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. 21 _
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 _ X
Amendment No. 18 _
INTERNATIONAL 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)
X on January 31, 1995 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i).
75 days after filing pursuant to paragraph (a)(ii)
on _________________ pursuant to paragraph (a)(ii) 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 17, 1995; 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.
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) Risks Associated with
Financial Futures Contracts and
Options on Financial Futures
Contracts; (2) Hedging Vehicles and
Strategies; (2) Hedging Strategies;
(1-2) Investment Limitations.
Item 5. Management of the Fund (1-2) International Series, Inc.
Information; (1-2) Management of the
Corporation; (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;
(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) Eliminating or
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) Eliminated or
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; (1b, 2b)
Reinvestment Privilege; (1b, 2b)
Elimination of Contingent Deferred
Sales Charge.
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; Transfer
Agent and Dividend Disbursing Agent.
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) Yield; (1-2) Total Return;
Performance Comparisons.
Item 23. Financial Statements (1-2) Filed in Part A.
INTERNATIONAL EQUITY FUND
(A PORTFOLIO OF INTERNATIONAL SERIES, INC.)
(FORMERLY, FT SERIES, INC.)
CLASS A SHARES
PROSPECTUS
The Class A 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. The Fund pursues
this objective through a diversified portfolio primarily invested in equity
securities of non-U.S. issuers.
THE CLASS A 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 A 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 A Shares of the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information for Class
A Shares, Class B Shares, and Class C Shares dated January 31, 1995, 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 January 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CLASS A SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
LIBERTY FAMILY OF FUNDS 3
- ------------------------------------------------------
LIBERTY FAMILY RETIREMENT PROGRAM 5
- ------------------------------------------------------
INVESTMENT INFORMATION 5
- ------------------------------------------------------
Investment Objective 5
Investment Policies 5
Risks Associated with Financial
Futures Contracts and Options
on Financial Futures Contracts 12
Investment Limitations 13
NET ASSET VALUE 13
- ------------------------------------------------------
INVESTING IN CLASS A SHARES 14
- ------------------------------------------------------
Share Purchases 14
Minimum Investment Required 15
What Shares Cost 15
Subaccounting Services 16
Eliminating or Reducing the Sales Load 16
Systematic Investment Program 18
Certificates and Confirmations 18
Dividends 18
Capital Gains 18
Retirement Plans 19
EXCHANGE PRIVILEGE 19
- ------------------------------------------------------
Eliminated or Reduced the Sales Load 19
Requirements for Exchange 19
Tax Consequences 19
Making an Exchange 20
REDEEMING CLASS A SHARES 20
- ------------------------------------------------------
Through a Financial Institution 20
Directly from the Fund 21
Systematic Withdrawal Program 22
Accounts with Low Balances 22
INTERNATIONAL SERIES, INC. INFORMATION 22
- ------------------------------------------------------
Management of the Corporation 22
Distribution of Class A Shares 29
Administration of the Fund 29
Brokerage Transactions 30
SHAREHOLDER INFORMATION 30
- ------------------------------------------------------
Voting Rights 30
TAX INFORMATION 31
- ------------------------------------------------------
Federal Income Tax 31
Pennsylvania Corporate and
Personal Property Taxes 32
PERFORMANCE INFORMATION 32
- ------------------------------------------------------
OTHER CLASSES OF SHARES 32
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CLASS B SHARES 34
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CLASS C SHARES 35
- ------------------------------------------------------
FINANCIAL STATEMENTS 36
- ------------------------------------------------------
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS 54
- ------------------------------------------------------
ADDRESSES 55
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)................... 5.50%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)......................................................... 0.00%
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable)................................................ None
Redemption Fee (as a percentage of amount redeemed, if applicable)............................ None
Exchange Fee.................................................................................. None
ANNUAL CLASS A SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee................................................................................ 1.00%
12b-1 Fee..................................................................................... None
Total Other Expenses.......................................................................... 0.61%
Shareholder Services Fee (after waiver) (1).............................................. 0.06%
Total Class A Shares Operating Expenses............................................. 1.61%
</TABLE>
(1) The maximum shareholder services fee is 0.25%.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Class A Shares of the Fund
will bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Investing in Class A Shares" and "International
Series, Inc. Information." Wire-transferred redemptions of less than $5,000 may
be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
--------- --------- --------- ----------
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time
period................................................................ $70 $103 $138 $236
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The information set forth in the foregoing table and example relates only
to Class A Shares of the Fund. The Fund also offers two additional classes of
shares called Class C Shares and Class B Shares. Class A Shares, Class C Shares
and Class B Shares are subject to certain of the same expenses. However, Class C
Shares are subject to a 12b-1 fee of 0.75% and a contingent deferred sales
charge of 1.00% but are not subject to a sales load. Class B Shares are subject
to a 12b-1 fee of 0.75% and a contingent deferred sales charge of up to 5.50%,
and are not subject to a sales load. See "Other Classes of Shares."
INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS--CLASS A SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants page 54.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 16.49 $ 14.09 $ 14.44 $ 14.28 $ 17.59 $ 17.34 $ 19.99 $ 22.87 $ 14.62
- ------------------------------
INCOME FROM INVESTMENT
OPERATIONS
- ------------------------------
Net investment income 0.15 0.06 0.10 0.11 0.19 0.18 0.19 0.24 0.04
- ------------------------------
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions 1.96 2.53 (0.37) 0.37 (1.16) 1.60 3.27 (0.72) 8.63
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations 2.11 2.59 (0.27) 0.48 (0.97) 1.78 3.46 (0.48) 8.67
- ------------------------------
LESS DISTRIBUTIONS
- ------------------------------
Dividends to shareholders
from net investment income (0.07) (0.06) (0.08) (0.21) (0.20) (0.23) (0.23) (0.05) (0.08)
- ------------------------------
Distributions to
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)(a) -- -- -- -- -- -- --
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total distributions (0.07) (0.19) (0.08) (0.32) (2.34) (1.53) (6.11) (2.40) (0.42)
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 18.53 $ 16.49 $ 14.09 $ 14.44 $ 14.28 $ 17.59 $ 17.34 $ 19.99 $ 22.87
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN* 12.82% 18.52% (1.86)% 3.49% (6.72)% 11.55% 24.33% (2.70)% 60.75%
- ------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------
Expenses 1.61% 1.60% 1.57% 1.52% 1.32% 1.01% 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%
- ------------------------------
Expense waiver/
reimbursement (b) -- 0.01% 0.02% 0.30% 0.25% 0.46% 0.28% 0.17% 0.19%
- ------------------------------
SUPPLEMENTAL DATA
- ------------------------------
Net assets, end of period
(000 omitted) $261,178 $192,860 $106,937 $101,980 $82,541 $65,560 $68,922 $85,860 $106,257
- ------------------------------
Portfolio turnover rate 73% 74% 91% 84% 114% 85% 98% 130% 70%
- ------------------------------
<CAPTION>
<S> <C>
1985
NET ASSET VALUE, BEGINNING OF
PERIOD $ 9.50
- ------------------------------
INCOME FROM INVESTMENT
OPERATIONS
- ------------------------------
Net investment income 0.09
- ------------------------------
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions 5.04
- ------------------------------ ---------
Total from investment
operations 5.13
- ------------------------------
LESS DISTRIBUTIONS
- ------------------------------
Dividends to shareholders
from net investment income (0.01)
- ------------------------------
Distributions to
shareholders from net
realized gain on investment
transactions --
- ------------------------------
Distributions in excess of
net investment income --
- ------------------------------ ---------
Total distributions (0.01)
- ------------------------------ ---------
NET ASSET VALUE, END OF PERIOD $ 14.62
- ------------------------------ ---------
TOTAL RETURN* 54.07%
- ------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------
Expenses 1.00%
- ------------------------------
Net investment income 1.30%
- ------------------------------
Expense waiver/
reimbursement (b) 0.50%
- ------------------------------
SUPPLEMENTAL DATA
- ------------------------------
Net assets, end of period
(000 omitted) $34,209
- ------------------------------
Portfolio turnover rate 61%
- ------------------------------
</TABLE>
* Based on net asset value which does not reflect the sales load or redemption
fee, if applicable.
(a) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(b) The voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal year ended November 30, 1994, which can be obtained
free of charge.
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 of the
Corporation (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 A Shares (the "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. In general, Shares are
sold at net asset value plus an applicable sales load and are redeemed at net
asset value. For a more complete description, see "Investing in Class A Shares"
and "Redeeming Class A Shares." A minimum initial investment of $500 is
required, unless the investment is in a retirement account, in which case the
minimum investment is $50.
The Fund's current net asset value and offering price can be found in the mutual
funds section of local newspapers under "Federated Liberty."
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 communications utilities;
. Limited Term Fund, providing a high level of current income consistent
with minimum fluctuation in principal 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 personal income taxes imposed by the
state of Michigan and Michigan municipalities, primarily through Michigan
municipal securities;
. Pennsylvania Municipal Income Fund, providing current income exempt from
federal regular income tax and the personal income taxes imposed by the
Commonwealth of Pennsylvania, primarily through Pennsylvania municipal
securities;
. Strategic Income Fund, providing a high level of current income,
primarily through domestic and foreign corporate debt obligations;
. Tax-Free Instruments Trust, providing current income consistent with the
stability of principal and exempt from federal income tax, through
high-quality, short-term municipal securities; and
. World Utility Fund, providing total return primarily through securities
issued by domestic and foreign companies in the utilities industries.
Prospectuses for these funds are available by writing to Federated Securities
Corp.
Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus. The Liberty Family of Funds provides
flexibility and diversification for an investor's long-term investment planning.
It enables an investor to meet the challenges of changing market conditions by
offering convenient exchange privileges which give access to various investment
vehicles and by providing the investment services of proven, professional
investment advisers.
Shareholders of Class A Shares participating in the Liberty Account are
designated as Liberty Life Members. Liberty Life Members are exempt from sales
loads on future purchases in and exchanges between the Class A Shares of any
funds in the Liberty Family of Funds, as long as they maintain a $500 balance in
one of the Liberty Funds.
LIBERTY FAMILY RETIREMENT PROGRAM
- --------------------------------------------------------------------------------
The Fund is also a member of the Liberty Family Retirement Program ("Program"),
an integrated program of investment options, plan recordkeeping, and
consultation services for 401(k) and other participant-directed benefit and
savings plans. Under the Program, employers or plan trustees may select a group
of investment options to be offered in a plan which also uses the Program for
recordkeeping and administrative services. Additional fees are charged to the
plan for these services. As part of the Program, exchanges may readily be made
between investment options selected by the employer or a plan trustee.
The other funds participating in the Liberty Family Retirement Program are:
American Leaders Fund, Inc.; Capital Growth Fund; Capital Preservation Fund;
Fund for U.S. Government Securities, Inc.; International Income Fund; Liberty
Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty Utility
Fund, Inc.; Prime Cash Series; and Strategic Income Fund.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Fund's objective is to obtain a total return on its assets. 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, including European Currency Units,
of issuers located in at least three countries outside of the United States and
sponsored or unsponsored American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs"), and European Depositary Receipts ("EDRs"),
collectively, "Depositary Receipts." 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. However, in no event will the Fund invest more than 25% of its
total assets in the debt securities of any one foreign country.
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 Ratings Group
("S&P") or A by Moody's Investors Service, Inc. ("Moody's"), or, if
unrated, will be judged by Federated Management, the Fund's investment
adviser (the "Adviser"), or Fiduciary International, Inc., the Fund's
investment sub-adviser (the "sub-adviser"), 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. A description of the ratings categories is contained in the
Appendix to the Statement of Additional Information.
The prices of fixed income securities generally fluctuate inversely to the
direction of interest rates.
DEPOSITARY RECEIPTS. The Fund may invest in foreign issuers by purchasing
sponsored or unsponsored ADRs, GDRs, and EDRs. ADRs are depositary receipts
typically issued by a United States bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. EDRs
and GDRs are typically issued by foreign banks or trust companies, although
they also may be issued by United States banks or trust companies, and
evidence ownership of underlying securities issued by either a foreign or a
United States corporation. Generally, Depositary Receipts in registered
form are designed for use in the United States securities market and
Depositary Receipts in bearer form are designed for use in securities
markets outside the United States. Depositary Receipts may not necessarily
be denominated in the same currency as the underlying securities into which
they may be converted. Ownership of unsponsored Depositary Receipts may not
entitle the Fund to financial or other reports from the issuer of the
underlying security, to which it would be entitled as the owner of
sponsored Depositary Receipts.
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 seller's failure to complete the transaction may cause the Fund
to miss a price or yield considered to be advantageous. 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. Accordingly, the
Fund may pay more/less than the market value of the securities on the settlement
date.
The Fund may dispose of a commitment prior to settlement if the Adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
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 ("OTC 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 OTC options only with investment dealers and other financial
institutions (such as commercial banks or savings and loan associations) deemed
creditworthy by the Adviser.
OTC 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 OTC 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, 1994,
the portfolio contained securities from issuers located primarily in Germany,
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 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.
The economies of foreign countries may differ 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 countries, and the extent of foreign investment in
certain debt securities and domestic companies may be subject to limitation.
Foreign ownership limitations also may be imposed by the charters of individual
companies 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
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 foreign 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.
Brokerage commissions, custodial services, and other costs relating to
investment may be more expensive than in the United States. Foreign markets may
have different clearance and settlement procedures and in certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
The inability of the Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of a portfolio security due to settlement problems could
result either in losses to the Fund due to subsequent declines in value of the
portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser.
CURRENCY RISKS. Because the majority of the 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 sales 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.
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.
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 accounting, auditing, and financial reporting
standards and practices or regulatory requirements comparable to those
applicable to U.S. 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;
. the limited size of many foreign securities markets and limited trading
volume in issuers compared to the volume of trading in U.S. securities
could cause prices to be erratic for reasons apart from factors that
affect the quality of securities;
. the likelihood that foreign securities may be less liquid or more
volatile;
. foreign brokerage commissions may be higher;
. unreliable mail service between countries;
. political or financial changes which adversely affect investments in some
countries;
. increased risk of delayed settlements of portfolio transactions or loss
of certificates for portfolio securities;
. certain markets may require payment for securities before delivery;
. religious and ethnic instability; and
. certain national policies which may restrict the Fund's investment
opportunities, including restrictions on investment in issuers or
industries deemed sensitive to national interests.
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 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
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;
nor
. 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, including repurchase agreements with maturities longer than seven
days after notice and certain OTC options; nor
. 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 A Share fluctuates. The net asset value for
Class A Shares is determined by adding the interest of the Class A Shares in the
market value of all securities and other assets of the Fund, less liabilities of
the Fund attributable to Class A Shares, and dividing the remainder by the total
number of Class A Shares outstanding. The net asset value for Class A Shares may
differ from that of Class B Shares 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 A SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open. Shares may
be purchased through a financial institution which has a sales agreement with
the distributor or directly from the distributor, Federated Securities Corp.,
once an account has been established. In connection with the sale of Shares,
Federated Securities Corp., may, from time to time, offer certain items of
nominal value to any shareholder or investor. The Fund reserves the right to
reject any purchase request.
Participants in plans under the Liberty Family Retirement Program shall purchase
Shares in accordance with the requirements of their respective plans.
THROUGH A FINANCIAL INSTITUTION. An investor may call his financial institution
(such as a bank or an investment dealer) to place an order to purchase Shares.
Orders placed through a financial institution are considered received when the
Fund is notified of the purchase order. 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.
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 A
Shares; and
. mail both to Federated Services Company, P.O. Box 8604, Boston, MA
02266-8604.
Orders by mail are considered received after payment by check is converted
by the transfer agent's bank, State Street Bank and Trust Company ("State
Street Bank"), into federal funds. This is generally the next business day
after State Street Bank receives the check.
BY WIRE. To purchase Shares directly from the distributor by wire, call
the Fund. All information needed will be taken over the telephone, and the
order is considered received when the transfer agent's bank, 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; Attention: Mutual Fund Servicing Division; For
Credit to: International Equity Fund--Class A 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; ABA Number
011000028. Shares cannot be purchased by wire on Columbus Day, Veterans'
Day, or Martin Luther King Day.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares is $500 unless the investment is in a
retirement plan, in which case the minimum initial investment is $50. Subsequent
investments must be in amounts of at least $100, except for retirement plans,
which must be in amounts of at least $50. (Other minimum investment requirements
may apply to investments through the Liberty Family Retirement Program.)
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received, plus a sales load as follows:
<TABLE>
<CAPTION>
SALES LOAD AS SALES LOAD AS DEALER CONCESSION
A PERCENTAGE OF A PERCENTAGE OF AS A PERCENTAGE OF
AMOUNT OF PUBLIC OFFERING NET AMOUNT PUBLIC OFFERING
TRANSACTION PRICE INVESTED PRICE
<S> <C> <C> <C>
Less than $50,000 5.50% 5.82% 5.00%
$50,000 but less than 4.50% 4.71% 4.00%
$100,000
$100,000 but less than 3.75% 3.90% 3.25%
$250,000
$250,000 but less than 2.50% 2.56% 2.25%
$500,000
$500,000 but less than 2.00% 2.04% 1.80%
$1,000,000
$1,000,000 or greater 0.00% 0.00% 0.25%*
</TABLE>
* See sub-section entitled "Dealer Concession" below.
The net asset value is determined at 4:00 P.M. (Eastern time) or at the close of
the New York Stock Exchange, Monday through Friday, except on: (i) days on which
there are not sufficient changes in the value of the Fund's portfolio securities
that its net asset value might be materially affected; (ii) days during which no
Shares are tendered for redemption and no orders to purchase Shares are
received; or (iii) the following holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
Shareholders designated as Liberty Life Members may purchase additional Shares
at net asset value, without a sales load, except that a sales load will be
imposed when the Shares are acquired in exchange for shares of another fund in
the Liberty Family of Funds.
No sales load is imposed for Shares purchased through bank trust departments,
investment advisers registered under the Investment Advisers Act of 1940, as
amended, or retirement plans where the third party administrator has entered
into certain arrangements with Federated Securities Corp. or its affiliates. In
addition, certain institutions such as insurance companies and certain
associations are exempt from the sales load for purchases of Shares. However,
investors who purchase
Shares through a trust department or investment adviser or retirement plan may
be charged an additional service fee by that institution.
Shareholders of record in the Fund on September 30, 1989, may purchase
additional Shares at net asset value, without a sales load, except that a sales
load will be imposed when the Shares are acquired in exchange for shares of
another fund in the Liberty Family of Funds.
No sales load is imposed on purchases made by qualified retirement plans with
over $1 million invested in funds available in the Liberty Family Retirement
Program.
DEALER CONCESSION. In addition to the dealer concession as noted on the
previous page, the distributor, in its sole discretion, may uniformly offer to
pay all dealers selling Shares additional amounts, all or a portion of which may
be paid from the sales load it normally retains or any other source available to
it. Such payments may take the form of cash or promotional incentives, such as
payment of certain expenses of qualified employees and their spouses to attend
informational meetings about the Fund, or other special events at
recreational-type facilities, or of items of material value. In some instances,
these incentives will be made available only to dealers whose employees have
sold or may sell a significant amount of Shares. On purchases of $1 million or
more, the investor pays no sales load; however, the distributor will make twelve
monthly payments to the dealer totaling 0.25% of the public offering price over
the first year following the purchase. Such payments are based on the original
purchase price of Shares outstanding at each month end.
The sales load for Shares sold other than through registered broker/dealers will
be retained by Federated Securities Corp. Federated Securities Corp. may pay
fees to banks out of the sales load in exchange for sales and/or administrative
services performed on behalf of the bank's customers in connection with the
initiation of customer accounts and purchases of Shares.
Effective June 1, 1994, and until further notice, the entire amount of the
applicable sales load will be reallowed to dealers. In addition, the distributor
will pay dealers additional bonus payments in an amount equal to 0.50% of the
public offering price of the Shares sold, with the exception of any transaction
in which no sales load is paid at all.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. Institutions holding Shares
in a fiduciary, agency, custodial, or similar capacity may charge or pass
through subaccounting fees as part of or in addition to normal trust or agency
account fees. They may also charge fees for other services provided which may be
related to the ownership of Shares. This prospectus should, therefore, be read
together with any agreement between the customer and the institution with regard
to the services provided, the fees charged for those services, and any
restrictions and limitations imposed.
ELIMINATING OR REDUCING THE SALES LOAD
The sales load can be eliminated or reduced on the purchase of Shares through:
. quantity discounts and accumulated purchases;
. signing a 13-month letter of intent;
. using the reinvestment privilege;
. purchases with proceeds from redemptions of unaffiliated mutual fund
shares; or
. concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table on page 15,
larger purchases may eliminate or reduce the sales load paid. The Fund will
combine purchases of Shares made on the same day by the investor, the investor's
spouse, and the investor's children under age 21 when it calculates the sales
load. In addition, the sales load, if applicable, is eliminated or reduced for
purchases made at one time by a trustee or fiduciary for a single trust estate
or a single fiduciary account.
If an additional purchase of Shares is made, the Fund will consider the previous
purchases still invested in the Fund. For example, if a shareholder already owns
Shares having a current value at the public offering price of $90,000 and he
purchases $10,000 more at the current public offering price, the sales load as a
percentage of public offering price on the additional purchase according to the
schedule now in effect would be 3.75%, not 4.50%.
To receive the sales load elimination or reduction, Federated Securities Corp.
must be notified by the shareholder in writing or by his financial institution
at the time the purchase is made that Shares are already owned or that purchases
are being combined. The Fund will eliminate or reduce the sales load after it
confirms the purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $50,000 of
shares in the funds in the Liberty Family of Funds over the next 13 months, the
sales load may be reduced by signing a letter of intent to that effect. This
letter of intent includes a provision for a sales load adjustment depending on
the amount actually purchased within the 13-month period, and a provision for
the custodian to hold 5.50% of the total amount intended to be purchased in
escrow (in Shares) until such purchase is completed.
The 5.50% held in escrow will be applied to the shareholder's account at the end
of the 13-month period unless the amount specified in the letter of intent is
not purchased. In this event, an appropriate number of escrowed Shares may be
redeemed in order to realize the difference in the sales load.
This letter of intent will not obligate the shareholder to purchase Shares, but
if he does, each purchase during the period will be at the sales load applicable
to the total amount intended to be purchased. This letter may be dated as of a
prior date to include any purchases made within the past 90 days toward the
dollar fulfillment of the letter of intent. Prior trade prices will not be
adjusted.
REINVESTMENT PRIVILEGE. If Shares in the Fund have been redeemed, the
shareholder has a one-time right, within 120 days, to reinvest the redemption
proceeds at the next-determined net asset value without any sales load.
Federated Securities Corp. must be notified by the shareholder in writing or by
his financial institution of the reinvestment in order to eliminate a sales
load. If the shareholder redeems his Shares in the Fund, there may be tax
consequences.
PURCHASES WITH PROCEEDS FROM REDEMPTIONS OF UNAFFILIATED MUTUAL FUND SHARES.
Investors may purchase Shares at net asset value, without a sales load, with
the proceeds from the redemption of shares of a mutual fund which was sold with
a sales load or commission and was not distributed by Federated Securities Corp.
(This does not include shares which were or would be subject to a contingent
deferred sales charge upon redemption.) The purchase must be made within 60 days
of the redemption, and Federated Securities Corp. must be notified by the
investor in writing or by his financial institution at the time the purchase is
made.
CONCURRENT PURCHASES. For purposes of qualifying for a sales load elimination
or reduction, a shareholder has the privilege of combining concurrent purchases
of two or more funds in the Liberty Family of Funds, the purchase price of which
includes a sales load. For example, if a shareholder concurrently invested
$30,000 in one of the other Liberty Funds with a sales load, and $20,000 in this
Fund, the sales load would be reduced.
To receive this sales load elimination or reduction, Federated Securities Corp.
must be notified by the shareholder in writing or by his financial institution
at the time the concurrent purchases are made. The Fund will eliminate or reduce
the sales load after it confirms the purchases.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Shares at the net asset value next determined after an order is
received by the transfer agent, plus the applicable sales load. A shareholder
may apply for participation in this program through his financial institution or
directly through the Fund.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a Share
account for each shareholder. Share certificates are not issued unless requested
in writing to Federated Services Company.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. 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 without a
sales load, unless shareholders request cash payments on the new account form or
by writing to the transfer agent. All shareholders on the record date are
entitled to the dividend. If Shares are redeemed or exchanged prior to the
record date, or purchased after the record date, those Shares are not entitled
to that 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, contact Federated Securities Corp. and
consult a tax adviser.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
In order to provide greater flexibility to Fund shareholders whose investment
objectives have changed, Class A shareholders may exchange all or some of their
Shares for Class A Shares in other funds in the Liberty Family of Funds.
Shareholders of Class A Shares may also exchange into certain other funds for
which affiliates of Federated Investors serve as investment adviser or principal
underwriter ("Federated Funds") which are sold with a sales load different from
that of the Fund's or with no sales load, and which are advised by subsidiaries
or affiliates of Federated Investors. These exchanges are made at net asset
value plus the difference between the Fund's sales load and any sales load of
the fund into which the Shares are to be exchanged, if higher. Neither the Fund
nor any of the funds in the Liberty Family of Funds imposes any additional fees
on exchanges. Shareholders in certain other Federated Funds may exchange their
shares in the Federated Funds for Class A Shares. Participants in a plan under
the Liberty Family Retirement Program may exchange all or some of their Shares
for Class A Shares of other funds offered under the plan at net asset value.
ELIMINATED OR REDUCED THE SALES LOAD
If a shareholder making such an exchange qualifies for an elimination or
reduction of the sales load, Federated Securities Corp. must be notified in
writing by the shareholder or by his financial institution.
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange Shares having a net asset value
equal to the minimum investment requirements of the fund into which the exchange
is being made. Before the exchange, the shareholder must receive a prospectus of
the fund for which the exchange is being made.
This privilege is available to shareholders resident in any state in which the
fund shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
the proceeds invested in shares of the other fund. The exchange privilege may be
modified or terminated at any time. Shareholders will be notified of the
modification or termination of the exchange privilege.
Further information on the exchange privilege and prospectuses for the Liberty
Family of Funds or certain Federated Funds are available by contacting the Fund.
TAX CONSEQUENCES
An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending on the circumstances, a short-term or long-term capital
gain or loss may be realized.
MAKING AN EXCHANGE
Instructions for exchanges for the Liberty Family of Funds and certain Federated
Funds may be given in writing or by telephone. Written instructions may require
a signature guarantee. Shareholders of the Fund may have difficulty in making
exchanges by telephone through brokers and other financial institutions during
times of drastic economic or market changes. If a shareholder cannot contact his
broker or financial institution by telephone, it is recommended that an exchange
request be made in writing and sent by overnight mail to Federated Services
Company, 500 Victory Road--2nd Floor, Quincy, Massachusetts 02171.
Instructions for exchanges for the Liberty Family Retirement Program should be
given to the plan administrator.
TELEPHONE INSTRUCTIONS. Telephone instructions made by the investor may be
carried out only if a telephone authorization form completed by the investor is
on file with the transfer agent. If the instructions are given by a broker, a
telephone authorization form completed by the broker must be on file with the
transfer agent. Shares may be exchanged between two funds by telephone only if
the two funds have identical shareholder registrations.
Any Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Services Company, P.O. Box 8604, Boston, Massachusetts
02266-8604, and deposited to the shareholder's account before being exchanged.
Telephone exchange instructions may be recorded and will be binding upon the
shareholder. 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.
REDEEMING CLASS A SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value, next determined after the
transfer agent receives the redemption request. Redemptions will be made on days
on which the Fund computes its net asset value. Redemptions can be made through
a financial institution or directly from the Fund. Redemption requests must be
received in proper form. Redemptions of Shares held through the Liberty Family
Retirement Program will be governed by the requirements of the respective plans.
THROUGH A FINANCIAL INSTITUTION
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 the net asset value, next determined after the Fund receives the redemption
request from the financial institution. Redemption requests through a registered
broker/dealer must be received by the broker before 4:00 P.M. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 P.M. (Eastern time) in
order for Shares to be redeemed at that day's net asset value. Redemption
requests through other financial institutions must be received by the financial
institution and transmitted to the Fund before 4:00 P.M. (Eastern time) in order
for Shares to be redeemed at that day's net asset value. The financial
institution is responsible for promptly submitting redemption requests and
providing proper written redemption instructions to the Fund. The financial
institution may charge customary fees and commissions for this service.
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.
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.
Telephone redemption instructions may be recorded. If reasonable procedures are
not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
BY MAIL. Any shareholder may redeem Shares by sending a written request to
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 of Shares name, 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
Exchanges;
. 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.
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. A shareholder may apply for participation
in this program through his financial institution. Due to the fact that Shares
are sold with a sales load, it is not advisable for shareholders to be
purchasing Shares while participating in this program.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the required minimum value of
$500. This requirement does not apply, however, if the balance falls below $500
because of changes in the Fund's net asset value.
Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional Shares to meet the minimum
requirement.
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,
present positions with International Series, Inc., and principal occupations,
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
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, tna 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 Company.
- --------------------------------------------------------------------------------
Thomas G. Bigley
28th Floor, One Oxford Center
Pittsburgh, PA
Director
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital of
Pittsburgh; Director, Trustee, or Managing General Partner of the Funds;
formerly, Senior Partner, Ernst & Young LLP.
- --------------------------------------------------------------------------------
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Director
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
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
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
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.+
Two Gateway Center-Suite 674
Pittsburgh, PA
Director
Attorney-at-law; Partner, Henny, Koehuba, 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
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
Two Gateway Center-Suite 674
Pittsburgh, PA
Director
Attorney-at-law; Partner, Henny, Koehuba, 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.
- --------------------------------------------------------------------------------
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Director
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
Public relations/marketing consultant; Director, Trustee, or Managing General
Partner of the Funds.
- --------------------------------------------------------------------------------
Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
President
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
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
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
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
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; Secretary and Trustee, Federated Shareholder Services; Executive Vice
President and Director, Federated Securities Corp.; Vice President and Secretary
of the Funds.
- --------------------------------------------------------------------------------
_*This Director is deemed to be an "interested person" as defined in the
Investment Company Act of 1940 as amended.
+Member of the Executive Committee. The Executive Committee of the Board of
Directors handles the responsibilities of the Board of Directors between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser (the "Adviser"), subject to direction
by the Board of 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 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 served as the Fund's sub-adviser, and
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 International, Inc., Fiduciary International, Inc. will
furnish to Federated Management such investment advice, statistical 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, the
sub-adviser receives an annual fee from the Adviser 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 the Adviser 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 the Adviser.
Notwithstanding any other provision in the Sub-Advisory 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 the Fund) to the extent that the Fund's expenses exceed such lower
expense limitations as the sub-adviser 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. As of December 31, 1994, Fiduciary Trust Company
International had total assets of approximately $375 million, and total
assets under management of approximately $30 billion.
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.
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.
DISTRIBUTION OF CLASS A 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.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. Federated Securities Corp. will pay
dealers an amount equal to .50 of 1% of the net asset value of Shares purchased
by their clients or customers under the Liberty Family Retirement Program. (Such
payments are subject to a reclaim from the dealer should the assets leave the
Program within 12 months after purchase.) These payments will be made directly
by the distributor and will not be made from the assets of the Fund or by the
assessment of a sales load on Shares.
Furthermore, the distributor may offer to pay a fee from its own assets to
financial institutions as financial assistance for providing substantial
marketing and sales support. The support may include sponsoring sales,
educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance will be predicated upon the amount of
Shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Fund's 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
Corporation and 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 (the "Federated Funds") as
specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
<C> <S>
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services Plan
(the "Services Plan") under which it may make payments up to 0.25 of 1% of the
average daily net asset value of 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 laws.
CUSTODIAN. State Street Bank and Trust Company, P.O. Box 8604, Boston,
Massachusetts 02266-8604, is custodian for the securities and cash of the Fund.
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, with offices in Boston, Massachusetts, is transfer
agent for the Shares of the Fund and dividend disbursing agent for the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen LLP, 2100 One PPG Place, Pittsburgh, Pennsylvania 15222.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet this criteria, the Adviser may give consideration to those
firms which have sold or are selling Shares of the Fund and other funds
distributed by Federated Securities Corp. The Adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Directors.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share gives the shareholder one vote in Director elections and other
matters submitted to shareholders for vote. All shares of each portfolio or
class in the 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 (the "Code"), 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 Code stipulations that would allow shareholders to claim a
foreign tax credit or deduction on their U.S. income tax returns. The Code 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
The Fund is not subject to Pennsylvania corporate or personal property taxes.
Fund Shares may be subject to personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania to the extent that the
portfolio securities in the Fund would be subject to such taxes if owned
directly by residents of those jurisdictions.
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 for Class A Shares.
Total return represents the change, over a specified period of time, in the
value of an investment in Class A Shares after reinvesting all income and
capital gains distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage.
The performance information reflects the effect of the maximum sales load,
which, if excluded, would increase the total return.
Total return will be calculated separately for Class A Shares, Class B Shares,
and Class C Shares. Because Class A Shares may be 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 will likely exceed that of another.
From time to time, the Fund may advertise the performance of Class A Shares
using certain financial publications and/or compare the performance of Class A
Shares to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Class B Shares are sold primarily to customers of financial institutions,
subject to a maximum contingent deferred sales charge of 5.50% and a Rule 12b-1
fee of up .75 of 1%. In addition, Class B Shares are subject to a shareholder
services fee of up to .25% of 1% of the Class B Shares' average daily net
assets. Investments in Class B Shares are subject to a minimum initial
investment of $1,500, unless the investment is in a retirement account, in which
case the minimum investment is $50.
Class C Shares are sold primarily to customers of financial institutions at net
asset value with no initial sales load. Class C Shares are distributed pursuant
to a Rule 12b-1 Plan adopted by the Fund, whereby, the distributor is paid a fee
of up to .75 of 1%. Class C Shares are also subject to a shareholder services
fee of up to .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
payable to 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
FINANCIAL HIGHLIGHTS--CLASS B SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Independent Public Accountants on page 54.
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1994**
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.61
- -----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------
Net investment income (0.01)
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign currency transactions (1.10)
- ----------------------------------------------------------------------------------------------- -------
Total from investment operations (1.11)
- -----------------------------------------------------------------------------------------------
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 $ 18.50
- ----------------------------------------------------------------------------------------------- -------
TOTAL RETURN* (5.27%)
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------
Expenses 2.59%(a)
- -----------------------------------------------------------------------------------------------
Net investment income (0.88%)(a)
- -----------------------------------------------------------------------------------------------
Expense waiver/reimbursement --
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 1,214
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate 73%
- -----------------------------------------------------------------------------------------------
</TABLE>
* Based on net asset value which does not reflect the sales load or
redemption fee, if applicable.
** Reflects operations for the period from September 19, 1994 (start of
business) to November 30, 1994.
(a) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated November 30, 1994, which can be obtained free of charge.
INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS--CLASS C SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 54.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER
30,
<S> <C> <C>
----------------------
<CAPTION>
1994 1993**
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.41 $ 14.88
- ---------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------
Net investment income (0.05) (0.04)
- ---------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign
currency transactions 1.98 1.57
- --------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 1.93 1.53
- ---------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income -- --
- ---------------------------------------------------------------------------------------------
Distributions in excess of net investment income (0.04)(a) --
- --------------------------------------------------------------------------------------------- --------- -----------
TOTAL DISTRIBUTIONS (0.04) --
- --------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 18.30 $ 16.41
- --------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN* 11.75% 10.28%
- ---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------
Expenses 2.55% 2.57%(c)
- ---------------------------------------------------------------------------------------------
Net investment income (0.91%) (1.10%)(c)
- ---------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) -- 0.01%(c)
- ---------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $8,836 $2,852
- ---------------------------------------------------------------------------------------------
Portfolio turnover rate 73% 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 (start of business)
to November 30, 1993.
(a) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(b) The voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(c) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal year ended November 30, 1994, which can be obtained
free of charge.
INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- ------------- ---------------------------------------------------------------------------------- --------------
COMMON STOCKS--92.3%
- -------------------------------------------------------------------------------------------------
ARGENTINA--1.7%
----------------------------------------------------------------------------------
126,609 Ciadea $ 1,407,048
----------------------------------------------------------------------------------
215,000 **Migor 1,666,250
----------------------------------------------------------------------------------
25,000 Telefonica de Argentina ADR 1,390,625
---------------------------------------------------------------------------------- --------------
Total 4,463,923
---------------------------------------------------------------------------------- --------------
AUSTRALIA--2.9%
----------------------------------------------------------------------------------
309,028 Amcor Limited 2,042,454
----------------------------------------------------------------------------------
212,875 Broken Hill Proprietary 3,056,029
----------------------------------------------------------------------------------
172,226 National Australia Bank 1,395,068
----------------------------------------------------------------------------------
260,000 Western Mining Corporation Holdings 1,478,635
---------------------------------------------------------------------------------- --------------
Total 7,972,186
---------------------------------------------------------------------------------- --------------
BRAZIL--1.0%
----------------------------------------------------------------------------------
105,000 **Aracruz Celulose ADR 1,325,625
----------------------------------------------------------------------------------
30,000 Telecomunicacoes Brasileras ADR 1,436,991
---------------------------------------------------------------------------------- --------------
Total 2,762,616
---------------------------------------------------------------------------------- --------------
CHILE--2.1%
----------------------------------------------------------------------------------
60,000 Compania Cervecerias Unidas ADR 1,560,000
----------------------------------------------------------------------------------
15,000 Compania de Telefonos de Chile ADR 1,290,000
----------------------------------------------------------------------------------
75,000 Cristalerias de Chile ADR 1,396,875
----------------------------------------------------------------------------------
50,000 Madeco ADR 1,450,000
---------------------------------------------------------------------------------- --------------
Total 5,696,875
---------------------------------------------------------------------------------- --------------
FRANCE--7.9%
----------------------------------------------------------------------------------
7,250 Carrefour 3,011,806
----------------------------------------------------------------------------------
11,473 Cetelem 2,172,231
----------------------------------------------------------------------------------
6,800 Colas $ 1,123,383
----------------------------------------------------------------------------------
12,800 Compagnie de Fives-Lille 1,117,888
----------------------------------------------------------------------------------
37,000 Credit Local de France 2,851,595
----------------------------------------------------------------------------------
2,220 Legrand 2,760,938
----------------------------------------------------------------------------------
27,000 SEB 2,666,271
----------------------------------------------------------------------------------
21,500 Ugine 1,632,265
----------------------------------------------------------------------------------
75,500 Valeo 4,022,145
---------------------------------------------------------------------------------- --------------
Total 21,358,522
---------------------------------------------------------------------------------- --------------
GERMANY--6.0%
----------------------------------------------------------------------------------
3,580 Buderus 1,583,768
----------------------------------------------------------------------------------
19,600 Krupp Fr Ag Hoesch 2,482,750
----------------------------------------------------------------------------------
12,150 Kaufhof Holding 3,387,460
----------------------------------------------------------------------------------
10,000 Mannesmann 2,609,803
----------------------------------------------------------------------------------
9,035 Preussag 2,490,232
----------------------------------------------------------------------------------
11,600 Veba 3,817,441
---------------------------------------------------------------------------------- --------------
Total 16,371,454
---------------------------------------------------------------------------------- --------------
HONG KONG--5.9%
----------------------------------------------------------------------------------
272,000 China Light & Power 1,171,186
----------------------------------------------------------------------------------
600,000 CITIC Pacific 1,520,617
----------------------------------------------------------------------------------
71,100 Consolidated Electric Power Asia ADR 1,539,933
----------------------------------------------------------------------------------
2,600,000 First Pacific Co. 1,798,622
----------------------------------------------------------------------------------
502,064 Hong Kong Land Holdings 1,041,950
----------------------------------------------------------------------------------
185,027 HSBC Holdings 2,045,568
----------------------------------------------------------------------------------
444,000 Hutchison Whampoa 1,768,261
----------------------------------------------------------------------------------
308,000 Sun Hung Kai Properties 1,979,337
----------------------------------------------------------------------------------
250,000 Swire Pacific $ 1,664,792
----------------------------------------------------------------------------------
350,000 Television Broadcasting 1,402,951
---------------------------------------------------------------------------------- --------------
Total 15,933,217
---------------------------------------------------------------------------------- --------------
INDONESIA--0.5%
----------------------------------------------------------------------------------
752,600 Lippo Bank 1,299,790
---------------------------------------------------------------------------------- --------------
IRELAND--2.2%
----------------------------------------------------------------------------------
463,491 Bank of Ireland 2,068,510
----------------------------------------------------------------------------------
400,000 CRH 2,135,923
----------------------------------------------------------------------------------
600,000 Irish Life 1,719,386
---------------------------------------------------------------------------------- --------------
Total 5,923,819
---------------------------------------------------------------------------------- --------------
JAPAN--25.3%
----------------------------------------------------------------------------------
150,000 Amway Japan Ltd., ADR 2,400,000
----------------------------------------------------------------------------------
99,000 Canon Sales 2,960,748
----------------------------------------------------------------------------------
180,000 Canon 3,109,876
----------------------------------------------------------------------------------
230,000 Daiwa Securities 2,997,727
----------------------------------------------------------------------------------
517 DDI 4,544,481
----------------------------------------------------------------------------------
66,000 Ito Yokado 3,500,884
----------------------------------------------------------------------------------
200,000 Japan Securities Finance 2,990,654
----------------------------------------------------------------------------------
45,000 Kyocera 3,337,206
----------------------------------------------------------------------------------
105,000 Mitsubishi Bank 2,344,531
----------------------------------------------------------------------------------
230,000 Mitsubishi Estate 2,532,963
----------------------------------------------------------------------------------
450,000 Mitsubishi Heavy Industries 3,337,206
----------------------------------------------------------------------------------
170,000 Mitsubishi Trust & Banking 2,404,648
----------------------------------------------------------------------------------
100,000 Mori Seiki Co. 2,364,233
----------------------------------------------------------------------------------
325,000 NEC 3,776,206
----------------------------------------------------------------------------------
960,000 Nippon Steel $ 3,724,577
----------------------------------------------------------------------------------
340 Nippon Telephone & Telegraph 2,885,577
----------------------------------------------------------------------------------
184,000 Sharp 3,197,575
----------------------------------------------------------------------------------
90,000 Shimachu 2,837,080
----------------------------------------------------------------------------------
200,000 Sumitomo Electric Industries 2,788,583
----------------------------------------------------------------------------------
650,000 Tokuyama Corp. 3,848,447
----------------------------------------------------------------------------------
700,000 Tosoh Corp. 2,906,795
----------------------------------------------------------------------------------
680,000 Yaskawa Electric Corp. 3,751,250
---------------------------------------------------------------------------------- --------------
Total 68,541,247
---------------------------------------------------------------------------------- --------------
KOREA--1.4%
----------------------------------------------------------------------------------
37,000 Korea Electric Power 1,341,052
----------------------------------------------------------------------------------
33,000 Pohang Iron and Steel Ltd., ADR 1,047,750
----------------------------------------------------------------------------------
17,000 **Samsung Electric Co. 922,250
----------------------------------------------------------------------------------
8,001 **Samsung Electronics Ltd., GDR 428,054
----------------------------------------------------------------------------------
202 **Samsung Electronics Ltd., GDR 10,656
---------------------------------------------------------------------------------- --------------
Total 3,749,762
---------------------------------------------------------------------------------- --------------
MALAYSIA--2.7%
----------------------------------------------------------------------------------
36,000 Aokam Perdana 247,917
----------------------------------------------------------------------------------
220,000 Aokam Perdana 1,626,951
----------------------------------------------------------------------------------
330,000 Genting Berhad 2,613,861
----------------------------------------------------------------------------------
230,000 Malayan Banking 1,493,916
----------------------------------------------------------------------------------
173,000 Telekom Malaysia 1,272,606
---------------------------------------------------------------------------------- --------------
Total 7,255,251
---------------------------------------------------------------------------------- --------------
MEXICO--4.5%
----------------------------------------------------------------------------------
196,750 Cemex 1,886,606
----------------------------------------------------------------------------------
650,000 Cifra $ 1,775,389
----------------------------------------------------------------------------------
190,000 **Elektra 2,070,318
----------------------------------------------------------------------------------
413,000 Farmacias Benavides 1,452,070
----------------------------------------------------------------------------------
93,000 **Grupo Industrial Durango, ADR 1,697,250
----------------------------------------------------------------------------------
80,500 **Grupo Televisa L 1,826,834
----------------------------------------------------------------------------------
550,000 Telefonos de Mexico 1,483,074
---------------------------------------------------------------------------------- --------------
Total 12,191,541
---------------------------------------------------------------------------------- --------------
NETHERLANDS--5.2%
----------------------------------------------------------------------------------
32,000 Akzo Nobel 3,547,470
----------------------------------------------------------------------------------
114,965 Boskalis Westminster 2,326,750
----------------------------------------------------------------------------------
289,000 Elsevier 2,875,213
----------------------------------------------------------------------------------
103,000 KNP BT 2,822,399
----------------------------------------------------------------------------------
62,000 Polygram 2,615,350
---------------------------------------------------------------------------------- --------------
Total 14,187,182
---------------------------------------------------------------------------------- --------------
NEW ZEALAND--1.6%
----------------------------------------------------------------------------------
1,174,274 Carter Holt Harvey 2,606,708
----------------------------------------------------------------------------------
1,163,056 Skellerup 1,623,685
---------------------------------------------------------------------------------- --------------
Total 4,230,393
---------------------------------------------------------------------------------- --------------
PHILIPPINES--1.3%
----------------------------------------------------------------------------------
3,312,000 JG Summit Holdings 1,208,151
----------------------------------------------------------------------------------
7,800 Metro Bank and Trust Co. 32,704
----------------------------------------------------------------------------------
39,000 Metro Bank and Trust Co. 1,144,654
----------------------------------------------------------------------------------
1,400,000 **Petron Corp. 1,247,379
---------------------------------------------------------------------------------- --------------
Total 3,632,888
---------------------------------------------------------------------------------- --------------
SINGAPORE--2.2%
----------------------------------------------------------------------------------
312,000 City Developments $ 1,651,075
----------------------------------------------------------------------------------
202,750 Development Bank of Singapore 2,021,270
----------------------------------------------------------------------------------
120,000 Fraser & Neave 1,335,610
----------------------------------------------------------------------------------
140,000 Sembawang Shipyard 1,003,756
---------------------------------------------------------------------------------- --------------
Total 6,011,711
---------------------------------------------------------------------------------- --------------
SWEDEN--5.2%
----------------------------------------------------------------------------------
50,000 **AutoLiv 1,751,337
----------------------------------------------------------------------------------
320,500 Bylock and Nordsjofr 2,487,595
----------------------------------------------------------------------------------
107,000 **Hoganas 1,703,573
----------------------------------------------------------------------------------
162,150 Sandvik 2,753,738
----------------------------------------------------------------------------------
57,000 SSAB 2,514,561
----------------------------------------------------------------------------------
152,635 Volvo 2,936,418
---------------------------------------------------------------------------------- --------------
Total 14,147,222
---------------------------------------------------------------------------------- --------------
SWITZERLAND--5.1%
----------------------------------------------------------------------------------
5,550 Alusuisse Lonza Holding 2,719,646
----------------------------------------------------------------------------------
2,825 BBC Brown Boveri 2,366,748
----------------------------------------------------------------------------------
5,125 Danzas Holding 1,010,726
----------------------------------------------------------------------------------
980 Reiseburo Kuoni 1,305,683
----------------------------------------------------------------------------------
1,045 Rieter Holdings 1,313,624
----------------------------------------------------------------------------------
4,950 Swiss Reinsurance 2,902,559
----------------------------------------------------------------------------------
3,475 Sulzer 2,335,849
---------------------------------------------------------------------------------- --------------
Total 13,954,835
---------------------------------------------------------------------------------- --------------
TAIWAN--0.5%
----------------------------------------------------------------------------------
122,138 **Tuntex Distinctive GDR 1,312,984
---------------------------------------------------------------------------------- --------------
THAILAND--0.8%
----------------------------------------------------------------------------------
230,500 Bangkok Bank $ 2,281,586
---------------------------------------------------------------------------------- --------------
UNITED KINGDOM--5.9%
----------------------------------------------------------------------------------
250,000 BAA 1,970,130
----------------------------------------------------------------------------------
150,000 Carlton Communication 2,058,800
----------------------------------------------------------------------------------
300,000 Guinness 2,146,884
----------------------------------------------------------------------------------
527,319 Hanson Trust 1,940,494
----------------------------------------------------------------------------------
164,800 Reuters Holdings 1,269,677
----------------------------------------------------------------------------------
210,000 Siebe 1,831,663
----------------------------------------------------------------------------------
141,943 Thorn EMI 2,229,390
----------------------------------------------------------------------------------
810,000 Vodafone Group 2,574,850
---------------------------------------------------------------------------------- --------------
Total 16,021,888
---------------------------------------------------------------------------------- --------------
VENEZUELA--0.4%
----------------------------------------------------------------------------------
200,000 Mavesa ADR 1,036,100
---------------------------------------------------------------------------------- --------------
TOTAL COMMON STOCKS (IDENTIFIED COST $226,259,472) 250,336,992
---------------------------------------------------------------------------------- --------------
PREFERRED STOCKS--2.5%
- -------------------------------------------------------------------------------------------------
AUSTRALIA--0.6%
----------------------------------------------------------------------------------
463,189 News Corporation Ltd. 1,608,989
---------------------------------------------------------------------------------- --------------
FINLAND--1.1%
----------------------------------------------------------------------------------
22,000 Nokia 3,001,641
---------------------------------------------------------------------------------- --------------
GERMANY--0.8%
----------------------------------------------------------------------------------
4,629 Fresenius 2,180,433
---------------------------------------------------------------------------------- --------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $4,072,886) 6,791,063
---------------------------------------------------------------------------------- --------------
TOTAL LONG-TERM SECURITIES (IDENTIFIED COST $230,332,358) 257,128,055
---------------------------------------------------------------------------------- --------------
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- ------------- ---------------------------------------------------------------------------------- --------------
*REPURCHASE AGREEMENT--4.6%
- -------------------------------------------------------------------------------------------------
$ 12,470,000 J.P. Morgan Securities, Inc., 5.77%, dated 11/30/94, due 12/5/94 (at amortized
cost) $ 12,470,000
---------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST $242,802,358) $ 269,598,055+
---------------------------------------------------------------------------------- --------------
</TABLE>
+The cost for federal tax purposes amounts to $242,108,509. The net unrealized
appreciation of investments amounts to $27,489,546, which is comprised of
$35,163,846 appreciation and $7,674,300 depreciation at November 30, 1994.
*Repurchase agreement is fully collateralized by U.S. government and/or agency
obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in joint
accounts with other Federated accounts.
**Non-income producing.
The following abbreviations are used in this portfolio.
ADR--American Depository Receipts
GDR--Global Depository Receipts
Note: The categories of investments are shown as a percentage of net assets
($271,228,225) at November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Investments, in repurchase agreements at amortized cost and value $12,470,000
- --------------------------------------------------------------------------------------
Investments in other securities, at value 257,128,055
- -------------------------------------------------------------------------------------- -----------
Total investments (identified cost $242,802,358 and tax cost, $242,108,509) $269,598,055
- ---------------------------------------------------------------------------------------------------
Dividends and interest receivable 656,990
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 1,608,292
- ---------------------------------------------------------------------------------------------------
Receivable for foreign currency sold 465,588
- ---------------------------------------------------------------------------------------------------
Receivable for capital stock sold 483,083
- --------------------------------------------------------------------------------------------------- -----------
Total assets 272,812,008
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Payable for investments purchased $ 684,035
- --------------------------------------------------------------------------------------
Payable for foreign currency purchased 465,588
- --------------------------------------------------------------------------------------
Payable for capital stock redeemed 120,297
- --------------------------------------------------------------------------------------
Dividend taxes withheld liability 76,034
- --------------------------------------------------------------------------------------
Payable to bank 18,308
- --------------------------------------------------------------------------------------
Accrued expenses 219,521
- -------------------------------------------------------------------------------------- -----------
Total liabilities 1,583,783
- --------------------------------------------------------------------------------------------------- -----------
NET ASSETS for 14,645,830 shares of capital stock outstanding $271,228,225
- --------------------------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid-in capital $231,241,120
- ---------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investments 26,801,876
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 63,509,324
- ---------------------------------------------------------------------------------------------------
Distributions paid from capital gains (50,597,175)
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income 273,080
- --------------------------------------------------------------------------------------------------- -----------
Total $271,228,225
- --------------------------------------------------------------------------------------------------- -----------
NET ASSET VALUE:
- ---------------------------------------------------------------------------------------------------
Class A ($261,178,232 / 14,097,247 shares of capital stock outstanding) $18.53
- --------------------------------------------------------------------------------------------------- -----------
Class B ($1,214,109 / 65,634 shares of capital stock outstanding) $18.50
- --------------------------------------------------------------------------------------------------- -----------
Class C Shares ($8,835,884 / 482,949 shares of capital stock outstanding) $18.30
- --------------------------------------------------------------------------------------------------- -----------
COMPUTATION OF OFFERING PRICE:
- ---------------------------------------------------------------------------------------------------
Class A Shares (100/94.5 of $18.53)* $19.61
- --------------------------------------------------------------------------------------------------- -----------
Class B Shares $18.50
- --------------------------------------------------------------------------------------------------- -----------
Class C Shares $18.30
- --------------------------------------------------------------------------------------------------- -----------
COMPUTATION OF PROCEEDS ON REDEMPTION:
- ---------------------------------------------------------------------------------------------------
Class A Shares $18.53
- --------------------------------------------------------------------------------------------------- -----------
Class B Shares (94.5/100 of $18.50)** $17.48
- --------------------------------------------------------------------------------------------------- -----------
Class C Shares (99/100 of $18.30)** $18.12
- --------------------------------------------------------------------------------------------------- -----------
</TABLE>
*See "What Shares Cost" in the prospectus.
**See "Redeeming Shares" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $406,845) $ 3,518,584
- ----------------------------------------------------------------------------------------------------
Interest 557,853
- ---------------------------------------------------------------------------------------------------- ------------
Total investment income 4,076,437
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------------------
Investment advisory fee $ 2,529,458
- ---------------------------------------------------------------------------------------
Administrative personnel and services fees 349,224
- ---------------------------------------------------------------------------------------
Custodian and recordkeeping fees 483,132
- ---------------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees 184,688
- ---------------------------------------------------------------------------------------
Directors' fees 4,976
- ---------------------------------------------------------------------------------------
Auditing fees 39,749
- ---------------------------------------------------------------------------------------
Legal fees 18,982
- ---------------------------------------------------------------------------------------
Capital stock registration costs 119,672
- ---------------------------------------------------------------------------------------
Printing and postage 128,711
- ---------------------------------------------------------------------------------------
Insurance premiums 9,390
- ---------------------------------------------------------------------------------------
Taxes 29,060
- ---------------------------------------------------------------------------------------
Miscellaneous 13,632
- ---------------------------------------------------------------------------------------
Shareholder service fee--Class A 152,547
- ---------------------------------------------------------------------------------------
Shareholder service fee--Class B 220
- ---------------------------------------------------------------------------------------
Shareholder service fee--Class C 16,570
- ---------------------------------------------------------------------------------------
Distribution fee--Class B 662
- ---------------------------------------------------------------------------------------
Distribution fee--Class C 50,203
- --------------------------------------------------------------------------------------- -----------
Total expenses 4,130,876
- ---------------------------------------------------------------------------------------------------- ------------
Net investment income (54,439)
- ---------------------------------------------------------------------------------------------------- ------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------------------------
Realized gain on investment transactions (identified cost basis)--
- ----------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions 15,659,072
- ----------------------------------------------------------------------------------------------------
Unrealized appreciation of investments--
- ----------------------------------------------------------------------------------------------------
Change in unrealized appreciation 7,122,265
- ---------------------------------------------------------------------------------------------------- ------------
Net realized and unrealized gain/(loss) on investments 22,781,337
- ---------------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ 22,726,898
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1994 1993
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------------
Net investment income $ (54,439) $ 172,409
- ---------------------------------------------------------------------------------
Net realized gain/(loss) on investment and forward contract
transactions (14,870,196 net gain and $5,764,462 net loss, respectively, as
computed for federal tax purposes) 15,659,072 5,894,827
- ---------------------------------------------------------------------------------
Change in unrealized appreciation 7,122,265 14,259,817
- --------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from operations 22,726,898 20,327,053
- --------------------------------------------------------------------------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------------------------
Class A Dividends to shareholders from net investment income (7,180) (644,382)
- ---------------------------------------------------------------------------------
Distributions in excess of net investment income--Class A shares (803,651) (747,020)
- ---------------------------------------------------------------------------------
Distributions in excess of net investment income--Class C shares (6,995) --
- --------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from distributions to shareholders (817,826) (1,391,402)
- --------------------------------------------------------------------------------- -------------- --------------
CAPITAL STOCK TRANSACTIONS--
- ---------------------------------------------------------------------------------
Net proceeds from sale of shares 158,071,765 127,561,470
- ---------------------------------------------------------------------------------
Net asset value of shares issued to shareholders electing to
receive payment of dividends in capital stock 324,527 623,074
- ---------------------------------------------------------------------------------
Cost of shares redeemed (104,788,830) (58,345,460)
- --------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from capital stock transactions 53,607,462 69,839,084
- --------------------------------------------------------------------------------- -------------- --------------
Change in net assets 75,516,534 88,774,735
- ---------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------
Beginning of period 195,711,691 106,936,956
- --------------------------------------------------------------------------------- -------------- --------------
End of period (including undistributed net investment income of $273,080 and $0,
respectively) $ 271,228,225 $ 195,711,691
- --------------------------------------------------------------------------------- -------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
International Series, Inc. (the "Corporation") (formerly FT Series, Inc.) is
registered under the Investment Company Act of 1940, as amended, as an open-end,
management investment company. The Corporation consists of two portfolios, one
diversified and one non-diversified. The financial statements included herein
are only those of the diversified portfolio, International Equity Fund (the
"Fund"). The financial statements of the other portfolio are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
Effective September 27, 1994 (Effective date of Class B Shares) the Fund
provides three classes of shares: Class A Shares, Class B Shares, and Class C
Shares.
Effective March 15, 1994, the Corporation changed its name from FT Series, Inc.
to International Series, Inc.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Listed equity securities are valued at the last sale
price reported on national securities exchanges. Unlisted securities and
short-term obligations (and private placement securities) are generally
valued at the prices provided by an independent pricing service. Short-term
securities with remaining maturities of sixty days or less may be stated at
amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
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 to be creditworthy pursuant to the guidelines
established by the Board of Directors (the "Directors"). Risks may arise
from the potential inability of counterparties to honor the terms of these
agreements.
Accordingly, the Fund could receive less than the repurchase price on the
sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income and expenses are accrued daily. Bond premium and discount,
if applicable, are amortized as required by the Internal Revenue Code, as
amended (the "Code"). Distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These distributions do not represent a return of capital for
federal income tax purposes.
D. FOREIGN CURRENCY TRANSLATION--The accounting records of the fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of FCs, currency gains or losses
realized between the trade and settlement dates on securities transactions,
the difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
E. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. However, federal
taxes may be imposed on the Fund upon the disposition of certain
investments in Passive Foreign Investment Companies. Withholding taxes on
foreign dividends have been provided for in accordance with the Fund's
understanding of the applicable country's tax rules and rates.
F. FOREIGN CURRENCY COMMITMENTS--The Fund may enter into foreign currency
commitments for the delayed delivery of securities or forward foreign
currency exchange transactions. Risks may arise upon entering these
transactions from the potential inability of counterparts to meet the terms
of their transactions and from unanticipated movements in security prices
or foreign exchanges rates. The forward foreign currency exchange
transactions are adjusted by the daily exchange rate of the underlying
currency and any gains or losses are recorded for financial statement
purposes as unrealized until the settlement date.
At November 30, 1994, the Fund had outstanding foreign currency commitments set
out below:
<TABLE>
<CAPTION>
COMMITMENTS UNREALIZED
TO DELIVER/ IN EXCHANGE APPRECIATION
SETTLEMENT DATE RECEIVE FOR (DEPRECIATION)
<S> <C> <C> <C>
UNSETTLED TRANSACTIONS
12/1/94
Indonesian Rupiah 9,881,200 $ 4,532.66 (3.02)
12/2/94
Mexican Peso 384,873.36 $ 112,012.04 97.72
12/5/94
Australian Dollar 457,162.47 $ 349,043.55 2,484.69
</TABLE>
G. OPTION CONTRACTS--The Fund may write or purchase option contracts. A
written option obligates the Fund to deliver (a call), or to receive (a
put), the contract amount of foreign currency upon exercise by the holder
of the option. The value of the option contract is recorded as a liability
and unrealized gain or loss is measured by the difference between the
current value and the premium received. The Fund had no written options
outstanding at November 30, 1994.
H. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
J. CONCENTRATION OF CREDIT RISK--The Fund invests in equity and fixed income
securities of non-U.S. issuers. Although the Fund maintains a diversified
investment portfolio the political or economic developments within a
particular country or region may have an adverse effect on the ability of
domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1994 the Portfolio was diversified with the following
industries:
<TABLE>
<S> <C> <C> <C>
Automotive 3.7% Energy 1.4%
Banking 8.5 Finance & Insurance 2.7
Beverage & Tobacco 1.9 Pharmaceuticals 1.1
Media & Entertainment 4.5 Forest Products 2.8
Diversified Investment Companies 2.5 Industrial Products 1.7
Building & Development 4.5 Manufacturing 3.2
Business & Equipment 5.6 Machinery 5.6
Capital Goods 0.5 Metals 1.7
Chemical 2.6 Other 6.8
Diversified Products 7.9 Retailers 5.7
Consumer Durables 2.1 Steel 4.4
Ecological Services 0.9 Technology Services 0.5
Utilities 2.5 Telecommunications 4.2
Electronics & Electrical Equipment 8.7 Transportation 1.8
</TABLE>
J. OTHER--Investment transactions are accounted for on the trade date.
K. RECLASSIFICATION--During the year ended November 30, 1994, the Fund adopted
Statement of Position 93-2, Determination, Disclosure, and Financial
Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies. Accordingly, permanent book and tax
differences have been reclassified. Amounts as of November 30, 1994, have
been reclassified to reflect a decrease in paid in capital of $138,442, an
increase in undistributed net investment income $1,886,989, and a decrease
in accumulated net realized gain/loss of $1,748,547. Net investment income,
net realized gains, and net assets were not affected by this change.
(3) CAPITAL STOCK
At November 30, 1994, there were 500,000,000 shares of $.0001 par value capital
stock authorized for Class A Shares, Class B Shares, and Class C Shares
respectively. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1994 1993
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
- ----------------------------------------------- ----------- --------------- ----------- --------------
Shares sold 7,830,629 $ 148,658,669 7,840,247 $ 124,575,022
- -----------------------------------------------
Shares issued to shareholders in payment of
dividends declared 18,065 320,105 45,118 623,074
- -----------------------------------------------
Shares redeemed (5,447,729) (102,494,771) (3,779,897) (58,259,919)
- ----------------------------------------------- ----------- --------------- ----------- --------------
Net change resulting from capital stock
transactions 2,400,965 $ 46,484,003 4,105,468 $ 66,938,177
- ----------------------------------------------- ----------- --------------- ----------- --------------
<CAPTION>
YEAR ENDED NOVEMBER 30,
1994**
CLASS B SHARES SHARES AMOUNT
<S> <C> <C>
- ----------------------------------------------- ----------- ---------------
Shares sold 66,837 $ 1,290,771
- -----------------------------------------------
Shares issued to shareholders in payment of
dividends declared -- --
- -----------------------------------------------
Shares redeemed (1,202) (23,249)
- ----------------------------------------------- ----------- ---------------
Net change resulting from capital stock
transactions 65,635 $ 1,267,522
- ----------------------------------------------- ----------- ---------------
<CAPTION>
YEAR ENDED NOVEMBER 30,
1994 1993*
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
- ----------------------------------------------------------- --------- ------------- --------- ------------
Shares sold 429,959 $ 8,122,325 177,586 $ 2,986,448
- -----------------------------------------------------------
Shares issued to shareholders in payment of
dividends declared 250 4,422
- -----------------------------------------------------------
Shares redeemed (120,985) (2,270,810) (3,862) (85,541)
- ----------------------------------------------------------- --------- ------------- --------- ------------
Net change resulting from capital stock
transactions 309,224 $ 5,855,937 173,724 $ 2,900,907
- ----------------------------------------------------------- --------- ------------- --------- ------------
</TABLE>
* For the period from March 31, 1993 (start of business) to November 30, 1993.
** For the period from September 19, 1994 (start of business) to November 30,
1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
ADVISORY FEE--On March 15, 1994, Federated Management became the Fund's
investment adviser ("Adviser"). Adviser receives for its services an annual
investment advisory fee equal to 1.00% of the Fund's average daily net assets.
Under the terms of a sub-advisory agreement between Federated Management and
Fiduciary International, Inc. (the "Sub-Adviser"), Sub-Adviser will receive an
annual fee from Federated Management equal to .50 of 1% of average daily net
assets of the Fund. Prior to March 15, 1994, Fiduciary International, Inc.
served as the Fund's investment adviser and received for its services an annual
investment advisory fee equal to 1.00% of the Fund's average daily net assets.
Prior to March 15, 1994, Federated Management, under the terms of a sub-advisory
agreement with Fiduciary International, Inc., served as the Fund's sub-adviser
and received an annual fee from Fiduciary International, Inc. equal to 0.50% of
1% of average daily net assets.
ADMINISTRATIVE SERVICES--Federated Administrative Services ("FAS") provides the
Fund administrative personnel and services. Prior to March 1, 1994, these
services were provided at approximate cost. Effective March 1, 1994, the FAS fee
is based on the level of average aggregate daily net assets of all funds advised
by subsidiaries of Federated Investors for the period. The administrative fee
received during any fiscal year shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
DISTRIBUTION AND SHAREHOLDER SERVICES FEES--The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940. Under the terms of the Plan, the Fund will compensate Federated Securities
Corp. ("FSC"), the principal distributor, from the net assets of the Fund to
finance activities intended to result in the sale of the Fund's Class B Shares
and Class C Shares. The Plan provides that the Fund may incur distribution
expenses up to 0.75 of 1% of the average daily net assets of the Class B Shares
and Class C Shares, annually, to compensate FSC. Under the terms of a
Shareholder Services agreement with FSC, the Fund will pay FSC up to .25 of 1%
of average net assets of the Class A, Class B, and Class C Shares for the
period. This fee is to obtain certain personal services for shareholders and to
maintain the shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT--Federated Services Company ("FServ")
serves as transfer and dividend disbursing agent for the Fund. The FServ fee is
based on the size, type and number of accounts and transactions made by
shareholders.
Certain of the Officers and Directors of the Fund are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
fiscal year ended
November 30, 1994 were as follows:
<TABLE>
<S> <C>
PURCHASES $ 228,447,062
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 173,028,760
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
INTERNATIONAL SERIES, INC. (formerly FT SERIES, INC.)
(International Equity Fund):
We have audited the accompanying statement of assets and liabilities of
International Equity Fund (an investment portfolio of International Series,
Inc., formerly FT Series, Inc., a Maryland Corporation), including the schedule
of portfolio investments, as of November 30, 1994, the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended and financial highlights for each
of the periods presented. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1994, by correspondence with the custodian and broker. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
International Equity Fund, an investment portfolio of International Series,
Inc., as of November 30, 1994, and the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and financial highlights for each of the periods presented in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
January 13, 1995
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
International Equity Fund Federated Investors Tower
Class A Shares 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
- ---------------------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen, LLP 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
INTERNATIONAL EQUITY FUND
CLASS A SHARES
PROSPECTUS
A Diversified Portfolio of
International Series, Inc.
An Open-End
Management Investment Company
January 31, 1995
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
46031P308
1010302A-A (1/95)
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. The Fund pursues
this objective 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 January 31, 1995, 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 January 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CLASS B SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
LIBERTY FAMILY OF FUNDS 3
- ------------------------------------------------------
INVESTMENT INFORMATION 4
- ------------------------------------------------------
Investment Objective 4
Investment Policies 5
Risks Associated with Financial
Futures Contracts and Options on
Financial Futures Contracts 12
Investment Limitations 12
NET ASSET VALUE 13
- ------------------------------------------------------
INVESTING IN CLASS B SHARES 13
- ------------------------------------------------------
Share Purchases 13
Minimum Investment Required 14
What Shares Cost 14
Conversion of Class B Shares 15
Systematic Investment Program 15
Certificates and Confirmations 15
Dividends 15
Capital Gains 16
Retirement Plans 16
EXCHANGE PRIVILEGE 16
- ------------------------------------------------------
Requirements for Exchange 16
Tax Consequences 16
Making an Exchange 17
REDEEMING CLASS B SHARES 17
- ------------------------------------------------------
Through a Financial Institution 17
Directly from the Fund 18
Contingent Deferred Sales Charge 19
Elimination of Contingent
Deferred Sales Charge 19
Systematic Withdrawal Program 20
Reinvestment Privilege 20
Accounts with Low Balances 20
INTERNATIONAL SERIES, INC., INFORMATION 21
- ------------------------------------------------------
Management of the Corporation 21
Distribution of Class B Shares 27
Administration of the Fund 28
Brokerage Transactions 29
Expenses of the Fund and Class B Shares 29
SHAREHOLDER INFORMATION 30
- ------------------------------------------------------
Voting Rights 30
TAX INFORMATION 30
- ------------------------------------------------------
Federal Income Tax 30
Pennsylvania Corporate and Personal
Property Taxes 31
PERFORMANCE INFORMATION 31
- ------------------------------------------------------
OTHER CLASSES OF SHARES 32
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CLASS A SHARES 33
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CLASS C SHARES 34
- ------------------------------------------------------
FINANCIAL STATEMENTS 35
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 53
- ------------------------------------------------------
ADDRESSES 54
- ------------------------------------------------------
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 average net assets)
Management Fee................................................................................. 1.00%
12b-1 Fee...................................................................................... 0.75%
Total Other Expenses........................................................................... 0.84%
Shareholder Services Fee................................................................... 0.25%
Total Class B Shares Operating Expenses............................................... 2.59%
</TABLE>
- ------------
(1) The contingent deferred sales charge assessed is 5.50% in the first year
declining to 1.00% in the sixth year and 0.00% thereafter. (See "Contingent
Deferred Sales Charge").
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the 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 charges 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.................................................. $83 $124
You would pay the following expenses on the same investment assuming
no redemption.................................................................................. $26 $81
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The information set forth in the foregoing table and example relates only to
Class 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 5.50%, but are not subject to a
12b-1 fee, however, may be subject to a contingent deferred sales charge. Class
C Shares are subject to a 12b-1 fee of 0.75% and a contingent deferred sales
charge of up to 1.00%, and are not subject to a sales load. See "Other Classes
of Shares."
INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS--CLASS B SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Independent Public Accountants on page 53.
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1994**
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.61
- -----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------
Net investment income (0.01)
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign currency transactions (1.10)
- ----------------------------------------------------------------------------------------------- -------
Total from investment operations (1.11)
- -----------------------------------------------------------------------------------------------
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 $ 18.50
- ----------------------------------------------------------------------------------------------- -------
TOTAL RETURN* (5.27%)
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------
Expenses 2.59%(a)
- -----------------------------------------------------------------------------------------------
Net investment income (0.88%)(a)
- -----------------------------------------------------------------------------------------------
Expense waiver/reimbursement --
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 1,214
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate 73%
- -----------------------------------------------------------------------------------------------
</TABLE>
* Based on net asset value which does not reflect the sales load or redemption
fee, if applicable.
** Reflects operations for the period from September 19, 1994 (start of
business) to November 30, 1994.
(a) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated November 30, 1994, which can be obtained free of charge.
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 of the
Corporation (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 (the "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. For a more complete
description, see "Investing in Class C Shares" and "Redeeming Class C Shares." 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
("CDSC") 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 and offering price can be found in the mutual
funds section of local newspapers under "Federated Liberty."
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 communications utilities;
. Limited Term Fund, providing a high level of current income consistent
with minimum fluctuation in principal 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 personal income taxes imposed by the
state of Michigan and Michigan municipalities, primarily through Michigan
municipal securities;
. Pennsylvania Municipal Income Fund, providing current income exempt from
federal regular income tax and the personal income taxes imposed by the
Commonwealth of Pennsylvania, primarily through Pennsylvania municipal
securities;
. Strategic Income Fund, providing a high level of current income,
primarily through domestic and foreign corporate debt obligations;
. Tax-Free Instruments Trust, providing current income consistent with the
stability of principal and exempt from federal income tax, through
high-quality, short-term municipal securities; and
. World Utility Fund, providing total return primarily through securities
issued by domestic and foreign companies in the utilities industries.
Prospectuses for these funds are available by writing to Federated Securities
Corp.
Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus. The Liberty Family of Funds provides
flexibility and diversification for an investor's long-term investment planning.
It enables an investor to meet the challenges of changing market conditions by
offering convenient exchange privileges which give access to various investment
vehicles and by providing the investment services of proven, professional
investment advisers.
INVESTMENT INFORMATION
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INVESTMENT OBJECTIVE
The Fund's objective is to obtain a total return on its assets. 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, including European Currency Units,
of issuers located in at least three countries outside of the United States and
sponsored or unsponsored American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs"), and European Depositary Receipts ("EDRs"),
collectively, "Depositary Receipts." 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. However, in no event will the Fund invest more than 25% of its
total assets in the debt securities of any one foreign country.
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 Ratings Group
("S&P") or A by Moody's Investors Service, Inc. ("Moody's"), or, if
unrated, will be judged by Federated Management, the Fund's investment
adviser (the "Adviser"), or Fiduciary International, Inc., the Fund's
investment sub-adviser (the "sub-adviser"), 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. A description of the ratings categories is contained
in the Appendix to the Statement of Additional Information.
The prices of fixed income securities generally fluctuate inversely to the
direction of interest rates.
DEPOSITARY RECEIPTS. The Fund may invest in foreign issuers by purchasing
sponsored or unsponsored ADRs, GDRs, and EDRs. ADRs are depositary receipts
typically issued by a United States bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. EDRs
and GDRs are typically issued by foreign banks or trust companies, although
they also may be issued by United States banks or trust companies, and
evidence ownership of underlying securities issued by either a foreign or a
United States corporation. Generally, Depositary Receipts in registered
form are designed for use in the United States securities market and
Depositary Receipts in bearer form are designed for use in securities
markets outside the United States. Depositary Receipts may not necessarily
be denominated in the same currency as the underlying securities into which
they may be converted. Ownership of unsponsored Depositary Receipts may not
entitle the Fund to financial or other reports from the issuer of the
underlying security, to which it would be entitled as the owner of
sponsored Depositary Receipts.
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 seller's failure to complete the transaction
may cause the Fund to miss a price or yield considered to be advantageous.
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. Accordingly, the Fund may pay more/less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the Adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
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
("OTC 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 OTC options only with investment dealers and other financial
institutions (such as commercial banks or savings and loan associations) deemed
creditworthy by the Adviser.
OTC 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 OTC 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, 1994,
the portfolio contained securities from issuers located primarily in Germany,
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 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.
The economies of foreign countries may differ 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 countries, and the extent of foreign investment
in certain debt securities and domestic companies may be subject to limitation.
Foreign ownership limitations also may be imposed by the charters of individual
companies 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
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 foreign 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.
Brokerage commissions, custodial services, and other costs relating to
investment may be more expensive than in the United States. Foreign markets may
have different clearance and settlement procedures and in certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
The inability of the Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of a portfolio security due to settlement problems could
result either in losses to the Fund due to subsequent declines in value of the
portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser.
CURRENCY RISKS. Because the majority of the 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 sales 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.
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.
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 accounting, auditing, and financial reporting
standards and practices or regulatory requirements comparable to those
applicable to U.S. 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;
. the limited size of many foreign securities markets and limited trading
volume in issuers compared to the volume of trading in U.S. securities
could cause prices to be erratic for reasons apart from factors that
affect the quality of securities;
. the likelihood that foreign securities may be less liquid or more
volatile;
. foreign brokerage commissions may be higher;
. unreliable mail service between countries;
. political or financial changes which adversely affect investments in some
countries;
. increased risk of delayed settlements of portfolio transactions or loss
of certificates for portfolio securities;
. certain markets may require payment for securities before delivery;
. religious and ethnic instability; and
. certain national policies which may restrict the Fund's investment
opportunities, including restrictions on investment in issuers or
industries deemed sensitive to national interests.
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 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
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;
nor
. 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, including repurchase agreements with maturities longer than seven
days after notice and certain OTC options; nor
. purchase put options on securities unless the securities or an offsetting
call option is held in the Fund's portfolio.
NET ASSET VALUE
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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, less liabilities of
the Fund 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
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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 CDSC (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 Federated Services Company, P.O. Box 8604, Boston, MA
02266-8604.
Orders by mail are considered received after payment by check is converted
by the transfer agent's bank, State Street Bank and Trust Company ("State
Street Bank"), into federal funds. This is generally the next business day
after State Street Bank receives the check.
BY WIRE. 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 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 CDSC 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 of 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, Class B 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, contact Federated Securities Corp. 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 CDSC 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 funds advised by subsidiaries of Federated Investors
("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, 500 Victory Road--2nd Floor, Quincy, Massachusetts 02171.
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 CDSC (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 CDSC, 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.
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.
Telephone redemption instructions may be recorded. If reasonable procedures are
not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
BY MAIL. Any shareholder may redeem Shares by sending a written request to
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
Exchanges;
. 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 CDSC by the Fund's
distributor. Any applicable CDSC 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>
CONTINGENT DEFERRED
SHARES HELD SALES CHARGE
<S> <C>
One full year or less 5.50%
Two full years or less 4.75%
Three full years or less 4.00%
Four full years or less 3.00%
Five full years or less 2.00%
Six full years or less 1.00%
Seven years and thereafter 0.00%
</TABLE>
The CDSC will be deducted from the redemption proceeds otherwise payable to the
shareholder and will be retained by the distributor. The CDSC 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 CDSC. In computing the amount of the applicable CDSC,
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 six years or less on a first-in, first-out basis.
A CDSC 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 CDSC 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
CDSC will be eliminated with respect to certain redemptions (see "Elimination of
Contingent Deferred Sales Charge.")
ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
The CDSC 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 CDSC
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 CDSC
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 CDSC.
Shareholders will be notified of such elimination. Any Shares purchased prior to
the termination of such waiver would have the CDSC 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 CDSC, 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 CDSC 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, present positions with International Series, Inc., and principal
occupations, 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
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, tna 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 Company.
- --------------------------------------------------------------------------------
Thomas G. Bigley
28th Floor, One Oxford Center
Pittsburgh, PA
Director
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital of
Pittsburgh; Director, Trustee, or Managing General Partner of the Funds;
formerly, Senior Partner, Ernst & Young LLP.
- --------------------------------------------------------------------------------
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Director
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
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
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
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.+
Two Gateway Center-Suite 674
Pittsburgh, PA
Director
Attorney-at-law; Partner, Henny, Koehuba, 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
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
Two Gateway Center-Suite 674
Pittsburgh, PA
Director
Attorney-at-law; Partner, Henny, Koehuba, 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.
- --------------------------------------------------------------------------------
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Director
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
Public relations/marketing consultant; Director, Trustee, or Managing General
Partner of the Funds.
- --------------------------------------------------------------------------------
Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
President
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
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
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
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
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; Secretary and Trustee, Federated Shareholder Services; Executive Vice
President and Director, Federated Securities Corp.; Vice President and Secretary
of the Funds.
- --------------------------------------------------------------------------------
*This Director is deemed to be an "interested person" as defined in the
Investment Company Act of 1940 as amended.
+Member of the Executive Committee. The Executive Committee of the Board of
Directors handles the responsibilities of the Board of Directors between
meetings of the Board.
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 served as the Fund's sub-adviser, and
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 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, the
sub-adviser receives an annual fee from the Adviser 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 the Adviser 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 the Adviser.
Notwithstanding any other provision in the Sub-Advisory 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 the Fund) to the extent that the Fund's expenses exceed such lower
expense limitations as the sub-adviser 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. As of December 31, 1994, Fiduciary
Trust Company International had total assets of approximately $375 million,
and total assets under management of approximately $30 billion.
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.
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.
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. Dealers may voluntarily waive receipt of
all or any portion of these payments.
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 up to 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. The distributor may pay a portion of
this amount to financial institutions that waive all or any portion of the
payments discussed in the preceding paragraph. 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. Except as set forth in
the next paragraph, 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.
The distributor may sell, assign, or pledge its right to receive Rule 12b-1
fees and CDSCs to finance payments made to brokers in connection with the sale
of Class B Shares. Fiduciary Trust Company International, parent of the
sub-adviser, or one of its subsidiaries, including the sub-adviser, expects to
participate in this financing program by purchasing 50% of the Rule 12b-1 fees
and CDSCs assigned by the distributor. Actual distribution expenses for Class B
Shares at any given time may exceed the Rule 12b-1 fees and payments received
pursuant to CDSCs. These unrecovered amounts, plus interest thereon, will be
carried forward and paid from future Rule 12b-1 fees and payments received
through CDSCs. If the Distribution Plan were terminated or not continued, the
Fund would not be contractually obligated to pay for any expenses not
previously reimbursed by the Fund or recovered through CDSCs.
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.
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.
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.
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.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen LLP, Pittsburgh, Pennsylvania.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet this criteria, the Adviser may give consideration to those
firms which have sold or are selling Shares of the Fund and other funds
distributed by Federated Securities Corp. The Adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
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 Class B
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 (the "Code"), 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 Code stipulations that would allow shareholders to claim a
foreign tax credit or deduction on their U.S. income tax returns. The Code, 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
The Fund is not subject to Pennsylvania corporate or personal property taxes.
Fund Shares may be subject to personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania to the extent that the
portfolio securities in the Fund would be subject to such taxes if owned
directly by residents of those jurisdictions.
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 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 performance information reflects the effect of non-recurring charges, such
as the CDSC, which, if excluded, would increase the total return.
Total return will be calculated separately for Class A Shares, Class B Shares,
and Class C Shares. Because Class A Shares may be 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 Shares using
certain financial publications and/or compare the performance of 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 5.50%. Under certain circumstances, investors
may qualify for reduced sales loads on purchases of Class A Shares. Class A
Shares are subject to a shareholder services fee of up to 0.25 of 1% of the
Class A Shares' average daily net assets. Investments in Class A Shares are
subject to a minimum initial investment of $500, unless the investment is in a
retirement account, in which case the minimum investment is $50.
Class C Shares are sold primarily to customers of financial institutions at net
asset value with no initial sales load. Class C Shares are distributed pursuant
to a Rule 12b-1 Plan adopted by the Fund, whereby, the distributor is paid a fee
of up to .75 of 1%. Class C Shares are also subject to a shareholder services
fee of up to .25 of 1% of the Class C Shares' average daily net assets. In
addition, Class C Shares may be subject to certain CDSCs. 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
payable to 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
FINANCIAL HIGHLIGHTS--CLASS A SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants page 53.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1993 1992 1991 1990 1989 1988 1987 1986
NET ASSET VALUE, BEGINNING OF
PERIOD $ 16.49 $ 14.09 $ 14.44 $ 14.28 $ 17.59 $ 17.34 $ 19.99 $ 22.87 $ 14.62
- ------------------------------
INCOME FROM INVESTMENT
OPERATIONS
- ------------------------------
Net investment income 0.15 0.06 0.10 0.11 0.19 0.18 0.19 0.24 0.04
- ------------------------------
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions 1.96 2.53 (0.37) 0.37 (1.16) 1.60 3.27 (0.72) 8.63
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations 2.11 2.59 (0.27) 0.48 (0.97) 1.78 3.46 (0.48) 8.67
- ------------------------------
LESS DISTRIBUTIONS
- ------------------------------
Dividends to shareholders
from net investment income (0.07) (0.06) (0.08) (0.21) (0.20) (0.23) (0.23) (0.05) (0.08)
- ------------------------------
Distributions to
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)(a) -- -- -- -- -- -- --
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total distributions (0.07) (0.19) (0.08) (0.32) (2.34) (1.53) (6.11) (2.40) (0.42)
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 18.53 $ 16.49 $ 14.09 $ 14.44 $ 14.28 $ 17.59 $ 17.34 $ 19.99 $ 22.87
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN* 12.82% 18.52% (1.86)% 3.49% (6.72)% 11.55% 24.33% (2.70)% 60.75%
- ------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------
Expenses 1.61% 1.60% 1.57% 1.52% 1.32% 1.01% 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%
- ------------------------------
Expense waiver/
reimbursement (b) -- 0.01% 0.02% 0.30% 0.25% 0.46% 0.28% 0.17% 0.19%
- ------------------------------
SUPPLEMENTAL DATA
- ------------------------------
Net assets, end of period
(000 omitted) $261,178 $192,860 $106,937 $101,980 $82,541 $65,560 $68,922 $85,860 $106,257
- ------------------------------
Portfolio turnover rate 73% 74% 91% 84% 114% 85% 98% 130% 70%
- ------------------------------
<CAPTION>
<S> <C>
1985
NET ASSET VALUE, BEGINNING OF
PERIOD $ 9.50
- ------------------------------
INCOME FROM INVESTMENT
OPERATIONS
- ------------------------------
Net investment income 0.09
- ------------------------------
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions 5.04
- ------------------------------ ---------
Total from investment
operations 5.13
- ------------------------------
LESS DISTRIBUTIONS
- ------------------------------
Dividends to shareholders
from net investment income (0.01)
- ------------------------------
Distributions to
shareholders from net
realized gain on investment
transactions --
- ------------------------------
Distributions in excess of
net investment income --
- ------------------------------ ---------
Total distributions (0.01)
- ------------------------------ ---------
NET ASSET VALUE, END OF PERIOD $ 14.62
- ------------------------------ ---------
TOTAL RETURN* 54.07%
- ------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------
Expenses 1.00%
- ------------------------------
Net investment income 1.30%
- ------------------------------
Expense waiver/
reimbursement (b) 0.50%
- ------------------------------
SUPPLEMENTAL DATA
- ------------------------------
Net assets, end of period
(000 omitted) $34,209
- ------------------------------
Portfolio turnover rate 61%
- ------------------------------
</TABLE>
* Based on net asset value which does not reflect the sales load or redemption
fee, if applicable.
(a) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(b) The voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal year ended November 30, 1994, which can be obtained
free of charge.
INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS--CLASS C SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 53.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER
30,
----------------------
1994 1993**
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.41 $ 14.88
- -------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------
Net investment income (0.05) (0.04)
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign
currency transactions 1.98 1.57
- ------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 1.93 1.53
- -------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income -- --
- -------------------------------------------------------------------------------------------
Distributions in excess of net investment income (0.04)(a) --
- ------------------------------------------------------------------------------------------- --------- -----------
TOTAL DISTRIBUTIONS (0.04) --
- ------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 18.30 $ 16.41
- ------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN* 11.75% 10.28%
- -------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------
Expenses 2.55% 2.57% (c)
- -------------------------------------------------------------------------------------------
Net investment income (0.91%) (1.10%)(c)
- -------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) -- 0.01% (c)
- -------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $8,836 $2,852
- -------------------------------------------------------------------------------------------
Portfolio turnover rate 73% 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 (start of business)
to November 30, 1993.
(a) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(b) The voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(c) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal year ended November 30, 1994, which can be obtained
free of charge.
INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- ------------- ---------------------------------------------------------------------------------- --------------
COMMON STOCKS--92.3%
- -------------------------------------------------------------------------------------------------
ARGENTINA--1.7%
----------------------------------------------------------------------------------
126,609 Ciadea $ 1,407,048
----------------------------------------------------------------------------------
215,000 **Migor 1,666,250
----------------------------------------------------------------------------------
25,000 Telefonica de Argentina ADR 1,390,625
---------------------------------------------------------------------------------- --------------
Total 4,463,923
---------------------------------------------------------------------------------- --------------
AUSTRALIA--2.9%
----------------------------------------------------------------------------------
309,028 Amcor Limited 2,042,454
----------------------------------------------------------------------------------
212,875 Broken Hill Proprietary 3,056,029
----------------------------------------------------------------------------------
172,226 National Australia Bank 1,395,068
----------------------------------------------------------------------------------
260,000 Western Mining Corporation Holdings 1,478,635
---------------------------------------------------------------------------------- --------------
Total 7,972,186
---------------------------------------------------------------------------------- --------------
BRAZIL--1.0%
----------------------------------------------------------------------------------
105,000 **Aracruz Celulose ADR 1,325,625
----------------------------------------------------------------------------------
30,000 Telecomunicacoes Brasileras ADR 1,436,991
---------------------------------------------------------------------------------- --------------
Total 2,762,616
---------------------------------------------------------------------------------- --------------
CHILE--2.1%
----------------------------------------------------------------------------------
60,000 Compania Cervecerias Unidas ADR 1,560,000
----------------------------------------------------------------------------------
15,000 Compania de Telefonos de Chile ADR 1,290,000
----------------------------------------------------------------------------------
75,000 Cristalerias de Chile ADR 1,396,875
----------------------------------------------------------------------------------
50,000 Madeco ADR 1,450,000
---------------------------------------------------------------------------------- --------------
Total 5,696,875
---------------------------------------------------------------------------------- --------------
FRANCE--7.9%
----------------------------------------------------------------------------------
7,250 Carrefour 3,011,806
----------------------------------------------------------------------------------
11,473 Cetelem 2,172,231
----------------------------------------------------------------------------------
6,800 Colas $ 1,123,383
----------------------------------------------------------------------------------
12,800 Compagnie de Fives-Lille 1,117,888
----------------------------------------------------------------------------------
37,000 Credit Local de France 2,851,595
----------------------------------------------------------------------------------
2,220 Legrand 2,760,938
----------------------------------------------------------------------------------
27,000 SEB 2,666,271
----------------------------------------------------------------------------------
21,500 Ugine 1,632,265
----------------------------------------------------------------------------------
75,500 Valeo 4,022,145
---------------------------------------------------------------------------------- --------------
Total 21,358,522
---------------------------------------------------------------------------------- --------------
GERMANY--6.0%
----------------------------------------------------------------------------------
3,580 Buderus 1,583,768
----------------------------------------------------------------------------------
19,600 Krupp Fr Ag Hoesch 2,482,750
----------------------------------------------------------------------------------
12,150 Kaufhof Holding 3,387,460
----------------------------------------------------------------------------------
10,000 Mannesmann 2,609,803
----------------------------------------------------------------------------------
9,035 Preussag 2,490,232
----------------------------------------------------------------------------------
11,600 Veba 3,817,441
---------------------------------------------------------------------------------- --------------
Total 16,371,454
---------------------------------------------------------------------------------- --------------
HONG KONG--5.9%
----------------------------------------------------------------------------------
272,000 China Light & Power 1,171,186
----------------------------------------------------------------------------------
600,000 CITIC Pacific 1,520,617
----------------------------------------------------------------------------------
71,100 Consolidated Electric Power Asia ADR 1,539,933
----------------------------------------------------------------------------------
2,600,000 First Pacific Co. 1,798,622
----------------------------------------------------------------------------------
502,064 Hong Kong Land Holdings 1,041,950
----------------------------------------------------------------------------------
185,027 HSBC Holdings 2,045,568
----------------------------------------------------------------------------------
444,000 Hutchison Whampoa 1,768,261
----------------------------------------------------------------------------------
308,000 Sun Hung Kai Properties 1,979,337
----------------------------------------------------------------------------------
250,000 Swire Pacific $ 1,664,792
----------------------------------------------------------------------------------
350,000 Television Broadcasting 1,402,951
---------------------------------------------------------------------------------- --------------
Total 15,933,217
---------------------------------------------------------------------------------- --------------
INDONESIA--0.5%
----------------------------------------------------------------------------------
752,600 Lippo Bank 1,299,790
---------------------------------------------------------------------------------- --------------
IRELAND--2.2%
----------------------------------------------------------------------------------
463,491 Bank of Ireland 2,068,510
----------------------------------------------------------------------------------
400,000 CRH 2,135,923
----------------------------------------------------------------------------------
600,000 Irish Life 1,719,386
---------------------------------------------------------------------------------- --------------
Total 5,923,819
---------------------------------------------------------------------------------- --------------
JAPAN--25.3%
----------------------------------------------------------------------------------
150,000 Amway Japan Ltd., ADR 2,400,000
----------------------------------------------------------------------------------
99,000 Canon Sales 2,960,748
----------------------------------------------------------------------------------
180,000 Canon 3,109,876
----------------------------------------------------------------------------------
230,000 Daiwa Securities 2,997,727
----------------------------------------------------------------------------------
517 DDI 4,544,481
----------------------------------------------------------------------------------
66,000 Ito Yokado 3,500,884
----------------------------------------------------------------------------------
200,000 Japan Securities Finance 2,990,654
----------------------------------------------------------------------------------
45,000 Kyocera 3,337,206
----------------------------------------------------------------------------------
105,000 Mitsubishi Bank 2,344,531
----------------------------------------------------------------------------------
230,000 Mitsubishi Estate 2,532,963
----------------------------------------------------------------------------------
450,000 Mitsubishi Heavy Industries 3,337,206
----------------------------------------------------------------------------------
170,000 Mitsubishi Trust & Banking 2,404,648
----------------------------------------------------------------------------------
100,000 Mori Seiki Co. 2,364,233
----------------------------------------------------------------------------------
325,000 NEC 3,776,206
----------------------------------------------------------------------------------
960,000 Nippon Steel $ 3,724,577
----------------------------------------------------------------------------------
340 Nippon Telephone & Telegraph 2,885,577
----------------------------------------------------------------------------------
184,000 Sharp 3,197,575
----------------------------------------------------------------------------------
90,000 Shimachu 2,837,080
----------------------------------------------------------------------------------
200,000 Sumitomo Electric Industries 2,788,583
----------------------------------------------------------------------------------
650,000 Tokuyama Corp. 3,848,447
----------------------------------------------------------------------------------
700,000 Tosoh Corp. 2,906,795
----------------------------------------------------------------------------------
680,000 Yaskawa Electric Corp. 3,751,250
---------------------------------------------------------------------------------- --------------
Total 68,541,247
---------------------------------------------------------------------------------- --------------
KOREA--1.4%
----------------------------------------------------------------------------------
37,000 Korea Electric Power 1,341,052
----------------------------------------------------------------------------------
33,000 Pohang Iron and Steel Ltd., ADR 1,047,750
----------------------------------------------------------------------------------
17,000 **Samsung Electric Co. 922,250
----------------------------------------------------------------------------------
8,001 **Samsung Electronics Ltd., GDR 428,054
----------------------------------------------------------------------------------
202 **Samsung Electronics Ltd., GDR 10,656
---------------------------------------------------------------------------------- --------------
Total 3,749,762
---------------------------------------------------------------------------------- --------------
MALAYSIA--2.7%
----------------------------------------------------------------------------------
36,000 Aokam Perdana 247,917
----------------------------------------------------------------------------------
220,000 Aokam Perdana 1,626,951
----------------------------------------------------------------------------------
330,000 Genting Berhad 2,613,861
----------------------------------------------------------------------------------
230,000 Malayan Banking 1,493,916
----------------------------------------------------------------------------------
173,000 Telekom Malaysia 1,272,606
---------------------------------------------------------------------------------- --------------
Total 7,255,251
---------------------------------------------------------------------------------- --------------
MEXICO--4.5%
----------------------------------------------------------------------------------
196,750 Cemex 1,886,606
----------------------------------------------------------------------------------
650,000 Cifra $ 1,775,389
----------------------------------------------------------------------------------
190,000 **Elektra 2,070,318
----------------------------------------------------------------------------------
413,000 Farmacias Benavides 1,452,070
----------------------------------------------------------------------------------
93,000 **Grupo Industrial Durango, ADR 1,697,250
----------------------------------------------------------------------------------
80,500 **Grupo Televisa L 1,826,834
----------------------------------------------------------------------------------
550,000 Telefonos de Mexico 1,483,074
---------------------------------------------------------------------------------- --------------
Total 12,191,541
---------------------------------------------------------------------------------- --------------
NETHERLANDS--5.2%
----------------------------------------------------------------------------------
32,000 Akzo Nobel 3,547,470
----------------------------------------------------------------------------------
114,965 Boskalis Westminster 2,326,750
----------------------------------------------------------------------------------
289,000 Elsevier 2,875,213
----------------------------------------------------------------------------------
103,000 KNP BT 2,822,399
----------------------------------------------------------------------------------
62,000 Polygram 2,615,350
---------------------------------------------------------------------------------- --------------
Total 14,187,182
---------------------------------------------------------------------------------- --------------
NEW ZEALAND--1.6%
----------------------------------------------------------------------------------
1,174,274 Carter Holt Harvey 2,606,708
----------------------------------------------------------------------------------
1,163,056 Skellerup 1,623,685
---------------------------------------------------------------------------------- --------------
Total 4,230,393
---------------------------------------------------------------------------------- --------------
PHILIPPINES--1.3%
----------------------------------------------------------------------------------
3,312,000 JG Summit Holdings 1,208,151
----------------------------------------------------------------------------------
7,800 Metro Bank and Trust Co. 32,704
----------------------------------------------------------------------------------
39,000 Metro Bank and Trust Co. 1,144,654
----------------------------------------------------------------------------------
1,400,000 **Petron Corp. 1,247,379
---------------------------------------------------------------------------------- --------------
Total 3,632,888
---------------------------------------------------------------------------------- --------------
SINGAPORE--2.2%
----------------------------------------------------------------------------------
312,000 City Developments $ 1,651,075
----------------------------------------------------------------------------------
202,750 Development Bank of Singapore 2,021,270
----------------------------------------------------------------------------------
120,000 Fraser & Neave 1,335,610
----------------------------------------------------------------------------------
140,000 Sembawang Shipyard 1,003,756
---------------------------------------------------------------------------------- --------------
Total 6,011,711
---------------------------------------------------------------------------------- --------------
SWEDEN--5.2%
----------------------------------------------------------------------------------
50,000 **AutoLiv 1,751,337
----------------------------------------------------------------------------------
320,500 Bylock and Nordsjofr 2,487,595
----------------------------------------------------------------------------------
107,000 **Hoganas 1,703,573
----------------------------------------------------------------------------------
162,150 Sandvik 2,753,738
----------------------------------------------------------------------------------
57,000 SSAB 2,514,561
----------------------------------------------------------------------------------
152,635 Volvo 2,936,418
---------------------------------------------------------------------------------- --------------
Total 14,147,222
---------------------------------------------------------------------------------- --------------
SWITZERLAND--5.1%
----------------------------------------------------------------------------------
5,550 Alusuisse Lonza Holding 2,719,646
----------------------------------------------------------------------------------
2,825 BBC Brown Boveri 2,366,748
----------------------------------------------------------------------------------
5,125 Danzas Holding 1,010,726
----------------------------------------------------------------------------------
980 Reiseburo Kuoni 1,305,683
----------------------------------------------------------------------------------
1,045 Rieter Holdings 1,313,624
----------------------------------------------------------------------------------
4,950 Swiss Reinsurance 2,902,559
----------------------------------------------------------------------------------
3,475 Sulzer 2,335,849
---------------------------------------------------------------------------------- --------------
Total 13,954,835
---------------------------------------------------------------------------------- --------------
TAIWAN--0.5%
----------------------------------------------------------------------------------
122,138 **Tuntex Distinctive GDR 1,312,984
---------------------------------------------------------------------------------- --------------
THAILAND--0.8%
----------------------------------------------------------------------------------
230,500 Bangkok Bank $ 2,281,586
---------------------------------------------------------------------------------- --------------
UNITED KINGDOM--5.9%
----------------------------------------------------------------------------------
250,000 BAA 1,970,130
----------------------------------------------------------------------------------
150,000 Carlton Communication 2,058,800
----------------------------------------------------------------------------------
300,000 Guinness 2,146,884
----------------------------------------------------------------------------------
527,319 Hanson Trust 1,940,494
----------------------------------------------------------------------------------
164,800 Reuters Holdings 1,269,677
----------------------------------------------------------------------------------
210,000 Siebe 1,831,663
----------------------------------------------------------------------------------
141,943 Thorn EMI 2,229,390
----------------------------------------------------------------------------------
810,000 Vodafone Group 2,574,850
---------------------------------------------------------------------------------- --------------
Total 16,021,888
---------------------------------------------------------------------------------- --------------
VENEZUELA--0.4%
----------------------------------------------------------------------------------
200,000 Mavesa ADR 1,036,100
---------------------------------------------------------------------------------- --------------
TOTAL COMMON STOCKS (IDENTIFIED COST $226,259,472) 250,336,992
---------------------------------------------------------------------------------- --------------
PREFERRED STOCKS--2.5%
- -------------------------------------------------------------------------------------------------
AUSTRALIA--0.6%
----------------------------------------------------------------------------------
463,189 News Corporation Ltd. 1,608,989
---------------------------------------------------------------------------------- --------------
FINLAND--1.1%
----------------------------------------------------------------------------------
22,000 Nokia 3,001,641
---------------------------------------------------------------------------------- --------------
GERMANY--0.8%
----------------------------------------------------------------------------------
4,629 Fresenius 2,180,433
---------------------------------------------------------------------------------- --------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $4,072,886) 6,791,063
---------------------------------------------------------------------------------- --------------
TOTAL LONG-TERM SECURITIES (IDENTIFIED COST $230,332,358) 257,128,055
---------------------------------------------------------------------------------- --------------
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- ------------- ---------------------------------------------------------------------------------- --------------
*REPURCHASE AGREEMENT--4.6%
- -------------------------------------------------------------------------------------------------
$ 12,470,000 J.P. Morgan Securities, Inc., 5.77%, dated 11/30/94, due 12/5/94 (at amortized
cost) $ 12,470,000
---------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST $242,802,358) $ 269,598,055+
---------------------------------------------------------------------------------- --------------
</TABLE>
+The cost for federal tax purposes amounts to $242,108,509. The net unrealized
appreciation of investments amounts to $26,006,805, which is comprised of
$35,163,846 appreciation and $7,674,300 depreciation at November 30, 1994.
*Repurchase agreement is fully collateralized by U.S. government and/or agency
obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in joint
accounts with other Federated accounts.
**Non-income producing.
The following abbreviations are used in this portfolio.
ADR--American Depository Receipts
GDR--Global Depository Receipts
Note: The categories of investments are shown as a percentage of net assets
($271,228,225) at November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Investments, in repurchase agreements at amortized cost and value $12,470,000
- --------------------------------------------------------------------------------------
Investments in other securities, at value 257,128,055
- -------------------------------------------------------------------------------------- -----------
Total investments (identified cost $242,802,358 and tax cost, $242,108,509) $269,598,055
- ---------------------------------------------------------------------------------------------------
Dividends and interest receivable 656,990
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 1,608,292
- ---------------------------------------------------------------------------------------------------
Receivable for foreign currency sold 465,588
- ---------------------------------------------------------------------------------------------------
Receivable for capital stock sold 483,083
- --------------------------------------------------------------------------------------------------- -----------
Total assets 272,812,008
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Payable for investments purchased $ 684,035
- --------------------------------------------------------------------------------------
Payable for foreign currency purchased 465,588
- --------------------------------------------------------------------------------------
Payable for capital stock redeemed 120,297
- --------------------------------------------------------------------------------------
Dividend taxes withheld liability 76,034
- --------------------------------------------------------------------------------------
Payable to bank 18,308
- --------------------------------------------------------------------------------------
Accrued expenses 219,521
- -------------------------------------------------------------------------------------- -----------
Total liabilities 1,583,783
- --------------------------------------------------------------------------------------------------- -----------
NET ASSETS for 14,645,830 shares of capital stock outstanding $271,228,225
- --------------------------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid-in capital $231,241,120
- ---------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investments 26,801,876
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 63,509,324
- ---------------------------------------------------------------------------------------------------
Distributions paid from capital gains (50,597,175)
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income 273,080
- --------------------------------------------------------------------------------------------------- -----------
Total $271,228,225
- --------------------------------------------------------------------------------------------------- -----------
NET ASSET VALUE:
- ---------------------------------------------------------------------------------------------------
Class A ($261,178,232 / 14,097,247 shares of capital stock outstanding) $18.53
- --------------------------------------------------------------------------------------------------- -----------
Class B ($1,214,109 / 65,634 shares of capital stock outstanding) $18.50
- --------------------------------------------------------------------------------------------------- -----------
Class C Shares ($8,835,884 / 482,949 shares of capital stock outstanding) $18.30
- --------------------------------------------------------------------------------------------------- -----------
COMPUTATION OF OFFERING PRICE:
- ---------------------------------------------------------------------------------------------------
Class A Shares (100/94.5 of $18.53)* $19.61
- --------------------------------------------------------------------------------------------------- -----------
Class B Shares $18.50
- --------------------------------------------------------------------------------------------------- -----------
Class C Shares $18.30
- --------------------------------------------------------------------------------------------------- -----------
COMPUTATION OF PROCEEDS ON REDEMPTION:
- ---------------------------------------------------------------------------------------------------
Class A Shares $18.53
- --------------------------------------------------------------------------------------------------- -----------
Class B Shares (94.5/100 of $18.50)** $17.48
- --------------------------------------------------------------------------------------------------- -----------
Class C Shares (99/100 of $18.30)** $18.12
- --------------------------------------------------------------------------------------------------- -----------
</TABLE>
*See "What Shares Cost" in the prospectus.
**See "Redeeming Shares" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $406,845) $ 3,518,584
- ----------------------------------------------------------------------------------------------------
Interest 557,853
- ---------------------------------------------------------------------------------------------------- ------------
Total investment income 4,076,437
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------------------
Investment advisory fee $ 2,529,458
- ---------------------------------------------------------------------------------------
Administrative personnel and services fees 349,224
- ---------------------------------------------------------------------------------------
Custodian and recordkeeping fees 483,132
- ---------------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees 184,688
- ---------------------------------------------------------------------------------------
Directors' fees 4,976
- ---------------------------------------------------------------------------------------
Auditing fees 39,749
- ---------------------------------------------------------------------------------------
Legal fees 18,982
- ---------------------------------------------------------------------------------------
Capital stock registration costs 119,672
- ---------------------------------------------------------------------------------------
Printing and postage 128,711
- ---------------------------------------------------------------------------------------
Insurance premiums 9,390
- ---------------------------------------------------------------------------------------
Taxes 29,060
- ---------------------------------------------------------------------------------------
Miscellaneous 13,632
- ---------------------------------------------------------------------------------------
Shareholder service fee--Class A 152,547
- ---------------------------------------------------------------------------------------
Shareholder service fee--Class B 220
- ---------------------------------------------------------------------------------------
Shareholder service fee--Class C 16,570
- ---------------------------------------------------------------------------------------
Distribution fee--Class B 662
- ---------------------------------------------------------------------------------------
Distribution fee--Class C 50,203
- --------------------------------------------------------------------------------------- -----------
Total expenses 4,130,876
- ---------------------------------------------------------------------------------------------------- ------------
Net investment income (54,439)
- ---------------------------------------------------------------------------------------------------- ------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------------------------
Realized gain on investment transactions (identified cost basis)--
- ----------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions 15,659,072
- ----------------------------------------------------------------------------------------------------
Unrealized appreciation of investments--
- ----------------------------------------------------------------------------------------------------
Change in unrealized appreciation 7,122,265
- ---------------------------------------------------------------------------------------------------- ------------
Net realized and unrealized gain/(loss) on investments 22,781,337
- ---------------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ 22,726,898
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
<S> <C> <C>
1994 1993
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------------
Net investment income $ (54,439) $ 172,409
- ---------------------------------------------------------------------------------
Net realized gain/(loss) on investment and forward contract
transactions (14,870,196 net gain and $5,764,462 net loss, respectively, as
computed for federal tax purposes) 15,659,072 5,894,827
- ---------------------------------------------------------------------------------
Change in unrealized appreciation 7,122,265 14,259,817
- --------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from operations 22,726,898 20,327,053
- --------------------------------------------------------------------------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------------------------
Class A Dividends to shareholders from net investment income (7,180) (644,382)
- ---------------------------------------------------------------------------------
Distributions in excess of net investment income--Class A shares (803,651) (747,020)
- ---------------------------------------------------------------------------------
Distributions in excess of net investment income--Class C shares (6,995) --
- --------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from distributions to shareholders (817,826) (1,391,402)
- --------------------------------------------------------------------------------- -------------- --------------
CAPITAL STOCK TRANSACTIONS--
- ---------------------------------------------------------------------------------
Net proceeds from sale of shares 158,071,765 127,561,470
- ---------------------------------------------------------------------------------
Net asset value of shares issued to shareholders electing to
receive payment of dividends in capital stock 324,527 623,074
- ---------------------------------------------------------------------------------
Cost of shares redeemed (104,788,830) (58,345,460)
- --------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from capital stock transactions 53,607,462 69,839,084
- --------------------------------------------------------------------------------- -------------- --------------
Change in net assets 75,516,534 88,774,735
- ---------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------
Beginning of period 195,711,691 106,936,956
- --------------------------------------------------------------------------------- -------------- --------------
End of period (including undistributed net investment income of $273,080 and $0,
respectively) $ 271,228,225 $ 195,711,691
- --------------------------------------------------------------------------------- -------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
International Series, Inc. (the "Corporation") (formerly FT Series, Inc.) is
registered under the Investment Company Act of 1940, as amended, as an open-end,
management investment company. The Corporation consists of two portfolios, one
diversified and one non-diversified. The financial statements included herein
are only those of the diversified portfolio, International Equity Fund (the
"Fund"). The financial statements of the other portfolio are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
Effective September 27, 1994 (Effective date of Class B Shares) the Fund
provides three classes of shares: Class A Shares, Class B Shares, and Class C
Shares.
Effective March 15, 1994, the Corporation changed its name from FT Series, Inc.
to International Series, Inc.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Listed equity securities are valued at the last sale
price reported on national securities exchanges. Unlisted securities and
short-term obligations (and private placement securities) are generally
valued at the prices provided by an independent pricing service. Short-term
securities with remaining maturities of sixty days or less may be stated at
amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
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 to be creditworthy pursuant to the guidelines
established by the Board of Directors (the "Directors"). Risks may arise
from the potential inability of counterparties to honor the terms of these
agreements.
Accordingly, the Fund could receive less than the repurchase price on the
sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income and expenses are accrued daily. Bond premium and discount,
if applicable, are amortized as required by the Internal Revenue Code, as
amended (the "Code"). Distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These distributions do not represent a return of capital for
federal income tax purposes.
D. FOREIGN CURRENCY TRANSLATION--The accounting records of the fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of FCs, currency gains or losses
realized between the trade and settlement dates on securities transactions,
the difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
E. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. However, federal
taxes may be imposed on the Fund upon the disposition of certain
investments in Passive Foreign Investment Companies. Withholding taxes on
foreign dividends have been provided for in accordance with the Fund's
understanding of the applicable country's tax rules and rates.
F. FOREIGN CURRENCY COMMITMENTS--The Fund may enter into foreign currency
commitments for the delayed delivery of securities or forward foreign
currency exchange transactions. Risks may arise upon entering these
transactions from the potential inability of counterparts to meet the terms
of their transactions and from unanticipated movements in security prices
or foreign exchanges rates. The forward foreign currency exchange
transactions are adjusted by the daily exchange rate of the underlying
currency and any gains or losses are recorded for financial statement
purposes as unrealized until the settlement date.
At November 30, 1994, the Fund had outstanding foreign currency commitments set
out below:
<TABLE>
<CAPTION>
COMMITMENTS UNREALIZED
TO DELIVER/ IN EXCHANGE APPRECIATION
SETTLEMENT DATE RECEIVE FOR (DEPRECIATION)
<S> <C> <C> <C>
UNSETTLED TRANSACTIONS
12/1/94
Indonesian Rupiah 9,881,200 $ 4,532.66 (3.02)
12/2/94
Mexican Peso 384,873.36 $ 112,012.04 97.72
12/5/94
Australian Dollar 457,162.47 $ 349,043.55 2,484.69
-----------------
</TABLE>
G. OPTION CONTRACTS--The Fund may write or purchase option contracts. A
written option obligates the Fund to deliver (a call), or to receive (a
put), the contract amount of foreign currency upon exercise by the holder
of the option. The value of the option contract is recorded as a liability
and unrealized gain or loss is measured by the difference between the
current value and the premium received. The Fund had no written options
outstanding at November 30, 1994.
H. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
J. CONCENTRATION OF CREDIT RISK--The Fund invests in equity and fixed income
securities of non-U.S. issuers. Although the Fund maintains a diversified
investment portfolio the political or economic developments within a
particular country or region may have an adverse effect on the ability of
domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1994 the Portfolio was diversified with the following
industries:
<TABLE>
<S> <C> <C> <C>
Automotive 3.7% Energy 1.4%
Banking 8.5 Finance & Insurance 2.7
Beverage & Tobacco 1.9 Pharmaceuticals 1.1
Media & Entertainment 4.5 Forest Products 2.8
Diversified Investment Companies 2.5 Industrial Products 1.7
Building & Development 4.5 Manufacturing 3.2
Business & Equipment 5.6 Machinery 5.6
Capital Goods 0.5 Metals 1.7
Chemical 2.6 Other 6.8
Diversified Products 7.9 Retailers 5.7
Consumer Durables 2.1 Steel 4.4
Ecological Services 0.9 Technology Services 0.5
Utilities 2.5 Telecommunications 4.2
Electronics & Electrical Equipment 8.7 Transportation 1.8
</TABLE>
J. OTHER--Investment transactions are accounted for on the trade date.
K. RECLASSIFICATION--During the year ended November 30, 1994, the Fund adopted
Statement of Position 93-2, Determination, Disclosure, and Financial
Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies. Accordingly, permanent book and tax
differences have been reclassified. Accordingly, amounts as of November 30,
1994, have been reclassified to reflect a decrease in paid in capital of
$138,442, an increase in undistributed net investment income of $1,886,989,
and a decrease in accumulated net realized gain/loss of $1,748,547. Net
investment income, net realized gains, and net assets were not affected by
this change.
(3) CAPITAL STOCK
At November 30, 1994, there were 500,000,000 shares of $.0001 par value capital
stock authorized for Class A Shares, Class B Shares, and Class C Shares
respectively. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1994 1993
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
- -------------------------------------------------- ----------- --------------- ----------- --------------
Shares sold 7,830,629 $ 148,658,669 7,840,247 $ 124,575,022
- --------------------------------------------------
Shares issued to shareholders in payment of
dividends declared 18,065 320,105 45,118 623,074
- --------------------------------------------------
Shares redeemed (5,447,729) (102,494,771) (3,779,897) (58,259,919)
- -------------------------------------------------- ----------- --------------- ----------- --------------
Net change resulting from capital stock
transactions 2,400,965 $ 46,484,003 4,105,468 $ 66,938,177
- -------------------------------------------------- ----------- --------------- ----------- --------------
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1994**
CLASS B SHARES SHARES AMOUNT
<S> <C> <C>
- -------------------------------------------------- ----------- ---------------
Shares sold 66,837 $ 1,290,771
- --------------------------------------------------
Shares issued to shareholders in payment of
dividends declared -- --
- --------------------------------------------------
Shares redeemed (1,202) (23,249)
- -------------------------------------------------- ----------- ---------------
Net change resulting from capital stock
transactions 65,635 $ 1,267,522
- -------------------------------------------------- ----------- ---------------
<CAPTION>
YEAR ENDED NOVEMBER 30,
1994 1993*
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
- ----------------------------------------------------------- --------- ------------- --------- ------------
Shares sold 429,959 $ 8,122,325 177,586 $ 2,986,448
- -----------------------------------------------------------
Shares issued to shareholders in payment of
dividends declared 250 4,422
- -----------------------------------------------------------
Shares redeemed (120,985) (2,270,810) (3,862) (85,541)
- ----------------------------------------------------------- --------- ------------- --------- ------------
Net change resulting from capital stock
transactions 309,224 $ 5,855,937 173,724 $ 2,900,907
- ----------------------------------------------------------- --------- ------------- --------- ------------
</TABLE>
* For the period from March 31, 1993 (start of business) to November 30, 1993.
** For the period from September 19, 1994 (start of business) to November 30,
1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
ADVISORY FEE--On March 15, 1994, Federated Management became the Fund's
investment adviser ("Adviser"). Adviser receives for its services an annual
investment advisory fee equal to 1.00% of the Fund's average daily net assets.
Under the terms of a sub-advisory agreement between Federated Management and
Fiduciary International, Inc. (the "Sub-Adviser"), Sub-Adviser will receive an
annual fee from Federated Management equal to .50 of 1% of average daily net
assets of the Fund. Prior to March 15, 1994, Fiduciary International, Inc.
served as the Fund's investment adviser and received for its services an annual
investment advisory fee equal to 1.00% of the Fund's average daily net assets.
Prior to March 15, 1994, Federated Management, under the terms of a sub-advisory
agreement with Fiduciary International, Inc., served as the Fund's sub-adviser
and received an annual fee from Fiduciary International, Inc. equal to 0.50% of
1% of average daily net assets.
ADMINISTRATIVE SERVICES--Federated Administrative Services ("FAS") provides the
Fund administrative personnel and services. Prior to March 1, 1994, these
services were provided at approximate cost. Effective March 1, 1994, the FAS fee
is based on the level of average aggregate daily net assets of all funds advised
by subsidiaries of Federated Investors for the period. The administrative fee
received during any fiscal year shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
DISTRIBUTION AND SHAREHOLDER SERVICES FEES--The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940. Under the terms of the Plan, the Fund will compensate Federated Securities
Corp. ("FSC"), the principal distributor, from the net assets of the Fund to
finance activities intended to result in the sale of the Fund's Class B Shares
and Class C Shares. The Plan provides that the Fund may incur distribution
expenses up to 0.75 of 1% of the average daily net assets of the Class B Shares
and Class C Shares, annually, to compensate FSC. Under the terms of a
Shareholder Services agreement with FSC, the Fund will pay FSC up to .25 of 1%
of average net assets of the Class A, Class B, and Class C Shares for the
period. This fee is to obtain certain personal services for shareholders and to
maintain the shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT--Federated Services Company ("FServ")
serves as transfer and dividend disbursing agent for the Fund. The FServ fee is
based on the size, type and number of accounts and transactions made by
shareholders.
Certain of the Officers and Directors of the Fund are Officers and Directors or
Trustees of the above companies.
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
fiscal year ended
November 30, 1994 were as follows:
<TABLE>
<S> <C>
PURCHASES $ 228,447,062
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 173,028,760
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
INTERNATIONAL SERIES, INC. (formerly FT SERIES, INC.)
(International Equity Fund):
We have audited the accompanying statement of assets and liabilities of
International Equity Fund (an investment portfolio of International Series,
Inc., formerly FT Series, Inc., a Maryland Corporation), including the schedule
of portfolio investments, as of November 30, 1994, the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended and financial highlights for each
of the periods presented. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
November 30, 1994, by correspondence with the custodian and broker. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
International Equity Fund, an investment portfolio of International Series,
Inc., as of November 30, 1994, and the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and financial highlights for each of the periods presented in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
January 13, 1995
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
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
- ---------------------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
INTERNATIONAL EQUITY
FUND
CLASS B SHARES
PROSPECTUS
An Open-End, Diversified
Management Investment Company
Prospectus dated January 31, 1995
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
46031P605
1010302A-B (1/95)
INTERNATIONAL EQUITY FUND
A PORTFOLIO OF INTERNATIONAL SERIES, INC.
(FORMERLY, FT SERIES, INC.)
CLASS C SHARES
PROSPECTUS
The Class C 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. The Fund pursues
this objective through a diversified portfolio primarily invested in equity
securities of non-U.S. issuers.
THE CLASS C 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 CLASS C 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 C Shares of the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information for Class
A Shares, Class B Shares, and Class Cormation for Class A Shares dated January
31, 1995, 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 January 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
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FINANCIAL HIGHLIGHTS--CLASS C SHARES 2
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GENERAL INFORMATION 3
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LIBERTY FAMILY OF FUNDS 3
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LIBERTY FAMILY RETIREMENT PROGRAM 4
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INVESTMENT INFORMATION 5
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Investment Objective 5
Investment Policies 5
Risks Associated with Financial
Futures Contracts and Options
on Financial Futures Contracts 12
Investment Limitations 13
NET ASSET VALUE 13
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INVESTING IN CLASS C SHARES 14
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Share Purchases 14
Minimum Investment Required 15
What Shares Cost 15
Systematic Investment Program 15
Certificates and Confirmations 15
Dividends 15
Capital Gains 16
Retirement Plans 16
EXCHANGE PRIVILEGE 16
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Requirements for Exchange 16
Tax Consequences 16
Making an Exchange 16
REDEEMING CLASS C SHARES 17
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Through a Financial Institution 17
Directly from the Fund 18
Contingent Deferred Sales Charge 19
Systematic Withdrawal Program 19
Accounts with Low Balances 20
INTERNATIONAL SERIES, INC. INFORMATION 20
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Management of the Corporation 20
Distribution of Class C Shares 26
Administration of the Fund 27
Brokerage Transactions 28
SHAREHOLDER INFORMATION 28
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Voting Rights 28
TAX INFORMATION 28
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Federal Income Tax 28
Pennsylvania Corporate and
Personal Property Taxes 29
PERFORMANCE INFORMATION 29
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OTHER CLASSES OF SHARES 30
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FINANCIAL HIGHLIGHTS--CLASS A SHARES 31
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FINANCIAL HIGHLIGHTS--CLASS B SHARES 32
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FINANCIAL STATEMENTS 33
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 50
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ADDRESSES 51
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SUMMARY OF FUND EXPENSES
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<TABLE>
<S> <C> <C>
CLASS C SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).......................................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable) (1)............................................. 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)............................. None
Exchange Fee................................................................................... None
ANNUAL CLASS C SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver).................................................................. 1.00%
12b-1 Fee...................................................................................... 0.75%
Total Other Expenses........................................................................... 0.80%
Shareholder Services Fee................................................................... 0.25%
Total Class C Shares Operating Expenses............................................... 2.55%
</TABLE>
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(1) The contingent deferred sales charge assessed is 1.00% of the lesser of the
original purchase price or the net asset value of shares redeemed within one
year of their purchase date. For a more complete description, see "Redeeming
Class C Shares."
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Class C Shares of the Fund
will bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Investing in Class C Shares" and "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 charges permitted under the rules of the National
Association of Securities Dealers, Inc.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
--------- --------- --------- ---------
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period....... $36 $79 $136 $289
You would pay the following expenses on the same investment assuming no
redemption............................................................... $26 $79 $136 $289
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The information set forth in the foregoing table and example relates only to
Class C Shares of the Fund. The Fund also offers two additional classes of
shares called Class A Shares and Class B Shares. Class C Shares, Class A Shares
and Class B Shares are subject to certain of the same expenses. However, Class A
Shares are subject to a maximum sales load of 5.50%, but are not subject to a
12b-1 fee, however, may be subject to a contingent deferred sales charge. Class
B Shares are subject to a 12b-1 fee of 0.75% and a contingent deferred sales
charge of up to 5.50%, and are not subject to a sales load. See "Other Classes
of Shares."
INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS--CLASS C SHARES
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 50.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER
30,
----------------------
1994 1993**
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.41 $ 14.88
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INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------
Net investment income (0.05) (0.04)
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Net realized and unrealized gain (loss) on investments and foreign
currency transactions 1.98 1.57
- ------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 1.93 1.53
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LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income -- --
- -------------------------------------------------------------------------------------------
Distributions in excess of net investment income (0.04)(a) --
- ------------------------------------------------------------------------------------------- --------- -----------
TOTAL DISTRIBUTIONS (0.04) --
- ------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 18.30 $ 16.41
- ------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN* 11.75% 10.28%
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RATIOS TO AVERAGE NET ASSETS
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Expenses 2.55% 2.57%(c)
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Net investment income (0.91%) (1.10%)(c)
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Expense waiver/reimbursement (b) -- 0.01%(c)
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SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $8,836 $2,852
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Portfolio turnover rate 73% 74 %
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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 (start of business)
to November 30, 1993.
(a) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(b) The voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(c) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal year ended November 30, 1994, which can be obtained
free of charge.
GENERAL INFORMATION
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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 of the
Corporation (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 C Shares (the "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. Shares are sold at net
asset value and are redeemed at net asset value. However, a contingent deferred
sales charge ("CDSC") of 1.00% will be charged on assets redeemed within the
first twelve months following purchase. For a more complete description, see
"Investing in Class C Shares" and "Redeeming Class C Shares." 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.
The Fund's current net asset value can be found in the mutual funds section of
local newspapers under "Federated Liberty."
LIBERTY FAMILY OF FUNDS
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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 communications utilities;
. Limited Term Fund, providing a high level of current income consistent
with minimum fluctuation in principal 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 personal income taxes imposed by the
state of Michigan and Michigan municipalities, primarily through Michigan
municipal securities;
. Pennsylvania Municipal Income Fund, providing current income exempt from
federal regular income tax and the personal income taxes imposed by the
Commonwealth of Pennsylvania, primarily through Pennsylvania municipal
securities;
. Strategic Income Fund, providing a high level of current income,
primarily through domestic and foreign corporate debt obligations;
. Tax-Free Instruments Trust, providing current income consistent with the
stability of principal and exempt from federal income tax, through
high-quality, short-term municipal securities; and
. World Utility Fund, providing total return primarily through securities
issued by domestic and foreign companies in the utilities industries.
Prospectuses for these funds are available by writing to Federated Securities
Corp.
Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus. The Liberty Family of Funds provides
flexibility and diversification for an investor's long-term investment planning.
It enables an investor to meet the challenges of changing market conditions by
offering convenient exchange privileges which give access to various investment
vehicles and by providing the investment services of proven, professional
investment advisers.
LIBERTY FAMILY RETIREMENT PROGRAM
- --------------------------------------------------------------------------------
The Fund is also a member of the Liberty Family Retirement Program ("Program"),
an integrated program of investment options, plan recordkeeping, and
consultation services for 401(k) and other participant-directed benefit and
savings plans. Under the Program, employers or plan trustees may select a group
of investment options to be offered in a plan which also uses the Program for
recordkeeping and administrative services. Additional fees are charged to the
plan for these services. As part of the Program, exchanges may readily be made
between investment options selected by the employer or plan trustee.
The other funds participating in the Liberty Family Retirement Program are:
American Leaders Fund, Inc.; Capital Growth Fund; Capital Preservation Fund;
Fund for U.S. Government Securities, Inc.; International Income Fund; Liberty
Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty Utility
Fund, Inc.; Prime Cash Series; and Strategic Income Fund.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Fund's objective is to obtain a total return on its assets. 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, including European Currency Units,
of issuers located in at least three countries outside of the United States and
sponsored or unsponsored American Depository Receipts ("ADRs"), Global
Depository Receipts ("GDRs"), and European Depository Receipts ("EDRs"),
collectively, "Depository Receipts." T
Exhibit (11) under 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. 21 to Form N-1A Registration Statement of
INTERNATIONAL SERIES, INC. (formerly FT Series, Inc.) of our reports dated
January 13, 1995, on the financial statements of International Income Fund
and International Equity Fund, the two portfolios comprising International
Series, Inc., included in or made part of this registration statement.
By: ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
Pittsburgh, Pennsylvania,
January 26, 1995
Exhibit 19 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 Janaury 16, 1995
John F. Donahue (Chief Executive Officer)
/s/ Glen R. Johnson President
Glen R. Johnson
/s/ Edward C. Gonzales Vice President and Treasurer
Edward C. Gonzales (Principal Financial and
Accounting Officer)
/s/ Thomas G. Bigley Director
Thomas G. Bigley
/s/ John T. Conroy, Jr. Director
John T. Conroy, Jr.
/s/ William J. Copeland Director
William J. Copeland
SIGNATURES TITLE DATE
/s/ James E. Dowd Director January 16, 1995
James E. Dowd
/s/ Lawrence D. Ellis, M.D. Director
Lawrence D. Ellis, M.D.
/s/ Edward L. Flaherty, Jr. Director
Edward L. Flaherty, Jr.
/s/ Peter E. Madden Director
Peter E. Madden
/s/ Gregor F. Meyer Director
Gregor F. Meyer
/s/ Wesley W. Posvar Director
Wesley W. Posvar
/s/ Marjorie P. Smuts Director
Marjorie P. Smuts
Sworn to and subscribed before me this 16th day of January, 1995.
/s/ Marie L. Hamm
Notary Public
-1-
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, 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 (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 may desire 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") if so
indicated on Exhibit 1, and the Company is willing to furnish such
services; and
WHEREAS, the Trust may desire to appoint the Company as its transfer
agent, dividend disbursing agent if so indicated on Exhibit 1, and agent
in connection with certain other activities, and the Company desires to
accept such appointment; and
WHEREAS, the Trust may desire to appoint the Company as its agent to
select, negotiate and subcontract for custodian services from an approved
list of qualified banks if so indicated on Exhibit 1, 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's 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 using: primarily, market quotations,
including the use of matrix pricing, supplied by the independent
pricing services selected by the Company in consultation with the
adviser, or sources selected by the adviser, and reviewed by the
board; secondarily, if a designated pricing service does not
provide a price for a security which the Company believes should
be available by market quotation, the Company may obtain a price
by calling brokers designated by the investment adviser of the
fund holding the security, or if the adviser does not supply the
names of such brokers, the Company will attempt on its own to
find brokers to price those securities; thirdly, for securities
for which no market price is available, the Pricing Committee of
the Board will determine a fair value in good faith. Consistent
with Rule 2a-4 of the 40 Act, estimates may be used where
necessary or appropriate. The Company's obligations with regard
to the prices received from outside pricing services and
designated brokers or other outside sources, is to exercise
reasonable care in the supervision of the pricing agent. The
Company is not the guarantor of the securities prices received
from such agents and the Company is not liable to the Fund for
potential errors in valuing a Fund's assets or calculating the
net asset value per share of such Fund or Class when the
calculations are based upon such prices. All of the above
sources of prices used as described are deemed by the Company to
be authorized sources of security prices. The Company provides
daily to the adviser the securities prices used in calculating
the net asset value of the fund, for its use in preparing
exception reports for those prices on which the adviser has
comment. Further, upon receipt of the exception reports
generated by the adviser, the Company diligently pursues
communication regarding exception reports with the designated
pricing agents.
B. 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;
C. Calculate the net income of each of the Funds, if any;
D. Calculate capital gains or losses of each of the Funds resulting
from sale or disposition of assets, if any;
E. 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;
F. 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;
G. At the request of the Trust, prepare various reports or other
financial documents required by federal, state and other
applicable laws and regulations; and
H. 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 agreed upon from time to time between the parties hereto.
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 agreed upon
between the parties from time to time.
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 compensation and out-of-pocket expenses shall be accrued by
the Fund and shall be paid to the Company no less frequently than
monthly, and shall be paid daily upon request of the Company.
The Company will maintain detailed information about the
compensation and out-of-pocket expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be
adjusted from time to time, shall be 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
conformable 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 agreed
upon between the parties and as may be added to 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 same fees 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 agreed
upon between the parties, as may be added to 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 compensation and out-of-pocket expenses shall be accrued by
the Fund and shall be paid to the Company no less frequently than
monthly, and shall be paid daily upon request of the Company.
The Company will maintain detailed information about the
compensation and out-of-pocket expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be
adjusted from time to time, shall be dated and signed by a duly
authorized officer of the Trust and/or the Funds and a duly
authorized officer of the Company.
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.
A. This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and
assigns.
B. 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
C. 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:
A. evaluate the nature and the quality of the custodial services
provided by the Eligible Custodian;
B. 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;
C. 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;
D. establish procedures to monitor the nature and the quality of the
services provided by the Custodians;
E. continuously monitor the nature and the quality of services
provided by the Custodians; and
F. 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 agreed upon between the parties.
B. Reimbursements
In addition to the fee paid under Section 11A 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 agreed
upon between the parties, as may be added to 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 compensation and out-of-pocket expenses shall be accrued by
the Fund and shall be paid to the Company no less frequently than
monthly, and shall be paid daily upon request of the Company.
The Company will maintain detailed information about the
compensation and out-of-pocket expenses by Fund.
D. Any schedule of compensation agreed to hereunder, as may be
adjusted from time to time, shall be dated and signed by a duly
authorized officer of the Trust and/or the Funds and a duly
authorized officer of the Company.
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. Standard of Care and Indemnification.
A. Standard of Care
The Company shall be held to a standard of reasonable care in
carrying out the provisions of this Contract. The Company 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.
B. 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, Adviser, Sub-adviser
or other party contracted by or approved by the Trust or
Fund,
(2) 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;
(b) are received by the Company from independent pricing
services or sources for use in valuing the assets of
the Funds; or
(c) are received by the Company or its agents or
subcontractors from Advisers, Sub-advisers or other
third parties contracted by or approved by the Trust
of Fund for use in the performance of services under
this Agreement;
(d) have been prepared and/or maintained by the Fund or
its affiliates or any other person or firm on behalf
of the Trust.
(3) The reliance on, or the carrying out by the Company or its
agents or subcontractors of Proper Instructions of the
Trust or the Fund.
(4) 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, negligence or reckless disregard of its duties
of failure to meet the standard of care set forth in 15.A.
above.
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 5 (iii) under Form N-1A
Exhibit 10 under 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
/s/ John W. McGonigle By: /s/ John A. Staley, IV
John W. McGonigle John A. Staley, IV
Secretary President
Attest: FT SERIES, INC.
/s/ John W. McGonigle By: /s/ J. Christopher Donahue
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
/s/ John W. McGonigle By: /s/ John A. Staley, IV
John W. McGonigle John A. Staley, IV
Secretary President
Attest: FT SERIES, INC.
/s/ John W. McGonigle By: /s/ Richard B. Fisher
John W. McGonigle Richard B. Fisher
Secretary Vice President
Exhibit 5 (v) under Form N-1A
Exhibit 10 under 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
/s/ John W. McGonigle By: /s/ John A. Staley, IV
John W. McGonigle John A. Staley, IV
Secretary President
Attest: FIDUCIARY INTERNATIONAL INC.
/s/ Irene Greenberg By: /s/ Stuart Hochberger
Vice President
Exhibit 5 (v) under Form N-1A
Exhibit 10 under 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
/s/ John W. McGonigle By: /s/ John A. Staley, IV
John W. McGonigle John A. Staley, IV
Secretary President
Attest: FIDUCIARY INTERNATIONAL INC.
/s/ Irene Greenberg By: /s/ Stuart Hochberger
Vice President
FSS subcontract 1
Exhibit 9 (v) under Form N-1A
Exhibit 10 under 601/Reg S-K
SHAREHOLDER SERVICES SUB-CONTRACT
This Agreement is made between the Financial Institution executing
this Agreement ("Provider") and Federated Shareholder Services ("FSS")
on behalf of the investment companies listed in Exhibit A hereto (the
"Funds"), for whom FSS administers the Shareholder Services Plan
("Plan") and who have approved this form of Agreement. In consideration
of the mutual covenants hereinafter contained, it is hereby agreed by
and between the parties hereto as follows:
1. FSS hereby appoints Provider 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").
Provider agrees to provide Services which, in its best judgment, are
necessary or desirable for its customers who are investors in the Funds.
Provider further agrees to provide FSS, upon request, a written
description of the Services which Provider is providing hereunder.
2. During the term of this Agreement, the Funds will pay the
Provider fees as set forth in a written schedule delivered to the
Provider pursuant to this Agreement. The fee schedule for Provider may
be changed by FSS sending a new fee schedule to Provider pursuant to
Paragraph 9 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 this
Agreement is in effect during the quarter. To enable the Funds to
comply with an applicable exemptive order, Provider represents that the
fees received pursuant to this Agreement will be disclosed to its
customers, will be authorized by its customers, and will not result in
an excessive fee to the Provider.
3. The Provider understands that the Department of Labor views
ERISA as prohibiting fiduciaries of discretionary ERISA assets from
receiving shareholder 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.
4. The Provider agrees not to solicit or cause to be solicited
directly, or indirectly at any time in the future, any proxies from the
shareholders of a Fund in opposition to proxies solicited by management
of the Fund, unless a court of competent jurisdiction shall have
determined that the conduct of a majority of the Board of Trustees or
Directors of the Fund constitutes willful misfeasance, bad faith, gross
negligence or reckless disregard of their duties. This paragraph 4 will
survive the term of this Agreement.
5. 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
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 Fund's Plan or in
any related documents to the Plan ("Disinterested Board Members") cast
in person at a meeting called for that purpose.
6. Notwithstanding paragraph 5, 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 Board Members 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; 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.
7. The Provider 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 the 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.
8. 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.
9. Notices of any kind to be given hereunder shall be in
writing (including facsimile communication) and shall be duly given if
delivered to Provider at the address set forth below and if delivered to
FSS at Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President.
10. 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 5
and 6, 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.
11. 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.
12. This Agreement shall not be assigned by any party without
the prior written consent of FSS in the case of assignment by Provider,
or of Provider 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.
13. This Agreement may be amended by FSS from time to time by
the following procedure. FSS will mail a copy of the amendment to the
Provider's address, as shown below. If the Provider does not object to
the amendment within thirty (30) days after its receipt, the amendment
will become part of the Agreement. The Provider's objection must be in
writing and be received by FSS within such thirty days.
14. This Agreement may be terminated with regard to a
particular Fund or Class at any time, without the payment of any
penalty, by FSS or by the vote of a majority of the Disinterested
Trustees or Directors, as applicable, 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 the Provider. This
Agreement may be terminated by Provider on sixty (60) days' written
notice to FSS.
15. The Provider acknowledges and agrees that FSS has entered
into this Agreement solely in the capacity of agent for the Funds and
administrator of the Plan. The Provider agrees not to claim that FSS is
liable for any responsibilities or amounts due by the Funds hereunder.
[Provider]
Address
City State Zip Code
Dated: By:
Authoried Signature
Title
Print Name of Authorized Signature
FEDERATED SHAREHOLDER SERVICES
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By:
Vice President
EXHIBIT A to Shareholder Services Sub-Contract with
INTERNATIONAL SERIES, INC.
Funds covered by this Agreement:
Shareholder Service Fees
1. During the term of this Agreement, FSS will pay Provider a
quarterly fee. This fee will be computed at the annual rate of ______
of the average net asset value of shares of the Funds held during the
quarter in accounts for which the Provider provides Services under this
Agreement, so long as the average net asset value of Shares in the Funds
during the quarter equals or exceeds such minimum amount as FSS shall
from time to time determine and communicate in writing to the Provider.
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.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> INTERNATIONAL SERIES, INC.
INTERNATIONAL EQUITY FUND
CLASS A
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Nov-30-1994
<PERIOD-END> Nov-30-1994
<INVESTMENTS-AT-COST> 242,802,358
<INVESTMENTS-AT-VALUE> 269,598,055
<RECEIVABLES> 3,213,953
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 272,812,008
<PAYABLE-FOR-SECURITIES> 684,035
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 899,748
<TOTAL-LIABILITIES> 1,583,783
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 231,701,811
<SHARES-COMMON-STOCK> 14,097,247
<SHARES-COMMON-PRIOR> 11,696,283
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (365,017)
<ACCUMULATED-NET-GAINS> 13,084,556
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 26,806,875
<NET-ASSETS> 261,178,232
<DIVIDEND-INCOME> 3,518,584
<INTEREST-INCOME> 557,853
<OTHER-INCOME> 0
<EXPENSES-NET> 4,130,876
<NET-INVESTMENT-INCOME> (54,439)
<REALIZED-GAINS-CURRENT> 15,659,072
<APPREC-INCREASE-CURRENT> 7,122,265
<NET-CHANGE-FROM-OPS> 22,726,898
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,180
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 803,651
<NUMBER-OF-SHARES-SOLD> 7,830,629
<NUMBER-OF-SHARES-REDEEMED> 5,447,729
<SHARES-REINVESTED> 18,065
<NET-CHANGE-IN-ASSETS> 75,516,534
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 49,588,801
<OVERDISTRIB-NII-PRIOR> 747,020
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,529,458
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,130,876
<AVERAGE-NET-ASSETS> 252,568,318
<PER-SHARE-NAV-BEGIN> 16.490
<PER-SHARE-NII> 0.040
<PER-SHARE-GAIN-APPREC> 2.070
<PER-SHARE-DIVIDEND> 0.020
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.050
<PER-SHARE-NAV-END> 18.530
<EXPENSE-RATIO> 161
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> INTERNATIONAL SERIES, INC.
INTERNATIONAL EQUITY FUND
CLASS B
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Nov-30-1994
<PERIOD-END> Nov-30-1994
<INVESTMENTS-AT-COST> 242,802,358
<INVESTMENTS-AT-VALUE> 269,598,055
<RECEIVABLES> 3,213,953
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 272,812,008
<PAYABLE-FOR-SECURITIES> 684,035
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 899,748
<TOTAL-LIABILITIES> 1,583,783
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 231,701,811
<SHARES-COMMON-STOCK> 65,634
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (365,017)
<ACCUMULATED-NET-GAINS> 13,084,556
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 26,806,875
<NET-ASSETS> 1,214,109
<DIVIDEND-INCOME> 3,518,584
<INTEREST-INCOME> 557,853
<OTHER-INCOME> 0
<EXPENSES-NET> 4,130,876
<NET-INVESTMENT-INCOME> (54,439)
<REALIZED-GAINS-CURRENT> 15,659,072
<APPREC-INCREASE-CURRENT> 7,122,265
<NET-CHANGE-FROM-OPS> 22,726,898
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 66,837
<NUMBER-OF-SHARES-REDEEMED> 1,202
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 75,516,534
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 49,588,801
<OVERDISTRIB-NII-PRIOR> 747,020
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,529,458
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,130,876
<AVERAGE-NET-ASSETS> 252,568,318
<PER-SHARE-NAV-BEGIN> 19.610
<PER-SHARE-NII> (0.010)
<PER-SHARE-GAIN-APPREC> (1.100)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 18.500
<EXPENSE-RATIO> 259
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> INTERNATIONAL SERIES, INC.
INTERNATIONAL EQUITY FUND
CLASS C
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Nov-30-1994
<PERIOD-END> Nov-30-1994
<INVESTMENTS-AT-COST> 242,802,358
<INVESTMENTS-AT-VALUE> 269,598,055
<RECEIVABLES> 3,213,953
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 272,812,008
<PAYABLE-FOR-SECURITIES> 684,035
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 899,748
<TOTAL-LIABILITIES> 1,583,783
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 231,701,811
<SHARES-COMMON-STOCK> 482,949
<SHARES-COMMON-PRIOR> 173,724
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (365,017)
<ACCUMULATED-NET-GAINS> 13,084,556
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 26,806,875
<NET-ASSETS> 8,835,884
<DIVIDEND-INCOME> 3,518,584
<INTEREST-INCOME> 557,853
<OTHER-INCOME> 0
<EXPENSES-NET> 4,130,876
<NET-INVESTMENT-INCOME> (54,439)
<REALIZED-GAINS-CURRENT> 15,659,072
<APPREC-INCREASE-CURRENT> 7,122,265
<NET-CHANGE-FROM-OPS> 22,726,898
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 6,995
<NUMBER-OF-SHARES-SOLD> 429,959
<NUMBER-OF-SHARES-REDEEMED> 120,985
<SHARES-REINVESTED> 250
<NET-CHANGE-IN-ASSETS> 75,516,534
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 49,588,801
<OVERDISTRIB-NII-PRIOR> 747,020
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,529,458
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,130,876
<AVERAGE-NET-ASSETS> 252,568,318
<PER-SHARE-NAV-BEGIN> 16.410
<PER-SHARE-NII> (0.050)
<PER-SHARE-GAIN-APPREC> 1.980
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.040
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 18.300
<EXPENSE-RATIO> 254
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> INTERNATIONAL SERIES, INC.
INTERNATIONAL INCOME FUND
CLASS A
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Nov-30-1994
<PERIOD-END> Nov-30-1994
<INVESTMENTS-AT-COST> 215,563,676
<INVESTMENTS-AT-VALUE> 207,392,199
<RECEIVABLES> 11,356,837
<ASSETS-OTHER> 302,056
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 219,051,092
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,845,560
<TOTAL-LIABILITIES> 1,845,560
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 238,384,981
<SHARES-COMMON-STOCK> 19,861,796
<SHARES-COMMON-PRIOR> 18,594,920
<ACCUMULATED-NII-CURRENT> 3,039,730
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (16,137,975)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (8,081,204)
<NET-ASSETS> 209,007,501
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 19,350,257
<OTHER-INCOME> 0
<EXPENSES-NET> 3,213,492
<NET-INVESTMENT-INCOME> 16,136,765
<REALIZED-GAINS-CURRENT> (19,246,738)
<APPREC-INCREASE-CURRENT> (1,632,121)
<NET-CHANGE-FROM-OPS> (4,742,094)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 13,175,437
<DISTRIBUTIONS-OF-GAINS> 12,426,841
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15,262,427
<NUMBER-OF-SHARES-REDEEMED> 14,688,399
<SHARES-REINVESTED> 692,848
<NET-CHANGE-IN-ASSETS> (8,162,619)
<ACCUMULATED-NII-PRIOR> 1,485,988
<ACCUMULATED-GAINS-PRIOR> 14,992,073
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,819,216
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,685,681
<AVERAGE-NET-ASSETS> 240,676,911
<PER-SHARE-NAV-BEGIN> 11.860
<PER-SHARE-NII> 0.700
<PER-SHARE-GAIN-APPREC> (0.760)
<PER-SHARE-DIVIDEND> 0.630
<PER-SHARE-DISTRIBUTIONS> 0.650
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.520
<EXPENSE-RATIO> 130
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> INTERNATIONAL SERIES, INC.
INTERNATIONAL INCOME FUND
CLASS B
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Nov-30-1994
<PERIOD-END> Nov-30-1994
<INVESTMENTS-AT-COST> 215,563,676
<INVESTMENTS-AT-VALUE> 207,392,199
<RECEIVABLES> 11,356,837
<ASSETS-OTHER> 302,056
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 219,051,092
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,845,560
<TOTAL-LIABILITIES> 1,845,560
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 238,384,981
<SHARES-COMMON-STOCK> 9,566
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 3,039,730
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (16,137,975)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (8,081,204)
<NET-ASSETS> 100,522
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 19,350,257
<OTHER-INCOME> 0
<EXPENSES-NET> 3,213,492
<NET-INVESTMENT-INCOME> 16,136,765
<REALIZED-GAINS-CURRENT> (19,246,738)
<APPREC-INCREASE-CURRENT> (1,632,121)
<NET-CHANGE-FROM-OPS> (4,742,094)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,320
<NUMBER-OF-SHARES-REDEEMED> 754
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (8,162,619)
<ACCUMULATED-NII-PRIOR> 1,485,988
<ACCUMULATED-GAINS-PRIOR> 14,992,073
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,819,216
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,685,681
<AVERAGE-NET-ASSETS> 240,676,911
<PER-SHARE-NAV-BEGIN> 10.210
<PER-SHARE-NII> 0.080
<PER-SHARE-GAIN-APPREC> 0.220
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.510
<EXPENSE-RATIO> 206
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> INTERNATIONAL SERIES, INC.
INTERNATIONAL INCOME FUND
CLASS C
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Nov-30-1994
<PERIOD-END> Nov-30-1994
<INVESTMENTS-AT-COST> 215,563,676
<INVESTMENTS-AT-VALUE> 207,392,199
<RECEIVABLES> 11,356,837
<ASSETS-OTHER> 302,056
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 219,051,092
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,845,560
<TOTAL-LIABILITIES> 1,845,560
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 238,384,981
<SHARES-COMMON-STOCK> 772,404
<SHARES-COMMON-PRIOR> 402,437
<ACCUMULATED-NII-CURRENT> 3,039,730
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (16,137,975)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (8,081,204)
<NET-ASSETS> 8,097,509
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 19,350,257
<OTHER-INCOME> 0
<EXPENSES-NET> 3,213,492
<NET-INVESTMENT-INCOME> 16,136,765
<REALIZED-GAINS-CURRENT> (19,246,738)
<APPREC-INCREASE-CURRENT> (1,632,121)
<NET-CHANGE-FROM-OPS> (4,742,094)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 365,743
<DISTRIBUTIONS-OF-GAINS> 280,823
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 688,918
<NUMBER-OF-SHARES-REDEEMED> 356,033
<SHARES-REINVESTED> 37,082
<NET-CHANGE-IN-ASSETS> (8,162,619)
<ACCUMULATED-NII-PRIOR> 1,485,988
<ACCUMULATED-GAINS-PRIOR> 14,992,073
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,819,216
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,685,681
<AVERAGE-NET-ASSETS> 240,676,911
<PER-SHARE-NAV-BEGIN> 11.840
<PER-SHARE-NII> 0.580
<PER-SHARE-GAIN-APPREC> (0.720)
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<EXPENSE-RATIO> 205
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
