Reg. No.333-
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811-3984
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INTERNATIONAL SERIES, INC.
(Exact Name of Registrant as Specified in Charter)
(412) 288-1900
(Area Code and Telephone Number)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
JOHN W. MCGONIGLE, ESQUIRE
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
Copies to:
Byron F. Bowman, Esquire Matthew G. Maloney, Esquire
Senior Corporate Counsel Dickstein Shapiro Morin & Oshinsky LLP
Federated Investors 2101 L Street, N.W.
Federated Investors Tower Washington, D.C. 20037
Pittsburgh, PA 15222
It is proposed that this filing will become effective on April 23, 1997
pursuant to Rule 488. (Approximate Date of Proposed Public Offering).
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, as amended, that it elects to register an indefinite amount of
securities under the Securities Act of 1933, as amended, and filed the
Notice required by that Rule for Registrant's fiscal year ended November
30, 1996 on January 15, 1997. Accordingly, no filing fee is submitted
herewith.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 1(A) OF FORM N-14 SHOWING LOCATION IN
PROSPECTUS OF INFORMATION REQUIRED BY FORM N-14
Item of Part A of Form N-14 and Caption or Location in
Caption Prospectus
1.Beginning of Registration
Statement and Outside Front Cross Reference Sheet;
Cover Page of Prospectus Cover Page
2.Beginning and Outside Back
Cover Page of Prospectus Table of Contents
3.Fee Table, Synopsis Information Summary of Expenses; Summary;
and Risk Factors Risk Factors
4.Information About the Information About the
Transaction Reorganization
5.Information About the Information About the Federated
Registrant Fund and the International Fund
6.Information About the Information About the Federated Fund
Company Being Acquired and the International Fund
7.Voting Information Voting Information
8.Interest of Certain Persons
and Experts Not Applicable
9.Additional Information
Required for Reoffering by
Persons Deemed to be
Underwriters Not Applicable
SCOTTISH WIDOWS INTERNATIONAL FUND
2650 WESTVIEW DRIVE
WYOMISSING, PA 19610
Dear Shareholders:
The Board of Trustees and management of Scottish Widows
International Fund (the `International Fund'') are pleased to submit for
your vote a proposal for the tax-free transfer of all the assets of the
International Fund to Federated International Equity Fund (the `Federated
Fund'), a mutual fund portfolio of International Series, Inc. advised by
Federated Global Research Corp. The Federated Fund has an investment
objective to obtain a total return on its assets. The Federated Fund's
policies are similar to those of the International Fund in that it pursues
its objective by investing at least 65%, and under normal market conditions
substantially all of its total assets, in non-U.S. equity securities of
established companies in economically developed countries. As part of the
transaction, holders of shares in the International Fund would receive
shares of the Federated Fund equal in value to their shares in the
International Fund and the International Fund would be liquidated.
Shareholders would not have to pay a sales charge upon receiving such
shares, nor would they be subject to any contingent deferred sales charges
in connection with the exercise of exchange rights or redemptions of such
shares. Further, William Penn fund group shareholders who were invested as
of November 30, 1988, will not be charged a sales charge for future
purchases made in any Federated Fund, provided the account has remained
open since that date.
The Board of Trustees of the International Fund, as well as Penn
Square Management Corporation, the International Fund's manager and
distributor, believe the proposed agreement and plan of reorganization is
in the best interests of International Fund shareholders for the following
reasons:
-- The Federated Fund has investment policies similar to that of
the International Fund and offers an investment portfolio which
invests primarily in non-U.S. equity securities to obtain a total
return on its assets.
-- The Federated Fund offers competitive performance and
comparable expense ratios.
-- The reorganization of the International Fund into the Federated
Fund may provide operating efficiencies as a result of the size of
the Federated Fund which were not available to International Fund
shareholders due to the smaller size of the International Fund.
-- As an investor in the Federated Fund, shareholders would have
access to a dramatically expanded array of investment alternatives
in the Federated retail family of funds.
-- Federated Investors also has an excellent reputation for
customer servicing, having received a #1 rating for the last five
surveys in a row by DALBAR, Inc. The shareholder services for the
Federated funds include advanced technological systems that result
in quick shareholder access to a broad spectrum of information and
efficient routing of telephone calls to the appropriate person.
The Federated Fund is managed by Federated Global Research Corp., a
subsidiary of Federated Investors. Federated Investors was founded in 1955
and is located in Pittsburgh, Pennsylvania. Federated Global Research
Corp. and other subsidiaries of Federated Investors serve as investment
advisers to a number of investment companies and private accounts. With
over $110 billion invested across more than 300 funds under management
and/or administration by its subsidiaries, Federated Investors is one of
the largest mutual fund investment managers in the United States. With
more than 2,000 employees, Federated continues to be led by the family
management who founded the company in 1955. Federated funds are presently
at work in and through 4,500 financial institutions nationwide.
We believe the transfer of the International Fund's assets in this
transaction presents an exciting investment opportunity for our
shareholders. Your vote on the transaction is critical to its success.
The transfer will be effected only if approved by a majority of all of the
International Fund's outstanding shares on the record date voted in person
or represented by proxy. We hope you share our enthusiasm and will
participate by casting your vote in person, or by proxy if you are unable
to attend the meeting. Please read the enclosed prospectus/proxy statement
carefully before you vote.
THE BOARD OF TRUSTEES BELIEVES THAT THE TRANSACTION IS IN THE BEST
INTERESTS OF THE INTERNATIONAL FUND AND ITS SHAREHOLDERS, AND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR ITS APPROVAL.
Thank you for your prompt attention and participation.
Sincerely,
James E. Jordan
President
SCOTTISH WIDOWS INTERNATIONAL FUND
2650 WESTVIEW DRIVE
WYOMISSING, PA 19610
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO SHAREHOLDERS OF SCOTTISH WIDOWS INTERNATIONAL FUND:
A Special Meeting of Shareholders Scottish Widows International Fund (the
`International Fund'') will be held at: 9:00 a.m. (general meeting) and
10:15 a.m. (Fund meeting) on May 29,1997 at: Sheraton Berkshire Motor Inn,
1741 Paper Mill Road, Wyomissing, PA 19610, for the following purposes:
1. To approve or disapprove a proposed Agreement and Plan of
Reorganization between the International Fund and Federated International
Equity Fund, Inc. (the `Federated Fund''), whereby the Federated Fund
would acquire all of the assets and assume certain liabilities of the
International Fund in exchange for the Federated Fund's Class A Shares and
Class C Shares to be distributed pro rata by the International Fund to the
holders of its Class A Shares and Class C Shares respectively in complete
liquidation of the International Fund; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
By Order of the Board of Trustees,
Dated: [ ] Sandra J. Houck
Secretary
Shareholders of record at the close of business on [ ],
are entitled to vote at the meeting. Whether or not you plan to attend the
meeting, please sign and return the enclosed proxy card. Your vote is
important.
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AND TO SAVE THE EXPENSE OF
FURTHER MAILINGS, PLEASE MARK YOUR PROXY CARD, SIGN IT, AND RETURN IT IN
THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. YOU MAY REVOKE YOUR PROXY AT ANY TIME AT OR BEFORE THE MEETING OR
VOTE IN PERSON IF YOU ATTEND THE MEETING.
PROSPECTUS/PROXY STATEMENT
[ ]
Acquisition of the Assets of
SCOTTISH WIDOWS INTERNATIONAL FUND
2650 Westview Drive
Wyomissing, PA 19610
Telephone Number: 1-800-523-8440
By and in exchange for Class A Shares and Class C Shares of
FEDERATED INTERNATIONAL EQUITY FUND
a portfolio of International Series, Inc.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-341-7400
This Prospectus/Proxy Statement describes the proposed Agreement
and Plan of Reorganization (the "Plan") whereby Federated International
Equity Fund, (the `Federated Fund''), a portfolio of International Series,
Inc., a Maryland corporation, would acquire all the assets and assume
certain liabilities of Scottish Widows International Fund (the
`International Fund''), a Massachusetts business trust (the ``Trust''), in
exchange for the Federated Fund's Class A Shares and Class C Shares to be
distributed pro rata by the International Fund to the holders of its Class
A Shares and Class C Shares, respectively, in complete liquidation of the
International Fund. As a result of the Plan, each shareholder of the
International Fund will become the owner of the corresponding Federated
Fund's Class A Shares and Class C Shares having a total net asset value
equal to the total net asset value of his or her holdings in the
International Fund's Class A Shares and Class C Shares.
THE BOARD OF TRUSTEES OF THE INTERNATIONAL FUND UNANIMOUSLY
RECOMMENDS APPROVAL OF THE PLAN.
The shares of each of the Federated Fund and the International Fund
represent interests in separate open-end, diversified management investment
companies. The Federated Fund's investment objective is to obtain a total
return on its assets. The Federated Fund pursues its objective by
investing at least 65%, and under normal market conditions substantially
all of its total assets, in non-U.S. equity securities of established
companies in economically developed countries. The International Fund's
investment objective is long-term capital appreciation. The International
Fund seeks to achieve its objective by investing primarily in equity
securities (common and preferred stock) of issuers organized under the laws
of, or headquartered in, countries outside the United States. For a
comparison of the investment policies of the Federated Fund and the
International Fund, see "Summary - Investment Objectives, Policies and
Limitations."
This Prospectus/Proxy Statement should be retained for future
reference. It sets forth concisely the information about the Federated
Fund that a prospective investor should know before investing. This
Prospectus/Proxy Statement is accompanied by the Prospectus of the
Federated Fund dated January 31, 1997, which is incorporated herein by
reference. Statements of Additional Information for the Federated Fund
dated January 31, 1997 (relating to the Federated Fund's Prospectus of the
same date) and [ ], 1997 (relating to this Prospectus/Proxy
------------
Statement), and the Annual Report to Shareholders dated November 30, 1996,
all containing additional information, have been filed with the Securities
and Exchange Commission and are incorporated herein by reference. Copies
of the Statements of Additional Information and the Annual Report may be
obtained without charge by writing or calling the Federated Fund at the
address and telephone number shown above.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES
INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Penn Square Management Corp.
TABLE OF CONTENTS
Page No.
Summary of Expenses.......................................
Summary...................................................
About the Proposed Reorganization ......................
Investment Objectives, Policies and Limitations ........
Advisory and Other Fees ................................
Distribution Arrangements ..............................
Purchase, Exchange and Redemption Procedures ...........
Dividends ..............................................
Tax Consequences .......................................
Risk Factors..............................................
Information About the Reorganization......................
Background and Reasons for the Proposed Reorganization .
Agreement Among Penn Square Management Corporation,
The William Penn Company and Federated ................
Description of the Plan of Reorganization ..............
Description of Federated Fund Shares ...................
Federal Income Tax Consequences ........................
Comparative Information on Shareholder Rights and Obligations
Capitalization .........................................
Information About the Federated Fund and the International Fund
Federated International Equity Fund, Inc. ..............
Scottish Widows International Fund .....................
Voting Information........................................
Outstanding Shares and Voting Requirements .............
Dissenter's Right of Appraisal .........................
Other Matters and Discretion of Persons Named in the Proxy
Agreement and Plan of Reorganization -- Exhibit A.........
<TABLE>
<CAPTION>
SUMMARY OF EXPENSES
(CLASS A SHARES)
International Pro Forma
Federated Fund Fund Combined
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 5.50%(1) 4.75% 5.50%(1)
Maximum Sales Charge Imposed on
Reinvested Dividends (as a percentage of
offering price) None None None
Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds,
as applicable) 0.00%(2) None 0.00%(2)
Redemption Fee (as a percentage of
amount redeemed, if applicable)(3) None None None
Exchange Fee None None None
</TABLE>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
(after expense reimbursements or waivers)
Management Fee 1.00% 0.675%(4) 1.00%
12b-1 Fee(5) None 0.25% None
Total Other Expenses 0.68%(6) 0.815% 0.63%(6)
Total Operating Expenses(7) 1.68% 1.74% 1.63%
(1) This sales charge would not be applicable to Class A Shares of the
Federated Fund acquired through the proposed reorganization or to William
Penn fund group shareholders invested as of November 30, 1988, for future
purchases of any of the Federated Funds provided the account remains open.
(2) Class A Shares purchased with the proceeds of a redemption of shares
of an unaffiliated investment company purchased or redeemed with a sales
charge and not distributed by Federated Securities Corp. and not charged a
sales charge but may be charged a contingent deferred sales charge of 0.50
of 1% for redemptions made within one full year of purchase. For a more
complete description, see `Summary - Distribution Arrangements.'' This
contingent deferred sales charge would not be applicable to Class A Shares
of the Federated Fund acquired through the proposed reorganization.
(3) Wire-transferred redemptions of Class A Shares of the Federated Fund
of less than $5,000 may be subject to additional fees. A $10.00 fee will
be charged for certain redemptions of International Fund shares by wire
transfer.
(4) The management fee for the International Fund has been reduced to
reflect the voluntary waiver of a portion of the management fee. The
adviser can terminate this voluntary waiver at any time in its sole
discretion. The maximum management fee is 0.85%.
(5) With respect to the International Fund, the 12b-1 fee has been reduced
to reflect the voluntary waiver; the maximum 12b-1 fee for Class A Shares
is 0.50%. The Federated Fund's Class A Shares have no 12b-1 fee.
(6) Total other expenses for the Federated Fund and the Pro Forma Combined
Fund include a shareholder services fee of 0.10%. The shareholder services
fee has been reduced to reflect the voluntary waiver of a portion of the
shareholder services fee. The shareholder service provider can terminate
this voluntary waiver at any time at its sole discretion. The maximum
shareholder services fee is 0.25%.
(7) The total operating expenses for Class A Shares of the Federated Fund
are based on expenses incurred during its fiscal year ending November 30,
1996, and would have been 1.83% absent the voluntary waiver of a portion of
the shareholder services fee. The total operating expenses for the
International Fund are based upon expenses incurred by the International
Fund during its fiscal year ended December 31, 1996.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that a shareholder of shares of each of the
Federated Fund, the International Fund and the Pro Forma Combined Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Summary - Advisory and Other Fees" and
"Summary - Distribution Arrangements."
EXAMPLES
The Examples below are intended to assist an investor in
understanding the various costs that an investor will bear directly or
indirectly. The Examples assume payment of operating expenses at the
levels set forth in the table above.
(1) This Example does not include sales charges or contingent deferred
sales charges since such sales charges are not applicable to Federated Fund
Class A Shares received as a result of the proposed reorganization.
An investor would pay the following expenses on a
1,000 investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period. Expenses
would be the same if there were no redemption at the
end of each time period. 1 year 3 years 5 years10 years
Federated Fund 17 53 91 199
International Fund 18 55 94 208
Pro Forma Combined 17 51 89 193
(2) This Example includes sales charges since Class A Shares purchased
subsequent to the reorganization may be subject to sales charges. For a
more complete description of sales charges, contingent deferred sales
charges and exemptions from such charges, reference is hereby made to the
Prospectus of the Federated Fund dated January 31, 1997, and the Prospectus
of the International Fund dated March 15, 1996, each of which is
incorporated herein by reference thereto.
An investor would pay the following expenses
on a $1,000 investment, assuming (1) 5% annual
return, (2) redemption at the end of each time
period and (3) payment of the maximum sales
charge. Expenses would be the same if there were
no redemption at the end of each time period.
1 year 3 years 5 years 10 years
Federated Fund 71 105 141 243
International Fund 64 100 137 243
Pro Forma Combined 71 104 139 238
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
SUMMARY OF EXPENSES
(CLASS C SHARES)
<TABLE>
<CAPTION>
International Pro Forma
Federated Fund Fund Combined
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) None None None
Maximum Sales Charge Imposed on
Reinvested Dividends (as a percentage of
offering price) None None None
Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds,
as applicable)(1) 1.00% 1.00% 1.00%
Redemption Fee (as a percentage of
amount redeemed, if applicable) None None None
Exchange Fee None None None
</TABLE>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
(after expense reimbursements or waivers)
Management Fee 1.00% 0.675%(2) 1.00%
12b-1 Fee 0.75% 0.75% 0.75%
Total Other Expenses(3) 0.82% 1.155% 0.77%
Total Operating Expenses(4) 2.57% 2.58% 2.52%
(1) The Contingent Deferred Sales Charge assessed is 1.00% of the lesser
of the original purchase price or the net Asset Value of Shares redeemed
within one year of their purchase date. For a more complete description,
see `Summary -- Distribution Arrangement.''
(2) The management fee for the International Fund has been reduced to
reflect the voluntary waiver of a portion of the management fee. The
adviser can terminate this voluntary waiver at any time in its sole
discretion. The maximum management fee is 0.85%.
(3) Total Other Expenses include a shareholder services fee of 0.25% for
the International Fund and 0.24% for the Federated Fund and Pro Forma
Combined Fund. The shareholder services fee for the Federated Fund and Pro
Forma Combined Fund has been reduced to reflect the voluntary waiver of a
portion of the shareholder services fee. The shareholder service provider
can terminate this voluntary waiver at any time at its sole discretion.
The maximum shareholder services fee is 0.25%.
(4) The total operating expenses for Class C Shares of the Federated Fund
are based on expenses incurred during its fiscal year ending November 30,
1996, and would have been 2.58% absent the voluntary waiver of a portion of
the shareholder services fee. The total operating expenses for the
International Fund are based upon expenses incurred by the International
Fund during its fiscal year ended December 31, 1996.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that a shareholder of shares of each of the
Federated Fund, the International Fund and the Pro Forma Combined Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Summary - Advisory and Other Fees" and
"Summary - Distribution Arrangements."
LONG-TERM SHAREHOLDERS 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.
EXAMPLES
The Examples below are intended to assist an investor in
understanding the various costs that an investor will bear directly or
indirectly. The Examples assume payment of operating expenses at the
levels set forth in the table above.
(1) This Example does not include sales charges or contingent deferred
sales charges since such sales charges are not applicable to Federated Fund
Class C Shares received as a result of the proposed reorganization.
An investor would pay the following expenses on a
1,000 investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period. Expenses
would be the same if there were no redemption at the
end of each time period. 1 year 3 years 5 years10 years
Federated Fund 26 80 137 290
International Fund 26 80 137 291
Pro Forma Combined 26 78 134 286
(2) This Example includes contingent deferred sales charges since Class C
Shares purchased subsequent to the reorganization may be subject to a sales
charge. For a more complete description of contingent deferred sales
charges and exemptions from such charges, reference is hereby made to the
Prospectus of the Federated Fund dated January 31, 1997, and the Prospectus
of the International Fund dated March 15, 1996, each of which is
incorporated herein by reference thereto.
An investor would pay the following expenses
on a $1,000 investment, assuming (1) 5% annual
return and (2) redemption at the end of each time
period. 1 year 3 years 5 years10 years
Federated Fund 36 80 137 290
International Fund 36 80 137 291
Pro Forma Combined 36 78 134 286
An investor would pay the following expenses
on a $1,000 investment, assuming (1) 5% annual
return and (2) no redemption at the end of each
time period. 1 year 3 years 5 years10 years
Federated Fund 26 80 137 290
International Fund 26 80 137 291
Pro Forma Combined 26 78 134 286
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
SUMMARY
This summary is qualified in its entirety by reference to the
additional information contained elsewhere in this Prospectus/Proxy
Statement, the Statement of Additional Information, dated [ ],
related to this Prospectus/Proxy Statement, the Prospectus of the Federated
Fund dated January 31, 1997, the Statement of Additional Information of
the Federated Fund dated January 31, 1997, the Prospectus of the
International Fund dated March 15, 1996, the Statement of Additional
Information of the International Fund dated March 15, 1996, and the Plan, a
copy of which is attached to this Prospectus/Proxy Statement as Exhibit A
all of which are incorporated herein by reference thereto.
About the Proposed Reorganization
The Board of Trustees of the International Fund has voted
unanimously to recommend to holders of the Class A Shares and Class C
Shares of the International Fund the approval of the Plan whereby the
Federated Fund would acquire all of the assets and assume certain
liabilities of the International Fund's Class A Shares and Class C Shares
in exchange for the corresponding Federated Fund's Class A Shares and Class
C Shares to be distributed pro rata by the International Fund to holders of
its Class A Shares and Class C Shares, respectively, in complete
liquidation and dissolution of the International Fund (the
"Reorganization"). As a result of the Reorganization, each shareholder of
the International Fund Class A Shares and Class C Shares will become the
owner of the Federated Fund's Class A Shares or Class C Shares,
respectively, having a total net asset value equal to the total net asset
value of his or her holdings in the International Fund on the date of the
Reorganization, i.e., the Closing Date (as hereinafter defined).
As a condition to the Reorganization transactions, the Federated
Fund and the International Fund will receive an opinion of counsel that the
Reorganization will be considered a tax-free "reorganization" under
applicable provisions of the Internal Revenue Code of 1986, as amended (the
`Code''), so that no gain or loss will be recognized by either the
Federated Fund or the International Fund or the shareholders of the
International Fund. The tax basis of the Federated Fund's corresponding
Class A Shares and Class C Shares received by International Fund's Class A
Shares and Class C Shares shareholders will be the same as the tax basis of
their shares in the International Fund. After the acquisition is
completed, the International Fund will be dissolved.
Investment Objectives, Policies and Limitations
The investment objective of the Federated Fund is to obtain a total
return on its assets. The investment objective and policies may be changed
by the Directors without shareholder approval. Shareholders will be
notified before any material change becomes effective.
The investment objective of the International Fund is long-term
capital appreciation. Similar to the Federated Fund, the investment
objective and policies may be changed by the Trustees without shareholder
approval. Shareholders will be notified before any material change becomes
effective.
The Federated 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 Federated 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, Global Depositary Receipts, and
European Depositary Receipts. The Federated 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.
The International Fund seeks to achieve its objective by investing
primarily in equity securities (common and preferred stock) of issuers
organized under the laws of, or headquartered in, countries outside the
United States (`foreign equities''). Under normal conditions, the
International Fund will invest at least 65% of its total assets in foreign
equities. The International Fund may invest in equity securities of
issuers in Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile,
Denmark, Finland, France, Germany, Greece, Hong Kong, India, Indonesia,
Ireland, Italy, Japan, Korea, Luxembourg, Malaysia, Mexico, the
Netherlands, New Zealand, Norway, the Philippines, Poland, Portugal,
Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey and the
United Kingdom. The International Fund will not necessarily invest in all
of these countries in the future if Scottish Widows Investment Management
Ltd. and Penn Square Management Corporation (the `International Fund's
Advisers') believe that appropriate investment opportunities exist in such
other countries. Under normal market conditions, the International Fund's
assets will be invested in securities of issuers in at least three
different foreign countries. The International Fund may also invest in
fixed income securities that are rated investment-grade or that the
International Fund's Advisers determine are comparable thereto. These
include convertible bonds and other corporate debt obligations, U.S. and
foreign government securities, and U.S. and foreign money market
securities. Money market securities will generally be held by the
International Fund only for temporary or defensive purposes. It is not
expected that the income yield of the International Fund will be
significant. The International Fund may purchase foreign securities
directly in foreign markets, or may purchase American Depositary Receipts
and European Depositary Receipts. With respect to certain countries,
investments by the International Fund may currently be made only by
acquiring shares of other investment companies which have local
governmental authority to invest in those countries. The International
Fund's investments in other investment companies are subject to certain
limitations. The International Fund may hold cash in U.S. dollars to meet
redemption requirements. The International Fund may engage in currency
exchange transactions in order to protect against uncertainty in the level
of future exchange rates between a particular foreign currency and the U.S.
dollar or between foreign currencies in which the International Fund's
securities are or may be denominated. The International Fund may conduct
its currency exchange transactions either on a `spot'' (i.e. cash) basis
at the rate then prevailing in the currency exchange market or through
entering into futures, forward, or option contracts to purchase or sell
currencies at a specified rate at a specified future time. The
International Fund's dealings in foreign currency exchange contracts will
be limited to hedging involving either specific transactions or aggregate
portfolio positions.
The Federated Fund will not: (i) 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; (ii) 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; (iii) sell securities short except
under strict limitations; (iv) borrow money or pledge securities except,
under certain circumstances, the Fund may borrow up to one-third of the
value of its total assets and pledge up to 15% of the value of those assets
to secure such borrowings; or (v) 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 Federated Fund's total assets, after taking into account the
unrealized profits and losses on those contracts. These investment
limitations (i-v) cannot be changed without shareholder approval.
The International Fund has adopted certain fundamental investment
restrictions which may not be changed without approval of the International
Fund's shareholders. These restrictions provide, among other things, that
the International Fund may not: (i) borrow in excess of 20% of the market
or other fair value of its total assets, or pledge its assets to an extent
greater than one-third of the market or other fair value of its total
assets (any such borrowings shall be from banks and shall be undertaken
only as a temporary measure for extraordinary or emergency purposes, and
deposits in connection with the purchase or sale of financial futures
contracts and related options are not deemed to be a pledge or other
encumbrance); (ii) invest more than 5% of its total assets in the
securities of any one issuer (other than the U.S. government and its
agencies, authorities or instrumentalities) treating each foreign
government as a single issuer, or purchase more than 10% of the outstanding
voting securities of any one issuer; (iii) purchase an illiquid security,
if as a result of such purchase more than 10% of the International Fund's
net assets would be invested in such securities; and (iv) invest in the
aggregate more than 5% of its total assets in the securities of any issuers
which have (with predecessors) a record of less than three years of
continuous operation.
In addition to the policies and limitations set forth above, both
the Federated Fund and the International Fund are subject to certain
additional investment policies and limitations, described in the Federated
Fund's Statement of Additional Information dated January 31, 1997, and the
International Fund's Statement of Additional Information dated March 15,
1996. Reference is hereby made to the Federated Fund's Prospectus and
Statement of Additional Information, each dated January 31, 1997, and to
the International Fund's Prospectus and Statement of Additional
Information, each dated March 15, 1996, which set forth in full the
investment objective, policies and investment limitations of each of the
Federated Fund and the International Fund, all of which are incorporated
herein by reference thereto.
Advisory and Other Fees
The annual investment advisory fee for the Federated Fund is 1.00%
of the Federated Fund's average daily net assets. The investment adviser
to the Federated Fund, Federated Global Research Corp. ("Federated
Global"), a subsidiary of Federated Investors, may voluntarily choose to
waive a portion of its advisory fee or reimburse the Federated Fund for
certain operating expenses. This voluntary reimbursement of expenses may
be terminated by Federated Global at any time in its sole discretion. The
maximum annual management fee for the International Fund is 0.85 of 1% of
average daily net assets of the International Fund. The investment adviser
of the International Fund is Penn Square Management Corporation (`Penn
Square'). The adviser is a wholly owned subsidiary of The William Penn
Company, New York, York. Scottish Widows Investment Management Limited
(the `Sub-Adviser'') serves as an investment adviser for the International
Fund pursuant to a sub-advisory agreement with the Penn Square. The Sub-
Adviser, a wholly owned subsidiary of Scottish Widows' Fund and Life
Assurance Society and is located in Edinburgh, Scotland. The International
Fund pays Penn Square 0.85% of its average daily assets of which Penn
Square pays 0.50% (subject to a minimum fee of $7,500 per calendar quarter)
the Sub-Adviser.
Federated Services Company, an affiliate of Federated Global,
provides certain administrative personnel and services necessary to operate
the Federated Fund at an annual rate based upon the average aggregate daily
net assets of all funds advised by Federated Global and its affiliates.
The rate charged is 0.15% on the first $250 million of all such funds'
average aggregate daily net assets, 0.125% on the next $250 million, 0.10%
on the next $250 million and 0.075% of all such funds' average aggregate
daily net assets in excess of $750 million, with a minimum annual fee per
portfolio of $125,000 plus $30,000 for each additional class of shares of
any such portfolio. Federated Services Company may choose voluntarily to
waive a portion of its fee. The administrative fee expense for the
Federated Fund's fiscal year ended November 30, 1996, was $185,000
representing an effective fee rate of .09%. Administrative personnel and
services necessary to operate the International Fund are currently provided
by Penn Square and are included in the annual transfer agent fee for the
International Fund.
The Federated Fund has entered into a Shareholder Services
Agreement under which it may make payments of up to 0.25% of the average
daily net asset value of each of the Class A Shares and Class C Shares to
obtain certain personal services for shareholders and the maintenance of
shareholder accounts. The Shareholder Services Agreement provides that
Federated Shareholder Services ("FSS"), an affiliate of Federated Global,
either will perform shareholder services directly or will select financial
institutions to perform such services. Financial institutions will receive
fees based upon shares owned by their clients or customers. The schedule
of such fees and the basis upon which such fees will be paid is determined
from time to time by the Federated Fund and FSS. Other than in connection
with payments under a Rule 12b-1 plan as described below, the International
Fund does not make payments to obtain similar shareholder services.
The total annual operating expenses for Class A Shares and Class C
Shares of the Federated Fund were 1.68% and 2.57% respectively of average
daily net assets (after waivers) for its most recent fiscal year. The
total annual operating expenses for Class A Shares and Class C Shares of
the International Fund were 1.74% and 2.58% respectively of average daily
net assets (after expense reimbursements) for its most recent fiscal year.
Without such waivers or reimbursements, the expense ratios of the Federated
Fund would have been 1.83% (Class A Shares) and 2.58% (Class C Shares).
Distribution Arrangements
Federated Securities Corp. ("FSC"), an affiliate of Federated
Global, is the principal distributor for shares of the Federated Fund. The
Federated Fund has adopted a Rule 12b-1 Distribution Plan (the
`Distribution Plan'') pursuant to which the Federated Fund will pay a fee
to the distributor in an amount computed at an annual rate of 0.75% of the
average daily net assets of the Class C Shares to finance any activity
which is principally intended to result in the sale of Class C Shares
subject to the Distribution Plan. FSC may offer to pay financial
institutions, at the time of purchase, an amount equal to 1.00% of the net
asset value of Class C Shares purchased by their clients. These payments
will be made directly by the distributor from its assets, and will not be
made from the assets of the Fund. The Federated Fund does not have a
Distribution Plan in effect with respect to its Class A Shares, and
accordingly, does not, nor does FSC, compensate brokers and dealers for
sales and administrative services performed in connection with the sale of
Class A Shares. However, FSC will pay financial institutions, at the time
of purchase of Class A Shares, an amount equal to 0.50% of the net asset
value of Class A Shares purchased by certain qualified plans as approved by
FSC. (Such payments are subject to a reclaim from the financial
institution should the assets leave the program within 12 months after
purchase.) In addition, FSC and FSS, from their own assets, may pay
financial institutions supplemental fees as financial assistance for
providing substantial sales services, distribution-related support services
or shareholder services with respect to the Class A Shares and Class C
Shares of the Federated Fund. Such assistance will be predicated upon the
amount of shares the financial institution sells or may sell, and/or upon
the type and nature of sales or marketing support furnished by the
financial institution. Any payments made by FSC may be reimbursed by
Federated Global or its affiliates. If a financial institution elects to
waive receipt of this payment, the Federated fund will waive any applicable
contingent deferred sales charge (such contingent deferred sales charges
are discussed below).
Penn Square is the principal distributor for shares of the
International Fund. The International Fund has adopted a Rule 12b-1
Distribution Plan (the "Rule 12b-1 Plan") pursuant to which the
International Fund reimburses Penn Square for certain of its expenses
incurred in connection with its services as distributor at an annual rate
not to exceed 0.50% of the average daily net assets of the International
Fund's Class A Shares. The fee may be used by Penn Square for its expenses
incurred in connection with (a) advertising and marketing Class A Shares;
(b) printing and distributing the Prospectus; (c) implementing and
operating the Rule 12b-1 Plan; and (d) payments made by the distributor for
servicing fees to broker/dealers, financial institutions, or other industry
professionals (`Service Organizations'') for distribution and/or
shareholder administrative services provided to their customers who own
Class A Shares. Pursuant to a Servicing Agreement with Penn Square, a
Service Organization may receive, on an annual basis, up to .50% of the
average daily net asset value of the Class A Shares owned by shareholders
with whom the Service Organization has a servicing relationship. The
services provided by a Service Organization pursuant to a Servicing
Agreement may include distribution or shareholder administrative services,
including establishing and maintaining shareholder accounts, sending
confirmations of transactions, forwarding financial reports and other
communications to shareholders, and responding to shareholder inquiries
regarding the International Fund. The International Fund has adopted a
Distribution Plan for Class C Shares to compensate the distributor for its
services and costs in distributing Class C Shares. Under the Rule 12b-1
Plan, the International Fund pays Penn Square an annual 12b-1 Distribution
Fee of 0.75% per year on Class C Shares. Penn Square also receives a
Service Fee of 0.25% per year. Both fees are computed on the average
annual net assets of Class C Shares, determined as of the close of each
regular business day. The distribution fee allows investors to buy Class C
Shares without a front end sales charge while permitting the distributor to
compensate dealers who sell Class C Shares. The distribution and service
fee increase Class C Shares expenses by 1.00% of average net assets per
year. Penn Square pays sales commissions of 1.00% of the purchase price to
dealers from its own resources at the time of sale. Penn Square retains
the distribution fee during the first year shares are outstanding to recoup
the sales commission it pays, the advances of service fee payments it
makes, and its financing costs. Penn Square plans to pay the distribution
fee as an ongoing commission to the dealer on Class C Shares that have been
outstanding for a year or more. Penn Square receives no other compensation
for its services as distributor, except that the sales charge will be paid
to the distributor. Penn Square may, in turn, pay such sales charge to
broker/dealers as a commission for generating sales of Class C Shares.
Certain costs exist with respect to the purchase and sale of
Federated Fund and International Fund shares. Shares of the Federated Fund
and shares of the International Fund are sold at their net asset value next
determined after an order is received, plus any applicable sales charge.
The Federated Fund Class A Shares and International Fund Class A Shares
have a maximum sales charge of 5.50% and 4.75%, respectively. No sales
charge will be imposed in connection with the issuance of Federated Fund
Class A Shares to Class A Shareholders of the International Fund as a
result of the Reorganization. Further, shareholders of the William Penn
group of funds who acquired Class A Shares on or before November 30, 1988,
will not be charged a sales charge for future purchases made in any
Federated Fund, provided the account has remained open. Class A Shares of
the Federated Fund purchased with the proceeds of a redemption of shares of
an unaffiliated investment company purchased or redeemed with a sales
charge and not distributed by FSC may be charged a contingent deferred
sales charge of 0.50 of 1% for redemptions made within one full year of
purchase. Any such charge will be imposed on the lesser of the net asset
value of the redeemed shares at the time of purchase or redemption. The
contingent deferred sales charges are not imposed in connection with the
exercise of exchange rights, nor will they be imposed on redemptions of
Federated Fund Class A Shares received by shareholders of the International
Fund as a result of the Reorganization. Sales of Class C Shares are
subject to a 1% contingent deferred sales charge on assets redeemed within
the first twelve months following purchase. For a complete description of
sales charges, contingent deferred sales charges and exemptions from such
charges, reference is hereby made to the Prospectus of the Federated Fund
dated January 31, 1997, and the Prospectus of the International Fund dated
March 15, 1996, each of which is incorporated herein by reference thereto.
Purchase, Exchange and Redemption Procedures
The transfer agent and dividend disbursing agent for the Federated
Fund is Federated Shareholder Services Company. The transfer agent and
dividend disbursing agent for the International Fund is Penn Square.
Procedures for the purchase, exchange and redemption of the Federated
Fund's Class A Shares and Class C Shares differ slightly from procedures
applicable to the purchase, exchange and redemption of the International
Fund's Class A Shares and Class C Shares. Any questions about such
procedures may be directed to, and assistance in effecting purchases,
exchanges or redemptions of the Federated Fund's Class A Shares and Class C
Shares or the International Fund's Class A Shares and Class C Shares may be
obtained from FSC, principal distributor for the Federated Fund, at 1-800-
341-7400, or from Penn Square, principal distributor for the International
Fund, at 1-800-523-8440.
Reference is made to the Prospectus of the Federated Fund dated
January 31, 1997, and the Prospectus of the International Fund dated March
15, 1996, for a complete description of the purchase, exchange and
redemption procedures applicable to purchases, exchanges and redemptions of
Federated Fund and International Fund shares, respectively, each of which
is incorporated herein by reference thereto. Set forth below is a brief
listing of the significant purchase, exchange and redemption procedures
applicable to the Federated Fund's Class A Shares and Class C Shares and
the International Fund's Class A Shares and Class C Shares.
Purchases of Class A Shares and Class C Shares of the Federated
Fund may be made through a financial institution that has an agreement with
FSC or, once an account has been established, by wire or check. Purchases
of shares of the International Fund may be made through Penn Square and
through certain broker-dealers under contract with Penn Square or directly
by wire or check once an account has been established. The minimum initial
investment in the Federated Fund is $500 for Class A Shares and $1,500 for
Class C Shares, except for retirement accounts for which the minimum is
$50. Subsequent investments must be in amounts of at least $100, except
for retirement accounts for which the minimum is $50. The minimum initial
investment in the International Fund is $500 for either Class of Shares,
except for retirement accounts for which the minimum is $250. Subsequent
investments must be in amounts of at least $100. The Federated Fund and
the International Fund each reserves the right to reject any purchase
request.
The purchase price of the Federated Fund's Class A Shares and the
International Fund's Class A Shares is based on net asset value plus a
sales charge. The net asset value per share for each class of the
Federated Fund and the International Fund is calculated as of the close of
trading (normally 4:00 p.m., Eastern time) on the New York Stock Exchange,
Inc. (the `NYSE'') on each day on which the Federated Fund and the
International Fund compute their net asset value. Purchase and redemption
orders for the Federated Fund received from broker/dealers before 5:00 p.m.
(Eastern time) and from financial institutions before 4:00 p.m. (Eastern
time) may be entered at that day's price. Purchase orders for the
International Fund are executed based on the net asset value calculated at
the close of business on the day such purchase orders are received.
Purchase orders received after the close of the NYSE will be executed based
on the net asset value calculated on the next business day. Redemption
orders for shares of the International Fund presented prior to the close of
the NYSE on any business day are redeemed at the net asset value calculated
at the close of the exchange that day, except that some Class C Shares may
be subject to a 1.0% contingent deferred sales charge. Federated Fund
purchase orders by wire are considered received upon receipt of payment by
wire. Federated Fund purchase orders received by check are considered
received after the check is converted into federal funds, which normally
occurs the business day after receipt.
Holders of Class A Shares and Class C Shares of the Federated Fund
have exchange privileges with respect to corresponding Class A Shares and
Class C Shares in certain of the funds for which affiliates of Federated
Investors serve as investment adviser or principal underwriter
(collectively, the "Federated Funds"), each of which has different
investment objectives and policies. Class A Shares and Class C Shares of
the Federated Fund may be exchanged for corresponding Class A Shares and
Class C Shares of certain Federated Funds at net asset value without a
contingent deferred sales charge. To the extent a shareholder exchanges
Class A Shares or Class C Shares of the Federated Fund for Class A Shares
or Class C Shares of other Federated Funds, the time for which the
exchanged-for shares are to be held will be added to the time for which
exchanged-from shares were held for purposes of satisfying the applicable
holding period for purposes of determining the contingent deferred sales
charge. Class A Shares to be exchanged must have a net asset value which
meets the minimum investment requirement for the fund into which the
exchange is being made. Holders of shares of the International Fund have
exchange privileges with respect to shares in certain of the other funds
for which Penn Square serves as investment manager (collectively, the
`Penn Square Group''), each of which has different investment objectives
and policies. Any exchange for shares of other funds in the Penn Square
Group will generally be at the respective net asset values next determined
after receipt of the request for exchange, provided the amount exchanged
previously incurred a sales charge. Exercise of the exchange privilege is
treated as a sale for federal income tax purposes and, accordingly, may
have tax consequences for the shareholder. Information on share exchanges
may be obtained from the Federated Fund or the International Fund, as
appropriate.
Redemptions of Federated Fund Class A Shares and Class C Shares may
be made through a financial institution, by telephone, by mailing a written
request or through the Federated Fund's systematic withdrawal program.
Redemptions of International Fund shares may be made by presenting share
certificates, by letter form, by telephone, or through the International
Fund's systematic withdrawal plan. Class C Shares of the Federated Fund are
redeemed at their net asset value, less any applicable contingent deferred
sales charge, next determined after the redemption request is received.
The International Fund imposes no charges for redemptions of Class A
Shares. For Class C shares, redemptions within the first year of purchase
will bear a contingent deferred sales charge. International Fund Class C
shareholders will have their current holding period tacked into the period
of time they hold their corresponding Federated Class C Shares for purposes
of determining any applicable redemption charges. Redemptions may also be
made through a broker/dealer, and that broker/dealer may charge a
transaction fee. Checks for redemption proceeds will be mailed within
three business days. However, redemption checks will not be mailed until
all checks in payment for the shares redeemed have been cleared.
Dividends
Both the Federated Fund and the International Fund pay dividends
annually from net investment income and make annual distributions of net
realized capital gains, if any. With respect to the Federated Fund, unless
a shareholder otherwise instructs, dividends and capital gain distributions
will be reinvested automatically in additional shares at net asset value,
subject to no sales charge. The International Fund shareholders may
instruct the fund to make such reinvestment which are also not subject to a
sales charge.
Tax Consequences
As a condition to the Reorganization, the Corporation, on behalf of
the Federated Fund, and the International Fund will receive an opinion of
counsel that the Reorganization will be considered a tax-free
"reorganization" under applicable provisions of the Code so that no gain or
loss will be recognized by either the Federated Fund or the International
Fund or the shareholders of the International Fund. The tax basis of the
Federated Fund shares received by International Fund shareholders will be
the same as the tax basis of their shares in the International Fund.
RISK FACTORS
As with other mutual funds that invest in non-U.S. securities, the
Federated Fund is subject to special risks. 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
Federated Fund diversifies its investments broadly among foreign countries,
including both developed and developing countries. At least three
different countries will always be represented. The Federated Fund
occasionally takes advantage of the unusual opportunities for high returns
available from investing in developing countries. 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. 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 Federated 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. The inability of the Federated
Fund to make intended security purchases due to settlement problems would
cause the Federated Fund to miss attractive investment opportunities.
Inability to dispose of a portfolio security due to settlement problems
could result either in losses to the Federated Fund due to subsequent
declines in value of the portfolio security or, the Federated Fund has
entered into a contract to sell the security, could result in possible
liability to the purchaser. Because the majority of the securities
purchased are denominated in currencies other than the U.S. dollar, changes
in foreign currency exchange rates will affect the NAV; the value of
interest earned; gains and losses realized on the sales or securities; and
net investment income and capital gain, if any to be distributed to
shareholders. Since the International Fund also invests primarily in non-
U.S. securities, these risk factors are generally also present in an
investment in the International Fund. A full discussion of the risks
inherent in investment in the Federated Fund and the International Fund is
set forth in the Federated Fund's Prospectus and Statement of Additional
Information, each dated January 31, 1997, and the International Fund's
Prospectus and Statement of Additional Information, each dated March 15,
1996, each of which is incorporated herein by reference thereto.
INFORMATION ABOUT THE REORGANIZATION
Background and Reasons for the Proposed Reorganization
Considerations of the Board of Trustees of the International Fund.
On February 12, 1997, Penn Square advised the Board of Trustees of the
International Fund that The William Penn Company was considering
redirecting its corporate strategy away from the management and
distribution of retail mutual funds and that it was seeking a buyer for its
core businesses. Moreover, Penn Square engaged an investment banker to
locate potential buyers for the corporation. The potential buyer would
provide value-added shareholder services, technological advancements,
comprehensive distribution networks, and diversified mutual fund product
choices that many larger mutual fund complexes offer. After conducting a
screening process, Penn Square determined that in its judgment, the
proposed Reorganization was the most desirable alternative involving the
International Fund that was reasonably available and that it should be
presented to the International Fund's Board of Trustees for its
consideration.
The independent trustees formed a four-person due diligence team.
The due diligence team visited the Federated Investors offices in
Pittsburgh, Pennsylvania, and reviewed with the portfolio manager of the
Federated Fund the investment style and philosophy used to manage the
assets of the Federated Fund. In addition, the due diligence team
inspected the Federated customer services area and the Penn Square Fund's
independent counsel inspected the legal records of the Federated Fund.
A meeting of the entire Board of Trustees was held on March 5,
1997, at which Federated Investors presented to the Board information
relating to the overall reputation, financial strength and stability of
Federated Investors, the parent company of Federated Global (together with
its affiliates, `Federated''). Federated, founded in 1955, is among the
seven largest mutual fund sponsors, with over $110 billion invested across
more than 300 funds under management and/or administration by its
subsidiaries, and over 2,000 employees. Federated's management discussed
the Federated Fund's investment performance history and explained to the
Board that the majority of this growth came from within Federated through
its multiple distribution channels. The Board was also informed of the
variety of investment products available through Federated, including
international funds and an array of domestic funds broader than currently
offered in the William Penn Fund Group, the exchange privileges that would
be available to former International Fund shareholders if the
Reorganization is consummated, and the multiple sales charge (or `load'')
structures available to prospective shareholders. The Board took into
account that if the Reorganization takes place, shareholders of the
International Fund would receive shares of the Federated Fund without the
imposition of any sales charge and without incurring any tax consequences.
Federated's management advised the Board of its reputation for
customer servicing, noting that it has received a #1 rating for the last
five surveys in a row by DALBAR, Inc. Federated's management stated that
its shareholder services include advanced technological systems that result
in quick shareholder access to a broad spectrum of information, including:
telephonic automated yield and performance information; consolidated
monthly shareholder statements; no-fee IRAs; quarterly newsletters; year-
end tax reporting information; direct deposit; and telephonic redemption
and exchange.
Federated's management also discussed comparative sales loads with
the Board. In particular, it was noted that the maximum front-end sales
load of the Class A Shares of the Federated Fund is higher than that of the
Class A Shares of the International Fund. Federated's management also
reviewed with the Board relative asset size and expense ratios, including
relative advisory fees. The Board discussed the fact that the Federated
Fund is larger in asset size than the International Fund and considered
potential economies of scale that might be experienced by former
International Fund shareholders if they were to become shareholders of a
larger fund.
The Board determined that the investment objectives and policies of
the International Fund were substantially similar to those of the Federated
Fund. The Board was also presented with and discussed materials comparing
the performance, and relative risks of the International Fund and the
Federated Fund. Federated's management also presented biographical
information about each of the Directors of the Federated Fund and reviewed
with the Board the structure of its compliance and internal audit
departments and the scope of its training programs.
The Board noted that the International Fund would not bear any of
the costs involved in the Reorganization, which would be borne entirely by
The William Penn Company and/or Federated. In addition, the Board
discussed the anticipated tax-free nature of the Reorganization to the
International Fund and its shareholders.
In connection with their consideration of the Reorganization, the
Board also reviewed their fiduciary obligations under state and federal
law. They considered the requirements of Section 15(f) of the 1940 Act,
which provides that an investment manager to an investment company, and the
affiliates of such manager (such as Penn Square Management Corporation),
may receive any amount or benefit in connection with a sale of any interest
in such investment manager which results in an assignment of an investment
management contract if (1) for a period of three years after such
assignment, at least 75% of the Board of Trustees of the investment company
are not `interested persons'' (as defined in the 1940 Act) of the new
investment manager or its predecessor; and (2) no `unfair burden'' (as
defined in the 1940 Act) is imposed on the investment company as a result
of the assignment or any express or implied terms, conditions or
understandings applicable thereto.
With respect to the first condition of Section 15(f) relating to
Board composition, the Board was advised that the Federated Fund's Board of
Trustees presently consists of thirteen (13) Directors, only three (3) of
whom are `interested persons.'' With respect to the second condition of
Section 15(f), while there is no specific definition of `unfair burden,''
it includes any arrangement, for two years after the transaction, pursuant
to which the predecessor or successor adviser is entitled to receive
compensation from any person in connection with the mutual fund's purchase
or sale of securities, other than bona fide ordinary compensation as
principal underwriter. The definition of unfair burden also includes any
payments from the fund for other than bona fide investment advisory or
other services. The Board considered the fact that representations were
made by Federated and Penn Square Management Corporation that the agreement
among Federated, Penn Square Management Corporation and The William Penn
Company would contain representations and covenants that the Reorganization
would not impose an unfair burden on the Penn Square Group.
After reviewing and considering all of the information provided by
Federated and Penn Square, including the terms of the Reorganization, the
Board, including all of the Trustees who are not interested persons of the
International Fund or Penn Square, voted unanimously in person at the
meeting held on March 5, 1997, to approve the Reorganization and to
recommend it to the shareholders of the International Fund for their
approval.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
REORGANIZATION.
Considerations of the Board of Directors of the Federated Fund.
The Board of Directors of the Federated Fund, including the independent
Directors, have unanimously concluded that consummation of the
Reorganization is in the best interests of the Federated Fund and the
shareholders of the Federated Fund and that the interests of Federated Fund
shareholders would not be diluted as a result of effecting the
Reorganization and have unanimously voted to approve the Plan.
Agreement Among William Penn Fund Group Shareholders, The William Penn
Company, and Federated
The Reorganization is being proposed as part of an agreement
between Federated, The William Penn Company and the Penn Square Group
Shareholders, pursuant to which The William Penn Company would be
compensated for selling to Federated it's capital stock and the books,
records and goodwill relating to the management of the Penn Square Group
and cooperating in facilitating the transaction contemplated by the
agreement.
Description of the Plan of Reorganization
The Plan provides that the Federated Fund will acquire all of the
assets and assume certain liabilities of the International Fund's Class A
Shares and Class C Shares in exchange for the Federated Fund's Class A
Shares and Class C Shares to be distributed pro rata by the International
Fund to its Class A and Class C shareholders, respectively, shareholders in
complete liquidation of the International Fund on or about [
] (the "Closing Date"). Shareholders of the International Fund
will become shareholders of the Federated Fund as of the close of business
on the Closing Date, and will be entitled to the Federated Fund's next
dividend distribution.
As of or prior to the Closing Date, the International Fund will
declare and pay a dividend or dividends which, together with all previous
such dividends, shall have the effect of distributing to its shareholders
all taxable income for the period ending on the Closing Date. In addition,
the International Fund's dividend will include its net capital gains
realized in the period ending on the Closing Date.
Consummation of the Reorganization is subject to the conditions set
forth in the Plan, including receipt of an opinion in form and substance
satisfactory to the International Fund and the Federated Fund, as described
under the caption "Federal Income Tax Consequences" below. The Plan may be
terminated and the Reorganization may be abandoned at any time before or
after approval by shareholders of the International Fund prior to the
Closing Date by either party if a majority of the independent board members
of either board believes that continuing the transaction would have a
material adverse impact on shareholders of that fund.
Federated Global is responsible for the payment of substantially
all of the expenses of the Reorganization incurred by either party, whether
or not the Reorganization is consummated. Such expenses include, but are
not limited to, registration fees, transfer taxes (if any), and the costs
of preparing, printing, copying and mailing proxy solicitation materials to
the International Fund shareholders. Penn Square is responsible for the
payment of the legal fees of the International Fund. The accountants' fees
of the International Fund will be borne by Penn Square.
The foregoing description of the Plan entered into between the
Federated Fund and the International Fund is qualified in its entirety by
the terms and provisions of the Plan, a copy of which is attached hereto as
Exhibit A and incorporated herein by reference thereto.
Description of Federated Fund Shares
Full and fractional Class A Shares and Class C Shares of the
Federated Fund will be issued without the imposition of a sales charge or
other fee to the corresponding shareholders of the International Fund in
accordance with the procedures described above. Class A Shares and Class C
Shares of the Federated Fund to be issued to shareholders of the
International Fund under the Plan will be fully paid and nonassessable when
issued and transferable without restriction and will have no preemptive or
conversion rights. Reference is hereby made to the Prospectus of the
Federated Fund dated January 31, 1997, provided herewith for additional
information about Class A Shares and Class C Shares of the Federated Fund.
Federal Income Tax Consequences
As a condition to the Reorganization, the Corporation on behalf of
the Federated Fund and the International Fund will receive an opinion from
Dickstein Shapiro Morin & Oshinsky LLP, counsel to the Federated Fund, to
the effect that, on the basis of the existing provisions of the Code,
current administrative rules and court decisions, for federal income tax
purposes: (1) the Reorganization as set forth in the Plan will constitute
a tax-free reorganization under Section 368(a)(1)(C) of the Code; (2) no
gain or loss will be recognized by the Federated Fund upon its receipt of
the International Fund's assets solely in exchange for Federated Fund Class
A Shares and Class C Shares and the assumption of certain stated
liabilities; (3) no gain or loss will be recognized by the International
Fund upon the transfer of its assets to the Federated Fund in exchange for
Federated Fund Class A Shares and Class C Shares and the assumption of
certain stated liabilities or upon the distribution (whether actual or
constructive) of the Federated Fund Class A Shares and Class C Shares to
the International Fund shareholders in exchange for their respective shares
of the International Fund; (4) no gain or loss will be recognized by
shareholders of the International Fund upon the exchange of their
International Fund shares for Federated Fund Class A Shares and Class C
Shares; (5) the tax basis of the International Fund's assets acquired by
the Federated Fund will be the same as the tax basis of such assets to the
International Fund immediately prior to the Reorganization; (6) the tax
basis of Federated Fund Class A Shares and Class C Shares received by each
shareholder of the International Fund pursuant to the Plan will be the same
as the tax basis of International Fund shares held by such shareholder
immediately prior to the Reorganization; (7) the holding period of the
assets of the International Fund in the hands of the Federated Fund will
include the period during which those assets were held by the International
Fund; and (8) the holding period of Federated Fund Class A Shares and Class
C Shares received by each shareholder of the International Fund will
include the period during which the International Fund shares exchanged
therefor were held by such shareholder, provided the International Fund
shares were held as capital assets on the date of the Reorganization.
Shareholders should recognize that an opinion of counsel is not
binding on the Internal Revenue Service (`IRS'') or any court. The
International Fund does not expect to obtain a ruling from the IRS
regarding the consequences of the Reorganization. Accordingly, if the IRS
sought to challenge the tax treatment of the Reorganization and was
successful, neither of which is anticipated, the Reorganization would be
treated as a taxable sale of assets of the International Fund, followed by
the taxable liquidation of the International Fund.
Comparative Information on Shareholder Rights and Obligations
General. Both the Federated Fund and the International Fund are
open-end, diversified management investment companies registered under the
1940 Act, which continuously offer to sell shares at their current net
asset value. The Federated Fund is an investment portfolio of
International Series, Inc. which is organized as a corporation under the
laws of the State of Maryland and is governed by its Articles of
Incorporation, By-Laws and Board of Directors, in addition to applicable
state and federal law. The International Fund is organized as a business
trust under the laws of Massachusetts and is governed by its Declaration of
Trust and Board of Trustees, in addition to applicable state and federal
law. Set forth below is a brief summary of the significant rights of
shareholders of the Federated Fund and the International Fund.
Shares of the Federated Fund and the International Fund. The
Federated Fund is authorized to issue 1,500,000,000 shares of common stock,
par value $0.0001 per share. The Federated Fund is one of two investment
portfolios of International Series, Inc., and the Board of Directors has
established Class A Shares, Class B Shares, and Class C Shares of the
Federated Fund. The International Fund is authorized to issue an unlimited
number of shares of beneficial interest which have no par value. The
International Fund has Class A Shares and Class C Shares. Issued and
outstanding shares of both the Federated Fund and International Fund are
fully paid and nonassessable, and freely transferable.
Voting Rights. Neither the Federated Fund nor the International
Fund is required to hold annual meetings of shareholders, except as
required under the 1940 Act. Shareholder approval is necessary only for
certain changes in operations or the election of directors under certain
circumstances. The Federated Fund requires that a special meeting of
shareholders be called for any permissible purpose upon the written request
of the holders of at least 10% of the outstanding shares of the series of
the Federated Fund entitled to vote. A special meeting of the shareholders
of the International Fund is required to be called upon the written request
of shareholders representing not less than 10% of the issued and
outstanding shares entitled to vote. Each share of the Federated Fund and
the International Fund gives the shareholder one vote in director/trustee
elections and other matters submitted to shareholders for vote. All shares
of each series or class in the Federated Fund and the International Fund
have equal voting rights except that in matters affecting only a particular
series or class, only shares of that series or class are entitled to vote.
Directors/Trustees. The By-Laws of the Federated Fund provide that
the term of office of each Director shall be until his or her resignation
or removal or until the annual meeting next held after his or her election
or until election and qualification of his or her successor. A Director of
the Federated Fund may be removed by a vote of a majority of all shares
outstanding and entitled to vote at any special meeting of shareholders,
and such shareholders may elect a Director to replace the Director so
removed to serve for the remainder of the term and until the election and
qualification of his or her successor. A vacancy on the Board may be
filled by the action of a majority of the Directors remaining in office,
and such elected Director shall hold office until the next annual meeting
of shareholders or until his or her successor is duly elected and
qualifies. Notwithstanding the foregoing, the shareholders may, at any
time during the term of such Director elected to fill a vacancy, elect some
other person to fill said vacancy and thereupon the election by the Board
shall be superseded. The Declaration of Trust of the International Fund
provides that each Trustee appointed or elected in accordance with the
Declaration of Trust serves until their successors have been elected and
qualified, unless they resign or are removed. The Trustees shall promptly
call a meeting of shareholders for the purpose of voting upon removal of
such Trustee(s) when requested in writing by holders of at least 10% of the
Portfolio's outstanding shares. Pending the filling of any vacancy or
vacancies caused by death, resignation, or removal, the remaining Trustee
or Trustees shall have all the powers and duties of the whole number of
Trustees. If a vacancy occurs in the office of a Trustee for any reason,
including an increase in the number of Trustees, the other Trustees shall
appoint a Trustee to fill the vacancy if, immediately after filling such
vacancy, at least two thirds of the Trustees then holding such officer
shall have been elected by shareholders, subject to the provisions of
Section 16(a) of the 1940 Act. With respect to both the Federated Fund and
the International Fund, a meeting of shareholders will be required for the
purpose of electing additional Directors/Trustees whenever fewer than a
majority of the Directors then in office were elected by shareholders.
Liability of Directors/Trustees and Officers. Under the Articles
of Incorporation of the Federated Fund, a Director or officer will be
personally liable only for his or her own willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his or her office. The Articles of Incorporation further
provide that Directors and officers will be indemnified by the Federated
Fund against reasonable costs and expenses incurred in connection with any
claim or litigation unless the person's conduct is determined to constitute
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of the person's office. The Declaration
of Trust for the International Fund contains a provision indemnifying the
Trustees and Officers by the assets of the fund from personal liability for
their actions as Trustees or Officers. Trustees and Officers of the
International Fund are not protected from liability by reason of willful
misconduct, bad faith, recklessness, or gross negligence in the performance
of his duties as Trustee or Officer.
Termination or Liquidation. In the event of the termination or
liquidation of the Federated Fund or any series or class of the Federated
Fund or of the termination or liquidation of the International Fund, the
shareholders of the respective fund or class are entitled to receive, when
and as declared by its Directors or Trustees, the excess of the assets
belonging to the respective fund or class over the liabilities belonging to
the respective fund or class. In either case, the assets belonging to the
fund or class will be distributed among the shareholders in proportion to
the number of shares of the respective fund or class held by them.
Capitalization
The following table sets forth the unaudited capitalization of
the Class A Shares and Class C Shares of the Federated Fund and the shares
of the International Fund as of February 28, 1997, and on a pro forma
combined basis as of that date:
Class A Shares Class C
Shares
Class A Shares Class C Shares Pro Forma Pro
Forma
Fed. Fund Int. FundFed. Fund Int. FundCombined
Combined
Net Assets 141,119,701 21,185,124 6,966,846231,696 162,304,825
7,198,542
Net Asset Value Per Share 16.90 12.46 16.39 12.34 16.90 16.39
Shares Outstanding 8,350,535 1,700,704 425,076 18,777
9,604,131 439,213
INFORMATION ABOUT THE FEDERATED FUND
AND THE INTERNATIONAL FUND
Federated International Equity Fund, Inc.
Information about the Federated Fund is contained in the Federated
Fund's current Prospectus dated January 31, 1997, a copy of which is
included herewith and incorporated herein by reference. Additional
information about the Federated Fund is included in the Federated Fund's
Annual Report to Shareholders dated November 30, 1996, the Statement of
Additional Information dated January 31, 1997, and the Statement of
Additional Information dated [ ] (relating to this
Prospectus/Proxy Statement), each of which is incorporated herein by
reference. Copies of the Annual Report, the Semi-Annual Report and
Statements of Additional Information, which have been filed with the
Securities and Exchange Commission (the "SEC"), may be obtained upon
request and without charge by contacting the Federated Fund at 1-800-341-
7400, option one, or by writing the Federated Fund at Federated Investors
Tower, Pittsburgh, PA 15222-3779. The Federated Fund is subject to the
informational requirements of the Securities Act of 1933, as amended (the
`1933 Act''), the Securities Exchange Act of 1934, as amended (the "1934
Act"), and the 1940 Act and in accordance therewith files reports and other
information with the SEC. Reports, proxy and information statements,
charter documents and other information filed by the Federated Fund can be
obtained by calling or writing the Federated Fund and can also be inspected
and copied by the public at the public reference facilities maintained by
the SEC in Washington, DC located at Room 1024, 450 Fifth Street, N.W.,
Washington, DC 20549 and at certain of its regional offices located at
Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
IL 60661 and 13th Floor, Seven World Trade Center, New York, NY 10048.
Copies of such material can be obtained from the Public Reference Branch,
Office of Consumer Affairs and Information Services, SEC, 450 Fifth Street,
N.W., Washington, DC 20549 at prescribed rates or electronically at
Internet Web Site (www.sec.gov).
This Prospectus/Proxy Statement, which constitutes part of a
Registration Statement filed by the Federated Fund with the SEC under the
1933 Act, omits certain of the information contained in the Registration
Statement. Reference is hereby made to the Registration Statement and to
the exhibits thereto for further information with respect to the Federated
Fund and the shares offered hereby. Statements contained herein concerning
the provisions of documents are necessarily summaries of such documents,
and each such statement is qualified in its entirety by reference to the
copy of the applicable document filed with the SEC.
Scottish Widows International Fund
Information about the Scottish Widows International Fund is
contained in the International Fund's current Prospectus dated March 15,
1996, the Annual Report to Shareholders dated December 31, 1996, the
Statement of Additional Information dated March 15, 1996, and the Statement
of Additional Information dated [ ] (relating to this
Prospectus/Proxy Statement), each of which is incorporated herein by
reference. Copies of such Prospectus, Annual Report, and Statements of
Additional Information, which have been filed with the SEC, may be obtained
upon request and without charge from the International Fund by calling 1-
800-523-8440 or by writing to the International Fund at 2650 Westview
Drive, Wyomissing, PA 19610. The International Fund is subject to the
informational requirements of the 1933 Act, the 1934 Act, and the 1940 Act
and in accordance therewith files reports and other information with the
SEC. Reports, proxy and information statements, charter documents and
other information filed by the International Fund, can be obtained by
calling or writing the International Fund and can also be inspected at the
public reference facilities maintained by the SEC or obtained at prescribed
rates at the addresses listed in the previous section.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the
solicitation by the Board of Trustees of the International Fund of proxies
for use at the Special Meeting of Shareholders (the "Special Meeting") to
be held at 9:00 a.m. (general meeting) and 10:15 a.m. (Fund meeting) (local
time) on May 29, 1997 at: Sheraton Berkshire Motor Inn, 1741 Paper Mill
Road, Wyomissing, PA 19610, and at any adjournments thereof. The proxy
confers discretionary authority on the persons designated therein to vote
on other business not currently contemplated which may properly come before
the Special Meeting. A proxy, if properly executed, duly returned and not
revoked, will be voted in accordance with the specifications thereon; if no
instructions are given, such proxy will be voted in favor of the Plan. A
shareholder may revoke a proxy at any time prior to use by filing with the
Secretary of the International Fund an instrument revoking the proxy, by
submitting a proxy bearing a later date or by attending and voting at the
Special Meeting. Proxies, instruments revoking a proxy, or proxies bearing
a later date may be received by telephone, by electronic means including
facsimile, or by mail.
The cost of the solicitation, including the printing and mailing of
proxy materials, will be borne by Federated Global. In addition to
solicitations through the mails, proxies may be solicited by officers,
employees and agents, including third party solicitors, of the
International Fund, Federated Global and their respective affiliates at no
additional cost to the International Fund. Such solicitations may be by
telephone, telegraph, or personal contact. Any telephonic solicitations
will follow procedures designed to insure accuracy and prevent fraud
including requiring identifying shareholder information, and recording the
shareholder's instructions. Shareholders who communicate proxies by
telephone or by other electronic means have the same power and authority to
issue, revoke, or otherwise change their voting instructions as currently
exists for instructions communicated in written form. Federated Global will
reimburse custodians, nominees and fiduciaries for the reasonable costs
incurred by them in connection with forwarding solicitation materials to
the beneficial owners of shares held of record by such persons.
Outstanding Shares and Voting Requirements
The Board of Trustees of the International Fund has fixed the close
of business on [ ], as the record date for the determination of
shareholders entitled to notice of and to vote at the Special Meeting and
any adjournments thereof. As of the record date, there were [ ]
Class A Shares and [ ] Class C Shares of the International Fund
outstanding. Each of the International Fund's shares is entitled to one
vote and fractional shares have proportionate voting rights. On the record
date, the Trustees and Officers of the International Fund as a group owned
less than [ ] of the outstanding shares of the International Fund. To the
best knowledge of Penn Square, as of the record date, no person owned
beneficially or of record 5% or more of the International Fund's
outstanding shares.
As of the record date, there were [ ] Class A Shares, and
[ ] Class C Shares of the Federated Fund outstanding. On the
record date, the Directors and officers of the Federated Fund as a group
owned less than 1% of the outstanding Class A Shares, and Class C Shares of
the Federated Fund. To the best knowledge of Federated Global, as of the
record date, no person, except as set forth in the table below, owned
beneficially or of record 5% or more of the Federated Fund's outstanding
Class A, or Class C Shares.
CLASS C SHARES NAME AND ADDRESS SHARES OWNED PERCENT OF
OUTSTANDING SHARES
Approval of the Plan requires the affirmative vote of a majority of
the outstanding shares of the International Fund. The votes of
shareholders of the Federated Fund are not being solicited since their
approval is not required in order to effect the Reorganization.
One-third of the issued and outstanding shares of the International
Fund, represented in person or by proxy, will be required to constitute a
quorum at the Special Meeting for the purpose of voting on the proposed
Reorganization. For purposes of determining the presence of a quorum,
shares represented by abstentions and "broker non-votes" will be counted as
present, but not as votes cast, at the Special Meeting. Because approval
of the Reorganization requires the approval of a majority of the
outstanding shares of the International Fund, abstentions and "broker non-
votes" will have the same effect as if they were votes against the
Reorganization.
Dissenter's Right of Appraisal
Shareholders of the International Fund objecting to the
Reorganization have no appraisal rights under the International Fund's
Declaration of Trust or Massachusetts law. Under the Plan, if approved by
International Fund shareholders, each shareholder will become the owner of
Class A Shares and Class C Shares of the Federated Fund having a total net
asset value equal to the total net asset value of his or her holdings in
the International Fund's Class A Shares or Class C Shares, respectively, at
the Closing Date.
OTHER MATTERS AND DISCRETION OF PERSONS NAMED IN THE PROXY
Management of the International Fund knows of no other matters that
may properly be, or which are likely to be, brought before the Special
Meeting. However, if any other business shall properly come before the
Special Meeting, the persons named in the proxy intend to vote thereon in
accordance with their best judgment.
If at the time any session of the Special Meeting is called to
order, a quorum is not present in person or by proxy, the persons named as
proxies may vote those proxies which have been received to adjourn the
Special Meeting to a later date. In the event that a quorum is present but
sufficient votes in favor of one or more of the proposals have not been
received, the persons named as proxies may propose one or more adjournments
of the Special Meeting to permit further solicitation of proxies with
respect to any such proposal. All such adjournments will require the
affirmative vote of a majority of the shares present in person or by proxy
at the session of the Special Meeting to be adjourned. The persons named
as proxies will vote those proxies which they are entitled to vote in favor
of the proposal, in favor of such an adjournment, and will vote those
proxies required to be voted against the proposal, against any such
adjournment.
Whether or not shareholders expect to attend the Special Meeting,
all shareholders are urged to sign, fill in and return the enclosed proxy
form promptly.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated , 1997 (the
--------
"Agreement"), between INTERNATIONAL SERIES, INC., a Maryland corporation
(the `Corporation''), on behalf of its portfolio, FEDERATED INTERNATIONAL
EQUITY FUND, INC., a Maryland corporation (hereinafter called the
"Acquiring Fund"), and SCOTTISH WIDOWS INTERNATIONAL FUND, a Massachusetts
Trust (hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C)
of the United States Internal Revenue Code of 1986, as amended (the
"Code"). The reorganization (the "Reorganization") will consist of the
transfer of all of the assets and the assumption of certain liabilities of
the Acquired Fund in exchange solely for Class A Shares and Class C Shares
of the Acquiring Fund (the "Acquiring Fund Shares") and the distribution,
after the Closing Date (as hereinafter defined), of the Acquiring Fund
Shares to the shareholders of the Acquired Fund in liquidation of the
Acquired Fund as provided herein, all upon the terms and conditions
hereinafter set forth in this Agreement.
WHEREAS, the Acquired Fund and the Corporation are registered open-
end management investment companies and the Acquired Fund owns securities
in which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are
authorized to issue shares of common stock or shares of beneficial
interest, as the case may be;
WHEREAS, the Board of Directors, including a majority of the
directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Corporation has
determined that the transfer of all of the assets and the assumption of
certain liabilities of the Acquired Fund for Acquiring Fund Shares is in
the best interests of the Acquiring Fund shareholders and that the
interests of the existing shareholders of the Acquiring Fund would not be
diluted as a result of this transaction; and
WHEREAS, the Board of Trustees, including a majority of the
trustees who are not "interested persons" (as defined under the 1940 Act),
of the Acquired Fund has determined that the transfer of all of the assets
and the assumption of certain liabilities of the Acquired Fund for
Acquiring Fund Shares is in the best interests of the Acquired Fund
shareholders;
NOW THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties agree as
follows:
1.TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE
ACQUIRING FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the
Acquired Fund agrees to assign, transfer and convey to the Acquiring Fund
all of the net assets of the Acquired Fund, including all securities and
cash, other than cash in an amount necessary to pay any unpaid dividends
and distributions as provided in paragraph 1.5, beneficially owned by the
Acquired Fund, and the Acquiring Fund agrees in exchange therefor to
deliver to the Acquired Fund the number of Acquiring Fund Shares, including
fractional Acquiring Fund Shares, determined as set forth in paragraph 2.3.
Such transaction shall take place at the closing (the "Closing") on the
closing date (the "Closing Date") provided for in paragraph 3.1. In lieu
of delivering certificates for the Acquiring Fund Shares, the Acquiring
Fund shall credit the Acquiring Fund Shares to the Acquired Fund's account,
for the benefit of its shareholders, on the stock record books of the
Acquiring Fund and shall deliver a confirmation thereof to the shareholders
of the Acquired Fund.
1.2 The Acquiring Fund will assume only those certain liabilities
which are set forth in a certificate to be provided by the Acquired Fund at
the Closing and accepted by the Acquiring Fund.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street
Bank and Trust Company (hereinafter called "State Street"), Boston,
Massachusetts, the Acquiring Fund's custodian (the "Custodian"), for the
account of the Acquiring Fund, together with proper instructions and all
necessary documents to transfer to the account of the Acquiring Fund, free
and clear of all liens, encumbrances, rights, restrictions and claims
created by the Acquired Fund. All cash delivered shall be in the form of
immediately available funds payable to the order of the Custodian for the
account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund thereunder. The
Acquired Fund will transfer to the Acquiring Fund any distributions, rights
or other assets received by the Acquired Fund after the Closing Date as
distributions on or with respect to the securities transferred. Such
assets shall be deemed included in assets transferred to the Acquiring Fund
on the Closing Date and shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable,
the Acquired Fund will liquidate and distribute pro rata to the Acquired
Fund's shareholders of record, determined as of the close of business on
the Closing Date (the "Acquired Fund Shareholders"), the Acquiring Fund
Shares received by the Acquired Fund pursuant to paragraph 1.1. In
addition, each Acquired Fund Shareholder shall have the right to receive
any unpaid dividends or other distributions which were declared before the
Valuation Date (as hereinafter defined) with respect to the shares of the
Acquired Fund that are held by the shareholder on the Valuation Date. Such
liquidation and distribution will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the Acquired Fund on
the books of the Acquiring Fund to open accounts on the share record books
of the Acquiring Fund in the names of the Acquired Fund Shareholders, and
representing the respective pro rata number of the Acquiring Fund Shares
due such shareholders, based on their ownership of shares of the Acquired
Fund on the Closing Date. All issued and outstanding Shares of the
Acquired Fund will simultaneously be canceled on the books of the Acquired
Fund. Share certificates representing interests in the Acquired Fund will
represent a number of Acquiring Fund Shares, after the Closing Date as
determined in accordance with paragraph 2.3. The Acquiring Fund shall not
issue certificates representing the Acquiring Fund Shares in connection
with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus
and statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund
shares on the books of the Acquired Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Acquired Fund up to and including the
Closing Date and such later dates, with respect to dissolution and
deregistration of the Acquired Fund, on which the Acquired Fund is
dissolved and deregistered.
1.9 The Acquired Fund shall be deregistered as an investment company
under the 1940 Act and dissolved as a Massachusetts business trust as
promptly as practicable following the Closing Date and the making of all
distributions pursuant to paragraph 1.5.
2.VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of
the close of the New York Stock Exchange (normally 4:00 p.m. Eastern time)
on the Closing Date (such time and date being herein called the "Valuation
Date"), using the valuation procedures set forth in the Acquiring Fund's
then-current prospectus or statement of additional information.
2.2 The net asset value of each Acquiring Fund Share shall be the net
asset value per share computed as of the close of the New York Stock
Exchange (normally 4:00 p.m. Eastern time) on the Valuation Date, using the
valuation procedures set forth in the Acquiring Fund's then-current
prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in
paragraph 2.1, by the net asset value of one Acquiring Fund Share
determined in accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund which have been reviewed by the
Acquired Fund's Board of Trustees.
3.CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be [ ] or such later date as
the parties may mutually agree. All acts taking place at the Closing shall
be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place
as the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of
the value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 Penn Square Management Corporation, as transfer agent for the
Acquired Fund, shall deliver at the Closing a certificate of an authorized
officer stating that its records contain the names and addresses of the
Acquired Fund Shareholders and the number and percentage ownership of
outstanding shares owned by each such shareholder immediately prior to the
Closing. The Acquiring Fund shall issue and deliver a confirmation
evidencing the Acquiring Fund Shares to be credited on the Closing Date to
the Secretary of the Acquired Fund, or provide evidence satisfactory to the
Acquired Fund that such Acquiring Fund Shares have been credited to the
Acquired Fund's account on the books of the Acquiring Fund. At the
Closing, each party shall deliver to the other such bills of sale, checks,
assignments, assumption agreements, share certificates, if any, receipts or
other documents as such other party or its counsel may reasonably request.
4.REPRESENTATIONS AND WARRANTIES.
4.1 The Acquired Fund represents and warrants to the Corporation as
follows:
(a) The Acquired Fund is a Business Trust duly organized,
validly existing and in good standing under the laws of Massachusetts and
has power to own all of its properties and assets and to carry out this
Agreement.
(b) The Acquired Fund is registered under the 1940 Act, as
an open-end, management investment company, and such registration has not
been revoked or rescinded and is in full force and effect.
(c) The Acquired Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquired Fund's Declaration of Trust or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquired Fund
is a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Acquired Fund or any of
its properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquired Fund knows of no facts which might form the basis
for the institution of such proceedings, and is not a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the 1940 Act and the rules and regulations of the
Securities and Exchange Commission (the "Commission") thereunder and do not
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(g) The Statement of Assets and Liabilities of the Acquired
Fund at December 31, 1995 and at December 31, 1996 has been audited by
Ernst & Young LLP, independent auditors, and have been prepared in
accordance with generally accepted accounting principles, consistently
applied, and such statements (copies of which have been furnished to the
Acquiring Fund) fairly reflect the financial condition of the Acquired Fund
as of such dates, and there are no known contingent liabilities of the
Acquired Fund as of such dates not disclosed therein.
(h) Since December 31, 1996, there has not been any
material adverse change in the Acquired Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course
of business, or any incurrence by the Acquired Fund of indebtedness
maturing more than one year from the date such indebtedness was incurred,
except as otherwise disclosed to and accepted by the Acquiring Fund.
(i) At the Closing Date, all federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
date shall have been filed or an appropriate extension obtained, and all
federal and other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof or contest in good faith, and
to the best of the Acquired Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such
returns.
(j) For each fiscal year of its operation the Acquired Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. All of the issued and
outstanding shares of the Acquired Fund will, at the time of the Closing,
be held by the persons and in the amounts set forth in the records of the
transfer agent as provided in paragraph 3.3. The Acquired Fund does not
have outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquired Fund shares, nor is there outstanding any
security convertible into any of the Acquired Fund shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets
to be transferred by it hereunder.
(m) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Acquired Fund and, subject to the
approval of the Acquired Fund Shareholders, this Agreement constitutes the
valid and legally binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions
with respect thereto, and to general principles of equity and the
discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund
(the "Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (only insofar as it relates to the
Acquired Fund) will, on the effective date of the Registration Statement
and on the Closing Date, not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
4.2 The Corporation represents and warrants to the Acquired Fund as
follows:
(a) The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Maryland and has the power to carry on its business as it is now being
conducted and to carry out this Agreement.
(b) The Corporation is registered under the 1940 Act as an
open-end, diversified, management investment company, and such registration
has not been revoked or rescinded and is in full force and effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Corporation's Articles of Incorporation or Bylaws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Acquiring Fund or any of
its properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquiring Fund knows of no facts which might form the basis
for the institution of such proceedings, and is not a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the
Acquiring Fund at November 30, 1995 and 1996, have been audited by Arthur
Andersen LLP, independent auditors, and have been prepared in accordance
with generally accepted accounting principles, and such statements (copies
of which have been furnished to the Acquired Fund) fairly reflect the
financial condition of the Acquiring Fund as of such dates, and there are
no known contingent liabilities of the Acquiring Fund as of such dates not
disclosed therein.
(g) Since November 30, 1996, there has not been any
material adverse change in the Acquiring Fund's financial condition,
assets, liabilities or business other than changes occurring in the
ordinary course of business.
(h) At the Closing Date, all federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed or an
appropriate extension obtained, by such date shall have been filed, and all
federal and other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof or contest in good faith, and
to the best of the Acquiring Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such
returns.
(i) For each fiscal year of its operation the Acquiring
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(j) All issued and outstanding Acquiring Fund Shares are,
and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquiring Fund Shares, nor is there outstanding any
security convertible into any Acquiring Fund Shares, except for Class B
Shares which are convertible into Class A Shares eight (8) years after
purchase.
(k) The execution, delivery and performance of this
Agreement has been duly authorized by all necessary action on the part of
the Acquiring Fund, and this Agreement constitutes the valid and legally
binding obligation of the Acquiring Fund enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws relating to or
affecting creditors' rights generally and court decisions with respect
thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a
proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not misleading.
5.COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing
Date, it being understood that such ordinary course of business will
include customary dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated
herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and
do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by
this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund,
in such form as is reasonably satisfactory to the Acquiring Fund, a
statement of the earnings and profits of the Acquired Fund for federal
income tax purposes which will be carried over to the Acquiring Fund as a
result of Section 381 of the Code and which will be certified by the
Acquired Fund's President and its Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with
information reasonably necessary for the preparation of the
Prospectus/Proxy Statement, referred to in paragraph 4.1(o), all to be
included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act and the 1940 Act
as it may deem appropriate in order to continue its operations after the
Closing Date.
5.7 Prior to the Valuation Date, the Acquired Fund shall have
declared a dividend or dividends, with a record date and ex-dividend date
prior to the Valuation Date, which, together with all previous dividends,
shall have the effect of distributing to its shareholders all of its
investment company taxable income, if any, plus the excess of its interest
income, if any, excludable from gross income under Section 103(a) of the
Code over its deductions disallowed under Sections 265 and 171(a)(2) of the
Code for the taxable periods or years ended on or before December 31, 1996
and for the period from said date to and including the Closing Date
(computed without regard to any deduction for dividends paid), and all of
its net capital gain, if any, realized in taxable periods or years ended on
or before December 31, 1996 and in the period from said date to and
including the Closing Date.
6.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance
by the Acquired Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
6.1 All representations and warranties of the Acquired Fund contained
in this Agreement shall be true and correct in all material respects as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the
Acquired Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of the
Closing Date, certified by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or
Vice President and its Treasurer, in form and substance satisfactory to the
Corporation, to the effect that the representations and warranties of the
Acquired Fund made in this Agreement are true and correct in all material
respects at and as of the Closing Date, except as they may be affected by
the transactions contemplated by this Agreement, and as to such other
matters as the Corporation shall reasonably request.
6.4 The Acquired Fund shall have delivered to the Acquiring Fund a
certificate specifying the liabilities which are to be assumed by the
Acquiring Fund all of which shall be reflected in the net asset value of
the Acquired Fund on the Closing Date, which liabilities shall be
acceptable to the Acquiring Fund in its sole discretion.
7.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by
the Acquiring Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
7.1 All representations and warranties of the Corporation contained
in this Agreement shall be true and correct in all material respects as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
7.2 The Corporation shall have delivered to the Acquired Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Corporation made in this Agreement are true and correct in all material
respects at and as of the Closing Date, except as they may be affected by
the transactions contemplated by this Agreement, and as to such other
matters as the Acquired Fund shall reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness,
except as otherwise disclosed to and accepted by the Acquired Fund.
8.FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING
FUND AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund,
either party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding
shares of the Acquired Fund in accordance with the provisions of the
Acquired Fund's Declaration of Trust and the 1940 Act.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those
of the Commission) deemed necessary by the Acquiring Fund or the Acquired
Fund to permit consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure to
obtain any such consent, order or permit would not involve a risk of a
material adverse effect on the assets or properties of the Acquiring Fund
or the Acquired Fund, provided that either party hereto may for itself
waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or
be pending, threatened or contemplated under the 1933 Act.
8.5 The Corporation and the Acquired Fund shall have received an
opinion of Dickstein Shapiro Morin & Oshinsky LLP substantially to the
effect that for federal income tax purposes:
(a) The transfer of all of the Acquired Fund assets and the
assumption of certain liabilities in exchange for the Acquiring Fund Shares
and the distribution of the Acquiring Fund Shares to the Acquired Fund
Shareholders in liquidation of the Acquired Fund will constitute a
"reorganization" within the meaning of Section 368(a)(1)(C) of the Code;
(b) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund solely in exchange for the
Acquiring Fund Shares and the assumption of certain liabilities; (c) No
gain or loss will be recognized by the Acquired Fund upon the transfer of
the Acquired Fund assets to the Acquiring Fund in exchange for the
Acquiring Fund Shares and the assumption of certain liabilities or upon the
distribution (whether actual or constructive) of the Acquiring Fund Shares
to Acquired Fund Shareholders in exchange for their shares of the Acquired
Fund; (d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the
Acquiring Fund Shares; (e) The tax basis of the Acquired Fund assets
acquired by the Acquiring Fund will be the same as the tax basis of such
assets to the Acquired Fund immediately prior to the Reorganization;
(f) The tax basis of the Acquiring Fund Shares received by each of the
Acquired Fund Shareholders pursuant to the Reorganization will be the same
as the tax basis of the Acquired Fund shares held by such shareholder
immediately prior to the Reorganization; (g) The holding period of the
assets of the Acquired Fund in the hands of the Acquiring Fund will include
the period during which those assets were held by the Acquired Fund; and
(h) The holding period of the Acquiring Fund Shares to be received by each
Acquired Fund Shareholder will include the period during which the Acquired
Fund shares exchanged therefor were held by such shareholder (provided the
Acquired Fund shares were held as capital assets on the date of the
Reorganization).
9.TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Trustees of the
Acquired Fund or the Board of Directors of the Corporation at any time
prior to the Closing Date (and notwithstanding any vote of the Acquired
Fund Shareholders) if a majority of the independent board members of either
board believes that continuing the transaction would have a material
adverse impact on shareholders of that fund.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on
the part of any party hereto or the directors/trustees or officers of the
Acquired Fund or the Corporation or the shareholders of the Acquiring Fund
or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Directors of the Corporation or
the Board of Trustees of the Acquired Fund, if, in the judgment of either,
such waiver will not have a material adverse effect on the benefits
intended under this Agreement to the shareholders of the Corporation or of
the Acquired Fund, as the case may be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated
hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements and understandings
of every kind and nature between them relating to the subject matter
hereof. Neither party shall be bound by any condition, definition,
warranty or representation, other than as set forth or provided in this
Agreement or as may be set forth in a later writing signed by the party to
be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania, without giving
effect to principles of conflicts of laws.
11.4 This Agreement may be executed in any number of counterparts,
each of which, when executed and delivered, shall be deemed to be an
original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
11.6 An agreement has been entered into under which Federated Global
Research Corp. will assume substantially all of the expenses of the
reorganization including registration fees, transfer taxes (if any), the
fees of banks and transfer agents and the costs of preparing, printing,
copying and mailing proxy solicitation materials to the Acquired Fund
Shareholders and the costs of holding the special meeting of shareholders.
Penn Square Management Corporation will assume the legal fees of the
Acquired Fund. The accountants' fees of the Acquired Fund will be borne
equally by Federated Global and Penn Square Management Corporation.
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the
date first above written.
Acquired Fund:
Attest: SCOTTISH WIDOWS INTERNATIONAL FUND
By:
Name: Name:
Title: Title:
Acquiring Fund:
Attest: INTERNATIONAL SERIES, INC., on behalf of
its portfolio,
FEDERATED INTERNATIONAL EQUITY FUND, INC.
By:
Name: S. Elliott Cohan Name: Glen R. Johnson
Title:Assistant Secretary Title: President
STATEMENT OF ADDITIONAL INFORMATION
[ ]
ACQUISITION OF THE ASSETS OF
SCOTTISH WIDOWS INTERNATIONAL FUND
2650 WESTVIEW DRIVE
WYOMISSING, PENNSYLVANIA 19610
TELEPHONE NUMBER: 1-800-523-8440
BY AND IN EXCHANGE FOR CLASS A AND CLASS C SHARES RESPECTIVELY OF
FEDERATED INTERNATIONAL EQUITY FUND
A PORTFOLIO OF INTERNATIONAL SERIES, INC.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TELEPHONE NUMBER: 1-800-343-7400
This Statement of Additional Information dated [ ] is not a
prospectus. A Prospectus/Proxy Statement dated [ ] related to the
above-referenced matter may be obtained from Federated International Equity
Fund, Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. This
Statement of Additional Information should be read in conjunction with such
Prospectus/Proxy Statement.
TABLE OF CONTENTS
1. Statement of Additional Information of Federated International Equity
Fund, dated January 31, 1997.
2. Statement of Additional Information of Scottish Widows International
Fund, dated March 15, 1996.
3. Financial Statements of Federated International Equity Fund, dated
November 30, 1996.
4. Financial Statements of Scottish Widows International Fund, dated
December 31, 1996.
5. Pro forma Financial Statements (unaudited) of the combined Scottish
Widows International Fund, dated November 30, 1996, and Federated
International Equity Fund, dated November 30, 1996.
The Statement of Additional Information of Federated International
Equity Fund (the "Federated Fund"), dated January 31, 1997, is incorporated
herein by reference to Post-Effective Amendment No.30 to the Federated
Fund's Registration Statement on Form N-1A (File Nos. 2-91776 and 811-3984)
which was filed with the Securities and Exchange Commission on or about
January 27, 1997. A copy may be obtained, upon request and without charge,
from the Federated Fund at Federated Investors Tower, Pittsburgh, PA 15222-
3279; telephone number: 1-800-341-7400.
The Statement of Additional Information of Scottish Widows
International Fund (the "International Fund"), dated March 15, 1996, is
incorporated herein by reference to Post-Effective Amendment No. 9 to the
Trust's Registration Statement on Form N-1A (File Nos. 33-35081 and 811-
6019) which was filed with the Securities and Exchange Commission on or
about March 21, 1996. A copy may be obtained, upon request and without
charge, from the International Fund at 2650 Westview Drive, Wyomissing,
Pennsylvania 19610; telephone number: 1-800-523-8440.
The audited financial statements of the Federated Fund, dated
November 30, 1996, are incorporated herein by reference to the Federated
Fund's Annual Report to Shareholders dated November 30, 1996, which was
filed with the Securities and Exchange Commission. A copy may be obtained,
upon request and without charge, from the Federated Fund at Federated
Investors Tower, Pittsburgh, PA 15222-3279; telephone number: 1-800-343-
7400.
The audited financial statements of the International Fund, dated
December 31, 1996, are incorporated herein by reference to the
International Fund's Annual Report to Shareholders dated December 31, 1996,
which was filed with the Securities and Exchange Commission. A copy may be
obtained, upon request and without charge, from the International Fund at
2650 Westview Drive, Wyomissing, Pennsylvania 19610; telephone number 1-
800-523-8440.
Pro forma financial statements are included herein as the total net
assets of the International Fund do exceed 10% of the total assets of the
Federated Fund. At February 28, 1997, the total net assets of the
International Fund were $21,416,820 and the total net assets of the
Federated Fund were $166,153,206.
FEDERATED INTERNATIONAL EQUITY FUND
SCOTTISH WIDOWS INTERNATIONAL FUND
INTRODUCTION TO PROPOSED MERGER
NOVEMBER 30, 1996 (UNAUDITED)
The accompanying unaudited Pro Forma Combining Portfolio of Investments and
Statement of Assets and Liabilities reflect the accounts of Federated
International Equity Fund and Scottish Widows International Fund,
collectively (`the Funds''), as of November 30, 1996. These statements
have been derived from the books and records utilized in calculating daily
net asset values at November 30, 1996. The accompanying unaudited Pro Forma
Combining Statement of Operations reflects the accounts of Federated
International Equity Fund's most recent fiscal year ended November 30,
1996, and the twelve month period ended November 30, 1996, for Scottish
Widows International Fund.
The Pro Forma statements give effect to the proposed transfer of assets
from Scottish Widows International Fund Class A and Class C Shares in
exchange for Class A and Class C Shares, respectively, of Federated
International Equity Fund.
<TABLE>
<CAPTION>
FEDERATED INTERNATIONAL EQUITY FUND
SCOTTISH WIDOWS INTERNATIONAL FUND
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996 (UNAUDITED)
<C> <C> <C> <S> <C> <C> <C>
SCOTTISH
FEDERATED WIDOWS FEDERATED SCOTTISH
INTERNATIONAL INTERNATIONAL PRO FORMA INTERNATIONAL WIDOWS PRO FORMA
EQUITY FUND FUND COMBINED EQUITY FUND INTERNATIONAL COMBINED
FUND
VALUE IN U.S. VALUE IN U.S. VALUE IN U.S.
SHARES SHARES SHARES DOLLARS DOLLARS DOLLARS
COMMON STOCKS 96.3%
ARGENTINA--0.6%
12,015 --- 12,015 Banco Frances del Rio de $363,454 --- $363,454
la Plata S.A., ADR
40,229 --- 40,229 Compania Naviera Perez 275,277 --- 275,277
Companc S.A., Class B
7,744 --- 7,744 (a) IRSA Inversiones y
Representaciones S.A., 240,064 --- 240,064
GDR
10,900 --- 10,900 Telefonica de Argentina 277,950 --- 277,950
S.A., ADR
9,800 --- 9,800 YPF Sociedad Anonima, 227,850 --- 227,850
ADR
Total 1,384,595 --- 1,384,595
AUSTRALIA--1.7%
105,000 --- 105,000 (b) Commonwealth
Installment Receipt 663,194 --- 663,194
Trustee Ltd.
195,000 --- 195,000 Darling Park Trust 158,717 --- 158,717
68,500 --- 68,500 Lend Lease Corp., Ltd. 1,271,203 --- 1,271,203
- --- 62,000 62,000 (a) News Corporation --- 330,229 330,229
7,000 --- 7,000 (a) Orogen Minerals 140,910 --- 140,910
Ltd., GDR
- --- 43,000 43,000 (a)Western Mining --- 273,154 273,154
Limited
130,000 --- 130,000 Woodside Petroleum,Ltd. 913,153 --- 913,153
Total 3,147,177 603,383 3,750,560
AUSTRIA--0.1%
3,400 --- 3,400 Vae Eisenbahnsyst 314,189 --- 314,189
BRAZIL--0.6%
36,700 --- 36,700 (a)(b) Elevadores Atlas 394,356 --- 394,356
1,338,000 --- 1,338,000 (a) Light Participacoes 251,409 --- 251,409
S.A.
8,195 --- 8,195 Telecomunicacoes 620,771 --- 620,771
Brasileras, ADR
Total 1,266,536 1,266,536
CANADA--0.1%
18,000 --- 18,000 Ontario Stores, Inc. 173,513 --- 173,513
CHILE--0.4%
9,000 --- 9,000 (a) Banco BHIF, ADR 151,875 --- 151,875
8,000 --- 8,000 (a) Banco de A. Edwards, $148,000 --- $148,000
ADR
3,100 --- 3,100 (a)(b) Chilectra S.A., 170,500 --- 170,500
ADR
2,000 --- 2,000 Compania 190,250 --- 190,250
Telecomunicacion Chile,
ADR
6,900 --- 6,900 (a) Santa Isabel S.A., 173,363 --- 173,363
ADR
3,200 --- 3,200 Sociedad Quimica Y 166,400 --- 166,400
Minera De Chile, ADR
Total 1,000,388 --- 1,000,388
COLOMBIA--0.3%
15,500 --- 15,500 Banco Ganadero S.A., ADR 383,625 --- 383,625
17,000 --- 17,000 Banco Industrial 274,125 --- 274,125
Colombiano, ADR
Total 657,750 --- 657,750
DENMARK--0.1%
4,000 --- 4,000 (a)(b) Inwear Group AS 181,223 --- 181,223
EGYPT--0.1%
10,500 --- 10,500 (a)(b) Suez Cement Co., 168,525 --- 168,525
GDR
FRANCE--7.6%
17,046 --- 17,046 AXA 1,024,300 --- 1,024,300
8,300 --- 8,300 Accor S.A. 1,064,551 --- 1,064,551
- --- 2,273 2,273 (a) Adecco S.A. --- 583,195 583,195
12,600 --- 12,600 Compagnie Financiere de 865,680 --- 865,680
Paribas, Class A
7,600 --- 7,600 Compagnie de St. Gobain 1,092,615 --- 1,092,615
16,400 --- 16,400 Credit Commerical De 794,288 --- 794,288
France
12,000 --- 12,000 Credit Local de France 1,086,336 --- 1,086,336
18,200 --- 18,200 Etablissements
Economiques du Casino 823,979 --- 823,979
Guichard-Perrachon
7,000 --- 7,000 Group Danon 1,030,476 --- 1,030,476
7,000 --- 7,000 Havas S.A. 495,808 --- 495,808
- --- 4,000 4,000 Imetal --- 630,332 630,332
6,700 --- 6,700 LVMH (Moet-Hennessy) 1,698,151 --- 1,698,151
22,900 --- 22,900 Lafarge-Coppee 1,446,648 --- 1,446,648
8,200 --- 8,200 Peugeot S.A. 1,007,772 --- 1,007,772
- --- 1,650 1,650 (a) Pinault Printers --- 656,823 656,823
20,372 --- 20,372 Schneider S.A. 969,111 --- 969,111
10,633 --- 10,633 Total SA-B 850,225 --- 850,225
- --- 9,600 9,600 (a) Veleo --- 589,679 589,679
Total 14,249,940 2,460,029 16,709,969
GERMANY--6.6%
32,000 --- 32,000 BASF AG 1,183,590 --- 1,183,590
30,000 18,000 48,000 (a) Bayer AG 1,207,139 723,697 1,930,836
49,500 --- 49,500 (a) Commerzbank AG, 1,216,501 --- 1,216,501
Frankfurt
20,000 --- 20,000 Daimler Benz AG 1,306,157 --- 1,306,157
21,400 --- 21,400 Deutsche Bank, AG 1,019,843 --- 1,019,843
5,000 --- 5,000 (a) Henkel KGAA 243,807 --- 243,807
2,200 --- 2,200 Linde AG 1,335,934 --- 1,335,934
2,800 1,490 4.290 Mannesmann AG 1,167,804 620,387 1,788,191
17,700 --- 17,700 Schwarz Pharma AG 1,317,632 --- 1,317,632
- --- 5,000 5,000 (a) SGL Carbon --- 618,044 618,044
30,000 --- 30,000 Siemens AG 1,445,290 --- 1,445,290
19,700 --- 19,700 Veba AG 1,152,080 --- 1,152,080
Total $12,595,777 1,962,128 $14,557,905
HONG KONG--6.9%
2,070,000 --- 2,070,000 Aeon Credit Service 696,068 --- 696,068
1,119,000 --- 1,119,000 Amoy Properties Ltd. 1,563,011 --- 1,563,011
- --- 117,000 117,000 (a) Asia Satelite --- 300,367 300,367
363,000 --- 363,000 (a) Cheung Kong 882,618 --- 882,618
87,000 --- 87,000 Cheung Kong 765,132 --- 765,132
152,600 --- 152,600 (a)(b) China Resources 94,734 --- 94,734
Bejing Land
- --- 65,000 65,000 (a) Citic Pacific Ltd. --- 338,785 338,785
71,014 18,395 89,409 HSBC Holdings PLC 1,478,693 383,029 1,861,722
1,159,000 --- 1,159,000 Henderson Investment 1,409,027 --- 1,409,027
Ltd.
388,000 --- 388,000 Hong Kong Telecom 672,426 --- 672,426
146,000 --- 146,000 Hutchison Whampoa 1,128,233 --- 1,128,233
123,000 --- 123,000 New World Development 831,189 --- 831,189
Co. Ltd.
1,414,000 --- 1,414,000 Oriental Press Group 795,512 --- 795,512
600,000 182,000 782,000 (a) Peregrine Investment 1,109,674 336,599 1,446,273
- --- 18,200 18,200 (a) Peregrine --- 6,002 6,002
Investment, Warrants
132,000 --- 132,000 Sun Hung Kai Properties 1,638,903 --- 1,638,903
549,500 --- 549,500 (a) Winsor Property 827,946 --- 827,946
Holdings Ltd.
Total 13,893,166 1,364,782 15,257,948
INDIA--1.1%
73,200 --- 73,200 (a)(b) Crompton Greaves 237,900 --- 237,900
Ltd., GDR
30,000 --- 30,000 (a) Hindalco Industries 612,000 --- 612,000
Ltd., GDR
40,000 --- 40,000 (a)(b) Larsen & Toubro 580,000 --- 580,000
Ltd., GDR
63,800 --- 63,800 (a)(b) Mahindra and 669,900 --- 669,900
Mahindra , GDR
34,200 --- 34,200 (a)(b) Steel Authority 290,700 --- 290,700
of India, GDR
Total 2,390,500 --- 2,390,500
INDONESIA--1.4%
552,500 --- 552,500 (a) PT Bank Negara 276,839 --- 276,839
Indonesia
360,000 --- 360,000 Citra Marga Nusaphala 303,198 --- 303,198
Persada
95,500 --- 95,500 Gudang Garam 406,231 --- 406,231
- --- 58,000 58,000 (a) Hanjaya Mandala --- 295,261 295,261
Sampoerna
168,000 --- 168,000 Modern Photo Film Co. 420,896 --- 420,896
112,000 --- 112,000 Semen Gresik 341,493 --- 341,493
360,667 --- 360,667 Steady Safe 422,957 --- 422,957
409,060 --- 409,060 Pab K Tjiwi Kimia 392,488 --- 392,488
170,000 --- 170,000 Tambang Timah 268,230 --- 268,230
Total 2,832,332 295,261 3,127,593
ISRAEL--0.1%
8,100 --- 8,100 (a) Memco Software, Ltd. 154,913 --- 154,913
ITALY--2.2%
150,000 --- 150,000 Bca Pop Di Milano 766,846 --- 766,846
128,000 --- 128,000 Burgo (Cartiere) SPA 612,157 --- 612,157
171,000 --- 171,000 Eni Spa 900,148 --- 900,148
96,000 --- 96,000 Imi 806,465 --- 806,465
5,000 --- 96,000 (a) La Rinascente SPA, 2,342 --- 2,342
Warrants
500,000 --- 5,000 Telecom Italia Mobile 1,175,830 --- 1,175,830
103,000 --- 103,000 (a) Unicem SPA 695,069 --- 695,069
Total $4,958,857 --- $4,958,857
JAPAN--23.7%
175,000 --- 175,000 Amada Co 1,462,687 --- 1,462,687
3,200 --- 3,200 Asahi Broadcasting Corp. 351,185 --- 351,185
40,000 --- 40,000 Canare Electric Co. Ltd. 842,845 --- 842,845
232,000 --- 232,000 Casio Computer Co 1,882,072 --- 1,882,072
250 --- 250 DDI Corp. 1,788,850 --- 1,788,850
113,000 --- 113,000 Dai Nippon Printing Co. 2,063,565 --- 2,063,565
Ltd.
145,200 --- 145,200 Daito Trust Construction 1,899,456 --- 1,899,456
62,000 --- 62,000 Fuji Photo Film 1,943,284 --- 1,943,284
100,000 --- 100,000 Hitachi Maxell 2,063,213 --- 2,063,213
- --- 16,000 16,000 (a) Ines --- 255,877 255,877
175,000 --- 175,000 JGC Corp. 1,613,257 --- 1,613,257
4,000 --- 4,000 Japan Cash Machine Co. 71,291 --- 71,291
Ltd.
85,000 --- 85,000 Japan Radio Co. 1,037,313 --- 1,037,313
270 20 290 (a)(b) Japan Tobacco, 1,922,476 142,525 2,065,001
Inc.
80,000 --- 80,000 Konami Co. 2,732,221 --- 2,732,221
- --- 40,000 40,000 Kurimoto Iron Works --- 376,084 376,084
12,000 --- 12,000 (a) Meiwa Estate 349,781 --- 349,781
250,000 --- 250,000 Minolta Co. 1,573,749 --- 1,573,749
250,000 74,000 324,000 Mitsubishi Heavy 2,041,264 604,721 2,645,985
Industries Ltd.
- --- 15,000 15,000 Murata Manufacturing --- 512,721 512,721
Company
25,000 --- 25,000 Nintendo Corp. Ltd. 1,766,901 --- 1,766,901
80,000 29,000 109,000 (a) Nippon Comsys Corp. 997,366 361,849 1,359,215
- --- 88,000 88,000 Nissan Motor Company --- 625,564 625,564
82,000 --- 82,000 Pioneer Electronic Corp. 1,763,828 --- 1,763,828
30,000 --- 30,000 Promise Co. Ltd. 1,501,317 --- 1,501,317
- --- 7,000 7,000 Rohm Company --- 430,563 430,563
70,000 --- 70,000 Sankyo Co. 1,874,451 --- 1,874,451
- --- 8,700 8,700 Sanyo Shinpan Finance --- 547,360 547,360
Company
110,000 --- 110,000 Shiseido Co. 1,323,090 --- 1,323,090
80,000 40,000 120,000 (a) Shochiku Co. 744,513 372,569 1,117,082
30,000 --- 30,000 Sony Corp. 1,920,105 --- 1,920,105
- --- 94,000 94,000 Sumitomo Realty & --- 652,523 652,523
Development
141,000 51,000 192,000 Sumitomo Trust & Banking 1,559,789 564,653 2,124,442
86,000 --- 86,000 Taisho Pharmaceutical Co 1,917,823 --- 1,917,823
88,000 --- 88,000 Takashimaya Co 1,174,364 --- 1,174,364
165,000 --- 165,000 Tokio Marine and Fire 1,825,285 --- 1,825,285
Insurance Co.
350,000 --- 350,000 (a) Tokyo Tatemono Co., 1,604,038 --- 1,604,038
Ltd.
150,000 --- 150,000 Tsubakimoto Chain 883,670 --- 883,670
- --- 70,000 70,000 Yamaichi Securities --- 369,669 369,669
Total 46,495,049 5,816,678 52,311,727
KOREA--0.9%
10,000 --- 10,000 Dongkuk Steel Mill 194,222 --- 194,222
7,300 --- 7,300 Hankuk Paper 165,559 --- 165,559
Manufacturing Co.
58,000 --- 58,000 Korea Exchange Bank 545,751 --- 545,751
84,650 --- 84,650 (a) Korea Mobile 1,100,450 --- 1,100,450
Telecomm Corp., ADR
50 --- 50 Samsung Electronics Co. 3,607 --- 3,607
166 --- 166 Samsung Electronics Co. $12,276 --- $12,276
4 --- 4 (a)(b) Samsung 0 --- 0
Electronics Co., GDR
15 --- 15 (a)(b) Samsung 754 --- 754
Electronics Co., GDR
2,740 --- 2,740 Shinhan Bank 48,391 --- 48,391
Total 2,071,010 --- 2,071,010
MALAYSIA--2.5%
429,000 --- 429,000 Eastern and Oriental 933,715 --- 933,715
84,000 --- 84,000 Malayan Banking 831,025 --- 831,025
590,000 --- 590,000 Malaysian Industrial 1,214,088 --- 1,214,088
Development
222,000 --- 222,000 Malaysian Pacific 904,867 --- 904,867
Industries
192,000 --- 192,000 Metacorp 592,639 --- 592,639
138,000 --- 138,000 UMW Holdings 655,322 --- 655,322
- --- 40,000 40,000 (a) United Engineers --- 362,409 362,409
Total 5,131,656 362,409 5,494,065
MEXICO--1.7%
16,950 --- 16,950 (a)(b) Acer, Inc., ADR 305,100 --- 305,100
44,700 --- 44,700 (a) Cemex S.A., Class B, 322,678 --- 322,678
ADR
268,000 --- 268,000 (a) Cifra SA de CV, 369,702 --- 369,702
Class B
28,400 --- 28,400 (a) Empresas ICA
Sociedad Controladora 408,250 --- 408,250
S.A., ADR
211,000 --- 211,000 Fomento Economico
Mexicano, S.A. de C.V., 720,990 --- 720,990
Class B
205,000 --- 205,000 (a) Grupo Corvi S.A., 171,548 --- 171,548
Class UBL
42,800 --- 42,800 (a)(b) Grupo Financiero
Bancomer, S.A. de C.V., 344,797 --- 344,797
Class B, ADR
8,600 --- 8,600 Pan American Beverage, 402,050 --- 402,050
Class A
10,900 --- 10,900 Telefonos de Mexico, 331,088 --- 331,088
Class L, ADR
29,500 --- 29,500 (a) Tubos de Acero de 401,938 --- 401,938
Mexico S.A., ADR
Total 3,778,141 --- 3,778,141
NETHERLANDS--3.2%
15,000 --- 15,000 ABN-Amro Hldgs N.V. 971,699 --- 971,699
22,800 --- 22,800 (a) ASM Lithography 1,003,607 --- 1,003,607
Holding N.V.
24,000 --- 24,000 Boskalis Westminster 476,019 --- 476,019
- --- 41,000 41,000 (a) Elsevier N.V. --- 698,955 698,955
32,300 19,292 51,592 ING Groep, N.V. 1,131,427 675,666 1,807,093
2,400 --- 2,400 Koninklijke Frans Maas 97,152 --- 97,152
Groep N.V.
- --- 21,000 21,000 (a) Philips Electronics --- 848,731 848,731
9,002 --- 9,002 Wolters Kluwer N.V. 1,177,261 --- 1,177,261
Total 4,857,165 2,223,352 7,080,517
NEW ZEALAND--0.4%
210,000 --- 210,000 Air New Zealand Ltd., 552,631 --- 552,631
Class B
100,000 --- 100,000 Fletcher Challenge 280,939 --- 280,939
Building
Total 833,570 --- 833,570
NORWAY--0.4%
51,000 --- 51,000 (a) Elkem A/S, Class A 794,640 --- 794,640
PAKISTAN--0.2%
230,000 --- 230,000 Faysal Bank 137,725 --- 137,725
12,000 --- 12,000 (a) Hub Power Co., GDR 258,000 --- 258,000
90,000 --- 90,000 (a) PEL Appliances Ltd. $78,593 --- $78,593
Total 474,318 --- 474,318
PHILIPPINES--0.9%
1,700,000 --- 1,700,000 (a) Belle Corp. 452,712 --- 452,712
911,552 --- 911,552 Davao Union Cement 298,232 --- 298,232
Corp., Class B
1,344,900 --- 1,344,900 (a) Filinvest Land, Inc. 475,826 --- 475,826
- --- 133,800 133,800 First Philippine --- 282,504 282,504
Holdings Corp.
30,200 --- 30,200 Philippine Commercial 402,115 --- 402,115
International Bank
Total 1,628,885 282,504 1,911,389
SINGAPORE--2.3%
172,000 --- 172,000 Hong Leong Finance Ltd. 596,021 --- 596,021
- --- 46 46 (a) OCBC Foreign --- 558 558
1,178,300 --- 1,178,300 Roly International 777,678 --- 777,678
Holdings
144,000 --- 144,000 Sembawang Corp. Ltd 780,321 --- 780,321
31,000 --- 31,000 Singapore Press Holdings 585,740 --- 585,740
Ltd.
184,000 --- 184,000 Straits Steamship Land 587,750 --- 587,750
Ltd.
69,750 --- 69,750 (a) Straits Steamship 78,080 --- 78,080
Land Ltd., Warrants
100,000 --- 100,000 United Overseas Bank 1,062,389 --- 1,062,389
Ltd.
220,000 --- 220,000 Wing Tai Holdings, Ltd. 602,353 --- 602,353
Total 5,070,332 558 5,070,890
SPAIN--3.0%
6,500 --- 6,500 (a) ABENGOA S.A. 225,548 --- 225,548
13,000 --- 13,000 Corp Mapfre S.A. 687,432 --- 687,432
14,500 --- 14,500 Empresa Nac De 979,427 --- 979,427
Electridad
10,500 --- 10,500 Fomento de 887,564 --- 887,564
Construcciones y
Contratas S.A.
79,000 --- 79,000 Iberdrola S.A. 911,726 --- 911,726
28,000 --- 28,000 Repsol S.A. 1,036,437 --- 1,036,437
42,000 --- 42,000 Telefonica de Espana 920,797 --- 920,797
8,800 --- 8,800 Zardoya-Otis S.A. 937,471 --- 937,471
Total 6,586,402 --- 6,586,402
SWEDEN--1.7%
25,000 --- 25,000 (a) Biacore 397,396 --- 397,396
International AB
- --- 16,640 16,640 (a) Ericsson (LM) --- 513,138 513,138
Telephone
- --- 11,400 11,400 (a) Pharmacia & Upjohn --- 439,011 439,011
- --- 25,500 25,500 (a) Sandvik AB --- 629,266 629,266
1,750 --- 1,750 (a) Scala International 153,747 --- 153,747
AB
121,000 --- 121,000 Stora Kopparbergs, Class 1,657,633 --- 1,657,633
A
Total 2,208,776 1,581,415 3,790,191
SWITZERLAND--5.1%
740 --- 740 ABB AG 925,923 --- 925,923
9,400 --- 9,400 CS Holding AG 1,000,575 --- 1,000,575
1,215 625 1,840 (a) Ciba-Giegy AG 1,503,487 774,095 2,277,582
820 --- 820 Nestle S.A. 890,142 --- 890,142
10,000 --- 10,000 (a) Oerlikon-Buhrle 1,031,837 --- 1,031,837
Holding AG
195 100 295 Roche Holding AG 1,498,964 769,392 2,268,356
950 --- 950 Sandoz AG 1,104,872 --- 1,104,872
1,500 --- 1,500 Sulzer AG 863,061 --- 863,061
3,200 --- 3,200 Zurich 908,324 --- 908,324
Versicherungsgesellschaf
t
Total $9,727,185 1,543,487 $11,270,672
THAILAND--1.0%
- --- 45,000 45,000 Bangkok Bank --- 359,424 359,424
214,100 --- 214,100 Industrial Finance 674,812 --- 674,812
Corporation of Thailand
78,900 --- 78,900 Krung Thai Bank PLC 225,512 --- 225,512
34,300 --- 34,300 PTT Exploration and 504,955 --- 504,955
Production Public Co.
380,000 --- 380,000 Siam City Bank 446,350 --- 446,350
Total 1,851,629 359,424 2,211,053
UNITED KINGDOM--20.0%
- --- 10,000 10,000 (a) AMERSHAW --- 183,991 183,991
International
275,000 --- 275,000 Asda Group 547,873 --- 547,873
40,000 --- 40,000 (a) Atlantic Telecom 82,717 --- 82,717
Group PLC
100,000 --- 100,000 BAA 823,806 --- 823,806
236,000 --- 236,000 BTR PLC 948,285 --- 948,285
60,766 --- 60,766 Barclays PLC 1,045,118 --- 1,045,118
50,724 --- 50,724 Boc Group PLC 755,573 --- 755,573
80,000 --- 80,000 Boots Co. PLC 852,724 --- 852,724
54,323 26,000 80,323 (a) British Aerospace 1,056,691 505,905 1,562,596
86,765 --- 86,765 British Petroleum Co. 1,003,239 --- 1,003,239
PLC
222,495 --- 222,495 Bunzl PLC 830,430 --- 830,430
85,822 --- 85,822 Cadbury Schweppes PLC 738,029 --- 738,029
190,000 --- 190,000 Caradon PLC 761,853 --- 761,853
100,000 --- 100,000 Carlton Communications 845,662 --- 845,662
PLC
70,000 --- 70,000 Chubb Security 403,665 --- 403,665
103,600 --- 103,600 Compass Group 1,056,379 --- 1,056,379
190,000 --- 190,000 Cookson Group 721,923 --- 721,923
63,500 --- 63,500 Cowie Group PLC 422,764 --- 422,764
152,757 --- 152,757 David S. Smith 810,270 --- 810,270
(Holdings) PLC
164,550 --- 164,550 Delta 1,005,614 --- 1,005,614
- --- 123,000 123,000 (a) Dewhirst Group --- 388,553 388,553
64,937 --- 64,937 EMI Group PLC 1,500,058 --- 1,500,058
16,500 --- 16,500 (a) Eidos PLC 233,020 --- 233,020
300,000 --- 300,000 FKI PLC 1,086,920 --- 1,086,920
- --- 37,000 37,000 (a) Farnell Electronics --- 442,658 442,658
59,400 --- 59,400 General Accident 731,515 --- 731,515
126,000 --- 126,000 General Electric Co. PLC 789,089 --- 789,089
56,000 --- 56,000 Glaxo Wellcome PLC 921,015 --- 921,015
- --- 37,000 37,000 Granada Group --- 538,402 538,402
114,448 --- 114,448 Grand Metropolitan PLC 893,764 --- 893,764
158,052 --- 158,052 Guardian Royal Ex 712,140 --- 712,140
52,000 --- 52,000 Imperial Chemical 674,479 --- 674,479
Industries, PLC
180,000 --- 180,000 Inchcape PLC 815,568 --- 815,568
166,393 --- 166,393 Ladbroke Group PLC 573,481 --- 573,481
- --- 31,500 31,500 Laporte PLC --- 362,037 362,037
- --- 58,438 58,438 Lloyds TSB Group --- 404,557 404,557
- --- 66,000 66,000 (a) Low & Bonar --- 470,215 470,215
120,000 --- 120,000 Marks & Spencer PLC 1,020,847 --- 1,020,847
277,000 --- 277,000 Mirror Group PLC 1,071,116 --- 1,071,116
78,500 --- 78,500 National Power Co. PLC $608,415 --- $608,415
95,000 --- 95,000 Pearson 1,173,924 --- 1,173,924
50,000 --- 50,000 Peninsular & Oriental 497,236 --- 497,236
Steam Navigation Co.
65,000 --- 65,000 Powergen PLC 633,827 --- 633,827
72,000 --- 72,000 Premier Farnell PLC 861,870 --- 861,870
41,614 --- 41,614 RTZ Corp. PLC 699,630 --- 699,630
100,000 --- 100,000 Rank Group PLC 731,338 --- 731,338
85,500 --- 85,500 Reckitt & Colman PLC 1,007,658 --- 1,007,658
57,000 --- 57,000 Reed International PlC 1,104,447 --- 1,104,447
500,000 --- 500,000 Rugby Group PLC 806,994 --- 806,994
86,000 --- 86,000 Safeway PLC 563,887 --- 563,887
330,000 --- 330,000 Sedgwick Group PLC 696,284 --- 696,284
66,000 --- 66,000 Siebe PLC 1,053,581 --- 1,053,581
114,000 --- 114,000 Smith, W.H. Group PLC 810,726 --- 810,726
66,344 --- 66,344 Smithkline Beecham Corp. 914,635 --- 914,635
- --- 119,000 119,000 (a) Storehouse --- 520,885 520,885
74,000 --- 74,000 (a) Thorn PLC 343,376 --- 343,376
235,000 --- 235,000 Tomkins PLC 981,801 --- 981,801
37,000 --- 37,000 Zeneca Group 1,020,175 --- 1,020,175
Total 40,245,431 3,817,203 44,062,634
UNITED STATES-0.1%
- --- 22,000 22,000 (a) ICICI-Industrial --- 177,375 177,375
Credit & Investment
Corp.
TOTAL COMMON STOCKS
(IDENTIFIED COST 191,123,570 22,849,988 213,973,558
$193,143,961)
FOREIGN
CURRENCY
PAR
AMOUNT
OR VALUE IN VALUE IN VALUE IN
SHARES U.S. DOLLARS U.S. DOLLARS U.S. DOLLARS
CORPORATE BONDS--0.2%
JAPAN--0.2%
53,000,000 --- 53,000,000 (b) Sumitomo Bank Ltd.,
Osaka, Conv. Bond, 505,454 --- 505,454
0.75%, 5/31/2001
(IDENTIFIED COST
$486,551)
PREFERRED STOCKS--3.7%
AUSTRALIA--0.5%
233,000 --- 233,000 News Corp., Ltd., Pfd. 1,024,093 --- 1,024,093
BRAZIL--1.7%
1,577,000 --- 1,577,000 Banco Itau S.A., 618,282 --- 618,282
Preference
1,800,000 --- 1,800,000 Centrais Eletricas 590,707 --- 590,707
Brasileiras, Preference,
Series B
29,200 --- 29,200 (a) Cofap-Cia Fab Peca, 238,858 --- 238,858
Preference
4,220,000 --- 4,220,000 (a) Petroleo Brasileiro 580,097 --- 580,097
S.A., Preference
250,000 --- 250,000 Sider Paulista (Cos.) 227,493 --- 227,493
3,230,000 --- 3,230,000 (a) Telecomunicacoes de ---
Sao Paulo S.A., 572,207 572,207
Preference
27,400,000 --- 27,400,000 (a) Uniao de Bancos 767,624 --- 767,624
Brasileir, Pfd.
247,900,000 --- 247,900,00 (a) Usinas Siderurgicas 247,180 --- 247,180
0 de Minas Gerais, Pfd.
Total 3,842,448 --- 3,842,448
GERMANY--0.5%
20,000 --- 20,000 Henkel KGAA, Pfd. 996,034 --- 996,034
JAPAN--0.7%
27 --- 27 (b) Sakura Finance 1,534,466 --- 1,534,466
(Bermuda), Conv. Pfd.,
TOTAL PREFERRED
STOCKS (IDENTIFIED COST 7,397,041 --- 7,397,041
$6,237,930)
PRINCIPAL VALUE IN VALUE IN VALUE IN
AMOUNT U.S. DOLLARS U.S. DOLLARS U.S. DOLLARS
(C) REPURCHASE AGREEMENT--1.1%
$2,350,000 --- 2,350,000 BT Securities
Corporation, 5.72%, $2,350,000 --- $2,350,000
dated 11/29/1996, due
12/2/1996 (AT AMORTIZED
COST)
TOTAL INVESTMENTS
(IDENTIFIED COST $201,376,065 $22,849,988 $224,226,053
$202,218,442)(D)
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal securities laws. At November 30, 1996, these securities amounted
to $8,206,604 which represents 3.7% of net assets.
(c) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the portfolio.
The investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to
$202,406,801. The net unrealized appreciation of investments on a federal tax
basis amounts to $21,819,252 which is comprised of $27,465,513 appreciation and
$5,646,261 depreciation at November 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($220,682,937) at November 30, 1996.
The following acronym(s) are used throughout this portfolio:
ADR --American Depository Receipt.
GDR --Global Depository Receipt.
PLC --Public Limited Company.
<TABLE>
<CAPTION>
Federated International Equity Fund
Scottish Widows International Fund
Pro Forma Combining Statement of Assets and Liabilities
November 30, 1996 (unaudited)
Scottish
Federated Widows
International International Pro Forma Pro Forma
Equity Fund Fund Adjustment Combined
<S> <C> <C> <C> <C>
Assets:
Investments in securities,
at value $ 201,376,065 $ 22,849,988 ---- $ 224,226,053
Cash 396,020 708,043 ---- 1,104,063
Cash denominated in foreign
currency 4,535 173,668 178,203
Receivables for:
Investments sold 3,170,635 992,424 ---- 4,163,059
Shares sold 502,108 455 ---- 502,563
Income 550,968 27,707 ---- 578,675
Tax refund 52,311 52,311
Other 22,412 22,412
Total assets 206,000,331 24,827,008 ---- 230,827,339
Liabilities:
Payables for/to:
Shares redeemed 277,960 21,188 ---- 299,148
Investments purchased 8,243,946 1,340,173 ---- 9,584,119
Taxes withheld 35,885 ---- ---- 35,885
Net payable for foreign exchange
contracts 11,278 ---- 11,278
Accrued expenses and other
liabilities 206,926 7,046 ---- 213,972
Total liabilities 8,775,995 1,368,407 ---- 10,144,402
Total Net Assets $197,224,336 $23,458,601 ---- $220,682,937
Net Assets consist of:
Paid in capital $174,869,114 $17,710,129 ---- $192,579,243
Net unrealized appreciation of
investments 18,212,892 3,794,235 ---- 22,007,127
Accumulated net realized gain (loss)
on investments 4,166,725 1,892,014 ---- 6,058,739
Undistributed (Distributions in excess
of) net investment income (24,395) 62,223 ---- 37,828
Total Net Assets $197,224,336 $23,458,601 $ $220,682,937
Class A Shares $172,937,556 $23,234,537 $ $196,172,093
Class B Shares $16,707,131 $---- $---- $16,707,131
Class C Shares $7,579,649 $224,064 $---- $7,803,713
Shares Outstanding
Class A Shares 9,982,601 1,733,150 (391,966) (a) 11,323,785
Class B Shares 980,572 ---- ---- 980,572
Class C Shares 449,814 16,841 (3,544) (a) 463,111
Total Shares Outstanding 11,412,987 1,749,991 (395,510) 12,767,468
</TABLE>
<TABLE>
<CAPTION>
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
<S> <C> <C> <C>
Class A Shares:
Net Asset Value Per Share $ 17.32 $ 13.41 $ 17.32
Offering Price Per Share $ 18.33 * $ 14.08 *** $ 18.33
Redemption Proceeds Per Share $ 17.32 $ 13.41 $ 17.32
Class B Shares:
Net Asset Value Per Share $ 17.04 $ N/A $ 17.04
Offering Price Per Share $ 17.04 $ N/A $ 17.04
Redemption Proceeds Per Share $ 16.10 ** $ N/A $ 16.10
Class C Shares:
Net Asset Value Per Share $ 16.85 $ 13.30 $ 16.85
Offering Price Per Share $ 16.85 $ 13.30 $ 16.85
Redemption Proceeds Per Share $ 16.68 ** $ 13.17 **** $ 16.68
Total Investments, at identified
cost $183,164,318 $19,054,124 $202,218,442
</TABLE>
(a) Adjustment to reflect share balance as a result of the combination,
based on the proforma exchange ratios of 0.7738418487 for Scottish Widows
International Fund Class A shares and 0.7895611900 for Scottish Widows
International Fund Class C shares.
* See "How to Purchase Shares" in the Federated International Equity
Fund Prospectus, as of January 31, 1997.
** See "Contingent Deferred Sales Charge " in the Federated International
Equity Fund Prospectus, as of January 31, 1997.
***See `How to Buy Shares'' in the Scottish Widows International Fund
Prospectus, as of March 15, 1996.
****See `How to Redeem Shares'' in the Scottish Widows International
Fund Prospectus, as of March 15, 1996.
<TABLE>
<CAPTION>
Federated International Equity Fund
Scottish Widows International Fund
Pro Forma Combining Statement of Operations
For the Year Ended November 30, 1996 (unaudited)
Federated Scottish
International Widows
Equity International Pro Forma Pro Forma
Fund Fund Adjustments Combined
<S> <C> <C> <C> <C>
Investment Income:
Dividends $3,539,771 $411,295 $---- $3,951,066
Interest 127,931 18,815 ---- 146,746
Total Investment Income 3,667,702 430,110 ---- 4,097,812
Expenses:
Investment advisory 2,004,435 206,623 99,485 (a) 2,310,543
Administrative personnel and
services fee 185,000 ---- ---- (b) 185,000
Custodian fees 341,587 34,914 (8,396) (c) 368,105
Transfer and dividend disbursing
agent fees and expenses 306,158 43,238 (19,295) (d) 330,101
Directors'/Trustees' fees 6,877 27,914 (26,791) (e) 8,000
Legal and auditing fees 68,931 35,561 (32,992) (f) 71,500
Portfolio accounting fees 91,853 ---- 8,168 (g) 100,021
Distribution services fee -
Class A Shares ---- 62,989 (62,989) (h) ---
Distribution services fee -
Class B Shares 92,608 ---- ---- 92,608
Distribution services fee -
Class C Shares 58,555 910 (565) (i) 58,900
Shareholder services fee -
Class A Shares 450,721 ---- 29,918 (j) 480,639
Shareholder services fee -
Class B Shares 30,869 ---- ---- 30,869
Shareholder services fee -
Class C Shares 19,518 305 (188) (j) 19,635
Share registration costs 39,419 15,296 (12,087) (k) 42,628
Printing and postage 56,268 9,318 (7,086) (l) 58,500
Insurance premiums and miscellaneous 11,556 9,572 (8,627) (m) 12,501
Taxes 60,641 ---- 1,359 (n) 62,000
Total expenses 3,824,996 446,640 (40,086) 4,231,550
Deduct-
Waiver of shareholder services fee
--Class A Shares (274,003) ---- ---- (274,003)
Waiver of Shareholder services fee
--Class C Shares (1,101) --- ---- (1,101)
Net expenses 3,549,892 446,640 (40,086) 3,956,446
Net investment income 117,810 (16,530) 40,086 141,366
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments 4,131,728 2,882,786 ---- 7,014,514
Net change in unrealized appreciation
of investments 11,785,397 618,257 ---- 12,403,654
Net realized and unrealized gain on
investments 15,917,125 3,501,043 ---- 19,418,168
Change in net assets resulting
from operations $16,034,935 $3,484,513 $40,086 $19,559,534
(See Notes to Pro Forma Combining Statement of Operations)
(See Notes to Pro Forma Financial Statements)
</TABLE>
Federated International Equity Fund
Scottish Widows International Fund
Notes to Pro Forma Combining Statement of Operations
For the Year Ended November 30, 1996 (unaudited)
(a) Federated Advisers receives for its services an annual investment
advisory fee equal to 1.00% of the Federated International Equity Fund's
(`the Federated Fund'') average daily net assets. Penn Square Management
Corporation receives for its services 0.675% of the Scottish Widows
International Fund's average daily net assets.
(b) Federated Services Company (`FServ'') provides the Federated Fund
with certain administrative personnel and services. The fee paid to FServ
is based on the level of average aggregate daily net assets of all funds
advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative
Services Agreement shall be at least $125,000 per portfolio and $30,000 per
each additional class of shares.
(c) State Street Bank and Trust Company is custodian for the securities and
cash of the Federated Fund. The custodian fee is based upon the level of
the Federated Fund's average daily net assets for the period, plus out-of-
pocket expenses.
(d) FServ serves as transfer and dividend disbursing agent for the
Federated Fund. The fee paid to FServ is based on the size, type, and
number of accounts and transactions made by shareholders.
(e) Adjustment to reflect the elimination of the Trustees' fees paid for
the Scottish Widows International Fund.
(f) Adjustment to reflect the audit and legal fee reductions due to the
combining of two portfolios into a single portfolio.
(g) FServ maintains the Federated Fund's accounting records. The fee paid
to FServ is based on the level of the Federated Fund's average net assets
for the period, plus out-of-pocket expenses.
(h) Adjustment to reflect the elimination of the distribution services fees
charged to the shareholders of the Scottish Widows International Fund. The
Federated Fund Class A Shares does not have a distribution plan.
(i) Under the distribution plan for the Federated Fund, Class C Shares will
pay a fee at an annual rate of 0.75% of the average daily net assets of its
Shares. Penn Square Management Corporation received for its services 0.75%
of the Scottish Widows International Fund's Class C Shares average daily
net assets.
(j) The Federated Fund has entered into a Shareholder Services Agreement
with Federated Shareholder Services (`FSS''). The Federated Fund will
pay FSS up to 0.25% of the average daily net assets of the Federated Fund
for the period. Penn Square Management Corporation received for its
services 0.25% of the Scottish Widows International Fund's Class C Shares
average daily net assets.
(k)Adjustment to reflect the state registration costs for the Federated
Fund only.
(l) Printing and postage expenses are adjusted to reflect estimated savings
to be realized by combining two portfolios into a single portfolio.
(m)Adjustment to reflect the decrease in insurance fees due to the
reduction in the coverage requirement of a single portfolio.
(n) Adjustment to reflect the tax increase due to the additional income in
combination with the portfolio's assets.
FEDERATED INTERNATIONAL EQUITY FUND
SCOTTISH WIDOWS INTERNATIONAL FUND
NOTES TO PRO FORMA FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (UNAUDITED)
1. BASIS OF COMBINATION
The accompanying unaudited Pro Forma Combining Portfolio of Investments and
Statement of Assets and Liabilities reflect the accounts of Federated
International Equity Fund and Scottish Widows International Fund,
collectively (the `Funds'') as of November 30, 1996. These statements
have been derived from the books and records utilized in calculating daily
net asset values at November 30, 1996. The accompanying unaudited Pro Forma
Combining Statement of Operations reflects the accounts of Federated
International Equity Fund's most recent fiscal year ended November 30,
1996, and the twelve month period ended November 30, 1996, for Scottish
Widows International Fund.
The Pro Forma Financial Statements should be read in conjunction with the
historical financial statements of the Funds which are incorporated by
reference in the Statement of Additional Information. The Funds follow
generally accepted accounting principles applicable to management
investment companies which are disclosed in the historical financial
statements of each fund.
The Pro Forma Financial Statements give effect to the proposed transfer of
assets of the Scottish Widows International Fund Class A and Class C Shares
in exchange for Class A and Class C Shares, respectively, of Federated
International Equity Fund. Under generally accepted accounting principles,
Federated International Equity Fund will be the surviving entity for
accounting purposes with its historical cost of investment securities and
results of operations being carried forward.
The Pro Forma Financial Statements have been adjusted to reflect the
anticipated advisory and administrative fee arrangements for the surviving
entity. Certain other operating costs have also been adjusted to reflect
anticipated expenses of the combined entity. Other costs which may change
as a result of the reorganization are currently undeterminable.
For the twelve months ended November 30, 1996, Federated International
Equity Fund and Scottish Widows International Fund paid investment
advisory fees computed at the annual rate of each Fund's average net assets
as follows:
Fund Percent of Each Fund's Average Net Assets
Federated International Equity Fund 1.00%
Scottish Widows International Fund 0.675%
2. SHARES OF BENEFICIAL INTEREST
The Pro Forma net asset value per share assumes the issuance of 1,341,184
shares of Federated International Equity Fund Class A shares in exchange
for 1,733,150 shares of Scottish Widows International Fund Class A shares
and the issuance of 13,297 shares of Federated International Equity Fund
Class C shares in exchange for 16,841 shares of Scottish Widows
International Fund Class C shares in conjunction with the proposed
reorganization.
Sheraton Berkshire Motor Inn
1741 Paper Mill Road
Wyomissing, PA 19610
SCOTTISH WIDOWS INTERNATIONAL FUND
SPECIAL MEETING OF SHAREHOLDERS
May 29, 1997
SCOTTISH WIDOWS INTERNATIONAL FUND
The undersigned shareholder(s) of SCOTTISH WIDOWS INTERNATIONAL FUND hereby
appoint(s) James E. Jordan, Sandra Houck, and Dennis Westley, or any of
them true and lawful proxies, with power of substitution of each, to vote
all shares of the SCOTTISH WIDOWS INTERNATIONAL FUND which the undersigned
is entitled to vote, at the Special Meeting of Shareholders to be held on
May 29, 1997 at Sheraton Berkshire Motor Inn, 1741 Paper Mill Road,
Wyomissing, PA 19610, at 9:00 a.m.(general meeting) and 10:15 a.m. (Fund
meeting) (local time) and at any adjournment thereof.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The proxies
named will vote the shares represented by this proxy in accordance with the
choice made on this ballot. IF NO CHOICE IS INDICATED, THIS PROXY WILL BE
VOTED AFFIRMATIVELY ON THAT MATTER.
The Board Of Trustees unanimously recommends a vote FOR the proposal below.
Please sign EXACTLY as your name(s)
appear(s) above. When signing as
attorney, executor, administrator,
guardian, trustee, custodian, etc.,
please give your full title as
such. If a corporation or
partnership, please sign the full
name by an authorized officer or
partner. If stock is owned
jointly, all owners should sign.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND
RETAIN THE TOP PORTION.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: X
KEEP THIS PORTION FOR YOUR RECORDS.
DETACH AND RETURN THIS PORTION ONLY.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
SCOTTISH WIDOWS INTERNATIONAL FUND
RECORD DATE SHARES:
-----------------
Vote on Proposal
TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
THE SCOTTISH WIDOWS INTERNATIONAL FUND AND THE FEDERATED INTERNATIONAL
EQUITY FUND
FOR AGAINST ABSTAIN
- -----------------------------------
Signature
Signature (Joint Owners)
Date:
---------------------------------
PART C - OTHER INFORMATION
Item 15. Indemnification
Indemnification is provided to directors and officers of the
Registrant pursuant to the Registrant's Articles of Incorporation, except
where such indemnification is not permitted by law. However, the Articles
of Incorporation do not protect the directors or officers from liability
based on willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of their office.
Directors and officers of the Registrant are insured against
certain liabilities, including liabilities arising under the Securities Act
of 1933 (the "Act").
Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers, and controlling persons of the
Registrant by the Registrant pursuant to the Articles of Incorporation or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by directors,
officers, or controlling persons of the Registrant in connection with the
successful defense of any act, suit, or proceeding) is asserted by such
directors, officers, or controlling persons in connection with the shares
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940 for directors,
officers, or controlling persons of the Registrant by the Registrant
pursuant to the Articles of Incorporation or otherwise, the Registrant is
aware of the position of the Securities and Exchange Commission as set
forth in Investment Company Act Release No. IC-11330. Therefore, the
Registrant undertakes that in addition to complying with the applicable
provisions of the Articles of Incorporation or otherwise, in the absence of
a final decision on the merits by a court or other body before which the
proceeding was brought, that an indemnification payment will not be made
unless in the absence of such a decision, a reasonable determination based
upon factual review has been made (i) by a majority vote of a quorum of
non-party directors who are not interested persons of the Registrant or
(ii) by independent legal counsel in a written opinion that the indemnitee
was not liable for an act of willful misfeasance, bad faith, gross
negligence, or reckless disregard of duties. The Registrant further
undertakes that advancement of expenses incurred in the defense of a
proceeding (upon undertaking for repayment unless it is ultimately
determined that indemnification is appropriate) against an officer,
director, or controlling person of the Registrant will not be made absent
the fulfillment of at least one of the following conditions: (i) the
indemnitee provides security for his undertaking; (ii) the Registrant is
insured against losses arising by reason of any lawful advances; or (iii) a
majority of a quorum of disinterested non-party directors or independent
legal counsel in a written opinion makes a factual determination that there
is reason to believe the indemnitee will be entitled to indemnification.
Item 16. Exhibits
1.1 Conformed Copy of Articles of Incorporation of the Registrant(1)
2.1 Bylaws of the Registrant(1)
3 Not Applicable
4 Agreement and Plan of Reorganization dated as of March 24, 1997,
between Scottish Widows International Fund, a Massachusetts business trust,
and International Series, Inc., a Maryland corporation, on behalf of its
portfolio, Federated International Equity Fund *
5 Copy of Specimen Certificate for Shares of Beneficial Interest of the
Registrant(2)
6.1 Conformed Copy of Investment Advisory Contract of the Registrant(1)
6.2 Conformed Copy of Assignment of Investment Advisory Contract of the
Registrant(4)
7.1 Conformed Copy of Distributor's Contract of the Registrant through and
inlcuding exhibit E(2)
7.2 Conformed Copy of Exhibit F to the Distributor's Contract of the
Registrant(4)
7.3 The Registrant hereby incorporates the conformed copy of the specimen
Mutual Funds Sales and Service Agreement; Mutual Funds Service Agreement;
and Plan Trustee/Mutual Funds Service Agreement from Item 24(b)(6) of the
Cash Trust Series II Registration Statement on Form N-1A, filed with the
Commission on July 24, 1995. (File Nos. 33-38550 and 811-6269)
8 Not Applicable
9 Conformed Copy of Custodian Agreement of the Registrant(2)
10.1 Conformed Copy of Distribution Plan of the Registrant through and
including Exhibit B(2)
10.2 Conformed Copy of Exhibit C to the Distribution Plan of the
Registrant(4)
10.3 Copy of Rule 12b-1 Agreement of the Registrant through and including
Exhibit C(2)
10.4 The Registrant hereby incorporates the conformed copy of the specimen
Multiple Class Plan from Item 24(b)(18) of the World Investment Series,
Inc. Registration Statement on Form N-1A, filed with the Commission on
January 26, 1996. (File Nos. 33-52149 and 811-07141)
10.5 The responses described in Item 16 (7.3) are hereby incorporated by
reference
11 Opinion of S. Elliott Cohan, Deputy General Counsel, Federated
Investors regarding legality of shares being issued*
12 Opinion of Dickstein Shapiro Morin & Oshinsky LLP regarding tax
consequences of Reorganization (5)
13.1 Conformed Copy of Agreement for Fund Accounting Services,
Administrative Services, Shareholder Recordkeeping Services and Custody
Services Procurement(6)
13.2 The responses described in Item 16 (7.3) and Item 16 (10.4) are hereby
incorporated by reference
13.3 The Registrant hereby incorporates the conformed copy of the
Shareholder Services Subcontract between National Pensions Alliance, Ltd.
and Federated Shareholder Services from Item 24(b)(9)(ii) of the Federated
GNMA Trust Registration Statement on Form N-1A, filed with the Commission
on March 25, 1996. (File Nos. 2-75670 and 811-3375)
13.4 The Registrant hereby incorporates the conformed copy of the
Shareholder Services Subcontract between Fidelity and Federated Shareholder
Services from Item 24(b)(9)(iii) of the Federated GNMA Trust Registration
on Form N-1A, filed with the Commission on March 25, 1996. (File Nos. 2-
75670 and 811-3375)
14.1 Conformed Copy of Consent of Independent Public Accountants of
Registrant, Arthur Andersen LLP*
14.2 Conformed Copy of Consent of Independent Auditors of Scottish Widows
International Fund, Ernst & Young LLP*
15 Not Applicable
16 Conformed Copy of Power of Attorney*
17.1 Declaration under Rule 24f-2*
17.2 Form of Proxy of Scottish Widows International Fund*
* Filed electronically.
(1) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed on February 13, 1991. (File Nos. 2-
91776 and 811-3984)
(2) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 on Form N-1A filed on July 29, 1994. (File Nos. 2-91776
and 811-3984)
(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 23 on Form N-1A filed on February 9, 1995. (File Nos. 2-
91776 and 811-3984)
(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 27 on Form N-1A filed January 31, 1996. (File Nos. 2-91776
and 811-3984)
(5 To be filed by Post-effective Amendment pursuant to `Dear
Registrant''letter dated February 15, 1996.
(6) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 30 on Form N-1A filed January 27, 1997. (File Nos. 2-91776
and 811-3984)
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus
which is a part of this Registration Statement by any person or party who
is deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act of 1933, the reoffering prospectus will contain the
information called for by the applicable registration form for reofferings
by persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that
is filed under paragraph (1) above will be filed as a part of an amendment
to the Registration Statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act
of 1933, each post-effective amendment shall be deemed to be a new
Registration Statement for the securities offered therein, and the offering
of the securities at that time shall be deemed to be the initial bona fide
offering of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, International Series, Inc., has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Pittsburgh, Commonwealth of Pennsylvania on
March 24, 1997.
INTERNATIONAL SERIES, INC.
(Registrant)
By: *
Glen R. Johnson
President
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities indicated on
March 24, 1997:
* Chairman and Director
John F. Donahue
(Chief Executive Officer)
* President
Glen R. Johnson
* Treasurer, Executive Vice President, and
Secretary
John W. McGonigle
(Principal Financial and
Accounting Officer)
* Director
Thomas G. Bigley
* Director
John T. Conroy, Jr.
* Director
William J. Copeland
* Director
James E. Dowd
* Director
Lawrence D. Ellis, M.D.
* Director
Edward L. Flaherty, Jr.
* Director
Peter E. Madden
* Director
Gregor F. Meyer
* Director
John E. Murray, Jr., J.D., S.J.D.
* Director
Wesley W. Posvar
* Director
Marjorie P. Smuts
1* By: /s/ S. Elliott Cohan
Attorney in Fact
EXHIBIT 11
INTERNATIONAL SERIES, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
March 24, 1997
The Directors of International Series , Inc.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
Federated International Equity Fund (the `Fund''), a portfolio of
International Series, Inc. (the `Corporation''), a Maryland Corporation,
proposes to issue shares of capital stock (such shares of capital stock
being herein referred to as `Shares'') in connection with the acquisition
of the assets of Scottish Widows International Fund, a Massachusetts
business trust, pursuant to the Agreement and Plan of Reorganization dated
as of March 24, 1997 (`Agreement''), filed as an exhibit to the
registration statement of the Fund filed on Form N-14 (Securities Act of
1933 No. to be assigned) under the Securities Act of 1933 as amended (`N-
14 Registration').
As counsel I have participated in the organization of the Corporation, its
registration under the Investment Company Act of 1940, the registration of
its securities on Form N-1A under the Securities Act of 1933 and its N-14
Registration. I have examined and am familiar with the written Declaration
of Trust dated March 9, 1984*, and the Articles of Incorporation dated
January 16, 1991 (`Articles of Incorporation''), the Bylaws of the
Corporation, the Agreement and such other documents and records deemed
The Directors of International Series , Inc.
March 6, 1997
Page 2
relevant. I have also reviewed questions of law and consulted with counsel
thereon as deemed necessary or appropriate for the purposes of this
opinion.
Based upon the foregoing, it is my opinion that:
1. The Corporation is duly organized and validly existing pursuant to the
Articles of Incorporation.
2. The Shares which are currently being registered by the N-14
Registration may be legally and validly issued in accordance with the
provisions of the Agreement and the Articles of Incorporation upon receipt
of consideration sufficient to comply with the provisions of Article
Fourth, Section (a), of the Articles of Incorporation and subject to
compliance with the Investment Company Act of 1940, as amended, and
applicable state laws regulating the sale of securities. Such Shares, when
so issued, will be fully paid and non-assessable.
*The Corporation was initially organized as a Massachusetts business trust
on March 9, 1984, and reorganized into a Maryland corporation on February
11, 1991.
I consent to your filing this opinion as an exhibit to the N-14
Registration referred to above and to any application or registration
statement filed under the securities laws of any of the states of the
United States.
The Directors of International Series , Inc.
March 6, 1997
Page 2
Very truly yours,
INTERNATIONAL SERIES, INC.
By:/s/ S. Elliott Cohan
S. Elliott Cohan
Title: Assistant Secretary
Exhibit 14.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement on Form N-14 of International
Series, Inc. of our report dated January 15, 1997, included in the
Federated International Equity Fund Annual Report dated November 30, 1996,
and to all references to our firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
Arthur Andersen LLP
Pittsburgh, Pennsylvania,
March 20, 1997
Exhibit 14.2
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in the Registration Statement
on Form N-14 ("Registration Statement") of Federated International Equity
Fund, a portfolio of International Series, Inc., of our report dated
January 19, 1996, appearing in the Annual Report of Scottish Widows
International Fund, for the year ended December 31, 1995, and to the
incorporation by reference of such report in the Prospectus and Statement
of Additional Information of Scottish Widows International Fund, dated
March 15, 1996, and the incorporation by reference in the Registration
Statement of Federated International Equity Fund, a portfolio of
International Series, Inc., of our report dated January 16, 1997, appearing
in the Annual Report of Scottish Widows International Fund, for the year
ended December 31, 1996.
By:/s/ ERNST & YOUNG LLP
Ernst & Young LLP
Reading, PA
March 19, 1997
Exhibit 16
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of INTERNATIONAL SERIES,
INC. and the Deputy General Counsel of Federated Services Company, and each
of them, their true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for them and in their names, place
and stead, in any and all capacities, to sign any and all documents to be
filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, by means of the Securities and Exchange
Commission's electronic disclosure system known as EDGAR; and to file the
same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
sign and perform each and every act and thing requisite and necessary to be
done in connection therewith, as fully to all intents and purposes as each
of them might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
SIGNATURES TITLE DATE
/s/John F. Donahue Chairman and Director January 10, 1997
John F. Donahue (Chief Executive Officer)
/s/Glen R. Johnson President January 10, 1997
Glen R. Johnson
/s/John W. McGonigle Treasurer, Executive January 10, 1997
John W. McGonigle Vice President and Secretary
(Principal Financial and
Accounting Officer)
/s/Thomas G. Bigley Director January 10, 1997
Thomas G. Bigley
/s/John T. Conroy, Jr. Director January 10, 1997
John T. Conroy, Jr.
/s/William J. Copeland Director January 10, 1997
William J. Copeland
/s/James E. Dowd Director January 10, 1997
James E. Dowd
/s/Lawrence D. Ellis, M.D. Director January 10, 1997
Lawrence D. Ellis, M.D.
/s/Edward L. Flaherty, Jr. Director January 10, 1997
/s/Peter E. Madden Director January 10, 1997
Peter E. Madden
/s/Gregor F. Meyer Director January 10, 1997
Gregor F. Meyer
/s/John E. Murray, Jr. Director January 10, 1997
John E. Murray, Jr.
/s/Wesley W. Posvar Director January 10, 1997
Wesley W. Posvar
/s/Marjorie P. Smuts Director January 10, 1997
Marjorie P. Smuts
Sworn to and subscribed before me this 10th day of January, 1997
/s/Marie M. Hamm
Marie M. Hamm
Notarial Seal
Marie M. Hamm, Notary Public
Plum Boro, Alleghny County
My Commission Expires Oct. 9, 2000
Member, Pennsylvania Association of Notaries
EXHIBIT 17.1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 24F-2
ANNUAL NOTICE OF SECURITIES SOLD
PURSUANT TO RULE 24F-2
Read instructions at end of Form before preparing Form.
Please print or type.
1. Name and address of issuer:
INTERNATIONAL SERIES, INC.
Federated Investors
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
2. Name of each series or class of funds for which this
notice is filed:
Federated International Income Fund
Federated International Equity Fund
3. Investment Company Act File Number: 811-3984
Securities Act File Number: 2-91776
4. Last day of fiscal year for which this notice is filed:
November 30, 1996
5. Check box if this notice is being filed more than 180
days after the close of the issuer's fiscal year for
purposes of reporting securities sold after the close
of the fiscal year but before termination of the
issuer's 24f-2 declaration: [ ]
6. Date of termination of issuer's declaration under rule
24f-2(a)(1), if applicable:
7. Number and amount of securities of the same class or
series which had been registered under the Securities
Act of 1933 other than pursuant to rule 24f-2 in a
prior fiscal year, but which remained unsold at the
beginning of the fiscal year: 0:$0
8. Number and amount of securities registered during the
fiscal year other than pursuant to rule 24f-2:
7,362,637:$128,478,016
9. Number and aggregate sale price of securities sold
during the fiscal year (includes DRIP shares):
17,774,301:$252,956,718
10. Number and aggregate sale price of securities sold
during the fiscal year in reliance upon registration
pursuant to rule 24f-2: 10,411,664:$124,478,702
11. Number and aggregate sale price of securities issued
during the fiscal year in connection with dividend
reinvestment plans, if applicable:
12. Calculation of registration fees:
(i) Aggregate sale price of securities sold during the
fiscal year in reliance on rule 24f-2 (from Item 10):
$124,478,702
(ii) Aggregate price of shares issued in connection
with dividend reimbursement plans (from Item 11,
if applicable) +
(iii) Aggregate price of shares redeemed or repurchased
during the fiscal year (if applicable)-124,478,702
(iv) Aggregate price of shares redeemed or repurchased
and previously applied as a reduction to filing
fees pursuant to rule 24e-2 (if applicable) +0
(v) Net aggregate price of securities sold and issued
during the fiscal year in reliance on rule 24f-2
[line (i), plus line (ii), less line (iii), plus
line (iv)] (if applicable): $0
(vi) Multiplier prescribed by Section 6(b) of the
Securities Act of 1933 or other applicable law or
regulation (see Instruction C.6): x 1/3300
(vii) Fee due [line (i) or line (v) multiplied by line
(vi)]: $0
Instruction: Issuers should complete lines (ii), (iii), (iv), and (v) only
if the form in being filed within 60 days after the close of the issuer's
fiscal year. See Instruction C.3.
13. Check box if fees are being remitted to the Commission's lockbox
depository as described in section 3a of the Commission's Rules of Informal
and Other Procedures (17 CFR 202.3a). [ ]
Date of mailing or wire transfer of filing fees to the Commission's lockbox
depository:
SIGNATURES
This report has been signed below by the following persons
on behalf of the issuer and in the capacities and on the
dates indicated.
By (Signature and Title)*
J. Crilley Kelly
Assistant Secretary
Date: January 15, 1997
* Please print the name and title of the signing officer below the
signature.
FEDERATED ADMINISTRATIVE SERVICES
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
412-288-1900
January 15, 1997
International Series, Inc.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
You have requested my opinion for use in conjunction with a Rule 24f-2
Notice for International Series, Inc. (`Corporation'') to be filed in
respect of shares of the Corporation (`Shares'') sold for the fiscal year
ended November 30, 1996, pursuant to the Corporation's registration
statement filed with the Securities and Exchange Commission (`SEC'') under
the Securities Act of 1933 (File No. 2-91776) (`Registration Statement'').
In its Registration Statement, the Corporation elected to register an
indefinite number of shares pursuant to the provisions of Investment
Company Act Rule 24f-2.
As counsel I have participated in the preparation and filing of the
Corporation's amended Registration Statement under the Securities Act of
1933. Further, I have examined and am familiar with the provisions of the
Articles of Incorporation dated February 11, 1991, the Bylaws of the
Corporation and such other documents and records deemed relevant. I have
also reviewed questions of law and consulted with counsel thereon as deemed
necessary or appropriate by me for the purposes of this opinion.
On the basis of the foregoing, it is my opinion the Shares sold for
the fiscal year ended November 30, 1996, registration of which the Rule
24f-2 Notice makes definite in number, were legally issued, fully paid and
non-assessable by the Corporation.
I hereby consent to the filing of this opinion as an exhibit to the
Rule 24f-2 Notice referred to above, the Registration Statement of the
Corporation and to any application or registration statement filed under
the securities laws of any of the States of the United States.
The foregoing opinion is limited to the Federal laws of the United
States and the laws of the State of Maryland, and I am expressing no
opinion as to the effect of the laws of any other jurisdiction.
Very truly yours,
/s/ J. Crilley Kelly
J. Crilley Kelly
Fund Attorney
INTERNATIONAL SERIES, INC.
Federated Investors
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
January 15, 1997
EDGAR Operations Branch
Securities and Exchange Commission
Division of Investment Management
450 Fifth Street, Northwest
Washington, DC 20549
RE: Form 24f-2 for INTERNATIONAL SERIES, INC.
1933 Act File No. 2-91776
1940 Act File No. 811-3984
Dear Sir or Madam:
Pursuant to the provisions of Rule 24f-2 of the Investment Company Act
of 1940, I enclose Form 24f-2 for International Series, Inc. This filing
has been filed electronically via EDGAR.
Since the aggregate redemption proceeds of redeemed securities
exceeded the aggregate sales price of securities sold during the period for
which the Form 24f-2 is filed, an additional filing fee pursuant to Rule
24f-2(c) has not been filed.
As required by Rule 24f-2(b), a conformed opinion of counsel has been
electronically filed herewith which indicates whether the securities, the
registration of which this Form makes definite in number, were legally
issued, fully paid and non-assessable.
Very truly yours,
/s/ J. Crilley Kelly
J. Crilley Kelly
Assistant Secretary
Enclosures
cc: Matthew G. Maloney, Esquire
Linda L. Banas
EXHIBIT 17.2
Sheraton Berkshire Motor Inn
1741 Paper Mill Road
Wyomissing, PA 19610
SCOTTISH WIDOWS INTERNATIONAL FUND
SPECIAL MEETING OF SHAREHOLDERS
May 29, 1997
SCOTTISH WIDOWS INTERNATIONAL FUND
The undersigned shareholder(s) of SCOTTISH WIDOWS INTERNATIONAL FUND hereby
appoint(s) James E. Jordan, Sandra Houck, and Dennis Westley, or any of
them true and lawful proxies, with power of substitution of each, to vote
all shares of the SCOTTISH WIDOWS INTERNATIONAL FUND which the undersigned
is entitled to vote, at the Special Meeting of Shareholders to be held on
May 29, 1997 at Sheraton Berkshire Motor Inn, 1741 Paper Mill Road,
Wyomissing, PA 19610, at 9:00 a.m.(general meeting) and 10:15 a.m. (Fund
meeting) (local time) and at any adjournment thereof.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The proxies
named will vote the shares represented by this proxy in accordance with the
choice made on this ballot. IF NO CHOICE IS INDICATED, THIS PROXY WILL BE
VOTED AFFIRMATIVELY ON THAT MATTER.
The Board Of Trustees unanimously recommends a vote FOR the proposal below.
Please sign EXACTLY as your name(s)
appear(s) above. When signing as
attorney, executor, administrator,
guardian, trustee, custodian, etc.,
please give your full title as
such. If a corporation or
partnership, please sign the full
name by an authorized officer or
partner. If stock is owned
jointly, all owners should sign.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND
RETAIN THE TOP PORTION.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: X
KEEP THIS PORTION FOR YOUR RECORDS.
DETACH AND RETURN THIS PORTION ONLY.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
SCOTTISH WIDOWS INTERNATIONAL FUND
RECORD DATE SHARES:
-----------------
Vote on Proposal
TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
THE SCOTTISH WIDOWS INTERNATIONAL FUND AND THE FEDERATED INTERNATIONAL
EQUITY FUND
FOR AGAINST ABSTAIN
- -----------------------------------
Signature
Signature (Joint Owners)
Date: __________________________
EXHIBIT 4
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated , 1997 (the
--------
"Agreement"), between INTERNATIONAL SERIES, INC., a Maryland corporation
(the `Corporation''), on behalf of its portfolio, FEDERATED INTERNATIONAL
EQUITY FUND, INC., a Maryland corporation (hereinafter called the
"Acquiring Fund"), and SCOTTISH WIDOWS INTERNATIONAL FUND, a Massachusetts
Trust (hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C)
of the United States Internal Revenue Code of 1986, as amended (the
"Code"). The reorganization (the "Reorganization") will consist of the
transfer of all of the assets and the assumption of certain liabilities of
the Acquired Fund in exchange solely for Class A Shares and Class C Shares
of the Acquiring Fund (the "Acquiring Fund Shares") and the distribution,
after the Closing Date (as hereinafter defined), of the Acquiring Fund
Shares to the shareholders of the Acquired Fund in liquidation of the
Acquired Fund as provided herein, all upon the terms and conditions
hereinafter set forth in this Agreement.
WHEREAS, the Acquired Fund and the Corporation are registered open-
end management investment companies and the Acquired Fund owns securities
in which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are
authorized to issue shares of common stock or shares of beneficial
interest, as the case may be;
WHEREAS, the Board of Directors, including a majority of the
directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Corporation has
determined that the transfer of all of the assets and the assumption of
certain liabilities of the Acquired Fund for Acquiring Fund Shares is in
the best interests of the Acquiring Fund shareholders and that the
interests of the existing shareholders of the Acquiring Fund would not be
diluted as a result of this transaction; and
WHEREAS, the Board of Trustees, including a majority of the
trustees who are not "interested persons" (as defined under the 1940 Act),
of the Acquired Fund has determined that the transfer of all of the assets
and the assumption of certain liabilities of the Acquired Fund for
Acquiring Fund Shares is in the best interests of the Acquired Fund
shareholders;
NOW THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties agree as
follows:
1.TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE
ACQUIRING FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the
Acquired Fund agrees to assign, transfer and convey to the Acquiring Fund
all of the net assets of the Acquired Fund, including all securities and
cash, other than cash in an amount necessary to pay any unpaid dividends
and distributions as provided in paragraph 1.5, beneficially owned by the
Acquired Fund, and the Acquiring Fund agrees in exchange therefor to
deliver to the Acquired Fund the number of Acquiring Fund Shares, including
fractional Acquiring Fund Shares, determined as set forth in paragraph 2.3.
Such transaction shall take place at the closing (the "Closing") on the
closing date (the "Closing Date") provided for in paragraph 3.1. In lieu
of delivering certificates for the Acquiring Fund Shares, the Acquiring
Fund shall credit the Acquiring Fund Shares to the Acquired Fund's account,
for the benefit of its shareholders, on the stock record books of the
Acquiring Fund and shall deliver a confirmation thereof to the shareholders
of the Acquired Fund.
1.2 The Acquiring Fund will assume only those certain liabilities
which are set forth in a certificate to be provided by the Acquired Fund at
the Closing and accepted by the Acquiring Fund.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street
Bank and Trust Company (hereinafter called "State Street"), Boston,
Massachusetts, the Acquiring Fund's custodian (the "Custodian"), for the
account of the Acquiring Fund, together with proper instructions and all
necessary documents to transfer to the account of the Acquiring Fund, free
and clear of all liens, encumbrances, rights, restrictions and claims
created by the Acquired Fund. All cash delivered shall be in the form of
immediately available funds payable to the order of the Custodian for the
account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund thereunder. The
Acquired Fund will transfer to the Acquiring Fund any distributions, rights
or other assets received by the Acquired Fund after the Closing Date as
distributions on or with respect to the securities transferred. Such
assets shall be deemed included in assets transferred to the Acquiring Fund
on the Closing Date and shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable,
the Acquired Fund will liquidate and distribute pro rata to the Acquired
Fund's shareholders of record, determined as of the close of business on
the Closing Date (the "Acquired Fund Shareholders"), the Acquiring Fund
Shares received by the Acquired Fund pursuant to paragraph 1.1. In
addition, each Acquired Fund Shareholder shall have the right to receive
any unpaid dividends or other distributions which were declared before the
Valuation Date (as hereinafter defined) with respect to the shares of the
Acquired Fund that are held by the shareholder on the Valuation Date. Such
liquidation and distribution will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the Acquired Fund on
the books of the Acquiring Fund to open accounts on the share record books
of the Acquiring Fund in the names of the Acquired Fund Shareholders, and
representing the respective pro rata number of the Acquiring Fund Shares
due such shareholders, based on their ownership of shares of the Acquired
Fund on the Closing Date. All issued and outstanding Shares of the
Acquired Fund will simultaneously be canceled on the books of the Acquired
Fund. Share certificates representing interests in the Acquired Fund will
represent a number of Acquiring Fund Shares, after the Closing Date as
determined in accordance with paragraph 2.3. The Acquiring Fund shall not
issue certificates representing the Acquiring Fund Shares in connection
with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus
and statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund
shares on the books of the Acquired Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Acquired Fund up to and including the
Closing Date and such later dates, with respect to dissolution and
deregistration of the Acquired Fund, on which the Acquired Fund is
dissolved and deregistered.
1.9 The Acquired Fund shall be deregistered as an investment company
under the 1940 Act and dissolved as a Massachusetts business trust as
promptly as practicable following the Closing Date and the making of all
distributions pursuant to paragraph 1.5.
2.VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of
the close of the New York Stock Exchange (normally 4:00 p.m. Eastern time)
on the Closing Date (such time and date being herein called the "Valuation
Date"), using the valuation procedures set forth in the Acquiring Fund's
then-current prospectus or statement of additional information.
2.2 The net asset value of each Acquiring Fund Share shall be the net
asset value per share computed as of the close of the New York Stock
Exchange (normally 4:00 p.m. Eastern time) on the Valuation Date, using the
valuation procedures set forth in the Acquiring Fund's then-current
prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in
paragraph 2.1, by the net asset value of one Acquiring Fund Share
determined in accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund which have been reviewed by the
Acquired Fund's Board of Trustees.
3.CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be [ ] or such later date as
the parties may mutually agree. All acts taking place at the Closing shall
be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place
as the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of
the value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 Penn Square Management Corporation, as transfer agent for the
Acquired Fund, shall deliver at the Closing a certificate of an authorized
officer stating that its records contain the names and addresses of the
Acquired Fund Shareholders and the number and percentage ownership of
outstanding shares owned by each such shareholder immediately prior to the
Closing. The Acquiring Fund shall issue and deliver a confirmation
evidencing the Acquiring Fund Shares to be credited on the Closing Date to
the Secretary of the Acquired Fund, or provide evidence satisfactory to the
Acquired Fund that such Acquiring Fund Shares have been credited to the
Acquired Fund's account on the books of the Acquiring Fund. At the
Closing, each party shall deliver to the other such bills of sale, checks,
assignments, assumption agreements, share certificates, if any, receipts or
other documents as such other party or its counsel may reasonably request.
4.REPRESENTATIONS AND WARRANTIES.
4.1 The Acquired Fund represents and warrants to the Corporation as
follows:
(a) The Acquired Fund is a Business Trust duly organized,
validly existing and in good standing under the laws of Massachusetts and
has power to own all of its properties and assets and to carry out this
Agreement.
(b) The Acquired Fund is registered under the 1940 Act, as
an open-end, management investment company, and such registration has not
been revoked or rescinded and is in full force and effect.
(c) The Acquired Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquired Fund's Declaration of Trust or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquired Fund
is a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Acquired Fund or any of
its properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquired Fund knows of no facts which might form the basis
for the institution of such proceedings, and is not a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the 1940 Act and the rules and regulations of the
Securities and Exchange Commission (the "Commission") thereunder and do not
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(g) The Statement of Assets and Liabilities of the Acquired
Fund at December 31, 1995 and at December 31, 1996 has been audited by
Ernst & Young LLP, independent auditors, and have been prepared in
accordance with generally accepted accounting principles, consistently
applied, and such statements (copies of which have been furnished to the
Acquiring Fund) fairly reflect the financial condition of the Acquired Fund
as of such dates, and there are no known contingent liabilities of the
Acquired Fund as of such dates not disclosed therein.
(h) Since December 31, 1996, there has not been any
material adverse change in the Acquired Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course
of business, or any incurrence by the Acquired Fund of indebtedness
maturing more than one year from the date such indebtedness was incurred,
except as otherwise disclosed to and accepted by the Acquiring Fund.
(i) At the Closing Date, all federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
date shall have been filed or an appropriate extension obtained, and all
federal and other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof or contest in good faith, and
to the best of the Acquired Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such
returns.
(j) For each fiscal year of its operation the Acquired Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. All of the issued and
outstanding shares of the Acquired Fund will, at the time of the Closing,
be held by the persons and in the amounts set forth in the records of the
transfer agent as provided in paragraph 3.3. The Acquired Fund does not
have outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquired Fund shares, nor is there outstanding any
security convertible into any of the Acquired Fund shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets
to be transferred by it hereunder.
(m) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Acquired Fund and, subject to the
approval of the Acquired Fund Shareholders, this Agreement constitutes the
valid and legally binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions
with respect thereto, and to general principles of equity and the
discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund
(the "Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (only insofar as it relates to the
Acquired Fund) will, on the effective date of the Registration Statement
and on the Closing Date, not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
4.2 The Corporation represents and warrants to the Acquired Fund as
follows:
(a) The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Maryland and has the power to carry on its business as it is now being
conducted and to carry out this Agreement.
(b) The Corporation is registered under the 1940 Act as an
open-end, diversified, management investment company, and such registration
has not been revoked or rescinded and is in full force and effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Corporation's Articles of Incorporation or Bylaws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Acquiring Fund or any of
its properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquiring Fund knows of no facts which might form the basis
for the institution of such proceedings, and is not a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the
Acquiring Fund at November 30, 1995 and 1996, have been audited by Arthur
Andersen LLP, independent auditors, and have been prepared in accordance
with generally accepted accounting principles, and such statements (copies
of which have been furnished to the Acquired Fund) fairly reflect the
financial condition of the Acquiring Fund as of such dates, and there are
no known contingent liabilities of the Acquiring Fund as of such dates not
disclosed therein.
(g) Since November 30, 1996, there has not been any
material adverse change in the Acquiring Fund's financial condition,
assets, liabilities or business other than changes occurring in the
ordinary course of business.
(h) At the Closing Date, all federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed or an
appropriate extension obtained, by such date shall have been filed, and all
federal and other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof or contest in good faith, and
to the best of the Acquiring Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such
returns.
(i) For each fiscal year of its operation the Acquiring
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(j) All issued and outstanding Acquiring Fund Shares are,
and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquiring Fund Shares, nor is there outstanding any
security convertible into any Acquiring Fund Shares, except for Class B
Shares which are convertible into Class A Shares eight (8) years after
purchase.
(k) The execution, delivery and performance of this
Agreement has been duly authorized by all necessary action on the part of
the Acquiring Fund, and this Agreement constitutes the valid and legally
binding obligation of the Acquiring Fund enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws relating to or
affecting creditors' rights generally and court decisions with respect
thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a
proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not misleading.
5.COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing
Date, it being understood that such ordinary course of business will
include customary dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated
herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and
do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by
this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund,
in such form as is reasonably satisfactory to the Acquiring Fund, a
statement of the earnings and profits of the Acquired Fund for federal
income tax purposes which will be carried over to the Acquiring Fund as a
result of Section 381 of the Code and which will be certified by the
Acquired Fund's President and its Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with
information reasonably necessary for the preparation of the
Prospectus/Proxy Statement, referred to in paragraph 4.1(o), all to be
included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act and the 1940 Act
as it may deem appropriate in order to continue its operations after the
Closing Date.
5.7 Prior to the Valuation Date, the Acquired Fund shall have
declared a dividend or dividends, with a record date and ex-dividend date
prior to the Valuation Date, which, together with all previous dividends,
shall have the effect of distributing to its shareholders all of its
investment company taxable income, if any, plus the excess of its interest
income, if any, excludable from gross income under Section 103(a) of the
Code over its deductions disallowed under Sections 265 and 171(a)(2) of the
Code for the taxable periods or years ended on or before December 31, 1996
and for the period from said date to and including the Closing Date
(computed without regard to any deduction for dividends paid), and all of
its net capital gain, if any, realized in taxable periods or years ended on
or before December 31, 1996 and in the period from said date to and
including the Closing Date.
6.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance
by the Acquired Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
6.1 All representations and warranties of the Acquired Fund contained
in this Agreement shall be true and correct in all material respects as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the
Acquired Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of the
Closing Date, certified by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or
Vice President and its Treasurer, in form and substance satisfactory to the
Corporation, to the effect that the representations and warranties of the
Acquired Fund made in this Agreement are true and correct in all material
respects at and as of the Closing Date, except as they may be affected by
the transactions contemplated by this Agreement, and as to such other
matters as the Corporation shall reasonably request.
6.4 The Acquired Fund shall have delivered to the Acquiring Fund a
certificate specifying the liabilities which are to be assumed by the
Acquiring Fund all of which shall be reflected in the net asset value of
the Acquired Fund on the Closing Date, which liabilities shall be
acceptable to the Acquiring Fund in its sole discretion.
7.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by
the Acquiring Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
7.1 All representations and warranties of the Corporation contained
in this Agreement shall be true and correct in all material respects as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
7.2 The Corporation shall have delivered to the Acquired Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Corporation made in this Agreement are true and correct in all material
respects at and as of the Closing Date, except as they may be affected by
the transactions contemplated by this Agreement, and as to such other
matters as the Acquired Fund shall reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness,
except as otherwise disclosed to and accepted by the Acquired Fund.
8.FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING
FUND AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund,
either party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding
shares of the Acquired Fund in accordance with the provisions of the
Acquired Fund's Declaration of Trust and the 1940 Act.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those
of the Commission) deemed necessary by the Acquiring Fund or the Acquired
Fund to permit consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure to
obtain any such consent, order or permit would not involve a risk of a
material adverse effect on the assets or properties of the Acquiring Fund
or the Acquired Fund, provided that either party hereto may for itself
waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or
be pending, threatened or contemplated under the 1933 Act.
8.5 The Corporation and the Acquired Fund shall have received an
opinion of Dickstein Shapiro Morin & Oshinsky LLP substantially to the
effect that for federal income tax purposes:
(a) The transfer of all of the Acquired Fund assets and the
assumption of certain liabilities in exchange for the Acquiring Fund Shares
and the distribution of the Acquiring Fund Shares to the Acquired Fund
Shareholders in liquidation of the Acquired Fund will constitute a
"reorganization" within the meaning of Section 368(a)(1)(C) of the Code;
(b) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund solely in exchange for the
Acquiring Fund Shares and the assumption of certain liabilities; (c) No
gain or loss will be recognized by the Acquired Fund upon the transfer of
the Acquired Fund assets to the Acquiring Fund in exchange for the
Acquiring Fund Shares and the assumption of certain liabilities or upon the
distribution (whether actual or constructive) of the Acquiring Fund Shares
to Acquired Fund Shareholders in exchange for their shares of the Acquired
Fund; (d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the
Acquiring Fund Shares; (e) The tax basis of the Acquired Fund assets
acquired by the Acquiring Fund will be the same as the tax basis of such
assets to the Acquired Fund immediately prior to the Reorganization;
(f) The tax basis of the Acquiring Fund Shares received by each of the
Acquired Fund Shareholders pursuant to the Reorganization will be the same
as the tax basis of the Acquired Fund shares held by such shareholder
immediately prior to the Reorganization; (g) The holding period of the
assets of the Acquired Fund in the hands of the Acquiring Fund will include
the period during which those assets were held by the Acquired Fund; and
(h) The holding period of the Acquiring Fund Shares to be received by each
Acquired Fund Shareholder will include the period during which the Acquired
Fund shares exchanged therefor were held by such shareholder (provided the
Acquired Fund shares were held as capital assets on the date of the
Reorganization).
9.TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Trustees of the
Acquired Fund or the Board of Directors of the Corporation at any time
prior to the Closing Date (and notwithstanding any vote of the Acquired
Fund Shareholders) if a majority of the independent board members of either
board believes that continuing the transaction would have a material
adverse impact on shareholders of that fund.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on
the part of any party hereto or the directors/trustees or officers of the
Acquired Fund or the Corporation or the shareholders of the Acquiring Fund
or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Directors of the Corporation or
the Board of Trustees of the Acquired Fund, if, in the judgment of either,
such waiver will not have a material adverse effect on the benefits
intended under this Agreement to the shareholders of the Corporation or of
the Acquired Fund, as the case may be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated
hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements and understandings
of every kind and nature between them relating to the subject matter
hereof. Neither party shall be bound by any condition, definition,
warranty or representation, other than as set forth or provided in this
Agreement or as may be set forth in a later writing signed by the party to
be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania, without giving
effect to principles of conflicts of laws.
11.4 This Agreement may be executed in any number of counterparts,
each of which, when executed and delivered, shall be deemed to be an
original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
11.6 An agreement has been entered into under which Federated Global
Research Corp. will assume substantially all of the expenses of the
reorganization including registration fees, transfer taxes (if any), the
fees of banks and transfer agents and the costs of preparing, printing,
copying and mailing proxy solicitation materials to the Acquired Fund
Shareholders and the costs of holding the special meeting of shareholders.
Penn Square Management Corporation will assume the legal fees of the
Acquired Fund. The accountants' fees of the Acquired Fund will be borne
equally by Federated Global and Penn Square Management Corporation.
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the
date first above written.
Acquired Fund:
Attest: SCOTTISH WIDOWS INTERNATIONAL FUND
By:
Name: Name:
Title: Title:
Acquiring Fund:
Attest: INTERNATIONAL SERIES, INC., on behalf of
its portfolio,
FEDERATED INTERNATIONAL EQUITY FUND,
INC.
By:
Name: S. Elliott Cohan Name: Glen R. Johnson
Title: Assistant Secretary Title: President
