INTERNATIONAL EQUITY FUND
(A PORTFOLIO OF FT SERIES, INC.)
Supplement to Prospectus dated March 29, 1993, as supplemented May 19, 1993
International Equity Fund (the "Fund") will hold a Special Meeting of
Shareholders on or about March 15, 1994 to seek approval of, among other
things, the following items:
o A new primary advisory contract between the Fund and Federated Management;
o A new sub-advisory agreement between Federated Management and Fiduciary
International, Inc.;
o Amended and Restated Articles of Incorporation for FT Series, Inc.; and,
o A change in the fundamental investment limitations of the Fund to allow
the Fund to invest in futures and options.
Investment decisions for the Fund are currently made by Fiduciary
International, Inc. In addition, Fiduciary International, Inc. entered into
a sub-advisory agreement with Federated Management whereby Federated
Management acts as the sub-adviser to the Fund. In order to present an
orderly and uniform approach to the management of the Fund, the Board of
Directors (the "Directors") proposes to alter the current investment
advisory arrangement by making Federated Management the primary investment
adviser and Fiduciary International, Inc. and/or one of its affiliates the
sub-adviser to the Fund. Neither the fees in total nor the allocation of
fees paid to the primary and sub-adviser would change under this proposal.
The Directors have reviewed and unanimously approved the terms of the
proposed advisory contract and of the sub-advisory agreement and have
directed that they be submitted to shareholders of the Fund for approval. If
approved, the Directors propose that the contract and the agreement be
executed immediately and take effect upon such execution.
The Articles of Incorporation will be amended and restated to, among other
things, change the name of the Corporation to "International Series, Inc."
Shareholders of the Fund are also being asked to approve those changes to
the Fund's "fundamental" investment limitations necessary to allow that Fund
to invest in futures and options. The Directors have approved amendments to
the fundamental investment limitations to permit the Fund to purchase and
sell financial futures contracts and options on financial futures contracts
and to purchase and write (sell) put and call options, provided that it may
only write covered call options and secured put options, and provided that
the sum of its initial margin deposits on open financial futures contracts,
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. The
Directors have also directed that the Fund will not enter into these types
of transactions for speculative purposes, but only for the purpose of (i)
earning current income on the existing securities of the portfolio through
the receipt of premiums for writing put and call options, (ii) protecting
the value of its portfolio securities through the purchase of hedges against
movements in the price of securities caused by general market factors and by
changes in market interest rates, and (iii) investing a portion of its
assets in options to achieve capital gains. The Directors have determined
that the proposed changes are consistent with and will assist the Fund in
achieving its investment objective.
The investment limitations of the Fund which are being sought are as
follows:
Dealing in Puts and Calls
Presently, the Fund's investment limitation governing dealing in puts and
calls prohibits the writing (selling) or purchase of puts, calls, or any
combinations of them. The amendment to this limitation permits the Fund to
write covered call options and secured put options on all or any portion of
its portfolio and to purchase put and call options.
It is proposed that the investment limitation governing the Fund's dealing
in puts and calls be amended from what is currently stated as:
"The Fund will not write, purchase, or sell puts, calls or any combinations
of them. The Fund may purchase, hold, or sell (i) contracts for future
delivery of securities or currencies and (ii) warrants granted by the issuer
of the underlying securities."
to read as follows:
"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."
The current limitation cannot be changed without shareholder approval. The
proposed limitation, however, may be changed by the Directors without
shareholder approval. Shareholders would be notified before any material
change becomes effective.
Investing in Commodities
Financial futures contracts and options on financial futures contracts are
commodities contracts. Presently the Fund's investment limitation governing
commodities prohibits any investment in commodities except to purchase or
sell forward contracts with respect to foreign securities or currencies.
The amendment to this limitation revises it to also permit the Fund to
purchase or sell financial futures contracts and purchase or sell options on
financial futures contracts, provided that 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 total
assets of the Fund.
It is proposed that the investment limitation governing the Fund's
investments in commodities be amended from what is currently stated as:
"The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts except that the Fund may purchase or sell
forward contracts with respect to foreign securities or currencies."
to read as follows:
"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."
Once approved by the shareholders of the Fund, this limitation cannot be
changed again without shareholder approval.
Buying on Margin
The Fund, when purchasing or selling a financial futures contract, or a put
or call option on a financial futures contract, is required to make payments
to the commodities broker which are called "margin" by commodities exchanges
and brokers. There are two categories of "margin" involved in these
transactions; initial or original margin and variation margin. Initial
margin does not represent a loan between the Fund and its broker, but rather
is a "good faith deposit" by the Fund to secure its obligations under a
financial futures contract or an option on a financial futures contract.
The amount of initial margin is ordinarily no more than 2 to 10 percent of
the contract price. Each day during the term of certain futures
transactions, the Fund will receive or pay "variation margin" equal to the
daily change in the value of the position held by the Fund.
The payment of "margin" in futures transactions is different than purchasing
securities "on the margin." In purchasing securities on "margin", an
investor pays part of the purchase price in cash and receives an extension
of credit from the broker, in the form of a loan secured by the securities,
for the unpaid balance.
The Fund's investment limitation restricting the purchase of securities "on
margin" is intended to prohibit the Fund from borrowing money to purchase
securities, not to prohibit the Fund from engaging in transactions involving
financial futures contracts and related options. The proposed amendment to
this investment limitation expressly confirms this point.
It is proposed that the limitation restricting the purchase of securities on
margin be amended from what is currently stated as:
"The Fund will not purchase any securities on margin, but may obtain such
short-term credits as are necessary for clearance of transactions."
to read as follows:
"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."
Once approved by the shareholders of the Fund, this limitation cannot be
changed again without shareholder approval.
Pledging Assets
Since the Fund does not borrow money in a futures transaction, it therefore
does not pledge property. The purpose of the proposed amendment to the
investment limitation concerning pledging securities is to clearly state
that margin payments in financial futures transactions and options on
financial futures contracts are not pledges of securities.
It is proposed that the investment limitation concerning pledging of
securities be amended from what is currently stated as:
"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 those transactions to 10% of its net
assets of market. (If state restrictions change, this latter restriction
may be revised without shareholder approval or notification.)"
to read as follows:
"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."
Once approved by the shareholders of the Fund, this limitation cannot be
changed again without shareholder approval.
Shareholders of record as of December 14, 1993, have received a proxy
statement describing the above issues in detail and will be entitled to vote
at the Special Meeting.
Following the Special Meeting of Shareholders, shareholders of the Fund will
be notified of the results.
February 25, 1994
FEDERATED SECURITIES CORP.
Distributor
4020910A(2/94)
INTERNATIONAL INCOME FUND
(A PORTFOLIO OF FT SERIES, INC.)
Supplement to Prospectus dated March 29, 1993
International Income Fund (the "Fund") will hold a Special Meeting of
Shareholders on or about March 15, 1994 to seek approval of, among other
things, the following items:
o A new primary advisory contract between the Fund and Federated
Management;
o A new sub-advisory agreement between Federated Management and Fiduciary
Trust International Limited; and,
o Amended and Restated Articles of Incorporation for FT Series, Inc.
Investment decisions for the Fund are currently made by Fiduciary
International, Inc. In addition, Fiduciary International, Inc. entered into
a sub-advisory agreement with Federated Management whereby Federated
Management acts as the sub-adviser to the Fund. In order to present an
orderly and uniform approach to the management of the Fund, the Board of
Directors (the "Directors") proposes to alter the current investment
advisory arrangement by making Federated Management the primary investment
adviser and Fiduciary International, Inc. and/or one of its affiliates the
sub-adviser to the Fund. Neither the fees in total nor the allocation of
fees paid to the primary and sub-adviser would change under this proposal.
The Directors have reviewed and unanimously approved the terms of the
proposed advisory contract and of the sub-advisory agreement and have
directed that they be submitted to shareholders of the Fund for approval. If
approved, the Directors propose that the contract and the agreement be
executed immediately and take effect upon such execution.
The Articles of Incorporation will be amended and restated to, among other
things, change the name of the Corporation to "International Series, Inc."
Shareholders of record as of December 14, 1993, have received a proxy
statement describing the above issues in detail and will be entitled to vote
at the Special Meeting.
Following the Special Meeting of Shareholders, shareholders of the Fund will
be notified of the results.
February 25, 1994
FEDERATED SECURITIES CORP.
Distributor
4020911A(2/94)
