1933 Act File No. 2-91090
1940 Act File No. 811-4017
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---
Pre-Effective Amendment No. .......................
Post-Effective Amendment No. 39_....................... X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 33 ...................................... X
---- ---
FEDERATED EQUITY FUNDS
(Exact Name of Registrant as Specified in Charter)
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) on _________________
pursuant to paragraph (b) 60 days after filing pursuant to paragraph (a) (i)
on _________________ pursuant to paragraph (a) (i).
X 75 days after filing pursuant to paragraph (a)(ii) on _________________
pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Copy to:
Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky, LLP
2101 L Street, N.W.
Washington, D.C. 20037
Prospectus December __, 1998
Federated Large Cap Growth Fund
Class A Shares, Class B Shares, Class C Shares
A mutual fund seeking capital appreciation by investing primarily in well
established large-sized companies while remaining sensitive to the tax liability
of shareholders.
Fund Shares are not bank deposits, federally insured, or guaranteed, and may
lose value. As with all mutual funds, the Securities and Exchange Commission has
not approved or disapproved these securities or passed upon the adequacy of this
prospectus, and any representation to the contrary is a criminal offense.
Contents
Risk/Return Summary..........................................................1
What Are The Specific Risks Of Investing In The Fund?........................2
What Do Shares Cost?.........................................................3
How Is The Fund Sold?........................................................5
How To Purchase Shares.......................................................5
How To Redeem And Exchange Shares............................................7
Account And Share Information................................................9
Who Manages The Fund?.......................................................10
Financial Information.......................................................11
<PAGE>
14
RISK/RETURN SUMMARY
What is the Fund's Objective?
The Fund's investment objective is capital appreciation. The investment
objective may be changed by the Fund's Trustees without shareholder approval.
What is the Fund's Investment Strategy?
The Fund pursues its objective by investing principally in the 100 largest
growth stocks of companies traded in the U.S. based upon price to earnings
ratio, price to book ratio and estimated earnings growth.
What are the Main Risks of Investing in the Fund?
All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund.
Stock Market Risks. The value of the stocks in the Fund's portfolio will go up
and down. These fluctuations could be a sustained trend or a drastic movement.
Fluctuations in the Fund's portfolio may reflect changes in individual portfolio
stocks or general changes in stock valuations and will result in changes in the
Fund's share price. The Fund's investment adviser (Adviser) attempts to manage
market risk through diversification by limiting the amount the Fund invests in
each stock.
What are the Fund's Fees and Expenses?
This table describes the fees and expenses that you may pay when you buy, hold,
and redeem shares of the Fund's Class A, B or C Shares.
Shareholder Fees
(Fees paid directly from your investment)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Class A Class B Class C
Maximum Sales Charge (Load) Imposed on Purchases 5.50% None None
(as a percentage of offering
price)......................................................................................
Maximum Deferred Sales Charge (Load) (as a 0.00% 5.50% 1.00%
percentage of original purchase price or
redemption proceeds, as applicable) (1)
Maximum Sales Charge (Load) Imposed on None None None
Reinvested Dividends (and other Distributions)
(as a percentage of offering
price)...................
Redemption Fee (as a percentage of amount None None None
redeemed, if applicable)....
Exchange None None None
Fee...........................................................................................
Maximum Account None None None
Fee............................................................................
Annual Fund Operating Expenses
(Expenses that are deducted from Fund assets. As a percentage of average net assets.)
Management Fee
....................................................
Shareholder Services Fee
Distribution (12b-1)
Fee...........................................................................
Other
Expenses......................................................................................
Total Annual Fund Operating Expenses (before waivers)
Waiver of Fund
Expenses(2)...................................................................
Total Annual Fund Operating Expenses (after waivers)
</TABLE>
<PAGE>
(1) Shareholders who purchase $1 million or more of Class A Shares through an
investment professional may be charged a contingent deferred sales charge of
0.75% for redemptions made within 24 months of purchase if the investment
professional received an advance payment. For shareholders of Class B Shares,
the maximum deferred sales charge (load) is 5.50% in the first year declining to
1.00% in the sixth year and 0.00% thereafter. For shareholders of Class C
Shares, the maximum deferred sales charge (load) assessed is 1.00% of the lesser
of the original purchase price or the net asset value of Shares redeemed within
one year of their purchase date. For a more complete description, see "What Do
Shares Cost?"
(2) TO COME
Example
This Example is intended to help you compare the cost of investing in the Fund's
Class A, B and C Shares with the cost of investing in other mutual funds. The
Example assumes that you invest $10,000 in the Fund's Class A, B and C Shares
for the time periods indicated and then redeem all of your shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's Class A, B and C Shares operating expenses are
before waivers as estimated above and remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
............................1 Year 3 Years
------ -------
Class A Shares
Payment of the maximum sales charge Expenses assuming no redemption..
Class B Shares
Payment of the maximum sales charge Expenses assuming no redemption..
Class C Shares
Payment of the maximum sales charge Expenses assuming no redemption..
MAIN INVESTMENT STRATEGY
The Fund pursues its objective by investing in equity securities, including
common stocks of the 100 largest growth companies traded in the U.S. stock
markets. To identify these companies, the Adviser will examine the expected
price to earnings ratio, price to book ratio and estimated earnings growth and
categorize each stock as growth or value. The Adviser will then pick the 100
largest growth stocks based on market capitalization. The Adviser will also
analyze each company's financial performance and business fundamentals to
determine how much the Fund should invest in each company.
From time to time the Fund's Adviser will review and update the list of 100
growth stocks. Stocks in the Fund's portfolio will be sold if they no longer
fall within the category of the largest 100 growth stocks.
When possible, the Fund will employ tax management techniques which are designed
to minimize capital gains distributions while maximizing after-tax returns. The
strategies used may include minimizing portfolio turnover, matching realized
gains with realized losses, and selling high cost investments first.
SECURITIES DESCRIPTIONS AND RISKS
Common stocks are the most prevalent type of equity security. Common
stockholders receive the residual value of the issuer's earnings and assets
after the issuer pays its creditors and any preferred stockholders. As a result,
changes in an issuer's earnings directly influence the value of its common
stock.
American Depositary Receipts (ADRs) are receipts that represent an interest in
shares of a foreign-based corporation. ADRs provide a way to buy such shares in
the U.S. rather than in overseas markets. ADRs involve many of the same risks of
investing directly in foreign securities including currency risks.
Currency Risks. Exchange rates for currency fluctuate daily. The combination of
currency risk and market risks tends to make securities traded in foreign
markets more volatile than securities traded exclusively in the U.S.
Stock Market Risks. The value of the stocks in the Fund's portfolio will go up
and down. These fluctuations could be a sustained trend or a drastic movement.
Fluctuations in the Fund's portfolio may reflect changes in individual portfolio
stocks or general changes in stock valuations and will result in changes in the
Fund's share price. The Adviser attempts to manage market risk through
diversification by limiting the amount the Fund invests in each stock.
Temporary Investments. The Fund may temporarily depart from its principal
investment strategies by investing its assets in cash, cash items, and
shorter-term, higher quality debt securities. It may do this to minimize
potential losses and maintain liquidity to meet shareholder redemptions during
adverse market conditions. This may cause the Fund to forego greater investment
returns for the safety of principal.
WHAT DO SHARES COST?
You can purchase, redeem, or exchange Shares any day the New York Stock Exchange
(NYSE) is open. When the Fund receives your transaction request in proper form,
it is processed at the next determined public offering price.
The public offering price is the net asset value (NAV) plus any applicable sales
charge. NAV is determined at the end of regular trading (normally 4 p.m. Eastern
time) each day the NYSE is open.
The following table summarizes the minimum required investment amount and the
maximum sales charge, if any, that you will pay on an investment in the Fund.
Keep in mind that financial intermediaries may charge you fees for their
services in connection with your Share transactions.
- -------------------------------------------------------------------------
Maximum Sales Charge
Shares Offered Minimum Contingent
Initial/Subsequent Front-End Deferred
Investment Sales Sales
Amounts(1) Charge(2) Charge(3)
- -------------------------------------------------------------------------
Class A $1500/$100 5.50% None
Class B $1500/$100 None 5.50%
Class C $1500/$100 None 1.00%
(1)The minimum initial and subsequent investment amounts for retirement plans
are $250 and $100, respectively. The minimum subsequent investment amounts
for Systematic Investment Programs is $50. Financial intermediaries may
impose higher or lower minimum investment requirements on their customers
than those imposed by the Fund. Orders for $250,000 or more will be invested
in Class A Shares instead of Class B Shares in order to maximize your return
and to minimize the sales charges and marketing fees. Accounts held in the
name of an investment professional may be treated differently. Class B Shares
will convert to Class A Shares at NAV approximately eight years after
purchase.
(2) Front-End Sales Charge is expressed as a percentage of public offering
price. See "Sales Charge When You Purchase" below. (3) See "Sales Charge When
You Redeem" below.
<PAGE>
Sales Charge When You Purchase
------------------------------------------------------------
Class A Shares
Purchase Amount Sales Charge as Sales Charge
a Percentage of as a
Public Offering Percentage of
Price NAV
------------------------------------------------------------
------------------------------------------------------------
Less than $50,000 5.50% 5.82%
------------------------------------------------------------
------------------------------------------------------------
$50,000 but less than 4.50% 4.71%
$100,000
------------------------------------------------------------
------------------------------------------------------------
$100,000 but less than 3.75% 3.90%
$250,000
------------------------------------------------------------
------------------------------------------------------------
$250,000 but less than 2.50% 2.56%
$500,000
------------------------------------------------------------
------------------------------------------------------------
$500,000 but less than 2.00% 2.04%
$1 million
------------------------------------------------------------
------------------------------------------------------------
$1 million or greater(1) 0.00% 0.00%
------------------------------------------------------------
------------------------------------------------------------
(1) A contingent deferred sales charge of 0.75% of the redemption amount
applies to Class A Shares redeemed up to 24 months after purchase under
certain investment programs where an investment professional received an
advance payment on the transaction.
The sales charge at purchase may be reduced or eliminated by:
oquantity purchases of Shares;
ocombining concurrent purchases of Shares:
* by you, your spouse, and your children under age 21; or
* of the same class of two or more Federated Funds (other than money
market funds);
oaccumulating purchases (in calculating the sales charge on an additional
purchase, you may count the current value of previous Share purchases
still invested in the Fund); or
osigning a letter of intent to purchase a specific dollar amount of Shares
within 13 months (call the Fund for more information).
The sales charge will be eliminated when you purchase Shares: owithin 120
days of redeeming Shares of an equal or lesser amount; oas a Federated
Life Member; oby exchanging shares from the same share class of another
Federated Fund (other than a money market fund); othrough wrap accounts or
other investment programs where you pay the investment professional
directly for services; or othrough financial intermediaries that receive
no portion of the sales charge.
If your investment qualifies for a reduction or elimination of the sales
charge, you or your investment professional must notify the Fund's
Distributor, Federated Securities Corp., at the time of purchase. If you
fail to notify the Distributor, you will receive the reduced sales charge
only on additional purchases, and not retroactively on your previous
purchases.
Sales Charge When You Redeem
Your redemption proceeds may be reduced by a sales charge, commonly referred to
as a contingent deferred sales charge (CDSC).
------------------------------------------------------------
Class B Shares
Shares Held Up To: CDSC
------------------------------------------------------------
------------------------------------------------------------
1 year 5.50%
------------------------------------------------------------
------------------------------------------------------------
2 years 4.75%
------------------------------------------------------------
------------------------------------------------------------
3 years 4.00%
------------------------------------------------------------
------------------------------------------------------------
4 years 3.00%
------------------------------------------------------------
------------------------------------------------------------
5 years 2.00%
------------------------------------------------------------
------------------------------------------------------------
6 years 1.00%
------------------------------------------------------------
------------------------------------------------------------
7 years or more 0.00%
------------------------------------------------------------
------------------------------------------------------------
Class C Shares
------------------------------------------------------------
------------------------------------------------------------
You will pay a 1% CDSC if you redeem Shares within one year of the
purchase date.
------------------------------------------------------------
You will not be charged a CDSC when redeeming Shares:
opurchased with reinvested dividends or capital gains, or purchased within
120 days of redeeming Shares of an equal or lesser amount; othat you
exchange into the same share class of another Federated Fund where the
original shares were held for seven years or more
(other than a money market fund);
opurchased through financial intermediaries that did not receive advanced
sales payments; or oif you have certain disabilities as defined by the
IRS.
In addition, you will not be charged a CDSC:
owhen the Fund redeems your Shares and closes your account for failing to
meet the minimum balance requirement; oif your redemption is a required
retirement plan distribution; oupon the death of the shareholder(s) of the
account or the redemption of Shares by a designated beneficiary.
If your redemption qualifies, you or your investment professional must
notify the Distributor at the time of redemption to eliminate the CDSC.
To keep the sales charge as low as possible, we sell your shares in the
following order:
oShares that are not subject to a CDSC;
oShares held the longest (to determine the number of years your Shares
have been held, include the time you held shares of Federated Funds that
have been exchanged for Fund Shares); and
othen, the CDSC is based on the NAV at the time you purchased or redeemed
those Shares, whichever is lower.
HOW IS THE FUND SOLD?
The Fund offers three share classes: Class A Shares, Class B Shares and Class C
Shares each representing interests in a single portfolio of securities.
The Fund's Distributor markets the Shares described in this prospectus to
institutions or individuals, directly or through financial intermediaries. When
the Distributor receives sales charges and marketing fees, it may pay some or
all of them to financial intermediaries. The Distributor and its affiliates may
pay out of their assets other amounts (including items of material value) to
financial intermediaries for marketing and servicing Shares. The Distributor is
a subsidiary of Federated Investors, Inc. (Federated).
Rule 12b-1 Plan
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and financial intermediaries for the sale, distribution and
customer servicing of the Fund's Shares. Because these Shares pay marketing fees
on an ongoing basis, your investment cost may be higher over time than shares
with different sales charges and marketing fees.
HOW TO PURCHASE SHARES
You may purchase Shares through an investment professional, directly from the
Fund, or through an exchange from another Federated Fund.
Where the Fund offers more than one Share Class and you do not specify the Class
choice on your form of payment, you automatically will receive Class A Shares.
The Fund reserves the right to reject any request to purchase or exchange
Shares.
Through An Investment Professional
o Establish an account with the investment professional; and
o Submit your purchase order to the investment professional before the end of
regular trading on the NYSE (normally 4 p.m. Eastern time). You will receive
that day's NAV if the investment professional forwards the order to the Fund
on the same day and the Fund receives payment within three business days. You
will become the owner of the Shares and receive dividends when the Fund
receives your payment.
o Financial intermediaries should send payments according to the instructions in
the sections By Wire or By Check.
Directly From The Fund
w Establish your account with the Fund by submitting a completed New Account
Form; and
w Send your payment to the Fund by Federal Reserve wire or check.
You will become a shareholder and your Shares will be priced at the NAV on the
day the Fund receives your wire or your check.
An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the NAV on the day the Fund receives the order.
By Wire. Send your wire to:
State Street Bank and Trust Company, Boston, MA
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number, or Group Number
Dollar Amount
For Credit to: (Fund/Class Name)
Account Name and Number.
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
By Check. Make your check payable to The Federated Funds, note your account
number on the check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600, Boston, MA 02266-8600.
If you send your check by a private courier or overnight delivery service that
requires a street address, send it to:
Federated Shareholder Services Company
1099 Hingham Street, Rockland, MA 02370-3317.
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third-party checks (checks originally payable to someone other than
you or The Federated Funds). If your check does not clear, your purchase will be
canceled and you could be liable for any losses or fees the Fund or its transfer
agent incurs.
Through An Exchange
You may purchase Shares through an exchange from the same Share class of another
Federated Fund. You must meet the minimum initial investment requirement for
purchasing Shares and both accounts must have identical registrations.
By Systematic Investment Program
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program
section of the New Account Form or contacting the Fund or your investment
professional.
By Automated Clearing House (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
Retirement Investments
You may purchase Shares as retirement investments (such as qualified plans and
IRAs or transfer or rollover of assets). In order for the Fund's custodian to
act as your custodian/trustee, you must establish your account by signing a
Federated Adoption Agreement. To request this Agreement or to ask a question
about investing for retirement, call the Fund or your investment professional.
We suggest that you discuss these retirement investments with your tax adviser.
You may be charged an annual IRA account fee.
HOW TO REDEEM AND EXCHANGE SHARES
You should redeem or exchange Shares:
o through an investment professional if you purchased Shares through an
investment professional; or
o directly from the Fund if you purchased Shares directly from the Fund.
Through An Investment Professional
Submit your redemption or exchange request to your investment professional by
the end of regular trading on the NYSE (normally 4 p.m. Eastern time). The
redemption amount you will receive is based upon the NAV on the day the Fund
receives the order from your investment professional.
Directly From The Fund
By Telephone. You may redeem or exchange Shares by calling the Fund once you
have completed the appropriate authorization form for telephone transactions. If
you call before the end of regular trading on the NYSE (normally 4 p.m. Eastern
time) you will receive a redemption amount based on that day's NAV.
By Mail. You may redeem or exchange Shares by mailing a written request to the
Fund.
You will receive a redemption amount based on the NAV on the day your written
request is received by the Fund in proper form.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600, Boston, MA 02266-8600.
Send requests by private courier or overnight delivery to:
Federated Shareholder Services Company
1099 Hingham Street, Rockland, MA 02370-3317.
All requests must include:
o Fund Name and Share Class, account number and account registration; o amount
to be redeemed or exchanged; o signatures of all Shareholders exactly as
registered; and
o if exchanging, the Fund Name and Share Class, account number and account
registration, into which you are exchanging.
Call the Fund or your investment professional if you need special instructions.
Signature Guarantees. Signatures must be guaranteed if:
w your redemption is to be sent to an address other than the address of record;
w your redemption is to be sent to an address of record that was changed within
the last thirty days; or w a redemption is payable to someone other than the
shareholder(s) of record.
Your signature can be guaranteed by any federally insured financial institution
(such as a bank or trust company, savings association or credit union) or a
broker/dealer that is a domestic stock exchange member, but not by a notary
public.
Payment Options
Your redemption proceeds will be mailed by check to your address of record.
However, the following payment options are available if you complete the
appropriate section of the New Account Form or an Account Service Options Form.
These payment options require a signature guarantee if they were not established
prior to redeeming Shares:
o an electronic transfer to your depository account at a financial institution
that is an ACH member; or
o wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
Redemption in Kind. Although the Fund intends to pay Share redemptions in cash,
it reserves the right to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Limitations On Redemption Proceeds
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
w to allow your purchase to clear;
w during periods of market volatility; or
w when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund. If
those checks are undeliverable and returned to the Fund, the proceeds will be
reinvested in Shares.
Retirement Distributions
A minimum of 10% of the value of your retirement distribution (redemption) will
be withheld for taxes in the absence of your specific instructions.
Exchange Privileges
You may exchange Shares of the Fund into Shares of the same class of another
Federated Fund. To do this, you must:
w ensure that the Share registrations are identical;
w meet any minimum initial investment requirements; and
w receive a prospectus for the fund into which you wish to exchange.
An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction. Signatures must be guaranteed if you request an exchange
into another fund with a different shareholder registration.
The Fund may modify or terminate the exchange privilege at any time. The Fund's
management or investment adviser may determine from the amount, frequency and
pattern of exchanges that a shareholder is engaged in excessive trading which is
detrimental to the Fund and other shareholders. If this occurs, the Fund may
terminate the availability of exchanges to that shareholder and may bar that
shareholder from purchasing other Federated Funds.
Systematic Withdrawal/Exchange Program
You may automatically redeem or exchange Shares on a regular basis by completing
the appropriate section of the New Account Form or an Account Service Options
Form or by contacting your investment professional or the Fund. Your account
value must meet the minimum initial investment amount at the time the program is
established. This program may reduce, and eventually deplete, your account, and
the payments should not be considered yield or income. Generally, it is not
advisable to continue to purchase Shares subject to a sales charge while
redeeming Shares using this program.
Systematic Withdrawal Program (SWP) On Class B Shares. You will not be
charged a CDSC on SWP redemptions if:
you redeem 12% or less of your account value in a single year;
your account is at least one year old;
you reinvest all dividends and capital gains distributions; and
your account has at least a $10,000 balance when you establish the SWP
(you cannot aggregate multiple Class B Share accounts to meet
this minimum balance).
You will be subject to a CDSC on redemption amounts that exceed the 12%
annual limit. In measuring the redemption percentage, your account is valued
when you establish the SWP and then annually at calendar year-end. You can
redeem only at a rate of 1% monthly, 3% quarterly, or 6% semi-annually.
Additional Conditions
Telephone Transactions. The Fund will record your telephone instructions. If the
Fund does not follow reasonable procedures, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. The Fund will notify you if
it changes telephone transaction privileges.
Share Certificates. The Fund no longer issues share certificates. If you are
redeeming or exchanging Shares represented by certificates previously issued by
the Fund, you must return the certificates with your written redemption or
exchange request. For your protection, send your certificates by registered or
certified mail, but do not endorse them.
ACCOUNT AND SHARE INFORMATION
Confirmations And Account Statements
You will receive confirmation of purchases, redemptions and exchanges (except
for systematic transactions). In addition, you will receive periodic statements
reporting all account activity, including systematic transactions, dividends and
capital gains paid.
Dividends And Capital Gains
The Fund declares and pays any dividends annually to shareholders. Dividends are
paid to all shareholders invested in the Fund on the record date.
In addition, the Fund pays any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments. If you elect cash
payments and the payment is returned as undeliverable, your cash payment will be
reinvested in Shares and your distribution option will convert to automatic
reinvestment. If any distribution check remains uncashed for six months the
check will no longer be honored, the check amount will be reinvested in Shares,
and you will not accrue any interest or dividends on this amount prior to the
reinvestment.
If you purchase Shares just before a Fund declares a dividend or capital gain
distribution, you will pay the full price for the Shares and then receive a
portion of the price back in the form of a distribution, whether or not you
reinvest the distribution in Shares. Therefore, you should consider the tax
implications of purchasing Shares shortly before the Fund declares a dividend or
capital gain. Contact your investment professional or the Fund for information
concerning when dividends and capital gains will be paid.
Accounts With Low Balances
Non-retirement accounts may be closed if redemptions or exchanges cause the
account balance to fall below the minimum initial investment amount. Before an
account is closed, the shareholder will be notified and allowed 30 days to
purchase additional Shares to meet the minimum.
Tax Information
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Capital gains distributions are taxable at different
rates depending upon the length of time the Fund holds its assets.
Fund distributions are expected to be primarily capital gains. Redemptions and
exchanges are taxable sales.
Please consult your tax preparer regarding your federal, state, and local tax
liability.
Tax-Sensitive Approach to Investing. When possible, and when doing so does not
jeopardize the primary objective of the Fund, the Fund will be managed in an
attempt to keep its distributions of capital gains relatively low. Whenever a
mutual fund sells a stock out of its portfolio, it is likely to "realize" either
a capital gain (if the stock has risen in value) or a capital loss (if the stock
has fallen in value) equal to the difference between the price the Fund paid to
acquire the stock and the price at which it sells the stock. Each year, mutual
funds are required to determine if their capital gains exceed their capital
losses, and generally must distribute any such "net capital gains" to their
shareholders. Shareholders must then pay capital gains taxes on these
distributions. The Fund will try to keep its capital gains distributions
relatively low. For example, it will generally buy securities that it intends to
hold over the long-term, and avoid short-term trading. In deciding which
securities to sell, the Fund's investment adviser will consider their capital
gain or loss situation, and may attempt to offset capital gains by appropriately
timing its sales of securities that have gone down in value. Also, the Fund's
investment adviser generally will consider selling any security that has not met
its expectations for growth, in which case the capital gain would be relatively
small. Successful application of this strategy will result in shareholders
incurring capital gains when they ultimately sell their shares.
WHO MANAGES THE FUND?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Management. The Adviser manages the Fund's assets, including
buying and selling portfolio securities. The Adviser's address is Federated
Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Fund's portfolio manager is James E. Grefenstette. Mr. Grefenstette has been
the Fund's portfolio manager since the Fund's inception. Mr. Grefenstette joined
Federated Investors in 1992 and has been a Vice President of the Fund's
investment adviser since 1996. From 1994 until 1996, Mr. Grefenstette acted as
an Assistant Vice President of the Fund's investment adviser, and served as an
Investment Analyst of the investment adviser from 1992 to 1994. Mr. Grefenstette
was a credit analyst at Westinghouse Credit Corp. from 1990 until 1992. Mr.
Grefenstette is a Chartered Financial Analyst; he received his M.S. in
Industrial Administration from Carnegie Mellon University.
The Adviser and other subsidiaries of Federated advise and/or provide
administrative services to more than 300 mutual funds and private accounts,
which total over $120 billion in assets as of December 31, 1997. Federated was
established in 1955 and is one of the largest mutual fund investment managers in
the United States with more than 2,000 employees. Over 4,000 financial
intermediaries make Federated Funds available to their customers.
The Adviser receives an annual investment advisory fee of 0.75% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Year 2000 Statement. Many computers cannot properly recognize dates of January
1, 2000 and beyond. The Fund's service providers are making changes to their
computer systems to fix this problem since it could disrupt Fund operations. The
financial impact on the Fund is still being determined, but Federated and its
service providers are working to make sure this problem does not adversely
affect the Fund.
FINANCIAL INFORMATION
The Fund will have a fiscal year end of October 31. As this is the Fund's first
fiscal year, financial information is not yet available.
<PAGE>
Federated Large Cap Growth Fund
Class A Shares, Class B Shares, Class C Shares
A Portfolio of Federated Equity Funds
A Statement of Additional Information (SAI) is incorporated by reference into
this prospectus. To obtain the SAI without charge call the Fund at
1-800-341-7400. To obtain other information, call your investment professional
or the Fund.
Internet Address: www.federatedinvestors.com
You can obtain information about the Fund by visiting or writing the Public
Reference Room of the Securities and Exchange Commission in Washington, D.C.
20549-6009 or from the Commission's Internet site at http://www.sec.gov. You can
call 1-800-SEC-0330 for information on the Public Reference Room's operations
and copying charges.
Cusip
Product Code
Federated Logo
811-4017
Statement of Additional Information December __, 1998
Federated Large Cap Growth Fund
A Portfolio of Federated Equity Funds
Class A Shares, Class B Shares and Class C Shares
This Statement of Additional Information (SAI) is not a prospectus. Read
this SAI in conjunction with the prospectus for Federated Large Cap Growth
Fund dated December __, 1998. Obtain the prospectus without charge by
calling 1-800-341-7400.
Contents
How Is The Fund Organized?...............................................1
Securities In Which The Fund Invests.....................................1
What Do Shares Cost?.....................................................9
How Is The Fund Sold?...................................................10
How To Buy Shares.......................................................12
How To Redeem Shares....................................................12
Account And Share Information...........................................13
Tax Information.........................................................13
Who Manages And Provides Services To The Fund?..........................13
How Does The Fund Measure Performance?..................................19
Who Is Federated Investors, Inc.?.......................................21
Addresses...............................................................22
[Federated Investors Logo]
Federated Securities Corp., Distributor,
subsidiary of Federated Investors
CUSIP [#]
[Product Code and Date]
<PAGE>
24
HOW IS THE FUND ORGANIZED?
The Fund is a diversified portfolio of Federated Equity Funds (the Trust) The
Trust is an open-end, management investment company that was established under
the laws of the Commonwealth of Massachusetts on April 17, 1984. The Trust may
offer separate series of shares representing interests in separate portfolios of
securities.
The Board of Trustees (the Board) has established three classes of shares of the
Fund, known as Class A Shares, Class B Shares and Class C Shares (Shares). This
SAI relates to all classes of the above-mentioned Shares.
SECURITIES IN WHICH THE FUND INVESTS
Securities Descriptions, Techniques and Risks
Bank Instruments. Bank Instruments include bank accounts, time deposits, savings
deposits, certificates of deposit and bankers' acceptances. The Fund will
invest in bank instruments that have been issued by banks and savings and loans
that have capital, surplus and undivided
profits of over $100 million or whose principal amount is insured by the Bank
Insurance Fund or the Savings Association Insurance Fund, which are administered
by the Federal Deposit Insurance Corporation. Securities that are
credit-enhanced with a bank's irrevocable letter of credit or unconditional
guaranty will also be treated as Bank Instruments.
Borrowing. The Fund may borrow money from banks or through reverse repurchase
agreements in amounts up to one-third of total assets, and pledge some assets as
collateral. The Fund that borrows will pay interest on borrowed money and may
incur other transaction costs. These expenses could exceed the income received
or capital appreciation realized by the Fund from any securities purchased with
borrowed money. With respect to borrowings, the Fund are required to maintain
continuous asset coverage to 300% of the amount borrowed. If the coverage
declines to less than 300%, the Fund must sell sufficient portfolio securities
to restore the coverage even if it must sell the securities at a loss.
Corporate Securities. The Fund may invest in preferred stocks, convertible
securities notes or debentures rated investment grade, i.e., Baa or better by
Moody's Investors Service, Inc. (Moody's), or BBB or better by Standard & Poor's
(S&P) or Fitch IBCA, Inc. (Fitch) (or if unrated, are deemed to be of comparable
quality by the Adviser, and warrants of these companies. Corporate fixed income
securities are subject to market and credit risks. In addition, the prices of
fixed income securities fluctuate inversely to the direction of interest rates.
It should be noted that securities receiving the lowest investment grade rating
are considered to have speculative characteristics. Changes in economic
conditions are more likely to lead to a weakened capacity to make principal and
interest payments than higher rated securities. In the event that a security
which had an eligible rating when purchased is downgraded below Baa or BBB, the
Adviser will promptly reassess whether continued holding of the security is
consistent with the Fund's objective.
Convertible Securities. Convertible securities are fixed income securities that
the Fund has the option to exchange for equity securities at a specified
conversion price. The option allows the Fund to realize additional returns if
the market price of the equity securities exceeds the conversion price. For
example, if the Fund holds fixed income securities convertible into shares of
common stock at a conversion price of $10 per share, and the shares have a
market value of $12, the Fund could realize an additional $2 per share by
converting the fixed income securities.
To compensate for the value of the conversion option, convertible securities
have lower yields than comparable fixed income securities. In addition, the
conversion price exceeds the market value of the underlying equity securities at
the time a convertible security is issued. Thus, convertible securities may
provide lower returns than non-convertible fixed income securities or equity
securities depending upon changes in the price of the underlying equity
securities. However, convertible securities permit the Fund to realize some of
the potential appreciation of the underlying equity securities with less risk of
losing its initial investment.
The Fund treats convertible securities as both fixed income and equity
securities for purposes of its investment policies and limitations, because of
their unique characteristics.
Demand Features. The Fund may purchase securities subject to a demand feature,
which may take the form of a put or standby commitment. Demand features permit a
fund to demand payment of the value of the security (plus an accrued interest)
from either the issuer of the security or a third-party. Demand features help
make a security more liquid, although an adverse change in the financial health
of the provider of a demand feature (such as bankruptcy), will negatively affect
the liquidity of the security. Other events may also terminate a demand feature,
in which case liquidity is also affected.
Derivative Contracts. The term derivative has traditionally been applied to
certain contracts (futures, forward, option and swap contracts) that derive
their value from changes in the value of an underlying security, currency,
commodity or index. Derivatives also refer to securities that incorporate the
performance characteristics of these contracts and securities derived from the
cash flows from underlying securities, mortgages or other obligations. While the
response of certain Derivatives to market changes may differ from traditional
investments like stock and bonds, they do not necessarily present greater market
risks than traditional investments. derivative contracts and securities can be
used to reduce or increase the volatility of an investment portfolio's total
performance.
Equity Securities are the fundamental unit of ownership in a company. They
represent a share of the issuer's earnings and assets, after the issuer pays its
liabilities. Generally, issuers have discretion as to the payment of any
dividends or distributions. As a result, investors cannot predict the income
they will receive from equity securities. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business. the
following describes the types of equity securities in which the Fund invests.
Common Stocks are the most prevalent type of equity security. Common
stockholders receive the residual value of the issuer's earnings and
assets after the issuer pays its creditors and any preferred stockholders.
As a result, changes in an issuer's earnings directly influence the value
of its common stock.
Preferred Stocks have the right to receive specified dividends or
distributions before the payment of dividends or distributions on common
stock. Some preferred stocks also participate in dividends and
distributions paid on common stock. Preferred stocks may provide for the
issuer to redeem the stock on a specified date. The Fund may treat such
redeemable preferred stock as a fixed income security.
Warrants give the Fund the option to buy the issuer's stock or other
equity securities at a specified price. The Fund may buy the designated
shares by paying the exercise price before the warrant expires. Warrants
may become worthless if the price of the stock does not rise above the
exercise price by the expiration date. Rights are the same as warrants,
except they are typically issued to existing stockholders.
Futures and Options Transactions. As a means of reducing fluctuations in its net
asset value, the Fund may buy and sell futures contracts and options on futures
contracts, and buy put and call options on portfolio securities and securities
indices to hedge its portfolio. The Fund may also write covered put and call
options on portfolio securities to attempt to increase its current income or to
hedge its portfolio. There is no assurance that a liquid secondary market will
exist for any particular futures contract or option at any particular time. The
Fund's ability to establish and close out futures and options positions depends
on this secondary market.
Futures Contracts. A futures contract is a commitment by two parties under
which one party agrees to make delivery of an asset (seller) and another
party agrees to take delivery of the asset at a certain time in the future.
A futures contract may involve a variety of assets including commodities
(such as oil, wheat, or corn) or a financial asset (such as a security).
The Fund may purchase and sell financial futures contracts to hedge against
anticipated changes in the value of its portfolio without necessarily
buying or selling the securities. Although some financial futures contracts
call for making or taking delivery of the underlying securities, in most
cases these obligations are closed out before the settlement date. The
closing of a futures contract is accomplished by purchasing or selling an
identical offsetting futures contract. Other financial futures contracts
call for cash settlements.
The Fund may purchase and sell stock index futures contracts to hedge
against anticipated price changes with respect to any stock index traded on
a recognized stock exchange or board of trade. A stock index futures
contract is an agreement in which two parties agree to take or make
delivery of an amount of cash equal to the difference between the price of
the original contract and the value of the index at the close of the last
trading day of the contract. No physical delivery of the underlying
securities in the index is made.
Settlement is made in cash upon termination of the contract.
Margin In Futures Transactions. Since the Fund does not pay or receive
money upon the purchase or sale of a futures contract, it is required to
deposit an amount of initial margin in cash, U.S. government securities or
highly-liquid debt securities as a good faith deposit. The margin is
returned to the Fund upon termination of the contract. Initial margin in
futures transactions does not involve borrowing to finance the
transactions.
As the value of the underlying futures contract changes daily, the Fund
pays or receives cash, called variation margin, equal to the daily change
in value of the futures contract. This process is known as marking to
market. Variation margin does not represent a borrowing or loan by the
Fund. It may be viewed as settlement between the Fund and the broker of the
amount one would owe the other if the futures contract expired. When the
Fund purchases futures contracts, an amount of cash and/or cash
equivalents, equal to the underlying commodity value of the futures
contracts (less any related margin deposits), will be deposited in a
segregated account with the Fund's custodian to collateralize the position
and insure that the use of futures contracts is unleveraged. The Fund is
also required to deposit and maintain margin when it writes call options on
futures contracts.
The Fund will not enter into a futures contract or purchase an option
thereon for other than hedging purposes if immediately thereafter the
initial margin deposits for futures contracts held by it, plus premiums
paid by it for open options on futures contracts, would exceed 5% of the
market value of its net assets, after taking into account the unrealized
profits and losses on those contracts it has entered into. However, in the
case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in computing such 5%.
Put Options on Financial Futures Contracts. The Fund may purchase listed
put options on financial futures contracts to protect portfolio securities
against decreases in value. Unlike entering directly into a futures
contract, which requires the purchaser to buy a financial instrument on a
set date at a specified price, the purchase of a put option on a futures
contract entitles (but does not obligate) its purchaser to decide on or
before a future date whether to assume a short position at the specified
price.
Generally, if the hedged portfolio securities decrease in value during the
term of an option, the related futures contracts will also decrease in
value and the option will increase in value. In such an event, the Fund
will normally close out its option by selling an identical option. If the
hedge is successful, the proceeds received by the Fund upon the sale of the
second option will be large enough to offset both the premium paid by the
Fund for the original option plus the decrease in value of the hedged
securities.
Alternatively, the Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures contract
of the type underlying the option (for a price less than the strike price
of the option) and exercise the option. The Fund would then deliver the
futures contract in return for payment of the strike price. If the Fund
neither closes out nor exercises an option, the option will expire on the
date provided in the option contract, and only the premium paid for the
contract will be lost.
The Fund may also write (sell) listed put options on financial futures
contracts to hedge its portfolio against a decrease in market interest
rates or an increase in stock prices. The Fund will use these transactions
to purchase portfolio securities in the future at price levels existing at
the time it enters into the transaction. When the Fund sells a put on a
futures contract, it receives a cash premium in exchange for granting to
the buyer of the put the right to receive from the Fund, at the strike
price, a short position in such futures contract. This is so even though
the strike price upon exercise of the option is greater than the value of
the futures position received by such holder. As market interest rates
decrease or stock prices increase, the market price of the underlying
futures contract normally increases. When the underlying futures contract
increases, the buyer of the put option has less reason to exercise the put
because the buyer can sell the same futures contract at a higher price in
the market. If the value of the underlying futures position is not such
that exercise of the option would be profitable to the option holder, the
option will generally expire without being exercised. The premium received
by the Fund can then be used to offset the higher prices of portfolio
securities to be purchased in the future.
In order to avoid the exercise of an option sold by it, generally the Fund
will cancel its obligation under the option by entering into a closing
purchase transaction, unless it is determined to be in the Fund's interest
to deliver the underlying futures position. A closing purchase transaction
consists of the purchase by the Fund of an option having the same term as
the option sold by the Fund, and has the effect of canceling the Fund's
position as a seller. The premium which the Fund will pay in executing a
closing purchase transaction may be higher than the premium received when
the option was sold, depending in large part upon the relative price of the
underlying futures position at the time of each transaction. If the hedge
is successful, the cost of buying the second option will be less than the
premium received by the Fund for the initial option.
Call Options on Financial Futures Contracts. The Fund may write (sell)
listed and over-the-counter call options on financial futures contracts to
hedge its portfolio. When the Fund writes a call option on a futures
contract, it undertakes to sell a futures contract at the fixed price at
any time during the life of the option. As stock prices fall or market
interest rates rise, causing the prices of futures to go down, the Fund's
obligation to sell a futures contract costs less to fulfill, causing the
value of the Fund's call option position to increase. In other words, as
the underlying futures price goes down below the strike price, the buyer of
the option has no reason to exercise the call, so that the Fund keeps the
premium received for the option. This premium can substantially offset the
drop in value of the Fund's portfolio securities.
Prior to the expiration of a call written by the Fund, or exercise of it by
the buyer, the Fund may close out the option by buying an identical option.
If the hedge is successful, the cost of the second option will be less than
the premium received by the Fund for the initial option. The net premium
income of the Fund will then substantially offset the decrease in value of
the hedged securities.
The Fund may buy a listed call option on a financial futures contract to
hedge against decreases in market interest rates or increases in stock
price. The Fund will use these transactions to purchase portfolio
securities in the future at price levels existing at the time it enters
into the transaction. When the Fund purchases a call on a financial futures
contract, it receives in exchange for the payment of a cash premium the
right, but not the obligation, to enter into the underlying futures
contract at a strike price determined at the time the call was purchased,
regardless of the comparative market value of such futures position at the
time the option is exercised. The holder of a call option has the right to
receive a long (or buyer's) position in the underlying futures contract. As
market interest rates fall or stock prices increase, the value of the
underlying futures contract will normally increase, resulting in an
increase in value of the Fund's option position. When the market price of
the underlying futures contract increases above the strike price plus
premium paid, the Fund could exercise its option and buy the futures
contract below market price. Prior to the exercise or expiration of the
call option, the Fund could sell an identical call option and close out its
position. If the premium received upon selling the offsetting call is
greater than the premium originally paid, the Fund has completed a
successful hedge.
Limitation on Open Futures Positions. The Fund will not maintain open
positions in futures contracts it has sold or call options it has written
on futures contracts if together the value of the open positions exceeds
the current market value of the Fund's portfolio plus or minus the
unrealized gain or loss on those open positions, adjusted for the
correlation of volatility between the hedged securities and the futures
contracts. If this limitation is exceeded at any time, the Fund will take
prompt action to close out a sufficient number of open contracts to bring
its open futures and options positions within this limitation.
Purchasing Put and Call Options on Securities. The Fund may purchase put
options on portfolio securities to protect against price movements in the
Fund's portfolio. A put option gives the Fund, in return for a premium, the
right to sell the underlying security to the writer (seller) at a specified
price during the term of the option. The Fund may purchase call options on
securities acceptable for purchase to protect against price movements by
locking in on a purchase price for the underlying security. A call option
gives the Fund, in return for a premium, the right to buy the underlying
security from the seller at a specified price during the term of the
option.
Writing Covered Call and Put Options on Securities. The Fund may write
covered call and put options to generate income and thereby protect against
price movements in the Fund's portfolio securities. As writer of a call
option, the Fund has the obligation, upon exercise of the option during the
option period, to deliver the underlying security upon payment of the
exercise price. The Fund may only sell call options either on securities
held in its portfolio or on securities which it has the right to obtain
without payment of further consideration (or has segregated cash or U.S.
government securities in the amount of any additional consideration). As a
writer of a put option, the Fund has the obligation to purchase a security
from the purchaser of the option upon the exercise of the option. In the
case of put options, the Fund will segregate cash or U.S. Treasury
obligations with a value equal to or greater than the exercise price of the
underlying securities.
Stock Index Options. The Fund may purchase or sell put or call options on
stock indices listed on national securities exchanges or traded in the
over-the-counter market. A stock index fluctuates with changes in the
market values of the stocks included in the index. Upon the exercise of the
option, the holder of a call option has the right to receive, and the
writer of a put option has the obligation to deliver, a cash payment equal
to the difference between the closing price of the index and the exercise
price of the option. The effectiveness of purchasing stock index options
will depend upon the extent to which price movements in the Fund's
portfolio correlate with price movements of the stock index selected. The
value of an index option depends upon movements in the level of the index
rather than the price of a particular stock. Accordingly, successful use by
the Fund of options on stock indices will be subject to the Adviser
correctly predicting movements in the directions of the stock market
generally or of a particular industry. This requires different skills and
techniques than predicting changes in the price of individual stocks.
Over-the-Counter Options. Over-the-counter options are two-party contracts
with price and terms negotiated between buyer and seller. In contrast,
exchange-traded options are third-party contracts with standardized strike
prices and expiration dates and are purchased from a clearing corporation.
Exchange-traded options have a continuous liquid market while
over-the-counter options may not. The Fund may generally purchase and write
over-the-counter options on portfolio securities or securities indices in
negotiated transactions with the buyers or writers of the options when
options on the Fund's portfolio securities or securities indices are not
traded on an exchange. The Fund purchases and writes options only with
investment dealers and other financial institutions deemed creditworthy by
Adviser.
Risks. When the Fund uses futures and options on futures as hedging
devices, there is a risk that the prices of the securities or foreign
currency subject to the futures contracts may not correlate perfectly with
the prices of the securities or currency in the Fund's portfolio. This may
cause the futures contract and any related options to react differently to
market changes than the portfolio securities or foreign currency. In
addition, the Adviser could be incorrect in its expectations about the
direction or extent of market factors such as stock price movements or
foreign currency exchange rate fluctuations. In these events, the Fund may
lose money on the futures contract or option.
When the Fund purchases futures contracts, an amount of cash and cash
equivalents, equal to the underlying commodity value of the futures
contracts (less any related margin deposits), will be deposited in a
segregated account with the Fund's custodian or the broker, to
collateralize the position and thereby insure that the use of such futures
contract is unleveraged. When the Fund sells futures contracts, it will
either own or have the right to receive the underlying future or security,
or will make deposits to collateralize the position as discussed above.
Lending of Portfolio Securities. In order to generate additional income, the
Fund may lend portfolio securities. When the Fund lends portfolio securities, it
will receive either cash or liquid securities as collateral from the borrower.
The Fund will reinvest cash collateral in short-term liquid securities that
qualify as an otherwise acceptable investment for the Fund. If the market value
of the loaned securities increases, the borrower must furnish additional
collateral to the Fund. During the time portfolio securities are on loan, the
borrower pays the Fund any dividends or interest paid on such securities. Loans
are subject to termination at the option of the Fund or the borrower. The Fund
may pay reasonable administrative and custodial fees in connection with a loan
and may pay a negotiated portion of the interest earned on the cash or
equivalent collateral to a securities lending agent or broker.
Real-Estate Investment Trusts. The Fund may purchase interests in equity,
mortgage, and hybrid real estate investment trusts ("REITs"). A real estate
investment trust manages a portfolio of real estate to earn profits. REITs make
investments in a diverse array of real estate from shopping centers and office
buildings to apartment complexes and hotels. Equity REITs take equity positions
in real estate, receiving income from rents and capital gains as buildings are
sold at a profit. Mortgage REITs lend money to building developers and receive
interest income. Hybrid REITs have characteristics of and may have risks
associated with both equity and mortgage REITs. Equity and mortgage REITs are
dependent upon management skill and are not diversified. Therefore, they are
subject to the risk of financing single projects. REITs are also subject to
heavy cash flow dependency, defaults by borrowers, and self-liquidation.
Additionally, equity REITs may be affected by any changes in the value of the
underlying property owned by the trusts, and mortgage REITs may be affected by
the quality of any credit extended. The Adviser seeks to mitigate these risks by
selecting REITs diversified by sector and geographic location.
Repurchase Agreements and Reverse Repurchase Agreements. The Fund's custodian is
required to take possession of the securities subject to repurchase agreements.
These securities are marked to market daily. To the extent that the original
seller defaults and does not repurchase the securities from a Fund, the Fund
could receive less than the repurchase price on any sale of such securities. In
the event that such a defaulting seller files for bankruptcy or becomes
insolvent, disposition of such securities by the Fund might be delayed pending
court action. The Fund believe that, under the procedures normally in effect for
custody of the portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions, such as
broker/dealers, which are deemed by the Adviser to be creditworthy.
Reverse repurchase agreement transactions are similar to borrowing cash. In a
reverse repurchase agreement, the Fund sells a portfolio security to another
person, such as a financial institution, broker, or dealer, in return for a
percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio at a price
equal to the original sale price plus interest. The Fund may use reverse
repurchase agreements for liquidity and may enable the Fund to avoid selling
portfolio instruments at a time when a sale may be deemed to be disadvantageous.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
Securities of Other Investment Companies. The Fund may invest its assets in
securities of other investment companies, including the securities of affiliated
money market funds, as an efficient means of carrying out its investment
policies and managing its uninvested cash. It should be noted that investment
companies incur certain expenses, such as management fees, and, therefore, any
investment by the Fund in shares of other investment companies may be subject to
such duplicate expenses.
Temporary Investments. There may be times when market conditions warrant a
defensive position During these market conditions the Fund may temporarily
invest without limit in short-term debt obligations (money market instruments).
These investments include commercial paper, bank instruments, U.S. government
obligations, repurchase agreements, and securities of other investment
companies. The Fund's temporary investments must be of comparable quality to its
primary investments.
U.S. Government Securities. The U.S. Government Securities in which the Fund may
invest include but are not limited to: direct obligations of the U.S. Treasury
(such as Treasury bills, notes and bonds), and obligations issued by U.S.
government agencies or instrumentalities, including securities that are
supported by the full faith and credit of the United States (such as GNMA
certificates); securities that are supported by the right of the issuer to
borrow from the U.S. Treasury (such as securities of Federal Home Loan Banks);
and securities that are supported by the credit of the instrumentality (such as
FNMA and FHLMC).
When-Issued and Delayed Delivery Transactions. These transactions are made to
secure what is considered to be an advantageous price or yield. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices. Other than
normal transaction costs, no fees or expenses are incurred. However, liquid
assets of the Fund are segregated on the Fund's records at the trade date in an
amount sufficient to make payment for the securities to be purchased. These
assets are marked to market daily and are maintained until the transaction has
been settled.
Investment Limitations
Fundamental Limitations
The following investment limitations are fundamental and cannot be changed
without shareholder approval:
Selling Short and Buying on Margin
The Fund will not sell securities short or purchase any securities on margin,
but may obtain such sort-term credits as are necessary for clearance of
purchases and sales of securities. The deposit or payment by the Fund of initial
or variation margin in connection with financial futures contract or related
options transactions is not considered the purchase of a security on margin.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may borrow money
directly or through reverse repurchase agreements in amounts up to one-third of
the value of its total assets, including the amount borrowed. The Fund will not
borrow money or engage in reverse repurchase agreements for investment leverage,
but rather as a temporary, extraordinary, or emergency measure or to facilitate
management of the portfolio by enabling the Fund to meet redemption requests
when the liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while any borrowings
in excess of 5% of its total assets re outstanding.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. For purposes of this limitation, the following will not be
deemed to be pledges of the Fund's assets; margin deposits for the sale of
financial futures contracts and related options, and segregation nor collateral
arrangements made in connection with options activities or the purchase of
securities on a when-issued basis.
Concentration of Investments
The Fund will not invest 25% or more of the value of its total assets in any one
industry, except that the Fund may invest 25% or more of the value of its total
assets in securities issued or guaranteed by the U.S. government, its agencies
or instrumentalities, and repurchase agreements collateralized by such
securities.
Investing in Commodities
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts, except to the extent that the Fund may engage in
transactions involving futures contracts or options on futures contracts.
Investing in Real Estate
The Fund will not buy or sell real estate, including limited partnership
interests, although it may invest in the securities of companies whose business
involves the purchase or sale of real estate or in securities which are secured
by real estate or interests in real estate.
Lending Cash or Securities
The Fund will not lend any of its assets, except portfolio securities. This
shall not prevent the Fund from purchasing or holding U.S. Government
Obligations, money market instruments, variable rate demand notes, bonds,
debentures, notes, certificates of indebtedness, or other debt securities,
entering into repurchase agreements, or engaging in other transactions where
permitted by the Fund's investment objective, policies, and limitations or the
Trust's Declaration of Trust.
Underwriting
The Fund will not underwrite any issue of securities, except as it may be deemed
to be an underwriter under the Securities Act of 1933 in connection with the
sale of securities in accordance with its investment objective, policies, and
limitations.
Diversification of Investments
With respect to securities comprising 75% of the value of its total assets, the
Fund will not purchase securities issued by any one issuer (other than cash,
cash items, or securities issued or guaranteed by the U.S. government, its
agencies, or instrumentalities, and repurchase agreements collateralized by such
securities) if, as a result, more than 5% of the value of its total assets would
be invested in the securities of that issuer, and will not acquire more than 10%
of the outstanding voting securities of any one issuer. For these purposes, the
Fund takes all common stock and all preferred stock of an issuer each as a
single class, regardless of priorities, series, designations, or other
differences.
The above investment limitations cannot be changed without shareholder approval.
The following limitation, however, may be changed by the trustees without
shareholder approval. Shareholders will be notified before any material changes
in these limitations become effective.
<PAGE>
Investing in Illiquid Securities
The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements providing for settlement in
more than seven days after notice, non-negotiable fixed time deposits with
maturities over seven days, over-the-counter options, and certain restricted
securities not determined by the Trustees to be liquid.
Determining Market Value of Securities
Market values of the Fund's portfolio securities are determined as follows:
o for equity securities, according to the last sale price in the market in which
they are primarily traded (either a national securities exchange or the
over-the-counter market), if available;
o in the absence of recorded sales for equity securities, according to the mean
between the last closing bid and asked prices;
o for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;
o for all other securities, at fair value as determined in good faith by the
Board.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider: institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker-dealers or
other financial institutions that trade the securities.
The Fund values futures contracts and options at their market values established
by the exchanges on which they are traded at the close of trading on such
exchanges. Options traded in the over-the-counter market are valued according to
the mean between the last bid and the last asked price for the option as
provided by an investment dealer or other financial institution that deals in
the option. The Board may determine in good faith that another method of valuing
such investments is necessary to appraise their fair market value.
WHAT DO SHARES COST?
The Fund's net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of the Fund. The NAV for each class of
Shares may differ due to the variance in daily net income realized by each
class. Such variance will reflect only accrued net income to which the
shareholders of a particular class are entitled.
Reducing or Eliminating the Front-End Sales Charge. You can reduce or eliminate
the applicable front-end sales charge, as follows.
Quantity Discounts. Larger purchases of the same Share class reduce the sales
charge you pay. You can combine purchases of Shares made on the same day by you,
your spouse, and your children under age 21. In addition, purchases made at one
time by a trustee or fiduciary for a single trust estate or a single fiduciary
account can be combined.
Accumulated Purchases. If you make an additional purchase of Shares, you can
count previous Share purchases still invested in the Fund in calculating the
applicable sales charge on the additional purchase.
Concurrent Purchases. You can combine concurrent purchases of the corresponding
Share class of two or Federated Funds in calculating the
applicable sales charge.
Letter of Intent. You can sign a letter of intent committing to purchase a
certain amount of the same or corresponding class of Shares within a 13 month
period in order to combine such purchases in calculating the applicable sales
charge. The Fund's custodian will hold Shares in escrow equal to the maximum
applicable sales charge. If you complete your commitment, the escrowed Shares
will be released to your account. If you do not complete your commitment within
13 months, the custodian will redeem an appropriate number of escrowed Shares to
pay for the applicable sales charge.
Reinvestment Privilege. You may reinvest, within 120 days, your Share redemption
proceeds at the next determined NAV, without any sales charge. This sales charge
elimination is offered because a sales charge was previously assessed.
Purchases by Affiliates of the Fund. The following individuals and their
immediate family members may buy Shares at NAV without any sales charge because
there are nominal sales efforts associated with their purchases:
o the Directors, Trustees, employees, and sales representatives of the Fund, the
Adviser, the Distributor and their affiliates; o Employees of State Street Bank
Pittsburgh who started their employment on January 1, 1998, and were employees
of Federated Investors on
December 31, 1997;
o any associated person of an investment dealer who has a sales agreement with
the Distributor; and o trusts, pension or profit-sharing plans for these
individuals.
Reducing or Eliminating the Contingent Deferred Sales Charge
These reductions or eliminations are offered because no sales commissions have
been advanced to the selling financial intermediary, the shareholder has already
paid a Contingent Deferred Sales Charge (CDSC), or nominal sales efforts are
associated with the original purchase of Shares.
Upon notification to the Distributor or the Fund's transfer agent, no CDSC will
be imposed on redemptions:
o following the death or disability, as defined in Section 72(m)(7) of the
Internal Revenue Code of 1986, of the last surviving shareholder; o representing
minimum required distributions from an Individual Retirement Account or other
retirement plan to a shareholder who has
attained the age of 70-1/2;
o which are involuntary redemptions of shareholder accounts that do not comply
with the minimum balance requirements; o which are qualifying redemptions of
Class B Shares under a Systematic Withdrawal Program (as described below); o of
Shares that represent a reinvestment within 120 days of a previous redemption
that was assessed a CDSC; o of Shares held by the Trustees, employees, and sales
representatives of the Fund, the Adviser, the Distributor and their affiliates;
employees of any financial intermediary that sells Shares pursuant to a sales
agreement with the Distributor; and the immediate family members of the
foregoing persons; and
o of Shares originally purchased through a bank trust department, a registered
investment adviser or retirement plans where the third party administrator has
entered into certain arrangements with the Distributor or its affiliates, or
any other financial intermediary, to the extent that no payments were advanced
for purchases made through such entities.
HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.), located at Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, PA 15222-3779, offers Shares on a continuous, best-efforts basis.
Front-End Sales Charge Reallowances
The Distributor receives a front-end sales charge on certain Share sales. The
Distributor generally pays up to 90% (and as much as 100%) of this charge to
investment professional for sales and/or administrative services. Any payments
to investment professional in excess of 90% of the front-end sales charge are
considered supplemental payments. The Distributor retains any portion not paid
to a financial intermediary.
Rule 12b-1 Plan
As a compensation type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professional such as banks,
broker/dealers, trust departments of bank, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. Also, the
Fund's service providers that receive asset-based fees also benefit from stable
or increasing Fund assets.
The Fund may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.
For some classes of Shares, the maximum Rule 12b-1 Plan fee that can be paid in
any one year may not be sufficient to cover the marketing related expenses the
Distributor has incurred. Therefore, it may take the Distributor a number of
years to recoup these expenses.
Federated Investors and its subsidiaries may benefit from arrangements where the
Rule 12b-1 Plan fees related to Class B Shares may be paid to third-parties who
have advanced commissions to investment professional.
Shareholder Services
The Fund may pay Federated Shareholder Services, a subsidiary of Federated, for
providing shareholder services and maintaining shareholder accounts. Federated
Shareholder Services may select others to perform these services for their
customers and pay them fees.
Supplemental Payments
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services may be reimbursed by the
Adviser or its affiliates.
Investment professional receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professional may be
paid cash or promotional incentives, such as reimbursement of certain expenses
of qualified employees and their spouses to attend informational meetings about
the Fund or other special events at recreational-type facilities, or items of
material value. These payments will be based upon the amount of Shares the
investment professional sells or may sell and/or upon the type and nature of
sales or marketing support furnished by the financial intermediary.
When a financial intermediary's customer purchases shares, the financial
intermediary may receive:
o an amount equal to 0.50% of the NAV of Class A Shares under certain qualified
retirement plans as approved by the Distributor. (Such payments are subject to
a reclaim from the financial intermediary should the assets leave the program
within 12 months after purchase.)
o an amount up to 5.50% and 1.00%, respectively, of the NAV of Class B and C
Shares.
In addition, the Distributor may pay a financial intermediary 0.25% of the
purchase price of $1 million or more of Class A that its customer has not
redeemed over the first year.
Class A Shares. Investment professionals purchasing Class A Shares for their
customers are eligible to receive an advance payment from the distributor based
on the following breakpoints:
Advance Payments
as a Percentage of
Transaction Amount Public Offering Price
First $1 - $5 million 0.75%
Next $5 - $20 million 0.50%
Over $20 million 0.25%
For accounts with assets over $1 million, the dealer advance payments resets
annually to the first breakpoint on the anniversary of the first purchase.
Class A Share purchases under this program may be made by Letter of Intent or by
combining concurrent purchases. The above advance payments will be paid only on
those purchases that were not previously subject to a front-end sales charge and
dealer advance payments. Certain retirement accounts may not be eligible for
this program. Investment professionals must notify the Fund once an account
reaches $1 million in order to qualify for advance payments.
A contingent deferred sales charge of 0.75% of the redemption amount applies to
Class A Shares redeemed up to 24 months after purchase. The CDSC will be waived
under certain investment programs where the investment professional does not
receive an advance payment on the transaction including, but not limited to,
trust accounts and wrap programs where the investor pays an account level fee
for investment management.
HOW TO BUY SHARES
Exchanging Securities For Shares
You may contact the Distributor to request a purchase of Shares in an exchange
for securities you own. The Fund reserves the right to determine whether to
accept your securities and the minimum market value to accept. The Fund will
value your securities in the same manner as it values its assets. This exchange
is treated as a sale of your securities for federal tax purposes.
Subaccounting Services
Investment professionals are encouraged to open single master accounts. However,
certain investment professional may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial, or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services they provide that may be related to the ownership
of Shares. This information should, therefore, be read together with any
agreement between the customer and the financial intermediary with regard to the
services provided, the fees charged for those services, and any restrictions and
limitations imposed.
HOW TO REDEEM SHARES
Redemption In Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
ACCOUNT AND SHARE INFORMATION
Voting Rights
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All Shares of 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.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of shareholders will be called by the Trustees upon the
written request of shareholders who own at least 10% of the Trust's outstanding
shares of all series entitled to vote.
TAX INFORMATION
Federal Income Tax
The Fund will pay no federal income tax because it expects to meet requirements
of Subchapter M of the Internal Revenue Code (Code) applicable to regulated
investment companies and to receive the special tax treatment afforded such
companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?
Board of Trustees
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes the following
data: name, address, birthdate, present position(s) held with the Trust,
principal occupations for the past five years, total compensation received as a
Trustee from the Trust for its most recent fiscal year, and the total
compensation received from the Federated Fund Complex for the most recent
calendar year. The Trust is comprised of five funds and the Federated Fund
Complex is comprised of [insert number] funds, whose investment advisers are
affiliated with the Fund's Adviser.
<PAGE>
An asterisk (*) denotes a Trustee who is deemed to be an interested person as
defined in the Investment Company Act of 1940. The following symbol (#) denotes
a Member of the Board's Executive Committee, which handles the Board's
responsibilities between its meetings.
John F. Donahue*#
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA
July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp., and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director or Trustee of the Federated Fund Complex.
Mr. Donahue is the father of J. Christopher Donahue, Executive Vice President of
the Trust.
Compensation from Trust $0
Compensation from Federated Fund Complex $0
Thomas G. Bigley
15 Old Timber Trail, Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Director, Member of
Executive Committee, University of Pittsburgh; Director or Trustee of the
Federated Fund Complex.
Compensation from Trust $1,454
Compensation from Federated Fund Complex $108,725
John T. Conroy, Jr.
Wood/IPC Commercial Department, John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North, Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; Partner or Trustee in private real estate
ventures in Southwest Florida; formerly, President, Naples Property Management,
Inc. and Northgate Village Development Corporation; Director or Trustee of the
Federated Fund Complex.
Compensation from Trust $1,600
Compensation from Federated Fund Complex $119,615
Nicholas Constantakis
175 Woodshire Drive, Pittsburgh, PA
Trustee
Formerly, Partner, Anderson Worldwide SC; Director or Trustee of the Federated
Fund Complex.
Compensation from Trust N/A
Compensation from Federated Fund Complex N/A
<PAGE>
William J. Copeland
One PNC Plaza - 23rd Floor, Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; Director, Ryan
Homes, Inc.; Director or Trustee of the Federated Fund Complex.
Compensation from Trust $1,600
Compensation from Federated Fund Complex $119,615
James E. Dowd
571 Hayward Mill Road, Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or Trustee
of the Federated Fund Complex.
Compensation from Trust $1,600
Compensation from Federated Fund Complex $119,615
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111, Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine, University of Pittsburgh; Medical Director, University of
Pittsburgh Medical Center - Downtown; Member, Board of Directors, University of
Pittsburgh Medical Center; formerly, Hematologist, Oncologist, and Internist,
Presbyterian and Montefiore Hospitals; Director or Trustee of the Federated Fund
Complex.
Compensation from Trust $1,454
Compensation from Federated Fund Complex $108,725
Edward L. Flaherty, Jr.#
Miller, Ament, Henny & Kochuba, 205 Ross Street, Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western Region;
Director or Trustee of the Federated Fund Complex.
Compensation from Trust $1,600
Compensation from Federated Fund Complex $119,615
<PAGE>
Peter E. Madden
One Royal Palm Way, 100 Royal Palm Way, Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Federated Fund Complex.
Compensation from Trust $1,454
Compensation from Federated Fund Complex $108,725
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University, Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica &
Murray; Director or Trustee of the Federated Fund Complex.
Compensation from Trust $1,454
Compensation from Federated Fund Complex $108.725
Wesley W. Posvar
1202 Cathedral of Learning, University of Pittsburgh, Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board and Czech Management Center, Prague; Director or Trustee of the Federated
Fund Complex.
Compensation from Trust $1,454
Compensation from Federated Fund Complex $108,725
Marjorie P. Smuts
4905 Bayard Street, Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public Relations/Marketing/Conference Planning; Director or Trustee of the
Federated Fund Complex.
Compensation from Trust $1,454
Compensation from Federated Fund Complex $108,725
Glen R. Johnson
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA
Birthdate: May 2, 1929
President
Trustee, Federated Investors; President and/or Trustee of some of the Funds in
the Federated Fund Complex; staff member, Federated Securities Corp.
Compensation from Trust $0
Compensation from Federated Fund Complex $0
J. Christopher Donahue
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global Research Corp.; President, Passport Research, Ltd.;
Trustee, Federated Shareholder Services Company, and Federated Shareholder
Services; Director, Federated Services Company; President or Executive Vice
President of the Federated Fund Complex; Director or Trustee of some of the
Funds in the Federated Fund Complex. Mr. Donahue is the son of John F. Donahue,
Chairman and Trustee of the Trust.
Compensation from Trust $0
Compensation from Federated Fund Complex $0
Edward C. Gonzales
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company; Trustee or Director of some of the Funds in the
Federated Fund Complex; President, Executive Vice President and Treasurer of
some of the Funds in the Federated Fund Complex.
Compensation from Trust $0
Compensation from Federated Fund Complex $0
John W. McGonigle
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President, Secretary and Treasurer
Executive Vice President, Secretary, and Trustee, Federated Investors; Trustee,
Federated Advisers, Federated Management, and Federated Research; Director,
Federated Research Corp. and Federated Global Research Corp.; Trustee, Federated
Shareholder Services Company; Director, Federated Services Company; President
and Trustee, Federated Shareholder Services; Director, Federated Securities
Corp.; Executive Vice President and Secretary of the Federated Fund Complex;
Treasurer of some of the Funds in the Federated Fund Complex.
Compensation from Trust $0
Compensation from Federated Fund Complex $0
Richard B. Fisher
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of the
Funds in the Federated Fund Complex; Director or Trustee of some of the Funds in
the Federated Fund Complex.
Compensation from Trust $0
Compensation from Federated Fund Complex $0
Investment Adviser
The Adviser conducts investment research and makes investment decisions for the
Fund. The Adviser is a wholly-owned subsidiary of Federated Investors, Inc.
The Adviser shall not be liable to the Trust, the Fund, or any Fund shareholder
for any losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
Advisory Fees. Gross income includes, in general, discount earned on U.S.
Treasury bills and agency discount notes, interest earned on all
interest-bearing obligations, and dividend income recorded on the ex-dividend
date but does not include capital gains or losses or reduction for expenses.
Other Related Services. Affiliates of the Adviser may, from time to time,
provide certain electronic equipment and software to institutional customers
in order to facilitate the purchase of Fund Shares offered by the
Distributor.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. The Adviser will generally use those who are recognized dealers in
specific portfolio instruments, except when a better price and execution of the
order can be obtained elsewhere. The Adviser may select brokers and dealers
based on whether they also offer research services (as described below). In
selecting among firms believed to meet these criteria, the Adviser may give
consideration to those firms which have sold or are selling Shares of the Fund
and other funds distributed by the Distributor and its affiliates. The Adviser
makes decisions on portfolio transactions and selects brokers and dealers
subject to review by the Fund's Board.
Research Services. Research services may include advice as to the advisability
of investing in securities; security analysis and reports; economic studies;
industry studies; receipt of quotations for portfolio evaluations; and similar
services. Research services may be used by the Adviser or by affiliates of
Federated Investors in advising other accounts. To the extent that receipt of
these services may replace services for which the Adviser or its affiliates
might otherwise have paid, it would tend to reduce their expenses. The Adviser
and its affiliates exercise reasonable business judgment in selecting those
brokers who offer brokerage and research services to execute securities
transactions. They determine in good faith that commissions charged by such
persons are reasonable in relationship to the value of the brokerage and
research services provided.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
Administrator
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund. Federated Services Company
provides these at the following annual rate of the average aggregate daily net
assets of all Federated Funds as specified below:
Maximum Average Aggregate Daily Net
Administrative Fee Assets of the Federated Funds
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
Custodian
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank.
Transfer Agent And Dividend Disbursing Agent
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type, and
number of accounts and transactions made by shareholders.
Independent Auditors
Ernst & Young LLP are the independent auditors for the Fund.
HOW DOES THE FUND MEASURE PERFORMANCE?
The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.
Unless otherwise stated, any quoted Share performance reflects the effect of
non-recurring charges, such as maximum sales charges, which, if excluded, would
increase the total return and yield. The performance of Shares depends upon such
variables as: portfolio quality; average portfolio maturity; type and value of
portfolio securities; changes in interest rates; changes or differences in the
Fund's or any class of Shares' expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings and
offering price per Share fluctuate daily. Both net earnings and offering price
per Share are factors in the computation of yield and total return.
Total Return
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of Shares owned at the end of the period by
the NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
When Shares of the Fund are in existence for less than a year, the Fund may
advertise cumulative total return for that specific period of time, rather than
annualizing the total return.
Yield
The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a thirty-day period; by (ii) the maximum
offering price per Share on the last day of the period. This number is then
annualized using semi-annual compounding. This means that the amount of income
generated during the thirty-day period is assumed to be generated each month
over a 12-month period and is reinvested every six months. The yield does not
necessarily reflect income actually earned by Shares because of certain
adjustments required by the SEC and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.
To the extent investment professional and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
Performance Comparisons
Advertising and sales literature may include:
o references to ratings, rankings, and financial publications and/or performance
comparisons of Shares to certain indices; o charts, graphs and illustrations
using the Fund's returns, or returns in general, that demonstrate investment
concepts such as
tax-deferred compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their impact
on the securities market, including the portfolio manager's views on how such
developments could impact the Fund; and
o information about the mutual fund industry from sources such as the Investment
Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which the Fund uses in advertising may include:
Dow Jones Industrial Average (DJIA). Represents share prices of selected
blue-chip industrial corporations. The DJIA indicates daily changes in the
average price of stock of these corporations. Because it represents the top
corporations of America, the DJIA index is a leading economic indicator for the
stock market as a whole.
Financial publications. The Wall Street Journal, Business Week, Changing Times,
Financial World, Forbes, Fortune and Money magazines, among others--provide
performance statistics over specified time periods.
Lipper Analytical Services, Inc. Ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specified period of time.
Moody's Investors Service, Inc., Fitch IBCA, Inc. and Standard & Poor's, various
publications.
Morningstar, Inc. An independent rating service, is the publisher of the
bi-weekly Mutual Fund Values, which rates more than 1,000 NASDAQ-listed mutual
funds of all types, according to their risk-adjusted returns. The maximum rating
is five stars, and ratings are effective for two weeks.
Standard & Poor's Daily Stock Price Index of 500 Common Stocks (S&P 500).
Composite index of common stocks in industry, transportation, and financial and
public utility companies. Can be used to compare to the total returns of funds
whose portfolios are invested primarily in common stocks. In addition, the S & P
500 assumes reinvestments of all dividends paid by stocks listed on its index.
Taxes due on any of these distributions are not included, nor are brokerage or
other fees calculated in the S & P figures.
S&P 500 Barra Growth Index is constructed by sorting the S&P 500 based on their
price/book ratios, with the high price/book companies making up the index.
WHO IS FEDERATED INVESTORS, INC.?
Federated Investors, Inc. is dedicated to meeting investor needs by making
structured, straightforward and consistent investment decisions. Federated
investment products have a history of competitive performance and have gained
the confidence of thousands of financial institutions and individual investors.
Federated disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. Investment decisions
are made by teams of portfolio managers and analysts which are executed by
traders dedicated to specific market sectors and who handle trillions of dollars
in annual trading volume.
Equity funds. In the equity sector, Federated Investors, Inc. has more than 27
years' experience. As of December 31, 1997, Federated managed 29 equity funds
totaling approximately $11.7 billion in assets across growth, value, equity
income, international, index and sector (i.e. utility) styles. Federated's
value-oriented management style combines quantitative and qualitative analysis
and features a structured, computer-assisted composite modeling system that was
developed in the 1970s.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated Investors, Inc. are: U.S. equity and high
yield - J. Thomas Madden; U.S. fixed income - William D. Dawson, III; and global
equities and fixed income - Henry A. Frantzen. The Chief Investment Officers are
Executive Vice Presidents of the Federated advisory companies.
Mutual Fund Market
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $4 trillion to the more than 6,700 funds available,
according to the Investment Company Institute.
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 900 institutional clients nationwide
by managing and servicing separate accounts and mutual funds for a variety of
purposes, including defined benefit and defined contribution programs, cash
management, and asset/liability management. Institutional clients include
corporations, pension funds, tax-exempt entities, foundations/endowments,
insurance companies, and investment and financial advisers. The marketing effort
to these institutional clients is headed by John B. Fisher, President,
Institutional Sales Division, Federated Securities Corp.
Bank Marketing
Other institutional clients include more than 1,600 banks and trust
organizations. Virtually all of the trust divisions of the top 100 bank holding
companies use Federated Funds in their clients' portfolios. The marketing effort
to trust clients is headed by Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Broker/Dealer Sales Division, Federated Securities Corp.
<PAGE>
ADDRESSES
Federated Large Cap Growth Fund
Class A Shares, Class B Shares and Class C Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
Distributor
Federated Securities Corp. Federated Investors Tower
1001 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3779
Investment Adviser
Federated Management Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, Massachusetts 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company P.O. Box 8600
Boston, Massachusetts 02266-8600
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, PA 15219
PART C. OTHER INFORMATION.
Item 23.EXHBITS
(a) Conformed copy of Declaration of Trust of the
Registrant; (11)
(i) Conformed copy of Amended and Restated
Declaration of Trust; (12)
(b) Copy of By-Laws of the Registrant as amended; (11)
(i) Copy of Amendment No. 2 to By-Laws effective
February 2, 1987; (11)
(ii) Copy of Amendment No. 3 to By-Laws effective
August 25, 1988; (11)
(iii) Copy of Amended and Restated By-Laws effective August
15, 1995; (12)
(c) (i) Copy of Specimen Certificate for Shares of Beneficial
Interest of the Registrant (Federated Small Cap
Strategies Fund); (7)
(ii) Copy of Specimen Certificate for Shares of Beneficial
Interest of the Registrant (Federated Growth Strategies Fund);
(8) (iii) Copy of Specimen Certificate for Shares of
Beneficial Interest of the Registrant (Federated Capital
Appreciation Fund);
(9)
(iv) Copy of Specimen Certificate for Shares of Beneficial
Interest of the Registrant (Federated Aggressive Growth Fund); (13)
(d) (i) Conformed copy of Investment Advisory Contract on behalf of
the Registrant; (6)
(ii) Conformed copy of Investment Advisory Contract on behalf
of the Registrant, which includes
......Exhibits A and B for Federated Small Cap Strategies
Fund and Federated Capital Appreciation Fund,
respectively; (10)
(iii).Conformed copy of Exhibit C to the Investment
Advisory Contract for Federated Aggressive
Growth ...... Fund; (14)
......
6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 on Form N-1A filed December 29, 1994. (File Nos. 2-91090
and 811-4017)
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 21 on Form N-1A filed June 30, 1995. (File Nos. 2-91090 and
811-4017)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 22 on Form N-1A filed July 17, 1995. (File Nos. 2-91090 and
811-4017)
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 25 on Form N-1A filed August 31, 1995. (File Nos. 2-91090 and
811-4017)
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 26 on Form N-1A filed September 12, 1995. (File Nos. 2- 91090
and 811-4017)
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 31 on Form N-1A filed June 11, 1996. (File Nos. 2-91090 and
811-4017)
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 30 on Form N-1A filed May 31, 1996. (File Nos. 2-91090 and
811-4017)
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 34 on Form N-1A filed December 30, 1996. (File Nos. 2-91090
and 811-4017)
14. Response is incorporated by reference to Registrant's Post Effective
Amendment No. 29 on Form N-1A filed May 29, 1997. (File Nos. 2- 910090 and
811-4017)
<PAGE>
(e) Conformed copy of Distributor's Contract of the Registrant;
(10)
(i) Conformed copy of Exhibit A to the Distributor's
Contract for Federated Small Cap Strategies Fund, Class A
Shares; (10) (ii) Conformed copy of Exhibit B to the
Distributor's Contract for Federated Small Cap Strategies
Fund, Class B Shares; (10)
(iii) Conformed copy of Exhibit C to the Distributor's
Contract for Federated Small Cap Strategies Fund, Class C
Shares; (10) (iv) Conformed copy of Exhibit D to the
Distributor's Contract for Federated Growth Strategies Fund,
Class A Shares; (10)
(v) Conformed copy of Exhibit E to the Distributor's
Contract for Federated Growth Strategies Fund, Class B
Shares; (10) (vi) Conformed copy of Exhibit F to the
Distributor's Contract for Federated Growth Strategies Fund,
Class C Shares; (10)
(vii) Conformed copy of Exhibit G to the Distributor's
Contract for Federated Capital Appreciation Fund, Class A
Shares; (10) (viii) Conformed copy of Exhibit H to the
Distributor's Contract for Federated Capital Appreciation Fund,
Class B Shares; (10)
(ix) Conformed copy of Exhibit I to the Distributor's
Contract for Federated Capital Appreciation Fund, Class C
Shares; (10) (x) Conformed copy of Exhibit J to the
Distributor's Contract for Federated Aggressive Growth Fund,
Class A Shares; (14)
(xi) Conformed copy of Exhibit K to the Distributor's
Contract for Federated Aggressive Growth Fund, Class B Shares;
(14) (xii) Conformed copy of Exhibit L to the Distributor's
Contract for Federated Aggressive Growth Fund, Class C Shares;
(14)
(xiii) Conformed copy of Distributor's Contract (Class
B Shares); (16)
(xiv) Conformed copy of Amendment to the Distribution
Plan (Class B Shares); (16)
(xv) 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 No.
33-38550 and 811-6269)
(f) Not applicable;
+ All exhibits have been filed electronically.
6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 on Form N-1A filed December 29, 1994. (File Nos. 2-
91090 and 811-4017)
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 26 on Form N-1A filed September 12, 1995. (File Nos. 2-
91090 and 811-4017)
14. Response is incorporated by reference to Registrant's Post Effective
Amendment No. 29 on Form N-1A filed May 29, 1997. (File Nos. 2-
910090 and 811-4017)
16. Response is incorporated by reference to Registrant's Post Effective
Amendment No. 35 of Form N-1A filed December 30, 1997 (File Nos.
2-910090 and 811-4017)
<PAGE>
(g) (i) Conformed Copy of the Custodian Agreement of the
Registrant; (6)
(ii) Conformed copy of Custodian Fee Schedule; (15)
(h) (i) Conformed copy of Amended and Restated Shareholder
Services Agreement; (15)
(ii) Conformed copy of Amended and Restated Agreement for
Fund Accounting Services, Administrative Services,
Shareholder Transfer Agency Services and Custody
Services Procurement; +
(iii) Conformed copy of Principal Shareholder
Servicer's Agreement (Class B Shares); (16)
(iv) Conformed copy of Shareholder Services Agreement
(Class B Shares); (16)
(v) The responses and exhibits described in Item 23(e)(xv)
are hereby incorporated by reference.
(vi) The Registrant hereby incorporates by reference the
conformed copy of the Shareholder Services Sub-Contract
between Fidelity and Federated Shareholder Services from
Item 24(b)(9)(iii) of the Federated GNMA Trust
Registration Statement on Form N-1A, filed with the
Commission on March 25, 1996 (File Nos. 2-75670 and
811-3375).
(i) Conformed copy of the Opinion and Consent of Counsel regarding
legality of shares being registered; (6)
(j) Not applicable;
(k) Not applicable;
(l) Conformed copy of Initial Capital Understanding; (2)
(m) Conformed Copy of Distribution Plan of the Registrant; (10)
(i) Conformed copy of Exhibit A to the Distribution Plan for
Federated Small Cap Strategies Fund, Class A Shares; (10)
(ii) Conformed copy of Exhibit B to the Distribution Plan for
Federated Small Cap Strategies Fund, Class B Shares; (10)
(iii) Conformed copy of Exhibit C to the Distribution Plan for
Federated Small Cap Strategies Fund, Class C Shares; (10)
(iv) Conformed copy of Exhibit D to the Distribution Plan for
Federated Growth Strategies Fund, Class B Shares; (10)
(v) Conformed copy of Exhibit E to the Distribution Plan for
Federated Growth Strategies Fund, Class C Shares;
(10)
(vi) Conformed copy of Exhibit F to the Distribution Plan for
Federated Capital Appreciation Fund, Class A Shares; (10) + All exhibits have
been filed electronically.
2. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed February 28, 1985. (File Nos. 2-91090
and 811-4017)
6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 on Form N-1A filed December 29, 1994. (File Nos. 2-91090
and 811-4017)
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 26 on Form N-1A filed September 12, 1995. (File Nos. 2-91090
and 811-4017)
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 29 on Form N-1A filed May 29, 1997. (File Nos. 2- 910090 and
811-4017)
15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 31 on Form N-1A filed October 30, 1997. (File Nos. 2- 91090
and 811-4017)
16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 35 on Form N-1A filed December 30, 1997. (File Nos. 2-91090
and 811-4017)
<PAGE>
(vii) Conformed copy of Exhibit I to the Distribution Plan for
Federated Aggressive Growth Fund, Class A Shares; (14) (viii)
Conformed copy of Exhibit J to the Distribution Plan for
Federated Aggressive Growth Fund, Class B Shares;(14)
(ix) Conformed copy of Exhibit K to the Distribution Plan for
Federated Aggressive Growth Fund, Class C Shares; (14) (x)
The responses described in Item 23(e)(xv) are hereby
incorporated by reference;
(n) Not applicable.
(o) 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);
(p) Conformed copy of Power of Attorney; (13)
Item 24. Persons Controlled by or Under Common Control with the Funds
None.
Item 25. Indemnification: (1)
+ All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed July 9, 1984. (File Nos. 2-91090 and
811-4017)
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 34 on Form N-1A filed December 30, 1996. (File Nos. 2-91090
and 811-4017)
14. Response is incorporated by reference to Registrant's Post Effective
Amendment No. 29 on Form N-1A filed May 29, 1997. (File Nos. 2- 910090 and
811-4017)
<PAGE>
Item 26. Business and Other Connections of the Investment Adviser:
(a) For a description of the other business of the investment adviser, see
the section entitled "Who Manages the Fund?" in Part A. The
affiliations with the Registrant of four of the Trustees and one of the
Officers of the investment adviser are included in Part B of this
Registration Statement under "Who Manages and Provides Services to the
Fund?" The remaining Trustee of the investment adviser, his position
with the investment adviser, and, in parentheses, his principal
occupation is: Mark D. Olson (Partner, Wilson, Halbrook & Bayard), 107
W. Market Street, Georgetown, Delaware 19947.
The remaining Officers of the investment adviser are:
Executive Vice Presidents: William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden
Senior Vice Presidents: Joseph M. Balestrino
Drew J. Collins
Jonathan C. Conley
Deborah A. Cunningham
Mark E. Durbiano
Sandra L. McInerney
J. Alan Minteer
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski
Vice Presidents: Todd A. Abraham
J. Scott Albrecht
Arthur J. Barry
Randall S. Bauer
David A. Briggs
Micheal W. Casey
Kenneth J. Cody
Alexandre de Bethmann
Michael P. Donnelly
Linda A. Duessel
Donald T. Ellenberger
Kathleen M. Foody-Malus
Thomas M. Franks
Edward C. Gonzales
James E. Grefenstette
Susan R. Hill
Stephen A. Keen
Robert K. Kinsey
Robert M. Kowit
Jeff A. Kozemchak
Richard J. Lazarchic
Steven Lehman
Marian R. Marinack
Charles A. Ritter
Keith J. Sabol
Scott B. Schermerhorn
Frank Semack
Aash M. Shah
Christopher Smith
Tracy P. Stouffer
Gregg S. Tenser
Edward J. Tiedge
Paige M. Wilhelm
Jolanta M. Wysocka
<PAGE>
Assistant Vice Presidents: Nancy J. Belz
Robert E. Cauley
Lee R. Cunningham, II
B. Anthony Delserone, Jr.
Paul S. Drotch
Salvatore A. Esposito
Donna M. Fabiano
John T. Gentry
William R. Jamison
Constantine Kartsonsas
John C. Kerber
Grant K. McKay
Natalie F. Metz
Joseph M. Natoli
John Sheehy
Michael W. Sirianni
Leonardo A. Vila
Lori A. Wolff
Secretary: Stephen A. Keen
Treasurer: Thomas R. Donahue
Assistant Secretaries: Thomas R. Donahue
Richard B. Fisher
Christine I. McGonigle
Assistant Treasurer: Richard B. Fisher
The business address of each of the Officers of the investment adviser
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh,
Pennsylvania 15222-3779. These individuals are also officers of a
majority of the investment advisers to the Funds listed in Part B of
this Registration Statement.
Item 27. Principal Underwriters:
(a) Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the following open-end investment
companies, including the Registrant:
Automated Government Money Trust; Blanchard Funds; Blanchard Precious Metals
Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; CCB Funds; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders Fund,
Inc.; Federated ARMs Fund; Federated Core Trust; Federated Equity Funds;
Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Master Trust; Federated Municipal Opportunities Fund, Inc.;
Federated Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated
Short-Term Municipal Trust; Federated Short-Term U.S. Government Trust;
Federated Stock and Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free
Trust; Federated Total Return Series, Inc.; Federated U.S. Government Bond Fund;
Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S. Government
Securities Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10
Years; Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; High Yield
Cash Trust; Independence One Mutual Funds; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment Series
Trust; Liberty U.S. Government Money Market Trust; Liquid Cash Trust; Managed
Series Trust; Marshall Funds, Inc.; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Peachtree Funds; Regions
Funds; RIGGS Funds; SouthTrust Funds; Star Funds; Targeted Duration Trust;
Tax-Free Instruments Trust; The Planters Funds; The Virtus Funds; The Wachovia
Funds; The Wachovia Municipal Funds; Tower Mutual Funds; Trust for Financial
Institutions; Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S.
Treasury Obligations; Vision Group of Funds, Inc.; and World Investment Series,
Inc.
Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Richard B. Fisher Director, Chairman, Chief
Federated Investors Tower Executive Officer, Chief
1001 Liberty Avenue Operating Officer, Asst.
Pittsburgh, PA 15222-3779 Secretary and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice
Federated Investors Tower President, Federated,
1001 Liberty Avenue
Pittsburgh, PA 15222-3779 Securities Corp.
Thomas R. Donahue Director, Assistant Secretary
Federated Investors Tower and Assistant Treasurer
1001 Liberty Avenue
Pittsburgh, PA 15222-3779 Federated Securities Corp.
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
<PAGE>
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Raymond Hanley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert M. Rossi Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(c) Not applicable.
<PAGE>
Item 28. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Registrant Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(notices should be sent to the Agent for Service at above address)
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Federated Services Company Federated Investors Tower
("Administrator") 1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Federated Management Federated Investors Tower
("Adviser") 1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Federated Shareholder Services Company Federated Investors Tower
("Transfer Agent and Dividend 1001 Liberty Avenue
Disbursing Agent") Pittsburgh, PA 15222-3779
State Street Bank and Trust Company P.O. Box 8600
("Custodian") Boston, MA 02266-8600
Item 29. Management Services: Not applicable.
Item 30. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant, FEDERATED EQUITY FUNDS, has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, duly authorized, in the City of Pittsburgh and Commonwealth
of Pennsylvania, on the 7th day of October, 1998.
FEDERATED EQUITY FUNDS
BY: /s/ Matthew S. Hardin
Matthew S. Hardin, Assistant Secretary
Attorney in Fact for John F. Donahue
October 7, 1998
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:
NAME TITLE DATE
By: /s/ Matthew S. Hardin Attorney In Fact October 7, 1998
Matthew S. Hardin For the Persons
ASSISTANT SECRETARY Listed Below
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Glen R. Johnson* President
John W. McGonigle* Executive Vice President,
Treasurer and Secretary
(Principal Financial and
Accounting Officer)
Thomas G. Bigley* Trustee
John T. Conroy, Jr.* Trustee
Nicholas P. Constantakis* Trustee
William J. Copeland* Trustee
James E. Dowd, Esq.* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr., Esq.* Trustee
Peter E. Madden* Trustee
John E. Murray, Jr., J.D., S.J.D.* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
Exhibit 23(h)(vi) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AMENDED & RESTATED
AGREEMENT
for
FUND ACCOUNTING SERVICES,
ADMINISTRATIVE SERVICES,
TRANSFER AGENCY SERVICES
and
CUSTODY SERVICES PROCUREMENT
AGREEMENT made as of March 1, 1996, and amended and restated as of September
1, 1997, by and between those investment companies listed on Exhibit 1 as may be
amended from time to time, having their principal office and place of business
at 5800 Corporate Drive, Pittsburgh, Pennsylvania (the "Investment Company"), on
behalf of the portfolios (individually referred to herein as a "Fund" and
collectively as "Funds") of the Investment Company, and FEDERATED SERVICES
COMPANY, a Pennsylvania corporation, having its principal office and place of
business at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779 on
behalf of itself and its subsidiaries (the "Company").
WHEREAS, the Investment Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), with authorized and issued shares of capital stock or beneficial
interest ("Shares");
WHEREAS, the Investment Company may desire to retain the Company as fund
accountant to provide fund accounting services (as herein defined) including
certain pricing, accounting and recordkeeping services for each of the Funds,
including any classes of shares issued by any Fund ("Classes") if so indicated
on Exhibit 1, and the Company desires to accept such appointment;
WHEREAS, the Investment Company may desire to appoint the Company as its
administrator to provide it with administrative services (as herein defined), if
so indicated on Exhibit, and the Company desires to accept such appointment;
WHEREAS, the Investment Company may desire to appoint the Company as its
transfer agent and dividend disbursing agent to provide it with transfer agency
services (as herein defined) if so indicated on Exhibit 1, and agent in
connection with certain other activities, and the Company desires to accept such
appointment; and
WHEREAS, the Investment Company may desire to appoint the Company as its
agent to select, negotiate and subcontract for custodian services from an
approved list of qualified banks if so indicated on Exhibit 1, and the Company
desires to accept such appointment; and
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, and intending to be legally bound hereby, the parties hereto agree as
follows:
SECTION ONE: Fund Accounting.
Article 1. Appointment.
The Investment Company hereby appoints the Company to provide certain pricing
and accounting services to the Funds, and/or the Classes, for the period and on
the terms set forth in this Agreement. The Company accepts such appointment and
agrees to furnish the services herein set forth in return for the compensation
as provided in Article 3 of this Section.
Article 2. The Company's Duties.
Subject to the supervision and control of the Investment Company's Board of
Trustees or Directors ("Board"), the Company will assist the Investment Company
with regard to fund accounting for the Investment Company, and/or the Funds,
and/or the Classes, and in connection therewith undertakes to perform the
following specific services;
A. Value the assets of the Funds using: primarily, market quotations,
including the use of matrix pricing, supplied by the independent
pricing services selected by the Company in consultation with the
adviser, or sources selected by the adviser, and reviewed by the
board; secondarily, if a designated pricing service does not provide a
price for a security which the Company believes should be available by
market quotation, the Company may obtain a price by calling brokers
designated by the investment adviser of the fund holding the security,
or if the adviser does not supply the names of such brokers, the
Company will attempt on its own to find brokers to price those
securities; thirdly, for securities for which no market price is
available, the Pricing Committee of the Board will determine a fair
value in good faith. Consistent with Rule 2a-4 of the 40 Act,
estimates may be used where necessary or appropriate. The Company's
obligations with regard to the prices received from outside pricing
services and designated brokers or other outside sources, is to
exercise reasonable care in the supervision of the pricing agent. The
Company is not the guarantor of the securities prices received from
such agents and the Company is not liable to the Fund for potential
errors in valuing a Fund's assets or calculating the net asset value
per share of such Fund or Class when the calculations are based upon
such prices. All of the above sources of prices used as described are
deemed by the Company to be authorized sources of security prices. The
Company provides daily to the adviser the securities prices used in
calculating the net asset value of the fund, for its use in preparing
exception reports for those prices on which the adviser has comment.
Further, upon receipt of the exception reports generated by the
adviser, the Company diligently pursues communication regarding
exception reports with the designated pricing agents;
B. Determine the net asset value per share of each Fund and/or Class, at
the time and in the manner from time to time determined by the Board and
as set forth in the Prospectus and Statement of Additional Information
("Prospectus") of each Fund;
C. Calculate the net income of each of the Funds, if any;
D. Calculate realized capital gains or losses of each of the Funds resulting
from sale or disposition of assets, if any;
E. Maintain the general ledger and other accounts, books and financial
records of the Investment Company, including for each Fund, and/or
Class, as required under Section 31(a) of the 1940 Act and the Rules
thereunder in connection with the services provided by the Company;
F. Preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records to be maintained by Rule 31a-1 under the 1940 Act in connection
with the services provided by the Company. The Company further agrees
that all such records it maintains for the Investment Company are the
property of the Investment Company and further agrees to surrender
promptly to the Investment Company such records upon the Investment
Company's request;
G. At the request of the Investment Company, prepare various reports or
other financial documents in accordance with generally accepted
accounting principles as required by federal, state and other applicable
laws and regulations; and
H. Such other similar services as may be reasonably requested by the
Investment Company.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section One,
shall hereafter be referred to as "Fund Accounting Services."
Article 3. Compensation and Allocation of Expenses.
A. The Funds will compensate the Company for Fund Accounting Services in
accordance with the fees agreed upon from time to time between the
parties hereto. Such fees do not include out-of-pocket disbursements of
the Company for which the Funds shall reimburse the Company.
Out-of-pocket disbursements shall include, but shall not be limited to,
the items agreed upon between the parties from time to time.
B. The Fund and/or the Class, and not the Company, shall bear the cost of:
custodial expenses; membership dues in the Investment Company Institute
or any similar organization; transfer agency expenses; investment
advisory expenses; Prospectuses, reports and notices; administrative
expenses; interest on borrowed money; brokerage commissions; taxes and
fees payable to federal, state and other governmental agencies; fees of
Trustees or Directors of the Investment Company; independent auditors
expenses; legal and audit department expenses billed to the Company for
work performed related to the Investment Company, the Funds, or the
Classes; law firm expenses; organizational expenses; or other expenses
not specified in this Article 3 which may be properly payable by the
Funds and/or Classes.
C. The compensation and out-of-pocket expenses attributable to the Fund
shall be accrued by the Fund and shall be paid to the Company no less
frequently than monthly, and shall be paid daily upon request of the
Company. The Company will maintain detailed information about the
compensation and out-of-pocket expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Investment Company and/or the Funds and a duly authorized
officer of the Company.
E. The fee for the period from the effective date of this Agreement with
respect to a Fund or a Class to the end of the initial month shall be
prorated according to the proportion that such period bears to the full
month period. Upon any termination of this Agreement before the end of
any month, the fee for such period shall be prorated according to the
proportion which such period bears to the full month period. For
purposes of determining fees payable to the Company, the value of the
Fund's net assets shall be computed at the time and in the manner
specified in the Fund's Prospectus.
F. The Company, in its sole discretion, may from time to time subcontract
to, employ or associate with itself such person or persons as the
Company may believe to be particularly suited to assist it in performing
Fund Accounting Services. Such person or persons may be affiliates of
the Company, third-party service providers, or they may be officers and
employees who are employed by both the Company and the Investment
Company; provided, however, that the Company shall be as fully
responsible to each Fund for the acts and omissions of any such
subcontractor as it is for its own acts and omissions. The compensation
of such person or persons shall be paid by the Company and no obligation
shall be incurred on behalf of the Investment Company, the Funds, or the
Classes in such respect.
SECTION TWO: ADMINISTRATIVE SERVICES.
Article 4. Appointment.
The Investment Company hereby appoints the Company as Administrator for the
period on the terms and conditions set forth in this Agreement. The Company
hereby accepts such appointment and agrees to furnish the services set forth in
Article 5 of this Agreement in return for the compensation set forth in Article
9 of this Agreement.
Article 5. The Company's Duties.
As Administrator, and subject to the supervision and control of the Board and
in accordance with Proper Instructions (as defined hereafter) from the
Investment Company, the Company will provide facilities, equipment, and
personnel to carry out the following administrative services for operation of
the business and affairs of the Investment Company and each of its portfolios:
A. prepare, file, and maintain the Investment Company's governing documents
and any amendments thereto, including the Charter (which has already
been prepared and filed), the By-laws and minutes of meetings of the
Board and Shareholders;
B. prepare and file with the Securities and Exchange Commission and the
appropriate state securities authorities the registration statements for
the Investment Company and the Investment Company's shares and all
amendments thereto, reports to regulatory authorities and shareholders,
prospectuses, proxy statements, and such other documents all as may be
necessary to enable the Investment Company to make a continuous offering
of its shares;
C. prepare, negotiate, and administer contracts (if any) on behalf of the
Investment Company with, among others, the Investment Company's
investment advisers and distributors, subject to any applicable
restrictions of the Board or the 1940 Act;
D. calculate performance data of the Investment Company for dissemination
to information services covering the investment company industry;
E. prepare and file the Investment Company's tax returns;
F. coordinate the layout and printing of publicly disseminated
prospectuses and reports;
G. perform internal audit examinations in accordance with a charter to be
adopted by the Company and the Investment Company;
H. assist with the design, development, and operation of the Investment
Company and the Funds;
I. provide individuals reasonably acceptable to the Board for nomination,
appointment, or election as officers of the Investment Company, who will
be responsible for the management of certain of the Investment Company's
affairs as determined by the Investment Company's Board; and
J. consult with the Investment Company and its Board on matters
concerning the Investment Company and its affairs.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section Two,
shall hereafter be referred to as "Administrative Services."
Article 6. Records.
The Company shall create and maintain all necessary books and records in
accordance with all applicable laws, rules and regulations, including but not
limited to records required by Section 31(a) of the Investment Company act of
1940 and the rules thereunder, as the same may be amended from time to time,
pertaining to the Administrative Services performed by it and not otherwise
created and maintained by another party pursuant to contract with the Investment
Company. Where applicable, such records shall be maintained by the Company for
the periods and in the places required by Rule 31a-2 under the 1940 Act. The
books and records pertaining to the Investment Company which are in the
possession of the Company shall be the property of the Investment Company. The
Investment Company, or the Investment Company's authorized representatives,
shall have access to such books and records at all times during the Company's
normal business hours. Upon the reasonable request of the Investment Company,
copies of any such books and records shall be provided promptly by the Company
to the Investment Company or the Investment Company's authorized
representatives.
Article 7. Duties of the Fund.
The Fund assumes full responsibility for the preparation, contents and
distribution of its own offering document and for complying with all applicable
requirements the 1940 Act, the Internal Revenue Code, and any other laws, rules
and regulations of government authorities having jurisdiction.
Article 8. Expenses.
The Company shall be responsible for expenses incurred in providing office
space, equipment, and personnel as may be necessary or convenient to provide the
Administrative Services to the Investment Company, including the compensation of
the Company employees who serve as trustees or directors or officers of the
Investment Company. The Investment Company shall be responsible for all other
expenses incurred by the Company on behalf of the Investment Company, including
without limitation postage and courier expenses, printing expenses, travel
expenses, registration fees, filing fees, fees of outside counsel and
independent auditors, or other professional services, organizational expenses,
insurance premiums, fees payable to persons who are not the Company's employees,
trade association dues, and other expenses properly payable by the Funds and/or
the Classes.
Article 9. Compensation.
For the Administrative Services provided, the Investment Company hereby
agrees to pay and the Company hereby agrees to accept as full compensation for
its services rendered hereunder an administrative fee at an annual rate per
Fund, as specified below.
The compensation and out of pocket expenses attributable to the Fund shall be
accrued by the Fund and paid to the Company no less frequently than monthly, and
shall be paid daily upon request of the Company. The Company will maintain
detailed information about the compensation and out of pocket expenses by the
Fund.
Max. Admin. Average Daily Net Assets
Fee of the Funds
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
(Average Daily Net Asset break-points are on a complex-wide basis)
However, in no event shall the administrative fee received during any year of
the Agreement be less than, or be paid at a rate less than would aggregate
$125,000 per Fund and $30,000 per Class. The minimum fee set forth above in this
Article 9 may increase annually upon each March 1 anniversary of this Agreement
over the minimum fee during the prior 12 months, as calculated under this
agreement, in an amount equal to the increase in Pennsylvania Consumer Price
Index (not to exceed 6% annually) as last reported by the U.S. Bureau of Labor
Statistics for the twelve months immediately preceding such anniversary.
Article 10. Responsibility of Administrator.
A. The Company shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Investment Company in
connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
The Company shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for the Investment Company) on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice. Any person, even though also
an officer, director, trustee, partner, employee or agent of the
Company, who may be or become an officer, director, trustee, partner,
employee or agent of the Investment Company, shall be deemed, when
rendering services to the Investment Company or acting on any business
of the Investment Company (other than services or business in
connection with the duties of the Company hereunder) to be rendering
such services to or acting solely for the Investment Company and not
as an officer, director, trustee, partner, employee or agent or one
under the control or direction of the Company even though paid by the
Company.
B. The Company shall be kept indemnified by the Investment Company and be
without liability for any action taken or thing done by it in
performing the Administrative Services in accordance with the above
standards. In order that the indemnification provisions contained in
this Article 10 shall apply, however, it is understood that if in any
case the Investment Company may be asked to indemnify or hold the
Company harmless, the Investment Company shall be fully and promptly
advised of all pertinent facts concerning the situation in question,
and it is further understood that the Company will use all reasonable
care to identify and notify the Investment Company promptly concerning
any situation which presents or appears likely to present the
probability of such a claim for indemnification against the Investment
Company. The Investment Company shall have the option to defend the
Company against any claim which may be the subject of this
indemnification. In the event that the Investment Company so elects,
it will so notify the Company and thereupon the Investment Company
shall take over complete defense of the claim, and the Company shall
in such situation initiate no further legal or other expenses for
which it shall seek indemnification under this Article. The Company
shall in no case confess any claim or make any compromise in any case
in which the Investment Company will be asked to indemnify the Company
except with the Investment Company's written consent.
SECTION THREE: Transfer Agency Services.
Article 11. Terms of Appointment.
Subject to the terms and conditions set forth in this Agreement, the
Investment Company hereby appoints the Company to act as, and the Company agrees
to act as, transfer agent and dividend disbursing agent for each Fund's Shares,
and agent in connection with any accumulation, open-account or similar plans
provided to the shareholders of any Fund ("Shareholder(s)"), including without
limitation any periodic investment plan or periodic withdrawal program.
Article 12. Duties of the Company.
The Company shall perform the following services in accordance with Proper
Instructions as may be provided from time to time by the Investment Company as
to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase of
shares and promptly deliver payment and appropriate documentation
therefore to the custodian of the relevant Fund, (the
"Custodian"). The Company shall notify the Fund and the Custodian
on a daily basis of the total amount of orders and payments so
delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of Shares of each Fund and/or Class and hold
such Shares in the appropriate Shareholder accounts.
(3) In the event that any check or other order for the purchase of
Shares of the Fund and/or Class is returned unpaid for any reason,
the Company shall debit the Share account of the Shareholder by
the number of Shares that had been credited to its account upon
receipt of the check or other order, promptly mail a debit advice
to the Shareholder, and notify the Fund and/or Class of its
action. In the event that the amount paid for such Shares exceeds
proceeds of the redemption of such Shares plus the amount of any
dividends paid with respect to such Shares, the Fund and/the Class
or its distributor will reimburse the Company on the amount of
such excess.
B. Distribution
(1) Upon notification by the Funds of the declaration of any
distribution to Shareholders, the Company shall act as Dividend
Disbursing Agent for the Funds in accordance with the provisions
of its governing document and the then-current Prospectus of the
Fund. The Company shall prepare and mail or credit income, capital
gain, or any other payments to Shareholders. As the Dividend
Disbursing Agent, the Company shall, on or before the payment date
of any such distribution, notify the Custodian of the estimated
amount required to pay any portion of said distribution which is
payable in cash and request the Custodian to make available
sufficient funds for the cash amount to be paid out. The Company
shall reconcile the amounts so requested and the amounts actually
received with the Custodian on a daily basis. If a Shareholder is
entitled to receive additional Shares by virtue of any such
distribution or dividend, appropriate credits shall be made to the
Shareholder's account; and
(2) The Company shall maintain records of account for each Fund and Class
and advise the Investment Company, each Fund and Class and its
Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or set forth
in Proper Instructions, deliver the appropriate instructions
therefor to the Custodian. The Company shall notify the Funds on a
daily basis of the total amount of redemption requests processed
and monies paid to the Company by the Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds from
the Custodian with respect to any redemption, the Company shall
pay or cause to be paid the redemption proceeds in the manner
instructed by the redeeming Shareholders, pursuant to procedures
described in the then-current Prospectus of the Fund.
(3) If any certificate returned for redemption or other request for
redemption does not comply with the procedures for redemption
approved by the Fund, the Company shall promptly notify the
Shareholder of such fact, together with the reason therefor, and
shall effect such redemption at the price applicable to the date
and time of receipt of documents complying with said procedures.
(4) The Company shall effect transfers of Shares by the registered
owners thereof.
(5) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual basis
and report such actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each Fund,
and/or Class, and maintain pursuant to applicable rules of the
Securities and Exchange Commission ("SEC") a record of the total
number of Shares of the Fund and/or Class which are authorized,
based upon data provided to it by the Fund, and issued and
outstanding. The Company shall also provide the Fund on a regular
basis or upon reasonable request with the total number of Shares
which are authorized and issued and outstanding, but shall have no
obligation when recording the issuance of Shares, except as
otherwise set forth herein, to monitor the issuance of such Shares
or to take cognizance of any laws relating to the issue or sale of
such Shares, which functions shall be the sole responsibility of
the Funds.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed hereunder in the form and manner as agreed to by the
Investment Company or the Fund to include a record for each
Shareholder's account of the following:
(a) Name, address and tax identification number (and whether such
number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account, including
dividends paid and date and price for all transactions;
(d) Any stop or restraining order placed against the account;
(e) Information with respect to withholding in the case of a
foreign account or an account for which withholding is
required by the Internal Revenue Code;
(f) Any dividend reinvestment order, plan application, dividend
address and correspondence relating to the current
maintenance of the account;
(g) Certificate numbers and denominations for any Shareholder
holding certificates;
(h) Any information required in order for the Company to perform
the calculations contemplated or required by this Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such record
retention shall be at the expense of the Company, and such records
may be inspected by the Fund at reasonable times. The Company may,
at its option at any time, and shall forthwith upon the Fund's
demand, turn over to the Fund and cease to retain in the Company's
files, records and documents created and maintained by the Company
pursuant to this Agreement, which are no longer needed by the
Company in performance of its services or for its protection. If
not so turned over to the Fund, such records and documents will be
retained by the Company for six years from the year of creation,
during the first two of which such documents will be in readily
accessible form. At the end of the six year period, such records
and documents will either be turned over to the Fund or destroyed
in accordance with Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the following
information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in each
state for "blue sky" purposes as determined according to
Proper Instructions delivered from time to time by the Fund
to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption fees, or
other transaction- or sales-related payments;
(f) Such other information as may be agreed upon from time to
time.
(2) The Company shall prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies, and, if
required, mail to Shareholders, such notices for reporting
dividends and distributions paid as are required to be so filed
and mailed and shall withhold such sums as are required to be
withheld under applicable federal and state income tax laws, rules
and regulations.
(3) In addition to and not in lieu of the services set forth above,
the Company shall:
(a) Perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, agent in connection
with accumulation, open-account or similar plans (including
without limitation any periodic investment plan or periodic
withdrawal program), including but not limited to: maintaining
all Shareholder accounts, mailing Shareholder reports and
Prospectuses to current Shareholders, withholding taxes on
accounts subject to back-up or other withholding (including
non-resident alien accounts), preparing and filing reports on
U.S. Treasury Department Form 1099 and other appropriate forms
required with respect to dividends and distributions by federal
authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to Shareholders for
all purchases and redemptions of Shares and other conformable
transactions in Shareholder accounts, preparing and mailing
activity statements for Shareholders, and providing Shareholder
account information; and
(b) provide a system which will enable the Fund to monitor the
total number of Shares of each Fund (and/or Class) sold in
each state ("blue sky reporting"). The Fund shall by Proper
Instructions (i) identify to the Company those transactions
and assets to be treated as exempt from the blue sky
reporting for each state and (ii) verify the classification
of transactions for each state on the system prior to
activation and thereafter monitor the daily activity for
each state. The responsibility of the Company for each
Fund's (and/or Class's) state blue sky registration status
is limited solely to the recording of the initial
classification of transactions or accounts with regard to
blue sky compliance and the reporting of such transactions
and accounts to the Fund as provided above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders relating
to their Share accounts and such other correspondence as may from
time to time be addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists, mail proxy
cards and other material supplied to it by the Fund in connection
with Shareholder meetings of each Fund; receive, examine and
tabulate returned proxies, and certify the vote of the
Shareholders;
(3) The Company shall establish and maintain faclities and procedures
for safekeeping of check forms and facsimile signature imprinting
devices, if any; and for the preparation or use, and for keeping
account of, such forms and devices.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section Three,
shall hereafter be referred to as "Transfer Agency Services."
Article 13. Duties of the Investment Company.
A. Compliance
The Investment Company or Fund assume full responsibility for the
preparation, contents and distribution of their own and/or their
classes' Prospectus and for complying with all applicable requirements
of the Securities Act of 1933, as amended (the "1933 Act"), the 1940 Act
and any laws, rules and regulations of government authorities having
jurisdiction.
Distributions
The Fund shall promptly inform the Company of the declaration of any
dividend or distribution on account of any Fund's shares.
Article 14. Compensation and Expenses.
A. Annual Fee
For performance by the Company pursuant to Section Three of this
Agreement, the Investment Company and/or the Fund agree to pay the
Company an annual maintenance fee for each Shareholder account as agreed
upon between the parties and as may be added to or amended from time to
time. Such fees may be changed from time to time subject to written
agreement between the Investment Company and the Company. Pursuant to
information in the Fund Prospectus or other information or instructions
from the Fund, the Company may sub-divide any Fund into Classes or other
sub-components for recordkeeping purposes. The Company will charge the
Fund the same fees for each such Class or sub-component the same as if
each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Investment
Company and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items agreed upon
between the parties, as may be added to or amended from time to time. In
addition, any other expenses incurred by the Company at the request or
with the consent of the Investment Company and/or the Fund, will be
reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the Fund
and shall be paid to the Company no less frequently than monthly, and
shall be paid daily upon request of the Company. The Company will
maintain detailed information about the compensation and out-of-pocket
expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Investment Company and/or the Funds and a duly authorized
officer of the Company.
SECTION FOUR: Custody Services Procurement.
Article 15. Appointment.
The Investment Company hereby appoints Company as its agent to evaluate and
obtain custody services from a financial institution that (i) meets the criteria
established in Section 17(f) of the 1940 Act and (ii) has been approved by the
Board as eligible for selection by the Company as a custodian (the "Eligible
Custodian"). The Company accepts such appointment.
Article 16. The Company and Its Duties.
Subject to the review, supervision and control of the Board, the Company
shall:
A. evaluate and obtain custody services from a financial institution that
meets the criteria established in Section 17(f) of the 1940 Act and has
been approved by the Board as being eligible for selection by the Company
as an Eligible Custodian;
B. negotiate and enter into agreements with Eligible Custodians for the
benefit of the Investment Company, with the Investment Company as a
party to each such agreement. The Company may, as paying agent, be a
party to any agreement with any such Eligible Custodian;
C. establish procedures to monitor the nature and the quality of the
services provided by Eligible Custodians;
D. monitor and evaluate the nature and the quality of services provided
by Eligible Custodians;
E. periodically provide to the Investment Company (i) written reports on
the activities and services of Eligible Custodians; (ii) the nature and
amount of disbursements made on account of the each Fund with respect to
each custodial agreement; and (iii) such other information as the Board
shall reasonably request to enable it to fulfill its duties and
obligations under Sections 17(f) and 36(b) of the 1940 Act and other
duties and obligations thereof;
F. periodically provide recommendations to the Board to enhance Eligible
Custodian's customer services capabilities and improve upon fees being
charged to the Fund by Eligible Custodian; and
The foregoing, along with any additional services that Company shall agree in
writing to perform for the Fund under this Section Four, shall hereafter be
referred to as "Custody Services Procurement."
Article 17. Fees and Expenses.
A. Annual Fee
For the performance of Custody Services Procurement by the Company
pursuant to Section Four of this Agreement, the Investment Company
and/or the Fund agree to compensate the Company in accordance with the
fees agreed upon from time to time.
B. Reimbursements
In addition to the fee paid under Section 11A above, the Investment
Company and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items agreed upon
between the parties, as may be added to or amended from time to time. In
addition, any other expenses incurred by the Company at the request or
with the consent of the Investment Company and/or the Fund, will be
reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the Fund
and shall be paid to the Company no less frequently than monthly, and
shall be paid daily upon request of the Company. The Company will
maintain detailed information about the compensation and out-of-pocket
expenses by Fund.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Investment Company and/or the Funds and a duly authorized
officer of the Company.
Article 18. Representations.
The Company represents and warrants that it has obtained all required
approvals from all government or regulatory authorities necessary to enter into
this arrangement and to provide the services contemplated in Section Four of
this Agreement.
SECTION FIVE: General Provisions.
Article 19. Proper Instructions.
As used throughout this Agreement, a "Proper Instruction" means a writing
signed or initialed by one or more person or persons as the Board shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved. Oral instructions will be deemed to
be Proper Instructions if (a) the Company reasonably believes them to have been
given by a person previously authorized in Proper Instructions to give such
instructions with respect to the transaction involved, and (b) the Investment
Company, or the Fund, and the Company promptly cause such oral instructions to
be confirmed in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that the
Investment Company, or the Fund, and the Company are satisfied that such
procedures afford adequate safeguards for the Fund's assets. Proper Instructions
may only be amended in writing.
Article 20. Assignment.
Except as provided below, neither this Agreement nor any of the rights or
obligations under this Agreement may be assigned by either party without the
written consent of the other party.
A. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
B. With regard to Transfer Agency Services, the Company may without further
consent on the part of the Investment Company subcontract for the
performance of Transfer Agency Services with
(1) its subsidiary, Federated Shareholder Service Company, a Delaware
business trust, which is duly registered as a transfer agent pursuant
to Section 17A(c)(1) of the Securities Exchange Act of 1934, as
amended, or any succeeding statute ("Section 17A(c)(1)"); or (2) such
other provider of services duly registered as a transfer agent under
Section 17A(c)(1) as Company shall select.
The Company shall be as fully responsible to the Investment Company for
the acts and omissions of any subcontractor as it is for its own acts
and omissions.
C. With regard to Fund Accounting Services, Administrative Services and
Custody Procurement Services, the Company may without further consent on
the part of the Investment Company subcontract for the performance of
such services with Federated Administrative Services, a wholly-owned
subsidiary of the Company.
D. The Company shall upon instruction from the Investment Company
subcontract for the performance of services under this Agreement with an
Agent selected by the Investment Company, other than as described in B.
and C. above; provided, however, that the Company shall in no way be
responsible to the Investment Company for the acts and omissions of the
Agent.
Article 21. Documents.
A. In connection with the appointment of the Company under this Agreement,
the Investment Company shall file with the Company the following
documents:
(1) A copy of the Charter and By-Laws of the Investment Company and all
amendments thereto;
(2) A copy of the resolution of the Board of the Investment Company
authorizing this Agreement;
(3) Printed documentation from the recordkeeping system representing
outstanding Share certificates of the Investment Company or the
Funds;
(4) All account application forms and other documents relating to
Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following documents:
(1) Each resolution of the Board of the Investment Company authorizing the
original issuance of each Fund's, and/or Class's Shares;
(2) Each Registration Statement filed with the SEC and amendments
thereof and orders relating thereto in effect with respect to the
sale of Shares of any Fund, and/or Class;
(3) A certified copy of each amendment to the governing document and
the By-Laws of the Investment Company;
(4) Certified copies of each vote of the Board authorizing officers to
give Proper Instructions to the Custodian and agents for fund
accountant, custody services procurement, and shareholder
recordkeeping or transfer agency services;
(5) Such other certifications, documents or opinions which the Company
may, in its discretion, deem necessary or appropriate in the
proper performance of its duties; and
(6) Revisions to the Prospectus of each Fund.
Article 22. Representations and Warranties.
A. Representations and Warranties of the Company
The Company represents and warrants to the Fund that:
(1) it is a corporation duly organized and existing and in good
standing under the laws of the Commonwealth of Pennsylvania;
(2) It is duly qualified to carry on its business in each jurisdiction
where the nature of its business requires such qualification, and
in the Commonwealth of Pennsylvania;
(3) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this
Agreement;
(4) all requisite corporate proceedings have been taken to authorize
it to enter into and perform its obligations under this
Agreement;
(5) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement;
(6) it is in compliance with federal securities law requirements and
in good standing as an administrator and fund accountant; and
B. Representations and Warranties of the Investment Company
The Investment Company represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and in
good standing under the laws of its state of organization;
(2) It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform its obligations under this
Agreement;
(3) All corporate proceedings required by said Charter and By-Laws
have been taken to authorize it to enter into and perform its
obligations under this Agreement;
(4) The Investment Company is an open-end investment company
registered under the 1940 Act; and
(5) A registration statement under the 1933 Act will be effective, and
appropriate state securities law filings have been made and will
continue to be made, with respect to all Shares of each Fund being
offered for sale.
Article 23. Standard of Care and Indemnification.
A. Standard of Care
With regard to Sections One, Three and Four, the Company shall be held
to a standard of reasonable care in carrying out the provisions of this
Contract. The Company shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Investment Company) on all
matters, and shall be without liability for any action reasonably taken
or omitted pursuant to such advice, provided that such action is not in
violation of applicable federal or state laws or regulations, and is in
good faith and without negligence.
B. Indemnification by Investment Company
The Company shall not be responsible for and the Investment Company or
Fund shall indemnify and hold the Company, including its officers,
directors, shareholders and their agents, employees and affiliates,
harmless against any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liabilities arising out of or attributable
to:
(1) The acts or omissions of any Custodian, Adviser, Sub-adviser or
other party contracted by or approved by the Investment Company
or Fund,
(2) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in proper
form which
(a) are received by the Company or its agents or subcontractors
and furnished to it by or on behalf of the Fund, its
Shareholders or investors regarding the purchase, redemption
or transfer of Shares and Shareholder account information;
(b) are received by the Company from independent pricing services
or sources for use in valuing the assets of the Funds; or
(c) are received by the Company or its agents or subcontractors
from Advisers, Sub-advisers or other third parties
contracted by or approved by the Investment Company of Fund
for use in the performance of services under this Agreement;
(d) have been prepared and/or maintained by the Fund or its
affiliates or any other person or firm on behalf of the
Investment Company.
(3) The reliance on, or the carrying out by the Company or its agents
or subcontractors of Proper Instructions of the Investment
Company or the Fund.
(4) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws
or regulations of any state that such Shares be registered in such
state or in violation of any stop order or other determination or
ruling by any federal agency or any state with respect to the
offer or sale of such Shares in such state.
Provided, however, that the Company shall not be protected by this
Article 23.B. from liability for any act or omission resulting
from the Company's willful misfeasance, bad faith, negligence or
reckless disregard of its duties or failure to meet the standard
of care set forth in 23.A. above.
C. Reliance
At any time the Company may apply to any officer of the Investment
Company or Fund for instructions, and may consult with legal counsel
with respect to any matter arising in connection with the services to be
performed by the Company under this Agreement, and the Company and its
agents or subcontractors shall not be liable and shall be indemnified by
the Investment Company or the appropriate Fund for any action reasonably
taken or omitted by it in reliance upon such instructions or upon the
opinion of such counsel provided such action is not in violation of
applicable federal or state laws or regulations. The Company, its agents
and subcontractors shall be protected and indemnified in recognizing
stock certificates which are reasonably believed to bear the proper
manual or facsimile signatures of the officers of the Investment Company
or the Fund, and the proper countersignature of any former transfer
agent or registrar, or of a co-transfer agent or co-registrar.
D. Notification
In order that the indemnification provisions contained in this Article
23 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification
shall promptly notify the other party of such assertion, and shall keep
the other party advised with respect to all developments concerning such
claim. The party who may be required to indemnify shall have the option
to participate with the party seeking indemnification in the defense of
such claim. The party seeking indemnification shall in no case confess
any claim or make any compromise in any case in which the other party
may be required to indemnify it except with the other party's prior
written consent.
Article 24. Term and Termination of Agreement.
This Agreement shall be effective from September 1, 1997, and shall continue
until February 28, 2003 (`Term"). Thereafter, the Agreement will continue for 18
month terms. The Agreement can be terminated by either party upon 18 months
notice to be effective as of the end of such 18 month period. In the event,
however, of willful misfeasance, bad faith, negligence or reckless disregard of
its duties by the Company, the Investment Company has the right to terminate the
Agreement upon 60 days written notice, if Company has not cured such willful
misfeasance, bad faith, negligence or reckless disregard of its duties within 60
days. The termination date for all original or after-added Investment companies
which are, or become, a party to this Agreement. shall be coterminous.
Investment Companies that merge or dissolve during the Term, shall cease to be a
party on the effective date of such merger or dissolution.
Should the Investment Company exercise its rights to terminate, all
out-of-pocket expenses associated with the movement of records and materials
will be borne by the Investment Company or the appropriate Fund. Additionally,
the Company reserves the right to charge for any other reasonable expenses
associated with such termination. The provisions of Articles 10 and 23 shall
survive the termination of this Agreement.
Article 25. Amendment.
This Agreement may be amended or modified by a written agreement executed by
both parties.
Article 26. Interpretive and Additional Provisions.
In connection with the operation of this Agreement, the Company and the
Investment Company may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Agreement as may in their joint
opinion be consistent with the general tenor of this Agreement. Any such
interpretive or additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such interpretive or
additional provisions shall contravene any applicable federal or state
regulations or any provision of the Charter. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Agreement.
Article 27. Governing Law.
This Agreement shall be construed and the provisions hereof interpreted under
and in accordance with the laws of the Commonwealth of Massachusetts
Article 28. Notices.
Except as otherwise specifically provided herein, Notices and other writings
delivered or mailed postage prepaid to the Company at Federated Investors Tower,
c/o John W. McGonigle, 1001 Liberty Avenue, Pittsburgh, Pennsylvania,
15222-3779, or to such other address as the Investment Company or the Company
may hereafter specify, shall be deemed to have been properly delivered or given
hereunder to the respective address.
Article 29. Counterparts.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original. Article 30. Limitations of Liability
of Trustees and Shareholders of the Company.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Company and signed by an authorized officer of the Company,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, and
the obligations of this Agreement are not binding upon any of the Trustees or
Shareholders of the Company, but bind only the appropriate property of the Fund,
or Class, as provided in the Declaration of Trust.
Article 31. Merger of Agreement.
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof whether
oral or written.
Article 32. Successor Agent.
If a successor agent for the Investment Company shall be appointed by the
Investment Company, the Company shall upon termination of this Agreement deliver
to such successor agent at the office of the Company all properties of the
Investment Company held by it hereunder. If no such successor agent shall be
appointed, the Company shall at its office upon receipt of Proper Instructions
deliver such properties in accordance with such instructions.
In the event that no written order designating a successor agent or Proper
Instructions shall have been delivered to the Company on or before the date when
such termination shall become effective, then the Company shall have the right
to deliver to a bank or trust company, which is a "bank" as defined in the 1940
Act, of its own selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than $2,000,000, all
properties held by the Company under this Agreement. Thereafter, such bank or
trust company shall be the successor of the Company under this Agreement.
Article 33. Force Majeure.
The Company shall have no liability for cessation of services hereunder or
any damages resulting therefrom to the Fund as a result of work stoppage, power
or other mechanical failure, natural disaster, governmental action,
communication disruption or other impossibility of performance.
Article 34. Assignment; Successors.
This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party may assign all of
or a substantial portion of its business to a successor, or to a party
controlling, controlled by, or under common control with such party. Nothing in
this Article 34 shall prevent the Company from delegating its responsibilities
to another entity to the extent provided herein.
Article 35. Severability.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
Article 36. Limitations of Liability of Trustees and Shareholders of the
Investment Company.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Investment Company and signed by an authorized officer of the
Investment Company, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on any of them
personally, and the obligations of this Agreement are not binding upon any of
the Trustees or Shareholders of the Investment Company, but bind only the
property of the Fund, or Class, as provided in the Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
INVESTMENT COMPANIES
(listed on Exhibit 1)
By: /s/ S. Elliott Cohan
Name: S. Elliott Cohan
Title: Assistant Secretary
FEDERATED SERVICES COMPANY
By: /s/ Thomas J. Ward
Name: Thomas J. Ward
Title: Secretary
<PAGE>
EXHIBIT 1
INVESTMENT COMPANY
Federated Equity Funds Federated Aggressive Growth Fund Class A Shares Class B
Shares Class C Shares Federated Capital Appreciation Fund Class A Shares Class B
Shares Class C Shares Federated Growth Strategies Fund Class A Shares Class B
Shares Class C Shares Federated Small Cap Strategies Fund Class A Shares Class B
Shares Class C Shares
