Reg. No.33-
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811-4017
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. _____
Post-Effective Amendment No. _____
(Check appropriate box or boxes)
FEDERATED EQUITY FUNDS
(Exact Name of Registrant as Specified in Charter)
(412) 288-1900
(Area Code and Telephone Number)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
JOHN W. MCGONIGLE, ESQUIRE
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
Copies to:
J. Crilley Kelly, Esquire Matthew G. Maloney, Esquire
Corporate Counsel Dickstein, Shapiro & Morin, L.L.P.
Federated Investors 2101 L Street, N.W.
Federated Investors Tower Washington, D.C. 20037
Pittsburgh, PA 15222
It is proposed that this filing will become effective on April 7, 1996, or as
soon thereafter as is practicable, pursuant to Rule 488. (Approximate Date
of Proposed Public Offering)
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of 1940
that it elects to register an indefinite amount of securities under the
Securities Act of 1933 and filed the Notice required by that Rule for
Registrant's fiscal year ended October 31, 1994 on December 15, 1994 and
filed the Notice required by Rule 24e-2 for its fiscal year ended October 31,
1995 on December 15, 1995. Accordingly, no filing fee is submitted herewith.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 1(A) OF FORM N-14 SHOWING LOCATION IN
PROSPECTUS OF INFORMATION REQUIRED BY FORM N-14
This Registration Statement is comprised of two prospectus/proxy statements,
and a related statement of additional information relating to the acquisition
by the Registrant of the assets of Capital Growth Fund in exchange for Class
A Shares of Federated Growth Strategies Fund, a Portfolio of the Registrant,
to be issued to holders of Class A Shares of Capital Growth Fund and in
exchange for Class C Shares of Federated Growth Strategies Fund to be issued
to holders of Class C Shares of Capital Growth Fund. The cross-references
below are applicable to each such prospectus/proxy statement.
Item of Part A of Form N-14 and Caption or Location in
Caption Each Prospectus
1.Beginning of Registration
Statement and Outside Front Cross Reference Sheet;
Cover Page of Prospectus Cover Page
2.Beginning and Outside Back
Cover Page of Prospectus Table of Contents
3.Fee Table, Synopsis Information Summary of Expenses; Summary;
and Risk Factors Risk Factors
4.Information About the Information About the
Transaction Reorganization
5.Information About the Information About the
Registrant Fund, the Trust, the Portfolio
and the Corporation
6.Information About the Information About the Fund,
Company Being Acquired the Trust, the Portfolio and the
Corporation
7.Voting Information Voting Information
8.Interest of Certain Persons
and Experts Not Applicable
9.Additional Information
Required for Reoffering by
Persons Deemed to be
Underwriters Not Applicable
CAPITAL GROWTH FUND,
A PORTFOLIO OF INVESTMENT SERIES FUNDS, INC.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Dear Shareholder:
The Board of Directors and management of Investment Series Funds,
Inc. (the "Corporation") are pleased to submit for your vote a proposal to
transfer all of the assets of Capital Growth Fund (the "Portfolio") to
Federated Growth Strategies Fund (the "Fund"), a portfolio of Federated
Equity Funds, a mutual fund advised by Federated Management. The Fund has an
investment objective similar to that of the Portfolio in that it seeks
appreciation of capital by investing primarily in equity securities of
companies with prospects for above-average growth in earnings and dividends.
As part of the transaction, holders of Class A Shares and Class C Shares in
the Portfolio would receive Class A Shares and Class C Shares, respectively,
of the Fund equal in value to their Class A Shares or Class C Shares in the
Portfolio and the Portfolio would be liquidated.
The Board of Directors of the Corporation, as well as Federated
Advisers, the Corporation's adviser, and Federated Securities Corp., the
Corporation's principal underwriter, believe the proposed agreement and plan
of reorganization is in the best interests of Portfolio shareholders for the
following reasons:
-- The reorganization of the Portfolio into the Fund may provide
operating efficiencies as a result of the size of the Fund which were
not available to Portfolio shareholders due to the smaller size of
the Portfolio.
-- The Fund has an investment objective similar to that of the
Portfolio and offers an investment portfolio which invests primarily
in equity securities of companies with prospects for above-average
growth in earnings and dividends.
We believe the transfer of the Portfolio's assets in this transaction
will present an excellent investment opportunity for our shareholders. Your
vote on the transaction is critical to its success. The transfer will be
effected only if approved by the lesser of (i) 67% of all Portfolio shares
present at the Special Meeting, if the holders of more than 50% of the
outstanding shares are present or represented by proxy, or (ii) a majority of
all of the Portfolio's outstanding shares on the record date voted in person
or represented by proxy. We hope you share our enthusiasm and will
participate by casting your vote in person, or by proxy if you are unable to
attend the meeting. Please read the enclosed prospectus/proxy statement
carefully before you vote.
Thank you for your prompt attention and participation.
Sincerely,
J. Christopher Donahue
President
CAPITAL GROWTH FUND,
A PORTFOLIO OF INVESTMENT SERIES FUNDS, INC.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO CLASS C SHAREHOLDERS OF CAPITAL GROWTH FUND:
A Special Meeting of Shareholders of Capital Growth Fund (the
"Portfolio"), a portfolio of Investment Series Funds, Inc. (the
"Corporation") will be held at 2:30 p.m. on May 31, 1996 at the office of the
Corporation, Federated Investors Tower, 19th Floor, Pittsburgh, Pennsylvania
15222-3779 for the following purposes:
1. To approve or disapprove a proposed Agreement and Plan of
Reorganization between the Corporation, on behalf of the Portfolio, and
Federated Equity Funds, on behalf of its portfolio, Federated Growth
Strategies Fund (the "Fund"), whereby the Fund would acquire all of the
assets of the Portfolio in exchange for the Fund's Class A Shares and Class C
Shares to be distributed pro rata by the Portfolio to the holders of its
Class A Shares and Class C Shares, respectively, in complete liquidation of
the Portfolio; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
By Order of the Board of Directors,
Dated: April 7, 1996 John W. McGonigle
Secretary
Shareholders of record at the close of business March 25, 1996 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
APRIL 7, 1996
Acquisition of the Assets of
CAPITAL GROWTH FUND,
a portfolio of
INVESTMENT SERIES FUNDS, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5051
By and in exchange for shares of
FEDERATED GROWTH STRATEGIES FUND,
a portfolio of
FEDERATED EQUITY FUNDS
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5051
This Prospectus/Proxy Statement describes the proposed Agreement and
Plan of Reorganization (the "Plan") whereby Federated Growth Strategies Fund
(the "Fund"), a portfolio of Federated Equity Funds, a Massachusetts business
trust, would acquire all of the assets of Capital Growth Fund (the
"Portfolio"), a portfolio of Investment Series Funds, Inc., a Maryland
corporation (the "Corporation"), in exchange for the Fund's Class A and Class
C Shares to be distributed pro rata by the Portfolio to the holders of its
Class A and Class C Shares, respectively, in complete liquidation of the
Portfolio. As a result of the Plan, each Class C shareholder of the
Portfolio will become the owner of the Fund's Class C Shares having a total
net asset value equal to the total net asset value of his or her Class C
Share holdings in the Portfolio.
The Fund and the Portfolio each are diversified portfolios of
securities of an open-end management investment company whose investment
objective is appreciation of capital. The Fund pursues this investment
objective by investing primarily in equity securities of companies with
prospects for above-average growth in earnings and dividends. The Portfolio
pursues this objective by investing primarily in equity securities of
companies with prospects for above-average growth in earnings or dividends or
of companies where significant fundamental changes are taking place. For a
comparison of the investment policies of the Fund and the Portfolio, see
"Summary-Investment Objectives and Policies".
This Prospectus/Proxy Statement should be retained for future
reference. It sets forth concisely the information about the Fund that a
prospective investor should know before investing. This Prospectus/Proxy
Statement is accompanied by the Prospectus of the Fund dated December 31,
1995 which is incorporated herein by reference. Statements of Additional
Information for the Fund dated December 31, 1995 (relating to the Fund's
prospectus of the same date) and April 7, 1996 (relating to this
Prospectus/Proxy Statement) containing additional information have been filed
with the Securities and Exchange Commission and are incorporated herein by
reference. Copies of the Statements of Additional Information may be
obtained without charge by writing or calling the Fund at the address and
telephone number shown above.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION 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 of Expenses.......................................................
Summary...................................................................
Risk Factors...............................................................
Information About the Reorganization.......................................
Information About the Fund, the Trust, the Portfolio and the Corporation...
Voting Information......................................................
SUMMARY OF EXPENSES
FUND PORTFOLIO
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)... None None
Maximum Sales Charge Imposed on
Reinvested Dividends (as a
percentage of offering price)....... None None
Contingent Deferred Sales Charge
(as a percentage of original
purchase price or redemption
proceeds, as applicable)(1)...... 1.00% 1.00%
Redemption Fee (as a percentage
of amount redeemed, if applicable None None
Exchange Fee None None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee 0.75% 0.00%(2)
12b-1 Fee 0.75% 0.75%
Total Other Expenses 0.51% 1.19%
Shareholder Services Fee 0.25% 0.19%(3)
Total Operating Expenses 2.01% 1.94%(4)
(1) 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. For a more complete description, see
"Summary - Distribution Arrangements."
(2) The management fee has been waived to reflect state imposed expense
limitations. The maximum management fee is 0.55% of average daily net assets
plus 4.50% of gross income, excluding capital gains and losses.
(3) The maximum shareholder services fee is 0.25%.
(4) The Fund's adviser has agreed to waive its advisory fee and/or reimburse
operating expenses of the Fund so that the annual operating expenses
applicable to Class C Shares of the Fund will not exceed 1.93% of average
daily net assets for the year following the consummation of the
Reorganization.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that a shareholder of Class C Shares of each
of the Fund and the Portfolio will bear, either directly or indirectly. For
more complete descriptions of the various costs and expenses see "Summary -
Advisory and Other Fees" and "Summary - Distribution Arrangements."
EXAMPLE - FUND
1 year 3 years
You would pay the
following
expenses on a $1,000
investment, assuming
(1) 5% annual return
and (2) redemption at
the end of each time
period................... $31 $63
You would pay the
following expenses on
the same investment,
assuming no
redemption........... $20 $63
EXAMPLE - PORTFOLIO
1 year 3 years 5 years 10 years
You would pay the
following
expenses on a $1,000
investment, assuming
(1) 5% annual return
and (2) redemption at
the end of each time
period............... $30 $61 $105 $226
You would pay the
following expenses on
the same investment,
assuming no
redemption........... $20 $61 $105 $226
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
SUMMARY
About the Proposed Reorganization
The Board of Directors of Investment Series Funds, Inc. (the
"Corporation") has voted to recommend to holders of the Class A Shares and
Class C Shares of its portfolio, Capital Growth Fund (the "Portfolio"), the
approval of an Agreement and Plan of Reorganization (the "Plan") whereby
Federated Growth Strategies Fund (the "Fund"), a portfolio of Federated
Equity Funds, a Massachusetts business trust (the "Trust"), would acquire all
of the assets of the Portfolio in exchange for the Fund's Class A and Class C
Shares to be distributed pro rata by the Portfolio to its Class A and Class C
shareholders, respectively, in complete liquidation and dissolution of the
Portfolio (the "Reorganization"). As a result of the Reorganization, each
shareholder of the Portfolio will become the owner of Fund shares having a
total net asset value equal to the total net asset value of his or her
holdings in the Portfolio on the date of the Reorganization, i.e., the
Closing Date.
As a condition to the Reorganization transactions, the Trust and the
Corporation will receive an opinion of counsel that the Reorganization will
be considered a tax-free "reorganization" under applicable provisions of the
Internal Revenue Code so that no gain or loss will be recognized by either
the Fund or the Portfolio or their shareholders. The tax cost basis of the
Fund shares received by Portfolio shareholders will be the same as the tax
cost basis of their shares in the Portfolio. After the acquisition is
completed, the Portfolio will be liquidated.
Investment Objectives and Policies
The investment objective of the Fund is to provide appreciation of
capital. This investment objective may not be changed without the approval
of shareholders. The Fund pursues its investment objective by investing
primarily in equity securities of companies with prospects for above-average
growth in earnings and dividends.
The investment objective of the Portfolio is appreciation of capital.
This investment objective may not be changed without the approval of
shareholders. The Portfolio pursues its investment objective by investing
primarily in equity securities of companies with prospects for above-average
growth in earnings and dividends or of companies where significant
fundamental changes are taking place. The Portfolio generally invests in
companies with a market capitalization of $100,000,000 or more.
The Fund invests primarily in equity securities of companies based on
traditional research techniques, including assessment of earnings and
dividend growth prospects and/or the risk and volatility of each company's
business. The Fund generally invests in companies with a market
capitalization of $100,000,000 or more. The Fund may invest in common and
preferred stocks, corporate bonds, debentures, notes, warrants and put and
call options on stocks. If necessary for temporary defensive purposes, the
Fund may also invest in short-term money market instruments, securities
issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities and repurchase agreements. Unless otherwise designated,
the investment policies of the Fund may be changed by the Board of Trustees
without shareholder approval, although shareholders will be notified before
any material change becomes effective.
Equity securities are selected by the Portfolio's adviser on the
basis of traditional research techniques, including assessment of earnings
and dividend growth prospects and/or the risk and volatility of each
company's business. The Portfolio may, at times, invest in securities which
are deemed to be candidates for acquisition by other entities. Under normal
circumstances, at least 65% of the value of the Portfolio's total assets will
be invested in equity securities. However, the Portfolio is not required to
purchase or sell these securities if the 65% investment level changes due to
increases or decreases in the market value of portfolio securities. The
Portfolio may also invest in preferred stocks, corporate bonds, debentures,
notes, warrants and put options on stocks and may invest up to 35% of its
total assets in corporate debt obligations that are rated B or better by a
nationally recognized statistical rating organization. If necessary for
temporary defensive purposes, the Portfolio may invest in short-term money
market instruments, U.S. government securities and may hold cash. Unless
otherwise designated, the investment policies of the Portfolio may be changed
by the Board of Directors without shareholder approval, although shareholders
will be notified before any material change becomes effective.
Both the Fund and the Portfolio are subject to certain investment
limitations. For the Fund, these include investment limitations which
prohibit it from (1) borrowing money directly or through reverse repurchase
agreements or pledging securities except that, under certain circumstances,
the Fund may borrow up to one-third of the value of its net assets;
(2) selling securities short except, under strict limitations, the Fund may
maintain open short positions so long as not more that 10% of the value of
its net assets is held as collateral for those positions; (3) investing more
than 5% of its total assets in securities of one issuer (except cash and cash
items, repurchase agreements and U.S. government obligations) or acquiring
more than 10% of any class of voting securities of any one issuer;
(4) purchasing securities of other investment companies, except in open
market transactions limited to not more than 10% of its total assets, or
except as part of a merger, consolidation or other acquisition; (5) investing
more than 5% of its total assets in securities of issuers that have records
of less than three years of continuous operations and in equity securities of
any issuer which are not readily marketable; (6) committing more than 5% of
its total assets to premiums or open put option positions; and (7) investing
more than 5% of its net assets in warrants. The first three investment
limitations listed above cannot be changed without shareholder approval; the
last four limitations may be changed by the Board of Trustees without
shareholder approval, although shareholders will be notified before any
material change becomes effective.
The Portfolio has investment limitations which prohibit it from (1)
borrowing money directly or through reverse repurchase agreements or pledging
securities except that, under certain circumstances, the Portfolio may borrow
up to one-third of the value of its total assets and pledge up to 10% of the
value of those assets to secure such borrowings; (2) selling securities short
except, under strict limitations, the Portfolio may maintain open short
positions so long as not more than 10% of the value of its net assets is held
as collateral for those positions; (3) lending any of its assets except
portfolio securities having a value of up to one-third of the value of its
total assets; (4) investing more than 5% of its total assets in securities of
one issuer (except cash and cash items, repurchase agreements collateralized
by U.S. government securities and U.S. government obligations) or purchasing
more than 10% of any class of voting securities of any one issuer; (5)
investing more than 5% of its total assets in securities of issuers that have
records of less than three years of continuous operations including the
operation of any predecessors; (6) committing more than 5% of its total
assets to premiums on open put option positions; and (7) investing more than
5% of its total assets in warrants. The Portfolio's first four investment
limitations cannot be changed without shareholder approval; the last three
may be changed by the Board of Directors without shareholder approval,
although shareholders will be notified before any material change becomes
effective.
Both the Portfolio and the Fund are also subject to certain additional
investment limitations, described in the Fund's Statement of Additional
Information dated December 31, 1995 and the Portfolio's Statement of
Additional Information dated December 31, 1995. Reference is hereby made to
the Fund's Prospectus and Statement of Additional Information, each dated
December 31, 1995, and to the Portfolio's Prospectus and Statement of
Additional Information, each dated December 31, 1995, which set forth in full
the investment objectives and policies and investment limitations of each of
the Fund and the Portfolio, all of which are incorporated herein by reference
thereto.
Advisory and Other Fees
The annual investment advisory fee for the Fund is 0.75 of 1% of the
Fund's average daily net assets. Federated Management ("Management"), the
investment adviser to the Fund, may voluntarily choose to waive a portion of
its advisory fee. This voluntary waiver of fees may be terminated by
Management at any time in its sole discretion. Management has also undertaken
to reimburse the Fund for operating expenses in excess of limitations
established by certain states. The maximum annual investment advisory fee
for the Portfolio is 0.55 of 1% of the Portfolio's average daily net assets
plus 4.50% of gross income, excluding capital gains or losses. The
Portfolio's investment adviser, Federated Advisers (the "Adviser"), may
similarly voluntarily choose to waive a portion of its advisory fee or
reimburse the Portfolio for certain operating expenses but may likewise
terminate such waiver at any time in its sole discretion. The Adviser has
also undertaken to reimburse the Portfolio for operating expenses in excess
of limitations established by certain states. Without such waivers or
reimbursements, the expense ratio of the Fund and the Portfolio would be
higher by 0.00% and 3.10%, respectively, of average daily net assets.
Federated Administrative Services, an affiliate of Management and the
Adviser, provides certain administrative personnel and services necessary to
operate both the Fund and the Portfolio at an annual rate based upon the
average aggregate daily net assets of all funds advised by Management, the
Adviser and their affiliates. The rate charged is 0.15 of 1% of the first
$250 million of all such funds' average aggregate daily net assets, 0.125 of
1% on the next $250 million, 0.10 of 1% on the next $250 million and 0.075 of
1% of all such funds' average aggregate daily net assets in excess of $750
million, with a minimum annual fee per portfolio of $125,000 plus $30,000 for
each additional class of shares of any such portfolio. Federated
Administrative Services may choose voluntarily to waive a portion of its fee.
The administrative fee expense for the Fund's most recent fiscal year
$197,711 and for the Portfolio's most recent fiscal year was $159,192.
Each of the Fund and the Portfolio have entered into a Shareholder
Services Agreement under which each may make payments of up to 0.25 of 1% of
its average daily net asset value to obtain certain personal services for
shareholders and the maintenance of shareholder accounts. The Shareholder
Services Agreement, in each case, provides that Federated Shareholder
Services ("FSS"), an affiliate of Management and the Adviser, will either
perform shareholder services directly or will select financial institutions
to perform such services. Financial institutions will receive fees based
upon shares owned by their customers. The schedule of such fees and the
basis upon which such fees will be paid is determined from time to time by
the Fund or the Portfolio, respectively, and Federated Shareholder Services.
The total annual operating expenses for Class C Shares of the Fund
were 2.05% of average daily net assets for its most recent fiscal year. The
total annual operating expenses for Class C Shares of the Portfolio were
1.94% of average daily net assets for its most recent fiscal year and would
have been 5.04% of average daily net assets absent the voluntary waiver by
the Adviser of a portion of the investment advisory fee, state imposed
limitations and reimbursement of certain other operating expenses and a
waiver of a portion of the shareholder services fee. In connection with the
Reorganization, Management has agreed to waive its advisory fee and/or
reimburse operating expenses of the Fund so that the annual operating
expenses applicable to Class C Shares of the Fund will not exceed 1.93% of
average daily net assets for the year following the consummation of the
Reorganization.
Distribution Arrangements
Federated Securities Corp. ("FSC") is the principal distributor for
shares of the Fund and the Portfolio. The Fund has adopted a Rule 12b-1
Distribution Plan (the "Distribution Plan") pursuant to which the Fund may
pay to the distributor an amount equal to an annual rate of 0.75 of 1% of the
average daily net asset value of the Fund to finance any activity which is
principally intended to result in the sale of shares subject to the
Distribution Plan. FSC may also, with respect to Class C Shares, select
financial institutions to provide sales services or distribution-related
support services as agents for their clients or customers. In addition, FSC
may pay financial institutions at the time of purchase, from its assets, an
amount equal to 1% of the net asset value of Class C Shares purchased by
their customers. If a financial institution elects to waive receipt of this
payment, the Fund will waive any applicable contingent deferred sales charge
(such contingent deferred sales charges are discussed below). The
Distribution Plan is a compensation type plan and, accordingly, no payments
are made to FSC except as described above, and the Fund does not pay FSC for
unreimbursed expenses.
The Portfolio has also adopted a Rule 12b-1 Distribution Plan (the
"Rule 12b-1 Plan") pursuant to which the Portfolio pays FSC an amount equal
to an annual rate of 0.75 of 1% of the average daily net asset value of the
Class C Shares to finance any activity which is principally intended to
result in the sale of shares subject to the Rule 12b-1 Plan. FSC may select
financial institutions to provide sales support services as agents for their
clients or customers. The Rule 12b-1 Plan is a compensation type plan and,
accordingly, no payments are made to FSC except as described above, and the
Portfolio does not pay FSC for unreimbursed expenses.
In addition, FSC and FSS, from their own assets, may pay financial
institutions supplemental fees as financial assistance for providing
substantial sales services, distribution-related support services or
shareholder services with respect to both the Fund and the Portfolio. Such
assistance will be predicated upon the amount of Class C Shares the financial
institution sells or may sell, and/or upon the type and nature of sales or
marketing support furnished by the financial institution. Any payments made
by FSC may be reimbursed by Management, the Adviser or their affiliates.
Certain costs exist with respect to the purchase and sale of Fund and
Portfolio shares. Shares of the Fund and the Portfolio are sold at their net
asset value next determined after an order is received. Absent an exemption,
shareholders redeeming Fund or Portfolio shares within one full year of the
purchase date will be charged a contingent deferred sales charge by FSC of
1.00%. Any such charge will be imposed on the lesser of the net asset value
of the redeemed shares at the time of purchase or redemption. The contingent
deferred sales charges are not imposed in connection with the exercise of
exchange rights, nor will they be imposed on any redemptions (effected
subsequent to the Reorganization) of Fund shares received by shareholders of
the Portfolio as a result of the consummation of the Reorganization provided
that such shares were originally purchased by the Portfolio shareholder more
than one year from the date of redemption. For a complete description of
sales charges, contingent deferred sales charges and exemptions from such
charges, reference is hereby made to the Prospectus of the Fund dated
December 31, 1995 and the Prospectus of the Portfolio dated December 31,
1995, each of which is incorporated herein by reference thereto.
Purchase and Redemption Procedures
The transfer agent and dividend disbursing agent for each of the Fund
and the Portfolio is Federated Shareholder Services Company (formerly called
Federated Services Company). Procedures for the purchase and redemption of
the Fund's Class C Shares differ slightly from procedures applicable to the
purchase and redemption of the Portfolio's Class C Shares. Any questions
about such procedures may be directed to, and assistance in effecting
purchases or redemptions of the Fund's Class C Shares or Portfolio's Class C
Shares, may be obtained from, FSC, principal distributor for each of the Fund
and the Portfolio, at 800-245-5051.
Reference is made to the Prospectus of the Fund dated December 31,
1995, and the Prospectus of the Portfolio dated December 31, 1995, for a
complete description of the purchase and redemption procedures applicable to
purchases and redemptions of Fund and Portfolio shares, respectively, each of
which is incorporated herein by reference thereto. Set forth below is a
brief listing of the significant purchase and redemption procedures
applicable to the Fund's Class C Shares and the Portfolio's Class C Shares.
Purchases of Class C Shares of the Fund may be made through a
financial institution who has an agreement with FSC or, once an account has
been established, by wire or check. Purchases of Class C Shares of the
Portfolio may be made through a financial institution which has a sales
agreement with FSC or directly from FSC once an account has been established.
The minimum initial investment in the Fund and the Portfolio is $1,500,
except for retirement accounts for which the minimum is $50. Subsequent
investments must be in amounts of at least $100, except for retirement
accounts for which the minimum is $50. The Fund and the Portfolio each
reserve the right to reject any purchase request. In connection with the
sale of Class C Shares of both the Fund and the Portfolio, FSC may from time
to time offer certain items of nominal value to any shareholder.
The purchase price of shares of both the Fund and the Portfolio is
based on net asset value. The net asset value for each of the Fund and the
Portfolio is calculated as of the close of trading (normally 4:00 p.m.,
Eastern time) on the New York Stock Exchange, on each day on which the Fund
and the Portfolio compute their net asset value. Purchase and redemption
orders for the Fund and the Portfolio received from broker/dealers before
5:00 p.m. (Eastern time) and from financial institutions before 4:00 p.m.
(Eastern time) may be entered at that day's price. Fund purchase orders by
wire are considered received immediately and payments must be received within
three business days following the order if a sales charge is due or by 3:00
p.m. (Eastern time) on the next business day if no such charge is due.
Portfolio purchase orders by wire are considered received when the
Portfolio's transfer agent's bank, State Street Bank and Trust Company
("State Street Bank"), receives payment by wire. Purchase orders received by
check are considered received after the check is converted into federal
funds, which normally occurs one day after receipt.
Holders of Fund and Portfolio Class C Shares each have exchange
privileges with respect to Class C Shares in certain of the funds for which
affiliates of Management or the Adviser serve as investment advisor or
principal underwriter (collectively, the "Federated Funds"), each of which
has different investment objectives and policies. Class C Shares in the Fund
or the Portfolio may be exchanged for Class C Shares of certain Federated
Funds at net asset value without a contingent deferred sales charge. To the
extent a shareholder exchanges Class C Shares of the Fund or Portfolio for
Class C Shares in other Federated Funds, the time for which the exchanged-for
shares are to be held will be added to the time for which exchanged-from
shares were held for purposes of satisfying the applicable holding period.
Class C Shares to be exchanged must have a net asset value which meets the
minimum investment requirement for the fund into which the exchange is being
made. Exercise of the exchange privilege is treated as a sale for federal
income tax purposes and, accordingly, may have tax consequences for the
shareholder. Information on share exchanges may be obtained from the Fund or
the Portfolio, as appropriate.
Redemptions of Fund Class C Shares may be made through a financial
institution, by telephone, by mailing a written request or through the Fund's
Systematic Withdrawal Program. Redemptions of Portfolio shares may be made
through a financial institution, by telephone, by mailing a written request
or through the Portfolio's Systematic Withdrawal Program. In each case,
Class C Shares are redeemed at their net asset value, less any applicable
contingent deferred sales charge, next determined after the redemption
request is received. Proceeds will be distributed by check within seven days
after receipt of a redemption request.
Tax Consequences
As a condition to the Reorganization transactions, the Trust and the
Corporation will receive an opinion of counsel that the Reorganization will
be considered a tax-free "reorganization" under applicable provisions of the
Internal Revenue Code so that no gain or loss will be recognized by either
the Fund or the Portfolio or their shareholders. The tax cost basis of the
Fund shares received by Portfolio shareholders will be the same as the tax
cost basis of their shares in the Portfolio.
RISK FACTORS
Investment in the Fund and the Portfolio is subject to certain risks
which are set forth in the Fund's Prospectus dated December 31, 1995 and the
Statement of Additional Information dated December 31, 1995 and the
Portfolio's Prospectus dated December 31, 1995 and the Statement of
Additional Information dated December 31, 1995, each of which is incorporated
herein by reference thereto. Briefly, these risks include, but are not
limited to, fluctuation in the value of the securities held by the Fund or
the Portfolio; gain or loss in the sale of stocks held by the Fund or the
Portfolio based on changes in the perceived prospects of the issuer; and
economic, political and regulatory developments which affect these
securities.
INFORMATION ABOUT THE REORGANIZATION
Background and Reasons for the Proposed Reorganization
The Portfolio was established in 1987 to provide investors with an
opportunity to invest in a professionally-managed, diversified pool of equity
securities with prospects for above-average growth in earnings and dividends.
Although its investment objective and policies were similar to other funds
advised by the Adviser at the time of its creation, the Portfolio was created
as a separate unit in order to market it to particular groups of investors.
Subsequent to the Portfolio's creation, the Adviser and its affiliates
determined that a more economically efficient method of marketing to
different groups of investors was to create separate classes of stock within
a single portfolio. The classes are then individually marketed and bear
different fees and expenses.
The Portfolio had net assets of approximately $16.4 million, compared
to the Fund's net assets of $250.9 million as of January 31, 1996. For the
last several years, in an effort to remain competitive with other investment
companies, the Adviser has waived all of its investment advisory fee and
reimbursed the Portfolio for certain operating expenses, resulting in
aggregate fee waivers and expense reimbursements of $356,497 for the
Portfolio's fiscal year ended October 31, 1995. The Adviser has concluded
that it will not be able to continue indefinitely to waive such investment
advisory fees and reimburse operating expenses in order to allow the
Portfolio to earn a return on its investments competitive with other
investment companies with similar investment objectives. As a result, the
Adviser has recommended to the Board of Directors that it would be in the
best interests of all of the Portfolio's shareholders to combine its assets
with those of the Fund. Such a combination may achieve operating
efficiencies and economies of scale as a result of the larger size of the
Fund while allowing shareholders to maintain an investment in a fund whose
investment objective is appreciation of capital.
The Corporation's Board of Directors, including a majority of the
independent Directors, determined that participation in the Reorganization is
in the best interests of the Portfolio and that the interests of Portfolio
shareholders would not be diluted as a result of its effecting the
Reorganization. Based upon the foregoing considerations, and the fact that
shareholders of the Portfolio will not suffer any adverse tax consequences as
a result of the Reorganization, the Board of Directors of the Corporation
unanimously voted to approve, and recommend to Portfolio shareholders the
approval of, the Reorganization.
The Board of Trustees of the Fund, including a majority of the
independent Trustees, have unanimously concluded that consummation of the
Reorganization is in the best interests of the Fund and the shareholders of
the Fund and that the interests of Fund shareholders would not be diluted as
a result of effecting the Reorganization and have unanimously approved the
Plan.
Description of the Plan of Reorganization
The Plan provides that the Fund will acquire all of the assets of the
Portfolio in exchange for the Fund's Class A Shares and Class C Shares to be
distributed pro rata by the Portfolio to its Class A and Class C shareholders
in complete liquidation of the Portfolio on or about May 31, 1996 (the
"Closing Date"). Shareholders of the Portfolio will become shareholders of
the Fund as of the close of business on the Closing Date, and will be
entitled to the Fund's next dividend distribution. Shareholders of the
Portfolio will earn their last dividend from the Portfolio on the dividend
date.
Consummation of the Reorganization is subject to the conditions set
forth in the Plan, including receipt of an opinion in form and substance
satisfactory to the Corporation, on behalf of the Portfolio, and the Trust,
on behalf of the Fund, as described under the caption "Federal Income Tax
Consequences" below. The Plan may be terminated and the Reorganization may
be abandoned at any time before or after approval by shareholders of the
Portfolio prior to the Closing Date by either party if it believes that
consummation of the Reorganization would not be in the best interests of its
shareholders.
Management is responsible for the payment of all expenses of the
Reorganization incurred by either party, whether or not the Reorganization is
consummated. Such expenses include, but are not limited to, 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 Portfolio's shareholders and the
costs of holding the Special Meeting of Shareholders.
The foregoing description of the Plan entered into between the Trust,
on behalf of the Fund, and the Corporation, on behalf of the Portfolio, 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 Fund Shares
Class C Shares of the Fund to be issued to Class C shareholders of
the Portfolio under the Plan will be fully paid and nonassessable when issued
and transferable without restriction and will have no preemptive or
conversion rights. Reference is hereby made to the Prospectus of the Fund
dated December 31, 1995 provided herewith for additional information about
Class C Shares of the Fund.
Federal Income Tax Consequences
As a condition to the Reorganization transactions, the Trust, on behalf of
the Fund, and the Corporation, on behalf of the Portfolio, will receive an
opinion from Dickstein, Shapiro & Morin, L.L.P., counsel to the Trust and the
Corporation, to the effect that, on the basis of the 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 Reorganization as set forth in the Plan will constitute a tax-free
reorganization under section 368(a)(1)(C) of the Code; (2) no gain or loss
will be recognized by the Fund upon its receipt of the Portfolio's assets
solely in exchange for Fund shares; (3) no gain or loss will be recognized by
the Portfolio upon the transfer of its assets to the Fund in exchange for
Fund shares or upon the distribution (whether actual or constructive) of the
Fund shares to the Portfolio shareholders in exchange for their shares of the
Portfolio; (4) no gain or loss will be recognized by shareholders of the
Portfolio upon the exchange of their Portfolio shares for Fund shares; (5)
the tax basis of the Portfolio's assets acquired by the Fund will be the same
as the tax basis of such assets to the Portfolio immediately prior to the
Reorganization; (6) the tax basis of Fund shares received by each shareholder
of the Portfolio pursuant to the Plan will be the same as the tax basis of
Portfolio shares held by such shareholder immediately prior to the
Reorganization; (7) the holding period of the assets of the Portfolio in the
hands of the Fund will include the period during which those assets were held
by the Portfolio; and (8) the holding period of Fund shares received by each
shareholder of the Portfolio will include the period during which the
Portfolio shares exchanged therefor were held by such shareholder, provided
the Portfolio shares were held as capital assets on the date of the
Reorganization.
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. Set forth
below is a brief summary of the significant rights of shareholders of the
Trust.
The Trust is not required to hold annual meetings of shareholders.
Shareholder approval is necessary only for certain changes in operations or
the election of trustees under certain circumstances. A special meeting of
shareholders of the Trust for any permissible purpose is required to be
called by the Trustees upon the written request of the holders of at least
10% of the Trust's outstanding shares of all series entitled to vote. Each
share of the Trust is entitled to one vote. All shares of each fund or class
in the Trust have equal voting rights except that in matters affecting only a
particular fund or class, only shares of that fund or class are entitled to
vote.
Under certain circumstances, shareholders of the Fund may be held
personally liable as partners under Massachusetts law for obligations of the
Trust on behalf of the Fund. To protect its shareholders, the Trust has
filed legal documents with the Commonwealth of Massachusetts that expressly
disclaim the liability of Fund shareholders 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.
In the unlikely event a shareholder is held personally liable for the
Trust's obligations on behalf of the Fund, the Trust is required to use its
property to protect or compensate the shareholder. On request, the Trust
will defend any claim made and pay any judgment against a shareholder for any
act or obligation of the Trust. Therefore, financial loss resulting from
liability as a shareholder will occur only if the Trust cannot meet its
obligations to indemnify shareholders and pay judgments against them.
The Corporation is organized as a corporation under the laws of the
State of Maryland and is not required to hold annual meetings of shareholders
except when required to do so under the 1940 Act. A special meeting of
shareholders of the Corporation is required to be called by the Directors
upon the written request of the holders of at least 10% of the outstanding
shares of the Corporation entitled to vote. Each share of the Corporation is
entitled to one vote at all meetings of shareholders except that in matters
affecting only a particular portfolio or class, only shares of that portfolio
or class are entitled to vote.
Capitalization
The following table sets forth the unaudited capitalization of the
Class C Shares of the Fund and the Class C Shares of the Portfolio as of
January 31, 1996 and on a pro forma basis as of that date:
Pro Forma
Fund Portfolio Combined
Class C Shares $420,209 $1,584,262 $2,004,471
Net Assets (1)
Net Asset Value $22.64 $13.70 $22.64
Per Class C Share
(1) Net Assets for Class A Shares for each of the Fund, the Portfolio and
Pro Forma Combined are $250,439,331, $14,856,970 and $265,296,301,
respectively. Net Asset Value Per Class A Share for each of the Fund, the
Portfolio and Pro Forma Combined are $22.65, $13.73 and $22.65, respectively.
INFORMATION ABOUT THE FUND, THE TRUST
THE PORTFOLIO AND THE CORPORATION
Federated Growth Strategies Fund, a portfolio of Federated Equity Funds
Information about the Trust and the Fund is contained in the Fund's
current Prospectus dated December 31, 1995, a copy of which is included
herewith and incorporated by reference herein. Additional information about
the Fund is included in the Fund's Statement of Additional Information dated
December 31, 1995 and the Statement of Additional Information dated April 7,
1996 relative to this Prospectus/Proxy Statement, each of which is
incorporated herein by reference. Copies of the Statements of Additional
Information, which have been filed with the Securities and Exchange
Commission (the "SEC"), may be obtained without charge by contacting the Fund
at 1-800-245-5051 or by writing the Fund at Federated Investors Tower,
Pittsburgh, PA 15222-3779. The Trust is subject to the informational
requirements of the 1933 Act, the Securities Exchange Act of 1934 (the "1934
Act") and the 1940 Act and in accordance therewith files reports and other
information with the SEC. Reports, proxy and information statements and
other information filed by the Trust or the Fund can be obtained by calling
or writing the Fund and can also be inspected and copied by the public at the
public reference facilities maintained by the SEC in Washington, D.C. located
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at certain
of its regional offices located at Suite 1400, Northwestern Atrium Center,
500 West Madison Street, Chicago, IL 60661 and 13th Floor, Seven World Trade
Center, New York, NY 10048. Copies of such material can be obtained at
prescribed rates from the Public Reference Branch, Office of Consumer Affairs
and Information Services, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549.
This Prospectus/Proxy Statement, which constitutes part of a
Registration Statement filed by the Trust with the SEC under the 1933 Act,
omits certain of the information contained in the Registration Statement.
Reference is hereby made to the Registration Statement and to the exhibits
thereto for further information with respect to the Trust and the Fund and
the shares offered hereby. Statements contained herein concerning the
provisions of documents are necessarily summaries of such documents, and each
such statement is qualified in its entirety by reference to the copy of the
applicable documents filed with the SEC.
Capital Growth Fund, a portfolio of Investment Series Funds, Inc.
Information about the Portfolio and the Corporation is contained in
the Portfolio's current Prospectus dated December 31, 1995, its Statement of
Additional Information dated December 31, 1995 and the Statement of
Additional Information dated April 7, 1996 relating to this Prospectus/Proxy
Statement, each of which is incorporated herein by reference. Copies of such
Prospectus and Statement(s) of Additional Information, which have been filed
with the SEC, may be obtained without charge from the Fund by calling 1-800-
245-5051 or by writing to the Fund at Federated Investors Tower, Pittsburgh,
PA 15222-3779. The Corporation is subject to the informational requirements
of the 1933 Act, the 1934 Act and the 1940 Act and in accordance therewith
files reports and other information with the SEC. Reports, proxy and
information statements and other information filed by the Corporation or the
Portfolio can be obtained by calling or writing the Fund and can also be
inspected at the public reference facilities maintained by the SEC or
obtained at prescribed rates at the addresses listed in the previous section.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of the Corporation of proxies for use
at the Special Meeting of Shareholders (the "Meeting") to be held on May 31,
1996 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 Plan. A shareholder may revoke a
proxy at any time prior to use by filing with the Secretary of the
Corporation an instrument revoking the proxy, 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 Management. In addition to solicitations
through the mails, proxies may be solicited by officers, employees and agents
of the Corporation and Management at no additional cost to the Corporation.
Such solicitations may be by telephone. Management will reimburse
custodians, nominees and fiduciaries for the reasonable costs incurred by
them in connection with forwarding solicitation materials to the beneficial
owners of shares held of record by such persons.
Outstanding Shares and Voting Requirements
The Board of Directors of the Corporation has fixed the close of
business on March 25, 1996 as the record date for the determination of
shareholders entitled to notice of and to vote at the Special Meeting of
Shareholders and any adjournment thereof. As of the record date, there were
Class A Shares and Class C Shares of the Portfolio outstanding.
- ------- ----
Each of the Portfolio's Class A Shares and Class C Shares are entitled to one
vote and fractional shares have proportionate voting rights. On the record
date, owned of record shares, or %, of the Portfolio's
-------- ----- -----
outstanding Class A Shares and owned of record shares, or
----- ----- -----
%, of the Portfolio's outstanding Class C Shares. On such date, no other
person owned of record, or to the knowledge of the Adviser, beneficially
owned, 5% or more of the Portfolio's outstanding Class A or Class C Shares.
On the record date, the directors and officers of the Corporation as a group
owned less than 1% of the outstanding Class A and Class C Shares of the
Portfolio.
As of the record date, there were Class A, Class B and
---------- --
Class C Shares of the Fund outstanding. On the record date,
- -- --------
owned of record shares, or %, of the Fund's outstanding Class A
----- ---
Shares, owned of record shares, or %, of the Fund's
----- ----- -----
outstanding Class B Shares and owned of record shares, or %, of the
-- -- --
Fund's outstanding Class C Shares. On such date, no other person owned of
record, or to the knowledge of the Management, beneficially owned, 5% or more
of the Fund's outstanding Class A, Class B or Class C Shares. On the record
date, the trustees and officers of the Fund as a group owned less than 1% of
the outstanding Class A, Class B and Class C Shares of the Fund.
Approval of the Plan requires the affirmative vote of the lesser of
(i) 67% of the shares of the Portfolio present at the Special Meeting, if the
holders of more than 50% of the outstanding shares are present or represented
by proxy, or (2) a majority of the outstanding shares of the Portfolio. The
votes of shareholders of the Fund are not being solicited since their
approval is not required in order to effect the Reorganization.
One-third of the outstanding shares of the Portfolio, represented in
person or by proxy, will be required to constitute a quorum at the Special
Meeting for the purpose of voting on the proposed Reorganization. For
purposes of determining the presence of a quorum, shares represented by
abstentions and "broker non-votes" will be counted as present, but not as
votes cast, at the Special Meeting. Under the 1940 Act, however, which
governs this transaction, matters subject to the requirements of the 1940
Act, including the Reorganization, are determined on the basis of a
percentage of votes present at the Special Meeting, which would have the
effect of treating abstentions and "broker non-votes" as if they were votes
against the proposal.
Dissenter's Right of Appraisal
Shareholders of the Portfolio objecting to the Reorganization have no
appraisal rights under the Corporation's Articles of Incorporation or
Maryland law. Under the Plan, if approved by Portfolio shareholders, each
Class C Portfolio shareholder will become the owner of Class C Shares of the
Fund having a total net asset value equal to the total net asset value of his
or her holdings in the Portfolio at the Closing Date.
Other Matters
Management of the Corporation 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 Fund.
If at the time any session of the Special Meeting is called to order,
a quorum is not present in person or by proxy, the persons named as proxies
may vote those proxies which have been received to adjourn the Special
Meeting to a later date. In the event that a quorum is present but
sufficient votes in favor of one or more of the proposals have not been
received, the persons named as proxies may propose one or more adjournments
of the Special Meeting to permit further solicitation of proxies with respect
to any such proposal. All such adjournments will require the affirmative
vote of a majority of the shares present in person or by proxy at the session
of the Special Meeting to be adjourned. The persons named as proxies will
vote those proxies which they are entitled to vote in favor of the proposal,
in favor of such an adjournment, and will vote those proxies required to be
voted against the proposal, against any such adjournment. A vote may be
taken on one or more of the proposals in this Prospectus/Proxy Statement
prior to any such adjournment if sufficient votes for its approval have been
received and it is otherwise appropriate.
Whether or not shareholders expect to attend the meeting, all
shareholders are urged to sign, fill in and return the enclosed proxy form
promptly.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated February 29, 1996 (the
"Agreement"), between FEDERATED EQUITY FUNDS, a Massachusetts business trust
(the "Trust"), on behalf of its portfolio FEDERATED GROWTH STRATEGIES FUND
(hereinafter called the "Acquiring Fund"), and INVESTMENT SERIES FUNDS, INC.,
a Maryland corporation (hereinafter called the "Corporation") on behalf of
its portfolio CAPITAL GROWTH FUND (hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of
the United States Internal Revenue Code of 1986, as amended (the "Code").
The reorganization (the "Reorganization") will consist of the transfer of all
of the assets of the Acquired Fund in exchange solely for Class A and Class C
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 shareholders of the Acquired Fund in liquidation
of the Acquired Fund as provided herein, all upon the terms and conditions
hereinafter set forth in this Agreement.
WHEREAS, the Corporation and the Trust are registered open-end
management investment companies and the Acquired Fund owns securities in
which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are authorized
to issue shares of common stock or shares of beneficial interest, as the case
may be;
WHEREAS, both the Acquired Fund and the Acquiring Fund have
outstanding Class A Shares and Class C Shares;
WHEREAS, the Board of Trustees, including a majority of the trustees
who are not "interested persons" (as defined under the Investment Company Act
of 1940, as amended (the "1940 Act")), of the Acquiring Fund has determined
that the exchange of all of the assets of the Acquired Fund for Acquiring
Fund Shares is in the best interests of the Acquiring Fund shareholders and
that the interests of the existing shareholders of the Acquiring Fund would
not be diluted as a result of this transaction; and
WHEREAS, the Board of Directors, including a majority of the
directors who are not "interested persons" (as defined under the 1940 Act),
of the Acquired Fund has determined that the exchange of all of the assets of
the Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquired Fund shareholders and that the interests of the existing
shareholders of the Acquired Fund would not be diluted as a result of this
transaction;
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE
ACQUIRING FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund agrees to assign, transfer and convey to the Acquiring Fund all of the
assets of the Acquired Fund, including all securities and cash, other than
cash in an amount necessary to pay any unpaid dividends and distributions as
provided in paragraph 1.5, beneficially owned by the Acquired Fund, and the
Acquiring Fund agrees in exchange therefor to deliver to the Acquired Fund
the number of Class A and Class C Acquiring Fund Shares, respectively,
including fractional Class A and Class C 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 Class A and Class
C Acquiring Fund Shares, the Acquiring Fund shall credit the Class A and
Class C Acquiring Fund Shares to the Acquired Fund's account, for the benefit
of its Class A and Class C shareholders, respectively, on the stock record
books of the Acquiring Fund 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 (hereinafter called "State Street"), Boston, Massachusetts, the
Acquiring Fund's custodian (the "Custodian"), for the account of the
Acquiring Fund, together with proper instructions and all necessary documents
to transfer to the account of the Acquiring Fund, free and clear of all
liens, encumbrances, rights, restrictions and claims. 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 thereunder. The Acquired
Fund will transfer to the Acquiring Fund any distributions, rights or other
assets received by the Acquired Fund after the Closing Date as distributions
on or with respect to the securities transferred. Such assets shall be
deemed included in assets transferred to the Acquiring Fund on the Closing
Date and shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable, the
Acquired Fund will liquidate and distribute pro rata to the Acquired Fund's
Class A and Class C shareholders of record, determined as of the close of
business on the Closing Date (the "Acquired Fund Shareholders"), the Class A
and Class C Acquiring Fund Shares, respectively, received by the Acquired
Fund pursuant to paragraph 1.1. In addition, each shareholder of record of
the Acquired Fund shall have the right to receive any unpaid dividends or
other distributions which were declared before the Valuation Date (as
hereinafter defined) with respect to the shares of the Acquired Fund that are
held by the shareholder on the Valuation Date. Such liquidation and
distribution will be accomplished by the transfer of the Class A and Class C
Acquiring Fund Shares then credited to the account of the Acquired Fund on
the books of the Acquiring Fund to open accounts on the share record books of
the Acquiring Fund in the names of the Class A and Class C Acquired Fund
Shareholders, respectively, and representing the respective pro rata number
of the Class A and Class C Acquiring Fund Shares due such shareholders, based
on their ownership of Class A and Class C Shares, respectively, of the
Acquired Fund on the Closing Date. All issued and outstanding Class A and
Class C Shares of the Acquired Fund will simultaneously be canceled on the
books of the Acquired Fund. Class A and Class C Share certificates
representing interests in the Acquired Fund will represent a number of Class
A and Class C Acquiring Fund Shares, respectively, after the Closing Date as
determined in accordance with Section 2.3. The Acquiring Fund shall not
issue certificates representing the Class A and Class C Acquiring Fund Shares
in connection with such exchange.
1.6 Ownership of Class A and Class C Acquiring Fund Shares will be
shown on the books of the Acquiring Fund's transfer agent. Shares of the
Acquiring Fund will be issued in the manner described in the Acquiring Fund's
current prospectus and statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Class A and Class C
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 Class A and Class C 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 Corporation.
2.VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of the
close of the New York Stock Exchange (normally 4:00 p.m. Eastern time) on the
Closing Date (such time and date being 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 each Class A and Class C Acquiring Fund
Share shall be the net asset value per share computed as of the close of the
New York Stock Exchange (normally 4:00 p.m. Eastern time) on the Valuation
Date, using the valuation procedures set forth in the Acquiring Fund's then-
current prospectus or statement of additional information.
2.3 The number of the Class A and Class C Acquiring Fund Shares to be
issued (including fractional shares, if any) in exchange for the Acquired
Fund's net assets shall be determined (a) by dividing the value of the net
assets of the Acquired Fund attributable to Class A Shares, determined using
the same valuation procedures referred to in paragraph 2.1, by the net asset
value of one Class A Acquiring Fund Share and (b) by dividing the value of
the net assets of the Acquired Fund attributable to Class C Shares,
determined using the same valuation procedures referred to in paragraph 2.1,
by the net asset value of one Class C Acquiring Fund Share, in each case
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 May 31, 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 the offices of the Acquiring Fund, Federated Investors
Tower, Pittsburgh, PA 15222-3779, or such other time and/or place as the
parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of the
value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 Federated Shareholder Services Company, as transfer agent for each
of the Acquired Fund and the Acquiring Fund, shall deliver at the Closing a
certificate of an authorized officer stating that its records contain the
names and addresses of the Class A and Class C Acquired Fund Shareholders and
the number and percentage ownership of outstanding Class A and Class C Shares
owned by each such shareholder immediately prior to the Closing. The
Acquiring Fund shall issue and deliver a confirmation evidencing the Class A
and Class C 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 Class A and Class C 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 Corporation represents and warrants to the Trust as follows:
(a) The Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland and has
power to own all of its properties and assets and to carry out this
Agreement.
(b) The Corporation is registered under the 1940 Act, as an
open-end, management investment company, and such registration has not been
revoked or rescinded and is in full force and effect.
(c) The Corporation is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of the
Corporation's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquired Fund is a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Acquired Fund or any of
its properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquired Fund knows of no facts which might form the basis for the
institution of such proceedings, and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to
consummate the transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "Commission") thereunder and do not include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(g) The Statements of Assets and Liabilities of the Acquired
Fund at October 31, 1994 and 1995 have been audited by Ernst & Young LLP,
independent auditors, and have been prepared in accordance with generally
accepted accounting principles, consistently applied, and such statements
(copies of which have been furnished to the Acquiring Fund) fairly reflect
the financial condition of the Acquired Fund as of such dates, and there are
no known contingent liabilities of the Acquired Fund as of such dates not
disclosed therein.
(h) Since October 31, 1995, 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) For each fiscal year of its operation, the Acquired Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company.
(k) All issued and outstanding Class A and Class C 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 Class A and Class C 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 Class A or Class C Acquired Fund Shares,
nor is there outstanding any security convertible into any of the Class A or
Class C Acquired Fund Shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets
to be transferred by it hereunder.
(m) The execution, delivery and performance of this Agreement
will have been duly authorized prior to the Closing Date by all necessary
action on the part of the Corporation's directors and, subject to the
approval of the Acquired Fund Shareholders, 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).
(n) The prospectus/proxy statement of the Acquired Fund (the
"Prospectus/Proxy Statement") to be included in the Registration Statement
referred to in paragraph 5.5 (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.
(o) The Acquired Fund has entered into an agreement under
which Federated Management will assume the expenses of the reorganization
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 shareholders and the costs of holding the Special Meeting of
Shareholders.
4.2 The Trust represents and warrants to the Corporation as follows:
(a) The Trust is a business trust duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has the power to carry on its business as it is now being
conducted 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 Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Trust's 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) The Statement of Assets and Liabilities of the Acquiring
Fund at October 31, 1994 and 1995, have been audited by Ernst & Young LLP,
independent auditors, and have been prepared in accordance with generally
accepted accounting principles, and such statements (copies of which have
been furnished to the Acquired Fund) fairly reflect the financial condition
of the Acquiring Fund as of such dates, and there are no known contingent
liabilities of the Acquiring Fund as of such dates not disclosed therein.
(g) Since October 31, 1995, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course
of business, or any incurrence by the Acquiring Fund of indebtedness maturing
more than one year from the date such indebtedness was incurred, except as
disclosed to and accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed by such
date shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment
thereof, and to the best of the Acquiring Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to
such returns.
(i) For each fiscal year of its operation, the Acquiring Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company.
(j) All issued and outstanding Class A and Class C 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 Class A or Class C Acquiring Fund Shares, nor is
there outstanding any security convertible into any Class A or Class C
Acquiring Fund Shares.
(k) 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 Trust'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).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading.
(m) The Acquiring Fund has entered into an agreement under
which Federated Management will assume the expenses of the reorganization
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 shareholders and the costs of holding the Special Meeting of
Shareholders.
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 Corporation will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund and
the Acquired Fund will each take, or cause to be taken, all action, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this
Agreement.
5.4 As promptly as practicable, but in any case within sixty days after
the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in such
form as is reasonably satisfactory to the Acquiring Fund, a statement of the
earnings and profits of the Acquired Fund for Federal income tax purposes
which will be carried over to the Acquiring Fund as a result of Section 381
of the Code and which will be certified by the Corporation's President and
its Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of the Prospectus/Proxy Statement,
referred to in paragraph 4.1(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
Shareholders to consider approval of this Agreement and the transactions
contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, 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.
5.7 Prior to the Valuation Date, the Acquired Fund shall have declared
a dividend or dividends, with a record date and ex-dividend date prior to the
Valuation Date, which, together with all previous dividends, shall have the
effect of distributing to its shareholders all of its investment company
taxable income, if any, plus the excess of its interest income, if any,
excludable from gross income under Code section 103a) over its deductions
disallowed under Code sections 265 and 171(a)(2) for the taxable periods or
years ended on or before October 31, 1995 and for the period from said date
to and including the Closing Date (computed without regard to any deduction
for dividends paid), and all of its net capital gain, if any, realized in
taxable periods or years ended on or before October 31, 1995 and in the
period from said date to and including the Closing Date.
6.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquired Fund of all the obligations to be performed by it hereunder on
or before the Closing Date and, in addition thereto, the following
conditions:
6.1 All representations and warranties of the Corporation contained in
this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such securities by lot
and the holding periods of such securities, as of the Closing Date, certified
by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of the
Corporation 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 Trust 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, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Trust 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.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness, except
as otherwise disclosed to and accepted by the Acquired Fund.
8.FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
@q3901!.doc/500373
50
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares
of the Acquired Fund in accordance with the provisions of the Corporation's
Articles of Incorporation and the 1940 Act.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those
of the Commission 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 Corporation shall have received an opinion of
Dickstein, Shapiro & Morin, L.L.P. substantially to the effect that for
Federal income tax purposes:
(a) The transfer of all of the Acquired Fund assets in
exchange for the Acquiring Fund Shares and the distribution of the Acquiring
Fund Shares to the Acquired Fund Shareholders in liquidation of the Acquired
Fund will constitute a "reorganization" within the meaning of Section
368(a)(1)(C) of the Code; (b) No gain or loss will be recognized by the
Acquiring Fund upon the receipt of the assets of the Acquired Fund solely in
exchange for the Acquiring Fund Shares; (c) No gain or loss will be
recognized by the Acquired Fund upon the transfer of the Acquired Fund assets
to the Acquiring Fund in exchange for the Acquiring Fund Shares or upon the
distribution (whether actual or constructive) of the Acquiring Fund Shares to
Acquired Fund Shareholders in exchange for their shares of the Acquired Fund;
(d) No gain or loss will be recognized by the Acquired Fund Shareholders upon
the exchange of their Acquired Fund shares for the Acquiring Fund Shares;
(e) The tax basis of the Acquired Fund assets acquired by the Acquiring Fund
will be the same as the tax basis of such assets to the Acquired Fund
immediately prior to the Reorganization; (f) The tax basis of the Acquiring
Fund Shares received by each of the Acquired Fund Shareholders pursuant to
the Reorganization will be the same as the tax basis of the Acquired Fund
shares held by such shareholder immediately prior to the Reorganization;
(g) The holding period of the assets of the Acquired Fund in the hands of the
Acquiring Fund will include the period during which those assets were held by
the Acquired Fund; and (h) The holding period of the Acquiring Fund Shares to
be received by each Acquired Fund Shareholder will include the period during
which the Acquired Fund shares exchanged therefor were held by such
shareholder (provided the Acquired Fund shares were held as capital assets on
the date of the Reorganization).
9.TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Directors of the
Corporation or the Board of Trustees of the Trust at any time prior to the
Closing Date (and notwithstanding any vote of the Board of Directors of the
Corporation) if circumstances should develop that, in the opinion of either
of the parties' Board, 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 directors, trustees or officers of the
Corporation or the Trust or the shareholders of the Acquiring Fund or of the
Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Trustees of the Trust or the Board
of Directors of the Corporation, if, in the judgment of either, such waiver
will not have a material adverse effect on the benefits intended under this
Agreement to the shareholders of the Acquiring Fund or of the Acquired Fund,
as the case may be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided for
herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings
of every kind and nature between them relating to the subject matter hereof.
Neither party shall be bound by any condition, definition, warranty or
representation, other than as set forth or provided in this Agreement or as
may be set forth in a later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania, without giving effect
to principles of conflicts of laws.
11.4 This Agreement may be executed in any number of counterparts, each
of which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason
of this Agreement.
11.6 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 Acquiring
Fund 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 Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the date
first above written.
Acquired Fund:
INVESTMENT SERIES FUNDS, INC.
on behalf of its portfolio,
CAPITAL GROWTH FUND
Attest:
By: /s/ J. Christopher Donahue
/s/ S. Elliott Cohan
Assistant Secretary Name: J. Christopher Donahue
Title: President
Acquiring Fund:
FEDERATED EQUITY FUNDS
on behalf of its portfolio,
FEDERATED GROWTH
STRATEGIES FUND
Attest:
By: /s/ Glen R. Johnson
/s/ S. Elliott Cohan
Assistant Secretary Name: Glen R. Johnson
Title: President
CAPITAL GROWTH FUND,
A PORTFOLIO OF INVESTMENT SERIES FUNDS, INC.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Dear Shareholder:
The Board of Directors and management of Investment Series Funds,
Inc. (the "Corporation") are pleased to submit for your vote a proposal to
transfer all of the assets of Capital Growth Fund (the "Portfolio") to
Federated Growth Strategies Fund (the "Fund"), a portfolio of Federated
Equity Funds, a mutual fund advised by Federated Management. The Fund has an
investment objective similar to that of the Portfolio in that it seeks
appreciation of capital by investing primarily in equity securities of
companies with prospects for above-average growth in earnings and dividends.
As part of the transaction, holders of Class A Shares and Class C Shares in
the Portfolio would receive Class A Shares and Class C Shares, respectively,
of the Fund equal in value to their Class A Shares or Class C Shares in the
Portfolio and the Portfolio would be liquidated.
The Board of Directors of the Corporation, as well as Federated
Advisers, the Corporation's adviser, and Federated Securities Corp., the
Corporation's principal underwriter, believe the proposed agreement and plan
of reorganization is in the best interests of Portfolio shareholders for the
following reasons:
-- The reorganization of the Portfolio into the Fund may provide
operating efficiencies as a result of the size of the Fund which were
not available to Portfolio shareholders due to the smaller size of
the Portfolio.
-- The Fund has an investment objective similar to that of the
Portfolio and offers an investment portfolio which invests primarily
in equity securities of companies with prospects for above-average
growth in earnings and dividends.
We believe the transfer of the Portfolio's assets in this transaction
will present an excellent investment opportunity for our shareholders. Your
vote on the transaction is critical to its success. The transfer will be
effected only if approved by the lesser of (i) 67% of all Portfolio shares
present at the Special Meeting, if the holders of more than 50% of the
outstanding shares are present or represented by proxy, or (ii) a majority of
all of the Portfolio's outstanding shares on the record date voted in person
or represented by proxy. We hope you share our enthusiasm and will
participate by casting your vote in person, or by proxy if you are unable to
attend the meeting. Please read the enclosed prospectus/proxy statement
carefully before you vote.
Thank you for your prompt attention and participation.
Sincerely,
J. Christopher Donahue
President
CAPITAL GROWTH FUND,
A PORTFOLIO OF INVESTMENT SERIES FUNDS, INC.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO CLASS A SHAREHOLDERS OF CAPITAL GROWTH FUND:
A Special Meeting of Shareholders of Capital Growth Fund (the
"Portfolio"), a portfolio of Investment Series Funds, Inc. (the
"Corporation") will be held at 2:30 p.m. on May 31, 1996 at the office of the
Corporation, Federated Investors Tower, 19th Floor, Pittsburgh, Pennsylvania
15222-3779 for the following purposes:
1. To approve or disapprove a proposed Agreement and Plan of
Reorganization between the Corporation, on behalf of the Portfolio, and
Federated Equity Funds, on behalf of its portfolio, Federated Growth
Strategies Fund (the "Fund"), whereby the Fund would acquire all of the
assets of the Portfolio in exchange for the Fund's Class A Shares and Class C
Shares to be distributed pro rata by the Portfolio to the holders of its
Class A Shares and Class C Shares, respectively, in complete liquidation of
the Portfolio; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
By Order of the Board of Directors,
Dated: April 7, 1996 John W. McGonigle
Secretary
Shareholders of record at the close of business March 25, 1996 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
APRIL 7, 1996
Acquisition of the Assets of
CAPITAL GROWTH FUND,
a portfolio of
INVESTMENT SERIES FUNDS, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5051
By and in exchange for shares of
FEDERATED GROWTH STRATEGIES FUND,
a portfolio of
FEDERATED EQUITY FUNDS
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5051
This Prospectus/Proxy Statement describes the proposed Agreement and
Plan of Reorganization (the "Plan") whereby Federated Growth Strategies Fund
(the "Fund"), a portfolio of Federated Equity Funds, a Massachusetts business
trust, would acquire all of the assets of Capital Growth Fund (the
"Portfolio"), a portfolio of Investment Series Funds, Inc., a Maryland
corporation (the "Corporation"), in exchange for the Fund's Class A and Class
C Shares to be distributed pro rata by the Portfolio to the holders of its
Class A and Class C Shares, respectively, in complete liquidation of the
Portfolio. As a result of the Plan, each Class A shareholder of the
Portfolio will become the owner of the Fund's Class A Shares having a total
net asset value equal to the total net asset value of his or her Class A
Share holdings in the Portfolio.
The Fund and the Portfolio each are diversified portfolios of
securities of an open-end management investment company whose investment
objective is appreciation of capital. The Fund pursues this investment
objective by investing primarily in equity securities of companies with
prospects for above-average growth in earnings and dividends. The Portfolio
pursues this objective by investing primarily in equity securities of
companies with prospects for above-average growth in earnings or dividends or
of companies where significant fundamental changes are taking place. For a
comparison of the investment policies of the Fund and the Portfolio, see
"Summary-Investment Objectives and Policies".
This Prospectus/Proxy Statement should be retained for future
reference. It sets forth concisely the information about the Fund that a
prospective investor should know before investing. This Prospectus/Proxy
Statement is accompanied by the Prospectus of the Fund dated December 31,
1995 which is incorporated herein by reference. Statements of Additional
Information for the Fund dated December 31, 1995 (relating to the Fund's
prospectus of the same date) and April 7, 1996 (relating to this
Prospectus/Proxy Statement) containing additional information have been filed
with the Securities and Exchange Commission and are incorporated herein by
reference. Copies of the Statements of Additional Information may be
obtained without charge by writing or calling the Fund at the address and
telephone number shown above.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION 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 of Expenses.........................................................
Summary.....................................................................
Risk Factors................................................................
Information About the Reorganization........................................
Information About the Fund, the Trust, the Portfolio and the Corporation....
Voting Information..........................................................
SUMMARY OF EXPENSES
FUND PORTFOLIO
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases 5.50% 5.50%
(as a percentage of offering price)..................
Maximum Sales Charge Imposed on
Reinvested Dividends (as a
percentage of None None
offering price).......................
Contingent Deferred Sales Charge
(as a percentage of original
purchase 0.00 0.00
price or redemption proceeds,
as applicable)(1)...
Redemption Fee (as a percentage
of amount redeemed, if applicable None None
Exchange Fee............................. None None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee 0.75% 0.00
12b-1 Fee None 0.06%(3)
Total Other Expenses 0.36% 1.19%
Shareholder Services Fee (4) 1.10% 0.19%
Total Operating Expenses 1.11% 1.25%
(1) Class A Shares purchased with proceeds of a redemption of shares of an
unaffiliated investment company purchased or redeemed with a sales charge and
not distributed by Federated Securities Corp. may be charged a contingent
deferred sales charge of 0.50 of 1.00% for redemptions made within one year
of purchase. See "Summary - Distribution Arrangements."
(2) The management fee has been waived to reflect state imposed expense
limitations. The maximum management fee is 0.55% of average daily net assets
plus 4.50% of gross income, excluding capital gains and losses.
(3) The maximum 12b-1 fee is 0.25%.
(4) The maximum shareholder services fee is 0.25%.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that a shareholder of Class A Shares of each
of the Fund and the Portfolio will bear, either directly or indirectly. For
more complete descriptions of the various costs and expenses see "Summary -
Advisory and Other Fees" and "Summary - Distribution Arrangements."
EXAMPLE - FUND
1 year 3 years 5 years 10 years
You would pay the
following
expenses on a $1,000
investment, assuming
(1) 5% annual return
and (2) redemption at
the end of each time
period................ $71 $88 $113 $183
You would pay the
following expenses on
the same investment, $66 $88 $113 $183
assuming no
redemption............
EXAMPLE - PORTFOLIO
1 year 3 years 5 years 10 years
You would pay the
following
expenses on a $1,000
investment, assuming
(1) 5% annual return
and (2) redemption at
the end of each time
period.............. $72 $92 $120 $198
You would pay the
following expenses on
the same investment,
assuming no
redemption........... $67 $92 $120 $198
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
SUMMARY
About the Proposed Reorganization
The Board of Directors of Investment Series Funds, Inc. (the
"Corporation") has voted to recommend to holders of the Class A Shares and
Class C Shares of its portfolio, Capital Growth Fund (the "Portfolio"), the
approval of an Agreement and Plan of Reorganization (the "Plan") whereby
Federated Growth Strategies Fund (the "Fund"), a portfolio of Federated
Equity Funds, a Massachusetts business trust (the "Trust"), would acquire all
of the assets of the Portfolio in exchange for the Fund's Class A and Class C
Shares to be distributed pro rata by the Portfolio to its Class A and Class C
shareholders, respectively, in complete liquidation and dissolution of the
Portfolio (the "Reorganization"). As a result of the Reorganization, each
shareholder of the Portfolio will become the owner of Fund shares having a
total net asset value equal to the total net asset value of his or her
holdings in the Portfolio on the date of the Reorganization, i.e., the
Closing Date.
As a condition to the Reorganization transactions, the Trust and the
Corporation will receive an opinion of counsel that the Reorganization will
be considered a tax-free "reorganization" under applicable provisions of the
Internal Revenue Code so that no gain or loss will be recognized by either
the Fund or the Portfolio or their shareholders. The tax cost basis of the
Fund shares received by Portfolio shareholders will be the same as the tax
cost basis of their shares in the Portfolio. After the acquisition is
completed, the Portfolio will be liquidated.
Investment Objectives and Policies
The investment objective of the Fund is to provide appreciation of
capital. This investment objective may not be changed without the approval
of shareholders. The Fund pursues its investment objective by investing
primarily in equity securities of companies with prospects for above-average
growth in earnings and dividends.
The investment objective of the Portfolio is appreciation of capital.
This investment objective may not be changed without the approval of
shareholders. The Portfolio pursues its investment objective by investing
primarily in equity securities of companies with prospects for above-average
growth in earnings and dividends or of companies where significant
fundamental changes are taking place. The Portfolio generally invests in
companies with a market capitalization of $100,000,000 or more.
The Fund invests primarily in equity securities of companies based on
traditional research techniques, including assessment of earnings and
dividend growth prospects and/or the risk and volatility of each company's
business. The Fund generally invests in companies with a market
capitalization of $100,000,000 or more. The Fund may invest in common and
preferred stocks, corporate bonds, debentures, notes, warrants and put and
call options on stocks. If necessary for temporary defensive purposes, the
Fund may also invest in short-term money market instruments, securities
issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities and repurchase agreements. Unless otherwise designated,
the investment policies of the Fund may be changed by the Board of Trustees
without shareholder approval, although shareholders will be notified before
any material change becomes effective.
Equity securities are selected by the Portfolio's adviser on the
basis of traditional research techniques, including assessment of earnings
and dividend growth prospects and/or the risk and volatility of each
company's business. The Portfolio may, at times, invest in securities which
are deemed to be candidates for acquisition by other entities. Under normal
circumstances, at least 65% of the value of the Portfolio's total assets will
be invested in equity securities. However, the Portfolio is not required to
purchase or sell these securities if the 65% investment level changes due to
increases or decreases in the market value of portfolio securities. The
Portfolio may also invest in preferred stocks, corporate bonds, debentures,
notes, warrants and put options on stocks and may invest up to 35% of its
total assets in corporate debt obligations that are rated B or better by a
nationally recognized statistical rating organization. If necessary for
temporary defensive purposes, the Portfolio may invest in short-term money
market instruments, U.S. government securities and may hold cash. Unless
otherwise designated, the investment policies of the Portfolio may be changed
by the Board of Directors without shareholder approval, although shareholders
will be notified before any material change becomes effective.
Both the Fund and the Portfolio are subject to certain investment
limitations. For the Fund, these include investment limitations which
prohibit it from (1) borrowing money directly or through reverse repurchase
agreements or pledging securities except that, under certain circumstances,
the Fund may borrow up to one-third of the value of its net assets;
(2) selling securities short except, under strict limitations, the Fund may
maintain open short positions so long as not more that 10% of the value of
its net assets is held as collateral for those positions; (3) investing more
than 5% of its total assets in securities of one issuer (except cash and cash
items, repurchase agreements and U.S. government obligations) or acquiring
more than 10% of any class of voting securities of any one issuer;
(4) purchasing securities of other investment companies, except in open
market transactions limited to not more than 10% of its total assets, or
except as part of a merger, consolidation or other acquisition; (5) investing
more than 5% of its total assets in securities of issuers that have records
of less than three years of continuous operations and in equity securities of
any issuer which are not readily marketable; (6) committing more than 5% of
its total assets to premiums or open put option positions; and (7) investing
more than 5% of its net assets in warrants. The first three investment
limitations listed above cannot be changed without shareholder approval; the
last four limitations may be changed by the Board of Trustees without
shareholder approval, although shareholders will be notified before any
material change becomes effective.
The Portfolio has investment limitations which prohibit it from (1)
borrowing money directly or through reverse repurchase agreements or pledging
securities except that, under certain circumstances, the Portfolio may borrow
up to one-third of the value of its total assets and pledge up to 10% of the
value of those assets to secure such borrowings; (2) selling securities short
except, under strict limitations, the Portfolio may maintain open short
positions so long as not more than 10% of the value of its net assets is held
as collateral for those positions; (3) lending any of its assets except
portfolio securities having a value of up to one-third of the value of its
total assets; (4) investing more than 5% of its total assets in securities of
one issuer (except cash and cash items, repurchase agreements collateralized
by U.S. government securities and U.S. government obligations) or purchasing
more than 10% of any class of voting securities of any one issuer; (5)
investing more than 5% of its total assets in securities of issuers that have
records of less than three years of continuous operations including the
operation of any predecessors; (6) committing more than 5% of its total
assets to premiums on open put option positions; and (7) investing more than
5% of its total assets in warrants. The Portfolio's first four investment
limitations cannot be changed without shareholder approval; the last three
may be changed by the Board of Directors without shareholder approval,
although shareholders will be notified before any material change becomes
effective.
Both the Portfolio and the Fund are also subject to certain
additional investment limitations, described in the Fund's Statement of
Additional Information dated December 31, 1995 and the Portfolio's Statement
of Additional Information dated December 31, 1995. Reference is hereby made
to the Fund's Prospectus and Statement of Additional Information, each dated
December 31, 1995, and to the Portfolio's Prospectus and Statement of
Additional Information, each dated December 31, 1995, which set forth in full
the investment objectives and policies and investment limitations of each of
the Fund and the Portfolio, all of which are incorporated herein by reference
thereto.
Advisory and Other Fees
The annual investment advisory fee for the Fund is 0.75 of 1% of the
Fund's average daily net assets. Federated Management ("Management"), the
investment adviser to the Fund, may voluntarily choose to waive a portion of
its advisory fee. This voluntary waiver of fees may be terminated by
Management at any time in its sole discretion. Management has also undertaken
to reimburse the Fund for operating expenses in excess of limitations
established by certain states. The maximum annual investment advisory fee
for the Portfolio is 0.55 of 1% of the Portfolio's average daily net assets
plus 4.50% of gross income, excluding capital gains or losses. The
Portfolio's investment adviser, Federated Advisers (the "Adviser"), may
similarly voluntarily choose to waive a portion of its advisory fee or
reimburse the Portfolio for certain operating expenses but may likewise
terminate such waiver at any time in its sole discretion. The Adviser has
also undertaken to reimburse the Portfolio for operating expenses in excess
of limitations established by certain states. Without such waivers or
reimbursements, the expense ratio of the Fund and the Portfolio would be
higher by 0.00% and 3.10%, respectively, of average daily net assets.
Federated Administrative Services, an affiliate of Management and the
Adviser, provides certain administrative personnel and services necessary to
operate both the Fund and the Portfolio at an annual rate based upon the
average aggregate daily net assets of all funds advised by Management, the
Adviser and their affiliates. The rate charged is 0.15 of 1% of the first
$250 million of all such funds' average aggregate daily net assets, 0.125 of
1% on the next $250 million, 0.10 of 1% on the next $250 million and 0.075 of
1% of all such funds' average aggregate daily net assets in excess of $750
million, with a minimum annual fee per portfolio of $125,000 plus $30,000 for
each additional class of shares of any such portfolio. Federated
Administrative Services may choose voluntarily to waive a portion of its fee.
The administrative fee expense for the Fund's most recent fiscal year was
$197,711 and for the Portfolio's most recent fiscal year was $159,192.
Each of the Fund and the Portfolio have entered into a Shareholder
Services Agreement under which each may make payments of up to 0.25 of 1% of
its average daily net asset value to obtain certain personal services for
shareholders and the maintenance of shareholder accounts. The Shareholder
Services Agreement, in each case, provides that Federated Shareholder
Services ("FSS"), an affiliate of Management and the Adviser, will either
perform shareholder services directly or will select financial institutions
to perform such services. Financial institutions will receive fees based
upon shares owned by their customers. The schedule of such fees and the
basis upon which such fees will be paid is determined from time to time by
the Fund or the Portfolio, respectively, and Federated Shareholder Services.
The total annual operating expenses for Class A Shares of the Fund
were 1.11% of average daily net assets for its most recent fiscal year. The
total annual operating expenses for Class A Shares of the Portfolio were
1.25% of average daily net assets for its most recent fiscal year and would
have been 4.54% of average daily net assets absent the voluntary waiver by
the Adviser of a portion of the investment advisory fee, state imposed
limitations and reimbursement of certain other operating expenses and a
waiver of a portion of the shareholder services fee and the 12b-1 fee.
Distribution Arrangements
Federated Securities Corp. ("FSC") is the principal distributor for
shares of the Fund and the Portfolio. FSC may also, with respect to Class A
Shares, select financial institutions to provide substantial sales services,
distribution-related support services or shareholder services. In addition,
FSC may pay financial institutions at the time of purchase, from its assets,
an amount equal to 0.50 of 1% of the net asset value of Class A Shares
purchased by their customers under certain qualified retirement plans as
approved by FSC. Such payments are, however, subject to reclaim should the
assets leave the Fund within twelve months after purchase.
The Portfolio has adopted a Rule 12b-1 Distribution Plan (the
"Distribution Plan") pursuant to which the Portfolio pays FSC an amount equal
to an annual rate of up to 0.25 of 1% of the average daily net asset value of
the Class A Shares to finance any activity which is principally intended to
result in the sale of shares subject to the Distribution Plan. FSC may
select financial institutions to provide sales support services as agents for
their clients or customers. The Distribution Plan is a compensation type
plan and, accordingly, no payments are made to FSC except as described above,
and the Portfolio does not pay FSC for unreimbursed expenses. The Fund has
not adopted a Rule 12b-1 Distribution Plan and accordingly does not make any
payments for distribution of shares.
In addition, FSC and FSS, from their own assets, may pay financial
institutions supplemental fees as financial assistance for providing
substantial sales services, distribution-related support services or
shareholder services with respect to the Portfolio. Such assistance will be
predicated upon the amount of Class A Shares the financial institution sells
or may sell, and/or upon the type and nature of sales or marketing support
furnished by the financial institution. Any payments made by FSC may be
reimbursed by Management, the Adviser or their affiliates but will not be
reimbursed by the Portfolio.
Certain costs exist with respect to the purchase and sale of Fund and
Portfolio shares. Shares of the Fund and the Portfolio are sold at their net
asset value next determined after an order is received plus a sales charge
and are redeemed at net asset value; however, a contingent deferred sales
charge is imposed on certain Class A Shares. The sales charge for each of
the Fund and the Portfolio is as follows: 5.50% for transactions less than
$50,000; 4.50% for transactions of at least $50,000 but less than $100,000;
3.75% for transaction of at least $100,000 but less than $250,000; 2.50% for
transactions of at least $250,000 but less than $500,000; 2.00% for
transactions of at least $500,000 but less than $1 million. No sales charge
is imposed for transactions of at least $1 million or for Class A Shares of
the Fund or the Portfolio purchased through certain trust departments,
investment advisers, retirements plans or "wrap accounts," although such
shareholders may be charged a service fee by the institutions. For sales of
Class A Shares of each of the Fund and the Portfolio, a dealer will normally
receive up to 90% of the applicable sales charge. Any portion of the sales
charge which is not paid to a dealer will be retained by FSC. However, FSC
may offer to pay certain dealers up to 100% of the sales charge retained by
it in the form of cash or promotional incentives. FSC may also make payments
to dealers with respect to transactions over $1 million for which no sales
charge is payable and may make payments out of the sales charge to banks in
exchange for sales and/or administrative services performed on behalf of the
banks' customers in connection with the initiation of customer accounts and
the sales of Class A Shares.
The sales charge can be reduced or eliminated on the purchase of
Class A Shares through quantity discounts and accumulated purchases,
concurrent purchases, the signing of a letter of intent, using the
reimbursement privilege or purchasing with proceeds from the redemption of
unaffiliated investment company shares. The sales charges are not imposed in
connection with the exercise of exchange rights, nor will they be imposed in
connection with the receipt of Fund shares received by shareholders of the
Portfolio as a result of the consummation of the Reorganization.
Subject to certain exemptions, Class A Shares of each of the Fund and
the Portfolio which are purchased under a periodic special offering with the
proceeds of a redemption of shares of an unaffiliated investment company and
purchased or redeemed with a sales charge and which are not distributed by
FSC may be charged a contingent deferred sale charge of 0.50 of 1.00% for
redemptions made within one full year of purchase. A contingent deferred
sales charge will not be charged in connection with the exercise of exchange
rights, nor will it be imposed on any redemption (effected subsequent to the
Reorganization) of Fund shares received by shareholders of the Portfolio as a
result of the consummation of the Reorganization provided that such shares
were originally purchased by the Portfolio shareholder more than one year
from the date of redemption. For a complete description of sales charges,
contingent deferred sales charges and exemptions from such charges, reference
is hereby made to the Prospectus of the Fund dated December 31, 1995 and the
Prospectus of the Portfolio dated December 31, 1995, each of which is
incorporated herein by reference thereto.
Purchase and Redemption Procedures
The transfer agent and dividend disbursing agent for each of the Fund
and the Portfolio is Federated Shareholder Services Company (formerly called
Federated Services Company). Procedures for the purchase and redemption of
the Fund's Class A Shares differ slightly from procedures applicable to the
purchase and redemption of the Portfolio's Class A Shares. Any questions
about such procedures may be directed to, and assistance in effecting
purchases or redemptions of the Fund's Class A Shares or Portfolio's Class A
Shares, may be obtained from FSC, principal distributor for each of the Fund
and the Portfolio, at 800-245-5051.
Reference is made to the Prospectus of the Fund dated December 31,
1995, and the Prospectus of the Portfolio dated December 31, 1995, for a
complete description of the purchase and redemption procedures applicable to
purchases and redemptions of Fund and Portfolio shares, respectively, each of
which is incorporated herein by reference thereto. Set forth below is a
brief listing of the significant purchase and redemption procedures
applicable to the Fund's Class A Shares and the Portfolio's Class A Shares.
Purchases of Class A Shares of the Fund or Portfolio may be made
through a financial institution which has a sales agreement with FSC or
directly from FSC once an account has been established. The minimum initial
investment in the Fund and the Portfolio is $500, except for retirement
accounts for which the minimum is $50. Subsequent investments must be in
amounts of at least $100, except for retirement accounts for which the
minimum is $50. The Fund and the Portfolio each reserve the right to reject
any purchase request. In connection with the sale of Class A Shares of both
the Fund and the Portfolio, FSC may from time to time offer certain items of
nominal value to any shareholder.
The purchase price of shares of both the Fund and the Portfolio is
based on net asset value. The net asset value for each of the Fund and the
Portfolio is calculated as of the close of trading (normally 4:00 p.m.,
Eastern time) on the New York Stock Exchange, on each day on which the Fund
and the Portfolio compute their net asset value. Purchase and redemption
orders for the Fund and the Portfolio received from broker/dealers before
5:00 p.m. (Eastern time) and from financial institutions before 4:00 p.m.
(Eastern time) may be entered at that day's price. Fund purchase orders by
wire are considered received immediately and payments must be received within
three business days following the order if a sales charge is due or by 3:00
p.m. (Eastern time) on the next business day if no such charge is due.
Portfolio purchase orders by wire are considered received when the
Portfolio's transfer agent's bank, State Street Bank and Trust Company
("State Street Bank"), receives payment by wire. Purchase orders received by
check are considered received after the check is converted into federal
funds, which normally occurs one day after receipt.
Holders of Fund and Portfolio Class A Shares each have exchange
privileges with respect to Class A Shares in certain of the funds for which
affiliates of Management or the Adviser serve as investment advisor or
principal underwriter (collectively, the "Federated Funds"), each of which
has different investment objectives and policies. Class A Shares in the Fund
or the Portfolio may be exchanged for Class A Shares of certain Federated
Funds at net asset value with no additional fees on exchange. Class A Shares
to be exchanged must have a net asset value which meets the minimum
investment requirement for the fund into which the exchange is being made.
Exercise of the exchange privilege is treated as a sale for federal income
tax purposes and, accordingly, may have tax consequences for the shareholder.
Information on share exchanges may be obtained from the Fund or the
Portfolio, as appropriate.
Redemptions of Fund Class A Shares may be made through a financial
institution, by telephone, by mailing a written request or through the Fund's
Systematic Withdrawal Program. Redemptions of Portfolio shares may be made
through a financial institution, by telephone, by mailing a written request
or through the Portfolio's Systematic Withdrawal Program. In each case,
Class A Shares are redeemed at their net asset value, less any applicable
contingent deferred sales charge, next determined after the redemption
request is received. Proceeds will be distributed by check within seven days
after receipt of a redemption request.
Tax Consequences
As a condition to the Reorganization transactions, the Trust and the
Corporation will receive an opinion of counsel that the Reorganization will
be considered a tax-free "reorganization" under applicable provisions of the
Internal Revenue Code so that no gain or loss will be recognized by either
the Fund or the Portfolio or their shareholders. The tax cost basis of the
Fund shares received by Portfolio shareholders will be the same as the tax
cost basis of their shares in the Portfolio.
RISK FACTORS
Investment in the Fund and the Portfolio is subject to certain risks
which are set forth in the Fund's Prospectus dated December 31, 1995 and the
Statement of Additional Information dated December 31, 1995 and the
Portfolio's Prospectus dated December 31, 1995 and the Statement of
Additional Information dated December 31, 1995, each of which is incorporated
herein by reference thereto. Briefly, these risks include, but are not
limited to, fluctuation in the value of the securities held by the Fund or
the Portfolio; gain or loss in the sale of stocks held by the Fund or the
Portfolio based on changes in the perceived prospects of the issuer; and
economic, political and regulatory developments which affect these
securities.
INFORMATION ABOUT THE REORGANIZATION
Background and Reasons for the Proposed Reorganization
The Portfolio was established in 1987 to provide investors with an
opportunity to invest in a professionally-managed, diversified pool of equity
securities with prospects for above-average growth in earnings and dividends.
Although its investment objective and policies were similar to other funds
advised by the Adviser at the time of its creation, the Portfolio was created
as a separate unit in order to market it to particular groups of investors.
Subsequent to the Portfolio's creation, the Adviser and its affiliates
determined that a more economically efficient method of marketing to
different groups of investors was to create separate classes of stock within
a single portfolio. The classes are then individually marketed and bear
different fees and expenses.
The Portfolio had net assets of approximately $16.4 million, compared
to the Fund's net assets of $240.9 million as of January 31, 1996. For the
last several years, in an effort to remain competitive with other investment
companies, the Adviser has waived all of its investment advisory fee and
reimbursed the Portfolio for certain operating expenses, resulting in
aggregate fee waivers and expense reimbursements of $356,497 for the
Portfolio's fiscal year ended October 31, 1995. The Adviser has concluded
that it will not be able to continue indefinitely to waive such investment
advisory fees and reimburse operating expenses in order to allow the
Portfolio to earn a return on its investments competitive with other
investment companies with similar investment objectives. As a result, the
Adviser has recommended to the Board of Directors that it would be in the
best interests of all of the Portfolio's shareholders to combine its assets
with those of the Fund. Such a combination may achieve operating
efficiencies and economies of scale as a result of the larger size of the
Fund while allowing shareholders to maintain an investment in a fund whose
investment objective is appreciation of capital.
The Corporation's Board of Directors, including a majority of the
independent Directors, determined that participation in the Reorganization is
in the best interests of the Portfolio and that the interests of Portfolio
shareholders would not be diluted as a result of its effecting the
Reorganization. Based upon the foregoing considerations, and the fact that
shareholders of the Portfolio will not suffer any adverse tax consequences as
a result of the Reorganization, the Board of Directors of the Corporation
unanimously voted to approve, and recommend to Portfolio shareholders the
approval of, the Reorganization.
The Board of Trustees of the Fund, including a majority of the
independent Trustees, have unanimously concluded that consummation of the
Reorganization is in the best interests of the Fund and the shareholders of
the Fund and that the interests of Fund shareholders would not be diluted as
a result of effecting the Reorganization and have unanimously approved the
Plan.
Description of the Plan of Reorganization
The Plan provides that the Fund will acquire all of the assets of the
Portfolio in exchange for the Fund's Class A Shares and Class C Shares to be
distributed pro rata by the Portfolio to its Class A and Class C shareholders
in complete liquidation of the Portfolio on or about May 31, 1996 (the
"Closing Date"). Shareholders of the Portfolio will become shareholders of
the Fund as of the close of business on the Closing Date, and will be
entitled to the Fund's next dividend distribution. Shareholders of the
Portfolio will earn their last dividend from the Portfolio on the dividend
date.
Consummation of the Reorganization is subject to the conditions set
forth in the Plan, including receipt of an opinion in form and substance
satisfactory to the Corporation, on behalf of the Portfolio, and the Trust,
on behalf of the Fund, as described under the caption "Federal Income Tax
Consequences" below. The Plan may be terminated and the Reorganization may
be abandoned at any time before or after approval by shareholders of the
Portfolio prior to the Closing Date by either party if it believes that
consummation of the Reorganization would not be in the best interests of its
shareholders.
Management is responsible for the payment of all expenses of the
Reorganization incurred by either party, whether or not the Reorganization is
consummated. Such expenses include, but are not limited to, 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 Portfolio's shareholders and the
costs of holding the Special Meeting of Shareholders.
The foregoing description of the Plan entered into between the Trust,
on behalf of the Fund, and the Corporation, on behalf of the Portfolio, 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 Fund Shares
Class A Shares of the Fund to be issued to Class A shareholders of
the Portfolio under the Plan will be fully paid and nonassessable when issued
and transferable without restriction and will have no preemptive or
conversion rights. Reference is hereby made to the Prospectus of the Fund
dated December 31, 1995 provided herewith for additional information about
Class A Shares of the Fund.
Federal Income Tax Consequences
As a condition to the Reorganization transactions, the Trust, on
behalf of the Fund, and the Corporation, on behalf of the Portfolio, will
receive an opinion from Dickstein, Shapiro & Morin, L.L.P., counsel to the
Trust and the Corporation, to the effect that, on the basis of the 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 Reorganization as set forth in the Plan will constitute a
tax-free reorganization under section 368(a)(1)(C) of the Code; (2) no gain
or loss will be recognized by the Fund upon its receipt of the Portfolio's
assets solely in exchange for Fund shares; (3) no gain or loss will be
recognized by the Portfolio upon the transfer of its assets to the Fund in
exchange for Fund shares or upon the distribution (whether actual or
constructive) of the Fund shares to the Portfolio shareholders in exchange
for their shares of the Portfolio; (4) no gain or loss will be recognized by
shareholders of the Portfolio upon the exchange of their Portfolio shares for
Fund shares; (5) the tax basis of the Portfolio's assets acquired by the Fund
will be the same as the tax basis of such assets to the Portfolio immediately
prior to the Reorganization; (6) the tax basis of Fund shares received by
each shareholder of the Portfolio pursuant to the Plan will be the same as
the tax basis of Portfolio shares held by such shareholder immediately prior
to the Reorganization; (7) the holding period of the assets of the Portfolio
in the hands of the Fund will include the period during which those assets
were held by the Portfolio; and (8) the holding period of Fund shares
received by each shareholder of the Portfolio will include the period during
which the Portfolio shares exchanged therefor were held by such shareholder,
provided the Portfolio shares were held as capital assets on the date of the
Reorganization.
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. Set forth
below is a brief summary of the significant rights of shareholders of the
Trust.
The Trust is not required to hold annual meetings of shareholders.
Shareholder approval is necessary only for certain changes in operations or
the election of trustees under certain circumstances. A special meeting of
shareholders of the Trust for any permissible purpose is required to be
called by the Trustees upon the written request of the holders of at least
10% of the Trust's outstanding shares of all series entitled to vote. Each
share of the Trust is entitled to one vote. All shares of each fund or class
in the Trust have equal voting rights except that in matters affecting only a
particular fund or class, only shares of that fund or class are entitled to
vote.
Under certain circumstances, shareholders of the Fund may be held
personally liable as partners under Massachusetts law for obligations of the
Trust on behalf of the Fund. To protect its shareholders, the Trust has
filed legal documents with the Commonwealth of Massachusetts that expressly
disclaim the liability of Fund shareholders 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.
In the unlikely event a shareholder is held personally liable for the
Trust's obligations on behalf of the Fund, the Trust is required to use its
property to protect or compensate the shareholder. On request, the Trust
will defend any claim made and pay any judgment against a shareholder for any
act or obligation of the Trust. Therefore, financial loss resulting from
liability as a shareholder will occur only if the Trust cannot meet its
obligations to indemnify shareholders and pay judgments against them.
The Corporation is organized as a corporation under the laws of the
State of Maryland and is not required to hold annual meetings of shareholders
except when required to to do so under the 1940 Act. A special meeting of
shareholders of the Corporation is required to be called by the Directors
upon the written request of the holders of at least 10% of the outstanding
shares of the Corporation entitled to vote. Each share of the Corporation is
entitled to one vote at all meetings of shareholders except that in matters
affecting only a particular portfolio or class, only shares of that portfolio
or class are entitled to vote.
Capitalization
The following table sets forth the unaudited capitalization of the
Class A Shares of the Fund and the Class A Shares of the Portfolio as of
January 31, 1996 and on a pro forma basis as of that date:
Pro Forma
Fund Portfolio Combined
Class A Shares $250,439,331 $14,856,970 $265,296,301
Net Assets (1)
Net Asset Value $22.65 $13.73 $22.65
Per Class A Share
(1) Net assets for Class C Shares of each of the Fund, the Portfolio and Pro
Forma combined are $420,209, $1,584,262 and $2,004,471. Net Asset Value Per
Class C Share for each of the Fund, the Portfolio and Pro Forma combined are
$22.64, $13.70, and $22.64.
INFORMATION ABOUT THE FUND, THE TRUST
THE PORTFOLIO AND THE CORPORATION
Federated Growth Strategies Fund, a portfolio of Federated Equity Funds
Information about the Trust and the Fund is contained in the Fund's
current Prospectus dated December 31, 1995, a copy of which is included
herewith and incorporated by reference herein. Additional information about
the Fund is included in the Fund's Statement of Additional Information dated
December 31, 1995 and the Statement of Additional Information dated April 7,
1996 relative to this Prospectus/Proxy Statement, each of which is
incorporated herein by reference. Copies of the Statements of Additional
Information, which have been filed with the Securities and Exchange
Commission (the "SEC"), may be obtained without charge by contacting the Fund
at 1-800-245-5051 or by writing the Fund at Federated Investors Tower,
Pittsburgh, PA 15222-3779. The Trust is subject to the informational
requirements of the 1933 Act, the Securities Exchange Act of 1934 (the "1934
Act") and the 1940 Act and in accordance therewith files reports and other
information with the SEC. Reports, proxy and information statements and
other information filed by the Trust or the Fund can be obtained by calling
or writing the Fund and can also be inspected and copied by the public at the
public reference facilities maintained by the SEC in Washington, D.C. located
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at certain
of its regional offices located at Suite 1400, Northwestern Atrium Center,
500 West Madison Street, Chicago, IL 60661 and 13th Floor, Seven World Trade
Center, New York, NY 10048. Copies of such material can be obtained at
prescribed rates from the Public Reference Branch, Office of Consumer Affairs
and Information Services, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549.
This Prospectus/Proxy Statement, which constitutes part of a
Registration Statement filed by the Trust with the SEC under the 1933 Act,
omits certain of the information contained in the Registration Statement.
Reference is hereby made to the Registration Statement and to the exhibits
thereto for further information with respect to the Trust and the Fund and
the shares offered hereby. Statements contained herein concerning the
provisions of documents are necessarily summaries of such documents, and each
such statement is qualified in its entirety by reference to the copy of the
applicable documents filed with the SEC.
Capital Growth Fund, a portfolio of Investment Series Funds, Inc.
Information about the Portfolio and the Corporation is contained in
the Portfolio's current Prospectus dated December 31, 1995, its Statement of
Additional Information dated December 31, 1995 and the Statement of
Additional Information dated April 7, 1996 relating to this Prospectus/Proxy
Statement, each of which is incorporated herein by reference. Copies of such
Prospectus and Statement(s) of Additional Information, which have been filed
with the SEC, may be obtained without charge from the Fund by calling 1-800-
245-5051 or by writing to the Fund at Federated Investors Tower, Pittsburgh,
PA 15222-3779. The Corporation is subject to the informational requirements
of the 1933 Act, the 1934 Act and the 1940 Act and in accordance therewith
files reports and other information with the SEC. Reports, proxy and
information statements and other information filed by the Corporation or the
Portfolio can be obtained by calling or writing the Fund and can also be
inspected at the public reference facilities maintained by the SEC or
obtained at prescribed rates at the addresses listed in the previous section.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of the Corporation of proxies for use
at the Special Meeting of Shareholders (the "Meeting") to be held on May 31,
1996 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 Plan. A shareholder may revoke a
proxy at any time prior to use by filing with the Secretary of the
Corporation an instrument revoking the proxy, 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 Management. In addition to solicitations
through the mails, proxies may be solicited by officers, employees and agents
of the Corporation and Management at no additional cost to the Corporation.
Such solicitations may be by telephone. Management will reimburse
custodians, nominees and fiduciaries for the reasonable costs incurred by
them in connection with forwarding solicitation materials to the beneficial
owners of shares held of record by such persons.
Outstanding Shares and Voting Requirements
The Board of Directors of the Corporation has fixed the close of
business on March 25, 1996 as the record date for the determination of
shareholders entitled to notice of and to vote at the Special Meeting of
Shareholders and any adjournment thereof. As of the record date, there were
Class A Shares and Class C Shares of the Portfolio outstanding.
- ------- ----
Each of the Portfolio's Class A Shares and Class C Shares are entitled to one
vote and fractional shares have proportionate voting rights. On the record
date, owned of record shares, or %, of the Portfolio's
-------- ----- -----
outstanding Class A Shares and owned of record shares, or
----- ----- -----
%, of the Portfolio's outstanding Class C Shares. On such date, no other
person owned of record, or to the knowledge of the Adviser, beneficially
owned, 5% or more of the Portfolio's outstanding Class A or Class C Shares.
On the record date, the directors and officers of the Corporation as a group
owned less than 1% of the outstanding Class A and Class C Shares of the
Portfolio.
As of the record date, there were Class A, Class B and
---------- --
Class C Shares of the Fund outstanding. On the record date,
- -- --------
owned of record shares, or %, of the Fund's outstanding Class A
----- ---
Shares, owned of record shares, or %, of the Fund's
----- ----- -----
outstanding Class B Shares and owned of record shares, or %, of the
-- -- --
Fund's outstanding Class C Shares. On such date, no other person owned of
record, or to the knowledge of the Management, beneficially owned, 5% or more
of the Fund's outstanding Class A, Class B or Class C Shares. On the record
date, the trustees and officers of the Fund as a group owned less than 1% of
the outstanding Class A, Class B and Class C Shares of the Fund.
Approval of the Plan requires the affirmative vote of the lesser of
(i) 67% of the shares of the Portfolio present at the Special Meeting, if the
holders of more than 50% of the outstanding shares are present or represented
by proxy, or (2) a majority of the outstanding shares of the Portfolio. The
votes of shareholders of the Fund are not being solicited since their
approval is not required in order to effect the Reorganization.
One-third of the outstanding shares of the Portfolio, represented in
person or by proxy, will be required to constitute a quorum at the Special
Meeting for the purpose of voting on the proposed Reorganization. For
purposes of determining the presence of a quorum, shares represented by
abstentions and "broker non-votes" will be counted as present, but not as
votes cast, at the Special Meeting. Under the 1940 Act, however, which
governs this transaction, matters subject to the requirements of the 1940
Act, including the Reorganization, are determined on the basis of a
percentage of votes present at the Special Meeting, which would have the
effect of treating abstentions and "broker non-votes" as if they were votes
against the proposal.
Dissenter's Right of Appraisal
Shareholders of the Portfolio objecting to the Reorganization have no
appraisal rights under the Corporation's Articles of Incorporation or
Maryland law. Under the Plan, if approved by Portfolio shareholders, each
Class A Portfolio shareholder will become the owner of Class A Shares of the
Fund having a total net asset value equal to the total net asset value of his
or her holdings in the Portfolio at the Closing Date.
Other Matters
Management of the Corporation 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 Fund.
If at the time any session of the Special Meeting is called to order,
a quorum is not present in person or by proxy, the persons named as proxies
may vote those proxies which have been received to adjourn the Special
Meeting to a later date. In the event that a quorum is present but
sufficient votes in favor of one or more of the proposals have not been
received, the persons named as proxies may propose one or more adjournments
of the Special Meeting to permit further solicitation of proxies with respect
to any such proposal. All such adjournments will require the affirmative
vote of a majority of the shares present in person or by proxy at the session
of the Special Meeting to be adjourned. The persons named as proxies will
vote those proxies which they are entitled to vote in favor of the proposal,
in favor of such an adjournment, and will vote those proxies required to be
voted against the proposal, against any such adjournment. A vote may be
taken on one or more of the proposals in this Prospectus/Proxy Statement
prior to any such adjournment if sufficient votes for its approval have been
received and it is otherwise appropriate.
Whether or not shareholders expect to attend the meeting, all
shareholders are urged to sign, fill in and return the enclosed proxy form
promptly.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated February 29, 1996 (the
"Agreement"), between FEDERATED EQUITY FUNDS, a Massachusetts business trust
(the "Trust"), on behalf of its portfolio FEDERATED GROWTH STRATEGIES FUND
(hereinafter called the "Acquiring Fund"), and INVESTMENT SERIES FUNDS, INC.,
a Maryland corporation (hereinafter called the "Corporation") on behalf of
its portfolio CAPITAL GROWTH FUND (hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of
the United States Internal Revenue Code of 1986, as amended (the "Code").
The reorganization (the "Reorganization") will consist of the transfer of all
of the assets of the Acquired Fund in exchange solely for Class A and Class C
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 shareholders of the Acquired Fund in liquidation
of the Acquired Fund as provided herein, all upon the terms and conditions
hereinafter set forth in this Agreement.
WHEREAS, the Corporation and the Trust are registered open-end
management investment companies and the Acquired Fund owns securities in
which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are authorized
to issue shares of common stock or shares of beneficial interest, as the case
may be;
WHEREAS, both the Acquired Fund and the Acquiring Fund have
outstanding Class A Shares and Class C Shares;
WHEREAS, the Board of Trustees, including a majority of the trustees
who are not "interested persons" (as defined under the Investment Company Act
of 1940, as amended (the "1940 Act")), of the Acquiring Fund has determined
that the exchange of all of the assets of the Acquired Fund for Acquiring
Fund Shares is in the best interests of the Acquiring Fund shareholders and
that the interests of the existing shareholders of the Acquiring Fund would
not be diluted as a result of this transaction; and
WHEREAS, the Board of Directors, including a majority of the
directors who are not "interested persons" (as defined under the 1940 Act),
of the Acquired Fund has determined that the exchange of all of the assets of
the Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquired Fund shareholders and that the interests of the existing
shareholders of the Acquired Fund would not be diluted as a result of this
transaction;
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE
ACQUIRING FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund agrees to assign, transfer and convey to the Acquiring Fund all of the
assets of the Acquired Fund, including all securities and cash, other than
cash in an amount necessary to pay any unpaid dividends and distributions as
provided in paragraph 1.5, beneficially owned by the Acquired Fund, and the
Acquiring Fund agrees in exchange therefor to deliver to the Acquired Fund
the number of Class A and Class C Acquiring Fund Shares, respectively,
including fractional Class A and Class C 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 Class A and Class
C Acquiring Fund Shares, the Acquiring Fund shall credit the Class A and
Class C Acquiring Fund Shares to the Acquired Fund's account, for the benefit
of its Class A and Class C shareholders, respectively, on the stock record
books of the Acquiring Fund 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 (hereinafter called "State Street"), Boston, Massachusetts, the
Acquiring Fund's custodian (the "Custodian"), for the account of the
Acquiring Fund, together with proper instructions and all necessary documents
to transfer to the account of the Acquiring Fund, free and clear of all
liens, encumbrances, rights, restrictions and claims. 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 thereunder. The Acquired
Fund will transfer to the Acquiring Fund any distributions, rights or other
assets received by the Acquired Fund after the Closing Date as distributions
on or with respect to the securities transferred. Such assets shall be
deemed included in assets transferred to the Acquiring Fund on the Closing
Date and shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable, the
Acquired Fund will liquidate and distribute pro rata to the Acquired Fund's
Class A and Class C shareholders of record, determined as of the close of
business on the Closing Date (the "Acquired Fund Shareholders"), the Class A
and Class C Acquiring Fund Shares, respectively, received by the Acquired
Fund pursuant to paragraph 1.1. In addition, each shareholder of record of
the Acquired Fund shall have the right to receive any unpaid dividends or
other distributions which were declared before the Valuation Date (as
hereinafter defined) with respect to the shares of the Acquired Fund that are
held by the shareholder on the Valuation Date. Such liquidation and
distribution will be accomplished by the transfer of the Class A and Class C
Acquiring Fund Shares then credited to the account of the Acquired Fund on
the books of the Acquiring Fund to open accounts on the share record books of
the Acquiring Fund in the names of the Class A and Class C Acquired Fund
Shareholders, respectively, and representing the respective pro rata number
of the Class A and Class C Acquiring Fund Shares due such shareholders, based
on their ownership of Class A and Class C Shares, respectively, of the
Acquired Fund on the Closing Date. All issued and outstanding Class A and
Class C Shares of the Acquired Fund will simultaneously be canceled on the
books of the Acquired Fund. Class A and Class C Share certificates
representing interests in the Acquired Fund will represent a number of Class
A and Class C Acquiring Fund Shares, respectively, after the Closing Date as
determined in accordance with Section 2.3. The Acquiring Fund shall not
issue certificates representing the Class A and Class C Acquiring Fund Shares
in connection with such exchange.
1.6 Ownership of Class A and Class C Acquiring Fund Shares will be
shown on the books of the Acquiring Fund's transfer agent. Shares of the
Acquiring Fund will be issued in the manner described in the Acquiring Fund's
current prospectus and statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Class A and Class C
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 Class A and Class C 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 Corporation.
2.VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of the
close of New York Stock Exchange (normally 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 each Class A and Class C Acquiring Fund
Share shall be the net asset value per share computed as of the close of the
New York Stock Exchange (normally 4:00 p.m., Eastern time) on the Valuation
Date, using the valuation procedures set forth in the Acquiring Fund's then-
current prospectus or statement of additional information.
2.3 The number of the Class A and Class C Acquiring Fund Shares to be
issued (including fractional shares, if any) in exchange for the Acquired
Fund's net assets shall be determined (a) by dividing the value of the net
assets of the Acquired Fund attributable to Class A Shares, determined using
the same valuation procedures referred to in paragraph 2.1, by the net asset
value of one Class A Acquiring Fund Share and (b) by dividing the value of
the net assets of the Acquired Fund attributable to Class C Shares,
determined using the same valuation procedures referred to in paragraph 2.1,
by the net asset value of one Class C Acquiring Fund Share, in each case
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 May 31, 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 the offices of the Acquiring Fund, Federated Investors
Tower, Pittsburgh, PA 15222-3779, or such other time and/or place as the
parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of the
value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 Federated Shareholder Services Company, as transfer agent for each
of the Acquired Fund and the Acquiring Fund, shall deliver at the Closing a
certificate of an authorized officer stating that its records contain the
names and addresses of the Class A and Class C Acquired Fund Shareholders and
the number and percentage ownership of outstanding Class A and Class C Shares
owned by each such shareholder immediately prior to the Closing. The
Acquiring Fund shall issue and deliver a confirmation evidencing the Class A
and Class C 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 Class A and Class C 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 Corporation represents and warrants to the Trust as follows:
(a) The Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland and has
power to own all of its properties and assets and to carry out this
Agreement.
(b) The Corporation is registered under the 1940 Act, as an
open-end, management investment company, and such registration has not been
revoked or rescinded and is in full force and effect.
(c) The Corporation is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of the
Corporation's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquired Fund is a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Acquired Fund or any of
its properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquired Fund knows of no facts which might form the basis for the
institution of such proceedings, and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to
consummate the transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "Commission") thereunder and do not include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(g) The Statements of Assets and Liabilities of the Acquired
Fund at October 31, 1994 and 1995 have been audited by Ernst & Young LLP,
independent auditors, and have been prepared in accordance with generally
accepted accounting principles, consistently applied, and such statements
(copies of which have been furnished to the Acquiring Fund) fairly reflect
the financial condition of the Acquired Fund as of such dates, and there are
no known contingent liabilities of the Acquired Fund as of such dates not
disclosed therein.
(h) Since October 31, 1995, 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) For each fiscal year of its operation, the Acquired Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company.
(k) All issued and outstanding Class A and Class C 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 Class A and Class C 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 Class A or Class C Acquired Fund Shares,
nor is there outstanding any security convertible into any of the Class A or
Class C Acquired Fund Shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets
to be transferred by it hereunder.
(m) The execution, delivery and performance of this Agreement
will have been duly authorized prior to the Closing Date by all necessary
action on the part of the Corporation's directors and, subject to the
approval of the Acquired Fund Shareholders, 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).
(n) The prospectus/proxy statement of the Acquired Fund (the
"Prospectus/Proxy Statement") to be included in the Registration Statement
referred to in paragraph 5.5 (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.
(o) The Acquired Fund has entered into an agreement under
which Federated Management will assume the expenses of the reorganization
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 shareholders and the costs of holding the Special Meeting of
Shareholders.
4.2 The Trust represents and warrants to the Corporation as follows:
(a) The Trust is a business trust duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has the power to carry on its business as it is now being
conducted 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 Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Trust's 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) The Statement of Assets and Liabilities of the Acquiring
Fund at October 31, 1994 and 1995, have been audited by Ernst & Young LLP,
independent auditors, and have been prepared in accordance with generally
accepted accounting principles, and such statements (copies of which have
been furnished to the Acquired Fund) fairly reflect the financial condition
of the Acquiring Fund as of such dates, and there are no known contingent
liabilities of the Acquiring Fund as of such dates not disclosed therein.
(g) Since October 31, 1995, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course
of business, or any incurrence by the Acquiring Fund of indebtedness maturing
more than one year from the date such indebtedness was incurred, except as
disclosed to and accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed by such
date shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment
thereof, and to the best of the Acquiring Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to
such returns.
(i) For each fiscal year of its operation, the Acquiring Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company.
(j) All issued and outstanding Class A and Class C 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 Class A or Class C Acquiring Fund Shares, nor is
there outstanding any security convertible into any Class A or Class C
Acquiring Fund Shares.
(k) 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 Trust'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).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading.
(m) The Acquiring Fund has entered into an agreement under
which Federated Management will assume the expenses of the reorganization
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 shareholders and the costs of holding the Special Meeting of
Shareholders.
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 Corporation will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund and
the Acquired Fund will each take, or cause to be taken, all action, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this
Agreement.
5.4 As promptly as practicable, but in any case within sixty days after
the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in such
form as is reasonably satisfactory to the Acquiring Fund, a statement of the
earnings and profits of the Acquired Fund for Federal income tax purposes
which will be carried over to the Acquiring Fund as a result of Section 381
of the Code and which will be certified by the Corporation's President and
its Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of the Prospectus/Proxy Statement,
referred to in paragraph 4.1(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
Shareholders to consider approval of this Agreement and the transactions
contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, 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.
5.7 Prior to the Valuation Date, the Acquired Fund shall have declared
a dividend or dividends, with a record date and ex-dividend date prior to the
Valuation Date, which, together with all previous dividends, shall have the
effect of distributing to its shareholders all of its investment company
taxable income, if any, plus the excess of its interest income, if any,
excludable from gross income under Code section 103a) over its deductions
disallowed under Code sections 265 and 171(a)(2) for the taxable periods or
years ended on or before October 31, 1995 and for the period from said date
to and including the Closing Date (computed without regard to any deduction
for dividends paid), and all of its net capital gain, if any, realized in
taxable periods or years ended on or before October 31, 1995 and in the
period from said date to and including the Closing Date.
6.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquired Fund of all the obligations to be performed by it hereunder on
or before the Closing Date and, in addition thereto, the following
conditions:
6.1 All representations and warranties of the Corporation contained in
this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such securities by lot
and the holding periods of such securities, as of the Closing Date, certified
by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of the
Corporation 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 Trust 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, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Trust 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.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness, except
as otherwise disclosed to and accepted by the Acquired Fund.
8.FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund, 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 holders of the outstanding shares
of the Acquired Fund in accordance with the provisions of the Corporation's
Articles of Incorporation and the 1940 Act.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those
of the Commission 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 Corporation shall have received an opinion of
Dickstein, Shapiro & Morin, L.L.P. substantially to the effect that for
Federal income tax purposes:
(a) The transfer of all of the Acquired Fund assets in
exchange for the Acquiring Fund Shares and the distribution of the Acquiring
Fund Shares to the Acquired Fund Shareholders in liquidation of the Acquired
Fund will constitute a "reorganization" within the meaning of Section
368(a)(1)(C) of the Code; (b) No gain or loss will be recognized by the
Acquiring Fund upon the receipt of the assets of the Acquired Fund solely in
exchange for the Acquiring Fund Shares; (c) No gain or loss will be
recognized by the Acquired Fund upon the transfer of the Acquired Fund assets
to the Acquiring Fund in exchange for the Acquiring Fund Shares or upon the
distribution (whether actual or constructive) of the Acquiring Fund Shares to
Acquired Fund Shareholders in exchange for their shares of the Acquired Fund;
(d) No gain or loss will be recognized by the Acquired Fund Shareholders upon
the exchange of their Acquired Fund shares for the Acquiring Fund Shares;
(e) The tax basis of the Acquired Fund assets acquired by the Acquiring Fund
will be the same as the tax basis of such assets to the Acquired Fund
immediately prior to the Reorganization; (f) The tax basis of the Acquiring
Fund Shares received by each of the Acquired Fund Shareholders pursuant to
the Reorganization will be the same as the tax basis of the Acquired Fund
shares held by such shareholder immediately prior to the Reorganization;
(g) The holding period of the assets of the Acquired Fund in the hands of the
Acquiring Fund will include the period during which those assets were held by
the Acquired Fund; and (h) The holding period of the Acquiring Fund Shares to
be received by each Acquired Fund Shareholder will include the period during
which the Acquired Fund shares exchanged therefor were held by such
shareholder (provided the Acquired Fund shares were held as capital assets on
the date of the Reorganization).
9.TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Directors of the
Corporation or the Board of Trustees of the Trust at any time prior to the
Closing Date (and notwithstanding any vote of the Board of Directors of the
Corporation) if circumstances should develop that, in the opinion of either
of the parties' Board, 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 directors, trustees or officers of the
Corporation or the Trust or the shareholders of the Acquiring Fund or of the
Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Trustees of the Trust or the Board
of Directors of the Corporation, if, in the judgment of either, such waiver
will not have a material adverse effect on the benefits intended under this
Agreement to the shareholders of the Acquiring Fund or of the Acquired Fund,
as the case may be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided for
herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings
of every kind and nature between them relating to the subject matter hereof.
Neither party shall be bound by any condition, definition, warranty or
representation, other than as set forth or provided in this Agreement or as
may be set forth in a later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania, without giving effect
to principles of conflicts of laws.
11.4 This Agreement may be executed in any number of counterparts, each
of which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason
of this Agreement.
11.6 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 Acquiring
Fund 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 Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the date
first above written.
Acquired Fund:
INVESTMENT SERIES FUNDS, INC.
on behalf of its portfolio,
CAPITAL GROWTH FUND
Attest:
By: /s/ J. Christopher Donahue
/s/ S. Elliott Cohan
Assistant Secretary Name: J. Christopher Donahue
Title: President
Acquiring Fund:
FEDERATED EQUITY FUNDS
on behalf of its portfolio,
FEDERATED GROWTH
STRATEGIES FUND
Attest:
By: /s/ Glen R. Johnson
/s/ S. Elliott Cohan
Assistant Secretary Name: Glen R. Johnson
Title: President
STATEMENT OF ADDITIONAL INFORMATION
April 7, 1996
Acquisition of the assets of
CAPITAL GROWTH FUND,
a Portfolio of INVESTMENT SERIES FUNDS, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5051
By and in exchange for shares of
FEDERATED GROWTH STRATEGIES FUND,
a Portfolio of FEDERATED EQUITY FUNDS
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5051
This Statement of Additional Information dated April 7, 1996 is not a
prospectus. A Prospectus/Proxy Statement dated April 7, 1996 related to the
above-referenced matter may be obtained from Federated Equity Funds,
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 Growth
Strategies Fund, a portfolio of Federated Equity Funds, dated December 31,
1995
2. Statement of Additional Information of Capital Growth Fund, a
portfolio of Investment Series Funds, Inc., dated December 31, 1995
3. Financial Statements of Federated Growth Strategies Fund, a
portfolio of Federated Equity Funds, dated October 31, 1995
4. Financial Statements of Capital Growth Fund, a portfolio of
Investment Series Funds, Inc., dated October 31, 1995
The Statement of Additional Information of Federated Growth
Strategies Fund, Inc. (the "Fund"), a portfolio of Federated Equity Funds
(the "Trust"), dated December 31, 1995, is incorporated herein by reference
to Post-Effective Amendment No. 29 to the Trust's Registration Statement on
Form N-1A (File Nos. 2-91090 and 811-4017) which was filed with the
Securities and Exchange Commission on or about December 27, 1995. A copy may
be obtained from the Fund at Federated Investors Tower, Pittsburgh, PA 15222-
3279; telephone number: 1-800-245-5051.
The Statement of Additional Information of Capital Growth Fund (the
"Portfolio"), a portfolio of Investment Series Funds, Inc. (the
"Corporation"), dated December 31, 1995, is incorporated herein by reference
to Post-Effective Amendment No. 9 to the Corporation's Registration Statement
on Form N-1A (File Nos. 33-48847 and 811-07021) which was filed with the
Securities and Exchange Commission on or about December 28, 1995.
The audited financial statements of the Fund, dated October 31, 1995,
are incorporated herein by reference to the Fund's Prospectus dated December
31, 1995 which was filed with the Securities and Exchange Commission in Post-
Effective Amendment No. 29 to the Trust's Registration Statement on Form N-1A
(File Nos. 2-91090 and 811-4017) on or about December 27, 1995.
The audited financial statements of the Portfolio, dated October 31,
1995, are incorporated herein by reference to the Portfolio's Prospectus
dated December 31, 1995, which was filed with the Securities and Exchange
Commission in Post-Effective Amendment No. 9 to the Corporation's
Registration Statement on Form N-1A (File Nos. 33-48847 and 811-07021) on or
about December 28, 1995.
Pro forma financial statements are not included herein as the total
net assets of the Portfolio do not exceed 10% of the total net assets of the
Fund. At January 31, 1996, the total net assets of the Portfolio were
$16,441,232 and the total net assets of the Fund were $254,231,940.
PART C - OTHER INFORMATION
Item 15. Indemnification
Indemnification is provided to trustees and officers of the
Registrant pursuant to the Registrant's Declaration of Trust, except where
such indemnification is not permitted by law. However, the Declaration of
Trust does not protect the trustees or officers from liability based on
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of their office.
Trustees and officers of the Registrant are insured against certain
liabilities, including liabilities arising under the Securities Act of 1933
(the "Act").
Insofar as indemnification for liabilities arising under the Act may
be permitted to trustees, officers, and controlling persons of the Registrant
by the Registrant pursuant to the Declaration of Trust or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by trustees, officers, or
controlling persons of the Registrant in connection with the successful
defense of any act, suit, or proceeding) is asserted by such trustees,
officers, or controlling persons in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Insofar as indemnification for liabilities may be permitted pursuant
to Section 17 of the Investment Company Act of 1940 for trustees, officers,
or controlling persons of the Registrant by the Registrant pursuant to the
Declaration of Trust or otherwise, the Registrant is aware of the position of
the Securities and Exchange Commission as set forth in Investment Company Act
Release No. IC-11330. Therefore, the Registrant undertakes that in addition
to complying with the applicable provisions of the Declaration of Trust or
otherwise, in the absence of a final decision on the merits by a court or
other body before which the proceeding was brought, that an indemnification
payment will not be made unless in the absence of such a decision, a
reasonable determination based upon factual review has been made (i) by a
majority vote of a quorum of non-party trustees who are not interested
persons of the Registrant or (ii) by independent legal counsel in a written
opinion that the indemnitee was not liable for an act of willful misfeasance,
bad faith, gross negligence, or reckless disregard of duties. The Registrant
further undertakes that advancement of expenses incurred in the defense of a
proceeding (upon undertaking for repayment unless it is ultimately determined
that indemnification is appropriate) against an officer, trustee, or
controlling person of the Registrant will not be made absent the fulfillment
of at least one of the following conditions: (i) the indemnitee provides
security for his undertaking; (ii) the Registrant is insured against losses
arising by reason of any lawful advances; or (iii) a majority of a quorum of
disinterested non-party trustees or independent legal counsel in a written
opinion makes a factual determination that there is reason to believe the
indemnitee will be entitled to indemnification.
Item 16. Exhibits
1.1 Conformed Copy of Declaration of Trust of the Registrant(1)
2.1 Bylaws of the Registrant, as amended(1)
2.2 Amendment No. 2 to Bylaws of the Registrant effective February 2, 1987(2)
2.3 Amendment No. 3 to Bylaws of the Registrant effective August 25, 1988(3)
3 Not Applicable
4 Agreement and Plan of Reorganization dated February 29, 1996, between
Investment Series Funds, Inc., a Maryland corporation, on behalf of its
portfolio, Capital Growth Fund, and Federated Equity Funds, a Massachusetts
business trust, on behalf of its portfolio Federated Growth Strategies
Fund*
5 Copy of Specimen Certificate for Shares of Beneficial Interest of
Federated Growth Strategies Fund(4)
6.1 Conformed Copy of Investment Advisory Contract on behalf of Federated
Growth Trust(5)
6.2 Conformed Copy of Investment Advisory Contract on behalf of Federated
Equity Funds(6)
7.1 Conformed Copy of Distributor's Contract on behalf of Federated Growth
Trust(5)
7.2 Conformed Copy of Distributor's Contract on behalf of Federated Equity
Funds(6)
7.3 The Registrant hereby incorporates the conformed copy of the specimen
Mutual Funds Sales and Service Agreement; Mutual Funds Service Agreement;
and Plan Trustee/Mutual Funds Service Agreement from Item 24(b)(6) of the
Cash Trust Series II Registration Statement on Form N-1A, filed with the
Commission on July 24, 1995. (File Nos. 33-38550 and 811-6269)
8 Not Applicable
9 Conformed Copy of Custodian Agreement of the Registrant(7)
10.1 Conformed Copy of Distribution Plan of the Registrant(6)
10.2 The Registrant hereby incorporates the conformed copy of the specimen
Multiple Class Plan from Item 24(b)(18) of the World Investment Series,
Inc. Registration Statement on Form N-1A, filed with the Commission on
January 26, 1996. (File Nos. 33-52149 and 811-07141)
10.3 The responses described in Item 16 (7.3) are hereby incorporated by
reference
11 Opinion of S. Elliott Cohan, Deputy General Counsel, Federated Investors
regarding legality of shares being issued*
12 Opinion of Dickstein, Shapiro & Morin, L.L.P. regarding tax consequences
of Reorganization*
13.1 Conformed Copy of Shareholder Services Agreement of the Registrant(7)
13.2 Conformed Copy of Administrative Services Agreement of the Registrant(7)
13.3 Conformed Copy of Agreement for Fund Accounting, Shareholder
Recordkeeping and Custody Services Procurement(7)
13.4 The responses described in Item 16 (7.3) and Item 16 (10.2) are hereby
incorporated by reference
14.1 Conformed copy of Consent of Independent Auditors, Ernst & Young LLP*
14.2 Consent of Legal Counsel, Dickstein, Shapiro & Morin, L.L.P. (contained
in Exhibit 12)
15 Not Applicable
16 Conformed Copy of Power of Attorney*
17.1 Declaration under Rule 24f-2*
17.2 Form of Proxy of Capital Growth Fund Class A Shares*
17.3 Form of Proxy of Capital Growth Fund Class C Shares*
* Filed electronically.
(1) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed on July 9, 1984 (File Nos. 2-91090 and
811-4017).
(2) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed on July 21, 1987 (File Nos. 2-91090 and
811-4017).
(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed on December 31, 1988
(File Nos. 2-91090 and 811-4017).
(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 22 on Form N-1A filed July 17, 1995.
(5) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 11 on Form N-1A filed October 23, 1989.
(6) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 26 on Form N-1A filed on September 12, 1995 (File Nos. 2-91090
and 811-4017).
(7) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 on Form N-1A filed on December 29, 1994 (File Nos. 2-91090
and 811-4017).
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus which
is a part of this Registration Statement by any person or party who is deemed
to be an underwriter within the meaning of Rule 145(c) of the Securities Act
of 1933, the reoffering prospectus will contain the information called for by
the applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that
is filed under paragraph (1) above will be filed as a part of an amendment to
the Registration Statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act of
1933, each post-effective amendment shall be deemed to be a new Registration
Statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide offering
of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Federated Equity Funds, has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Pittsburgh, Commonwealth of Pennsylvania on March
8, 1996.
FEDERATED EQUITY FUNDS
(Registrant)
By: *
Glen R. Johnson
President
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on March 8, 1996:
* Chairman and Trustee
John F. Donahue
(Chief Executive Officer)
* President
Glen R. Johnson
* Treasurer
David M. Taylor
(Principal Financial and
Accounting Officer)
* Trustee
Thomas G. Bigley
* Trustee
John T. Conroy, Jr.
* Trustee
William J. Copeland
* Trustee
James E. Dowd
* Trustee
Lawrence D. Ellis, M.D.
* Trustee
Edward L. Flaherty, Jr.
* Trustee
Peter E. Madden
* Trustee
Gregor F. Meyer
* Trustee
John E. Murray, Jr., J.D., S.J.D.
* Trustee
Wesley W. Posvar
* Trustee
Marjorie P. Smuts
1* By: /s/ S. Elliott Cohan
Attorney in Fact
Exhibit 17.2
CAPITAL GROWTH FUND, CLASS A SHARES
a Portfolio of
INVESTMENT SERIES FUNDS, INC.,
FEDERATED INVESTORS TOWER
PITTSBURGH PA 15222-3779
1* Such signature has been affixed pursuant to a Power of Attorney.
CAPITAL GROWTH FUND, CLASS A SHARES
a Portfolio of
INVESTMENT SERIES FUNDS, INC.
CUSIP NO. 461444 20 8
FOR SPECIAL MEETING OF SHAREHOLDERS MAY 31, 1996
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned
shareholder(s) of Capital Growth Fund (the "Portfolio"), a portfolio of
Investment Series Funds, Inc. (the "Corporation"), hereby appoint(s) Gia
Albanowski, Patricia Conner, Patricia Godlewski, Suzanne Land and S. Elliott
Cohan, or any of them, true and lawful attorneys, with power of substitution
of each, to vote all Class A Shares of Capital Growth Fund, a portfolio of
Investment Series Funds, Inc., which the undersigned is entitled to vote, at
the Special Meeting of Shareholders to be held on May 31, 1996, at Federated
Investors Tower, Pittsburgh, Pennsylvania, at 2:30 p.m. (Eastern Time) and
at any adjournment thereof.
Discretionary authority is hereby conferred as to all other matters
as may properly come before the Special Meeting.
PROPOSAL
1.TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
THE CORPORATION, ON BEHALF OF THE PORTFOLIO, AND FEDERATED EQUITY FUNDS, ON
BEHALF OF FEDERATED GROWTH STRATEGIES FUND.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The
attorneys named will vote the shares represented by this proxy in accordance
with the choices made on this card. IF NO CHOICE IS INDICATED AS TO ANY
ITEM, THIS PROXY WILL BE VOTED AFFIRMATIVELY ON THAT MATTER.
PLEASE RETURN THE BOTTOM PORTION WITH YOUR VOTE IN
THE ENCLOSED ENVELOPE AND RETAIN THE TOP PORTION
CAPITAL GROWTH FUND, CLASS A SHARES PROXY VOTING MAIL-IN STUB
a portfolio of Investment PROPOSAL 1: TO APPROVE OR
Series Funds, Inc. DISAPPROVE AN AGREEMENT
AND PLAN OF REORGANIZATION
RECORD DATE SHARES:
----------------
oFOR the Agreement
and Plan of
Reorganization
oAGAINST the Agree-
ment and Plan of
Reorganization
oABSTAIN
Please sign EXACTLY as your name(s)
appear(s) above. When signing as
attorney, executor, administrator,
guardian, trustee, custodian, etc.,
please give your full title as
such. If a corporation or
partnership, please sign the full
name by an authorized officer or
partner. If stock is owned
jointly, all owners should sign.
-----------------------------------
Signature(s) of Shareholder(s)
Date:
-----------------------------
Exhibit 17.3
CAPITAL GROWTH FUND, CLASS C SHARES
a Portfolio of
INVESTMENT SERIES FUNDS, INC.,
FEDERATED INVESTORS TOWER
PITTSBURGH PA 15222-3779
CAPITAL GROWTH FUND, CLASS C SHARES
a Portfolio of
INVESTMENT SERIES FUNDS, INC.
CUSIP NO. 461444 40 8
FOR SPECIAL MEETING OF SHAREHOLDERS MAY 31, 1996
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned
shareholder(s) of Capital Growth Fund (the "Portfolio"), a portfolio of
Investment Series Funds, Inc. (the "Corporation"), hereby appoint(s) Gia
Albanowski, Patricia Conner, Patricia Godlewski, Suzanne Land and S. Elliott
Cohan, or any of them true and lawful attorneys, with power of substitution
of each, to vote all Class C Shares of Capital Growth Fund, a portfolio of
Investment Series Funds, Inc., which the undersigned is entitled to vote, at
the Special Meeting of Shareholders to be held on May 31, 1996, at Federated
Investors Tower, Pittsburgh, Pennsylvania, at 2:30 p.m. (Eastern Time) and
at any adjournment thereof.
Discretionary authority is hereby conferred as to all other matters
as may properly come before the Special Meeting.
PROPOSAL
1.TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
THE CORPORATION, ON BEHALF OF THE PORTFOLIO, AND FEDERATED EQUITY FUNDS, ON
BEHALF OF FEDERATED GROWTH STRATEGIES FUND.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The
attorneys named will vote the shares represented by this proxy in accordance
with the choices made on this card. IF NO CHOICE IS INDICATED AS TO ANY
ITEM, THIS PROXY WILL BE VOTED AFFIRMATIVELY ON THAT MATTER.
PLEASE RETURN THE BOTTOM PORTION WITH YOUR VOTE IN
THE ENCLOSED ENVELOPE AND RETAIN THE TOP PORTION
CAPITAL GROWTH FUND, CLASS C SHARES PROXY VOTING MAIL-IN STUB
a portfolio of Investment PROPOSAL 1: TO APPROVE OR
Series Funds, Inc. DISAPPROVE AN AGREEMENT
AND PLAN OF REORGANIZATION
RECORD DATE SHARES:
----------------
oFOR the Agreement
and Plan of
Reorganization
oAGAINST the Agreement
and Plan of
Reorganization
oABSTAIN
Please sign EXACTLY as your name(s)
appear(s) above. When signing as
attorney, executor, administrator,
guardian, trustee, custodian, etc.,
please give your full title as
such. If a corporation or
partnership, please sign the full
name by an authorized officer or
partner. If stock is owned
jointly, all owners should sign.
-----------------------------------
Signature(s) of Shareholder(s)
Date:
-----------------------------
Exhibit 11
FEDERATED GROWTH STRATEGIES FUND
a portfolio of Federated Equity Funds
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Phone: 412-288-1900
March 6, 1996
The Trustees of
Federated Equity Funds
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
Federated Growth Strategies Fund (the "Fund"), a portfolio of Federated
Equity Funds (the "Trust"), proposes to issue shares of beneficial interest
(such shares of beneficial interest being herein referred to as the "Shares")
in connection with the acquisition of the assets of Capital Growth Fund, a
portfolio of Investment Series Funds, Inc., pursuant to the Agreement and
Plan of Reorganization dated February 29, 1996 (the "Agreement"), filed as an
exhibit to the registration statement of the Trust filed on Form N-14
(Securities Act of 1933 No. to be assigned) under the Securities Act of 1933
as amended (the "N-14 Registration").
As counsel, I have participated in the organization of the Trust, its
registration under the Investment Company Act of 1940, as amended, the
registration of its securities on Form N-1A under the Securities Act of 1933,
and its N-14 Registration. I have examined and am familiar with the written
Declaration of Trust dated April 17, 1984 (the "Declaration of Trust"), the
Bylaws of the Trust, the Agreement and such other documents and records
deemed relevant. I have also reviewed questions of law and consulted with
counsel thereon as deemed necessary or appropriate by me for the purposes of
this opinion.
Based upon the foregoing, it is my opinion that:
1. The Trust is duly organized and validly existing pursuant to the
Declaration of Trust.
2. The Shares which are currently being registered by the N-14
Registration may be legally and validly issued in accordance with the
provisions of the Agreement and the Declaration of Trust upon receipt of
consideration sufficient to comply with the provisions of Article III,
Section 3, of the Declaration of Trust and subject to compliance with the
Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and applicable state laws regulating the sale of securities. Such
Shares, when so issued, will be fully paid and non-assessable.
I consent to your filing this opinion as an exhibit to the N-14
Registration referred to above and to any application or registration
statement filed under the securities laws of any of the states of the United
States.
Very truly yours,
By:
S. Elliott Cohan
Exhibit 12
DICKSTEIN, SHAPIRO & MORIN, L.L.P.
2101 L STREET, N.W.
WASHINGTON, D.C. 20037
March 8, 1996
Federated Equity Funds, on behalf of its portfolio,
Federated Growth Strategies Fund
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Investment Series Funds, Inc., on behalf of its portfolio,
Capital Growth Fund
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Ladies and Gentlemen:
We have acted as special counsel in connection with, and you have
requested our opinion concerning the federal income tax consequences of, a
transaction (the "Reorganization") in which all of the assets of Capital
Growth Fund, (the "Acquired Fund"), a portfolio of Investment Series Funds,
Inc., a Maryland corporation ("Corporation"), will be acquired by Federated
Equity Funds, a Massachusetts business trust ("Trust"), on behalf of its
portfolio, Federated Growth Strategies Fund (the "Acquiring Fund"), in
exchange solely for Class A and Class C Shares of Acquiring Fund (the
"Acquiring Fund Shares"). The terms and conditions of this transaction are
set forth in an Agreement and Plan of Reorganization dated February 29, 1996
between Trust, on behalf of the Acquiring Fund, and Corporation, on behalf of
the Acquired Fund (the "Agreement"). This opinion is rendered to you
pursuant to paragraph 8.5 of the Agreement, and all terms used herein have
the meanings assigned to them in the Agreement.
Both Trust and Corporation are open-end, management investment companies
which qualify as regulated investment companies described in Section 851(a)
of the Internal Revenue Code of 1986, as amended (the "Code"). The Acquired
Fund and the Acquiring Fund are engaged in the business of investing in
professionally managed portfolios of equity securities.
On the Closing Date under the Agreement, the Acquired Fund will transfer its
entire investment portfolio to the Acquiring Fund. In exchange, the
Acquiring Fund will transfer, to the Acquired Fund, Acquiring Fund Shares in
an amount equal in value to the assets transferred by the Acquired Fund to
the Acquiring Fund. The Acquired Fund will thereupon liquidate and
distribute its Acquiring Fund Shares pro rata to its shareholders ("Acquired
Fund Shareholders") as provided under the Agreement.
We have reviewed and relied upon the representations contained in the
Agreement and in such other documents and instruments as we have deemed
necessary for the purposes of this opinion, and have reviewed the applicable
provisions of the Code, current regulations and administrative rules
thereunder and pertinent case law.
Based upon the foregoing, and assuming that the Reorganization and related
transactions will take place as described in the Agreement, we are of the
opinion that, for federal income tax purposes:
The transfer of all of the Acquired Fund assets in exchange for the Acquiring
Fund Shares and the distribution of the Acquiring Fund Shares to the Acquired
Fund Shareholders in liquidation of the Acquired Fund will constitute a
"reorganization" within the meaning of Section 368(a)(1)(C) of the Code;
No gain or loss will be recognized by the Acquiring Fund upon the receipt of
the assets of the Acquired Fund solely in exchange for the Acquiring Fund
Shares;
No gain or loss will be recognized by the Acquired Fund upon the transfer of
the Acquired Fund assets to the Acquiring Fund in exchange for the Acquiring
Fund Shares or upon the distribution (whether actual or constructive) of the
Acquiring Fund Shares to Acquired Fund Shareholders in exchange for their
shares of the Acquired Fund;
No gain or loss will be recognized by the Acquired Fund Shareholders upon the
exchange of their Acquired Fund shares for the Acquiring Fund Shares;
The tax basis of the Acquired Fund assets acquired by the Acquiring Fund will
be the same as the tax basis of such assets to the Acquired Fund immediately
prior to the Reorganization;
The tax basis of the Acquiring Fund Shares received by each of the Acquired
Fund Shareholders pursuant to the Reorganization will be the same as the tax
basis of the Acquired Fund shares held by such shareholder immediately prior
to the Reorganization;
The holding period of the assets of the Acquired Fund in the hands of the
Acquiring Fund will include the period during which those assets were held by
the Acquired Fund; and
The holding period of the Acquiring Fund Shares received by each Acquired
Fund Shareholder will include the period during which the Acquired Fund
shares exchanged therefor were held by such shareholder (provided the
Acquired Fund shares were held as capital assets on the date of the
Reorganization).
We hereby consent to the filing of a copy of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration Statement on Form
N-14 filed by Trust in connection with the Reorganization, and to the
references to this firm and this opinion in the Prospectus/Proxy Statement
which is contained in such Registration Statement.
Very truly yours,
Exhibit 14
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the use of our report dated December 12, 1995 on the financial
statements and financial highlights of Federated Growth Strategies Fund, a
portfolio of Federated Equity Funds, incorporated by reference in the initial
Registration Statement (Form N-14) and the related Prospectus/Proxy Statement
of Federated Equity Funds.
We also consent to the use of our report dated December 12, 1995 on the
financial statements and financial highlights of Capital Growth Fund, a
portfolio of Investment Series Funds, Inc. incorporated by reference in the
initial Registration Statement described above.
By:ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
Exhibit 16
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of FEDERATED EQUITY FUNDS and
the Deputy General Counsel of Federated Investors, and each of them, their
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution for them and in their names, place and stead, in any and
all capacities, to sign any and all documents to be filed with the Securities
and Exchange Commission pursuant to the Securities Act of 1933, the
Securities Exchange Act of 1934 and the Investment Company Act of 1940, by
means of the Securities and Exchange Commission's electronic disclosure
system known as EDGAR; and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to sign and perform each and every act and
thing requisite and necessary to be done in connection therewith, as fully to
all intents and purposes as each of them might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any
of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue thereof.
SIGNATURES TITLE DATE
/s/ John F. Donahue Chairman and Trustee March 5, 1996
John F. Donahue (Chief Executive Officer)
/s/ Glen R. Johnson President March 5, 1996
Glen R. Johnson
/s/ David M. Taylor Treasurer March 5, 1996
David M. Taylor (Principal Financial and
Accounting Officer)
/s/ Thomas G. Bigley Trustee March 5, 1996
Thomas G. Bigley
/s/ John T. Conroy, Jr. Trustee March 5, 1996
John T. Conroy, Jr.
SIGNATURES TITLE DATE
/s/ William J. Copeland Trustee March 5, 1996
William J. Copeland
/s/ James E. Dowd Trustee March 5, 1996
James E. Dowd
/s/ Lawrence D. Ellis, M.D. Trustee March 5, 1996
Lawrence D. Ellis, M.D.
/s/ Edward L. Flaherty, Jr. Trustee March 5, 1996
Edward L. Flaherty, Jr.
/s/ Peter E. Madden Trustee March 5, 1996
Peter E. Madden
/s/ Gregor F. Meyer Trustee March 5, 1996
Gregor F. Meyer
/s/ John E. Murray, Jr. Trustee March 5, 1996
John E. Murray, Jr.
/s/ Wesley W. Posvar Trustee March 5, 1996
Wesley W. Posvar
/s/ Marjorie P. Smuts Trustee March 5, 1996
Marjorie P. Smuts
Sworn to and subscribed before me this 5th day of March , 1996.
- -- -----
(SEAL)
/s/ Marie M. Hamm
--------------------------------------------
Notarial Seal
Marie M. Hamm, Notary Public
Plum Boro, Allegheny County
My Commission Expires Sept. 16, 1996
Exhibit 17.1
1933 Act File No. 1940 Act File No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 XX
Pre-Effective Amendment No. .................
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 XX
Amendment No. ...............................
FEDERATED GROWTH TRUST
(Exact name of Registrant as Specified in Charter)
421 Seventh Avenue, Pittsburgh, Pennsylvania 15219
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esq., 421 Seventh Avenue, Pittsburgh, Pennsylvania 15219
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering As soon as possible after
effectiveness of Registration
Statement.
Copies to:
Thomas J. Donnelly, Esquire Charles H. Morin, Esquire
Houston, Houston & Donnelly Dickstein, Shapiro & Morin
2510 Centre City Tower 2101 L Street, N.W.
650 Smithfield Street Washington, D.C. 20037
Pittsburgh, Pennsylvania 15222
Pursuant to the provisions of Rule 24f-2 of the Investment Company Act of
1940, Registrant hereby elects to register an indefinite number of shares.
Amendment Pursuant to Rule 473
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission acting
