FEDERATED EXCHANGE FUND, LTD.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
November 24, 1995
Dear Limited Partner:
The Board of Managing General Partners of Federated Exchange Fund,
Ltd. (the "Fund") is pleased to submit for your vote a proposal to reorganize
the Fund into Federated Capital Appreciation Fund, a portfolio of Federated
Equity Funds. We believe that this proposal presents Limited Partners of the
Fund with an exciting opportunity to participate in a new investment vehicle in
which they can purchase additional shares.
The Board of Managing General Partners believes that the
reorganization transaction is in the best interest of the Fund's Limited
Partners for several reasons:
Shares of Federated Capital Appreciation Fund provide shareholders with
an excellent investment opportunity. Limited Partners who invest may
acquire shares without the imposition of a sales load. In addition,
they may participate in a fund that is positioned to pursue further
growth of capital. The objective and policies of Federated Capital
Appreciation Fund, as compared to Federated Exchange Fund, are fully
described in the Prospectus/Proxy Statement.
Under federal tax law, Federated Exchange Fund would be treated, and
taxed, as a corporation after December 31, 1997. To avoid corporate
income taxation, the Fund must either reorganize as described in the
proxy statement or elect to be treated as a non-publicly offered
regulated investment company. The ability to grow the investment in the
reorganized fund could help achieve economies of scale, resulting in
lower expenses and greater opportunity to participate in a diversified
fund.
The reorganization will be accomplished in a TAX-FREE transaction. This
means that Limited Partners will not recognize gains or losses on the
exchange of Fund shares for shares of Federated Capital Appreciation
Fund, and will carryover their cost basis and holding period in the
shares they receive.
We believe that the reorganization of the Fund presents an excellent
opportunity to the Limited Partners. We have appreciated your loyalty as an
investor in the Fund and are excited to offer you the benefits of investing in
Federated Capital Appreciation Fund.
Your vote on the transaction is critical to its success. The
reorganization will be accomplished only on the affirmative vote of a majority
of the Fund's shareholders. We hope you share our enthusiasm and will
participate by casting your vote in person or by proxy if you are unable to
attend the meeting scheduled for December 21, 1995. Please read the enclosed
Prospectus/Proxy Statement carefully before you vote. If you have any
questions, please feel free to call our Investor Services representatives at 1-
800-245-2423.
Thank you for your participation in the proposed reorganization.
Very truly yours,
FEDERATED EXCHANGE FUND, LTD.
By:
John F. Donahue
Chairman and
Managing General Partner
FEDERATED EXCHANGE FUND, LTD.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
NOTICE OF A SPECIAL MEETING OF LIMITED PARTNERS
TO LIMITED PARTNERS OF FEDERATED EXCHANGE FUND, LTD.: A Special
Meeting of Limited Partners of Federated Exchange Fund, Ltd. (the "Fund") will
be held at 2 p.m. on December 21, 1995 on the 19th Floor, Federated Investors
Tower, 1001 Liberty Avenue, Pittsburgh, Pennsylvania 15222-3779 for the
following purposes:
1. To approve a proposed Agreement and Plan of Exchange between the
Fund and Federated Equity Funds (the "Trust"), on behalf of its
portfolio, Federated Capital Appreciation Fund (the "Portfolio"),
whereby the Trust would acquire all of the assets of the Fund in
exchange for Class A Shares of the Portfolio to be distributed
pro rata by the Fund to its limited partners in complete
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liquidation and dissolution of the Fund; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
By Order of the
Managing General Partners,
Dated: November 24, 1995 John F. Donahue
President and
Managing General Partner
Limited partners of record at the close of business November 16, 1995,
are entitled to vote at the meeting. Whether or not you plan to attend the
meeting, please sign and return the enclosed proxy card. Your vote is
important.
To secure the largest possible representation and to save the expense
of further mailings, please mark your proxy card, sign it, and return it in the
enclosed envelope, which requires no postage if mailed in the United States.
You may revoke your proxy at any time at or before the meeting or vote in person
if you attend the meeting.
PROSPECTUS/PROXY STATEMENT
November 24, 1995
Acquisition of the assets of
FEDERATED EXCHANGE FUND, LTD.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-235-4669
By and in exchange for Class A Shares of
FEDERATED CAPITAL APPRECIATION FUND
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-235-4669
This Prospectus/Proxy Statement describes the proposed Agreement and
Plan of Exchange (the "Plan") whereby Federated Equity Funds, a Massachusetts
business trust (the "Trust"), on behalf of its portfolio, Federated Capital
Appreciation Fund (the "Portfolio"), would acquire all of the assets of
Federated Exchange Fund, Ltd., a California limited partnership (the "Fund"), in
exchange for Class A Shares ("Shares") of the Portfolio to be distributed pro
---
rata by the Fund to its limited partners in complete liquidation and dissolution
- ----
of the Fund. As a result of the Plan, each limited partner of the Fund will
become the owner of Shares having a total net asset value equal to the total net
asset value of his holdings in the Fund.
The Trust is an open-end, diversified management investment company
which currently includes three portfolios: Federated Growth Strategies Fund,
Federated Small Cap Strategies Fund, and the Portfolio. The investment
objective of the Portfolio is capital appreciation. The Portfolio pursues this
investment objective by investing at least 65% of its assets in equity
securities, including common stocks, preferred stocks, and securities (including
investment grade debt securities) that are convertible into common stocks. The
investment objective of the Fund is long-term growth of capital and income,
which it pursues by investing principally in common stocks. For a comparison of
the investment policies of the Portfolio and the Fund, see "Comparison of
Investment Policies and Risk Factors."
This Prospectus/Proxy Statement should be retained for future
reference. It sets forth concisely the information about the Trust and the
Portfolio that a prospective investor should know before investing. This
Prospectus/Proxy Statement is accompanied by the Prospectus of the Portfolio
dated November 14, 1995 (Revised, November 17, 1995), which is incorporated
herein by reference. Statements of Additional Information for the Portfolio
dated November 14, 1995, (relating to the Portfolio's prospectus of the same
date) and November 24, 1995 (relating to this Prospectus/Proxy Statement)
containing additional information have been filed by the Trust with the
Securities and Exchange Commission and are incorporated herein by reference.
Copies of the Statements of Additional Information may be obtained without
charge by writing or by calling the Trust at the address and telephone number
shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Summary...................................... 1
Comparison on Investment Policies and Risk Factors .....6
Information about the Exchange............... 9
Information about the Trust,
the Portfolio, and the Fund................. 16
Voting Information........................... 18
Agreement and Plan of Exchange............... Exhibit A
SUMMARY
ABOUT THE PROPOSED EXCHANGE
The Managing General Partners of Federated Exchange Fund, Ltd. (the "Fund")
have voted to recommend to the limited partners (individually, "Partner" or
collectively, "Partners") of the Fund the approval of an Agreement and Plan of
Exchange (the "Plan"), dated October 10, 1995, whereby Federated Equity Funds, a
Massachusetts business trust (the "Trust"), on behalf of its portfolio,
Federated Capital Appreciation Fund (the "Portfolio"), would acquire all of the
assets of the Fund in exchange for Class A Shares ("Shares") of the Portfolio to
be distributed pro rata by the Fund to its Partners in complete liquidation and
--- ----
dissolution of the Fund (the "Exchange"). As a result of the Exchange, each
Partner of the Fund will become the owner of Shares of the Portfolio having a
total net asset value equal to the total net asset value of his holdings in the
Fund on the date of the Exchange, i.e., the Closing Date, which is scheduled for
January 2, 1996.
As a condition to the Exchange, the Trust and the Fund will receive an
opinion of counsel that the Exchange will be considered a tax-free "Exchange"
under applicable provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), so that no gain or loss will be recognized by the Trust, its
shareholders, the Fund, or its Partners. The tax cost basis of the Portfolio
Shares received by Fund Partners will be the same as the tax cost basis of their
shares in the Fund.
After the Exchange is completed, the Fund will dissolve and deregister as
an investment company under the Investment Company Act of 1940 (the "1940 Act").
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Portfolio is capital appreciation while the
Fund's investment objective is long-term growth of capital and income. Both the
Portfolio and the Fund pursue their respective investment objectives by
investing in common stocks, preferred stocks, convertible securities, corporate
bonds, notes and warrants, cash and cash items, and repurchase agreements, and
writing call options on securities in their portfolios. The Portfolio is also
permitted to enter into foreign currency transactions, and purchase and sell put
options, financial futures and options on futures, while the Fund is also
permitted to invest in municipal and government obligations. The Fund and the
Portfolio are subject to the same principal risk factors. For additional
information, see "Comparison of Investment Policies and Risk Factors" below.
ADVISORY FEES AND EXPENSE RATIOS
The investment adviser to the Portfolio is Federated Management. The
investment adviser to the Fund is Federated Advisers. Both of these advisers,
which are registered under the Investment Advisers Act of 1940, are subsidiaries
of Federated Investors.
The annual investment advisory fee for the Portfolio is .75% of average
daily net assets. The fee paid by the Portfolio, while higher than the advisory
fees paid by other mutual funds in general, is comparable to fees paid by other
mutual funds with similar objectives and policies. The Portfolio's estimated
total operating expenses for its fiscal year ended October 31, 1996, are 1.15%,
including a 0.75% management (advisory) fee and 0.40% of total other expenses.
The annual investment advisory fee for the Fund is .55% of average daily
net assets plus 4.5% of the gross income of the Fund (excluding capital gains
and losses). The Fund's total operating expenses for its fiscal year ended
December 31, 1994, were 1.063%, including a 0.676% management fee and 0.387% of
total other expenses. The Fund's estimated total operating expenses for its
fiscal year ended December 31, 1995, are 1.015%, including a 0.675% management
fee and 0.34% of total other expenses.
DISTRIBUTION ARRANGEMENTS
Federated Securities Corp. ("FSC"), a subsidiary of Federated Investors, is
the principal distributor for the Portfolio. Under a distribution plan adopted
in accordance with Rule 12b-1 under the 1940 Act (the "12b-1 Plan"), the
Portfolio may pay FSC an amount computed at an annual rate of up to 0.25 of 1%
of average daily net assets to finance any activity which is principally
intended to result in the sale of Shares. However, the Portfolio does not
currently make payments to the distributor or charge a fee under the 12b-1 Plan
for Shares. Before the fee can be incurred, the Board of Trustees of the Trust
must agree to impose the fee and holders of Shares would be notified of the
Portfolio's intention to charge a fee under the 12b-1 Plan. The Fund is not
subject to a 12b-1 Plan.
SHAREHOLDER SERVICES
The Fund has entered into a shareholder services agreement with Federated
Shareholder Services ("FSS"), a subsidiary of Federated Investors, under which
it may pay FSS up to 0.25 of 1% of average daily net assets to obtain certain
personal services for Partners and for the maintenance of Partner accounts. The
Portfolio has not entered into a shareholder services agreement.
ADMINISTRATIVE SERVICES
Federated Administrative Services ("FAS"), a subsidiary of Federated
Investors, provides the Portfolio and the Fund with administrative personnel and
services. FAS provides services to the Portfolio and the Fund under identical
agreements at the annual rate of 0.15% on the first $250 million of average
daily net assets, 0.125% on the next $250 million, 0.10% on the next $250
million and 0.075% on assets in excess of $750 million. The annual
administrative fee is based on the level of average aggregate daily net assets
of all funds advised by subsidiaries of Federated Investors for the period, but
is at least $125,000 per portfolio and $30,000 per each additional class of
shares.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian
for the securities and cash of the Portfolio and the Fund.
TRANSFER AND DIVIDEND DISBURSING AGENT
Federated Services Company, a subsidiary of Federated Investors, is
transfer agent and dividend disbursing agent for the Portfolio and the Fund.
INDEPENDENT AUDITORS
Ernst & Young LLP, Pittsburgh, Pennsylvania, are the independent auditors
for the Portfolio. Deloitte & Touche, LLP, Boston, Massachusetts, are the
independent auditors for the Fund.
PURCHASE AND REDEMPTION PROCEDURES
If the Exchange is consummated, Partners of the Fund will receive
information shortly after the Closing Date with respect to the various services
provided by the Portfolio, as well as a detailed explanation of the options
available to shareholders for effecting purchases and redemptions of Portfolio
Shares. Any questions about such procedures may be directed to, and assistance
in effecting purchases or redemptions of Portfolio Shares may be obtained from,
FSC at 1-800-235-4669.
Reference is made to the Prospectus of the Portfolio dated November 14,
1995, and the Registration Statement of the Fund dated April 28, 1995, for a
complete description of the purchase and redemption procedures applicable to
purchases and redemptions of Portfolio and Fund shares, respectively, each of
which is incorporated herein by reference thereto. Set forth below is a brief
listing of the more significant differences between the purchase and redemption
procedures of the Portfolio, as compared to the Fund.
Purchases of Portfolio Shares may be made by wire, by check, or through a
financial institution. Additionally, the Portfolio offers a systematic
investment program. The minimum initial investment for Shares is $500, and the
minimum subsequent investment is $100, except in the case of retirement plans,
in which case the minimum initial or subsequent investment is $50. Shares are
sold at net asset value next determined after an order is received, plus a sales
load based on the amount of the transaction.
Shareholders who receive Shares through the Exchange will not be subject to
such sales load on the consummation of the transaction. In addition, Partners
will be able to purchase additional shares of the Portfolio in the future
without the imposition of a sales load. Finally, as is the case with other
shareholders of the Portfolio, certain exchanges into other mutual funds (as
described in the prospectus for the Portfolio) are exempt from the imposition of
a sales load.
No Partners have been admitted to the Fund since its organization in 1976.
At that time, a prospective partner who held acceptable securities could
exchange such securities for Fund shares by depositing such securities, along
with appropriate documentation, with the Fund's securities depository, State
Street Bank and Trust Company. The Fund would not accept a deposit of
securities unless the aggregate value of such securities, plus cash, if any,
deposited was at least $25,000, determined as of the date of deposit.
Shares of the Portfolio may be redeemed by mail, by telephone, or through a
financial institution. The Portfolio also offers a systematic withdrawal
program for shareholders with minimum account values of $10,000. Shares are
redeemed at their net asset value next determined after the Portfolio receives
the redemption request.
Shares of the Fund may be redeemed by mail. Shares are redeemed at their
net asset value determined at the close of business on the New York Stock
Exchange on the day of receipt of the written redemption request. The Fund may
redeem its shares wholly or partly in portfolio securities (i.e., redemption in
kind) instead of in cash, and deliver one or more portfolio securities in
satisfaction of the redemption request regardless of which securities were
deposited by the Partner or the composition of the portfolio of the Fund at the
time of redemption. Securities delivered in redemption in kind are valued at
the amount at which they were valued in computing the redemption value of the
Shares redeemed.
EXCHANGE PRIVILEGES
Holders of Portfolio Shares are permitted to exchange all or some of their
Shares for Class A shares of other funds in the Liberty Family of Funds, which
are distributed by FSC. Such exchanges will be effected at net asset value
without the imposition of additional fees. Shareholders using the exchange
privilege must exchange shares having a net asset value equal to the minimum
investment requirements of the fund into which the exchange is being made.
Information with respect to the other funds in the Liberty Family of Funds,
including a prospectus which describes the shares offered thereby, may be
obtained from FSC.
Partners of the Fund may exchange all or some of their shares for shares of
American Leaders Fund, Inc., Money Market Management, Inc., and Fund for U.S.
Government Securities, Inc., each of which is distributed by FSC. Shares with a
net asset value of $2,500 must be exchanged initially, and subsequent exchanges
must be in the minimum amount of $1,000. FSC will provide information with
respect to such funds, including a prospectus which describes the shares offered
thereby.
COMPARATIVE FEE TABLES. Set forth below is comparative fee information for the
Fund and the Portfolio. After giving effect to the Exchange, Partners will be
subject to the fees described for Class A Shares of the Portfolio.
COMPARATIVE FEE TABLE FOR THE FUND AND THE PORTFOLIO
FEDERATED EXCHANGE FEDERATED CAPITAL APPRECIATION FUND
FUND, LTD.
CLASS A SHARESCLASS B SHARESCLASS C SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases None 5.50%(1) None None
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering
price)....................None None None None
Contingent Deferred Sales Load (as a
percentage of original purchase price or
redemption proceeds, as applicable) None 0.00%(2) 5.50% (2) 1.00%(3)
Redemption Fee (as a percentage of amount
redeemed, if applicable)..None None None None
Exchange Fee..................None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee................0.68% 0.75% 0.75% 0.75%
12b-1 Fees....................None None 0.75% 0.75%
Other Expenses (after fee waivers and/or
expense reimbursements)..0.39% 0.40% 0.40% 0.40%
Total Operating Expenses (after fee waivers
and/or expense reimbursements) 1.07% 1.15% 1.90% 1.90%
(1) .......................The sales load is not imposed upon shares received
by Limited Partners of Federated Exchange Fund, Ltd. in the proposed
reorganization transaction, and is not imposed on additional purchases of
Class A Shares by such Limited Partners.
(2) ......................Class A Shares purchased with the proceeds of a
redemption of shares of an unaffiliated investment company purchased or
redeemed with a sales load and not distributed by Federated Securities Corp.
may be charged a contingent deferred sales charge of 0.50% of 1.00% for
redemptions made within one full year of purchase. For Class B Shares, the
contingent deferred sales charge is 5.50% in the first year declining to
1.00% in the sixth year and 0.00% thereafter.
(3) ......................The contingent deferred sales charge assessed is
1.00% of the lesser of the original purchase price or the net asset value of
Class C Shares redeemed within one year of their purchase date.
Long-term shareholders in Class B Shares and Class C Shares may pay
more than the economic equivalent of the maximum front-end sales charges
permitted under the rules of the National Association of Securities
Dealers, Inc.
* Total Operating Expenses for Class A Shares, Class B Shares, and Class C
Shares of Federated Capital Appreciation Fund are estimated based on average
expenses expected to be incurred during the period ending October 31, 1996.
During the course of the period, expenses may be more or less the average
amount shown.
EXAMPLE : An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, and (2) redemption at the end of the following
periods:
1 year 3 years 5 years 10 years
Federated Exchange Fund, Ltd............. $ 11 $ 34 $ 59 $ 131
Federated Capital Appreciation Fund
Class A Shares........ $ 71 $ 90
Class B Shares........ $ 76 $104
Class C Shares........ $ 30 $ 60
COMPARISON OF INVESTMENT POLICIES AND RISK FACTORS
Both the Portfolio and the Fund have similar investment objectives. The
Portfolio seeks capital appreciation, while the Fund seeks long-term growth of
capital and income.
The Portfolio invests at least 65% of its assets in equity securities,
including common stocks, preferred stocks, and securities (including investment
grade debt securities) that are convertible into common stocks. The Portfolio
may also invest in foreign securities, high-yield convertible securities
(commonly referred to as "junk bonds"), and restricted and illiquid securities;
enter into foreign currency transactions, repurchase agreements, and when-issued
and delayed delivery transactions; and purchase and sell put and call options,
financial futures, and options on futures.
The Portfolio may invest up to, but not including, 35% of its assets in
lower-rated convertible, synthetic, and zero coupon convertible securities. A
"synthetic convertible" is created by combining distinct securities that
possess the two principle characteristics of a true convertible: a fixed income
component and a convertibility component. This combination is achieved by
investing the nonconvertible fixed-income securities (nonconvertible bonds,
preferred stocks, and money market instruments) and in warrants or call options
traded on U.S. or foreign exchanges or in the over-the-counter markets granting
the holder the right to purchase a specified quantity of securities within a
specified period of time at a specified price or to receive cash in the case of
stock index options.
Debt obligations that are not determined to be investment grade are high-
yield, high-risk bonds, typically subject to greater market fluctuations and
greater risk of loss of income and principal due to an issuer's default. To a
greater extent than investment-grade bonds, lower-rated bonds tend to reflect
short-term corporate, economic, and market developments, as well as investor
perceptions of the issuer's credit quality. In addition, lower-rated bonds may
be more difficult to dispose of or to value than higher-rated, lower-yielding
bonds. The Portfolio may invest in securities rated in the lowest rating
category.
The Fund invests principally in common stocks, but may also invest in other
corporate securities such as preferred stocks, convertible securities, corporate
bonds, notes and warrants, or in municipal and government obligations, or cash
and cash items, including but not limited to short-term obligations such as
certificates of deposit, short-term notes, and repurchase agreements. Some of
the convertible securities in which the Fund may invest may be high-yield
securities (commonly referred to as "junk bonds"), that are subject to the risks
described in the preceding paragraph. The Fund may invest in securities rated
in the lowest rating category. The Fund may also write call options on
portfolio securities and purchase restricted securities. Under normal
circumstances, as an operating policy, the Fund will invest at least 65% of its
assets in equity securities, and no more than 35% of its assets in lower-rated
securities.
The principal difference between the Portfolio and the Fund is that the
Portfolio is permitted to invest in foreign securities, purchase and sell
financial futures and options on futures, and enter into foreign currency
transactions. Because the Fund is not permitted to engage in these activities,
the Portfolio is exposed to different types of risk than the Fund.
Investments in foreign securities, in which the Portfolio is permitted to
invest, are subject to different risks than domestic securities. These risks
include, but are not limited to, the possibility of expropriation, confiscatory
taxation, currency fluctuations, the unavailability of financial information or
the difficulty of interpreting financial information prepared under foreign
accounting standards, less liquidity and more volatility in foreign securities
markets, the impact of political, social, or diplomatic developments, and the
difficulty of assessing economic trends in foreign countries. Insofar as the
Portfolio may invest in foreign securities, as an operating policy, which may be
changed without shareholder approval, the Portfolio intends to invest not more
than 20% of its assets in foreign securities.
The Portfolio is also permitted to purchase and sell financial futures and
options on futures to hedge against changes in interest rates. There is a risk
that the prices of the securities subject to the futures contracts may not
correlate perfectly with the price of the Portfolio's securities, causing the
futures contract and any related options to react differently than the
Portfolio's securities to market changes. Also, it is not certain that a
secondary market for positions in futures contracts or for options will exist at
all times, and the Portfolio's ability to establish and close out futures and
options positions depends on this secondary market. Insofar as the Portfolio
may invest in foreign currency transactions, as an operating policy, which may
be changed without shareholder approval, the Portfolio intends to invest not
more than 20% of its assets in foreign transactions.
Finally, the Portfolio is permitted to enter into foreign currency
transactions, such as forward foreign currency exchange contracts, foreign
currency options and foreign currency futures transactions. Thus, changes in
foreign currency exchange rates will affect the Portfolio's net asset value. If
the value of a foreign currency declines against the U.S. dollar, the value of
the Portfolio's assets denominated in that currency will decrease. Foreign
currency options and foreign currency futures transactions are subject to the
same risks that apply to options and futures generally. In addition, the
markets in foreign currency options and foreign currency futures transactions
are relatively new, and the Portfolio's ability to establish and close out
positions on such transactions is subject to the maintenance of a liquid
secondary market.
Although the Portfolio and the Fund invest in many of the same types of
securities, as described above, the percentage of assets that may be invested in
particular securities differs between the funds. Generally, the Fund may invest
in any of the securities described without limitation as to percentage of
assets. The Portfolio is subject to specific limitations as to the percentage
of assets that may be invested in particular securities. For example, the
Portfolio must invest at least 65% of its assets in equity securities, which
means that it cannot invest more than 35% of its assets in a combination of
restricted and illiquid securities, repurchase agreements, when-issued and
delayed delivery transactions, and other non-equity securities. Among these
transactions, the Portfolio is subject to certain additional restrictions: no
more than 10% of the Portfolio's net assets may be invested in restricted
securities; no more than 15% of the Portfolio's net assets may be invested in
illiquid securities; and no more than 20% of total assets may be segregated to
reflect the Portfolio's participation in when-issued or delayed delivery
transactions. Because the Portfolio is subject to limitations on its
investments in various types of securities and the Fund is not subject to such
limitations, the Portfolio may provide investors with additional protections due
to its inability to concentrate investments in certain types of securities.
The Portfolio's investment objective and policies are more fully described
in its current Prospectus dated November 14, 1995 (Revised, November 17, 1995),
a copy of which accompanies this Prospectus/Proxy Statement. The Portfolio's
investment objective, as described on page 5 of its current Prospectus, may not
be changed without the approval of the Portfolio's shareholders.
In general, the investment restrictions of the Portfolio and the Fund are
similar, although not identical. Set forth below is a brief summary of the more
significant differences between rights of Partners of the Fund and shareholders
of the Portfolio.
The Portfolio may not sell securities short except under strict
limitations; the Fund may not sell securities short under any circumstance.
Neither the Portfolio nor the Fund may borrow money except as a temporary
measure for extraordinary purposes, in which case the Portfolio may borrow up to
one-third the value of its total assets, while the Fund may borrow up to 10% of
the value of its total assets. The Portfolio may not pledge assets except to
secure permitted borrowings, in which case it may pledge assets having a market
value not exceeding the lesser of the dollar amounts borrowed or 10% of the
value of total assets at the time of the borrowing; the Fund may not pledge
assets. Finally, the Portfolio may purchase and sell puts, calls, straddles, or
spreads, or any combination thereof, while the Fund is prohibited from engaging
in such transactions, except that it may write call options on securities
constituting not more than 5% of the value of its net assets when the Fund owns
securities against which the option is written or owns securities convertible
into such securities. The Portfolio has adopted non-fundamental investment
limitations whereby it will not commit more than 5% of the value of its total
assets to premiums on open option positions.
Reference is hereby made to the Portfolio's Statement of Additional
Information dated November 14, 1995, and the Fund's registration statement dated
April 28, 1995, for a complete description of the investment restrictions of the
Portfolio, and the Fund. Copies of such documents are available upon request at
no charge. See "Information About the Trust, the Portfolio and the Fund."
INFORMATION ABOUT THE EXCHANGE
BACKGROUND AND REASONS FOR THE PROPOSED ACQUISITION
The Fund was created in 1976 as a tax-free exchange fund that allowed
investors to exchange stock from their own portfolios for shares of a
professionally managed mutual fund. The Fund is organized as a limited
partnership under the laws of the State of California. This form of
organization was chosen because a tax-free exchange of that sort, which is not
available after 1976 under the Code, was available at the time of the Fund's
organization only to mutual funds organized as limited partnerships.
For tax purposes, the Fund is treated as a publicly traded partnership
("PTP") because its shares are considered readily tradable. Most PTPs are taxed
as if they were corporations. A grandfather provision, however, protects the
Fund from corporate income taxation through the end of 1997. In order to avoid
the imposition of corporate income tax on its net income, the Fund must (1)
effect the Exchange; or (2) elect to be treated as a regulated investment
company under the Internal Revenue Code, as amended (for federal tax purposes),
after December 31, 1997. The Fund has registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended, and
intends to maintain such registration following the reorganization transaction.
The Managing General Partners of the Fund have concluded that it is
desirable to effect the Exchange to relieve some of the difficulties and
expenses experienced by the Partners of the Fund in accounting for their
investments and preparing federal tax returns. The Managing General Partners
also believe that the public offering of Portfolio Shares will result in certain
economies of scale due to a larger asset base. Finally, the Managing General
Partners believe that the Exchange will simplify the procedures involved in the
Fund's administrative operations, and eliminate certain expenses associated with
the limited partnership form of organization.
The accounting required of an owner of shares of the Portfolio, as a
Massachusetts business trust, is far simpler than the accounting involved in
owning shares of a limited partnership. Because income and gains earned by the
Portfolio would be taxable only when paid out to shareholders as a dividend
(instead of when earned, as with the Fund), a shareholder in the Portfolio could
easily estimate the amount of income from the Portfolio that he must report for
tax purposes by simply referring to the account statements provided whenever a
dividend is paid. By contrast, present Partners of the Fund cannot determine
the amount of income that must be reported until a Form K-1 is provided by the
Fund after the end of the year.
Accounting for gains and losses realized upon the sale of shares would also
be simplified. A Partner's tax basis in shares of the Fund, like each Partner's
portion of the Fund's income and gains, changes daily according to the Fund's
transactions, and can only be determined after receipt of Form K-1. The tax
basis in shares of the Portfolio, on the other hand, generally would be
unaffected by the operations of the Portfolio unless the Portfolio paid a
distribution from capital rather than from income or gains, and could readily be
estimated at any time from information and account statements supplied to each
shareholder. The Managing General Partners believe that the Exchange should
increase the convenience of maintaining an investment in the Fund, and could
also reduce the costs to Partners of preparing their tax returns and monitoring
their investments.
The Managing General Partners have considered the possibility of organizing
a trust under the laws of other states, including certain states which, by
statute, provide limited liability to trust shareholders. The Managing General
Partners feel, however, that it is in the best interest of Partners of the Fund
to adopt a Massachusetts domicile, largely because the laws of Massachusetts
regarding business trusts are the most developed of any state and any potential
for shareholder liability is extremely remote. It is expected that some minor
additional savings to the Fund may also be realized through administrative
efficiencies because many Federated funds are organized in the same manner.
The Managing General Partners also believe that the Partners will realize
certain economies of scale due to a larger asset base. This larger asset base
will allow the Portfolio to invest in, and be exposed to, a greater range of
equity issuers. Greater diversification will decrease the risk and volatility
of investment in the Portfolio. In addition, the larger asset base will allow
the Portfolio to participate in securities transactions involving larger
denominations than would be available to the Fund, thereby reducing transaction
costs.
Finally, the Portfolio would not be subject to the legal and administrative
expenses incurred by the Fund in connection with amendments to the Agreement of
Limited Partnership that it is required to file with the State of California for
each substitution of Partners upon transfer of ownership of shares.
On August 22, 1995, the Board of Trustees of the Trust and the Managing
General Partners of the Fund each met to discuss the above information, as well
as the terms and conditions of the proposed Exchange and Plan. Since the Trust
and the Fund may be deemed affiliates of one another because they have common
Trustees and Managing General Partners, and certain of the same officers and
service providers, the Board of Trustees of the Trust and the Managing General
Partners of the Fund unanimously approved the proposed Exchange under Rule 17a-8
under the 1940 Act. In accordance with this Rule, the Board of Trustees of the
Trust and the Managing General Partners of the Fund determined that
participation in the transaction is in the best interests of the Trust and the
Fund, respectively, and the Managing General Partners of the Fund determined
that the interests of existing Partners of the Fund will not be diluted as a
result of the Exchange. The Board of Trustees and the Managing General Partners
also approved the Plan, as described below.
DESCRIPTION OF THE PLAN OF EXCHANGE
The Plan provides that the Fund will discharge all of its liabilities and
the Trust, on behalf of the Portfolio, will acquire all of the assets of the
Fund in exchange for Shares of the Portfolio to be distributed pro rata by the
--- ----
Fund to its Partners in complete liquidation and dissolution of the Fund on or
about . Partners of the Fund will become shareholders of the Portfolio as
of 4:00 (Eastern time) on the Closing Date and will begin accruing dividends as
of such day.
Consummation of the Exchange is subject to the conditions set forth in the
Plan, including receipt of an opinion of counsel in form and substance
satisfactory to the Fund and the Trust, on behalf of the Portfolio, as described
under the caption "Federal Income Tax Consequences" below. The Plan may be
terminated and the Exchange may be abandoned at any time before or after
approval by the Partners of the Fund prior to the Closing Date by either party
if it believes that consummation of the Exchange would not be in the best
interests of its Partners or shareholders.
Federated Management is responsible for the payment of all expenses of the
Exchange incurred by either party, whether or not the Exchange is consummated.
Such expenses include, but are not limited to, legal fees, registration fees,
transfer taxes (if any), the fees of banks and transfer agents, and the costs of
preparing, printing, copying and mailing proxy solicitation materials to the
Fund's Partners and the costs of holding the Special Meeting of Partners.
The foregoing description of the Plan entered into between the Trust, on
behalf of the Portfolio, and the Fund is qualified in its entirety by the terms
and provisions of the Plan, a copy of which is attached hereto as Exhibit A and
incorporated herein by reference thereto.
DESCRIPTION OF PORTFOLIO SHARES
Shares of the Portfolio to be issued to Partners of the Fund under the Plan
will be fully paid and nonassessable when issued and transferable without
restrictions and will have no preemptive or conversion rights. The Declaration
of Trust of the Portfolio permits it to offer separate series of shares
representing interests in separate portfolios of securities. The shares in any
one portfolio may be offered in separate classes. Currently, the Trustees have
established three classes of shares: Class A Shares, Class B Shares, and Class C
Shares. Class A Shares are generally sold at net asset value plus an applicable
sales load and are redeemed at net asset value. Class B Shares are sold at net
asset value and are redeemed at net asset value; a contingent deferred sales
charge is imposed on certain shares which are redeemed within six full years of
purchase. Class C shares are sold at net asset value; a contingent deferred
sales charge will be charged on assets redeemed within the first twelve months
following purchase. Partners of the Fund will receive Class A shares of the
Portfolio if the Exchange is consummated. Reference is hereby made to the
Prospectus of the Portfolio provided herewith for additional information about
Shares of the Portfolio.
FEDERAL INCOME TAX CONSEQUENCES
As a condition to the Exchange, the Trust, on behalf of the Portfolio, and
the Fund will receive an opinion from Hunton & Williams to the effect that, on
the basis of existing provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), current administrative rules and court decisions, for
federal income tax purposes:
1) The Partnership will recognize no gain or loss on the transfer of the
Assets to the Fund solely in exchange for Stock and the Fund's
assumption of the Partnership's liabilities.
2) The Fund will recognize no gain or loss on the transfer of the Assets
to the Fund solely in exchange for Stock and the Fund's assumption of
the Partnership's liabilities.
3) The Fund's basis in the Assets transferred to the Fund will equal the
basis of the Assets in the hands of the Partnership immediately prior
to the Exchange.
4) The Fund's holding period for the Assets transferred to the Fund will,
in each case, include the period during which the Partnership held the
Assets.
5) The General Partners will recognize no gain or loss on the redemption
of their partnership interests in exchange for a pro rata portion of
each asset held by the Partnership immediately prior to the Exchange.
6) Each General Partner's aggregate basis in the assets distributed to it
in redemption of its Partnership interest will equal its adjusted
basis in its Partnership interest, after taking into account the
reduction in such basis resulting from the General Partner's being
relieved of its share of Partnership liabilities.
7) Each General Partner's holding period for the assets distributed to it
in redemption of its Partnership interest will include the
Partnership's holding period.
8) The Limited Partners will recognize no gain or loss on the
distribution of the Stock to them in exchange for their Partnership
interests.
9) Each Limited Partner's aggregate basis in the Stock distributed to him
will equal his adjusted basis in his Partnership interest, after
taking into account the reduction in such basis resulting from the
Limited Partner's being relieved of its share of Partnership
liabilities.
10) Each Limited Partner's holding period for the Stock will include the
Partnership's holding period for the Stock, which in turn will include
the period for which the Partnership held the Assets. To the extent
that the Partnership's holding period for some Assets exceeds one year
(long-term Assets) and its holding period for other Assets does not
exceed one year (short-term Assets), the Limited Partners' holding
periods for the Stock will be in part long-term and in part
short-term.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS AND OBLIGATIONS
The Trust is organized as a business trust pursuant to a Declaration of
Trust under the laws of the Commonwealth of Massachusetts while the Fund is
organized as a limited partnership under the laws of the State of California.
In general, the rights of shareholders of the Trust and Partners of the Fund are
similar, although not identical. Set forth below is a brief summary of the more
significant differences between rights of Partners of the Fund and shareholders
of the Portfolio.
The Trust's Declaration of Trust provides that the presence of the
holders of one-fourth of the shares of the Trust constitutes a quorum. A
plurality of votes cast will elect a Trustee, and all other matters will be
decided by a majority of the votes cast and entitled to vote thereon. Trustees
may be removed at any special meeting of shareholders by a vote of two-thirds of
the outstanding shares.
Under the Fund's Agreement of Limited Partnership, a majority of the
outstanding shares will elect the Managing General Partners or terminate the
Partnership. All other actions of Partners, including the removal of Managing
General Partners, requires the lesser of (i) the vote of Partners holding a
majority of the then outstanding shares; or (ii) the vote of Partners holding
67% or more of the shares represented in person or by proxy at a meeting at
which Partners holding a majority of outstanding shares are present in person or
by proxy.
Under certain circumstances, shareholders of the Portfolio may be held
personally liable as partners under Massachusetts law for acts or obligations of
the Trust on behalf of the Portfolio. To protect shareholders of the Portfolio,
the Trust has filed legal documents with the Commonwealth of Massachusetts that
expressly disclaim the liability of shareholders of the Portfolio for such acts
or obligations of the Trust. These documents require that notice of this
disclaimer be given in each agreement, obligation, or instrument that the Trust
or its Trustees enter into or sign on behalf of the Portfolio.
In the unlikely event that a shareholder of the Portfolio is held
personally liable for the Trust's obligations on behalf of the Portfolio, the
Trust is required to use the property of the Portfolio to protect or compensate
the shareholder. On request, the Trust will defend any claims made and pay any
judgment against a shareholder of the Portfolio for any act or obligation of the
Trust on behalf of the Portfolio. Therefore, financial loss resulting from
liability as a shareholder of the Portfolio will occur only if the Trust cannot
meet its obligations to indemnify shareholders and pay judgments against them
from the assets of the Portfolio.
Partners of the Fund generally are not personally liable for liabilities of
the Fund. However, if the Fund were unable to pay its liabilities, recipients
of distributions from the Fund could be liable to certain creditors of the Fund
to the extent of such distributions, plus interest. The Fund will, to the
extent of its net assets, indemnify the Partners or former Partners against any
liability which is incurred because of the receipt of a distribution which has
to be returned to creditors in satisfaction of Fund liability. If the Fund's
net assets are insufficient to indemnify the Partners in full, the Fund will
attempt to recover from other Partners who received such distributions their
proportionate share of such liability. Each Partner agrees to indemnify each
other Partner against such liability to the extent of his proportionate share of
such liability. Each Partner, by becoming a Partner, consents to pro rata
distributions to holders of shares which may constitute, in whole or in part,
returns of contributions with respect to such shares.
CAPITALIZATION
The following table shows the capitalization of the Portfolio and the Fund
as of November 16, 1995 and on a pro forma basis as of that date:
Pro Forma
Portfolio* Fund Combined
Net Assets $0 (A) $100,409,475.22 $100,409,475.22 (A)
$0 (B) $0 $0 (B)
$0 (C) $0 $0 (C)
$0 $0 $
Net Asset
Value Per
Share $0 $90.84 $90.84
Shares
Outstanding 0 (A) 1,105,333.068 1,105,333.068 (A)
0 (B) 0 0 (B)
0 (C) 0 0 (C)
Shares
Authorized Indefinite Indefinite Indefinite
*The Figures for the Portfolio are shown for Class A Shares, Class B
Shares, and Class C Shares where different, although the Exchange involves
issuance of Class A Shares of the Portfolio to the Fund Partners.
INFORMATION ABOUT THE TRUST, THE PORTFOLIO, AND THE FUND
FEDERATED CAPITAL APPRECIATION FUND, A PORTFOLIO OF FEDERATED EQUITY FUNDS
Information about the Trust and the Portfolio is contained in the
Portfolio's Prospectus dated November 14, 1995 (Revised, November 17, 1995), a
copy of which is included herewith and incorporated by reference herein.
Additional information about the Trust and the Portfolio is included in the
Portfolio's Statement of Additional Information dated November 14, 1995
(Revised, November 17, 1995) , which is incorporated herein by reference.
Copies of the Statement of Additional Information, which has been filed with the
Securities and Exchange Commission, may be obtained without charge by contacting
the Trust at 1-800-235-4669 or by writing the Trust at Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779. The Trust, on behalf of the
Portfolio, is subject to the informational requirements of the Securities Act of
1933, the Securities Exchange Act of 1934 and the 1940 Act and in accordance
therewith files reports and other information with the Securities and Exchange
Commission. Reports, proxy and information statements and other information
filed by the Trust, on behalf of the Portfolio, can be obtained by calling or
writing the Trust and can also be inspected and copied by the public at the
public reference facilities maintained by the Securities and Exchange Commission
in Washington, D.C. located at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the following SEC regional offices: Northeast Regional Office,
7 World Trade Center, Suite 1300, New York, New York 10048; and the Midwest
Regional Office, Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material can be obtained at
prescribed rates from the Public Reference Branch, Office of Consumer Affairs
and Information Services, Securities and Exchange Commission, Washington, D.C.
20549.
This Prospectus/Proxy Statement, which constitutes part of a Registration
Statement filed by the Trust, on behalf of the Portfolio, with the Securities
and Exchange Commission under the Securities Act of 1933, omits certain of the
information contained in the Registration Statement. Reference is hereby made
to the Registration Statement and to the exhibits thereto for further
information with respect to the Trust, the Portfolio, and the shares offered
hereby. Statements contained herein concerning the provisions of documents are
necessarily summaries of such documents, and each such statement is qualified in
its entirety by reference to the copy of the applicable documents filed with the
Securities and Exchange Commission.
FEDERATED EXCHANGE FUND, LTD.
Information about the Fund may be found in the Fund's Registration
Statement dated April 28, 1995, its Annual Report dated December 31, 1994, and
its Semi-Annual Report dated June 30, 1995, all of which are incorporated herein
by reference. Copies of such documents, which have been filed with the
Securities and Exchange Commission, may be obtained without charge from the
Trust by calling 1-800-235-4669 or by writing to the Trust at Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779. The Fund is subject to
the informational requirements of the Securities Act of 1933, the Securities
Exchange Act of 1934, and the Investment Company Act of 1940, and in accordance
therewith files reports and other information with the Securities and Exchange
Commission. Reports, proxy, and information statements and other information
filed by the Fund can be obtained by calling or writing the Fund and can also be
inspected at the public reference facilities maintained by the Securities and
Exchange Commission at the addresses listed in the previous sections.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the
solicitation by the Managing General Partners of the Fund of proxies for use at
the Special Meeting of Partners of the Fund (the "Meeting") to be held on
December 21, 1995, and at any adjournment thereof. The proxy confers
discretionary authority on the persons designated therein to vote on other
business not currently contemplated which may properly come before the Meeting.
A proxy, if properly executed, duly returned, and not revoked, will be voted in
accordance with the specifications thereon; if no instructions are given, such
proxy will be voted in favor of the Exchange. A Partner may revoke a proxy at
any time prior to use by filing with the Secretary of the
Fund an instrument revoking the proxy, or by submitting a proxy bearing a later
date, or by attending and voting at the Meeting.
The cost of the solicitation, including the printing and mailing of proxy
materials, will be borne by Federated Management. In addition to solicitations
through the mails, proxies may be solicited by officers, employees, and agents
of the Fund at no additional cost to the Fund. Such solicitations may be by
telephone or otherwise. Federated Management will reimburse custodians,
nominees, and fiduciaries for the reasonable costs incurred by them in
solicitation materials to the beneficial owners of shares held of record by such
persons.
OUTSTANDING SHARES AND VOTING REQUIREMENTS
The Managing General Partners of the Fund have fixed the close of business
on November 16, 1995, as the record date for the determination of Partners
entitled to notice of and to vote at the Meeting and any adjournment thereof.
As of the record date, there were 1,105,333.068 shares of the Fund outstanding.
Each Fund share is entitled to one vote and fractional shares have proportionate
voting rights. On the record date, Paulette M. Boiardi, New York, New York,
beneficially owned 91,356.7600 shares, or approximately 8.27% of the Fund's
outstanding shares. On such date, no other person owned or record, or to the
knowledge of FSC, beneficially owned, 5% or more of the Fund's outstanding
shares. On the record date, the Managing General Partners and officers of the
Fund as a group owned less than 1% of the outstanding shares of the Fund.
On the record date, the Trustees and officers of the Portfolio as a group
owned less than 1% of the outstanding shares of the Portfolio. On the record
date, no person owned of record, or to the knowledge of FSC, beneficially owned,
5% or more of a class of shares of the Portfolio. After giving effect to the
Exchange, the following persons of record on the record date would own 5% or
more of the outstanding shares of Class A Shares, Class B Shares, or Class C
Shares, as indicated: [name, address, percentage of shares class].
The votes of shareholders of the Portfolio are not being solicited since
their approval is not required in order to effect the acquisition.
Approval of the Plan requires the lesser of (i) the vote of Partners
holding a majority of the then outstanding shares; or (ii) the vote of Partners
holding 67% or more of the shares represented in person or by proxy at a meeting
at which Partners holding a majority of outstanding shares are present in person
or by proxy.
OTHER MATTERS
Management of the Fund knows of no other matters that may properly be, or
which are likely to be, brought before the meeting. However, if any other
business shall properly come before the meeting the persons named in the proxy
intend to vote thereon in accordance with their best judgment.
So far as management is presently informed, there is no litigation pending
or threatened against the Trust.
Whether or not shareholders expect to attend the meeting, all shareholders
are urged to sign, fill in, and return the enclosed proxy ballot promptly.
Exhibit A
AGREEMENT AND PLAN OF EXCHANGE
AGREEMENT AND PLAN OF EXCHANGE dated October 10, 1995,(the "Agreement"),
among Federated Equity Funds, a Massachusetts business trust (hereinafter called
the "Trust"), on behalf of its portfolio, Federated Capital Appreciation Fund
(hereinafter called the "Acquiring Fund"), and Federated Exchange Fund, Ltd., a
California limited partnership (the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of exchange
within the meaning of Section 351 of the United States Internal Revenue Code of
1986, as amended (the "Code"). The exchange (the "Exchange") will consist of
the transfer of substantially all of the assets of the Acquired Fund in exchange
solely for shares of beneficial interest of the Class A Shares of the Acquiring
Fund (the "Acquiring Fund Shares") and the distribution, after the Closing Date
hereinafter referred to, of the Acquiring Fund Shares to the limited partners
("Partners") of the Acquired Fund in liquidation of the Acquired Fund as
provided herein, all upon the terms and conditions hereinafter set forth in this
Agreement.
WHEREAS, the Acquired Fund and the Trust are registered open-end management
investment companies and the Acquired Fund owns securities which generally are
assets of the character in which the Acquiring Fund is permitted to invest;
WHEREAS, the Acquired Fund and the Trust are authorized to issue their
shares of beneficial interest; and
WHEREAS, the Managing General Partners, including a majority of the
Managing General Partners who are not "interested persons" (as defined in the
Investment Company Act of 1940 (the "1940 Act")), of the Acquired Fund have
determined that the exchange of all or substantially all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the Acquired
Fund and that the interests of the existing Partners of the Acquired Fund would
not be diluted as a result of this transaction; and
WHEREAS, the Board of Trustees, including a majority of the Trustees who
are not "interested persons" (as defined in the 1940 Act), of the Trust has
determined that the exchange of all or substantially all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquiring Fund;
NOW THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING FUND
SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund agrees to assign, transfer and convey to the Acquiring Fund substantially
all of the assets of the Acquired Fund, including all securities and cash, and
the Acquiring Fund agrees in exchange therefor to deliver to the Acquired Fund
the number of Acquiring Fund Shares, including fractional Acquiring Fund Shares,
determined as set forth in paragraph 2.3. Such transaction shall take place at
the closing (the "Closing") on the closing date (the "Closing Date") provided
for in paragraph 3.1. In lieu of delivering certificates for the Acquiring Fund
Shares, the Acquiring Fund shall credit the Acquiring Fund Shares to the
Acquired Fund's account on the stock record books of the Acquiring Fund's
transfer agent and shall deliver a confirmation thereof to the Acquired Fund.
1.2 The Acquired Fund will discharge all of its liabilities and
obligations prior to the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred shall be
made on the Closing Date and shall be delivered to State Street Bank and Trust
Company ("State Street"), Boston, Massachusetts, the Acquiring Fund's custodian
(the "Custodian"), for the account of the Acquiring Fund, together with proper
instructions and all necessary documents to transfer such assets to the account
of the Acquiring Fund, free and clear of all liens, encumbrances, rights,
restrictions and claims. All cash delivered shall be in the form of currency
and immediately available funds payable to the order of the Custodian for the
account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring Fund
any dividends or interest received on or after the Closing Date with respect to
assets transferred to the Acquiring Fund hereunder. The Acquired Fund will
transfer to the Acquiring Fund any distributions, rights or other assets
received by the Acquired Fund after the Closing Date as distributions on or with
respect to the securities transferred. Such assets shall be deemed included in
assets transferred to the Acquiring Fund on the Closing Date and shall not be
separately valued.
1.5 As soon after the Closing Date as is conveniently practicable (but in
no event later than 90 days of the Closing Date) (the "Liquidation Date"), the
Acquired Fund will liquidate and distribute pro rata to the Acquired Fund's
Partners of record, determined as of the close of business on the Closing Date
(the "Acquired Fund Partners"), the Acquiring Fund Shares received by the
Acquired Fund pursuant to paragraph 1.1. Such liquidation and distribution will
be accomplished by the transfer of the Acquiring Fund Shares then credited to
the account of the Acquired Fund on the books of the Acquiring Fund's transfer
agent to open accounts on the share record books of the Acquiring Fund's
transfer agent in the names of the Acquired Fund Partners and representing the
respective pro rata number of the Acquiring Fund Shares due such Partners. All
issued and outstanding shares of the Acquired Fund will simultaneously be
canceled on the books of the Acquired Fund. Share certificates representing
interests in the Acquired Fund will represent a number of Acquiring Fund Shares
after the Closing Date as determined in accordance with paragraph 2.3. The
Acquiring Fund shall not issue certificates representing the Acquiring Fund
Shares in connection with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent. Acquiring Fund Shares will be issued in the
manner described in the Acquiring Fund's current prospectus and statement of
additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund Shares
in a name other than the registered holder of the Acquired Fund shares on the
books of the Acquired Fund as of that time shall, as a condition of such
issuance and transfer, be paid by the person to whom such Acquiring Fund Shares
are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall remain
the responsibility of the Acquired Fund up to and including the Closing Date and
such later dates, with respect to dissolution and deregistration of the Acquired
Fund, on which the Acquired Fund is deregistered and dissolved.
1.9 The Acquired Fund shall be deregistered as an investment company under
the 1940 Act and dissolved as a California limited partnership promptly
following the Closing Date and the making of all distributions pursuant to
paragraph 1.5.
2. VALUATION
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of 4:00
p.m. (Eastern time) on the Closing Date (such time and date being hereinafter
called the "Valuation Date"), using the valuation procedures set forth in the
Acquiring Fund's then-current prospectus or statement of additional information.
2.2 The net asset value of an Acquiring Fund Share shall be the net asset
value per share computed as of 4:00 p.m. (Eastern time) on the Valuation Date,
using the valuation procedures set forth in the Acquiring Fund's then-current
prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets shall
be determined by dividing the value of the net assets of the Acquired Fund
determined using the same valuation procedures referred to in paragraph 2.1 by
the net asset value of one Acquiring Fund Share determined in accordance with
paragraph 2.2.
2.4 All computations of value shall be made in accordance with the regular
practices of the Acquiring Fund.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be January 2, 1996, or such later date as the
parties may mutually agree. All acts taking place at the Closing Date shall be
deemed to take place simultaneously as of the close of business on the Closing
Date unless otherwise provided. The Closing shall be held at 4:00 p.m. (Eastern
time) at Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh,
Pennsylvania 15222-3779, or such other time and/or place as the parties may
mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for portfolio
securities of the Acquiring Fund or the Acquired Fund shall be closed to trading
or trading thereon shall be restricted; or (b) trading or the reporting of
trading shall be disrupted so that accurate appraisal of the value of the net
assets of the Acquiring Fund or the Acquired Fund is impracticable, the Closing
Date shall be postponed until the first business day after the day when trading
shall have been fully resumed and reporting shall have been restored.
3.3 Federated Services Company, as transfer agent for each of the Acquired
Fund and Acquiring Fund, shall deliver at the Closing a certificate of an
authorized officer stating that its records contain the names and addresses of
the Acquired Fund Partners and the number and percentage ownership of
outstanding shares owned by each such Partner immediately prior to the Closing.
The Acquiring Fund shall issue and deliver a confirmation evidencing the
Acquiring Fund Shares to be credited on the Closing Date to the Secretary of the
Acquired Fund, or provide evidence satisfactory to the Acquired Fund that such
Acquiring Fund Shares have been credited to the Acquired Fund's account on the
books of the Acquiring Fund. At the Closing, each party shall deliver to the
other such bills of sale, checks, assignments, assumption agreements, share
certificates, if any, receipts or other documents as such other party or its
counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Acquired Fund represents and warrants to the Acquiring Fund as
follows:
(a) The Acquired Fund is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of California
and has power to own all of its properties and assets and to carry out this
Agreement.
(b) The Acquired Fund is registered under the 1940 Act, as an open-
end, diversified, management investment company, and such registration has not
been revoked or rescinded and is in full force and effect.
(c) The Acquired Fund is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of its
Agreement of Limited Partnership or of any agreement, indenture, instrument,
contract, lease or other undertaking to which the Acquired Fund is a party or by
which it is bound.
(d) The Acquired Fund has no material contracts or other commitments
outstanding (other than this Agreement) which will result in liability to it
after the Closing Date.
(e) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or to its knowledge
threatened against the Acquired Fund or any of its properties or assets which,
if adversely determined, would materially and adversely affect its financial
condition or the conduct of its business. The Acquired Fund knows of no facts
which might form the basis for the institution of such proceedings, and is not a
party to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects its business
or its ability to consummate the transactions herein contemplated.
(f) The current prospectus and statement of additional information of
the Acquired Fund conform in all material respects to the applicable
requirements of the Securities Act of 1933, as amended (the "1933 Act"), and the
1940 Act and the rules and regulations of the Securities and Exchange Commission
(the "Commission") thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
as necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(g) The Statement of Assets and Liabilities of the Acquired Fund at
December 31, 1994, has been audited by Deloitte & Touche, LLP, independent
auditors, and has been prepared in accordance with generally accepted accounting
principles, consistently applied, and such statement (a copy of which has been
furnished to the Acquiring Fund) fairly reflects the financial condition of the
Acquired Fund as of such date, and there are no known contingent liabilities of
the Acquired Fund as of such date not disclosed therein.
(h) Since December 31, 1994, there has not been any material adverse
change in the Acquired Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Acquired Fund of indebtedness maturing more than one year from
the date such indebtedness was incurred, except as otherwise disclosed to and
accepted by the Acquiring Fund.
(i) At the Closing Date, all Federal and other tax returns and
reports of the Acquired Fund required by law to have been filed by such dates
shall have been filed, and all Federal and other taxes shall have been paid so
far as due, or provision shall have been made for the payment thereof, and to
the best of the Acquired Fund's knowledge no such return is currently under
audit and no assessment has been asserted with respect to such returns.
(j) All issued and outstanding shares of the Acquired Fund are, and
at the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable. All of the issued and outstanding shares of the Acquired
Fund will, at the time of the Closing, be held by the persons and in the amounts
set forth in the records of the transfer agent as provided in paragraph 3.3.
The Acquired Fund does not have outstanding any options, warrants or other
rights to subscribe for or purchase any of the Acquired Fund shares, nor is
there outstanding any security convertible into any of the Acquired Fund shares.
(k) On the Closing Date, the Acquired Fund will have full right,
power and authority to sell, assign, transfer and deliver the assets to be
transferred by it hereunder.
(l) The execution, delivery and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary action on
the part of the Acquired Fund's Managing General Partners and, subject to the
approval of the Acquired Fund Partners, this Agreement will constitute the valid
and legally binding obligation of the Acquired Fund enforceable in accordance
with its terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws relating to or
affecting creditors' rights generally and court decisions with respect thereto,
and to general principles of equity and the discretion of the court (regardless
of whether the enforceability is considered in a proceeding in equity or at
law).
(m) The prospectus/proxy statement of the Acquired Fund (the
"Prospectus/Proxy Statement") to be included in the Registration Statement
referred to in paragraph 5.5 (other than information therein that relates to the
Acquiring Fund) will, on the effective date of the Registration Statement and on
the Closing Date, not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading.
4.2 The Trust represents and warrants to the Trust as follows:
(a) The Acquiring Fund is a portfolio of the Trust, which is duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has the power to own all of its properties and
assets and to carry out this Agreement.
(b) The Trust is registered under the 1940 Act, as an open-end,
diversified, management investment company, and such registration has not been
revoked or rescinded and is in full force and effect.
(c) The Trust is not, and the execution, delivery and performance of
this Agreement will not result, in material violation of its Declaration of
Trust or By-Laws or of any agreement, indenture, instrument, contract, lease or
other undertaking to which the Acquiring Fund is a party or by which it is
bound.
(d) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or to its knowledge
threatened against the Acquiring Fund or any of its properties or assets which,
if adversely determined, would materially and adversely affect its financial
condition or the conduct of its business. The Acquiring Fund knows of no facts
which might form the basis for the institution of such proceedings, and is not a
party to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects its business
or its ability to consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional information of
the Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Commission thereunder and do not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(f) At the Closing Date, all Federal and other tax returns and
reports of the Acquiring Fund required by law then to be filed shall have been
filed, and all Federal and other taxes shown as due on said returns and reports
shall have been paid or provision shall have been made for the payment thereof.
(g) All issued and outstanding shares of the Acquiring Fund are, and
at the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable. The Acquiring Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquiring Fund
Shares, nor is there outstanding any security convertible into any Acquiring
Fund Shares.
(h) The execution, delivery and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary action, if
any, on the part of the Acquiring Fund's Trustees, and this Agreement will
constitute the valid and legally binding obligation of the Acquiring Fund
enforceable in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar
laws relating to or affecting creditors' rights generally and court decisions
with respect thereto, and to general principles of equity and the discretion of
the court (regardless of whether the enforceability is considered in a
proceeding in equity or at law).
(i) The Prospectus/Proxy Statement to be included in the Registration
Statement (only insofar as it relates to the Acquiring Fund) will, on the
effective date of the Registration Statement and on the Closing Date, not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not
misleading.
(j) The Acquiring Fund has entered into an agreement under which its
investment adviser, Federated Management, will assume the expenses of the
exchange including accountants' fees, legal fees, registration fees, transfer
taxes (if any), the fees of banks and transfer agents and the costs of
preparing, printing, copying and mailing proxy solicitation materials to the
Acquired Fund's Partners and the costs of holding the Special Meeting of
Partners.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date, it
being understood that such ordinary course of business will include customary
dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund Partners to
consider and act upon this Agreement and to take all other action necessary to
obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund and
the Acquired Fund will each take, or cause to be taken, all action, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty days after
the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in such
form as is reasonably satisfactory to the Acquiring Fund, a statement of the
earnings and profits of the Acquired Fund for Federal income tax purposes which
will be carried over to the Acquiring Fund as a result of Section 381 of the
Code and which will be certified by the Acquired Fund's President or Vice
President and its Treasurer or Assistant Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(m), all to
be included in a Registration Statement on Form N-14 of the Acquiring Fund (the
"Registration Statement"), in compliance with the 1933 Act, the Securities
Exchange Act of 1934, as amended, and the 1940 Act in connection with the
meeting of the Acquired Fund Partners to consider approval of this Agreement and
the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such of
the state Blue Sky or securities laws as it may deem appropriate in order to
continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions provided
for herein shall be subject, at its election, to the performance by the Acquired
Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of the Acquired Fund contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such securities by lot and
the holding periods of such securities, as of the Closing Date, certified by the
Treasurer or Assistant Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
satisfactory to the Acquiring Fund, to the effect that the representations and
warranties of the Acquired Fund made in this Agreement are true and correct at
and as of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as the Acquiring
Fund shall reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquiring Fund contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
satisfactory to the Acquired Fund, to the effect that the representations and
warranties of the Acquiring Fund made in this Agreement are true and correct at
and as of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as the Acquired
Fund shall reasonably request.
8. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND AND
THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the Partners of the Acquired Fund in
accordance with the provisions of the Acquired Fund's Agreement of Limited
Partnership.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit consummation, in
all material respects, of the transactions contemplated hereby shall have been
obtained, except where failure to obtain any such consent, order or permit would
not involve a risk of a material adverse effect on the assets or properties of
the Acquiring Fund or the Acquired Fund, provided that either party hereto may
for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act.
8.5 The Trust and the Acquired Fund shall have received an opinion of
Hunton & Williams substantially to the effect that for Federal income tax
purposes: (1) the general partners will recognize no gain or loss upon the
redemption of their partnership interests in exchange for a pro rata portion of
each asset held by the Acquired Fund immediately prior to the Exchange; (2) the
Acquired Fund will recognize no gain or loss upon the transfer of the assets to
the Acquiring Fund solely in exchange for Acquiring Fund Shares and the
Acquiring Fund's assumption of the Acquired Fund's liabilities; (3) the Partners
will recognize no gain or loss upon the distribution of the Acquiring Fund
Shares to them in exchange for their Acquired Fund interests; (4) the Acquiring
Fund will recognize no gain or loss upon the transfer of the assets to the
Acquiring Fund solely in exchange for Acquiring Fund Shares and the Acquiring
Fund's assumption of the Acquired Fund's liabilities; (5) the Acquiring Fund's
basis in the assets transferred to the Acquiring Fund will equal the basis of
the assets in the hands of the Acquired Fund immediately prior to the Exchange;
(6) the Acquiring Fund's holding period for the assets transferred to the
Acquiring Fund will, in each case, include the period during which the Acquired
Fund held such assets; (7) each Partner's basis in the Acquiring Fund Shares
distributed to him will equal his adjusted basis in his Acquired Fund interest
immediately prior to the Exchange; (8) each Partner's holding period for the
Acquiring Fund Shares will include the period during which the Partner was
considered to have held the assets transferred to the Acquiring Fund, provided
that the assets were capital assets; (9) each general partner's basis in the
assets distributed to it in redemption of its Acquired Fund interest will equal
its adjusted basis in its Acquired Fund interest; and (10) each general
partner's holding period for the assets distributed to it in redemption of its
Acquired Fund interest will include the period during which the general partner
was considered to have held the assets, provided that the assets were capital
assets.
9. TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Managing General Partners of the
Acquired Fund or the Board of Trustees of the Acquiring Fund at any time prior
to the Closing Date if circumstances should develop that, in the opinion of
either of such Managing General Partners or Board of Trustees, make proceeding
with the Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated hereby
is abandoned pursuant to the provisions of this Section 9, this Agreement shall
become void and have no effect, without any liability on the part of any party
hereto or the Managing General Partners, trustees, officers, Partners, or
shareholders of the Acquiring Fund or of the Acquired Fund, in respect of this
Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing conditions may
be waived by the Managing General Partners of the Acquired Fund or the Board of
Trustees of the Trust, if, in the judgment of either, such waiver will not have
a material adverse effect on the benefits intended under this Agreement to the
Partners of the Acquired Fund or the shareholders of the Acquiring Fund, as the
case may be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided for
herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding between
the parties hereto with respect to the subject matter hereof, and merges and
supersedes all prior discussions, agreements, and understandings of every kind
and nature between them relating to the subject matter hereof. Neither party
shall be bound by any condition, definition, warranty or representation, other
than as set forth or provided in this Agreement or as may be set forth in a
later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with the
internal laws of the Commonwealth of Massachusetts, without giving effect to
principles of conflict of laws.
11.4 This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
11.6 The Acquired Fund is hereby expressly put on notice of the limitation
of liability as set forth in Article XI of the Declaration of Trust of the Trust
and agrees that the obligations assumed by the Trust pursuant to this Agreement
shall be limited in any case to the Acquiring Fund and its assets and the
Acquired Fund shall not seek satisfaction of any such obligation from the
shareholders of the Acquiring Fund, the trustees, officers, employees or agents
of the Trust or any of them.
IN WITNESS WHEREOF, the Trust, on behalf of the Acquired Fund, and the
Acquiring Fund have caused this Agreement and Plan of Exchange to be executed
and attested on its behalf by its duly authorized representatives as of the date
first above written.
Acquired Fund:
FEDERATED EXCHANGE FUND, LTD.
Attest:
/s/Robert C. Rosselot By: /s/John W. McGonigle
Robert C. Rosselot Name: John W. McGonigle
Assistant Secretary Title: Vice President & Secretary
Acquiring Fund:
FEDERATED EQUITY FUNDS, on behalf of its
portfolio
FEDERATED CAPITAL
APPRECIATION FUND
Attest:
/s/Robert C. Rosselot By: /s/John W. McGonigle
Robert C. Rosselot Name: John W. McGonigle
Assistant Secretary Title: Vice President & Secretary
STATEMENT OF ADDITIONAL INFORMATION
November 24, 1995
Acquisition of the assets of
FEDERATED EXCHANGE FUND, LTD.
By and in exchange for Class A Shares of
FEDERATED CAPITAL APPRECIATION FUND,
a portfolio of FEDERATED EQUITY FUNDS
Federated Investors Tower
Pittsburgh, PA 15222-3779
Telephone Number: 1-800-235-4669
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779
CUSIP 314175100
G01369-01(11/95)
This Statement of Additional Information dated November 24, 1995 is not a
prospectus. A Prospectus/Proxy Statement dated November 24, 1995 related to the
above-referenced matter may be obtained from Federated Equity Funds, on behalf
of its portfolio, Federated Capital Appreciation Fund, Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779. This Statement of Additional
Information should be read in conjunction with such Prospectus/Proxy Statement.
TABLE OF CONTENTS
1. Statement of Additional Information of Federated Capital Appreciation Fund,
a portfolio of Federated Equity Funds, dated November 14, 1995 (Revised
November 17, 1995).
2. Registration Statement of Federated Exchange Fund, Ltd. dated April 28,
1995.
3. Annual Report of Federated Exchange Fund, Ltd., dated December 31, 1994.
4. Semi-Annual Report of Federated Exchange Fund, Ltd., dated June 30, 1995.
The Statement of Additional Information of Federated Capital Appreciation Fund
(the "Portfolio"), a portfolio of Federated Equity Funds (the "Trust"), is
incorporated herein by reference to the Trust's Registration Statement on Form
N-1A (1933 Act File No. 2-91090; 1940 Act File No. 811-4017), which was filed
with the Securities and Exchange Commission on or about August 31, 1995. Copies
of this document may be obtained free of charge from the Portfolio at Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779, telephone number
1-800-235-4669.
The Registration Statement of Federated Exchange Fund, Ltd. (the "Fund") dated
April 28, 1995, is incorporated herein by reference to Post-Effective Amendment
No. 15 to the Registration Statement of Federated Exchange Fund, Ltd. on Form N-
1A (1940 Act File No. 811-2626. The Annual Report of the Fund dated December 31,
1994, and the Independent Auditors' report of Deloitte & Touche LLP, are
incorporated herein by reference.
The Annual Report of the Fund was filed with the Securities and Exchange
Commission pursuant to Section 30(b) of the Investment Company Act of 1940 on or
about February 24, 1995. Copies of these documents may be obtained free of
charge from the Fund at Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779, telephone number 1-800-235-4669.
The Semi-Annual Report of the Fund was filed with the Securities and Exchange
Commission pursuant to Section 30(b) of the Investment Company Act of 1940 on or
about August 29, 1995. Copies of these documents may be obtained free of charge
from the Fund at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779,
telephone number 1-800-235-4669.
FEDERATED EXCHANGE FUND, LTD. SPECIAL MEETING OF LIMITED PARTNERS DECEMBER 21,
1995
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned limited partner of
FEDERATED EXCHANGE FUND, LTD. hereby appoint Robert C. Rosselot, Stephen R.
Newcamp, Jennifer Conner, Colleen Gallagher, and Patricia F. Conner, or any of
them, true and lawful attorneys, with power of substitution of each, to vote all
shares of FEDERATED EXCHANGE FUND, LTD. which the undersigned is entitled to
vote, at the Special Meeting of Limited Partners to be held on December 21,
1995, at Federated Investors Tower, Pittsburgh, Pennsylvania, at 2:00 p.m., and
at any adjournment thereof.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF MANAGING GENERAL PARTNERS.
The attorneys named will vote the shares represented by this proxy in accordance
with the choices made on this ballot. IF NO CHOICE IS INDICATED AS TO ANY ITEM,
THIS PROXY WILL BE VOTED AFFIRMATIVELY ON THAT MATTER.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND RETAIN
THE TOP PORTION.
PROPOSAL(S)
1) TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF EXCHANGE WHEREBY FEDERATED
CAPITAL APPRECIATION FUND WILL ACQUIRE ALL OF THE ASSETS OF FEDERATED
EXCHANGE FUND, LTD. IN EXCHANGE FOR SHARES OF FEDERATED CAPITAL APPRECIATION
FUND.
PROPOSAL 1:
FOR
----
AGAINST
----
ABSTAIN
----
Please sign EXACTLY as your name(s) appear below. When signing as attorney,
executor, administrator, guardian, trustee, custodian, etc., please give your
full title as such. If a corporation or partnership, please sign the full name
by an authorized officer or partner. If shares are owned jointly, all parties
should sign.
SIGNATURE SIGNATURE (Joint Owners) DATE
