1933 Act File No. 2-91776
1940 Act File No. 811-3984
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 20 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 17 X
INTERNATIONAL SERIES, INC.
(formerly, FT Series, Inc.)
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
on _________________ pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a)
on pursuant to paragraph (a) of Rule 485.
Registrant has filed with the Securities and Exchange Commission a declaration
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and:
X filed the Notice required by that Rule on January 14, 1994; or
intends to file the Notice required by that Rule on or about ____________;
or
during the most recent fiscal year did not sell any securities pursuant to
Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to
Rule 24f-2(b)(2), need not file the Notice.
Copies to:
Thomas J. Donnelly, Esquire Charles H. Morin, Esquire
Houston, Houston & Donnelly Dickstein, Shapiro & Morin, L.L.P.
2510 Centre City Tower 2101 L Street, N.W.
650 Smithfield Street Washington, D.C. 20037
Pittsburgh, Pennsylvania 15222
CROSS-REFERENCE SHEET
This amendment to the Registration Statement of INTERNATIONAL SERIES, INC.
(formerly, FT Series, Inc.), which is comprised of two portfolios: (1)
International Equity Fund consisting of three classes of shares, (a) Class A
Shares, (b) Class C Shares, and (c) Class B Shares; and (2) International
Income Fund consisting of three classes of shares, (a) Class A Shares,
(b) Class C Shares, and (c) Class B Shares, and is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page (1-2) Cover Page.
Item 2. Synopsis (1-2) Summary of Fund Expenses.
Item 3. Condensed Financial
Information (1-2) Performance Information;
(1a, 1b, 2a, 2b) Financial
Highlights.
Item 4. General Description of
Registrant (1-2) General Information; (1-2)
Liberty Family of Funds; (1a, 2a,
1b, 2b) Liberty Family Retirement
Program; (1-2) Investment
Information; (1-2) Investment
Objective; (1-2) Investment
Policies; (1-2) Acceptable
Investments; (2) Foreign Securities;
(1) Foreign Currency Transactions;
(1) Forward Foreign Currency
Exchange Contracts; (1) Put and Call
Options with Respect to Equity
Securities; (1) Financial Futures
and Options on Financial Futures; (1-
2) Risk Considerations; (2) Hedging
Vehicles and Strategies; (1-2)
Investment Limitations.
Item 5. Management of the Fund (1-2) International Series, Inc.
Information; (1-2) Management of the
Corporation; (1-2) Distribution
Plan; (1a, 2a) Distribution of Class
A Shares; (1b, 2b) Distribution of
Class C Shares; (1c, 2c)
Distribution of Class B Shares; (1-
2) Administration of the Fund; (1a,
2a) Expenses of the Fund and Class A
Shares; (1b, 2b) Expenses of the
Fund and Class C Shares; (1c, 2c)
Expenses of the Fund and Class B
Shares; (1-2) Brokerage
Transactions.
Item 6. Capital Stock and Other
Securities (1-2) Dividends; Capital Gains;
Shareholder Information; Voting
Rights; Tax Information; Federal
Income Tax; Pennsylvania Corporate
and Personal Property Taxes; Other
Classes of Shares.
Item 7. Purchase of Securities Being
Offered (1-2) Net Asset Value; (1a, 2a)
Investing in Class A Shares; (1b,
2b) Investing in Class C Shares;
(1c, 2c) Investing in Class B
Shares; (1-2) Share Purchases;
Minimum Investment Required; What
Shares Cost; (1a, 2a) Reducing the
Sales Charge; (1c, 2c) Conversion of
Class B Shares; (1-2) Systematic
Investment Program; Certificates and
Confirmations; Retirement Plans; (1-
2) Exchange Privilege; (1a, 2a)
Reduced Sales Charge; (1-2)
Requirements for Exchange; Tax
Consequences; Making an Exchange.
Item 8. Redemption or Repurchase (1a, 2a) Redeeming Class A Shares;
(1b, 2b) Redeeming Class C Shares;
(1c, 2c) Redeeming Class B Shares;
(1-2) Through a Financial
Institution; (1-2) Directly from the
Fund; (1b, 1c, 2b, 2c) Contingent
Deferred Sales Charge; (1-2)
Systematic Withdrawal Program;
Accounts with Low Balances;
Redemption in Kind.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page (1-2) Cover Page.
Item 11. Table of Contents (1-2) Table of Contents.
Item 12. General Information and
History (1-2) General Information About the
Fund.
Item 13. Investment Objectives and
Policies (1-2) Investment Objectives and
Policies.
Item 14. Management of the
Corporation (1-2) Filed in Part A, Management of
the Corporation.
Item 15. Control Persons and Principal
Holders of Securities Fund Ownership.
Item 16. Investment Advisory and Other
Services (1-2) Investment Advisory Services;
Administrative Services.
Item 17. Brokerage Allocation (1-2) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not Applicable.
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered (1-2) Purchasing Shares; Determining
Net Asset Value; Redeeming Shares.
Item 20. Tax Status (1-2) Tax Status.
Item 21. Underwriters (1-2) Distribution and Shareholder
Services Plans.
Item 22. Calculation of Performance
Data (1-2) Total Return; Yield;
Performance Comparisons.
Item 23. Financial Statements (1-2) Incorporated by reference into
Part B.
INTERNATIONAL EQUITY FUND
A PORTFOLIO OF INTERNATIONAL SERIES, INC.
(FORMERLY, FT SERIES, INC.)
CLASS B SHARES
PROSPECTUS
The Class B Shares of International Equity Fund (the "Fund") offered by this
prospectus represent interests in the Fund, which is a diversified investment
portfolio in International Series, Inc. (formerly, FT Series, Inc.) (the
"Corporation"), an open-end, management investment company (a mutual fund).
The Fund's objective is to obtain a total return on its assets from a
combination of long-term capital growth and income through a diversified
portfolio primarily invested in equity securities of non-U.S. issuers.
THE CLASS B SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE CLASS B SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in Class B Shares of the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information for Class
A Shares, Class B Shares, and Class C Shares dated September , 1994, with the
Securities and Exchange Commission. The information contained in the Combined
Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Combined Statement of Additional
Information free of charge by calling 1-800-235-4669. To obtain other
information or to make inquiries about the Fund, contact the Fund at the address
listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated September , 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
GENERAL INFORMATION 2
- ------------------------------------------------------
LIBERTY FAMILY OF FUNDS 2
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 4
Acceptable Investments 4
Equity and Fixed Income Securities 4
Forward Commitments 4
Money Market Instruments 5
Repurchase Agreements 5
Options and Financial Futures Contracts 5
When-Issued and Delayed Delivery Transactions 5
Foreign Currency Transactions 5
Forward Foreign Currency Exchange Contracts 6
Put and Call Options with Respect to
Equity Securities 6
Financial Futures and Options on Financial
Futures 7
Risk Considerations 7
Exchange Rates 8
Foreign Companies 8
U.S. Government Policies 8
Short Sales 8
Risks Associated with Financial Futures
Contracts and Options on Financial
Futures Contracts 9
Investment Limitations 9
NET ASSET VALUE 10
- ------------------------------------------------------
INVESTING IN CLASS B SHARES 10
- ------------------------------------------------------
Share Purchases 10
Through a Financial Institution 10
Directly from the Distributor 11
Minimum Investment Required 11
What Shares Cost 11
Conversion of Class B Shares 12
Systematic Investment Program 12
Certificates and Confirmations 12
Dividends 12
Capital Gains 13
Retirement Plans 13
EXCHANGE PRIVILEGE 13
- ------------------------------------------------------
Requirements for Exchange 13
Tax Consequences 13
Making an Exchange 13
Telephone Instructions 14
REDEEMING CLASS B SHARES 14
- ------------------------------------------------------
Through a Financial Institution 14
Directly from the Fund 15
By Telephone 15
By Mail 15
Signatures 15
Contingent Deferred Sales Charge 16
Elimination of Contingent Deferred Sales Charge 16
Systematic Withdrawal Program 17
Reinvestment Privilege 17
Accounts with Low Balances 17
INTERNATIONAL SERIES, INC., INFORMATION 18
- ------------------------------------------------------
Management of the Corporation 18
Board of Directors 18
Officers and Directors 18
Investment Adviser 22
Advisory Fees 22
Adviser's Background 22
Sub-Adviser 23
Sub-Advisory Fees 23
Sub-Adviser's Background 23
Distribution of Class B Shares 24
Distribution and Shareholder Services Plans 24
Other Payments to Financial Institutions 25
Administration of the Fund 25
Administrative Services 25
Custodian 25
Transfer Agent and Dividend Disbursing Agent 25
Legal Counsel 25
Independent Public Accountants 25
Brokerage Transactions 25
Expenses of the Fund and Class B Shares 26
SHAREHOLDER INFORMATION 26
- ------------------------------------------------------
Voting Rights 26
TAX INFORMATION 27
- ------------------------------------------------------
Federal Income Tax 27
Pennsylvania Corporate and
Personal Property Taxes 27
PERFORMANCE INFORMATION 28
- ------------------------------------------------------
OTHER CLASSES OF SHARES 28
- ------------------------------------------------------
Financial Highlights--Class A Shares 30
Financial Highlights--Class C Shares 31
ADDRESSES Inside Back Cover
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)...................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)............................................................ None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) (1)...................................... 5.50%
Redemption Fee (as a percentage of amount redeemed, if applicable)............................... None
Exchange Fee..................................................................................... None
ANNUAL CLASS B SHARES OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver) (2)................................................................ %
12b-1 Fee........................................................................................ %
Total Other Expenses............................................................................. %
Shareholder Services Fee......................................................................... %
Total Class B Shares Operating Expenses (3)(4)................................................... %
</TABLE>
(1) The contingent deferred sales charge is 5.50% in the first year, declining
to 1.00% in the sixth year, and 0.00% thereafter. (See "Contingent Deferred
Sales Charge.")
(2) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The adviser can
terminate this voluntary waiver at any time at its sole discretion. The
maximum management fee is 1.00%.
(3) Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase.
(4) Total Class B Shares Operating Expenses are estimated to be % absent the
anticipated voluntary waiver of a portion of the management fee.
*Total Class B Shares Operating Expenses are estimated based on average expenses
expected to be incurred during the period ending November 30, 1995. During the
course of this period, expenses may be more or less than the average amount
shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES THAT A HOLDER OF CLASS B SHARES OF THE FUND WILL BEAR,
EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS
COSTS AND EXPENSES, SEE "INVESTING IN CLASS B SHARES" AND "INTERNATIONAL
SERIES, INC., INFORMATION." Wire-transferred redemptions of less than $5,000
may be subject to additional fees.
Long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales loads permitted under the rules of the National Association of
Securities Dealers, Inc.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming
(1) 5% annual return and (2) redemption at the end of each time period........................ $ $
You would pay the following expenses on the same investment, assuming
no redemption................................................................................. $ $
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS EXAMPLE
IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER 30, 1995.
The information set forth in the foregoing table and example relates only to
Class B Shares of the Fund. The Fund also offers two additional classes of
shares called Class A Shares and Class C Shares. Class B Shares, Class A Shares,
and Class C Shares are subject to certain of the same expenses; however, Class A
Shares are subject to a maximum sales load of 4.50% but are not subject to a
12b-1 fee or a contingent deferred sales charge. Class C Shares are subject to a
12b-1 fee of up to 0.75% and may be subject to a contingent deferred sales
charge of 1.00%, but are not subject to a front-end sales load. See "Other
Classes of Shares."
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Corporation was established as FT International Trust, a Massachusetts
business trust, on March 9, 1984, and reorganized as a corporation under the
laws of the state of Maryland on February 11, 1991. At a special meeting of
shareholders held on March 15, 1994, the shareholders of the Corporation
approved an amendment to the Articles of Incorporation to change the name of the
Corporation to International Series, Inc. The Corporation's address is Liberty
Center, Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. The
Articles of Incorporation permit the Corporation to offer separate series of
shares representing interests in separate portfolios of securities. The shares
in any one portfolio may be offered in separate classes. With respect to this
Fund, as of the date of this prospectus, the Board of Directors (the
"Directors") has established three classes of shares known as Class A Shares,
Class B Shares, and Class C Shares. This prospectus relates only to Class B
Shares ("Shares ") of the Corporation's portfolio known as International Equity
Fund.
Shares of the Fund are designed for investors who wish to spread their
investments beyond the United States and who are prepared to accept the
particular risks associated with these investments. It is not intended to
provide a complete investment program for an investor. A minimum initial
investment of $1,500 is required, unless the investment is in a retirement
account, in which case the minimum investment is $50.
Except as otherwise noted in this prospectus, Shares are sold at net asset value
and redeemed at net asset value. However, a contingent deferred sales charge is
imposed on certain Shares of the Fund which are redeemed within six full years
of the date of purchase.
The Fund's current net asset value can be found in the mutual funds section of
local newspapers under " ."
LIBERTY FAMILY OF FUNDS
- --------------------------------------------------------------------------------
This Fund is a member of a family of mutual funds, collectively known as the
Liberty Family of Funds. The other funds in the Liberty Family of Funds are:
American Leaders Fund, Inc., providing growth of capital and income
through high-quality stocks;
Capital Growth Fund, providing appreciation of capital primarily through
equity securities;
Fund for U.S. Government Securities, Inc., providing current income
through long-term U.S. government securities;
International Income Fund, providing a high level of current income
consistent with prudent investment risk through high-quality debt
securities denominated primarily in foreign currencies;
Liberty Equity Income Fund, Inc., providing above-average income and
capital appreciation through income-producing equity securities;
Liberty High Income Bond Fund, Inc., providing high current income through
high-yielding, lower-rated corporate bonds;
Liberty Municipal Securities Fund, Inc., providing a high level of current
income exempt from federal regular income tax through municipal bonds;
Liberty U.S. Government Money Market Trust, providing current income
consistent with stability of principal through high-quality U.S.
government securities;
Liberty Utility Fund, Inc., providing current income and long-term growth
of income, primarily through electric, gas, and communication utilities;
Limited Term Fund, providing a high level of current income consistent
with minimum fluctuation in principal value through investment-grade
securities;
Limited Term Municipal Fund, providing a high level of current income
exempt from federal regular income tax consistent with the preservation of
principal, primarily limited to municipal securities;
Michigan Intermediate Municipal Trust, providing current income exempt
from federal regular income tax and the personal income taxes imposed by
the state of Michigan and Michigan municipalities, primarily through
Michigan municipal securities;
Pennsylvania Intermediate Municipal Trust, providing current income exempt
from federal regular income tax and the personal income taxes imposed by
the Commonwealth of Pennsylvania, primarily through Pennsylvania municipal
securities;
Strategic Income Fund, providing a high level of current income, primarily
through domestic and foreign corporate debt obligations;
Tax-Free Instruments Trust, providing current income consistent with
stability of principal and exempt from federal income tax through
high-quality, short-term municipal securities; and
World Utility Fund, providing total return through securities issued by
domestic and foreign companies in the utilities industry.
Prospectuses for these funds are available by writing to Federated Securities
Corp.
Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus.
The Liberty Family of Funds provides flexibility and diversification for an
investor's long-term investment planning. It enables an investor to meet the
challenges of changing market conditions by offering convenient exchange
privileges which give access to various investment vehicles and by providing the
investment services of proven, professional investment advisers.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Fund's objective is to obtain a total return on its assets from a
combination of long-term capital growth and income through a diversified
portfolio primarily invested in equity securities of non-U.S. issuers. The
objective is based on the premise that investing in non-U.S. securities provides
three potential benefits over investing solely in U.S. securities:
the opportunity to invest in non-U.S. companies believed to have superior
growth potential;
the opportunity to invest in foreign countries with economic policies or
business cycles different from those of the United States; and
the opportunity to reduce portfolio volatility to the extent that
securities markets inside and outside the United States do not move in
harmony.
While there is no assurance that the Fund will achieve its investment objective,
it endeavors to do so by following the investment policies described in this
prospectus. The investment objective and policies may be changed by the
Directors without shareholder approval. Shareholders will be notified before any
material change in the objective or policies becomes effective.
INVESTMENT POLICIES
ACCEPTABLE INVESTMENTS. The Fund invests primarily in non-U.S. securities. A
substantial portion of these will be equity securities of established companies
in economically developed countries. The Fund will invest at least 65%, and
under normal market conditions substantially all of its total assets, in equity
securities denominated in foreign currencies of issuers located in at least
three countries outside of the United States. The Fund may also purchase
corporate and government fixed income securities denominated in currencies other
than U.S. dollars; enter into forward commitments, repurchase agreements, and
foreign currency transactions; maintain reserves in foreign or U.S. money market
instruments; and purchase options and financial futures contracts.
EQUITY AND FIXED INCOME SECURITIES. At the date of this prospectus, the
Fund has committed its assets primarily to dividend-paying equity
securities of established companies that appear to have growth potential.
However, as a temporary defensive position, the Fund may shift its emphasis
to fixed income securities, warrants, or other obligations of foreign
companies or governments, if they appear to offer potential higher return.
Fixed income securities include preferred stock, convertible securities,
bonds, notes, or other debt securities which are investment grade or
higher.
The high-quality debt securities in which the Fund will invest will possess
a minimum credit rating of A as assigned by Standard & Poor's Corporation
("S&P") or A by Moody's Investors Service, Inc. ("Moody's"), or, if
unrated, will be judged by the investment adviser or sub-adviser to the
Fund, to be of comparable quality. Because the average quality of the
Fund's portfolio investments should remain constantly between A and AAA,
the Fund will seek to avoid the adverse consequences that may arise for
some debt securities in difficult economic circumstances. Downgraded
securities will be evaluated on a case-by-case basis by the adviser. The
adviser will determine whether or not the security continues to be an
acceptable investment. If not, the security will be sold.
FORWARD COMMITMENTS. Forward commitments are contracts to purchase
securities for a fixed price at a date beyond customary settlement time.
The Fund may enter into these contracts if liquid securities in amounts
sufficient to meet the purchase price are segregated on the Fund's records
at the trade date and maintained until the transaction has been settled.
Risk is involved if the value of the security declines before settlement.
Although the Fund enters into forward commitments with the intention of
acquiring the security, it may dispose of the commitment prior to
settlement and realize short-term profit or loss.
MONEY MARKET INSTRUMENTS. The Fund may invest in U.S. and foreign
short-term money market instruments, including interest-bearing call
deposits with banks, government obligations, certificates of deposit,
bankers' acceptances, commercial paper, short-term corporate debt
securities, and repurchase agreements. The commercial paper in which the
Fund invests will be rated
A-1 by S&P or P-1 by Moody's. These investments may be used to temporarily
invest cash received from the sale of Fund shares, to establish and
maintain reserves for temporary defensive purposes, or to take advantage of
market opportunities. Investments in the World Bank, Asian Development
Bank, or Inter-American Development Bank are not anticipated.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which
banks, broker/ dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them at
a mutually agreed upon time and price. To the extent that the original
seller does not repurchase the securities from the Fund, the Fund could
receive less than the repurchase price on any sale of such securities.
OPTIONS AND FINANCIAL FUTURES CONTRACTS. The Fund may purchase put and
call options, financial futures contracts, and options on financial futures
contracts. In addition, the Fund may write (sell) put and call options with
respect to securities in the Fund's portfolio.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The Fund engages in when-issued and delayed delivery transactions
only for the purpose of acquiring portfolio securities consistent with the
Fund's investment objective and policies, not for investment leverage. These
transactions are made to secure what is considered to be an advantageous price
and yield for the Fund. Settlement dates may be a month or more after entering
into these transactions, and the market values of the securities may vary from
the purchase price. In when-issued and delayed delivery transactions, the Fund
relies on the seller to complete the transaction. The seller's failure to
complete the transaction may cause the Fund to miss a price or yield considered
to be advantageous.
No fees or other expenses, other than normal transaction costs, are incurred.
However, assets of the Fund sufficient to make payment for the securities to be
purchased are segregated on the Fund's records at the trade date and are
maintained until the transaction is settled.
FOREIGN CURRENCY TRANSACTIONS. The Fund will enter into foreign currency
transactions to obtain the necessary currencies to settle securities
transactions. Currency transactions may be conducted either on a spot or cash
basis at prevailing rates or through forward foreign currency exchange
contracts.
The Fund may also enter into foreign currency transactions to protect Fund
assets against adverse changes in foreign currency exchange rates or exchange
control regulations. Such changes could unfavorably affect the value of Fund
assets which are denominated in foreign currencies, such as foreign securities
or funds deposited in foreign banks, as measured in U.S. dollars. Although
foreign currency exchanges may be used by the Fund to protect against a decline
in the value of one or more currencies, such efforts may also limit any
potential gain that might result from a relative increase in the value of such
currencies and might, in certain cases, result in losses to the Fund.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency
exchange contract ("forward contract") is an obligation to purchase or sell an
amount of a particular currency at a specific price and on a future date agreed
upon by the parties.
Generally, no commission charges or deposits are involved. At the time the Fund
enters into a forward contract, Fund assets with a value equal to the Fund's
obligation under the forward contract are segregated on the Fund's records and
are maintained until the contract has been settled. The Fund will not enter into
a forward contract with a term of more than one year. The Fund will generally
enter into a forward contract to provide the proper currency to settle a
securities transaction at the time the transaction occurs ("trade date"). The
period between the trade date and settlement date will vary between 24 hours and
30 days, depending upon local custom.
The Fund may also protect against the decline of a particular foreign currency
by entering into a forward contract to sell an amount of that currency
approximating the value of all or a portion of the Fund's assets denominated in
that currency ("hedging"). The success of this type of short-term hedging
strategy is highly uncertain due to the difficulties of predicting short-term
currency market movements and of precisely matching forward contract amounts and
the constantly changing value of the securities involved. Although the adviser
will consider the likelihood of changes in currency values when making
investment decisions, the adviser believes that it is important to be able to
enter into forward contracts when it believes the interests of the Fund will be
served. The Fund will not enter into forward contracts for hedging purposes in a
particular currency in an amount in excess of the Fund's assets denominated in
that currency. No more than 30% of the Fund's assets will be committed to
forward contracts for hedging purposes at any time. (This restriction does not
include forward contracts entered into to settle securities transactions.)
PUT AND CALL OPTIONS WITH RESPECT TO EQUITY SECURITIES. The Fund may purchase
put and call options on its portfolio of securities. Put and call options will
be used as a hedge to attempt to protect securities which the Fund holds, or
will be purchasing, against decreases or increases in value. The Fund is also
authorized to write (sell) put and call options on all or any portion of its
portfolio of securities to generate income. The Fund may write call options on
securities either held in its portfolio or which it has the right to obtain
without payment of further consideration or for which it has segregated cash in
the amount of any additional consideration. In the case of put options written
by the Fund, the Corporation's custodian will segregate cash, U.S. Treasury
obligations, or highly liquid debt securities with a value equal to or greater
than the exercise price of the underlying securities.
The Fund is authorized to invest in put and call options that are traded on
securities exchanges. The Fund may also purchase and write over-the-counter
options on portfolio securities in negotiated transactions with the buyers or
writers of the options since options on some of the portfolio securities held by
the Fund are not traded on an exchange. The Fund will purchase and write
over-the-counter options only with investment dealers and other financial
institutions (such as commercial banks or savings and loan associations) deemed
creditworthy by Federated Management and Fiduciary International, Inc., the
Fund's investment adviser and sub-adviser.
Over-the-counter options are two-party contracts with price and terms negotiated
between buyer and seller. In contrast, exchange-traded options are third-party
contracts with standardized strike prices and expiration dates and are purchased
from a clearing corporation. Exchange-traded options have a
continuous liquid market while over-the-counter options may not. Prior to
exercise or expiration, an option position can only be terminated by entering
into a closing purchase or sale transaction. This requires a secondary market on
an exchange which may or may not exist for any particular call or put option at
any specific time. The absence of a liquid secondary market also may limit the
Fund's ability to dispose of the securities underlying an option. The inability
to close options also could have an adverse impact on the Fund's ability to
effectively hedge its portfolio.
FINANCIAL FUTURES AND OPTIONS ON FINANCIAL FUTURES. The Fund may purchase and
sell financial futures contracts to hedge all or a portion of its portfolio
securities against changes in interest rates or securities prices. Financial
futures contracts on securities call for the delivery of particular securities
at a certain time in the future. The seller of the contract agrees to make
delivery of the type of instrument called for in the contract, and the buyer
agrees to take delivery of the instrument at the specified future time. A
financial futures contract on a securities index does not involve the actual
delivery of securities, but merely requires the payment of a cash settlement
based on changes in the securities index.
The Fund may also write call options and purchase put options on financial
futures contracts as a hedge to attempt to protect securities in its portfolio
against decreases in value resulting from anticipated increases in market
interest rates or broad declines in securities prices. When the Fund writes a
call option on a financial futures contract, it is undertaking the obligation of
selling the financial futures contract at a fixed price at any time during a
specified period if the option is exercised. Conversely, as a purchaser of a put
option on a financial futures contract, the Fund is entitled (but not obligated)
to sell a financial futures contract at the fixed price during the life of the
option.
The Fund may also write put options and purchase call options on financial
futures contracts as a hedge against rising purchase prices of securities
eligible for purchase by the Fund. The Fund will use these transactions to
attempt to protect its ability to purchase securities in the future at price
levels existing at the time it enters into the transactions. When the Fund
writes a put option on a futures contract, it is undertaking to buy a particular
futures contract at a fixed price at any time during a specified period if the
option is exercised. As a purchaser of a call option on a futures contract, the
Fund is entitled (but not obligated) to purchase a futures contract at a fixed
price at any time during the life of the option.
The Fund may not purchase or sell financial futures contracts or options on
financial futures contracts if, immediately thereafter, the sum of the amount of
initial margin deposits on the Fund's existing financial futures positions and
premiums paid for related options would exceed 5% of the fair market value of
the Fund's total assets, after taking into account the unrealized profits and
losses on those contracts it has entered into. When the Fund purchases financial
futures contracts, an amount of cash and cash equivalents, equal to the
underlying commodity value of the financial futures contracts (less any related
margin deposits), will be deposited in a segregated account with the Fund's
custodian to collateralize the position and, thereby, insure that the use of
such financial futures contracts is unleveraged.
RISK CONSIDERATIONS. Investing in non-U.S. securities carries substantial risks
in addition to those associated with domestic investments. In an attempt to
reduce some of these risks, the Fund diversifies its investments broadly among
foreign countries, including both developed and developing countries. At least
three different countries will always be represented. As of November 30, 1993,
the portfolio
contained securities from issuers located primarily in Japan, the United
Kingdom, France, Hong Kong, Switzerland, and Mexico. There are also investments
in several other countries.
The Fund occasionally takes advantage of the unusual opportunities for higher
returns available from investing in developing countries. As discussed in detail
in the Statement of Additional Information, however, these investments carry
considerably more volatility and risk because they are associated with less
mature economies and less stable political systems.
EXCHANGE RATES. Foreign securities are denominated in foreign currencies.
Therefore, the value in U.S. dollars of the Fund's assets and income may be
affected by changes in exchange rates and regulations. Although the Fund
values its assets daily in U.S. dollars, it will not convert its holding of
foreign currencies to U.S. dollars daily. When the Fund converts its
holdings to another currency, it may incur conversion costs. Foreign
exchange dealers realize a profit on the difference between the prices at
which they buy and sell currencies.
FOREIGN COMPANIES. Other differences between investing in foreign and U.S.
companies include:
less publicly available information about foreign companies;
the lack of uniform financial accounting standards applicable to foreign
companies;
less readily available market quotations on foreign companies;
differences in government regulation and supervision of foreign stock
exchanges, brokers, listed companies, and banks;
differences in legal systems which may affect the ability to enforce
contractual obligations or obtain court judgments;
generally lower foreign stock market volume;
the likelihood that foreign securities may be less liquid or more
volatile;
foreign brokerage commissions may be higher;
unreliable mail service between countries; and
political or financial changes which adversely affect investments in some
countries.
U.S. GOVERNMENT POLICIES. In the past, U.S. government policies have
discouraged or restricted certain investments abroad by investors such as
the Fund. Investors are advised that, when such policies are instituted,
the Fund will abide by them.
SHORT SALES. The Fund intends to sell securities short from time to time,
subject to certain restrictions. A short sale occurs when a borrowed
security is sold in anticipation of a decline in its price. If the decline
occurs, shares equal in number to those sold short can be purchased at the
lower price. If the price increases, the higher price must be paid. The
purchased shares are then returned to the original lender. Risk arises
because no loss limit can be placed on the transaction. When the Fund
enters into a short sale, assets, equal to the market price of the
securities sold short or any lesser price at which the Fund can obtain such
securities, are segregated on the Fund's records and maintained until the
Fund meets its obligations under the short sale.
RISKS ASSOCIATED WITH FINANCIAL FUTURES CONTRACTS
AND OPTIONS ON FINANCIAL FUTURES CONTRACTS
Financial futures contracts and options on financial futures contracts can be
highly volatile and could result in a reduction of the Fund's total return. The
Fund's attempt to use such investment devices for hedging purposes may not be
successful. Successful futures strategies require the ability to predict future
movements in securities prices, interest rates and other economic factors. When
the Fund uses financial futures contracts and options on financial futures
contracts as hedging devices, there is a risk that the prices of the securities
subject to the financial futures contracts and options on financial futures
contracts may not correlate perfectly with the prices of the securities in the
Fund. This may cause the financial futures contract and any related options to
react to market changes differently than the portfolio securities. In addition,
the investment adviser or sub-adviser could be incorrect in its expectations
about the direction or extent of market factors, such as interest rate,
securities price movements, and other economic factors. In these events, the
Fund may lose money on the financial futures contract or the options on
financial futures contracts. It is not certain that a secondary market for
positions in financial futures contracts or for options on financial futures
contracts will exist at all times. Although the investment adviser or
sub-adviser will consider liquidity before entering into financial futures
contracts or options on financial futures contracts transactions, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular financial futures contract or option on a financial futures contract
at any particular time. The Fund's ability to establish and close out financial
futures contracts and options on financial futures contract positions depends on
this secondary market. If the Fund is unable to close out its position due to
disruptions in the market or lack of liquidity, the losses to the Fund could be
significant.
INVESTMENT LIMITATIONS
The Fund will not:
with respect to 75% of the value of its total assets, invest more than 5%
of the value of its total assets in the securities (other than securities
issued or guaranteed by the government of the United States or its
agencies or instrumentalities) of any one issuer;
acquire more than 10% of the outstanding voting securities of any one
issuer, or acquire any securities of Fiduciary Trust Company International
or its affiliates;
sell securities short except under strict limitations;
borrow money or pledge securities except, under certain circumstances, the
Fund may borrow up to one-third of the value of its total assets and
pledge up to 15% of the value of those assets to secure such borrowings;
or
permit margin deposits for financial futures contracts held by the Fund,
plus premiums paid by it for open options on financial futures contracts,
to exceed 5% of the fair market value of the Fund's total assets, after
taking into account the unrealized profits and losses on those contracts.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Directors without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
The Fund will not:
invest more than 5% of its assets in warrants;
own securities of open-end or closed-end investment companies, except
under certain circumstances and subject to certain limitations not
exceeding 10% of its total assets (The Fund will indirectly bear its
proportionate share of any fees and expenses paid by other investment
companies, in addition to the fees and expenses payable directly by the
Fund.);
invest more than 5% of its total assets in securities of issuers that have
records of less than three years of continuous operations;
invest more than 15% of the value of its net assets in illiquid
securities, including securities not determined by the Directors to be
liquid, repurchase agreements with maturities longer than seven days after
notice, and certain over-the-counter options; or
purchase put options on securities unless the securities or an offsetting
call option is held in the Fund's portfolio.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund's net asset value per Class B Share fluctuates. The net asset value for
Class B Shares is determined by adding the interest of the Class B Shares in the
market value of all securities and other assets of the Fund, subtracting the
interest of the Class B Shares in the liabilities of the Fund and those
attributable to Class B Shares, and dividing the remainder by the total number
of Class B Shares outstanding. The net asset value for Class B Shares may differ
from that of Class A Shares and Class C Shares due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
INVESTING IN CLASS B SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open. Shares may
be purchased through a financial institution which has a sales agreement with
the distributor or directly from the distributor, Federated Securities Corp.,
once an account has been established. In connection with the sale of Shares,
Federated Securities Corp. may, from time to time, offer certain items of
nominal value to any shareholder or investor. The Fund reserves the right to
reject any purchase request.
Orders for $250,000 or more of Class B Shares will normally be invested in Class
A Shares. (See "Other Classes of Shares.")
THROUGH A FINANCIAL INSTITUTION. Investors may call their financial institution
(such as a bank or an investment dealer) to place an order to purchase Shares.
Orders placed through a financial institution are considered received when the
Fund is notified of the purchase order or when converted into federal funds. It
is the financial institution's responsibility to transmit orders promptly.
Purchase orders through a registered broker/dealer must be received by the
broker before 4:00 p.m. (Eastern time) and must be transmitted by the broker to
the Fund before 5:00 p.m. (Eastern time) in order for Shares to be purchased at
that day's price. Purchase orders through other financial institutions must be
received by
the financial institution and transmitted to the Fund before 4:00 p.m. (Eastern
time) in order for Shares to be purchased at that day's price.
The financial institution which maintains investor accounts with the Fund must
do so on a fully disclosed basis unless it accounts for share ownership periods
used in calculating the contingent deferred sales charge. (See "Contingent
Deferred Sales Charge.") In addition, advance payments made to financial
institutions may be subject to reclaim by the distributor for accounts
transferred to financial institutions which do not maintain investor accounts on
a fully disclosed basis and do not account for share ownership periods. (See
"Other Payments to Financial Institutions.")
DIRECTLY FROM THE DISTRIBUTOR. An investor may place an order to purchase
Shares directly from the distributor once an account has been established. To do
so:
complete and sign the new account form available from the Fund;
enclose a check made payable to International Equity Fund--Class B Shares;
and
mail both to the Fund's transfer agent, Federated Services Company, c/o
State Street Bank and Trust Company, P.O. Box 8604, Boston, MA 02266-8604.
Orders by mail are considered received after payment by check is converted by
the transfer agent's bank, State Street Bank and Trust Company ("State Street
Bank"), into federal funds. This is generally the next business day after State
Street Bank receives the check.
To purchase Shares directly from the distributor by wire once an account has
been established, call the Fund. All information needed will be taken over the
telephone, and the order is considered received when State Street Bank receives
payment by wire. Federal funds should be wired as follows: Federated Services
Company, c/o State Street Bank and Trust Company, Boston, Massachusetts 02105;
Attention: Mutual Fund Servicing Division; For Credit to: International Equity
Fund--Class B Shares; Fund Number (this number can be found on the account
statement or by contacting the Fund); Group Number or Order Number; Nominee or
Institution Name; and ABA Number 011000028. Shares cannot be purchased by wire
on days on which the New York Stock Exchange is closed and on federal holidays
restricting wire transfers.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Class B Shares is $1,500 unless the investment
is in a retirement account, in which case the minimum initial investment is $50.
Subsequent investments must be in amounts of at least $100, except for
retirement accounts, which must be in amounts of at least $50.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received.
The net asset value is determined at 4:00 p.m. (Eastern time), Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; and (iii) the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Under certain circumstances described under "Redeeming Class B Shares,"
shareholders may be charged a contingent deferred sales charge by the
distributor at the time Shares are redeemed.
CONVERSION OF CLASS B SHARES
Class B Shares will automatically convert into Class A Shares on the fifteenth
day following the month eight years after the purchase date, except as noted
below, and will no longer be subject to a distribution fee. (See "Other Classes
of Shares.") Such conversion will be on the basis of the relative net asset
values per share, without the imposition of any sales load, fee, or other
charge. Class B Shares acquired by exchange from Class B Shares of another fund
in the Liberty Family of Funds will convert into Class A Shares based on the
time of the initial purchase. For purposes of conversion to Class A Shares,
Shares purchased through the reinvestment of dividends and distributions paid on
Class B Shares will be considered to be held in a separate sub-account. Each
time any Class B Shares in the shareholder's account (other than those in the
sub-account) convert to Class A Shares, an equal pro rata portion of the Class B
Shares in the sub-account will also convert to Class A Shares. The availability
of the conversion feature is subject to the granting of an exemptive order by
the Securities and Exchange Commission or the adoption of a rule permitting such
conversion. In the event that the exemptive order or rule ultimately issued by
the Securities and Exchange Commission requires any conditions additional to
those described in this prospectus, shareholders will be notified. The
conversion of Class B Shares to Class A Shares is subject to the continuing
availability of a ruling from the Internal Revenue Service or an opinion of
counsel that such conversions will not constitute taxable events for federal tax
purposes. There can be no assurance that such ruling or opinion will be
available, and the conversion of Class B Shares to Class A Shares will not occur
if such ruling or opinion is not available. In such event, Class B Shares would
continue to be subject to higher expenses than Class A Shares for an indefinite
period.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Shares at the net asset value next determined after an order is
received by the Fund. Shareholders may apply for participation in this program
through their financial institution or directly through the Fund.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a Share
account for each shareholder. Share certificates are not issued unless requested
in writing to the Fund.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Annual confirmations are sent to report dividends paid during the
year.
DIVIDENDS
Dividends are declared and paid annually to all shareholders invested in the
Fund on the record date. Dividends are automatically reinvested in additional
Shares on the payment date at the ex-dividend date net asset value, unless
shareholders request cash payments on the new account form or by writing to the
Fund. All shareholders on the record date are entitled to the dividend. If
Shares are redeemed or
exchanged prior to the record date or purchased after the record date, those
Shares are not entitled to that year's dividend.
CAPITAL GAINS
Capital gains realized by the Fund, if any, will be distributed at least once
every twelve months.
RETIREMENT PLANS
Shares of the Fund can be purchased as an investment for retirement plans or for
IRA accounts. For further details, including prototype retirement plans, contact
the Fund and consult a tax adviser.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
In order to provide greater flexibility to Fund shareholders whose investment
objectives have changed, Class B shareholders may exchange all or some of their
Shares for Class B Shares of other funds in the Liberty Family of Funds at net
asset value without being assessed a contingent deferred sales charge on the
exchanged Shares. (Not all funds in the Liberty Family of Funds currently offer
Class B Shares. Contact your financial institution regarding the availability of
other Class B Shares in the Liberty Family of Funds.) To the extent that a
shareholder exchanges Shares for Class B Shares in other funds in the Liberty
Family of Funds, the time for which the exchanged-for shares were held will be
added, or tacked, to the time for which the exchanged-from shares were held for
purposes of satisfying the applicable holding period.
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange Shares having a net asset value
equal to the minimum investment requirements of the fund into which the exchange
is being made. Before the exchange, the shareholder must receive a prospectus of
the fund into which the exchange is being made.
This privilege is available to shareholders resident in any state in which the
fund shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
the proceeds invested in Class B Shares of the other fund. The exchange
privilege may be modified or terminated at any time. Shareholders will be
notified of the modification or termination of the exchange privilege.
Further information on the exchange privilege and prospectuses for the Liberty
Family of Funds or certain Federated Funds are available by contacting the Fund.
TAX CONSEQUENCES
An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending on the circumstances, a short-term or long-term capital
gain or loss may be realized.
MAKING AN EXCHANGE
Instructions for exchanges for the Liberty Family of Funds or certain Federated
Funds may be given in writing or by telephone. Written instructions may require
a signature guarantee. Shareholders of the Fund may have difficulty in making
exchanges by telephone through brokers and other financial
institutions during times of drastic economic or market changes. If shareholders
cannot contact their broker or financial institution by telephone, it is
recommended that an exchange request be made in writing and sent by overnight
mail to Federated Services Company, c/o State Street Bank and Trust Company,
P.O. Box 8604, Boston, Massachusetts 02266-8604.
TELEPHONE INSTRUCTIONS. Telephone instructions made by the investor may be
carried out only if a telephone authorization form completed by the investor is
on file with the Fund. If the instructions are given by a broker, a telephone
authorization form completed by the broker must be on file with the Fund. Shares
may be exchanged between two funds by telephone only if the two funds have
identical shareholder registrations.
Any Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Services Company, c/o State Street Bank and Trust
Company, P.O. Box 8604, Boston, Massachusetts 02266-8604, and deposited to the
shareholder's account before being exchanged. Telephone exchange instructions
may be recorded. Such instructions will be processed as of 4:00 p.m. (Eastern
time) and must be received by the Fund before that time for Shares to be
exchanged the same day. Shareholders exchanging into a fund will not receive any
dividend that is payable to shareholders of record on that date. This privilege
may be modified or terminated at any time. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
REDEEMING CLASS B SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value next determined after the Fund
receives the redemption request, less any applicable contingent deferred sales
charge. (See "Contingent Deferred Sales Charge.") Redemptions will be made on
days on which the Fund computes its net asset value. Redemptions can be made
through a financial institution or directly from the Fund. Redemption requests
must be received in proper form.
THROUGH A FINANCIAL INSTITUTION
Shareholders may redeem Shares by calling their financial institution (such as a
bank or an investment dealer) to request the redemption. Shares will be redeemed
at their net asset value, less any applicable contingent deferred sales charge,
next determined after the Fund receives the redemption request from the
financial institution. Redemption requests through a registered broker/dealer
must be received by the broker before 4:00 p.m. (Eastern time) and must be
transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in order
for Shares to be redeemed at that day's net asset value. Redemption requests
through other financial institutions must be received by the financial
institution and transmitted to the Fund before 4:00 p.m. (Eastern time) in order
for Shares to be redeemed at that day's net asset value. The financial
institution is responsible for promptly submitting redemption requests and
providing proper written redemption instructions to the Fund. The financial
institution may charge customary fees and commissions for this service.
DIRECTLY FROM THE FUND
BY TELEPHONE. Shareholders who have not purchased through a financial
institution may redeem their Shares by telephoning the Fund. The proceeds will
be mailed to the shareholder's address of record or wire transferred to the
shareholder's account at a domestic commercial bank that is a member of the
Federal Reserve System, normally within one business day, but in no event longer
than seven days after the request. The minimum amount for a wire transfer is
$1,000. If at any time the Fund shall determine it necessary to terminate or
modify this method of redemption, shareholders would be promptly notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp. Telephone redemption instructions may
be recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as redeeming by mail, should be considered.
BY MAIL. Any shareholder may redeem Shares by sending a written request to
Federated Services Company, c/o State Street Bank and Trust Company, P.O. Box
8604, Boston, Massachusetts 02266-8604. The written request should include the
shareholder's name, the Fund name and class designation, the account number, and
the Share or dollar amount requested, and should be signed exactly as the Shares
are registered.
If Share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders should call the Fund for assistance in redeeming by mail.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.
CONTINGENT DEFERRED SALES CHARGE
Shareholders redeeming Shares from their Fund accounts within six full years of
the purchase date of those Shares will be charged a contingent deferred sales
charge by the Fund's distributor. Any applicable contingent deferred sales
charge will be imposed on the lesser of the net asset value of the redeemed
Shares at the time of purchase or the net asset value of the redeemed Shares at
the time of redemption in accordance with the following schedule:
<TABLE>
<CAPTION>
YEAR OF REDEMPTION CONTINGENT DEFERRED
AFTER PURCHASE SALES CHARGE
<S> <C>
First.............................................. 5.50%
Second............................................. 4.75%
Third.............................................. 4.00%
Fourth............................................. 3.00%
Fifth.............................................. 2.00%
Sixth.............................................. 1.00%
Seventh and thereafter............................. 0.00%
</TABLE>
The contingent deferred sales charge will be deducted from the redemption
proceeds otherwise payable to the shareholder and will be retained by the
distributor. The contingent deferred sales charge will not be imposed with
respect to: (1) Shares acquired through the reinvestment of dividends or
distributions of long-term capital gains; and/or (2) Shares held for more than
six full years from the date of purchase. Redemptions will be processed in a
manner intended to maximize the amount of redemption which will not be subject
to a contingent deferred sales charge. In computing the amount of the applicable
contingent deferred sales charge, redemptions are deemed to have occurred in the
following order: (1) Shares acquired through the reinvestment of dividends and
long-term capital gains; (2) Shares held for more than six full years from the
date of purchase; and (3) Shares held for fewer than six years on a first-in,
first-out basis.
A contingent deferred sales charge is not assessed in connection with an
exchange of Fund Shares for shares of other Class B Shares of funds in the
Liberty Family of Funds. (See "Exchange Privilege.") Any contingent deferred
sales charge imposed at the time the exchanged-for shares are redeemed is
calculated as if the shareholder had held the shares from the date on which the
investor became a shareholder of the exchanged-from Shares. Moreover, the
contingent deferred sales charge will be eliminated with respect to certain
redemptions. (See "Elimination of Contingent Deferred Sales Charge.")
ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
The contingent deferred sales charge will be eliminated with respect to the
following redemptions: (1) redemptions following the death or disability, as
defined in Section 72(m)(7) of the Internal Revenue Code of 1986, of a
shareholder; (2) redemptions representing minimum required distributions from an
Individual Retirement Account or other qualified retirement plan to a
shareholder who has attained the age of 70-1/2; and (3) involuntary redemptions
by the Fund of Shares in shareholder
accounts that do not comply with the minimum balance requirements. In addition,
to the extent that the distributor does not make advance payments to certain
financial institutions for purchases made by their clients, no contingent
deferred sales charge will be imposed on redemptions of Shares held by
Directors, employees and sales representatives of the Fund, the distributor, or
affiliates of the Fund or distributor; employees of any financial institution
that sells Shares of the Fund pursuant to a sales agreement with the
distributor; and spouses and children under the age of 21 of the aforementioned
persons. Finally, no contingent deferred sales charge will be imposed on the
redemption of Shares originally purchased through a bank trust department, an
investment adviser registered under the Investment Advisers Act of 1940, as
amended, or a retirement plan where the third-party administrator has entered
into certain arrangements with Federated Securities Corp. or its affiliates, or
any other financial institution, to the extent that no payments were advanced
for purchases made through or by such entities.
The Directors reserve the right to discontinue elimination of the contingent
deferred sales charge. Shareholders will be notified of such elimination. Any
Shares purchased prior to the termination of such waiver would have the
contingent deferred sales charge eliminated as provided in the Fund's prospectus
at the time of the purchase of the Shares. If a shareholder making a redemption
qualifies for an elimination of the contingent deferred sales charge, the
shareholder must notify Federated Securities Corp. or the Fund in writing that
said shareholder is entitled to such elimination.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount not less
than $100 may take advantage of the Systematic Withdrawal Program. Under this
program, Shares are redeemed to provide for periodic withdrawal payments in an
amount directed by the shareholder. Depending upon the amount of the withdrawal
payments, the amount of dividends paid and capital gains distributions with
respect to Shares, and the fluctuation of the net asset value of Shares redeemed
under this program, redemptions may reduce, and eventually deplete, the
shareholder's investment in Shares. For this reason, payments under this program
should not be considered as yield or income on the shareholder's investment in
Shares. To be eligible to participate in this program, a shareholder must have
an account value of at least $10,000. Shareholders may apply for participation
in this program through their financial institution. A contingent deferred sales
charge will be imposed on Shares redeemed within six full years of their
purchase date. (See "Contingent Deferred Sales Charge.")
REINVESTMENT PRIVILEGE
If Shares have been redeemed, the shareholder has a one-time right, within 120
days, to reinvest the redemption proceeds into Class A Shares at the
next-determined net asset value without a sales load. (See "Other Classes of
Shares.") Federated Securities Corp. must be notified by the shareholder in
writing or by his or her financial institution of the reinvestment in order to
receive this privilege. If the shareholder redeems his or her Shares, there may
be tax consequences.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls
below the required minimum value of $1,500. This requirement does not apply,
however, if the balance falls below $1,500 because of changes in the Fund's net
asset value.
Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional Shares to meet the minimum
requirement.
INTERNATIONAL SERIES, INC., INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE CORPORATION
BOARD OF DIRECTORS. The Corporation is managed by a Board of Directors. The
Directors are responsible for managing the Corporation's business affairs and
for exercising all the Corporation's powers except those reserved for the
shareholders. An Executive Committee of the Board of Directors handles the
Board's responsibilities between meetings of the Board.
OFFICERS AND DIRECTORS. Officers and Directors are listed with their addresses,
principal occupations, and present positions, including those with Federated
Management, its affiliates, and the "Funds" described in the Statement of
Additional Information.
- --------------------------------------------------------------------------------
John F. Donahue+*
Federated Investors Tower
Pittsburgh, PA
Chairman and Director of the Corporation
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or Managing General
Partner of the Funds. Mr. Donahue is the father of J. Christopher Donahue, Vice
President of the Corporation.
- --------------------------------------------------------------------------------
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Director of the Corporation
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds; formerly,
President, Naples Property Management, Inc.
- --------------------------------------------------------------------------------
William J. Copeland
One PNC Plaza--23rd Floor
Pittsburgh, PA
Director of the Corporation
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.
- --------------------------------------------------------------------------------
James E. Dowd
571 Hayward Mill Road
Concord, MA
Director of the Corporation
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds; formerly, Director, Blue Cross of
Massachusetts, Inc.
- --------------------------------------------------------------------------------
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Director of the Corporation
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore Hospitals;
Professor of Medicine and Trustee, University of Pittsburgh; Director of
Corporate Health, University of Pittsburgh Medical Center; Director, Trustee, or
Managing General Partner of the Funds.
- --------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+
5916 Penn Mall
Pittsburgh, PA
Director of the Corporation
Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park Restaurants,
Inc., and Statewide Settlement Agency, Inc.; Director, Trustee, or Managing
General Partner of the Funds; formerly, Counsel, Horizon Financial, F.A.,
Western Region.
- --------------------------------------------------------------------------------
Peter E. Madden
225 Franklin Street
Boston, MA
Director of the Corporation
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation and Trustee,
Lahey Clinic Foundation, Inc.
- --------------------------------------------------------------------------------
Gregor F. Meyer
5916 Penn Mall
Pittsburgh, PA
Director of the Corporation
Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or Managing General
Partner of the Funds; formerly, Vice Chairman, Horizon Financial, F.A.
- --------------------------------------------------------------------------------
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Director of the Corporation
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie Endowment
for International Peace, RAND Corporation, Online Computer Library Center, Inc.,
and U.S. Space Foundation; Chairman, Czecho Slovak Management Center; Director,
Trustee, or Managing General Partner of the Funds; President Emeritus,
University of Pittsburgh; formerly, Chairman, National Advisory Council for
Environmental Policy and Technology.
- --------------------------------------------------------------------------------
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Director of the Corporation
Public relations/marketing consultant; Director, Trustee, or Managing General
Partner of the Funds.
- --------------------------------------------------------------------------------
Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
President of the Corporation
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative Services.
- --------------------------------------------------------------------------------
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President of the Corporation
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp.; President, Passport Research, Ltd.; Trustee, Federated Administrative
Services, Federated Services Company, and Federated Shareholder Services;
President or Vice President of the Funds; Director, Trustee, or Managing General
Partner of some of the Funds. Mr. Donahue is the son of John F. Donahue,
Chairman and Director of the Corporation.
- --------------------------------------------------------------------------------
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President of the Corporation
Executive Vice President and Trustee, Federated Investors; Director, Federated
Research Corp.; Chairman and Director, Federated Securities Corp.; President or
Vice President of some of the Funds; Director or Trustee of some of the Funds.
- --------------------------------------------------------------------------------
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer of the Corporation
Vice President, Treasurer, and Trustee, Federated Investors; Vice President and
Treasurer, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Executive Vice President,
Treasurer, and Director, Federated Securities Corp.; Trustee, Federated Services
Company and Federated Shareholder Services; Chairman, Treasurer, and Trustee,
Federated Administrative Services; Trustee or Director of some of the Funds;
Vice President and Treasurer of the Funds.
- --------------------------------------------------------------------------------
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary of the Corporation
Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and Secretary, Federated
Research Corp. and Passport Research, Ltd.; Trustee, Federated Services Company;
Executive Vice President, Secretary, and Trustee, Federated Administrative
Services; Trustee and Secretary, Federated Shareholder Services; Director and
Executive Vice President, Federated Securities Corp.; Vice President and
Secretary of the Funds.
- --------------------------------------------------------------------------------
*This Director is deemed to be an "interested person" of the Corporation as
defined in the Investment Company Act of 1940, as amended..
+Members of the Corporation's Executive Committee. The Executive Committee of
the Board of Directors handles the responsibilities of the Board of Directors
between meetings of the Board.
Officers and Directors own less than 1% of the Fund's outstanding Shares.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser (the "Adviser"), subject to direction
by the Directors. The Adviser continually conducts investment research and
supervision for the Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee
equal to 1.00% of the Fund's average daily net assets. The fee paid by the
Fund, while higher than the advisory fee paid by other mutual funds in
general, is comparable to fees paid by many mutual funds with similar
objectives and policies. The Adviser may voluntarily choose to waive a
portion of its fee. The Adviser can terminate this voluntary waiver at any
time at its sole discretion. The Adviser has also undertaken to reimburse
the Fund for operating expenses in excess of limitations established by
certain states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track
record of competitive performance and its disciplined, risk-averse
investment philosophy serve approximately 3,500 client institutions
nationwide. Through these same client institutions, individual shareholders
also have access to this same level of investment expertise.
Randall S. Bauer is the Fund's portfolio manager. He has contributed toward
the management of the Fund's portfolio of investments since December 1,
1990, when Federated Management became the Fund's sub-adviser, and has
continued in that capacity through March 15, 1994, when, pursuant to
shareholder approval, Federated Management became the Fund's investment
adviser. Mr. Bauer joined Federated Investors in 1989 as an Assistant Vice
President of Federated Management. Mr. Bauer was an Assistant Vice
President of the International Banking Division at Pittsburgh National Bank
from 1982 until 1989. Mr. Bauer is a Chartered Financial Analyst and
received his M.B.A. in Finance from Pennsylvania State University.
SUB-ADVISER. Under the terms of a Sub-Advisory Agreement between Federated
Management and Fiduciary International, Inc., Fiduciary International, Inc.,
will furnish to Federated Management such investment advice, statistical
information, and other factual information as may, from time to time, be
reasonably requested by Federated Management.
SUB-ADVISORY FEES. For its services under the Sub-Advisory Agreement,
Fiduciary International, Inc. ("Fiduciary"), receives an annual fee from
Federated Management equal to .50 of 1% of average daily net assets of the
Fund. The sub-advisory fee is accrued and paid daily. In the event that the
fee due from the Fund to Federated Management is reduced in order to meet
expense limitations imposed on the Fund by state securities laws or
regulations, the sub-advisory fee will be reduced by one-half of said
reduction in the fee due from the Fund to Federated Management.
Notwithstanding any other provision in the Sub-Advisory Agreement,
Fiduciary may, from time to time, and for such periods as it deems
appropriate, reduce its compensation (and, if appropriate, assume expenses
of the Fund) to the extent that the Fund's expenses exceed such lower
expense limitations as Fiduciary may, by notice to the Fund, voluntarily
declare to be effective.
SUB-ADVISER'S BACKGROUND. Fiduciary International, Inc., is a New York
corporation that was organized in 1982 as Fir Tree Advisers, Inc. Fiduciary
International, Inc., is a wholly-owned subsidiary of Fiduciary Investment
Corporation, which, in turn, is a wholly-owned subsidiary of Fiduciary
Trust Company International. Fiduciary Trust Company International has more
than 30 years of experience in managing funds which invest in the
international markets.
Fiduciary International, Inc., is a registered investment adviser under the
Investment Advisers Act of 1940. The Adviser and sub-adviser, their
officers, affiliates, and employees may act as investment managers for
parties other than the Fund, including other investment companies.
Margaret Lindsay has been the Fund's portfolio manager since mid-1992, when
Fiduciary International, Inc., was the Fund's investment adviser. Ms.
Lindsay joined Fiduciary International, Inc., in 1991 as a Vice President.
From 1987 through 1991, Ms. Lindsay worked in international strategy,
analysis, and sales at S.G. Warburg Securities.
DISTRIBUTION OF CLASS B SHARES
Federated Securities Corp. is the principal distributor for Shares of the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
The distributor will pay financial institutions an amount equal to 5.50% of the
net asset value of Shares purchased by their clients or customers. These
payments will be made directly by the distributor from its assets, and will not
be made from the assets of the Fund.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the Class B Shares will pay to the distributor an amount, computed at an annual
rate of 0.75 of 1% of the average daily net assets of Class B Shares, to finance
any activity which is principally intended to result in the sale of Shares
subject to the Distribution Plan. Because distribution fees to be paid by the
Fund to the distributor may not exceed an annual rate of 0.75 of 1% of the
Shares' average daily net assets, it will take the distributor a number of years
to recoup the expenses it has incurred for its distribution and
distribution-related services pursuant to the Distribution Plan.
The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by the Class
B Shares under the Distribution Plan.
In addition, the Fund has adopted a Shareholder Services Plan (the "Services
Plan") under which it may make payments up to 0.25 of 1% of the average daily
net asset value of Class B Shares to obtain certain personal services for
shareholders and for the maintenance of shareholder accounts ("shareholder
services"). The Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
Federated Shareholder Services will either perform shareholder services directly
or will select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon Shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Fund and Federated Shareholder
Services.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the capacities described above or should
Congress relax current restrictions on depository institutions, the Directors
will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
The distributor may, from time to time, and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Distribution Plan.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor may offer to pay a
fee from its own assets to financial institutions as financial assistance for
providing substantial marketing and sales support. The support may include
sponsoring sales, educational and training seminars at recreational-type
facilities, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Fund. Such assistance will be
predicated upon the amount of Shares the financial institution sells or may sell
and/or upon the nature and type of sales or marketing support furnished by the
financial institution. Any payments made by the distributor may be reimbursed by
the Fund's investment adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors ("Federated Funds") as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
<C> <S>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund. Foreign instruments purchased
by the Fund are held by foreign banks participating in a network coordinated by
State Street Bank.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for shares of the Fund and dividend
disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, L.L.P., Washington,
D.C.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen & Co., Pittsburgh, Pennsylvania.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser and sub-adviser look for prompt execution of the order
at a favorable price. In working with dealers, the Adviser and sub-adviser will
generally utilize those who are recognized dealers in specific portfolio
instruments, except when a better price and execution of the order can be
obtained elsewhere.
In selecting among firms believed to meet this criteria, the Adviser and
sub-adviser may give consideration to those firms which have sold or are selling
shares of the Fund and other funds distributed by Federated Securities Corp. The
Adviser and sub-adviser make decisions on portfolio transactions and select
brokers and dealers subject to review by the Directors.
EXPENSES OF THE FUND AND CLASS B SHARES
Holders of Shares pay their allocable portion of Fund and Corporation expenses.
The Corporation expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Corporation and
continuing its existence; registering the Corporation with federal and state
securities authorities; Directors' fees; auditors' fees; the cost of meetings of
Directors; legal fees of the Corporation; association membership dues; and such
non-recurring and extraordinary items as may arise from time to time.
The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the Fund and Shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such non-recurring and extraordinary items as may
arise from time to time.
At present, the only expenses which are allocated specifically to Shares as a
class are expenses under the Fund's Services Plan and Distribution Plan.
However, the Directors reserve the right to allocate certain other expenses to
holders of Shares as they deem appropriate ("Class Expenses"). In any case,
Class Expenses would be limited to: distribution fees; transfer agent fees as
identified by the transfer agent as attributable to holders of Shares; fees
under the Fund's Services Plan; printing and postage expenses related to
preparing and distributing materials such as shareholder reports, prospectuses,
and proxies to current shareholders; registration fees paid to the Securities
and Exchange Commission and to state securities commissions; expenses related to
administrative personnel and services as required to support holders of Shares;
legal fees relating solely to Shares; and Directors' fees incurred as a result
of issues relating solely to Shares.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share gives the shareholder one vote in Director elections and other
matters submitted to shareholders for vote. All shares of each portfolio or
class in the Corporation have equal voting rights, except that, in matters
affecting only a particular Fund or class, only shares of that particular Fund
or class are entitled to vote.
As a Maryland corporation, the Corporation is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Fund's operation and for the election of Directors under certain
circumstances.
Directors may be removed by a two-thirds vote of the number of Directors prior
to such removal or by a two-thirds vote of the shareholders at a special
meeting. The Directors shall call a special meeting of
shareholders upon the written request of shareholders owning at least 10% of the
Corporation's outstanding shares entitled to vote.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code, as amended, applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
However, the Fund may invest in the stock of certain foreign corporations which
would constitute a Passive Foreign Investment Company (PFIC). Federal income
taxes may be imposed on the Fund upon disposition of PFIC investments.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Corporation's other portfolios, if any, will not be combined for tax purposes
with those realized by the Fund.
Investment income received by the Fund from sources within foreign countries may
be subject to foreign taxes withheld at the source. The United States has
entered into tax treaties with many foreign countries that entitle the Fund to
reduced tax rates or exemptions on this income. The effective rate of foreign
tax cannot be predicted since the amount of Fund assets to be invested within
various countries is unknown. However, the Fund intends to operate so as to
qualify for treaty-reduced tax rates where applicable.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional Shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held the Shares. No federal income tax is due on any
dividends earned in an IRA or qualified retirement plan until distributed.
If more than 50% of the value of the Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund intends to
qualify for certain Internal Revenue Code stipulations that would allow
shareholders to claim a foreign tax credit or deduction on their U.S. income tax
returns. The Internal Revenue Code, as amended, may limit a shareholder's
ability to claim a foreign tax credit. Furthermore, shareholders who elect to
deduct their portion of the Fund's foreign taxes rather than take the foreign
tax credit must itemize deductions on their income tax returns.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Fund:
the Fund is subject to the Pennsylvania corporate franchise tax; and
Fund Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund advertises the total return and yield for Class B
Shares.
Total return represents the change, over a specific period of time, in the value
of an investment in Class B Shares after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of Class B Shares is calculated by dividing the net investment income
per Share (as defined by the Securities and Exchange Commission) earned by Class
B Shares over a thirty-day period by the maximum offering price per Share on the
last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
Class B Shares and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
The performance information reflects the effect of non-recurring charges, such
as the contingent deferred sales charge, which, if excluded, would increase the
total return and yield.
Total return and yield will be calculated separately for Class A Shares, Class B
Shares, and Class C Shares. Because Class B Shares and Class C Shares are
subject to a Rule 12b-1 fee, the yield for Class A Shares, for the same period,
may exceed that of Class B Shares and Class C Shares. Because Class A Shares are
subject to a front-end sales load, the total return for Class B Shares and Class
C Shares, for the same period, may exceed that of Class A Shares. Depending on
the dollar amount invested and the time period for which any class of shares is
held, the total return for any particular class may exceed that of another.
From time to time, the Fund may advertise the performance of Class B Shares
using certain financial publications and/or compare the performance of Class B
Shares to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Class A Shares are sold primarily to customers of financial institutions subject
to a front-end sales load of up to 4.50%. Under certain circumstances, investors
may qualify for reduced sales loads on purchases of Class A Shares. Class A
Shares are subject to a Services Plan fee of up to 0.25 of 1% of the Class A
Shares' average daily net assets and are subject to a minimum initial investment
of $500, unless the investment is in a retirement account, in which case the
minimum is $50.
Class C Shares are sold primarily to customers of financial institutions at net
asset value with no initial sales load. Class C Shares are distributed pursuant
to a Distribution Plan adopted by the Fund whereby the distributor is paid a fee
of up to 0.75 of 1%, in addition to a Services Plan fee of up to 0.25 of 1%, of
the Class C Shares' average daily net assets. In addition, Class C Shares may be
subject to certain contingent deferred sales charges. Investments in Class C
Shares are subject to a minimum initial investment of $1,500, unless the
investment is in a retirement account, in which case the minimum investment is
$50.
The amount of dividends payable to Class A Shares will generally exceed that of
Class B Shares and Class C Shares by the difference between Class Expenses and
distribution and shareholder service expenses borne by shares of each respective
class.
The stated advisory fee is the same for all classes of shares.
INTERNATIONAL EQUITY FUND
CLASS A SHARES
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen & Co., the Fund's
independent public accountants. Their report dated January 21, 1994, is included
in the annual report, which is incorporated by reference. This table should be
read in conjunction with the Fund's financial statements and notes thereto,
which may be obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1993 1992 1991 1990 1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 14.09 $ 14.44 $ 14.28 $ 17.59 $ 17.34 $ 19.99 $ 22.87 $ 14.62 $ 9.50
- --------------------------
INCOME FROM INVESTMENT
OPERATIONS
- --------------------------
Net investment income 0.06 0.10 0.11 0.19 0.18 0.19 0.24 0.04 0.09
- --------------------------
Net realized and
unrealized gain (loss)
on investments 2.53 (0.37) 0.37 (1.16) 1.60 3.27 (0.72) 8.63 5.04
- -------------------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations 2.59 (.27) 0.48 (.97) 1.78 3.46 (0.48) 8.67 5.13
- --------------------------
LESS DISTRIBUTIONS
- --------------------------
Dividends to
shareholders from net
investment income (0.06) (0.08) (0.21) (0.20) (0.23) (0.23) (0.05) (0.08) (0.01)
- --------------------------
Distributions for
shareholders from net
realized gain on
investment transactions -- -- (0.11) (2.14) (1.30) (5.88) (2.35) (0.34) --
- --------------------------
Distributions in excess
of net investment income (0.13)(b)
- -------------------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (0.19) (0.08) (0.32) (2.34) (1.53) (6.11) (2.40) (0.42) (0.01)
- -------------------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $ 16.49 $ 14.09 $ 14.44 $ 14.28 $ 17.59 $ 17.34 $ 19.99 $ 22.87 $ 14.62
- -------------------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN* 18.52% (1.86%) 3.49% (6.72)% 11.55% 24.33% (2.70%) 60.75% 54.07%
- --------------------------
RATIOS TO AVERAGE NET
ASSETS
- --------------------------
Expenses 1.60% 1.57% 1.52% 1.32% 1.01% 1.00% 1.00% 1.00% 1.00%
- --------------------------
Net investment income 0.13% 0.69% 0.78% 1.39% 1.04% 1.43% 0.93% 0.34% 1.30%
- --------------------------
Expense waiver/
reimbursement(c) 0.01% 0.02% 0.30% 0.25% 0.46% 0.28% 0.17% 0.19% 0.50%
- --------------------------
SUPPLEMENTAL DATA
- --------------------------
Net assets, end of
period
(000 omitted) $192,860 $106,937 $101,980 $82,541 $65,560 $68,922 $85,860 $106,257 $34,209
- --------------------------
Portfolio turnover
rate*** 74% 91% 84% 114% 85% 98% 130% 70% 61%
- --------------------------
<CAPTION>
<S> <C>
1984**
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.00
- --------------------------
INCOME FROM INVESTMENT
OPERATIONS
- --------------------------
Net investment income 0.02
- --------------------------
Net realized and
unrealized gain (loss)
on investments (0.52)
- -------------------------- -----------
Total from investment
operations (0.50)
- --------------------------
LESS DISTRIBUTIONS
- --------------------------
Dividends to
shareholders from net
investment income --
- --------------------------
Distributions for
shareholders from net
realized gain on
investment transactions --
- --------------------------
Distributions in excess
of net investment income
- -------------------------- -----------
TOTAL DISTRIBUTIONS --
- -------------------------- -----------
NET ASSET VALUE, END OF
PERIOD $ 9.50
- -------------------------- -----------
TOTAL RETURN* (2.86)%
- --------------------------
RATIOS TO AVERAGE NET
ASSETS
- --------------------------
Expenses 0.56%(a)
- --------------------------
Net investment income 2.89%(a)
- --------------------------
Expense waiver/
reimbursement(c) 0.74%(a)
- --------------------------
SUPPLEMENTAL DATA
- --------------------------
Net assets, end of
period
(000 omitted) $6,439
- --------------------------
Portfolio turnover
rate*** 6%
- --------------------------
</TABLE>
* Based on net asset value, which does not reflect the sales load or redemption
fee, if applicable.
** Reflects operations from August 17, 1984 to November 30, 1984. For the
period from the start of business, March 12, 1984 to August 16, 1984, net
investment income aggregating $0.274 per share ($27,229) was distributed to
the Fund's former sub-adviser. Such distribution represented substantially
all of the net income of the Fund prior to the initial public offering of
Fund shares which commenced on August 17, 1984.
*** Represents portfolio turnover rate for the entire Fund.
(a) Computed on an annualized basis.
(b) Distributions in excess of net investment income for the year ended
November 30, 1993, were a result of certain book and tax timing
differences. These distributions do not represent a return of capital for
federal income tax purposes.
(c) Increase/decrease in above expense/income ratios due to waivers or
reimbursements of expenses (Note 4).
Further information about the Fund's performance is contained in the Fund's
annual report dated November 30, 1993, which can be obtained free of charge.
INTERNATIONAL EQUITY FUND
CLASS C SHARES
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Arthur Andersen & Co., the Fund's
independent public accountants. Their report dated January 21, 1994, on the
Fund's financial statements for the year ended November 30, 1993, and on the
following table for each of the periods presented, is included in the Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto, which may be
obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1993**
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.88
- -----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------
Net investment income (0.04)
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.57
- ----------------------------------------------------------------------------------------------- -----------------
Total from investment operations 1.53
- -----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income --
- -----------------------------------------------------------------------------------------------
Distributions for shareholders from net realized gain on investment transactions --
- ----------------------------------------------------------------------------------------------- -----------------
TOTAL DISTRIBUTIONS --
- ----------------------------------------------------------------------------------------------- -----------------
NET ASSET VALUE, END OF PERIOD $16.41
- ----------------------------------------------------------------------------------------------- -----------------
TOTAL RETURN* 10.28%
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------
Expenses 2.57%(b)
- -----------------------------------------------------------------------------------------------
Net investment income (1.10%)(b)
- -----------------------------------------------------------------------------------------------
Expense waiver/reimbursement(a) %.01(b)
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $2,852
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate*** % 74
- -----------------------------------------------------------------------------------------------
</TABLE>
* Based on net asset value, which does not reflect the sales load or
redemption fee, if applicable.
** Reflects operations for the period from March 31, 1993 (date of initial
public offering) to November 30, 1993.
*** Represents portfolio turnover rate for the entire Fund.
(a) Increase/decrease in above expense/income ratios due to waivers or
reimbursements of expenses.
(b) Computed on an annualized basis.
Further information about the Fund's performance is contained in the Fund's
annual report dated November 30, 1993, which can be obtained free of charge.
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
International Equity Fund
Class B Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------------------------------
Sub-Adviser
Fiduciary International, Inc. Two World Trade Center
New York, New York 10048
- -------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8604
Trust Company Boston, Massachusetts 02266-8604
- -------------------------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- -------------------------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
- -------------------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen & Co. 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
INTERNATIONAL EQUITY FUND
A PORTFOLIO OF INTERNATIONAL SERIES, INC.
(FORMERLY, FT SERIES, INC.)
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
COMBINED STATEMENT OF ADDITIONAL INFORMATION
This Combined Statement of Additional Information should be read with
the respective prospectuses for Class A Shares and Class C Shares of
International Equity Fund (the "Fund") dated March 29, 1994, and for
Class B Shares of the Fund dated September __, 1994. This Statement is
not a prospectus itself. To receive a copy of any of the prospectuses,
write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated September __, 1994
[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES 1
- ---------------------------------------------------------------
Types of Investments 1
When-Issued and Delayed Delivery Transactions 1
Repurchase Agreements 1
Lending Portfolio Securities 1
Restricted and Illiquid Securities 2
Futures and Options Transactions 2
Futures Contracts 2
Put Options on Futures Contracts 2
Call Options on Futures Contracts 3
"Margin" in Futures Transactions 3
Regulatory Restrictions 4
Purchasing Put Options on Portfolio Securities 4
Writing Covered Call Options on
Portfolio Securities 4
Over-the-Counter Options 4
Warrants 4
Developing/Emerging Markets 4
Portfolio Turnover 5
Investment Limitations 5
THE FUNDS 7
- ---------------------------------------------------------------
Fund Ownership 7
INVESTMENT ADVISORY SERVICES 8
- ---------------------------------------------------------------
Adviser to the Fund 8
Sub-Adviser 8
Advisory Fees 8
Sub-Advisory Fees 9
Other Related Services 9
ADMINISTRATIVE SERVICES 9
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 9
- ---------------------------------------------------------------
PURCHASING SHARES 10
- ---------------------------------------------------------------
Distribution of Shares 10
Distribution and Shareholder Services Plans 10
Conversion to Federal Funds 10
Purchases by Sales Representatives, Directors
of the Corporation, and Employees 10
DETERMINING NET ASSET VALUE 11
- ---------------------------------------------------------------
Determining Market Value of Securities 11
Trading in Foreign Securities 11
REDEEMING SHARES 11
- ---------------------------------------------------------------
Redemption in Kind 11
TAX STATUS 12
- ---------------------------------------------------------------
The Fund's Tax Status 12
Foreign Taxes 12
Shareholders' Tax Status 12
TOTAL RETURN 12
- ---------------------------------------------------------------
YIELD 12
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 13
- ---------------------------------------------------------------
FINANCIAL STATEMENTS 13
- ---------------------------------------------------------------
APPENDIX 14
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio in International Series, Inc. (the "Corporation"), which
was established as FT International Trust, a Massachusetts business trust, under
a Declaration of Trust dated March 9, 1984, and reorganized as a corporation
under the laws of the state of Maryland on February 11, 1991. At a special
meeting of shareholders held on March 15, 1994, the shareholders of the
Corporation approved an amendment to the Articles of Incorporation to change the
name of the Corporation from FT Series, Inc., to International Series, Inc.
Shares of the Fund are offered in three classes, known as Class A Shares, Class
B Shares, and Class C Shares (individually and collectively referred to as
"Shares" as the context may require). This Combined Statement of Additional
Information relates to all three both classes of the above mentioned Shares.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to obtain a total return on its assets from a
combination of long-term capital growth and income through a diversified
portfolio primarily invested in equity securities of non-U.S. issuers.
TYPES OF INVESTMENTS
The Fund invests in a diversified portfolio composed primarily of non-U.S.
securities. A substantial portion of these instruments will be equity securities
of established companies in economically developed countries. The Fund will
invest at least 65%, and under normal market conditions, substantially all of
its total assets, in equity securities denominated in foreign currencies of
issuers located in at least three countries outside of the United States. The
Fund may also purchase investment grade fixed income securities and foreign
government securities; enter into forward commitments, repurchase agreements,
and foreign currency transactions; and maintain reserves in foreign or U.S.
money market instruments.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.
No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for the securities
to be purchased are segregated at the trade date. These assets are marked to
market daily and maintained until the transaction is settled. The Fund may
engage in these transactions to an extent that would cause the segregation of an
amount up to 20% of its total assets.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily. In
the event that such a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Fund might be delayed pending
court action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the Fund
and allow retention or disposition of such securities. The Fund will only enter
into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by the Fund's adviser or
sub-adviser to be creditworthy.
LENDING PORTFOLIO SECURITIES
In order to generate additional income, the Fund may lend its portfolio
securities to broker/dealers, banks, or other institutional borrowers of
securities. The Fund will only enter into loan arrangements with broker/dealers,
banks, or other institutions which the investment adviser or sub-adviser have
determined are creditworthy under guidelines established by the Corporation's
Board of Directors (the "Directors") and will receive collateral equal to at
least 100% of the value of the securities loaned. The Fund did not lend
portfolio securities during the last fiscal year and has no present intent to do
so in the current fiscal year.
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
RESTRICTED AND ILLIQUID SECURITIES
The ability of the Directors to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission Staff
position set forth in the adopting release for Rule 144A under the Securities
Act of 1933 (the "Rule"). The Rule is a non-exclusive, safe-harbor for certain
secondary market transactions involving securities subject to restrictions on
resale under federal securities laws. The Rule provides an exemption from
registration for resales of otherwise restricted securities to qualified
institutional buyers. The Rule was expected to further enhance the liquidity of
the secondary market for securities eligible for resale under Rule 144A. The
Fund believes that the staff of the Securities and Exchange Commission has left
the question of determining the liquidity of all restricted securities (eligible
for resale under Rule 144A) to the Corporation's Directors. The Directors
consider the following criteria in determining the liquidity of certain
restricted securities:
.the frequency of trades and quotes for the security;
.the number of dealers willing to purchase or sell the security and the number
of other potential buyers;
.dealer undertakings to make a market in the security; and
.the nature of the security and the nature of the marketplace trades.
When the Fund invests in certain restricted securities determined by the
Directors to be liquid, such investments could have the effect of increasing the
level of Fund illiquidity to the extent that the buyers in the secondary market
for such securities (whether in Rule 144A resales or other exempt transactions)
become, for a time, uninterested in purchasing these securities.
FUTURES AND OPTIONS TRANSACTIONS
The Fund may engage in futures and options hedging transactions. In an effort to
reduce fluctuations in the net asset value of Shares of the Fund, the Fund may
attempt to hedge all or a portion of its portfolio by buying and selling
financial futures contracts, buying put options on portfolio securities and
listed put options on futures contracts, and writing call options on futures
contracts. The Fund may also write covered call options on portfolio securities
to attempt to increase its current income. The Fund will maintain its positions
in securities, option rights, and segregated cash subject to puts and calls
until the options are exercised, closed, or have expired. An option position on
financial futures contracts may be closed out only on the exchange on which the
position was established.
FUTURES CONTRACTS
The Fund may engage in transactions in futures contracts. A futures contract is
a firm commitment by two parties: the seller who agrees to make delivery of the
specific type of security called for in the contract ("going short") and the
buyer who agrees to take delivery of the security ("going long") at a certain
time in the future. However, a stock index futures contract is an agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to the difference between the value of the index at the close of the
last trading day of the contract and the price at which the index contract was
originally written. No physical delivery of the underlying securities in the
index is made.
The purpose of the acquisition or sale of a futures contract by the Fund is to
protect the Fund from fluctuations in the value of its securities caused by
anticipated changes in interest rates or market conditions without necessarily
buying or selling the securities. For example, in the fixed income securities
market, price generally moves inversely to interest rates. A rise in rates
generally means a drop in price. Conversely, a drop in rates generally means a
rise in price. In order to hedge its holdings of fixed income securities against
a rise in market interest rates, the Fund could enter into contracts to deliver
securities at a predetermined price (i.e., "go short") to protect itself against
the possibility that the prices of its fixed income securities may decline
during the anticipated holding period. The Fund would "go long" (i.e., agree to
purchase securities in the future at a predetermined price) to hedge against a
decline in market interest rates.
PUT OPTIONS ON FUTURES CONTRACTS
The Fund may engage in transactions in put options on futures contracts. The
Fund may purchase listed put options on futures contracts. Unlike entering
directly into a futures contract, which requires the purchaser to buy a
financial instrument on a set date at a specified price, the purchase of a put
option on a futures contract entitles (but does not obligate) its purchaser to
decide on or before a future date whether to assume a short position at the
specified price. The Fund would purchase put options on futures contracts to
protect portfolio securities against decreases in value resulting from market
factors, such as an anticipated increase in interest rates.
Generally, if the hedged portfolio securities decrease in value during the term
of an option, the related futures contracts will also decrease in value and the
option will increase in value. In such an event, the Fund will normally
close out its option by selling an identical option. If the hedge is successful,
the proceeds received by the Fund upon the sale of the second option may be
large enough to offset both the premium paid by the Fund for the original option
plus the decrease in value of the hedged securities. Alternatively, the Fund may
exercise its put option to close out the position. To do so, it would
simultaneously enter into a futures contract of the type underlying the option
(for a price less than the strike price of the option) and exercise the option.
The Fund would then deliver the futures contract in return for payment of the
strike price. If the Fund neither closes out nor exercises an option, the option
will expire on the date provided in the option contract, and only the premium
paid for the contract will be lost.
When the Fund sells a put on a futures contract, it receives a cash premium
which can be used in whatever way is deemed most advantageous to the Fund. In
exchange for such premium, the Fund grants to the purchaser of the put the right
to receive from the Fund, at the strike price, a short position in such futures
contract, even though the strike price upon exercise of the option is greater
than the value of the futures position received by such holder. If the value of
the underlying futures position is not such that exercise of the option would be
profitable to the option holder, the option will generally expire without being
exercised. The Fund has no obligation to return premiums paid to it whether or
not the option is exercised. It will generally be the policy of the Fund, in
order to avoid the exercise of an option sold by it, to cancel its obligation
under the option by entering into a closing purchase transaction, if available,
unless it is determined to be in the Fund's interest to deliver the underlying
futures position. A closing purchase transaction consists of the purchase by the
Fund of an option having the same term as the option sold by the Fund, and has
the effect of canceling the Fund's position as a seller. The premium which the
Fund will pay in executing a closing purchase transaction may be higher than the
premium received when the option was sold, depending in large part upon the
relative price of the underlying futures position at the time of each
transaction.
CALL OPTIONS ON FUTURES CONTRACTS
The Fund may engage in transactions in call options on futures contracts. In
addition to purchasing put options on futures, the Fund may write listed call
options on futures contracts to hedge its portfolio against, for example, an
increase in market interest rates. When the Fund writes a call option on a
futures contract, it is undertaking the obligation of assuming a short futures
position (selling a futures contract) at the fixed strike price at any time
during the life of the option if the option is exercised. As market interest
rates rise or as stock prices fall, causing the prices of futures to go down,
the Fund's obligation under a call option on a future (to sell a futures
contract) costs less to fulfill, causing the value of the Fund's call option
position to increase. In other words, as the underlying future's price goes down
below the strike price, the buyer of the option has no reason to exercise the
call, so that the Fund keeps the premium received for the option. This premium
can help substantially to offset the drop in value of the Fund's portfolio
securities. Prior to the expiration of a call written by the Fund, or exercise
of it by the buyer, the Fund may close out the option by buying an identical
option. If the hedge is successful, the cost of the second option will be less
than the premium received by the Fund for the initial option. The net premium
income of the Fund will then help offset the decrease in value of the hedged
securities.
When the Fund purchases a call on a financial futures contract, it receives in
exchange for the payment of a cash premium the right, but not the obligation, to
enter into the underlying futures contract at a strike price determined at the
time the call was purchased, regardless of the comparative market value of such
futures position at the time the option is exercised. The holder of a call
option has the right to receive a long (or buyer's) position in the underlying
futures contract.
The Fund will not maintain open positions in futures contracts it has sold or
call options it has written on futures contracts if, in the aggregate, the value
of the open positions (marked to market) exceeds the current market value of its
securities portfolio (including cash or cash equivalents) plus or minus the
unrealized gain or loss on those open positions, adjusted for the correlation of
volatility between the hedged securities and the futures contracts. If this
limitation is exceeded at any time, the Fund will take prompt action to close
out a sufficient number of open contracts to bring its open futures and options
positions within this limitation.
"MARGIN" IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Fund does not pay or receive
money upon the purchase or sale of a futures contract. Rather, the Fund is
required to deposit an amount of "initial margin" in cash or U.S. Treasury bills
with the custodian (or the broker, if legally permitted). The nature of initial
margin in futures transactions is different from that of margin in securities
transactions in that futures contracts initial margin does not involve a
borrowing by the Fund to finance the transactions. Initial margin is in the
nature of a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official settlement
price of the exchange on which it is traded. Each day the Fund pays or receives
cash, called "variation margin," equal to the daily change in value of the
futures contract. This process is known as "marking to market." Variation margin
does not represent a borrowing or loan by the Fund but is instead settlement
between the Fund and the broker of the amount one would owe the other if the
futures contract expired. In computing its daily net asset value, the Fund will
mark to market its open futures positions. The Fund is also required to deposit
and maintain margin when it writes call options on futures contracts.
REGULATORY RESTRICTIONS
To the extent required to comply with Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid status as a "commodity pool operator," the Fund
will not enter into a futures contract, or purchase an option thereon, if
immediately thereafter the initial margin deposits for futures contracts held by
it, plus premiums paid by it for open options on futures, would exceed 5% of the
total assets of the Fund. The Fund will not engage in transactions in futures
contracts or options thereon for speculation, but only to attempt to hedge
against changes in market conditions affecting the value of assets which the
Fund holds or intends to purchase. When futures contracts or options thereon are
purchased in order to protect against a price increase on securities or other
assets intended to be purchased later, it is anticipated that at least 75% of
such intended purchases will be completed. When other futures contracts or
options thereon are purchased, the underlying value of such contracts will at
all times not exceed the sum of (1) accrued profit on such contracts held by the
broker; (2) cash or high-quality money market instruments set aside in an
identifiable manner; and (3) cash proceeds from investments due in 30 days or
less.
PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES
The Fund may purchase put options on portfolio securities to protect against
price movements in particular securities in its portfolio. A put option gives
the Fund, in return for a premium, the right to sell the underlying security to
the writer (seller) at a specified price during the term of the option.
WRITING COVERED CALL OPTIONS ON PORTFOLIO SECURITIES
The Fund may write covered call options to generate income. As a writer of a
call option, the Fund has the obligation upon exercise of the option during the
option period to deliver the underlying security upon payment of the exercise
price. The Fund may only sell call options either on securities held in its
portfolio or on securities which it has the right to obtain without payment of
further consideration (or has segregated cash in the amount of any additional
consideration).
OVER-THE-COUNTER OPTIONS
The Fund may purchase and write over-the-counter options on portfolio securities
in negotiated transactions with the buyers or writers of the options for those
options on portfolio securities held by the Fund and not traded on an exchange.
Over-the-counter options are two-party contracts with price and terms negotiated
between buyer and seller. In contrast, exchange-traded options are third-party
contracts with standardized strike prices and expiration dates and are purchased
from a clearing corporation. Exchange-traded options have a continuous liquid
market while over-the-counter options may not.
WARRANTS
The Fund may invest in warrants. Warrants are basically options to purchase
common stock at a specific price (usually at a premium above the market value of
the optioned common stock at issuance) valid for a specific period of time.
Warrants may have a life ranging from less than a year to twenty years or may be
perpetual. However, most warrants have expiration dates after which they are
worthless. In addition, if the market price of the common stock does not exceed
the warrant's exercise price during the life of the warrant, the warrant will
expire as worthless. Warrants have no voting rights, pay no dividends, and have
no rights with respect to the assets of the corporation issuing them. The
percentage increase or decrease in the market price of the warrant may tend to
be greater than the percentage increase or decrease in the market price of the
optioned common stock.
DEVELOPING/EMERGING MARKETS
The economies of individual emerging countries may differ favorably from the
U.S. economy in such respects as growth of gross domestic product, rate of
inflation, currency depreciation, capital reinvestment, resource
self-sufficiency and balance of payments position. Further, the economies of
developing countries generally are heavily dependent on international trade and,
accordingly, have been, and may continue to be, adversely affected by trade
barriers, exchange controls, managed adjustments in relative currency values and
other protectionist measures
imposed or negotiated by the countries with which they trade. These economies
also have been, and may continue to be, adversely affected by economic
conditions in the countries with which they trade.
Prior governmental approval for foreign investments may be required under
certain circumstances in some emerging countries, and the extent of foreign
investment in certain debt securities and domestic companies may be subject to
limitation in other emerging countries. Foreign ownership limitations also may
be imposed by the charters of individual companies in emerging countries to
prevent, among other concerns, violation of foreign investment limitations.
Repatriation of investment income, capital and the proceeds of sales by foreign
investors may require governmental registration and/or approval in some emerging
countries. The Fund could be adversely affected by delays in, or a refusal to
grant, any required governmental registration or approval for such repatriation.
Any investment subject to such repatriation controls will be considered illiquid
if it appears reasonably likely that this process will take more than seven
days.
With respect to any emerging country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political changes,
governmental regulation, social instability or diplomatic developments
(including war) which could affect adversely the economies of such countries or
the value of the Fund's investments in those countries. In addition, it may be
difficult to obtain and enforce a judgment in a court outside of the U.S.
PORTFOLIO TURNOVER
The Fund will not attempt to set or meet a portfolio turnover rate since any
turnover would be incidental to transactions undertaken in an attempt to achieve
the Fund's investment objective. Portfolio securities will be sold when the
Fund's adviser or sub-adviser believes it is appropriate, regardless of how long
those securities have been held. For the fiscal years ended November 30, 1993,
and 1992, the portfolio turnover rates were 74% and 91%, respectively.
INVESTMENT LIMITATIONS
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of the value of its total assets, the Fund will not
purchase securities of any one issuer (other than securities issued or
guaranteed by the government of the United States or its agencies or
instrumentalities) if as a result more than 5% of the value of its total
assets would be invested in the securities of that issuer. To comply with
certain state restrictions, the Fund will not purchase securities of any
issuer if as a result more than 5% of its total assets would be invested
in securities of that issuer. (If state restrictions change, this latter
restriction may be revised without shareholder approval or notification.)
ACQUIRING SECURITIES
The Fund will not acquire more than 10% of the outstanding voting
securities of any one issuer, or acquire any securities of Fiduciary
Trust Company International or its affiliates.
CONCENTRATION OF INVESTMENTS
The Fund will not invest more than 25% of its total assets in securities
of issuers having their principal business activities in the same
industry.
BORROWING
The Fund will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts up to
one-third of the value of its total assets, including the amount
borrowed. This borrowing provision is not for investment leverage but
solely to facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio securities
would be inconvenient or disadvantageous. The Fund will not purchase
securities while outstanding borrowings exceed 5% of the value of its
total assets.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate assets, except when
necessary for permissible borrowings. In those cases, it may pledge
assets having a value of 15% of its assets taken at cost. Neither the
deposit of underlying securities or other assets in escrow in connection
with the writing of put or call options or the purchase of securities on
a when-issued basis, nor margin deposits for the purchase and sale of
financial futures contracts and related options are deemed to be a
pledge.
BUYING ON MARGIN
The Fund will not purchase any securities on margin, but may obtain such
short-term credits as are necessary for clearance of transactions, except
that the Fund may make margin payments in connection with its use of
financial futures contracts or related options and transactions.
ISSUING SENIOR SECURITIES
The Fund will not issue senior securities except in connection with
borrowing money directly or through reverse repurchase agreements or as
required by forward commitments to purchase securities or currencies.
UNDERWRITING
The Fund will not underwrite or participate in the marketing of
securities of other issuers, except as it may be deemed to be an
underwriter under federal securities law in connection with the
disposition of its portfolio securities.
INVESTING IN REAL ESTATE
The Fund will not invest in real estate, although it may invest in
securities secured by real estate or interests in real estate or issued
by companies, including real estate investment trusts, which invest in
real estate or interests therein.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities or commodity contracts,
except that the Fund may purchase and sell financial futures contracts
and options on financial futures contracts, provided that the sum of its
initial margin deposits for financial futures contracts held by the Fund,
plus premiums paid by it for open options on financial futures contracts,
may not exceed 5% of the fair market value of the Fund's total assets,
after taking into account the unrealized profits and losses on those
contracts. Further, the Fund may engage in foreign currency transactions
and purchase or sell forward contracts with respect to foreign currencies
and related options.
LENDING CASH OR SECURITIES
The Fund will not lend any assets except portfolio securities. This shall
not prevent the purchase or holding of bonds, debentures, notes,
certificates of indebtedness, or other debt securities of an issuer,
repurchase agreements or other transactions which are permitted by the
Fund's investment objective and policies or its Articles of
Incorporation.
INVESTING IN MINERALS
The Fund will not invest in interests in oil, gas, or other mineral
exploration or development programs, other than debentures or equity
stock interests.
SELLING SHORT
The Fund will not sell securities short unless (1) it owns, or has a
right to acquire, an equal amount of such securities, or (2) it has
segregated an amount of its other assets equal to the lesser of the
market value of the securities sold short or the amount required to
acquire such securities. The segregated amount will not exceed 10% of the
Fund's net assets. While in a short position, the Fund will retain the
securities, rights, or segregated assets.
Except as noted, the above investment limitations cannot be changed without
shareholder approval. The following limitations, however, may be changed by the
Directors without shareholder approval. Except as noted, shareholders will be
notified before any material change in these limitations becomes effective.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for the purpose of
exercising control or management.
INVESTING IN WARRANTS
The Fund will not invest more than 5% of its assets in warrants,
including those acquired in units or attached to other securities. To
comply with certain state restrictions, the Fund will limit its
investment in such warrants not listed on recognized stock exchanges to
2% of its total assets. (If state restrictions change, this latter
restriction may be revised without notice to shareholders.) For purposes
of this investment restriction, warrants acquired by the Fund in units or
attached to securities may be deemed to be without value.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not own securities of open-end investment companies, own
more than 3% of the total outstanding voting stock of any closed-end
investment company, invest more than 5% of its total assets in any
closed-end investment company, or invest more than 10% of its total
assets in closed-end investment companies in general. The Fund will
purchase securities of closed-end investment companies only in open-
market transactions involving only customary broker's commissions.
However, these limitations are not applicable if the securities are
acquired in a merger, consolidation, reorganization, or acquisition of
assets. The Fund will indirectly bear its proportionate share of any fees
and expenses paid by other investment companies, in addition to the fees
and expenses payable directly by the Fund.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers which have records of less than three years of
continuous operations, including the operation of any predecessor.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including securities not determined by the Directors
to be liquid, and repurchase agreements with maturities longer than seven
days after notice, and certain over-the-counter options.
DEALING IN PUTS AND CALLS
The Fund will not write call options or put options on securities, except
that the Fund may write covered call options and secured put options on
all or any portion of its portfolio, provided the securities are held in
the Fund's portfolio or the Fund is entitled to them in deliverable form
without further payment or the Fund has segregated cash in the amount of
any further payments. The Fund will not purchase put options on
securities unless the securities or an offsetting call option is held in
the Fund's portfolio. The Fund may also purchase, hold or sell (i)
contracts for future delivery of securities or currencies and (ii)
warrants granted by the issuer of the underlying securities.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND
DIRECTORS OF THE CORPORATION
The Fund will not purchase or retain the securities of any issuer if the
officers and Directors of the Corporation or the Fund's investment
adviser or sub-adviser owning individually more than 1/2 of 1% of the
issuer's securities together own more than 5% of the issuer's securities.
ARBITRAGE TRANSACTIONS
To comply with certain state restrictions, the Fund will not enter into
transactions for the purpose of engaging in arbitrage. If state
requirements change, this restriction may be revised without shareholder
notification.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
To comply with registration requirements in certain states, the Fund (1) will
limit short sales of securities of any class of any one issuer to the lesser of
2% of the Fund's net assets or 2% of the securities of that class, and (2) will
make short sales only on securities listed on recognized stock exchanges. The
latter restrictions, however, do not apply to short sales of securities the Fund
holds or has a right to acquire without the payment of any further
consideration. (If state requirements change, these restrictions may be revised
without shareholder notification.)
The Fund did not borrow money or pledge securities in excess of 5% of the value
of its total assets during the last fiscal year and has no present intent to do
so in the coming fiscal year.
THE FUNDS
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The "Funds" and "Funds" mean the following investment companies: American
Leaders Fund, Inc.; Annuity Management Series; Automated Cash Management Trust;
Automated Government Money Trust; California Municipal Cash Trust; Cash Trust
Series II; Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated Growth Trust;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Intermediate Government Trust; Federated
Master Trust; Federated Municipal Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated
Stock Trust; Federated Tax-Free Trust; Federated U.S. Government Bond Fund;
First Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate
U.S. Government Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress
Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.; Government Income
Securities, Inc.; High Yield Cash Trust; Insight Institutional Series, Inc.;
Insurance Management Series; Intermediate Municipal Trust; International Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty Equity
Income Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty Municipal
Securities Fund, Inc.; Liberty Term Trust, Inc.--1999; Liberty U.S. Government
Money Market Trust; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed
Series Trust; Mark Twain Funds; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust; New
York Municipal Cash Trust; 111 Corcoran Funds; Peachtree Funds; The Planters
Funds; Portage Funds; RIMCO Monument Funds; The Shawmut Funds; Short-Term
Municipal Trust; Signet Select Funds; Star Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for Financial
Institutions; Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; and World Investment
Series, Inc.
FUND OWNERSHIP
As of July 9, 1994, the following shareholders of record owned 5% or more of the
outstanding Class A Shares of the Fund: Clooney & Co., New York, New York, owned
approximately 1,673,785 Class A Shares (12.96%); Mertru & Company, Muncie,
Indiana, owned approximately 902,580 Class A Shares (6.99%); and Bozworth
Company, Little Rock, Arkansas, owned approximately 864,220 Class A Shares
(6.69%).
Also as of July 9, 1994, the following shareholder of record owned 5% or more of
the outstanding Class C Shares of the Fund: Merrill Lynch Pierce Fenner & Smith
(as record owner holding Class C Shares for its clients), Jacksonville, Florida,
owned approximately 124,460 Class C Shares (32.16%).
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Federated Management (the "Adviser"), a
subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, his wife, and his son, J. Christopher Donahue. For information
regarding those persons who are affiliated with the Fund and who are also
affiliated with the Adviser, see "Officers and Directors" section contained in
the prospectus.
The Adviser shall not be liable to the Fund, the Corporation, or any shareholder
of the Fund for any losses that may be sustained in the purchase, holding, or
sale of any security or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Corporation.
SUB-ADVISER
Fiduciary International, Inc. ("Fiduciary"), is the sub-adviser to the Fund
under the terms of a Sub-Advisory Agreement between Federated Management and
Fiduciary. All of the directors, officers, and employees of the sub-adviser also
serve as directors, officers and employees of Fiduciary Trust Company
International. However, no director, officer, or employee of either the
sub-adviser or Fiduciary Trust Company International serves as a director,
officer, or employee of the Corporation.
Fiduciary Trust Company International was founded in 1931 and is a New York
state-chartered bank. It has focused primarily on the management of the
investments and financial affairs of its customers, and has chosen to minimize
its commercial banking activities. As of December 31, 1993, Fiduciary Trust
Company International had total assets of approximately $335 million, and total
assets under management of over $29 billion, of which in excess of
$10 billion is invested in foreign securities. Fiduciary International, Inc., is
a wholly-owned subsidiary of Fiduciary Investment Corporation, which, in turn,
is a wholly-owned subsidiary of Fiduciary Trust Company International. Fiduciary
Investment Corporation is a corporation organized under Article XII of the New
York Banking Law. Its primary activity is to act as an intermediate parent of
several Fiduciary Trust Company International subsidiaries.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectuses. For the fiscal years ended
November 30, 1993, and, prior to the creation of separate classes of shares,
November 30, 1992 and 1991, Fiduciary International, Inc., the Fund's former
investment adviser, earned advisory fees of $1,387,617, $1,092,369, and
$923,543, respectively, which were reduced by $16,560, $21,055, and $278,090,
respectively, because of the voluntary undertaking to limit the Fund's expenses.
SUB-ADVISORY FEES
For its sub-advisory services, Fiduciary International, Inc., receives an annual
sub-advisory fee as described in the prospectuses. Federated Management became
the Fund's sub-adviser December 1, 1990, and served in that capacity until March
15, 1994. For the fiscal years ended November 30, 1993, and, prior to the
creation of separate classes of shares, November 30, 1992 and 1991, Federated
Management, in its former capacity as sub-adviser to the Fund, received a gross
fee from Fiduciary International, Inc., the Fund's former investment adviser,
amounting to $693,809, $546,184, and $461,772, respectively.
STATE EXPENSE LIMITATIONS
The Adviser and sub-adviser have undertaken to comply with the expense
limitation established by certain states for investment companies whose
shares are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory and sub-advisory
fees, but not including brokerage commissions, interest, taxes, and
extraordinary expenses) exceed 2-1/2% per year of the first $30 million
of average net assets, 2% per year of the next $70 million of average net
assets, and 1-1/2% per year of the remaining average net assets, the
Adviser and sub-adviser will reimburse the Fund for their expenses over
the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory and sub-advisory fees paid will be
reduced by the amounts of the excess, subject to an annual adjustment. If
the expense limitation is exceeded, the amounts to be reimbursed by the
Adviser and sub-adviser will be limited, in any single fiscal year, by
the amounts of the investment advisory and sub-advisory fees.
This arrangement is not part of the advisory contract or sub-advisory
agreement and may be amended or rescinded in the future.
OTHER RELATED SERVICES
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of shares of funds offered by Federated Securities Corp.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund and receives an administrative
fee as described in the prospectuses. For the fiscal years ended November 30,
1993, and, prior to the creation of separate classes of shares, November 30,
1992, and 1991, the Fund incurred administrative service fees of $208,142,
$163,855, and $140,238, respectively. Dr. Henry J. Gailliot, an officer of
Federated Management, the Adviser to the Fund, holds approximately 20% of the
outstanding common stock and serves as a director of Commercial Data Services,
Inc., a company which provides computer processing services to Federated
Administrative Services.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
The Adviser and sub-adviser may select brokers and dealers who offer brokerage
and research services. These services may be furnished directly to the Fund or
to the Adviser and sub-adviser and may include:
.advice as to the advisability of investing in securities;
.security analysis and reports;
.economic studies;
.industry studies;
.receipt of quotations for portfolio evaluations; and
.similar services.
The Adviser and sub-adviser and their affiliates exercise reasonable business
judgment in selecting brokers who offer brokerage and research services to
execute securities transactions. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of the
brokerage and research services provided.
Research services provided by brokers may be used by the Adviser, the
sub-adviser, or by affiliates of Federated Investors in advising certain other
accounts. To the extent that receipt of these services may supplant services for
which the Adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.
Investment decisions for the Fund will be made independently from those of any
fiduciary or other accounts that may be managed by Fiduciary Trust Company
International or its subsidiaries. If, however, such accounts and the
Fund are simultaneously engaged in transactions involving the same securities,
the transactions may be combined and allocated to each account. This system may
adversely affect the price the Fund pays or receives, or the size of the
position it obtains.
The Adviser may engage in other non-U.S. transactions that may have adverse
effects on the market for securities in the Fund's portfolio. The Adviser and
sub-adviser are not obligated to obtain any material non-public ("inside")
information about any securities issuer, or to base purchase or sale
recommendations on such information.
For the fiscal years ended November 30, 1993, and, prior to the creation of
separate classes of shares, November 30, 1992, and 1991, the Fund paid
$1,072,963, $848,720, and $584,282, respectively, in brokerage commissions on
brokerage transactions.
As of November 30, 1993, the Fund owned $1,958,000 of securities of Deutsche
Bank, one of its regular broker/dealers that derives more than 15% of gross
revenues from securities-related activities.
PURCHASING SHARES
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Except under certain circumstances described in the respective prospectuses,
Shares are sold at their net asset value (plus a sales load on Class A Shares
only) on days the New York Stock Exchange is open for business. The procedure
for purchasing Shares is explained in the respective prospectuses under
"Investing in Class A Shares," "Investing in Class B Shares," or "Investing in
Class C Shares."
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for Shares of the Fund.
For the fiscal years ended November 30, 1993, and, prior to the creation of
separate classes of shares, November 30, 1992, and 1991, the distributor was
paid $114,693, $92,633, and $129,461, respectively. For the same periods, the
distributor retained $13,186, $6,976, and $11,744, respectively, after dealer
concessions.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS
As explained in the respective prospectuses, with respect to the Shares of the
Fund, the Fund has adopted a Shareholder Services Plan, and, with respect to
Class B Shares and Class C Shares, the Fund has adopted a Distribution Plan.
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; providing office space, equipment, telephone facilities, and
various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses.
By adopting the Distribution Plan, the Directors expect that the Fund will be
able to achieve a more predictable flow of cash for investment purposes and to
meet redemptions. This will facilitate more efficient portfolio management and
assist the Fund in pursuing its investment objective. By identifying potential
investors whose needs are served by the Fund's objective, and properly servicing
these accounts, it may be possible to curb sharp fluctuations in rates of
redemptions and sales.
Other benefits, which may be realized under either arrangement, may include: (1)
providing personal services to shareholders; (2) investing shareholder assets
with a minimum of delay and administrative detail; (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds before shareholders begin to
earn dividends. Federated Services Company acts as the shareholder's agent in
depositing checks and converting them to federal funds.
PURCHASES BY SALES REPRESENTATIVES, DIRECTORS OF THE CORPORATION, AND EMPLOYEES
Directors, employees, and sales representatives of the Fund, Federated
Management, Fiduciary International, Inc., and Federated Securities Corp., or
their affiliates, or any investment dealer who has a sales agreement with
Federated Securities Corp., and their spouses and children under 21, may buy
Shares at net asset value without a sales load and are not subject to a
contingent deferred sales charge (Class B Shares and Class C Shares only) to the
extent the financial institution through which the Shares are sold agrees to
waive any initial payment to which it might otherwise be entitled. Shares may
also be sold without sales charges to trusts or pension or profit-sharing plans
for these persons.
These sales are made with the purchaser's written assurance that the purchase is
for investment purposes and that the securities will not be resold except
through redemption by the Fund.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the respective prospectuses.
DETERMINING MARKET VALUE OF SECURITIES
Market or fair values of the Fund's portfolio securities are determined as
follows:
.according to the last reported sale price on a recognized securities exchange,
if available. (If a security is traded on more than one exchange, the price on
the primary market for that security, as determined by the Adviser or sub-
adviser, is used.);
.according to the last reported bid price, if no sale on the recognized exchange
is reported or if the security is traded over-the-counter; or
.at fair value as determined in good faith by the Corporation's Directors; or
.for short-term obligations with remaining maturities of less than 60 days at
the time of purchase, at amortized cost, which approximates value.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider: institutional trading in
similar groups of securities; yield; quality; coupon rate; maturity; type of
issue; trading characteristics; and other market data.
TRADING IN FOREIGN SECURITIES
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange. In computing the net asset value, the
Fund values foreign securities at the latest closing price on the exchange on
which they are traded immediately prior to the closing of the New York Stock
Exchange. Certain foreign currency exchange rates may also be determined at the
latest rate prior to the closing of the New York Stock Exchange. Foreign
securities quoted in foreign currencies are translated into U.S. dollars at
current rates. Occasionally, events that affect these values and exchange rates
may occur between the times at which they are determined and the closing of the
New York Stock Exchange. If such events materially affect the value of portfolio
securities, these securities may be valued at their fair value as determined in
good faith by the Directors, although the actual calculation may be done by
others.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at the next computed net asset value after the Fund
receives the redemption request. Shareholder redemptions of Class B Shares and
Class C Shares may be subject to a contingent deferred sales charge. Redemption
procedures are explained in the respective prospectuses under "Redeeming Class A
Shares," "Redeeming Class B Shares," and "Redeeming Class C Shares." Although
the transfer agent does not charge for telephone redemptions, it reserves the
right to charge a fee for the cost of wire-transferred redemptions of less than
$5,000.
Since portfolio securities of the Fund may be traded on foreign exchanges which
trade on Saturdays or on holidays on which the Fund will not make redemptions,
the net asset value of each class of Shares of the Fund may be significantly
affected on days when shareholders do not have an opportunity to redeem their
Shares.
REDEMPTION IN KIND
Although the Corporation intends to redeem Shares in cash, it reserves the right
under certain circumstances to pay the redemption price, in whole or in part, by
a distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the
Directors determine to be fair and equitable.
The Corporation has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940 under which the Corporation is obligated to redeem Shares
for any one shareholder in cash only up to the lesser of $250,000 or 1% of a
class of Shares' net asset value during any 90-day period.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code, as amended,
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, the Fund
must, among other requirements:
.derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
.derive less than 30% of its gross income from the sale of securities held less
than three months;
.invest in securities within certain statutory limits; and
.distribute to its shareholders at least 90% of its net income earned during the
year.
However, the Fund may invest in the stock of certain foreign corporations which
would constitute a Passive Foreign Investment Company (PFIC). Federal income
taxes may be imposed on the Fund upon disposition of PFIC investments.
FOREIGN TAXES
Investment income on certain foreign securities in which the Fund may invest may
be subject to foreign withholding or other taxes that could reduce the return on
these securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign taxes to which the Fund
would be subject.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional Shares. The Fund's dividends, and any short-term
capital gains, are taxable as ordinary income.
CAPITAL GAINS
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have held
the Fund Shares.
TOTAL RETURN
- --------------------------------------------------------------------------------
The Fund's average annual total returns for the fiscal year ended November 30,
1993, and, prior to the creation of separate classes of shares, for the
five-year period ended November 30, 1993, and for the period from August 17,
1984 (effective date of the Fund's registration statement) to November 30, 1993,
were 13.22%, 3.65%, and 14.44%, respectively.
The average annual total return for all classes of Shares of the Fund is the
average compounded rate of return for a given period that would equate a $1,000
initial investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of Shares owned at the
end of the period by the offering price per Share at the end of the period. The
number of Shares owned at the end of the period is based on the number of Shares
purchased at the beginning of the period with $1,000, less any applicable sales
load, adjusted over the period by any additional Shares, assuming the annual
reinvestment of all dividends and distributions. Any applicable contingent
deferred sales charge is deducted from the ending value of the investment based
on the lesser of the original purchase price or the offering price of Shares
redeemed.
YIELD
- --------------------------------------------------------------------------------
The yield for Class A Shares for the thirty-day period ended November 30, 1993,
was _____%. The yield for Class C Shares for the thirty-day period ended
November 30, 1993, was _____%.
The yield for all classes of Shares of the Fund is determined by dividing the
net investment income per Share (as defined by the Securities and Exchange
Commission) earned by any class of Shares over a thirty-day period by the
maximum offering price per Share of any class of Shares on the last day of the
period. This value is then annualized using semi-annual compounding. This means
that the amount of income generated during the thirty-day period is assumed to
be generated each month over a 12-month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by any
class of Shares because of certain adjustments required by the SEC and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in any class
of Shares, the performance will be reduced for those shareholders paying those
fees.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The Fund's performance of each class of Shares depends upon such variables as:
.portfolio quality;
.average portfolio maturity;
.type of instruments in which the portfolio is invested;
.changes in interest rates on money market instruments;
.changes in the Fund's or a class of Shares' expenses; and
.various other factors.
A class of Shares' performance fluctuates on a daily basis largely because net
earnings and offering price per Share fluctuate daily. Both net earnings and
offering price per Share are factors in the computation of total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any indices
used, prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute offering price. The
financial publications and/or indices which the Fund uses in advertising may
include:
.LIPPER ANALYTICAL SERVICES, INC., for example, makes comparative calculations
for one-month, three-month, one-year, and five-year periods which assume the
reinvestment of all capital gains distributions and income dividends.
.EUROPE, AUSTRALIA, AND FAR EAST (EAFE) INDEX is a market capitalization
weighted foreign securities index, which is widely used to measure the
performance of European, Australian, New Zealand and Far Eastern stock markets.
The index covers approximately 1,020 companies drawn from 18 countries in the
above regions. The index values its securities daily in both U.S. dollars and
local currency and calculates total returns monthly. EAFE U.S. dollar total
return is a net dividend figure less Luxembourg withholding tax. The EAFE is
monitored by Capital International, S.A., Geneva, Switzerland.
.STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a composite
index of common stocks in industry, transportation, and financial and public
utility companies, can be used to compare to the total returns of funds whose
portfolios are invested primarily in common stocks. In addition, the Standard &
Poor's index assumes reinvestments of all dividends paid by stocks listed on
its index. Taxes due on any of these distributions are not included, nor are
brokerage or other fees calculated in Standard & Poor's figures.
.MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
Advertisements and sales literature for any class of Shares may quote total
returns which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment in any
class of Shares based on annual reinvestment of dividends over a specified
period of time.
Advertisments may quote performance information which does not reflect the
effect of the sales load or contingent deferred sales charge, as applicable.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The financial statements for the fiscal year ended November 30, 1993, are
incorporated herein by reference to the Annual Report of the Fund dated November
30, 1993 (File No. 811-3984). Additionally, the financial statements for the
six-month period ended May 31, 1994, are incorporated herein by reference from
the Fund's Semi-Annual Report dated May 31, 1994 (File No. 811-3984). Copies of
the Annual and Semi-Annual Reports may be obtained without charge by contacting
the Fund at the address located on the back cover of the prospectus.
APPENDIX
- --------------------------------------------------------------------------------
MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER RATING DEFINITIONS
PRIME-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following characteristics:
.Leading market positions in well-established industries.
.High rates of return on funds employed.
.Conservative capitalization structure with moderate reliance on debt and ample
asset protection.
.Broad margins in earning coverage of fixed financial charges and high internal
cash generation.
.Well-established access to a range of financial markets and assured sources of
alternate liquidity.
PRIME-2--Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
STANDARD AND POOR'S CORPORATION COMMERCIAL PAPER RATING DEFINITIONS
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
MOODY'S INVESTORS SERVICE, INC., LONG-TERM BOND RATING DEFINITIONS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
STANDARD AND POOR'S CORPORATION LONG-TERM DEBT RATING DEFINITIONS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's
Corporation. Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes in
circumstances and economic conditions than debt in higher rated categories.
1010302B (9/94)
INTERNATIONAL INCOME FUND
A PORTFOLIO OF INTERNATIONAL SERIES, INC.
(FORMERLY, FT SERIES, INC.)
CLASS B SHARES
PROSPECTUS
The Class B Shares of International Income Fund (the "Fund") offered by this
prospectus represent interests in the Fund, which is a non-diversified
investment portfolio in International Series, Inc. (formerly, FT Series, Inc.)
(the "Corporation"), an open-end, management investment company (a mutual fund).
The Fund's objective is to seek a high level of current income in U.S. Dollars
consistent with prudent investment risk. The Fund has a secondary objective of
capital appreciation. The Fund will pursue these objectives by investing in
high-quality debt securities denominated primarily in foreign currencies.
THE CLASS B SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE CLASS B SHARES INVOLVES INVESTMENT RISKS
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in Class B Shares of the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information for Class
A Shares, Class B Shares, and Class C Shares dated September , 1994, with the
Securities and Exchange Commission. The information contained in the Combined
Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Combined Statement of Additional
Information free of charge by calling 1-800-235-4669. To obtain other
information or to make inquiries about the Fund, contact your financial
institution.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated September , 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
GENERAL INFORMATION 2
- ------------------------------------------------------
LIBERTY FAMILY OF FUNDS 2
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 4
Acceptable Investments 4
Foreign Government Securities 4
Temporary Investments 5
Repurchase Agreements 5
When-Issued and Delayed Delivery
Transactions 5
Lending of Portfolio Securities 5
Risk Considerations 5
Allocation 5
Duration 6
Foreign Securities 6
U.S. Government Policies 6
Currency Risks 6
Hedging Vehicles and Strategies 7
Hedging Vehicles 7
Forward Foreign Currency Exchange Contracts 7
Options 8
Futures 8
Hedging Strategies 8
Currency Hedging 8
Interest Rate Hedging 9
General 9
Non-Diversification 10
Portfolio Turnover 10
Investment Limitations 10
NET ASSET VALUE 11
- ------------------------------------------------------
INVESTING IN CLASS B SHARES 11
- ------------------------------------------------------
Share Purchases 11
Through a Financial Institution 11
Directly from the Distributor 12
Minimum Investment Required 12
What Shares Cost 12
Conversion of Class B Shares 13
Systematic Investment Program 13
Certificates and Confirmations 13
Dividends 13
Capital Gains 14
Retirement Plans 14
EXCHANGE PRIVILEGE 14
- ------------------------------------------------------
Requirements for Exchange 14
Tax Consequences 14
Making an Exchange 14
Telephone Instructions 15
REDEEMING CLASS B SHARES 15
- ------------------------------------------------------
Through a Financial Institution 15
Directly from the Fund 15
By Telephone 15
By Mail 16
Signatures 16
Contingent Deferred Sales Charge 17
Elimination of Contingent Deferred Sales Charge 17
Systematic Withdrawal Program 18
Reinvestment Privilege 18
Accounts with Low Balances 18
INTERNATIONAL SERIES, INC., INFORMATION 19
- ------------------------------------------------------
Management of the Corporation 19
Board of Directors 19
Officers and Directors 19
Investment Adviser 23
Advisory Fees 23
Adviser's Background 23
Sub-Adviser 24
Sub-Advisory Fees 24
Sub-Adviser's Background 24
Distribution of Class B Shares 25
Distribution and Shareholder Services Plans 25
Other Payments to Financial Institutions 26
Administration of the Fund 26
Administrative Services 26
Custodian 26
Transfer Agent and Dividend Disbursing Agent 26
Legal Counsel 26
Independent Public Accountants 26
Brokerage Transactions 27
Expenses of the Fund and Class B Shares 27
SHAREHOLDER INFORMATION 27
- ------------------------------------------------------
Voting Rights 27
TAX INFORMATION 28
- ------------------------------------------------------
Federal Income Tax 28
Pennsylvania Corporate and
Personal Property Taxes 28
PERFORMANCE INFORMATION 29
- ------------------------------------------------------
OTHER CLASSES OF SHARES 29
- ------------------------------------------------------
Financial Highlights--Class A Shares 31
Financial Highlights--Class C Shares 32
ADDRESSES Inside Back Cover
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).............................. None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)................... None
Contingent Deferred Sales Charge (as a percentage of original purchase price
or redemption proceeds, as applicable) (1)............................................................. 5.50%
Redemption Fee (as a percentage of amount redeemed, if applicable)....................................... None
Exchange Fee............................................................................................. None
ANNUAL CLASS B SHARES OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver)(2)......................................................................... 0.00%
12b-1 Fee................................................................................................ 0.00%
Total Other Expenses..................................................................................... 0.00%
Shareholder Services Fee.................................................................. 0.00%
Total Class B Shares Operating Expenses(3)(4)................................................... 0.00%
</TABLE>
(1) The contingent deferred sales charge is 5.50% in the first year, declining
to 1.00% in the sixth year, and 0.00% thereafter. (See "Contingent Deferred
Sales Charge.").
(2) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The adviser can
terminate this voluntary waiver at any time at its sole discretion. The
maximum management fee is 0.75%.
(3) Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase.
(4) The Total Class B Shares Operating Expenses are estimated to be % absent
the anticipated voluntary waiver of a portion of the management fee.
* Total Class B Shares Operating Expenses are estimated based on average
expenses expected to be incurred during the period ending November 30, 1995.
During the course of this period, expenses may be more or less than the
average amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF CLASS B SHARES OF THE FUND WILL
BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE
VARIOUS COSTS AND EXPENSES, SEE "INVESTING IN CLASS B SHARES" AND "FUND
INFORMATION." Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales loads permitted under the rules of the National
Association of Securities Dealers, Inc.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming
(1) 5% annual return and (2) redemption at the end of each time period......................... $00 $00
You would pay the following expenses on the same investment,
assuming no redemption......................................................................... $00 $00
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER
30, 1995.
The information set forth in the foregoing table and example relates only to
Class B Shares of the Fund. The Fund also offers two additional classes of
shares called Class A Shares and Class C Shares. Class B Shares, Class A Shares,
and Class C Shares are subject to certain of the same expenses; however, Class A
Shares are subject to a maximum sales load of 4.50%, a 12b-1 fee of up to 0.25%,
but are not subject to a contingent deferred sales charge. Class C Shares are
subject to a 12b-1 fee of up to 0.75% and may be subject to a contingent
deferred sales charge of 1.00%, but are not subject to a front-end sales load.
See "Other Classes of Shares."
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Corporation was established as FT International Trust, a Massachusetts
business trust, on March 9, 1984, and reorganized as a corporation under the
laws of the state of Maryland on February 11, 1991. At a special meeting of
shareholders held on March 15, 1994, the shareholders of the Corporation
approved an amendment to the Articles of Incorporation to change the name of the
Corporation to International Series, Inc. The Corporation's address is Liberty
Center, Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. The
Articles of Incorporation permit the Corporation to offer separate series of
shares representing interests in separate portfolios of securities. The shares
in any one portfolio may be offered in separate classes. With respect to this
Fund, as of the date of this prospectus, the Board of Directors (the
"Directors") has established three classes of shares, known as Class A Shares,
Class B Shares, and Class C Shares. This prospectus relates only to Class B
Shares ("Shares") of the Corporation's portfolio known as International Income
Fund.
Shares of the Fund are designed for investors who wish to spread their
investments beyond the United States and who are prepared to accept the
particular risks associated with these investments. It is not intended to
provide a complete investment program for an investor. A minimum initial
investment of $1,500 is required, unless the investment is in a retirement
account, in which case the minimum investment is $50.
Except as otherwise noted in this prospectus, Shares are sold at net asset value
and redeemed at net asset value. However, a contingent deferred sales charge is
imposed on certain Shares of the Fund which are redeemed within six full years
of the date of purchase.
The Fund's current net asset value can be found in the mutual funds section of
local newspapers under " ."
LIBERTY FAMILY OF FUNDS
- --------------------------------------------------------------------------------
The Fund is a member of a family of mutual funds, collectively known as the
Liberty Family of Funds. The other funds in the Liberty Family of Funds are:
American Leaders Fund, Inc., providing growth of capital and income
through high-quality stocks;
Capital Growth Fund, providing appreciation of capital primarily through
equity securities;
Fund for U.S. Government Securities, Inc., providing current income
through long-term U.S. government securities;
International Equity Fund, providing long-term capital growth and income
through international securities;
Liberty Equity Income Fund, Inc., providing above average income and
capital appreciation through income-producing equity securities;
Liberty High Income Bond Fund, Inc., providing high current income through
high-yielding, lower-rated corporate bonds;
Liberty Municipal Securities Fund, Inc., providing a high level of current
income exempt from federal regular income tax through municipal bonds;
Liberty U.S. Government Money Market Trust, providing current income
consistent with stability of principal through high-quality U.S.
government securities;
Liberty Utility Fund, Inc. providing current income and long-term growth
of income, primarily through electric, gas, and communication utilities;
Limited Term Fund, providing a high level of current income consistent
with minimum fluctuation in principal value through investment-grade
securities;
Limited Term Municipal Fund, providing a high level of current income
exempt from federal regular income tax consistent with the preservation of
principal, primarily limited to municipal securities;
Michigan Intermediate Municipal Trust, providing current income exempt
from federal regular income tax and the personal income taxes imposed by
the state of Michigan and Michigan municipalities, primarily through
Michigan municipal securities;
Pennsylvania Intermediate Municipal Trust, providing current income exempt
from federal regular income tax and the personal income taxes imposed by
the Commonwealth of Pennsylvania, primarily through Pennsylvania municipal
securities;
Strategic Income Fund, providing a high level of current income, primarily
through domestic and foreign corporate debt obligations;
Tax-Free Instruments Trust, providing current income consistent with
stability of principal and exempt from federal income tax, through
high-quality, short-term municipal securities; and
World Utility Fund, providing total return through securities issued by
domestic and foreign companies in the utilities industry.
Prospectuses for these funds are available by writing to Federated Securities
Corp.
Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus.
The Liberty Family of Funds provides flexibility and diversification for an
investor's long-term investment planning. It enables an investor to meet the
challenges of changing market conditions by offering convenient exchange
privileges which give access to various investment vehicles and by providing the
investment services of proven, professional investment advisers.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Fund's objective is to seek a high level of current income in U.S. Dollars
consistent with prudent investment risk. The Fund has a secondary investment
objective of capital appreciation. The investment objectives cannot be changed
without the approval of the shareholders. The Fund will pursue these objectives
by investing in high-quality debt securities denominated primarily in foreign
currencies.
While there is no assurance that the Fund will achieve its investment
objectives, it endeavors to do so by following the investment policies described
in this prospectus. Unless indicated otherwise, the investment policies of the
Fund may be changed by the Directors without shareholder approval. Shareholders
will be notified before any material change in the policies becomes effective.
INVESTMENT POLICIES
ACCEPTABLE INVESTMENTS. The Fund will invest primarily in high-quality debt
securities denominated in the currencies of the nations that are members of the
Organization for Economic Cooperation and Development. These nations include,
but are not limited to, the following: Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Greece, Hong Kong, Iceland, Ireland, Italy,
Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden,
Switzerland, the United Kingdom, and the United States. The Fund will invest at
least 65%, and under normal market conditions substantially all of its total
assets in high-quality debt securities denominated in foreign currencies of
issuers located in at least three countries outside of the United States.
Additionally, investments may be made in securities denominated in the European
Currency Unit (the "ECU"), a multinational currency unit which represents
specified amounts of the currencies of certain member states of the European
Economic Community.
The high-quality debt securities in which the Fund will invest will possess a
minimum credit rating of A as assigned by Standard & Poor's Corporation ("S&P")
or A by Moody's Investors Service, Inc. ("Moody's"), or, if unrated, will be
judged by the adviser or sub-adviser to the Fund, to be of comparable quality.
Because the average quality of the Fund's portfolio investments should remain
constantly between A and AAA, the Fund will seek to avoid the adverse
consequences that may arise for some debt securities in difficult economic
circumstances. Downgraded securities will be evaluated on a case-by-case basis
by the adviser or sub-adviser. The adviser or sub-adviser will determine whether
or not the security continues to be an acceptable investment. If not, the
security will be sold.
The Fund's portfolio of debt securities will be comprised mainly of foreign
government, foreign governmental agency or supranational institution bonds. In
addition, the Fund will also invest in high quality debt securities issued by
corporations in the currencies specified above and subject to the credit
limitations listed above. No more than 25% of the Fund's total assets will be
invested in the securities of issuers located in any one country. The Fund will
also invest in both exchange traded and over-the-counter options, subject to the
limitations outlined in this prospectus.
FOREIGN GOVERNMENT SECURITIES. The foreign government securities in which
the Fund may invest generally consist of obligations supported by national,
state or provincial governments or similar political subdivisions. Foreign
government securities also include debt obligations of supranational
entities, which include international organizations designed or supported
by governmental entities to promote economic reconstruction or development,
international banking institutions and related government agencies.
Examples include the International Bank for Reconstruction and Development
(the World Bank), the European Coal and Steel Community, the Asian
Development Bank and the Inter-American Development Bank.
Foreign government securities also include debt securities of
"quasi-governmental agencies." Debt securities of quasi-governmental
agencies are either debt securities issued by entities which are owned by a
national, state or equivalent government or are obligations of a political
unit that
are not backed by the national government's full faith and credit and
general taxing powers. Further, foreign government securities include
mortgage-related securities issued or guaranteed by national, state or
provincial governmental instrumentalities, including quasi-governmental
agencies.
TEMPORARY INVESTMENTS. Up to 10% of the Fund's total assets may be
invested at any one time in cash deposits or in certificates of deposit
issued by banks of high credit quality, or in commercial paper with an
A1/P1 rating assigned by S&P or Moody's, or in repurchase agreements. At
the discretion of the adviser or sub-adviser, these instruments may be
denominated in foreign currencies or U.S. Dollars.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which
banks, broker/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them at
a mutually agreed upon time and price. To the extent that the original
seller does not repurchase the securities from the Fund, the Fund could
receive less than the repurchase price on any sale of such securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The Fund engages in when-issued and delayed delivery transactions
only for the purpose of acquiring portfolio securities consistent with the
Fund's investment objective and policies, not for investment leverage. These
transactions are made to secure what is considered to be an advantageous price
and yield for the Fund. Settlement dates may be a month or more after entering
into these transactions, and the market values of the securities may vary from
the purchase price. In when-issued and delayed delivery transactions, the Fund
relies on the seller to complete the transaction. The seller's failure to
complete the transaction may cause the Fund to miss a price or yield considered
to be advantageous.
No fees or other expenses, other than normal transaction costs, are incurred.
However, assets of the Fund sufficient to make payment for the securities to be
purchased are segregated on the Fund's records at the trade date and are
maintained until the transaction is settled.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term or long-term basis up to
one-third the value of its total assets to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the adviser
has determined are creditworthy under guidelines established by the Board of
Directors and will receive collateral in the form of cash or U.S. government
securities equal to at least 100% of the value of the securities loaned.
RISK CONSIDERATIONS. Investing in foreign securities carries substantial risks
in addition to those associated with investments in domestic securities. In an
attempt to reduce some of these risks, the Fund will attempt to distribute its
investments broadly among foreign countries. The debt securities of at least
three different foreign countries will always be represented.
ALLOCATION. The allocation of the Fund's assets in a particular market and
currency will be based on a fundamental assessment of the economic strength
of each relevant country combined with considerations of credit quality and
currency and interest rate trends. These factors are reviewed
on a regular basis in order to derive specific interest rate and currency
forecasts, which are quantified in terms of total return. The adviser or
sub-adviser will vary the market and currency allocation of the Fund
seeking to achieve an optimal mix of investments to achieve the investment
objectives of the Fund.
DURATION. Duration measures the magnitude of the change in the price of a
debt security relative to a given change in the market rate of interest.
The duration of a debt security depends primarily upon the security's
coupon rate, maturity date, and level of market interest rates for similar
debt securities. There will be no limit on the duration of any one
individual issue purchased by the Fund, except that the purchase of an
issue that has no final maturity date shall not be permitted. The weighted
average duration of the Fund shall not exceed ten years and shall not be
less than one year, but will normally fall within a range of three to seven
years. The adviser regards that range as being consistent with a prudent
attitude towards risk. Shifts outside this range would be made only under
unusual circumstances.
FOREIGN SECURITIES. Investments in foreign securities involve special
risks that differ from those associated with investments in domestic
securities. The risks associated with investments in foreign securities
relate to political and economic developments abroad, as well as those that
result from the differences between the regulation of domestic securities
and issuers and foreign securities and issuers. These risks may include,
but are not limited to, expropriation, confiscatory taxation, currency
fluctuations, withholding taxes on interest, limitations on the use or
transfer of Fund assets, political or social instability and adverse
diplomatic developments. It may also be more difficult to enforce
contractual obligations or obtain court judgments abroad than would be the
case in the United States because of differences in the legal systems.
Moreover, individual foreign economies may differ favorably or unfavorably
from the domestic economy in such respects as growth of gross national
product, the rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.
Additional differences exist between investing in foreign and domestic
securities. Examples of such differences include:
less publicly available information about foreign issuers;
credit risks associated with certain foreign governments;
the lack of uniform financial accounting standards applicable to foreign
issuers;
less readily available market quotations on foreign issues;
the likelihood that securities of foreign issuers may be less liquid or
more volatile;
generally higher foreign brokerage commissions; and
unreliable mail service between countries.
U.S. GOVERNMENT POLICIES. In the past, U.S. government policies have
discouraged or restricted certain investments abroad by investors such as
the Fund. Investors are advised that when such policies are instituted, the
Fund will abide by them.
CURRENCY RISKS. Because the majority of the debt securities purchased by
the Fund are denominated in currencies other than the U.S. Dollar, changes
in foreign currency exchange rates will affect the Fund's net asset value;
the value of interest earned; gains and losses realized on the sale
of securities; and net investment income and capital gain, if any, to be
distributed to shareholders by the Fund. If the value of a foreign currency
rises against the U.S. Dollar, the value of the Fund assets denominated in
that currency will increase; correspondingly, if the value of a foreign
currency declines against the U.S. Dollar, the value of Fund assets
denominated in that currency will decrease. Under the U.S. tax code, the
Fund is required to separately account for the foreign currency component
of gains or losses, which will usually be viewed under the U.S. tax code as
items of ordinary and distributable income or loss, thus affecting the
Fund's distributable income.
The exchange rates between the U.S. Dollar and foreign currencies are a
function of such factors as supply and demand in the currency exchange
markets, international balances of payments, governmental interpretation,
speculation and other economic and political conditions. Although the Fund
values its assets daily in U.S. Dollars, the Fund will not convert its
holdings of foreign currencies to U.S. Dollars daily. When the Fund
converts its holdings to another currency, it may incur conversion costs.
Foreign exchange dealers may realize a profit on the difference between the
price at which they buy and sell currencies.
The Fund will engage in foreign currency exchange transactions in
connection with its investments in foreign securities. The Fund will
conduct its foreign currency exchange transactions either on a spot (i.e.
cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through forward contracts to purchase or sell foreign
currencies.
The adviser or sub-adviser believes that active management of currency
risks through a variety of hedging vehicles and strategies can considerably
limit the risk of capital loss through movements in the foreign exchange
markets, such as those described above. The adviser or sub-adviser will not
engage in hedging for speculative purposes.
HEDGING VEHICLES AND STRATEGIES
HEDGING VEHICLES. The Fund may use the following hedging vehicles in an attempt
to manage currency and interest rate risks:
forward foreign currency exchange contracts;
options contracts; and
futures contracts.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the
date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded directly between currency
traders (usually large commercial banks) and their customers. When the Fund
enters into a contract for the purchase or sale of a security denominated
in a foreign currency, it may want to establish the U.S. Dollar cost or
proceeds, as the case may be. By entering into a forward contract in U.S.
Dollars for the purchase or sale of the amount of foreign currency involved
in an underlying security transaction, the Fund is able to protect itself
against a possible loss between trade and settlement dates resulting from
an adverse change in the relationship between the U.S. Dollar and such
foreign currency. However, this tends to limit potential gains which might
result from a positive change in such currency relationships.
There is no limitation as to the percentage of the Fund's assets that may
be committed under forward foreign currency exchange contracts. The Fund
does not enter into such forward contracts or maintain a net exposure in
such contracts where the Fund would be obligated to deliver an amount of
foreign currency in excess of the value of the Fund's portfolio securities
or other assets denominated in that currency or, in the case of a
"cross-hedge" (see "Hedging Strategies" below), denominated in a currency
or currencies that the Fund's adviser or sub-adviser believes will reflect
a high degree of correlation with the currency with regard to price
movements. The Fund generally does not enter into a forward foreign
currency exchange contract with a term longer than one year.
OPTIONS. The Fund may deal in options on foreign currencies, foreign
currency futures, securities, and securities indices, which options may be
listed for trading on a national securities exchange or traded
over-the-counter. The Fund may write covered call options and secured put
options on up to 25% of its net assets and may purchase put and call
options provided that no more than 5% of the fair market value of its net
assets may be invested in premiums on such options.
A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying currency, security or other asset at the
exercise price during the option period. A put option gives the purchaser
the right to sell, and the writer the obligation to buy, the underlying
currency, security or other asset at the exercise price during the option
period. The writer of a covered call owns assets that are acceptable for
escrow and the writer of a secured put invests an amount not less than the
exercise price in eligible assets to the extent that it is obligated as a
writer. If a call written by the Fund is exercised, the Fund forgoes any
possible profit from an increase in the market price of the underlying
asset over the exercise price plus the premium received. In writing puts,
there is a risk that the Fund may be required to take delivery of the
underlying asset at a disadvantageous price.
Over-the-counter options ("OTC options") differ from exchange traded
options in several respects. They are transacted directly with dealers and
not with a clearing corporation, and there is a risk of non-performance by
the dealer as a result of the insolvency of such dealer or otherwise, in
which event the Fund may experience material losses. However, in writing
options the premium is paid in advance by the dealer. OTC options, which
may not be continuously liquid, are available for a greater variety of
assets, and a wider range of expiration dates and exercise prices, than are
exchange traded options.
FUTURES. Futures contracts are contracts that obligate the long or short
holder to take or make delivery of a specified quantity of an asset, such
as a currency, a security, or the cash value of a securities index at a
specified future date at a specified price. The Fund may engage in futures
transactions, but will not participate in futures contracts if the sum of
its initial margin deposits on open contracts will exceed 5% of the fair
market value of the Fund's net assets.
HEDGING STRATEGIES
CURRENCY HEDGING. When the Fund's adviser or sub-adviser believes that the
currency of a particular foreign country may suffer a substantial decline
against the U.S. Dollar, it may enter into a forward contract to sell an
amount of that foreign currency for a fixed U.S. Dollar amount
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency (i.e., "hedge"). The Fund may, as an
alternative, enter into a forward contract to sell a different foreign
currency for a fixed U.S. Dollar amount where the Fund's investment adviser
believes that the U.S. Dollar value of the currency to be sold pursuant to
the forward contract will fall whenever there is a decline in the U.S.
Dollar value of the currency in which portfolio securities of the Fund are
denominated (i.e., "cross-hedge"). A cross hedge can be achieved not only
by using a "proxy" currency in which Fund securities are denominated, but
also by using the generally higher yielding Canadian Dollar as a "proxy"
currency for the U.S. Dollar. This strategy may be beneficial because the
level of divergence in the exchange rates of the two currencies has
historically tended to be relatively small.
For example, the Fund may invest in securities denominated in a Western
European currency, such as the French Franc, and seek to hedge against the
effect of an increase in the value of the U.S. Dollar against that currency
by entering into a forward foreign currency exchange contract to sell the
lower yielding German Mark, which has historically had price movements that
tend to correlate closely with those of the French Franc, thereby creating
a hedge similar to the simple Dollar/Franc hedge, but at a possibly lower
cost. In addition, the Fund might arrange to sell those Marks against
Canadian Dollars in an effort to minimize hedging costs.
INTEREST RATE HEDGING. The Fund may engage in futures transactions and may
use options in an attempt to hedge against the effects of fluctuations in
interest rates and other market conditions. For example, if the Fund owned
long-term bonds and interest rates were expected to rise, it could sell
futures contracts or the cash value of a securities index. If interest
rates did increase, the value of the bonds in the Fund would decline, but
this decline would be offset in whole or in part by an increase in the
value of the Fund's futures contracts or the cash value of the securities
index.
If, on the other hand, long-term interest rates were expected to decline,
the Fund could hold short-term debt securities and benefit from the income
earned by holding such securities, while at the same time the Fund could
purchase futures contracts on long-term bonds or the cash value of a
securities index. Thus, the Fund could take advantage of the anticipated
rise in the value of long-term bonds without actually buying them. The
futures contracts and short-term debt securities could then be liquidated
and the cash proceeds used to buy long-term bonds.
GENERAL. The Fund might not employ any of the techniques or strategies
described above, and there can be no assurance that any technique or
strategy (or combination thereof) used will succeed. The use of these
techniques and strategies involves certain risks, including:
dependence on the adviser's or sub-adviser's ability to predict movements
in the prices of assets being hedged or movements in interest rates and
currency markets;
imperfect correlation between the hedging instruments and the securities
or currencies being hedged;
the fact that skills needed to use these instruments are different from
those needed to select the Fund's securities;
the possible absence of a liquid secondary market for any particular
instrument at any particular time;
possible impediments to effective portfolio management or the ability to
meet redemption requests or other short-term obligations because of the
percentage of the Fund's assets segregated to cover its obligations; and
the possible need to defer closing out hedged positions to avoid adverse
tax consequences.
New futures contracts, options thereon and other financial products and risk
management techniques continue to be developed. The Fund may use these
investments and techniques to the extent consistent with its investment
objectives and regulatory and federal tax considerations.
NON-DIVERSIFICATION. The Fund is a non-diversified investment portfolio. As
such, there is no limit on the percentage of assets which can be invested in any
single issuer. An investment in the Fund, therefore, will entail greater risk
than would exist in a diversified portfolio of securities because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio. Any economic, political, or
regulatory developments affecting the value of the securities in the Fund's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.
The Fund intends to comply with Subchapter M of the Internal Revenue Code. This
undertaking requires that at the end of each quarter of the taxable year, with
regard to at least 50% of the Fund's total assets, no more than 5% of its total
assets are invested in the securities of a single issuer; beyond that, no more
than 25% of its total assets are invested in the securities of a single issuer.
PORTFOLIO TURNOVER. Although the Fund does not intend to invest for the purpose
of seeking short-term profits, securities in its portfolio will be sold whenever
the Fund's adviser or sub-adviser believes it is appropriate to do so in light
of the Fund's investment objective, without regard to the length of time a
particular security may have been held. The Fund's rate of portfolio turnover
may exceed that of certain other mutual funds with the same investment
objective. A higher rate of portfolio turnover involves correspondingly greater
transaction expenses which must be borne directly by the Fund and, thus,
indirectly by its shareholders. In addition, a high rate of portfolio turnover
may result in the realization of larger amounts of capital gains which, when
distributed to the Fund's shareholders, are taxable to them. (Further
information is contained in the Fund's Statement of Additional Information
within the sections "Brokerage Transactions" and "Tax Status"). Nevertheless,
transactions for the Fund's portfolio will be based only upon investment
considerations and will not be limited by any other considerations when the
Fund's investment adviser or sub-adviser deems it appropriate to make changes in
the Fund's portfolio.
INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow up to one-third of the value of its total assets and pledge up
to 15% of the value of those assets to secure such borrowings; or
sell securities short except under strict limitations.
The above investment limitation cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Directors without
shareholder approval. Shareholders will be notified before any material changes
in these limitations become effective.
The Fund will not:
invest more than 5% of its total assets in securities of issuers that have
records of less than three years of continuous operations; or
invest more than 15% of the value of its net assets in illiquid
securities, including securities not determined by the Directors to be
liquid, repurchase agreements with maturities longer than seven days after
notice and certain OTC options.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund's net asset value per Class B Share fluctuates. The net asset value for
Class B Shares is determined by adding the interest of the Class B Shares in the
market value of all securities and other assets of the Fund, subtracting the
interest of the Class B Shares in the liabilities of the Fund and those
attributable to Class B Shares, and dividing the remainder by the total number
of Class B Shares outstanding. The net asset value for Class B Shares may differ
from that of Class A Shares and Class C Shares due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
INVESTING IN CLASS B SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open. Shares may
be purchased through a financial institution which has a sales agreement with
the distributor or directly from the distributor, Federated Securities Corp.,
once an account has been established. In connection with the sale of Shares,
Federated Securities Corp. may from time to time offer certain items of nominal
value to any shareholder or investor. The Fund reserves the right to reject any
purchase request.
Orders for $250,000 or more of Class B Shares will normally be invested in Class
A Shares. (See "Other Classes of Shares.")
THROUGH A FINANCIAL INSTITUTION. Investors may call their financial institution
(such as a bank or an investment dealer) to place an order to purchase Shares.
Orders placed through a financial institution are considered received when the
Fund is notified of the purchase order or when converted into federal funds. It
is the financial institution's responsibility to transmit orders promptly.
Purchase orders through a registered broker/dealer must be received by the
broker before 4:00 p.m. (Eastern time) and must be transmitted by the broker to
the Fund before 5:00 p.m. (Eastern time) in order for Shares to be purchased at
that day's price. Purchase orders through other financial institutions must be
received by the financial institution and transmitted to the Fund before 4:00
p.m. (Eastern time) in order for Shares to be purchased at that day's price.
The financial institution which maintains investor accounts with the Fund must
do so on a fully disclosed basis unless it accounts for share ownership periods
used in calculating the contingent deferred sales charge. (See "Contingent
Deferred Sales Charge.") In addition, advance payments made to financial
institutions may be subject to reclaim by the distributor for accounts
transferred to financial institutions which do not maintain investor accounts on
a fully disclosed basis and do not account for share ownership periods. (See
"Other Payments to Financial Institutions.")
DIRECTLY FROM THE DISTRIBUTOR. An investor may place an order to purchase
Shares directly from the distributor once an account has been established. To do
so:
complete and sign the new account form available from the Fund;
enclose a check made payable to International Income Fund--Class B Shares;
and
mail both to the Fund's transfer agent, Federated Services Company, c/o
State Street Bank and Trust Company, P.O. Box 8604, Boston, MA 02266-8604.
Orders by mail are considered received after payment by check is converted by
the transfer agent's bank, State Street Bank and Trust Company ("State Street
Bank"), into federal funds. This is generally the next business day after State
Street Bank receives the check.
To purchase Shares directly from the distributor by wire once an account has
been established, call the Fund. All information needed will be taken over the
telephone, and the order is considered received when State Street Bank receives
payment by wire. Federal funds should be wired as follows: Federated Services
Company, c/o State Street Bank and Trust Company, Boston, Massachusetts 02105;
Attention: Mutual Fund Servicing Division; For Credit to: International Income
Fund--Class B Shares; Fund Number (this number can be found on the account
statement or by contacting the Fund); Group Number or Order Number; Nominee or
Institution Name; and ABA Number 011000028. Shares cannot be purchased by wire
on days on which the New York Stock Exchange is closed and on federal holidays
restricting wire transfers.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Class B Shares is $1,500 unless the investment
is in a retirement account, in which case the minimum initial investment is $50.
Subsequent investments must be in amounts of at least $100, except for
retirement accounts, which must be in amounts of at least $50.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received.
The net asset value is determined at 4:00 p.m. (Eastern time), Monday through
Friday, except on:
(i) days on which there are not sufficient changes in the value of the Fund's
portfolio securities that its net asset value might be materially affected; (ii)
days during which no Shares are tendered for redemption and no orders to
purchase Shares are received; and (iii) the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
Under certain circumstances described under "Redeeming Class B Shares,"
shareholders may be charged a contingent deferred sales charge by the
distributor at the time Shares are redeemed.
CONVERSION OF CLASS B SHARES
Class B Shares will automatically convert into Class A Shares on the fifteenth
day following the month eight years after the purchase date, except as noted
below, and will be subject to a lower distribution fee. (See "Other Classes of
Shares.") Such conversion will be on the basis of the relative net asset values
per share, without the imposition of any sales load, fee, or other charge. Class
B Shares acquired by exchange from Class B Shares of another fund in the Liberty
Family of Funds will convert into Class A Shares based on the time of the
initial purchase. For purposes of conversion to Class A Shares, Shares purchased
through the reinvestment of dividends and distributions paid on Class B Shares
will be considered to be held in a separate sub-account. Each time any Class B
Shares in the shareholder's account (other than those in the sub-account)
convert to Class A Shares, an equal pro rata portion of the Class B Shares in
the sub-account will also convert to Class A Shares. The availability of the
conversion feature is subject to the granting of an exemptive order by the
Securities and Exchange Commission or the adoption of a rule permitting such
conversion. In the event that the exemptive order or rule ultimately issued by
the Securities and Exchange Commission requires any conditions additional to
those described in this prospectus, shareholders will be notified. The
conversion of Class B Shares to Class A Shares is subject to the continuing
availability of a ruling from the Internal Revenue Service or an opinion of
counsel that such conversions will not constitute taxable events for federal tax
purposes. There can be no assurance that such ruling or opinion will be
available, and the conversion of Class B Shares to Class A Shares will not occur
if such ruling or opinion is not available. In such event, Class B Shares would
continue to be subject to higher expenses than Class A Shares for an indefinite
period.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Shares at the net asset value next determined after an order is
received by the Fund. Shareholders may apply for participation in this program
through their financial institution or directly through the Fund.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a Share
account for each shareholder. Share certificates are not issued unless requested
in writing to the Fund.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Annual confirmations are sent to report dividends paid during the
year.
DIVIDENDS
Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Dividends are automatically reinvested in additional
Shares on the payment date at the ex-dividend date net asset value, unless
shareholders request cash payments on the new account form or by writing to the
Fund. All shareholders on the record date are entitled to the dividend. If
Shares are redeemed or exchanged prior to the record date or purchased after the
record date, those Shares are not entitled to that quarter's dividend.
CAPITAL GAINS
Capital gains realized by the Fund, if any, will be distributed at least once
every twelve months.
RETIREMENT PLANS
Shares of the Fund can be purchased as an investment for retirement plans or for
IRA accounts. For further details, including prototype retirement plans, contact
the Fund and consult a tax adviser.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
In order to provide greater flexibility to Fund shareholders whose investment
objectives have changed, Class B shareholders may exchange all or some of their
Shares for Class B Shares of other funds in the Liberty Family of Funds at net
asset value without being assessed a contingent deferred sales charge on the
exchanged Shares. (Not all funds in the Liberty Family of Funds currently offer
Class B Shares. Contact your financial institution regarding the availability of
other Class B Shares in the Liberty Family of Funds.) To the extent that a
shareholder exchanges Shares for Class B Shares in other funds in the Liberty
Family of Funds, the time for which the exchanged-for shares were held will be
added, or tacked, to the time for which the exchanged-from shares were held for
purposes of satisfying the applicable holding period.
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange Shares having a net asset value
equal to the minimum investment requirements of the fund into which the exchange
is being made. Before the exchange, the shareholder must receive a prospectus of
the fund into which the exchange is being made.
This privilege is available to shareholders resident in any state in which the
fund shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
the proceeds invested in Class B Shares of the other fund. The exchange
privilege may be modified or terminated at any time. Shareholders will be
notified of the modification or termination of the exchange privilege.
Further information on the exchange privilege and prospectuses for the Liberty
Family of Funds or certain Federated Funds are available by contacting the Fund.
TAX CONSEQUENCES
An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending on the circumstances, a short-term or long-term capital
gain or loss may be realized.
MAKING AN EXCHANGE
Instructions for exchanges for the Liberty Family of Funds or certain Federated
Funds may be given in writing or by telephone. Written instructions may require
a signature guarantee. Shareholders of the Fund may have difficulty in making
exchanges by telephone through brokers and other financial institutions during
times of drastic economic or market changes. If shareholders cannot contact
their broker or financial institution by telephone, it is recommended that an
exchange request be made in
writing and sent by overnight mail to Federated Services Company, c/o State
Street Bank and Trust Company, P.O. Box 8604, Boston, Massachusetts 02266-8604.
TELEPHONE INSTRUCTIONS. Telephone instructions made by the investor may be
carried out only if a telephone authorization form completed by the investor is
on file with the Fund. If the instructions are given by a broker, a telephone
authorization form completed by the broker must be on file with the Fund. Shares
may be exchanged between two funds by telephone only if the two funds have
identical shareholder registrations.
Any Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Services Company, c/o State Street Bank and Trust
Company, P.O. Box 8604, Boston, Massachusetts 02266-8604, and deposited to the
shareholder's account before being exchanged. Telephone exchange instructions
may be recorded. Such instructions will be processed as of 4:00 p.m. (Eastern
time) and must be received by the transfer agent before that time for Shares to
be exchanged the same day. Shareholders exchanging into a fund will not receive
any dividend that is payable to shareholders of record on that date. This
privilege may be modified or terminated at any time. If reasonable procedures
are not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
REDEEMING CLASS B SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value next determined after the Fund
receives the redemption request, less any applicable contingent deferred sales
charge. (See "Contingent Deferred Sales Charge.") Redemptions will be made on
days on which the Fund computes its net asset value. Redemptions can be made
through a financial institution or directly from the Fund. Redemption requests
must be received in proper form.
THROUGH A FINANCIAL INSTITUTION
Shareholders may redeem Shares by calling their financial institution (such as a
bank or an investment dealer) to request the redemption. Shares will be redeemed
at their net asset value, less any applicable contingent deferred sales charge,
next determined after the Fund receives the redemption request from the
financial institution. Redemption requests through a registered broker/dealer
must be received by the broker before 4:00 p.m. (Eastern time) and must be
transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in order
for Shares to be redeemed at that day's net asset value. Redemption requests
through other financial institutions must be received by the financial
institution and transmitted to the Fund before 4:00 p.m. (Eastern time) in order
for Shares to be redeemed at that day's net asset value. The financial
institution is responsible for promptly submitting redemption requests and
providing proper written redemption instructions to the Fund. The financial
institution may charge customary fees and commissions for this service.
DIRECTLY FROM THE FUND
BY TELEPHONE. Shareholders who have not purchased through a financial
institution may redeem their Shares by telephoning the Fund. The proceeds will
be mailed to the shareholder's address of record or wire transferred to the
shareholder's account at a domestic commercial bank that is a member
of the Federal Reserve System, normally within one business day, but in no event
longer than seven days after the request. The minimum amount for a wire transfer
is $1,000. If at any time the Fund shall determine it necessary to terminate or
modify this method of redemption, shareholders would be promptly notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp. Telephone redemption instructions may
be recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as redeeming by mail, should be considered.
BY MAIL. Any shareholder may redeem Shares by sending a written request to
Federated Services Company, c/o State Street Bank and Trust Company, P.O. Box
8604, Boston, Massachusetts 02266-8604. The written request should include the
shareholder's name, the Fund name and class designation, the account number, and
the Share or dollar amount requested, and should be signed exactly as the Shares
are registered.
If Share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders should call the Fund for assistance in redeeming by mail.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
any other "eligible guarantor institution," as defined in the Securities
Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.
CONTINGENT DEFERRED SALES CHARGE
Shareholders redeeming Shares from their Fund accounts within six full years of
the purchase date of those Shares will be charged a contingent deferred sales
charge by the Fund's distributor. Any applicable contingent deferred sales
charge will be imposed on the lesser of the net asset value of the redeemed
Shares at the time of purchase or the net asset value of the redeemed Shares at
the time of redemption in accordance with the following schedule:
<TABLE>
<CAPTION>
YEAR OF REDEMPTION CONTINGENT DEFERRED
AFTER PURCHASE SALES CHARGE
<S> <C>
First.............................................. 5.50%
Second............................................. 4.75%
Third.............................................. 4.00%
Fourth............................................. 3.00%
Fifth.............................................. 2.00%
Sixth.............................................. 1.00%
Seventh and thereafter............................. 0.00%
</TABLE>
The contingent deferred sales charge will be deducted from the redemption
proceeds otherwise payable to the shareholder and will be retained by the
distributor. The contingent deferred sales charge will not be imposed with
respect to: (1) Shares acquired through the reinvestment of dividends or
distributions of long-term capital gains; and/or (2) Shares held for more than
six full years from the date of purchase. Redemptions will be processed in a
manner intended to maximize the amount of redemption which will not be subject
to a contingent deferred sales charge. In computing the amount of the applicable
contingent deferred sales charge, redemptions are deemed to have occurred in the
following order: (1) Shares acquired through the reinvestment of dividends and
long-term capital gains; (2) Shares held for more than six full years from the
date of purchase; and (3) Shares held for fewer than six years on a first-in,
first-out basis.
A contingent deferred sales charge is not assessed in connection with an
exchange of Fund Shares for shares of other Class B Shares of funds in the
Liberty Family of Funds. (See "Exchange Privilege.") Any contingent deferred
sales charge imposed at the time the exchanged-for shares are redeemed is
calculated as if the shareholder had held the shares from the date on which the
investor became a shareholder of the exchanged-from shares. Moreover, the
contingent deferred sales charge will be eliminated with respect to certain
redemptions. (See "Elimination of Contingent Deferred Sales Charge.")
ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
The contingent deferred sales charge will be eliminated with respect to the
following redemptions: (1) redemptions following the death or disability, as
defined in Section 72(m)(7) of the Internal Revenue Code of 1986, of a
shareholder; (2) redemptions representing minimum required distributions from an
Individual Retirement Account or other qualified retirement plan to a
shareholder who has attained the age of 70-1/2; and (3) involuntary redemptions
by the Fund of Shares in shareholder accounts that do not comply with the
minimum balance requirements. In addition, to the extent that the distributor
does not make advance payments to certain financial institutions for purchases
made by
their clients, no contingent deferred sales charge will be imposed on
redemptions of Shares held by Directors, employees and sales representatives of
the Fund, the distributor, or affiliates of the Fund or distributor; employees
of any financial institution that sells Shares of the Fund pursuant to a sales
agreement with the distributor; and spouses and children under the age of 21 of
the aforementioned persons. Finally, no contingent deferred sales charge will be
imposed on the redemption of Shares originally purchased through a bank trust
department, an investment adviser registered under the Investment Advisers Act
of 1940, as amended, or a retirement plan where the third-party administrator
has entered into certain arrangements with Federated Securities Corp. or its
affiliates, or any other financial institution, to the extent that no payments
were advanced for purchases made through or by such entities.
The Directors reserve the right to discontinue elimination of the contingent
deferred sales charge. Shareholders will be notified of such elimination. Any
Shares purchased prior to the termination of such waiver would have the
contingent deferred sales charge eliminated as provided in the Fund's prospectus
at the time of the purchase of the Shares. If a shareholder making a redemption
qualifies for an elimination of the contingent deferred sales charge, the
shareholder must notify Federated Securities Corp. or the Fund in writing that
said shareholder is entitled to such elimination.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount not less
than $100 may take advantage of the Systematic Withdrawal Program. Under this
program, Shares are redeemed to provide for periodic withdrawal payments in an
amount directed by the shareholder. Depending upon the amount of the withdrawal
payments, the amount of dividends paid and capital gains distributions with
respect to Shares, and the fluctuation of the net asset value of Shares redeemed
under this program, redemptions may reduce, and eventually deplete, the
shareholder's investment in Shares. For this reason, payments under this program
should not be considered as yield or income on the shareholder's investment in
Shares. To be eligible to participate in this program, a shareholder must have
an account value of at least $10,000. Shareholders may apply for participation
in this program through their financial institution. A contingent deferred sales
charge will be imposed on Shares redeemed within six full years of their
purchase date. (See "Contingent Deferred Sales Charge.")
REINVESTMENT PRIVILEGE
If Shares have been redeemed, the shareholder has a one-time right, within 120
days, to reinvest the redemption proceeds into Class A Shares at the
next-determined net asset value without a sales load. (See "Other Classes of
Shares.") Federated Securities Corp. must be notified by the shareholder in
writing or by his or her financial institution of the reinvestment in order to
receive this privilege. If the shareholder redeems his or her Shares, there may
be tax consequences.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the required minimum value of
$1,500. This requirement does not apply, however, if the balance falls below
$1,500 because of changes in the Fund's net asset value.
Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional Shares to meet the minimum
requirement.
INTERNATIONAL SERIES, INC., INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE CORPORATION
BOARD OF DIRECTORS. The Corporation is managed by a Board of Directors. The
Directors are responsible for managing the Corporation's business affairs and
for exercising all the Corporation's powers except those reserved for the
shareholders. An Executive Committee of the Board of Directors handles the
Board's responsibilities between meetings of the Board.
OFFICERS AND DIRECTORS. Officers and Directors are listed with their addresses,
principal occupations, and present positions, including those with Federated
Management, its affiliates, and the "Funds" described in the Statement of
Additional Information.
- --------------------------------------------------------------------------------
John F. Donahue+*
Federated Investors Tower
Pittsburgh, PA
Chairman and Director of the Corporation
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or Managing General
Partner of the Funds. Mr. Donahue is the father of J. Christopher Donahue, Vice
President of the Corporation.
- --------------------------------------------------------------------------------
John T. Conroy, Jr.
Wood/lPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Director of the Corporation
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds; formerly,
President, Naples Property Management, Inc.
- --------------------------------------------------------------------------------
William J. Copeland
One PNC Plaza--23rd Floor
Pittsburgh, PA
Director of the Corporation
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.
- --------------------------------------------------------------------------------
James E. Dowd
571 Hayward Mill Road
Concord, MA
Director of the Corporation
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds; formerly, Director, Blue Cross of
Massachusetts, Inc.
- --------------------------------------------------------------------------------
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Director of the Corporation
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore Hospitals;
Professor of Medicine and Trustee, University of Pittsburgh; Director of
Corporate Health, University of Pittsburgh Medical Center; Director, Trustee, or
Managing General Partner of the Funds.
- --------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+
5916 Penn Mall
Pittsburgh, PA
Director of the Corporation
Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park Restaurants,
Inc., and Statewide Settlement Agency, Inc.; Director, Trustee, or Managing
General Partner of the Funds; formerly, Counsel, Horizon Financial, F.A.,
Western Region.
- --------------------------------------------------------------------------------
Peter E. Madden
225 Franklin Street
Boston, MA
Director of the Corporation
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation and Trustee,
Lahey Clinic Foundation, Inc.
- --------------------------------------------------------------------------------
Gregor F. Meyer
5916 Penn Mall
Pittsburgh, PA
Director of the Corporation
Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or Managing General
Partner of the Funds; formerly, Vice Chairman, Horizon Financial, F.A.
- --------------------------------------------------------------------------------
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Director of the Corporation
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie Endowment
for International Peace, RAND Corporation, Online Computer Library Center, Inc.,
and U.S. Space Foundation; Chairman, Czecho Slovak Management Center; Director,
Trustee, or Managing General Partner of the Funds; President Emeritus,
University of Pittsburgh; formerly, Chairman, National Advisory Council for
Environmental Policy and Technology.
- --------------------------------------------------------------------------------
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Director of the Corporation
Public relations/marketing consultant; Director, Trustee, or Managing General
Partner of the Funds.
- --------------------------------------------------------------------------------
Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
President of the Corporation
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative Services.
- --------------------------------------------------------------------------------
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President of the Corporation
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp.; President, Passport Research, Ltd.; Trustee, Federated Administrative
Services, Federated Services Company, and Federated Shareholder Services;
President or Vice President of the Funds; Director, Trustee, or Managing General
Partner of some of the Funds. Mr. Donahue is the son of John F. Donahue,
Chairman and Director of the Corporation.
- --------------------------------------------------------------------------------
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President of the Corporation
Executive Vice President and Trustee, Federated Investors; Director, Federated
Research Corp.; Chairman and Director, Federated Securities Corp.; President or
Vice President of some of the Funds; Director or Trustee of some of the Funds.
- --------------------------------------------------------------------------------
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer of the Corporation
Vice President, Treasurer, and Trustee, Federated Investors; Vice President and
Treasurer, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Executive Vice President,
Treasurer, and Director, Federated Securities Corp.; Trustee, Federated Services
Company and Federated Shareholder Services; Chairman, Treasurer, and Trustee,
Federated Administrative Services; Trustee or Director of some of the Funds;
Vice President and Treasurer of the Funds.
- --------------------------------------------------------------------------------
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary of the Corporation
Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and Secretary, Federated
Research Corp. and Passport Research, Ltd.; Trustee, Federated Services Company;
Executive Vice President, Secretary, and Trustee, Federated Administrative
Services; Trustee and Secretary, Federated Shareholder Services; Director and
Executive Vice President, Federated Securities Corp.; Vice President and
Secretary of the Funds.
- --------------------------------------------------------------------------------
*This Director is deemed to be an "interested person" of the Corporation as
defined in the Investment Company Act of 1940, as amended.
+Members of the Corporation's Executive Committee. The Executive Committee of
the Board of Directors handles the responsibilities of the Board of Directors
between meetings of the Board.
Officers and Directors own less than 1% of the Fund's outstanding Shares.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser (the "Adviser"), subject to direction
by the Directors. The Adviser continually conducts investment research and
supervision for the Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee
equal to 0.75% of the Fund's average daily net assets. The fee paid by the
Fund, while higher than the advisory fee paid by other mutual funds in
general, is comparable to fees paid by many mutual funds with similar
objectives and policies. The Adviser may voluntarily choose to waive a
portion of its fee. The Adviser can terminate this voluntary waiver at any
time at its sole discretion. The Adviser has also undertaken to reimburse
the Fund for operating expenses in excess of limitations established by
certain states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track
record of competitive performance and its disciplined, risk-averse
investment philosophy serve approximately 3,500 client institutions
nationwide. Through these same client institutions, individual shareholders
also have access to this same level of investment expertise.
Randall S. Bauer is the Fund's portfolio manager. He has contributed toward
the management of the Fund's portfolio of investments since its inception
on May 15, 1991, while Federated Management served as the Fund's
sub-adviser, and has continued in that capacity through
March 15, 1994, when, pursuant to shareholder approval, Federated
Management was appointed the Fund's investment adviser. Mr. Bauer joined
Federated Investors in 1989 as an Assistant Vice President of Federated
Management. Mr. Bauer was an Assistant Vice President of the International
Banking Division at Pittsburgh National Bank from 1982 until 1989. Mr.
Bauer is a Chartered Financial Analyst and received his M.B.A. in Finance
from Pennsylvania State University.
SUB-ADVISER. Under the terms of a Sub-Advisory Agreement between Federated
Management and Fiduciary Trust International Limited, Fiduciary Trust
International Limited will furnish to Federated Management such investment
advice, statistical information, and other factual information as may, from time
to time, be reasonably requested by Federated Management.
SUB-ADVISORY FEES. For its services under the Sub-advisory Agreement,
Fiduciary Trust International Limited ("Fiduciary") receives an annual fee
from Federated Management equal to .375 of 1% of average daily net assets
of the Fund. The sub-advisory fee is accrued and paid daily. In the event
that the fee due from the Fund to Federated Management is reduced in order
to meet expense limitations imposed on the Fund by state securities laws or
regulations, the sub-advisory fee will be reduced by one-half of said
reduction in the fee due from the Fund to Federated Management.
Notwithstanding any other provision in the Sub-advisory Agreement,
Fiduciary may, from time to time, and for such periods as it deems
appropriate, reduce its compensation (and, if appropriate, assume expenses
of the Fund) to the extent that the Fund's expenses exceed such lower
expense limitations as Fiduciary may, by notice to the Fund, voluntarily
declare to be effective.
SUB-ADVISER'S BACKGROUND. Fiduciary Trust International Limited
("Fiduciary International") is located at 30 Old Burlington Street, London,
W1X1LB. Fiduciary International, which is an English company formed on May
20, 1985, is registered as an investment adviser with the Securities and
Exchange Commission and is a member of the Investment Management Regulatory
Organization, a United Kingdom self-regulatory organization. Substantially
all of the shares of Fiduciary International are owned by Fiduciary Trust
International (SA), a wholly-owned subsidiary of Fiduciary Trust Company
International. No director, officer or employee of Fiduciary International
or Fiduciary Trust International (SA) serves as a director, officer or
employee of the Corporation.
Fiduciary Trust Company International was founded in 1931 and is a New York
state-chartered bank. It has focused primarily on the management of the
investments and financial affairs of its customers, and has chosen to
minimize its commercial banking activities (i.e., accepting deposits and
making loans). As of December 31, 1993, Fiduciary Trust Company
International had total assets of approximately $335 million, and total
assets under management of over $29 billion.
Fiduciary Trust International (SA) is a Swiss company organized to act as
an intermediate foreign parent for certain of Fiduciary Trust Company
International's foreign subsidiaries.
David Smart has been primarily responsible for management of the Fund's
portfolio since its inception, when Fiduciary International, Inc. was the
Fund's investment adviser. Mr. Smart, a Managing Director of Fiduciary
Trust International Limited, joined its parent in 1988.
DISTRIBUTION OF CLASS B SHARES
Federated Securities Corp. is the principal distributor for Shares of the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
The distributor will pay financial institutions an amount equal to 5.50% of the
net asset value of Shares purchased by their clients or customers. These
payments will be made directly by the distributor from its assets, and will not
be made from the assets of the Fund.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the Class B Shares will pay to the distributor an amount, computed at an annual
rate of 0.75 of 1% of the average daily net assets of Class B Shares, to finance
any activity which is principally intended to result in the sale of Shares
subject to the Distribution Plan. Because distribution fees to be paid by the
Fund to the distributor may not exceed an annual rate of 0.75 of 1% of the
Shares' average daily net assets, it will take the distributor a number of years
to recoup the expenses it has incurred for its distribution and
distribution-related services pursuant to the Distribution Plan.
The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by the Class
B Shares under the Distribution Plan.
In addition, the Fund has adopted a Shareholder Services Plan (the "Services
Plan") under which it may make payments up to 0.25 of 1% of the average daily
net asset value of Class B Shares to obtain certain personal services for
shareholders and the maintenance of shareholder accounts ("shareholder
services"). The Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
Federated Shareholder Services will either perform shareholder services directly
or will select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon Shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Fund and Federated Shareholder
Services.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the administrative capacities described
above or should Congress relax current restrictions on depository institutions,
the Board of Directors will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
The distributor may, from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Distribution Plan.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor may offer to pay a
fee from its own assets to financial institutions as financial assistance for
providing substantial marketing and sales support. The support may include
sponsoring sales, educational and training seminars at recreational-type
facilities, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Fund. Such assistance will be
predicated upon the amount of Shares the financial institution sells or may sell
and/or upon the nature and type of sales or marketing support furnished by the
financial institution. Any payments made by the distributor may be reimbursed by
the Fund's investment adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors ("Federated Funds") as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
<C> <S>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund. Foreign instruments purchased
by the Fund are held by foreign banks participating in a network coordinated by
State Street Bank.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for shares of the Fund and dividend
disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, L.L.P., Washington,
D.C.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen & Co., Pittsburgh, Pennsylvania.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser and sub-adviser look for prompt execution of the order
at a favorable price. In working with dealers, the Adviser and sub-adviser will
generally utilize those who are recognized dealers in specific portfolio
instruments, except when a better price and execution of the order can be
obtained elsewhere. In selecting among firms believed to meet this criteria, the
Adviser and sub-adviser may give consideration to those firms which have sold or
are selling shares of the Fund and other funds distributed by Federated
Securities Corp. The Adviser and sub-adviser make decisions on portfolio
transactions and select brokers and dealers subject to review by the Directors.
EXPENSES OF THE FUND AND CLASS B SHARES
Holders of Shares pay their allocable portion of Fund and Corporation expenses.
The Corporation expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Corporation and
continuing its existence; registering the Corporation with federal and state
securities authorities; Directors' fees; auditors' fees; the cost of meetings of
Directors; legal fees of the Corporation; association membership dues; and such
non-recurring and extraordinary items as may arise from time to time.
The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the Fund and Shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such non-recurring and extraordinary items as may
arise from time to time.
At present, the only expenses which are allocated specifically to Shares as a
class are expenses under the Fund's Services Plan and Distribution Plan.
However, the Directors reserve the right to allocate certain other expenses to
holders of Shares as they deem appropriate ("Class Expenses"). In any case,
Class Expenses would be limited to: distribution fees; transfer agent fees as
identified by the transfer agent as attributable to holders of Shares; fees
under the Fund's Services Plan; printing and postage expenses related to
preparing and distributing materials such as shareholder reports, prospectuses,
and proxies to current shareholders; registration fees paid to the Securities
and Exchange Commission and to state securities commissions; expenses related to
administrative personnel and services as required to support holders of Shares;
legal fees relating solely to Shares; and Directors' fees incurred as a result
of issues relating solely to Shares.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share gives the shareholder one vote in Director elections and other
matters submitted to shareholders for vote. All shares of each portfolio or
class in the Corporation have equal voting rights, except that, in matters
affecting only a particular Fund or class, only shares of that particular Fund
or class are entitled to vote.
As a Maryland corporation, the Corporation is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Fund's operation and for the election of Directors under certain
circumstances.
Directors may be removed by a two-thirds vote of the number of Directors prior
to such removal or by a two-thirds vote of the shareholders at a special
meeting. The Directors shall call a special meeting of shareholders upon the
written request of shareholders owning at least 10% of the Corporation's
outstanding shares entitled to vote.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code, as amended, applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Corporation's other portfolios, if any, will not be combined for tax purposes
with those realized by the Fund.
Investment income received by the Fund from sources within foreign countries may
be subject to foreign taxes withheld at the source. The United States has
entered into tax treaties with many foreign countries that entitle the Fund to
reduced tax rates or exemptions on this income. The effective rate of foreign
tax cannot be predicted since the amount of Fund assets to be invested within
various countries is unknown. However, the Fund intends to operate so as to
qualify for treaty-reduced tax rates where applicable.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional Shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held the Shares. No federal income tax is due on any
dividend earned in an IRA or qualified retirement plan until distributed.
If more than 50% of the value of the Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund intends to
qualify for certain Internal Revenue Code stipulations that would allow
shareholders to claim a foreign tax credit or deduction on their U.S. income tax
returns. The Internal Revenue Code, as amended, may limit a shareholder's
ability to claim a foreign tax credit. Furthermore, shareholders who elect to
deduct their portion of the Fund's foreign taxes rather than take the foreign
tax credit must itemize deductions on their income tax returns.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Fund:
the Fund is subject to the Pennsylvania corporate franchise tax; and
Fund Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return and yield for Class B
Shares.
Total return represents the change, over a specific period of time, in the value
of an investment in Class B Shares after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of Class B Shares is calculated by dividing the net investment income
per Share (as defined by the Securities and Exchange Commission) earned by Class
B Shares over a thirty-day period by the maximum offering price per Share on the
last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
Class B Shares and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
The performance information reflects the effect of non-recurring charges, such
as the contingent deferred sales charge, which, if excluded, would increase the
total return and yield.
Total return and yield will be calculated separately for Class A Shares, Class B
Shares, and Class C Shares. Because Class A Shares may be subject to lower 12b-1
fees, the yield for Class A Shares, for the same period, may exceed that of
Class B Shares and Class C Shares. Because Class A Shares are subject to a
front-end sales load, the total return for Class B Shares and Class C Shares,
for the same period, may exceed that of Class A Shares. Depending on the dollar
amount invested and the time period for which any class of shares is held, the
total return for any particular class may exceed that of another.
From time to time, the Fund may advertise the performance of Class B Shares
using certain financial publications and/or compare the performance of Class B
Shares to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Class A Shares are sold primarily to customers of financial institutions subject
to a front-end sales load of up to 4.50% and a Rule 12b-1 fee of up to 0.25 of
1%. Under certain circumstances, investors may qualify for reduced sales loads
on purchases of Class A Shares. Class A Shares are subject to a Services Plan
fee of up to 0.25 of 1% of the Class A Shares' average daily net assets and are
subject to a minimum initial investment of $500, unless the investment is in a
retirement account, in which case the minimum investment is $50.
Class C Shares are sold primarily to customers of financial institutions at net
asset value with no initial sales load. Class C Shares are distributed pursuant
to a Distribution Plan adopted by the Fund whereby the distributor is paid a fee
of up to 0.75 of 1%, in addition to a Services Plan fee of up to 0.25 of 1%, of
the Class C Shares' average daily net assets. In addition, Class C Shares may be
subject to certain contingent deferred sales charges. Investments in Class C
Shares are subject to a minimum initial
investment of $1,500, unless the investment is in a retirement account, in which
case the minimum investment is $50.
The amount of dividends payable to Class A Shares will generally exceed that of
Class B Shares and Class C Shares by the difference between Class Expenses and
distribution and shareholder service expenses borne by shares of each respective
class.
The stated advisory fee is the same for all classes of shares.
INTERNATIONAL INCOME FUND
CLASS A SHARES
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen & Co., the Fund's
independent public accountants. Their report dated January 21, 1994, on the
Fund's financial statements for the year ended November 30, 1993, and on the
following table for each of the periods presented, is included in the Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto, which may be
obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1993 1992 1991**
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.47 $ 10.84 $ 10.00
- ------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------
Net investment income 0.88 0.62 0.25
- ------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.40 (0.20) 0.75
- ------------------------------------------------------------------------------------ --------- --------- ---------
Total from investment operations 2.28 0.42 1.00
- ------------------------------------------------------------------------------------ --------- --------- ---------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.75) (0.71) (0.16)
- ------------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.14) (0.03) --
- ------------------------------------------------------------------------------------
Distributions in excess of net investment income -- (0.05)(b) --
- ------------------------------------------------------------------------------------ --------- --------- ---------
TOTAL DISTRIBUTIONS (0.89) (0.79) (0.16)
- ------------------------------------------------------------------------------------ --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 11.86 $ 10.47 $ 10.84
- ------------------------------------------------------------------------------------ --------- --------- ---------
TOTAL RETURN* 22.95% 3.82% 10.07%
- ------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------
Expenses 1.25% 0.99% 0.32%(a)
- ------------------------------------------------------------------------------------
Net investment income 7.71 5.83% 7.54%(a)
- ------------------------------------------------------------------------------------
Expense waiver/reimbursements (c) 0.27% 0.62% 1.18%(a)
- ------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) 220,602 86,937 23,465
- ------------------------------------------------------------------------------------
Portfolio turnover rate*** 189% 314% 35%
- ------------------------------------------------------------------------------------
</TABLE>
* Based on net asset value, which does not reflect the sales load or redemption
fee, if applicable.
** Reflects operations for the period June 4, 1991 (date of initial public
investment) to November 30, 1991.
*** Represents portfolio turnover for the entire Fund.
(a) Computed on an annualized basis.
(b) Distributions in excess of net investment income for the year ended
November 30, 1992, were a result of certain book and tax timing
differences. These distributions do not represent a return of capital for
federal income tax purposes.
(c) Increase/decrease in above expense/income ratios due to waivers or
reimbursements of expenses.
Further information about the Fund's performance is contained in the Fund's
annual report dated
November 30, 1993, which can be obtained free of charge.
INTERNATIONAL INCOME FUND
CLASS C SHARES
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen & Co., the Fund's
independent public accountants. Their report dated January 21, 1994, on the
Fund's financial statements for the year ended November 30, 1993, and on the
following table for each of the periods presented, is included in the Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto, which may be
obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1993**
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.23
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INCOME FROM INVESTMENT OPERATIONS
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Net investment income 0.41
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Net realized and unrealized gain (loss) on investments 1.58
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Total from investment operations 1.99
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LESS DISTRIBUTIONS
- -----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.38)
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TOTAL DISTRIBUTIONS (0.38)
- ----------------------------------------------------------------------------------------------- -----------------
NET ASSET VALUE, END OF PERIOD (000 OMITTED) $ 11.84
- ----------------------------------------------------------------------------------------------- -----------------
TOTAL RETURN* 19.67%
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RATIOS TO AVERAGE NET ASSETS
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Expenses 2.05%(a)
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Net investment income 5.39%(a)
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Expense waiver/reimbursements (b) 0.21%(a)
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SUPPLEMENTAL DATA
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Net assets, end of period (000 omitted) 4,767
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Portfolio turnover rate*** 189%
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</TABLE>
* Based on net asset value, which does not reflect the sales load or
redemption fee, if applicable.
** Reflects operations for the period from March 31, 1993 (date of initial
public offering) to November 30, 1993.
*** Represents portfolio turnover for the entire Fund.
(a) Computed on an annualized basis.
(b) Increase/decrease in above expense/income ratios due to waivers or
reimbursements of expenses.
Further information about the Fund's performance is contained in the Fund's
annual report dated
November 30, 1993, which can be obtained free of charge.
ADDRESSES
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<TABLE>
<S> <C> <C>
International Income Fund
Class B Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
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Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
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Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
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Sub-adviser
Fiduciary Trust 30 Old Burlington Street
International Limited London W1X1LB
England
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Custodian
State Street Bank P.O. Box 8604
and Trust Company Boston, Massachusetts 02266-8604
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Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
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Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
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Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
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Independent Public Accountants
Arthur Andersen & Co. 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
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</TABLE>
INTERNATIONAL INCOME FUND
A PORTFOLIO OF INTERNATIONAL SERIES, INC.
(FORMERLY, F.T. SERIES, INC.)
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
COMBINED STATEMENT OF ADDITIONAL INFORMATION
This Combined Statement of Additional Information should be read with
the respective prospectuses for Class A Shares and Class C Shares of
International Income Fund (the "Fund") dated March 29, 1994 and the
Class B Shares of the Fund dated September __, 1994. This Statement is
not a prospectus itself. To receive a copy of any of the prospectuses,
write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3776
Statement dated September __, 1994
[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
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GENERAL INFORMATION ABOUT THE FUND 1
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INVESTMENT OBJECTIVES AND POLICIES 1
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Types of Investments and Investment Techniques 1
When-Issued and Delayed Delivery Transactions 5
Repurchase Agreements 6
Reverse Repurchase Agreements 6
Lending Portfolio Securities 6
Restricted and Illiquid Securities 6
Duration 7
Portfolio Turnover 7
Investment Limitations 7
THE FUNDS 9
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Fund Ownership 10
INVESTMENT ADVISORY SERVICES 10
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Adviser to the Fund 10
Sub-Adviser 10
Advisory Fees 10
Sub-Advisory Fees 10
Other Related Services 11
ADMINISTRATIVE SERVICES 11
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BROKERAGE TRANSACTIONS 11
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PURCHASING SHARES 12
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Distribution of Shares 12
Distribution and Shareholder Services Plans 12
Conversion to Federal Funds 12
Purchases by Sales Representatives,
Directors of the Corporation, and Employees 12
DETERMINING NET ASSET VALUE 12
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Determining Market Value of Securities 13
Trading in Foreign Securities 13
REDEEMING SHARES 13
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Redemption in Kind 13
TAX STATUS 13
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The Fund's Tax Status 13
Foreign Taxes 14
Shareholders' Tax Status 14
TOTAL RETURN 14
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YIELD 14
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PERFORMANCE COMPARISONS 14
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FINANCIAL STATEMENTS 16
- ---------------------------------------------------------------
APPENDIX 17
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio in International Series, Inc. (the "Corporation"), which
was established as FT International Trust, a Massachusetts business trust, under
a Declaration of Trust dated March 9, 1984, and reorganized as a corporation
under the laws of the state of Maryland on February 11, 1991. At a special
meeting of shareholders held on March 15, 1994, the shareholders of the
Corporation approved an amendment to the Articles of Incorporation to change the
name of the Corporation from FT Series, Inc., to International Series, Inc.
Shares of the Fund are offered in three classes known as Class A Shares, Class B
Shares, and Class C Shares (individually and collectively referred to as
"Shares" as the context may require). This Combined Statement of Additional
Information relates to all three classes of the above-mentioned Shares.
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to seek a high level of current income in
U.S. dollars consistent with prudent investment risk. The Fund has a secondary
objective of capital appreciation. The investment objectives of the Fund cannot
be changed without the approval of the shareholders.
TYPES OF INVESTMENTS AND INVESTMENT TECHNIQUES
GENERAL
The Fund will invest primarily in high-quality debt securities
denominated in foreign currencies in accordance with the Fund's
investment objectives and policies. The Fund intends to engage in forward
contracts, futures and options transactions whenever it appears to the
investment adviser or sub-adviser (a) to be advantageous to do so in
pursuing the Fund's investment objectives; (b) to hedge (i.e., protect)
against foreign currency and interest rate risks; and (c) to stabilize
the value of the Fund's assets. The Fund will not engage in such
transactions for speculation. Up to 10% of the Fund's total assets may be
invested at any one time in commercial paper, certificates of deposit or
repurchase agreements. The use of forward contracts, futures and options,
and the attendant benefits and possible risks of such transactions, are
discussed below along with certain other investment information.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency exchange contracts in
order to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. Dollar and a foreign currency
involved in an underlying transaction. However, forward foreign currency
exchange contracts may limit potential gains which could result from a
positive change in such currency relationships. The Fund's investment
adviser and sub-adviser believe that it is important to have the
flexibility to enter into forward foreign currency exchange contracts
whenever it determines that it is in the Fund's best interest to do so.
The Fund will not speculate in foreign currency exchange.
There is no limitation as to the percentage of the Fund's assets that may
be committed to such contracts. The Fund does not enter into forward
foreign currency exchange contracts or maintain a net exposure in such
contracts when the Fund would be obligated to deliver an amount of
foreign currency in excess of the value of the Fund's portfolio
securities or other assets denominated in that currency or, in the case
of a "cross-hedge" denominated in a currency or currencies that the
Fund's investment adviser or sub-adviser believe will tend to be closely
correlated with that currency with regard to price movements. Generally,
the Fund does not enter into a forward foreign currency exchange contract
with a term longer than one year.
FOREIGN CURRENCY OPTIONS
A foreign currency option provides the option buyer with the right to buy
or sell a stated amount of foreign currency at the exercise price on a
specified date or during the option period. The owner of a call option
has the right, but not the obligation, to buy the currency. Conversely,
the owner of a put option has the right, but not the obligation to sell
the currency.
When the option is exercised, the seller (i.e., writer) of the option is
obligated to fulfill the terms of the sold option. However, either the
seller or the buyer may, in the secondary market, close its position
during the option period at any time prior to expiration.
A call option on foreign currency generally rises in value if the
underlying currency appreciates in value, and a put option on foreign
currency generally falls in value if the underlying currency depreciates
in value. Although purchasing a foreign currency option can protect the
Fund against an adverse movement in the value of a foreign currency, the
option will not limit the movement in the value of such currency. For
example, if the Fund were holding securities denominated in a foreign
currency that was appreciating and had purchased a foreign currency put
to hedge against a decline in the value of the currency, the Fund would
not have to exercise its put option. Likewise, if the Fund were to enter
into a contract to purchase a
security denominated in foreign currency and, in conjunction with that
purchase, were to purchase a foreign currency call option to hedge
against a rise in value of the currency, and if the value of the currency
instead depreciated between the date of purchase and the settlement date,
the Fund would not have to exercise its call. Instead, the Fund could
acquire in the spot market the amount of foreign currency needed for
settlement.
SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY OPTIONS
Buyers and sellers of foreign currency options are subject to the same
risks that apply to options generally. In addition, there are certain
additional risks associated with foreign currency options. The markets in
foreign currency options are relatively new, and the Fund's ability to
establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. Although the Fund will not
purchase or write such options unless and until, in the opinion of the
fund's investment adviser or sub-adviser, the market for them has
developed sufficiently to ensure that the risks in connection with such
options are not greater than the risks in connection with the underlying
currency, there can be no assurance that a liquid secondary market will
exist for a particular option at any specific time.
In addition, options on foreign currencies are affected by all of those
factors that influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. Dollar. As a result, the price
of the option position may vary with changes in the value of either or
both currencies and may have no relationship to the investment merits of
a foreign security. Because foreign currency transactions occurring in
the interbank market involve substantially larger amounts than those that
may be involved in the use of foreign currency options, investors may be
disadvantaged by having to deal in an odd lot market (generally
consisting of transactions of less than $1 million) for the underlying
foreign currencies at prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely
basis. Available quotation information is generally representative of
very large transactions in the interbank market and thus may not reflect
relatively smaller transactions (i.e. less than $1 million) where rates
may be less favorable. The interbank market in foreign currencies is a
global, around-the-clock market. To the extent that the U.S. option
markets are closed while the markets for the underlying currencies remain
open, significant price and rate movements may take place in the
underlying markets that cannot be reflected in the options markets until
they reopen.
FUTURES CONTRACTS
The Fund may enter into contracts for the future delivery of a financial
instrument such as an amount of foreign currency, a security, or the cash
value of a securities index during a specified future period at a
specified price. This investment technique is designed primarily to hedge
against anticipated future changes in foreign exchange rates, interest
rates or market conditions, all of which might otherwise have an adverse
effect upon the value of securities or other assets which the Fund holds
or intends to purchase. A "sale" of a futures contract means the
undertaking of a contractual obligation to deliver the underlying foreign
currency, security or cash value of a securities index called for by the
contract at a specified price during a specified delivery period. A
"purchase" of a futures contract means the undertaking of a contractual
obligation to acquire the underlying foreign currency, security or cash
value of a securities index at a specified price during a specified
delivery period. At the time of delivery, in the case of fixed income
securities pursuant to the contract, adjustments are made to recognize
differences in value resulting from the delivery of securities with a
different interest rate than the rate specified in the contract. In some
cases, securities called for by a futures contract may not have been
issued at the time the contract was written.
Although some futures contracts by their terms call for the actual
delivery or acquisition of assets, in most cases a party will close out
the contractual commitment before delivery without having to make or take
delivery of the underlying assets by purchasing (or selling, as the case
may be) on a commodities exchange an identical futures contract calling
for delivery in the same month. Such a transaction, if effected through a
member of an exchange, cancels the obligation to make or take delivery of
the underlying assets. All transactions in the futures market are made,
offset or fulfilled through a clearing house associated with the exchange
on which the contracts are traded. Brokerage fees will be incurred by the
Fund when it purchases or sells contracts, and the Fund will be required
to maintain margin deposits. At the time the Fund enters into a futures
contract, it is required to deposit with its custodian, on behalf of the
broker, a specified amount of cash or eligible securities, called
"initial margin." The initial margin required for a futures
contract is set by the exchange on which the contract is traded.
Subsequent payments, which are called "variation margin," to and from the
broker are made on a daily basis as the market price of the futures
contract fluctuates. The costs incurred in connection with futures
transactions could reduce the Fund's return.
Futures contracts entail risks. If the investment adviser's or
sub-adviser's judgment about the general direction of interest rates,
markets or exchange rates is wrong, the overall performance may be poorer
than if no such contracts had been entered into. An imperfect correlation
may exist between movements in the prices of futures contracts and
portfolio assets being hedged. Further, the market prices of futures
contracts may be affected by certain factors. For example, the normal
relationship between the assets and futures markets could be distorted if
participants in the futures market were to elect to close out their
contracts through offsetting transactions rather than by meeting margin
requirements. Price distortions also could result if investors in futures
contracts were to decide to make or take delivery of underlying assets
rather than engaging in closing transactions because of the resultant
liquidity of the futures market. Further, increased participation by
speculators in the futures market could cause temporary price distortions
because, as perceived by speculators, margin requirements in the futures
market are less onerous than margin requirements in the cash market.
Because of the possibility of price distortions in the futures market and
the imperfect correlation between movements in the prices of securities
or other assets and movements in the prices of futures contracts, a
correct forecast of market trends by the investment adviser still may not
result in a successful hedging transaction. If one of these events were
to occur, the Fund could lose money on the futures contracts as well as
on its portfolio assets.
OPTIONS ON FUTURES CONTRACTS
The Fund may purchase and write call and put options on futures
contracts. An option on a futures contract gives the purchaser the right,
in return for the premium paid, to assume a position in a futures
contract at a specified price at any time during the period of the
option. When the option is exercised, the writer of the option delivers
the futures contract to the holder at the exercise price. With regard to
put and call options on futures contracts written by the Fund, the Fund
would be required to deposit initial and maintenance margin with the
custodian. Options on futures contracts involve risks similar to those
discussed above that relate to transactions in futures contracts.
Furthermore, an option on a futures contract purchased by the Fund may
expire worthless, which would cause the Fund to lose the premium paid for
the option.
FOREIGN CURRENCY FUTURES TRANSACTIONS
By using foreign currency futures contracts and options on such
contracts, the Fund may be able to achieve many of the same objectives as
it would through the use of forward foreign currency exchange contracts.
The Fund may be able to achieve these objectives possibly more
effectively and at a lower cost by using futures transactions instead of
forward foreign currency exchange contracts.
SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY FUTURES CONTRACTS AND
RELATED OPTIONS
Buyers and sellers of foreign currency futures contracts are subject to
the same risks that apply to the use of futures generally. In addition,
there are risks associated with foreign currency futures contracts and
their use as a hedging device similar to those associated with options on
foreign currencies, as described above.
Options on foreign currency futures contracts may involve certain
additional risks. Trading options on foreign currency futures contracts
is relatively new. The ability to establish and close out positions on
such options is subject to the maintenance of a liquid secondary market.
To reduce this risk, the Fund will not purchase or write options on
foreign currency futures contracts unless and until, in the investment
adviser's and the subadviser's opinions, the market for such options has
developed sufficiently that the risks in connection with such options are
not greater than the risks in connection with transactions in the
underlying foreign currency futures contracts. Compared to the purchase
or sale of foreign currency futures contracts, the purchase of call or
put options on futures contracts involves less potential risk to the Fund
because the maximum amount at risk is the premium paid for the option
(plus transaction costs). However, there may be circumstances when the
purchase of a call or put option on a futures contract would result in a
loss, such as when there is no movement in the price of the underlying
currency or futures contract.
OPTIONS ON SECURITIES
The Fund may write (sell) covered call options on securities if it owns
securities that are acceptable for escrow purposes. Additionally, the
Fund may write secured put options on securities. When writing a secured
put option, the Fund will invest an amount not less than the exercise
price of the put option in eligible securities, so long as the Fund is
obligated as a writer of a put option. A call option gives the
purchaser the right to buy, and the writer the obligation to sell, the
underlying security at the exercise price during the option period. A put
option gives the purchaser the right to sell, and the writer the
obligation to buy, the underlying security at the exercise price during
the option period. The premium received for writing an option will
reflect such factors as the current market price of the underlying
security, the relationship of the exercise price to such market price,
the option period, supply and demand, and interest rates. The exercise
price of an option may be below, equal to or above the current market
value of the underlying security at the time that the option is written.
The Fund may also write or purchase spread options. A spread option is an
option for which the exercise price may be a fixed dollar spread or yield
spread between the security underlying the option and another security
that it does not own but uses as a bench mark.
The purchase of a put option by the owner of the related security
protects the purchaser against any decline in the related security's
price below the exercise price (less the amount paid for the option). The
ability of the Fund to purchase put options allows it to protect capital
gains in an appreciated security without actually requiring the Fund to
sell the appreciated security. On occasion, the Fund would like to
establish a position in a security upon which call options are available.
The purchase of a call option enables the Fund to fix the cost of
acquiring the security, which would be the cost of the call plus the
exercise price of the option. In addition, this method of acquiring
securities provides some protection from an unexpected downturn in the
market. This is because the Fund is at risk only for the amount of the
premium paid for the call option, which it can let lapse, if it so
chooses.
During the option period, the covered call writer gives up the potential
for capital appreciation above the exercise price if the underlying asset
rises in value, and the secured put writer retains the risk of loss if
the underlying asset declines in value. For the covered call writer,
substantial appreciation in the value of the underlying asset would
result in the asset being "called away." For the secured put writer,
substantial depreciation in the value of the underlying asset could
result in the asset being "put to" the writer. If a covered call option
expired unexercised, the writer of the call would realize a gain and the
buyer would realize a loss in the amount of the premium. If the covered
call option writer had to sell the underlying asset because of the
exercise of the call option, it would realize a gain or loss from the
sale of the underlying asset, with the proceeds being increased by the
amount of the premium.
If a secured put option expired unexercised, the writer would realize a
gain and the buyer would realize a loss on the amount of the premium. If
the secured put writer would have to buy the underlying asset because of
the exercise of the put option, the writer would incur an unrealized loss
to the extent that the current market value of the underlying asset is
less than the exercise price of the put option, less the premium
received.
OVER-THE-COUNTER OPTIONS
The Fund may deal in over-the-counter traded options ("OTC options") in
addition to exchange traded options. OTC options differ from exchange
traded options in several respects. First, they are transacted with
dealers rather than a clearing corporation. Second, a risk of
nonperformance by the dealer exists, whether as a result of the
insolvency of the dealer or otherwise, which could cause the Fund to
experience material losses; however, in writing OTC options, the premium
is paid in advance by the dealer. Third, in contrast to exchange traded
options, OTC options are available for a greater variety of securities
and wider range of expiration dates and exercise prices. Because there is
no exchange in the case of OTC options, pricing is normally done with
reference to information from market makers, which is carefully monitored
by the Fund's investment adviser and verified in appropriate cases.
A writer or purchaser of a put or call option can terminate it
voluntarily only by entering into a closing transaction. In the case of
OTC options, there cannot be any assurance that a continuous liquid
secondary market will exist for any particular option at any given time.
As a result, the Fund may be able to realize the value of an OTC option
it has purchased only by exercising it or by entering into a closing sale
transaction with the dealer that issued it. Likewise, in cases where the
Fund writes an OTC option, it generally can close out that option prior
to its expiration only by entering into a closing purchase transaction
with the dealer to whom the Fund wrote the option. If a covered call
option writer is unable to effect a closing transaction, it cannot sell
the underlying asset until the option either expires or is exercised.
Thus, a covered call option writer of an OTC option may not be able to
sell an underlying asset even though it might otherwise be advantageous
to do so. Moreover, a secured put writer of an OTC option may be unable
to sell the assets pledged to secure the put for other investment
purposes so long as it is obligated as a put writer, and a purchaser of
the put or call option might also find it difficult to terminate its
position on a timely basis when no secondary market exists.
OPTIONS ON SECURITIES INDICES
The Fund also may purchase and write call and put options on securities
indices in order to hedge against market conditions which affect the
values of securities that the Fund owns or intends to purchase. The Fund
will not purchase and write such options for speculation. By writing and
purchasing index options, the Fund may be able to achieve many of the
same objectives as through the purchasing and writing of options on
individual securities. Options on securities indices are similar to
options on individual securities. However, unlike an option on an
individual security, which gives the right to take or make delivery of a
security at a specified price, an option on a securities index gives the
holder upon exercise the right to receive an amount of cash if the
closing level of the securities index upon which the option is based
exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the option. Upon exercise of the option, the amount
of cash received by the holder is equal to the difference between the
closing price of the index and the exercise price of the option. In
consideration for the premium received, the writer of the option has an
obligation to make delivery of the amount of cash resulting from the
exercise of the option. Unlike options on individual securities, all
settlements are in cash, and the gain or loss depends upon price
movements in the market generally or in a segment of the market, rather
than upon price movements in individual securities.
The Fund covers call options written on a securities index through the
ownership of securities whose changes in price, in the opinion of the
Fund's investment adviser, are anticipated to be similar to the price
changes of the index, or in such other manner or may be in conformance
with applicable laws, regulations and exchange rules. Any changes in the
prices of the securities owned by the Fund probably will not be perfectly
correlated with the securities index. The Fund will secure put options
written on a securities index by means of segregating liquid high-grade
securities equal to the exercise price, or in such other manner as may be
in conformance with applicable laws, regulations and exchange rules. Upon
writing an option on a securities index, the Fund will be required to
deposit with its custodian and mark-to-market, eligible securities that
are equal in value to at least 100% of the exercise price in the case of
a put or, in the case of a call, the value of the contract. Additionally,
if the Fund writes a call option on a securities index at a time when the
value of the contract is greater than the exercise price, the Fund will
segregate and mark to market, until such time as the option expires or is
closed out, cash or a cash equivalent equal in value to the excess of the
contract value.
In addition, the Fund may purchase and write options on other appropriate
indices, as available
(e.g., foreign currency indices).
Index options involve risks similar to those associated with transactions
in futures contracts, as described above. Also, an option purchased by
the Fund may expire worthless. In such case, the Fund could lose the
premium paid for the option.
REGULATORY RESTRICTIONS
To the extent required to comply with Securities and Exchange Commission
Release No. 10666, when purchasing a futures contract, writing a put
option or entering into a delayed delivery purchase or forward foreign
currency exchange purchase, the Fund will establish and maintain a
segregated account consisting of cash or liquid high-grade securities
equal to the value of such contracts.
To the extent required to comply with Commodity Futures Trading
Commission Regulation 4.5 and thereby avoid status as a "commodity pool
operator", the Fund will not enter into a futures contract, or purchase
an option thereon, if immediately thereafter the initial margin deposits
for futures contracts held by the Fund, plus premiums paid by it for open
options of futures, would exceed 5% of the total assets of the Fund. The
Fund will not engage in transactions in futures contracts or options
thereon for speculation, but only to attempt to hedge against changes in
market conditions affecting the values of assets which the Fund holds or
intends to purchase. When futures contracts or options thereon are
purchased in order to protect against a price increase on securities or
other assets intended to be purchased later, it is anticipated that at
least 75% of such intended purchases will be completed. When other
futures contracts or options thereon are purchased, the underlying value
of such contracts will at all times not exceed the sum of (1) accrued
profit on such contracts held by the broker; (2) cash or high-quality
money market instruments set aside in an identifiable manner; and (3)
cash proceeds from investments due in 30 days or less.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.
No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for the securities
to be purchased are segregated at the trade date. These assets are marked to
market daily and maintained until the transaction is settled. The Fund may
engage in these transactions to an extent that would cause the segregation of an
amount up to 20% of its total assets.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily. In
the event that such a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Fund might be delayed pending
court action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the Fund
and allow retention or disposition of such securities. The Fund will only enter
into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers which are deemed by the Fund's investment
adviser or sub-adviser to be creditworthy pursuant to guidelines established by
the Corporation's Board of Directors (the "Directors").
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate.
The use of reverse repurchase agreements may enable the Fund to avoid selling
portfolio instruments at a time when a sale may be deemed to be disadvantageous,
but the ability to enter into reverse repurchase agreements does not ensure that
the Fund will be able to avoid selling portfolio instruments at a
disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated on the Fund's records at the trade date. These assets are marked
to market daily and maintained until the transaction is settled.
LENDING PORTFOLIO SECURITIES
The Fund may lend its portfolio securities to broker-dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker-dealers, banks, or other institutions which the
investment adviser or sub-adviser has determined are creditworthy under
guidelines established by the Corporation's Directors and will receive
collateral equal to at least 100% of the value of the securities loaned.
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
RESTRICTED AND ILLIQUID SECURITIES
The ability of the Directors to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission ("SEC") staff
position set forth in the adopting release for Rule 144A under the Securities
Act of 1933 (the "Rule"). The Rule is a non-exclusive, safe-harbor for certain
secondary market transactions involving securities subject to restrictions on
resale under federal securities laws. The Rule provides an exemption from
registration for resales of otherwise restricted securities to qualified
institutional buyers. The Rule was expected to further enhance the liquidity of
the secondary market for securities eligible for resale under Rule 144A. The
Fund believes that the staff of the SEC has left the question of determining the
liquidity of all restricted securities (eligible for resale under Rule 144A) for
determination of the Corporation's Directors. The Directors consider the
following criteria in determining the liquidity of certain restricted
securities:
the frequency of trades and quotes for the security;
the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
dealers' undertakings to make a market in the security; and
the nature of the security and the nature of the marketplace trades.
Notwithstanding the foregoing, securities of foreign issuers which are
not listed on a recognized domestic or foreign exchange or for which a
bona fide market does not exist at the time of purchase or subsequent
transaction shall be treated as illiquid securities by the Directors.
When the Fund invests in certain restricted securities determined by the
Directors to be liquid, such investments could have the effect of
increasing the level of Fund illiquidity to the extent that the buyers in
the secondary market for such securities (whether in Rule 144A resales or
other exempt transactions) become, for a time, uninterested in purchasing
these securities.
DURATION
Duration is a measure of a debt security's price sensitivity expressed in years
and is a measure of the interest rate risk of a debt security, taking into
consideration that there may be cash flows before the maturity date and that the
cash flows must be considered in terms of their present value. Duration is
similar to, but more precise than, average life. It is a measure of the number
of years until the average dollar--in present value terms--is received from
coupon and principal payments. As such, it is one measure of systematic risk.
Average life, on the other hand, is a measure of the time to receive a dollar of
principal--it takes into consideration neither interest payments nor present
value. Duration is computed by multiplying each principal and interest payment
by its present value, summing these products, and dividing the sum by the full
price of the debt security. When a Fund invests in mortgage pass-through
securities, its duration will be calculated in a manner which requires
assumptions to be made regarding future principal prepayments. A more complete
description of this calculation is available upon request from the Fund.
PORTFOLIO TURNOVER
Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities in its portfolio will be sold whenever the Fund's
investment adviser or sub-adviser believes it is appropriate to do so in light
of the Fund's investment objectives, without regard to the length of time a
particular security may have been held. The adviser and sub-adviser to the Fund
do not anticipate that portfolio turnover will result in adverse tax
consequences. For the fiscal years ended November 30, 1993 and 1992, the
portfolio turnover rates were 189% and 314%.
INVESTMENT LIMITATIONS
ACQUIRING SECURITIES
The Fund will not acquire any securities of Fiduciary Trust Company
International or its affiliates.
CONCENTRATION OF INVESTMENTS
The Fund will not invest more than 25% of its total assets in securities
of any one government or supranational issuer.
BORROWING
The Fund will not borrow money except from banks or through reverse
repurchase agreements as a temporary measure for extraordinary or
emergency purposes and then only in amounts up to one-third of the value
of its total assets, including the amount borrowed, but entering into
futures contracts shall not be considered borrowing. This borrowing
provision is not for investment leverage but solely to facilitate
management of the portfolio by enabling the Fund to meet redemption
requests when the liquidation of portfolio securities would be
inconvenient or disadvantageous. The Fund will not purchase securities
while outstanding borrowings exceed 5% of the value of its total assets.
PLEDGING SECURITIES
The Fund will not mortgage, pledge, or hypothecate securities, except
when necessary for permissible borrowings. In those cases, it may pledge
assets having a value of 15% of its assets taken at cost. To comply with
certain state restrictions, the Fund will limit these transactions to 10%
of its net assets at market. If state restrictions change, this latter
restriction may be revised without shareholder approval or notification.
For purposes of the limitation, (a) the deposit of assets in escrow in
connection with the writing of covered call and secured put options and
(b) collateral arrangements with respect to (i) the purchase and sale of
options and (ii) initial or variation margins for futures contracts, will
not be deemed to be pledges of the Fund's assets.
BUYING ON MARGIN
The Fund will not purchase any securities on margin but may obtain such
short-term credits as may be necessary for clearance of purchases and
sales of securities, and except that the Fund may make margin
deposits or payments in connection with its use of options, futures
contracts and options on futures contracts.
ISSUING SENIOR SECURITIES
The Fund will not issue senior securities except in connection with
borrowing money directly or through reverse repurchase agreements or as
required by forward commitments to purchase securities or currencies.
UNDERWRITING
The Fund will not underwrite or participate in the marketing of
securities of other issuers, except as it may be deemed to be an
underwriter under federal securities law in connection with the
disposition of its portfolio securities.
INVESTING IN REAL ESTATE
The Fund will not invest in real estate, including limited partnership
interests, although it may invest in securities secured by real estate or
interests in real estate or issued by companies, including real estate
investment trusts, which invest in real estate or interests therein.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities or commodity contracts,
except that the Fund may purchase or sell futures contracts and options
thereon, provided that the sum of its initial margin deposits on open
contracts will not exceed 5% of the fair market value of the Fund's net
assets. Further, the Fund may engage in transactions in foreign
currencies and may purchase and sell options on foreign currencies and
indices for hedging purposes.
LENDING CASH OR SECURITIES
The Fund will not lend any assets except portfolio securities. This shall
not prevent the purchase or holding of bonds, debentures, notes,
certificates of indebtedness, or other debt securities of an issuer,
repurchase agreements or other transactions which are permitted by the
Fund's investment objective and policies or its Articles of
Incorporation.
INVESTING IN MINERALS
The Fund will not invest in interests in oil, gas, or other mineral
exploration or development programs or leases.
DEALING IN PUTS AND CALLS
The Fund may not write or purchase options, except that the Fund may
write covered call options and secured put options on up to 25% of its
net assets and may purchase put and call options, provided that no more
than 5% of its net assets may be invested in premiums of such options.
SELLING SHORT
The Fund will not sell securities short unless (1) it owns, or has a
right to acquire, an equal amount of such securities, or (2) it has
segregated an amount of its other assets equal to the lesser of the
market value of the securities sold short or the amount required to
acquire such securities. The segregated amount will not exceed 10% of the
Fund's net assets. While in a short position, the Fund will retain the
securities, rights, or segregated assets.
Except as noted, the above investment limitations cannot be changed without
shareholder approval. The following limitations, however, may be changed by the
Directors without shareholder approval. Except as noted, shareholders will be
notified before any material change in these limitations becomes effective.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for the purpose of
exercising control or management.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not own securities of open-end investment companies, own
more than 3% of the total outstanding voting stock of any closed-end
investment company, invest more than 5% of its total assets in any
closed-end investment company, or invest more than 10% of its total
assets in closed-end investment companies in general. The Fund will
purchase securities of closed-end investment companies only in open-
market transactions involving only customary broker's commissions.
However, these limitations are not applicable if the securities are
acquired in a merger, consolidation, reorganization, or acquisition of
assets.
The Fund will indirectly bear its proportionate share of any fees and
expenses paid by other investment companies in addition to the fees and
expenses payable directly by the Fund.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers which have records of less than three years of
continuous operations, including the operation of any predecessor.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including securities not determined by the Directors
to be liquid, repurchase agreements with maturities longer than seven
days after notice, and certain over-the-counter options.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND
DIRECTORS OF THE CORPORATION
The Fund will not purchase or retain the securities of any issuer if the
officers and directors of the Corporation or the Fund's investment
adviser or sub-adviser owning individually more than -1/2 of 1% of the
issuer's securities together own more than 5% of the issuer's securities.
ARBITRAGE TRANSACTIONS
To comply with certain state restrictions, the Fund will not enter into
transactions for the purpose of engaging in arbitrage. If state
requirements change, this restriction may be revised without shareholder
notification.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
To comply with registration requirements in certain states, the Fund (1) will
limit short sales of securities of any class of any one issuer to the lesser of
2% of the Fund's net assets or 2% of the securities of that class, and (2) will
make short sales only on securities listed on recognized stock exchanges. The
latter restrictions, however, do not apply to short sales of securities the Fund
holds or has a right to acquire without the payment of any further
consideration. If state requirements change, these restrictions may be revised
without shareholder notification.
The Fund did not to borrow money, pledge securities in excess of 5% of the value
of its total assets or sell securities short in an amount exceeding 5% of its
net assets, during the past year and does not anticipate doing so during the
current fiscal year.
THE FUNDS
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The "Funds" and "Funds" mean the following investment companies: American
Leaders Fund, Inc.; Annuity Management Series; Automated Cash Management Trust;
Automated Government Money Trust; California Municipal Cash Trust; Cash Trust
Series II; Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated Growth Trust;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Intermediate Government Trust; Federated
Master Trust; Federated Municipal Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated Stock Trust;
Federated Tax-Free Trust; Federated U.S. Government Bond Fund; First Priority
Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.;
Fund for U.S. Government Securities, Inc.; Government Income Securities, Inc.;
High Yield Cash Trust; Insight Institutional Series, Inc.; Insurance Management
Series; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty Term Trust, Inc.--1999; Liberty U.S. Government Money Market Trust;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Mark Twain
Funds; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; New York Municipal Cash Trust;
111 Corcoran Funds; Peachtree Funds; The Planters Funds; Portage Funds; RIMCO
Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Signet Select
Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and Bond
Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments Trust;
Trademark Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; and World Investment Series, Inc.
FUND OWNERSHIP
As of July 9, 1994, the following shareholders of record owned 5% or more of the
outstanding Class A Shares of the Fund: Clooney & Co., New York, New York, owned
approximately 2,564,700 Class A Shares (11.07%); JATO/ National City Bank of
Minneapolis, Minneapolis, Minnesota, owned approximately 2,294,751 Class A
Shares (9.90%); Charles Schwab & Co. Inc., San Francisco, California, owned
approximately 2,243,461 Class A Shares (9.68%); and Mertru and Company, Muncie,
Indiana, owned approximately 1,478,041 Class A Shares (6.38%).
Also as of July 9, 1994, the following shareholder of record owned 5% or more of
the outstanding Class C Shares of the Fund: Merrill Lynch Pierce Fenner & Smith
(as record owner holding Class C Shares for its clients), Jacksonville, Florida,
owned approximately 243,339 Class C Shares (29.55%)
INVESTMENT ADVISORY SERVICES
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ADVISER TO THE FUND
The Fund's investment adviser is Federated Management (the "Adviser"), a
subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, his wife, and his son, J. Christopher Donahue. For information
regarding those persons who are affiliated with the Fund and who are also
affiliated with the Adviser, see "Officers and Directors" section contained in
the prospectus.
The Adviser shall not be liable to the Fund, the Corporation, or any shareholder
of the Fund for any losses that may be sustained in the purchase, holding, or
sale of any security or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Corporation.
SUB-ADVISER
Fiduciary Trust International Limited ("Fiduciary International"), is the
sub-adviser to the Fund under the terms of a Sub-Advisory Agreement between
Federated Management and Fiduciary International. Fiduciary International is
located at 30 Old Burlington Street, London W1X1LB. Fiduciary International,
which is an English company formed on May 20, 1985, is registered as an
investment adviser with the Securities and Exchange Commission and is a member
of the Investment Management Regulatory Organization, a United Kingdom
self-regulatory organization. Substantially all of the shares of Fiduciary
International are owned by Fiduciary Trust International (SA), a wholly-owned
subsidiary of Fiduciary Trust Company International. No director, officer or
employee of Fiduciary International or Fiduciary Trust International (SA) serves
as director, officer or employee of the Corporation.
Fiduciary Trust Company International was founded in 1931 and is a New York
state-chartered bank. It has focused primarily on the management of the
investments and financial affairs of its customers, and has chosen to minimize
its commercial banking activities (i.e., accepting deposits and making loans).
As of December 31, 1993, Fiduciary Trust Company International had total assets
in excess of $335 million, and total assets under management of over $29
billion. Fiduciary Trust International (SA) is a Swiss company organized to act
as an intermediate foreign parent for certain of Fiduciary Trust Company
International's foreign subsidiaries.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectuses. For the fiscal years ended
November 30, 1993, and, prior to the creation of separate classes of shares,
November 30, 1992, and for the period from June 4, 1991 (date of initial public
investment) to November 30, 1991, Fiduciary International, Inc. the Fund's
former investment adviser earned $986,055, $528,035, and $32,066, respectively,
which were reduced by $271,710, $433,317 and $332,066, respectively, because of
the voluntary undertaking to limit the Fund's expenses.
SUB-ADVISORY FEES
For its sub-advisory services, Fiduciary Trust International Limited receives an
annual sub-advisory fee as described in the prospectuses. Federated Management
became the Fund's sub-adviser December 1, 1990, and served in that capacity
until March 15, 1994. For the fiscal years ended November 30, 1993, and, prior
to the creation of separate classes of shares, November 30, 1992, and for the
period from June 4, 1991 (date of initial public investment) to November 30,
1991, Federated Management, in its former capacity as sub-adviser to the Fund,
received a gross fee from Fiduciary International, Inc., the Fund's former
investment adviser, amounting to $493,028, $264,018 and $16,033, respectively,
which were reduced by $135,855, $216,659 and $8,017, respectively.
STATE EXPENSE LIMITATION
The Adviser and sub-adviser have undertaken to comply with the expense
limitation established by certain states for investment companies whose
shares are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory and sub-advisory
fees, but not including brokerage commissions, interest, taxes, and
extraordinary expenses) exceed 2-1/2% per year of the first $30 million
of average net assets, 2% per year of the next $70 million of average net
assets, and 1-1/2% per year of the remaining average net assets, the
Adviser and sub-adviser will reimburse the Fund for their expenses over
the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory and sub-advisory fees paid will be
reduced by the amount of the excess, subject to an annual adjustment. If
the expense limitation is exceeded, the amounts to be reimbursed by the
Adviser and sub-adviser will be limited, in any single fiscal year, by
the amount of the investment advisory and sub-advisory fee.
This arrangement is not part of the investment advisory contract or
sub-advisory agreement, and may be amended or rescinded in the future.
OTHER RELATED SERVICES
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of shares of funds offered by Federated Securities Corp.
ADMINISTRATIVE SERVICES
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Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund and receives an administrative
fee as described in the prospectuses. For the fiscal years ended November 30,
1993, and, prior to the creation of separate classes of shares, November 30,
1992, and for the period from June 4, 1991 (date of initial public investment)
to November 30, 1991, the Fund incurred administrative service fees of $197,211,
$105,607 and $6,412, respectively, none of which were voluntarily waived. Dr.
Henry J. Gailliot, an officer of Federated Management, the Adviser to the Fund,
holds approximately 20% of the outstanding common stock and serves as a director
of Commercial Data Services, Inc., a company which provides computer processing
services to Federated Administrative Services.
BROKERAGE TRANSACTIONS
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The Adviser and sub-adviser may select brokers and dealers who offer brokerage
and research services. These services may be furnished directly to the Fund or
to the Adviser and sub-adviser and may include:
.advice as to the advisability of investing in securities;
.security analysis and reports;
.economic studies;
.industry studies;
.receipt of quotations for portfolio evaluations; and
.similar services.
The Adviser and sub-adviser and their affiliates exercise reasonable business
judgment in selecting brokers who offer brokerage and research services to
execute securities transactions. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of the
brokerage and research services provided.
Research services provided by brokers may be used by the Adviser, the
sub-Adviser, or by affiliates of Federated Investors in advising certain other
accounts. To the extent that receipt of these services may supplant services for
which the adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.
Investment decisions for the Fund will be made independently from those of any
fiduciary or other accounts that may be managed by Fiduciary Trust Company
International or its subsidiaries. If, however, such accounts and the Fund are
simultaneously engaged in transactions involving the same securities, the
transactions may be combined and allocated to each account. This system may
adversely affect the price the Fund pays or receives, or the size of the
position it obtains.
The Adviser may engage in other non-U.S. transactions that may have adverse
effects on the market for securities in the Fund's portfolio. The Adviser and
sub-adviser are not obligated to obtain any material non-public ("inside")
information about any securities issuer, or to base purchase or sale
recommendations on such information.
For the fiscal years ended November 30, 1993, and, prior to the creation of
separate classes of shares, November 30, 1992, and for the period from June 4,
1991 (date of initial public investment) to November 30, 1991, the Fund paid
total brokerage commissions of $0, $0, and $0, respectively.
PURCHASING SHARES
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Except under certain circumstances described in the respective prospectuses,
Shares are sold at their net asset value (plus a sales load on Class A Shares
only) on days the New York Stock Exchange is open for business. The procedure
for purchasing Shares is explained in the respective prospectuses under
"Investing in Class A Shares," "Investing in Class B Shares," or "Investing in
Class C Shares."
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for Shares of the Fund.
For the fiscal years ended November 30, 1993, and, prior to the creation of
separate classes of shares, November 30, 1992, and for the period from June 14,
1991 (date of initial public investment) to November 30, 1991, the distributor
was paid $197,776, $246,266, and $142,428, respectively. For the same periods,
the distributor retained $21,516, $65 and $0, respectively, after dealer
concessions.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities may include, but are not limited to, marketing
efforts; providing office space, equipment, telephone facilities, and various
clerical, supervisory, computer, and other personnel as necessary or beneficial
to establish and maintain shareholder accounts and records; processing purchase
and redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries; and assisting clients in changing
dividend options, account designations, and addresses.
By adopting the Distribution Plan, the Directors expect that the Fund will be
able to achieve a more predictable flow of cash for investment purposes and to
meet redemptions. This will facilitate more efficient portfolio management and
assist the Fund in pursuing its investment objective. By identifying potential
investors whose needs are served by the Fund's objective, and properly servicing
these accounts, it may be possible to curb sharp fluctuations in rates of
redemptions and sales.
Other benefits, which may be realized under either arrangement, may include: (1)
providing personal services to shareholders; (2) investing shareholder assets
with a minimum of delay and administrative detail; (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds before shareholders begin to
earn dividends. Federated Services Company acts as the shareholder's agent in
depositing checks and converting them to federal funds.
PURCHASES BY SALES REPRESENTATIVES, DIRECTORS OF THE CORPORATION, AND EMPLOYEES
Directors, employees, and sales representatives of the Fund, Federated
Management, Fiduciary Trust International Limited, and Federated Securities
Corp., or their affiliates, or any investment dealer who has a sales agreement
with Federated Securities Corp., and their spouses and children under 21, may
buy Shares at net asset value without a load and are not subject to a contingent
deferred sales charge (Class B Shares and Class C Shares only) to the extent the
financial institution through which the Shares are sold agrees to waive any
initial payment to which it might otherwise be entitled. Shares may also be sold
without sales charges to trusts or pension or profit-sharing plans for these
persons.
These sales are made with the purchaser's written assurance that the purchase is
for investment purposes and that the securities will not be resold except
through redemption by the Fund.
DETERMINING NET ASSET VALUE
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Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the respective prospectuses.
DETERMINING MARKET VALUE OF SECURITIES
Market or appraised values of the Fund's portfolio securities are determined as
follows:
.according to the prices provided by an independent pricing service, if
available, or at fair value as determined in good faith by the Corporation's
Directors; or
.for short-term obligations with remaining maturities of less than 60 days at
the time of purchase, at amortized cost, unless the Directors determine that
particular circumstances of the security indicate otherwise.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider: institutional trading in
similar groups of securities; yield; quality; coupon rate; maturity; type of
issue; trading characteristics; and other market data.
TRADING IN FOREIGN SECURITIES
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange. In computing the net asset value, the
Fund values foreign securities at the latest closing price on the exchange on
which they are traded immediately prior to the closing of the New York Stock
Exchange. Certain foreign currency exchange rates may also be determined at the
latest rate prior to the closing of the New York Stock Exchange. Foreign
securities quoted in foreign currencies are translated into U.S. dollars at
current rates. Occasionally, events that affect these values and exchange rates
may occur between the times at which they are determined and the closing of the
New York Stock Exchange. If such events materially affect the value of portfolio
securities, these securities may be valued at their fair value as determined in
good faith by the Directors, although the actual calculation may be done by
others.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at the next computed net asset value after the Fund
receives the redemption request. Shareholder redemptions of Class B Shares and
Class C Shares may be subject to a contingent deferred sales charge. Redemption
procedures are explained in the respective prospectuses under "Redeeming Class A
Shares," "Redeeming Class B Shares," or "Redeeming Class C Shares." Although the
transfer agent does not charge for telephone redemptions, it reserves the right
to charge a fee for the cost of wire-transferred redemptions of less than
$5,000.
Since portfolio securities of the Fund may be traded on foreign exchanges which
trade on Saturdays or on holidays on which the Fund will not make redemptions,
the net asset value of each class of Shares of the Fund may be significantly
affected on days when shareholders do not have an opportunity to redeem their
Shares.
REDEMPTION IN KIND
Although the Corporation intends to redeem Shares in cash, it reserves the right
under certain circumstances to pay the redemption price, in whole or in part, by
a distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable SEC rules, taking
such securities at the same value employed in determining net asset value and
selecting the securities in a manner the Directors determine to be fair and
equitable.
The Corporation has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940 under which the Corporation is obligated to redeem Shares
for any one shareholder in cash only up to the lesser of $250,000 or 1% of a
class of Shares' net asset value during any 90-day period.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
is kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
TAX STATUS
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THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code, as amended,
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, the Fund
must, among other requirements:
.derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
.derive less than 30% of its gross income from the sale of securities held less
than three months;
.invest in securities within certain statutory limits; and
.distribute to its shareholders at least 90% of its net income earned during the
year.
FOREIGN TAXES
Investment income on certain foreign securities in which the Fund may invest may
be subject to foreign withholding or other taxes that could reduce the return on
these securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign taxes to which the Fund
would be subject.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional Shares. The Fund's dividends, and any short-term
capital gains, are taxable as ordinary income.
CAPITAL GAINS
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have held
the Fund Shares.
TOTAL RETURN
- --------------------------------------------------------------------------------
The Class A Shares' average annual total return for the fiscal year ended
November 30, 1993, and, prior to the creation of separate classes of shares, for
the period from June 4, 1991 (effective date of the Fund's registration
statement) to November 30, 1993, were 17.46% and 12.66%, respectively.
The Class C Shares' cumulative total return from March 31, 1993 to November 30,
1993 was 18.66%. Cumulative total return reflects the Class C Shares' total
performance over a specific period of time. This total return assumes and is
reduced by the payment of the maximum sales load. The Class C Shares' total
return is representative of only eight months of investment activity since the
Class C Shares' effective date.
The average annual total return for all classes of Shares of the Fund is the
average compounded rate of return for a given period that would equate a $1,000
initial investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of Shares owned at the
end of the period by the offering price per Share at the end of the period. The
number of Shares owned at the end of the period is based on the number of Shares
purchased at the beginning of the period with $1,000, less any applicable sales
load, adjusted over the period by any additional Shares, assuming the quarterly
reinvestment of all dividends and distributions. Any applicable contingent
deferred sales charge is deducted from the ending value of the investment based
on the lesser of the original purchase price or the offering price of Shares
redeemed.
YIELD
- --------------------------------------------------------------------------------
The yield for Class A Shares for the thirty-day period ended November 30, 1993,
was 5.33%. The yield for Class C Shares for the thirty-day period ended November
30, 1993, was 4.85%.
The yield for all classes of Shares of the Fund is determined by dividing the
net investment income per Share (as defined by the Securities and Exchange
Commission) earned by any class of Shares over a thirty-day period by the
maximum offering price per Share of any class of Shares on the last day of the
period. This value is then annualized using semi-annual compounding. This means
that the amount of income generated during the thirty-day period is assumed to
be generated each month over a 12-month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by any
class of Shares because of certain adjustments required by the SEC and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in any class
of Shares, the performance will be reduced for those shareholders paying those
fees.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The Fund's performance of each classes of Shares depends upon such variables as:
.portfolio quality;
.average portfolio maturity;
.type of instruments in which the portfolio is invested;
.changes in interest rates on money market instruments;
.changes in the Fund's or a class of Shares' expenses; and
.various other factors.
A class of Shares' performance fluctuates on a daily basis largely because net
earnings and offering price per Share fluctuate daily. Both net earning and
offering price per Share are factors in the computation of yield and total
return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
.LIPPER ANALYTICAL SERVICES, INC., for example, makes comparative calculations
for one-month, three-month, one-year, and five-year periods which assume the
reinvestment of all capital gains distributions and income dividends;
.SALOMON BROTHERS HIGH GRADE BOND INDEX; SALOMON BROTHERS WORLD GOVERNMENT BOND
INDEX; and J.P. MORGAN GOVERNMENT BOND INDEX.
.MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
.LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX is comprised of approximately
5,000 issues which include non-convertible bonds publicly issued by the U.S.
government or its agencies; corporate bonds guaranteed by the U.S. government
and quasi-federal corporations; and publicly issued, fixed rate,
non-convertible domestic bonds of companies in industry, public utilities, and
finance. The average maturity of these bonds approximates nine years. Tracked
by Lehman Brothers, Inc., the index calculates total returns for one-month,
three-month, twelve-month, and ten-year periods and year-to-date.
Advertisements and sales literature for any class of Shares may quote total
returns which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment in any
class of Shares based on quarterly reinvestment of dividends over a specified
period of time.
Advertisements may quote performance information which does not reflect the
effect of the sales load or contingent deferred sales charge, as applicable.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The financial statements for the fiscal year ended November 30, 1993, are
incorporated herein by reference to the Annual Report of the Fund dated November
30, 1993 (File No. 811-3984). Additionally, the financial statements for the
six-month period ended May 31, 1994, are incorporated herein by reference from
the Fund's Semi-Annual Report dated May 31, 1994 (File No. 811-3984). Copies of
the Annual and Semi-Annual Reports may be obtained without charge by contacting
the Fund at the address located on the back cover of the prospectus.
APPENDIX
- --------------------------------------------------------------------------------
MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER RATING DEFINITIONS
PRIME-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following characteristics:
.Leading market positions in well-established industries.
.High rates of return on funds employed.
.Conservative capitalization structure with moderate reliance on debt and ample
asset protection.
.Broad margins in earning coverage of fixed financial charges and high internal
cash generation.
.Well-established access to a range of financial markets and assured sources of
alternate liquidity.
STANDARD AND POOR'S CORPORATION COMMERCIAL PAPER RATING DEFINITIONS
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
MOODY'S INVESTORS SERVICE, INC., LONG-TERM BOND RATING DEFINITIONS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
STANDARD AND POOR'S CORPORATION LONG-TERM DEBT RATING DEFINITIONS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's
Corporation. Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
1051602B (7/94)
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (Incorporated into the Statement of
Additional Information by reference to
the Fund's Annual Report);
(b) Exhibits:
(1) Copy of the Articles of Incorporation of the
Registrant (10.);
(2) Copy of the By-Laws of the Registrant (10.);
(3) Not applicable;
(4) Copies of Specimen Certificate for Shares of Common
Stock for Class A Shares, Class B Shares, and Class C
Shares of International Equity Fund and International
Income Fund;+
(5) (i) Copy of the Investment Advisory Contract dated
February 11, 1991, of the Registrant (10.);
(ii) Copy of the Sub-Advisory Agreement dated
February 11, 1991, of the Registrant (10.);
(iii) Form of proposed Investment Advisory Contract of
the Registrant with Federated Management;+
(iv) Form of proposed Sub-Advisory Contract of the
Registrant between Federated Management and
Fiduciary Trust International Limited on behalf
of the International Income Fund;+
(v) Form of proposed Sub-Advisory Contract of the
Registrant between Federated Management and
Fiduciary International, Inc., on behalf of the
International Equity Fund;+
+ Exhibits have been filed electronically.
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1 filed August 17, 1984 (File Nos. 2-91776 and
811-3984).
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N-1A filed January 24, 1989 (File Nos. 2-91776
and 811-3984).
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed February 13, 1991 (File Nos. 2-91776
and 811-3984).
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed March 22, 1991 (File Nos. 2-91776
and 811-3984).
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 15 on Form N-1A filed November 25, 1991 (File Nos. 2-91776
and 811-3984).
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 17 on Form N-1A filed February 2, 1993 (File Nos. 2-91776
and 811-3984).
(6) (i) Conformed copy of Distributor's Contract of the
Registrant dated February 11, 1991, through and
including Exhibit E;+
(ii) Form of Exhibit F to the Distributor's Contract
of the Registrant adding Class B Shares to the
current existing Distributor's Contract;+
(7) Not applicable;
(8) Conformed copy of the Custodian Contract of the
Registrant;+
(9) (i) Conformed copy of the Fund Accounting,
Shareholder Recordkeeping and Custody Services
Procurement Agreement;+
(ii) Conformed copy of Shareholder Services Plan;+
(iii) Conformed copy of Administrative Services
Agreement of the Registrant;+
(iv) Conformed copy of Shareholder Services Agreement
of the Registrant;+
(10) Paper Copy of the Opinion and Consent of Counsel as to
the legality of shares being registered (2);
(11) Conformed copy of Consent of Independent Public
Accountants;+
(13) Paper Copy of Initial Capital Understanding (2.);
(14) Not applicable;
(15) (i) Conformed copy of Rule 12b-1 Plan of the
Registrant, through and including Exhibit B;+
(ii) Form of Exhibit C to Rule 12b-1 Plan of the
Registrant adding Class B Shares to the current
existing Rule 12b-1 Plan;+
(iii) Copy of 12b-1 Agreement, through and including
Exhibit C;+
+ Exhibits have been filed electronically.
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1 filed August 17, 1984 (File Nos. 2-91776 and
811-3984).
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N-1A filed January 24, 1989 (File Nos. 2-91776
and 811-3984).
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed February 13, 1991 (File Nos. 2-91776
and 811-3984).
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed March 22, 1991 (File Nos. 2-91776
and 811-3984).
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 15 on Form N-1A filed November 25, 1991 (File Nos. 2-91776
and 811-3984).
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 17 on Form N-1A filed February 2, 1993 (File Nos. 2-91776
and 811-3984).
(16) (i) Paper copy of Schedule for Computation of Fund
Performance Data for International Equity Fund
(8.);
(ii) Paper copy of Schedule for Computation of Fund
Performance Data for International Income Fund
(12.);
(17) Conformed Copy of Power of Attorney;+
(18) Not applicable.
Item 25. Persons Controlled by or Under Common Control with Registrant:
None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of July 8, 1994
Shares of common International Equity Fund
stock Class A Shares 7,181
Class C Shares 581
Shares of common International Income Fund
stock Class A Shares 2,256
Class C Shares 408
Item 27. Indemnification: (13)
Item 28. Business and Other Connections of Investment Advisers:
For a description of the other business of the investment adviser,
see the section entitled "International Series, Inc. Information -
Management of the Corporation" in Part A. The affiliations with
the Registrant of four of the Trustees and one of the Officers of
the investment adviser are included in Part A of this Registration
Statement under "Management of the Corporation - Officers and
Directors." The remaining Trustee of the investment adviser, his
position with the investment adviser, and, in parentheses, his
principal occupation is: Mark D. Olson, (Partner, Wilson,
Halbrook & Bayard), 107 W. Market Street, Georgetown, Delaware
19947.
+ Exhibits have been filed electronically.
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N-1A filed January 24, 1989 (File Nos. 2-91776
and 811-3984).
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 15 on Form N-1A filed November 25, 1991 (File Nos. 2-91776
and 811-3984).
The remaining Officers of the investment adviser are: William D.
Dawson, III, J. Thomas Madden, and Mark L. Mallon, Executive Vice
Presidents; Henry J. Gailliot, Senior Vice President-Economist;
Peter R. Anderson, Gary J. Madich, and J. Alan Minteer, Senior
Vice Presidents; Randall A. Bauer, Jonathan C. Conley, Deborah A.
Cunningham, Mark E. Durbiano, Kathleen M. Foody-Malus, Thomas M.
Franks, Edward C. Gonzales, Jeff A. Kozemchak, Marian R. Marinack,
John W. McGonigle, Gregory M. Melvin, Susan M. Nason, Mary Jo
Ochson, Robert J. Ostrowski, Charles A. Ritter and Christopher H.
Wiles, Vice Presidents; Edward C. Gonzales, Treasurer; and John W.
McGonigle, Secretary. The business address of each of the
Officers of the investment adviser is Federated Investors Tower,
Pittsburgh, PA 15222-3779. These individuals are also officers of
a majority of the investment advisers to the Funds listed in Part
B of this Registration Statement under "The Funds."
(b) For a description of the other business of the sub-
adviser to International Equity Fund, Fiduciary International,
Inc., see the section entitled "International Series, Inc.,
Information -- Sub-Adviser's Background" in Part A.
The officers and directors of the sub-adviser and any other
business, profession, vocation or employment of a substantial
nature in which each such officer and director is or has been
engaged during the past two years is set forth below.
FIDUCIARY INTERNATIONAL, INC.
Directors Officers
L. F. Boker Doyle L. F. Boker Doyle - Chairman
Lawrence S. Huntington Landon Thomas - President & CEO
Landon Thomas Stephen C. Thormahlen - Senior VP
Jeremy H. Biggs - Vice President
Sheila H. Coco - Vice President
James M. Drury - Vice President
Francois Gour - Vice President
Stuart Hochberger - Vice
President
Cheng Hock-Lau - Vice President
Brian Hopkinson - Vice President
Margaret Lindsay - Vice President
George J. Mullen - Vice President
Anne M. Tatlock - Vice President
William Y. Yun - Vice President
Nancy Nierman - Assistant VP
Brenda C. Soule - Assistant VP
Robert T. Wilmoth, Jr. - Assstant
VP
Kevin K. Wong - Assistant VP
Barry J. McKeon - Treasurer
Mary A. Mullin - Secretary
(c) For a description of the other business of the sub-
adviser to International Income Fund, Fiduciary Trust
International Limited, see the section entitled "International
Series, Inc., Information - Sub-Adviser's Background" in Part A.
The officers and directors of the sub-adviser and any other
business, profession, vocation or employment of a substantial
nature in which each such officer and director is or has been
engaged during the past two years is set forth below.
FIDUCIARY TRUST INTERNATIONAL LIMITED
Directors Officers
Michel de Selys David Smart - Managing Director
Landon Thomas John W. Beck - Assistant Director
David Smart Nicholas B. Holliday - Assistant
Director
Brian Cox Brian Cox - Secretary and
Compliance Officer
Thomas W. Alder - Manager
Keith Kelsall - Manager
Maureen O'Meara - Manager
Gail A. Wayman - Manager
Mathew Head - Assistant Manager
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the following
open-end investment companies: Alexander Hamilton Funds; American
Leaders Fund, Inc.; Annuity Management Series; Automated Cash
Management Trust; Automated Government Money Trust; BayFunds; The
Biltmore Funds; The Biltmore Municipal Funds; The Boulevard Funds;
California Municipal Cash Trust; Cambridge Series Trust; Cash
Trust Series, Inc.; Cash Trust Series II; DG Investor Series;
Edward D. Jones & Co. Daily Passport Cash Trust; Federated ARMs
Fund; Federated Exchange Fund, Ltd.; Federated GNMA Trust;
Federated Government Trust; Federated Growth Trust; Federated High
Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Intermediate Government
Trust; Federated Master Trust; Federated Municipal Trust;
Federated Short-Intermediate Government Trust; Federated Short-
Term U.S. Government Trust; Federated Stock Trust; Federated Tax-
Free Trust; Federated U.S. Government Bond Fund; First Priority
Funds; First Union Funds; Fixed Income Securities, Inc.; Fortress
Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal
Income Fund, Inc.; Fortress Utility Fund, Inc.; Fountain Square
Funds; Fund for U.S. Government Securities, Inc.; Government
Income Securities, Inc.; High Yield Cash Trust; Independence One
Mutual Funds; Insight Institutional Series, Inc.; Insurance
Management Series; Intermediate Municipal Trust; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund,
Inc.; Liberty High Income Bond Fund, Inc.; Liberty Municipal
Securities Fund, Inc.; Liberty U.S. Government Money Market Trust;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series
Trust; Mark Twain Funds; Marshall Funds, Inc.; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market
Trust; The Monitor Funds; Municipal Securities Income Trust; New
York Municipal Cash Trust; 111 Corcoran Funds; Peachtree Funds;
The Planters Funds; Portage Funds; RIMCO Monument Funds; The
Shawmut Funds; Short-Term Municipal Trust; Signet Select Funds;
SouthTrust Vulcan Funds; Star Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; Tower Mutual
Funds; Trademark Funds; Trust for Financial Institutions; Trust
for Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; Vision Fiduciary
Funds, Inc.; Vision Group of Funds, Inc.; and World Investment
Series, Inc.
Federated Securities Corp. also acts as principal underwriter for
the following closed-end investment company: Liberty Term Trust,
Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, and
Asst. Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice Vice President and
Federated Investors Tower President, and Treasurer, Treasurer
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice Vice President and
Federated Investors Tower President, and Assistant Secretary
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
John A. Staley, IV Executive Vice President --
Federated Investors Tower and Assistant Secretary,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James R. Ball Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David C. Glabicki Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William J. Kerns Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Francis J. Matten, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Jeffrey Niss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charles A. Robison Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Federated Assistant
Federated Investors Tower Securities Corp. Secretary
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promugated
thereunder are maintained at one of the following locations:
Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Services Company Federated Investors Tower
("Transfer Agent and Dividend Pittsburgh, PA 15222-3779
Disbursing Agent")
Federated Administrative Services Federated Investors Tower
("Administrator") Pittsburgh, PA 15222-3779
Federated Management Federated Investors Tower
("Adviser") Pittsburgh, PA 15222-3779
Fiduciary International, Inc. Two World Trade Center
("Sub-Adviser to International New York, NY 10048
Equity Fund")
Fiduciary Trust International Ltd. 30 Old Burlington Street
("Sub-Adviser to International London W1X1LB
Income Fund") England
State Street Bank and Trust Co. P.O. Box 8604
("Custodian") Boston, MA 02266-8604
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Directors and the calling of special shareholder meetings by
shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered, a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, INTERNATIONAL SERIES,
INC.(formerly, FT Series, Inc.), has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Pittsburgh and Commonwealth of
Pennsylvania, on the 29th day of July, 1994.
INTERNATIONAL SERIES, INC.
(formerly, FT Series, Inc.)
BY: /s/Charles H. Field
Charles H. Field, Assistant Secretary
Attorney in Fact for John F. Donahue
July 29, 1994
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:
NAME TITLE DATE
By: /s/Charles H. Field
Charles H. Field Attorney In Fact July 29, 1994
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Director
(Chief Executive Officer)
Glen R. Johnson* President
Edward C. Gonzales* Vice President and Treasurer
(Principal Financial and
Accounting Officer)
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
Wesley W. Posvar* Director
Marjorie P. Smuts* Director
* By Power of Attorney
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg SK
ARTHUR ANDERSEN & CO.
Pittsburgh, Pennsylvania
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in Post-
Effective Amendment No. 20 to Form N-1A Registration Statement of
International Series, Inc., of our reports dated January 21, 1994, on the
financial statements of International Income Fund and International Equity
Fund, the two portfolios comprising International Series, Inc., included in
or made a part of this registration statement.
/s/ ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
Pittsburgh, Pennsylvania,
July 28, 1994
Exhibit 17 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of International
Series, Inc.____ and the Assistant General Counsel of Federated
Investors, and each of them, their true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for them and
in their names, place and stead, in any and all capacities, to sign any
and all documents to be filed with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, by means of
the Securities and Exchange Commission's electronic disclosure system
known as EDGAR; and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents,
and each of them, full power and authority to sign and perform each and
every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as each of them might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute
or substitutes, may lawfully do or cause to be done by virtue thereof.
SIGNATURES TITLE DATE
/s/ John F. Donahue Chairman and Director July 18, 1994
John F. Donahue (Chief Executive Officer)
/s/ Glen R. Johnson President July 18, 1994
Glen R. Johnson
/s/ E. C. Gonzales Vice President and Treasurer July 18, 1994
Edward C. Gonzales (Principal Financial and
Accounting Officer)
/s/ William J. Copeland Director July 18, 1994
William J. Copeland
/s/ James E. Dowd Director July 18, 1994
James E. Dowd
/s/ Lawrence D. Ellis, M.D. Director July 18, 1994
Lawrence D. Ellis, M.D.
/s/ Edward L. Flaherty, Jr. Director July 18, 1994
Edward L. Flaherty, Jr.
SIGNATURES TITLE DATE
/s/ Gregor F. Meyer Director July 18, 1994
Gregor F. Meyer
/s/ Wesley W. Posvar Director July 18, 1994
Wesley W. Posvar
/s/ Marjorie P. Smuts Director July 18, 1994
Marjorie P. Smuts
/s/ Peter E. Madden Director July 18, 1994
Peter E. Madden
/s/ John T. Conroy, Jr. Director July 18, 1994
John T. Conroy, Jr.
Sworn to and subscribed before me this _18th day of __July_____, 1994.
(SEAL)
/s/ Elaine T. Polens
Notary Public
Notarial Seal
Elaine T. Polens, Notary Public
Pittsburgh, Allegheny County
My Commission Expires March 28, 1998
Member, Pennsylvania Association of
Notaries
Exhibit (4) under Form N-1A
Exhibit 3(c) under 601/Reg. S-K
INTERNATIONAL SERIES, INC.
INTERNATIONAL EQUITY FUND
(Class A Shares)
PORTFOLIO
Number Shares
_____ _____
Account No. Incorporated Under the Laws See Reverse Side For
of the State of Maryland Certain Definitions
THIS IS TO CERTIFY THAT is the owner of
CUSIP 46031P 30 8
Fully Paid and Non-Assessable Shares of Common Stock, of the
INTERNATIONAL EQUITY FUND (Class A Shares) Portfolio of International
Series, Inc. hereafter called the "Company," transferable on the books
of the Company by the owner, in person or by duly authorized attorney,
upon surrender of this Certificate properly endorsed.
The shares represented hereby are issued and shall be held subject
to the provisions of the Articles of Incorporation and By-Laws of the
Company, and all amendments thereto, to all of which the holder by
acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
signed in its name by its proper officers and to be sealed with its
Seal.
Dated: INTERNATIONAL SERIES, INC.
Corporate Seal
1991
Maryland
/s/ Edward C. Gonzales /s/ John F. Donahue
Vice President and Treasurer Chairman
Countersigned: Federated Services
Company (Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in
full according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN ACT-
...Custodian...
TEN ENT - as tenants by the entirety (Cust) (Minors)
JT TEN - as joint tenants with right of under Uniform Gifts to
survivorship and not as Minors Act
tenants in common (State)
Additional abbreviations may also be used though not in the above
list.
For value received__________ hereby sell, assign, and transfer
unto
The Company will furnish to any stockholder, on request and
without charge, a full statement of designations and any preferences,
conversion and other rights, voting powers, restrictions, limitations as
to dividends, qualifications, and terms and conditions of redemption of
the stock of each class which the corporation is authorized to issue.
Please insert social security or other
identifying number of assignee
______________________________________
________________________________________________________________________
(Please print or typewrite name and address, including zip code, of
assignee)
________________________________________________________________________
________________________________________________________________________
_________________________________________________________________ shares
of common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________
__________________________________ Attorney
to transfer the said shares on the books of the within named Company
with full power of substitution in the premises.
Dated______________________ NOTICE:_____________________________
The signature to this assignment
must correspond with the name as
written upon the face of the
certificate in every particular,
without alteration or enlargement or
any change whatever.
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by an (color) one-half inch border.
B. The number in the upper left-hand corner and the number of shares
in the upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is
boxed.
D. The Maryland corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.
Exhibit (4) under Form N-1A
Exhibit 3(c) under 601/Reg. S-K
INTERNATIONAL SERIES, INC.
INTERNATIONAL EQUITY FUND
(Class B Shares)
PORTFOLIO
Number Shares
_____ _____
Account No. Incorporated Under the Laws See Reverse Side For
of the State of Maryland Certain Definitions
THIS IS TO CERTIFY THAT is the owner of
CUSIP (to be applied for)
Fully Paid and Non-Assessable Shares of Common Stock, of the
INTERNATIONAL EQUITY FUND (Class B Shares) Portfolio of International
Series, Inc. hereafter called the "Company," transferable on the books
of the Company by the owner, in person or by duly authorized attorney,
upon surrender of this Certificate properly endorsed.
The shares represented hereby are issued and shall be held subject
to the provisions of the Articles of Incorporation and By-Laws of the
Company, and all amendments thereto, to all of which the holder by
acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
signed in its name by its proper officers and to be sealed with its
Seal.
Dated: INTERNATIONAL SERIES, INC.
Corporate Seal
1991
Maryland
/s/ Edward C. Gonzales /s/ John F. Donahue
Vice President and Treasurer Chairman
Countersigned: Federated Services
Company (Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in
full according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN ACT-
...Custodian...
TEN ENT - as tenants by the entirety (Cust) (Minors)
JT TEN - as joint tenants with right of under Uniform Gifts to
survivorship and not as Minors Act
tenants in common (State)
Additional abbreviations may also be used though not in the above
list.
For value received__________ hereby sell, assign, and transfer
unto
The Company will furnish to any stockholder, on request and
without charge, a full statement of designations and any preferences,
conversion and other rights, voting powers, restrictions, limitations as
to dividends, qualifications, and terms and conditions of redemption of
the stock of each class which the corporation is authorized to issue.
Please insert social security or other
identifying number of assignee
______________________________________
________________________________________________________________________
(Please print or typewrite name and address, including zip code, of
assignee)
________________________________________________________________________
________________________________________________________________________
_________________________________________________________________ shares
of common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________
__________________________________ Attorney
to transfer the said shares on the books of the within named Company
with full power of substitution in the premises.
Dated______________________ NOTICE:_____________________________
The signature to this assignment
must correspond with the name as
written upon the face of the
certificate in every particular,
without alteration or enlargement or
any change whatever.
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by an (color) one-half inch border.
B. The number in the upper left-hand corner and the number of shares
in the upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is
boxed.
D. The Maryland corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.
Exhibit (4) under Form N-1A
Exhibit 3(c) under 601/Reg. S-K
INTERNATIONAL SERIES, INC.
INTERNATIONAL EQUITY FUND
(Class C Shares)
PORTFOLIO
Number Shares
_____ _____
Account No. Incorporated Under the Laws See Reverse Side For
of the State of Maryland Certain Definitions
THIS IS TO CERTIFY THAT is the owner of
CUSIP 46031P 40 7
Fully Paid and Non-Assessable Shares of Common Stock, of the
INTERNATIONAL EQUITY FUND (Class C Shares) Portfolio of International
Series, Inc. hereafter called the "Company," transferable on the books
of the Company by the owner, in person or by duly authorized attorney,
upon surrender of this Certificate properly endorsed.
The shares represented hereby are issued and shall be held subject
to the provisions of the Articles of Incorporation and By-Laws of the
Company, and all amendments thereto, to all of which the holder by
acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
signed in its name by its proper officers and to be sealed with its
Seal.
Dated: INTERNATIONAL SERIES, INC.
Corporate Seal
1991
Maryland
/s/ Edward C. Gonzales /s/ John F. Donahue
Vice President and Treasurer Chairman
Countersigned: Federated Services
Company (Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in
full according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN ACT-
...Custodian...
TEN ENT - as tenants by the entirety (Cust) (Minors)
JT TEN - as joint tenants with right of under Uniform Gifts to
survivorship and not as Minors Act
tenants in common (State)
Additional abbreviations may also be used though not in the above
list.
For value received__________ hereby sell, assign, and transfer
unto
The Company will furnish to any stockholder, on request and
without charge, a full statement of designations and any preferences,
conversion and other rights, voting powers, restrictions, limitations as
to dividends, qualifications, and terms and conditions of redemption of
the stock of each class which the corporation is authorized to issue.
Please insert social security or other
identifying number of assignee
______________________________________
________________________________________________________________________
(Please print or typewrite name and address, including zip code, of
assignee)
________________________________________________________________________
________________________________________________________________________
_________________________________________________________________ shares
of common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________
__________________________________ Attorney
to transfer the said shares on the books of the within named Company
with full power of substitution in the premises.
Dated______________________ NOTICE:_____________________________
The signature to this assignment
must correspond with the name as
written upon the face of the
certificate in every particular,
without alteration or enlargement or
any change whatever.
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by an (color) one-half inch border.
B. The number in the upper left-hand corner and the number of shares
in the upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is
boxed.
D. The Maryland corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.
Exhibit (4) under Form N-1A
Exhibit 3(c) under 601/Reg. S-K
INTERNATIONAL SERIES, INC.
INTERNATIONAL INCOME FUND
(Class A Shares)
PORTFOLIO
Number Shares
_____ _____
Account No. Incorporated Under the Laws See Reverse Side For
of the State of Maryland Certain Definitions
THIS IS TO CERTIFY THAT is the owner of
CUSIP 46031P 10 0
Fully Paid and Non-Assessable Shares of Common Stock, of the
INTERNATIONAL INCOME FUND (Class A Shares) Portfolio of International
Series, Inc. hereafter called the "Company," transferable on the books
of the Company by the owner, in person or by duly authorized attorney,
upon surrender of this Certificate properly endorsed.
The shares represented hereby are issued and shall be held subject
to the provisions of the Articles of Incorporation and By-Laws of the
Company, and all amendments thereto, to all of which the holder by
acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
signed in its name by its proper officers and to be sealed with its
Seal.
Dated: INTERNATIONAL SERIES, INC.
Corporate Seal
1991
Maryland
/s/ Edward C. Gonzales /s/ John F. Donahue
Vice President and Treasurer Chairman
Countersigned: Federated Services
Company (Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in
full according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN ACT-
...Custodian...
TEN ENT - as tenants by the entirety (Cust) (Minors)
JT TEN - as joint tenants with right of under Uniform Gifts to
survivorship and not as Minors Act
tenants in common (State)
Additional abbreviations may also be used though not in the above
list.
For value received__________ hereby sell, assign, and transfer
unto
The Company will furnish to any stockholder, on request and
without charge, a full statement of designations and any preferences,
conversion and other rights, voting powers, restrictions, limitations as
to dividends, qualifications, and terms and conditions of redemption of
the stock of each class which the corporation is authorized to issue.
Please insert social security or other
identifying number of assignee
______________________________________
________________________________________________________________________
(Please print or typewrite name and address, including zip code, of
assignee)
________________________________________________________________________
________________________________________________________________________
_________________________________________________________________ shares
of common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________
__________________________________ Attorney
to transfer the said shares on the books of the within named Company
with full power of substitution in the premises.
Dated______________________ NOTICE:_____________________________
The signature to this assignment
must correspond with the name as
written upon the face of the
certificate in every particular,
without alteration or enlargement or
any change whatever.
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by an (color) one-half inch border.
B. The number in the upper left-hand corner and the number of shares
in the upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is
boxed.
D. The Maryland corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.
Exhibit (4) under Form N-1A
Exhibit 3(c) under 601/Reg. S-K
INTERNATIONAL SERIES, INC.
INTERNATIONAL INCOME FUND
(Class B Shares)
PORTFOLIO
Number Shares
_____ _____
Account No. Incorporated Under the Laws See Reverse Side For
of the State of Maryland Certain Definitions
THIS IS TO CERTIFY THAT is the owner of
CUSIP (to be applied for)
Fully Paid and Non-Assessable Shares of Common Stock, of the
INTERNATIONAL INCOME FUND (Class B Shares) Portfolio of International
Series, Inc. hereafter called the "Company," transferable on the books
of the Company by the owner, in person or by duly authorized attorney,
upon surrender of this Certificate properly endorsed.
The shares represented hereby are issued and shall be held subject
to the provisions of the Articles of Incorporation and By-Laws of the
Company, and all amendments thereto, to all of which the holder by
acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
signed in its name by its proper officers and to be sealed with its
Seal.
Dated: INTERNATIONAL SERIES, INC.
Corporate Seal
1991
Maryland
/s/ Edward C. Gonzales /s/ John F. Donahue
Vice President and Treasurer Chairman
Countersigned: Federated Services
Company (Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in
full according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN ACT-
...Custodian...
TEN ENT - as tenants by the entirety (Cust) (Minors)
JT TEN - as joint tenants with right of under Uniform Gifts to
survivorship and not as Minors Act
tenants in common (State)
Additional abbreviations may also be used though not in the above
list.
For value received__________ hereby sell, assign, and transfer
unto
The Company will furnish to any stockholder, on request and
without charge, a full statement of designations and any preferences,
conversion and other rights, voting powers, restrictions, limitations as
to dividends, qualifications, and terms and conditions of redemption of
the stock of each class which the corporation is authorized to issue.
Please insert social security or other
identifying number of assignee
______________________________________
________________________________________________________________________
(Please print or typewrite name and address, including zip code, of
assignee)
________________________________________________________________________
________________________________________________________________________
_________________________________________________________________ shares
of common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________
__________________________________ Attorney
to transfer the said shares on the books of the within named Company
with full power of substitution in the premises.
Dated______________________ NOTICE:_____________________________
The signature to this assignment
must correspond with the name as
written upon the face of the
certificate in every particular,
without alteration or enlargement or
any change whatever.
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by an (color) one-half inch border.
B. The number in the upper left-hand corner and the number of shares
in the upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is
boxed.
D. The Maryland corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.
Exhibit (4) under Form N-1A
Exhibit 3(c) under 601/Reg. S-K
INTERNATIONAL SERIES, INC.
INTERNATIONAL INCOME FUND
(Class C Shares)
PORTFOLIO
Number Shares
_____ _____
Account No. Incorporated Under the Laws See Reverse Side For
of the State of Maryland Certain Definitions
THIS IS TO CERTIFY THAT is the owner of
CUSIP 46031P 20 9
Fully Paid and Non-Assessable Shares of Common Stock, of the
INTERNATIONAL INCOME FUND (Class C Shares) Portfolio of International
Series, Inc. hereafter called the "Company," transferable on the books
of the Company by the owner, in person or by duly authorized attorney,
upon surrender of this Certificate properly endorsed.
The shares represented hereby are issued and shall be held subject
to the provisions of the Articles of Incorporation and By-Laws of the
Company, and all amendments thereto, to all of which the holder by
acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
signed in its name by its proper officers and to be sealed with its
Seal.
Dated: INTERNATIONAL SERIES, INC.
Corporate Seal
1991
Maryland
/s/ Edward C. Gonzales /s/ John F. Donahue
Vice President and Treasurer Chairman
Countersigned: Federated Services
Company (Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in
full according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN ACT-
...Custodian...
TEN ENT - as tenants by the entirety (Cust) (Minors)
JT TEN - as joint tenants with right of under Uniform Gifts to
survivorship and not as Minors Act
tenants in common (State)
Additional abbreviations may also be used though not in the above
list.
For value received__________ hereby sell, assign, and transfer
unto
The Company will furnish to any stockholder, on request and
without charge, a full statement of designations and any preferences,
conversion and other rights, voting powers, restrictions, limitations as
to dividends, qualifications, and terms and conditions of redemption of
the stock of each class which the corporation is authorized to issue.
Please insert social security or other
identifying number of assignee
______________________________________
________________________________________________________________________
(Please print or typewrite name and address, including zip code, of
assignee)
________________________________________________________________________
________________________________________________________________________
_________________________________________________________________ shares
of common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________
__________________________________ Attorney
to transfer the said shares on the books of the within named Company
with full power of substitution in the premises.
Dated______________________ NOTICE:_____________________________
The signature to this assignment
must correspond with the name as
written upon the face of the
certificate in every particular,
without alteration or enlargement or
any change whatever.
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by an (color) one-half inch border.
B. The number in the upper left-hand corner and the number of shares
in the upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is
boxed.
D. The Maryland corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.
Exhibit 5(iii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
FT SERIES, INC.
INVESTMENT ADVISORY CONTRACT
This Contract is made between Federated Management, a Delaware business
trust (the "Adviser"), and FT Series, Inc., a Maryland corporation, having
its principal place of business in Pittsburgh, Pennsylvania (the
"Corporation").
WHEREAS, the Corporation is an open-end management investment company
as that term is defined in the Investment Company Act of 1940 (the "Act") and
is registered as such with the Securities and Exchange Commission; and
WHEREAS, the Adviser is engaged in the business of rendering investment
advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
1. The Corporation hereby appoints Adviser as Investment Adviser for
each of the portfolios ("Funds") of the Corporation, which may be offered in
one or more classes of shares ("Classes"), on whose behalf the Corporation
executes an exhibit to this Contract, and Adviser, by its execution of each
such exhibit, accepts the appointments. Subject to the direction of the
Directors of the Corporation, Adviser shall provide investment research and
supervision of the investments of each of the Funds and conduct a continuous
program of investment evaluation and of appropriate sale or other disposition
and reinvestment of each Fund's assets.
2. Adviser, in its supervision of the investments of each of the Funds
will be guided by each of the Funds' fundamental investment policies and the
provisions and restrictions contained in the Articles of Incorporation and By-
Laws of the Corporation and as set forth in the Registration Statement and
exhibits as may be on file with the Securities and Exchange Commission.
3. The Corporation shall pay or cause to be paid, on behalf of each
Fund or Class, all of the Fund's or Class's expenses and the Fund's or
Class's allocable share of Corporation expenses.
4. The Corporation, on behalf of each of the Funds shall pay to
Adviser, for all services rendered to such Fund by Adviser hereunder, the
fees set forth in the exhibits attached hereto.
5. The Adviser may from time to time and for such periods as it deems
appropriate reduce its compensation to the extent that any Fund's expenses
exceed such lower expense limitation as the Adviser may, by notice to the
Corporation, voluntarily declare to be effective. Furthermore, the Adviser
may, if it deems appropriate, assume expenses of one or more Fund or Class to
the extent that any Fund's or Class's expenses exceed such lower expense
limitation as the Adviser may, by notice to the Corporation, voluntarily
declare to be effective.
6. This Contract shall begin for each Fund on the date that the
Corporation executes an exhibit to this Contract relating to such Fund. This
Contract shall remain in effect for each Fund until the first meeting of
shareholders held after the execution date of an exhibit relating to the
respective Fund, and if approved at such meeting by the shareholders of a
particular Fund, shall continue in effect for such Fund for two years from
the date of its execution and from year to year thereafter, subject to the
provisions for termination and all of the other terms and conditions hereof
if: (a) such continuation shall be specifically approved at least annually by
the vote of a majority of the Directors of the Corporation, including a
majority of the Directors who are not parties to this Contract or interested
persons of any such party (other than as Directors of the Corporation) cast
in person at a meeting called for that purpose; and (b) Adviser shall not
have notified the Corporation in writing at least sixty (60) days prior to
the anniversary date of this Contract in any year thereafter that it does not
desire such continuation with respect to that Fund.
7. Notwithstanding any provision in this Contract, it may be terminated
at any time with respect to any Fund, without the payment of any penalty, by:
(a) the Directors of the Corporation or by a vote of a majority of the
outstanding voting securities (as defined in Section 2(a)(42) of the Act) of
the Fund, on sixty (60) days' written notice to Adviser; or (b) the Adviser
on sixty (60) days' written notice to the Corporation.
8. This Contract may not be assigned by Adviser and shall automatically
terminate in the event of any assignment. Adviser may employ or contract with
such other person, persons, corporation or corporations at its own cost and
expense as it shall determine in order to assist it in carrying out this
Contract.
9. In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties under this Contract on the
part of Adviser, Adviser shall not be liable to the Corporation or to any of
the Funds or to any shareholder for any act or omission in the course of or
connected in any way with rendering services or for any losses that may be
sustained in the purchase, holding or sale of any security.
10. This Contract may be amended at any time by agreement of the
parties provided that the amendment shall be approved both by the vote of a
majority of the Directors of the Corporation, including a majority of
Directors who are not parties to this Contract or interested persons of any
such party to this Contract (other than as Directors of the Corporation),
cast in person at a meeting called for that purpose, and on behalf of a Fund
by a majority of the outstanding voting securities (as defined in Section
2(a)(42) of the Act) of such Fund.
11. Adviser is hereby expressly put on notice of the limitation of
liability as set forth in Article XI of the Articles of Incorporation and
agrees that the obligations pursuant to this Contract of a particular Fund
and of the Corporation with respect to that particular Fund be limited solely
to the assets of that particular Fund, the Directors, officers, employees or
agents of the Corporation, or any of them; and Adviser shall not seek
satisfaction of any such obligation from the assets of any other Fund, or the
shareholders of any Fund.
12. This Contract shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
13. All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been given if delivered or
mailed first class to the Corporation, c/o Federated Investors, Federated
Investors Tower, Pittsburgh, PA 15222-3779, Attention: John W. McGonigle,
Secretary; and to Adviser, Federated Management, Federated Investors Tower,
Pittsburgh, PA 15222-3779, Attention: John A. Staley, IV, President.
14. This Contract will become binding on the parties hereto upon their
execution of the attached exhibits to this Contract.
EXHIBIT A TO THE INVESTMENT ADVISORY CONTRACT
INTERNATIONAL EQUITY FUND
A PORTFOLIO OF FT SERIES, INC.
For all services rendered by Adviser hereunder, the Corporation shall
pay to Adviser and Adviser agrees to accept as full compensation for all
services rendered hereunder, an annual investment advisory fee equal to 1.00
of 1% of the average daily net assets of the Fund.
The fee shall be accrued daily at the rate of 1/365th of 1.00 of 1%
applied to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
The effective date hereof shall be the 15th day of March, 1994 to be
renewed on March 1, 1996, and annually thereafter.
This Exhibit duly incorporates by reference the Primary Investment
Advisory Contract.
Attest: FEDERATED MANAGEMENT
_____________________________ By:_____________________________
John W. McGonigle John A. Staley, IV
Secretary President
Attest: FT SERIES, INC.
_____________________________ By:_____________________________
John W. McGonigle J. Christopher Donahue
Secretary Vice President
EXHIBIT B TO THE INVESTMENT ADVISORY CONTRACT
INTERNATIONAL INCOME FUND
A PORTFOLIO OF FT SERIES, INC.
For all services rendered by Adviser hereunder, the Corporation shall
pay to Adviser and Adviser agrees to accept as full compensation for all
services rendered hereunder, an annual investment advisory fee equal to .75
of 1% of the average daily net assets of the Fund.
The fee shall be accrued daily at the rate of 1/365th of .75 of 1%
applied to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
The effective date hereof shall be this 15th day of March, 1994 to be
renewed on March 1, 1996, and annually thereafter.
This Exhibit duly incorporates by reference the Primary Investment
Advisory Contract.
Attest: FEDERATED MANAGEMENT
_____________________________ By:_____________________________
John W. McGonigle John A. Staley, IV
Secretary President
Attest: FT SERIES, INC.
_____________________________ By:_____________________________
John W. McGonigle Richard B. Fisher
Secretary Vice President
Exhibit 5(iv) under Form N-1A
Exhibit 10 under Item 601/Reg S-K
FT SERIES, INC.
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made between FEDERATED MANAGEMENT, a Delaware
business trust (hereinafter referred to as "Adviser")
and
FIDUCIARY TRUST INTERNATIONAL LIMITED, an English company (hereinafter
referred to as "Sub-Adviser").
WITNESSETH:
That the parties hereto, intending to be legally bound hereby agree as
follows:
1. Sub-Adviser hereby agrees to furnish to Adviser in its capacity as
investment adviser to FT SERIES, INC. ("Corporation"), such investment
advice, statistical and other factual information, as may from time to time
be reasonably requested by Adviser for one or more of the portfolios
("Funds") of the Corporation, which may be offered in one or more classes of
shares ("Classes").
2. For its services under this Agreement, Sub-Adviser shall receive
from Adviser an annual fee ("the Sub-Advisory Fee"), as set forth in the
exhibits hereto. In the event that the fee due from the Corporation to the
Adviser on behalf of a Fund is reduced in order to meet expense limitations
imposed on the Fund by state securities laws or regulations, the Sub-Advisory
Fee shall be reduced by one-half of said reduction in the fee due from the
Corporation to the Adviser on behalf of such Fund.
Notwithstanding any other provisions of this Agreement, the Sub-
Adviser may from time to time and for such periods as it deems appropriate,
reduce its compensation (and, if appropriate, assume expenses of a Fund or
Class) to the extent that the Fund's expenses exceed such lower expense
limitation as the Sub-Adviser may, by notice to the Corporation on behalf of
the Fund, voluntarily declare to be effective.
3. This Agreement shall begin for each Fund on the date that the
parties execute an exhibit to this Agreement relating to such Fund. This
Agreement shall remain in effect for each Fund until the first meeting of
Shareholders held after the execution date of an exhibit relating to the
respective Fund, and if approved at such meeting by the shareholders of a
particular Fund, shall continue in effect for such Fund for two years from
the date of its execution and from year to year thereafter, subject to the
provisions for termination and all of the other terms and conditions hereof
if: (a) such continuation shall be specifically approved at least annually by
the vote of a majority of the Directors of the Corporation, including a
majority of the Directors who are not parties to this Agreement or interested
persons of any such party (other than as Directors of the Corporation) cast
in person at a meeting called for that purpose; and (b) Adviser shall not
have notified the Corporation in writing at least sixty (60) days prior to
the anniversary date of this Agreement in any year thereafter that it does
not desire such continuation with respect to that Fund.
4. Notwithstanding any provision in this Agreement, it may be
terminated at any time with respect to any Fund, without the payment of any
penalty: (a) by the Directors of the Corporation or by a vote of a majority
of the outstanding voting securities (as defined in Section 2(a)(42) of the
Act) of that Fund on sixty (60) days' written notice to Adviser; (b) by Sub-
Adviser or Adviser upon 120 days' written notice to the other party to the
Agreement.
5. This Agreement shall automatically terminate: (a) in the event of
its assignment (as defined in the Investment Company Act of 1940); or (b) in
the event of termination of the Investment Advisory Contract for any reason
whatsoever.
6. So long as both Adviser and Sub-Adviser shall be legally qualified
to act as an investment adviser to a Fund, neither Adviser nor Sub-Adviser
shall act as an investment adviser (as such term is defined in the Investment
Company Act of 1940) to such Fund except as provided herein and in the
Investment Advisory Contract or in such other manner as may be expressly
agreed between Adviser and Sub-Adviser.
Provided, however, that if the Adviser or Sub-Adviser shall resign
with respect to a Fund prior to the end of any term of this Agreement for
such Fund or for any reason be unable or unwilling to serve for a successive
term which has been approved by the Directors of the Corporation pursuant to
the provisions of Paragraph 3 of this Agreement or Paragraph 6 of the
Investment Advisory Contract, the remaining party, Sub-Adviser or Adviser as
the case may be, shall not be prohibited from serving as an investment
adviser to such Fund by reason of the provisions of this Paragraph 6.
7. This Agreement may be amended from time to time by agreement of the
parties hereto provided that such amendment shall be approved both by the
vote of a majority of Directors of the Corporation, including a majority of
Directors who are not parties to this Agreement or interested persons, as
defined in Section 2(a)(19) of the Investment company Act of 1940, of any
such party at a meeting called for that purpose, and by the holders of a
majority of the outstanding voting securities (as defined in Section 2(a)(42)
of the Investment Company Act of 1940) of such Fund.
EXHIBIT A TO THE SUB-ADVISORY AGREEMENT
INTERNATIONAL INCOME FUND
A PORTFOLIO OF FT SERIES, INC.
For all services rendered by Sub-Adviser hereunder, Adviser shall pay
Sub-Adviser a Sub-Advisory Fee equal to 0.375 of 1% of the average daily net
assets of the Fund. The Sub-Advisory Fee shall be accrued, and paid daily as
set forth in the Investment Advisory Contract between FT Series, Inc. and
Federated Management.
The effective date hereof shall be the 15th day of March, 1994 to be
renewed on March 1, 1996, and annually thereafter.
This Exhibit duly incorporates by reference the Sub-Advisory Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on their behalf by their duly authorized officers, and their
corporate seals to be affixed hereto this day of , 19 .
Attest: FEDERATED MANAGEMENT
_____________________________ By:_____________________________
John W. McGonigle John A. Staley, IV
Attest: FIDUCIARY TRUST INTERNATIONAL
LIMITED
______________________________ By:_____________________________
Brian Cox David Smart
Secretary Managing Director
Exhibit 5(v) under Form N-1A
Exhibit 10 under Item 601/Reg S-K
FT SERIES, INC.
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made between FEDERATED MANAGEMENT, a Delaware
business trust (hereinafter referred to as "Adviser")
and
FIDUCIARY INTERNATIONAL INC., a New York corporation (hereinafter
referred to as "Sub-Adviser").
WITNESSETH:
That the parties hereto, intending to be legally bound hereby agree as
follows:
1. Sub-Adviser hereby agrees to furnish to Adviser in its capacity as
investment adviser to FT SERIES, INC. ("Corporation"), such investment advice,
statistical and other factual information, as may from time to time be
reasonably requested by Adviser for one or more of the portfolios ("Funds") of
the Corporation, which may be offered in one or more classes of shares
("Classes").
2. For its services under this Agreement, Sub-Adviser shall receive
from Adviser an annual fee ("the Sub-Advisory Fee"), as set forth in the
exhibits hereto. In the event that the fee due from the Corporation to the
Adviser on behalf of a Fund is reduced in order to meet expense limitations
imposed on the Fund by state securities laws or regulations, the Sub-Advisory
Fee shall be reduced by one-half of said reduction in the fee due from the
Corporation to the Adviser on behalf of such Fund.
Notwithstanding any other provisions of this Agreement, the Sub-Adviser
may from time to time and for such periods as it deems appropriate, reduce its
compensation (and, if appropriate, assume expenses of a Fund or Class) to the
extent that the Fund's expenses exceed such lower expense limitation as the
Sub-Adviser may, by notice to the Corporation on behalf of the Fund,
voluntarily declare to be effective.
3. This Agreement shall begin for each Fund on the date that the
parties execute an exhibit to this Agreement relating to such Fund. This
Agreement shall remain in effect for each Fund until the first meeting of
Shareholders held after the execution date of an exhibit relating to the
respective Fund, and if approved at such meeting by the shareholders of a
particular Fund, shall continue in effect for such Fund for two years from the
date of its execution and from year to year thereafter, subject to the
provisions for termination and all of the other terms and conditions hereof
if: (a) such continuation shall be specifically approved at least annually by
the vote of a majority of the Directors of the Corporation, including a
majority of the Directors who are not parties to this Agreement or interested
persons of any such party (other than as Directors of the Corporation) cast in
person at a meeting called for that purpose; and (b) Adviser shall not have
notified the Corporation in writing at least sixty (60) days prior to the
anniversary date of this Agreement in any year thereafter that it does not
desire such continuation with respect to that Fund.
4. Notwithstanding any provision in this Agreement, it may be
terminated at any time with respect to any Fund, without the payment of any
penalty: (a) by the Directors of the Corporation or by a vote of a majority of
the outstanding voting securities (as defined in Section 2(a)(42) of the Act)
of that Fund on sixty (60) days' written notice to Adviser; (b) by Sub-Adviser
or Adviser upon 120 days' written notice to the other party to the Agreement.
5. This Agreement shall automatically terminate: (a) in the event of
its assignment (as defined in the Investment Company Act of 1940); or (b) in
the event of termination of the Investment Advisory Contract for any reason
whatsoever.
6. So long as both Adviser and Sub-Adviser shall be legally qualified
to act as an investment adviser to a Fund, neither Adviser nor Sub-Adviser
shall act as an investment adviser (as such term is defined in the Investment
Company Act of 1940) to such Fund except as provided herein and in the
Investment Advisory Contract or in such other manner as may be expressly
agreed between Adviser and Sub-Adviser.
Provided, however, that if the Adviser or Sub-Adviser shall resign with
respect to a Fund prior to the end of any term of this Agreement for such Fund
or for any reason be unable or unwilling to serve for a successive term which
has been approved by the Directors of the Corporation pursuant to the
provisions of Paragraph 3 of this Agreement or Paragraph 6 of the Investment
Advisory Contract, the remaining party, Sub-Adviser or Adviser as the case may
be, shall not be prohibited from serving as an investment adviser to such Fund
by reason of the provisions of this Paragraph 6.
7. This Agreement may be amended from time to time by agreement of the
parties hereto provided that such amendment shall be approved both by the vote
of a majority of Directors of the Corporation, including a majority of
Directors who are not parties to this Agreement or interested persons, as
defined in Section 2(a)(19) of the Investment company Act of 1940, of any such
party at a meeting called for that purpose, and by the holders of a majority
of the outstanding voting securities (as defined in Section 2(a)(42) of the
Investment Company Act of 1940) of such Fund.
EXHIBIT A TO THE SUB-ADVISORY AGREEMENT
INTERNATIONAL EQUITY FUND
A PORTFOLIO OF FT SERIES, INC.
For all services rendered by Sub-Adviser hereunder, Adviser shall pay
Sub-Adviser a Sub-Advisory Fee equal to 0.50 of 1% of the average daily net
assets of the Fund. The Sub-Advisory Fee shall be accrued, and paid daily as
set forth in the Investment Advisory Contract between FT Series, Inc. and
Federated Management.
The effective date hereof shall be the 15th day of March, 1994 to be
renewed on March 1, 1996, and annually thereafter.
This Exhibit duly incorporates by reference the Sub-Advisory Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on their behalf by their duly authorized officers, and their
corporate seals to be affixed hereto this day of , 19 .
Attest: FEDERATED MANAGEMENT
_____________________________ By:_____________________________
John W. McGonigle John A. Staley, IV
Secretary President
Attest: FIDUCIARY INTERNATIONAL INC.
_____________________________ By:_____________________________
Mary Mullin Landon Thomas
Secretary President
Exhibit 6(i) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
FT SERIES, INC.
DISTRIBUTOR'S CONTRACT
AGREEMENT made effective as of the 11th day of February, 1991, by and
between FT SERIES, INC. (the "Corporation"), a Maryland corporation, and
FEDERATED SECURITIES CORP. ("FSC"), a Pennsylvania corporation.
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Corporation hereby appoints FSC as its agent to sell and
distribute shares of the Corporation which may be offered in one or more
series (the "Funds") consisting of one or more classes (the "Classes") of
shares (the "Shares") as described and set forth on one or more exhibits to
this Agreement at the current offering price thereof as described and set
forth in the current Prospectuses of the Corporation. FSC hereby accepts
such appointment and agrees to provide such other services for the
Corporation, if any, and accept such compensation from the Corporation, if
any, as set forth in the applicable exhibit to this Agreement.
2. The sale of any Shares may be suspended without prior notice
whenever in the judgment of the Corporation it is in its best interest to do
so.
3. Neither FSC nor any other person is authorized by the Corporation
to give any information or to make any representation relative to any Shares
other than those contained in the Registration Statement, Prospectuses, or
Statements of Additional Information ("SAIs") filed with the Securities and
Exchange Commission, as the same may be amended from time to time, or in any
supplemental information to said Prospectuses or SAIs approved by the
Corporation. FSC agrees that any other information or representations other
than those specified above which it or any dealer or other person who
purchases Shares through FSC may make in connection with the offer or sale
of Shares, shall be made entirely without liability on the part of the
Corporation. No person or dealer, other than FSC, is authorized to act as
agent for the Corporation for any purpose. FSC agrees that in offering or
selling Shares as agent of the Corporation, it will, in all respects, duly
conform to all applicable state and federal laws and the rules and
regulations of the National Association of Securities Dealers, Inc.,
including its Rules of Fair Practice. FSC will submit to the Corporation
copies of all sales literature before using the same and will not use such
sales literature if disapproved by the Corporation.
4. This Agreement is effective with respect to each Class as of the
date of execution of the applicable exhibit and shall continue in effect
with respect to each Class presently set forth on an exhibit and any
subsequent Classes added pursuant to an exhibit during the initial term of
this Agreement for one year from the date set forth above, and thereafter
for successive periods of one year if such continuance is approved at least
annually by the Directors of the Corporation including a majority of the
members of the Board of Directors of the Corporation who are not interested
persons of the Corporation and have no direct or indirect financial interest
in the operation of any Distribution Plan relating to the Corporation or in
any related documents to such Plan ("Disinterested Directors") cast in
person at a meeting called for that purpose. If a Class is added after the
first annual approval by the Directors as described above, this Agreement
will be effective as to that Class upon execution of the applicable exhibit
and will continue in effect until the next annual approval of this Agreement
by the Directors and thereafter for successive periods of one year, subject
to approval as described above.
5. This Agreement may be terminated with regard to a particular Fund
or Class at any time, without the payment of any penalty, by the vote of a
majority of the Disinterested Directors or by a majority of the outstanding
voting securities of the particular Fund or Class on not more than sixty
(60) days' written notice to any other party to this Agreement. This
Agreement may be terminated with regard to a particular Fund or Class by FSC
on sixty (60) days' written notice to the Corporation.
6. This Agreement may not be assigned by FSC and shall automatically
terminate in the event of an assignment by FSC as defined in the Investment
Company Act of 1940, provided, however, that FSC may employ such other
person, persons, corporation or corporations as it shall determine in order
to assist it in carrying out its duties under this Agreement.
7. FSC shall not be liable to the Corporation for anything done or
omitted by it, except acts or omissions involving willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties imposed by this
Agreement.
8. This Agreement may be amended at any time by mutual agreement in
writing of all the parties hereto, provided that such amendment is approved
by the Directors of the Corporation including a majority of the
Disinterested Directors of the Corporation cast in person at a meeting
called for that purpose.
9. This Agreement shall be construed in accordance with and governed
by the laws of the Commonwealth of Pennsylvania.
10. (a) Subject to the conditions set forth below, the Corporation
agrees to indemnify and hold harmless FSC and each person, if any, who
controls FSC within the meaning of Section 15 of the Securities Act of 1933
and Section 20 of the Securities Act of 1934, as amended, against any and
all loss, liability, claim, damage and expense whatsoever (including but not
limited to any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectuses or SAI's (as from time to time
amended and supplemented) or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading, unless such statement or omission was
made in reliance upon and in conformity with written information furnished
to the Corporation about FSC by or on behalf of FSC expressly for use in the
Registration Statement, any Prospectuses and SAIs or any amendment or
supplement thereof.
If any action is brought against FSC or any controlling person thereof
with respect to which indemnity may be sought against the Corporation
pursuant to the foregoing paragraph, FSC shall promptly notify the
Corporation in writing of the institution of such action and the Corporation
shall assume the defense of such action, including the employment of counsel
selected by the Corporation and payment of expenses. FSC or any such
controlling person thereof shall have the right to employ separate counsel
in any such case, but the fees and expenses of such counsel shall be at the
expense of FSC or such controlling person unless the employment of such
counsel shall have been authorized in writing by the Corporation in
connection with the defense of such action or the Corporation shall not have
employed counsel to have charge of the defense of such action, in any of
which events such fees and expenses shall be borne by the Corporation.
Anything in this paragraph to the contrary notwithstanding, the Corporation
shall not be liable for any settlement of any such claim of action effected
without its written consent. The Corporation agrees promptly to notify FSC
of the commencement of any litigation or proceedings against the Corporation
or any of its officers or Directors or controlling persons in connection
with the issue and sale of Shares or in connection with the Registration
Statement, Prospectuses, or SAI's.
(b) FSC agrees to indemnify and hold harmless the Corporation, each of
its Directors, each of its officers who have signed the Registration
Statement and each other person, if any, who controls the Corporation within
the meaning of Section 15 of the Securities Act of 1933, but only with
respect to statements or omissions, if any, made in the Registration
Statement or any Prospectus, SAI, or any amendment or supplement thereof in
reliance upon, and in conformity with, information furnished to the
Corporation about FSC by or on behalf of FSC expressly for use in the
Registration Statement or any Prospectus, SAI, or any amendment or
supplement thereof. In case any action shall be brought against the
Corporation or any other person so indemnified based on the Registration
Statement or any Prospectus, SAI, or any amendment or supplement thereof,
and with respect to which indemnity may be sought against FSC, FSC shall
have the rights and duties given to the Corporation, and the Corporation and
each other person so indemnified shall have the rights and duties given to
FSC by the provisions of subsection (a) above.
(c) Nothing herein contained shall be deemed to protect any person
against liability to the Corporation or its shareholders to which such
person would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of the duties of such person or
by reason of the reckless disregard by such person of the obligations and
duties of such person under this Agreement.
(d) Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940 for Directors,
officers, FSC and controlling persons of the Corporation by the Corporation
pursuant to this Agreement, the Corporation is aware of the position of the
Securities and Exchange Commission as set forth in the Investment Company
Act Release No. IC-11330. Therefore, the Corporation undertakes that in
addition to complying with the applicable provisions of this Agreement, 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 Disinterested Directors, 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 Corporation 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, Corporationee, FSC or controlling person of
the Corporation 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 Corporation is insured against losses arising by
reason of any lawful advances; or (iii) a majority of a quorum of non-party
Disinterested 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.
11. FSC is hereby expressly put on notice of the limitation of
liability as set forth in Article EIGHTH of the Articles of Incorporation
and agrees that the obligations assumed by the Corporation pursuant to this
agreement shall be limited in any case to the Corporation and its assets and
FSC shall not seek satisfaction of any such obligation from the shareholders
of the Corporation, the Directors, officers, employees or agents of the
Corporation, or any of them.
12. FSC agrees to adopt compliance standards as to when a class of
shares may be sold to particular investors.
13. This Agreement will become binding on the parties hereto upon the
execution of the attached exhibits to the Agreement.
Exhibit A
FT SERIES, INC.
International Equity Fund
In consideration of the mutual covenants set forth in the Distributor's
Contract dated February 11, 1991, between FT SERIES, INC. and Federated
Securities Corp., FT SERIES, INC. executes and delivers this Exhibit on
behalf of the Funds, and with respect to the separate Classes of Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this 11th day of February, 1991.
ATTEST: FT SERIES, INC.
/s/ John W. McGonigle By: /s/ Glen R. Johnson
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ S. Elliott Cohan By: /s/ Richard B. Fisher
Secretary President
(SEAL)
Exhibit B
FT SERIES, INC.
International Income Fund
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated the 11th day of February, 1991, between FT
Series, Inc. (the "Corporation") and Federated Securities Corp. ("FSC") with
respect to the separate Classes of Shares thereof, first set forth in this
Exhibit.
1. The Corporation hereby appoints FSC to engage in activities
principally intended to result in the sale of shares of the Classes.
Pursuant to this appointment FSC is authorized to select a group of brokers
("Brokers") to sell shares of the above-listed Classes ("Shares"), at the
current offering price thereof as described and set forth in the respective
prospectuses of the Corporation, and to render administrative support
services to the Corporation and its shareholders. In addition, FSC is
authorized to select a group of Administrators ("Administrators") to render
administrative support services to the Corporation and its shareholders.
2. Administrative support services may include, but are not limited
to, the following eleven functions: 1) account openings: the Broker or
Administrator communicates account openings via computer terminals located
on the Broker or Administrator's premises; 2) account closings: the Broker
or Administrator communicates account closings via computer terminals; 3)
enter purchase transactions: purchase transactions are entered through the
Broker or Administrator's own personal computer or through the use of a toll-
free telephone number; 4) enter redemption transactions: Broker or
Administrator enters redemption transactions in the same manner as
purchases; 5) account maintenance: Broker or Administrator provides or
arranges to provide accounting support for all transactions. Broker or
Administrator also wires funds and receives funds for Corporation share
purchases and redemptions, confirms and reconciles all transactions, reviews
the activity in the Corporation's accounts, and provides training and
supervision of its personnel; 6) interest posting: Broker or Administrator
posts and reinvests dividends to the Corporation's accounts; 7) prospectus
and shareholder reports: Broker or Administrator maintains and distributes
current copies of prospectuses and shareholder reports; 8) advertisements:
the Broker or Administrator continuously advertises the availability of its
services and products; 9) customer lists: the Broker or Administrator
continuously provides names of potential customers; 10) design services:
the Broker or Administrator continuously designs material to send to
customers and develops methods of making such materials accessible to
customers; and 11) consultation services: the Broker or Administrator
continuously provides information about the product needs of customers.
3. During the term of this Agreement, the Corporation will pay FSC
for services pursuant to this Agreement, a monthly fee computed at the
annual rate of .25 of 1% of the average aggregate net asset value of the
shares of the International Income Fund held during the month. For the
month in which this Agreement becomes effective or terminates, there shall
be an appropriate proration of any fee payable on the basis of the number of
days that the Agreement is in effect during the month.
4. FSC may from time-to-time and for such periods as it deems
appropriate reduce its compensation to the extent any Class expenses exceed
such lower expense limitation as FSC may, by notice to the Corporation,
voluntarily declare to be effective.
5. FSC will enter into separate written agreements with various firms
to provide certain of the services set forth in Paragraph 1 herein. FSC, in
its sole discretion, may pay Brokers and Administrators a periodic fee in
respect of Shares owned from time to time by their clients or customers.
The schedules of such fees and the basis upon which such fees will be paid
shall be determined from time to time by FSC in its sole discretion.
6. FSC will prepare reports to the Board of Directors of the
Corporation on a quarterly basis showing amounts expended hereunder
including amounts paid to Brokers and Administrators and the purpose for
such payments.
In consideration of the mutual covenants set forth in the Distributor's
Contract dated February 11, 1991 between FT Series, Inc. and Federated
Securities Corp., FT Series, Inc. executes and delivers this Exhibit on
behalf of the Funds, and with respect to the separate Classes of Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this 15th day of May, 1991.
ATTEST: FT SERIES, INC.
/s/ John W. McGonigle By: /s/ Glen R. Johnson
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ S. Elliott Cohan By: /s/ Richard B. Fisher
(SEAL)
Exhibit C
FT SERIES, INC.
International Equity Fund
Class A Shares
In consideration of the mutual covenants set forth in the
Distributor's Contract dated February 11, 1991, between FT SERIES, INC. and
Federated Securities Corp., FT SERIES, INC. executes and delivers this
Exhibit on behalf of the Funds, and with respect to the separate Classes of
Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1st day of March, 1993.
ATTEST: FT SERIES, INC.
/s/ John W. McGonigle By: /s/ Glen R. Johnson
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ S. Elliott Cohan By: /s/ John A. Staley, IV
Secretary Executive Vice President
(SEAL)
Exhibit D
to the
Distributor's Contract
FT SERIES, INC.
International Income Fund
Class A Shares
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated the 11th day of February, 1991, between FT
Series, Inc. and Federated Securities Corp. with respect to Classes of the
Funds set forth above.
1. The Corporation hereby appoints FSC to engage in activities
principally intended to result in the sale of shares of the Classes.
Pursuant to this appointment, FSC is authorized to select a group of brokers
("Brokers") to sell shares of the above-listed Classes ("Shares"), at the
current offering price thereof as described and set forth in the respective
prospectuses of the Corporation, and to render administrative support
services to the Corporation and its shareholders. In addition, FSC is
authorized to select a group of Administrators ("Administrators") to render
administrative support services to the Corporation and its shareholders.
2. Administrative support services may include, but are not limited
to, the following eleven functions: 1) account openings: the Broker or
Administrator communicates account openings via computer terminals located
on the Broker's or Administrator's premises; 2) account closings: the
Broker or Administrator communicates account closings via computer
terminals; 3) enter purchase transactions: purchase transactions are
entered through the Broker's or Administrator's own personal computer or
through the use of a toll-free telephone number; 4) enter redemption
transactions: Broker or Administrator enters redemption transactions in the
same manner as purchases; 5) account maintenance: Broker or Administrator
provides or arranges to provide accounting support for all transactions.
Broker or Administrator also wires funds and receives funds for Corporation
share purchases and redemptions, confirms and reconciles all transactions,
reviews the activity in the Corporation's accounts, and provides training
and supervision of its personnel; 6) interest posting: Broker or
Administrator posts and reinvests dividends to the Corporation's accounts;
7) prospectus and shareholder reports: Broker or Administrator maintains
and distributes current copies of prospectuses and shareholder reports; 8)
advertisements: the Broker or Administrator continuously advertises the
availability of its services and products; 9) customer lists: the Broker or
Administrator continuously provides names of potential customers; 10) design
services: the Broker or Administrator continuously designs material to send
to customers and develops methods of making such materials accessible to
customers; and 11) consultation services: the Broker or Administrator
continuously provides information about the product needs of customers.
3. During the term of this Agreement, the Corporation will pay FSC
for services pursuant to this Agreement, a monthly fee computed at the
annual rate of .25% of the average aggregate net asset value of the
Investment Shares of the International Income Fund held during the month.
For the month in which this Agreement becomes effective or terminates, there
shall be an appropriate proration of any fee payable on the basis of the
number of days that the Agreement is in effect during the month.
4. FSC may from time-to-time and for such periods as it deems
appropriate reduce its compensation to the extent any Classes' expenses
exceed such lower expense limitation as FSC may, by notice to the
Corporation, voluntarily declare to be effective.
5. FSC will enter into separate written agreements with various
firms to provide certain of the services set forth in Paragraph 1 herein.
FSC, in its sole discretion, may pay Brokers and Administrators a periodic
fee in respect of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon which such fees
will be paid shall be determined from time to time by FSC in its sole
discretion.
6. FSC will prepare reports to the Board of Directors of the
Corporation on a quarterly basis showing amounts expended hereunder
including amounts paid to Brokers and Administrators and the purpose for
such payments.
In consideration of the mutual covenants set forth in the
Distributor's Contract dated February 11, 1991, between FT SERIES, INC. and
Federated Securities Corp., FT SERIES, INC. executes and delivers this
Exhibit on behalf of the Funds, and with respect to the separate Classes of
Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1st day of March, 1993.
ATTEST: FT SERIES, INC.
/s/ John W. McGonigle By: /s/ Glen R. Johnson
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ S. Elliott Cohan By: /s/ John A. Staley, IV
Secretary Executive Vice President
(SEAL)
Exhibit E
FT SERIES, INC.
International Equity Fund
Class C Shares
International Income Fund
Class C Shares
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated the 11th day of February, 1991, between FT
Series, Inc. and Federated Securities Corp. with respect to Classes of the
Funds set forth above.
1. The Corporation hereby appoints FSC to engage in activities
principally intended to result in the sale of shares of the Classes.
Pursuant to this appointment, FSC is authorized to select a group of brokers
("Brokers") to sell shares of the above-listed Classes ("Shares"), at the
current offering price thereof as described and set forth in the respective
prospectuses of the Corporation, and to render administrative support
services to the Corporation and its shareholders. In addition, FSC is
authorized to select a group of Administrators ("Administrators") to render
administrative support services to the Corporation and its shareholders.
2. Administrative support services may include, but are not limited
to, the following eleven functions: 1) account openings: the Broker or
Administrator communicates account openings via computer terminals located
on the Broker's or Administrator's premises; 2) account closings: the
Broker or Administrator communicates account closings via computer
terminals; 3) enter purchase transactions: purchase transactions are
entered through the Broker's or Administrator's own personal computer or
through the use of a toll-free telephone number; 4) enter redemption
transactions: Broker or Administrator enters redemption transactions in the
same manner as purchases; 5) account maintenance: Broker or Administrator
provides or arranges to provide accounting support for all transactions.
Broker or Administrator also wires funds and receives funds for Corporation
share purchases and redemptions, confirms and reconciles all transactions,
reviews the activity in the Corporation's accounts, and provides training
and supervision of its personnel; 6) interest posting: Broker or
Administrator posts and reinvests dividends to the Corporation's accounts;
7) prospectus and shareholder reports: Broker or Administrator maintains
and distributes current copies of prospectuses and shareholder reports; 8)
advertisements: the Broker or Administrator continuously advertises the
availability of its services and products; 9) customer lists: the Broker or
Administrator continuously provides names of potential customers; 10) design
services: the Broker or Administrator continuously designs material to send
to customers and develops methods of making such materials accessible to
customers; and 11) consultation services: the Broker or Administrator
continuously provides information about the product needs of customers.
3. During the term of this Agreement, the Corporation will pay FSC
for services pursuant to this Agreement, a monthly fee computed at the
annual rate of .25% of the average aggregate net asset value of the
Investment Shares of the International Income Fund-Class C Shares and
International Equity Fund-Class C Shares held during the month. For the
month in which this Agreement becomes effective or terminates, there shall
be an appropriate proration of any fee payable on the basis of the number of
days that the Agreement is in effect during the month.
4. FSC may from time-to-time and for such periods as it deems
appropriate reduce its compensation to the extent any Classes' expenses
exceed such lower expense limitation as FSC may, by notice to the
Corporation, voluntarily declare to be effective.
5. FSC will enter into separate written agreements with various
firms to provide certain of the services set forth in Paragraph 1 herein.
FSC, in its sole discretion, may pay Brokers and Administrators a periodic
fee in respect of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon which such fees
will be paid shall be determined from time to time by FSC in its sole
discretion.
6. FSC will prepare reports to the Board of Directors of the
Corporation on a quarterly basis showing amounts expended hereunder
including amounts paid to Brokers and Administrators and the purpose for
such payments.
In consideration of the mutual covenants set forth in the
Distributor's Contract dated February 11, 1991, between FT SERIES, INC. and
Federated Securities Corp., FT SERIES, INC. executes and delivers this
Exhibit on behalf of the Funds, and with respect to the separate Classes of
Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this 7th day of April, 1993.
ATTEST: FT SERIES, INC.
/s/ John W. McGonigle By: /s/ Glen R. Johnson
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ S. Elliott Cohan By: /s/ John A. Staley, IV
Secretary Executive Vice President
(SEAL)
Exhibit 6(ii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
Exhibit F
FT SERIES, INC.
International Equity Fund
Class B Shares
International Income Fund
Class B Shares
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated the 11th day of February, 1991, between FT
Series, Inc. and Federated Securities Corp. with respect to Classes of the
Funds set forth above.
1. The Corporation hereby appoints FSC to engage in activities
principally intended to result in the sale of shares of the Classes.
Pursuant to this appointment, FSC is authorized to select a group of brokers
("Brokers") to sell shares of the above-listed Classes ("Shares"), at the
current offering price thereof as described and set forth in the respective
prospectuses of the Corporation, and to render administrative support
services to the Corporation and its shareholders. In addition, FSC is
authorized to select a group of Administrators ("Administrators") to render
administrative support services to the Corporation and its shareholders.
2. Administrative support services may include, but are not limited
to, the following eleven functions: 1) account openings: the Broker or
Administrator communicates account openings via computer terminals located
on the Broker's or Administrator's premises; 2) account closings: the
Broker or Administrator communicates account closings via computer
terminals; 3) enter purchase transactions: purchase transactions are
entered through the Broker's or Administrator's own personal computer or
through the use of a toll-free telephone number; 4) enter redemption
transactions: Broker or Administrator enters redemption transactions in the
same manner as purchases; 5) account maintenance: Broker or Administrator
provides or arranges to provide accounting support for all transactions.
Broker or Administrator also wires funds and receives funds for Corporation
share purchases and redemptions, confirms and reconciles all transactions,
reviews the activity in the Corporation's accounts, and provides training
and supervision of its personnel; 6) interest posting: Broker or
Administrator posts and reinvests dividends to the Corporation's accounts;
7) prospectus and shareholder reports: Broker or Administrator maintains
and distributes current copies of prospectuses and shareholder reports; 8)
advertisements: the Broker or Administrator continuously advertises the
availability of its services and products; 9) customer lists: the Broker or
Administrator continuously provides names of potential customers; 10) design
services: the Broker or Administrator continuously designs material to send
to customers and develops methods of making such materials accessible to
customers; and 11) consultation services: the Broker or Administrator
continuously provides information about the product needs of customers.
3. During the term of this Agreement, the Corporation will pay FSC
for services pursuant to this Agreement, a monthly fee computed at the
annual rate of .75% of the average aggregate net asset value of the
International Income Fund-Class B Shares and International Equity Fund-Class
B Shares held during the month. For the month in which this Agreement
becomes effective or terminates, there shall be an appropriate proration of
any fee payable on the basis of the number of days that the Agreement is in
effect during the month.
4. FSC may from time-to-time and for such periods as it deems
appropriate reduce its compensation to the extent any Classes' expenses
exceed such lower expense limitation as FSC may, by notice to the
Corporation, voluntarily declare to be effective.
5. FSC will enter into separate written agreements with various
firms to provide certain of the services set forth in Paragraph 1 herein.
FSC, in its sole discretion, may pay Brokers and Administrators a periodic
fee in respect of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon which such fees
will be paid shall be determined from time to time by FSC in its sole
discretion.
6. FSC will prepare reports to the Board of Directors of the
Corporation on a quarterly basis showing amounts expended hereunder
including amounts paid to Brokers and Administrators and the purpose for
such payments.
In consideration of the mutual covenants set forth in the
Distributor's Contract dated February 11, 1991, between FT SERIES, INC. and
Federated Securities Corp., FT SERIES, INC. executes and delivers this
Exhibit on behalf of the Funds, and with respect to the separate Classes of
Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this _____ day of ________, 1994.
ATTEST: FT SERIES, INC.
By:
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
By:
Secretary Executive Vice President
(SEAL)
Exhibit 8 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
CUSTODIAN CONTRACT
Between
FEDERATED INVESTMENT COMPANIES
and
STATE STREET BANK AND TRUST COMPANY
and
FEDERATED SERVICES COMPANY
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held by It 1
2. Duties of the Custodian With Respect to Property
of the Funds Held by the Custodian 2
2.1 Holding Securities 2
2.2 Delivery of Securities 2
2.3 Registration of Securities 5
2.4 Bank Accounts 6
2.5 Payments for Shares 7
2.6 Availability of Federal Funds 7
2.7 Collection of Income 7
2.8 Payment of Fund Moneys 8
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased. 9
2.10 Payments for Repurchases or Redemptions
of Shares of a Fund 9
2.11 Appointment of Agents 10
2.12 Deposit of Fund Assets in Securities System 10
2.13 Segregated Account 12
2.14 Joint Repurchase Agreements 13
2.15 Ownership Certificates for Tax Purposes 13
2.16 Proxies 13
2.17 Communications Relating to Fund Portfolio Securities 13
2.18 Proper Instructions 14
2.19 Actions Permitted Without Express Authority 14
2.20 Evidence of Authority 15
2.21 Notice to Trust by Custodian Regarding Cash Movement. 15
3. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
4. Records
5. Opinion of Funds' Independent Public Accountants/Auditors 16
6. Reports to Trust by Independent Public Accountants/Auditors 17
7. Compensation of Custodian 17
8. Responsibility of Custodian 17
9. Effective Period, Termination and Amendment 19
10. Successor Custodian 20
11. Interpretive and Additional Provisions 21
12. Massachusetts Law to Apply 22
13. Notices 22
14. Counterparts 22
15. Limitations of Liability 22
CUSTODIAN CONTRACT
This Contract between those INVESTMENT COMPANIES listed on Exhibit 1, as
it may be amended from time to time, (the "Trust"), which may be
Massachusetts business trusts or Maryland corporations or have such other
form of organization as may be indicated, on behalf of the portfolios
(hereinafter collectively called the "Funds" and individually referred to
as a "Fund") of the Trust, having its principal place of business at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, and
STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company,
having its principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian", and FEDERATED
SERVICES COMPANY, a Delaware Business trust company, having its principal
place of business at Federated Investors Tower, Pittsburgh, Pennsylvania,
15222-3779, hereinafter called ("Company").
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Trust hereby employs the Custodian as the custodian of the assets
of each of the Funds of the Trust. Except as otherwise expressly
provided herein, the securities and other assets of each of the
Funds shall be segregated from the assets of each of the other Funds
and from all other persons and entities. The Trust will deliver to
the Custodian all securities and cash owned by the Funds and all
payments of income, payments of principal or capital distributions
received by them with respect to all securities owned by the Funds
from time to time, and the cash consideration received by them for
shares ("Shares") of beneficial interest/capital stock of the Funds
as may be issued or sold from time to time. The Custodian shall not
be responsible for any property of the Funds held or received by the
Funds and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.18), the Custodian shall from time to time employ one or more sub-
custodians upon the terms specified in the Proper Instructions,
provided that the Custodian shall have no more or less
responsibility or liability to the Trust or any of the Funds on
account of any actions or omissions of any sub-custodian so employed
than any such sub-custodian has to the Custodian.
2.Duties of the Custodian With Respect to Property of the Funds Held by
the Custodian
2.1Holding Securities. The Custodian shall hold and physically segr
egate for the account of each Fund all non-cash property,
including all securities owned by each Fund, other than
securities which are maintained pursuant to Section 2.12 in a
clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities
System", or securities which are subject to a joint repurchase
agreement with affiliated funds pursuant to Section 2.14. The
Custodian shall maintain records of all receipts, deliveries and
locations of such securities, together with a current inventory
thereof, and shall conduct periodic physical inspections of
certificates representing stocks, bonds and other securities
held by it under this Contract in such manner as the Custodian
shall determine from time to time to be advisable in order to
verify the accuracy of such inventory. With respect to
securities held by any agent appointed pursuant to Section 2.11
hereof, and with respect to securities held by any sub-custodian
appointed pursuant to Section 1 hereof, the Custodian may rely
upon certificates from such agent as to the holdings of such
agent and from such sub-custodian as to the holdings of such sub-
custodian, it being understood that such reliance in no way
relieves the Custodian of its responsibilities under this
Contract. The Custodian will promptly report to the Trust the
results of such inspections, indicating any shortages or
discrepancies uncovered thereby, and take appropriate action to
remedy any such shortages or discrepancies.
2.2Delivery of Securities. The Custodian shall release and deliver
securities owned by a Fund held by the Custodian or in a
Securities System account of the Custodian only upon receipt of
Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, and only in the following
cases:
(1)Upon sale of such securities for the account of a Fund and r
eceipt of payment therefor;
(2)Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Trust;
(3)In the case of a sale effected through a Securities System,
in accordance with the provisions of Section 2.12 hereof;
(4)To the depository agent in connection with tender or other s
imilar offers for portfolio securities of a Fund, in
accordance with the provisions of Section 2.17 hereof;
(5)To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
(6)To the issuer thereof, or its agent, for transfer into the n
ame of a Fund or into the name of any nominee or nominees
of the Custodian or into the name or nominee name of any
agent appointed pursuant to Section 2.11 or into the name
or nominee name of any sub-custodian appointed pursuant to
Section 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in
any such case, the new securities are to be delivered to
the Custodian;
(7)Upon the sale of such securities for the account of a Fund,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery custom";
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's
own failure to act in accordance with the standard of
reasonable care or any higher standard of care imposed upon
the Custodian by any applicable law or regulation if such
above-stated standard of reasonable care were not part of
this Contract;
(8)For exchange or conversion pursuant to any plan of merger, c
onsolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
(9)In the case of warrants, rights or similar securities, the s
urrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts
or temporary securities for definitive securities; provided
that, in any such case, the new securities and cash, if
any, are to be delivered to the Custodian;
(10)For delivery in connection with any loans of portfolio secu
rities of a Fund, but only against receipt of adequate
collateral in the form of (a) cash, in an amount specified
by the Trust, (b) certificated securities of a description
specified by the Trust, registered in the name of the Fund
or in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer, or (c)
securities of a description specified by the Trust,
transferred through a Securities System in accordance with
Section 2.12 hereof;
(11)For delivery as security in connection with any borrowings
requiring a pledge of assets by a Fund, but only against
receipt of amounts borrowed, except that in cases where
additional collateral is required to secure a borrowing
already made, further securities may be released for the
purpose;
(12)For delivery in accordance with the provisions of any agree
ment among the Trust or a Fund, the Custodian and a broker-
dealer registered under the Securities Exchange Act of
1934, as amended, (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options
Clearing Corporation and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions for a Fund;
(13)For delivery in accordance with the provisions of any agree
ment among the Trust or a Fund, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations,
regarding account deposits in connection with transaction
for a Fund;
(14)Upon receipt of instructions from the transfer agent ("Tran
sfer Agent") for a Fund, for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, in satisfaction of requests by
holders of Shares for repurchase or redemption; and
(15)For any other proper corporate purpose, but only upon recei
pt of, in addition to Proper Instructions, a certified copy
of a resolution of the Executive Committee of the Trust on
behalf of a Fund signed by an officer of the Trust and
certified by its Secretary or an Assistant Secretary,
specifying the securities to be delivered, setting forth
the purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (o
ther than bearer securities) shall be registered in the name of
a particular Fund or in the name of any nominee of the Fund or
of any nominee of the Custodian which nominee shall be assigned
exclusively to the Fund, unless the Trust has authorized in
writing the appointment of a nominee to be used in common with
other registered investment companies affiliated with the Fund,
or in the name or nominee name of any agent appointed pursuant
to Section 2.11 or in the name or nominee name of any sub-
custodian appointed pursuant to Section 1. All securities
accepted by the Custodian on behalf of a Fund under the terms of
this Contract shall be in "street name" or other good delivery
form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts in the name of each Fund, subject only
to draft or order by the Custodian acting pursuant to the terms
of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from
or for the account of each Fund, other than cash maintained in a
joint repurchase account with other affiliated funds pursuant to
Section 2.14 of this Contract or by a particular Fund in a bank
account established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940, as amended, (the "1940
Act"). Funds held by the Custodian for a Fund may be deposited
by it to its credit as Custodian in the Banking Department of
the Custodian or in such other banks or trust companies as it
may in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be
qualified to act as a custodian under the 1940 Act and that each
such bank or trust company and the funds to be deposited with
each such bank or trust company shall be approved by vote of a
majority of the Board of Trustees/Directors ("Board") of the
Trust. Such funds shall be deposited by the Custodian in its
capacity as Custodian for the Fund and shall be withdrawable by
the Custodian only in that capacity. If requested by the Trust,
the Custodian shall furnish the Trust, not later than twenty
(20) days after the last business day of each month, an internal
reconciliation of the closing balance as of that day in all
accounts described in this section to the balance shown on the
daily cash report for that day rendered to the Trust.
2.5Payments for Shares. The Custodian shall make such arrangements
with the Transfer Agent of each Fund, as will enable the
Custodian to receive the cash consideration due to each Fund and
will deposit into each Fund's account such payments as are
received from the Transfer Agent. The Custodian will provide
timely notification to the Trust and the Transfer Agent of any
receipt by it of payments for Shares of the respective Fund.
2.6Availability of Federal Funds. Upon mutual agreement between the
Trust and the Custodian, the Custodian shall make federal funds
available to the Funds as of specified times agreed upon from
time to time by the Trust and the Custodian in the amount of
checks, clearing house funds, and other non-federal funds
received in payment for Shares of the Funds which are deposited
into the Funds' accounts.
2.7 Collection of Income.
(1)The Custodian shall collect on a timely basis all income and
other payments with respect to registered securities held
hereunder to which each Fund shall be entitled either by
law or pursuant to custom in the securities business, and
shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date
of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such
income, as collected, to each Fund's custodian account.
Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when
they become due and shall collect interest when due on
securities held hereunder. The collection of income due
the Funds on securities loaned pursuant to the provisions
of Section 2.2 (10) shall be the responsibility of the
Trust. The Custodian will have no duty or responsibility
in connection therewith, other than to provide the Trust
with such information or data as may be necessary to assist
the Trust in arranging for the timely delivery to the
Custodian of the income to which each Fund is properly
entitled.
(2)The Custodian shall promptly notify the Trust whenever income
due on securities is not collected in due course and will
provide the Trust with monthly reports of the status of
past due income unless the parties otherwise agree.
2.8Payment of Fund Moneys. Upon receipt of Proper Instructions, whi
ch may be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out moneys of each Fund in the
following cases only:
(1)Upon the purchase of securities, futures contracts or options
on futures contracts for the account of a Fund but only (a)
against the delivery of such securities, or evidence of
title to futures contracts, to the Custodian (or any bank,
banking firm or trust company doing business in the United
States or abroad which is qualified under the 1940 Act to
act as a custodian and has been designated by the Custodian
as its agent for this purpose) registered in the name of
the Fund or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer, (b) in the case of a purchase effected through a
Securities System, in accordance with the conditions set
forth in Section 2.12 hereof or (c) in the case of
repurchase agreements entered into between the Trust and
any other party, (i) against delivery of the securities
either in certificate form or through an entry crediting
the Custodian's account at the Federal Reserve Bank with
such securities or (ii) against delivery of the receipt
evidencing purchase for the account of the Fund of
securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase
such securities from the Fund;
(2)In connection with conversion, exchange or surrender of secu
rities owned by a Fund as set forth in Section 2.2 hereof;
(3)For the redemption or repurchase of Shares of a Fund issued
by the Trust as set forth in Section 2.10 hereof;
(4)For the payment of any expense or liability incurred by a Fu
nd, including but not limited to the following payments for
the account of the Fund: interest; taxes; management,
accounting, transfer agent and legal fees; and operating
expenses of the Fund, whether or not such expenses are to
be in whole or part capitalized or treated as deferred
expenses;
(5)For the payment of any dividends on Shares of a Fund declared
pursuant to the governing documents of the Trust;
(6)For payment of the amount of dividends received in respect of
securities sold short;
(7)For any other proper purpose, but only upon receipt of, in a
ddition to Proper Instructions, a certified copy of a
resolution of the Executive Committee of the Trust on
behalf of a Fund signed by an officer of the Trust and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring
such purpose to be a proper purpose, and naming the person
or persons to whom such payment is to be made.
2.9Liability for Payment in Advance of Receipt of Securities Purchas
ed. In any and every case where payment for purchase of
securities for the account of a Fund is made by the Custodian in
advance of receipt of the securities purchased, in the absence
of specific written instructions from the Trust to so pay in
advance, the Custodian shall be absolutely liable to the Fund
for such securities to the same extent as if the securities had
been received by the Custodian.
2.10Payments for Repurchases or Redemptions of Shares of a Fund. Fr
om such funds as may be available for the purpose of
repurchasing or redeeming Shares of a Fund, but subject to the
limitations of the Declaration of Trust/Articles of
Incorporation and any applicable votes of the Board of the Trust
pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for
payment to holders of shares of such Fund who have delivered to
the Transfer Agent a request for redemption or repurchase of
their shares including without limitation through bank drafts,
automated clearinghouse facilities, or by other means. In
connection with the redemption or repurchase of Shares of the
Funds, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders.
2.11Appointment of Agents. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other
bank or trust company which is itself qualified under the 1940
Act and any applicable state law or regulation, to act as a
custodian, as its agent to carry out such of the provisions of
this Section 2 as the Custodian may from time to time direct;
provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities
hereunder.
2.12Deposit of Fund Assets in Securities System. The Custodian may
deposit and/or maintain securities owned by the Funds in a
clearing agency registered with the Securities and Exchange
Commission ("SEC") under Section 17A of the Exchange Act, which
acts as a securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and certain
federal agencies, collectively referred to herein as "Securities
System" in accordance with applicable Federal Reserve Board and
SEC rules and regulations, if any, and subject to the following
provisions:
(1)The Custodian may keep securities of each Fund in a Securities System
provided that such securities are represented in an account ("Account")
of the Custodian in the Securities System which shall not include any
assets of the Custodian other than assets held as a fiduciary, custodian
or otherwise for customers;
(2)The records of the Custodian with respect to securities of the Funds which
are maintained in a Securities System shall identify by book-entry those
securities belonging to each Fund;
(3)The Custodian shall pay for securities purchased for the account of each
Fund upon (i) receipt of advice from the Securities System that such
securities have been transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such payment and transfer
for the account of the Fund. The Custodian shall transfer securities sold
for the account of a Fund upon (i) receipt of advice from the Securities
System that payment for such securities has been transferred to the Account,
and (ii) the making of an entry on the record Custodian to reflect such
transfer and payment for the account of the Fund.
all advices from the Securities System of transfers of securities for
Fund shall identify the Fund, be maintained for the Fund by the
Custodian and be
provided to the Trust at its request. Upon request, the
Custodian shall furnish the
Trust confirmation of each transfer to or from the account of
a Fund in the form of a
written advice or notice and shall furnish to the Trust
copies of daily transaction
sheets reflecting each day's transactions in the Securities
System for the account of a Fund.
(4)The Custodian shall provide the Trust with any report obtained by the
Custodian on the Securities System's accounting system, internal accounting
control and procedures for safeguarding securities deposited in the
Securities System;
(5)The Custodian shall have received the initial certificate, required
by Section 9 hereof;
(6)Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Trust for any loss or damage to
a Fund resulting from use of the Securities
System by reason of any negligence, misfeasance or misconduct of
the Custodian or any
of its agents or of any of its or their employees or from failure of
the Custodian or
any such agent to enforce effectively such rights as it may have
against the
Securities System; at the election of the Trust, it shall be entitled
to be subrogated
to the rights of the Custodian with respect to any claim
against the Securities System
or any other person which the Custodian may have as a consequence
of any such loss or
damage if and to the extent that a Fund has not been made whole
for any such loss or
damage.
(7)The authorization contained in this Section 2.12 shall not
relieve the Custodian from
using reasonable care and diligence in making use of any
Securities System.
2.13Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or
accounts for and on behalf of each Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.12 hereof, (i) in accordance with the provisions of
any agreement among the Trust, the Custodian and a broker-dealer
registered under the Exchange Act and a member of the NASD (or
any futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission
or any registered contract market), or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions for a Fund, (ii)
for purpose of segregating cash or government securities in
connection with options purchased, sold or written for a Fund or
commodity futures contracts or options thereon purchased or sold
for a Fund, (iii) for the purpose of compliance by the Trust or
a Fund with the procedures required by any release or releases
of the SEC relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper
corporate purposes, but only, in the case of clause (iv), upon
receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Board or of the Executive Committee
signed by an officer of the Trust and certified by the Secretary
or an Assistant Secretary, setting forth the purpose or purposes
of such segregated account and declaring such purposes to be
proper corporate purposes.
2.14Joint Repurchase Agreements. Upon the receipt of Proper Instruc
tions, the Custodian shall deposit and/or maintain any assets of
a Fund and any affiliated funds which are subject to joint
repurchase transactions in an account established solely for
such transactions for the Fund and its affiliated funds. For
purposes of this Section 2.14, "affiliated funds" shall include
all investment companies and their portfolios for which
subsidiaries or affiliates of Federated Investors serve as
investment advisers, distributors or administrators in
accordance with applicable exemptive orders from the SEC. The
requirements of segregation set forth in Section 2.1 shall be
deemed to be waived with respect to such assets.
2.15Ownership Certificates for Tax Purposes. The Custodian shall ex
ecute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of a Fund
held by it and in connection with transfers of securities.
2.16Proxies. The Custodian shall, with respect to the securities he
ld hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered
otherwise than in the name of a Fund or a nominee of a Fund, all
proxies, without indication of the manner in which such proxies
are to be voted, and shall promptly deliver to the Trust such
proxies, all proxy soliciting materials and all notices relating
to such securities.
2.17Communications Relating to Fund Portfolio Securities. The Custo
dian shall transmit promptly to the Trust all written
information (including, without limitation, pendency of calls
and maturities of securities and expirations of rights in
connection therewith and notices of exercise of call and put
options written by the Fund and the maturity of futures
contracts purchased or sold by the Fund) received by the
Custodian from issuers of the securities being held for the
Fund. With respect to tender or exchange offers, the Custodian
shall transmit promptly to the Trust all written information
received by the Custodian from issuers of the securities whose
tender or exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Trust desires to
take action with respect to any tender offer, exchange offer or
any other similar transaction, the Trust shall notify the
Custodian in writing at least three business days prior to the
date on which the Custodian is to take such action. However,
the Custodian shall nevertheless exercise its best efforts to
take such action in the event that notification is received
three business days or less prior to the date on which action is
required.
2.18Proper Instructions. Proper Instructions as used throughout this
Section 2 means a writing signed or initialed by one or more
person or persons as the Board shall have from time to time
authorized. Each such writing shall set forth the specific
transaction or type of transaction involved. Oral instructions
will be deemed to be Proper Instructions if (a) the Custodian
reasonably believes them to have been given by a person
previously authorized in Proper Instructions to give such
instructions with respect to the transaction involved, and (b)
the Trust promptly causes such oral instructions to be confirmed
in writing. Upon receipt of a certificate of the Secretary or
an Assistant Secretary as to the authorization by the Board of
the Trust accompanied by a detailed description of procedures
approved by the Board, Proper Instructions may include
communications effected directly between electro-mechanical or
electronic devices provided that the Board and the Custodian are
satisfied that such procedures afford adequate safeguards for a
Fund's assets.
2.19Actions Permitted Without Express Authority. The Custodian may
in its discretion, without express authority from the Trust:
(1)make payments to itself or others for minor expenses of hand
ling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Trust in such form that it
may be allocated to the affected Fund;
(2)surrender securities in temporary form for securities in def
initive form;
(3)endorse for collection, in the name of a Fund, checks, drafts
and other negotiable instruments; and
(4)in general, attend to all non-discretionary details in conne
ction with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and
property of each Fund except as otherwise directed by the
Trust.
2.20Evidence of Authority. The Custodian shall be protected in acti
ng upon any instructions, notice, request, consent, certificate
or other instrument or paper reasonably believed by it to be
genuine and to have been properly executed on behalf of a Fund.
The Custodian may receive and accept a certified copy of a vote
of the Board of the Trust as conclusive evidence (a) of the
authority of any person to act in accordance with such vote or
(b) of any determination of or any action by the Board pursuant
to the Declaration of Trust/Articles of Incorporation as
described in such vote, and such vote may be considered as in
full force and effect until receipt by the Custodian of written
notice to the contrary.
2.21Notice to Trust by Custodian Regarding Cash Movement. The Custo
dian will provide timely notification to the Trust of any
receipt of cash, income or payments to the Trust and the release
of cash or payment by the Trust.
3.Duties of Custodian With Respect to the Books of Account and Calculati
on of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to t
he entity or entities appointed by the Board of the Trust to keep
the books of account of each Fund and/or compute the net asset value
per share of the outstanding Shares of each Fund or, if directed in
writing to do so by the Trust, shall itself keep such books of
account and/or compute such net asset value per share. If so
directed, the Custodian shall also calculate daily the net income of
a Fund as described in the Fund's currently effective prospectus and
Statement of Additional Information ("Prospectus") and shall advise
the Trust and the Transfer Agent daily of the total amounts of such
net income and, if instructed in writing by an officer of the Trust
to do so, shall advise the Transfer Agent periodically of the
division of such net income among its various components. The
calculations of the net asset value per share and the daily income
of a Fund shall be made at the time or times described from time to
time in the Fund's currently effective Prospectus.
4. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as
will meet the obligations of the Trust and the Funds under the 1940
Act, with particular attention to Section 31 thereof and Rules 31a-1
and 31a-2 thereunder, and specifically including identified cost
records used for tax purposes. All such records shall be the
property of the Trust and shall at all times during the regular
business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Trust and employees
and agents of the SEC. In the event of termination of this
Contract, the Custodian will deliver all such records to the Trust,
to a successor Custodian, or to such other person as the Trust may
direct. The Custodian shall supply daily to the Trust a tabulation
of securities owned by a Fund and held by the Custodian and shall,
when requested to do so by the Trust and for such compensation as
shall be agreed upon between the Trust and the Custodian, include
certificate numbers in such tabulations.
5. Opinion of Funds' Independent Public Accountants/Auditors.
The Custodian shall take all reasonable action, as the Trust may from
time to time request, to obtain from year to year favorable opinions
from each Fund's independent public accountants/auditors with
respect to its activities hereunder in connection with the
preparation of the Fund's registration statement, periodic reports,
or any other reports to the SEC and with respect to any other
requirements of such Commission.
6. Reports to Trust by Independent Public Accountants/Auditors.
The Custodian shall provide the Trust, at such times as the Trust may
reasonably require, with reports by independent public
accountants/auditors for each Fund on the accounting system,
internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts,
including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian for the
Fund under this Contract; such reports shall be of sufficient scope
and in sufficient detail, as may reasonably be required by the
Trust, to provide reasonable assurance that any material
inadequacies would be disclosed by such examination and, if there
are no such inadequacies, the reports shall so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time
between Company and the Custodian.
8. Responsibility of Custodian.
The Custodian shall be held to a standard of reasonable care in
carrying out the provisions of this Contract; provided, however,
that the Custodian shall be held to any higher standard of care
which would be imposed upon the Custodian by any applicable law or
regulation if such above stated standard of reasonable care was not
part of this Contract. The Custodian shall be entitled to rely on
and may act upon advice of counsel (who may be counsel for the
Trust) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice, provided that
such action is not in violation of applicable federal or state laws
or regulations, and is in good faith and without negligence.
Subject to the limitations set forth in Section 15 hereof, the
Custodian shall be kept indemnified by the Trust but only from the
assets of the Fund involved in the issue at hand and be without
liability for any action taken or thing done by it in carrying out
the terms and provisions of this Contract in accordance with the
above standards.
In order that the indemnification provisions contained in this
Section 8 shall apply, however, it is understood that if in any case
the Trust may be asked to indemnify or save the Custodian harmless,
the Trust shall be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further understood
that the Custodian will use all reasonable care to identify and
notify the Trust promptly concerning any situation which presents or
appears likely to present the probability of such a claim for
indemnification. The Trust shall have the option to defend the
Custodian against any claim which may be the subject of this
indemnification, and in the event that the Trust so elects it will
so notify the Custodian and thereupon the Trust shall take over
complete defense of the claim, and the Custodian shall in such
situation initiate no further legal or other expenses for which it
shall seek indemnification under this Section. The Custodian shall
in no case confess any claim or make any compromise in any case in
which the Trust will be asked to indemnify the Custodian except with
the Trust's prior written consent.
Notwithstanding the foregoing, the responsibility of the Custodian
with respect to redemptions effected by check shall be in accordance
with a separate Agreement entered into between the Custodian and the
Trust.
If the Trust requires the Custodian to take any action with respect
to securities, which action involves the payment of money or which
action may, in the reasonable opinion of the Custodian, result in
the Custodian or its nominee assigned to a Fund being liable for the
payment of money or incurring liability of some other form, the
Custodian may request the Trust, as a prerequisite to requiring the
Custodian to take such action, to provide indemnity to the Custodian
in an amount and form satisfactory to the Custodian.
Subject to the limitations set forth in Section 15 hereof, the Trust
agrees to indemnify and hold harmless the Custodian and its nominee
from and against all taxes, charges, expenses, assessments, claims
and liabilities (including counsel fees) (referred to herein as
authorized charges) incurred or assessed against it or its nominee
in connection with the performance of this Contract, except such as
may arise from it or its nominee's own failure to act in accordance
with the standard of reasonable care or any higher standard of care
which would be imposed upon the Custodian by any applicable law or
regulation if such above-stated standard of reasonable care were not
part of this Contract. To secure any authorized charges and any
advances of cash or securities made by the Custodian to or for the
benefit of a Fund for any purpose which results in the Fund
incurring an overdraft at the end of any business day or for
extraordinary or emergency purposes during any business day, the
Trust hereby grants to the Custodian a security interest in and
pledges to the Custodian securities held for the Fund by the
Custodian, in an amount not to exceed 10 percent of the Fund's gross
assets, the specific securities to be designated in writing from
time to time by the Trust or the Fund's investment adviser. Should
the Trust fail to make such designation, or should it instruct the
Custodian to make advances exceeding the percentage amount set forth
above and should the Custodian do so, the Trust hereby agrees that
the Custodian shall have a security interest in all securities or
other property purchased for a Fund with the advances by the
Custodian, which securities or property shall be deemed to be
pledged to the Custodian, and the written instructions of the Trust
instructing their purchase shall be considered the requisite
description and designation of the property so pledged for purposes
of the requirements of the Uniform Commercial Code. Should the
Trust fail to cause a Fund to repay promptly any authorized charges
or advances of cash or securities, subject to the provision of the
second paragraph of this Section 8 regarding indemnification, the
Custodian shall be entitled to use available cash and to dispose of
pledged securities and property as is necessary to repay any such
advances.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the
parties hereto and may be terminated by either party by an
instrument in writing delivered or mailed, postage prepaid to the
other party, such termination to take effect not sooner than sixty
(60) days after the date of such delivery or mailing; provided,
however that the Custodian shall not act under Section 2.12 hereof
in the absence of receipt of an initial certificate of the Secretary
or an Assistant Secretary that the Board of the Trust has approved
the initial use of a particular Securities System as required in
each case by Rule 17f-4 under the 1940 Act; provided further,
however, that the Trust shall not amend or terminate this Contract
in contravention of any applicable federal or state regulations, or
any provision of the Declaration of Trust/Articles of Incorporation,
and further provided, that the Trust may at any time by action of
its Board (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or
(ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the
appropriate banking regulatory agency or upon the happening of a
like event at the direction of an appropriate regulatory agency or
court of competent jurisdiction.
Upon termination of the Contract, the Trust shall pay to the
Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Board of the
Trust, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed
and in the form for transfer, all securities then held by it
hereunder for each Fund and shall transfer to separate accounts of
the successor custodian all of each Fund's securities held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of
the Board of the Trust, deliver at the office of the Custodian and
transfer such securities, funds and other properties in accordance
with such vote.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board shall have been delivered
to the Custodian on or before the date when such termination shall
become effective, then the Custodian shall have the right to deliver
to a bank or trust company, which is a "bank" as defined in the 1940
Act, (delete "doing business ... Massachusetts" unless SSBT is the
Custodian) doing business in Boston, Massachusetts, of its own
selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than
$100,000,000, all securities, funds and other properties held by the
Custodian and all instruments held by the Custodian relative thereto
and all other property held by it under this Contract for each Fund
and to transfer to separate accounts of such successor custodian
all of each Fund's securities held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the
Custodian under this Contract.
In the event that securities, funds and other properties remain in
the possession of the Custodian after the date of termination hereof
owing to failure of the Trust to procure the certified copy of the
vote referred to or of the Board to appoint a successor custodian,
the Custodian shall be entitled to fair compensation for its
services during such period as the Custodian retains possession of
such securities, funds and other properties and the provisions of
this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and
the Trust may from time to time agree on such provisions
interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of
this Contract. Any such interpretive or additional provisions shall
be in a writing signed by both parties and shall be annexed hereto,
provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any
provision of the Declaration of Trust/Articles of Incorporation. No
interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this
Contract.
12. Massachusetts Law to Apply.
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
13. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or
to the Custodian at address for SSBT only: 225 Franklin Street,
Boston, Massachusetts, 02110, or to such other address as the Trust
or the Custodian may hereafter specify, shall be deemed to have been
properly delivered or given hereunder to the respective address.
14. Counterparts.
This Contract may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
15. Limitations of Liability.
The Custodian is expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust of
those Trusts which are business trusts and agrees that the
obligations and liabilities assumed by the Trust and any Fund
pursuant to this Contract, including, without limitation, any
obligation or liability to indemnify the Custodian pursuant to
Section 8 hereof, shall be limited in any case to the relevant Fund
and its assets and that the Custodian shall not seek satisfaction of
any such obligation from the shareholders of the relevant Fund, from
any other Fund or its shareholders or from the Trustees, Officers,
employees or agents of the Trust, or any of them. In addition, in
connection with the discharge and satisfaction of any claim made by
the Custodian against the Trust, for whatever reasons, involving
more than one Fund, the Trust shall have the exclusive right to
determine the appropriate allocations of liability for any such
claim between or among the Funds.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative
and its seal to be hereunder affixed effective as of the 1st day of
December, 1993.
ATTEST: INVESTMENT COMPANIES (Except those
listed below)
/s/John W. McGonigle_________ By /s/John F. Donahue_____________
John W. McGonigle John F. Donahue
Secretary Chairman
ATTEST: STATE STREET BANK AND TRUST
COMPANY
/s/ Ed McKenzie______________ By /s/ F. J. Sidoti, Jr._______
(Assistant) Secretary Typed Name: Frank J. Sidoti, Jr.
Typed Name: Ed McKenzie Title: Vice President
ATTEST: FEDERATED SERVICES COMPANIY
/s/ Jeannette Fisher-Garber______ By /s/ James J. Dolan________________
Jeannette Fisher-Garber James J. Dolan
Secretary President
EXHIBIT 1
International Series, Inc.
Exhibit 9(i) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AGREEMENT
for
FUND ACCOUNTING,
SHAREHOLDER RECORDKEEPING,
and
CUSTODY SERVICES PROCUREMENT
AGREEMENT made as of the 1st day of December, 1993, by and between those
investment companies listed on Exhibit 1 as may be amended from time to time,
having their principal office and place of business at Federated Investors
Tower, Pittsburgh, PA 15222-3779 (the "Trust"), on behalf of the portfolios
(individually referred to herein as a "Fund" and collectively as "Funds") of
the Trust, and FEDERATED SERVICES COMPANY, a Delaware business trust, having
its principal office and place of business at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779 (the "Company").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
with authorized and issued shares of capital stock or beneficial interest
("Shares"); and
WHEREAS, the Trust wishes to retain the Company to provide certain pricing,
accounting and recordkeeping services for each of the Funds, including any
classes of shares issued by any Fund ("Classes"), and the Company is willing
to furnish such services; and
WHEREAS, the Trust desires to appoint the Company as its transfer agent,
dividend disbursing agent, and agent in connection with certain other
activities, and the Company desires to accept such appointment; and
WHEREAS, the Trust desires to appoint the Company as its agent to select,
negotiate and subcontract for custodian services from an approved list of
qualified banks and the Company desires to accept such appointment; and
WHEREAS, from time to time the Trust may desire and may instruct the
Company to subcontract for the performance of certain of its duties and
responsibilities hereunder to State Street Bank and Trust Company or another
agent (the "Agent"); and
WHEREAS, the words Trust and Fund may be used interchangeably for those
investment companies consisting of only one portfolio;
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, and intending to be legally bound hereby, the parties hereto agree
as follows:
SECTION ONE: Fund Accounting.
Article 1. Appointment.
The Trust hereby appoints the Company to provide certain pricing and
accounting services to the Funds, and/or the Classes, for the period and on
the terms set forth in this Agreement. The Company accepts such appointment
and agrees to furnish the services herein set forth in return for the
compensation as provided in Article 3 of this Section.
Article 2. The Company and Duties.
Subject to the supervision and control of the Trust's Board of Trustees or
Directors ("Board"), the Company will assist the Trust with regard to fund
accounting for the Trust, and/or the Funds, and/or the Classes, and in
connection therewith undertakes to perform the following specific services;
A. Value the assets of the Funds and determine the net asset value per
share of each Fund and/or Class, at the time and in the manner from
time to time determined by the Board and as set forth in the
Prospectus and Statement of Additional Information ("Prospectus") of
each Fund;
B. Calculate the net income of each of the Funds, if any;
C. Calculate capital gains or losses of each of the Funds resulting from
sale or disposition of assets, if any;
D. Maintain the general ledger and other accounts, books and financial
records of the Trust, including for each Fund, and/or Class, as
required under Section 31(a) of the 1940 Act and the Rules thereunder
in connection with the services provided by the Company;
E. Preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records to be maintained by Rule 31a-1 under the 1940 Act in
connection with the services provided by the Company. The Company
further agrees that all such records it maintains for the Trust are
the property of the Trust and further agrees to surrender promptly to
the Trust such records upon the Trust's request;
F. At the request of the Trust, prepare various reports or other financial
documents required by federal, state and other applicable laws and
regulations; and
G. Such other similar services as may be reasonably requested by the
Trust.
Article 3. Compensation and Allocation of Expenses.
A. The Funds will compensate the Company for its services rendered
pursuant to Section One of this Agreement in accordance with the fees
set forth on Fee Schedules A ("A1, A2, A3 etc..."), annexed hereto and
incorporated herein, as may be added or amended from time to time.
Such fees do not include out-of-pocket disbursements of the Company
for which the Funds shall reimburse the Company upon receipt of a
separate invoice. Out-of-pocket disbursements shall include, but
shall not be limited to, the items specified in Schedules B ("B1, B2,
B3, etc..."), annexed hereto and incorporated herein, as may be added
or amended from time to time. Schedules B may be modified by the
Company upon not less than thirty days' prior written notice to the
Trust.
B. The Fund and/or the Class, and not the Company, shall bear the cost of:
custodial expenses; membership dues in the Investment Company
Institute or any similar organization; transfer agency expenses;
investment advisory expenses; costs of printing and mailing stock
certificates, Prospectuses, reports and notices; administrative
expenses; interest on borrowed money; brokerage commissions; taxes and
fees payable to federal, state and other governmental agencies; fees
of Trustees or Directors of the Trust; independent auditors expenses;
Federated Administrative Services and/or Federated Administrative
Services, Inc. legal and audit department expenses billed to Federated
Services Company for work performed related to the Trust, the Funds,
or the Classes; law firm expenses; or other expenses not specified in
this Article 3 which may be properly payable by the Funds and/or
classes.
C. The Company will send an invoice to each of the Funds as soon as
practicable after the end of each month. Each invoice will provide
detailed information about the compensation and out-of-pocket expenses
in accordance with Schedules A and Schedules B. The Funds and or the
Classes will pay to the Company the amount of such invoice within 30
days of receipt of the invoices.
D. Any compensation agreed to hereunder may be adjusted from time to time
by attaching to Schedules A revised Schedules dated and signed by a
duly authorized officer of the Trust and/or the Funds and a duly
authorized officer of the Company.
E. The fee for the period from the effective date of this Agreement with
respect to a Fund or a Class to the end of the initial month shall be
prorated according to the proportion that such period bears to the
full month period. Upon any termination of this Agreement before the
end of any month, the fee for such period shall be prorated according
to the proportion which such period bears to the full month period.
For purposes of determining fees payable to the Company, the value of
the Fund's net assets shall be computed at the time and in the manner
specified in the Fund's Prospectus.
F. The Company, in its sole discretion, may from time to time subcontract
to, employ or associate with itself such person or persons as the
Company may believe to be particularly suited to assist it in
performing services under this Section One. Such person or persons
may be third-party service providers, or they may be officers and
employees who are employed by both the Company and the Funds. The
compensation of such person or persons shall be paid by the Company
and no obligation shall be incurred on behalf of the Trust, the Funds,
or the Classes in such respect.
SECTION TWO: Shareholder Recordkeeping.
Article 4. Terms of Appointment.
Subject to the terms and conditions set forth in this Agreement, the Trust
hereby appoints the Company to act as, and the Company agrees to act as,
transfer agent and dividend disbursing agent for each Fund's Shares, and agent
in connection with any accumulation, open-account or similar plans provided to
the shareholders of any Fund ("Shareholder(s)"), including without limitation
any periodic investment plan or periodic withdrawal program.
As used throughout this Agreement, a "Proper Instruction" means a writing
signed or initialed by one or more person or persons as the Board shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved. Oral instructions will be deemed
to be Proper Instructions if (a) the Company reasonably believes them to have
been given by a person previously authorized in Proper Instructions to give
such instructions with respect to the transaction involved, and (b) the Trust,
or the Fund, and the Company promptly cause such oral instructions to be
confirmed in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that the
Trust, or the Fund, and the Company are satisfied that such procedures afford
adequate safeguards for the Fund's assets. Proper Instructions may only be
amended in writing.
Article 5. Duties of the Company.
The Company shall perform the following services in accordance with Proper
Instructions as may be provided from time to time by the Trust as to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase of
shares and promptly deliver payment and appropriate
documentation therefore to the custodian of the relevant Fund,
(the "Custodian"). The Company shall notify the Fund and the
Custodian on a daily basis of the total amount of orders and
payments so delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of Shares of each Fund and/or Class and hold
such Shares in the appropriate Shareholder accounts.
(3) For certificated Funds and/or Classes, if a Shareholder or its
agent requests a certificate, the Company, as Transfer Agent,
shall countersign and mail by first class mail, a certificate to
the Shareholder at its address as set forth on the transfer
books of the Funds, and/or Classes, subject to any Proper
Instructions regarding the delivery of certificates.
(4) In the event that any check or other order for the purchase of
Shares of the Fund and/or Class is returned unpaid for any
reason, the Company shall debit the Share account of the
Shareholder by the number of Shares that had been credited to
its account upon receipt of the check or other order, promptly
mail a debit advice to the Shareholder, and notify the Fund
and/or Class of its action. In the event that the amount paid
for such Shares exceeds proceeds of the redemption of such
Shares plus the amount of any dividends paid with respect to
such Shares, the Fund and/the Class or its distributor will
reimburse the Company on the amount of such excess.
B. Distribution
(1) Upon notification by the Funds of the declaration of any
distribution to Shareholders, the Company shall act as Dividend
Disbursing Agent for the Funds in accordance with the provisions
of its governing document and the then-current Prospectus of the
Fund. The Company shall prepare and mail or credit income,
capital gain, or any other payments to Shareholders. As the
Dividend Disbursing Agent, the Company shall, on or before the
payment date of any such distribution, notify the Custodian of
the estimated amount required to pay any portion of said
distribution which is payable in cash and request the Custodian
to make available sufficient funds for the cash amount to be
paid out. The Company shall reconcile the amounts so requested
and the amounts actually received with the Custodian on a daily
basis. If a Shareholder is entitled to receive additional
Shares by virtue of any such distribution or dividend,
appropriate credits shall be made to the Shareholder's account,
for certificated Funds and/or Classes, delivered where
requested; and
(2) The Company shall maintain records of account for each Fund and
Class and advise the Trust, each Fund and Class and its
Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or set
forth in Proper Instructions, deliver the appropriate
instructions therefor to the Custodian. The Company shall
notify the Funds on a daily basis of the total amount of
redemption requests processed and monies paid to the Company by
the Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds from
the Custodian with respect to any redemption, the Company shall
pay or cause to be paid the redemption proceeds in the manner
instructed by the redeeming Shareholders, pursuant to procedures
described in the then-current Prospectus of the Fund.
(3) If any certificate returned for redemption or other request for
redemption does not comply with the procedures for redemption
approved by the Fund, the Company shall promptly notify the
Shareholder of such fact, together with the reason therefor, and
shall effect such redemption at the price applicable to the date
and time of receipt of documents complying with said procedures.
(4) The Company shall effect transfers of Shares by the registered
owners thereof.
(5) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual
basis and report such actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each Fund,
and/or Class, and maintain pursuant to applicable rules of the
Securities and Exchange Commission ("SEC") a record of the total
number of Shares of the Fund and/or Class which are authorized,
based upon data provided to it by the Fund, and issued and
outstanding. The Company shall also provide the Fund on a
regular basis or upon reasonable request with the total number
of Shares which are authorized and issued and outstanding, but
shall have no obligation when recording the issuance of Shares,
except as otherwise set forth herein, to monitor the issuance of
such Shares or to take cognizance of any laws relating to the
issue or sale of such Shares, which functions shall be the sole
responsibility of the Funds.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed hereunder in the form and manner as agreed to by the
Trust or the Fund to include a record for each Shareholder's
account of the following:
(a) Name, address and tax identification number (and whether
such number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account, including
dividends paid and date and price for all transactions;
(d) Any stop or restraining order placed against the account;
(e) Information with respect to withholding in the case of a
foreign account or an account for which withholding is
required by the Internal Revenue Code;
(f) Any dividend reinvestment order, plan application, dividend
address and correspondence relating to the current
maintenance of the account;
(g) Certificate numbers and denominations for any Shareholder
holding certificates;
(h) Any information required in order for the Company to
perform the calculations contemplated or required by this
Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such
record retention shall be at the expense of the Company, and
such records may be inspected by the Fund at reasonable times.
The Company may, at its option at any time, and shall forthwith
upon the Fund's demand, turn over to the Fund and cease to
retain in the Company's files, records and documents created and
maintained by the Company pursuant to this Agreement, which are
no longer needed by the Company in performance of its services
or for its protection. If not so turned over to the Fund, such
records and documents will be retained by the Company for six
years from the year of creation, during the first two of which
such documents will be in readily accessible form. At the end
of the six year period, such records and documents will either
be turned over to the Fund or destroyed in accordance with
Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the following
information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in each
state for "blue sky" purposes as determined according to
Proper Instructions delivered from time to time by the
Fund to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption fees,
or other transaction- or sales-related payments;
(f) Such other information as may be agreed upon from time to
time.
(2) The Company shall prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies, and, if
required, mail to Shareholders, such notices for reporting
dividends and distributions paid as are required to be so filed
and mailed and shall withhold such sums as are required to be
withheld under applicable federal and state income tax laws,
rules and regulations.
(3) In addition to and not in lieu of the services set forth above,
the Company shall:
(a) Perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, agent in
connection with accumulation, open-account or similar
plans (including without limitation any periodic
investment plan or periodic withdrawal program), including
but not limited to: maintaining all Shareholder accounts,
mailing Shareholder reports and Prospectuses to current
Shareholders, withholding taxes on accounts subject to
back-up or other withholding (including non-resident alien
accounts), preparing and filing reports on U.S. Treasury
Department Form 1099 and other appropriate forms required
with respect to dividends and distributions by federal
authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares
and other confirmable transactions in Shareholder
accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account
information; and
(b) provide a system which will enable the Fund to monitor the
total number of Shares of each Fund and/or Class sold in
each state ("blue sky reporting"). The Fund shall by
Proper Instructions (i) identify to the Company those
transactions and assets to be treated as exempt from the
blue sky reporting for each state and (ii) verify the
classification of transactions for each state on the
system prior to activation and thereafter monitor the
daily activity for each state. The responsibility of the
Company for each Fund's and/or Class's state blue sky
registration status is limited solely to the recording of
the initial classification of transactions or accounts
with regard to blue sky compliance and the reporting of
such transactions and accounts to the Fund as provided
above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders
relating to their Share accounts and such other correspondence
as may from time to time be addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists, mail proxy
cards and other material supplied to it by the Fund in
connection with Shareholder Meetings of each Fund; receive,
examine and tabulate returned proxies, and certify the vote of
the Shareholders;
(3) The Company shall establish and maintain facilities and
procedures for safekeeping of stock certificates, check forms
and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such
certificates, forms and devices.
Article 6. Duties of the Trust.
A. Compliance
The Trust or Fund assume full responsibility for the preparation,
contents and distribution of their own and/or their classes'
Prospectus and for complying with all applicable requirements of the
Securities Act of 1933, as amended (the "1933 Act"), the 1940 Act and
any laws, rules and regulations of government authorities having
jurisdiction.
B. Share Certificates
The Trust shall supply the Company with a sufficient supply of blank
Share certificates and from time to time shall renew such supply upon
request of the Company. Such blank Share certificates shall be
properly signed, manually or by facsimile, if authorized by the Trust
and shall bear the seal of the Trust or facsimile thereof; and
notwithstanding the death, resignation or removal of any officer of
the Trust authorized to sign certificates, the Company may continue to
countersign certificates which bear the manual or facsimile signature
of such officer until otherwise directed by the Trust.
C. Distributions
The Fund shall promptly inform the Company of the declaration of any
dividend or distribution on account of any Fund's shares.
Article 7. Compensation and Expenses.
A. Annual Fee
For performance by the Company pursuant to Section Two of this
Agreement, the Trust and/or the Fund agree to pay the Company an
annual maintenance fee for each Shareholder account as set out in
Schedules C ("C1, C2, C3 etc..."), attached hereto, as may be added or
amended from time to time. Such fees may be changed from time to time
subject to written agreement between the Trust and the Company.
Pursuant to information in the Fund Prospectus or other information or
instructions from the Fund, the Company may sub-divide any Fund into
Classes or other sub-components for recordkeeping purposes. The
Company will charge the Fund the fees set forth on Schedule C for each
such Class or sub-component the same as if each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Trust and/or
Fund agree to reimburse the Company for out-of-pocket expenses or
advances incurred by the Company for the items set out in Schedules D
("D1, D2, D3 etc..."), attached hereto, as may be added or amended
from time to time. In addition, any other expenses incurred by the
Company at the request or with the consent of the Trust and/or the
Fund, will be reimbursed by the appropriate Fund.
C. Payment
The Company shall send an invoice with respect to fees and
reimbursable expenses to the Trust or each of the Funds as soon as
practicable at the end of each month. Each invoice will provide
detailed information about the Compensation and out-of-pocket expenses
in accordance with Schedules C and Schedules D. The Trust or the
Funds will pay to the Company the amount of such invoice within 30
days following the receipt of the invoices.
Article 8. Assignment of Shareholder Recordkeeping.
Except as provided below, no right or obligation under this Section
Two may be assigned by either party without the written consent of the
other party.
(1) This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and
assigns.
(2) The Company may without further consent on the part of the Trust
subcontract for the performance hereof with (A) State Street
Bank and its subsidiary, Boston Financial Data Services, Inc., a
Massachusetts Trust ("BFDS"), which is duly registered as a
transfer agent pursuant to Section 17A(c)(1) of the Securities
Exchange Act of 1934, as amended, or any succeeding statute
("Section 17A(c)(1)"), or (B) a BFDS subsidiary duly registered
as a transfer agent pursuant to Section 17A(c)(1), or (C) a BFDS
affiliate, or (D) such other provider of services duly
registered as a transfer agent under Section 17A(c)(1) as
Company shall select; provided, however, that the Company shall
be as fully responsible to the Trust for the acts and omissions
of any subcontractor as it is for its own acts and omissions; or
(3) The Company shall upon instruction from the Trust subcontract for
the performance hereof with an Agent selected by the Trust,
other than BFDS or a provider of services selected by Company,
as described in (2) above; provided, however, that the Company
shall in no way be responsible to the Trust for the acts and
omissions of the Agent.
SECTION THREE: Custody Services Procurement
Article 9. Appointment.
The Trust hereby appoints Company as its agent to evaluate and obtain
custody services from a financial institution that (i) meets the
criteria established in Section 17(f) of the 1940 Act and (ii) has
been approved by the Board as eligible for selection by the Company as
a custodian (the "Eligible Custodian"). The Company accepts such
appointment.
Article 10. The Company and Its Duties.
Subject to the review, supervision and control of the Board, the
Company shall:
(1) evaluate the nature and the quality of the custodial services
provided by the Eligible Custodian;
(2) employ the Eligible Custodian to serve on behalf of the Trust as
Custodian of the Trust's assets substantially on the terms set
forth as the form of agreement in Exhibit 2;
(3) negotiate and enter into agreements with the Custodians for the
benefit of the Trust, with the Trust as a party to each such
agreement. The Company shall not be a party to any agreement
with any such Custodian;
(4) establish procedures to monitor the nature and the quality of the
services provided by the Custodians;
(5) continuously monitor the nature and the quality of services
provided by the Custodians; and
(6) periodically provide to the Trust (i) written reports on the
activities and services of the Custodians; (ii) the nature and
amount of disbursement made on account of the Trust with respect
to each custodial agreement; and (iii) such other information as
the Board shall reasonably request to enable it to fulfill its
duties and obligations under Sections 17(f) and 36(b) of the
1940 Act and other duties and obligations thereof.
Article 11. Fees and Expenses.
A. Annual Fee
For the performance by the Company pursuant to Section Three of this
Agreement, the Trust and/or the Fund agree to pay the Company an
annual fee as set forth in Schedule E, attached hereto.
B. Payment
The Company shall send an invoice with respect to fees and
reimbursable expenses to each of the Trust/or Fund as soon as
practicable at the end of each month. Each invoice will provide
detailed information about the Compensation and out-of-pocket expenses
in occurrence with Schedule E. The Trust and/or Fund will pay to the
Company the amount of such invoice within 30 days following the
receipt of the invoice.
Article 12. Representations.
The Company represents and warrants that it has obtained all required
approvals from all government or regulatory authorities necessary to
enter into this arrangement and to provide the services contemplated
in Section Three of this Agreement.
SECTION FOUR: General Provisions.
Article 13. Documents.
A. In connection with the appointment of the Company under this Agreement,
the Trust shall file with the Company the following documents:
(1) A copy of the Charter and By-Laws of the Trust and all amendments
thereto;
(2) A copy of the resolution of the Board of the Trust authorizing
this Agreement;
(3) Specimens of all forms of outstanding Share certificates of the
Trust or the Funds in the forms approved by the Board of the
Trust with a certificate of the Secretary of the Trust as to
such approval;
(4) All account application forms and other documents relating to
Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following documents:
(1) Each resolution of the Board of the Trust authorizing the
original issuance of each Fund's, and/or Class's Shares;
(2) Each Registration Statement filed with the SEC and amendments
thereof and orders relating thereto in effect with respect to
the sale of Shares of any Fund, and/or Class;
(3) A certified copy of each amendment to the governing document and
the By-Laws of the Trust;
(4) Certified copies of each vote of the Board authorizing officers
to give Proper Instructions to the Custodian and agents for fund
accountant, custody services procurement, and shareholder
recordkeeping or transfer agency services;
(5) Specimens of all new Share certificates representing Shares of
any Fund, accompanied by Board resolutions approving such forms;
(6) Such other certificates, documents or opinions which the Company
may, in its discretion, deem necessary or appropriate in the
proper performance of its duties; and
(7) Revisions to the Prospectus of each Fund.
Article 14. Representations and Warranties.
A. Representations and Warranties of the Company
The Company represents and warrants to the Trust that:
(1) It is a business trust duly organized and existing and in good
standing under the laws of the State of Delaware.
(2) It is duly qualified to carry on its business in the State of
Delaware.
(3) It is empowered under applicable laws and by its charter and by-
laws to enter into and perform this Agreement.
(4) All requisite corporate proceedings have been taken to authorize
it to enter into and perform its obligations under this
Agreement.
(5) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
(6) It is in compliance with federal securities law requirements and
in good standing as a transfer agent.
B. Representations and Warranties of the Trust
The Trust represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and in
good standing under the laws of its state of organization;
(2) It is empowered under applicable laws and by its Charter and By-
Laws to enter into and perform its obligations under this
Agreement;
(3) All corporate proceedings required by said Charter and By-Laws
have been taken to authorize it to enter into and perform its
obligations under this Agreement;
(4) The Trust is an open-end investment company registered under the
1940 Act; and
(5) A registration statement under the 1933 Act will be effective,
and appropriate state securities law filings have been made and
will continue to be made, with respect to all Shares of each
Fund being offered for sale.
Article 15. Indemnification.
A. Indemnification by Trust
The Company shall not be responsible for and the Trust or Fund shall
indemnify and hold the Company, including its officers, directors,
shareholders and their agents employees and affiliates, harmless
against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liabilities arising out of or attributable to:
(1) The acts or omissions of any Custodian,
(2) The Trust's or Fund's refusal or failure to comply with the terms
of this Agreement, or which arise out of the Trust's or The
Fund's lack of good faith, negligence or willful misconduct or
which arise out of the breach of any representation or warranty
of the Trust or Fund hereunder or otherwise.
(3) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in proper
form which
(a) are received by the Company or its agents or subcontractors
and furnished to it by or on behalf of the Fund, its
Shareholders or investors regarding the purchase,
redemption or transfer of Shares and Shareholder account
information; or
(b) have been prepared and/or maintained by the Fund or its
affiliates or any other person or firm on behalf of the
Trust.
(4) The reliance on, or the carrying out by the Company or its agents
or subcontractors of Proper Instructions of the Trust or the
Fund.
(5) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities
laws or regulations of any state that such Shares be registered
in such state or in violation of any stop order or other
determination or ruling by any federal agency or any state with
respect to the offer or sale of such Shares in such state.
Provided, however, that the Company shall not be protected by
this Article 15.A. from liability for any act or omission
resulting from the Company's willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties.
B. Indemnification by the Company
The Company shall indemnify and hold the Trust or each Fund harmless
from and against any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liabilities arising out of or
attributable to any action or failure or omission to act by the
Company as a result of the Company's willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties.
C. Reliance
At any time the Company may apply to any officer of the Trust or Fund
for instructions, and may consult with legal counsel with respect to
any matter arising in connection with the services to be performed by
the Company under this Agreement, and the Company and its agents or
subcontractors shall not be liable and shall be indemnified by the
Trust or the appropriate Fund for any action reasonably taken or
omitted by it in reliance upon such instructions or upon the opinion
of such counsel provided such action is not in violation of applicable
federal or state laws or regulations. The Company, its agents and
subcontractors shall be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual
or facsimile signatures of the officers of the Trust or the Fund, and
the proper countersignature of any former transfer agent or registrar,
or of a co-transfer agent or co-registrar.
D. Notification
In order that the indemnification provisions contained in this
Article 15 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such
assertion, and shall keep the other party advised with respect to all
developments concerning such claim. The party who may be required to
indemnify shall have the option to participate with the party seeking
indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent.
Article 16. Termination of Agreement.
This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other. Should the Trust
exercise its rights to terminate, all out-of-pocket expenses
associated with the movement of records and materials will be borne by
the Trust or the appropriate Fund. Additionally, the Company reserves
the right to charge for any other reasonable expenses associated with
such termination. The provisions of Article 15 shall survive the
termination of this Agreement.
Article 17. Amendment.
This Agreement may be amended or modified by a written agreement
executed by both parties.
Article 18. Interpretive and Additional Provisions.
In connection with the operation of this Agreement, the Company and
the Trust may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Agreement as may in their
joint opinion be consistent with the general tenor of this Agreement.
Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, provided that no
such interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the
Charter. No interpretive or additional provisions made as provided in
the preceding sentence shall be deemed to be an amendment of this
Agreement.
Article 19. Governing Law.
This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth
of Massachusetts
Article 20. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at Federated
Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the
Company at Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-
3779, or to such other address as the Trust or the Company may
hereafter specify, shall be deemed to have been properly delivered or
given hereunder to the respective address.
Article 21. Counterparts.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
Article 22. Limitations of Liability of Trustees and Shareholders of
the Trust.
The execution and delivery of this Agreement have been authorized by
the Trustees of the Trust and signed by an authorized officer of the
Trust, acting as such, and neither such authorization by such Trustees
nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability
on any of them personally, and the obligations of this Agreement are
not binding upon any of the Trustees or Shareholders of the Trust, but
bind only the appropriate property of the Fund, or Class, as provided
in the Declaration of Trust.
Article 23. Limitations of Liability of Trustees and Shareholders of
the Company.
The execution and delivery of this Agreement have been authorized by
the Trustees of the Company and signed by an authorized officer of the
Company, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officer shall be
deemed to have been made by any of them individually or to impose any
liability on any of them personally, and the obligations of this
Agreement are not binding upon any of the Trustees or Shareholders of
the Company, but bind only the property of the Company as provided in
the Declaration of Trust.
Article 24. Assignment.
This Agreement and the rights and duties hereunder shall not be
assignable with respect to the Trust or the Funds by either of the
parties hereto except by the specific written consent of the other
party.
Article 25. Merger of Agreement.
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject
hereof whether oral or written.
Article 26. Successor Agent.
If a successor agent for the Trust shall be appointed by the Trust,
the Company shall upon termination of this Agreement deliver to such
successor agent at the office of the Company all properties of the
Trust held by it hereunder. If no such successor agent shall be
appointed, the Company shall at its office upon receipt of Proper
Instructions deliver such properties in accordance with such
instructions.
In the event that no written order designating a successor agent or
Proper Instructions shall have been delivered to the Company on or
before the date when such termination shall become effective, then the
Company shall have the right to deliver to a bank or trust company,
which is a "bank" as defined in the 1940 Act, of its own selection,
having an aggregate capital, surplus, and undivided profits, as shown
by its last published report, of not less than $2,000,000, all
properties held by the Company under this Agreement. Thereafter, such
bank or trust company shall be the successor of the Company under this
Agreement.
Article 27. Force Majeure.
The Company shall have no liability for cessation of services
hereunder or any damages resulting therefrom to the Fund as a result
of work stoppage, power or other mechanical failure, natural disaster,
governmental action, communication disruption or other impossibility
of performance.
Article 28. Assignment; Successors.
This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party may
assign to a successor all of or a substantial portion of its business,
or to a party controlling, controlled by, or under common control with
such party. Nothing in this Article 28 shall prevent the Company from
delegating its responsibilities to another entity to the extent
provided herein.
Article 29. Severability.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
ATTEST: INVESTMENT COMPANIES (listed on Exhibit 1)
/s/ John W. McGonigle_______ By:__/s/ John F. Donahue___
John W. McGonigle John F. Donahue
Secretary Chairman
ATTEST: FEDERATED SERVICES COMPANY
/s/ Jeannette Fisher-Garber By:_/s/ James J. Dolan_____
Jeannette Fisher-Garber James J. Dolan
Secretary President
EXHIBIT 1
International Series, Inc.
Exhibit 9(ii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
SHAREHOLDER SERVICES PLAN
This Shareholder Services Plan ("Plan") is adopted as of this 1st
day of March, 1994, by the Boards of Directors or Trustees, as
applicable (the "Boards"), of those investment companies listed on
Exhibit 1 hereto as may be amended from time to time, having their
principal office and place of business at Federated Investors Tower,
Pittsburgh, PA 15222-3779 (individually referred to herein as a "Fund"
and collectively as "Funds").
1. This Plan is adopted to allow the Funds to make payments as
contemplated herein to obtain certain personal services for shareholders
and/or the maintenance of shareholder accounts ("Services").
2. This Plan is designed to compensate Federated Shareholder
Services ("FSS") for providing personal services and/or the maintenance
of shareholder accounts to the Funds and their shareholders. In
compensation for the services provided pursuant to this Plan, FSS may be
paid a monthly fee computed at the annual rate not to exceed .25 of 1%
of the average aggregate net asset value of the shares of each Fund held
during the month.
3. Any payments made by the Funds to FSS pursuant to this Plan
will be made pursuant to a "Shareholder Services Agreement" between FSS
and each of the Funds.
4. Quarterly in each year that this Plan remains in effect, FSS
shall prepare and furnish to the Boards of the Funds, and the Boards
shall review, a written report of the amounts expended under the Plan.
5. This Plan shall become effective with regard to each Fund
(i) after approval by majority votes of: (a) such Fund's Board; and (b)
the members of the Board of such Fund who are not interested persons of
such Fund and have no direct or indirect financial interest in the
operation of such Fund's Plan or in any related documents to the Plan
("Independent Trustees or Directors"), cast in person at a meeting
called for the purpose of voting on the Plan.
6. This Plan shall remain in effect with respect to each Fund
presently set forth on an exhibit and any subsequent Fund added pursuant
to an exhibit during the initial year of this Plan for the period of one
year from the date set forth above and may be continued thereafter if
this Plan is approved with respect to each Fund at least annually by a
majority of the relevant Fund's Board and a majority of the Independent
Trustees or
Directors, of such Fund as applicable, cast in person at a meeting
called for the purpose of voting on the renewal of such Plan. If this
Plan is adopted with respect to a fund after the first annual approval
by the Trustees or Directors as described above, this Plan will be
effective as to that Fund at such time as Exhibit 1 hereto is amended to
add such Fund and will continue in effect until the next annual approval
of this Plan by the Funds' Boards and thereafter for successive periods
of one year subject to approval as described above.
7. All material amendments to this Plan must be approved by a
vote of the Board of each Fund and of the Independent Directors or
Trustees of such Fund, cast in person at a meeting called for such
purpose.
8. This Plan may be terminated as follows:
(a) at any time, without the payment of any penalty, by
the vote of a majority of the Independent Board Members of any
Fund or by a vote of a majority of the outstanding voting
securities of any Fund as defined in the Investment Company Act
of 1940 on sixty (60) days' written notice to the parties to
this Agreement; or
(b) by any party to the Agreement without cause by
giving the other party at least sixty (60) days' written notice
of its intention to terminate.
9. While this Plan shall be in effect, the selection and
nomination of Independent Directors or Trustees of each Fund shall be
committed to the discretion of the Independent Directors or Trustees
then in office.
10. All agreements with any person relating to the
implementation of this Plan shall be in writing and any agreement
related to this Plan shall be subject to termination, without penalty,
pursuant to the provisions of Paragraph 8 herein.
11. This Plan shall be construed in accordance with and governed
by the laws of the Commonwealth of Pennsylvania.
Witness the due execution hereof this as of the date set forth
above.
Investment Companies (listed
on Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Shareholder Services
By: /s/ James J. Dolan
Title: President
Attest: /s/ John W. McGonigle
John W. McGonigle
EXHIBIT 1
International Series, Inc.
Exhibit 9(iii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement is made as of this first day of
March, 1994, between those investment companies listed on Exhibit 1, as may
be amended from time to time, having their principal office and place of
business at Federated Investors Tower, Pittsburgh PA 15222-3779
(individually referred to herein as "Fund" and collectively referred to as
"Funds), on behalf of the portfolios of the Funds, and Federated
Administrative Services, a Delaware business trust (herein called "FAS").
WHEREAS, the Funds desire to retain FAS as their Administrator to
provide them with Administrative Services (as herein defined), and FAS is
willing to render such services;
WHEREAS, the Funds are registered as open-end management investment
companies under the Investment Company Act of 1940, as amended (the "1940
Act"), with authorized and issued shares of capital stock or beneficial
interest ("Shares"); and
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereto agree as follows:
1. Appointment of Administrator. The Funds hereby appoint FAS as
Administrator of the Funds on the terms and conditions set forth in this
Agreement; and FAS hereby accepts such appointment and agrees to perform the
services and duties set forth in Section 2 of this Agreement in consideration
of the compensation provided for in Section 4 hereof.
2. Services and Duties. As Administrator, and subject to the
supervision and control of the Funds' Boards of Trustees or Directors, as
applicable (the "Boards"), FAS will provide facilities, equipment, and
personnel to carry out the following administrative services for operation of
the business and affairs of the Funds and each of their portfolios:
(a) prepare, file, and maintain the Funds'
governing documents and any amendments thereto, including the
Declaration of Trust or Articles of Incorporation, as
appropriate,(which has already been prepared and filed), the By-
laws and minutes of meetings of their Boards, Committees, and
shareholders;
(b) prepare and file with the Securities
and Exchange Commission and the appropriate state securities
authorities the registration statements for the Funds and the
Funds' shares and all amendments thereto, reports to regulatory
authorities and shareholders, prospectuses, proxy statements,
and such other documents all as may be necessary to enable the
Funds to make continuous offerings of their shares, as
applicable;
(c) prepare, negotiate, and administer
contracts on behalf of the Funds with, among others, each Fund's
investment adviser, distributor, custodian, and transfer agent,
subject to any applicable restrictions of the Boards or the 1940
Act;
(d) supervise the Funds' custodians in the
maintenance of the Funds' general ledgers and in the preparation
of the Funds' financial statements, including oversight of
expense accruals and payments, the determination of the net
asset value of the Funds and the declaration and payment of
dividends and other distributions to shareholders;
(e) calculate performance data of the
Funds for dissemination to information services covering the
investment company industry;
(f) prepare and file the Funds' tax
returns;
(g) examine and review the operations of
the Funds' custodians and transfer agents;
(h) coordinate the layout and printing of
publicly disseminated prospectuses and reports;
(i) perform internal audit examinations in
accordance with a charter to be adopted by FAS and the Funds;
(j) assist with the design, development,
and operation of the Funds;
(k) provide individuals reasonably
acceptable to the Funds' Boards for nomination, appointment, or
election as officers of the Funds, who will be responsible for
the management of certain of the Funds' affairs as determined by
the Funds' Boards; and
(l) consult with the Funds and their
Boards of Trustees or Directors, as appropriate, on matters
concerning the Funds and their affairs.
The foregoing, along with any additional services that FAS shall agree
in writing to perform for the Funds hereunder, shall hereafter be referred to
as "Administrative Services." Administrative Services shall not include any
duties, functions, or services to be performed for any Fund by such Fund's
investment adviser, distributor, custodian, transfer agent, or shareholder
service agent, pursuant to their respective agreements with such Fund.
3. Expenses. FAS shall be responsible for expenses incurred in
providing office space, equipment, and personnel as may be necessary or
convenient to provide the Administrative Services to the Fund, including the
compensation of FAS employees who serve on the Funds' Boards, or as officers
of the Funds. Each Fund shall be responsible for all other expenses incurred
by FAS on behalf of such Fund, including without limitation postage and
courier expenses, printing expenses, travel expenses, registration fees,
filing fees, fees of outside counsel and independent auditors, insurance
premiums, fees payable to members of such Fund's Board who are not FAS
employees, and trade association dues.
4. Compensation. For the Administrative Services provided, each
Fund hereby agrees to pay and FAS hereby agrees to accept as full
compensation for its services rendered hereunder an administrative fee at an
annual rate, payable daily, as specified below, based upon the total assets
of all of the Funds:
Maximum Administrative Average Daily Net Assets
Fee of the Funds
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of
$750 million
However, in no event shall the administrative fee received during any
year of this Agreement be less than, or be paid at a rate less than would
aggregate, $125,000, per individual Fund, with an additional $30,000 for each
class of shares added to any such Fund after the date hereof.
5. Standard of Care.
(a) FAS shall not be liable for any error
of judgment or mistake of law or for any loss suffered by any
Fund in connection with the matters to which this Agreement
relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and
duties under this Agreement. FAS shall be entitled to rely on
and may act upon advice of counsel (who may be counsel for such
Fund) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice. Any
person, even though also an officer, trustee, partner, employee
or agent of FAS, who may be or become a member of such Fund's
Board, officer, employee or agent of any Fund, shall be deemed,
when rendering services to such Fund or acting on any business
of such Fund (other than services or business in connection with
the duties of FAS hereunder) to be rendering such services to or
acting solely for such Fund and not as an officer, trustee,
partner, employee or agent or one under the control or direction
of FAS even though paid by FAS.
(b) This Section 5 shall survive
termination of this Agreement.
6. Duration and Termination. The initial term of this Agreement
with respect to each Fund shall commence on the date hereof, and extend for a
period of one year, renewable annually by the approval of the Board of
Directors/Trustees of each Fund.
7. Amendment. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which an enforcement of the change, waiver,
discharge or termination is sought.
8. Limitations of Liability of Trustees or Officers, Employees,
Agents and Shareholders of the Funds. FAS is expressly put on notice of the
limitation of liability as set forth in the Declaration of Trust of each Fund
that is a Massachusetts business trust and agrees that the obligations
assumed by each such Fund pursuant to this Agreement shall be limited in any
case to such Fund and its assets and that FAS shall not seek satisfaction of
any such obligations from the shareholders of such Fund, the Trustees,
Officers, Employees or Agents of such Fund, or any of them.
9. Limitations of Liability of Trustees and Shareholders of FAS.
The execution and delivery of this Agreement have been authorized by the
Trustees of FAS and signed by an authorized officer of FAS, acting as such,
and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, and the
obligations of this Agreement are not binding upon any of the Trustees or
shareholders of FAS, but bind only the trust property of FAS as provided in
the Declaration of Trust of FAS.
10. Notices. Notices of any kind to be given hereunder shall be
in writing (including facsimile communication) and shall be duly given if
delivered to any Fund at the following address: Federated Investors Tower,
Pittsburgh, PA 15222-3779, Attention: President and if delivered to FAS at
Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention: President.
11. Miscellaneous. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with respect to
the subject hereof whether oral or written. The captions in this Agreement
are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction
or effect. If any provision of this Agreement shall be held or made invalid
by a court or regulatory agency decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. Subject to the
provisions of Section 5, hereof, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and shall be governed by Pennsylvania law; provided, however, that
nothing herein shall be construed in a manner inconsistent with the
Investment Company Act of 1940 or any rule or regulation promulgated by the
Securities and Exchange Commission thereunder.
12. Counterparts. This Agreement may be executed by different
parties on separate counterparts, each of which, when so executed and
delivered, shall be an original, and all such counterparts shall together
constitute one and the same instrument.
13. Assignment; Successors. This Agreement shall not be assigned by
any party without the prior written consent of FAS, in the case of assignment
by any Fund, or of the Funds, in the case of assignment by FAS, except that
any party may assign to a successor all of or a substantial portion of its
business to a party controlling, controlled by, or under common control with
such party. Nothing in this Section 14 shall prevent FAS from delegating its
responsibilities to another entity to the extent provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
Investment Companies (listed
on Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Administrative Services
By: /s/ Edward C. Gonzales
Edward C. Gonzales
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
EXHIBIT 1
International Series, Inc.
Exhibit 9(iv) under Form N-1A
Exhibit 10under Item 601/Reg. S-K
SHAREHOLDER SERVICES AGREEMENT
AGREEMENT made as of the first day of March, 1994, by and between
those investment companies listed on Exhibit 1, as may be amended from
time to time, having their principal office and place of business at
Federated Investors Tower, Pittsburgh, PA 15222-3779 and who have
approved a Shareholder Services Plan (the "Plan") and this form of
Agreement (individually referred to herein as a "Fund" and collectively
as "Funds") and Federated Shareholder Services, a Delaware business
trust, having its principal office and place of business at Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779 ("FSS").
1. The Funds hereby appoint FSS to render or cause to be
rendered personal services to shareholders of the Funds and/or the
maintenance of accounts of shareholders of the Funds ("Services"). In
addition to providing Services directly to shareholders of the Funds,
FSS is hereby appointed the Funds' agent to select, negotiate and
subcontract for the performance of Services. FSS hereby accepts such
appointments. FSS agrees to provide or cause to be provided Services
which, in its best judgment (subject to supervision and control of the
Funds' Boards of Trustees or Directors, as applicable), are necessary or
desirable for shareholders of the Funds. FSS further agrees to provide
the Funds, upon request, a written description of the Services which FSS
is providing hereunder.
2. During the term of this Agreement, each Fund will pay FSS
and FSS agrees to accept as full compensation for its services rendered
hereunder a fee at an annual rate, calculated daily and payable monthly,
up to 0.25% of 1% of average net assets of each Fund.
For the payment period in which this Agreement becomes effective
or terminates with respect to any Fund, there shall be an appropriate
proration of the monthly fee on the basis of the number of days that
this Agreement is in effect with respect to such Fund during the month.
To enable the Funds to comply with an applicable exemptive order, FSS
represents that the fees received pursuant to this Agreement will be
disclosed to and authorized by any person or entity receiving Services,
and will not result in an excessive fee to FSS.
3. This Agreement shall continue in effect for one year from
the date of its execution, and thereafter for successive periods of one
year only if the form of this Agreement is approved at least annually by
the Board of each Fund, including a majority of the members of the Board
of the Fund who are not interested persons of the Fund and have no
direct or indirect financial interest in the operation of the Funds'
Plan or in any related documents to the Plan ("Independent Board
Members") cast in person at a meeting called for that purpose.
4. Notwithstanding paragraph 3, this Agreement may be
terminated as follows:
(a) at any time, without the payment of any penalty, by
the vote of a majority of the Independent Board Members of any
Fund or by a vote of a majority of the outstanding voting
securities of any Fund as defined in the Investment Company Act
of 1940 on sixty (60) days' written notice to the parties to
this Agreement;
(b) automatically in the event of the Agreement's
assignment as defined in the Investment Company Act of 1940; and
(c) by any party to the Agreement without cause by
giving the other party at least sixty (60) days' written notice
of its intention to terminate.
5. FSS agrees to obtain any taxpayer identification number
certification from each shareholder of the Funds to which it provides
Services that is required under Section 3406 of the Internal Revenue
Code, and any applicable Treasury regulations, and to provide each Fund
or its designee with timely written notice of any failure to obtain such
taxpayer identification number certification in order to enable the
implementation of any required backup withholding.
6. FSS shall not be liable for any error of judgment or mistake
of law or for any loss suffered by any Fund in connection with the
matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. FSS shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for such
Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. Any person, even
though also an officer, trustee, partner, employee or agent of FSS, who
may be or become a member of such Fund's Board, officer, employee or
agent of any Fund, shall be deemed, when rendering services to such Fund
or acting on any business of such Fund (other than services or business
in connection with the duties of FSS hereunder) to be rendering such
services to or acting solely for such Fund and not as an officer,
trustee, partner, employee or agent or one under the control or
direction of FSS even though paid by FSS.
This Section 6 shall survive termination of this Agreement.
7. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing
signed by the party against which an enforcement of the change, waiver,
discharge or termination is sought.
8. FSS is expressly put on notice of the limitation of
liability as set forth in the Declaration of Trust of each Fund that is
a Massachusetts business trust and agrees that the obligations assumed
by each such Fund pursuant to this Agreement shall be limited in any
case to such Fund and its assets and that FSS shall not seek
satisfaction of any such obligations from the shareholders of such Fund,
the Trustees, Officers, Employees or Agents of such Fund, or any of
them.
9. The execution and delivery of this Agreement have been
authorized by the Trustees of FSS and signed by an authorized officer of
FSS, acting as such, and neither such authorization by such Trustees nor
such execution and delivery by such officer shall be deemed to have been
made by any of them individually or to impose any liability on any of
them personally, and the obligations of this Agreement are not binding
upon any of the Trustees or shareholders of FSS, but bind only the trust
property of FSS as provided in the Declaration of Trust of FSS.
10. Notices of any kind to be given hereunder shall be in
writing (including facsimile communication) and shall be duly given if
delivered to any Fund and to such Fund at the following address:
Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President and if delivered to FSS at Federated Investors Tower,
Pittsburgh, PA 15222-3779, Attention: President.
11. This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the
subject hereof whether oral or written. If any provision of this
Agreement shall be held or made invalid by a court or regulatory agency
decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. Subject to the provisions of Sections 3
and 4, hereof, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
shall be governed by Pennsylvania law; provided, however, that nothing
herein shall be construed in a manner inconsistent with the Investment
Company Act of 1940 or any rule or regulation promulgated by the
Securities and Exchange Commission thereunder.
12. This Agreement may be executed by different parties on
separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together
constitute one and the same instrument.
13. This Agreement shall not be assigned by any party without
the prior written consent of FSS in the case of assignment by any Fund,
or of the Funds in the case of assignment by FSS, except that any party
may assign to a successor all of or a substantial portion of its
business to a party controlling, controlled by, or under common control
with such party. Nothing in this Section 14 shall prevent FSS from
delegating its responsibilities to another entity to the extent provided
herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year
first above written.
Investment Companies (listed
on Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Shareholder Services
By: /s/ James J. Dolan
Title: President
Attest: /s/ John W. McGonigle
John W. McGonigle
EXHIBIT 1
International Series, Inc.
Exhibit 15(i) under Form N-1A
Exhibit 1 under Item 601/Reg S-K
FT SERIES, INC.
RULE 12B-1 PLAN
This Plan ("Plan") is adopted as of this 1st day of March, 1993, by the
Board of Directors of FT Series, Inc. (the "Corporation"), a Maryland
corporation with respect to certain classes of shares ("Classes") of the
portfolios of the Corporation (the "Funds") set forth in exhibits hereto.
1. This Plan is adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended ("Act"), so as to allow the Corporation to
make payments as contemplated herein, in conjunction with the distribution of
Classes of the Funds ("Shares").
2. This Plan is designed to finance activities of Federated Securities
Corp. ("FSC") principally intended to result in the sale of Shares to
include: (a) providing incentives to broker/dealers ("Brokers") to sell
Shares and to provide administrative support services to the Funds and their
shareholders; (b) compensating other participating financial institutions and
other persons ("Administrators") for providing administrative support
services to the Funds and their shareholders; (c) paying for the costs
incurred in conjunction with advertising and marketing of Shares to include
expenses of preparing, printing and distributing prospectuses and sales
literature to prospective shareholders, Brokers or Administrators; and (d)
other costs incurred in the implementation and operation of the Plan. In
compensation for services provided pursuant to this Plan, FSC will be paid a
fee in respect of the following Classes set forth on the applicable exhibit.
3. Any payment to FSC in accordance with this Plan will be made
pursuant to the "Distributor's Contract" entered into by the Corporation and
FSC. Any payments made by FSC to Brokers and Administrators with funds
received as compensation under this Plan will be made pursuant to the "Rule
12b-1 Agreement" entered into by FSC and the Broker or Administrator.
4. FSC has the right (i) to select, in its sole discretion, the Brokers
and Administrators to participate in the Plan and (ii) to terminate without
cause and in its sole discretion any Rule 12b-1 Agreement.
5. Quarterly in each year that this Plan remains in effect, FSC shall
prepare and furnish to the Board of Directors of the Corporation, and the
Board of Directors shall review, a written report of the amounts expended
under the Plan and the purpose for which such expenditures were made.
6. This Plan shall become effective with respect to each Class
(i) after approval by majority votes of: (a) the Corporation's Board of
Directors; (b) the members of the Board of the Corporation who are not
interested persons of the Corporation and have no direct or indirect
financial interest in the operation of the Corporation's Plan or in any
related documents to the Plan ("Disinterested Directors"), cast in person at
a meeting called for the purpose of voting on the Plan; and (c) the
outstanding voting securities of the particular Class, as defined in Section
2(a)(42) of the Act and (ii) upon execution of an exhibit adopting this Plan
with respect to such Class.
7. This Plan shall remain in effect with respect to each Class
presently set forth on an exhibit and any subsequent Classes added pursuant
to an exhibit during the initial year of this Plan for the period of one year
from the date set forth above and may be continued thereafter if this Plan is
approved with respect to each Class at least annually by a majority of the
Corporation's Board of Directors and a majority of the Disinterested
Directors, cast in person at a meeting called for the purpose of voting on
such Plan. If this Plan is adopted with respect to a Class after the first
annual approval by the Directors as described above, this Plan will be
effective as to that Class upon execution of the applicable exhibit pursuant
to the provisions of paragraph 6(ii) above and will continue in effect until
the next annual approval of this Plan by the Directors and thereafter for
successive periods of one year subject to approval as described above.
8. All material amendments to this Plan must be approved by a vote of
the Board of Directors of the Corporation and of the Disinterested Directors,
cast in person at a meeting called for the purpose of voting on it.
9. This Plan may not be amended in order to increase materially the
costs which the Classes may bear for distribution pursuant to the Plan
without being approved by a majority vote of the outstanding voting
securities of the Classes as defined in Section 2(a)(42) of the Act.
10. This Plan may be terminated with respect to a particular Class at
any time by: (a) a majority vote of the Disinterested Directors; or (b) a
vote of a majority of the outstanding voting securities of the particular
Class as defined in Section 2(a)(42) of the Act; or (c) by FSC on 60 days'
notice to the Corporation.
11. While this Plan shall be in effect, the selection and nomination of
Disinterested Directors of the Corporation shall be committed to the
discretion of the Disinterested Directors then in office.
12. All agreements with any person relating to the implementation of
this Plan shall be in writing and any agreement related to this Plan shall be
subject to termination, without penalty, pursuant to the provisions of
Paragraph 10 herein.
13. This Plan shall be construed in accordance with and governed by the
laws of the Commonwealth of Pennsylvania.
EXHIBIT A
to the
Plan
FT SERIES, INC.
International Income Fund
Class C Shares
International Equity Fund
Class C Shares
This Plan is adopted by FT Series, Inc. with respect to the Class of
Shares of the portfolio(s) of the Corporation set forth above.
In compensation for the services provided pursuant to this Plan, FSC
will be paid a monthly fee computed at the annual rate of .75 of 1% of the
average aggregate net asset value of the Class C Shares of International
Income Fund and Class C Shares of International Equity Fund held during the
month.
Witness the due execution hereof this 7th day of April, 1993.
FT SERIES, INC.
By: /s/ Glen R. Johnson
President
EXHIBIT B
to the
Plan
FT SERIES, INC.
International Income Fund
Class A Shares
This Plan is adopted by FT Series, Inc. with respect to the Class of
Shares of the portfolio of the Corporation set forth above.
In compensation for the services provided pursuant to this Plan, FSC
will be paid a monthly fee computed at the annual rate of .25 of 1% of the
average aggregate net asset value of the Class A Shares of International
Income Fund held during the month.
Witness the due execution hereof this 1st day of March, 1993.
FT SERIES, INC.
By: /s/ Glen R. Johnson
President
Exhibit 15(ii) under Form N-1A
Exhibit 1 under Item 601/Reg S-K
EXHIBIT C
to the
Plan
FT SERIES, INC.
International Income Fund
Class B Shares
International Equity Fund
Class B Shares
This Plan is adopted by FT Series, Inc. with respect to the Class of
Shares of the portfolio(s) of the Corporation set forth above.
In compensation for the services provided pursuant to this Plan, FSC
will be paid a monthly fee computed at the annual rate of .75 of 1% of the
average aggregate net asset value of the Class B Shares of International
Income Fund and the Class B Shares of the International Equity Fund held
during the month.
Witness the due execution hereof this _________ day of _______, 1994.
FT SERIES, INC.
By:
President
Exhibit 15(iii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
RULE 12b-1 AGREEMENT
This Agreement is made between the Financial Institution executing this
Agreement ("Administrator") and Federated Securities Corp. ("FSC") for the
mutual funds (referred to individually as the "Fund" and collectively as the
"Funds") for which FSC serves as Distributor of shares of beneficial interest
or capital stock ("Shares") and which have adopted a Rule 12b-1 Plan ("Plan")
and approved this form of agreement pursuant to Rule 12b-1 under the
Investment Company Act of 1940. In consideration of the mutual covenants
hereinafter contained, it is hereby agreed by and between the parties hereto
as follows:
1. FSC hereby appoints Administrator to render or cause to be rendered
sales and administrative support services to the Funds and their
shareholders.
2. The services to be provided under Paragraph 1 may include, but are
not limited to, the following:
(a) communicating account openings through computer terminals
located on the Administrator's premises ("computer terminals"),
through a toll-free telephone number or otherwise;
(b) communicating account closings via the computer terminals,
through a toll-free telephone number or otherwise;
(c) entering purchase transactions through the computer terminals,
through a toll-free telephone number or otherwise;
(d) entering redemption transactions through the computer terminals,
through a toll-free telephone number or otherwise;
(e) electronically transferring and receiving funds for Fund Share
purchases and redemptions, and confirming and reconciling all such
transactions;
(f) reviewing the activity in Fund accounts;
(g) providing training and supervision of its personnel;
(h) maintaining and distributing current copies of prospectuses and
shareholder reports;
(i) advertising the availability of its services and products;
(j) providing assistance and review in designing materials to send
to customers and potential customers and developing methods of making
such materials accessible to customers and potential customers; and
(k) responding to customers' and potential customers' questions
about the Funds.
The services listed above are illustrative. The Administrator is not
required to perform each service and may at any time perform either more or
fewer services than described above.
3. During the term of this Agreement, FSC will pay the Administrator
fees for each Fund as set forth in a written schedule delivered to the
Administrator pursuant to this Agreement. FSC's fee schedule for
Administrator may be changed by FSC sending a new fee schedule to
Administrator pursuant to Paragraph 12 of this Agreement. For the payment
period in which this Agreement becomes effective or terminates, there shall
be an appropriate proration of the fee on the basis of the number of days
that the Rule 12b-1 Agreement is in effect during the quarter.
4. The Administrator will not perform or provide any duties which would
cause it to be a fiduciary under Section 4975 of the Internal Revenue Code,
as amended. For purposes of that Section, the Administrator understands that
any person who exercises any discretionary authority or discretionary control
with respect to any individual retirement account or its assets, or who
renders investment advice for a fee, or has any authority or responsibility
to do so, or has any discretionary authority or discretionary responsibility
in the administration of such an account, is a fiduciary.
5. The Administrator understands that the Department of Labor views
ERISA as prohibiting fiduciaries of discretionary ERISA assets from receiving
administrative service fees or other compensation from funds in which the
fiduciary's discretionary ERISA assets are invested. To date, the Department
of Labor has not issued any exemptive order or advisory opinion that would
exempt fiduciaries from this interpretation. Without specific authorization
from the Department of Labor, fiduciaries should carefully avoid investing
discretionary assets in any fund pursuant to an arrangement where the
fiduciary is to be compensated by the fund for such investment. Receipt of
such compensation could violate ERISA provisions against fiduciary self-
dealing and conflict of interest and could subject the fiduciary to
substantial penalties.
6. The Administrator agrees not to solicit or cause to be solicited
directly, or indirectly at any time in the future, any proxies from the
shareholders of any or all of the Funds in opposition to proxies solicited by
management of the Fund or Funds, unless a court of competent jurisdiction
shall have determined that the conduct of a majority of the Board of
Directors or Trustees of the Fund or Funds constitutes willful misfeasance,
bad faith, gross negligence or reckless disregard of their duties. This
paragraph 6 will survive the term of this Agreement.
7. With respect to each Fund, this Agreement shall continue in effect
for one year from the date of its execution, and thereafter for successive
periods of one year if the form of this Agreement is approved at least
annually by the Directors or Trustees of the Fund, including a majority of
the members of the Board of Directors or Trustees of the Fund who are not
interested persons of the Fund and have no direct or indirect financial
interest in the operation of the Fund's Plan or in any related documents to
the Plan ("Disinterested Directors or Trustees") cast in person at a meeting
called for that purpose.
8. Notwithstanding paragraph 7, this Agreement may be terminated as
follows:
(a) at any time, without the payment of any penalty, by the vote of
a majority of the Disinterested Directors or Trustees of the Fund or
by a vote of a majority of the outstanding voting securities of the
Fund as defined in the Investment Company Act of 1940 on not more
than sixty (60) days' written notice to the parties to this
Agreement;
(b) automatically in the event of the Agreement's assignment as
defined in the Investment Company Act of 1940 or upon the termination
of the "Administrative Support and Distributor's Contract" or
"Distributor's Contract" between the Fund and FSC; and
(c) by either party to the Agreement without cause by giving the
other party at least sixty (60) days' written notice of its intention
to terminate.
9. The termination of this Agreement with respect to any one Fund will
not cause the Agreement's termination with respect to any other Fund.
10. The Administrator agrees to obtain any taxpayer identification
number certification from its customers required under Section 3406 of the
Internal Revenue Code, and any applicable Treasury regulations, and to
provide FSC or its designee with timely written notice of any failure to
obtain such taxpayer identification number certification in order to enable
the implementation of any required backup withholding.
11. This Agreement supersedes any prior service agreements between the
parties for the Funds.
12. This Agreement may be amended by FSC from time to time by the
following procedure. FSC will mail a copy of the amendment to the
Administrator's address, as shown below. If the Administrator does not
object to the amendment within thirty (30) days after its receipt, the
amendment will become part of the Agreement. The Administrator's objection
must be in writing and be received by FSC within such thirty days.
13. This Agreement shall be construed in accordance with the Laws of the
Commonwealth of Pennsylvania.
FEDERATED ADMINISTRATIVE SERVICES
Federated Investors Tower
Address
Pittsburgh, Pennsylvania 15222-3779
City State Zip Code
Dated:_______________________ By:________________________________
Authorized Signature
___________________________________
Title
___________________________________
Print Name of Authorized Signature
FEDERATED SECURITIES CORP.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By:_________________________________
Richard B. Fisher, President
FT SERIES, Inc.
International Income Fund - Class C Shares
International Equity Fund - Class C Shares
_______________________
EXHIBIT A to 12b-1 Agreement with
Federated Securities Corp. ("FSC")
Portfolios
FSC will pay Administrator fees for the following portfolios (the
"Funds") effective as of the dates set forth below:
Name Date
International Income Fund - Class C Shares April 7, 1993
International Equity Fund - Class C Shares April 7, 1993
Administrative Fees
1. During the term of this Agreement, FSC will pay Administrator a
quarterly fee in respect of each Fund. This fee will be computed at the
annual rate of .75% of the average net asset value of Shares held during the
quarter in accounts for which the Administrator provides services under this
Agreement, so long as the average net asset value of Shares in each Fund
during the quarter equals or exceeds such minimum amount as FSC shall from
time to time determine and communicate in writing to the Administrator.
2. For the quarterly period in which the Agreement becomes effective
or terminates, there shall be an appropriate proration of any fee payable on
the basis of the number of days that the Agreement is in effect during the
quarter.
FT SERIES, Inc.
International Income Fund - Class A Shares
_______________________
EXHIBIT B to 12b-1 Agreement with
Federated Securities Corp. ("FSC")
Portfolios
FSC will pay Administrator fees for the following portfolios (the
"Funds") effective as of the dates set forth below:
Name Date
International Income Fund - Class A Shares April 7, 1993
Administrative Fees
1. During the term of this Agreement, FSC will pay Administrator a
quarterly fee in respect of each Fund. This fee will be computed at the
annual rate of .25% of the average net asset value of Shares held during the
quarter in accounts for which the Administrator provides services under this
Agreement, so long as the average net asset value of Shares in each Fund
during the quarter equals or exceeds such minimum amount as FSC shall from
time to time determine and communicate in writing to the Administrator.
2. For the quarterly period in which the Agreement becomes effective
or terminates, there shall be an appropriate proration of any fee payable on
the basis of the number of days that the Agreement is in effect during the
quarter.
FT SERIES, Inc.
International Income Fund - Class B Shares
International Equity Fund - Class B Shares
_______________________
EXHIBIT C to 12b-1 Agreement with
Federated Securities Corp. ("FSC")
Portfolios
FSC will pay Administrator fees for the following portfolios (the
"Funds") effective as of the dates set forth below:
Name Date
International Income Fund - Class B Shares September __, 1994
International Equity Fund - Class B Shares September __, 1994
Administrative Fees
1. During the term of this Agreement, FSC will pay Administrator a
quarterly fee in respect of each Fund. This fee will be computed at the
annual rate of .75% of the average net asset value of Shares held during the
quarter in accounts for which the Administrator provides services under this
Agreement, so long as the average net asset value of Shares in each Fund
during the quarter equals or exceeds such minimum amount as FSC shall from
time to time determine and communicate in writing to the Administrator.
2. For the quarterly period in which the Agreement becomes effective
or terminates, there shall be an appropriate proration of any fee payable on
the basis of the number of days that the Agreement is in effect during the
quarter.
