1933 Act File No. 33-6901
1940 Act File No. 811-4743
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. 28 X
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 25 X
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FEDERATED EQUITY INCOME FUND, INC.
(Exact Name of Registrant as Specified in Charter)
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent for Service)
It is proposed that this filing will become effective:
____ immediately upon filing pursuant to paragraph (b) ___ on __________________
pursuant to paragraph (b) _X__ 60 days after filing pursuant to paragraph (a)
(i) _ __ on __ pursuant to paragraph (a)(i) ____ 75 days after filing pursuant
to paragraph (a) (ii) ____ on _______________ pursuant to paragraph (a) (ii) of
Rule 485.
If appropriate, check the following box:
____ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Copies to:
Matthew G. Maloney, Esquire
Dickstein Shapiro Morin and Oshinsky, LLP
2101 L Street, N.W.
Washington, D.C. 20037
FEDERATED EQUITY INCOME FUND, INC.
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
A mutual fund seeking to provide above average income and capital appreciation
by investing primarily in income-producing equity securities.
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.
May 31, 2000
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in
Which the Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 6
What Do Shares Cost? 6
How is the Fund Sold? 9
How to Purchase Shares 9
How to Redeem and Exchange Shares 11
Account and Share Information 14
Who Manages the Fund? 15
Financial Information 16
RISK/RETURN SUMMARY
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund's investment objective is to provide above average income and capital
appreciation. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by following the strategies and
policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund pursues its investment objective by investing primarily in
income-producing equity securities, including securities that are convertible
into common stocks. The Adviser ordinarily selects securities that have a
comparatively low volatility in share price relative to the overall equity
market and which may provide relatively high dividend income, but may also
select securities of companies that offer superior growth prospects.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, it is possible to
lose money by investing in the Fund. The primary factors that may reduce the
Fund's returns include:
o STOCK MARKET RISKS. The value of equity securities in the Fund's portfolio
will fluctuate and, as a result, the Fund's share price may decline
suddenly or over a sustained period of time.
O INVESTMENT STYLE RISK
The Fund may employ a combination of styles that impact its risk
characteristics, such as growth and value investing. Due to the Fund's "blend"
style of investing, the Fund's share price may lag that of other funds using a
different investment style.
The Shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency.
RISK/RETURN BAR CHART AND TABLE
[TO BE FILED BY 485B AMENDMENT]
WHAT ARE THE FUND'S INVESTMENT STRATEGIES?
The Fund pursues its investment objective by investing at least 65% of its
assets in income-producing equity securities, including securities that are
convertible into common stocks. The Fund's holdings ordinarily will be in large
and middle capitalization companies. The Adviser attempts to manage the Fund so
that, on average, the Fund's portfolio yield is at least 50% greater than the
yield of the Standard & Poor's 500 Index (the "Index"). A description of the
various types of securities in which the Fund invests, and their risks,
immediately follows the strategy discussion.
Companies with similar characteristics may be grouped together in broad
categories called sectors. The Adviser diversifies the Fund's investments,
limiting the Fund's risk exposure with respect to individual securities and
industry sectors. In attempting to remain relatively sector-neutral, and in
order to manage sector risk, the Adviser attempts to limit the Fund's exposure
to each industry sector in the Index, as a general matter, to not less than 80%
nor more than 120% of the Index's allocation to that sector.
The Adviser performs a technical review of potential issuers, looking at
criteria appropriate to the Fund's investment goals. The Adviser examines
primarily large and middle capitalization companies, which, in the Adviser's
opinion, are trading at a low valuation in relation to their historic and
current market prices, and to their expected future price based on projected
earnings. In addition, the equity securities held by the Fund will generally
have a history and an expectation of paying increasing dividends to
shareholders. The Adviser also looks for securities of companies that may offer
superior growth prospects.
Additionally, the Adviser performs traditional fundamental analysis to
select securities that exhibit the most promising long-term value for the Fund's
portfolio, as well as securities that exhibit growth characteristics. In
selecting securities, the Adviser focuses on the current financial condition of
the issuing company, in addition to examining its business and product strength,
earnings quality, competitive position, management expertise and sustainability
of current growth trends. Further, the Adviser considers current economic,
financial market, and industry factors, which may affect the issuing company. To
determine the timing of purchases of portfolio securities, the Adviser compares
the current stock price of an issuer with the Adviser's judgment as to that
stock's current and expected value based on projected future earnings. The
Adviser sells a portfolio security if it determines that the issuer's prospects
have deteriorated, or if it finds an attractive security which the Adviser deems
has superior risk and return characteristics to a security held by the Fund.
The Adviser ordinarily uses the "blend" style of investing, selecting
securities that may have a comparatively low volatility in share price relative
to the overall equity market and which may provide relatively high dividend
income, as well as securities that may offer superior growth prospects. When the
Adviser uses a "value" style of investing, the price of the securities held by
the Fund may not, under certain market conditions, increase as rapidly as stocks
selected primarily for their growth attributes. In addition, some securities in
which the Adviser invests may have "growth" style characteristics because the
Fund is sector-neutral in its investment approach.
The Fund purchases convertible preferred stocks and convertible bonds, which
have a higher yield than common stocks, in order to increase the Fund's yield
and to generally provide a measure of protection against market declines.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash, cash items, and shorter-term, higher-quality debt
securities and similar obligations. It may do this to minimize potential losses
and maintain liquidity to meet shareholder redemptions during adverse market
conditions. This may cause the Fund to give up greater investment returns to
maintain the safety of principal, that is, the original amount invested by
shareholders.
WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?
EQUITY SECURITIES
Equity securities represent a share of an issuer's earnings and assets, after
the issuer pays its liabilities. The Fund cannot predict the income it will
receive from equity securities because issuers generally have discretion as to
the payment of any dividends or distributions. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business. The
following describes the principal types of equity securities in which the Fund
invests.
COMMON STOCKS
Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings directly
influence the value of its common stock.
CONVERTIBLE SECURITIES
Convertible securities are convertible preferred stock or convertible bonds that
the Fund has the option to exchange for equity securities of the issuer at a
specified conversion price. The option allows the Fund to realize additional
returns if the market price of the equity securities exceeds the conversion
price. For example, the Fund may hold securities that are convertible into
shares of common stock at a conversion price of $10 per share. If the market
value of the shares of common stock reached $12, the Fund could realize an
additional $2 per share by converting its securities.
Convertible preferred stock and convertible bonds pay or accrue interest or
dividends at a specified rate. The rate may be a fixed percentage of the
principal or adjusted periodically. In addition, the issuer of a convertible
bond must repay the principal amount of the bond, normally within a specified
time. Convertible preferred stock and convertible bonds provide more income than
equity securities.
WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?
STOCK MARKET RISKS
The value of equity securities in the Fund's portfolio will rise and fall. These
fluctuations could be a sustained trend or a drastic movement. The Fund's
portfolio will reflect changes in prices of individual portfolio stocks or
general changes in stock valuations. Consequently, the Fund's share price may
decline.
The Adviser attempts to manage market risk by limiting the amount the Fund
invests in each company's equity securities. However, diversification will not
protect the Fund against widespread or prolonged declines in the stock market.
INVESTMENT STYLE RISK
Securities with different characteristics tend to shift in and out of favor
depending upon market and economic conditions as well as investor sentiment. A
fund may outperform other funds that employ a different style. The Fund may
employ a combination of styles that impact its risk characteristics, such as
growth and value investing. Growth stocks may be more volatile than other stocks
because they are more sensitive to investor perceptions of the issuing company's
growth of earnings potential. Growth oriented funds will typically underperform
when value investing is in favor. Value stocks are those which are out of favor
or undervalued in comparison to their peers due to adverse business developments
or other factors. Value oriented funds will typically underperform when growth
investing is in favor.
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 calculated net asset value (NAV) plus any applicable
front-end sales charge (public offering price). NAV is determined at the end of
regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.
The Fund's current NAV and public offering price may be found in the mutual
funds section of certain local newspapers under "Federated" and the appropriate
class designation listing.
The following table summarizes the minimum required investment amount and the
maximum sales charge, if any, that you will pay on an investment in the Fund.
Keep in mind that investment professionals may charge you fees for their
services in connection with your Share transactions.
MAXIMUM SALES
CHARGE
SHARES MINIMUM FRONT-ENCONTINGENT
OFFERED INITIAL/ SALES DEFERRED
SUBSEQUENCHARGE2 SALES
INVESTMENT CHARGE3
AMOUNTS1
Class A $1,500/$15.50% 0.00%
Class B $1,500/$1None 5.50%
Class C $1,500/$1None 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. INVESTMENT PROFESSIONALS MAY IMPOSE
HIGHER OR LOWER MINIMUM INVESTMENT REQUIREMENTS ON THEIR CUSTOMERS THAN THOSE
IMPOSED BY THE FUND. ORDERS FOR $250,000 OR MORE WILL BE INVESTED IN CLASS A
SHARES INSTEAD OF CLASS B SHARES TO MAXIMIZE YOUR RETURN AND MINIMIZE THE
SALES CHARGES AND MARKETING FEES. ACCOUNTS HELD IN THE NAME OF AN INVESTMENT
PROFESSIONAL MAY BE TREATED DIFFERENTLY. CLASS B SHARES WILL AUTOMATICALLY
CONVERT INTO CLASS A SHARES AFTER EIGHT FULL YEARS FROM THE PURCHASE DATE.
THIS CONVERSION IS A NON-TAXABLE EVENT.
2 FRONT-END SALES CHARGE IS EXPRESSED AS A PERCENTAGE OF PUBLIC OFFERING PRICE.
SEE "SALES CHARGE WHEN YOU PURCHASE."
3 SEE "SALES CHARGE WHEN YOU REDEEM."
SALES CHARGE WHEN YOU PURCHASE
CLASS A SHARES
Purchase Sales Sales
Amount Charge Charge
as a as a
Percentage Percentage
of of NAV
Public
Offering
Price
Less than 5.50% 5.82%
$50,000
$50,000 but 4.50% 4.71%
less than
$100,000
$100,000 but 3.75% 3.90%
less than
$250,000
$250,000 but 2.50% 2.56%
less than
$500,000
$500,000 but 2.00% 2.04%
less than
$1million
$1million or 0.00% 0.00%
greater1
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:
n purchasing Shares in greater quantities to reduce the applicable sales
charge;
n combining concurrent purchases of Shares:
- - by you, your spouse, and your children under age 21; or
- - of the same share class of two or more Federated Funds (other than money
market funds);
n accumulating purchases (in calculating the sales charge on an additional
purchase, include the current value of previous Share purchases still
invested in the Fund); or
n signing a letter of intent to purchase a specific dollar amount of Shares
within 13 months (call your investment professional or the Fund for more
information).
THE SALES CHARGE WILL BE ELIMINATED WHEN YOU PURCHASE SHARES: n within 120
days of redeeming Shares of an equal or lesser amount; n by exchanging shares
from the same share class of another Federated Fund (other than a money market
fund);
n through wrap accounts or other investment programs where you pay the
investment professional directly for services;
n through investment professionals that receive no portion of the sales
charge;
n as a Federated Life Member (Class A Shares only) and their immediate family
members; or
n as a Director or employee of the Fund, the Adviser, the Distributor and
their affiliates, and the immediate family members of these individuals.
If your investment qualifies for a reduction or elimination of the sales charge,
you or your investment professional should notify the Fund's Distributor,
Federated Securities Corp., at the time of purchase. If the Distributor is not
notified, you will receive the reduced sales charge only on additional
purchases, and not retroactively on previous purchases.
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 A SHARES A CDSC of 0.75% of
the redemption amount applies to ClassA Shares redeemed up to 24 months after
purchase under certain investment programs where an investment professional
received an advance payment on the transaction.
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:
n purchased with reinvested dividends or capital gains;
n purchased within 120 days of redeeming Shares of an equal or lesser amount;
n that you exchanged into the same share class of another Federated Fund
where the shares were held for the applicable CDSC holding period (other
than a money market fund);
n purchased through investment professionals who did not receive advanced
sales payments; or
n if, after you purchase Shares, you become disabled as defined by the IRS.
IN ADDITION, YOU WILL NOT BE CHARGED A CDSC:
n if the Fund redeems your Shares and closes your account for not meeting the
minimum balance requirement;
n if your redemption is a required retirement plan distribution; n upon the
death of the last surviving shareholder of the account. If your redemption
qualifies, you or your investment professional should notify the
Distributor at the time of redemption to eliminate the CDSC. If the
Distributor is not notified, the CDSC will apply.
TO KEEP THE SALES CHARGE AS LOW AS POSSIBLE, THE FUND REDEEMS YOUR SHARES IN
THIS ORDER: n Shares that are not subject to a CDSC; and n Shares held the
longest (to determine the number of years your Shares have been
held, include the time you held shares of other Federated Funds that have been
exchanged for Shares of this Fund).
The CDSC is then calculated using the share price at the time of purchase or
redemption, whichever is lower.
HOW IS THE FUND SOLD?
The Fund offers four share classes: Class A Shares, Class B Shares, Class C
Shares and Class F Shares, each representing interests in a single portfolio of
securities. This prospectus relates only to Class A Shares, Class B Shares and
Class C Shares. Each share class has different sales charges and other expenses,
which affect their performance. Contact your investment professional or call
1-800-341-7400 for more information concerning the other class.
The Fund's Distributor markets the Shares described in this prospectus to
institutions or individuals, directly or through investment professionals.
When the Distributor receives sales charges and marketing fees, it may pay
some or all of them to investment professionals. The Distributor and its
affiliates may pay out of their assets other amounts (including items of
material value) to investment professionals for marketing and servicing Shares.
The Distributor is a subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Class A, Class B and Class C Shares. Because
these Shares pay marketing fees on an ongoing basis, your investment cost may be
higher over time than other shares with different sales charges and marketing
fees.
HOW TO PURCHASE SHARES
You may purchase Shares through an investment professional, directly from the
Fund, or through an exchange from another Federated Fund. The Fund reserves the
right to reject any request to purchase or exchange Shares.
Where the Fund offers more than one share class and you do not specify the
class choice on your New Account Form or form of payment (e.g., Federal Reserve
wire or check) you automatically will receive Class A Shares.
THROUGH AN INVESTMENT PROFESSIONAL
n Establish an account with the investment professional; and
n Submit your purchase order to the investment professional before the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will
receive the next calculated NAV if the investment professional forwards the
order to the Fund on the same day and the Fund receives payment within
three business days. You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
n Establish your account with the Fund by submitting a completed New Account
Form; and
n Send your payment to the Fund by Federal Reserve wire or check. You will
become the owner of Shares and your Shares will be priced at the next
calculated NAV after the Fund receives your wire or your check. If your
check does not clear, your purchase will be canceled and you could be
liable for any losses or fees the Fund or its transfer agent incurs.
An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the next calculated NAV after the Fund receives
the order.
BY WIRE Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third- party checks (checks originally payable to someone other than
you or The Federated Funds).
THROUGH AN EXCHANGE
You may purchase Shares through an exchange from the same Share class of another
Federated Fund. You must meet the minimum initial investment requirement for
purchasing Shares and both accounts must have identical registrations.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program
section of the New Account Form or by contacting the Fund or your investment
professional.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
RETIREMENT INVESTMENTS
You may purchase Shares as retirement investments (such as qualified plans and
IRAs or transfer or rollover of assets). Call your investment professional or
the Fund for information on retirement investments. We suggest that you discuss
retirement investments with your tax adviser. You may be subject to an annual
IRA account fee.
HOW TO REDEEM AND EXCHANGE SHARES
You should redeem or exchange Shares:
n through an investment professional if you purchased Shares through an
investment professional; or
n directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption or exchange request to your investment professional by
the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). The
redemption amount you will receive is based upon the next calculated NAV after
the Fund receives the order from your investment professional.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem or exchange Shares by calling the Fund once you have completed
the appropriate authorization form for telephone transactions. If you call
before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time)
you will receive a redemption amount based on that day's NAV.
BY MAIL
You may redeem or exchange Shares by mailing a written request to the Fund. You
will receive a redemption amount based on the next calculated NAV after the Fund
receives your written request in proper form. Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317 All requests must include:
n Fund Name and Share Class, account number and account registration;
n amount to be redeemed or exchanged;
n signatures of all shareholders exactly as registered; and
n IF EXCHANGING, the Fund Name and Share Class, account number and account
registration into which you are exchanging.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES Signatures must be guaranteed if:
n your redemption will be sent to an address other than the address of
record;
n your redemption will be sent to an address of record that was changed
within the last 30 days;
n a redemption is payable to someone other than the shareholder(s) of record;
or
n IF EXCHANGING (TRANSFERRING) into another fund with a different shareholder
registration.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
n an electronic transfer to your account at a financial institution that is
an ACH member; or
n 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:
n to allow your purchase to clear;
n during periods of market volatility; or
n when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
REDEMPTIONS FROM RETIREMENT ACCOUNTS
In the absence of your specific instructions, 10% of the value of your
redemption from a retirement account in the Fund may be withheld for taxes. This
withholding only applies to certain types of retirement accounts.
EXCHANGE PRIVILEGES
You may exchange Shares of the Fund into Shares of the same class of another
Federated Fund. To do this, you must: n ensure that the account registrations
are identical; n meet any minimum initial investment requirements; and n receive
a prospectus for the fund into which you wish to exchange. An exchange is
treated as a redemption and a subsequent purchase, and is a taxable transaction.
The Fund may modify or terminate the exchange privilege at any time. The
Fund's management or investment adviser may determine from the amount, frequency
and pattern of exchanges that a shareholder is engaged in excessive trading that
is detrimental to the Fund and other shareholders. If this occurs, the Fund may
terminate the availability of exchanges to that shareholder and may bar that
shareholder from purchasing other Federated Funds.
SYSTEMATIC WITHDRAWAL/EXCHANGE PROGRAM
You may automatically redeem or exchange Shares in a minimum amount of $100 on a
regular basis. Complete the appropriate section of the New Account Form or an
Account Service Options Form or contact your investment professional or the
Fund. Your account value must meet the minimum initial investment amount at the
time the program is established. This program may reduce, and eventually
deplete, your account. Payments should not be considered yield or income.
Generally, it is not advisable to continue to purchase 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:
n you redeem 12% or less of your account value in a single year;
n you reinvest all dividends and capital gains distributions; and
n your account has at least a $10,000 balance when you establish the SWP.
(You cannot aggregate multiple Class B Share accounts to meet this minimum
balance.) You will be subject to a CDSC on redemption amounts that exceed
the 12% annual limit. In measuring the redemption percentage, your account
is valued when you establish the SWP and then annually at calendar
year-end. You can redeem monthly, quarterly, or semi-annually.
For SWP accounts established prior to April 1, 1999, your account must be at
least one year old in order to be eligible for the waiver of the CDSC.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming or exchanging
Shares represented by certificates previously issued by the Fund, you must
return the certificates with your written redemption or exchange request. For
your protection, send your certificates by registered or certified mail, but do
not endorse them.
ACCOUNT AND SHARE INFORMATION
CONFIRMATIONS AND ACCOUNT STATEMENTS
You will receive confirmation of purchases, redemptions and exchanges (except
for systematic transactions). In addition, you will receive periodic statements
reporting all account activity, including dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares and pays any dividends monthly to shareholders. Dividends are
paid to all shareholders invested in the Fund on the record date. The record
date is the date on which a shareholder must officially own Shares in order to
earn a dividend.
In addition, the Fund pays any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
If you purchase Shares just before a Fund declares a dividend or capital gain
distribution, you will pay the full price for the Shares and then receive a
portion of the price back in the form of a taxable distribution, whether or not
you reinvest the distribution in Shares. Therefore, you should consider the tax
implications of purchasing Shares shortly before the Fund declares a dividend or
capital gain. Contact your investment professional or the Fund for information
concerning when dividends and capital gains will be paid.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, non-retirement
accounts may be closed if redemptions or exchanges cause the account balance to
fall below the minimum initial investment amount. Before an account is closed,
you will be notified and allowed 30 days to purchase additional Shares to meet
the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.
Fund distributions are expected to be both dividends and capital gains.
Redemptions and exchanges are taxable sales. Please consult your tax adviser
regarding your federal, state and local tax liability.
WHO MANAGES THE FUND?
The Board of Directors governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. 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 Adviser and other subsidiaries of Federated advise approximately 175
mutual funds and separate accounts, which total approximately $111 billion in
assets as of December 31, 1998. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
THE FUND'S PORTFOLIO MANAGERS ARE:
LINDA A. DUESSEL
Linda A. Duessel has been the Fund's portfolio manager since February 1997. She
is Vice President of the Fund. Ms. Duessel joined Federated in 1991 and has been
a Portfolio Manager and a Vice President of the Fund's Adviser since 1995. Ms.
Duessel was a Senior Investment Analyst and an Assistant Vice President of the
Fund's Adviser from 1991 until 1995. Ms. Duessel is a Chartered Financial
Analyst and received her M.S. in Industrial Administration from Carnegie Mellon
University.
STEVEN J. LEHMAN
Steven J. Lehman has been the Fund's portfolio manager since September 1997. Mr.
Lehman joined the Fund's Adviser in May 1997 as a Portfolio Manager and Vice
President. He has been a Senior Portfolio Manager since 1998. From 1986 to May
1997, Mr. Lehman served as a Portfolio Manager, then Vice President/Senior
Portfolio Manager, at First Chicago NBD. Mr. Lehman is a Chartered Financial
Analyst; he received his M.A. from the University of Chicago.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.60% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years, or since inception, if the life of
the Fund is shorter. Some of the information is presented on a per share basis.
Total returns represent the rate an investor would have earned (or lost) on an
investment in the Fund, assuming reinvestment of any dividends and capital
gains.
This information has been audited by Ernst & Young LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.
FEDERATED EQUITY INCOME FUND, INC.
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
May 31, 2000
A Statement of Additional Information (SAI) dated May 31, 2000, is incorporated
by reference into this prospectus. Additional information about the Fund's
investments is contained in the Fund's Annual and Semi- Annual Reports to
shareholders as they become available. The Annual Report discusses market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year. To obtain the SAI, the Annual Report,
Semi-Annual Report and other information without charge, and make inquiries,
call your investment professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by visiting or
writing the Public Reference Room of the Securities and Exchange Commission in
Washington, DC 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.
INVESTMENT COMPANY ACT FILE NO. 811-4743
CUSIP 313915100
CUSIP 313915209
CUSIP 313915308
G00492-01 (5/00)
FEDERATED EQUITY INCOME FUND, INC.
CLASS F SHARES
A mutual fund seeking to provide above average income and capital appreciation
by investing primarily in income-producing equity securities.
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.
May 31, 2000
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in
Which the Fund Invests? 6
What are the Specific Risks of Investing in the Fund? 6
What Do Shares Cost? 7
How is the Fund Sold? 9
How to Purchase Shares 9
How to Redeem and Exchange Shares 11
Account and Share Information 13
Who Manages the Fund? 14
Financial Information 16
RISK/RETURN SUMMARY
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund's investment objective is to provide above average income and capital
appreciation. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by following the strategies and
policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund pursues its investment objective by investing primarily in
income-producing equity securities, including securities that are convertible
into common stocks. The Adviser ordinarily selects securities that have a
comparatively low volatility in share price relative to the overall equity
market and which may provide relatively high dividend income, but may also
select securities of companies that offer superior growth prospects.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, it is possible to lose
money by investing in the Fund. The primary factors that may reduce the Fund's
returns include:
o STOCK MARKET RISKS. The value of equity securities in the Fund's portfolio
will fluctuate and, as a result, the Fund's share price may decline
suddenly or over a sustained period of time.
O INVESTMENT STYLE RISK
The Fund may employ a combination of styles that impact its risk
characteristics, such as growth and value investing. Due to the Fund's "blend"
style of investing, the Fund's share price may lag that of other funds using a
different investment style.
n
RISK/RETURN BAR CHART AND TABLE
[TO BE FILED BY 485B AMENDMENT]
WHAT ARE THE FUND'S INVESTMENT STRATEGIES?
The Fund pursues its investment objective by investing at least 65% of its
assets in income-producing equity securities, including securities that are
convertible into common stocks. The Fund's holdings ordinarily will be in large
and middle capitalization companies. The Adviser attempts to manage the Fund so
that, on average, the Fund's portfolio yield is at least 50% greater than the
yield of the Standard & Poor's 500 Index (the "Index"). A description of the
various types of securities in which the Fund invests, and their risks,
immediately follows the strategy discussion.
Companies with similar characteristics may be grouped together in broad
categories called sectors. The Adviser diversifies the Fund's investments,
limiting the Fund's risk exposure with respect to individual securities and
industry sectors. In attempting to remain relatively sector-neutral, and in
order to manage sector risk, the Adviser attempts to limit the Fund's exposure
to each industry sector in the Index, as a general matter, to not less than 80%
nor more than 120% of the Index's allocation to that sector.
The Adviser performs a technical review of potential issuers, looking at
criteria appropriate to the Fund's investment goals. The Adviser examines
primarily large and middle capitalization companies, which, in the Adviser's
opinion, are trading at a low valuation in relation to their historic and
current market prices, and to their expected future price based on projected
earnings. In addition, the equity securities held by the Fund will generally
have a history and an expectation of paying increasing dividends to
shareholders. The Adviser also looks for securities of companies that may offer
superior growth prospects.
Additionally, the Adviser performs traditional fundamental analysis to
select securities that exhibit the most promising long-term value for the Fund's
portfolio, as well as securities that exhibit growth characteristics. In
selecting securities, the Adviser focuses on the current financial condition of
the issuing company, in addition to examining its business and product strength,
earnings quality, competitive position, management expertise and sustainability
of current growth trends. Further, the Adviser considers current economic,
financial market, and industry factors, which may affect the issuing company. To
determine the timing of purchases of portfolio securities, the Adviser compares
the current stock price of an issuer with the Adviser's judgment as to that
stock's current and expected value based on projected future earnings. The
Adviser sells a portfolio security if it determines that the issuer's prospects
have deteriorated, or if it finds an attractive security which the Adviser deems
has superior risk and return characteristics to a security held by the Fund.
The Adviser ordinarily uses the "blend" style of investing, selecting
securities that may have a comparatively low volatility in share price relative
to the overall equity market and which may provide relatively high dividend
income, as well as securities that may offer superior growth prospects. When the
Adviser uses a "value" style of investing, the price of the securities held by
the Fund may not, under certain market conditions, increase as rapidly as stocks
selected primarily for their growth attributes. In addition, some securities in
which the Adviser invests may have "growth" style characteristics because the
Fund is sector-neutral in its investment approach.
The Fund purchases convertible preferred stocks and convertible bonds, which
have a higher yield than common stocks, in order to increase the Fund's yield
and to generally provide a measure of protection against market declines.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash, cash items, and shorter-term, higher quality debt
securities and similar obligations. It may do this to minimize potential losses
and maintain liquidity to meet shareholder redemptions during adverse market
conditions. This may cause the Fund to give up greater investment returns to
maintain the safety of principal, that is, the original amount invested by
shareholders.
WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?
EQUITY SECURITIES
Equity securities represent a share of an issuer's earnings and assets, after
the issuer pays its liabilities. The Fund cannot predict the income it will
receive from equity securities because issuers generally have discretion as to
the payment of any dividends or distributions. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business. The
following describes the principal types of equity securities in which the Fund
invests.
COMMON STOCKS
Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings directly
influence the value of its common stock.
CONVERTIBLE SECURITIES
Convertible securities are convertible preferred stock or convertible bonds that
the Fund has the option to exchange for equity securities of the issuer at a
specified conversion price. The option allows the Fund to realize additional
returns if the market price of the equity securities exceeds the conversion
price. For example, the Fund may hold securities that are convertible into
shares of common stock at a conversion price of $10 per share. If the market
value of the shares of common stock reached $12, the Fund could realize an
additional $2 per share by converting its securities.
Convertible preferred stock and convertible bonds pay or accrue interest or
dividends at a specified rate. The rate may be a fixed percentage of the
principal or adjusted periodically. In addition, the issuer of a convertible
bond must repay the principal amount of the bond, normally within a specified
time. Convertible preferred stock and convertible bonds provide more income than
equity securities.
WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?
STOCK MARKET RISKS
The value of equity securities in the Fund's portfolio will rise and fall. These
fluctuations could be a sustained trend or a drastic movement. The Fund's
portfolio will reflect changes in prices of individual portfolio stocks or
general changes in stock valuations. Consequently, the Fund's share price may
decline.
The Adviser attempts to manage market risk by limiting the amount the Fund
invests in each company's equity securities. However, diversification will not
protect the Fund against widespread or prolonged declines in the stock market.
INVESTMENT STYLE RISK
Securities with different characteristics tend to shift in and out of favor
depending upon market and economic conditions as well as investor sentiment. A
fund may outperform other funds that employ a different style. The Fund may
employ a combination of styles that impact its risk characteristics, such as
growth and value investing. Growth stocks may be more volatile than other stocks
because they are more sensitive to investor perceptions of the issuing company's
growth of earnings potential. Growth oriented funds will typically underperform
when value investing is in favor. Value stocks are those which are out of favor
or undervalued in comparison to their peers due to adverse business developments
or other factors. Value oriented funds will typically underperform when growth
investing is in favor.
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 calculated net asset value (NAV) plus any applicable
front-end sales charge (public offering price). NAV is determined at the end of
regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.
The Fund's current NAV and public offering price may be found in the mutual
funds section of certain local newspapers under "Federated" and the appropriate
class designation listing.
The following table summarizes the minimum required investment amount and the
maximum sales charge, if any, that you will pay on an investment in the Fund.
Keep in mind that investment professionals may charge you fees for their
services in connection with your Share transactions.
MAXIMUM SALES
CHARGE
MINIMUM FRONT-ENCONTINGENT
INITIAL/ SALES DEFERRED
SUBSEQUENCHARGE2 SALES
INVESTMENT CHARGE3
AMOUNTS1
Class F $1,500/$11.00% 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. INVESTMENT PROFESSIONALS MAY
IMPOSE HIGHER OR LOWER MINIMUM INVESTMENT REQUIREMENTS ON THEIR CUSTOMERS
THAN THOSE IMPOSED BY THE FUND.
2 FRONT-END SALES CHARGE IS EXPRESSED AS A PERCENTAGE OF PUBLIC OFFERING
PRICE. SEE "SALES CHARGE WHEN YOU PURCHASE."
3 SEE "SALES CHARGE WHEN YOU REDEEM."
SALES CHARGE WHEN YOU PURCHASE
CLASS F SHARES
Purchase Sales Sales
Amount Charge Charge
as a as a
Percentage Percentage
of of NAV
Public
Offering
Price
Less than 1.00% 1.01%
$1million
$1million or 0.00% 0.00%
greater
THE SALES CHARGE AT PURCHASE MAY BE ELIMINATED BY:
n purchasing Shares in greater quantities to reduce the applicable sales
charge;
n combining concurrent purchases of Shares:
- - by you, your spouse, and your children under age 21; or
- - of the same share class of two or more Federated Funds (other than money
market funds);
n accumulating purchases (in calculating the sales charge on an additional
purchase, include the current value of previous Share purchases still
invested in the Fund); or
n signing a letter of intent to purchase a specific dollar amount of Shares
within 13 months (call your investment professional or the Fund for more
information).
THE SALES CHARGE WILL BE ELIMINATED WHEN YOU PURCHASE SHARES:
n within 120 days of redeeming Shares of an equal or lesser amount;
n when the Fund's Distributor does not advance payment to the investment
professional for your purchase;
n by exchanging shares from the same share class of another Federated Fund;
n for trusts or pension or profit-sharing plans where the third-party
administrator has an arrangement with the Fund's Distributor or its
affiliates to purchase shares without a sales charge; or
n through investment professionals 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 should notify the Fund's
Distributor, Federated Securities Corp., at the time of purchase. If the
Distributor is not notified, you will receive the reduced sales charge only
on additional purchases, and not retroactively on previous purchases.
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 F SHARES
Purchase Amount Shares CDSC
Held
Up to $2million 4 years 1.00%
or less
$2 - $5million 2 years 0.50%
or less
$5million or more 1 year 0.25%
or less
YOU WILL NOT BE CHARGED A CDSC WHEN REDEEMING SHARES:
n.....purchased with reinvested dividends or capital gains;
n purchased within 120 days of redeeming Shares of an equal or lesser amount;
n that you exchanged into the same share class of another Federated Fund
where the shares were held for the applicable CDSC holding period (other
than a money market fund);
n purchased through investment professionals who did not receive advanced
sales payments; or
n if, after you purchase Shares, you become disabled as defined by the IRS.
IN ADDITION, YOU WILL NOT BE CHARGED A CDSC:
n if the Fund redeems your Shares and closes your account for not meeting the
minimum balance requirement;
n if your redemption is a required retirement plan distribution; n upon the
death of the last surviving shareholder of the account. If your redemption
qualifies, you or your investment professional should notify the
Distributor at the time of redemption to eliminate the CDSC. If the
Distributor is not notified, the CDSC will apply.
TO KEEP THE SALES CHARGE AS LOW AS POSSIBLE, THE FUND REDEEMS YOUR SHARES IN
THIS ORDER: n Shares that are not subject to a CDSC; and n Shares held the
longest (to determine the number of years your Shares have been
held, include the time you held shares of other Federated Funds that have been
exchanged for Shares of this Fund).
The CDSC is then calculated using the share price at the time of purchase or
redemption, whichever is lower.
HOW IS THE FUND SOLD?
The Fund offers four share classes: Class A Shares, Class B Shares, Class C
Shares and Class F Shares, each representing interests in a single portfolio of
securities. This prospectus relates only to Class F Shares. Each share class has
different sales charges and other expenses, which affect their performance.
Contact your investment professional or call 1-800-341-7400 for more information
concerning the other classes.
The Fund's Distributor markets the Shares described in this prospectus to
institutions or individuals, directly or through investment professionals.
When the Distributor receives sales charges and marketing fees, it may pay
some or all of them to investment professionals. The Distributor and its
affiliates may pay out of their assets other amounts (including items of
material value) to investment professionals for marketing and servicing Shares.
The Distributor is a subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Class F Shares. Because these Shares pay
marketing fees on an ongoing basis, your investment cost may be higher over time
than other shares with different sales charges and marketing fees.
HOW TO PURCHASE SHARES
You may purchase Shares through an investment professional, directly from the
Fund, or through an exchange from another Federated Fund. The Fund reserves the
right to reject any request to purchase or exchange Shares. Where the Fund
offers more than one share class and you do not specify the class choice on your
New Account Form or form of payment (e.g., Federal Reserve wire or check) you
automatically will receive Class A Shares.
THROUGH AN INVESTMENT PROFESSIONAL
n Establish an account with the investment professional; and
n Submit your purchase order to the investment professional before the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will
receive the next calculated NAV if the investment professional forwards the
order to the Fund on the same day and the Fund receives payment within
three business days. You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
n Establish your account with the Fund by submitting a completed New Account
Form; and
n Send your payment to the Fund by Federal Reserve wire or check. You will
become the owner of Shares and your Shares will be priced at the next calculated
NAV after the Fund receives your wire or your check. If your check does not
clear, your purchase will be canceled and you could be liable for any losses or
fees the Fund or its transfer agent incurs.
An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the next calculated NAV after the Fund receives
the order.
BY WIRE Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number, or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third- party checks (checks originally payable to someone other than
you or The Federated Funds).
THROUGH AN EXCHANGE
You may purchase Shares through an exchange from the same Share class of another
Federated Fund. You must meet the minimum initial investment requirement for
purchasing Shares and both accounts must have identical registrations.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program
section of the New Account Form or by contacting the Fund or your investment
professional.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
RETIREMENT INVESTMENTS
You may purchase Shares as retirement investments (such as qualified plans and
IRAs or transfer or rollover of assets). Call your investment professional or
the Fund for information on retirement investments. We suggest that you discuss
retirement investments with your tax adviser. You may be subject to an annual
IRA account fee.
HOW TO REDEEM AND EXCHANGE SHARES
You should redeem or exchange Shares:
n through an investment professional if you purchased Shares through an
investment professional; or
n directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption or exchange request to your investment professional by
the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). The
redemption amount you will receive is based upon the next calculated NAV after
the Fund receives the order from your investment professional.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem or exchange Shares by calling the Fund once you have completed
the appropriate authorization form for telephone transactions. If you call
before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time)
you will receive a redemption amount based on that day's NAV.
BY MAIL
You may redeem or exchange Shares by mailing a written request to the Fund. You
will receive a redemption amount based on the next calculated NAV after the Fund
receives your written request in proper form. Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317 All requests must include:
n Fund Name and Share Class, account number and account registration;
n amount to be redeemed or exchanged;
n signatures of all shareholders exactly as registered; and
n IF EXCHANGING, the Fund Name and Share Class, account number and account
registration into which you are exchanging.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES Signatures must be guaranteed if:
n your redemption will be sent to an address other than the address of
record;
n your redemption will be sent to an address of record that was changed
within the last 30 days;
n a redemption is payable to someone other than the shareholder(s) of record;
or
n IF EXCHANGING (TRANSFERRING) into another fund with a different shareholder
registration.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
n an electronic transfer to your account at a financial institution that is
an ACH member; or
n 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: n
to allow your purchase to clear; n during periods of market volatility; or n
when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
REDEMPTIONS FROM RETIREMENT ACCOUNTS
In the absence of your specific instructions, 10% of the value of your
redemption from a retirement account in the Fund may be withheld for taxes. This
withholding only applies to certain types of retirement accounts.
EXCHANGE PRIVILEGES
You may exchange Shares of the Fund into Shares of the same class of another
Federated Fund. To do this, you must: n ensure that the account registrations
are identical; n meet any minimum initial investment requirements; and n receive
a prospectus for the fund into which you wish to exchange. An exchange is
treated as a redemption and a subsequent purchase, and is a taxable transaction.
The Fund may modify or terminate the exchange privilege at any time. The
Fund's management or investment adviser may determine from the amount, frequency
and pattern of exchanges that a shareholder is engaged in excessive trading that
is detrimental to the Fund and other shareholders. If this occurs, the Fund may
terminate the availability of exchanges to that shareholder and may bar that
shareholder from purchasing other Federated Funds.
SYSTEMATIC WITHDRAWAL/EXCHANGE PROGRAM
You may automatically redeem or exchange Shares in a minimum amount of $100 on a
regular basis. Complete the appropriate section of the New Account Form or an
Account Service Options Form or contact your investment professional or the
Fund. Your account value must meet the minimum initial investment amount at the
time the program is established. This program may reduce, and eventually
deplete, your account. Payments should not be considered yield or income.
Generally, it is not advisable to continue to purchase Shares subject to a
sales charge while redeeming Shares using this program.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming or exchanging
Shares represented by certificates previously issued by the Fund, you must
return the certificates with your written redemption or exchange request. For
your protection, send your certificates by registered or certified mail, but do
not endorse them.
ACCOUNT AND SHARE INFORMATION
CONFIRMATIONS AND ACCOUNT STATEMENTS
You will receive confirmation of purchases, redemptions and exchanges (except
for systematic transactions). In addition, you will receive periodic statements
reporting all account activity, including dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares and pays any dividends monthly to shareholders. Dividends are
paid to all shareholders invested in the Fund on the record date. The record
date is the date on which a shareholder must officially own Shares in order to
earn a dividend.
In addition, the Fund pays any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
If you purchase Shares just before a Fund declares a dividend or capital gain
distribution, you will pay the full price for the Shares and then receive a
portion of the price back in the form of a taxable distribution, whether or not
you reinvest the distribution in Shares. Therefore, you should consider the tax
implications of purchasing Shares shortly before the Fund declares a dividend or
capital gain. Contact your investment professional or the Fund for information
concerning when dividends and capital gains will be paid.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, non-retirement
accounts may be closed if redemptions or exchanges cause the account balance to
fall below the minimum initial investment amount. Before an account is closed,
you will be notified and allowed 30 days to purchase additional Shares to meet
the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.
Fund distributions are expected to be both dividends and capital gains.
Redemptions and exchanges are taxable sales. Please consult your tax adviser
regarding your federal, state and local tax liability.
WHO MANAGES THE FUND?
The Board of Directors governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. 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 Adviser and other subsidiaries of Federated advise approximately 175
mutual funds and separate accounts, which total approximately $111 billion in
assets as of December 31, 1998. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
THE FUND'S PORTFOLIO MANAGERS ARE:
LINDA A. DUESSEL
Linda A. Duessel has been the Fund's portfolio manager since February 1997. She
is Vice President of the Fund. Ms. Duessel joined Federated in 1991 and has been
a Portfolio Manager and a Vice President of the Fund's Adviser since 1995. Ms.
Duessel was a Senior Investment Analyst and an Assistant Vice President of the
Fund's Adviser from 1991 until 1995. Ms. Duessel is a Chartered Financial
Analyst and received her M.S. in Industrial Administration from Carnegie Mellon
University.
STEVEN J. LEHMAN
Steven J. Lehman has been the Fund's portfolio manager since September 1997. Mr.
Lehman joined the Fund's Adviser in May 1997 as a Portfolio Manager and Vice
President. He has been a Senior Portfolio Manager since 1998. From 1986 to May
1997, Mr. Lehman served as a Portfolio Manager, then Vice President/Senior
Portfolio Manager, at First Chicago NBD. Mr. Lehman is a Chartered Financial
Analyst; he received his M.A. from the University of Chicago.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.60% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years, or since inception, if the life of
the Fund is shorter. Some of the information is presented on a per share basis.
Total returns represent the rate an investor would have earned (or lost) on an
investment in the Fund, assuming reinvestment of any dividends and capital
gains.
This information has been audited by Ernst & Young LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.
FEDERATED EQUITY INCOME FUND, INC.
CLASS F SHARES
May 31, 2000
A Statement of Additional Information (SAI) dated May 31, 2000, is incorporated
by reference into this prospectus. Additional information about the Fund's
investments is contained in the Fund's Annual and Semi- Annual Reports to
shareholders as they become available. The Annual Report discusses market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year. To obtain the SAI, the Annual Report,
Semi-Annual Report and other information without charge, and make inquiries,
call your investment professional or the Fund at 1-800-341- 7400.
You can obtain information about the Fund (including the SAI) by visiting or
writing the Public Reference Room of the Securities and Exchange Commission in
Washington, DC 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.
INVESTMENT COMPANY ACT FILE NO. 811-4743
CUSIP 313915407
8062806A-F (5/00)
FEDERATED EQUITY INCOME FUND, INC.
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
CLASS F SHARES
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for Federated Equity Income Fund, Inc.
(Fund), dated May 31, 2000.
This SAI incorporates by reference the Fund's Annual Report. Obtain the
prospectuses or the Annual Report without charge by calling 1-800-341-7400.
May 31, 2000
8062806B (5/00)
CONTENTS
How is the Fund Organized? 1
Securities in Which the Fund Invests 1
What Do Shares Cost? 8
How is the Fund Sold? 9
Exchanging Securities for Shares 10
Subaccounting Services 10
Redemption in Kind 10
Account and Share Information 11
Tax Information 11
Who Manages and Provides Services to the Fund? 12
How Does the Fund Measure Performance? 15
Who is Federated Investors, Inc.? 17
Financial Information 18
Investment Ratings 18
Addresses 21
HOW IS THE FUND ORGANIZED?
The Fund is a diversified open-end, management investment company that was
established under the laws of the State of Maryland on July 29, 1986. The Fund
changed its name from Liberty Equity Income Fund, Inc. to Federated Equity
Income Fund, Inc. on February 26, 1996. The Fund's investment adviser is
Federated Investment Management Company (Adviser). The Adviser, formerly known
as Federated Advisers, changed its name effective March 31, 1999.
The Board of Directors (the Board) has established four classes of shares
of the Fund, known as Class A Shares, Class B Shares, Class C Shares and Class F
Shares (Shares). This SAI relates to all of the above-mentioned Shares.
SECURITIES IN WHICH THE FUND INVESTS
In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
EQUITY SECURITIES
Equity securities represent a share of an issuer's earnings and assets, after
the issuer pays its liabilities. The Fund cannot predict the income it will
receive from equity securities because issuers generally have discretion as to
the payment of any dividends or distributions. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business. The
following describes the types of equity securities in which the Fund may invest:
Common Stocks
Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings directly
influence the value of its common stock.
Preferred Stocks
Preferred stocks have the right to receive specified dividends or distributions
before the issuer makes payments on its common stock. Some preferred stocks also
participate in dividends and distributions paid on common stock. Preferred
stocks may also permit the issuer to redeem the stock. The Fund may also treat
such redeemable preferred stock as a fixed income security.
Interests in Other Limited Liability Companies
Entities such as limited partnerships, limited liability companies, business
trusts and companies organized outside the United States may issue securities
comparable to common or preferred stock.
Real Estate Investment Trusts (REITs)
REITs are real estate investment trusts that lease, operate and finance
commercial real estate. REITs are exempt from federal corporate income tax if
they limit their operations and distribute most of their income. Such tax
requirements limit a REIT's ability to respond to changes in the commercial real
estate market. Warrants Warrants give the Fund the option to buy the issuer's
equity securities at a specified price (the exercise price) at a specified
future date (the expiration date). The Fund may buy the designated securities by
paying the exercise price before the expiration date. Warrants may become
worthless if the price of the stock does not rise above the exercise price by
the expiration date. This increases the market risks of warrants as compared to
the underlying security. Rights are the same as warrants, except companies
typically issue rights to existing stockholders.
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests: Treasury Securities Treasury securities are direct obligations of the
federal government of the United States. Treasury securities are generally
regarded as having the lowest credit risks. Agency Securities Agency securities
are issued or guaranteed by a federal agency or other government sponsored
entity acting under federal authority (a GSE). The United States supports some
GSEs with its full faith and credit. Other GSEs receive support through federal
subsidies, loans or other benefits. A few GSEs have no explicit financial
support, but are regarded as having implied support because the federal
government sponsors their activities. Agency securities are generally regarded
as having low credit risks, but not as low as treasury securities.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. The Fund may also purchase interests in bank loans to
companies. The credit risks of corporate debt securities vary widely among
issuers.
In addition, the credit risk of an issuer's debt security may vary based on
its priority for repayment. For example, higher ranking (senior) debt securities
have a higher priority than lower ranking (subordinated) securities. This means
that the issuer might not make payments on subordinated securities while
continuing to make payments on senior securities. In addition, in the event of
bankruptcy, holders of senior securities may receive amounts otherwise payable
to the holders of subordinated securities. Some subordinated securities, such as
trust preferred and capital securities notes, also permit the issuer to defer
payments under certain circumstances. For example, insurance companies issue
securities known as surplus notes that permit the insurance company to defer any
payment that would reduce its capital below regulatory requirements.
COMMERCIAL PAPER
Commercial paper is an issuer's obligation with a maturity of less than nine
months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and use the
proceeds (or bank loans) to repay maturing paper. If the issuer cannot continue
to obtain liquidity in this fashion, its commercial paper may default. The short
maturity of commercial paper reduces both the interest rate and credit risks as
compared to other debt securities of the same issuer.
DEMAND INSTRUMENTS
Demand instruments are corporate debt securities that the issuer must repay upon
demand. Other demand instruments require a third party, such as a dealer or
bank, to repurchase the security for its face value upon demand. The Fund treats
demand instruments as short-term securities, even though their stated maturity
may extend beyond one year.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances. Yankee instruments are denominated in U.S. dollars and
issued by U.S. branches of foreign banks. Eurodollar instruments are denominated
in U.S. dollars and issued by non-U.S. branches of U.S. or foreign banks.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below the
amount payable at maturity. The difference between the purchase price and the
amount paid at maturity represents interest on the zero coupon security.
Investors must wait until maturity to receive interest and principal, which
increases the interest rate and credit risks of a zero coupon security.
There are many forms of zero coupon securities. Some are issued at a discount
and are referred to as zero coupon or capital appreciation bonds. Others are
created from interest bearing bonds by separating the right to receive the
bond's coupon payments from the right to receive the bond's principal due at
maturity, a process known as coupon stripping. In addition, some securities give
the issuer the option to deliver additional securities in place of cash interest
payments, thereby increasing the amount payable at maturity. These are referred
to as pay-in-kind or PIK securities.
CONVERTIBLE SECURITIES
Convertible securities are convertible preferred stock or convertible bonds that
the Fund has the option to exchange for equity securities at a specified
conversion price. The option allows the Fund to realize additional returns if
the market price of the equity securities exceeds the conversion price. For
example, the Fund may hold securities that are convertible into shares of common
stock at a conversion price of $10 per share. If the market value of the shares
of common stock reached $12, the Fund could realize an additional $2 per share
by converting its securities.
Convertible securities have lower yields than comparable fixed income
securities. In addition, at the time a convertible security is issued the
conversion price exceeds the market value of the underlying equity securities.
Thus, convertible securities may provide lower returns than non-convertible
fixed income securities or equity securities depending upon changes in the price
of the underlying equity securities. However, convertible securities permit the
Fund to realize some of the potential appreciation of the underlying equity
securities with less risk of losing its initial investment.
FOREIGN SECURITIES
Foreign securities are securities of issuers based outside the United
States. The Fund considers an issuer to be based outside the United States if:
n it is organized under the laws of, or has a principal office located in,
another country;
n the principal trading market for its securities is in another country; or
n it (or its subsidiaries) derived in its most current fiscal year at least
50% of its total assets, capitalization, gross revenue or profit from goods
produced, services performed, or sales made in another country.
Foreign securities are primarily denominated in foreign currencies. Along with
the risks normally associated with domestic securities of the same type, foreign
securities are subject to currency risks and risks of foreign investing. Trading
in certain foreign markets is also subject to liquidity risks.
DEPOSITARY RECEIPTS
Depositary receipts represent interests in underlying securities issued by
a foreign company. Depositary receipts are not traded in the same market as the
underlying security. American Depositary Receipts (ADRs) provide a way to buy
shares of foreign-based companies in the United States rather than in overseas
markets. ADRs are also traded in U.S. dollars, eliminating the need for foreign
exchange transactions. The foreign securities underlying European Depositary
Receipts (EDRs), Global Depositary Receipts (GDRs), and International Depositary
Receipts (IDRs), are traded globally or outside the United States. Depositary
receipts involve many of the same risks of investing directly in foreign
securities, including currency risks and risks of foreign investing.
DERIVATIVE CONTRACTS
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty.
Many derivative contracts are traded on securities or commodities exchanges.
In this case, the exchange sets all the terms of the contract except for the
price. Investors make payments due under their contracts through the exchange.
Most exchanges require investors to maintain margin accounts through their
brokers to cover their potential obligations to the exchange. Parties to the
contract make (or collect) daily payments to the margin accounts to reflect
losses (or gains) in the value of their contracts. This protects investors
against potential defaults by the counterparty. Trading contracts on an exchange
also allows investors to close out their contracts by entering into offsetting
contracts.
For example, the Fund could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Fund realizes a gain; if it is less, the Fund realizes a loss.
Exchanges may limit the amount of open contracts permitted at any one time. Such
limits may prevent the Fund from closing out a position. If this happens, the
Fund will be required to keep the contract open (even if it is losing money on
the contract), and to make any payments required under the contract (even if it
has to sell portfolio securities at unfavorable prices to do so). Inability to
close out a contract could also harm the Fund by preventing it from disposing of
or trading any assets it has been using to secure its obligations under the
contract.
The Fund may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.
Depending upon how the Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset,
derivative contracts may increase or decrease the Fund's exposure to interest
rate and currency risks, and may also expose the Fund to liquidity and leverage
risks. OTC contracts also expose the Fund to credit risks in the event that a
counterparty defaults on the contract.
The Fund may trade in the following types of derivative contracts.
FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified price,
date, and time. Entering into a contract to buy an underlying asset is commonly
referred to as buying a contract or holding a long position in the asset.
Entering into a contract to sell an underlying asset is commonly referred to as
selling a contract or holding a short position in the asset. Futures contracts
are considered to be commodity contracts. Futures contracts traded OTC are
frequently referred to as forward contracts.
The Fund may buy and sell financial futures contracts.
OPTIONS
Options are rights to buy or sell an underlying asset for a specified price
(the exercise price) during, or at the end of, a specified period. A call option
gives the holder (buyer) the right to buy the underlying asset from the seller
(writer) of the option. A put option gives the holder the right to sell the
underlying asset to the writer of the option. The writer of the option receives
a payment, or premium, from the buyer, which the writer keeps regardless of
whether the buyer uses (or exercises) the option.
The Fund may:
Buy put options on portfolio securities and financial futures contracts in
anticipation of a decrease in the value of the underlying asset.
Write call options on portfolio securities and financial futures contracts
to generate income from premiums, and in anticipation of a decrease or only
limited increase in the value of the underlying asset. If a call written by the
Fund is exercised, the Fund foregoes any possible profit from an increase in the
market price of the underlying asset over the exercise price plus the premium
received.
Buy or write options to close out existing options positions. When the Fund
writes options on futures contracts, it will be subject to margin requirements
similar to those applied to futures contracts.
The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed 5%
of the market value of the Fund's total assets.
SPECIAL TRANSACTIONS
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.
DELAYED DELIVERY TRANSACTIONS
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit risks
in the event of a counterparty default.
SECURITIES LENDING
The Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from the
borrower as collateral. The borrower must furnish additional collateral if the
market value of the loaned securities increases. Also, the borrower must pay the
Fund the equivalent of any dividends or interest received on the loaned
securities.
The Fund will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund must pay interest to the
borrower for the use of cash collateral.
Loans are subject to termination at the option of the Fund or the borrower.
The Fund will not have the right to vote on securities while they are on loan,
but it will terminate a loan in anticipation of any important vote. The Fund may
pay administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash collateral to a securities
lending agent or broker.
Securities lending activities are subject to interest rate and credit risks.
ASSET COVERAGE
In order to secure its obligations in connection with derivatives contracts or
special transactions, the Fund will either own the underlying assets, enter into
an offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to secure
such obligations without entering into an offsetting derivative contract or
terminating a special transaction. This may cause the Fund to miss favorable
trading opportunities or to realize losses on derivative contracts or special
transactions.
INVESTING IN 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.
INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES
The Adviser will determine whether a security is investment grade based upon the
credit ratings given by one or more nationally recognized rating services. For
example, Standard and Poor's, a rating service, assigns ratings to investment
grade securities (AAA, AA, A, and BBB) based on their assessment of the
likelihood of the issuer's inability to pay interest or principal (default) when
due on each security. Lower credit ratings correspond to higher credit risk. If
a security has not received a rating, the Fund must rely entirely upon the
Adviser's credit assessment that the security is comparable to investment grade.
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are outlined below.
EQUITY SECURITIES INVESTMENT RISKS
STOCK MARKET RISKS
n The value of equity securities in the Fund's portfolio will rise and fall.
These fluctuations could be a sustained trend or a drastic movement. The
Fund's portfolio will reflect changes in prices of individual portfolio stocks
or general changes in stock valuations. Consequently, the Fund's share price
may decline.
n The Adviser attempts to manage market risk by limiting the amount the Fund
invests in each company's equity securities. However, diversification will not
protect the Fund against widespread or prolonged declines in the stock market.
INVESTMENT STYLE RISK
n Securities with different characteristics tend to shift in and out of favor
depending upon market and economic conditions as well as investor sentiment. A
fund may outperform other funds that employ a different style. The Fund may
employ a combination of styles that impact its risk characteristics, such as
growth and value investing. Growth stocks may be more volatile than other
stocks because they are more sensitive to investor perceptions of the issuing
company's growth of earnings potential. Growth oriented funds will typically
underperform when value investing is in favor. Value stocks are those which
are out of favor or undervalued in comparison to their peers due to adverse
business developments or other factors. Value oriented funds will typically
underperform when growth investing is in favor.
n
SECTOR RISKS
n Companies with similar characteristics may be grouped together in broad
categories called sectors. Sector risk is the possibility that a certain
sector may underperform other sectors or the market as a whole. As the Adviser
allocates more of the Fund's portfolio holdings to a particular sector, the
Fund's performance will be more susceptible to any economic, business or other
developments which generally affect that sector.
LIQUIDITY RISKS
n Trading opportunities are more limited for equity securities that are not
widely held. This may make it more difficult to sell or buy a security at a
favorable price or time. Consequently, the Fund may have to accept a lower
price to sell a security, sell other securities to raise cash or give up an
investment opportunity, any of which could have a negative effect on the
Fund's performance. Infrequent trading of securities may also lead to an
increase in their price volatility.
n Liquidity risk also refers to the possibility that the Fund may not be able to
sell a security when it wants to. If this happens, the Fund will be required
to continue to hold the security, and the Fund could incur losses.
RISKS RELATED TO COMPANY SIZE
n Generally, the smaller the market capitalization of a company, the fewer the
number of shares traded daily, the less liquid its stock and the more volatile
its price. Market capitalization is determined by multiplying the number of
its outstanding shares by the current market price per share.
n Companies with smaller market capitalizations also tend to have unproven track
records, a limited product or service base and limited access to capital.
These factors also increase risks and make these companies more likely to fail
than larger, well capitalized companies.
RISKS OF FOREIGN INVESTING
n Foreign securities pose additional risks because foreign economic or political
conditions may be less favorable than those of the United States. Securities
in foreign markets may also be subject to taxation policies that reduce
returns for U.S. investors.
n Foreign companies may not provide information (including financial statements)
as frequently or to as great an extent as companies in the United States.
Foreign companies may also receive less coverage than United States companies
by market analysts and the financial press. In addition, foreign countries may
lack uniform accounting, auditing and financial reporting standards or
regulatory requirements comparable to those applicable to U.S. companies.
These factors may prevent the Fund and its Adviser from obtaining information
concerning foreign companies that is as frequent, extensive and reliable as
the information available concerning companies in the United States.
n Foreign countries may have restrictions on foreign ownership of securities or
may impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the liquidity of the Fund's
investments.
CURRENCY RISKS
n Exchange rates for currencies fluctuate daily. The combination of currency
risk and market risk tends to make securities traded in foreign markets more
volatile than securities traded exclusively in the U.S.
n The Adviser attempts to manage currency risk by limiting the amount the Fund
invests in securities denominated in a particular currency. However,
diversification will not protect the Fund against a general increase in the
value of the U.S. dollar relative to other currencies.
EURO RISKS
n The Fund may make significant investments in securities denominated in the
Euro, the new single currency of the European Monetary Union (EMU). Therefore,
the exchange rate between the Euro and the U.S. dollar will have a significant
impact on the value of the Fund's investments.
n With the advent of the Euro, the participating countries in the EMU can no
longer follow independent monetary policies. This may limit these countries'
ability to respond to economic downturns or political upheavals, and
consequently reduce the value of their foreign government securities.
CREDIT RISKS
n Credit risk includes the possibility that a party to a transaction involving
the Fund will fail to meet its obligations. This could cause the Fund to lose
the benefit of the transaction or prevent the Fund from selling or buying
other securities to implement its investment strategy.
FIXED INCOME SECURITIES INVESTMENT RISKS
INTEREST RATE RISKS
n Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
n Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of a
fixed income security to changes in interest rates.
CREDIT RISKS
n Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money.
n Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investor Services, Inc. These services assign
ratings to securities by assessing the likelihood of issuer default. Lower
credit ratings correspond to higher credit risk. If a security has not
received a rating, the Fund must rely entirely upon the Adviser's credit
assessment.
n Fixed income securities generally compensate for greater credit risk by paying
interest at a higher rate. The difference between the yield of a security and
the yield of a U.S. Treasury security with a comparable maturity (the spread)
measures the additional interest paid for risk. Spreads may increase generally
in response to adverse economic or market conditions. A security's spread may
also increase if the security's rating is lowered, or the security is
perceived to have an increased credit risk. An increase in the spread will
cause the price of the security to decline.
n Credit risk includes the possibility that a party to a transaction involving
the Fund will fail to meet its obligations. This could cause the Fund to lose
the benefit of the transaction or prevent the Fund from selling or buying
other securities to implement its investment strategy.
CALL RISKS
n Call risk is the possibility that an issuer may redeem a fixed income security
before maturity (a call) at a price below its current market price. An
increase in the likelihood of a call may reduce the security's price.
n If a fixed income security is called, the Fund may have to reinvest the
proceeds in other fixed income securities with lower interest rates, higher
credit risks, or other less favorable characteristics.
LIQUIDITY RISKS
n Trading opportunities are more limited for fixed income securities that have
not received any credit ratings, have received ratings below investment grade
or are not widely held. These features may make it more difficult to sell or
buy a security at a favorable price or time. Consequently, the Fund may have
to accept a lower price to sell a security, sell other securities to raise
cash or give up an investment opportunity, any of which could have a negative
effect on the Fund's performance. Infrequent trading of securities may also
lead to an increase in their price volatility.
n Liquidity risk refers to the possibility that the Fund may not be able to sell
a security or close out a derivative contract when it wants to. If this
happens, the Fund will be required to continue to hold the security or keep
the position open, and the Fund could incur losses.
n OTC derivative contracts generally carry greater liquidity risk than
exchange-traded contracts.
RISKS ASSOCIATED WITH NONINVESTMENT GRADE SECURITIES
n Securities rated below investment grade, also known as junk bonds, generally
entail greater market, credit and liquidity risks than investment grade
securities. For example, their prices are more volatile, economic downturns
and financial setbacks may affect their prices more negatively, and their
trading market may be more limited.
LEVERAGE RISKS
n Leverage risk is created when an investment exposes the Fund to a level of
risk that exceeds the amount invested. Changes in the value of such an
investment magnify the Fund's risk of loss and potential for gain.
INVESTMENT LIMITATIONS
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the 1940 Act.
INVESTING IN REAL ESTATE
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, except that the Fund may
purchase and sell financial futures contracts and related options.
UNDERWRITING
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
LENDING CASH OR SECURITIES
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
CONCENTRATION OF INVESTMENTS
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of the value of its total assets, the
Fund will not purchase securities of any one issuer (other than cash; cash
items; securities issued or guaranteed by the government of the United States or
its agencies or instrumentalities and repurchase agreements collateralized by
such U.S. government securities; and securities of other investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in securities of that issuer, or the Fund would own more than 10% of the
outstanding voting securities of that issuer.
THE ABOVE LIMITATIONS CANNOT BE CHANGED UNLESS AUTHORIZED BY THE BOARD AND BY
THE "VOTE OF A MAJORITY OF ITS OUTSTANDING VOTING SECURITIES," AS DEFINED BY THE
INVESTMENT COMPANY ACT OF 1940 (1940 ACT). THE FOLLOWING LIMITATIONS, HOWEVER,
MAY BE CHANGED BY THE BOARD WITHOUT SHAREHOLDER APPROVAL. SHAREHOLDERS WILL BE
NOTIFIED BEFORE ANY MATERIAL CHANGE IN THESE LIMITATIONS BECOMES EFFECTIVE.
BUYING ON MARGIN
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities, and further provided that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions, and other financial contracts or
derivative instruments.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
INVESTING IN RESTRICTED AND ILLIQUID SECURITIES
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time depostis maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 15% of the Fund's net assets.
Except with respect to borrowing money, if a percentage limitation is adhered
to at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a violation
of such restriction.
For purposes of the concentration limitation: (a) utility companies will be
divided according to their services (for example, gas, gas transmission,
electric and telephone will be considered a separate industry); (b) financial
service companies will be classified according to the end users of their
services (for example, automobile finance, bank finance and diversified finance
will each be considered a separate industry); and (c) asset-backed securities
will be classified according to the underlying assets securing such securities.
To conform to the current view of the SEC staff that only domestic bank
instruments may be excluded from industry concentration limitations, as a matter
of non-fundamental policy, the Fund will not exclude foreign bank instruments
from industry concentration limitation tests so long as the policy of the SEC
remains in effect. In addition, investments in bank instruments, and investments
in certain industrial development bonds funded by activities in a single
industry, will be deemed to constitute investment in an industry, except when
held for temporary defensive purposes. The investment of more than 25% of the
value of the Fund's total assets in any one industry will constitute
`concentration.'
For purposes of the commodities policy, investments in transactions involving
futures contracts and options, forward currency contracts, swap transactions and
other financial contracts that settle by payment of cash are not deemed to be
investments in commodities.
For purposes of its policies and limitations, the Fund considers certificates
of deposit and demand and time deposits issued by a U.S. branch of a domestic
bank or savings association having capital, surplus, and undivided profits in
excess of $100,000,000 at the time of investment to be cash items.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:
n 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;
n in the absence of recorded sales for equity securities, according to the
mean between the last closing bid and asked prices;
n 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;
n futures contracts and options are valued at market values established by
the exchanges on which they are traded at the close of trading on such
exchanges. Options traded in the over-the- counter market are 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;
n for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service, except that
short-term obligations with remaining maturities of less than 60 days at
the time of purchase may be valued at amortized cost or at fair market
value as determined in good faith by the Board; and
n for all other securities at fair value as determined in good faith by the
Board.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker- dealers
or other financial institutions that trade the securities.
TRADING IN FOREIGN SECURITIES
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange (NYSE). In computing its NAV, the Fund
values foreign securities at the latest closing price on the exchange on which
they are traded immediately prior to the closing of the NYSE. Certain foreign
currency exchange rates may also be determined at the latest rate prior to the
closing of the NYSE. Foreign securities quoted in foreign currencies are
translated into U.S. dollars at current rates. Occasionally, events that affect
these values and exchange rates may occur between the times at which they are
determined and the closing of the NYSE. If such events materially affect the
value of portfolio securities, these securities may be valued at their fair
value as determined in good faith by the Fund's Board, although the actual
calculation may be done by others.
WHAT DO SHARES COST?
The Fund's net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of the Fund. The NAV for each class of
Shares may differ due to the variance in daily net income realized by each
class. Such variance will reflect only accrued net income to which the
shareholders of a particular class are entitled.
REDUCING OR ELIMINATING THE FRONT-END SALES CHARGE
You can reduce or eliminate the applicable front-end sales charge, as follows.
QUANTITY DISCOUNTS
Larger purchases of the same Share class reduce or eliminate the sales charge
you pay. You can combine purchases of Shares made on the same day by you, your
spouse and your children under age 21. In addition, purchases made at one time
by a trustee or fiduciary for a single trust estate or a single fiduciary
account can be combined.
ACCUMULATED PURCHASES
If you make an additional purchase of Shares, you can count previous Share
purchases still invested in the Fund in calculating the applicable sales charge
on the additional purchase.
CONCURRENT PURCHASES
You can combine concurrent purchases of the same share class of two or more
Federated Funds in calculating the applicable sales charge.
LETTER OF INTENT CLASS A SHARES AND CLASS F SHARES
You can sign a Letter of Intent committing to purchase a certain amount of the
same class of Shares within a 13-month period to combine such purchases in
calculating the sales charge. The Fund's custodian will hold Shares in escrow
equal to the maximum applicable sales charge. If you complete the Letter of
Intent, the Custodian will release the Shares in escrow to your account. If you
do not fulfill the Letter of Intent, the Custodian will redeem the appropriate
amount from the Shares held in escrow to pay the sales charges that were not
applied to your purchases.
REINVESTMENT PRIVILEGE
You may reinvest, within 120 days, your Share redemption proceeds at the next
determined NAV without any sales charge.
PURCHASES BY AFFILIATES OF THE FUND
The following individuals and their immediate family members may buy Shares at
NAV without any sales charge because there are nominal sales efforts associated
with their purchases:
n the Directors, employees and sales representatives of the Fund, the
Adviser, the Distributor and their affiliates;
n Employees of State Street Bank Pittsburgh who started their employment on
January 1, 1998, and were employees of Federated Investors, Inc.
(Federated) on December 31, 1997;
n any associated person of an investment dealer who has a sales agreement
with the Distributor; and
n trusts, pension or profit-sharing plans for these individuals.
FEDERATED LIFE MEMBERS
Shareholders of the Fund known as "Federated Life Members" are exempt from
paying any front-end sales charge. These shareholders joined the Fund
originally:
n through the "Liberty Account," an account for Liberty Family of Funds
shareholders on February 28, 1987 (the Liberty Account and Liberty Family
of Funds are no longer marketed); or
n as Liberty Account shareholders by investing through an affinity group
prior to August 1, 1987.
REDUCING OR ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE
These reductions or eliminations are offered because: no sales commissions have
been advanced to the investment professional selling Shares; the shareholder has
already paid a Contingent Deferred Sales Charge (CDSC); or nominal sales efforts
are associated with the original purchase of Shares.
Upon notification to the Distributor or the Fund's transfer agent, no CDSC
will be imposed on redemptions:
n following the death or post-purchase disability, as defined in Section
72(m)(7) of the Internal Revenue Code of 1986, of the last surviving
shareholder;
n 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;
n representing a total or partial distribution from a qualified plan. A total
or partial distribution does not include an account transfer, rollover or
other redemption made for purposes of reinvestment. A qualified plan does
not include an Individual Retirement Account, Keogh Plan, or a custodial
account, following retirement;
n which are involuntary redemptions processed by the Fund because the
accounts do not meet the minimum balance requirements;
n which are qualifying redemptions of Class B Shares under a Systematic
Withdrawal Program;
n of Shares that represent a reinvestment within 120 days of a previous
redemption;
n of Shares held by the Directors, employees, and sales representatives of
the Fund, the Adviser, the Distributor and their affiliates; employees of
any investment professional that sells Shares according to a sales
agreement with the Distributor; and the immediate family members of the
above persons; and
n of Shares originally purchased through a bank trust department, a
registered investment adviser or retirement plans where the third party
administrator has entered into certain arrangements with the Distributor or
its affiliates, or any other investment professional, to the extent that no
payments were advanced for purchases made through these entities.
HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best- efforts basis.
FRONT-END SALES CHARGE REALLOWANCES
The Distributor receives a front-end sales charge on certain Share sales. The
Distributor generally pays up to 90% (and as much as 100%) of this charge to
investment professionals for sales and/or administrative services. Any payments
to investment professionals in excess of 90% of the front-end sales charge are
considered supplemental payments. The Distributor retains any portion not paid
to an investment professional.
RULE 12B-1 PLAN
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets.
The Fund 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 and its subsidiaries may benefit from arrangements where the Rule
12b-1 Plan fees related to Class B Shares may be paid to third parties who have
advanced commissions to investment professionals.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated, for providing shareholder services and maintaining shareholder
accounts. Federated Shareholder Services Company may select others to perform
these services for their customers and may pay them fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related
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 professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at 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 investment professional.
When an investment professional's customer purchases shares, the investment
professional may receive:
n an amount up to 5.50% and 1.00%, respectively, of the NAV of Class B and C
Shares.
n an amount on the NAV of Class F Shares purchased as follows: up to 1% on
purchases below $2 million; 0.50% on purchases from $2 million but below $5
million; and 0.25% on purchases of $5 million or more. In addition, the
Distributor may pay investment professionals 0.25% of the purchase price of
$1 million or more of Class A and Class F Shares that its customer has not
redeemed over the first year.
CLASS A SHARES
Investment professionals purchasing Class A Shares for their customers are
eligible to receive an advance payment from the Distributor based on the
following breakpoints:
AMOUNT ADVANCE
PAYMENTS AS
A
PERCENTAGE
OF PUBLIC
OFFERING
PRICE
First $1 - $5million 0.75%
Next $5 - $20million 0.50%
Over $20million 0.25%
For accounts with assets over $1 million, the dealer advance payments reset
annually to the first breakpoint on the anniversary of the first purchase.
Class A Share purchases under this program may be made by Letter of Intent or
by combining concurrent purchases. The above advance payments will be paid only
on those purchases that were not previously subject to a front-end sales charge
and dealer advance payments. Certain retirement accounts may not be eligible for
this program.
A contingent deferred sales charge of 0.75% of the redemption amount applies
to Class A Shares redeemed up to 24 months after purchase. The CDSC does not
apply under certain investment programs where the investment professional does
not receive an advance payment on the transaction including, but not limited to,
trust accounts and wrap programs where the investor pays an account level fee
for investment management.
CLASS F SHARES
Investment professionals purchasing Class F Shares for their customers are
eligible to receive an advance payment from the distributor of 0.25% of the
purchase price.
EXCHANGING SECURITIES FOR SHARES
You may contact the Distributor to request a purchase of Shares in exchange for
securities you own. The Fund reserves the right to determine whether to accept
your securities and the minimum market value to accept. The Fund will value your
securities in the same manner as it values its assets. This exchange is treated
as a sale of your securities for federal tax purposes.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial, or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the 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 Director elections and
other matters submitted to shareholders for vote.
All Shares of the Fund have equal voting rights, except that in matters
affecting only a particular class, only Shares of that class are entitled to
vote.
Directors may be removed by the Board or by shareholders at a special meeting.
A special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Fund's outstanding shares of
all series entitled to vote.
As of May 7, 1999, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Class B Shares: Merrill Lynch Pierce Fenner &
Smith (as record owner holding Class B Shares for its clients), Jacksonville,
Florida, owned approximately 4,470,830 shares (6.88%).
As of May 7, 1999, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Class C Shares. Merrill Lynch Pierce Fenner &
Smith (as record owner holding Class C Shares for its clients), Jacksonville,
Florida, owned approximately 3,131,841 shares (31.10%).
As of May 7, 1999, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Class F Shares. Merrill Lynch Pierce Fenner &
Smith (as record owner holding Class F Shares for its clients), Jacksonville,
Florida, owned approximately 1,363,018 shares (20.95%).
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
FOREIGN INVESTMENTS
If the Fund purchases foreign securities, their investment income may be subject
to foreign withholding or other taxes that could reduce the return on these
securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign taxes to which the Fund
would be subject. The effective rate of foreign tax cannot be predicted since
the amount of Fund assets to be invested within various countries is uncertain.
However, the Fund intends to operate so as to qualify for treaty-reduced tax
rates when applicable.
Distributions from a Fund may be based on estimates of book income for the
year. Book income generally consists solely of the coupon income generated by
the portfolio, whereas tax-basis income includes gains or losses attributable to
currency fluctuation. Due to differences in the book and tax treatment of fixed-
income securities denominated in foreign currencies, it is difficult to project
currency effects on an interim basis. Therefore, to the extent that currency
fluctuations cannot be anticipated, a portion of distributions to shareholders
could later be designated as a return of capital, rather than income, for income
tax purposes, which may be of particular concern to simple trusts.
If the Fund invests in the stock of certain foreign corporations, they may
constitute Passive Foreign Investment Companies (PFIC), and the Fund may be
subject to Federal income taxes upon disposition of PFIC investments.
If more than 50% of the value of the Fund's assets at the end of the tax year
is represented by stock or securities of foreign corporations, the Fund intends
to qualify for certain Code stipulations that would allow shareholders to claim
a foreign tax credit or deduction on their U.S. income tax returns. The Code may
limit a shareholder's ability to claim a foreign tax credit. Shareholders who
elect to deduct their portion of the Fund's foreign taxes rather than take the
foreign tax credit must itemize deductions on their income tax returns.
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?
BOARD OF DIRECTORS
The Board is responsible for managing the Fund's business affairs and for
exercising all the Fund's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Fund,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Director from the Fund 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 one
fund and the Federated Fund Complex is comprised of 54 investment companies,
whose investment advisers are affiliated with the Fund's Adviser.
As of May 7, 1999, the Fund's Board and Officers as a group owned less than 1%
of the Fund's outstanding Class A, B, C, and F Shares.
An asterisk (*) denotes a Director 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.
<TABLE>
<CAPTION>
NAME BIRTH DATE PRINCIPAL OCCUPATIONS FOR PAST FIVE AGGREGATE TOTAL
ADDRESS POSITION WITH YEARS COMPENSATIONCOMPENSATION
FUND FROM FUND FROM FUND AND
FUND COMPLEX
<S> <C> <C> <C>
JOHN F. DONAHUE*# Chief Executive Officer and $0 $0 for the
Birth Date: July28, Director or Trustee of the Fund and 54
1924 Federated Fund Complex; Chairman other
Federated Investors and Director, Federated Investors, investment
Tower Inc.; Chairman and Trustee, companies in
1001 Liberty Avenue Federated Investment Management the Fund
Pittsburgh, PA Company; Chairman and Director, Complex
CHAIRMAN AND DIRECTOR Federated Investment Counseling,
and Federated Global Investment
Management Corp.; Chairman,
Passport Research, Ltd.
THOMAS G. BIGLEY Director or Trustee of theFederated $2,345.33 $113,860.22
Birth Date: Fund Complex; Director, Member of for the Fund
February3, 1934 Executive Committee, Children's and 54 other
15 Old Timber Trail Hospital of Pittsburgh; formerly: investment
Pittsburgh, PA Senior Partner, Ernst & Young LLP; companies in
DIRECTOR Director, MED 3000 Group, Inc.; the Fund
Director, Member of Executive Complex
Committee, University of Pittsburgh.
JOHN T. CONROY, JR. Director or Trustee of the $2,580.26 $125,264.48
Birth Date: June23, Federated Fund Complex; President, for the Fund
1937 Investment Properties Corporation; and 54 other
Wood/IPC Commercial Senior Vice President, JohnR.Wood investment
Dept. and Associates, Inc., Realtors; companies in
John R. Wood Partner or Trustee in private real the Fund
Associates, Inc. estate ventures in Southwest Complex
Realtors 3255 Tamiami Florida; formerly: President,
Trail North Naples Property Management, Inc.
Naples, FL and Northgate Village Development
DIRECTOR Corporation.
NICHOLAS CONSTANTAKIS Director or Trustee of the $2,345.33 $47,958.02 for
Birth Date: Federated Fund Complex; formerly: the Fund and
September3, 1939 Partner, Andersen Worldwide SC. 39 other
175 Woodshire Drive investment
Pittsburgh, PA companies in
DIRECTOR the Fund
Complex
JOHN F. CUNNINGHAM Director or Trustee of some of the $583.03 $0 for the
Birth Date: March5, Federated Funds Complex; Chairman, Fund and 43
1943 President and Chief Executive other
353 El Brillo Officer, Cunningham & Co., Inc.; investment
Way Palm Beach, FL Trustee Associate, Boston College; companies in
DIRECTOR Director, EMC Corporation; the Fund
formerly: Director, Redgate Complex
Communications. Previous Positions:
Chairman of the Board and Chief
Executive Officer, Computer
Consoles, Inc.; President and Chief
Operating Officer, Wang
Laboratories; Director, First
National Bank of Boston; Director,
Apollo Computer, Inc.
LAWRENCE D. ELLIS, Director or Trustee of the $2,345.33 $113,860.22
M.D.* Federated Fund Complex; Professor for the Fund
Birth Date: of Medicine, University of and 54 other
October11, 1932 Pittsburgh; Medical Director, investment
3471 Fifth Avenue University of Pittsburgh Medical companies in
Suite 1111 Center Downtown; Hematologist, the Fund
Pittsburgh, PA Oncologist, and Internist, Complex
DIRECTOR University of Pittsburgh Medical
Center; Member, National Board of
Trustees, Leukemia Society of
America.
PETER E. MADDEN Director or Trustee of the $2,403.73 $113,860.22
Birth Date: March16, Federated Fund Complex; formerly: for the Fund
1942 Representative, Commonwealth of and 54 other
One Royal Palm Way Massachusetts General Court; investment
100 Royal Palm Way President, State Street Bank and companies in
Palm Beach, FL Trust Company and State Street the Fund
DIRECTOR Corporation. Previous Positions: Complex
Director, VISA USA and VISA International; Chairman and
Director, Massachusetts Bankers Association; Director,
Depository Trust Corporation.
CHARLES F. MANSFIELD, Director or Trustee of some of the $583.03 $0 for the
JR. Federated Fund Complex; Management Fund and 43
Birth Date: April10, Consultant. Previous Positions: other
1945 Chief Executive Officer, PBTC investment
80 South Road International Bank; Chief Financial companies in
Westhampton Beach, NY Officer of Retail Banking Sector, the Fund
DIRECTOR Chase Manhattan Bank; Senior Vice Complex
President, Marine Midland Bank;
Vice President, Citibank; Assistant
Professor of Banking and Finance,
Frank G. Zarb School of Business,
Hofstra University.
JOHN E. MURRAY, JR., Director or Trustee of theFederated $2,403.73 $113,860.22
J.D., S.J.D.# Birth Fund Complex; President, Law for the Fund
Date: December20, Professor, Duquesne University; and 54 other
1932 President, Consulting Partner, Mollica & investment
Duquesne University Murray. Previous Positions: Dean companies in
Pittsburgh, PA and Professor of Law, University of the Fund
DIRECTOR Pittsburgh School of Law; Dean and Complex
Professor of Law, Villanova
University School of Law.
MARJORIE P. SMUTS Director or Trustee of the $2,345.33 $113,860.22
Birth Date: June21, Federated Fund Complex; Public for the Fund
1935 Relations/Marketing/Conference and 54 other
4905 Bayard Street Planning. Previous Positions: investment
Pittsburgh, PA National Spokesperson, Aluminum companies in
DIRECTOR Company of America; business owner. the Fund
Complex
JOHN S. WALSH Director or Trustee of some of the $583.03 $0 for the
Birth Date: Federated Fund Complex; President Fund and 40
November28, 1957 and Director, Heat Wagon, Inc.; other
2007 Sherwood Drive President and Director, investment
Valparaiso, IN Manufacturers Products, Inc.; companies in
DIRECTOR President, Portable Heater Parts, a the Fund
division of Manufacturers Products, Complex
Inc.; Director, Walsh & Kelly,
Inc.; formerly: Vice President,
Walsh & Kelly, Inc.
J.CHRISTOPHER DONAHUE President or Executive Vice $0 $0 for the
Birth Date: April11, President of the Federated Fund Fund and 22
1949 Complex; Director or Trustee of other
Federated Investors some of the Funds in the Federated investment
Tower Fund Complex; President and companies in
1001 Liberty Avenue Director, Federated Investors, the Fund
Pittsburgh, PA Inc.; President and Trustee, Complex
EXECUTIVE VICE Federated Investment Management
PRESIDENT AND DIRECTOR Company; President and Director,
Federated Investment Counseling and
Federated Global Investment
Management Corp.; President,
Passport Research, Ltd.; Trustee,
Federated Shareholder Services
Company; Director, Federated
Services Company.
EDWARD C. GONZALES Trustee or Director of some of the $0 $0 for the
Birth Date: Funds in the Federated Fund Fund and 1
October22, 1930 Complex; President, Executive Vice other
Federated Investors President and Treasurer of some of investment
Tower the Funds in the Federated Fund company in the
1001 Liberty Avenue Complex; Vice Chairman, Federated Fund Complex
Pittsburgh, PA Investors, Inc.; Vice President,
EXECUTIVE VICE Federated Investment Management
PRESIDENT Company and Federated Investment
Counseling, Federated Global
Investment Management Corp. and
Passport Research, Ltd.; Executive
Vice President and Director,
Federated Securities Corp.;
Trustee, Federated Shareholder
Services Company.
JOHN W. MCGONIGLE Executive Vice President and $0 $0 for the
Birth Date: October Secretary of the Federated Fund Fund and 54
26, 1938 Federated Complex; Executive Vice President, other
Investors Tower 1001 Secretary, and Director, Federated investment
Liberty Avenue Investors, Inc.; Trustee, Federated companies in
Pittsburgh, PA Investment Management Company; the Fund
EXECUTIVE VICE Director, Federated Investment Complex
PRESIDENT AND Counseling and Federated Global
SECRETARY Investment Management Corp.;
Director, Federated Services
Company; Director, Federated
Securities Corp.
RICHARD J.THOMAS Treasurer of the Federated Fund $0 $0 for the
Birth Date: June17, Complex; Vice President - Funds Fund and 54
1954 Financial Services Division, other
Federated Investors Federated Investors, Inc.; investment
Tower formerly: various management companies in
1001 Liberty Avenue positions within Funds Financial the Fund
Pittsburgh, PA Services Division of Federated Complex
TREASURER Investors, Inc.
RICHARD B. FISHER President or Vice President of some $0 $0 for the
Birth Date: May17, of the Funds in the Federated Fund Fund and 6
1923 Complex; Director or Trustee of other
Federated Investors some of the Funds in the Federated investment
Tower Fund Complex; Executive Vice companies in
1001 Liberty Avenue President, Federated Investors, the Fund
Pittsburgh, PA Inc.; Chairman and Director, Complex
PRESIDENT Federated Securities Corp.
J.THOMAS MADDEN Chief Investment Officer of this $0 $0 for the
Birth Date: Fund and various other Funds in the Fund and 12
October22, 1945 Federated Fund Complex; Executive other
Federated Investors Vice President, Federated investment
Tower Investment Counseling, Federated companies in
1001 Liberty Avenue Global Investment Management Corp., the Fund
Pittsburgh, PA Federated Investment Management Complex
CHIEF INVESTMENT Company and Passport Research,
OFFICER Ltd.; Vice President, Federated
Investors, Inc.; formerly:
Executive Vice President and Senior
Vice President, Federated
Investment Counseling Institutional
Portfolio Management Services
Division; Senior Vice President,
Federated Investment Management
Company and Passport Research, Ltd.
LINDA A. DUESSEL Linda A. Duessel has been the $0 $0 for the
Birth Date: September Fund's portfolio manager since Fund and no
30, 1957 Federated February1997. She is Vice President other
Investors Tower of the Fund. Ms.Duessel joined investment
1001 Liberty Avenue Federated in 1991 and has been a companies in
Pittsburgh, PA Portfolio Manager and a Vice the Fund
VICE PRESIDENT President of the Fund's Adviser Complex
since 1995. Ms.Duessel was a Senior
Investment Analyst and an Assistant
Vice President of the Fund's
Adviser from 1991 until 1995.
Ms.Duessel is a Chartered Financial
Analyst and received her M.S. in
Industrial Administration from
Carnegie Mellon University.
</TABLE>
+ MR. DONAHUE IS THE FATHER OF J. CHRISTOPHER DONAHUE, EXECUTIVE VICE PRESIDENT
AND DIRECTOR OF THE FUND.
++MESSRS. CUNNINGHAM, MANSFIELD AND WALSH BECAME MEMBERS OF THE BOARD OF
DIRECTORS ON JANUARY 1, 1999. THEY DID NOT EARN ANY FEES FOR SERVING THE FUND
COMPLEX SINCE THESE FEES ARE REPORTED AS OF THE END OF THE LAST CALENDAR YEAR.
THEY DID NOT RECEIVE ANY FEES AS OF THE FISCAL YEAR END OF THE FUND.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund. The Adviser is a wholly owned subsidiary of Federated. The Adviser shall
not be liable to the 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 Fund.
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 in advising
other accounts. To the extent that receipt of these services may replace
services for which the Adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The Adviser and its affiliates exercise
reasonable business judgment in selecting those brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE FEE DAILY NET ASSETS OF
THE FEDERATED FUNDS
0.150 of 1% on the first
$250million
0.125 of 1% on the next
$250million
0.100 of 1% on the next
$250million
0.075 of 1% on assets in excess
of $750million
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 PUBLIC AUDITORS
Ernst & Young LLP is the independent public auditor for the Fund.
FEES PAID BY THE FUND FOR SERVICES
FOR THE YEAR ENDED 1999 1998 1997
MARCH31
Advisory Fee Earned $13,782,$9,452,$4,100,883
Advisory Fee $0 $0 $0
Reduction
Brokerage $3,321,4$1,772,$1,109,630
Commissions
Administrative Fee $1,732,0$1,188,$516,371
12B-1 FEE:
Class A Shares $0
Class B Shares $8,453,807
Class C Shares $1,369,380
Class F Shares $308,337
SHAREHOLDER
SERVICES FEE:
Class A Shares $2,160,036
Class B Shares $2,817,935
Class C Shares $456,460
Class F Shares $308,338
Fees are allocated among classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable class of Shares.
HOW DOES THE FUND MEASURE PERFORMANCE?
The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.
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
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns given for the one-year, five-year and ten-year or start of
performance periods ended March 31, 1999.
Yield given for the 30-day period ended March 31, 1999.
SHARES CLASS 30-DAY1 5 10
PERIODYEAR YEARS YEARS
CLASS A
Total Return NA 4.14% 18.16%13.94%
Yield 0.96% NA NA NA
SHARES 30-DAY 1 5 10 START
CLASS PERIOD YEAR YEARS YEARS OF
PERFORMANCE
ON
9/27/94
CLASS B
Total NA 3.82%NA NA 19.76%
Return
Yield 0.28% NA NA NA NA
SHARES 30-DAY 1 5 10 START
CLASS PERIOD YEAR YEARS YEARS OF
PERFORMANCE
ON
5/3/93
CLASS C
Total NA 8.37%18.62%NA 16.62%
Return
Yield 0.28% NA NA NA NA
SHARES 30-DAY 1 5 10 START
CLASS PERIOD YEAR YEARS YEARS OF
PERFORMANCE
ON
11/12/93
CLASS F
Total NA 7.83%18.97%NA 16.53%
Return
Yield 0.76% NA NA NA NA
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of Shares owned at the end of the period by
the NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD
The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a 30-day period; by (ii) the maximum offering
price per Share on the last day of the period. This number is then annualized
using semi- annual compounding. This means that the amount of income generated
during the 30-day period is assumed to be generated each month over a 12-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by Shares because of certain adjustments required
by the SEC and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
n..... references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
n 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;
n 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 Funds; and
n information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete
view of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which the Fund uses in advertising may include:
LIPPER ANALYTICAL SERVICES, INC.
Lipper Analytical Services, Inc., 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 specific period of time. From
time to time, the Fund will quote its Lipper ranking in the convertible
securities and fixed income funds categories in advertising and sales
literature.
DOW JONES INDUSTRIAL AVERAGE ("DJIA")
Dow Jones Industrial Average ("DJIA") represents share prices of selected
blue-chip industrial corporations as well as public utility
and transportation companies. The DJIA indicates daily changes in the average
price of stocks in any of its categories. It also reports total sales for each
group of industries. Because it represents the top corporations of America, the
DJIA index is a leading economic indicator for the stock market as a whole.
STANDARD & POOR'S RATINGS GROUP DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS
Standard & Poor's Ratings Group Daily Stock Price Index of 500 Common Stocks is
a composite index of common stocks in industry, transportation, and financial
and public utility companies which compares total returns of funds whose
portfolios are invested primarily in common stocks. In addition, the Standard &
Poor's index assumes reinvestment of all dividends paid by stocks listed on the
index. Taxes due on any of these distributions are not included, nor are
brokerage or other fees calculated, in the Standard & Poor's figures.
MORNINGSTAR, INC.
Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
LEHMAN BROTHERS HIGH YIELD INDEX
Lehman Brothers High Yield Index covers the universe of fixed rate, publicly
issued, noninvestment grade debt registered with the SEC. All bonds included in
the High Yield Index must be dollar-denominated and nonconvertible and have at
least one year remaining to maturity and an outstanding par value of at least
$100 million. Generally securities must be rated Ba1 or lower by Moody's
Investors Service, including defaulted issues. If no Moody's rating is
available, bonds must be rated BB+ or lower by S&P; and if no S&P rating is
available, bonds must be rated below investment grade by Fitch Investor's
Service. A small number of unrated bonds is included in the index; to be
eligible they must have previously held a high-yield rating or have been
associated with a high-yield issuer, and must trade accordingly.
In addition, the Fund will, from time to time, use the following standard
convertible securities indices against which it will compare its performance:
Goldman Sachs Convertible 100; Kidder Peabody Convertible Bond Index; Value Line
Convertible Bond Index; and Dow Jones Utility Index.
WHO IS FEDERATED INVESTORS, INC.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
MUNICIPAL FUNDS
In the municipal sector, as of December 31, 1998, Federated managed 10 bond
funds with approximately $2.2 billion in assets and 23 money market funds with
approximately $12.5 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
EQUITY FUNDS
In the equity sector, Federated has more than 28 years' experience. As of
December 31, 1998, Federated managed 27 equity funds totaling approximately
$14.9 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
CORPORATE BOND FUNDS
In the corporate bond sector, as of December 31, 1998, Federated managed 9 money
market funds and 15 bond funds with assets approximating $22.8 billion and $7.1
billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 26 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
GOVERNMENT FUNDS
In the government sector, as of December 31, 1998, Federated manages 9 mortgage
backed, 5 government/agency and 19 government money market mutual funds, with
assets approximating $5.3 billion, $1.8 billion and $41.6 billion, respectively.
Federated trades approximately $425 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.2 billion in government funds within these
maturity ranges.
MONEY MARKET FUNDS
In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market fund.
Simultaneously, the company pioneered the use of the amortized cost method of
accounting for valuing shares of money market funds, a principal means used by
money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1998, Federated managed more than $76.7 billion in assets across 52 money market
funds, including 19 government, 9 prime and 23 municipal with assets
approximating $41.6 billion, $22.8 billion and $12.5 billion, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield--J. Thomas
Madden; U.S. fixed income--William D. Dawson, III; and global equities and fixed
income--Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
INSTITUTIONAL CLIENTS
Federated meets the needs of approximately 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.
FINANCIAL INFORMATION
The Financial Statements for the Fund for the fiscal year ended March 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of
Federated Equity Income Fund, Inc. dated March 31, 1999.
INVESTMENT RATINGS
STANDARD AND POOR'S LONG-TERM DEBT RATING DEFINITIONS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong. AA--Debt rated
AA has a very strong capacity to pay interest and repay principal and differs
from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB--Debt rated BB has less near-term, vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB-rating.
B--Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating. CCC--Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, it is not likely
to have the capacity to pay interest and repay principal. The CCC rating
category is also used for debt subordinated to senior debt that is assigned an
actual or implied B or B-rating. CC--The rating CC typically is applied to debt
subordinated to senior debt that is assigned an actual or implied CCC debt
rating.
C--The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC-debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
MOODY'S INVESTORS SERVICE, INC. LONG-TERM BOND RATING DEFINITIONS AAA--Bonds
which are rated AAA are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as gilt edged.
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA--Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in AAA securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
BAA--Bonds which are rated BAA are considered as medium grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA--Bonds which are BA are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class. B--Bonds which are rated B generally lack characteristics
of the desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
CAA--Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest. CA--Bonds which are rated CA represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings. C--Bonds which are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
FITCH IBCA, INC. LONG-TERM DEBT RATING DEFINITIONS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short- term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects
the obligor's limited margin of safety and the need for reasonable business and
economic activity throughout the life of the issue. CCC--Bonds have certain
identifiable characteristics which, if not remedied, may lead to default. The
ability to meet obligations requires an advantageous business and economic
environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time. C--Bonds are imminent default in payment of
interest or principal.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
PRIME-1--Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
n Leading market positions in well established industries.
n High rates of return on funds employed.
n Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
n Broad margins in earning coverage of fixed financial charges and high
internal cash generation.
n Well established access to a range of financial markets and assured sources
of alternate liquidity.
PRIME-2--Issuers rated Prime-1 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
STANDARD AND POOR'S COMMERCIAL PAPER RATINGS
A-1--This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
FITCH IBCA, INC. COMMERCIAL PAPER RATING DEFINITIONS
FITCH-1--(Highest Grade) Commercial paper assigned this rating is regarded as
having the strongest degree of assurance for timely payment. FITCH-2--(Very Good
Grade) Issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than the strongest issues.
ADDRESSES
FEDERATED EQUITY INCOME FUND, INC.
Class A Shares
Class B Shares
Class C Shares
Class F Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT PUBLIC AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
PART C. OTHER INFORMATION
Item 23. EXHIBITS:
---------
(a) (i) Conformed copy of Articles of Restatement of the
Registrant; (15)
(ii) Conformed copy of Articles of Amendment of the
Registrant; (15)
(b) Copy of By-Laws of the Registrant as Restated and
Amended; (3)
(i) Copy of Amendment to By-Laws effective August 28,
1987;(4) (ii) Copy of Amendment to By-Laws effective November 19,
1987; (4)
(iii) ......Copy of Amendment to By-Laws effective May 4, 1993;
(14)
(iv) Copy of Amendment No. 6 to By-Laws effective February 23, 1998; (15)
(v) Copy of Amendment No. 7 to By-Laws effective February 27,
1998; (15)
(vi) Copy of Amendment No. 8 to By-Laws effective May 12, 1998; (15)
(c) Copies of Specimen Certificates for Shares of Capital
Stock for Class A Shares, Class B Shares, Class C
Shares, and Class F Shares of the Registrant; (12)
(d) Conformed copy of Investment Advisory Contract of the
Registrant; (5)
- ---------------
+ All exhibits have been filed electronically.
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 2 on Form N-1A filed May 18, 1988 (File Nos. 33-6901 and
811-4743).
4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 3 on Form N-1A filed July 19, 1988 (File Nos. 33-6901
and 811-4743).
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed July 28, 1989 (File Nos. 33-6901
and 811-4743).
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 22 on Form N-1A filed May 30, 1997 (File Nos. 33-6901
and 811-4743).
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 25 on Form N-1A filed May 28, 1998 (File Nos. 33-6901
and 811-4743).
15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 26 on Form N-1A filed March 29, 1999 (File Nos. 33-6901
and 811-4743).
(e)
(i) Conformed copy of Distributor's Contract of the
Registrant, through and including Exhibit C; (11)
(ii) Conformed copy of Exhibit D to the Distributor's
Contract of the Registrant; (12)
(iii) The Registrant hereby incorporates the conformed copy
of the specimen Mutual Funds Sales and Service
Agreement; Mutual Funds Service Agreement; and Plan
Trustee/Mutual Funds Service Agreement from Item
24(b)(6) of the Cash Trust Series II Registration
Statement on Form N-1A, filed with the Commission on
July 24, 1995. (File Nos. 33-38550 and 811-6269).
(iv) Conformed copy of Distributor's Contract (Class B
Shares) including Exhibit 1 and Schedule A; (14)
(f) Not applicable;
(g) (i) Conformed copy of Custodian Contract of the
Registrant; (10)
(ii) Conformed Copy of Custody Fee Schedule; (14)
(h) (i) Conformed copy of Amended and Restated Agreement
for Fund Accounting Services, Administrative
Services, Transfer Agency Services, and Custody
Services Procurement of the Registrant; (15)
(ii) The responses described in Item 23(e)(iii) are
hereby incorporated by reference.
(iii) Conformed copy of Amended and Restated Shareholder
Services Agreement; (15)
(iv) Conformed copy of Principal Shareholder Servicer's
Agreement (Class B Shares) including Exhibit 1 and
Schedule A; (14)
(v) Conformed copy of Shareholders Services Agreement
(Class B Shares) including Exhibit 1 and Schedule A;
(14)
(vi) The Registrant hereby incorporates the conformed
copy of the Shareholder Services Sub-Contract between
Fidelity and Federated Shareholder Services from Item
24(b)(9)(iii) of the Federated GNMA Trust Registration
Statement on Form N-1A, filed with the Commission on March 26,
1996. (File Nos. 2-75670 and 811-3375).
- ---------------
+ All exhibits have been filed electronically.
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 2 on Form N-1A filed December 15, 1986 (File Nos.
33-6901 and 811-4743).
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 17 on Form N-1A filed May 24, 1995 (File Nos. 33-6901
and 811-4743).
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 21 on Form N-1A filed May 29, 1996 (File Nos. 33-6901
and 811-4743).
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 22 on Form N-1A filed May 30, 1997 (File Nos. 33-6901
and 811-4743).
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 25 on Form N-1A filed May 28, 1998 (File Nos. 33-6901
and 811-4743).
15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 26 on Form N-1A filed March 29, 1999 (File Nos. 33-6901
and 811-4743).
16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 27 on Form N-1A filed May 26, 1999 (File Nos. 33-6901
and 811-4743).
(i) Conformed copy of Opinion and Consent of Counsel as to
legality of shares being registered; (2)
(j) Conformed Copy of Consent of Independent Auditors; (16)
(k) Not applicable;
(l) Copy of Initial Capital Understanding; (2)
(m) (i) Copy of Rule 12b-1 Plan of the Registrant, through
and including Exhibit B; (11)
(ii) Conformed Copy of Exhibit C to the Rule 12b-1 Plan;
(12) (iii) Conformed copy of Exhibit 1 and Schedule A to the
12b-1 Distribution Plan (Class B Shares) of the
Registrant; (14)
(iv) The responses described in Item 23(e)(iii) are
hereby incorporated by reference.
(n) Copy of Financial Data Schedules; (not included per
footnote 60 of Release No. 33-7684)
(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) (i) Conformed copy of Power of Attorney of
Registrant; (13)
(ii) Conformed copy of Power of Attorney of Chief
Investment Officer of the Registrant; (15)
(iii)Conformed copy of Power of Attorney of Treasurer of
the Registrant; (15)
(iv) Conformed copy of Power of Attorney of Director of
the Registrant; (15)
(v) Conformed copy of Power of Attorney of Director of
the Registrant; (15)
(vi) Conformed copy of Power of Attorney of Director of
the Registrant; (15)
- ---------------
+ All exhibits have been filed electronically.
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 2 on Form N-1A filed December 15, 1986 (File Nos.
33-6901 and 811-4743).
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 21 on Form N-1A filed May 29, 1996 (File Nos. 33-6901
and 811-4743).
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 22 on Form N-1A filed May 30, 1997 (File Nos. 33-6901
and 811-4743).
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No.24 on Form N-1A filed March 26, 1998 (File Nos. 33-6901
and 811-4743).
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 25 on Form N-1A filed May 28, 1998 (File Nos. 33-6901
and 811-4743).
15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 26 on Form N-1A filed March 29, 1999 (File Nos. 33-6901
and 811-4743).
16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 27 on Form N-1A filed May 26, 1999 (File Nos. 33-6901
and 811-4743).
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND:
------------------------------------------------------------
None
Item 25. INDEMNIFICATION: (5)
----------------
Item 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER:
---------------------------------------------------------
For a description of the other business of the investment adviser, see
the section entitled "Who Manages the Fund" in Part A. The affiliations
with the Registrant of four of the Trustees and one of the Officers of
the investment adviser are included in Part B of this Registration
Statement under "Who Manages and Provides Services to the Fund" The
remaining 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
David A. Briggs
Drew J. Collins
Jonathan C. Conley
Deborah A. Cunningham
Mark E. Durbiano
Jeffrey A. Kozemchak
Sandra L. McInerney
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
Robert E. Cauley
Kenneth J. Cody
Alexandre de Bethmann
B. Anthony Delserone, Jr.
Michael P. Donnelly
Linda A. Duessel
Donald T. Ellenberger
Kathleen M. Foody-Malus
Thomas M. Franks
Edward C. Gonzales
James E. Grefenstette
Marc Halperin
Patricia L. Heagy
Susan R. Hill
William R. Jamison
- --------------------
5. Response is incorporated by reference to Registrant's Post-effective
Amendment No. 6 on Form N-1A filed July 28, 1989 (File Nos. 33-6901
and 811-4743).
Constantine J. Kartsonas
Stephen A. Keen
Robert M. Kowit
Richard J. Lazarchic
Steven Lehman
Marian R. Marinack
Keith J. Sabol
Frank Semack
Aash M. Shah
Michael W. Sirianni, Jr.
Christopher Smith
Tracy P. Stouffer
Edward J. Tiedge
Paige M. Wilhelm
George B. Wright
Jolanta M. Wysocka
Assistant Vice Presidents: Nancy J. Belz
Lee R. Cunningham, II
James H. Davis, II
Jacqueline A. Drastal
Paul S. Drotch
Salvatore A. Esposito
Donna M. Fabiano
Gary E. Farwell
Eamonn G. Folan
John T. Gentry
John W. Harris
Nathan H. Kehm
John C. Kerber
Grant K. McKay
Natalie F. Metz
Joseph M. Natoli
John Sheehy
Matthew K. Stapen
Diane Tolby
Timothy G. Trebilcock
Leonardo A. Vila
Steven J. Wagner
Lori A. Wolff
Secretary: G. Andrew Bonnewell
Treasurer: Thomas R. Donahue
Assistant Secretaries: Thomas R. Donahue
Richard B. Fisher
Christine M. Newcamp
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 investment companies in the
Federated Fund Complex described in Part B of this Registration
Statement.
Item 27. PRINCIPAL UNDERWRITERS:
-----------------------
(a)...Federated Securities Corp. the Distributor for shares of the
Fund, acts as principal underwriter for the following
open-end investment companies, including the Registrant:
Automated Government Money Trust; Cash Trust Series II; Cash Trust Series,
Inc.; CCB Funds; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders Fund,
Inc.; Federated ARMs Fund; Federated Core Trust; Federated Equity Funds;
Federated Equity Income Fund, Inc.; Federated 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.; ; Hibernia
Funds; Independence One Mutual Funds; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; 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; Regions Funds; RIGGS Funds; SouthTrust Funds;
Tax-Free Instruments Trust; The Planters Funds; The Wachovia Funds; The Wachovia
Municipal Funds; Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; Vision Group of
Funds, Inc.; World Investment Series, Inc.; Blanchard Funds; Blanchard Precious
Metals Fund, Inc.; DG Investor Series; High Yield Cash Trust; Investment Series
Trust; Star Funds; Targeted Duration Trust; The Virtus Funds; Trust for
Financial Institutions;
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 President
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 Executive Vice
Federated Investors Tower President, President
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas R. Donahue Director, Assistant Secretary --
Federated Investors Tower and Assistant Treasurer
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
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
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
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Matthew W. Brown Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark Carroll Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Steven R. Cohen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert J. Deuberry Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
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
Mark A. Gessner Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Tad Gullickson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dayna C. Haferkamp Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
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
Christopher A. Layton Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael H. Liss Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
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
Thomas P. Moretti 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 J. Segura Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
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
Robert W. Bauman Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
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
John T. Glickson 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
Matthew S. Hardin Secretary, --
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. Ross Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 28. LOCATION OF ACCOUNTS AND RECORDS:
---------------------------------
All accounts and records required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and Rules 31a-1 through 31a-3
promulgated thereunder are maintained at one of the following
locations:
Federated Equity Income ederated Investors Tower
Fund, Inc.("Registrant") 001 Liberty Avenue
ittsburgh, PA 15222-3779
...... Notices should be sent to the
gent for Service at the above address)
ederated Investors Funds
800 Corporate Drive
ittsburgh, PA 15237-7000
Federated Shareholder
Services Company P.O. Box 8600
("Transfer Agent, Dividend Boston, MA 02266-8600
Disbursing Agent and Portfolio
Recordkeeper")
Federated Services Federated Investors Tower
Company ...... 1001 Liberty Avenue
("Administrator") Pittsburgh, PA 15222-3779
Federated Investment Federated Investors Tower
Management Company 1001 Liberty Avenue
("Adviser") Pittsburgh, PA 15222-3779
State Street Bank and Trust P.O. Box 8600
Company Boston, MA 02266-8600
("Custodian")
Item 29. MANAGEMENT SERVICES: Not applicable.
-------------------
Item 30. UNDERTAKINGS:
------------
Registrant hereby undertakes to comply with the provisions of Section
16(c) of the 1940 Act with respect to the removal of Directors and the
calling of special shareholder meetings by shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, FEDERATED EQUITY INCOME FUND, INC., has
duly caused this Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Pittsburgh
and Commonwealth of Pennsylvania, on the 31st day of March 2000.
FEDERATED EQUITY INCOME FUND, INC.
BY: /s/C. Grant Anderson
C. Grant Anderson, Assistant Secretary
Attorney in Fact for John F. Donahue
March 31, 2000
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
its Registration Statement has been signed below by the following person in the
capacity and on the date indicated:
NAME TITLE DATE
---- ----- ----
By:/s/C. Grant Anderson. Attorney In Fact March 31, 2000
C. Grant Anderson.... For the Persons
ASSISTANT SECRETARY.. Listed Below
NAME TITLE
John F. Donahue* Chairman and Director
Chief Executive Officer)
Richard B. Fisher* President
J. Christopher Donahue* Executive Vice President and Director
Richard J. Thomas* Treasurer (Principal Financial
and Accounting Officer)
J. Thomas Madden* Chief Investment Officer
Thomas G. Bigley* Director
John T. Conroy, Jr.* Director
Nicholas P. Constantakis* Director
John F. Cunningham* Director
Lawrence D. Ellis, M.D.* Director
Peter E. Madden* Director
Charles F. Mansfield, Jr.* Director
John E. Murray, Jr., J.D., S.J.D.* Director
Marjorie P. Smuts* Director
John S. Walsh* Director
* By Power of Attorney
