38
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
International Series, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary proxy materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------
<PAGE>
INTERNATIONAL SERIES, INC.
Federated International Equity Fund
Federated International Income Fund
Proxy Statement - Please Vote!
TIME IS OF THE ESSENCE ...VOTING ONLY TAKES A FEW MINUTES AND YOUR
PARTICIPATION IS IMPORTANT! ACT NOW TO HELP THE
COMPANY AVOID ADDITIONAL EXPENSE.
International Series, Inc. (the "Company") will hold a special meeting of
shareholders of Federated International Equity Fund and Federated International
Income Fund (collectively, the "Funds") on November 30, 1999. It is important
for you to vote on the issues described in this Proxy Statement. We recommend
that you read the Proxy Statement in its entirety; the explanations will help
you to decide on the issues.
Following is an introduction to the proposals and the process.
Why am I being asked to vote?
Mutual funds are required to obtain shareholders' votes for certain types of
changes, like those included in this Proxy Statement. As a shareholder, you have
a right to vote on these changes.
What issues am I being asked to vote on?
The proposals include the election of Directors and changes to the Funds'
fundamental investment policies. The Board also recommends an amendment to the
Articles of Incorporation.
Why are individuals recommended for election to the Board of Directors?
The Funds are devoted to serving the needs of their shareholders, and the Board
is responsible for managing the Company's business affairs to meet those needs.
The Board represents the shareholders and can exercise all of the Funds' powers,
except those reserved only for shareholders.
Directors are selected on the basis of their education and professional
experience. Candidates are chosen based on their distinct interest in, and
capacity for understanding the complexities of, the operation of a mutual fund.
These individuals bring considerable experience to the impartial oversight of a
fund's operation.
The Proxy Statement includes a brief description of each nominee's history and
current position with the Company, if applicable.
Why are the Funds' "fundamental policies" being changed or eliminated?
Every mutual fund has certain investment policies that can be changed only with
the approval of its shareholders. These are referred to as "fundamental"
investment policies.
In some cases, these policies were adopted to reflect regulatory, business, or
industry conditions that no longer exist or no longer are necessary. In other
cases, advances in the securities markets and the economy have created different
procedures and techniques that affect the Funds' operations.
By reducing the number of "fundamental policies," the Funds may be able to
minimize the costs and delays associated with frequent shareholder meetings.
Also, the investment adviser's ability to manage the Funds' assets may be
enhanced and investment opportunities increased.
The proposed amendments will:
o reclassify as operating policies those fundamental policies that are not
required to be fundamental by the Investment Company Act of 1940, as
amended ("1940 Act");
o simplify and modernize the policies that are required to be "fundamental"
by the 1940 Act; and
o eliminate fundamental policies that are no longer required by the
securities laws of individual states.
Federated is a conservative money manager. Our highly trained professionals are
dedicated to making investment decisions in the best interest of the Funds and
their shareholders. The Board believes that the proposed changes will be applied
responsibly by the Funds' investment adviser.
Why are some "fundamental policies" being reclassified as "operating policies?"
As noted above, some "fundamental policies" have been redefined as "operating
policies." Operating policies do not require shareholder approval to be changed.
This gives the Company's Board additional flexibility to determine whether to
participate in new investment opportunities and to meet industry changes
promptly.
Why is the Board recommending an amendment to the Articles of Incorporation?
The Articles organizing the Company were prepared many years ago. Since then,
developments in the investment company industry and changes in the law have
resulted in many improvements. The Board is recommending a change to the
Articles of Incorporation that permits the Company to benefit from these
developments.
How do I vote my shares?
You may vote in person at the special meeting of shareholders or complete and
return the enclosed Proxy Card. If you sign and return the Proxy Card without
indicating a preference, your vote will be cast "for" all the proposals.
You may also vote by telephone at 1-800-690-6903, or through the Internet at
www.proxyvote.com. If you choose to help save the Company time and postage costs
by voting through the Internet or by telephone, please don't return your Proxy
Card. If you do not respond at all, we may contact you by telephone to request
that you cast your vote.
Who do I call if I have questions about the Proxy Statement?
Call your Investment Professional or a Federated Client Service Representative.
Federated's toll-free number is
1-800-341-7400.
After careful consideration, the Board of Directors has
unanimously approved these proposals. The Board recommends
that you read the enclosed materials
carefully and vote for all proposals.
<PAGE>
4
DEFINITIVE
INTERNATIONAL SERIES, INC.
Federated International Equity Fund
Federated International Income Fund
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 30, 1999
A special meeting of the shareholders of Federated
International Equity Fund (the "Equity Fund") and Federated International Income
Fund (the "Income Fund") (individually referred to as a "Fund," and collectively
referred to as the "Funds"), portfolios of International Series, Inc. (the
"Company"), will be held at 5800 Corporate Drive, Pittsburgh, Pennsylvania
15237-7000, at 2:00 p.m. (Eastern time), on November 30, 1999 to consider
proposals:
(1) To elect seven Directors.
(2) To make changes to the Funds' fundamental investment
policies:
(a) To amend the Equity Fund's fundamental
investment policy regarding diversification
(Equity Fund only);
(b) To amend the Funds' fundamental investment
policies regarding borrowing money and issuing
senior securities;
(c) To amend the Funds' fundamental investment
policies regarding investments in real estate;
(d) To amend the Funds' fundamental investment
policies regarding investments in commodities;
(e) To amend the Funds' fundamental investment
policies regarding underwriting securities;
(f) To amend the Funds' fundamental investment
policies regarding lending by the Funds;
(g) To amend the Funds' fundamental investment
policies regarding concentration of the Funds'
investments in the securities of companies in
the same industry;
(h) To amend, and to make non-fundamental, the
Funds' fundamental investment policies regarding
buying securities on margin; and
(i) To amend, and to make non-fundamental, the
Funds' fundamental investment policies regarding
pledging assets.
(3) To eliminate certain fundamental investment policies of
the Funds:
(a) To remove the Funds' fundamental investment
policies regarding selling securities short;
(b) To remove the Funds' fundamental investment
policies regarding investing in oil, gas and
minerals;
(c) To remove the Funds' fundamental investment
policies regarding purchasing securities of
Fiduciary Trust Company International; and
(d) To remove the Income Fund's fundamental
investment policy regarding purchasing and
selling options (Income Fund only).
(4) To approve an amendment to the Company's Articles of
Incorporation to permit the Board of Directors to
liquidate assets of a series or class without seeking
shareholder approval to the extent permitted under
Maryland law.
To transact such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed September 8, 1999 as the record date for
determination of shareholders entitled to vote at the meeting.
By Order of the Board of Directors,
John W. McGonigle
Secretary
September 24, 1999
YOU CAN HELP THE COMPANY AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP
LETTERS TO ENSURE A QUORUM BY PROMPTLY SIGNING AND RETURNING THE ENCLOSED PROXY.
IF YOU ARE UNABLE TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY SO THAT THE NECESSARY QUORUM MAY BE REPRESENTED AT THE SPECIAL
MEETING. THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
<PAGE>
TABLE OF CONTENTS
About the Proxy Solicitation and the Special Meeting.........................4
Election of Seven Directors..................................................5
About the Election of Directors..............................................5
Directors Standing for Election..............................................6
Nominees Not Presently Serving as Directors..................................6
Approval of Changes to the Funds' Fundamental Investment
Policies................................................................7
Approval of the Elimination of Certain of the Funds' Fundamental
Investment Policies ...................................................15
Approval of an Amendment to the Company's Articles of Incorporation.........17
Information About the Company...............................................19
Proxies, Quorum and Voting at the Special Meeting...........................19
Share Ownership of the Directors............................................20
Director Compensation.......................................................20
Officers and Incumbent Directors of the Company.............................22
Other Matters and Discretion of Attorneys Named in the Proxy................25
<PAGE>
DEFINITIVE
PROXY STATEMENT
INTERNATIONAL SERIES, INC.
Federated International Equity Fund
Federated International Income Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
About the Proxy Solicitation and the Special Meeting
The enclosed proxy is solicited on behalf of the Board of Directors of
the Company (the "Board" or "Directors"), which presently consists of two series
or portfolios, Federated International Equity Fund (the "Equity Fund") and
Federated International Income Fund (the "Income Fund"). The proxies will be
voted at a special meeting of shareholders of the Company to be held on November
30, 1999, at 5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7000, at 2:00
p.m. (such special meeting and any adjournment or postponement thereof are
referred to as the "Special Meeting").
The cost of the solicitation, including the printing and mailing of
proxy materials, will be borne by the Company. In addition to solicitations
through the mails, proxies may be solicited by officers, employees, and agents
of the Company or, if necessary, a communications firm retained for this
purpose. Such solicitations may be by telephone, telegraph, through the Internet
or otherwise. Any telephonic solicitations will follow procedures designed to
ensure accuracy and prevent fraud, including requiring identifying shareholder
information, recording the shareholder's instructions, and confirming to the
shareholder after the fact. 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 instruction as shareholders submitting proxies in
written form. The Company may 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.
The Board has reviewed the proposed changes recommended in the
investment policies of the Funds, and the proposed amendment to the Company's
Articles of Incorporation, and has approved them, subject to shareholder
approval. The purposes of the Special Meeting are set forth in the accompanying
Notice. The Directors know of no business other than that mentioned in the
Notice that will be presented for consideration at the Special Meeting. Should
other business properly be brought before the Special Meeting, proxies will be
voted in accordance with the best judgment of the persons named as proxies. This
Proxy Statement and the enclosed proxy card are expected to be mailed on or
about September 24, 1999, to shareholders of record at the close of business on
September 8, 1999 (the "Record Date"). On the Record Date, each Fund had
outstanding the following number of shares of common stock:
Equity Fund 14,481,704 shares
Income Fund 13,966,074 shares
The Funds' annual reports, which include audited financial statements
for each Fund for the fiscal year ended November 30, 1998, were previously
mailed to shareholders. The Funds' semi-annual reports, which contain unaudited
financial statements for the period ended May 31, 1999, were also previously
mailed to shareholders. The Company will promptly provide, without charge and
upon request, to each person to whom this Proxy Statement is delivered, a copy
of a Fund's annual report and/or semi-annual report. Requests for an annual
report or semi-annual report for each Fund may be made by writing to the
Company's principal executive offices or by calling the Company. The Company's
principal executive offices are located at Federated Investors Funds, 5800
Corporate Drive, Pittsburgh, Pennsylvania 15237-7000. The Company's toll-free
telephone number is 1-800-341-7400.
PROPOSAL #1: ELECTION OF SEVEN DIRECTORS
The persons named as proxies intend to vote in favor of the election of
Thomas G. Bigley, Nicholas P. Constantakis, John F. Cunningham, J. Christopher
Donahue, Charles F. Mansfield, Jr., John E. Murray, Jr. and John S. Walsh
(collectively, the "Nominees") as Directors of the Company. Each of Messrs.
Bigley, Mansfield, Murray and Walsh is presently serving as a Director. If
elected by shareholders, it is anticipated that Messrs. Constantakis, Cunningham
and Donahue will assume their responsibilities as Directors on January 1, 2000.
Please see "About the Election of Directors" below for current information about
the Nominees, and "Officers and Incumbent Directors of the Company" in this
Proxy Statement for information about the Directors who have previously been
elected by shareholders.
Messrs. Bigley and Murray were appointed Directors on November 15, 1994 and
February 14, 1995, respectively, to fill vacancies created by the decision to
expand the size of the Board. Messrs. Mansfield and Walsh were appointed
Directors on January 1, 1999, also to fill vacancies resulting from the decision
to expand the size of the Board. Messrs. Constantakis, Cunningham and Donahue
are being proposed for election as Directors also as a result of the decision to
expand the size of the Board.
All Nominees have consented to serve if elected. If elected, the
Directors will hold office without limit in time until death, resignation,
retirement, or removal or until the next meeting of shareholders to elect
Directors and the election and qualification of their successors. Election of a
Director is by a plurality of the votes cast by shareholders of the Company at
the Special Meeting. The seven individuals receiving the greatest number of
votes at the Special Meeting will be deemed to be elected Directors.
If any Nominee for election as a Director named above shall by reason
of death or for any other reason become unavailable as a candidate at the
Special Meeting, votes pursuant to the enclosed proxy will be cast for a
substitute candidate by the proxies named on the proxy card, or their
substitutes, present and acting at the Special Meeting. Any such substitute
candidate for election as a Director who is an "interested person" (as such term
is defined in the Investment Company Act of 1940, as amended (the "1940 Act"))
of the Company shall be nominated by the Executive Committee. The selection of
any substitute candidate for election as a Director who is not an "interested
person" shall be made by a majority of the Directors who are not "interested
persons" of the Company. The Board has no reason to believe that any Nominee
will become unavailable for election as a Director.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE TO ELECT AS DIRECTORS THE NOMINEES FOR ELECTION
TO THE BOARD OF DIRECTORS OF THE COMPANY
About the Election of Directors
Maryland law does not require the election of the Company's Directors
each year, and shareholders should anticipate that, prior to the election of
successor Directors, incumbent Directors will hold office during the lifetime of
the Company, except that: (a) any Director may resign; (b) any Director may be
removed by written instrument signed by at least two-thirds of the number of
Directors prior to such removal; (c) any Director who requests to be retired or
who has become mentally or physically incapacitated may be retired by written
instrument signed by a majority of the other Directors; and (d) a Director may
be removed at any special meeting of the shareholders by a vote of two-thirds of
the outstanding shares of the Company. In case a vacancy shall exist for any
reason, the remaining Directors will fill such vacancy by appointment of another
Director. The Directors will not fill any vacancy by appointment if, immediately
after filling such vacancy, less than two-thirds of the Directors then holding
office would have been elected by the shareholders. If, at any time, less than a
majority of the Directors holding office have been elected by the shareholders,
the Directors then in office will call a shareholders' meeting for the purpose
of electing Directors to fill vacancies. Otherwise, there will normally be no
meeting of shareholders called for the purpose of electing Directors.
Set forth below is a listing of: (i) Directors standing for election,
and (ii) the Nominees standing for election who are not presently serving as
Directors, along with their addresses, birth dates, present positions with the
Company, if applicable, and principal occupations during the past five years:
Directors Standing for Election
Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birth date: February 3, 1934
Director
Director or Trustee of the Federated Fund Complex; Director and Member of the
Executive Committee, Children's Hospital of Pittsburgh; Director, Robroy
Industries, Inc. (coated steel conduits/ computer storage equipment); formerly,
Senior Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; (physician
practice management); Director and Member of Executive Committee, University of
Pittsburgh.
Charles F. Mansfield, Jr.
80 South Road
Westhampton Beach, NY
Birth date: April 10, 1945
Director
Director or Trustee of some of the Funds in the Federated Fund Complex;
management consultant. Previous Positions: Chief Executive Officer, PBTC
International Bank; Partner, Arthur Young & Company (now Ernst & Young, LLP);
Chief Financial Officer of Retail Banking Sector, Chase Manhattan Bank; Senior
Vice President, Marine Midland Bank; Vice President, Citibank; Assistant
Professor of Banking and Finance, Frank G. Zarb School of Business, Hofstra
University.
<PAGE>
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birth date: December 20, 1932
Director
Director or Trustee of the Federated Fund Complex; President, Law Professor,
Duquesne University; Consulting Partner, Mollica & Murray; Director, Michael
Baker Corp. (engineering, construction, operations, and technical services).
Previous Positions: Dean and Professor of Law, University Pittsburgh School of
Law; Dean and Professor of Law, Villanova University School of Law.
John S. Walsh
2007 Sherwood Drive
Valparaiso, IN
Birth date: November 28, 1957
Director
Director or Trustee of some of the Funds in the Federated Fund Complex;
President and Director, Heat Wagon, Inc.; (manufacturer of construction
temporary heaters); President and Director, Manufacturers Products, Inc.;
(distributor of portable construction heaters); President, Portable Heater
Parts, a division of Manufacturers Products, Inc.; Director, Walsh & Kelly,
Inc.; (heavy highway contractor); formerly, Vice President, Walsh & Kelly, Inc.
Nominees Not Presently Serving as Directors
Nicholas P. Constantakis
175 Woodshire Drive
Pittsburgh, PA
Birth date: September 3, 1939
Director or Trustee of the Federated Fund Complex; formerly: Partner, Andersen
Worldwide SC.
John F. Cunningham
353 El Brillo Way
Palm Beach, FL
Birth date: March 5, 1943
Director or Trustee of some of the Funds in the Federated Fund Complex;
Chairman, President and Chief Executive Officer, Cunningham & Co., Inc.
(strategic business consulting); Trustee Associate, Boston College; Director,
Iperia Corp. (communications/ software); formerly: Director, Redgate
Communications and EMC Corporation (computer storage systems). Previous
Positions: Chairman of the Board and Chief Executive Officer, Computer Consoles,
Inc.; President and Chief Operating Officer, Wang Laboratories; Director, First
National Bank of Boston; Director, Apollo Computer, Inc.
<PAGE>
J. Christopher Donahue
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birth date: April 11, 1949
Executive Vice President
President or Executive Vice President of the Federated Fund Complex; Director or
Trustee of some of the Funds in the Federated Fund Complex; President, Chief
Executive Officer and Director, Federated Investors, Inc.; President and
Trustee, Federated Investment Management Company; President and Trustee,
Federated Investment Counseling, President and Director, Federated Global
Investment Management Corp.; President, Passport Research, Ltd.; Trustee,
Federated Shareholder Services Company; Director, Federated Services Company.
Mr. Donahue is the son of John F. Donahue, Chairman and Director of the Company.
APPROVAL OF CHANGES TO THE FUNDS'
FUNDAMENTAL INVESTMENT POLICIES
Introduction to Proposals #2(a) to #2(i) and #3(a) to #3(d).
The 1940 Act (which was adopted to protect mutual fund shareholders)
requires investment companies such as the Funds to adopt certain specific
investment policies or restrictions that can be changed only by shareholder
vote. An investment company may also elect to designate other policies or
restrictions that may be changed only by shareholder vote. Both types of
policies and restrictions are often referred to as "fundamental policies." These
policies and restrictions limit the investment activities of the Funds'
investment adviser.
After the Company was formed in 1991, legal and regulatory requirements
applicable to mutual funds changed. For example, certain restrictions imposed by
state laws and regulations were preempted by the National Securities Markets
Improvement Act of 1996 ("NSMIA") and no longer apply. As a result, the Funds
are subject to fundamental policies that are no longer required to be
fundamental, and to other policies that are no longer required at all.
Accordingly, the Directors have authorized the submission to the Funds'
shareholders for their approval, and recommend that shareholders approve, the
amendment, reclassification and/or elimination of certain of the Funds'
fundamental policies.
The proposed amendments would:
(i) simplify, modernize and standardize the fundamental policies that
are required to be stated under the 1940 Act;
(ii) reclassify as operating policies those fundamental policies
that are not required to be fundamental under the 1940 Act;
and
(iii) eliminate those fundamental policies that are no longer
required by the securities laws of the various states.
By reducing the number of policies that can be changed only by
shareholder vote, the Directors believe that the Funds would be able to minimize
the costs and delays associated with holding future shareholder meetings to
revise fundamental policies that become outdated or inappropriate. The Directors
also believe that the investment adviser's ability to manage the Funds' assets
in a changing investment environment will be enhanced and that investment
management opportunities will be increased by these changes. The chart that
follows briefly describes the differences between fundamental policies and
non-fundamental policies.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Fundamental Policies Non-Fundamental Policies
-------------------------------------- ---------------------------------------
Who must approve changes in the Board of Directors and shareholders Board of
Directors policies?
How quickly can a change in the Fairly slowly, since a vote of Fairly quickly, because the change
policies be made? shareholders is required can be accomplished by action of the
Board of Directors
What is the relative cost to Costly to change because a Less costly to change because a
change a policy? shareholder vote requires holding a change can be accomplished by action
meeting of shareholders of the Board of Directors
</TABLE>
The recommended changes are specified below. Each Proposal will be
voted on separately by each Fund (unless otherwise noted), and the approval of
each Proposal for each Fund will require the approval of a majority of the
outstanding voting shares of the Fund as defined in the 1940 Act. (See "Proxies,
Quorum and Voting at the Special Meeting" below.)
Description of Proposed Changes
The proposed standardized fundamental investment policies cover those
areas for which the 1940 Act requires the Funds to have a fundamental
restriction. They satisfy current regulatory requirements and are written to
provide flexibility to respond to future legal, regulatory, market or technical
changes. The proposed standardized changes will not affect the Funds' investment
objectives. Although the proposed changes in fundamental policies will allow the
Funds greater flexibility to respond to future investment opportunities, the
Board of Directors of the Company does not anticipate that the changes,
individually or in the aggregate, will result at this time in a material change
in the level of investment risk associated with investments in the Funds. Nor
does the Board of Directors anticipate that the proposed changes in fundamental
investment policies will, individually or in the aggregate, change materially
the manner in which the Funds are managed.
The following is the text and a summary description of the proposed
changes to the Funds' fundamental policies and restrictions. Any non-fundamental
policy may be modified or eliminated by the Directors at any future date without
any further approval of shareholders. Shareholders should note that certain of
the fundamental policies that are treated separately below currently are
combined within a single existing fundamental policy.
Presently, if a Fund adheres to a fundamental or non-fundamental
percentage restriction at the time of an investment or transaction, a later
increase or decrease in the percentage resulting from a change in the value of
the Fund's portfolio securities or the amount of its total assets does not
create a violation of the policy. This policy will continue to apply for any of
the proposed changes that are approved.
PROPOSAL #2: APPROVAL OF AMENDMENTS TO THE FUNDS'
FUNDAMENTAL INVESTMENT POLICIES
PROPOSAL #2(a): TO AMEND THE EQUITY FUND'S FUNDAMENTAL
INVESTMENT POLICY REGARDING DIVERSIFICATION
This Proposal Pertains to the Equity Fund Only.
Under the 1940 Act, a fund's policy relating to the diversification of
its investments must be fundamental. The 1940 Act prohibits a "diversified"
mutual fund from purchasing securities of any one issuer if, at the time of
purchase, more than 5% of the fund's total assets would be invested in
securities of that issuer or the fund would own or hold more than 10% of the
outstanding voting securities of that issuer, except that up to 25% of the
fund's total assets may be invested without regard to this limitation. The 5%
limitation does not apply to securities issued by or guaranteed by the U.S.
government, its agencies or instrumentalities or to securities issued by other
open-end investment companies.
The Equity Fund's present policy regarding diversification states:
"With respect to 75% of the value of its total assets, the Fund will
not purchase securities of any one issuer (other than securities issued
or guaranteed by the government of the United States or its agencies or
instrumentalities) if as a result more than 5% of the value to its
total assets would be invested in the securities of that issuer. To
comply with certain state restrictions, the Fund will not purchase
securities of any issuer if as a result more than 5% of its total
assets would be invested in securities of that issuer. (If state
restrictions change, this latter restriction may be revised without
shareholder approval or notification.) The Fund will not acquire more
than 10% of the outstanding voting securities of any one issuer."
In order to afford the Equity Fund's investment adviser maximum
flexibility in managing the Fund's assets, the Directors propose to amend the
Fund's diversification policy to be consistent with the definition of a
diversified investment company under the 1940 Act. The restated policy complies
with the U.S. Securities and Exchange Commission's (the "SEC" or the
"Commission") general definition of diversification. The new policy would
specifically add securities of other investment companies to the list of issuers
which are excluded from the 5% limitation. Upon approval of the Equity Fund's
shareholders, the fundamental investment policy governing diversification will
be amended as follows:
"With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities of any one issuer (other
than cash; cash items; securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities
and repurchase agreements collateralized by such U.S. government
securities; and securities of other investment companies) if, as a
result, more than 5% of the value of its total assets would be invested
in securities of that issuer, or the Fund would own more than 10% of
the outstanding voting securities of that issuer."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(b): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICIES
REGARDING BORROWING MONEY AND ISSUING SENIOR SECURITIES
The 1940 Act requires each Fund to have a fundamental investment policy
defining its ability to borrow money or issue senior securities. In general,
limitations on borrowing are designed to protect shareholders and their
investments by restricting the Fund's ability to subject its assets to any
claims of creditors or senior security holders who would be entitled to
dividends or rights on liquidation of the Fund prior to the rights of
shareholders.
Shareholders of the Funds are being asked to approve a new standardized
fundamental policy for borrowing and the issuance of senior securities designed
to reflect all current regulatory requirements. The Funds' current policies
state:
Equity Fund:
"The Fund will not issue senior securities except in connection with
transactions described in other investment limitations or as required
by forward commitments to purchase securities or currencies. The Fund
will not borrow money except as a temporary measure for extraordinary
or emergency purposes and then only in amounts up to one-third of the
value of its total assets, including the amount borrowed. The Fund will
not purchase securities while outstanding borrowings exceed 5% of the
value of its total assets."
Income Fund:
"The Fund will not issue senior securities except in connection with
transactions described in other investment limitations or as required
by forward commitments to purchase securities or currencies. The Fund
will not borrow money except from banks or through reverse repurchase
agreements as a temporary measure for extraordinary or emergency
purposes and then only in amounts up to one-third of the value of its
total assets, including the amount borrowed, but entering into future
contracts shall not be considered borrowing. This borrowing provision
is not for investment leverage but solely to facilitate management of
the portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities would be inconvenient or
disadvantageous. The Fund will not purchase securities while
outstanding borrowings exceed 5% of the value of its total assets."
Senior Securities-Generally. A "senior security" is an obligation of a mutual
fund with respect to its earnings or assets that takes precedence over the
claims of the fund's shareholders with respect to the same earnings or assets.
The 1940 Act generally prohibits a fund from issuing senior securities, in order
to limit the use of leverage. In general, an investment company uses leverage
when it borrows money to enter into securities transactions, or acquires an
asset without being required to make payment until a later time.
SEC staff interpretations allow a fund to engage in a number of types
of transactions which might otherwise be considered to create "senior
securities" or "leverage," so long as the fund meets certain collateral
requirements designed to protect shareholders. For example, some transactions
that may create senior security concerns include short sales, certain options
and futures transactions, reverse repurchase agreements and securities
transactions that obligate a fund to pay money at a future date (such as
when-issued, forward commitment or delayed delivery transactions). When engaging
in such transactions, a fund must set aside money or securities to meet the SEC
staff's collateralization requirements. This procedure effectively eliminates a
fund's ability to engage in leverage for these types of transactions.
Borrowing-Generally. Under the 1940 Act, an investment company is permitted to
borrow up to 5% of its total assets for temporary purposes. A fund may borrow
only from banks. If borrowings exceed 5%, the fund must have assets totaling at
least 300% of the borrowings when the amount of the borrowings are added to the
fund's other assets. The effect of this provision is to allow a fund to borrow
from banks in amounts up to one-third (33 1/3%) of its total assets (including
the amount borrowed). Investment companies typically borrow money to meet
redemptions in order to avoid a forced, unplanned sale of portfolio securities.
This technique allows a fund greater flexibility to buy and sell portfolio
securities for investment or tax considerations, rather than for cash flow
considerations. The costs of borrowing, however, can also reduce the fund's
total return.
The borrowing restrictions of the Funds permit borrowing only as a
temporary extraordinary or emergency measure, and restrict the purchase of any
new securities while borrowings are outstanding. The proposed investment policy
would provide greater flexibility, and would permit the Funds to borrow money,
directly or indirectly (such as through reverse repurchase agreements, where
permitted by the Funds' policies), and issue senior securities within the limits
established under the 1940 Act or under any rule or regulation of the
Commission, or any SEC staff interpretation thereof. If the new policy is
approved by shareholders, the Funds do not presently anticipate changing their
current practices relating to borrowing money and issuing senior securities. As
a matter of operating policy, the Funds do not presently intend to engage in
leveraging.
Upon shareholder approval, the fundamental investment policy governing
borrowing money and issuing senior securities will state:
"The Fund may borrow money, directly or indirectly, and issue senior
securities to the maximum extent permitted under the 1940 Act."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(c): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICIES
REGARDING INVESTMENTS IN REAL ESTATE
Under the 1940 Act, each Fund's policy concerning investments in real
estate must be fundamental. The Funds currently have fundamental investment
policies prohibiting the purchase or sale of real estate, and which state:
Equity Fund:
"The Fund will not invest in real estate, although it may invest in
securities secured by real estate or interests in real estate or issued
by companies, including real estate investment trusts, which invest in
real estate or interests therein."
Income Fund:
"The Fund will not invest in real estate, including limited partnership
interests, although it may invest in securities secured by real estate
or interests in real estate or issued by companies, including real
estate investment trusts, which invest in real estate or interests
therein."
The proposed fundamental investment policy will not permit a Fund to
purchase real estate directly, but will permit the purchase of securities whose
payments of interest or principal are secured by mortgages or other rights to
real estate in the event of default. The investment policies will also enable
the Funds to invest in companies within the real estate industry, provided such
investments are consistent with the Funds' investment objectives and policies.
If the new policies are approved by shareholders, the Funds do not presently
anticipate changing their current practices relating to investing in real
estate.
Upon shareholder approval, the fundamental investment policies of the
Funds governing investments in real estate by each Fund will state:
"The Fund may not purchase or sell real estate, provided that this
restriction does not prevent the Fund from investing in issuers which
invest, deal, or otherwise engage in transactions in real estate or
interests therein, or investing in securities that are secured by real
estate or interests therein. The Fund may exercise its rights under
agreements relating to such securities, including the right to enforce
security interests and to hold real estate acquired by reason of such
enforcement until that real estate can be liquidated in an orderly
manner."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(d): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICIES
REGARDING INVESTMENTS IN COMMODITIES
Under the 1940 Act, each Fund's policy concerning investments in
commodities must be fundamental. Each Fund is currently subject to a fundamental
restriction prohibiting the purchase or sale of commodities or commodity
contracts, and which provide:
<PAGE>
Equity Fund:
"The Fund will not purchase or sell commodities or commodity contracts,
except that the Fund may purchase and sell financial futures contracts
and options on financial futures contracts, provided that the sum of
its initial margin deposits for financial futures contracts held by the
Fund, plus premiums paid by it for open options on financial futures
contracts may not exceed 5% of the fair market value of the Fund's
total assets, after taking into account the unrealized profits and
losses on those contracts. Further, the Fund may engage in foreign
currency transactions and purchase or sell forward contracts with
respect to foreign currencies and related options."
Income Fund:
"The Fund will not purchase or sell commodities or commodity contracts,
except that the Fund may purchase or sell futures contracts and options
thereon, provided that the sum of its initial margin deposits on open
contracts will not exceed 5% of the fair market value of the Fund's net
assets. Further, the Fund may engage in transactions in foreign
currencies and may purchase and sell options on foreign currencies and
indices for hedging purposes."
Historically, the most common types of commodities have been physical
commodities such as wheat, cotton, rice and corn. However, under federal law,
futures contracts are considered to be commodities and, therefore, financial
futures contracts, such as futures contracts related to currencies, stock
indices or interest rates, are considered to be commodities. Financial futures
contracts enable an investment company to buy (or sell) the right to receive the
cash difference between the contract price for an underlying asset or index and
the future market price, if the market price is higher. If the future price is
lower, the investment company is obligated to pay (or, if the investment company
sold the contract, the investment company receives) the amount of the decrease.
Investment companies often desire to invest in financial futures contracts and
options related to such contracts for hedging or other investment reasons.
The proposed policy would provide appropriate flexibility for the Funds
to invest in financial futures contracts and related options. As proposed, the
policy is broad enough to permit investment in financial futures instruments for
either investment or hedging purposes, which is broader than the Funds' current
policies. Using financial futures instruments can involve substantial risks, and
would be utilized only if the Funds' investment adviser determined that such
investments are advisable and such practices were disclosed in the Funds'
prospectuses or statements of additional information. Gains or losses on
investments in financial futures instruments depend on the direction of
securities prices, interest rates and other economic factors, and losses from
engaging in these types of transactions are potentially unlimited. At the
present time, the Funds do not intend to engage in these activities beyond what
is disclosed in the Funds' current prospectuses. As a matter of non-fundamental
operating policy, for purposes of the proposed policy, investments in
transactions involving futures contracts and options, forward currency
contracts, swap transactions and other financial contracts that settle by
payment of cash are not deemed to be investments in commodities.
Upon shareholder approval, the standardized fundamental investment
policy governing investments in commodities for the Funds will state:
"The Fund may not purchase or sell physical commodities, provided that
the Fund may purchase securities of companies that deal in
commodities."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(e): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT
POLICIES REGARDING UNDERWRITING SECURITIES
Under the 1940 Act, each Fund's policy relating to underwriting is
required to be fundamental. Each Fund currently is subject to a fundamental
investment policy prohibiting it from acting as an underwriter of the securities
of other issuers, and states:
"The Fund will not underwrite or participate in the marketing of
securities of other issuers, except as it may be deemed to be an
underwriter under federal securities law in connection with the
disposition of its portfolio securities."
A person or company generally is considered an underwriter under the
federal securities laws if it participates in the public distribution of
securities of other issuers, usually by purchasing the securities from the
issuer and re-selling the securities to the public. From time to time, a mutual
fund may purchase a security for investment purposes which it later sells or
redistributes to institutional investors or others under circumstances where the
fund could possibly be considered to be an underwriter under the technical
definition of underwriter contained in the securities laws.
Upon shareholder approval, the fundamental investment policy concerning
underwriting will state:
"The Fund may not underwrite the securities of other issuers, except
that the Fund may engage in transactions involving the acquisition,
disposition or resale of its portfolio securities, under circumstances
where it may be considered to be an underwriter under the Securities
Act of 1933."
This does not constitute a substantive change in the Funds' fundamental
policies. Rather, it reflects a restatement to the standardized language now to
be used by the Federated Funds, and is submitted to shareholders for approval as
a result of the 1940 Act's requirements.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(f): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICIES
REGARDING LENDING BY THE FUNDS
Under the 1940 Act, each Fund's policy concerning lending must be
fundamental. The Funds currently are subject to fundamental investment policies
limiting their ability to make loans which state:
"The Fund will not lend any assets except portfolio securities. This
shall not prevent the purchase or holding of bonds, debentures, notes,
certificates of indebtedness, or other debt securities of an issuer,
repurchase agreements or other transactions which are permitted by the
Fund's investment objective and policies or its Articles of
Incorporation."
In order to ensure that the Funds may invest in certain debt securities
or repurchase agreements, which could technically be characterized as the making
of loans, the Funds' current fundamental policies specifically permit such
investments. In addition, the Funds' fundamental policies explicitly permit the
Funds to lend their portfolio securities to broker-dealers or institutional
investors. Securities lending is a practice that has become common in the mutual
fund industry and involves the temporary loan of portfolio securities to parties
who use the securities for the settlement of securities transactions. The
collateral delivered to a Fund in connection with such a transaction is then
invested to provide the Fund with additional income it might not otherwise have.
Securities lending involves certain risks if the borrower fails to
return the securities. However, management believes that with appropriate
controls, such as 100% or greater collateralization of the loan and regular
monitoring of the creditworthiness of the counterparty, the ability to engage in
securities lending does not materially increase the risks to which the Funds
currently are subject. In addition, securities on loan cannot generally be sold
until the term of the loan is over.
Upon approval of the Funds' shareholders, the fundamental investment
policy governing the lending of assets will state:
"The Fund may not make loans, provided that this restriction does not
prevent the Fund from purchasing debt obligations, entering into
repurchase agreements, lending its assets to broker/dealers or
institutional investors and investing in loans, including assignments
and participation interests."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(g): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICIES REGARDING
CONCENTRATION OF THE FUNDS'
INVESTMENTS IN THE SECURITIES OF COMPANIES IN THE SAME INDUSTRY
Under the 1940 Act, each Fund's policy relating to the concentration of
its investments in securities of companies in a single industry must be
fundamental. The SEC staff considers a mutual fund to "concentrate" its
investments if 25% or more of its total assets are invested in a particular
industry (not counting U.S. government securities, bank instruments issued by
domestic banks and municipal securities).
The Funds currently are subject to fundamental investment policies
prohibiting them from concentrating their investments in a single industry.
These policies provide:
Equity Fund:
"The Fund will not invest more than 25% of its total assets in
securities having their principal business activities in the same
industry."
Income Fund:
"The Fund will not invest more than 25% of its total assets in
securities of any one government or
supranational issuer."
Upon the approval by the Funds' shareholders, the fundamental
investment policy governing concentration will provide:
"The Fund will not make investments that will result in the
concentration of its investments in the securities of issuers primarily
engaged in the same industry. Government securities, municipal
securities and bank instruments will not be deemed to constitute an
industry. To conform to the current view of the SEC staff that only
domestic bank instruments may be excluded from industry concentration
limitations, as a matter of non-fundamental policy, the Fund will not
exclude foreign bank instruments from industry concentration limitation
tests as long as the policy of the SEC remains in effect. In addition,
investments in bank instruments, and investments in certain industrial
development bonds funded by activities in a single industry, will be
deemed to constitute investment in an industry, except when held for
temporary defensive purposes. The investment of more than 25% of the
value of the Fund's total assets in any one industry will constitute
`concentration.'"
The Company's Board has also approved related non-fundamental
investment policies for each Fund, which will be adopted if the new fundamental
policy is approved by shareholders. These policies provide that in applying the
concentration restriction: (1) utility companies will be divided according to
their services, for example, gas, gas transmission, electric and telephone will
each be considered a separate industry; (2) financial service companies will be
classified according to the end users of their services, for example, automobile
finance, bank finance and diversified finance will each be considered a separate
industry; and (3) asset-backed securities will be classified according to the
underlying assets securing such securities.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(h): TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE FUNDS'
FUNDAMENTAL INVESTMENT POLICIES REGARDING BUYING SECURITIES ON MARGIN
The Funds are not required to have a fundamental restriction on margin
transactions. Accordingly, it is proposed that each Fund's existing fundamental
policy be replaced with a non-fundamental restriction. Each Fund's current
policy provides:
Equity Fund:
"The Fund will not purchase any securities on margin, but may obtain
such short-term credits as are necessary for clearance of transactions,
except that the Fund may make margin payments in connection with its
use of financial futures contracts or related options and
transactions."
Income Fund:
"The Fund will not purchase any securities on margin but may obtain
such short-term credits as may be necessary for clearance of purchases
and sales of securities, and except that the Fund may make margin
deposits or payments in connection with its use of options, futures
contracts and options on futures contracts."
The proposed non-fundamental policy makes some changes in wording from
the existing fundamental restriction, and contemplates that the Funds may engage
in the same types of transactions as they are presently authorized to do. Upon
the approval of the elimination of the existing fundamental policy on engaging
in margin transactions, each Fund would become subject to the following
non-fundamental policy:
"The Fund will not purchase securities on margin, provided that the
Fund may obtain short-term credits necessary for the clearance of
purchases and sales of securities, and further provided that the Fund
may make margin deposits in connection with its use of financial
options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative instruments."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
<PAGE>
PROPOSAL #2(i): TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE FUNDS'
FUNDAMENTAL INVESTMENT POLICIES REGARDING PLEDGING ASSETS
The Funds are not required to have a fundamental investment restriction
with respect to the pledging of assets. To maximize the Funds' flexibility in
this area, the Board of the Company believes the policy on pledging assets
should be made non-fundamental. The non-fundamental policy would be similar to
the fundamental policies proposed to be eliminated, which state:
Equity Fund:
"The Fund will not mortgage, pledge, or hypothecate assets, except when
necessary for permissible borrowings. In those cases, it may pledge
assets having a value of 15% of its assets taken at cost. Neither the
deposit of underlying securities or other assets in escrow in
connection with the writing of put or call options or the purchase of
securities on a when-issued basis, nor margin deposits for the purchase
and sale of financial futures contracts and related options are deemed
to be a pledge."
Income Fund:
"The Fund will not mortgage, pledge, or hypothecate securities, except
when necessary for permissible borrowings. In those cases, it may
pledge assets having a value of 15% of its assets taken at cost. To
comply with certain state restrictions, the Fund will limit these
transactions to 10% of its net assets at market. If state restrictions
change, this latter restriction may be revised without shareholder
approval or notification. For purposes of the limitation, (a) the
deposit of assets in escrow in connection with the writing of covered
call and secured put options and (b) collateral arrangements with
respect to (i) the purchase and sale of options and (ii) initial or
variation margins for futures contracts, will not be deemed to be
pledges of the Fund's assets."
The Board does not expect this change to have a material impact on the
Funds' operations. Establishing the policy as non-fundamental, however, would
enable the Board to change this policy in the future without shareholder
approval. Upon the approval of the elimination of the existing fundamental
policy on pledging assets, each Fund would become subject to the following
non-fundamental policy:
"The Fund will not mortgage, pledge, or hypothecate any of its assets,
provided that this shall not apply to the transfer of securities in
connection with any permissible borrowing or to collateral arrangements
in connection with permissible activities."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3: ELIMINATION OF CERTAIN OF THE
FUNDS' FUNDAMENTAL INVESTMENT POLICIES
The Board has determined that certain of the Funds' current fundamental
investment policies are unnecessary and should be removed. Until NSMIA was
adopted in 1996, the securities laws of several states required every investment
company which intended to sell its shares in those states to adopt policies
governing a variety of operational issues, including investments in certain
securities. As a consequence of those restrictions, the Funds adopted the
investment policies described below and agreed that the policies would be
changed only upon the approval of shareholders. Since these prohibitions are no
longer required under current law, the management of the Company has
recommended, and the Board has determined, that the policies should be removed.
The removal of these policies would provide greater flexibility in the
management of the Funds by permitting the Funds to purchase a broader range of
securities that are permitted investments and that are consistent with the
Funds' investment objectives and policies.
The policies being removed are listed below. Each Proposal will be
voted on separately by each Fund (unless otherwise noted), and the approval of
each change by a Fund will require the affirmative vote of a majority of the
outstanding voting shares of the Fund as defined in the 1940 Act. (See "Proxies,
Quorum and Voting at the Special Meeting" below.)
PROPOSAL #3(a): TO REMOVE THE FUNDS' FUNDAMENTAL INVESTMENT
POLICIES REGARDING SELLING SECURITIES SHORT
The Funds are not required to have a fundamental investment restriction
with respect to short sales of securities. The Funds' restrictions state:
"The Fund will not sell securities short unless (1) it owns, or has a
right to acquire, an equal amount of such securities, or (2) it has
segregated an amount of its other assets equal to the lesser of the
market value of the securities sold short or the amount required to
acquire such securities. The segregated amount will not exceed 10% of
the Fund's net assets. While in a short position, the Fund will retain
the securities, rights, or segregated assets."
To maximize the Funds' flexibility in this area, the Board believes
that the Funds' restrictions on short sales of securities should be eliminated.
These restrictions were imposed as a result of state law, and NSMIA preempts the
requirement. Notwithstanding the elimination of these fundamental restrictions,
the Funds expect to continue not to engage in short sales of securities, except
to the extent that the Funds contemporaneously own or have the right to acquire,
at no additional cost, securities identical to, or convertible or exchangeable
for, those sold short.
Upon the approval by shareholders of Proposal #3(a), the existing
fundamental investment restrictions on selling securities short for the Funds
will be eliminated.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(b): TO REMOVE THE FUNDS' FUNDAMENTAL
INVESTMENT POLICIES ON INVESTING IN OIL, GAS AND MINERALS
The Funds are not required to have a fundamental restriction with
respect to oil, gas or mineral investments. To maximize the Funds' flexibility
in this area, the Board of the Company believes that the Funds' fundamental
investment policies on oil, gas and mineral investments should be eliminated.
These restrictions were imposed as a result of state law, and NSMIA preempts the
requirement. Notwithstanding the elimination of these fundamental policies, the
Funds do not expect to invest at this time in oil, gas or mineral exploration or
development programs or leases.
Upon the approval by shareholders of Proposal #3(b), the following
fundamental restrictions on investments in oil, gas or minerals for the Funds
will be eliminated:
Equity Fund:
"The Fund will not invest in interests in oil, gas, or other mineral
exploration or development programs, other than debentures or equity
stock interests."
Income Fund:
"The Fund will not invest in interests in oil, gas, or other mineral exploration
or development programs or leases."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(c): TO REMOVE THE FUNDS' FUNDAMENTAL INVESTMENT
POLICIES REGARDING PURCHASING SECURITIES OF
FIDUCIARY TRUST COMPANY INTERNATIONAL
Each Fund is presently subject to a fundamental investment restriction
that provides:
"The Fund will not acquire any securities of Fiduciary Trust Company
International or its affiliates."
These policies, which prohibit the Funds' acquisition of securities
issued by Fiduciary Trust Company International or its affiliates ("Fiduciary"),
were adopted at the time of the Funds' creation, when Fiduciary served as the
sub-adviser to the Funds, and were intended to assure that the Funds complied
with the 1940 Act requirement that prohibits an investment company from
acquiring securities issued by its investment adviser (or sub-adviser).
Subsequent to the adoption of these restrictions, Fiduciary ceased to serve as
the sub-adviser to the Funds, and thus, there is no legal requirement that the
Funds retain these fundamental investment restrictions. As a consequence,
management of the Company has proposed eliminating this policy for each Fund.
Notwithstanding the elimination of this investment restriction, the Funds do not
presently intend to invest in securities issued by Fiduciary. In the event that
the Funds were to invest in securities of Fiduciary, such investments would be
undertaken in compliance with the Funds' other investment policies and
restrictions.
Upon the approval by shareholders of Proposal #3(c), the fundamental
restrictions prohibiting investing in securities issued by Fiduciary will be
eliminated.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(d): TO REMOVE THE INCOME FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING PURCHASING AND SELLING OPTIONS
This Proposal Pertains to the Income Fund Only.
The Income Fund is presently subject to a fundamental investment
restriction that provides:
"The Fund will not write or purchase options, except that the Fund may
write covered call options and secured put options on up to 25% of its
net assets and may purchase put and call options, provided that no more
than 5% of its net assets may be invested in premiums on such options."
There is no legal requirement that the Income Fund adopt this
restriction, and, as a consequence, management of the Company has proposed that
the policy be eliminated. The Fund's investment adviser does not believe that
the deletion of the policy will have a material effect on the manner in which
the Fund is managed, and does not believe that the elimination will materially
increase the risks of investing in the Fund.
Upon the approval by shareholders of Proposal #3(d), the fundamental
investment restriction regarding purchasing and selling options for the Income
Fund will be eliminated.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #4: TO APPROVE AN AMENDMENT TO THE COMPANY'S
ARTICLES OF INCORPORATION TO PERMIT THE BOARD OF DIRECTORS
TO LIQUIDATE ASSETS OF A SERIES OR CLASS WITHOUT SEEKING SHAREHOLDER APPROVAL
TO THE EXTENT PERMITTED UNDER
MARYLAND LAW
Mutual funds, such as the Company, are required to organize under the
laws of a state and to create and be bound by organizational documents outlining
how they will operate. In the case of the Company, these organizational
documents are the Articles of Incorporation and the By-Laws. Since the adoption
of the Articles of Incorporation in 1991, and the Articles of Amendment and
Restatement (collectively, the "Articles of Incorporation") by the Company in
1994, the market for mutual funds has evolved, requiring mutual funds to be more
flexible in their operation so that they may respond quickly to changes in the
market. Certain items in the Company's current Articles of Incorporation
prohibit the Company from responding quickly and favorably to changing markets
without going to the expense and delay of holding a shareholder meeting.
Accordingly, the Directors have approved, and have authorized the
submission to the shareholders of the Company for their approval, an amendment
to the Company's Articles of Incorporation which is described below. If the
amendment is approved by shareholders, and in light of other amendments that
have been adopted to the Articles of Incorporation that do not require
shareholder approval, it is contemplated that the Amended and Restated Articles
of Incorporation will, following Board approval, be filed in Maryland following
the Special Meeting. The approval of the proposed amendment will require the
affirmative vote of a majority of the aggregate number of shares of the Company
entitled to be cast thereon, as described in the Articles of Incorporation. (See
"Proxies, Quorum and Voting at the Special Meeting" below.)
Shareholders are being asked to approve an amendment to the Company's
Amended and Restated Articles of Incorporation to permit the Directors, to the
extent permissible under Maryland law from time to time, to sell and convert
into money (i.e., liquidate) all of the assets of the Company, or a class or
series of the Company, and then redeem all outstanding shares of any series or
class of the Company. Currently, a vote of shareholders is required to
liquidate the Company, or a class or series thereof. The Directors have
determined that the current restriction presents a cumbersome structure under
which the best interest of all of the Company's shareholders may not be
served. By requiring the Directors to solicit a shareholder vote, by means of
a proxy solicitation for a meeting of shareholders, the Articles of
Incorporation as currently in effect greatly hinder the Directors' ability to
effectively act on decisions about the continued viability of the Company, or
a series or class thereof. If it is determined that it is no longer advisable
to continue the Company, or a series or class thereof, it may not be in the
best interest of shareholders to incur the substantial additional expense of a
shareholder meeting when it is more important to preserve for shareholders
those assets that remain. Depending on the terms of Maryland corporate law,
which may change from time to time, if this proposal is approved by
shareholders, the Directors may be authorized to liquidate a class or series
of the Company by Board action without a further shareholder vote. The
Directors have no present intention of liquidating the Company or any Fund.
If approved by shareholders, the Amended and Restated Articles of
Incorporation would provide substantially to the effect that:
"To the extent permitted under Maryland law, without the vote of the
shares of any class of stock of the Corporation then outstanding, the
Corporation may, upon approval of a majority of the Board of Directors,
sell and convert into money all the assets of any class or series of
the Corporation. Upon making provision for the payment of all
outstanding obligations, taxes and other liabilities, accrued or
contingent, belonging to the Corporation, or any class or series
thereof, the Directors shall distribute the remaining assets of the
Corporation ratably among the holders of the outstanding shares of the
Corporation, or any affected class or series thereof."
In the event that the amendment to the Amended and Restated Articles
of Incorporation to allow the Directors to liquidate the Company, or its
classes or series, as set forth above is not approved by the shareholders, the
provisions of the Amended and Restated Articles of Incorporation shall remain
as they are presently in the Articles of Restatement, and the Directors will
consider what action, if any, should be taken.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
INFORMATION ABOUT THE COMPANY
Proxies, Quorum and Voting at the Special Meeting
Only shareholders of record on the Record Date will be entitled to vote
at the Special Meeting. Each share of each Fund is entitled to one vote.
Fractional shares are entitled to proportionate shares of one vote. Under the
Investment Company Act of 1940, the favorable vote of: (a) the holders of 67% or
more of the outstanding voting securities present at the Special Meeting, if the
holders of 50% or more of the outstanding voting securities of each Fund are
present or represented by proxy; or (b) the vote of the holders of more than 50%
of the outstanding voting securities, whichever is less, is required to approve
all of the proposals, except the election of Directors and the amendment to the
Articles of Incorporation.
Any person giving a proxy has the power to revoke it any time prior to
its exercise by executing a superseding proxy or by submitting a written notice
of revocation to the Secretary of the Company. In addition, although mere
attendance at the Special Meeting will not revoke a proxy, a shareholder present
at the Special Meeting may withdraw his or her proxy and vote in person. All
properly executed and unrevoked proxies received in time for the Special Meeting
will be voted in accordance with the instructions contained in the proxies. If
no instruction is given on the proxy, the persons named as proxies will vote the
shares represented thereby in favor of the matters set forth in the attached
Notice.
In order to hold the Special Meeting, a "quorum" of shareholders must
be present. Holders of one-third of the total number of outstanding shares of
the Company, present in person or by proxy, shall be required to constitute a
quorum for the purpose of voting on the proposals pertaining to the election of
Directors and the amendment to the Articles of Incorporation. Holders of
one-third of the total number of outstanding shares of each Fund, present in
person or by proxy, shall be required to constitute a quorum for the purpose of
voting on the other proposals.
For purposes of determining a quorum for transacting business at the
Special Meeting, abstentions and broker "non-votes" (that is, proxies from
brokers or nominees indicating that such persons have not received instructions
from the beneficial owner or other persons entitled to vote shares on a
particular matter with respect to which the brokers or nominees do not have
discretionary power) will be treated as shares that are present but which have
not been voted. For this reason, abstentions and broker non-votes will have the
effect of a "no" vote for purposes of obtaining the requisite approval of some
of the proposals.
If a quorum is not present, the persons named as proxies may vote those
proxies that 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
solicitations of proxies with respect to such proposal(s). 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 AGAINST an adjournment those proxies that they are
required to vote against the proposal, and will vote in FAVOR of such an
adjournment all other proxies that they are authorized to vote. A shareholder
vote may be taken on the proposals in this proxy statement prior to any such
adjournment if sufficient votes have been received for approval.
As referred to in this Proxy Statement, the "Federated Fund Complex,"
"The Funds" or "Funds" includes the following investment companies: Cash Trust
Series, Inc.; Cash Trust Series II; CCB Funds; Federated Adjustable Rate U.S.
Government Fund, Inc.; Federated American Leaders Fund, Inc.; Federated ARMs
Fund; Federated Core Trust; Federated Equity Funds; Federated Equity Income
Fund, Inc.; Federated Fund for U.S. Government Securities, Inc.; Federated GNMA
Trust; Federated Government Income Securities, Inc.; Federated Government Trust;
Federated High Income Bond Fund, Inc.; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Insurance Series; Federated Municipal
Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated
Municipal Trust; Federated Short-Term Municipal Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds, Inc.;
Edward D. Jones & Co. Daily Passport Cash Trust; Liberty Term Trust, Inc. -
1999; Liberty U.S. Government Money Market Trust; Managed Series Trust; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market
Obligations Trust II; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Regions Funds; RIGGS Funds; Tax-Free Instruments Trust; The
Planters Funds; WesMark Funds; WCT Funds; and World Investment Series, Inc.
Share Ownership of the Directors
Officers and Directors of the Company own less than 1% of the Company's
outstanding shares.
At the close of business on the Record Date, the following persons owned, to the
knowledge of management, more than 5% of the outstanding shares of the Funds:
Equity Fund:
Class A Shares: The Provident Bank, Cincinnati, OH, owned approximately 611,859
Class A Shares (5.67%).
Class C Shares: HUBCO, Birmingham, AL, owned approximately 797,342 Class C
Shares (51.33%); and Merrill Lynch, Pierce, Fenner & Smith, Jacksonville, FL, on
behalf of various customer accounts, owned approximately 131,941 Class C Shares
(8.49%).
Income Fund:
Class A Shares: JATO, Minneapolis, MN, owned approximately 3,502,688 Class A
Shares (28.49%); LaCross & Co, LaCrosse, WI, owned approximately 1,967,101 Class
A Shares (16.00%); Charles Schwab & CO, Inc., San Francisco, CA, owned
approximately 742,790 Class A Shares (6.04%); and Wabank, Waukesha, WI, owned
approximately 618,615 Class A Shares (5.03%).
Class C Shares: Merrill Lynch, Pierce, Fenner & Smith, Jacksonville, FL, on
behalf of various customer accounts owned approximately 121,556 Class C Shares
(23.89%).
<TABLE>
<CAPTION>
<S> <C> <C>
Director Compensation
Name and Position Aggregate Total Compensation Paid From Fund Complex+
With Company Compensation
From Company1#
- --------------------------------------- -------------------------- -------------------------------------------------------
John F. Donahue*@ $0 $0 for the Company and 54 other
Chairman and Director investment companies in the Fund Complex
Thomas G. Bigley $1,277.32 $113,860.22 for the Company and 54 other
Director investment companies in the Fund Complex
John T. Conroy, Jr. $1,405.25 $125,264.48 for the Company and 54 other
Director investment companies in the Fund Complex
William J. Copeland $1,405.25 $125,264.48 for the Company and 54 other
Director investment companies in the Fund Complex
Lawrence D. Ellis, M.D.* $1,277.32 $113,860.22 for the Company and 54 other
Director investment companies in the Fund Complex
Peter E. Madden $1,277.32 $113,860.22 for the Company and 54 other
Director investment companies in the Fund Complex
Charles F. Mansfield, Jr.** $0 $0 for the Company and 50 other investment
Director companies in the Fund Complex
John E. Murray, Jr., J.D., S.J.D. @ $1,277.32 $113,860.22 for the Company and 54 other
Director investment companies in the Fund Complex
Marjorie P. Smuts
Director $1,277.32 $113,860.22 for the Company and 54 other
investment companies in the Fund Complex
John S. Walsh** $0 $0 for the Company and 48 other investment
Director companies in the Fund Complex
</TABLE>
1 Information is furnished for the fiscal year ended November 30, 1998.
# The aggregate compensation is provided for the Company which is comprised of
three portfolios.
+ The information is provided for the last calendar year.
*This Director is deemed to be an "interested person" as defined in the
1940 Act.
@ Member of the Executive Committee.
If the Nominees are elected by shareholders at the Special Meeting, it is
anticipated that Mr. Copeland will resign as a Director.
** Messrs. Mansfield and Walsh became Directors of the Company on January 1,
1999. They did not receive any fees from the Fund Complex as of the last
calendar year.
During the fiscal year ended November 30, 1998, there were four
meetings of the Board of Directors. The interested Directors, other than Dr.
Ellis, do not receive fees from the Company. Dr. Ellis is an interested person
by reason of the employment of his son-in-law by Federated Securities Corp. All
Directors were reimbursed for expenses for attendance at Board of Directors
meetings.
The Executive Committee of the Board of Directors handles the
responsibilities of the Board between meetings of the Board. Other than its
Executive Committee, the Company has one Board committee, the Audit Committee.
Generally, the function of the Audit Committee is to assist the Board of
Directors in fulfilling its duties relating to the Company's accounting and
financial reporting practices and to serve as a direct line of communication
between the Board of Directors and the independent auditors. The specific
functions of the Audit Committee include recommending the engagement or
retention of the independent auditors, reviewing with the independent auditors
the plan and the results of the auditing engagement, approving professional
services provided by the independent auditors prior to the performance of such
services, considering the range of audit and non-audit fees, reviewing the
independence of the independent auditors, reviewing the scope and results of the
Company's procedures for internal auditing, and reviewing the Company's system
of internal accounting controls.
Messrs. Conroy, Madden and Murray serve on the Audit Committee. These
Directors are not interested Directors of the Company. During the fiscal year
ended November 30, 1998, there were four meetings of the Audit Committee. All of
the members of the Audit Committee were present for each meeting. Each member of
the Audit Committee receives an annual fee of $100 plus $25 for attendance at
each meeting and is reimbursed for expenses of attendance.
Officers and Incumbent Directors of the Company
The executive officers of the Company are elected annually by the Board
of Directors. Each officer holds the office until qualification of his
successor. The names and birth dates of the executive officers of the Company,
as well as the incumbent Directors of the Company who have previously been
elected by shareholders, and their principal occupations during the last five
years, are set forth below:
John F. Donahue
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birth date: July 28, 1924
Chairman and Director
Date Became an Officer and a Director: March 9, 1984
Chief Executive Officer and Director or Trustee of the Federated Fund Complex;
Chairman and Director, Federated Investors, Inc., Chairman and Trustee,
Federated Investment Management Company; Chairman and Director, Federated
Investment Counseling, and Federated Global Investment Management Corp.;
Chairman, Passport Research, Ltd. Mr. Donahue is the father of J. Christopher
Donahue, Executive Vice President of the Company and Nominee for Director.
John T. Conroy, Jr.
Wood/IPC Commercial Dept.
John R. Wood Associates, Inc. Realtors
3255 Tamiami Trail North
Naples, FL
Birth date: June 23, 1937
Director
Date Became a Director: August 21, 1991
Director or Trustee of the Federated Fund Complex; President, Investment
Properties Corporation; Senior Vice President, John R. Wood and Associates,
Inc., Realtors; Partner or Trustee in private real estate ventures in Southwest
Florida; formerly: President, Naples Property Management, Inc. and Northgate
Village Development Corporation.
<PAGE>
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birth date: July 4, 1918
Director
Date Became a Director: March 9, 1984
Director or Trustee of the Federated Fund Complex; Director and Member of the
Executive Committee, Michael Baker, Corp.; (engineering, construction,
operations, and technical services); Chairman, Pittsburgh Foundation; Director,
Forbes Fund (philanthropy); formerly: Vice Chairman and Director, PNC Bank,
N.A., and PNC Bank Corp.; Director, Ryan Homes, Inc. Previous Positions:
Director, United Refinery; Director, Forbes Fund; Chairman, Pittsburgh Civic
Light Opera; Chairman, Health Systems Agency of Allegheny County; Vice
President, United Way of Allegheny County; President, St. Clair Hospital;
Director, Allegheny Hospital.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue
Suite 1111
Pittsburgh, PA
Birth date: October 11, 1932
Director
Date Became a Director: August 26, 1987
Director or Trustee of the Federated Fund Complex; Professor of Medicine,
University of Pittsburgh; Medical Director, University of Pittsburgh Medical
Center - Downtown; Hematologist, Oncologist, and Internist, University of
Pittsburgh Medical Center; Member, National Board of Trustees, Leukemia Society
of America.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birth date: March 16, 1942
Director
Date Became a Director: August 21, 1991
Director or Trustee of the Federated Fund Complex; formerly: Representative,
Commonwealth of Massachusetts General Court; President, State Street Bank and
Trust Company and State Street Corporation. Previous Positions: Director, VISA
USA and VISA International; Chairman and Director, Massachusetts Bankers
Association; Director, Depository Trust Corporation; Director, The Boston Stock
Exchange.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birth date: June 21, 1935
Director
Date Became a Director: March 9, 1984
Director or Trustee of the Federated Fund Complex; Public
Relations/Marketing/Conference Planning. Previous Positions: National
Spokesperson, Aluminum Company of America; television producer; business owner.
<PAGE>
Glen R. Johnson
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birth date: May 2, 1929
President
Date Became an Officer: March 9, 1984
Staff member, Federated Securities Corp.
J. Christopher Donahue
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birth date: April 11, 1949
Executive Vice President
Date Became an Officer: June 1, 1995
President or Executive Vice President of the Federated Fund Complex; Director or
Trustee of some of the Funds in the Federated Fund Complex; President, CEO and
Director, Federated Investors, Inc., President, and Trustee, Federated
Investment Management Company; President and Trustee, Federated Investment
Counseling, President and Director, Federated Global Investment Management
Corp.; President, Passport Research, Ltd.; Trustee, Federated Shareholder
Services Company; Director, Federated Services Company. Mr. Donahue is the son
of John F. Donahue, Chairman and Director of the Company.
Edward C. Gonzales
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birth date: October 22, 1930
Executive Vice President
Date Became an Officer: June 1, 1995
Trustee or Director of some of the Funds in the Federated Fund Complex;
President, Executive Vice President and Treasurer of some of the Funds in the
Federated Fund Complex; Vice Chairman, Federated Investors, Inc.; Vice
President, Federated Investment Management Company and Federated Investment
Counseling, Federated Global Investment Management Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company.
John W. McGonigle
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birth date: October 26, 1938
Executive Vice President and Secretary
Date Became an Officer: March 9, 1984
Executive Vice President and Secretary of the Federated Fund Complex; Executive
Vice President, Secretary and Director, Federated Investors, Inc.; Trustee,
Federated Investment Management Company and Trustee, Federated Investment
Counseling and Director, Federated Global Investment Research Corp.; Director,
Federated Services Company; Director, Federated Securities Corp.
Richard B. Fisher
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birth date: May 17, 1923
Vice President
Date Became an Officer: March 9, 1984
President or Vice President of some of the Funds in the Federated Fund Complex;
Director or Trustee of some of the Funds in the Federated Fund Complex;
Executive Vice President, Federated Investors, Inc.; Chairman and Director,
Federated Securities Corp.
Richard J. Thomas
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birth date: June 17, 1954
Treasurer
Date Became an Officer: November 19, 1998
Treasurer of the Federated Fund Complex; Vice President - Funds Financial
Services Division, Federated Investors, Inc.; formerly: various management
positions within Funds Financial Services Division of Federated Investors, Inc.
Henry A. Frantzen
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birth date: November 28, 1942
Chief Investment Officer
Date Became an Officer: November 19, 1998
Chief Investment Officer of the Company and various other Funds in the Federated
Fund Complex; Executive Vice President, Federated Investment Counseling,
Federated Global Investment Management Corp., Federated Investment Management
Company and Passport Research, Ltd.; Registered Representative, Federated
Securities Corp.; Vice President, Federated Investors, Inc.; formerly: Executive
Vice President, Federated Investment Counseling Institutional Portfolio
Management Services Division; Chief Investment Officer/Manager, International
Equities, Brown Brothers Harriman & Co.; Managing Director, BBH Investment
Management Limited.
Drew J. Collins
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birth date: December 19, 1956
Vice President
Date Became an Officer: November 19, 1998
Senior Vice President and Senior Portfolio Manager, Federated Global Investment
Management Corp.; formerly, Vice President/Portfolio Manager of international
equity portfolios at Arnhold and Bleichroeder, Inc. from 1994 to 1995; Assistant
Vice President/Portfolio Manager for international equities at the College
Retirement Equities Fund from 1986 to 1994.
None of the Officers of the Company received salaries from the
Company during the fiscal year ended November 30, 1998.
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY
The Company is not required, and does not intend, to hold regular
annual meetings of shareholders. Shareholders wishing to submit proposals for
consideration for inclusion in a proxy statement for the next meeting of
shareholders should send their written proposals to International Series, Inc.,
Federated Investors Funds, 5800 Corporate Drive, Pittsburgh, Pennsylvania
15237-7000, so that they are received within a reasonable time before any such
meeting.
No business other than the matters described above is expected to come
before the Special Meeting, but should any other matter requiring a vote of
shareholders arise, including any question as to an adjournment or postponement
of the Special Meeting, the persons named on the enclosed proxy card will vote
on such matters according to their best judgment in the interests of the
Company.
SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED
PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE,
WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors,
John W. McGonigle
Secretary
September 24, 1999
<PAGE>
INTERNATIONAL SERIES, INC.
Federated International Equity Fund
Federated International Income Fund
Investment Adviser
FEDERATED GLOBAL INVESTMENT MANAGEMENT CORP.
175 Water Street
New York, NY 10038-4965
Distributor
FEDERATED SECURITIES CORP.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Administrator
FEDERATED SERVICES COMPANY
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
<PAGE>
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned Shareholders of
Federated International Equity Fund (the "Fund"), a portfolio of International
Series, Inc. (the "Company"), hereby appoint Patricia F. Conner, Gail Cagney,
William Haas, Suzanne W. Land and Ann M. Scanlon, or any one of them, true and
lawful attorneys, with the power of substitution of each, to vote all shares of
the Fund which the undersigned is entitled to vote at the Special Meeting of
Shareholders (the "Special Meeting") to be held on November 30, 1999 at 5800
Corporate Drive, Pittsburgh, Pennsylvania, at 2:00 p.m., and at any adjournment
thereof.
The attorneys named will vote the shares represented by this proxy in accordance
with the choices made on this ballot. If no choice is indicated as to the item,
this proxy will be voted affirmatively on the matters. Discretionary authority
is hereby conferred as to all other matters as may properly come before the
Special Meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF INTERNATIONAL
SERIES, INC. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" THE PROPOSALS.
By checking the box "FOR" below, you will vote to approve each of the proposed
items in this proxy, and to elect each of the nominees as Directors of the
Company
For [ ]
Proposal 1 To elect Thomas G. Bigley, Nicholas P. Constantakis, John F.
Cunningham, J. Christopher Donahue, Charles F. Mansfield, Jr., John E.
Murray, Jr. and John S. Walsh as Directors of the Company
FOR [ ]
AGAINST [ ]
WITHHOLD AUTHORITY
TO VOTE [ ]
FOR ALL EXCEPT [ ]
If you do not wish your shares to be voted "FOR"
a particular nominee, mark the "For All Except"
box and strike a line through the name of each
nominee for whom you are NOT voting. Your shares
will be voted for the remaining nominees.
Proposal 2........To make changes to the Fund's fundamental investment policies:
2(a) To amend the Fund's fundamental investment policy regarding
diversification
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(b) To amend the Fund's fundamental investment policy regarding
borrowing money and issuing senior securities
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(c) To amend the Fund's fundamental investment
policy regarding investments in real estate
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2(d) To amend the Fund's fundamental investment
policy regarding investments in commodities
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2(e) To amend the Fund's fundamental investment
policy regarding underwriting securities FOR
[ ] AGAINST [ ] ABSTAIN [ ]
2(f) To amend the Fund's fundamental investment
policy regarding lending assets FOR [ ]
AGAINST [ ] ABSTAIN [ ]
2(g) To amend the Fund's fundamental investment policy regarding
concentration of the Fund's investments in the securities of
companies in the same industry
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(h) To amend, and to make non-fundamental, the Fund's fundamental
investment policy regarding buying securities on margin
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(i) To amend, and to make non-fundamental, the Fund's fundamental
investment policy regarding pledging assets
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
Proposal 3: To eliminate certain of the Fund's fundamental investment
policies:
3(a) To remove the Fund's fundamental investment
policy regarding selling securities short
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3(b) To remove the Fund's fundamental investment
policy regarding investing in oil, gas and
minerals FOR [ ] AGAINST [ ] ABSTAIN [ ]
3(c) To remove the Fund's fundamental investment policy regarding
purchasing securities of Fiduciary Trust Company International
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
Proposal 4: To approve an amendment to the Company's Articles of
Incorporation to permit the Board of Directors to liquidate
assets of a series or class without seeking shareholder
approval to the extent permitted under Maryland law
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
YOUR VOTE
IS
IMPORTANT
Please
complete,
sign and
return
this card
as soon
as
possible.
Dated
Signature
Signature (Joint Owners)
Please sign this proxy exactly as your name appears on the books of the Company.
Joint owners should each sign personally. Directors and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
You may also vote your shares by touchtone phone
by calling 1-800-690-6903, or through the
Internet at www.proxyvote.com.
<PAGE>
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned Shareholders of
Federated International Income Fund (the "Fund"), a portfolio of International
Series, Inc. (the "Company"), hereby appoint Patricia F. Conner, Gail Cagney,
William Haas, Suzanne W. Land and Ann M. Scanlon, or any one of them, true and
lawful attorneys, with the power of substitution of each, to vote all shares of
the Fund which the undersigned is entitled to vote at the Special Meeting of
Shareholders (the "Special Meeting") to be held on November 30, 1999, at 5800
Corporate Drive, Pittsburgh, Pennsylvania, at 2:00 p.m., and at any adjournment
thereof.
The attorneys named will vote the shares represented by this proxy in accordance
with the choices made on this ballot. If no choice is indicated as to the item,
this proxy will be voted affirmatively on the matters. Discretionary authority
is hereby conferred as to all other matters as may properly come before the
Special Meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF INTERNATIONAL
SERIES, INC. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" THE PROPOSALS.
By checking the box "FOR" below, you will vote to approve each of the proposed
items in this proxy, and to elect each of the nominees as Directors of the
Company
For [ ]
Proposal 1 To elect Thomas G. Bigley, Nicholas P. Constantakis, John F.
Cunningham, J. Christopher Donahue, Charles F. Mansfield, Jr., John E.
Murray, Jr. and John S. Walsh as Directors of the Company
FOR [ ]
AGAINST [ ]
WITHHOLD AUTHORITY
TO VOTE [ ]
FOR ALL EXCEPT [ ]
If you do not wish your shares to be voted "FOR"
a particular nominee, mark the "For All Except"
box and strike a line through the name of each
nominee for whom you are NOT voting. Your shares
will be voted for the remaining nominees.
Proposal 2 To make changes to the Fund's fundamental investment policies:
2(b) To amend the Fund's fundamental investment policy regarding
borrowing money and issuing senior securities
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(c) To amend the Fund's fundamental investment
policy regarding investments in real estate
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(d) To amend the Fund's fundamental investment
policy regarding investments in commodities
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(e) To amend the Fund's fundamental investment
policy regarding underwriting securities
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(f) To amend the Fund's fundamental investment
policy regarding lending assets
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(g) To amend the Fund's fundamental investment policy regarding
concentration of the Fund's investments in the securities of
companies in the same industry
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(h) To amend, and to make non-fundamental, the Fund's fundamental
investment policy regarding buying securities on margin
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(i) To amend, and to make non-fundamental, the Fund's fundamental
investment policy regarding pledging assets
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
Proposal 3: To eliminate certain of the Fund's fundamental investment
policies:
3(a) To remove the Fund's fundamental investment
policy regarding selling securities short
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(b) To remove the Fund's fundamental investment
policy regarding investing in oil, gas and
minerals
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(c) To remove the Fund's fundamental investment policy regarding
purchasing securities of Fiduciary Trust Company International
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(d) To remove the Fund's fundamental investment
policy regarding purchasing and selling
options FOR [ ] AGAINST [ ] ABSTAIN [ ]
Proposal 4: To approve an amendment to the Company's Articles of
Incorporation to permit the Board of Directors to liquidate
assets of a series or class without seeking shareholder
approval to the extent permitted under Maryland law
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
YOUR VOTE
IS
IMPORTANT
Please
complete,
sign and
return
this card
as soon
as
possible.
Dated
Signature
Signature (Joint Owners)
Please sign this proxy exactly as your name appears on the books of the Company.
Joint owners should each sign personally. Directors and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
You may also vote your shares by touchtone phone
by calling 1-800-690-6903, or through the
Internet at www.proxyvote.com.
