1933 Act File No. 2-91776
1940 Act File No. 811-3984
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
-------
Pre-Effective Amendment No. ......................
------ ------
Post-Effective Amendment No. 36 ................... X_
-------- -------
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 _ X
-------
Amendment No. 31 ................................... _X
------- -------
INTERNATIONAL SERIES, INC.
(Exact Name of Registrant as Specified in Charter)
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) X_ on March 31, 2000 pursuant
to paragraph (b) 60 days after filing pursuant to paragraph (a) (i) on
_________________ pursuant to paragraph (a) (i) 75 days after filing pursuant to
paragraph (a)(ii) on _________________ pursuant to paragraph (a)(ii) of Rule
485.
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a previously
filed post-effective amendment.
Copies To:
Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037
PROSPECTUS
Federated International Equity Fund
A Portfolio of Federated International Series, Inc.
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
A mutual fund seeking to obtain a total return on its assets by investing
primarily in equity securities of companies based outside the United States.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
MARCH 31, 2000
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the
Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 6
What Do Shares Cost? 8
How is the Fund Sold? 11
How to Purchase Shares 12
How to Redeem and Exchange Shares 14
Account and Share Information 17
Who Manages the Fund? 19
Financial Information 19
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund's investment objective is to obtain a total return on its assets. The
Fund's total return will consist of two components: (1) changes in the market
value of its portfolio securities (both realized and unrealized appreciation);
and (2) income received from its portfolio securities. The Fund expects that
changes in market value will comprise the largest component of its total return.
While there is no assurance that the Fund will achieve its investment objective,
it endeavors to do so by following the strategies and policies described in this
prospectus. This investment objective may be changed by the Fund's Directors
without shareholder approval.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund pursues its investment objective by investing at least 65% of its
assets in equity securities of companies based outside the U.S. The investment
adviser (Adviser) manages the Fund based on the view that international equity
markets are inefficient at pricing securities and that careful security
selection offers the best potential for superior long-term investment returns.
The Adviser uses a "bottom-up" approach to stock selection and selection of
industry and country are secondary considerations. The Adviser attempts to
purchase securities with a mix of growth and value characteristics. Using its
own quantitative process, the Adviser ranks the future performance potential of
companies by evaluating each company's earnings potential and management quality
as well as reviewing the company's financial statements and earnings forecasts.
The Adviser then evaluates the sustainability of the company's current growth
trends and potential catalysts for increased growth. Using this fundamental
analysis, the Adviser selects the most promising companies for the Fund's
portfolio.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factors that may reduce the Fund's returns
include:
* fluctuations in the value of equity securities in foreign securities
markets, and
* fluctuations in the exchange rate between the U.S. dollar and foreign
currencies.
An investment in the Fund involves additional risks of foreign investing such as
sector risks, regional risks and Euro risks.
The Shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency.
RISK/RETURN BAR CHART AND TABLE
[Graphic]
The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.
The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.
Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 55.35% (quarter ended December 31, 1999). Its lowest
quarterly return was (19.77%) (quarter ended September 30, 1990).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Fund's Class A, Class B, and Class C Average
Annual Total Returns, reduced to reflect applicable sales charges, for the
calendar periods ended December 31, 1999. The table shows the Fund's total
returns averaged over a period of years relative to the Morgan Stanley Capital
International Europe, Australia, and Far East Index (EAFE), a broad-based market
index. The EAFE is a standard foreign securities index representing major
non-U.S. stock markets as monitored by Morgan Stanley Capital International.
Total returns for the index shown do not reflect sales charges, expenses or
other fees that the SEC requires to be reflected in the Fund's performance.
Indexes are unmanaged and it is not possible to invest directly in an index.
<TABLE>
<CAPTION>
CALENDAR PERIOD CLASS A SHARES CLASS B SHARES CLASS C SHARES EAFE
<S> <C> <C> <C> <C>
1 Year 68.52% 71.40% 76.18% 26.96%
5 Years 20.45% 20.58% 20.86% 12.83%
10 Years 11.59% - - 7.01%
Start of Performance 1 - 18.01% 18.42% -
</TABLE>
1 The Fund's Class A, Class B and Class C Shares start of performance dates were
August 17, 1984, September 28, 1994,and April 1, 1993, respectively.
Past performance does not necessarily predict the future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
returns.
What are the Fund's Fees and Expenses?
FEDERATED INTERNATIONAL EQUITY FUND
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
the Fund's Class A, B and C Shares.
<TABLE>
<CAPTION>
SHAREHOLDER FEES CLASS A CLASS B
CLASS C
<S> <C> <C>
<C>
Fees Paid Directly From
Your
Investment
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) 5.50% None
None
Maximum Deferred Sales
Charge (Load) (as a
percentage of original
purchase price or
redemption proceeds, as
applicable) None 5.50%
1.00%
Maximum Sales Charge
(Load) Imposed on
Reinvested Dividends (and
other Distributions) (as a
percentage of offering
price) None None
None
Redemption Fee (as a
percentage of amount
redeemed, if applicable) None None
None
Exchange Fee None None
None
ANNUAL FUND OPERATING
EXPENSES
Expenses That are Deducted
From Fund Assets (as a
percentage of average net
assets)
Management Fee 1.00% 1.00%
1.00%
Distribution (12b-1) Fee None 0.75%
0.75%
Shareholder Services Fee 0.25% 0.25%
0.25%
Other Expenses 0.42% 0.42%
0.42%
Total Annual Fund
Operating Expenses 1.67% 2.42% 1
2.42%
1 Class B Shares convert to Class A Shares (which pay lower
ongoing expenses) approximately eight years after purchase.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Class A, B and C Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Class A, B and C
Shares for the time periods indicated and then redeem all of your Shares at the
end of those periods. Expenses assuming no redemption are also shown. The
Example also assumes that your investment has a 5% return each year and that the
Fund's Class A, B and C Shares operating expenses are as shown in the table and
remain the same. Although your actual costs and returns may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A:
Expenses assuming redemption $710 $1,048 $1,407 $2,418
Expenses assuming no redemption $710 $1,048 $1,407 $2,418
CLASS B:
Expenses assuming redemption $795 $1,155 $1,491 $2,570
Expenses assuming no redemption $245 $ 755 $1,291 $2,570
CLASS C:
Expenses assuming redemption $345 $ 755 $1,291 $2,756
Expenses assuming no redemption $245 $ 755 $1,291 $2,756
</TABLE>
What are the Fund's Investment Strategies?
The Fund pursues its investment objective by investing at least 65% of its
assets in equity securities of companies based outside the U.S. The adviser
manages the Fund based on the view that international equity markets are
inefficient at pricing securities and that careful security selection offers the
best potential for superior long-term investment returns. Selection of industry
and country are secondary considerations.
The Adviser emphasizes growth stocks at a reasonable price. The market
capitalization of portfolio securities is not a determinative factor. Rather,
the Adviser takes a "bottom-up" approach and looks for companies which it
perceives as being undervalued in the market place.
Using its own quantitative process, the Adviser ranks the potential future
performance of select companies. The Adviser evaluates each company's earnings
potential in light of its current valuation to narrow the list of attractive
companies. The Adviser reviews such factors as the company's price-to-earnings
ratio, enterprise value, organic growth rates versus growth through acquisition,
product niche and its pricing power. The Adviser then evaluates management
quality and may meet with company representatives, company suppliers, customers,
or competitors. The Adviser also reviews the company's financial statements and
forecasts of earnings. Based on this information, the Adviser evaluates the
sustainability of the company's current growth trends and potential catalysts
for increased growth. Using this type of fundamental analysis, the Adviser
selects the most promising companies for the Fund's portfolio.
The Adviser frequently identifies benchmarks for certain securities such as
price-to-earnings ratios or stock prices. Once those benchmarks are achieved,
the Adviser will often consider selling all or a portion of the Fund's holdings
to lock in profit. Holdings will also be sold if they fail to meet performance
expectations or better investment opportunities are identified.
With respect to the Fund's investments in developed markets, companies may be
grouped together in broad categories called business sectors. The Adviser may
emphasize certain business sectors in the portfolio that exhibit stronger growth
potential or higher profit margins. The Fund will not invest more than 20% of
its assets in companies located in emerging markets. In selecting emerging
markets countries in which to invest, the Adviser reviews the country's economic
outlook, its interest and inflation rates, and the political and foreign
exchange risk of investing in a particular country. The Adviser then analyzes
companies located in particular emerging market countries.
PORTFOLIO TURNOVER
The Fund actively trades its portfolio securities in an attempt to achieve its
investment objective. Active trading will cause the Fund to have an increased
portfolio turnover rate, which is likely to generate shorter- term gains
(losses) for its shareholders, which are taxed at a higher rate than longer-term
gains (losses). Actively trading portfolio securities increases the Fund's
trading costs and may have an adverse impact on the Fund's performance.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash, cash items, and shorter-term, higher quality debt
securities and similar obligations. It may do this to minimize potential losses
and maintain liquidity to meet shareholder redemptions during adverse market
conditions. This may cause the Fund to give up greater investment returns to
maintain the safety of principal, that is, the original amount invested by
shareholders.
What are the Principal Securities in Which the Fund Invests?
FOREIGN SECURITIES
Foreign equity securities are securities of issuers based outside the United
States. The Fund considers an issuer to be based outside the United States if:
* it is organized under the laws of, or has a principal office located in,
another country;
* the principal trading market for its securities is in another country; or
* it (or its subsidiaries) derived in its most current fiscal year at least 50%
of its total assets, capitalization, gross revenue or profit from goods
produced, services performed, or sales made in another country.
Foreign equity securities are primarily denominated in foreign currencies. Along
with the risks normally associated with domestic securities of the same type,
foreign securities are subject to currency risks and risks of foreign investing.
Trading in certain foreign markets is also subject to liquidity risks.
Equity securities represent a share of an issuer's earnings and assets, after
the issuer pays its liabilities. The Fund cannot predict the income it will
receive from equity securities because issuers generally have discretion as to
the payment of any dividends or distributions. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business. The
following describes the types of equity securities in which the Fund invests.
COMMON STOCKS
Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings directly
influence the value of its common stock.
PREFERRED STOCKS
Preferred stocks have the right to receive specified dividends or distributions
before the issuer makes payments on its common stock. Some preferred stocks also
participate in dividends and distributions paid on common stock. Preferred
stocks may also permit the issuer to redeem the stock.
What are the Specific Risks of Investing in the Fund?
The specific risks associated with foreign equity securities are as follows:
STOCK MARKET RISKS
* The foreign exchanges on which foreign equity securities are traded or are
listed may be less technologically developed or less regulated than those in the
U.S. possibly increasing the volatility and decreasing the efficiency of those
markets.
* The value of equity securities in the Fund's portfolio will rise and fall.
These fluctuations could be a sustained trend or a drastic movement. The Fund's
portfolio will reflect changes in prices of individual portfolio stocks or
general changes in stock valuations. Consequently, the Fund's share price may
decline and you could lose money.
* The Adviser attempts to manage market risk by limiting the amount the Fund
invests in each company. However, diversification will not protect the Fund
against widespread or prolonged declines in the stock market.
CURRENCY RISKS
* Exchange rates for currencies fluctuate daily. Foreign securities are normally
denominated and traded in foreign currencies. As a result, the value of the
Fund's foreign investments and the value of its Shares may be affected favorably
or unfavorably by changes in currency exchange rates relative to the U.S.
dollar. The combination of currency risk and market risks tends to make
securities traded in foreign markets more volatile than securities traded
exclusively in the U.S.
* The Adviser attempts to manage currency risk by limiting the amount the Fund
invests in securities denominated in a particular currency. However,
diversification will not protect the Fund against a general increase in the
value of the U.S. dollar relative to other currencies.
RISKS OF FOREIGN INVESTING
* Foreign securities pose additional risks because foreign economic or political
conditions may be less favorable than those of the United States. Foreign
financial markets may also have fewer investor protections. Securities in
foreign markets may also be subject to taxation policies that reduce returns for
U.S. investors.
* Foreign countries may have restrictions on foreign ownership of securities or
may impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the liquidity of the Fund's
investments.
* Legal remedies available to investors in certain foreign countries may be more
limited than those available with respect to investments in the U.S. or in other
foreign countries.
* Foreign companies may not provide information (including financial statements)
as frequently or to as great an extent as companies in the United States.
Foreign companies may also receive less coverage than United States companies by
market analysts and the financial press. In addition, foreign countries may lack
financial controls and reporting standards, or regulatory requirements
comparable to those applicable to U.S. companies. These factors may prevent the
Fund and its Adviser from obtaining information concerning foreign companies
that is as frequent, extensive and reliable as the information available
concerning companies in the United States.
CUSTODIAL SERVICES AND RELATED INVESTMENT COSTS
* Custodial services and other costs relating to investment in international
securities markets are generally more expensive than in the U.S. Such markets
have settlement and clearance procedures that differ from those in the U.S. In
certain markets there have been times when settlements have been unable to keep
pace with the volume of securities transactions, making it difficult to conduct
such transactions. The inability of the Fund to make intended securities
purchases due to settlement problems could cause the Fund to miss attractive
investment opportunities. The inability to dispose of a portfolio security
caused by settlement problems could result either in losses to the Fund due to a
subsequent decline in value of the portfolio security or could result in
possible liability to the Fund. In addition, security settlement and clearance
procedures in some emerging countries may not fully protect the Fund against
loss or theft of its assets.
EURO RISKS
* The Fund makes significant investments in securities denominated in the Euro,
the new single currency of the European Monetary Union (EMU). Therefore, the
exchange rate between the Euro and the U.S. dollar will have a significant
impact on the value of the Fund's investments.
LIQUIDITY RISKS
* Trading opportunities are more limited for equity securities issued by
companies located in emerging markets. This may make it more difficult to sell
or buy a security at a favorable price or time. Consequently, the Fund may have
to accept a lower price to sell a security, sell other securities to raise cash
or give up an investment opportunity, any of which could have a negative effect
on the Fund's performance. Infrequent trading may also lead to greater price
volatility.
* Liquidity risk also refers to the possibility that the Fund may not be able to
sell a security when it wants to. If this happens, the Fund will be required to
continue to hold the security and the Fund could incur losses.
The specific risks associated with equity securities are as follows:
SECTOR AND REGIONAL RISKS
* Companies with similar characteristics may be grouped together in broad
categories called sectors. Sector risk is the possibility that a certain sector
may underperform other sectors or as the market as a whole. As the Adviser
allocates more of the Fund's portfolio holdings to a particular sector, or
geographic region, the Fund's performance will be more susceptible to any
economic, business or other developments which generally affect that sector or
geographic region.
What Do Shares Cost?
You can purchase, redeem or exchange Shares any day the New York Stock Exchange
(NYSE) is open. When the Fund receives your transaction request in proper form
(as described in the prospectus) it is processed at the next calculated net
asset value (NAV) plus any applicable front-end sales charge (public offering
price). If the Fund purchases foreign securities that trade in foreign markets
on days the NYSE is closed, the value of the Fund's assets may change on days
you cannot purchase or redeem Shares. NAV is determined at the end of regular
trading (normally 4:00 p.m. Eastern time) each day the NYSE is open. The Fund
generally values equity securities according to the last sale price in the
market in which they are primarily traded (either a national securities exchange
or the over-the- counter market).
The Fund's current NAV and public offering price may be found in the mutual
funds section of certain local newspapers under "Federated" and the appropriate
class designation listing.
The following table summarizes the minimum required investment amount and the
maximum sales charge, if any, that you will pay on an investment in the Fund.
Keep in mind that investment professionals may charge you fees for their
services in connection with your Share transactions.
<TABLE>
<CAPTION>
MAXIMUM SALES CHARGE
MINIMUM
INITIAL/ CONTINGENT
SUBSEQUENT FRONT-END DEFERRED
INVESTMENT SALES SALES
SHARES OFFERED AMOUNTS 1 CHARGE 2 CHARGE 3
<S> <C> <C> <C>
Class A $1,500/$100 5.50% 0.00%
Class B $1,500/$100 None 5.50%
Class C $1,500/$100 None 1.00%
</TABLE>
1 The minimum initial and subsequent investment amounts for retirement plans are
$250 and $100, respectively. The minimum subsequent investment amounts for
Systematic Investment Programs is $50. Investment professionals may impose
higher or lower minimum investment requirements on their customers than those
imposed by the Fund. Orders for $250,000 or more will be invested in Class A
Shares instead of Class B Shares to maximize your return and minimize the sales
charges and marketing fees. Accounts held in the name of an investment
professional may be treated differently. Class B Shares will automatically
convert into Class A Shares after eight full years from the purchase date. This
conversion is a non-taxable event.
2 Front-End Sales Charge is expressed as a percentage of public offering
price. See "Sales Charge When You Purchase."
3 See "Sales Charge When You Redeem."
SALES CHARGE WHEN YOU PURCHASE
<TABLE>
<CAPTION>
CLASS A SHARES
Sales Charge
as a Percentage Sales Charge
of Public as a Percentage
Purchase Amount Offering Price of NAV
<S> <C> <C>
Less than $50,000 5.50% 5.82%
$50,000 but less than $100,000 4.50% 4.71%
$100,000 but less than $250,000 3.75% 3.90%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $1 million 2.00% 2.04%
$1 million or greater 1 0.00% 0.00%
</TABLE>
1 A contingent deferred sales charge of 0.75% of the redemption amount applies
to Class A Shares redeemed up to 24 months after purchase under certain
investment programs where an investment professional received an advance payment
on the transaction.
If your investment qualifies for a reduction or elimination of the sales charge
as described below, you or your investment professional should notify the Fund's
Distributor at the time of purchase. If the Distributor is not notified, you
will receive the reduced sales charge only on additional purchases, and not
retroactively on previous purchases.
THE SALES CHARGE AT PURCHASE MAY BE REDUCED OR ELIMINATED BY:
* purchasing Shares in greater quantities to reduce the applicable sales
charge;
* combining concurrent purchases of Shares:
- - by you, your spouse, and your children under age 21; or
- - of the same share class of two or more Federated Funds (other than money
market funds);
* accumulating purchases (in calculating the sales charge on an additional
purchase, include the current value of previous Share purchases still invested
in the Fund); or
* signing a letter of intent to purchase a specificdollar amount of Shares
within 13 months (call your investment professional or the Fund for more
information).
THE SALES CHARGE WILL BE ELIMINATED WHEN YOU PURCHASE SHARES:
* within 120 days of redeeming Shares of an equal or lesser amount;
* by exchanging shares from the same share class of another Federated Fund
(other than a money market fund);
* through wrap accounts or other investment programs where you pay the
investment professional directly for services;
* through investment professionals that receive no portion of the sales
charge;
* as a Federated Life Member (Class A Shares only) and their immediate
family members; or
* as a Director or employee of the Fund, the Adviser, the Distributor and their
affiliates, and the immediate family members of these individuals.
SALES CHARGE WHEN YOU REDEEM
Your redemption proceeds may be reduced by a sales charge, commonly referred to
as a contingent deferred sales charge (CDSC).
<TABLE>
<CAPTION>
CLASS A SHARES
<S>
<C>
A CDSC of 0.75% of the redemption amount applies to Class A Shares redeemed up
to 24 months after purchase under certain investment programs where an
investment professional received an advance payment on the transaction.
<CAPTION>
CLASS B SHARES
<S>
<C>
Shares Held Up To:
CDSC
1 Year
5.50%
2 Years
4.75%
3 Years
4.00%
4 Years
3.00%
5 Years
2.00%
6 Years
1.00%
7 Years or More
0.00%
<CAPTION>
CLASS C SHARES
<S>
<C>
You will pay a 1% CDSC if you redeem Shares within one year of the purchase
date.
</TABLE>
If your investment qualifies for a reduction or elimination of the CDSC as
described below, you or your investment professional should notify the
Distributor at the time of redemption. If the Distributor is not notified, the
CDSC will apply.
YOU WILL NOT BE CHARGED A CDSC WHEN REDEEMING SHARES:
* purchased with reinvested dividends or capital gains;
* purchased within 120 days of redeeming Shares of an equal or lesser
amount;
* that you exchanged into the same share class of another Federated Fund if the
shares were held for the applicable CDSC holding period (other than a money
market fund);
* purchased through investment professionals who did not receive advanced
sales payments;
* if, after you purchase Shares, you become disabled as defined by the IRS;
* if the Fund redeems your Shares and closes your account for not meeting
the minimum balance requirement;
* if your redemption is a required retirement plan distribution; or
* upon the death of the last surviving shareholder of the account.
TO KEEP THE SALES CHARGE AS LOW AS POSSIBLE, THE FUND REDEEMS YOUR SHARES IN
THIS ORDER:
* Shares that are not subject to a CDSC; and
* Shares held the longest (to determine the number of years your Shares have
been held, include the time you held shares of other Federated Funds that have
been exchanged for Shares of this Fund).
The CDSC is then calculated using the share price at the time of purchase or
redemption, whichever is lower.
How is the Fund Sold?
The Fund offers three share classes: Class A Shares, Class B Shares and Class C
Shares, each representing interests in a single portfolio of securities.
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to investors who wish to spread their investments beyond the
United States and are prepared to accept the particular risks associated with
these investments, directly or through investment professionals.
When the Distributor receives marketing fees and sales charges, it may pay some
or all of them to investment professionals. The Distributor and its affiliates
may pay out of their assets other amounts (including items of material value) to
investment professionals for marketing and servicing Shares. The Distributor is
a subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Class B and Class C Shares. Because these
Shares pay marketing fees on an ongoing basis, your investment cost may be
higher over time than other shares with different sales charges and marketing
fees.
How to Purchase Shares
You may purchase Shares through an investment professional, directly from the
Fund, or through an exchange from another Federated Fund. The Fund reserves the
right to reject any request to purchase or exchange Shares.
Where the Fund offers more than one share class and you do not specify the class
choice on your New Account Form or form of payment (e.g., Federal Reserve wire
or check) you automatically will receive Class A Shares.
THROUGH AN INVESTMENT PROFESSIONAL
* Establish an account with the investment professional; and
* Submit your purchase order to the investment professional before the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will receive
the next calculated NAV if the investment professional forwards the order to the
Fund on the same day and the Fund receives payment within three business days.
You will become the owner of Shares and receive dividends when the Fund receives
your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
* Establish your account with the Fund by submitting a completed New
Account Form; and
* Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares and your Shares will be priced at the next
calculated NAV after the Fund receives your wire or your check. If your check
does not clear, your purchase will be canceled and you could be liable for any
losses or fees incurred by the Fund or Federated Shareholder Services Company,
the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the next calculated NAV after the Fund receives
the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).
THROUGH AN EXCHANGE
You may purchase Shares through an exchange from the same Share class of another
Federated Fund. You must meet the minimum initial investment requirement for
purchasing Shares and both accounts must have identical registrations.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program
section of the New Account Form or by contacting the Fund or your investment
professional.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
RETIREMENT INVESTMENTS
You may purchase Shares as retirement investments (such as qualified plans and
IRAs or transfer or rollover of assets). Call your investment professional or
the Fund for information on retirement investments. We suggest that you discuss
retirement investments with your tax adviser. You may be subject to an annual
IRA account fee.
How to Redeem and Exchange Shares
You should redeem or exchange Shares:
* through an investment professional if you purchased Shares through an
investment professional; or
* directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption or exchange request to your investment professional by
the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). The
redemption amount you will receive is based upon the next calculated NAV after
the Fund receives the order from your investment professional.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem or exchange Shares by calling the Fund at 1-800-341-7400 once you
have completed the appropriate authorization form for telephone transactions. If
you call before the end of regular trading on the NYSE (normally 4:00 p.m.
Eastern time) you will receive a redemption amount based on that day's NAV.
BY MAIL
You may redeem or exchange Shares by mailing a written request to the Fund.
You will receive a redemption amount based on the next calculated NAV after the
Fund receives your written request in proper form.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
* Fund Name and Share Class, account number and account registration;
* amount to be redeemed or exchanged;
* signatures of all shareholders exactly as registered; and
* IF EXCHANGING, the Fund Name and Share Class, account number and account
registration into which you are exchanging.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES
Signatures must be guaranteed if:
* your redemption will be sent to an address other than the address of
record;
* your redemption will be sent to an address of record that was changed
within the last 30 days;
* a redemption is payable to someone other than the shareholder(s) of
record; or
* IF EXCHANGING (TRANSFERRING) into another fund with a different shareholder
registration.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
* an electronic transfer to your account at a financial institution that is
an ACH member; or
* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
* to allow your purchase to clear;
* during periods of market volatility; or
* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
REDEMPTIONS FROM RETIREMENT ACCOUNTS
In the absence of your specific instructions, 10% of the value of your
redemption from a retirement account in the Fund may be withheld for taxes. This
withholding only applies to certain types of retirement accounts.
EXCHANGE PRIVILEGE
You may exchange Shares of the Fund into Shares of the same class of another
Federated Fund. To do this, you must:
* ensure that the account registrations are identical;
* meet any minimum initial investment requirements; and
* receive a prospectus for the fund into which you wish to exchange.
An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction.
The Fund may modify or terminate the exchange privilege at any time. The Fund's
management or investment adviser may determine from the amount, frequency and
pattern of exchanges that a shareholder is engaged in excessive trading that is
detrimental to the Fund and other shareholders. If this occurs, the Fund may
terminate the availability of exchanges to that shareholder and may bar that
shareholder from purchasing other Federated Funds.
SYSTEMATIC WITHDRAWAL/EXCHANGE PROGRAM
You may automatically redeem or exchange Shares in a minimum amount of $100 on a
regular basis. To participate in this program, complete the appropriate section
of the New Account Form or an Account Service Options Form or contact your
investment professional or the Fund. Your account value must meet the minimum
initial investment amount at the time the program is established. This program
may reduce, and eventually deplete, your account. Payments should not be
considered yield or income. Generally, it is not advisable to continue to
purchase Class A Shares subject to a sales charge while redeeming Shares using
this program.
SYSTEMATIC WITHDRAWAL PROGRAM (SWP) ON CLASS B SHARES
You will not be charged a CDSC on SWP redemptions if:
* you redeem 12% or less of your account value in a single year;
* you reinvest all dividends and capital gains distributions; and
* your account has at least a $10,000 balance when you establish the SWP. (You
cannot aggregate multiple Class B Share accounts to meet this minimum balance.)
You will be subject to a CDSC on redemption amounts that exceed the 12% annual
limit. In measuring the redemption percentage, your account is valued when you
establish the SWP and then annually at calendar year-end. You can redeem
monthly, quarterly, or semi-annually.
For SWP accounts established prior to April 1, 1999, your account must be at
least one year old in order to be eligible for the waiver of the CDSC.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming or exchanging
Shares represented by certificates previously issued by the Fund, you must
return the certificates with your written redemption or exchange request. For
your protection, send your certificates by registered or certified mail, but do
not endorse them.
Account and Share Information
CONFIRMATIONS AND ACCOUNT STATEMENTS
You will receive confirmation of purchases, redemptions and exchanges (except
for systematic transactions). In addition, you will receive periodic statements
reporting all account activity, including systematic transactions, dividends and
capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares and pays any dividends annually to shareholders. Dividends are
paid to all shareholders invested in the Fund on the record date. The record
date is the date on which a shareholder must officially own Shares in order to
earn a dividend.
In addition, the Fund pays any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
If you purchase Shares just before a Fund declares a dividend or capital gain
distribution, you will pay the full price for the Shares and then receive a
portion of the price back in the form of a taxable distribution, whether or not
you reinvest the distribution in Shares. Therefore, you should consider the tax
implications of purchasing Shares shortly before the Fund declares a dividend or
capital gain. Contact your investment professional or the Fund for information
concerning when dividends and capital gains will be paid.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, non- retirement
accounts may be closed if redemptions or exchanges cause the account balance to
fall below the minimum initial investment amount. Before an account is closed,
you will be notified and allowed 30 days to purchase additional Shares to meet
the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.
Fund distributions are expected to be primarily capital gains. Redemptions and
exchanges are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
Who Manages the Fund?
The Board of Directors governs the Fund. The Board selects and oversees the
Adviser, Federated Global Investment Management Corp. The Adviser manages the
Fund's assets, including buying and selling portfolio securities. The Adviser's
address is 175 Water Street, New York, NY 10038-4965.
The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which totaled approximately $125 billion in assets
as of December 31, 1999. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.
THE FUND'S PORTFOLIO MANAGERS AND INVESTMENT ANALYSTS ARE:
HENRY A. FRANTZEN
Henry A. Frantzen has been the Adviser's Chief Investment Officer since
September 1995. Mr. Frantzen joined Federated in 1995 as an Executive Vice
President of the Fund's Adviser and has overseen the operations of the
Adviser since its formation. Mr. Frantzen served as Chief Investment
Officer of international equities at Brown Brothers Harriman & Co. from
1992-1995. Mr. Frantzen earned his bachelors degree in Business
Administration from the University of North Dakota.
ALEXANDRE DE BETHMANN
Alexandre de Bethmann has been the Fund's Portfolio Manager since
October 1999. Mr. de Bethmann joined Federated in 1995 as a Senior
Portfolio Manager and a Vice President of the Fund's Adviser. Mr. de
Bethmann served as Assistant Vice President/Portfolio Manager for Japanese
and Korean equities at the College Retirement Equities Fund from 1994 to
1995. Mr. de Bethmann is a Chartered Financial Analyst. He received his
M.B.A. in Finance from Duke University.
ADVISER FEES
The Adviser receives an annual investment adviser fee of 1.00% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years, or since inception, if the life of
the Fund is shorter. Some of the information is presented on a per share basis.
Total returns represent the rate an investor would have earned (or lost) on an
investment in the Fund, assuming reinvestment of any dividends and capital
gains.
This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights-Class A Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30 1999 1 1998 1997 1996
1995
<S> <C> <C> <C> <C>
<C>
NET ASSET VALUE, BEGINNING
OF PERIOD $19.56 $17.93 $17.32
$17.89 $18.53
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (net
operating loss) (0.12) 2 (0.01) 2 0.04 2
0.03 0.09
Net realized and
unrealized gain on
investments and foreign
currency transactions 11.20 2.99 0.95
1.38 0.17
TOTAL FROM INVESTMENT
OPERATIONS 11.08 2.98 0.99
1.41 0.26
LESS DISTRIBUTIONS:
Distributions from net
investment income - - -
(0.09) (0.00) 3
Distributions from net
realized gain on
investments and foreign
currency transactions (1.48) (1.35) (0.38)
(1.89) (0.90)
TOTAL DISTRIBUTIONS (1.48) (1.35) (0.38)
(1.98) (0.90)
NET ASSET VALUE, END OF
PERIOD $29.16 $19.56 $17.93
$17.32 $17.89
TOTAL RETURN 4 61.10% 17.78% 5.89%
8.63% 1.60%
RATIOS TO AVERAGE NET
ASSETS:
Expenses 1.67% 1.63% 1.71%
1.68% 1.57%
Net investment income (net
operating loss) (0.57%) (0.06%) 0.23%
0.15% 0.42%
Expense
waiver/reimbursement 5 - - 0.10%
0.15% 0.18%
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $389,592 $172,160 $134,858 $172,938
$191,911
Portfolio turnover 297% 243% 210%
119% 166%
</TABLE>
1 For the year ended November 30, 1999, the Fund was audited by Ernst & Young
LLP. Each of the previous years was audited by other auditors.
2 Amount based on average outstanding shares.
3 Per share amount does not round to $(0.01).
4 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
5 This voluntary expense decrease is reflected in both the expense and the net
investment income (net operating loss) ratios shown above.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated November 30, 1999, which can be obtained free of charge.
Financial Highlights-Class B Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30 1999 1 1998 1997 1996
1995
<S> <C> <C> <C> <C>
<C>
NET ASSET VALUE, BEGINNING
OF PERIOD $18.89 $17.48 $17.04 $17.70
$18.50
INCOME FROM INVESTMENT
OPERATIONS:
Net operating loss (0.26) 2 (0.16) 2 (0.10) 2 (0.03 )
(0.08 )
Net realized and
unrealized gain on
investments and foreign
currency transactions 10.72 2.92 0.92
1.26 0.18
TOTAL FROM INVESTMENT
OPERATIONS 10.46 2.76 0.82
1.23 0.10
LESS DISTRIBUTIONS:
Distributions from net
investment income - - - (0.00)
3 -
Distributions in excess of
net investment income - - (0.00) 3
- - -
Distributions from net
realized gain on
investments and foreign
currency transactions (1.48) (1.35) (0.38)
(1.89) (0.90)
TOTAL DISTRIBUTIONS (1.48) (1.35) (0.38)
(1.89) (0.90)
NET ASSET VALUE, END OF
PERIOD $27.87 $18.89 $17.48 $17.04
$17.70
TOTAL RETURN 4 59.90% 16.92% 4.97%
7.59% 0.68%
RATIOS TO AVERAGE NET
ASSETS:
Expenses 2.42% 2.38% 2.56%
2.58% 2.52%
Net operating loss (1.28%) (0.84%) (0.59%)
(0.74%) (0.52%)
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $62,786 $35,689 $23,629 $16,707
$6,370
Portfolio turnover 297% 243% 210%
119% 166%
</TABLE>
1 For the year ended November 30, 1999, the Fund was audited by Ernst & Young
LLP. Each of the previous years was audited by other auditors.
2 Amount based on average outstanding shares.
3 Per share amount does not round to $(0.01).
4 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated November 30, 1999, which can be obtained free of charge.
Financial Highlights-Class C Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30 1999 1 1998 1997 1996
1995
<S> <C> <C> <C> <C>
<C>
NET ASSET VALUE, BEGINNING
OF PERIOD $18.66 $17.28 $16.85 $17.50
$18.30
INCOME FROM INVESTMENT
OPERATIONS:
Net operating loss (0.26) 2 (0.16) 2 (0.11) 2 (0.10 )
(0.12 )
Net realized and
unrealized gain on
investments and foreign
currency transactions 10.58 2.89 0.92 1.34
0.22
TOTAL FROM INVESTMENT
OPERATIONS 10.32 2.73 0.81 1.24
0.10
LESS DISTRIBUTIONS:
Distributions from net
investment income - - - (0.00) 3
(0.00) 3
Distributions from net
realized gain on
investments and foreign
currency transactions (1.48) (1.35) (0.38) (1.89)
(0.90)
TOTAL DISTRIBUTIONS (1.48) (1.35) (0.38) (1.89)
(0.90)
NET ASSET VALUE, END OF
PERIOD $27.50 $18.66 $17.28 $16.85
$17.50
TOTAL RETURN 4 59.89% 16.94% 4.96% 7.75%
0.69%
RATIOS TO AVERAGE NET
ASSETS:
Expenses 2.42% 2.38% 2.56% 2.57%
2.46%
Net operating loss (1.27%) (0.83%) (0.67%) (0.72%)
(0.47%)
Expense
waiver/reimbursement 5 - - - 0.01%
0.04%
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $41,602 $14,145 $8,841 $7,580
$7,146
Portfolio turnover 297% 243% 210%
119% 166%
</TABLE>
1 For the year ended November 30, 1999, the Fund was audited by Ernst & Young
LLP. Each of the previous years was audited by other auditors.
2 Amount based on average outstanding shares.
3 Per share amount does not round to $(0.01).
4 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
5 This voluntary expense decrease is reflected in both the expense and the net
operating loss ratios shown above.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated November 30, 1999, which can be obtained free of charge.
[Graphic]
Federated
World-Class Investment Manager
PROSPECTUS
Federated International Equity Fund
A Portfolio of Federated International Series, Inc.
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
MARCH 31, 2000
A Statement of Additional Information (SAI) dated March 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Annual and
Semi-Annual Reports to shareholders as they become available. The Annual
Report's Management Discussion and Analysis discusses market conditions and
investment strategies that significantly affected the Fund's performance during
its last fiscal year. To obtain the SAI, Annual Report, Semi-Annual Report and
other information without charge, and make inquiries, call your investment
professional or the Fund at 1-800-341- 7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.
[Graphic]
Federated
Federated International Equity Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Investment Company Act File No. 811-3984
Cusip 46031P308
(Effective April 3, 2000, the Cusip number will be 31420G101)
Cusip 46031P605
(Effective April 3, 2000, the Cusip number will be 31420G200)
Cusip 46031P407
(Effective April 3, 2000,the Cusip number will be 31420G309)
G00692-02-ABC (3/00) 513049
[Graphic]
STATEMENT OF ADDITIONAL INFORMATION
Federated International Equity Fund
A Portfolio of Federated International Series, Inc.
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Federated International Equity Fund
(Fund), dated March 31, 2000.
This SAI incorporates by reference the Fund's Annual Report. Obtain the
prospectus or the Annual Report without charge by calling 1-800-341-7400.
MARCH 31, 2000
[Graphic]
Federated
World-Class Investment Manager
Federated International Equity Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
1010302B (3/00)
[Graphic]
CONTENTS
How is the Fund Organized? 1
Securities in Which the Fund Invests 1
What Do Shares Cost? 6
How is the Fund Sold? 7
Exchanging Securities for Shares 8
Subaccounting Services 9
Redemption in Kind 9
Account and Share Information 9
Tax Information 10
Who Manages and Provides Services to the Fund? 11
How Does the Fund Measure Performance? 14
Who is Federated Investors, Inc.? 16
Financial Information 17
Investment Ratings 17
Addresses 19
How is the Fund Organized?
The Fund is a diversified portfolio of Federated International Series, Inc.
(Corporation). The Corporation is an open-end, management investment
company that was established under the laws of the State of Maryland on
February 11, 1991. The Corporation may offer separate series of shares
representing interests in separate portfolios of securities. The
Corporation changed its name from FT Series, Inc., to International Series,
Inc. on March 15, 1994 and from International Series, Inc. to Federated
International Series, Inc. on March 31, 2000.
The Board of Directors (the Board) has established three classes of shares of
the Fund, known as Class A Shares, Class B Shares, and Class C Shares (Shares).
This SAI relates to all classes of the above-mentioned Shares.
The investment objective, the principal investment policies and the main risks
of the Fund are described in the Prospectus. This SAI contains supplemental
information about those policies and risks and the types of securities that the
Fund's adviser can select for the Fund.
Securities in Which the Fund Invests
In pursuing its investment strategy, the Fund may invest in the following
securities, in addition to those described in the Prospectus, for any purpose
that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
DEPOSITARY RECEIPTS
Depositary receipts represent interests in underlying securities issued by a
foreign company. Depositary receipts are not traded in the same market as the
underlying security. The foreign securities underlying American Depositary
Receipts (ADRs) are not traded in the United States. ADRs provide a way to buy
shares of foreign-based companies in the United States rather than in overseas
markets. ADRs are also traded in U.S. dollars, eliminating the need for foreign
exchange transactions. The foreign securities underlying European Depositary
Receipts (EDRs), Global Depositary Receipts (GDRs), and International Depositary
Receipts (IDRs), are traded globally or outside the United States. Depositary
Receipts involve many of the same risks of investing directly in foreign
securities, including currency risks and risks of foreign investing.
FOREIGN EXCHANGE CONTRACTS
In order to convert U.S. dollars into the currency needed to buy a foreign
security, or to convert foreign currency received from the sale of a foreign
security into U.S. dollars, the Fund may enter into spot currency trades. In a
spot trade, the Fund agrees to exchange one currency for another at the current
exchange rate. The Fund may also enter into derivative contracts in which a
foreign currency is an underlying asset. The exchange rate for currency
derivative contracts may be higher or lower than the spot exchange rate. Use of
these derivative contracts may increase or decrease the Fund's exposure to
currency risks.
INTERESTS IN OTHER LIMITED LIABILITY COMPANIES
Entities such as limited partnerships, limited liability companies, business
trusts and companies organized outside the United States may issue securities
comparable to common or preferred stock.
REAL ESTATE INVESTMENT TRUSTS (REITS)
REITs are real estate investment trusts that lease, operate and finance
commercial real estate. REITs are exempt from federal corporate income tax if
they limit their operations and distribute most of their income. Such tax
requirements limit a REIT's ability to respond to changes in the commercial real
estate market.
WARRANTS
Warrants give the Fund the option to buy the issuer's equity securities at a
specified price (the exercise price) at a specified future date (the expiration
date). The Fund may buy the designated securities by paying the exercise price
before the expiration date. Warrants may become worthless if the price of the
stock does not rise above the exercise price by the expiration date. This
increases the market risks of warrants as compared to the underlying security.
Rights are the same as warrants, except companies typically issue rights to
existing stockholders.
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
TREASURY SECURITIES
Treasury securities are direct obligations of the government of a foreign
country.
FOREIGN GOVERNMENT SECURITIES
Foreign government securities generally consist of fixed income securities
supported by national, state or provincial governments or similar political
subdivisions. Foreign government securities also include debt obligations of
supranational entities, such as international organizations designed or
supported by governmental entities to promote economic reconstruction or
development, international banking institutions and related government agencies.
Examples of these include, but are not limited to, the International Bank for
Reconstruction and Development (the World Bank), the Asian Development Bank, the
European Investment Bank and the Inter-American Development Bank.
Foreign government securities also include fixed income securities of
quasi-governmental agencies that are either issued by entities owned by a
national, state or equivalent government or are obligations of a political unit
that are not backed by the national government's full faith and credit. Further,
foreign government securities include mortgage-related securities issued or
guaranteed by national, state or provincial governmental instrumentalities,
including quasi-governmental agencies.
AGENCY SECURITIES
Agency securities are issued or guaranteed by a foreign governmental agency or
other government sponsored entity acting under foreign governmental authority (a
GSE). Foreign governments support some GSEs with its full faith and credit.
Other GSEs receive support through governmental subsidies, loans or other
benefits. A few GSEs have no explicit financial support, but are regarded as
having implied support because the federal government sponsors their activities.
Investors regard agency securities as having low credit risks, but not as low as
treasury securities.
CORPORATE DEBT SECURITIES
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. The Fund may also purchase interests in bank loans to
companies. The credit risks of corporate debt securities vary widely among
issuers. The credit risk of an issuer's debt security may also vary based on its
priority for repayment. For example, higher ranking (senior) debt securities
have a higher priority than lower ranking (subordinated) securities. This means
that the issuer might not make payments on subordinated securities while
continuing to make payments on senior securities. In addition, in the event of
bankruptcy, holders of senior securities may receive amounts otherwise payable
to the holders of subordinated securities. Some subordinated securities, such as
trust preferred and capital securities notes, also permit the issuer to defer
payments under certain circumstances. For example, insurance companies issue
securities known as surplus notes that permit the insurance company to defer any
payment that would reduce its capital below regulatory requirements.
CONVERTIBLE SECURITIES
Convertible securities are fixed income securities that the Fund has the option
to exchange for equity securities at a specified conversion price. The option
allows the Fund to realize additional returns if the market price of the equity
securities exceeds the conversion price. For example, the Fund may hold fixed
income securities that are convertible into shares of common stock at a
conversion price of $10 per share. If the market value of the shares of common
stock reached $12, the Fund could realize an additional $2 per share by
converting its fixed income securities.
Convertible securities have lower yields than comparable fixed income
securities. In addition, at the time a convertible security is issued the
conversion price exceeds the market value of the underlying equity securities.
Thus, convertible securities may provide lower returns than non-convertible
fixed income securities or equity securities depending upon changes in the price
of the underlying equity securities. However, convertible securities permit the
Fund to realize some of the potential appreciation of the underlying equity
securities with less risk of losing its initial investment.
The Fund treats convertible securities as both fixed income and equity
securities for purposes of its investment policies and limitations, because of
their unique characteristics.
DERIVATIVE CONTRACTS
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty.
The Fund may trade in the following types of derivative contracts:
FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified price,
date, and time. Entering into a contract to buy an underlying asset is commonly
referred to as buying a contract or holding a long position in the asset.
Entering into a contract to sell an underlying asset is commonly referred to as
selling a contract or holding a short position in the asset. Futures contracts
are considered to be commodity contracts. Futures contracts traded OTC are
frequently referred to as forward contracts.
The Fund can buy or sell futures contracts on portfolio securities or indexes
and engage in foreign currency forward contracts.
OPTIONS
Options are rights to buy or sell an underlying asset for a specified price (the
exercise price) during, or at the end of, a specified period. A call option
gives the holder (buyer) the right to buy the underlying asset from the seller
(writer) of the option. A put option gives the holder the right to sell the
underlying asset to the writer of the option. The writer of the option receives
a payment, or premium, from the buyer, which the writer keeps regardless of
whether the buyer uses (or exercises) the option.
The Fund may:
Write call options on portfolio securities and securities which the Fund has the
right to obtain without payment of further consideration or for which it has
segregated cash in the amount of any additional consideration to generate income
from premiums, and in anticipation of a decrease or only limited increase in the
value of the underlying asset. If a call written by the Fund is exercised, the
Fund foregoes any possible profit from an increase in the market price of the
underlying asset over the exercise price plus the premium received.
Write put options on all or any portion of its portfolio of securities (to
generate income from premiums, and in anticipation of an increase or only
limited decrease in the value of the underlying asset). In writing puts, there
is a risk that the Fund may be required to take delivery of the underlying asset
when its current market price is lower than the exercise price.
Write call options and purchase put options as a hedge to attempt to protect
securities in its portfolio against decreases in value or as a hedge against
rising purchase prices of securities eligible for purchase by the Fund.
When the Fund writes options on futures contracts, it will be subject to margin
requirements similar to those applied to futures contracts.
HYBRID INSTRUMENTS
Hybrid instruments combine elements of derivative contracts with those of
another security (typically a fixed income security). All or a portion of the
interest or principal payable on a hybrid security is determined by reference to
changes in the price of an underlying asset or by reference to another benchmark
(such as interest rates, currency exchange rates or indices). Hybrid instruments
also include convertible securities with conversion terms related to an
underlying asset or benchmark.
The risks of investing in hybrid instruments reflect a combination of the risks
of investing in securities, options, futures and currencies, and depend upon the
terms of the instrument. Thus, an investment in a hybrid instrument may entail
significant risks in addition to those associated with traditional fixed income
or convertible securities. Hybrid instruments are also potentially more volatile
and carry greater market risks than traditional instruments.
SPECIAL TRANSACTIONS
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.
DELAYED DELIVERY TRANSACTIONS
Delayed delivery securities, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, when issued transactions create market risks for
the Fund. When issued transactions also involve credit risks in the event of a
counterparty default.
SECURITIES LENDING
The Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from the
borrower as collateral. The borrower must furnish additional collateral if the
market value of the loaned securities increases. Also, the borrower must pay the
Fund the equivalent of any dividends or interest received on the loaned
securities.
The Fund will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund must pay interest to the
borrower for the use of cash collateral.
Loans are subject to termination at the option of the Fund or the borrower. The
Fund will not have the right to vote on securities while they are on loan, but
it will terminate a loan in anticipation of any important vote. The Fund may pay
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash collateral to a securities
lending agent or broker.
Securities lending activities are subject to market risks and credit risks.
ASSET COVERAGE
In order to secure its obligations in connection with derivatives contracts or
special transactions, the Fund will either own the underlying assets, enter into
an offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to secure
such obligations entering into an offsetting derivative contract or terminating
a special transaction. This may cause the Fund to miss favorable trading
opportunities or to realize losses on derivative contracts or special
transactions.
HEDGING TRANSACTIONS
Hedging transactions are intended to reduce specific risks. For example, to
protect the Fund against circumstances that would normally cause the Fund's
portfolio securities to decline in value, the Fund may buy or sell a derivative
contract that would normally increase in value under the same circumstances. The
Fund may attempt to lower the cost of hedging by entering into transactions that
provide only limited protection, including transactions that: (1) hedge only a
portion of its portfolio; (2) use derivatives contracts that cover a narrow
range of circumstances; or (3) involve the sale of derivatives contracts with
different terms. Consequently, hedging transactions will not eliminate risk even
if they work as intended. In addition, hedging strategies are not always
successful, and could result in increased expenses and losses to the Fund.
INTER-FUND BORROWING AND LENDING ARRANGEMENTS
The SEC has granted an exemption that permits the Fund and all other funds
advised by subsidiaries of Federated Investors, Inc. ("Federated funds") to lend
and borrow money for certain temporary purposes directly to and from other
Federated funds. Participation in this inter-fund lending program is voluntary
or both borrowing and lending funds, and an inter-fund loan is only made if it
benefits each participating fund. Federated administers the program according to
procedures approved by the Fund's Board, and the Board monitors the operation of
the program. Any inter-fund loan must comply with certain conditions set out in
the exemption, which are designed to assure fairness and protect all
participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter- fund loans may
be made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the "Repo Rate") AND more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term borrowings
(the "Bank Loan Rate"), as determined by the Board. The interest rate imposed on
inter-fund loans is the average of the Repo Rate and the Bank Loan Rate."
INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES
The fixed income securities in which the Fund will invest will possess a minimum
credit rating of A as assigned by Standard & Poor's or A by Moody's Investors
Service, Inc., or, if unrated, judged by the Adviser to be of comparable
quality. The Adviser will determinate whether a security is investment grade
based upon the credit ratings given by one or more nationally recognized rating
services. For example, Standard & Poor's, a rating service, assigns ratings to
investment grade securities (AAA, AA, A, and BBB) based on their assessment of
the likelihood of the issuer's inability to pay interest or principal (default)
when due on each security. Lower credit ratings correspond to higher credit
risk. If a security has not received a rating, the Fund must rely entirely upon
the Adviser's credit assessment that the security is comparable to investment
grade.
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its Prospectus. Additional risk factors are
outlined below.
RISKS RELATED TO INVESTING FOR GROWTH
Due to their relatively high valuations, growth stocks are typically more
volatile than value stocks. For instance, the price of a growth stock may
experience a larger decline on a forecast of lower earnings, a negative
fundamental development, or an adverse market development. Further, growth
stocks may not pay dividends or may pay lower dividends than value stocks. This
means they depend more on price changes for returns and may be more adversely
affected in a down market compared to value stocks that pay higher dividends.
INVESTMENT LIMITATIONS
DIVERSIFICATION OF INVESTMENTS
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 the securities of that issuer, or the Fund would own more than 10% of the
outstanding voting securities of that issuer.
BORROWING MONEY AND ISSUING SENIOR SECURITIES
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the 1940 Act.
UNDERWRITING
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.
INVESTING IN REAL ESTATE
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.
INVESTING IN COMMODITIES
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
LENDING CASH OR SECURITIES
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.
CONCENTRATION OF INVESTMENTS
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.
The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
Investment Company Act of 1940 (1940 Act). The following limitations, however,
may be changed by the Board without shareholder approval. Shareholders will be
notified before any material change in these limitations becomes effective.
CONCENTRATION OF INVESTMENTS
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 so 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. Foreign securities will not be excluded
from industry concentration limits. The investment of more than 25% of the value
of the Fund's total assets in any one industry will constitute "concentration."
In applying the concentration restriction: (a) utility companies will be divided
according to their services (for example, gas, gas transmission, electric and
telephone will be considered a separate industry); (b) 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 (c) asset-backed securities will be
classified according to the underlying assets securing such securities.
INVESTING IN COMMODITIES
As a matter of non-fundamental operating policy, for purposes of the commodities
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.
BUYING ON MARGIN
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.
PLEDGING ASSETS
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.
INVESTING IN RESTRICTED AND ILLIQUID SECURITIES
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 15% of the Fund's net assets.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment companies,
including securities of affiliated investment companies, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
PORTFOLIO TURNOVER
The Fund will not attempt to set or meet a portfolio turnover rate since any
turnover would be incidental to transactions undertaken in an attempt to achieve
the Fund's investment objective. Portfolio securities will be sold when the
Adviser believes it is appropriate, regardless of how long those securities have
been held. For the fiscal years ended November 30, 1999 and 1998, the portfolio
turnover rates were 297% and 243%, respectively.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:
* for equity securities, according to the last sale price in the market in which
they are primarily traded (either a national securities exchange or the
over-the-counter market), if available;
* in the absence of recorded sales for equity securities, according to the
mean between the last closing bid and asked prices;
* for fixed income securities, at the last sale price on a national securities
exchange, if available, otherwise, as determined by an independent pricing
service;
* futures contracts and options are generally valued at market values
established by the exchanges on which they are traded at the close of trading on
such exchanges. Options traded in the over-the-counter market are generally
valued according to the mean between the last bid and the last asked price for
the option as provided by an investment dealer or other financial institution
that deals in the option. The Board may determine in good faith that another
method of valuing such investments is necessary to appraise their fair market
value;
* for short-term obligations, according to the mean between bid and asked prices
as furnished by an independent pricing service, except that short- term
obligations with remaining maturities of less than 60 days at the time of
purchase may be valued at amortized cost or at fair market value as determined
in good faith by the Board; and
* for all other securities at fair value as determined in good faith by the
Board.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker/dealers or
other financial institutions that trade the securities.
TRADING IN FOREIGN SECURITIES
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange (NYSE). In computing its NAV, the Fund
values foreign securities at the latest closing price on the exchange on which
they are traded immediately prior to the closing of the NYSE. Certain foreign
currency exchange rates may also be determined at the latest rate prior to the
closing of the NYSE. Foreign securities quoted in foreign currencies are
translated into U.S. dollars at current rates. Occasionally, events that affect
these values and exchange rates may occur between the times at which they are
determined and the closing of the NYSE. If such events materially affect the
value of portfolio securities, these securities may be valued at their fair
value as determined in good faith by the Fund's Board, although the actual
calculation may be done by others.
What Do Shares Cost?
The Fund's net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of the Fund.
The NAV for each class of Shares may differ due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
REDUCING OR ELIMINATING THE FRONT-END SALES CHARGE
You can reduce or eliminate the applicable front-end sales charge, as follows:
QUANTITY DISCOUNTS
Larger purchases of the same Share class reduce or eliminate the sales charge
you pay. You can combine purchases of Shares made on the same day by you, your
spouse and your children under age 21. In addition, purchases made at one time
by a trustee or fiduciary for a single trust estate or a single fiduciary
account can be combined.
ACCUMULATED PURCHASES
If you make an additional purchase of Shares, you can count previous Share
purchases still invested in the Fund in calculating the applicable sales charge
on the additional purchase.
CONCURRENT PURCHASES
You can combine concurrent purchases of the same share class of two or more
Federated Funds in calculating the applicable sales charge.
LETTER OF INTENT (CLASS A SHARES)
You can sign a Letter of Intent committing to purchase a certain amount of the
same class of Shares within a 13-month period to combine such purchases in
calculating the sales charge. The Fund's custodian will hold Shares in escrow
equal to the maximum applicable sales charge. If you complete the Letter of
Intent, the Custodian will release the Shares in escrow to your account. If you
do not fulfill the Letter of Intent, the Custodian will redeem the appropriate
amount from the Shares held in escrow to pay the sales charges that were not
applied to your purchases.
REINVESTMENT PRIVILEGE
You may reinvest, within 120 days, your Share redemption proceeds at the next
determined NAV without any sales charge.
PURCHASES BY AFFILIATES OF THE FUND
The following individuals and their immediate family members may buy Shares at
NAV without any sales charge because there are nominal sales efforts associated
with their purchases:
* the Directors, employees and sales representatives of the Fund, the
Adviser, the Distributor and their affiliates;
* any associated person of an investment dealer who has a sales agreement
with the Distributor; and
* trusts, pension or profit-sharing plans for these individuals.
FEDERATED LIFE MEMBERS
Shareholders of the Fund known as "Federated Life Members" are exempt from
paying any front-end sales charge. These shareholders joined the Fund
originally:
* through the "Liberty Account," an account for Liberty Family of Funds
shareholders on February 28, 1987 (the Liberty Account and Liberty Family of
Funds are no longer marketed); or
* as Liberty Account shareholders by investing through an affinity group prior
to August 1, 1987.
REDUCING OR ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE
These reductions or eliminations are offered because: no sales commissions have
been advanced to the investment professional selling Shares; the shareholder has
already paid a Contingent Deferred Sales Charge (CDSC); or nominal sales efforts
are associated with the original purchase of Shares.
Upon notification to the Distributor or the Fund's transfer agent, no CDSC will
be imposed on redemptions:
* following the death or post-purchase disability, as defined in Section
72(m)(7) of the Internal Revenue Code of 1986, of the last surviving
shareholder;
* representing minimum required distributions from an Individual Retirement
Account or other retirement plan to a shareholder who has attained the age of
70-1/2;
* of Shares that represent a reinvestment within 120 days of a previous
redemption;
* of Shares held by the Directors, employees, and sales representatives of the
Fund, the Adviser, the Distributor and their affiliates; employees of any
investment professional that sells Shares according to a sales agreement with
the Distributor; and the immediate family members of the above persons;
* of Shares originally purchased through a bank trust department, a registered
investment adviser or retirement plans where the third party administrator has
entered into certain arrangements with the Distributor or its affiliates, or any
other investment professional, to the extent that no payments were advanced for
purchases made through these entities;
* which are involuntary redemptions processed by the Fund because the
accounts do not meet the minimum balance requirements;
To keep the sales charge as low as possible, the Fund redeems your Shares in
this order:
* Shares that are not subject to a CDSC; and
* Shares held the longest (to determine the number of years your Shares have
been held, include the time you held shares of other Federated Funds that have
been exchanged for Shares of this Fund).
The CDSC is then calculated using the share price at the time of purchase or
redemption, whichever is lower.
CLASS B SHARES ONLY
* which are qualifying redemptions of Class B Shares under a Systematic
Withdrawal Program.
How is the Fund Sold?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis. The
Distributor pays the expenses of the distribution of Fund shares, including
advertising expenses and the costs of printing sales material and prospectuses
used to offer shares to the public. The Fund pays the expenses of preparing and
printing amendments to its registration statements and prospectuses (other than
those necessitated by the activities of the Distributor) and of sending
prospectuses to existing shareholders. In the SAI section "Fees Paid by the Fund
for Services," there is disclosed, as applicable, the underwriting commissions
the Distributor received in connection with the offering of the Fund's shares,
the net underwriting discounts and commissions the Distributor retained after
allowances to investment professionals, and the amounts the Distributor received
in connection with redemptions or repurchases of shares for the last three
fiscal years of the Fund. The Distributor may be entitled to reimbursement under
the Rule 12b-1 Plan, as discussed below. Except as noted, the Distributor
received no other compensation from the Fund for acting as underwriter.
FRONT-END SALES CHARGE REALLOWANCES
The Distributor receives a front-end sales charge on certain Share sales. The
Distributor generally pays up to 90% (and as much as 100%) of this charge to
investment professionals for sales and/or administrative services. Any payments
to investment professionals in excess of 90% of the front-end sales charge are
considered supplemental payments. The Distributor retains any portion not paid
to an investment professional.
RULE 12B-1 PLAN (CLASS B AND CLASS C SHARES)
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets. The Fund accrues 12b-1 fees daily
from the Plan and pays them periodically during the fiscal year. The amounts
accrued, retained by the Distributor and paid to Broker/Dealers are disclosed in
the SAI section "Fees Paid by the Fund for Services."
The Fund may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.
Federated and its subsidiaries may benefit from arrangements where the Rule
12b-1 Plan fees related to Class B Shares may be paid to third parties who have
advanced commissions to investment professionals.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals (such as broker/dealers or banks) may be paid
significant amounts of fees out of the assets of the Distributor and/or
Federated Shareholder Services Company (these fees do not come out of Fund
assets). The Distributor and/or Federated Shareholder Services Company may be
reimbursed by the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution- related
and/or shareholder services, such as advertising, providing incentives to their
sales personnel, sponsoring other activities intended to promote sales, and
maintaining shareholder accounts These payments may be based upon such factors
as the amount of Shares the investment professional sells or may sell; the
amount of client assets invested; and/ or the type and nature of sales or
marketing support furnished by the investment professional.
When an investment professional's customer purchases shares, the investment
professional may receive an amount up to 5.50% and 1.00%, respectively, of the
NAV of Class B and C Shares.
In addition, the Distributor may pay investment professionals 0.25% of the
purchase price of $1 million or more of Class A Shares that its customer has not
redeemed over the first year.
CLASS A SHARES
Investment professionals purchasing Class A Shares for their customers are
eligible to receive an advance payment from the Distributor based on the
following breakpoints:
<TABLE>
<CAPTION>
ADVANCE PAYMENTS AS A PERCENTAGE OF PUBLIC
AMOUNT OFFERING PRICE <S> <C> First $1 - $5 million 0.75% Next $5 - $20 million
0.50% Over $20 million 0.25%
</TABLE>
For accounts with assets over $1 million, the dealer advance payments reset
annually to the first breakpoint on the anniversary of the first purchase.
Class A Share purchases under this program may be made by Letter of Intent or by
combining concurrent purchases. The above advance payments will be paid only on
those purchases that were not previously subject to a front- end sales charge
and dealer advance payments. Certain retirement accounts may not be eligible for
this program.
A contingent deferred sales charge of 0.75% of the redemption amount applies to
Class A Shares redeemed up to 24 months after purchase. The CDSC does not apply
under certain investment programs where the investment professional does not
receive an advance payment on the transaction including, but not limited to,
trust accounts and wrap programs where the investor pays an account level fee
for investment management.
Exchanging Securities for Shares
You may contact the Distributor to request a purchase of Shares in exchange for
securities you own. The Fund reserves the right to determine whether to accept
your securities and the minimum market value to accept. The Fund will value your
securities in the same manner as it values its assets. This exchange is treated
as a sale of your securities for federal tax purposes.
Subaccounting Services
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the 1940 Act,
the Fund is obligated to pay Share redemptions to any one shareholder in cash
only up to the lesser of $250,000 or 1% of the net assets represented by such
Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
Account and Share Information
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Director elections and
other matters submitted to shareholders for vote.
All Shares of the Fund have equal voting rights, except that in matters
affecting only a particular class, only Shares of that class are entitled to
vote.
Directors may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Fund's outstanding shares.
As of March 6, 2000, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Class A Shares: Hubco, Birmingham, Alabama,
owned approximately 834,092 shares (5.16%); Istco, Belleville, Illinois, owned
approximately 932,822 shares (5.78%); Enbanco, Traverse City, Michigan, owned
approximately 993,352 shares (6.15%); and Edward Jones & Co., Maryland Heights,
Missouri, owned approximately 1,805,998 shares (11.19%).
As of March 6, 2000, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Class B Shares: Merrill Lynch Pierce Fenner &
Smith (for the sole benefit of its customers), Jacksonville, Florida, owned
approximately 165,890 shares (5.65%) and Edward Jones & Co., Maryland Heights,
Missouri, owned approximately 244,104 shares (8.32%).
As of March 6, 2000, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Class C Shares: Edward Jones & Co., Maryland
Heights, Missouri, owned approximately 115,045 shares (5.90%); Merrill Lynch
Pierce Fenner & Smith (for the sole benefit of its customers), Jacksonville,
Florida, owned approximately 233,336 shares (11.97%); and Hubco, Birmingham,
Alabama, owned approximately 378,945 shares (34.84%).
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
Tax Information
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Corporation's other portfolios will be separate from those realized by the Fund.
FOREIGN INVESTMENTS
If the Fund purchases foreign securities, their investment income may be subject
to foreign withholding or other taxes that could reduce the return on these
securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign taxes to which the Fund
would be subject. The effective rate of foreign tax cannot be predicted since
the amount of Fund assets to be invested within various countries is uncertain.
However, the Fund intends to operate so as to qualify for treaty-reduced tax
rates when applicable.
Distributions from a Fund may be based on estimates of book income for the year.
Book income generally consists solely of the coupon income generated by the
portfolio, whereas tax-basis income includes gains or losses attributable to
currency fluctuation. Due to differences in the book and tax treatment of
fixed-income securities denominated in foreign currencies, it is difficult to
project currency effects on an interim basis. Therefore, to the extent that
currency fluctuations cannot be anticipated, a portion of distributions to
shareholders could later be designated as a return of capital, rather than
income, for income tax purposes, which may be of particular concern to simple
trusts.
If the Fund invests in the stock of certain foreign corporations, they may
constitute Passive Foreign Investment Companies (PFIC), and the Fund may be
subject to Federal income taxes upon disposition of PFIC investments.
If more than 50% of the value of the Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund intends to
qualify for certain Code stipulations that would allow shareholders to claim a
foreign tax credit or deduction on their U.S. income tax returns. The Code may
limit a shareholder's ability to claim a foreign tax credit. Shareholders who
elect to deduct their portion of the Fund's foreign taxes rather than take the
foreign tax credit must itemize deductions on their income tax returns.
Who Manages and Provides Services to the Fund?
BOARD OF DIRECTORS
The Board is responsible for managing the Corporation's business affairs and for
exercising all the Corporation's powers except those reserved for the
shareholders. Information about each Board member is provided below and includes
each person's: name, address, birthdate, present position(s) held with the
Corporation, principal occupations for the past five years and positions held
prior to the past five years, total compensation received as a Director from the
Corporation for its most recent fiscal year, and the total compensation received
from the Federated Fund Complex for the most recent calendar year. The
Corporation is comprised of two funds and the Federated Fund Complex is
comprised of 43 investment companies, whose investment advisers are affiliated
with the Fund's Adviser.
As of March 6, 2000, the Fund's Board and Officers as a group owned less than 1%
of the Fund's outstanding Class A, Class B, and Class C Shares.
<TABLE>
<CAPTION>
NAME AGGREGATE TOTAL
BIRTHDATE COMPENSATION COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS FROM FROM CORPORATION
POSITION WITH CORPORATION FOR PAST 5 YEARS CORPORATION AND FUND COMPLEX
<S> <C> <C> <C>
JOHN F. DONAHUE* Chief Executive Officer $0 $0 for the Corporation
Birthdate: July 28, 1924 and Director or Trustee of and 43 other investment
Federated Investors Tower the Federated Fund companies in the
1001 Liberty Avenue Complex; Chairman and Fund Complex
Pittsburgh, PA Director, Federated
CHAIRMAN and DIRECTOR Investors, Inc.; Chairman,
Federated Investment
Management Company,
Federated Global
Investment Management
Corp. and Passport
Research, Ltd.; formerly:
Trustee, Federated
Investment Management
Company and Chairman and
Director, Federated
Investment Counseling.
THOMAS G. BIGLEY Director or Trustee of the $1,254.34 $116,760.63 for the
Birthdate: February 3, 1934 Federated Fund Complex; Corporation and 43
15 Old Timber Trail Director, Member of other investment
Pittsburgh, PA Executive Committee, companies in the
DIRECTOR Children's Hospital of Fund Complex
Pittsburgh; formerly:
Senior Partner, Ernst &
Young LLP; Director, MED
3000 Group, Inc.;
Director, Member of
Executive Committee,
University of Pittsburgh.
JOHN T. CONROY, JR. Director or Trustee of the $1,379.98 $128,455.37 for the
Birthdate: June 23, 1937 Federated Fund Complex; Corporation and 43
Wood/IPC Commercial Dept. President, Investment other investment
John R. Wood Associates, Inc. Realtors Properties Corporation; companies in the
3255 Tamiami Trail North Senior Vice President, Fund Complex
Naples, FL John R. Wood and
DIRECTOR 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.
NICHOLAS P. CONSTANTAKIS Director or Trustee of the $0 $73,191.21 for the
Birthdate: September 3, 1939 Federated Fund Complex; Corporation and 37
175 Woodshire Drive Director, Michael Baker other investment
Pittsburgh, PA Corporation (engineering, companies in the
DIRECTOR construction, operations Fund Complex
and technical services);
formerly: Partner,
Andersen Worldwide SC.
JOHN F. CUNNINGHAM++ Director or Trustee of some $0 $93,190.48 for the
Birthdate: March 5, 1943 of the Federated Fund Corporation and 37
353 El Brillo Way Complex; Chairman, other investment
Palm Beach, FL President and Chief companies in the
DIRECTOR Executive Officer, Fund Complex
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.
J. CHRISTOPHER DONAHUE President or Executive $0 $0 for the Corporation
Birthdate: April 11, 1949 Vice President of the and 30 other investment
Federated Investors Tower Federated Fund Complex; companies in the
1001 Liberty Avenue Director or Trustee of some Fund Complex
Pittsburgh, PA of the Funds in the
EXECUTIVE VICE PRESIDENT Federated Fund Complex;
AND DIRECTOR President, Chief Executive
Officer and Director,
Federated Investors, Inc.;
President, Chief Executive
Officer and Trustee,
Federated Investment
Management Company;
Trustee, Federated
Investment Counseling;
President, Chief Executive
Officer and Director,
Federated Global
Investment Management
Corp.; President and Chief
Executive Officer,
Passport Research, Ltd.;
Trustee, Federated
Shareholder Services
Company; Director,
Federated Services
Company; formerly:
President, Federated
Investment Counseling.
<CAPTION>
NAME AGGREGATE TOTAL
BIRTHDATE COMPENSATION COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS FROM FROM CORPORATION
POSITION WITH CORPORATION FOR PAST 5 YEARS CORPORATION AND FUND COMPLEX
<S> <C> <C> <C>
LAWRENCE D. ELLIS, M.D.* Director or Trustee of the $1,254.34 $116,760.63 for the
Birthdate: October 11, 1932 Federated Fund Complex; Corporation and 43
3471 Fifth Avenue Suite 1111 Professor of Medicine, other investment
Pittsburgh, PA University of Pittsburgh; companies in the
DIRECTOR Medical Director, Fund Complex
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 Director or Trustee of the $1,175.14 $109,153.60 for the
Birthdate: March 16, 1942 Federated Fund Complex; Corporation and 43
One Royal Palm Way 100 formerly: Representative, other investment
Royal Palm Way Commonwealth of companies in the
Palm Beach, FL Massachusetts General Fund Complex
DIRECTOR Court; President, State
Street Bank and Trust
Company and State Street
Corporation. Retired:
Director, VISA USA and VISA
International; Chairman
and Director,
Massachusetts Bankers
Association; Director,
Depository Trust
Corporation.
CHARLES F. MANSFIELD, JR.++ Director or Trustee of some $1,318.21 $102,573.91 for the
Birthdate: April 10, 1945 of the Federated Funds; Corporation and 40
80 South Road Management Consultant. other investment
Westhampton Beach, NY Previous Positions: Chief companies in the
DIRECTOR Executive Officer, PBTC Fund Complex
International Bank; 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.
JOHN E. MURRAY, JR., J.D., S.J.D. Director or Trustee of the $1,379.98 $128,455.37 for the
Birthdate: December 20, 1932 Federated Fund Complex; Corporation and 43
President, Duquesne University President, Law Professor, other investment
Pittsburgh, PA Duquesne University; companies in the
DIRECTOR Consulting Partner, Fund Complex
Mollica & Murray. Previous
Positions: Dean and
Professor of Law,
University of Pittsburgh
School of Law; Dean and
Professor of Law,
Villanova University
School of Law.
MARJORIE P. SMUTS Director or Trustee of the $1,254.34 $116,760.63 for the
Birthdate: June 21, 1935 Federated Fund Complex; Corporation and 43
4905 Bayard Street Public Relations/ other investment
Pittsburgh, PA Marketing/Conference companies in the
DIRECTOR Planning. Previous Fund Complex
Positions: National
Spokesperson, Aluminum
Company of America;
business owner.
JOHN S. WALSH++ Director or Trustee of some $1,254.34 $94,536.85 for the
Birthdate: November 28, 1957 of the Federated Funds; Corporation and 39
2007 Sherwood Drive President and Director, other investment
Valparaiso, IN Heat Wagon, Inc.; companies in the
DIRECTOR President and Director, Fund Complex
Manufacturers Products,
Inc.; President, Portable
Heater Parts, a division of
Manufacturers Products,
Inc.; Director, Walsh &
Kelly, Inc.; formerly,
Vice President, Walsh &
Kelly, Inc.
GLEN R. JOHNSON President of some of the $0 $0 for the Corporation
Birthdate: May 2, 1929 Funds in the Federated Fund and 21 other investment
Federated Investors Tower Complex; Staff member, companies in the
1001 Liberty Avenue Federated Securities Fund Complex
Pittsburgh, PA Corp.; formerly: Trustee
PRESIDENT or Director of some of the
Funds in the Federated Fund
Complex.
EDWARD C. GONZALES President, Executive Vice $0 $0 for the Corporation
Birthdate: October 22, 1930 President and Treasurer of and 42 other investment
Federated Investors Tower some of the Funds in the company in the
1001 Liberty Avenue Federated Fund Complex; Fund Complex
Pittsburgh, PA Vice Chairman, Federated
EXECUTIVE VICE PRESIDENT Investors, Inc.; Trustee,
Federated Administrative
Services; formerly:
Trustee or Director of some
of the Funds in the
Federated Fund Complex;
CEO and Chairman,
Federated Administrative
Services; Vice President,
Federated Investment
Management Company,
Federated Investment
Counseling, Federated
Global Investment
Management Corp. and
Passport Research, Ltd.;
Director and Executive
Vice President, Federated
Securities Corp.;
Director, Federated
Services Company; Trustee,
Federated Shareholder
Services Company.
JOHN W. MCGONIGLE Executive Vice President $0 $0 for the Corporation
Birthdate: October 26, 1938 and Secretary of the and 43 other investment
Federated Investors Tower Federated Fund Complex; companies in the
1001 Liberty Avenue Executive Vice President, Fund Complex
Pittsburgh, PA Secretary and Director,
EXECUTIVE VICE PRESIDENT Federated Investors, Inc.;
AND SECRETARY formerly: Trustee,
Federated Investment
Management Company and
Federated Investment
Counseling; Director,
Federated Global
Investment Management
Corp., Federated Services
Company and Federated
Securities Corp.
RICHARD J. THOMAS Treasurer of the Federated $0 $0 for the Corporation
Birthdate: June 17, 1954 Fund Complex; Vice and 43 other investment
Federated Investors Tower President Funds Financial companies in the
1001 Liberty Avenue Services Division, Fund Complex
Pittsburgh, PA Federated Investors, Inc.;
TREASURER Formerly: various
management positions
within Funds Financial
Services Division of
Federated Investors, Inc.
<CAPTION>
NAME AGGREGATE TOTAL
BIRTHDATE COMPENSATION COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS FROM FROM CORPORATION
POSITION WITH CORPORATION FOR PAST 5 YEARS CORPORATION AND FUND COMPLEX
<S> <C> <C> <C>
RICHARD B. FISHER President or Vice $0 $0 for the Corporation
Birthdate: May 17, 1923 President of some of the and 41 other investment
Federated Investors Tower Funds in the Federated Fund companies in the
1001 Liberty Avenue Complex; Vice Chairman, Fund Complex
Pittsburgh, PA Federated Investors, Inc.;
VICE PRESIDENT Chairman, Federated
Securities Corp.;
formerly: Director or
Trustee of some of the
Funds in the Federated Fund
Complex; Executive Vice
President, Federated
Investors, Inc. and
Director and Chief
Executive Officer,
Federated Securities Corp.
HENRY A. FRANTZEN Chief Investment Officer $0 $0 for the Corporation
Birthdate: November 28, 1942 of this Fund and various and 2 other investment
Federated Investors Tower other Funds in the companies in the
1001 Liberty Avenue Federated Fund Complex; Fund Complex
Pittsburgh, PA Executive Vice President,
CHIEF INVESTMENT OFFICER Federated Investment
Counseling, Federated
Global Investment
Management Corp.,
Federated Investment
Management Company and
Passport Research, Ltd.;
Director, Federated Global
Investment Management
Corp. and Federated
Investment Management
Company; 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.
</TABLE>
* An asterisk denotes a Director who is deemed to be an interested person as
defined in the 1940 Act.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Corporation.
++ Messrs. Mansfield and Walsh became members of the Board of Directors on
January 1, 1999. Mr. Cunningham became a member of the Board of Directors
on January 1, 2000. Mr. Cunningham did not receive any fees as of the
fiscal year end of the Company.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund.
The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Corporation or any Fund shareholder for
any losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Corporation.
OTHER RELATED SERVICES
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
CODE OF ETHICS RESTRICTIONS ON PERSONAL TRADING
As required by SEC rules, the Fund, its Adviser, and its Distributor have
adopted codes of ethics. These codes govern securities trading activities of
investment personnel, Fund Directors, and certain other employees. Although they
do permit these people to trade in securities, including those that the Fund
could buy, they also contain significant safeguards designed to protect the Fund
and its shareholders from abuses in this area, such as requirements to obtain
prior approval for, and to report, particular transactions.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. The Adviser will generally use those who are recognized dealers in
specific portfolio instruments, except when a better price and execution of the
order can be obtained elsewhere. The Adviser may select brokers and dealers
based on whether they also offer research services (as described below). In
selecting among firms believed to meet these criteria, the Adviser may give
consideration to those firms which have sold or are selling Shares of the Fund
and other funds distributed by the Distributor and its affiliates. The Adviser
makes decisions on portfolio transactions and selects brokers and dealers
subject to review by the Fund's Board.
RESEARCH SERVICES
Research services may include advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services. Research
services may be used by the Adviser or by affiliates of Federated in advising
other accounts. To the extent that receipt of these services may replace
services for which the Adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The Adviser and its affiliates exercise
reasonable business judgment in selecting those brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided.
For the fiscal year ended, November 30, 1999, the Fund's Adviser directed
brokerage transactions to certain brokers due to research services they
provided. The total amount of these transactions was $1,612,421,133.74 for which
the Fund paid $4,678,989.89 in brokerage commissions.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
<S> <C>
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditor for the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
FEES PAID BY THE FUND FOR SERVICES
<TABLE>
<CAPTION>
FOR THE YEAR ENDED NOVEMBER 30 1999 1998 1997
<S> <C> <C> <C>
Advisory Fee Earned $3,036,053 $2,137,661 $1,732,925
Advisory Fee Reduction 0 0 0
Brokerage Commissions 4,806,361 2,652,870 4,321,392
Administrative Fee 228,145 185,000 185,000
12B-1 FEE
Class B Shares 330,551 -- --
Class C Shares 206,060 -- --
SHAREHOLDER SERVICES FEE
Class A Shares 580,143 -- --
Class B Shares 110,183 -- --
Class C Shares 68,687 -- --
</TABLE>
Fees are allocated among classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable class of Shares.
How Does the Fund Measure Performance?
The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.
Share performance reflects the effect of non-recurring charges, such as maximum
sales charges, which, if excluded, would increase the total return and yield.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns are given for the one-year, five-year, and ten-year or Start of
Performance periods ended November 30, 1999.
<TABLE>
<CAPTION>
START OF PERFORMANCE
SHARE CLASS 1 YEAR 5 YEARS 10 YEARS ON AUGUST 17, 1984
<S> <C> <C> <C> <C>
CLASS A SHARES:
Total Return 52.23% 15.95% 10.26% --
<CAPTION>
START OF PERFORMANCE
1 YEAR 5 YEARS 10 YEARS ON SEPTEMBER 28, 1994
<S> <C> <C> <C> <C>
CLASS B SHARES:
Total Return 54.40% 16.06% -- 14.37%
<CAPTION>
START OF PERFORMANCE
1 YEAR 5 YEARS 10 YEARS ON APRIL 1, 1993
<S> <C> <C> <C> <C>
CLASS C SHARES:
Total Return 58.89% 16.32% -- 15.57%
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of Shares owned at the end of the period by
the NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD
The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a 30-day period; by (ii) the maximum offering
price per Share on the last day of the period. This number is then annualized
using semi-annual compounding. This means that the amount of income generated
during the 30-day period is assumed to be generated each month over a 12-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by Shares because of certain adjustments required
by the SEC and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
* references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
* charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment;
* discussions of economic, financial and political developments and their impact
on the securities market, including the portfolio manager's views on how such
developments could impact the Fund; and
* information about the mutual fund industry from sources such as the Investment
Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which the Fund uses in advertising may include:
LIPPER ANALYTICAL SERVICES, INC.
Lipper Analytical Services, Inc., for example, makes comparative
calculations for one-month, three-month, one-year, and five-year periods
which assume the reinvestment of all capital gains distributions and income
dividends.
EUROPE, AUSTRALIA, AND FAR EAST (EAFE) INDEX
Europe, Australia, and Far East (EAFE) Index is a market capitalization weighted
foreign securities index, which is widely used to measure the performance of
European, Australian, New Zealand, and Far Eastern stock markets. The index
covers approximately 1,020 companies drawn from 18 countries in the above
regions. The index values its securities daily in both U.S. dollars and local
currency and calculates total returns monthly. EAFE U.S. dollar total return is
a net dividend figure less Luxembourg withholding tax. The EAFE is monitored by
Capital International, S.A., Geneva, Switzerland.
STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS
Standard & Poor's Daily Stock Price Index of 500 Common Stocks, a composite
index of common stocks in industry, transportation, and financial and public
utility companies, can be used to compare to the total returns of funds whose
portfolios are invested primarily in common stocks. In addition, the Standard &
Poor's index assumes reinvestments of all dividends paid by stocks listed on its
index. Taxes due on any of these distributions are not included, nor are
brokerage or other fees calculated in Standard & Poor's figures.
MORNINGSTAR, INC.
Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
Who is Federated Investors, Inc.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state- of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
MUNICIPAL FUNDS
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
EQUITY FUNDS
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999, Federated managed 53 equity funds totaling approximately
$18.3 billion in assets across growth, value, equity income, international,
index and sector (i.e., utility) styles. Federated's value- oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
CORPORATE BOND FUNDS
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
GOVERNMENT FUNDS
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
MONEY MARKET FUNDS
In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market fund.
Simultaneously, the company pioneered the use of the amortized cost method of
accounting for valuing shares of money market funds, a principal means used by
money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime, 24 municipal and 1 euro-denominated
with assets approximating $34.1 billion, $35.7 billion, $13.1 billion and $115
million, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield--Thomas
Madden; U.S. fixed income--William D. Dawson, III; and global equities and
fixed income--Henry A. Frantzen. The Chief Investment Officers are Executive
Vice Presidents of the Federated advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
INSTITUTIONAL CLIENTS
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities Corp.
BANK MARKETING
Other institutional clients include more than 1,600 banks and trust
organizations. Virtually all of the trust divisions of the top 100 bank holding
companies use Federated Funds in their clients' portfolios. The marketing effort
to trust clients is headed by Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Broker/Dealer Sales Division, Federated Securities Corp.
Financial Information
The Financial Statements for the Fund for the fiscal year ended November 30,
1999 are incorporated herein by reference to the Annual Report to Shareholders
of Federated International Equity Fund dated November 30, 1999.
Investment Ratings
STANDARD AND POOR'S LONG-TERM DEBT RATING DEFINITIONS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.
B--Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC--Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.
C--The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
MOODY'S INVESTORS SERVICE, INC. LONG-TERM BOND RATING DEFINITIONS
AAA--Bonds which are rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as gilt
edged. Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA--Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in AAA securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
BAA--Bonds which are rated BAA are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA--Bonds which are BA are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA--Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA--Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C--Bonds which are rated C are the lowest-rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
FITCH IBCA, INC. LONG-TERM DEBT RATING DEFINITIONS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F- 1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C--Bonds are imminent default in payment of interest or principal.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
PRIME-1--Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
* Leading market positions in well-established industries;
* High rates of return on funds employed;
* Conservative capitalization structure with moderate reliance on debt and
ample asset protection;
* Broad margins in earning coverage of fixed financial charges and high internal
cash generation; and
* Well-established access to a range of financial markets and assured sources of
alternate liquidity.
PRIME-2--Issuers rated Prime-1 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
STANDARD AND POOR'S COMMERCIAL PAPER RATINGS
A-1--This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
FITCH IBCA, INC. COMMERCIAL PAPER RATING DEFINITIONS
FITCH-1--(Highest Grade) Commercial paper assigned this rating is regarded as
having the strongest degree of assurance for timely payment.
FITCH-2--(Very Good Grade) Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.
Addresses
FEDERATED INTERNATIONAL EQUITY FUND
Class A Shares
Class B Shares
Class C Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Global Investment Management Corp.
175 Water Street
New York, NY 10038-4965
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
PROSPECTUS
Federated International Income Fund
A Portfolio of Federated International Series, Inc.
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
A mutual fund seeking a high level of current income in U.S. dollars consistent
with prudent investment risk by investing primarily in fixed income securities
of foreign governments and their agencies. The Fund has a secondary objective of
capital appreciation.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
MARCH 31, 2000
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the
Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 6
What Do Shares Cost? 8
How is the Fund Sold? 11
How to Purchase Shares 12
How to Redeem and Exchange Shares 13
Account and Share Information 16
Who Manages the Fund? 17
Financial Information 18
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund's investment objective is to seek a high level of current income in
U.S. dollars consistent with prudent investment risk. The Fund has a secondary
objective of capital appreciation. The ability of the Fund to achieve its
investment objective is dependent on the continuing ability of issuers of the
debt securities in which the Fund invests to meet their obligation for the
payment of interest and principal when due. While there is no assurance that the
Fund will achieve its investment objective, it endeavors to do so by following
the strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund pursues its investment objective by investing primarily in high quality
fixed income securities with a minimum credit rating of BBB of foreign
governments and their agencies. The Fund will endeavor to maintain a
dollar-weighted average rating of its portfolio securities of A. The Fund
emphasizes investments in members of the Organization for Economic Cooperation
and Development which have received investment grade ratings for securities
denominated in their local currency.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factors that may reduce the Fund's returns
include:
* fluctuations in the exchange rate between the U.S. dollar and foreign
currencies; and
* a general rise in interest rates.
The Fund is non-diversified. Compared to diversified mutual funds, it may invest
a higher percentage of its assets among fewer issuers of portfolio securities.
This increases the Fund's risk by magnifying the impact (positively or
negatively) that any one issuer has on the Fund's Share price and performance.
The Shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency.
RISK/RETURN BAR CHART AND TABLE
[Graphic]
The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.
The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.
Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 11.37% (quarter ended September 30, 1993). Its lowest
quarterly return was (5.19%) (quarter ended March 31, 1997).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Fund's Class A, Class B, and Class C Average
Annual Total Returns, reduced to reflect applicable sales charges, for the
calendar periods ended December 31, 1999. The table shows the Fund's total
returns averaged over a period of years relative to the J.P. Morgan Global
Government Bond Non-U.S. Index (JPMGXUS), a broad-based market index. The
JPMGXUS is a total return, trade-weighted index of over 360 government and
high-grade bonds in 12 developed countries. JPMGXUS start of performance is June
4, 1991. Total returns for the index shown do not reflect sales charges,
expenses or other fees that the SEC requires to be reflected in the Fund's
performance. Indexes are unmanaged, and it is not possible to invest directly in
an index.
<TABLE>
<CAPTION>
CALENDAR CLASS A CLASS B CLASS C
PERIOD SHARES SHARES SHARES JPMGXUS
<S> <C> <C> <C> <C>
1 Year (15.73%) (17.04%) (13.23%) (6.17%)
5 Years 3.60% 3.50% 3.80% 6.37%
Start of
Performance 1 6.22% 4.10% 5.44% 8.42%
</TABLE>
1 The Fund's Class A, Class B and Class C Shares start of performance dates were
June 4, 1991, September 28, 1994, and April 1, 1993, respectively.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
returns.
What are the Fund's Fees and Expenses?
FEDERATED INTERNATIONAL INCOME FUND
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
the Fund's Class A, B and C Shares.
<TABLE>
<CAPTION>
SHAREHOLDER FEES CLASS A
CLASS B CLASS C
<S> <C>
<C> <C>
Fees Paid Directly
From
Your
Investment
Maximum Sales
Charge
(Load) Imposed
on
Purchases (as a
percentage
of
offering price) 4.50%
None None
Maximum Deferred
Sales
Charge (Load) (as
a
percentage of
original
purchase price
or
redemption proceeds,
as
applicable) None
5.50% 1.00%
Maximum Sales
Charge
(Load) Imposed
on
Reinvested Dividends
(and
other Distributions) (as
a
percentage of
offering
price) None
None None
Redemption Fee (as
a
percentage of
amount
redeemed, if applicable) None
None None
Exchange Fee None
None None
ANNUAL FUND
OPERATING
EXPENSES (Before
Waivers)
1
Expenses That are
Deducted
From Fund Assets (as
a
percentage of average
net
assets)
Management Fee 2 0.75%
0.75% 0.75%
Distribution (12b-1) Fee 3 0.25%
0.75% 0.75%
Shareholder Services Fee 4 0.25%
0.25% 0.25%
Other Expenses 0.44%
0.44% 0.44%
Total Annual
Fund
Operating Expenses 1.69%
2.19% 5 2.19%
1 Although not contractually obligated to do so, the adviser, distributor, and
shareholder service
provider waived certain amounts. These are shown below along with the net expenses
the Fund actually
paid for the fiscal year ended
November 30, 1999.
Total Waivers of
Fund
Expenses 0.23%
0.01% 0.01%
Total Actual Annual
Fund
Operating Expenses
(after
waivers) 1.46% 2.18% 2.18% 2 The adviser voluntarily waived a portion of the
management fee. The adviser can terminate this voluntary waiver at any time.
Themanagement fee paid by the Fund (after the voluntary waiver) was 0.74% for
the fiscal year ended November 30, 1999. 3 A portion of the distribution (12b-1)
fee for Class A Shares has been voluntarily waived. This voluntary waiver can be
terminated at any time. The distribution (12b-1) fee paid by the Fund's Class A
Shares (after the voluntary waiver) was 0.10% for the fiscal year ended November
30, 1999.
4 A portion of the shareholder services fee for Class A Shares has been
voluntarily waived. This voluntary waiver can be terminated at any time. The
shareholder services fee paid by the Fund's Class A Shares (after the voluntary
waiver) was 0.18% for the fiscal year ended November 30, 1999.
5 Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Class A, B and C Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Class A, B and C
Shares for the time periods indicated and then redeem all of your Shares at the
end of those periods. Expenses assuming no redemption are also shown. The
Example also assumes that your investment has a 5% return each year and that the
Fund's Class A, B and C Shares operating expenses BEFORE WAIVERS as shown in the
table and remain the same. Although your actual costs and returns may be higher
or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A:
Expenses assuming redemption $614 $ 959 $1,326 $2,358
Expenses assuming no redemption $614 $ 959 $1,326 $2,358
CLASS B:
Expenses assuming redemption $772 $ 1,085 $1,375 $2,398
Expenses assuming no redemption $222 $ 685 $1,175 $2,398
CLASS C:
Expenses assuming redemption $322 $ 685 $1,175 $2,524
Expenses assuming no redemption $222 $ 685 $1,175 $2,524
</TABLE>
What are the Fund's Investment Strategies?
The Fund pursues its investment objective by investing primarily in fixed income
securities of foreign governments and their agencies which are members of the
Organization for Economic Cooperation and Development (OECD). The OECD is an
organization of 29 member countries which share the principles of the market
economy and pluralist democracy. The original 20 members of the OECD are located
in Western Europe and North America. More recently, Japan, Australia, New
Zealand, Finland, Mexico, the Czech Republic, Hungary, Poland and Korea have
joined. The Fund limits its investments to securities with a credit quality
equal to an A rating or better. The Fund endeavors to maintain a dollar-weighted
average credit rating of AA for its portfolio securities.
The investment adviser (Adviser) uses the J.P. Morgan Global Government Bond
Non-U.S. Index (JPMGXUS) as a starting point for selecting portfolio securities.
If the Adviser finds a comparable security outside of the index which represents
a better value and better opportunity to enhance the Fund's performance, the
Fund may diverge from the JPMGXUS by purchasing that security. Such
opportunities may cause the Adviser to weight the portfolio differently than the
JPMGXUS. Under ordinary market conditions, however, the duration of the
portfolio securities does not deviate more than 25% from the duration of the
JPMGXUS. Duration measures the price sensitivity of a fixed income security to
changes in interest rates. The Fund will not invest more than 30% of its assets
in any one country.
The Adviser weighs several factors in selecting investments for the portfolio.
First, the Adviser analyzes a country's general economic condition and outlook,
including its interest rates, foreign exchange rates and trade balance. The
Adviser then analyzes the country's financial condition, including its credit
ratings, government budget, tax base, outstanding public debt and the amount of
public debt held outside the country. In connection with this analysis, the
Adviser also considers how developments in other countries in the region or the
world might affect these factors.
Using its analysis, the Adviser tries to identify countries with favorable
characteristics, such as a strengthening economy, favorable inflation rate,
sound budget policy or strong public commitment to repay government debt. The
Adviser then evaluates available investments in these countries based upon its
outlook for interest and foreign exchange rates. The Adviser tries to select
securities that offer the best potential returns consistent with its general
portfolio strategy.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash, cash items, and shorter-term, higher quality debt
securities and similar obligations. It may do this to minimize potential losses
and maintain liquidity to meet shareholder redemptions during adverse market
conditions. This may cause the Fund to give up greater investment returns to
maintain the safety of principal, that is, the original amount invested by
shareholders.
What are the Principal Securities in Which the Fund Invests?
FOREIGN GOVERNMENT SECURITIES
Foreign government securities generally consist of fixed income securities
supported by national, state or provincial governments or similar political
subdivisions. Foreign government securities also include debt obligations of
supranational entities, such as international organizations designed or
supported by governmental entities to promote economic reconstruction or
development, international banking institutions and related government agencies.
Examples of these include, but are not limited to, the International Bank for
Reconstruction and Development (the World Bank), the Asian Development Bank, the
European Investment Bank and the Inter-American Development Bank.
Foreign government securities also include fixed income securities of
quasi-governmental agencies that are either issued by entities owned by a
national, state or equivalent government or are obligations of a political unit
that are not backed by the national government's full faith and credit. Further,
foreign government securities include mortgage-related securities issued or
guaranteed by national, state or provincial governmental instrumentalities,
including quasi-governmental agencies.
Foreign securities are often denominated in foreign currencies. Along with the
risks normally associated with domestic securities of the same type, foreign
securities are subject to currency risks and risks of foreign investing.
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time.
FOREIGN EXCHANGE CONTRACTS
In order to convert U.S. dollars into the currency needed to buy a foreign
security, or to convert foreign currency received from the sale of a foreign
security into U.S. dollars, the Fund may enter into spot currency trades. In a
spot trade, the Fund agrees to exchange one currency for another at the current
exchange rate.
INVESTMENT RATINGS FOR HIGH QUALITY SECURITIES
The Adviser will determine the credit rating of a security based upon the credit
ratings given by one or more nationally recognized rating services. Rating
services assign ratings to securities based on their assessment of the
likelihood of the issuer's ability to pay interest or principal (default) when
due on each security. Lower credit ratings correspond to higher credit risk. If
a security has not received a rating, the Fund must rely entirely upon the
Adviser's credit assessment that the security is comparable to a rated security.
For example, the eligible ratings assigned by Standard & Poor's to high quality
securities are AAA, AA, and A. Standard & Poor's classifies bonds considered to
be investment grade and of satisfactory credit quality as BBB.
What are the Specific Risks of Investing in the Fund?
CURRENCY RISKS
Exchange rates for currencies fluctuate daily. Foreign securities are normally
denominated and traded in foreign currencies. As a result, the value of the
Fund's foreign investments and the value of its Shares may be affected favorably
or unfavorably by changes in currency exchange rates relative to the U.S.
dollar. The combination of currency risk and market risks tends to make
securities traded in foreign markets more volatile than securities traded
exclusively in the U.S.
BOND MARKET RISKS
* Prices of fixed income securities rise and fall in response to interest rate
changes for similar securities. Generally, when interest rates rise, prices of
fixed income securities fall.
* Interest rate changes have a greater effect on the price of fixed income
securities with longer durations.
EURO RISKS
The Fund makes significant investments in securities denominated in Euro, the
new single currency of the European Monetary union (EMU). Therefore, the
exchange rate between the Euro and the U.S. dollar will have a significant
impact on the value of the Fund's investments.
RISKS OF FOREIGN INVESTING
* Foreign securities pose additional risks because foreign economic or political
conditions may be less favorable than those of the United States. Foreign
financial markets may also have fewer investor protections. Securities in
foreign markets may also be subject to taxation policies that reduce returns for
U.S. investors.
* Foreign countries may have restrictions on foreign ownership of securities or
may impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the liquidity of the Fund's
investments.
* Foreign companies may not provide information (including financial statements)
as frequently or to as great an extent as companies in the United States.
Foreign companies may also receive less coverage than United States companies by
market analysts and the financial press. In addition, foreign countries may lack
financial controls and reporting standards, or regulatory requirements
comparable to those applicable to U.S. companies. These factors may prevent the
Fund and its Adviser from obtaining information concerning foreign companies
that is as frequent, extensive and reliable as the information available
concerning companies in the United States.
* Some countries are less well developed, overly reliant on particular
industries, and more vulnerable to the cyclical nature of international trade.
Some countries have histories of hyperinfluction and currency devaluations
versus the dollar (which may adversely affect returns to U.S. investors) and may
be overly dependent on foreign capital.
CUSTODIAL SERVICES AND RELATED INVESTMENT COSTS
Custodial services and other costs relating to investment in international
securities markets generally are more expensive than in the U.S. Such markets
have settlement and clearance procedures that differ from those in the U.S. In
certain markets there have been times when settlements have been unable to keep
pace with the volume of securities transactions, making it difficult to conduct
such transactions. The inability of the Fund to make intended securities
purchases due to settlement problems could cause the Fund to miss attractive
investment opportunities. Inability to dispose of a portfolio security caused by
settlement problems could result in losses to the Fund due to a subsequent
decline in value of the portfolio security. In addition, security settlement and
clearance procedures in some emerging countries may not fully protect the Fund
against loss of its assets.
CREDIT RISKS
* Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money.
* Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investor Services, Inc. These services assign
ratings to securities by assessing the likelihood of issuer default. Lower
credit ratings correspond to higher credit risk. If a security has not received
a rating, the Fund must rely entirely upon the Adviser's credit assessment.
* After purchase by the Fund, a security may cease to be rated or its rating may
be reduced below the minimum required for purchase by the Fund. Neither event
will require a sale of such security by the Fund. The adviser will consider such
an event in its determination of whether the Fund should continue to hold the
security.
* Fixed income securities generally compensate for greater credit risk by paying
interest at a higher rate. The difference between the yield of a security and
the yield of a U.S. Treasury security with a comparable maturity (the spread)
measures the additional interest paid for risk. Spreads may increase generally
in response to adverse economic or market conditions. A security's spread may
also increase if the security's rating is lowered, or the security is perceived
to have an increased credit risk. An increase in the spread will cause the price
of the security to decline.
* The Fund is non-diversified. Compared to diversified mutual funds, it may
invest a higher percentage of its assets among fewer issuers of portfolio
securities. This increases the Fund's risk by magnifying the impact (positively
or negatively) that any one issuer has on the Fund's share price and
performance.
PORTFOLIO TURNOVER
The Fund actively trades its portfolio securities in an attempt to achieve its
investment objective. Active trading will cause the Fund to have an increased
portfolio turnover rate which is likely to generate shorter-term gains (losses)
for its shareholders, which are taxed at a higher rate than longer-term gains
(losses). Actively trading portfolio securities increases the Fund's trading
costs and may have an adverse impact on the Fund's performance.
What Do Shares Cost?
You can purchase, redeem or exchange Shares any day the New York Stock Exchange
(NYSE) is open. When the Fund receives your transaction request in proper form
(as described in the prospectus) it is processed at the next calculated net
asset value (NAV) plus any applicable front-end sales charge (public offering
price). If the Fund purchases foreign securities that trade in foreign markets
on days the NYSE is closed, the value of the Fund's assets may change on days
you cannot purchase or redeem Shares. NAV is determined at the end of regular
trading (normally 4:00 p.m. Eastern time) each day the NYSE is open. The Fund
generally values equity securities according to the last sale price in the
market in which they are primarily traded (either a national securities exchange
or the over-the- counter market).
The Fund's current NAV and public offering price may be found in the mutual
funds section of certain local newspapers under "Federated" and the appropriate
class designation listing.
The following table summarizes the minimum required investment amount and the
maximum sales charge, if any, that you will pay on an investment in the Fund.
Keep in mind that investment professionals may charge you fees for their
services in connection with your Share transactions.
<TABLE>
<CAPTION>
MAXIMUM SALES CHARGE
MINIMUM
INITIAL/ CONTINGENT
SUBSEQUENT FRONT-END DEFERRED
INVESTMENT SALES SALES
SHARES OFFERED AMOUNTS 1 CHARGE 2 CHARGE 3
<S> <C> <C> <C>
Class A $1,500/$100 5.50% 0.00%
Class B $1,500/$100 None 5.50%
Class C $1,500/$100 None 1.00%
</TABLE>
1 The minimum initial and subsequent investment amounts for retirement plans are
$250 and $100, respectively. The minimum subsequent investment amounts for
Systematic Investment Programs is $50. Investment professionals may impose
higher or lower minimum investment requirements on their customers than those
imposed by the Fund. Orders for $250,000 or more will be invested in Class A
Shares instead of Class B Shares to maximize your return and minimize the sales
charges and marketing fees. Accounts held in the name of an investment
professional may be treated differently. Class B Shares will automatically
convert into Class A Shares after eight full years from the purchase date. This
conversion is a non-taxable event.
2 Front-End Sales Charge is expressed as a percentage of public offering
price. See "Sales Charge When You Purchase."
3 See "Sales Charge When You Redeem."
SALES CHARGE WHEN YOU PURCHASE
<TABLE>
<CAPTION>
CLASS A SHARES
Sales Charge
as a Percentage Sales Charge
of Public as a Percentage
Purchase Amount Offering Price of NAV
<S> <C> <C>
Less than $50,000 5.50% 5.82%
$50,000 but less than $100,000 4.50% 4.71%
$100,000 but less than $250,000 3.75% 3.90%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $1 million 2.00% 2.04%
$1 million or greater 1 0.00% 0.00%
</TABLE>
1 A contingent deferred sales charge of 0.75% of the redemption amount applies
to Class A Shares redeemed up to 24 months after purchase under certain
investment programs where an investment professional received an advance payment
on the transaction.
If your investment qualifies for a reduction or elimination of the sales charge
as described below, you or your investment professional should notify the Fund's
Distributor at the time of purchase. If the Distributor is not notified, you
will receive the reduced sales charge only on additional purchases, and not
retroactively on previous purchases.
THE SALES CHARGE AT PURCHASE MAY BE REDUCED OR ELIMINATED BY:
* purchasing Shares in greater quantities to reduce the applicable sales
charge;
* combining concurrent purchases of Shares:
- - by you, your spouse, and your children under age 21; or
- - of the same share class of two or more Federated Funds (other than money
market funds);
* accumulating purchases (in calculating the sales charge on an additional
purchase, include the current value of previous Share purchases still invested
in the Fund); or
* signing a letter of intent to purchase a specific dollar amount of Shares
within 13 months (call your investment professional or the Fund for more
information).
THE SALES CHARGE WILL BE ELIMINATED WHEN YOU PURCHASE SHARES:
* within 120 days of redeeming Shares of an equal or lesser amount;
* by exchanging shares from the same share class of another Federated Fund
(other than a money market fund);
* through wrap accounts or other investment programs where you pay the
investment professional directly for services;
* through investment professionals that receive no portion of the sales
charge;
* as a Federated Life Member (Class A Shares only) and their immediate
family members; or
* as a Director or employee of the Fund, the Adviser, the Distributor and their
affiliates, and the immediate family members of these individuals.
SALES CHARGE WHEN YOU REDEEM
Your redemption proceeds may be reduced by a sales charge, commonly referred to
as a contingent deferred sales charge (CDSC).
<TABLE>
<CAPTION>
CLASS A SHARES
<S>
<C>
A CDSC of 0.75% of the redemption amount applies to Class A Shares redeemed up
to 24 months after purchase under certain investment programs where an
investment professional received an advance payment on the transaction.
<CAPTION>
CLASS B
SHARES
Shares Held Up To:
CDSC
<S>
<C>
1 Year
5.50%
2 Years
4.75%
3 Years
4.00%
4 Years
3.00%
5 Years
2.00%
6 Years
1.00%
7 Years or More
0.00%
<CAPTION>
CLASS C SHARES
<S>
<C>
You will pay a 1% CDSC if you redeem Shares within one year of the purchase
date.
</TABLE>
If your investment qualifies for a reduction or elimination of the CDSC as
described below, you or your investment professional should notify the
Distributor at the time of redemption. If the Distributor is not notified, the
CDSC will apply.
YOU WILL NOT BE CHARGED A CDSC WHEN REDEEMING SHARES:
* purchased with reinvested dividends or capital gains;
* purchased within 120 days of redeeming Shares of an equal or lesser
amount;
* that you exchanged into the same share class of another Federated Fund if the
shares were held for the applicable CDSC holding period (other than a money
market fund);
* purchased through investment professionals who did not receive advanced
sales payments;
* if, after you purchase Shares, you become disabled as defined by the IRS;
* if the Fund redeems your Shares and closes your account for not meeting
the minimum balance requirement;
* if your redemption is a required retirement plan distribution; or
* upon the death of the last surviving shareholder of the account.
TO KEEP THE SALES CHARGE AS LOW AS POSSIBLE, THE FUND REDEEMS YOUR SHARES IN
THIS ORDER:
* Shares that are not subject to a CDSC; and
* Shares held the longest (to determine the number of years your Shares have
been held, include the time you held shares of other Federated Funds that have
been exchanged for Shares of this Fund).
The CDSC is then calculated using the share price at the time of purchase or
redemption, whichever is lower.
How is the Fund Sold?
The Fund offers three share classes: Class A Shares, Class B Shares and Class C
Shares, each representing interests in a single portfolio of securities.
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to investors who wish to spread their investments beyond the
United States and are prepared to accept the particular risks associated with
these investments, directly or through investment professionals.
When the Distributor receives marketing fees and sales charges, it may pay some
or all of them to investment professionals. The Distributor and its affiliates
may pay out of their assets other amounts (including items of material value) to
investment professionals for marketing and servicing Shares. The Distributor is
a subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Class B and Class C Shares. Because these
Shares pay marketing fees on an ongoing basis, your investment cost may be
higher over time than other shares with different sales charges and marketing
fees.
How to Purchase Shares
You may purchase Shares through an investment professional, directly from the
Fund, or through an exchange from another Federated Fund. The Fund reserves the
right to reject any request to purchase or exchange Shares.
Where the Fund offers more than one share class and you do not specify the class
choice on your New Account Form or form of payment (e.g., Federal Reserve wire
or check) you automatically will receive Class A Shares.
THROUGH AN INVESTMENT PROFESSIONAL
* Establish an account with the investment professional; and
* Submit your purchase order to the investment professional before the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will receive
the next calculated NAV if the investment professional forwards the order to the
Fund on the same day and the Fund receives payment within three business days.
You will become the owner of Shares and receive dividends when the Fund receives
your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
* Establish your account with the Fund by submitting a completed New
Account Form; and
* Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares and your Shares will be priced at the next
calculated NAV after the Fund receives your wire or your check. If your check
does not clear, your purchase will be canceled and you could be liable for any
losses or fees incurred by the Fund or Federated Shareholder Services Company,
the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the next calculated NAV after the Fund receives
the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).
THROUGH AN EXCHANGE
You may purchase Shares through an exchange from the same Share class of another
Federated Fund. You must meet the minimum initial investment requirement for
purchasing Shares and both accounts must have identical registrations.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program
section of the New Account Form or by contacting the Fund or your investment
professional.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
RETIREMENT INVESTMENTS
You may purchase Shares as retirement investments (such as qualified plans and
IRAs or transfer or rollover of assets). Call your investment professional or
the Fund for information on retirement investments. We suggest that you discuss
retirement investments with your tax adviser. You may be subject to an annual
IRA account fee.
How to Redeem and Exchange Shares
You should redeem or exchange Shares:
* through an investment professional if you purchased Shares through an
investment professional; or
* directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption or exchange request to your investment professional by
the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). The
redemption amount you will receive is based upon the next calculated NAV after
the Fund receives the order from your investment professional.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem or exchange Shares by calling the Fund at 1-800-341-7400 once you
have completed the appropriate authorization form for telephone transactions. If
you call before the end of regular trading on the NYSE (normally 4:00 p.m.
Eastern time) you will receive a redemption amount based on that day's NAV.
BY MAIL
You may redeem or exchange Shares by mailing a written request to the Fund.
You will receive a redemption amount based on the next calculated NAV after the
Fund receives your written request in proper form.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
* Fund Name and Share Class, account number and account registration;
* amount to be redeemed or exchanged;
* signatures of all shareholders exactly as registered; and
* IF EXCHANGING, the Fund Name and Share Class, account number and account
registration into which you are exchanging.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES
Signatures must be guaranteed if:
* your redemption will be sent to an address other than the address of
record;
* your redemption will be sent to an address of record that was changed
within the last 30 days;
* a redemption is payable to someone other than the shareholder(s) of
record; or
* IF EXCHANGING (TRANSFERRING) into another fund with a different shareholder
registration.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
* an electronic transfer to your account at a financial institution that is
an ACH member; or
* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
* to allow your purchase to clear;
* during periods of market volatility; or
* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
REDEMPTIONS FROM RETIREMENT ACCOUNTS
In the absence of your specific instructions, 10% of the value of your
redemption from a retirement account in the Fund may be withheld for taxes. This
withholding only applies to certain types of retirement accounts.
EXCHANGE PRIVILEGE
You may exchange Shares of the Fund into Shares of the same class of another
Federated Fund. To do this, you must:
* ensure that the account registrations are identical;
* meet any minimum initial investment requirements; and
* receive a prospectus for the fund into which you wish to exchange.
An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction.
The Fund may modify or terminate the exchange privilege at any time. The Fund's
management or investment adviser may determine from the amount, frequency and
pattern of exchanges that a shareholder is engaged in excessive trading that is
detrimental to the Fund and other shareholders. If this occurs, the Fund may
terminate the availability of exchanges to that shareholder and may bar that
shareholder from purchasing other Federated Funds.
SYSTEMATIC WITHDRAWAL/EXCHANGE PROGRAM
You may automatically redeem or exchange Shares in a minimum amount of $100 on a
regular basis. To participate in this program, complete the appropriate section
of the New Account Form or an Account Service Options Form or contact your
investment professional or the Fund. Your account value must meet the minimum
initial investment amount at the time the program is established. This program
may reduce, and eventually deplete, your account. Payments should not be
considered yield or income. Generally, it is not advisable to continue to
purchase Class A Shares subject to a sales charge while redeeming Shares using
this program.
SYSTEMATIC WITHDRAWAL PROGRAM (SWP) ON CLASS B SHARES
YOU WILL NOT BE CHARGED A CDSC ON SWP REDEMPTIONS IF:
* you redeem 12% or less of your account value in a single year;
* you reinvest all dividends and capital gains distributions; and
* your account has at least a $10,000 balance when you establish the SWP. (You
cannot aggregate multiple Class B Share accounts to meet this minimum balance.)
You will be subject to a CDSC on redemption amounts that exceed the 12% annual
limit. In measuring the redemption percentage, your account is valued when you
establish the SWP and then annually at calendar year-end. You can redeem
monthly, quarterly, or semi-annually.
For SWP accounts established prior to April 1, 1999, your account must be at
least one year old in order to be eligible for the waiver of the CDSC.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming or exchanging
Shares represented by certificates previously issued by the Fund, you must
return the certificates with your written redemption or exchange request. For
your protection, send your certificates by registered or certified mail, but do
not endorse them.
Account and Share Information
CONFIRMATIONS AND ACCOUNT STATEMENTS
You will receive confirmation of purchases, redemptions and exchanges (except
for systematic transactions). In addition, you will receive periodic statements
reporting all account activity, including systematic transactions, dividends and
capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares and pays any dividends annually to shareholders. Dividends are
paid to all shareholders invested in the Fund on the record date. The record
date is the date on which a shareholder must officially own Shares in order to
earn a dividend.
In addition, the Fund pays any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
If you purchase Shares just before a Fund declares a dividend or capital gain
distribution, you will pay the full price for the Shares and then receive a
portion of the price back in the form of a taxable distribution, whether or not
you reinvest the distribution in Shares. Therefore, you should consider the tax
implications of purchasing Shares shortly before the Fund declares a dividend or
capital gain. Contact your investment professional or the Fund for information
concerning when dividends and capital gains will be paid.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, non- retirement
accounts may be closed if redemptions or exchanges cause the account balance to
fall below the minimum initial investment amount. Before an account is closed,
you will be notified and allowed 30 days to purchase additional Shares to meet
the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.
Fund distributions are expected to be primarily capital gains. Redemptions and
exchanges are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
Who Manages the Fund?
The Board of Directors
governs the Fund. The Board
selects and oversees the Adviser, Federated Global Investment Management
Corp. The Adviser manages the Fund's assets, including buying and selling
portfolio securities. The Adviser's address is 175 Water Street, New York,
NY 10038-4965.
The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which total approximately $125 billion in assets as
of December 31, 1999. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.
THE FUND'S PORTFOLIO MANAGERS AND INVESTMENT ANALYSTS ARE:
ROBERT M. KOWIT
Robert M. Kowit has been the Fund's Portfolio Manager since December 1995.
Mr. Kowit joined Federated in 1995 as a Senior Portfolio Manager and a Vice
President of the Fund's Adviser. Mr. Kowit served as a Managing Partner of
Copernicus Global Asset Management from January 1995 through October 1995.
From 1990 to 1994, he served as Senior Vice President/Portfolio Manager of
International Fixed Income and Foreign Exchange for John Hancock Advisers.
Mr. Kowit received his M.B.A. from Iona College with a concentration in
finance.
MICHEAL W. CASEY, PH.D.
Micheal W. Casey, Ph.D. has been the Fund's Portfolio Manager since
January 1997. Mr. Casey joined Federated in 1996 as a Senior Investment
Analyst and an Assistant Vice President. Mr. Casey currently serves as a
Portfolio Manager and has been a Vice President of the Adviser since 1998.
Mr. Casey served as an International Economist and Portfolio Strategist
for Maria Fiorini Ramirez Inc. from 1990 to 1996. Mr. Casey earned a Ph.D.
concentrating in economics from The New School for Social Research and a
M.Sc. from the London School of Economics.
HENRY A. FRANTZEN
Henry A. Frantzen has been the Adviser's Chief Investment Officer since
December 1995. Mr. Frantzen joined Federated in 1995 as an Executive Vice
President of the Fund's Adviser and has overseen the operations of the
Adviser since its formation. Mr. Frantzen served as Chief Investment
Officer of international equities at Brown Brothers Harriman & Co. from
1992-1995. Mr. Frantzen earned his bachelors degree in Business
Administration from the University of North Dakota.
ADVISER FEES
The Adviser receives an annual investment adviser fee of 0.75% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years, or since inception, if the life of
the Fund is shorter. Some of the information is presented on a per share basis.
Total returns represent the rate an investor would have earned (or lost) on an
investment in the Fund, assuming reinvestment of any dividends and capital
gains.
This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights-Class A Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30 1999 1 1998
1997 1996 1995
<S> <C> <C>
<C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $11.22 $10.65
$11.92 $11.38 $10.52
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.55 2 0.52 2 0.63
2 0.74 2 0.79
Net realized and
unrealized gain (loss) on
investments and
foreign currency
transactions (1.63) 0.53
(1.07) 0.67 0.84
TOTAL FROM
INVESTMENT OPERATIONS (1.08) 1.05
(0.44) 1.41 1.63
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.46) (0.48)
(0.83) (0.87) (0.77)
NET ASSET VALUE, END OF
PERIOD $ 9.68 $11.22
$10.65 $11.92 $11.38
TOTAL RETURN 3 (9.87%) 10.22%
(3.70%) 13.27% 16.12%
RATIOS TO AVERAGE NET
ASSETS:
Expense 1.46% 1.33%
1.30% 1.30% 1.30%
Net investment income 5.19% 5.04%
5.83% 6.58% 6.79%
Expense
waiver/reimbursement 4 0.23% 0.24%
0.26% 0.34% 0.40%
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $115,155 $138,567 $180,415
$200,758 $173,905
Portfolio turnover 52% 37%
67% 92% 41%
</TABLE>
1 For the year ended November 30, 1999, the Fund was audited by Ernst & Young
LLP. Each of the previous years was audited by other auditors.
2 Per share information presented is based upon the monthly average number of
shares outstanding.
3 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
4 This voluntary expense decrease is reflected in both the expense and the net
investment income ratios shown above.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated November 30, 1999, which can be obtained free of charge.
Financial Highlights-Class B Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30 1999 1 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $11.19 $10.62 $11.89
$11.36 $10.51
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.47 2 0.46 2 0.56 2
0.84 2 0.77
Net realized and
unrealized gain (loss) on
investments and foreign
currency transactions (1.62) 0.51 (1.08)
0.48 0.78
TOTAL FROM INVESTMENT
OPERATIONS (1.15) 0.97 (0.52)
1.32 1.55
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.38) (0.40) (0.75)
(0.79) (0.70)
NET ASSET VALUE, END OF
PERIOD $ 9.66 $11.19 $10.62
$11.89 $11.36
TOTAL RETURN 3 (10.47%) 9.45% (4.43%)
12.41% 15.28%
RATIOS TO AVERAGE NET
ASSETS:
Expense 2.18% 2.05% 2.06%
2.11% 2.10%
Net investment income 4.47% 4.31% 5.06%
5.76% 5.76%
Expense
waiver/reimbursement 4 0.01% 0.02% -
0.02% 0.10%
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $10,702 $13,174 $12,521
$8,641 $1,123
Portfolio turnover 52% 37%
67% 92% 41%
</TABLE>
1 For the year ended November 30, 1999, the Fund was audited by Ernst & Young
LLP. Each of the previous years was audited by other auditors.
2 Per share information presented is based upon the monthly average number of
shares outstanding.
3 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
4 This voluntary expense decrease is reflected in both the expense and the net
investment income ratios shown above.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated November 30, 1999, which can be obtained free of charge.
Financial Highlights-Class C Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30 1999 1 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $11.20 $10.63 $11.89
$11.36 $10.48
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.47 2 0.46 2 0.56 2
0.67 2 0.60
Net realized and
unrealized gain (loss) on
investments and foreign
currency transactions (1.62) 0.51 (1.08)
0.64 0.95
TOTAL FROM INVESTMENT
OPERATIONS (1.15) 0.97 (0.52)
1.31 1.55
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.38) (0.40) (0.74)
(0.78) (0.67)
NET ASSET VALUE, END OF
PERIOD $ 9.67 $11.20 $10.63
$11.89 $11.36
TOTAL RETURN 3 (10.46%) 9.42% (4.42%)
12.31% 15.32%
RATIOS TO AVERAGE NET
ASSETS:
Expense 2.18% 2.05% 2.06%
2.09% 2.06%
Net investment income 4.47% 4.32% 5.10%
5.80% 5.96%
Expense
waiver/reimbursement 4 0.01% 0.02% -
0.04% 0.14%
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $4,281 $6,654 $8,285
$14,976 $12,015
Portfolio turnover 52% 37% 67%
92% 41%
</TABLE>
1 For the year ended November 30, 1999, the Fund was audited by Ernst & Young
LLP. Each of the previous years was audited by other auditors.
2 Per share information presented is based upon the monthly average number of
shares outstanding.
3 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
4 This voluntary expense decrease is reflected in both the expense and the net
investment income ratios shown above.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated November 30, 1999, which can be obtained free of charge.
[Graphic]
Federated
World-Class Investment Manager
PROSPECTUS
Federated International Income Fund
A Portfolio of Federated International Series, Inc.
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
MARCH 31, 2000
A Statement of Additional Information (SAI) dated March 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Annual and
Semi-Annual Reports to shareholders as they become available. The Annual
Report's Management Discussion and Analysis discusses market conditions and
investment strategies that significantly affected the Fund's performance during
its last fiscal year. To obtain the SAI, Annual Report, Semi-Annual Report and
other information without charge, and make inquiries, call your investment
professional or the Fund at 1-800-341- 7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.
[Graphic]
Federated
Federated International Income Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Investment Company Act File No. 811-3984
Cusip 46031P100
(Effective April 3, 2000, the Cusip number will be 31420G408)
Cusip 46031P506
(Effective April 3, 2000, the Cusip number will be 31420G507)
Cusip 46031P209
(Effective April 3, 2000, the Cusip number will be 31420G606)
G00494-02-ABC (3/00) 513050
[Graphic]
STATEMENT OF ADDITIONAL INFORMATION
Federated International Income Fund
A Portfolio of Federated International Series, Inc.
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Federated International Income Fund
(Fund), dated March 31, 2000.
This SAI incorporates by reference the Fund's Annual Report. Obtain the
prospectus or the Annual Report without charge by calling 1-800-341-7400.
MARCH 31, 2000
[Graphic]
Federated
World-Class Investment Manager
Federated International Income Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
1051602B (3/00)
[Graphic]
CONTENTS
How is the Fund Organized? 1
Securities in Which the Fund Invests 1
What Do Shares Cost? 6
How is the Fund Sold? 7
Exchanging Securities for Shares 8
Subaccounting Services 8
Redemption in Kind 8
Account and Share Information 9
Tax Information 9
Who Manages and Provides Services to the Fund? 10
How Does the Fund Measure Performance? 13
Who is Federated Investors, Inc.? 15
Financial Information 16
Investment Ratings 16
Addresses 18
How is the Fund Organized?
The Fund is a non-diversified portfolio of Federated International Series,
Inc. (Corporation). The Corporation is an open-end, management investment
company that was established under the laws of the State of Maryland on
February 11, 1991. The Corporation may offer separate series of shares
representing interests in separate portfolios of securities. The
Corporation changed its name from FT Series, Inc., to International Series,
Inc. on March 15, 1994 and from International Series, Inc. to Federated
International Series, Inc. on March 31, 2000.
The Board of Directors (the "Board") has established three classes of shares of
the Fund, known as Class A Shares, Class B Shares, and Class C Shares (Shares).
This SAI relates to all classes of the above-mentioned Shares.
The investment objective, the principal investment policies and the main risks
of the Fund are described in the Prospectus. This SAI contains supplemental
information about those policies and risks and the types of securities that the
Fund's adviser can select for the Fund.
Securities in Which the Fund Invests
In pursuing its investment strategy, the Fund may invest in the following
additional securities, in addition to those described in the Prospectus, for any
purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
Yields on short-, intermediate-, and long-term securities are dependent on a
variety of factors, including the general conditions of the money, bond and
foreign exchange markets, the size of a particular offering, the maturing of the
obligation, and the rating of the issue. Debt securities with longer maturities
are generally subject to potentially greater capital appreciation and
depreciation than obligations with shorter maturities and lower yields.
The following describes additional types of fixed income securities in which the
Fund invests.
CORPORATE DEBT SECURITIES
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. The Fund may also purchase interests in bank loans to
companies. The credit risks of corporate debt securities vary widely among
issuers. The credit risk of an issuer's debt security may also vary based on its
priority for repayment. For example, higher ranking (senior) debt securities
have a higher priority than lower ranking (subordinated) securities. This means
that the issuer might not make payments on subordinated securities while
continuing to make payments on senior securities. In addition, in the event of
bankruptcy, holders of senior securities may receive amounts otherwise payable
to the holders of subordinated securities. Some subordinated securities, such as
trust preferred and capital securities notes, also permit the issuer to defer
payments under certain circumstances. For example, insurance companies issue
securities known as surplus notes that permit the insurance company to defer any
payment that would reduce its capital below regulatory requirements.
MORTGAGE BACKED SECURITIES
Mortgage backed securities represent interests in pools of mortgages. The
mortgages that comprise a pool normally have similar interest rates, maturities
and other terms. Mortgages may have fixed or adjustable interest rates.
Interests in pools of adjustable rate mortgages are known as ARMs.
Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. An issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer deducts
its fees and expenses and passes the balance of the payments onto the
certificate holders once a month. Holders of pass-through certificates receive a
pro rata share of all payments and prepayments from the underlying mortgages. As
a result, the holders assume all the prepayment risks of the underlying
mortgages.
ASSET BACKED SECURITIES
Asset backed securities are payable from pools of obligations other than
mortgages. Most asset backed securities involve consumer or commercial debts
with maturities of less than ten years. However, almost any type of fixed income
assets (including other fixed income securities) may be used to create an asset
backed security. Asset backed securities may take the form of commercial paper,
notes, or pass-through certificates. Asset backed securities may also resemble
some types of CMOs, such as Floaters, Inverse Floaters, IOs and POs.
Historically, borrowers are more likely to refinance their mortgage than any
other type of consumer or commercial debt. In addition, some asset backed
securities use prepayments to buy additional assets, rather than paying off the
securities. Therefore, while asset backed securities may have some prepayment
risks, they generally do not present the same degree of risk as mortgage backed
securities.
ZERO COUPON SECURITIES
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below the
amount payable at maturity. The difference between the purchase price and the
amount paid at maturity represents interest on the zero coupon security. An
investor must wait until maturity to receive interest and principal, which
increases the market and credit risks of a zero coupon security.
There are many forms of zero coupon securities. Some are issued at a discount
and are referred to as zero coupon or capital appreciation bonds. Others are
created from interest bearing bonds by separating the right to receive the
bond's coupon payments from the right to receive the bond's principal due at
maturity, a process known as coupon stripping. Treasury STRIPs, IOs and POs are
the most common forms of stripped zero coupon securities. In addition, some
securities give the issuer the option to deliver additional securities in place
of cash interest payments, thereby increasing the amount payable at maturity.
These are referred to as pay-in- kind or PIK securities.
BANK INSTRUMENTS
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit
and banker's acceptances. Yankee instruments are denominated in
U.S. dollars and issued by U.S. branches of foreign banks. Eurodollar
instruments are denominated in U.S. dollars and issued by non-
U.S. branches of U.S. or foreign banks.
DERIVATIVE CONTRACTS
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty.
The Fund may trade in the following types of derivative contracts:
FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified price,
date, and time. Entering into a contract to buy an underlying asset is commonly
referred to as buying a contract or holding a long position in the asset.
Entering into a contract to sell an underlying asset is commonly referred to as
selling a contract or holding a short position in the asset. Futures contracts
are considered to be commodity contracts. Futures contracts traded OTC are
frequently referred to as forward contracts.
The Fund can buy or sell futures contracts on portfolio securities or indexes
and engage in foreign currency forward contracts.
OPTIONS
Options are rights to buy or sell an underlying asset for a specified price (the
exercise price) during, or at the end of, a specified period. A call option
gives the holder (buyer) the right to buy the underlying asset from the seller
(writer) of the option. A put option gives the holder the right to sell the
underlying asset to the writer of the option. The writer of the option receives
a payment, or premium, from the buyer, which the writer keeps regardless of
whether the buyer uses (or exercises) the option.
The Fund may:
Buy call options on foreign currencies, foreign currency futures, portfolio
securities and securities indices in anticipation of an increase in the value of
the underlying asset.
Buy put options on foreign currencies, foreign currency futures, portfolio
securities and securities indices in anticipation of a decrease in the value of
the underlying asset.
When the Fund writes options on futures contracts, it will be subject to margin
requirements similar to those applied to futures contracts.
HYBRID INSTRUMENTS
Hybrid instruments combine elements of derivative contracts with those of
another security (typically a fixed income security). All or a portion of the
interest or principal payable on a hybrid security is determined by reference to
changes in the price of an underlying asset or by reference to another benchmark
(such as interest rates, currency exchange rates or indices). Hybrid instruments
also include convertible securities with conversion terms related to an
underlying asset or benchmark.
The risks of investing in hybrid instruments reflect a combination of the risks
of investing in securities, options, futures and currencies, and depend upon the
terms of the instrument. Thus, an investment in a hybrid instrument may entail
significant risks in addition to those associated with traditional fixed income
or convertible securities. Hybrid instruments are also potentially more volatile
and carry greater market risks than traditional instruments. Moreover, depending
on the structure of the particular hybrid, it may expose the Fund to leverage
risks or carry liquidity risks.
SPECIAL TRANSACTIONS
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.
DELAYED DELIVERY TRANSACTIONS
Delayed delivery transactions, including when-issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, when- issued transactions create market risks
for the Fund. When-issued transactions also involve credit risks in the event of
a counterparty default.
SECURITIES LENDING
The Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from the
borrower as collateral. The borrower must furnish additional collateral if the
market value of the loaned securities increases. Also, the borrower must pay the
Fund the equivalent of any dividends or interest received on the loaned
securities.
The Fund will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund must pay interest to the
borrower for the use of cash collateral.
Loans are subject to termination at the option of the Fund or the borrower. The
Fund will not have the right to vote on securities while they are on loan, but
it will terminate a loan in anticipation of any important vote. The Fund may pay
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash collateral to a securities
lending agent or broker.
Securities lending activities are subject to market risks and credit risks.
HEDGING TRANSACTIONS
Hedging transactions are intended to reduce specific risks. For example, to
protect the Fund against circumstances that would normally cause the Fund's
portfolio securities to decline in value, the Fund may buy or sell a derivative
contract that would normally increase in value under the same circumstances. The
Fund may attempt to lower the cost of hedging by entering into transactions that
provide only limited protection, including transactions that: (1) hedge only a
portion of its portfolio; (2) use derivatives contracts that cover a narrow
range of circumstances; or (3) involve the sale of derivatives contracts with
different terms. Consequently, hedging transactions will not eliminate risk even
if they work as intended. In addition, hedging strategies are not always
successful, and could result in increased expenses and losses to the Fund.
INTER-FUND BORROWING AND LENDING ARRANGEMENTS
The SEC has granted an exemption that permits the Fund and all other funds
advised by subsidiaries of Federated Investors, Inc. ("Federated funds") to lend
and borrow money for certain temporary purposes directly to and from other
Federated funds. Participation in this inter-fund lending program is voluntary
or both borrowing and lending funds, and an inter-fund loan is only made if it
benefits each participating fund. Federated administers the program according to
procedures approved by the Fund's Board, and the Board monitors the operation of
the program. Any inter-fund loan must comply with certain conditions set out in
the exemption, which are designed to assure fairness and protect all
participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter- fund loans may
be made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the "Repo Rate") AND more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term borrowings
(the "Bank Loan Rate"), as determined by the Board. The interest rate imposed on
inter-fund loans is the average of the Repo Rate and the Bank Loan Rate."
ASSET COVERAGE
In order to secure its obligations in connection with derivatives contracts or
special transactions, the Fund will either own the underlying assets, enter into
an offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to secure
such obligations entering into an offsetting derivative contract or terminating
a special transaction. This may cause the Fund to miss favorable trading
opportunities or to realize losses on derivative contracts or special
transactions.
INVESTMENT RISKS
The following risks of investing in the Fund are in addition to those primary
risks disclosed in the Prospectus.
CALL RISKS
* Call risk is the possibility that an issuer may redeem a fixed income security
before maturity (a call) at a price below its current market price. An increase
in the likelihood of a call may reduce the security's price.
* If a fixed income security is called, the Fund may have to reinvest the
proceeds in other fixed income securities with lower interest rates, higher
credit risks, or other less favorable characteristics.
LIQUIDITY RISKS
* Trading opportunities are more limited for fixed income securities that have
not received any credit ratings, have received ratings below investment grade or
are not widely held. These features may make it more difficult to sell or buy a
security at a favorable price or time. Consequently, the Fund may have to accept
a lower price to sell a security, sell other securities to raise cash or give up
an investment opportunity, any of which could have a negative effect on the
Fund's performance. Infrequent trading may also lead to greater price
volatility.
* Liquidity risk also refers to the possibility that the Fund may not be able to
sell a security or close out a derivative contract when it wants to. If this
happens, the Fund will be required to continue to hold the security or keep the
position open, and the Fund could incur losses.
INVESTMENT LIMITATIONS
BORROWING MONEY AND ISSUING SENIOR SECURITIES
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the 1940 Act.
UNDERWRITING
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.
INVESTING IN REAL ESTATE
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.
INVESTING IN COMMODITIES
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
LENDING CASH OR SECURITIES
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.
CONCENTRATION OF INVESTMENTS
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.
THE ABOVE LIMITATIONS CANNOT BE CHANGED UNLESS AUTHORIZED BY THE "VOTE OF A
MAJORITY OF ITS OUTSTANDING VOTING SECURITIES," AS DEFINED BY THE INVESTMENT
COMPANY ACT OF 1940. THE FOLLOWING LIMITATIONS, HOWEVER, MAY BE CHANGED BY THE
BOARD WITHOUT SHAREHOLDER APPROVAL. SHAREHOLDERS WILL BE NOTIFIED BEFORE ANY
MATERIAL CHANGE IN THESE LIMITATIONS BECOMES EFFECTIVE.
CONCENTRATION OF INVESTMENTS
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 so 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. Foreign securities will not be excluded
from industry concentration limits. The investment of more than 25% of the value
of the Fund's total assets in any one industry will constitute "concentration."
In applying the Fund's concentration restriction: (a) utility companies will be
divided according to their services (for example, gas, gas transmission,
electric and telephone will be considered a separate industry); (b) 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 (c) asset-backed securities
will be classified according to the underlying assets securing such securities.
INVESTING IN COMMODITIES
As a matter of non-fundamental operating policy, for purposes of the commodities
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.
BUYING ON MARGIN
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.
PLEDGING ASSETS
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.
INVESTING IN RESTRICTED AND ILLIQUID SECURITIES
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 15% of the Fund's net assets.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment companies,
including securities of affiliated investment companies, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of the value of its total assets, the Fund will not purchase
securities of any one issuer (other than securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities) if as a
result more than 5% of the value of its total assets would be invested in the
securities of that issuer.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
The Fund did not borrow money or pledge securities in excess of 5% of the value
of its total assets during the last fiscal year and has no present intent to do
so in the coming fiscal year.
PORTFOLIO TURNOVER
Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities in its portfolio will be sold whenever the
Adviser believes it is appropriate to do so in light of the Fund's investment
objectives, without regard to the length of time a particular security may have
been held. The Adviser does not anticipate that portfolio turnover will result
in adverse tax consequences. For the fiscal years ended November 30, 1999 and
1998, the portfolio turnover rates were 52% and 37%, respectively.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:
* for equity securities, according to the last sale price in the market in which
they are primarily traded (either a national securities exchange or the
over-the-counter market), if available;
* in the absence of recorded sales for equity securities, according to the
mean between the last closing bid and asked prices;
* for fixed income securities, at the last sale price on a national securities
exchange, if available, otherwise, as determined by an independent pricing
service;
* futures contracts and options are generally valued at market values
established by the exchanges on which they are traded at the close of trading on
such exchanges. Options traded in the over-the-counter market are generally
valued according to the mean between the last bid and the last asked price for
the option as provided by an investment dealer or other financial institution
that deals in the option. The Board may determine in good faith that another
method of valuing such investments is necessary to appraise their fair market
value;
* for short-term obligations, according to the mean between bid and asked prices
as furnished by an independent pricing service, except that short- term
obligations with remaining maturities of less than 60 days at the time of
purchase may be valued at amortized cost or at fair market value as determined
in good faith by the Board; and
* for all other securities at fair value as determined in good faith by the
Board.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker/dealers or
other financial institutions that trade the securities.
TRADING IN FOREIGN SECURITIES
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange (NYSE). In computing its NAV, the Fund
values foreign securities at the latest closing price on the exchange on which
they are traded immediately prior to the closing of the NYSE. Certain foreign
currency exchange rates may also be determined at the latest rate prior to the
closing of the NYSE. Foreign securities quoted in foreign currencies are
translated into U.S. dollars at current rates. Occasionally, events that affect
these values and exchange rates may occur between the times at which they are
determined and the closing of the NYSE. If such events materially affect the
value of portfolio securities, these securities may be valued at their fair
value as determined in good faith by the Fund's Board, although the actual
calculation may be done by others.
What Do Shares Cost?
The Fund's net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of the Fund.
The NAV for each class of Shares may differ due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
REDUCING OR ELIMINATING THE FRONT-END SALES CHARGE
You can reduce or eliminate the applicable front-end sales charge, as follows:
QUANTITY DISCOUNTS
Larger purchases of the same Share class reduce or eliminate the sales charge
you pay. You can combine purchases of Shares made on the same day by you, your
spouse and your children under age 21. In addition, purchases made at one time
by a trustee or fiduciary for a single trust estate or a single fiduciary
account can be combined.
ACCUMULATED PURCHASES
If you make an additional purchase of Shares, you can count previous Share
purchases still invested in the Fund in calculating the applicable sales charge
on the additional purchase.
CONCURRENT PURCHASES
You can combine concurrent purchases of the same share class of two or more
Federated Funds in calculating the applicable sales charge.
LETTER OF INTENT (CLASS A SHARES)
You can sign a Letter of Intent committing to purchase a certain amount of the
same class of Shares within a 13-month period to combine such purchases in
calculating the sales charge. The Fund's custodian will hold Shares in escrow
equal to the maximum applicable sales charge. If you complete the Letter of
Intent, the Custodian will release the Shares in escrow to your account. If you
do not fulfill the Letter of Intent, the Custodian will redeem the appropriate
amount from the Shares held in escrow to pay the sales charges that were not
applied to your purchases.
REINVESTMENT PRIVILEGE
You may reinvest, within 120 days, your Share redemption proceeds at the next
determined NAV without any sales charge.
PURCHASES BY AFFILIATES OF THE FUND
The following individuals and their immediate family members may buy Shares at
NAV without any sales charge because there are nominal sales efforts associated
with their purchases:
* the Directors, employees and sales representatives of the Fund, the
Adviser, the Distributor and their affiliates;
* any associated person of an investment dealer who has a sales agreement
with the Distributor; and
* trusts, pension or profit-sharing plans for these individuals.
FEDERATED LIFE MEMBERS
Shareholders of the Fund known as "Federated Life Members" are exempt from
paying any front-end sales charge. These shareholders joined the Fund
originally:
* through the "Liberty Account," an account for Liberty Family of Funds
shareholders on February 28, 1987 (the Liberty Account and Liberty Family of
Funds are no longer marketed); or
* as Liberty Account shareholders by investing through an affinity group prior
to August 1, 1987.
REDUCING OR ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE
These reductions or eliminations are offered because: no sales commissions have
been advanced to the investment professional selling Shares; the shareholder has
already paid a Contingent Deferred Sales Charge (CDSC); or nominal sales efforts
are associated with the original purchase of Shares.
Upon notification to the Distributor or the Fund's transfer agent, no CDSC will
be imposed on redemptions:
* following the death or post-purchase disability, as defined in Section
72(m)(7) of the Internal Revenue Code of 1986, of the last surviving
shareholder;
* representing minimum required distributions from an Individual Retirement
Account or other retirement plan to a shareholder who has attained the age of
70-1/2;
* of Shares that represent a reinvestment within 120 days of a
previous redemption;
* of Shares held by the Directors, employees, and sales representatives of the
Fund, the Adviser, the Distributor and their affiliates; employees of any
investment professional that sells Shares according to a sales agreement with
the Distributor; and the immediate family members of the above persons;
* of Shares originally purchased through a bank trust department, a registered
investment adviser or retirement plans where the third-party administrator has
entered into certain arrangements with the Distributor or its affiliates, or any
other investment professional, to the extent that no payments were advanced for
purchases made through these entities; or
* which are involuntary redemptions processed by the Fund because the accounts
do not meet the minimum balance requirements.
TO KEEP THE SALES CHARGE AS LOW AS POSSIBLE, THE FUND REDEEMS YOUR SHARES IN
THIS ORDER:
* Shares that are not subject to a CDSC; and
* Shares held the longest (to determine the number of years your Shares have
been held, include the time you held shares of other Federated Funds that have
been exchanged for Shares of this Fund).
The CDSC is then calculated using the share price at the time of purchase or
redemption, whichever is lower.
CLASS B SHARES ONLY
* which are qualifying redemptions of Class B Shares under a Systematic
Withdrawal Program.
How is the Fund Sold?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis. The
Distributor pays the expenses of the distribution of Fund shares, including
advertising expenses and the costs of printing sales material and prospectuses
used to offer shares to the public. The Fund pays the expenses of preparing and
printing amendments to its registration statements and prospectuses (other than
those necessitated by the activities of the Distributor) and of sending
prospectuses to existing shareholders. In the SAI section "Fees Paid by the Fund
for Services," there is disclosed, as applicable, the underwriting commissions
the Distributor received in connection with the offering of the Fund's shares,
the net underwriting discounts and commissions the Distributor retained after
allowances to investment professionals, and the amounts the Distributor received
in connection with redemptions or repurchases of shares for the last three
fiscal years of the Fund. The Distributor may be entitled to reimbursement under
the Rule 12b-1 Plan, as discussed below. Except as noted, the Distributor
received no other compensation from the Fund for acting as underwriter.
FRONT-END SALES CHARGE REALLOWANCES
The Distributor receives a front-end sales charge on certain Share sales. The
Distributor generally pays up to 90% (and as much as 100%) of this charge to
investment professionals for sales and/or administrative services. Any payments
to investment professionals in excess of 90% of the front-end sales charge are
considered supplemental payments. The Distributor retains any portion not paid
to an investment professional.
RULE 12B-1 PLAN (CLASS B AND CLASS C SHARES)
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets. The Fund accrues 12b-1 fees daily
from the Plan and pays them periodically during the fiscal year. The amounts
accrued, retained by the Distributor and paid to Broker/Dealers are disclosed in
the SAI section "Fees Paid by the Fund for Services."
The Fund may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.
Federated and its subsidiaries may benefit from arrangements where the Rule
12b-1 Plan fees related to Class B Shares may be paid to third parties who have
advanced commissions to investment professionals.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals (such as broker/dealers or banks) may be paid
significant amounts of fees out of the assets of the Distributor and/or
Federated Shareholder Services Company (these fees do not come out of Fund
assets). The Distributor and/or Federated Shareholder Services Company may be
reimbursed by the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related
and/or shareholder services, such as advertising, providing incentives to their
sales personnel, sponsoring other activities intended to promote sales, and
maintaining shareholder accounts. These payments may be based upon such factors
as the amount of Shares the investment professional sells or may sell; the
amount of client assets invested; and/or the type and nature of sales or
marketing support furnished by the investment professional.
When an investment professional's customer purchases shares, the investment
professional may receive an amount up to 5.50% and 1.00%, respectively, of the
NAV of Class B and C Shares.
In addition, the Distributor may pay investment professionals 0.25% of the
purchase price of $1 million or more of Class A Shares that its customer has not
redeemed over the first year.
CLASS A SHARES
Investment professionals purchasing Class A Shares for their customers are
eligible to receive an advance payment from the Distributor based on the
following breakpoints:
<TABLE>
<CAPTION>
ADVANCE PAYMENTS
AS A PERCENTAGE OF
AMOUNT PUBLIC OFFERING PRICE
<S> <C>
First $1 - $5 million 0.75% Next $5 - $20 million 0.50% Over $20 million 0.25%
</TABLE>
For accounts with assets over $1 million, the dealer advance payments reset
annually to the first breakpoint on the anniversary of the first purchase.
Class A Share purchases under this program may be made by Letter of Intent or by
combining concurrent purchases. The above advance payments will be paid only on
those purchases that were not previously subject to a front- end sales charge
and dealer advance payments. Certain retirement accounts may not be eligible for
this program.
A contingent deferred sales charge of 0.75% of the redemption amount applies to
Class A Shares redeemed up to 24 months after purchase. The CDSC does not apply
under certain investment programs where the investment professional does not
receive an advance payment on the transaction including, but not limited to,
trust accounts and wrap programs where the investor pays an account level fee
for investment management.
Exchanging Securities for Shares
You may contact the Distributor to request a purchase of Shares in exchange for
securities you own. The Fund reserves the right to determine whether to accept
your securities and the minimum market value to accept. The Fund will value your
securities in the same manner as it values its assets. This exchange is treated
as a sale of your securities for federal tax purposes.
Subaccounting Services
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the 1940 Act,
the Fund is obligated to pay Share redemptions to any one shareholder in cash
only up to the lesser of $250,000 or 1% of the net assets represented by such
Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
Account and Share Information
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Director elections and
other matters submitted to shareholders for vote.
All Shares of the Fund have equal voting rights, except that in matters
affecting only a particular class, only Shares of that class are entitled to
vote.
Directors may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Fund's outstanding shares.
As of March 6, 2000, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Class A Shares: Lacross Co., Lacrosse,
Wisconsin, owned approximately 2,074,970 shares (18.33%) and Jatco, Minneapolis,
Minnesota, owned approximately 4,273,819 shares (37.76%).
As of March 6, 2000, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Class C Shares: Edward Jones & Co., Maryland
Heights, Missouri, owned approximately 31,854 shares (7.65%) and Merrill Lynch
Pierce Fenner & Smith (for the sole benefit of its customers) owned
approximately 79,344 shares (19.05%).
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
Tax Information
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Corporation's other portfolios will be separate from those realized by the Fund.
FOREIGN INVESTMENTS
If the Fund purchases foreign securities, their investment income may be subject
to foreign withholding or other taxes that could reduce the return on these
securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign taxes to which the Fund
would be subject. The effective rate of foreign tax cannot be predicted since
the amount of Fund assets to be invested within various countries is uncertain.
However, the Fund intends to operate so as to qualify for treaty-reduced tax
rates when applicable.
Distributions from a Fund may be based on estimates of book income for the year.
Book income generally consists solely of the coupon income generated by the
portfolio, whereas tax-basis income includes gains or losses attributable to
currency fluctuation. Due to differences in the book and tax treatment of
fixed-income securities denominated in foreign currencies, it is difficult to
project currency effects on an interim basis. Therefore, to the extent that
currency fluctuations cannot be anticipated, a portion of distributions to
shareholders could later be designated as a return of capital, rather than
income, for income tax purposes, which may be of particular concern to simple
trusts.
If the Fund invests in the stock of certain foreign corporations, they may
constitute Passive Foreign Investment Companies (PFIC), and the Fund may be
subject to Federal income taxes upon disposition of PFIC investments.
If more than 50% of the value of the Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund intends to
qualify for certain Code stipulations that would allow shareholders to claim a
foreign tax credit or deduction on their U.S. income tax returns. The Code may
limit a shareholder's ability to claim a foreign tax credit. Shareholders who
elect to deduct their portion of the Fund's foreign taxes rather than take the
foreign tax credit must itemize deductions on their income tax returns.
Who Manages and Provides Services to the Fund?
BOARD OF DIRECTORS
The Board is responsible for managing the Corporation's business affairs and for
exercising all the Corporation's powers except those reserved for the
shareholders. Information about each Board member is provided below and includes
each person's: name, address, birth date, present position(s) held with the
Corporation, principal occupations for the past five years and positions held
prior to the past five years, total compensation received as a Director from the
Corporation for its most recent fiscal year, and the total compensation received
from the Federated Fund Complex for the most recent calendar year. The
Corporation is comprised of two funds and the Federated Fund Complex is
comprised of 43 investment companies, whose investment advisers are affiliated
with the Fund's Adviser.
As of March 6, 2000, the Fund's Board and Officers as a group owned less than 1%
of the Fund's outstanding Class A, Class B, and Class C Shares.
<TABLE>
<CAPTION>
NAME
Total
BIRTH DATE
Aggregate Compensation
ADDRESS PRINCIPAL OCCUPATIONS
Compensation From Corporation
POSITION WITH CORPORATION FOR PAST 5 YEARS From
Corporation and Fund Complex
<S> <C>
<C> <C>
JOHN F. DONAHUE* Chief Executive
Officer $0 $0 for the Corporation and
Birth Date: July 28, 1924 and Director or Trustee
of 43 other investment
Federated Investors Tower the Federated
Fund companies in the Fund
1001 Liberty Avenue Complex; Chairman
and Complex
Pittsburgh, PA Director,
Federated
CHAIRMAN AND DIRECTOR Investors, Inc.; Chairman,
Federated
Investment
Management Company,
Federated
Global
Investment
Management
Corp. and
Passport
Research, Ltd.; formerly:
Trustee,
Federated
Investment
Management
Company and Chairman
and
Director,
Federated
Investment Counseling.
THOMAS G. BIGLEY Director or Trustee of the
$1,254.34 $116,760.63 for the
Birth Date: February 3, 1934 Federated Fund
Complex; Corporation and
15 Old Timber Trail Director, Member
of 43 other investment
Pittsburgh, PA Executive
Committee, companies in the Fund
DIRECTOR Children's Hospital
of Complex
Pittsburgh; formerly:
Senior Partner, Ernst
&
Young LLP; Director,
MED
3000 Group, Inc.;
Director, Member
of
Executive Committee,
University of Pittsburgh.
JOHN T. CONROY, JR. Director or Trustee of the
$1,379.98 $128,455.37 for the
Birth Date: June 23, 1937 Federated Fund
Complex; Corporation and
Wood/IPC Commercial Dept. President,
Investment 43 other investment
John R. Wood Associates, Inc. Realtors Properties
Corporation; companies in the Fund
3255 Tamiami Trail North Senior Vice
President, Complex
Naples, FL John R. Wood
and
DIRECTOR 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.
NICHOLAS P. CONSTANTAKIS Director or Trustee of
the $0 $73,191.21 for the
Birth Date: September 3, 1939 Federated Fund
Complex; Corporation and
175 Woodshire Drive Director, Michael
Baker 37 other investment
Pittsburgh, PA Corporation
(engineering, companies in the Fund
DIRECTOR construction,
operations Complex
and technical services);
formerly: Partner,
Andersen Worldwide SC.
JOHN F. CUNNINGHAM++ Director or Trustee of
some $0 $93,190.48 for the
Birth Date: March 5, 1943 of the Federated
Fund Corporation and
353 El Brillo Way Complex;
Chairman, 37 other investment
Palm Beach, FL President and
Chief companies in the Fund
DIRECTOR Executive Officer,
Complex
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.
J. CHRISTOPHER DONAHUE President or
Executive $0 $0 for the Corporation and
Birth Date: April 11, 1949 Vice President of
the 30 other investment
Federated Investors Tower Federated Fund
Complex; companies in the Fund
1001 Liberty Avenue Director or Trustee of
some Complex
Pittsburgh, PA of the Funds in
the
EXECUTIVE VICE PRESIDENT Federated Fund Complex;
AND DIRECTOR President, Chief
Executive
Officer and Director,
Federated Investors, Inc.;
President, Chief
Executive
Officer and Trustee,
Federated
Investment
Management Company;
Trustee,
Federated
Investment Counseling;
President, Chief
Executive
Officer and Director,
Federated
Global
Investment
Management
Corp.; President and
Chief
Executive Officer,
Passport Research, Ltd.;
Trustee,
Federated
Shareholder
Services
Company; Director,
Federated
Services
Company; formerly:
President,
Federated
Investment Counseling.
LAWRENCE D. ELLIS, M.D.* Director or Trustee of the
$1,254.34 $116,760.63 for the
Birth Date: October 11, 1932 Federated Fund
Complex; Corporation and
3471 Fifth Avenue Professor of
Medicine, 43 other investment
Suite 1111 University of
Pittsburgh; companies in the Fund
Pittsburgh, PA Medical
Director, Complex
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.
<CAPTION>
NAME
Total
BIRTH DATE
Aggregate Compensation
ADDRESS PRINCIPAL OCCUPATIONS
Compensation From Corporation
POSITION WITH CORPORATION FOR PAST 5 YEARS From
Corporation and Fund Complex
<S> <C>
<C> <C>
PETER E. MADDEN Director or Trustee of the
$1,175.14 $109,153.60 for the
Birth Date: March 16, 1942 Federated Fund
Complex; Corporation and
One Royal Palm Way 100 formerly:
Representative, 43 other investment
Royal Palm Way Commonwealth
of companies in the Fund
Palm Beach, FL Massachusetts
General Complex
DIRECTOR Court; President,
State
Street Bank and
Trust
Company and State
Street
Corporation. Retired:
Director, VISA USA and
VISA
International;
Chairman
and Director,
Massachusetts
Bankers
Association; Director,
Depository
Trust
Corporation.
CHARLES F. MANSFIELD, JR.++ Director or Trustee of some
$1,318.21 $102,573.91 for the
Birth Date: April 10, 1945 of the Federated
Funds; Corporation and
80 South Road Management
Consultant. 40 other investment
Westhampton Beach, NY Previous Positions:
Chief companies in the Fund
DIRECTOR Executive Officer,
PBTC Complex
International Bank;
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.
JOHN E. MURRAY, JR., J.D., S.J.D. Director or Trustee of the
$1,379.98 $128,455.37 for the
Birth Date: December 20, 1932 Federated Fund
Complex; Corporation and
President, Duquesne University President, Law
Professor, 43 other investment
Pittsburgh, PA Duquesne
University; companies in the Fund
DIRECTOR Consulting
Partner, Complex
Mollica & Murray.
Previous Positions:
Dean
and Professor of Law,
University of
Pittsburgh
School of Law; Dean
and
Professor of Law,
Villanova
University
School of Law.
MARJORIE P. SMUTS Director or Trustee of the
$1,254.34 $116,760.63 for the
Birth Date: June 21, 1935 Federated Fund
Complex; Corporation and
4905 Bayard Street Public
Relations/ 43 other investment
Pittsburgh, PA
Marketing/Conference companies in the Fund
DIRECTOR
Planning. Complex
Previous Positions:
National Spokesperson,
Aluminum Company
of
America; business owner.
JOHN S. WALSH++ Director or Trustee of some
$1,254.34 $94,536.85 for the
Birth Date: November 28, 1957 of the Federated
Funds; Corporation and
2007 Sherwood Drive President and
Director, 39 other investment
Valparaiso, IN Heat Wagon,
Inc.; companies in the Fund
DIRECTOR President and
Director, Complex
Manufacturers Products,
Inc.; President,
Portable
Heater Parts, a division
of
Manufacturers Products,
Inc.; Director, Walsh
&
Kelly, Inc.; formerly,
Vice President, Walsh
&
Kelly, Inc.
GLEN R. JOHNSON President of some of
the $0 $0 for the Corporation and
Birth Date: May 2, 1929 Funds in the Federated
Fund 21 other investment
Federated Investors Tower Complex; Staff
member, companies in the Fund
1001 Liberty Avenue Federated
Securities Complex
Pittsburgh, PA Corp.; formerly:
Trustee
PRESIDENT or Director of some of
the
Funds in the Federated
Fund
Complex.
EDWARD C. GONZALES President, Executive
Vice $0 $0 for the Corporation and
Birth Date: October 22, 1930 President and Treasurer
of 42 other investment
Federated Investors Tower some of the Funds in
the company in the Fund Complex
1001 Liberty Avenue Federated Fund Complex;
Pittsburgh, PA Vice Chairman,
Federated
EXECUTIVE VICE PRESIDENT Investors, Inc.; Trustee,
Federated
Administrative
Services; formerly:
Trustee or Director of
some
of the Funds in
the
Federated Fund Complex;
CEO and Chairman,
Federated
Administrative
Services; Vice President,
Federated
Investment
Management Company,
Federated
Investment
Counseling,
Federated
Global
Investment
Management Corp.
and
Passport Research, Ltd.;
Director and
Executive
Vice President,
Federated
Securities Corp.;
Director,
Federated
Services Company; Trustee,
Federated
Shareholder
Services Company.
JOHN W. MCGONIGLE Executive Vice
President $0 $0 for the Corporation and
Birth Date: October 26, 1938 and Secretary of
the 43 other investment
Federated Investors Tower Federated Fund
Complex; companies in the Fund
1001 Liberty Avenue Executive Vice
President, Complex
Pittsburgh, PA Secretary and Director,
EXECUTIVE VICE PRESIDENT Federated Investors, Inc.;
AND SECRETARY formerly: Trustee,
Federated
Investment
Management Company
and
Federated
Investment
Counseling; Director,
Federated
Global
Investment
Management
Corp., Federated
Services
Company and
Federated
Securities Corp.
RICHARD J. THOMAS Treasurer of the
Federated $0 $0 for the Corporation and
Birth Date: June 17, 1954 Fund Complex;
Vice 43 other investment
Federated Investors Tower President Funds
Financial companies in the Fund
1001 Liberty Avenue Services
Division, Complex
Pittsburgh, PA Federated Investors, Inc.;
TREASURER formerly:
various
management
positions
within Funds
Financial
Services Division
of
Federated Investors, Inc.
<CAPTION>
NAME
Total
BIRTH DATE
Aggregate Compensation
ADDRESS PRINCIPAL OCCUPATIONS
Compensation From Corporation
POSITION WITH CORPORATION FOR PAST 5 YEARS From
Corporation and Fund Complex
<S> <C>
<C> <C>
RICHARD B. FISHER President or
Vice $0 $0 for the Corporation and
Birth Date: May 17, 1923 President of some of
the 41 other investment
Federated Investors Tower Funds in the Federated
Fund companies in the Fund
1001 Liberty Avenue Complex; Vice
Chairman, Complex
Pittsburgh, PA Federated Investors, Inc.;
VICE PRESIDENT Chairman,
Federated
Securities Corp.;
formerly: Director
or
Trustee of some of
the
Funds in the Federated
Fund
Complex,; Executive
Vice
President,
Federated
Investors, Inc.
and
Director and
Chief
Executive Officer,
Federated Securities Corp.
HENRY A. FRANTZEN Chief Investment
Officer $0 $0 for the Corporation and
Birth Date: November 28, 1942 of this Fund and
various 2 other investment
Federated Investors Tower other Funds in
the companies in the Fund
1001 Liberty Avenue Federated Fund
Complex; Complex
Pittsburgh, PA Executive Vice President,
CHIEF INVESTMENT OFFICER Federated
Investment
Counseling,
Federated
Global
Investment
Management Corp.,
Federated
Investment
Management Company
and
Passport Research, Ltd.;
Director, Federated
Global
Investment .
Management Corp. and
Federated Investment
Management Company;
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
</TABLE>
* An asterisk denotes a Director who is deemed to be an interested person as
defined in the 1940 Act.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Corporation.
++ Messrs. Mansfield and Walsh became members of the Board of Directors on
January 1, 1999. Mr. Cunningham became a member of the Board of Directors
on January 1, 2000. Mr. Cunningham did not receive any fees as of the
fiscal year end of the Company.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund.
The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Corporation or any Fund shareholder for
any losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Corporation.
OTHER RELATED SERVICES
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
CODE OF ETHICS RESTRICTIONS ON PERSONAL TRADING
As required by SEC rules, the Fund, its Adviser, and its Distributor have
adopted codes of ethics. These codes govern securities trading activities of
investment personnel, Fund Directors, and certain other employees. Although they
do permit these people to trade in securities, including those that the Fund
could buy, they also contain significant safeguards designed to protect the Fund
and its shareholders from abuses in this area, such as requirements to obtain
prior approval for, and to report, particular transactions.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. The Adviser will generally use those who are recognized dealers in
specific portfolio instruments, except when a better price and execution of the
order can be obtained elsewhere. The Adviser may select brokers and dealers
based on whether they also offer research services (as described below). In
selecting among firms believed to meet these criteria, the Adviser may give
consideration to those firms which have sold or are selling Shares of the Fund
and other funds distributed by the Distributor and its affiliates. The Adviser
makes decisions on portfolio transactions and selects brokers and dealers
subject to review by the Fund's Board.
RESEARCH SERVICES
Research services may include advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services. Research
services may be used by the Adviser or by affiliates of Federated in advising
other accounts. To the extent that receipt of these services may replace
services for which the Adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The Adviser and its affiliates exercise
reasonable business judgment in selecting those brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
<S> <C>
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditor for the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
FEES PAID BY THE FUND FOR SERVICES
<TABLE>
<CAPTION>
FOR THE YEAR ENDED NOVEMBER 30 1999 1998 1997
<S> <C> <C> <C>
Advisory Fee Earned $1,087,256 $ 1,306,572 $1,615,465
Advisory Fee Reduction 10,521 37,551 0
Brokerage Commissions 0 0 0
Administrative Fee 185,000 185,000 185,000
12B-1 FEE
Class A Shares 126,596 - -
Class B Shares 94,016 - -
Class C Shares 43,767 - -
SHAREHOLDER SERVICES FEE
Class A Shares 227,874 - -
Class B Shares 31,338 - -
Class C Shares 14,589 - -
</TABLE>
Fees are allocated among Classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable Class of Shares.
How Does the Fund Measure Performance?
The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.
Share performance reflects the effect of non-recurring charges, such as maximum
sales charges, which, if excluded, would increase the total return and yield.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELDS
Total returns given for the one-, five-year and start of performance periods
ended November 30, 1999.
Yields given for the 30-day period ended November 30, 1999.
<TABLE>
<CAPTION>
START OF
30-DAY PERFORMANCE ON
SHARE CLASS PERIOD 1 YEAR 5 YEARS JUNE 4, 1991
<S> <C> <C> <C> <C>
CLASS A:
Total Return - (13.94%) 3.73% 6.26%
Yield 4.43% - - -
<CAPTION>
START OF
PERFORMANCE ON
30-DAY SEPTEMBER 28,
SHARE CLASS PERIOD 1 YEAR 5 YEARS 1994
<S> <C> <C> <C> <C>
CLASS B:
Total Return - (15.22%) 3.63% 4.14%
Yield 3.90% - - -
<CAPTION>
START OF
30-DAY PERFORMANCE ON
SHARE CLASS PERIOD 1 YEAR 5 YEARS APRIL 1, 1993
<S> <C> <C> <C> <C>
CLASS C:
Total Return - (11.33%) 3.93% 5.50%
Yield 3.90% - - -
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of Shares owned at the end of the period by
the NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD
The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a 30-day period; by (ii) the maximum offering
price per Share on the last day of the period. This number is then annualized
using semi-annual compounding. This means that the amount of income generated
during the 30-day period is assumed to be generated each month over a 12-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by Shares because of certain adjustments required
by the SEC and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
* references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
* charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment;
* discussions of economic, financial and political developments and their impact
on the securities market, including the portfolio manager's views on how such
developments could impact the Fund; and
* information about the mutual fund industry from sources such as the Investment
Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which the Fund uses in advertising may include:
LIPPER ANALYTICAL SERVICES, INC.
Lipper Analytical Services, Inc., for example, makes comparative
calculations for one-month, three-month, one-year, and five-year periods
which assume the reinvestment of all capital gains distributions and income
dividends.
SALOMON BROTHERS HIGH GRADE BOND INDEX; SALOMON BROTHERS WORLD
GOVERNMENT BOND INDEX; AND J.P. MORGAN GOVERNMENT BOND INDEX.
MORNINGSTAR, INC.
Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX
Lehman Brothers Government/Corporate Bond Index is comprised of approximately
5,000 issues which include nonconvertible bonds publicly issued by the U.S.
government or its agencies; corporate bonds guaranteed by the U.S. government
and quasi-federal corporations; and publicly issued, fixed rate, nonconvertible
domestic bonds of companies in industry, public utilities, and finance. The
average maturity of these bonds approximates nine years. Tracked by Lehman
Brothers, Inc., the index calculates total returns for one-month, three-month,
twelve-month, and ten-year periods and year-to-date.
Who is Federated Investors, Inc.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state- of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
MUNICIPAL FUNDS
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
EQUITY FUNDS
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999, Federated managed 53 equity funds totaling approximately
$18.3 billion in assets across growth, value, equity income, international,
index and sector (i.e., utility) styles. Federated's value- oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
CORPORATE BOND FUNDS
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making-based on
intensive, diligent credit analysis-is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
GOVERNMENT FUNDS
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
MONEY MARKET FUNDS
In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market fund.
Simultaneously, the company pioneered the use of the amortized cost method of
accounting for valuing shares of money market funds, a principal means used by
money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime, 24 municipal and 1 euro-denominated
with assets approximating $34.1 billion, $35.7 billion, $13.1 billion and $115
million, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield-
J. Thomas Madden; U.S. fixed income-William D. Dawson III; and global
equities and fixed income-Henry A. Frantzen. The Chief Investment Officers
are Executive Vice Presidents of the Federated advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
INSTITUTIONAL CLIENTS
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities Corp.
BANK MARKETING
Other institutional clients include more than 1,600 banks and trust
organizations. Virtually all of the trust divisions of the top 100 bank holding
companies use Federated Funds in their clients' portfolios. The marketing effort
to trust clients is headed by Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated Funds are available to consumers through major brokerage firms
nationwide-we have over 2,200 broker/dealer and bank broker/dealer relationships
across the country-supported by more wholesalers than any other mutual fund
distributor. Federated's service to financial professionals and institutions has
earned it high ratings in several surveys performed by DALBAR, Inc. DALBAR is
recognized as the industry benchmark for service quality measurement. The
marketing effort to these firms is headed by James F. Getz, President,
Broker/Dealer Sales Division, Federated Securities Corp.
Financial Information
The Financial Statements for the Fund for the fiscal year ended November 30,
1999 are incorporated herein by reference to the Annual Report to Shareholders
of Federated International Income Fund dated November 30, 1999.
Investment Ratings
STANDARD AND POOR'S LONG-TERM DEBT RATING DEFINITIONS
AAA-Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA-Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher-rated issues only in small degree.
A-Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB-Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
BB-Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.
B-Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC-Debt rated CCC has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC-The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.
C-The rating C typically is applied to debt subordinated to senior debt which is
assigned an actual or implied CCC debt rating. The C rating may be used to cover
a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
MOODY'S INVESTORS SERVICE, INC. LONG-TERM BOND RATING DEFINITIONS
AAA-Bonds which are rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as gilt
edged. Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA-Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in AAA securities.
A-Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
BAA-Bonds which are rated BAA are considered as medium-grade obligations, (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA-Bonds which are BA are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B-Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA-Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA-Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C-Bonds which are rated C are the lowest-rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
FITCH IBCA, INC. LONG-TERM DEBT RATING DEFINITIONS
AAA-Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA-Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F- 1+.
A-Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB-Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB-Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B-Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC-Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC-Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C-Bonds are imminent default in payment of interest or principal.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
PRIME-1-Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
* Leading market positions in well-established industries;
* High rates of return on funds employed;
* Conservative capitalization structure with moderate reliance on debt and
ample asset protection;
* Broad margins in earning coverage of fixed financial charges and high internal
cash generation; and
* Well-established access to a range of financial markets and assured sources of
alternate liquidity.
PRIME-2-Issuers rated Prime-1 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
STANDARD AND POOR'S COMMERCIAL PAPER RATINGS
A-1-This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2-Capacity for timely payment on issues with this designation is satisfactory.
However, the relative degree of safety is not as high as for issues designated
A-1.
FITCH IBCA, INC. COMMERCIAL PAPER RATING DEFINITIONS
FITCH-1-(Highest Grade) Commercial paper assigned this rating is regarded as
having the strongest degree of assurance for timely payment.
FITCH-2-(Very Good Grade) Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.
Addresses
FEDERATED INTERNATIONAL INCOME FUND
Class A Shares
Class B Shares
Class C Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Global Investment Management Corp.
175 Water Street
New York, NY 10038-4965
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
PART C. OTHER INFORMATION
Item 23. EXHIBITS:
--------
(a) (i) Conformed copy of the Articles of Incorporation of
the Registrant; (10)
(ii) Conformed copy of Amendment Nos. 3-8 to the Articles
of Incorporation of Registrant; (+)
(b) (i) Copy of the By-Laws of the Registrant; (10)
(ii) Copy of Amendment No. 1 to the By-Laws;(21)
(iii) Copy of Amendment No. 2 to the By-Laws (effective
February 23, 1998); (21)
(iv) Copy of Amendment No. 3 to the By-Laws
(effective February 27, 1998); (21)
(v) Copy of Amendment No. 4 to the By-Laws
(effective May 12, 1998); (21)
(c) Copy of Specimen Certificate for Shares of Common Stock for
Class A Shares, Class B Shares, and Class C Shares of
International Equity Fund and International Income Fund; (14)
(d) (i) Conformed copy of Investment Advisory Contract of the
Registrant dated March 15, 1994; (15)
(ii) Conformed copy of Assignment of Investment Advisory
Contract; (16)
(e) (i) Conformed copy of Distributor's Contract of the
Registrant dated February 11, 1991, through and
including Exhibit E; (14)
(ii) Conformed copy of Exhibit F to the Distributor's
Contract of the Registrant adding Class B Shares
to the current existing Distributor's Contract;
(16)
(iii) The Registrant hereby incorporates the conformed
copy of the specimen Mutual Funds and Service
Agreement; Mutual Funds Service Agreement; and
Plan Trustee/Mutual Funds Service Agreement from
Item 24(b) (6) of the Cash Trust Series II
Registration Statement on Form N-1A filed with
the Commission on July 24, 1995. (File Nos.
2-91776 and 811-3984);
+ All Exhibits have been filed electronically.
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed February 13, 1991 (File Nos. 2-91776
and 811-3984).
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 on Form N-1A filed July 29, 1994 (File Nos. 2-91776 and
811-3984).
15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 23 on Form N-1A filed February 9, 1995 (File Nos. 2-91776 and
811-3984).
16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 27 on Form N-1A filed January 31, 1996 (File Nos. 2-91776 and
811-3984).
21. Response is incorporated by reference to Registrant's Post- Effective
Amendment No. 33 on Form N-1A filed November 30, 1998 ......(File Nos.
2-91776 and 811-3984).
(iv) Conformed Copy of New Distributor's Contract on behalf
of Class B Shares of the Registrant; (20)
(f) Not applicable;
(g) (i) Conformed copy of the Custodian Contract of the
Registrant (14);
(ii) Conformed Copy of Fee Schedule for Custodian Contract;
(19)
(h) (i) Conformed Copy of Amended and Restated Agreement for
Fund Accounting Services, Administrative Services,
Transfer Agency Services, and Custody Services
Procurement; (21)
(ii) The responses described in Item 24(b)(6) are hereby
incorporated by reference;
(iii) The Registrant hereby incorporates the conformed copy
of the Shareholder Services Sub-Contract between
National Pensions Alliance, Ltd. and Federated
Shareholder Services from Item 24(b)(9)(ii) of the
Federated GNMA Trust Registration Statement on Form
N-1A, filed with the Commission on March 25, 1996.
(File Nos. 2-75670 and 811-3375);
(iv) The Registrant hereby incorporates the conformed copy
of the Shareholder Services Sub-Contract between
Fidelity and Federated Shareholder Services from Item
24(b)(9) (iii) of the Federated GNMA Trust Registration
Statement on Form N-1A, filed with the Commission on
March 25, 1996. (File Nos. 2-75670 and 811-3375);
(v) Conformed Copy of Amended and Restated Shareholder
Services Agreement; (19)
(vi) Conformed Copy of Principal Shareholder Servicer's
Agreement on behalf of Class B Shares of the
Registrant; (20)
(vii) Conformed Copy of Shareholder Services Agreement on behalf of Class B
Shares of the Registrant; (20)
(i) Conformed copy of the Opinion and Consent of Counsel as to legality of
shares being registered; (17)
___
----------------
+ All Exhibits have been filed electronically.
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 on Form N-1A filed July 29, 1994 (File Nos. 2-91776 and
811-3984).
17. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 28 on Form N-1A filed April 25, 1996 (File Nos. 2-91776 and
811-3984).
19. Response is incorporated by reference to Registrant's Post- Effective
Amendment No. 31 on Form N-1A filed November 24, 1997 (File Nos. 2-91776
and 811-3984).
20. Response is incorporated by reference to Registrant's Post- Effective
Amendment No. 32 on Form N-1A filed January 28, 1998 (File Nos. 2-91776 and
811-3984).
21. Response is incorporated by reference to Registrant's Post- Effective
Amendment No. 33 on Form N-1A filed November 30, 1998 (File Nos. 2-91776
and 811-3984).
(j) Conformed copy of Consent of Independent Public Accountants;
(+)
(k) Not applicable;
(l) Copy of Initial Capital Understanding; (2)
(m) (i) Conformed copy of Rule 12b-1 Plan of the Registrant,
through and including Exhibit B; (14)
(ii) Conformed copy of Exhibit C to Rule 12b-1 Plan of the
Registrant adding Class B Shares to the current
existing Rule 12b-1 Plan; (16)
(iii) Copy of 12b-1 Agreement, through and including Exhibit
C; (14)
(iv) The responses described in Item 24(b) (6) are hereby
incorporated by reference;
(v) Conformed Copy of Amendment No. 1 and Schedule A to
the 12b-1 Plan on behalf of Class B Shares of the
Registrant; (20)
(n) The Registrant hereby incorporates the conformed
copy of the specimen Multiple Class Plan from Item
24(b)(18) of the World Investment Series, Inc.
Registration Statement on Form N-1A, filed with the Commission
on January 26, 1996. (File Nos. 33-52149 and 811-07141);
(o) (i) Conformed copy of Power of Attorney; (+)
(ii) Conformed copy of Power of Attorney for Nicholas P.
Constantakis; (+)
(iii) Conformed copy of Power of Attorney for Henry A Frantzen;
(+)
(iv) Conformed copy of Power of Attorney for John S.
Walsh; (+) (v) Conformed copy of Power of Attorney
for Charles F.
Mansfield, Jr.; (+)
(vi)Conformed copy of Power of Attorney for John F.
Cunningham; (+)
(vii) Conformed copy of Limited Power of Attorney; (20)
(p) The Registrant hereby incorporates the conformed
copy of the Code of Ethics for Access Persons
from Item 23(p) of the Money Market Obligations Trust
Registration Statement on Form N-1A filed with the
Commission on February 25, 2000. (File Nos. 33-31602 and
811-5950).
+ All Exhibits have been filed electronically.
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1 filed August 17, 1984 (File Nos. 2-91776 and
811-3984).
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 on Form N-1A filed July 29, 1994 (File Nos. 2-91776 and
811-3984).
16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 27 on Form N-1A filed January 31, 1996 (File Nos. 2-91776 and
811-3984).
18. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 30 on Form N-1A filed January 27, 1997 (File Nos. 2-91776 and
811-3984).
20. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 32 on Form N-1A filed January 28, 1998 (File Nos. 2-91776 and
811-3984).
22. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 34 on Form N-1A filed January 29, 1999 (File Nos. 2-91776 and
811-3984).
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUNDS:
------------------------------------------------------------
None
Item 25. INDEMNIFICATION: (13)
---------------
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER:
- ---------------------------------------------------------------
For a description of the other business of the investment adviser, see
the section entitled "Who Manages the Fund?" in Part A. The
affiliations with the Registrant of four of the Trustees and one of the
Officers of the investment adviser are included in Part B of this
Registration Statement under "Who Manages and Provides Services to the
Fund?" The remaining Trustees of the investment adviser and, in
parentheses, their principal occupations are: Thomas R. Donahue, (Chief
Financial Officer, Federated Investors, Inc.), 1001 Liberty Avenue,
Pittsburgh, PA, 15222-3779 and Mark D. Olson (Partner, Wilson, Halbrook
& Bayard), 107 W. Market Street, Georgetown, Delaware 19947.
The remaining Officers of the investment adviser are:
Executive Vice Presidents: William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden
Senior Vice Presidents: Joseph M. Balestrino
David A. Briggs
Jonathan C. Conley
Deborah A. Cunningham
Michael P. Donnelly
Linda A. Duessel
Mark E. Durbiano
James E. Grefenstette
Jeffrey A. Kozemchak
Sandra L. McInerney
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski
Bernard A. Picchi
Peter Vutz
Vice Presidents: Todd A. Abraham
J. Scott Albrecht
Arthur J. Barry
Randall S. Bauer
G. Andrew Bonnewell
Micheal W. Casey
Robert E. Cauley
Alexandre de Bethmann
B. Anthony Delserone, Jr.
Donald T. Ellenberger
Eamonn G. Folan
Kathleen M. Foody-Malus
Thomas M. Franks
Marc Halperin
John W. Harris
Patricia L. Heagy
Susan R. Hill
William R. Jamison
- ----------------- 13. Response is incorporated by reference to Registrant's
Post-Effective Amendment No. 16 on Form N-1A filed January 28, 1992. (File
No. 2-91776).
Item 26. Business and Other Connections of Investment Adviser (continued):
Constantine J. Kartsonas
Robert M. Kowit
Richard J. Lazarchic
Steven J. Lehman
Marian R. Marinack
Christopher Matyszewski
William M. Painter
Jeffrey A. Petro
Vice Presidents Keith J. Sabol
Frank Semack
Aash M. Shah
Michael W. Sirianni, Jr.
Christopher Smith
Edward J. Tiedge
Leonardo A. Vila
Paige M. Wilhelm
Lori A. Wolff
George B. Wright
Assistant Vice Presidents: Catherine A. Arendas
Arminda Aviles
Nancy J. Belz
James R. Crea, Jr.
Karol M. Krummie
Lee R. Cunningham, II
James H. Davis, II
Paul S. Drotch
Salvatore A. Esposito
Donna M. Fabiano
Gary E. Falwell
John T. Gentry
Nikola A. Ivanov
Nathan H. Kehm
John C. Kerber
Grant K. McKay
Natalie F. Metz
Thomas Mitchell
Joseph M. Natoli
Trent Nevills
Bob Nolte
Mary Kay Pavuk
John Quartarolo
Rae Ann Rice
Roberto Sanchez-Dahl, Sr.
Sarath Sathkumara
James W. Schaub
John Sidawi
Matthew K. Stapen
Diane R. Startari
Diane Tolby
Timothy G. Trebilcock
Leonarda A. Vila
Steven J. Wagner
Secretary: G. Andrew Bonnewell
Treasurer: Thomas R. Donahue
Assistant Secretaries: C. Grant Anderson
Karen M. Brownlee
Leslie K. Ross
Assistant Treasurer: Denis McAuley, III
The business address of each of the Officers of the investment adviser
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh,
Pennsylvania 15222-3779. These individuals are also officers of a
majority of the investment advisers to the investment companies in the
Federated Fund Complex described in Part B of this Registration
Statement.
ITEM 27. PRINCIPAL UNDERWRITERS:
(a)...Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the following open-end investment
companies, including the Registrant:
Cash Trust Series II; Cash Trust Series, Inc.; CCB Funds; Edward D. Jones & Co.
Daily Passport Cash Trust; 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
Fixed Income Securities, Inc.;
Federated Fund for U.S. Government Securities, Inc.; Federated GNMA Trust;
Federated Government Income Securities, Inc.; 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 Investment Series Funds, Inc.; Federated Managed
Allocation Portfolios; Federated Municipal Opportunities Fund, Inc.; Federated
Municipal Securities Fund, Inc.; Federated Municipal Securities Income 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.;
FirstMerit Funds; Hibernia Funds; Independence One Mutual Funds; Intermediate
Municipal Trust;
International Series, Inc.; Marshall Funds, Inc.; Money Market Obligations
Trust; Regions Funds; RIGGS Funds; SouthTrust Funds;
Tax-Free Instruments Trust; The Wachovia Funds; The Wachovia Municipal Funds;
Vision Group of Funds, Inc.; and World Investment Series, Inc.;
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Richard B. Fisher Chairman, Vice President
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Arthur L. Cherry Director, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales --
Federated Investors Tower and Director,
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas R. Donahue Director, Executive Vice --
Federated Investors Tower Vice President and Assistant
1001 Liberty Avenue Secretary,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
James F. Getz President-Broker/Dealer and --
Federated Investors Tower Director,
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Ronald M. Petnuch Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Matthew W. Brown Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark Carroll Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Steven R. Cohen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert J. Deuberry Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark A. Gessner Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Tad Gullickson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dayna C. Haferkamp Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Anthony J. Harper Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Christopher A. Layton Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael H. Liss Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Amy Michalisyn Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas A. Peter III Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Larry Sebbens Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward J. Segura Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert W. Bauman Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Donald C. Edwards Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John T. Glickson Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Kirk A. Montgomery Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Denis McAuley, III Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Timothy S. Johnson Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Victor R. Siclari Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 28. LOCATION OF ACCOUNTS AND RECORDS:
--------------------------------
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Registrant
Federated Investors Tower 1001 Liberty
Avenue Pittsburgh, PA 15222-3779
(Notices should be sent to the Agent
for Service at the above address)
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Federated Shareholder Services Company Federated Investors Tower
("Transfer Agent and Dividend 1001 Liberty Avenue
Disbursing Agent") Pittsburgh, PA 15222-3779
Federated Services Company Federated Investors Tower
("Administrator") 1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Federated Global Investment Management
Corp. 175 Water Street
("Adviser") New York, New York 10038-4965
State Street Bank and Trust Company P.O. Box 8600
("Custodian") Boston, MA 02266-8600
Item 29. MANAGEMENT SERVICES: Not applicable.
-------------------
Item 30. UNDERTAKINGS:
------------
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Directors and the calling of special shareholder meetings by
shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, INTERNATIONAL SERIES, INC.,
certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, duly authorized, in the
City of Pittsburgh and Commonwealth of Pennsylvania, on this 29th day of March,
2000.
INTERNATIONAL SERIES, INC.
BY: /s/ James O. Perry
James O. Perry, Assistant Secretary
Attorney in Fact for John F. Donahue
March 29, 2000
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:
NAME TITLE DATE
---- ----- ----
By: /s/ James O. Perry Attorney in Fact March 29, 2000
James O. Perry for the Persons
ASSISTANT SECRETARY Listed Below
NAME TITLE
John F. Donahue* Chairman and Director
(Chief Executive Officer)
Glen R. Johnson* President
Richard J. Thomas* Treasurer
(Principal Financial and
Accounting Officer)
Henry A. Frantzen* Chief Investment Officer
Thomas G. Bigley* Director
John T. Conroy, Jr.* Director
Nicholas P. Constantakis* Director
John F. Cunningham* Director
J. Christopher Donahue* Director
Lawrence D. Ellis, M.D.* Director
Peter E. Madden* Director
Charles F. Mansfield, Jr.* Director
John E. Murray, Jr.* Director
Marjorie P. Smuts* Director
John S. Walsh* Director
* By Power of Attorney
Exhibit a under Form N-1A
Exhibit 3(i) under Item 601/Reg. S-K
(AMD. #3) FILE STAMPED 3/21/94
FT SERIES, INC.
ARTICLES OF AMENDMENT AND RESTATEMENT
March 21, 1994
FT Series, Inc., a Maryland corporation having its principal offices in the
State of Maryland in Baltimore City, Maryland (hereinafter called
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland as follows:
FIRST: WHEREAS, the Corporation desires to restate its Charter as currently
in effect, the Charter of the Corporation, is amended and so amended is restated
in its entirety by striking out articles FIRST through EIGHTH and inserting in
lieu thereof the following:
FIRST: The name of the corporation is International Series, Inc.
("Corporation").
SECOND: The purpose for which the Corporation is formed is to act as an
open-end investment company of the management type registered as such with the
Securities and Exchange Commission pursuant to the Investment Company Act of
1940 and to exercise and generally to enjoy all of the powers, rights and
privileges granted to, or conferred upon, corporations by the Maryland General
Corporation Law now or hereafter in force.
THIRD: The post office address of the principal office and the office of
the resident agent of the Corporation in the State of Maryland is 32ESouth
Street, Baltimore, Maryland 21202. The resident agent of the Corporation in the
state of Maryland is THE CORPORATION TRUST INCORPORATED, which is a corporation
organized and existing under the laws of the State of Maryland, the address of
which is 32 South Street, Baltimore, Maryland 21202.
FOURTH: (a) The Corporation is authorized to issue five billion
(5,000,000,000) shares of common stock, par value $.0001 per share. The
aggregate par value of all shares which the Corporation is authorized to issue
is Five Hundred Thousand Dollars ($500,000). Subject to the following paragraph,
the authorized shares are classified as five hundred million 500,000,000 shares
of the International Equity Fund Class A Shares, five hundred million
500,000,000 shares of International Equity Fund Class C Shares, five hundred
million 500,000,000 shares of the International Income Fund Class A Shares, five
hundred million 500,000,000 shares of International Income Fund Class C Shares.
The remaining three billion (3,000,000,000) shares shall remain unclassified
until action is taken by the Board of Directors pursuant to the following
paragraph.
(b) The Board of Directors is authorized to classify or to reclassify
(i.e., into series and classes within series), from time to time, any unissued
shares of stock of the Corporation, whether now or hereafter authorized, by
setting, changing or eliminating the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications or
terms and conditions of or rights to require redemption of the stock.
Unless otherwise provided by the Board of Directors prior to the
issuance of the stock, the shares of each class of stock shall be subject to the
following:
(i) The Board of Directors may redesignate a class of stock
whether or not shares of such class are issued and outstanding, provided that
such redesignation does not affect the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications or
terms or conditions of redemption of such class of stock.
(ii) The assets attributable to each class may be invested in a
common investment portfolio. The assets and liabilities and the income and
expenses of each class of the Corporation's stock shall be determined separately
and, accordingly, the net asset value of shares of the Corporation's stock may
vary from class to class. The income or gain and the expense or liabilities of
the Corporation shall be allocated to each class of stock as determined by or
under the direction of the Board of Directors.
(iii) Shares of each class of stock shall be entitled to such
dividends or distributions, in stock or in cash or both, as may be declared from
time to time by the Board of Directors with respect to such class. Dividends or
distributions shall be paid on shares of a class of stock only out of the assets
belonging to that class.
(iv) In the event of liquidation or dissolution of the
Corporation, the stockholders of each class of the Corporation's stock shall be
entitled to receive, as a class, out of the assets of the Corporation available
for distribution to stockholders, the assets belonging to that class less the
liabilities allocated to that class. The assets so distributable to the
stockholders of a class shall be distributed among such stockholders in
proportion to the number of shares of that class held by them and recorded on
the books of the Corporation. In the event that there are any assets available
for distribution that are not attributable to any particular class of stock,
such assets shall be allocated to all classes in proportion to the net asset
value of the respective classes.
(v) All holders of shares of stock shall vote as a single class
except as may be otherwise required by law pursuant to the 1940 Act or any
applicable order, rule or interpretation issued by the Securities and Exchange
Commission, or otherwise, and except to respect to any matter which affects only
one or more classes of stock, in which case only the holders of shares of the
classes affected shall be entitled to vote.
(c) The Corporation may issue fractional shares. Any fractional share
shall carry proportionately all the rights of a whole share, excepting any right
to receive a certificate evidencing such fractional share, but including,
without limitation, the right to vote and the right to receive dividends.
FIFTH: (a) The number of Directors of the Corporation shall initially be
ten. The number may be changed by the By-Laws of the Corporation or by the Board
of Directors pursuant to the By-Laws.
(b) The names of the Directors who shall act until the initial meeting of
shareholders and until their successors are elected and qualify, are: John F.
Donahue, John T. Conroy, Jr., William J. Copeland, James E. Dowd, Lawrence D.
Ellis, M.D., Edward L. Flaherty, Jr., Peter E. Madden, Gregor F. Meyer, Wesley
W. Posvar, and Marjorie P. Smuts.
SIXTH: (a) To the extent the Corporation has funds or property legally
available therefor, each shareholder shall have the right at such times as may
be permitted by the Corporation, but no less frequently than as required under
the 1940 Act, to require the Corporation to redeem all or any part of its shares
at a redemption price equal to the net asset value per share next determined
after the shares are tendered for redemption, less any applicable redemption
charges as determined by the Board of Directors. The Board of Directors may
adopt requirements and procedures for redemption of shares.
Notwithstanding the foregoing, the Corporation may postpone payment or
deposit of the redemption price and may suspend the right of the shareholders to
require the Corporation to redeem shares of any series or class pursuant to the
applicable rules and regulations, or any order, of the Securities and Exchange
Commission.
(b) The Corporation shall have the right, exercisable at the discretion
of the Board of Directors, to redeem any shareholder's shares of any series or
class for their then current net asset value per share if at such time (i) the
shareholder owns shares having an aggregate net asset value of less than $500 or
such greater amount for such series or class set forth in the current
registration statement of the Corporation filed with the Securities and Exchange
Commission, (ii) regardless of the amount, if a shareholder fails to supply a
valid taxpayer identification number, or (iii) the Directors determine in their
sole discretion that failure to do so redeem may have materially adverse
consequences to the remaining shareholders or the Corporation or any series or
class thereof.
(c) Each share is subject to redemption by the Corporation at the
redemption price computed in the manner set forth in subparagraph (a) of Article
SIXTH of this Article of Incorporation at any time if the Board of Directors, in
its sole discretion, determines that failure to so redeem may result in the
Corporation being classified as a personal holding company as defined in the
Internal Revenue Code, as amended.
SEVENTH: The following provisions are hereby adopted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the
Directors and shareholders:
(a) No shareholder shall have any pre-emptive or preferential right of
subscription to any shares of any series or class whether now or hereafter
authorized.
(b) The presence in person or by proxy of the holders of one-third of
the shares of stock of the Corporation entitled to vote without regard to class
shall constitute a quorum at any meeting of the shareholders, except with
respect to any matter which by law requires the approval of one or more classes
of stock, in which case the presence in person or by proxy of the holders of
one-third of the shares of stock of each class entitled to vote on the matter
shall constitute a quorum.
(c) In addition to its other powers explicitly or implicitly granted
under these Articles of Incorporation, by law or otherwise, the Board of
Directors of the Corporation (i) is expressly authorized to make, alter, amend
or repeal the By-Laws of the Corporation, (ii) may from time to time determine
whether, to what extent, at what times and places, and under what conditions and
regulations the accounts and books of the Corporation, or any of them, shall be
open to the inspection of the shareholders, and no shareholder shall have any
right to inspect any account, book or document of the Corporation except as
conferred by statute or as authorized by the Board of Directors of the
Corporation, (iii) is empowered to authorize, without shareholder approval, the
issuance and sale from time to time of shares of stock of the Corporation
whether now or hereafter authorized, and (iv) is authorized to adopt procedures
for determination of and to maintain constant the net asset value of shares of
the Corporation's stock.
(d) Notwithstanding any provision of law requiring a greater proportion
than a majority of the votes of any or all series or classes of shares entitled
to be cast to take or authorize any action, the Corporation may take or
authorize any such action upon the concurrence of a majority of the aggregate
number of the votes entitled to be cast thereon.
(e) The Corporation reserves the right from time to time to make any
amendment of its Articles of Incorporation now or hereafter authorized by law,
including any amendment which alters the contract rights, as expressly set forth
in its Articles of Incorporation, of any outstanding shares or any series or
class.
(f) The Board of Directors is expressly authorized to declare and pay
dividends and distributions in cash, securities or other property from surplus
or any funds legally available therefor, at such intervals (which may be as
frequently as daily) or on such other periodic basis, as it shall determine, for
any series or class of the Corporation; to declare such dividends or
distributions for any series or class of the Corporation by means of a formula
or other method of determination, at meetings held less frequently than the
frequency of the effectiveness of such declarations; to establish payment dates
for dividends or any other distributions for any series or class of the
Corporation on any basis, including dates occurring less frequently than the
effectiveness of declarations thereof; and to provide for the payment of
declared dividends on a date earlier or later than the specified payment date in
the case of shareholders of such series or class redeeming their entire
ownership of shares.
(g) Any determination made in good faith by or pursuant to the direction
of the Board of Directors as to the amount of the assets, debts, obligations or
liabilities of the Corporation, as to the amount of any reserves or charges set
up and the propriety thereof, as to the time of or purpose for creating such
reserves or charges, as to the use, alteration or cancellation of any reserves
or charges (whether or not any debt, obligation or liability for which such
reserves or charges shall have been created shall have been paid or discharged
or shall be then or thereafter required to be paid or discharged), as to the
value of or the method of valuing any investment or other asset owned or held by
the Corporation, as to the number of shares of any class of stock outstanding,
as to the income of the Corporation or as to any other matter relating to the
determination of net asset value, the declaration of dividends or the issue,
sale, redemption or other acquisition of shares of the Corporation, shall be
final and conclusive and shall be binding upon the Corporation and all holders
of its shares, past, present and future, and shares of the Corporation are
issued and sold on the condition and understanding that any and all such
determinations shall be binding as aforesaid.
EIGHTH: (a) To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law, no
director or officer of the Corporation shall have any liability to the
Corporation or its shareholders for damages. This limitation on liability
applies to events occurring at the time a person serves as a director or officer
of the Corporation whether or not such person is a director or officer at the
time of any proceeding in which liability is asserted.
(b) The Corporation shall indemnify and advance expenses to its
currently acting and its former directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify and advance expenses to its officers to the
same extent as its directors and may do so to such further extent as is
consistent with law. The Board of Directors may by by-law, resolution or
agreement make further provision for indemnification of directors, officers,
employees and agents to the fullest extent permitted by the Maryland General
Corporation Law.
(c) No provision of this Article shall be effective to protect or
purport to protect any director or officer of the Corporation against any
liability to the Corporation or its security holders to which he would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
(d) References to the Maryland General Corporation Law in these Articles
of Incorporation are to that law as from time to time amended. No amendment to
the charter of the Corporation shall affect any right of any person under this
Article based on any event, omission or proceeding prior to the amendment.
SECOND: The provisions set forth in these Articles of Amendment and
Restatement are all the provisions of the Charter currently in effect. The
current address of the principal office of the Corporation, the name and address
of the Corporation's current resident agent and the number of directors of the
Corporation and the names of those currently in office are as set forth herein.
THIRD: The Articles of Amendment and Restatement of the Corporation as
hereinabove set forth have been duly advised by the Board of Directors, approved
by a majority of the entire Board of Directors and approved by the stockholders
of the Corporation by the vote required by law.
IN WITNESS WHEREOF, The Corporation has caused these Articles of Amendment
and Restatement to be signed and acknowledged by its Vice President, John W.
McGonigle, and attested by its Assistant Secretary, Jeannette Fisher-Garber, on
this 21st day of March, 1994.
The undersigned acknowledges these Articles of Amendment and Restatement to
be the corporate act of the Corporation and states that, to the best of his or
her knowledge, information and belief, the matters and facts set forth herein
with respect to the authorization and approval hereof are true in all material
respects and that this statement is made under the penalties of perjury.
ATTEST: FT SERIES, INC.
/S /JEANNETTE FISHER-GARBER By: /S/ JOHN W. MCGONIGLE
- ------------------------------ ---------------------
Jeannette Fisher-Garber John W. McGonigle
Assistant Secretary Vice President
(AMD. #4) - FILE STAMPED 9/12/94
INTERNATIONAL SERIES, INC.
ARTICLES SUPPLEMENTARY
INTERNATIONAL SERIES, INC., a Maryland corporation having its principal
offices in Baltimore, Maryland (hereinafter called the "Corporation"), hereby
certifies:
FIRST: The Board of Directors hereby reclassifies 1,000,000,000 of the
authorized but unissued shares of common stock of the Corporation as 500,000,000
shares of International Equity Fund Class B Shares and 500,000,000 shares of
International Income Fund Class B Shares.
SECOND: The shares of Common Stock reclassified hereby shall have the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption as set forth in Article FOURTH, paragraph (b) of the CorporationOs
charter and shall be subject to all provisions of the charter relating to stock
of the Corporation generally.
THIRD: The stock has been reclassified by the Board of Directors under the
authority contained in the charter of the Corporation.
IN WITNESS WHEREOF, International Series, Inc. has caused these presents
to be signed in its name and on its behalf by its Vice President and witnessed
by its Assistant Secretary on September 1, 1994.
The undersigned, John W. McGonigle, Vice President of the Corporation,
hereby acknowledges in the name and on behalf of the Corporation the foregoing
Articles Supplementary to be its corporate act and further certifies to the best
of his knowledge, information and belief, that the matters and facts set forth
herein with respect to the authorization and approval hereof are true in all
material respects and that this statement is made under the penalties of
perjury.
ATTEST: INTERNATIONAL SERIES, INC.
/S/ JEANNETTE FISHER-GARBER By:/S/ JOHN W. MCGONIGLE
- ------------------------------------ ---------------------
Jeannette Fisher-Garber John W. McGonigle
Assistant Secretary Vice President
(AMD. #5) - FILE STAMPED 1/31/96
INTERNATIONAL SERIES, INC.
ARTICLES OF AMENDMENT
INTERNATIONAL SERIES, INC., a Maryland corporation having its principal
offices in Baltimore, Maryland (hereinafter called the "Corporation"), hereby
certifies:
FIRST: In order to add the name "Federated" to each class of the
Corporation's common stock, the Articles of Amendment and Restatement are hereby
amended by striking paragraph (a) of Article FOURTH in its entirety and
inserting the following in its place:
"(a) The Corporation is authorized to issue five billion (5,000,000,000)
shares of common stock, par value $.0001 per share. The aggregate
par value of all shares which the Corporation is authorized to issue
is Five Hundred Thousand Dollars ($500,000). Subject to the
following paragraph, the authorized shares are classified as five
hundred million (500,000,000) shares of Federated International
Equity Fund Class A, five hundred million (500,000,000) shares of
Federated International Equity Fund Class B, five hundred million
(500,000,000) shares of Federated International Equity Fund Class C,
five hundred million (500,000,000) shares of Federated International
Income Fund Class B, and five hundred million (500,000,000) shares
of Federated International Income Fund Class B, and five hundred
million (5000,000,000) shares of Federated International Equity Fund
Class C. The remaining two billion (2,000,000,000) shares shall
remain unclassified until action is taken by the Board of Directors
pursuant to the following paragraph."
SECOND: The foregoing amendment was approved by a majority of the entire
Board of Directors of the Corporation and such amendment is limited to a change
expressly permitted by Section 2-605 of subtitle 6 of title 2 of the Maryland
General Corporation Law to be made without action by the stockholders and the
Corporation is registered an open-end Company under the Investment Company Act
of 1940, as amended.
THIRD: The foregoing amendment does not increase the authorized stock of
the Corporation or the aggregate par value thereof.
IN WITNESS WHEREOF, International Series, Inc. has caused these presents
to be signed in its name and on its behalf by its Vice President and witnessed
by its Assistant Secretary on August 25, 1995.
The undersigned, Richard B. Fisher, Vice President of the Corporation,
hereby acknowledges in the name and on behalf of the Corporation the foregoing
Articles of Amendment to be its corporate act and further certifies to the best
of his knowledge, information and belief, that the matters and facts set forth
herein with respect to the authorization and approval hereof are true in all
material respects and that this statement is made under the penalties of
perjury.
ATTEST: INTERNATIONAL SERIES, INC.
/s/J. CRILLEY KELLY By:/S/RICHARD B. FISHER
--------------------------- --------------------
J. Crilley Kelly, Assistant Secretary Richard B. Fisher, Vice President
(AMD. #6) - FILE STAMPED 3/12/97
INTERNATIONAL SERIES, INC.
CERTIFICATE OF CORRECTION
International Series, Inc., a Maryland corporation, having its principal
office in Maryland in the City of Baltimore, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The title of the document being corrected is "Articles
Supplementary."
SECOND: The only party to the document being corrected is International Series,
Inc.
THIRD: The document being corrected was filed with the State Department of
Assessments and Taxation on September 12, 1994.
FOURTH: (1) Article SECOND in the document as previously filed reads as follows:
SECOND: The shares of Common Stock reclassified hereby shall have
the preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption as set forth in Article FOURTH, paragraph (b) of the Corporation's
charter and shall be subject to all provisions of the charter relating to stock
of the Corporation generally.
(2) Article SECOND in the document as corrected reads as follows:
SECOND: The shares of common stock reclassified hereby shall have
the preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption as set forth in Article FOURTH, paragraph (b) of the Corporation's
charter and shall be subject to all provisions of the charter relating to stock
of the Corporation generally and to the following:
At such times as may be determined by the Board of Directors (or with the
authorization of the Board of Directors, by the Officers of the Corporation) in
accordance with the Investment Company Act of 1940, as amended, applicable rules
and regulations thereunder, and applicable rules and regulations of the National
Association of Securities Dealers, Inc., and reflected in the pertinent
registration statement of the Corporation, International Equity Fund Class B
Shares may be automatically converted into International Equity Fund Class A
Shares, and International Income Fund Class B Shares may be automatically
converted into International Income Fund Class A Shares based on the relative
net asset values of such classes at the time of the conversion, subject,
however, to any conditions of conversion that may be imposed by the Board of
Directors (or with the authorization of the Board of Directors, by the Officers
of the Corporation) and reflected in the pertinent registration statement of the
Corporation as aforesaid.
IN WITNESS WHEREOF, the Corporation has caused these presents to be signed
in its name and on its behalf by its Executive Vice President and witnessed by
its Assistant Secretary on this 28th day of February, 1997.
The undersigned Executive Vice President acknowledges this Certificate of
Correction to be the corporate act of the Corporation and as to all matters or
facts required to be verified under oath the undersigned Executive Vice
President acknowledges that to the best of his knowledge, information and
belief, these matters and facts are true in all material respects and that this
statement is made under the penalties for perjury.
WITNESSED INTERNATIONAL SERIES, INC.
/S/ S. ELLIOTT COHAN By:/S/ J. CHRISTOPHER DONAHUE
- ------------------------------ --------------------------
S. Elliott Cohan J. Christopher Donahue
Assistant Secretary Executive Vice President
(AMD. #7) - FILE STAMPED 4/23/97
INTERNATIONAL SERIES, INC.
CERTIFICATE OF CORRECTION
International Series, Inc., a Maryland corporation (the "Corporation"),
hereby certifies that:
FIRST: The title of the document being corrected is "Articles of
Amendment."
SECOND: The only party to the document being corrected is International
Series, Inc.
THIRD: The Articles of Amendment were filed on January 31, 1996.
FOURTH: A. Article FIRST of the Articles of Amendment as filed January 31,
1996 reads as follows:
FIRST: In order to add the name "Federated" to each class of the
Corporation's common stock, the Articles of Amendment and Restatement are hereby
amended by striking paragraph (a) of Article FOURTH in its entirety and
inserting the following in its place:
"(a) The Corporation is authorized to issue five billion
(5,000,000,000) shares of common stock, par value $.0001 per share.
The aggregate par value of all shares which the Corporation is
authorized to issue is Five Hundred Thousand Dollars ($500,000).
Subject to the following paragraph, the authorized shares are
classified as five hundred million (500,000,000) shares of
Federated International Equity Fund Class A, five hundred million
(500,000,000) shares of Federated International Equity Fund Class
B, five hundred million (500,000,000) shares of Federated
International Equity Fund Class C, five hundred million
(500,000,000) shares of Federated International Income Fund Class
A, five hundred million (500,000,000) shares of Federated
International Income Fund Class B, and five hundred million
(500,000,000) shares of Federated International Equity Fund Class
C. The remaining two billion (2,000,000,000) shares shall remain
unclassified until action is taken by the Board of Directors
pursuant to the following paragraph."
B. As corrected Article FIRST of the Articles of Amendment reads as
follows:
"FIRST: In order to add the name "Federated" to each class of the
Corporation's common stock, the Articles of Amendment and Restatement are hereby
amended by striking paragraph (a) of Article FOURTH in its entirety and
inserting the following in its place:
"(a) The Corporation is authorized to issue five billion
(5,000,000,000) shares of common stock, par value $.0001 per share.
The aggregate par value of all shares which the Corporation is
authorized to issue is Five Hundred Thousand Dollars ($500,000).
Subject to the following paragraph, the authorized shares are
classified as five hundred million (500,000,000) shares of
Federated International Equity Fund Class A, five hundred million
(500,000,000) shares of Federated International Equity Fund Class
B, five hundred million (500,000,000) shares of Federated
International Equity Fund Class C, five hundred million
(500,000,000) shares of Federated International Income Fund Class
A, five hundred million (500,000,000) shares of Federated
International Income Fund Class B, and five hundred million
(500,000,000) shares of Federated International Equity Fund Class
C. The remaining two billion (2,000,000,000) shares shall remain
unclassified until action is taken by the Board of Directors
pursuant to the following paragraph."
IN WITNESS WHEREOF, International Series, Inc. has caused these presents
to be signed in its name and on its behalf as of April 11, 1997, by its duly
authorized officers who acknowledge that this Certificate of Correction is the
act of the Corporation, that to the best of their knowledge, information and
belief, all matters and facts set forth herein that are required to be executed
under oath are true in all material respects, and that this statement is made
under the penalties of perjury.
WITNESS: INTERNATIONAL SERIES, INC.
/S/ S. ELLIOTT COHAN By:/S/ JOHN W. MCGONIGLE
- ------------------------------ ---------------------
S. Elliott Cohan John W. McGonigle
Assistant Secretary Executive Vice President
(AMD. #8) - FILE STAMPED 1/19/00
INTERNATIONAL SERIES, INC.
ARTICLES OF AMENDMENT
INTERNATIONAL SERIES, INC., a Maryland corporation having its principal
office in Maryland in the City of Baltimore, Maryland (the "Corporation"),
hereby certifies to the Maryland State Department of Assessments and Taxation
that:
FIRST: The charter of the Corporation is amended to change the name of the
Corporation by amending Article First of the Articles of Incorporation to read:
FIRST: The name of the corporation is Federated
International Series, Inc.
SECOND: The foregoing amendment to the charter of the Corporation was
approved by a majority of the entire Board of Directors of the Corporation; the
charter amendment is limited to a change expressly permitted by Section 2-605 of
the Maryland General Corporation Law to be made without action by stockholders.
THIRD: These Articles of Amendment shall become effective immediately upon
the filing of these Articles.
IN WITNESS WHEREOF, INTERNATIONAL SERIES, INC. has caused these Articles of
Amendment to be signed in its name and on its behalf by its Executive Vice
President, and witnessed by its Assistant Secretary, as of January 18, 2000.
The undersigned, J. Christopher Donahue, Executive Vice President of the
Corporation, hereby acknowledges in the name and on behalf of the Corporation
that the foregoing Articles of Amendment are the act of the Corporation and that
to the best of his knowledge, information and belief, all matters and facts set
forth relating to the authorization and approval of these Articles of Amendment
are true in all material respects, and that this statement is made under
penalties of perjury.
WITNESS: INTERNATIONAL SERIES, INC.
/S/ JAMES O. PERRY /S/ J. CHRISTOPHER DONAHUE
- ------------------------------ --------------------------
James O. Perry, Esq. J. Christopher Donahue
Assistant Secretary Executive Vice President
Exhibit o(ii) under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
the Secretary and Assistant Secretaries of Federated International Series, Inc.
and each of them, their true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
the Securities Exchange Act of 1934 and the Investment Company Act of 1940, by
means of the Securities and Exchange Commission's electronic disclosure system
known as EDGAR; and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to sign and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
SIGNATURES TITLE DATE
/s/ Nicholas P. Constantakis Director February 23, 2000
Nicholas P. Constantakis
Sworn to and subscribed before me this 23rd day of February, 2000
/s/Janice L. Vandenberg
Janice L. Vandenberg
Notarial Seal
Janive L. Vandenberg, Notary Public
Pittsburgh, Allegheny County
My Commission Expires July 4, 2002
Member, Pennsylvania Association of Notaries
Exhibit o(vi) under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
the Secretary and Assistant Secretaries of Federated International Series, Inc.
and each of them, their true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
the Securities Exchange Act of 1934 and the Investment Company Act of 1940, by
means of the Securities and Exchange Commission's electronic disclosure system
known as EDGAR; and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to sign and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
SIGNATURES TITLE DATE
/s/ John F. Cunningham Director February 23, 2000
John F. Cunningham
Sworn to and subscribed before me this 23rd day of February, 2000
/s/Janice L. Vandenberg
Janice L. Vandenberg
Notarial Seal
Janive L. Vandenberg, Notary Public
Pittsburgh, Allegheny County
My Commission Expires July 4, 2002
Member, Pennsylvania Association of Notaries
Exhibit o(iii) under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
the Secretary and Assistant Secretaries of Federated International Series, Inc.
and each of them, their true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
the Securities Exchange Act of 1934 and the Investment Company Act of 1940, by
means of the Securities and Exchange Commission's electronic disclosure system
known as EDGAR; and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to sign and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
SIGNATURES TITLE DATE
/s/ Henry A. Frantzen Chief Executive Officer February 23, 2000
Henry A. Frantzen
Sworn to and subscribed before me this 23rd day of February, 2000
/s/Janice L. Vandenberg
Janice L. Vandenberg
Notarial Seal
Janive L. Vandenberg, Notary Public
Pittsburgh, Allegheny County
My Commission Expires July 4, 2002
Member, Pennsylvania Association of Notaries
Exhibit o(v) under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
the Secretary and Assistant Secretaries of Federated International Series, Inc.
and each of them, their true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
the Securities Exchange Act of 1934 and the Investment Company Act of 1940, by
means of the Securities and Exchange Commission's electronic disclosure system
known as EDGAR; and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to sign and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
SIGNATURES TITLE DATE
/s/ Charles F. Mansfield, Jr. Director February 23, 2000
Charles F. Mansfield, Jr.
Sworn to and subscribed before me this 23rd day of February, 2000
/s/Janice L. Vandenberg
Janice L. Vandenberg
Notarial Seal
Janive L. Vandenberg, Notary Public
Pittsburgh, Allegheny County
My Commission Expires July 4, 2002
Member, Pennsylvania Association of Notaries
Exhibit o(iv) under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
the Secretary and Assistant Secretaries of Federated International Series, Inc.
and each of them, their true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
the Securities Exchange Act of 1934 and the Investment Company Act of 1940, by
means of the Securities and Exchange Commission's electronic disclosure system
known as EDGAR; and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to sign and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
SIGNATURES TITLE DATE
/s/ John S. Walsh Director February 23, 2000
John S. Walsh
Sworn to and subscribed before me this 23rd day of February, 2000
/s/Janice L. Vandenberg
Janice L. Vandenberg
Notarial Seal
Janive L. Vandenberg, Notary Public
Pittsburgh, Allegheny County
My Commission Expires July 4, 2002
Member, Pennsylvania Association of Notaries
Exhibit o(i) under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
the Secretary and Assistant Secretaries of Federated International Series, Inc.
and each of them, their true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
the Securities Exchange Act of 1934 and the Investment Company Act of 1940, by
means of the Securities and Exchange Commission's electronic disclosure system
known as EDGAR; and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to sign and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
SIGNATURES TITLE DATE
/s/John F. Donahue Chairman and Director February 23, 2000
John F. Donahue (Chief Executive Officer)
/s/Glen R. Johnson President February 23, 2000
Glen R. Johnson
/s/J. Christopher Donahue Executive Vice President February 23, 2000
J. Christopher Donahue and Director
/s/Richard J. Thomas Treasurer February 23, 2000
Richard J. Thomas (Principal Financial and
Accounting Officer)
/s/Thomas G. Bigley Director February 23, 2000
Thomas G. Bigley
/s/John T. Conroy, Jr. Director February 23, 2000
John T. Conroy, Jr.
/s/Lawrence D. Ellis, M.D. Director February 23, 2000
Lawrence D. Ellis, M.D.
/s/Peter E. Madden Director February 23, 2000
Peter E. Madden
/s/John E. Murray, Jr. Director February 23, 2000
John E. Murray, Jr.
/s/Marjorie P. Smuts Director February 23, 2000
Marjorie P. Smuts
Sworn to and subscribed before me this 23rd day of February, 2000
/s/Janice L. Vandenberg
Janice L. Vandenberg
Notarial Seal
Janive L. Vandenberg, Notary Public
Pittsburgh, Allegheny County
My Commission Expires July 4, 2002
Member, Pennsylvania Association of Notaries
Exhibit j under form N-1A
Exhibit 23 under Item 601/Reg. S-K
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectuses and "Independent Auditors" in the Statements of
Additional Information and to the use of our reports dated January 21, 2000 in
Post-Effective Amendment Number 36 to the Registration Statement (Form N-1A No.
2-91776) of Federated International Equity Fund and Federated International
Income Fund, each a portfolio of Federated International Series, Inc., dated
March 31, 2000.
/s/ Ernst & Young LLP
Ernst & Young LLP
Boston, Massachusetts
March 27, 2000
