SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No.
FEDERATED UTILITY FUND, INC.
(formerly, Liberty Utility Fund, Inc.)
(Exact Name of Registrant as Specified in Charter)
(412) 288-1900
(Area Code and Telephone Number)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
JOHN W. McGONIGLE, ESQUIRE
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
Copy to:
Matthew G. Maloney, Esquire
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, DC 20037
It is proposed that this filing will become effective on March 31, 1996, or
as soon thereafter as is practicable, pursuant to Rule 488. (Approximate
Date of Proposed Public Offering)
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of 1940
that it elects to register an indefinite amount of securities under the
Securities Act of 1933 and filed the Notice required by that Rule for
Registrant's most recent fiscal year ending February 28, 1995 was filed on
April 13, 1995. Therefore, no filing fee is required.
CROSS REFERENCE SHEET
Pursuant to Item 1(a) of Form N-14 Showing Location in
Prospectus of Information Required by Form N-14
Item of Part A of Form N-14 and Caption Caption or Location in
Prospectus
1.Beginning of Registration Statement and Cross Reference Sheet; Cover
Page
Outside Front Cover Page of Prospectus.
2.Beginning and Outside Back Cover Page Table of Contents
of Prospectus
3.Fee Table, Synopsis Information and Summary of Fund Expenses; Synopsis;
Risk Factors Risk Factors
4.Information About the Transaction Information About the Transaction
5.Information About the Registrant Information About the Federated Fund and
the Fortress Fund
6.Information About the Company Information About the Federated Fund and
Being Acquired the Fortress Fund
7.Voting Information Voting Information
8.Interest of Certain Persons and Experts Legal Matters
9.Additional Information Required For Not Applicable
Reoffering by Persons Deemed To Be
Underwriters.
Item of Part B of Form N-14 and Caption Caption or Location in
Statement of
Additional Information
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. Additional Information about the
Registrant Statement of Additional Information of
Federated Utility Fund, Inc., dated
March 29, 1996.
13. Additional Information about the Company
Statement of Additional Information of
Being Acquired Fortress Utility Fund, Inc., dated
July 31, 1995.
14. Financial Statements Financial
Statements of Federated Utility Fund,
Inc., dated February 28, 1995.
Financial Statements of Fortress Utility
Fund, Inc., dated May 31, 1995.
Financial Statements (unaudited) of
Federated Utility Fund, Inc.,
dated August 31, 1995.
Financial Statements (unaudited) of
Fortress Utility Fund, Inc.,
dated November 30, 1995.
Pro Forma Financial Statements.
FORTRESS UTILITY FUND, INC.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Dear Shareholder:
The management of the Fortress Utility Fund, Inc. (the "Fortress Fund") is
pleased to announce the next step in reorganizing many of its Federated
mutual funds under the Federated name, the purpose of which is to make it
easier for you to locate your fund in newspapers, trade journals, and other
rating services. The Board of Directors of the Liberty Utility Fund, Inc.
took the first two steps by changing the name of the Liberty Utility Fund,
Inc. to the Federated Utility Fund, Inc. (the "Federated Fund"), and by
adding a new class of shares called Class F Shares.
To eliminate the offering of substantially identical funds, the Board of
Directors of the Fortress Fund has recommended that the Fortress Fund become
part of the Federated Fund. The Fortress Fund has a similar investment
objective and policies to that of the Federated Fund in that it seeks income
by investing primarily in securities issued by companies in the utilities
industry. The Class F Shares have identical distribution related charges and
operating expenses to those of the Fortress Fund.
The Board of Directors of the Fortress Fund submits for your vote a proposal
to transfer all of the assets of the Fortress Fund to the Federated Fund. As
a part of the transaction, shareholders in the Fortress Fund would receive
Class F Shares in the Federated Fund equal in value to their shares in the
Fortress Fund and the Fortress Fund would be liquidated. If approved, this
proposed combination will be a tax-free reorganization that will not affect
the value of your account.
Your vote on this issue is critical to its success. The combination will be
effected only if approved by a majority of the Fortress Fund's outstanding
shares, as defined under the Investment Company Act of 1940, on the record
date voted in person or represented by proxy. Because we believe this
combination of funds is in the best interest of shareholders, we encourage
you to vote in favor of the proposal in person, or by proxy if you are
unable to attend the meeting. We encourage you to review the enclosed
materials carefully before you vote.
Sincerely,
Richard B. Fisher
President
FORTRESS UTILITY FUND, INC.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Notice of Special Meeting of Shareholders of Fortress Utility Fund, Inc.
A Special Meeting of Shareholders (the "Meeting") of Fortress Utility Fund,
Inc. (the "Fortress Fund"), a Maryland corporation, will be held at 2:00
p.m. on May 31, 1996, at the office of the Fortress Fund, Federated
Investors Tower, 19th Floor, Pittsburgh, Pennsylvania 15222-3779 for the
following purpose:
1. To approve or disapprove a proposed Agreement and Plan of
Reorganization between the Fortress Fund and Federated Utility
Fund, Inc. (the "Federated Fund"), whereby the Fortress Fund would
transfer all of its assets and liabilities to the Federated Fund
in exchange for Class F Shares of the Federated Fund to be
distributed pro rata by the Fortress Fund to its shareholders in
complete liquidation and dissolution of the Fortress Fund; and
2. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
Dated: April 11, 1996
By the Order of the Board of Directors,
John W. McGonigle
Secretary
Shareholders of record at the close of business on March 25, 1996 are
entitled to vote at the Meeting. Whether or not you plan to attend the
Meeting, please sign and return the enclosed proxy card. Your vote is
important.
To secure the largest possible representation, and to save the expense of
further mailings, please sign your proxy card and return it in the enclosed
envelope, which requires no postage if mailed in the United States. You may
revoke your proxy at any time, at or prior to the Meeting, or vote in person
if you attend the Meeting.
PROSPECTUS/PROXY STATEMENT
March 31, 1996
Acquisition of the Assets of
FORTRESS UTILITY FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
1-800-245-5051
By and In Exchange for F Shares of
FEDERATED UTILITY FUND, INC.
(FORMERLY LIBERTY UTILITY FUND, INC.)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
1-800-245-5051
This Prospectus/Proxy Statement relates to shares of common stock
designated as Class F Shares, par value $0.001 per Share, of Federated
Utility Fund, Inc. (the "Federated Fund") to be issued to, and in exchange
for all the assets of and the assumption of the liabilities of, Fortress
Utility Fund, Inc. (the "Fortress Fund"). Following receipt of the
Federated Fund shares, the Fortress Fund will be liquidated and the
Federated Fund shares will be distributed pro rata to shareholders of the
Fortress Fund, with Fortress Fund shareholders receiving Class F Shares of
the Federated Fund. The total value of a Fortress Fund shareholder's
investment will not change in connection with the reorganization. The terms
and conditions of this transaction is more fully described in the
Prospectus/Proxy Statement. The Federated Fund is an open-end, diversified
management investment company whose investment objectives are current income
and long-term growth of income. Capital appreciation is a secondary
objective. The Federated Fund pursues its investment objective by investing
in a professionally managed, diversified portfolio limited primarily to
securities issued by companies in the utilities industry. The Fortress Fund
is also an open-end, diversified management investment company whose
investment objective is high current income and moderate capital
appreciation. The Fortress Fund pursues its objective by investing in a
professionally managed, diversified portfolio limited primarily to
securities issued by companies in the utilities industry. For a comparison
of the investment policies of the Federated Fund and the Fortress Fund, see
"Investment Objectives and Policies."
This Prospectus/Proxy Statement should be retained for future
reference. It sets forth concisely the information about the Federated Fund
that a prospective investor should know before investing. This
Prospectus/Proxy Statement is accompanied by the Class F Shares Prospectus
of the Federated Fund dated March 29, 1996, which is incorporated herein by
reference. Statements of Additional Information for the Federated Fund
dated March 29, 1996 (relating to the Class F Shares Prospectus of the same
date) and March 31, 1996 (relating to this Prospectus/Proxy Statement), the
Annual Report of the Federated Fund for the fiscal year ended February 28,
1995, and the Semi-Annual Report of the Federated Fund for the period ended
August 31, 1995, all containing additional information, have been filed with
the Securities and Exchange Commission and are incorporated herein by
reference. Copies of the Statements of Additional Information and Annual
Report may be obtained without charge by writing or calling the Federated
Fund at the address and telephone number shown above.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS
OR OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES
INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
SUMMARY OF FUND EXPENSES
SYNOPSIS
Investment Objectives and Policies
Distribution, Purchase and
Redemption Procedures and
Exchange Rights
Advisory and Other Significant Fees
RISK FACTORS
INFORMATION ABOUT THE TRANSACTION
Reasons for the Proposed Reorganization
Terms of the Acquisition
Comparative Information on Shareholder Rights
Federal Income Tax Consequences
Capitalization
INFORMATION ABOUT THE FEDERATED FUND
AND THE FORTRESS FUND
Federated Utility Fund, Inc.
Fortress Utility Fund, Inc.
VOTING INFORMATION
Security Ownership of Certain Beneficial Owners
and Management of the Federated Fund and the
Fortress Fund
LEGAL MATTERS
OTHER MATTERS AND DISCRETION
OF ATTORNEYS NAMED IN THE PROXY
AGREEMENT AND PLAN OF REORGANIZATION Exhibit A
SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Federated Fund
Fortress Fund Class F
Shares
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) .........1.00% 1.00%
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) .........None None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)(1) 1.00% 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable) None
None
Exchange Fee...................................None None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)*
Management Fee (after waiver)(2)...............0.64% 0.61%
12b-1 Fee......................................None None
Total Other Expenses...........................0.50% 0.51%
Shareholder Services Fee (after waiver) (3) 0.21% 0.22%
Total Operating Expenses (4)...................1.14% 1.12%
(1)The contingent deferred sales charge assessed is 1.00% of the lesser of
the original purchase price or the net asset value of shares redeemed
within four years of their purchase date.
(2)The management fee for the Fortress Fund has been reduced to reflect the
voluntary waiver of a portion of the management fee. The adviser can
terminate this voluntary waiver at any time at its sole discretion. The
maximum management fee is 0.75%. The estimated management fee for the
Federated Fund has been reduced to reflect the anticipated voluntary
waiver of a portion of the management fee. The adviser can terminate
this anticipated voluntary waiver at any time at its sole discretion.
The maximum management fee is 0.75%.
(3)The maximum shareholder services fee is 0.25%.
(4)The total Fortress Fund operating expenses would have been 1.29% absent
the voluntary waivers of a portion of the management fee and the
shareholder services fee. The total Class F Shares operating expenses
are estimated to be 1.29% absent the anticipated voluntary waivers of a
portion of the management fee and the shareholder services fee.
* As a percentage of projected average net assets with respect to Class F
Shares of the Federated Fund. Total Class F Shares operating expenses are
estimated based on average expenses expected to be incurred during the
period ending February 28, 1997. During the course of this period,
expenses may be more or less than the average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Fortress Fund and Class
F Shares will bear, either directly or indirectly. Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
EXAMPLE 1 year 3 years 5 years 10 years
You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and
(2) redemption at the end of each time period
Fortress Fund ....................$32 $57 $72 $147
Federated Fund Class F Shares ....$32 $56 - -
You would pay the following expenses on a $1,000
investment, assuming no redemption
Fortress Fund ....................$22 $46 $72 $147
Federated Fund Class F Shares ....$21 $45 - -
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THIS EXAMPLE IS BASED ON ESTIMATED DATA FOR THE CLASS F SHARES' FISCAL YEAR
ENDING FEBRUARY 28, 1997.
PROSPECTUS/PROXY STATEMENT
SYNOPSIS
This Prospectus/Proxy Statement is furnished in connection with the
solicitation of proxies by and on behalf of the Board of Directors of
Fortress Utility Fund, Inc. to be used at the Special Meeting of
Shareholders (the "Meeting") to be held at the Fortress Fund's principal
offices on the 19th floor of Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3779 at 2:00 p.m. on May 31, 1996 and at any
adjournment thereof. The Board of Directors of the Fortress Fund has
determined that it is in the best interest of the Fortress Fund's
shareholders that the Fortress Fund and the Federated Fund be combined.
Under the Agreement and Plan of Reorganization, the Fortress Fund would
transfer all of its assets and liabilities to the Federated Fund in exchange
for Class F Shares of the Federated Fund to be distributed pro rata by the
Fortress Fund to its shareholders in complete liquidation and dissolution
of the Fortress Fund (the "Reorganization"). If the Reorganization is
consummated, shareholders of the Fortress Fund will become holders of Class
F Shares of the Federated Fund having a total net asset value equal to the
total net asset value of his or her holdings in the Fortress Fund on the
date of the Reorganization, i.e., the Closing Date.
As a condition to the Reorganization, the Federated Fund and the Fortress
Fund will receive an opinion of counsel that the Reorganization will be
considered a tax-free "reorganization" under applicable provisions of the
Internal Revenue Code so that no gain or loss will be recognized by either
the Fortress Fund or its shareholders. The tax cost basis of the Class F
Shares received by Federated Fund shareholders will be the same as the cost
of the shares of the Fortress Fund held by shareholders immediately before
the Reorganization.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of both funds are substantially
similar, and are described in the Class F Shares' Prospectus dated March 29,
1996 and the Fortress Fund's Prospectus dated July 31, 1995. Reference is
hereby made to both Prospectuses, which set forth in detail the investment
objectives and policies of each of the Federated Fund and the Fortress Fund,
each of which is incorporated by reference into this Prospectus/Proxy
Statement.
The Federated Fund is an open-end, diversified management investment company
that seeks current income and long-term growth of income with capital
appreciation as a secondary objective. The Federated Fund pursues its
objectives by investing primarily in common stocks, preferred stocks, units
of participation in master limited partnerships which are traded on a
national securities exchange, securities convertible into stock, and debt
securities issued by companies in the utilities industry. Under normal
circumstances, with respect to 65% of its assets, the Federated Fund will
invest in utility companies that derive 50% of their revenues from utilities
or assets relating to utility industries. The investment objectives and the
investment policies described above cannot be changed without shareholder
approval.
The Fortress Fund is an open-end, diversified management investment company
that seeks high current income and moderate capital appreciation by
investing primarily in a professionally managed, diversified portfolio of
equity and debt securities of utility companies. The investment objective
cannot be changed without approval of shareholders; however, the investment
policies may be changed by the Board of Directors without shareholder
approval. As a matter of investment policy, the Fortress Fund will invest
at least 65% of its total assets in securities of utility companies.
The utility securities in which both funds invest include common stocks of
utility companies, debt obligations which fall in one of the following
rating categories: (i) rated investment grade by either Moody's Investors
Service, Inc. ("Moody's") or Standard & Poor's Ratings Group ("S&P"), or
(ii) determined by the adviser to be of investment grade and not rated by
either of the aforementioned rating services. Both funds may purchase
securities of foreign issuers. Securities of a foreign issuer may present
greater risks in the form of nationalization, confiscation, domestic
marketability, or other national or international restrictions. There are
other differences between investing in foreign and U.S. companies that
include: less publicly available information about foreign companies; lack
of uniform financial accounting standards applicable to foreign companies;
less readily available market quotations on foreign companies; differences
in governmental regulations and supervision of foreign stock exchanges,
brokers, listed companies and banks; generally lower foreign stock market
value; likelihood that foreign securities may be less liquid or more
volatile; foreign brokerage commissions may be higher; unreliable mail
service between countries; and political or financial changes which
adversely affect investments in some countries.
In order to generate additional income, both funds may lend portfolio
securities up to one-third of their total assets. There is risk that when
lending portfolio securities, the securities may not be available on a
timely basis, and the funds may, therefore, lose the opportunity to sell the
securities at a desirable price.
Both funds may also enter into repurchase agreements and when-issued and
delayed delivery transactions. Repurchase agreements are arrangements in
which banks, broker/dealers, and other recognized financial institutions
sell securities to the fund and agree to repurchase them at a mutually
agreed upon time and price. To the extent that the original seller does not
repurchase the securities, the fund would receive less than the repurchase
price on any sale of such securities. When-issued and delayed delivery
transactions are arrangements in which the funds buy securities with payment
and delivery scheduled for a future time. The seller's failure to complete
these transactions may cause the fund to miss a price or yield considered to
be advantageous.
Both funds have investment limitations which prohibit them from (1)
borrowing money directly or through reverse repurchase agreements or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its assets and pledge up to 10% of the value of
those assets to secure such borrowings (with respect to the Federated Fund,
the borrowing policy is stated in terms of net assets and with respect to
the Fortress Fund, the borrowing policy is stated in terms of total assets);
(2) investing more than 5% of its total assets in securities of one issuer
(except cash and cash items and U.S. government securities); (3) investing
more than 5% of its total assets in securities of issuers that have records
of less than three years of continuous operations; (4) investing more than
10% of its assets in certain securities subject to restrictions on resale
under federal securities law; and (5) acquiring more than 10% of any class
of voting securities of any one issuer.
Both the Federated Fund and the Fortress Fund are also subject to certain
additional limitations which are similar, although not identical, and are
described in the Federated Fund's Statement of Additional Information dated
March 29, 1996, and the Fortress Fund's Statement of Additional Information
dated July 31, 1995. Reference is hereby made to both Statements of
Additional Information, which set forth in full the investment objectives
and policies and investment limitations of each of the Federated Fund and
the Fortress Fund, each of which is incorporated by reference into this
Prospectus/Proxy Statement.
DISTRIBUTION, PURCHASE AND REDEMPTION PROCEDURES AND EXCHANGE RIGHTS
Reference is made to the Prospectus of the Class F Shares dated March 29,
1996 and the Prospectus of the Fortress Fund dated July 31, 1995 for a
complete description of the distribution, purchase and redemption
procedures and exchange rights of shares, each of which is incorporated by
reference into this Prospectus/Proxy Statement. Set forth below is a brief
description of the distribution, purchase and redemption procedures and
exchange rights of the Class F Shares and the Fortress Fund.
The transfer agent and dividend disbursing agent for both the Federated Fund
and the Fortress Fund is Federated Shareholder Services Company, a
subsidiary of Federated Investors. Class F Shares and shares of the
Fortress Fund are sold on days on which the New York Stock Exchange is open.
Shares may be purchased through a financial institution or directly from
Federated Securities Corp. ("FSC"), the principal distributor for Class F
Shares and shares of the Fortress Fund. The minimum initial investment in
the Class F Shares and the Fortress Fund is $1,500, except for retirement
plans, in which case the minimum initial investment is $50.
The purchase price of each of the Class F Shares and Fortress Fund shares is
based on the net asset value. The net asset value for each of the Class F
Shares and Fortress Fund shares is calculated as of the close of the New
York Stock Exchange (normally 4:00 p.m., Eastern time) on each day on which
the Class F Shares and the Fortress Fund compute their net asset value.
Purchase and redemption orders for the Class F Shares and the Fortress Fund
received from broker/dealers before 5:00 p.m. (Eastern time) and from other
financial institutions before 4:00 p.m. (Eastern time) receive that day's
price.
Class F Shares and Fortress Fund shares are available through certain
authorized dealers at the public offering price, which is the net asset
value per share plus a sales charge of 1%. Class F Shares received by
Fortress Fund shareholders in connection with the Reorganization will not be
subject to this charge. In addition to the sales charge, FSC will pay
financial institutions from its own assets for distribution of and/or
administrative services relating to Class F Shares and Fortress Fund shares
an amount equal to 1% of the offering price of shares purchased by their
clients on purchases up to $1,999,999, .50% of the offering price on
purchases of $2,000,000 to $4,999,999, and .25% of the offering price on
purchases of $5,000,000 or more. Financial institutions may elect to waive
all or a portion of the initial payment; such waiver will result in the
waiver of the otherwise applicable contingent deferred sales charge.
The Federated Fund and the Fortress Fund each have adopted a Shareholder
Services Agreement under which they pay up to .25 of 1% of the average daily
net assets of the Class F Shares and the Fortress Fund shares to obtain
personal services for shareholders and for the maintenance of shareholder
accounts. The Federated Fund and the Fortress Fund have each entered into a
Shareholder Services Agreement with Federated Shareholder Services, a
subsidiary of Federated Investors, under which Federated Shareholder
Services will either perform shareholder services directly or will select
financial institutions to perform shareholder services.
Class F Shares and shares of the Fortress Fund are redeemable at any time at
a price equal to the net asset value, less any applicable contingent
deferred sales charge, next determined after the Fund receives the
redemption request. Redemptions will be made on days on which each of the
Federated Fund and the Fortress Fund compute net asset value. Redemptions
may be made through a financial institution, by telephone, by mailing a
written request, or through each of the Systematic Withdrawal Programs.
Shareholders redeeming Class F Shares and Fortress Fund shares within
certain time periods of the purchase date of those shares will be charged a
contingent deferred sales charge by FSC of the lesser of the original price
or the net asset value of shares redeemed, unless otherwise exempt, as
follows:
CONTINGENT DEFERRED
AMOUNT OF PURCHASE SHARES HELD SALES CHARGE
Up to $1,999,999 4 years or less 1%
$2,000,000 to $4,999,999 2 years or less .50%
$5,000,000 or more 1 year or less .25%
The contingent deferred sales charge will not be imposed on redemptions of
Fortress Fund shares as a result of the completion of the Reorganization.
In addition, the holding period or amount of contingent deferred sales
charge to which original Fortress Fund share purchases are subject will not
be affected by completion of the Reorganization. For purposes of computing
the holding period and amount of the contingent deferred sales charge, if
any, for the newly acquired Class F Shares in connection with the
Reorganization, the time for which original Fortress Fund shares were held
will be added to the time for which Class F Shares are held.
The Class F Shares and Fortress Fund have precisely the same exchange
privileges. Class F shareholders may exchange all or some of their shares
for Class F Shares in other funds distributed by FSC at net asset value
without a contingent deferred sales charge and in funds that were previously
members of a family of funds known as the Fortress Investment Program.
Shareholders using this privilege must exchange Class F Shares having a net
asset value equal to the minimum investment requirements of the fund into
which the exchange is made. This privilege is available to shareholders
resident in any state in which the Class F Shares being acquired may be
sold. An exercise of the exchange privilege is treated as a sale for
federal income tax purposes. Depending upon the circumstances, a capital
loss or gain may be realized.
ADVISORY AND OTHER SIGNIFICANT FEES
Passport Research, Ltd. ("Passport") is the investment adviser to the
Federated Fund pursuant to an investment advisory contract which specifies
an annual fee of .75 of 1% of the Federated Fund's average daily net assets.
Federated Advisers, a subsidiary of Federated Investors, is the general
partner and has a 50.5% interest in Passport. Edward D. Jones & Co., L.P.,
is the limited partner and has a 49.5% interest in Passport. Federated
Management, a subsidiary of Federated Investors, is the investment adviser
to the Fortress Fund pursuant to an investment advisory contract which
specifies an annual fee of .75 of 1% of the Fortress Fund's average daily
net assets.
Both Passport and Federated Management may voluntarily waive all or a
portion of their fee or reimburse both funds for certain operating expenses.
Passport and Federated Management can terminate their voluntary waivers at
any time at their sole discretion. Passport and Federated Management have
also undertaken to reimburse their respective funds for operating expenses
in excess of limitations established by certain states.
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services (including certain legal and
financial reporting services) necessary to operate the Federated Fund and
the Fortress Fund. Federated Administrative Services provides these at an
annual rate which relates to the average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors, as specified below:
AVERAGE AGGREGATE DAILY
NET ASSETS OF THE
MAXIMUM FEE FEDERATED FUNDS
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion
of its fee.
The maximum total operating expenses for the Class F Shares are expected to
be 1.12% of the average daily net assets and would be 1.29% absent the
voluntary waiver or reimbursement by Passport of certain operating expenses.
The total operating expenses for the Fortress Fund for the [fiscal
year/period] ending were 1.14% of the average daily net assets
-----------
and would have been 1.29% absent voluntary waivers and reimbursements by
Federated Management.
RISK FACTORS
Because of the similarities in the investment objectives, policies and
portfolio composition of the Federated Fund and the Fortress Fund, the
relative risks involved in investing in the Federated Fund, as outlined in
the section entitled "Investment Objectives and Policies," can be considered
similar to those associated with the Fortress Fund.
In addition to the risks described above, there are certain risks and
considerations affecting utility companies which an investor should take
into account when investing in these securities. These include various
factors which may adversely affect utility companies including: difficulty
in financing large construction programs during inflationary periods;
technological innovations which may cause existing plants, equipment or
products to become less competitive or obsolete; the impact of natural or
manmade disasters (especially on regional utilities); increased costs or
reductions in production due to the unavailability of appropriate types of
fuels; seasonally or occasionally reduced availability or higher costs of
natural gas; and reduced demand due to energy conservation among consumers.
Furthermore, utilities securities tend to be interest rate sensitive.
The special risk factors of utility securities are described in the Class F
Shares prospectus dated March 29, 1996 and the Fortress Fund's prospectus
dated July 31, 1995. Reference is hereby made to both prospectuses, which
set forth in detail the considerations of utility securities and special
risk factors, each of which is incorporated by reference into this
Prospectus/Proxy Statement.
INFORMATION ABOUT THE TRANSACTION
REASONS FOR THE PROPOSED REORGANIZATION
The Board of Directors of the Fortress Fund believes that the proposed
Reorganization will be in the best interests of shareholders of the Fortress
Fund. The Federated Fund and the Fortress Fund have substantially the same
investment objectives and policies and were created as separate funds to
permit investors to purchase shares with different distribution fee options.
Both funds were created before mutual funds in general were permitted to
offer multiple classes of shares. The Directors believe that combining
assets of the Federated Fund and Fortress Fund under a reorganized Federated
Utility Fund, Inc. will be less confusing to investors and financial
institutions that distribute shares. In considering and approving the
Reorganization, the Directors considered several additional factors,
including that the implementation of the Reorganization would (i) enable
investors to choose various purchasing options that best suits their
individual situations, thereby attracting new investors and assets to the
reorganized Federated Utility Fund, Inc. to the benefit of the shareholders,
(ii) facilitate distribution of the reorganized Federated Utility Fund,
Inc., and (iii) maintain the competitive position of the reorganized
Federated Utility Fund, Inc. in relation to other funds that have
implemented similar distribution arrangements. The Directors also took note
of the fact that the portfolio managers of each fund are identical and that
their shareholders will receive similar administrative and shareholder
services. Finally, the Directors noted that the total operating expenses of
both the Class F Shares of the Federated Fund and the Fortress Fund are
expected to remain the same.
Accordingly, the Board of Directors of the Fortress Fund, including a
majority of the independent Directors, determined that the Reorganization is
in the best interests of the Fortress Fund and that the interest of its
shareholders would not be diluted as a result of effecting the
Reorganization. Based upon the foregoing considerations, and the fact that
shareholders will not suffer any adverse tax consequences as a result of the
Reorganization, the Board of Directors unanimously voted to approve, and
recommend to Fortress Fund shareholders the approval of, the Reorganization.
The Directors of the Federated Fund, including the independent Directors,
have unanimously concluded that: (i) consummation of the Reorganization is
in the best interests of the Federated Fund and that the interest of its
shareholders would not be diluted as a result of effecting the
Reorganization, and (ii) have unanimously approved the Agreement and Plan of
Reorganization.
TERMS OF THE ACQUISITION
The shareholders of the Fortress Fund are being asked to approve the
Reorganization as described in the Agreement and Plan of Reorganization (the
"Plan") between the Federated Fund and the Fortress Fund. The
Reorganization will consist of: (i) the transfer of all assets of the
Fortress Fund to the Federated Fund in exchange solely for Class F Shares of
the Federated Fund, (ii) the distribution of Class F Shares to the
shareholders of the Fortress Fund in liquidation of the Fortress Fund as
provided in the Plan, and (iii) the termination of the Fortress Fund.
If shareholders of the Fortress Fund approve the Reorganization, it will be
consummated promptly after the various conditions to the obligations of each
of the parties are satisfied (the "Closing Date"). On the Closing Date, the
Fortress Fund will transfer all of its assets to the Federated Fund in
exchange for Class F Shares having an aggregate net asset value equal to the
aggregate net assets, less liabilities, of the Fortress Fund. The Fortress
Fund will distribute as of the Closing Date such Class F Shares pro rata to
its shareholders of record, determined as of the valuation date, in exchange
for their shares of the Fortress Fund. Shareholders of the Fortress Fund
will earn their last dividend for the Fortress Fund on the dividend date.
The Class F Shares to be issued to shareholders of the Fortress Fund will be
fully paid, nonassessable when issued and transferable without restriction
and will have no preemptive rights or conversion rights. The net asset
value of the Class F Shares and the value of the Fortress Fund shares and
the amount of their respective liabilities will be determined in accordance
with the valuation procedures set forth in each Fund's respective Articles
of Incorporation and current Prospectus and Statement of Additional
Information. The valuation procedures used by the Class F Shares and the
Fortress Fund are precisely the same.
Consummation of the Reorganization is subject to the conditions set forth in
the Plan, including receipt of an opinion in form and substance satisfactory
to the Federated Fund and the Fortress Fund as described under the section
"Federal Income Tax Consequences." The Plan may be terminated and the
Reorganization may be abandoned at any time before or after approval by the
shareholders of the Fortress Fund prior to Closing Date by either party if
it believes that consummation of the Reorganization would not be in the best
interests of its shareholders.
If the shareholders do not approve the Reorganization, the Fortress Fund
will continue to engage in business as an independent entity.
Passport and Federated Management are responsible for the payment of all
expenses of the Reorganization incurred by either party, whether or not the
Reorganization is consummated. Such expenses include, but are not limited
to, accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Fortress
Fund's shareholders and the costs of holding the Meeting.
The foregoing description of the Plan entered into between the Federated
Fund and the Fortress Fund is qualified in its entirety by the terms and
provisions of the Plan, a copy of which is attached as Exhibit A and
incorporated by reference herein.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS
The Board of Directors has authorized the Federated Fund to offer four
classes of shares: Class A Shares, Class B Shares, Class C Shares, and
Class F Shares. Each share of the Federated Fund gives the shareholder one
vote in Director elections and other matters submitted to shareholders for
vote. All shares of each class have equal voting rights except that in
matters affecting only a particular class, only shareholders of that class
are entitled to vote.
The Board of Directors of the Fortress Fund has authorized it to offer only
one class of shares. Each share is entitled to one vote at all meeting of
shareholders.
As Maryland corporations, neither Fund is required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in each of the Fund's operation and for the election of Directors
under certain circumstances. Directors of both Funds may be removed by a
majority vote of the shareholders at a special meeting. A special meeting
of shareholders shall be called by the Directors upon the request of
shareholders owning at least 10% of the outstanding shares.
FEDERAL INCOME TAX CONSEQUENCES
As a condition to the Reorganization, the Federated Fund and the Fortress
Fund will receive an opinion from Dickstein, Shapiro & Morin, L.L.P.,
counsel to the Federated Fund and the Fortress Fund, to the effect that, on
the basis of the existing provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), current administrative rules and court decisions,
for federal income tax purposes: (1) the Reorganization set forth in the
Plan will constitute a tax-free reorganization under Section 368(a)(1)(C) of
the Code; (2) no gain or loss will be recognized by the Federated Fund upon
receipt of the Fortress Fund's assets solely in exchange for the Federated
Fund Class F Shares; (3) no gain or loss will be recognized by the Fortress
Fund upon the transfer of its assets to the Federated Fund in exchange for
the Federated Fund Class F Shares or upon the distribution (whether actual
or constructive) of the Federated Fund Shares to Fortress Fund shareholders
in exchange for their shares of the Fortress Fund; (4) no gain or loss will
be recognized by shareholders in the Fortress Fund upon exchange of their
Fortress Fund shares for the Federated Fund Class F Shares; (5) the tax
basis of the Fortress Fund's assets acquired by the Federated Fund will be
the same as the tax basis of such assets to the Fortress Fund immediately
prior to the Reorganization; (6) the tax basis of the Federated Fund Class F
Shares received by each shareholder of the Fortress Fund pursuant to the
Plan will be the same as the tax basis of Fortress Fund shares held by such
shareholder immediately prior to the Reorganization; (7) the holding period
of the assets of the Fortress Fund in the hands of the Federated Fund will
include the period during which those assets were held by the Fortress Fund;
and (8) the holding period of the Federated Fund Class F Shares received by
each shareholder of the Fortress Fund will include the period during which
the Fortress Fund shares exchanged therefor were held by such shareholder,
provided the Fortress Fund shares were held as capital assets on the date of
the Reorganization.
Fund shareholders are advised to consult their own tax advisers as to the
tax consequences of the proposed Reorganization under applicable state,
local and foreign laws.
CAPITALIZATION
The following table shows the capitalization of the Federated Fund and of
the Fortress Fund as of August 31, 1995 and on a pro forma basis as of that
date, giving effect to the proposed Reorganization:
Class F Shares Pro Forma
the Federated Fund Fortress Fund Combined
Net Assets $0 $750,445,689 $750,445,689
Net Asset Value
Per Share $0.00 $12.79 $11.60
Shares Outstanding 0 58,678,360 64,666,774
Shares Authorized 0 2,000,000,000 2,000,000,000
INFORMATION ABOUT THE FEDERATED FUND AND THE FORTRESS FUND
FEDERATED UTILITY FUND, INC.
The Articles of Incorporation of the Federated Fund permit it to offer
separate series of shares representing interests in separate portfolios of
securities. As of the date of this Prospectus/Proxy Statement, the Board of
Directors has established four classes of shares, known as Class A Shares,
Class B Shares, Class C Shares, and Class F Shares.
For a discussion of the factors that materially affected the Federated Fund
during its most recent fiscal year as well as a comparison of its
performance to the Standard & Poor's 500 Index, Standard & Poor's Utility
Index, and the Dow Jones Utility Average during the past ten years,
reference is made to the Federated Fund's most recent Annual Report, dated
February 28, 1995, which is incorporated by reference into this
Prospectus/Proxy Statement.
Information about the Class F Shares is contained in its current Prospectus,
dated March 29, 1996, a copy of which is included herewith and incorporated
by reference herein. Additional information about the Federated Fund is
included in its Annual Report dated February 28, 1995, its Semi-Annual
Report dated August 31, 1995, its Statement of Additional Information dated
March 29, 1996 (relating to the Class F Shares Prospectus of the same date),
and the Statement of Additional Information dated March 31, 1996 (relating
to this Prospectus/Proxy Statement) which are incorporated by reference into
this Prospectus/Proxy Statement. Copies of the Annual and Semi-Annual
Reports and Statements of Additional Information, which have been filed with
the Securities and Exchange Commission (the "SEC"), may be obtained without
charge by contacting the Federated Fund at 1-800-245-5051 or by writing to
the Federated Fund at Federated Investors Tower, Pittsburgh, PA 15222-3779.
The Federated Fund is subject to the informational requirements of the
Securities Act of 1933, the Securities Exchange Act of 1934, and the
Investment Company Act of 1940 and, in accordance therewith, files reports
and other information with the SEC. Reports, proxy and information
statements and other information filed by the Federated Fund can be obtained
by calling or writing the Federated Fund and can also be inspected and
copied by the public at the public reference facilities maintained by the
SEC in Washington, D.C. located at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at certain of its regional offices located at
Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, IL
60661 and 13th Floor, Seven World Trade Center, New York, NY 10048. Copies
of such material can be obtained at prescribed rates from the Public
Reference Branch, Office of Consumer Affairs and Information Services, SEC,
450 Fifth Street, N.W., Washington, D.C. 20549.
This Prospectus/Proxy Statement, which constitutes part of a Registration
Statement filed by the Federated Fund with the SEC under the Securities Act
of 1933, omits certain of the information contained in the Registration
Statement. Reference is hereby made to the Registration Statement and the
exhibits thereto for further information with respect to the Federated Fund.
Statements contained herein concerning the provisions of documents are
necessarily summaries of such documents, and each such statement is
qualified in its entirety by reference to the copy of the applicable
documents filed with the SEC.
FORTRESS UTILITY FUND, INC.
Information about the Fortress Fund is contained in the Fortress Fund's
current Prospectus dated July 31, 1995, its Statement of Additional
Information dated July 31, 1995 (relating to the Fortress Fund Prospectus of
the same date), the Statement of Additional Information dated March 31, 1996
(relating to this Prospectus/Proxy Statement), its Annual Report dated May
31, 1995, and its Semi-Annual Report dated November 30, 1995, which are
incorporated by reference into this Prospectus/Proxy Statement. Copies of
such Prospectus, Statements of Additional Information and Annual and Semi-
Annual Reports may be obtained without charge by calling 1-800-245-5051 or
by writing to the Fortress Fund at Federated Investors Tower, Pittsburgh, PA
15222-3779. The Fortress Fund is subject to the informational requirements
of the Securities Act of 1933, the Securities Exchange Act of 1934, and the
Investment Company Act of 1940 and, in accordance therewith, files reports
and other information with the SEC. Reports, proxy and information
statements and other information filed by the Fortress Fund can be obtained
by calling or writing the Fortress Fund and can also be inspected at the
public reference facilities maintained by the SEC or obtained at prescribed
rates at the addresses listed in the previous section.
VOTING INFORMATION
On March 25, 1996, the Fortress Fund had outstanding shares of
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capital stock, each share being entitled to one vote. Only shareholders of
record at the close of business on that date will be entitled to notice of
and to vote at the Meeting. Approval of the Plan requires the affirmative
vote of the lesser of (i) 67% of the shares of the Fortress Fund present at
the meeting, if holders of more than 50% of the outstanding shares are
present or represented by proxy, or (ii) a majority of the outstanding
shares of the Fortress Fund. The votes of shareholders of the Federated
Fund are not being solicited since their approval is not required in order
to effect the Reorganization.
A majority of the outstanding shares of the Fortress Fund, represented in
person or by proxy, shall be required to constitute a quorum at the Meeting.
For purposes of determining the presence of a quorum and counting votes on
the matters presented, the shares represented by abstentions and "broker
non-votes" will be counted as present, but not as votes cast, at the
Meeting. Under the Investment Company Act of 1940, the affirmative vote
necessary to approve the Plan is determined on the basis of a percentage of
votes present at the Meeting, which would have the effect of treating the
abstentions and non-votes as if they were votes against the proposal.
Shareholders of the Fortress Fund objecting to the Plan have no appraisal
rights under the Fortress Fund's Articles of Incorporation or Maryland law.
Under the Plan, if approved by the shareholders, each Fortress Fund
shareholder will become the owner of Class F Shares of the Federated Fund
having a total net asset value equal to the total net asset value of his or
her holdings in the Fortress Fund at the Closing Date.
The proxy confers discretionary authority on the persons designated therein
to vote on other business not currently contemplated which may properly come
before the Meeting. If the proxy is properly executed and returned before
the Meeting, it will be voted in accordance with any instructions and, if no
specification is made, the proxy will be voted in favor of the Plan. A
shareholder may revoke a proxy at any time prior to use by filing with the
Secretary of the Fortress Fund an instrument revoking the proxy, by
submitting a proxy bearing a later date, or by attending and voting at the
meeting.
The cost of preparing and mailing the notice of meeting, proxy card, the
Prospectus/Proxy Statement, and any additional material, along with other
expense relating to the Meeting will be borne by Passport and Federated
Management. Proxy solicitations will be made primarily by mail, but may
also be made by telephone, telegraph, or personal interview conducted by
certain officers or employees of the Fortress Fund. The Adviser will
reimburse custodians, nominees and fiduciaries for reasonable costs incurred
by them in connection with forwarding solicitation materials to beneficial
owners of shares held of record by such persons.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE
FEDERATED FUND AND THE FORTRESS FUND
To the knowledge of the Federated Fund, as of March 25, 1996, no person
owned of record or beneficially, 5% or more of the outstanding shares of the
Federated Fund, except for , which was the record
----------------------
owner of approximately % of the outstanding shares of the Federated
----
Fund. To the knowledge of the Fortress Fund, as of March 25, 1996, no
person owned of record or beneficially, 5% or more of the outstanding shares
of the Fortress Fund, except , which was the record owner of
--------------
approximately % of the outstanding shares of the Fortress Fund.
---
As of March 25, 1996, the Directors and officers of the Federated Fund, as a
group, and of the Fortress Fund, as a group, owned less than 1% of the
outstanding shares of the Federated Fund and the Fortress Fund,
respectively.
LEGAL MATTERS
Certain legal matters in connection with the Reorganization will be passed
upon by Dickstein, Shapiro, & Morin, L.L.P., Washington, D.C. Charles H.
Morin, Of Counsel to Dickstein, Shapiro, & Morin, L.L.P., is the beneficial
owner of shares of the Federated Fund having an aggregate value in excess of
$50,000.
OTHER MATTERS AND DISCRETION OF ATTORNEYS
NAMED IN THE PROXY
Management of the Fortress Fund knows of no other matters that may properly
be, or which are likely to be brought before the Meeting. However, if any
other business shall properly come before the Meeting, the persons named in
the proxy intend to vote thereon in accordance with their best judgment.
If at the time any session of the Meeting is called to order, a quorum is
not present in person or by proxy, the persons named as proxies may vote
those proxies which have been received to adjourn the Meeting to a later
date. In the event that a quorum is present but sufficient votes in favor
of one or more of the proposals have not been received, the persons named as
proxies may propose one or more adjournments of the Meeting to permit
further solicitation of proxies with respect to any such proposal. All such
adjournments will require the affirmative vote of a majority of the Fortress
Fund shares present in person or by proxy at the session of the Meeting to
be adjourned. The persons named as proxies will vote those proxies which
they are entitled to vote in favor of the proposal, in favor of such an
adjournment, and will vote those proxies required to be voted against the
proposal, against any such adjournment. A vote may be taken on one or more
of the proposals in this Prospectus/Proxy Statement prior to any such
adjournment if sufficient votes for its approval have been received and it
is otherwise appropriate.
So far as management is presently informed, there is no litigation pending
or threatened against the Fortress Fund.
Whether or not shareholders expect to attend the meeting, all shareholders
are urged to sign, fill in and return the enclosed proxy form promptly.
Exhibit A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated February 29, 1996 (the
"Agreement"), between FEDERATED UTILITY FUND, INC., a Maryland corporation
(hereinafter called the "Acquiring Fund"), and FORTRESS UTILITY FUND, INC.,
a Maryland corporation (hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of
the United States Internal Revenue Code of 1986, as amended (the "Code").
The reorganization (the "Reorganization") will consist of the transfer of
all of the assets of the Acquired Fund in exchange solely for Class F Shares
of common stock of the Acquiring Fund (the "Acquiring Fund Shares") and the
distribution, after the Closing Date hereinafter referred to, of the
Acquiring Fund Shares to the shareholders of the Acquired Fund in
liquidation of the Acquired Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are registered open-
end management investment companies and the Acquired Fund owns securities in
which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are authorized
to issue shares of common stock;
WHEREAS, the Board of Directors, including a majority of the Directors
who are not "interested persons" (as defined under the Investment Company
Act of 1940, as amended (the "1940 Act")), of the Acquiring Fund has
determined that the exchange of all of the assets of the Acquired Fund for
Acquiring Fund Shares is in the best interests of the Acquiring Fund
shareholders and that the interests of the existing shareholders of the
Acquiring Fund would not be diluted as a result of this transaction; and
WHEREAS, the Board of Directors, including a majority of the Directors
who are not "interested persons" (as defined under the 1940 Act), of the
Acquired Fund has determined that the exchange of all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquired Fund shareholders and that the interests of the existing
shareholders of the Acquired Fund would not be diluted as a result of this
transaction;
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the
Acquired Fund agrees to assign, transfer and convey to the Acquiring Fund
all of the assets of the Acquired Fund, including all securities and cash,
other than cash in an amount necessary to pay any unpaid dividends and
distributions as provided in paragraph 1.5, and the Acquiring Fund agrees in
exchange therefor to deliver to the Acquired Fund the number of Acquiring
Fund Shares, including fractional Acquiring Fund Shares, determined as set
forth in paragraph 2.3. Such transaction shall take place at the closing
(the "Closing") on the closing date (the "Closing Date") provided for in
paragraph 3.1. In lieu of delivering certificates for the Acquiring Fund
Shares, the Acquiring Fund shall credit the Acquiring Fund Shares to the
Acquired Fund's account on the stock record books of the Acquiring Fund and
shall deliver a confirmation thereof to the Acquired Fund.
1.2 The Acquired Fund will discharge all of its liabilities and
obligations prior to the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street
Bank and Trust Company, Boston, Massachusetts, the Acquiring Fund's
custodian (the "Custodian"), for the account of the Acquiring Fund, together
with proper instructions and all necessary documents to transfer to the
account of the Acquiring Fund, free and clear of all liens, encumbrances,
rights, restrictions and claims. All cash delivered shall be in the form of
currency and immediately available funds payable to the order of the
Custodian for the account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the
Acquiring Fund any dividends or interest received on or after the Closing
Date with respect to assets transferred to the Acquiring Fund thereunder.
The Acquired Fund will transfer to the Acquiring Fund any distributions,
rights or other assets received by the Acquired Fund after the Closing Date
as distributions on or with respect to the securities transferred. Such
assets shall be deemed included in assets transferred to the Acquiring Fund
on the Closing Date and shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently
practicable, the Acquired Fund will liquidate and distribute pro rata to the
Acquired Fund's shareholders of record, determined as of the close of
business on the Closing Date (the "Acquired Fund Shareholders"), the
Acquiring Fund Shares received by the Acquired Fund pursuant to paragraph
1.1. In addition, each shareholder of record of the Acquired Fund shall
have the right to receive any unpaid dividends or other distributions which
were declared before the Valuation Date (as hereinafter defined) with
respect to the shares of the Acquired Fund that are held by the shareholder
on the Valuation Date. Such liquidation and distribution will be
accomplished by the transfer of the Acquiring Fund Shares then credited to
the account of the Acquired Fund on the books of the Acquiring Fund to open
accounts on the share record books of the Acquiring Fund in the names of the
Acquired Fund Shareholders and representing the respective pro rata number
of the Acquiring Fund Shares due such shareholders. All issued and
outstanding shares of the Acquired Fund will simultaneously be canceled on
the books of the Acquired Fund. Share certificates representing interests
in the Acquired Fund will represent a number of Acquiring Fund Shares after
the Closing Date as determined in accordance with Section 2.3. The
Acquiring Fund shall not issue certificates representing the Acquiring Fund
Shares in connection with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books
of the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will
be issued in the manner described in the Acquiring Fund's current prospectus
and statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring
Fund Shares in a name other than the registered holder of the Acquired Fund
shares on the books of the Acquired Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Acquired Fund.
1.9 The Acquired Fund will be deregistered as an investment company
under the 1940 Act and dissolved as a Maryland Corporation promptly after
the closing date.
2. VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by
the Acquiring Fund hereunder shall be the value of such assets computed as
of the close of the New York Stock Exchange (normally 4:00 p.m., Eastern
time) on the Closing Date (such time and date being hereinafter called the
"Valuation Date"), using the valuation procedures set forth in the Acquiring
Fund's then-current prospectus or statement of additional information.
2.2 The net asset value of an Acquiring Fund Share shall be the
net asset value per share computed as of the close of the New York Stock
Exchange (normally 4:00 p.m., Eastern time) on the Valuation Date, using the
valuation procedures set forth in the Acquiring Fund's then-current
prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued
(including fractional shares, if any) in exchange for the Acquired Fund's
net assets shall be determined by dividing the value of the net assets of
the Acquired Fund determined using the same valuation procedures referred to
in paragraph 2.1 by the net asset value of one Acquiring Fund Share
determined in accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be May 31, 1996, or such later date as
the parties may mutually agree. All acts taking place at the Closing Date
shall be deemed to take place simultaneously as of the close of business on
the Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place
as the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of
the value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 Federated Shareholder Services Company, as transfer agent for each
of the Acquired Fund and the Acquiring Fund, shall deliver at the Closing a
certificate of an authorized officer stating that its records contain the
names and addresses of the Acquired Fund Shareholders and the number and
percentage ownership of outstanding shares owned by each shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and
deliver a confirmation evidencing the Acquiring Fund Shares to be credited
on the Closing Date to the Secretary of the Acquired Fund, or provide
evidence satisfactory to the Acquired Fund that such Acquiring Fund Shares
have been credited to the Acquired Fund's account on the books of the
Acquiring Fund. At the Closing, each party shall delivery to the other such
bills of sale, checks, assignments, assumption agreements, share
certificates, if any, receipts or other documents as such other party or its
counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Acquired Fund represents and warrants to the Acquiring Fund as
follows:
(a) The Acquired Fund is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland and
has power to own all of its properties and assets and to carry out this
Agreement.
(b) The Acquired Fund is registered under the 1940 Act, as an
open-end, management investment company, and such registration has not been
revoked or rescinded and is in full force and effect.
(c) The Acquired Fund is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of its
Articles of Incorporation or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquired Fund
is a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or investigation
of or before any court or governmental body is currently pending or to its
knowledge threatened against the Acquired Fund or any of its properties or
assets which, if adversely determined, would materially and adversely affect
its financial condition or the conduct of its business. The Acquired Fund
knows of no facts which might form the basis for the institution of such
proceedings, and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially
and adversely affects its business or its ability to consummate the
transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "Commission") hereunder and do not include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein as necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(g) The Statements of Assets and Liabilities of the Acquired Fund
at May 31, 1995 and 1994, have been audited by Ernst & Young LLP,
independent auditors, and have been prepared in accordance with generally
accepted accounting principles, consistently applied, and such statements
(copies of which have been furnished to the Acquiring Fund) fairly reflect
the financial condition of the Acquired Fund as of such dates, and there are
no known contingent liabilities of the Acquired Fund as of such dates not
disclosed therein.
(h) The Acquired Fund's financial statements at November 30, 1995
have been prepared in accordance with generally accepted accounting
principles.
(i) Since November 30, 1995, there has not been any material
adverse change in the Acquired Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course
of business, or any incurrence by the Acquired Fund of indebtedness maturing
more than one year from the date such indebtedness was incurred, except as
otherwise disclosed to and accepted by the Acquiring Fund.
(j) At the Closing Date, all Federal and other tax returns and
reports of the Acquired Fund required by law to have been filed by such
dates shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment
thereof, and to the best of the Acquired Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to
such returns.
(k) For each fiscal year of its operation, the Acquired Fund has
met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company.
(l) All issued and outstanding shares of the Acquired Fund are,
and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. All of the issued and outstanding shares of
the Acquired Fund will, at the time of the Closing, be held by the persons
and in the amounts set forth in the records of the transfer agent as
provided in paragraph 3.3. The Acquired Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any of the
Acquired Fund shares, nor is there outstanding any security convertible into
any of the Acquired Fund shares.
(m) On the Closing Date, the Acquired Fund will have full right,
power and authority to sell, assign, transfer and deliver the assets to be
transferred by it hereunder.
(n) The execution, delivery and performance of this Agreement
will have been duly authorized prior to the Closing Date by all necessary
action on the part of the Acquired Fund's Directors and, subject to the
approval of the Acquired Fund Shareholders, this Agreement will constitute
the valid and legally binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions
with respect thereto, and to general principles of equity and the discretion
of the court (regardless of whether the enforceability is considered in a
proceeding in equity or at law).
(o) The prospectus/proxy statement of the Acquired Fund (the
"Prospectus/Proxy Statement") to be included in the Registration Statement
referred to in paragraph 5.5 (other than information therein that relates to
the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
(p) The Acquired Fund has entered into an agreement under which
Passport Research, Ltd. and Federated Management will assume the expenses of
the reorganization including accountants' fees, legal fees, registration
fees, transfer taxes (if any), the fees of banks and transfer agents and the
costs of preparing, printing, copying and mailing proxy solicitation
materials to the Acquired Fund's Shareholders and the costs of holding the
Special Meeting of Shareholders.
4.2 The Acquiring Fund represents and warrants to the Acquired Fund as
follows:
(a) The Acquiring Fund is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland and
the Acquiring Fund has the power to carry on its business as it is now being
conducted and to carry out this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as an
open-end, diversified, management investment company, and such registration
has not been revoked or rescinded and is in full force and effect.
(c) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of the
Acquiring Fund's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or investigation
of or before any court or governmental body is currently pending or to its
knowledge threatened against the Acquiring Fund or any of its properties or
assets which, if adversely determined, would materially and adversely affect
its financial condition or the conduct of its business. The Acquiring Fund
knows of no facts which might form the basis for the institution of such
proceedings, and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which
materially and adversely affects its business or its ability to consummate
the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(f) The Class F Shares of the Acquiring Fund have not previously
been publicly offered. Class F Shares have been created as of March 29,
1996 in order to permit shareholders of the Acquired Fund to exchange into
the Acquiring Fund. There will be no assets in the Class F Shares as of
March 29, 1996.
(g) The Statement of Assets and Liabilities of the Acquiring Fund
at February 28, 1995 and 1994, have been audited by Ernst & Young LLP,
independent auditors, and have been prepared in accordance with generally
accepted accounting principles, and such statements (copies of which have
been furnished to the Acquired Fund) fairly reflect the financial condition
of the Acquiring Fund as of such dates, and there are no known contingent
liabilities of the Acquiring Fund as of such dates not disclosed therein.
(h) Since February 28, 1995, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course
of business, or any incurrence by the Acquiring Fund of indebtedness
maturing more than one year from the date such indebtedness was incurred,
except as disclosed to and accepted by the Acquired Fund.
(i) At the Closing Date, all Federal and other tax returns and
reports of the Acquiring Fund required by law to have been filed by such
date shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment
thereof, and to the best of the Acquiring Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to
such returns.
(j) For each fiscal year of its operation, the Acquiring Fund has
met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company.
(k) All issued and outstanding shares of the Acquiring Fund are,
and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. The Acquiring Fund does not have outstanding
any options, warrants or other rights to subscribe for or purchase any of
the Acquiring Fund Shares, nor is there outstanding any security convertible
into any Acquiring Fund Shares.
(l) The execution, delivery and performance of this Agreement
will have been duly authorized prior to the Closing Date by all necessary
action, if any, on the part of the Acquiring Fund's Directors, and this
Agreement will constitute the valid and legally binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws relating to or affecting creditors' rights
generally and court decisions with respect thereto, and to general
principles of equity and the discretion of the court (regardless of whether
the enforceability is considered in a proceeding in equity or at law).
(m) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such
statements were made, not misleading.
(n) The Acquiring Fund has entered into an agreement under which
Passport Research, Ltd. and Federated Management will assume the expenses of
the reorganization including accountants' fees, legal fees, registration
fees, transfer taxes (if any), the fees of banks and transfer agents and the
costs of preparing, printing, copying and mailing proxy solicitation
materials to the Acquired Fund's Shareholders and the costs of holding the
Special Meeting of Shareholders.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing
Date, it being understood that such ordinary course of business will include
customary dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action , and
do or cause to be done, all things reasonably necessary, proper or advisable
to consummate and make effective the transactions contemplated by this
Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund,
in such form as is reasonably satisfactory to the Acquiring Fund, a
statement of the earnings and profits of the Acquired Fund for Federal
income tax purposes which will be carried over to the Acquiring Fund as a
result of Section 381 of the Code and which will be certified by the
Acquired Fund's President or Vice President and its Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Prospectus/Proxy Statement, referred to in paragraph
4.1(n), all to be included in a Registration Statement on Form N-14 of the
Acquiring Fund (the "Registration Statement"), in compliance with the 1933
Act, the Securities Exchange Act of 1934, as amended, and the 1940 Act in
connection with the meeting of the Acquired Fund Shareholders to consider
approval of this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
5.7 Prior to the Valuation Date, the Acquired Fund shall have declared
a dividend or dividends, with a record date and ex-dividend date prior to
the Valuation Date, which, together with all previous dividends, shall have
the effect of distributing to its shareholders all of its investment company
taxable income, if any, plus the excess of its interest income, if any,
excludable from gross income under Code section 103 (a) over its deductions
disallowed under Code sections 265 and 171 (a) (2) for the taxable periods
or years ended on or before May 31, 1995 and for the period from said date
to and including the Closing Date (computed without regard to any deduction
for dividends paid), and all of its net capital gain, if any, realized in
taxable periods or years ended on or before May 31, 1995 and in the period
from said date to and including the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquired Fund of all the obligations to be performed by it hereunder on
or before the Closing Date and, in addition thereto, the following
conditions:
6.1 All representations and warranties of the Acquired Fund contained
in this Agreement shall be true and correct in all material respects as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the
Acquired Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of the
Closing Date, certified by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of the
Acquired Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as the
Acquiring Fund shall reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquiring Fund contained
in this Agreement shall be true and correct in all material respects as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as the Acquired
Fund shall reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness,
except as otherwise disclosed to and accepted by the Acquired Fund.
8. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares
of the Acquired Fund in accordance with the provisions of the Acquired
Fund's Articles of Incorporation and the 1940 Act.
8.2 On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those
of the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit consummation,
in all material respects, of the transactions contemplated hereby shall have
been obtained, except where failure to obtain any such consent, order or
permit would not involve a risk of a material adverse effect on the assets
or properties of the Acquiring Fund or the Acquired Fund, provided that
either party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or
be pending, threatened or contemplated under the 1933 Act.
8.5 The Acquiring Fund and the Acquired Fund shall have received an
opinion of Dickstein, Shapiro & Morin, L.L.P. substantially to the effect
that for Federal income tax purposes:
(a) The transfer of all of the Acquired Fund assets in exchange
for the Acquiring Fund Shares and the distribution of the Acquiring Fund
Shares to the Acquired Fund Shareholders in liquidation of the Acquired
Fund will constitute a "reorganization" within the meaning of Section
368(a)(1)(C) of the Code;
(b) No gain or loss will be recognized by the Acquiring Fund upon
the receipt of the assets of the Acquired Fund solely in exchange for the
Acquiring Fund Shares;
(c) No gain or loss will be recognized by the Acquired Fund upon
the transfer of the Acquired Fund assets to the Acquiring Fund in exchange
for the Acquiring Fund Shares or upon the distribution (whether actual or
constructive) of the Acquiring Fund Shares to Acquired Fund Shareholders in
exchange for their shares of the Acquired Fund;
(d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the
Acquiring Fund Shares;
(e) The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization;
(f) The tax basis of the Acquiring Fund Shares received by each
of the Acquired Fund Shareholders pursuant to the Reorganization will be the
same as the tax basis of the Acquired Fund shares held by such shareholder
immediately prior to the Reorganization;
(g) The holding period of the assets of the Acquired Fund in the
hands of the Acquiring Fund will include the period during which those
assets were held by the Acquired Fund; and
(h) The holding period of the Acquiring Fund Shares to be
received by each Acquired Fund Shareholder will include the period during
which the Acquired Fund shares exchanged therefor were held by such
shareholder (provided the Acquired Fund shares were held as capital assets
on the date of the Reorganization).
9. TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution by the Board of Directors of the
Acquired Fund or the Board of Directors of the Acquiring Fund at any time
prior to the Closing Date (and notwithstanding any vote of the shareholders
of the Acquired Fund) if circumstances should develop that, in the opinion
of either of the parties' Board of Directors, make proceeding with the
Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on the
part of any party hereto or the directors, officers or shareholders of the
Acquiring Fund or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing conditions
may be waived by the Board of Directors of the Acquiring Fund or of the
Acquired Fund, if in the judgment of either, such waiver will not have a
material adverse effect on the benefits intended under this Agreement to the
shareholders of the Acquiring Fund or of the Acquired Fund, as the case may
be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated
hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings
of every kind and nature between them relating to the subject matter hereof.
Neither party shall be bound by any condition, definition, warranty or
representation, other than as set forth or provided in this Agreement or as
may be set forth in a later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the State of Maryland, without giving effect to
principles of conflict of laws.
11.4 This Agreement may be executed in any number of counterparts, each
of which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have each
caused this Agreement and Plan of Reorganization to be executed and attested
on its behalf by its duly authorized representatives as of the date first
above written.
Acquired Fund:
FORTRESS UTILITY FUND, INC.
Attest:
By:/s/ John W. McGonigle
Name: John W. McGonigle
/s/ Charles H. Field
Assistant Secretary
Title: Executive Vice President
Acquiring Fund:
FEDERATED UTILITY FUND, INC.
Attest:
By:/s/ John W. McGonigle
Name: John W. McGonigle
/s/ Charles H. Field
Assistant Secretary
Title: Executive Vice President
STATEMENT OF ADDITIONAL INFORMATION
March 31, 1996
Acquisition of the Assets of
FORTRESS UTILITY FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
1-800-245-5051
By and In Exchange for F Shares of
FEDERATED UTILITY FUND, INC.
(FORMERLY LIBERTY UTILITY FUND, INC.)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
1-800-245-5051
This Statement of Additional Information dated March 31, 1996, is not a
prospectus. A Prospectus/Proxy Statement dated March 31, 1996, related to
the above-referenced matter may be obtained from Federated Utility Fund,
Inc., Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. This
Statement of Additional Information should be read in conjunction with such
Prospectus/Proxy Statement.
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of Federated Investors
TABLE OF CONTENTS
1. Statement of Additional Information of Federated Utility Fund, Inc.
(formerly, Liberty Utility Fund, Inc.), dated March 29, 1996.
2. Statement of Additional Information of Fortress Utility Fund, Inc.,
dated July 31, 1995.
3. Financial Statements of Federated Utility Fund, Inc. (formerly, Liberty
Utility Fund, Inc.), dated February 28, 1995.
4. Financial Statements of Fortress Utility Fund, Inc., dated May 31,
1995.
5. Financial Statements (unaudited) of Federated Utility Fund, Inc.
(formerly, Liberty Utility Fund, Inc.), dated August 31, 1995.
6. Financial Statements (unaudited) of Fortress Utility Fund, Inc., dated
November 30, 1995.
7. Pro Forma Financial Statements.
The Statement of Additional Information of Federated Utility Fund, Inc. (the
"Federated Fund"), dated March 29, 1996, is incorporated herein by reference
to Post-Effective Amendment No. 14 to the Federated Fund's Registration
Statement on Form N-1A (File No. 33-13388; 811-5114) which was filed with
the Securities and Exchange Commission on or about February 29, 1996. A
copy may be obtained from the Federated Fund at Federated Investors Tower,
Pittsburgh, PA 15222-3779; telephone number 1-800-245-5051.
The Statement of Additional Information of Fortress Utility Fund, Inc. (the
"Fortress Fund"), dated July 31, 1995, is incorporated herein by reference
to Post-Effective Amendment No. 11 to the Fortress Fund's Registration
Statement on Form N-1A (File Nos. 33-10209; 811-4530) which was filed with
the Securities and Exchange Commission on or about July 26, 1995.
The audited financial statements of the Federated Fund, dated February 28,
1995, are incorporated herein by reference to the Federated Fund's Annual
Report dated February 28, 1995, which was filed with the Securities and
Exchange Commission on or about April 28, 1995. (File Nos. 33-13388; 811-
5114)
The audited financial statements of the Fortress Fund, dated May 31, 1995,
are incorporated herein by reference to the Fortress Fund's Annual Report
dated May 31, 1995, which was filed with the Securities and Exchange
Commission on or about July 28, 1995. (File Nos. 33-10209; 811-4530)
The unaudited financial statements of the Federated Fund, dated August 31,
1995, are incorporated herein by reference to the Federated Fund's Semi-
Annual Report dated August 31, 1995, which was filed with the Securities and
Exchange Commission on or about November 1, 1995. (File Nos. 33-13388; 811-
5114)
The unaudited financial statements of the Fortress Fund, dated November 30,
1995, are incorporated herein by reference to the Fortress Fund's Semi-
Annual Report dated November 30, 1995, which was filed with the Securities
and Exchange Commission on or about January 30, 1996. (File Nos. 33-10209;
<TABLE>
<CAPTION>
Portfolio of Investments
August 31, 1995 (unaudited)
<C> <C> <C> <S> <C> <C> <C>
Federated Federated
Utility Utility Fund,
Fund, Inc. Inc.
(formerly, (formerly,
Liberty Fortress Pro Liberty Fortress
Utility Utility Forma Utility Fund, Utility Pro Forma
Fund, Inc.) Fund, Inc. Combined Inc. Fund, Inc. Combined
Value in Value in Value in
Shares Shares Shares U.S. Dollars U.S. Dollars U.S. Dollars
Common Stocks--66.5%
Consumer Non-Durables--1.0%
118,000 100,000 218,000 Philip Morris Cos., Inc. $8,805,750 $7,462,500 $16,268,250
Electric Utilities: Central--13.6%
660,000 591,700 1,251,700 Cinergy Corp. 16,912,500 15,162,313 32,074,813
776,000 694,400 1,470,400 CMS Energy Corp. 19,109,000 17,099,600 36,208,600
714,600 629,400 1,344,000 DPL, Inc. 15,899,850 14,004,150 29,904,000
678,000 596,600 1,274,600 Illinova Corp. 17,034,750 14,989,575 32,024,325
493,200 444,000 937,200 NIPSCO Industries, Inc. 16,152,300 14,541,000 30,693,300
550,000 494,900 1,044,900 Utilicorp United, Inc. 14,918,750 13,424,163 28,342,913
550,000 464,500 1,014,500 Western Resources, Inc. 16,637,500 14,051,125 30,688,625
Total 116,664,650 103,271,926 219,936,576
Electric Utilities: East--9.3%
429,000 376,000 805,000 Baltimore Gas & Electric Co. 11,261,250 9,870,000 21,131,250
750,000 674,800 1,424,800 DQE, Inc. 17,906,250 16,110,850 34,017,100
550,000 493,900 1,043,900 General Public Utilities 15,743,750 14,137,888 29,881,638
921,900 804,600 1,726,500 Peco Energy Co. 24,545,587 21,422,475 45,968,062
370,000 327,600 697,600 Public Service Enterprises Group, Inc. 10,175,000 9,009,000 19,184,000
Total 79,631,837 70,550,213 150,182,050
Electric Utilities: South--10.1%
527,400 463,400 990,800 Duke Power Co. 21,425,625 18,825,625 40,251,250
350,000 293,400 643,400 Florida Progress Corp. 10,631,250 8,912,025 19,543,275
550,500 486,600 1,037,100 FPL Group, Inc. 21,400,688 18,916,575 40,317,263
750,000 672,900 1,422,900 Southern Co. 15,843,750 14,215,013 30,058,763
512,700 454,700 967,400 Texas Utilities Co. 17,816,325 15,800,825 33,617,150
Total 87,117,638 76,670,063 163,787,701
Electric Utilities: West--4.0%
780,000 699,300 1,479,300 Pacificorp $ 14,137,500 $ 12,674,813 $ 26,812,313
803,000 716,100 1,519,100 Pinnacle West Capital Corp. 19,974,625 17,812,988 37,787,613
Total 34,112,125 30,487,801 64,599,926
Energy Minerals--1.4%
175,000 146,700 321,700 Exxon Corp. 12,031,250 10,085,625 22,116,875
Finance--1.9%
499,400 448,900 948,300 Meditrust, REIT 16,417,775 14,757,588 31,175,363
Major U.S. Telecommunications--9.5%
500,000 435,000 935,000 AT&T Corp. 28,250,000 24,577,500 52,827,500
206,000 184,800 390,800 BellSouth Corp. 14,162,500 12,705,000 26,867,500
720,000 620,000 1,340,000 GTE Corp. 26,370,000 22,707,500 49,077,500
450,000 391,200 841,200 Pacific Telesis Group 12,768,750 11,100,300 23,869,050
Total 81,551,250 71,090,300 152,641,550
Natural Gas Distribution--4.4%
240,800 119,500 360,300 Consolidated Natural Gas Co. 9,300,900 4,615,688 13,916,588
708,200 620,700 1,328,900 MCN Corp. 13,190,225 11,560,538 24,750,763
608,200 534,500 1,142,700 Pacific Enterprises 14,596,800 12,828,000 27,424,800
194,800 ----- 194,800 UGI Corp. 4,163,850 ----- 4,163,850
Total 41,251,775 29,004,226 70,256,001
Non-U.S. Utilities--3.3%
566,000 355,210 921,210 National Power Co. PLC, ADR 8,419,250 5,283,749 13,702,999
225,000 201,500 426,500 Telefonica de Espana, ADR 9,140,625 8,185,938 17,326,563
750,000 672,900 1,422,900 Westcoast Energy, Inc. 11,437,500 10,261,725 21,699,225
Total 28,997,375 23,731,412 52,728,787
Oil/Gas Transmission--7.4%
450,000 401,000 851,000 Enron Corp. 15,131,250 13,483,625 28,614,875
344,400 315,000 659,400 Enron Global Power & Pipelines, L.L.C. 8,007,300 7,323,750 15,331,050
209,900 187,800 397,700 Panhandle Eastern Corp. 5,247,500 4,695,000 9,942,500
750,000 671,900 1,421,900 Sonat, Inc. 23,812,500 21,332,825 45,145,325
300,000 268,000 568,000 Williams Companies, Inc. (The) 10,987,500 9,815,500 20,803,000
Total 63,186,050 56,650,700 119,836,750
Other Telephone/Communications--0.6%
192,000 101,400 293,400 Southern New England Telecommunications $ 6,456,000 $ 3,409,575 $ 9,865,575
Total Common Stocks (identified cost $973,947,747) 576,223,475 497,171,929 1,073,395,404
Preferred Stocks--20.2%
Consumer Durables--0.6%
407,600 300,000 707,600 Kaufman & Broad Homes Corp., Conv. Pfd.,
Series B, $1.52 5,808,300 4,275,000 10,083,300
Consumer Non-Durables--3.9%
5,500,000 5,000,000 10,500,000 RJR Nabisco Holdings Corp.,
Conv. Pfd., Series C, $.60 33,000,000 30,000,000 63,000,000
Electric Utilities: Central--0.4%
188,450 163,200 351,650 Toledo Edison Co., ARPS, Series B 3,863,225 3,376,350 7,239,575
Electric Utilities: East--0.7%
335,000 150,000 485,000 Niagara Mohawk Power Corp., ARPS,
Series C 7,788,750 3,487,500 11,276,250
Electric Utilities: South--0.3%
42,000 11,275 53,275 Texas Utilities Electric Co., ARPS,
Series A 3,801,000 1,020,388 4,821,388
Energy Minerals--1.0%
152,000 142,000 294,000 (a) Occidental Petroleum Corp.,
Conv. Pfd., $3.88 8,531,000 7,969,750 16,500,750
Finance--3.5%
20,200 18,700 38,900 Allstate Corp. 818,100 757,350 1,575,450
239,200 213,000 452,200 Merrill Lynch & Co., Inc., STRYPES,
Series MGIC, $3.12 12,976,600 11,555,250 24,531,850
323,000 304,000 627,000 Sunamerica, Inc., Conv. Pfd.,
Series D, $2.78 15,342,500 14,440,000 29,782,500
Total 29,137,200 26,752,600 55,889,800
Non-Energy Minerals--1.7%
Federated Federated
Utility Utility Fund,
Fund, Inc. Inc.
(formerly, (formerly,
Liberty Fortress Pro Liberty Fortress
Utility Utility Forma Utility Fund, Utility Pro Forma
Fund, Inc.) Fund, Inc. Combined Inc. Fund, Inc. Combined
Shares or Shares or Shares or
Principal Principal Principal
Amount of Amount of Amount of
Foreign Foreign Foreign
Currency Currency Currency Value in Value in Value in
Par Amount Par Amount Par Amount U.S. Dollars U.S. Dollars U.S. Dollars
260,000 245,000 505,000 Reynolds Metals Co., PRIDES, $3.30 13,942,500 13,138,125 $ 27,080,625
Non-U.S. Utilities--2.0%
340,000 310,000 650,000 (a) Cointel, Telefonica de Argentina SA,
PRIDES, $5.04 17,000,000 15,500,000 32,500,000
Oil/Gas Transmission--1.0%
122,500 111,250 233,750 Williams Companies, Inc. (The),
Conv. Pfd., $7.00 8,085,000 7,342,500 15,427,500
Process Industries--1.6%
403,500 354,300 757,800 James River Corp. of Virginia, DECS,
Series P, $1.55 13,365,938 11,736,188 25,102,126
Producer Manufacturing--2.5%
1,533,000 1,378,000 2,911,000 (a) Westinghouse Electric Corp., PEPs,
Series C, $1.30 20,841,135 18,733,910 39,575,045
Technology Services--1.0%
135,100 120,500 255,600 General Motors Corp., Conv. Pfd.,
Series C, $3.25 8,967,262 7,998,188 16,965,450
Total Preferred Stocks
(identified cost $316,123,478) 174,131,310 151,330,499 325,461,809
Corporate Bonds--8.6%
Consumer Services--1.1%
17,810,000 17,265,000 35,075,000 (a) Rogers Communications, Inc., Conv. Deb., 2.00%,
11/26/2005 9,083,100 8,805,150 17,888,250
Energy Minerals--1.4%
10,000,000 8,700,000 18,700,000 Pennzoil Co., Conv. Deb., 6.50%, 1/15/2003 12,060,300 10,492,461 22,552,761
Finance--1.0%
7,515,000 6,470,000 13,985,000 Equitable Cos.,Inc.,Conv. Sub. Deb.,
6.125%, 12/15/2024 8,803,822 7,579,605 16,383,427
Health Technology--1.9%
39,000,000 37,250,000 76,250,000 Roche Holdings, Inc.,Conv. LYON, 7.00% accrual,
4/20/2010 15,356,250 14,667,188 30,023,438
Non-U.S. Utilities--3.2%
20,000,000,000 20,000,000,000 40,000,000,000 Softe SA, Conv. Bond, 4.25%,
7/30/1998 14,677,826 14,677,819 29,355,645
Federated Federated
Utility Utility Fund,
Fund, Inc. Inc.
(formerly, (formerly,
Liberty Fortress Pro Liberty Fortress
Utility Utility Forma Utility Fund, Utility Pro Forma
Fund, Inc.) Fund, Inc. Combined Inc. Fund, Inc. Combined
Principal Principal Principal Value in Value in Value in
Amount Amount Amount U.S. Dollars U.S. Dollars U.S. Dollars
12,000,000 12,000,000 24,000,000 (a) Telekom Malaysia Berhad, Conv.
Bond, 4.00%, 10/3/2004 $ 10,920,000 10,920,000 21,840,000
Total 25,597,826 25,597,819 51,195,645
Total Corporate Bonds
(identified cost $137,587,881) 70,901,298 67,142,223 138,043,521
(b) Repurchase Agreement--4.2%
35,605,000 31,855,000 67,460,000 J.P. Morgan Securities, Inc., 5.83%, dated
8/31/1995, due 9/1/1995 (at amortized cost) 35,605,000 31,855,000 67,460,000
Total Investments
(identified cost $1,495,119,106)(c) 856,861,083 747,499,651 1,604,360,734
</TABLE>
(a) Restricted securities--Investment in securities not registered under the
Securities Act of 1933. At the end of the period, these securities amounted
to 7.95% of net assets.
(b) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(c) The cost of investments for federal tax purposes amounts to
$1,495,119,106. The net unrealized appreciation of investments on a federal
tax basis amounts to $109,241,628 which is comprised of $139,834,775
appreciation and $30,593,147 depreciation at August 31, 1995.
Note:
The categories of investments are shown as a percentage of net assets
($1,613,134,248) at August 31, 1995.
The following acronyms are used throughout this portfolio:
ADR --American Depository Receipt
ARPS --Adjustable Rate Preferred Stock
DECS --Dividend Enhanced Convertible Stock
LYON --Liquid Yield Option Note
PEPs --Participating Equity Preferred Stock
PLC --Public Limited Company
PRIDES --Preferred Redeemable Increased Dividend Equity Securities
REIT --Real Estate Investment Trust
STRYPES--Structured Yield Product Exchangeable for Stock
(See Notes to Pro Forma Financial Statements)
<TABLE>
<CAPTION>
Federated Utility Fund, Inc. (formerly, Liberty Utility Fund, Inc.)
Fortress Utility Fund, Inc.
Pro Forma Combining Statement of Assets and Liabilities
August 31, 1995 (unaudited)
<S> <C> <C> <C> <C>
Federated Fortress
Utility Utility Pro Forma Pro Forma
Fund, Inc. Fund, Inc. Adjustment Combined
Assets:
Investments in securities, at value
(identified cost, $ 1,495,119,106) $ 856,861,083 $ 747,499,651 --- $ 1,604,360,734
Cash 24,996 --- --- 24,996
Income receivable 4,622,794 3,984,141 --- 8,606,935
Receivable for investments sold 3,242,599 4,872,662 --- 8,115,261
Receivable for shares sold 1,749,438 454,141 --- 2,203,579
Total assets 866,500,910 756,810,595 --- 1,623,311,505
Liabilities:
Payable to Bank --- 2,610,762 2,610,762
Payable for investments purchased 1,779,823 1,466,560 --- 3,246,383
Income distributions payable --- 1,277,430 --- 1,277,430
Payable for shares redeemed 1,663,687 833,501 --- 2,497,188
Accrued expenses 368,841 176,653 --- 545,494
Total liabilities 3,812,351 6,364,906 --- 10,177,257
Net Assets $ 862,688,559 $ 750,445,689 --- $ 1,613,134,248
Net Assets Consists of:
Paid in capital $ 799,287,015 $ 703,340,198 --- 1,502,627,213
Net unrealized appreciation of investments and
translation of assets and liabilities in foreign currency 63,468,619 45,768,684 --- 109,237,303
Accumulated net realized loss on investments and
foreign currency transactions (1,294,199) (17,175,285) --- (18,469,484)
Undistributed net investment income 1,227,124 18,512,092 --- 19,739,216
Total Net Assets $ 862,688,559 $ 750,445,689 --- $ 1,613,134,248
Net Assets:
Class A Shares $ 754,791,714 --- --- $ 754,791,714
Class B Shares $ 49,035,535 --- --- $ 49,035,535
Class C Shares $ 58,861,310 --- --- $ 58,861,310
Class F Shares --- $ 750,445,689 --- $ 750,445,689
Shares Outstanding:
Class A Shares 65,035,201 --- --- 65,035,201
Class B Shares 4,227,437 --- --- 4,227,437
Class C Shares 5,076,233 --- --- 5,076,233
Class F Shares --- 58,678,360 5,988,414 (a) 64,666,774
Net Asset Value, Offering Price, and Redemption Proceeds Per Share:
Class A Shares:
Net Asset Value Per Share $ 11.61 --- --- $ 11.61
Offering Price Per Share (100/94.5 of $11.61)* $ 12.29 --- --- $ 12.29
Redemption Proceeds Per Share $ 11.61 --- --- $ 11.61
Class B Shares:
Net Asset Value Per Share $ 11.60 --- --- $ 11.60
Offering Price Per Share $ 11.60 --- --- $ 11.60
Redemption Proceeds Per Share (94.5/100 of $11.60)** $ 10.96 --- --- $ 10.96
Class C Shares:
Net Asset Value Per Share $ 11.60 --- --- $ 11.60
Offering Price Per Share $ 11.60 --- --- $ 11.60
Redemption Proceeds Per Share (99/100 of $11.60)** $ 11.48 --- --- $ 11.48
Class F Shares:
Net Asset Value Per Share --- $ 12.79 --- $ 11.60
Offering Price Per Share (100/99 of $11.60)* --- $ 12.92 --- $ 11.72
Redemption Proceeds Per Share (99/100 of $11.60)** --- $ 12.66 --- $ 11.48
</TABLE>
(a) Adjustement to reflect share balance as a result of
the combination, based on an exchange ratio of 1.1025862 ($12.79/$11.60).
* See "What Shares Cost" in the prospectus.
** See " Redeeming Shares" in the prospectus.
<TABLE>
<CAPTION>
FEDERATED UTILITY FUND, INC. (FORMERLY, LIBERTY UTILITY FUND, INC.)
FORTRESS UTILITY FUND, INC.
PRO FORMA COMBINING STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED)
<S> <C> <C> <C> <C>
<C>
FEDERATED FORTRESS
UTILITY UTILITY PRO FORMA PRO FORMA
FUND, INC. FUND, INC. ADJUSTMENTS NOTES COMBINED
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $113,808) $22,184,831 $10,781,500 $ --- $32,966,331
Interest 2,465,218 479,982 --- 2,945,200
Total income 24,650,049 11,261,482 --- 35,911,531
EXPENSES:
Investment advisory fee 3,177,204 2,892,997 --- 6,070,201
Administrative personnel and services fee 320,686 292,000 --- 612,686
Custodian fees 65,495 53,838 (39,333) (b) 80,000
Transfer agent and dividend disbursing
agent fees and expenses 576,813 553,765 --- 1,130,578
Directors'/Trustees' fees 9,936 10,614 (9,550) (e) 11,000
Auditing fees 10,488 8,967 (8,967) (f) 10,488
Legal fees 15,624 4,941 (3,565) (d) 17,000
Portfolio accounting fees 92,607 57,684 (61,791) (a) 88,500
Distribution services fee- Class B Shares 128,767 --- --- 128,767
Distribution services fee- Class C Shares 222,110 --- --- 222,110
Shareholder services fee- Class A Shares 942,109 --- --- 942,109
Shareholder services fee- Class B Shares 42,922 --- --- 42,922
Shareholder services fee- Class C Shares 74,037 --- --- 74,037
Shareholder services fee- Class F Shares --- 964,332 --- 964,332
Share registration costs 48,400 17,202 --- 65,602
Printing and postage 110,768 48,495 (39,263) (c) 120,000
Insurance premiums 9,016 8,967 (6,983) (g) 11,000
Taxes 90,528 79,971 (40,499) (g) 30,000
Miscellaneous 1,656 7,869 (1,525) (g) 8,000
Total expenses 5,939,166 5,001,642 (211,476) 10,729,332
Waivers-
Waiver of investment advisory fee (712,362) (394,448) 44,083 (h) (1,062,727)
Waiver of shareholder services fee- Class A Shares (30,068) --- --- (30,068)
Waiver of shareholder services fee- Class C Shares (14,807) --- --- (14,807)
Waiver of shareholder services fee- Class F Shares --- (115,720) --- (115,720)
Total Waivers (757,237) (510,168) 44,083 (1,223,322)
Net expenses 5,181,929 4,491,474 (167,393) 9,506,010
Net investment income 19,468,120 6,770,008 167,393 26,405,521
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain on investments and foreign currency
transactions 18,853,539 10,696,289 --- 29,549,828
Net change in unrealized appreciation of
investments and translation of assets and
liabilities in foreign currency 26,226,713 27,681,914 --- 53,908,627
Net realized and unrealized gain on
investments and foreign currency 45,080,252 38,378,203 --- 83,458,455
Change in net assets resulting from
operations $ 64,548,372 $ 45,148,211 $ 167,393 $109,863,976
(See legend to the Statement of Operations)
(See Notes to Pro Forma Financial Statements)
</TABLE>
<TABLE>
<CAPTION>
FEDERATED UTILITY FUND, INC. (FORMERLY, LIBERTY UTILITY FUND, INC.)
FORTRESS UTILITY FUND, INC.
PRO FORMA COMBINING STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1995 (UNAUDITED)
<S> <C> <C> <C> <C> <C>
FEDERATED FORTRESS
UTILITY UTILITY PRO FORMA PRO FORMA
FUND, INC. FUND, INC. ADJUSTMENTS NOTES COMBINED
INVESTMENT INCOME:
Dividends (net of foreign taxes
withheld of $552,152) $ 47,928,315 $ 35,060,117 $ --- $ 82,988,432
Interest 3,261,445 214,249 --- 3,475,694
Total income 1,189,760 35,274,366 --- 86,464,126
EXPENSES:
Investment advisory fee 6,347,619 6,360,742 --- 12,708,361
Administrative personnel and services fee 640,686 641,163 --- 1,281,849
Custodian fees 163,731 172,754 (87,985) (b) 248,500
Transfer agent and dividend disbursing
agent fees and expenses 1,060,365 1,096,288 --- 2,156,653
Directors'/Trustees' fees 18,391 20,717 (18,108) (e) 21,000
Auditing fees 20,913 17,500 (17,500) (f) 20,913
Legal fees 59,593 13,936 (13,529) (d) 60,000
Portfolio accounting fees 68,362 56,789 (36,651) (a) 88,500
Distribution services fee- Class B Shares 21,567 --- --- 21,567
Distribution services fee- Class C Shares 453,766 --- --- 453,766
Shareholder services fee- Class A Shares 1,900,244 --- --- 1,900,244
Shareholder services fee- Class B Shares 7,189 --- --- 7,189
Shareholder services fee- Class C Shares 151,255 --- --- 151,255
Shareholder services fee- Class F Shares --- 1,814,932 --- 1,814,932
Share registration costs 116,258 54,350 --- 170,608
Printing and postage 254,502 96,376 (60,878) (c) 290,000
Insurance premiums 17,886 17,200 (13,086) (g) 22,000
Taxes 180,393 186,500 (109,893) (g) 257,000
Miscellaneous 1,559 14,393 (3,952) (g) 12,000
Total expenses 11,484,279 10,563,640 (361,582) 21,686,337
Waivers- Waiver of investment advisory fee (1,683,310) (886,832) (212,027) (h)
(2,782,169)
Net expenses 9,800,969 9,676,808 (573,609)
18,904,168
Net investment income 41,388,791 25,597,558 573,609
67,559,958
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized loss on investments and foreign currency
transactions (19,441,678) (25,911,557) ---
(45,353,235)
Net change in unrealized depreciation of investments
and translation of assets and liabilities in foreign
currency (34,280,851) (18,665,120) ---
(52,945,971)
Net realized and unrealized loss on investments
and foreign currency (53,722,529) (44,576,677) ---
(98,299,206)
Change in net assets resulting from operations $ (12,333,738) $ (18,979,119) $ 573,609
$ (30,739,248)
(See legend to the Statement of Operations)
(See Notes to Pro Forma Financial Statements)
</TABLE>
FEDERATED UTILITY FUND, INC. (FORMERLY, LIBERTY UTILITY FUND, INC.)
FORTRESS UTILITY FUND, INC.
PRO FORMA COMBINING STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED FEBRUARY 28, 1995 AND SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED)
(a) Federated Services Company maintains the Fund accounting records for wich
it receives a fee. The fee is based on the level of Fund's average daily net
assets, for the period plus out-of-pocket expense.
(b) State Street Bank and Trust Company is custodian for the securities and
cash of the Fund. The custodian fee is based on a percentage of assets, plus
out-of-pocket expenses.
(c) Printing and postage expenses are adjusted to reflect estimated savings to
be realized by combining two portfolios into a single portfolio.
(d) Legal expenses are adjusted to reflect estimated savings to be realized by
combining two portfolios into a single portfolio.
(e) Director expenses are adjusted to reflect estimated savings to be realized
by combining two portfolios into a single portfolio.
(f) Adjustment to reflect audit charge for one portfolio only.
(g) Other expenses are adjusted to reflect estimated savings to be realized by
combining two portfolios into a single portfolio.
(h) Federated Management is entitled to receive for its services an annual
investment advisory fee equal to 0.75% of the fund's average daily net assets.
The advisor may voluntarily chose to waive a portion of its fee. The advisor can
modify or terminate this voluntary waiver at any time at its sole discretion.
Federated Utility Fund, Inc. (formerly, Liberty Utility Fund, Inc.)
Fortress Utility Fund, Inc.
Notes to Pro Forma Financial Statements (unaudited)
1. Basis of Combination
The unaudited Pro Forma Combining Portfolio of Investments, Statement of
Assets and Liabilities and Statement of Operations ("Pro Forma Financial
Statements") reflect the accounts of Federated Utility Fund, Inc. and
Fortress Utility Fund, Inc. (collectively, the "Funds") for the year ended
February 28, 1995 and for the six months ended August 31, 1995. These
statements have been derived from the books and records utilized in
calculating daily net asset values at February 28, 1995 and for the six
months ended August 31, 1995.
The Pro Forma Combining Portfolio of Investments, Statement of Assets and
Liabilities and Statement of Operations should be read in conjunction with
the historical financial statements of the Funds incorporated by reference
in the Statement of Additional Information. The Funds follow generally
accepted accounting principles applicable to management investment
companies which are disclosed in the historical financial statements of
each Fund.
The Pro Forma Financial Statements give effect to the proposed transfer of
the assets of Fortress Utility Fund, Inc. in exchange for Class F Shares
of Federated Utility Fund, Inc. Under generally accepted accounting
principles, Federated Utility Fund, Inc. will be the surviving entity for
accounting purposes with its historical cost of investment securities and
results of operations being carried forward.
The Pro Forma Financial Statements have been adjusted to reflect the
anticipated advisory and administration fee arrangements for the surviving
entity. Certain other operating costs have also been adjusted to reflect
anticipated expenses of the combined entity. Other costs which may change
as a result of the reorganization are currently undeterminable.
For the fiscal year ended February 28, 1995, and August 31, 1995, the
Federated Utility Fund, Inc. and Fortress Utility Fund, Inc. paid
investment advisory fees computed at the annual rate of .75% of the Fund's
average net assets for Federated Utility Fund, Inc. and Fortress Utility
Fund, Inc.
The advisor and administrator may voluntarily choose to waive a portion of
their fees and reimburse certain operating expenses of Federated Utility
Fund, Inc. and Fortress Utility Fund, Inc.
2. Shares of Beneficial Interest
The Pro Forma net asset value per share assumes the issuance of 64,666,774
shares of the Federated Utility Fund, Inc.'s Class F Shares in exchange
for 58,678,360 shares from the Fortress Utility Fund, Inc. which would have
been issued at August 31, 1995, in connection with the proposed
PART C. OTHER INFORMATION
Item 15. Indemnification
Indemnification is provided to Officers and Directors of the Registrant
pursuant to the Registrant's Articles of Incorporation, except where such
indemnification is not permitted by law. However, the Articles of
Incorporation does not protect the Directors from liabilities based on
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office.
Directors and Officers of the Registrant are insured against certain
liabilities, including liabilities arising under the Securities Act of 1933
(the "Act").
Insofar as indemnification for liabilities arising under the Act may be
permitted to Directors, Officers, and controlling persons of the Registrant
by the Registrant pursuant to the Articles of Incorporation or otherwise, the
Registrant has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, is unenforceable. In the event that
a claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by Directors, Officers, or
controlling persons of the Registrant in connection with the successful
defense of any act, suit, or proceeding) is asserted by such Directors,
Officers, or controlling persons in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issues.
Insofar as indemnification for liabilities may be permitted pursuant to
Section 17 of the Investment Company Act of 1940 for Directors, Officers, and
controlling persons of the Registrant by the Registrant pursuant to the
Articles of Incorporation or otherwise, the Registrant is aware of the
position of the Securities and Exchange Commission as set forth in Investment
Company Act Release No. IC-11330. Therefore, the Registrant undertakes that
in addition to complying with the applicable provisions of the Articles of
Incorporation or otherwise, in the absence of a final decision on the merits
by a court or other body before which the proceeding was brought, that an
indemnification payment will not be made unless in the absence of such a
decision, a reasonable determination based upon factual review has been made
(i) by a majority vote of a quorum of non-party Directors who are not
interested persons of the Registrant; or (ii) by independent legal counsel in
a written opinion that the indemnitee was not liable for an act of willful
misfeasance, bad faith, gross negligence, or reckless disregard of duties.
The Registrant further undertakes that advancement of expenses incurred in
the defense of a proceeding (upon undertaking for repayment unless it is
ultimately determined that indemnification is appropriate) against an
Officer, Director, or controlling person of the Registrant will not be made,
absent the fulfillment of at least one of the following conditions: (i) the
indemnitee provides security for his undertaking; (ii) the Registrant is
insured against losses arising by reason of any lawful advances; or (iii) a
majority of a quorum of disinterested non-party Directors or independent
legal counsel in a written opinion makes a factual determination that there
is reason to believe the indemnitee will be entitled to indemnification.
Item 16. Exhibits
(1) Conformed Copy of Amended and Restated Articles of
Incorporation of the Registrant; (2.)
(i) Conformed Copy of Articles of Incorporation, as amended;
(3.)
(2) Copy of By-Laws of the Registrant as amended; (1.)
(3) Not applicable;
(4) Conformed Copy of the Agreement and Plan of Reorganization
(Included as Exhibit A to the Prospectus/Proxy Statement (Part
A) of this Registration Statement); +
(5) Not applicable;
(6) Conformed Copy of Investment Advisory Contract of the
Registrant; (3.)
(7) (i) Conformed Copy of Distributor's Contract of the
Registrant, through and including Exhibits A and B; (4.)
(ii) Conformed Copy of Exhibit C to Distributor's Contract of
the Registrant adding Class F Shares to the existing
Distributor's Contract; (4.)
(iii) The Registrant hereby incorporates the conformed
copy of the specimen Mutual Funds Sales and Services
Agreement; Mutual Fund Services 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 Numbers 33-38550 and 811-6269).
(8) Not applicable;
(9) Conformed Copy of Custodian Contract of the Registrant; (4.)
(10) (i) Conformed Copy of Distribution Plan of the Registrant;
(4.)
(ii) 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 Numbers 33-52149 and 811-07141).
(iii) The responses described in Item 16 (7) (iii) are
hereby incorporated by reference.
(11) Conformed Copy of Opinion regarding legality of shares being
issued; +
(12) Form of Opinion regarding tax consequences of Reorganization;+
(13) (i) Conformed Copy of the Agreement for Fund Accounting,
Shareholder Recordkeeping, and Custody Services
Procurement of the Registrant; (4.)
(ii) Conformed Copy of the Administrative Services Agreement
of the Registrant; (4.)
(iii) Conformed Copy of Shareholder Services Agreement of
the Registrant; (4.)
+ All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-2 filed April 16, 1987 (File No. 33-
13388 and File No. 811-5114).
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed May 18, 1988. (File No. 33-13388 and
File No. 811-5114).
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 3 on Form N-1A filed February 21, 1990. (File No. 33-
13388 and File No. 811-5114).
4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed May 23, 1995. (File No. 33-13388
and File No. 811-5114).
(iv) The responses described in Item 16 (7) (iii) and Item 16
(10) (ii) are hereby incorporated by reference.
(14) Conformed Copy of Consent of Independent Auditors; +
(15) Not applicable;
(16) Conformed Copy of Power of Attorney; +
(17) (i) Copy of Notice under Rule 24f-2; +
(ii) Form of Proxy Card; +
Item 17. Undertakings
(1) The undersigned Registrant agrees that, prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this Registration Statement by
any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c) of the Securities Act of 1933, the
reoffering prospectus will contain the information called for
by the applicable registration form for reofferings by persons
who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form;
(2) The undersigned Registrant agrees that every prospectus that
is filed under paragraph (1) above will be filed as part of an
amendment to the Registration Statement and will not be used
until the amendment is effective, and that, in determining any
liability under the Securities Act of 1933, each post-
effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering
of the securities at that time shall be deemed to be the
initial bona fide offering of them.
+ All exhibits have been filed electronically.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, FEDERATED UTILITY FUND, INC., has duly caused this 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 1st day of March 1996.
FEDERATED UTILITY FUND, INC.
BY: /s/ Charles H. Field
Charles H. Field, Assistant Secretary
Attorney in Fact for John F. Donahue
March 1, 1996
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated:
NAME TITLE DATE
By:/s/ Charles H. Field
Charles H. Field Attorney In Fact March 1, 1996
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Director
(Chief Executive Officer)
Richard B. Fisher* President and Director
David M. Taylor* Treasurer
(Principal Financial and
Accounting Officer)
Thomas G. Bigley* Director
John T. Conroy, Jr.* Director
William J. Copeland* Director
James E. Dowd* Director
Lawrence D. Ellis, M.D.* Director
Edward L. Flaherty, Jr.* Director
Peter E. Madden* Director
Gregor F. Meyer* Director
John E. Murray, Jr.* Director
Wesley W. Posvar* Director
Marjorie P. Smuts* Director
Exhibit 17 (ii)
FORTRESS UTILITY FUND, INC.
SPECIAL MEETING OF SHAREHOLDERS MAY 31, 1996
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned shareholders of
Fortress Utility Fund, Inc. hereby appoint Patricia Conner, Charles Field,
Patricia Godlewski, Stephen Newcamp, and Scott Tretter or any of them, true
and lawful attorneys, with the power of substitution of each, to vote all
shares of Fortress Utility Fund, Inc. which the undersigned is entitled to
vote, at the Special Meeting of Shareholders to be held on May 31, 1996, at
Federated Investors Tower, Pittsburgh, Pennsylvania, at 2:00 p.m. (Eastern
Time), and at any adjournment thereof.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting.
PROPOSAL(S)
1) TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION
PROVIDING FOR THE TRANSFER OF THE ASSETS OF THE FORTRESS UTILITY FUND,
INC. TO THE CLASS F SHARES OF FEDERATED UTILITY FUND, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The attorneys
named will vote the shares represented by this proxy in accordance with the
choices made on this card. IF NO CHOICE IS INDICATED AS TO ANY ITEM, THIS
PROXY WILL BE VOTED AFFIRMATIVELY ON THAT MATTER.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND
RETAIN THE TOP PORTION. Place the ballot so that the return address,
located on the reverse side of the mail-in-stub, appears through the window
of the envelope.
FORTRESS UTILITY FUND, INC. PROXY VOTING MAIL-IN STUB
RECORD DATE SHARES
Please sign EXACTLY as your name(s) appear above. When signing as attorney,
executor, administrator, guardian, trustee, custodian, etc., please give
your full title as such. If a corporation or partnership, please sign the
full name by an authorized officer or partner. If stock is owned jointly,
all owners should sign.
PROPOSAL(S):
1) FOR AGAINST ABSTAIN
---- ---- ----
Dated: , 19
=============== ===
- ---------------------------
Exhibit 11
FEDERATED UTILITY FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Phone: 412-288-1900
February 29, 1996
The Directors of
Federated Utility Fund, Inc.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
Federated Utility Fund, Inc. (the "Corporation") proposes to offer and
sell shares of its common stock in connection with the acquisition of the
assets of Fortress Utility Fund, Inc., pursuant to the Agreement and Plan of
Reorganization dated February 29, 1996 (the "Agreement"), filed as an exhibit
to the registration statement of the Corporation filed on N-14 (Securities
Act of 1933 No. to be assigned) under the Securities Act of 1933 as amended
(the "N-14 Registration").
As counsel, I have participated in organization of the Corporation, its
registration under the Investment Company Act of 1940, as amended, the
registration of its securities on Form N-1A under the Securities Act of 1933,
and its N-14 Registration. I have examined and am familiar with the
provisions of the Corporation's Articles of Incorporation dated April 20,
1987 ("Articles of Incorporation"), its Bylaws and other such documents and
records deemed relevant. I have also reviewed questions of law and consulted
with counsel thereon as deemed necessary or appropriate by me for the
purposes of this opinion.
Based on the foregoing, it is my opinion that:
1. The Corporation is duly organized and validly existing under the
laws of the State of Maryland.
2. The Corporation is authorized to issue 1,000,000,000 shares of
common stock of a par value of $0.001 per share.
3. The shares which are currently being registered by the Registration
Statement referred to above may be legally and validly issued from time to
time in accordance with the Articles of Incorporation upon receipt of
consideration sufficient to comply with the provisions of the Articles of
Incorporation and subject to compliance with the Securities Act of 1933, as
amended, the Investment Company Act of 1940, as amended, and applicable state
laws regulating the sale of securities. Such shares, when so issued, will be
fully paid and non-assessable by the Corporation.
I hereby consent to the filing of this opinion as an exhibit to the N-14
Registration referred to above and to any registration statement filed under
the securities laws of any of the states of the United States.
The foregoing opinion is limited to the Federal laws of the United
States and the laws of the State of Maryland, and I am expressing no opinion
as to the effect of the laws of any other jurisdiction.
Very truly yours,
/s/ Charles H. Field
Charles H. Field
Exhibit 12
February 29, 1996
Federated Utility Fund, Inc.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Fortress Utility Fund, Inc.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Ladies and Gentlemen:
We have acted as special counsel in connection with, and you have
requested our opinion concerning the federal income tax consequences of, a
transaction (the "Reorganization") in which all of the assets of Fortress
Utility Fund, Inc., a Maryland corporation, (the "Acquired Fund"), will be
acquired by Federated Utility Fund, Inc., a Maryland corporation (the
"Acquiring Fund"), in exchange solely for Class F Shares of Acquiring Fund
(the "Acquiring Fund Shares"). The terms and conditions of this
transaction are set forth in an Agreement and Plan of Reorganization dated
February 29, 1996 between Acquiring Fund and Acquired Fund (the
"Agreement"). This opinion is rendered to you pursuant to paragraph 8.5 of
the Agreement, and all terms used herein have the meanings assigned to them
in the Agreement.
Both Acquiring Fund and Acquired Fund are open-end, management investment
companies which qualify as regulated investment companies described in
Section 851(a) of the Internal Revenue Code of 1986, as amended (the
"Code"). The Acquired Fund and the Acquiring Fund are engaged in the
business of investing in professionally managed portfolios primarily of
securities issued by companies in the utilities industry.
On the Closing Date under the Agreement, the Acquired Fund will transfer
its entire investment portfolio to the Acquiring Fund. In exchange, the
Acquiring Fund will transfer, to the Acquired Fund, Acquiring Fund Shares
in an amount equal in value to the assets transferred by the Acquired Fund
to the Acquiring Fund. The Acquired Fund will thereupon liquidate and
distribute its Acquiring Fund Shares pro rata to its shareholders
("Acquired Fund Shareholders").
We have reviewed and relied upon the representations contained in the
Agreement and in such other documents and instruments as we have deemed
necessary for the purposes of this opinion, and have reviewed the
applicable provisions of the Code, current regulations and administrative
rules thereunder and pertinent case law.
Based upon the foregoing, and assuming that the Reorganization and related
transactions will take place as described in the Agreement, we are of the
opinion that, for federal income tax purposes:
The transfer of all of the Acquired Fund assets in exchange for the
Acquiring Fund Shares and the distribution of the Acquiring Fund Shares to
the Acquired Fund Shareholders in liquidation of the Acquired Fund will
constitute a "reorganization" within the meaning of Section 368(a)(1)(C) of
the Code;
No gain or loss will be recognized by the Acquiring Fund upon the receipt
of the assets of the Acquired Fund solely in exchange for the Acquiring
Fund Shares;
No gain or loss will be recognized by the Acquired Fund upon the transfer
of the Acquired Fund assets to the Acquiring Fund in exchange for the
Acquiring Fund Shares or upon the distribution (whether actual or
constructive) of the Acquiring Fund Shares to Acquired Fund Shareholders in
exchange for their shares of the Acquired Fund;
No gain or loss will be recognized by the Acquired Fund Shareholders upon
the exchange of their Acquired Fund shares for the Acquiring Fund Shares;
The tax basis of the Acquired Fund assets acquired by the Acquiring Fund
will be the same as the tax basis of such assets to the Acquired Fund
immediately prior to the Reorganization;
The tax basis of the Acquiring Fund Shares received by each of the Acquired
Fund Shareholders pursuant to the Reorganization will be the same as the
tax basis of the Acquired Fund shares held by such shareholder immediately
prior to the Reorganization;
The holding period of the assets of the Acquired Fund in the hands of the
Acquiring Fund will include the period during which those assets were held
by the Acquired Fund; and
The holding period of the Acquiring Fund Shares received by each Acquired
Fund Shareholder will include the period during which the Acquired Fund
shares exchanged therefor were held by such shareholder (provided the
Acquired Fund shares were held as capital assets on the date of the
Reorganization).
We hereby consent to the filing of a copy of this opinion with the
Securities and Exchange Commission as an exhibit to the Registration
Statement on Form N-14 filed by Acquiring Fund in connection with the
Reorganization, and to the references to this firm and this opinion in the
Prospectus/Proxy Statement which is contained in such Registration
Statement.
Very truly yours,
Exhibit 14
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the use of our report dated April 18, 1995 on the financial
statements and financial highlights of Federated Utility Fund, Inc.
(formerly, Liberty Utility Fund, Inc.) incorporated by reference in the
initial Registration Statement (Form N-14) and the related Prospectus/Proxy
Statement of Federated Utility Fund, Inc.
We also consent to the use of our report dated July 14, 1995 on the
financial statements and financial highlights of Fortress Utility Fund,
Inc. incorporated by reference in the initial Registration Statement
described above.
By:ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
EXHIBIT 16
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of FEDERATED UTILITY FUND,
INC. and the Deputy General Counsel of Federated Investors, and each of
them, their true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed
with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, the Securities Exchange Act of 1934 and the Investment Company Act
of 1940, by means of the Securities and Exchange Commission's electronic
disclosure system known as EDGAR; and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to sign and perform each and every
act and thing requisite and necessary to be done in connection therewith, as
fully to all intents and purposes as each of them might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
SIGNATURES TITLE DATE
/s/ John F. Donahue Chairman and DirectorFebruary 6, 1996
John F. Donahue (Chief Executive Officer)
/s/ Richard B. Fisher President and DirectorFebruary 6, 1996
Richard B. Fisher
/s/ David M. Taylor Treasurer February 6, 1996
David M. Taylor (Principal Financial and
Accounting Officer)
/s/ Thomas G. Bigley Director February 6, 1996
Thomas G. Bigley
/s/ John T. Conroy, Jr. Director February 6, 1996
John T. Conroy, Jr.
SIGNATURES TITLE DATE
/s/ William J. Copeland Director February 6, 1996
William J. Copeland
/s/ James E. Dowd Director February 6, 1996
James E. Dowd
/s/ Lawrence D. Ellis, M.D. Director February 6, 1996
Lawrence D. Ellis, M.D.
/s/ Edward L. Flaherty, Jr. Director February 6, 1996
Edward L. Flaherty, Jr.
/s/ Peter E. Madden Director February 6, 1996
Peter E. Madden
/s/ Gregor F. Meyer Director February 6, 1996
Gregor F. Meyer
/s/ John E. Murray, Jr. Director February 6, 1996
John E. Murray, Jr.
/s/ Wesley W. Posvar Director February 6, 1996
Wesley W. Posvar
/s/ Marjorie P. Smuts Director February 6, 1996
Marjorie P. Smuts
Sworn to and subscribed before me this 6th day of February , 1996
(SEAL)
/s/ Marie M. Hamm
--------------------------------------------
Notarial Seal
Marie M. Hamm, Notary Public
Plum Boro, Allegheny County
My Commission Expires September 16, 1996
Exhibit 17(i)
Rule 24f-2 Notice
LIBERTY UTILITY FUND, INC.
(Fund Name)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
1933 Act No. 33-13388
(i) fiscal period for which notice is filed February 28, 1995
(ii) The number or amount of securities of the
same class or series, if any, which had
been registered under the Securities Act
of 1933, other than pursuant to Rule 24f-2
but which remained unsold at March 1, 1994,
the beginning of the Registrant's fiscal
period -0-
(iii) The number or amount of securities, if
any, registered during the fiscal period
of this notice other than pursuant to
Rule 24f-2 -0- -0-
(iv) The number or amount of securities
sold during the fiscal period of this
notice 8,846,372
(v) The number or amount of securities sold
during the fiscal period of this notice
in reliance upon registration pursuant
to Rule 24f-2 (see attached Computation
of Fee) 8,846,372
WITNESS the due execution hereof this 13th day of April, 1995.
By: /s/Charles H. Field
Charles H. Field
Assistant Secretary
COMPUTATION OF FEE
1. Actual aggregate sale price of Registrant's
securities sold pursuant to Rule 24f-2 during
the fiscal period for which the 24f-2 notice
is filed (see Section v) $100,314,649
2. Reduced by the difference between:
(a)actual aggregate redemption price
of such securities redeemed by the
issuer during the fiscal period for
which the 24f-2 notice is filed $186,835,493
(b)actual aggregate redemption price
of such redeemed securities
previously applied by the issuer
pursuant to Section 24e(2)(a) for
the fiscal period for which the
24f-2 notice is filed -0- 186,835,493
Total amount upon which the fee calculation specified
in Section 6(b) of the Securities Act of 1933 is
based $(86,520,844)
FEE SUBMITTED (1/29 of 1% of Total amount) $ -0-
CONVERSION OF NET REDEMPTIONS ON
RULE 24f-2 NOTICE TO FILING
UNDER RULE 24e-2
When a negative amount appears on the line captioned "Total amount upon
which the fee calculated specified in Section 6(b) of the Securities Act of
1933 is based", the following calculation should be made to determine the
share information needed to file under Rule 24e-2:
Total redemptions (per annual report) 16,805,654
Less: Line (v) - Rule 24f-2 Notice 8,846,372
Shares available to register under
Rule 24e-2 7,959,282 (a)
Fund's Current Net Asset Value $ 11.54 (b)
Multiply: Shares available to register
under Rule 24e-2 by the fund's current
net asset value (a x b) to obtain Proposed
Federated Administrative
Services
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
412-288-1900
April 13, 1995
Liberty Utility Fund, Inc.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
You have requested my opinion for use in conjunction with a Rule 24f-2
Notice for Liberty Utility Fund, Inc. ("Corporation") to be filed in respect
of shares of the Corporation ("Shares") sold for the fiscal year ended
February 28, 1995, pursuant to the Corporation's registration statement filed
with the Securities and Exchange Commission ("SEC") under the Securities Act
of 1933 (File No. 33-13388) ("Registration Statement").
In its Registration Statement, the Corporation elected to register an
indefinite number of shares pursuant to the provisions of Investment Company
Act Rule 24f-2.
As counsel I have participated in the preparation and filing of the
Corporation's amended Registration Statement under the Securities Act of
1933. Further, I have examined and am familiar with the provisions of the
Articles of Incorporation dated April 20, 1987 ("Articles of Incorporation"),
the Bylaws of the Corporation and such other documents and records deemed
relevant. I have also reviewed questions of law and consulted with counsel
thereon as deemed necessary or appropriate by me for the purposes of this
opinion.
On the basis of the foregoing, it is my opinion the Shares sold for the
fiscal year ended February 28, 1995, registration of which the Rule 24f-2
Notice makes definite in number, were legally issued, fully paid and non-
assessable by the Corporation.
I hereby consent to the filing of this opinion as an exhibit to the Rule
24f-2 Notice referred to above, the Registration Statement of the Corporation
and to any application or registration statement filed under the securities
laws of any of the States of the United States.
The foregoing opinion is limited to the Federal laws of the United
States and the laws of the State of Maryland, and I am expressing no opinion
as to the effect of the laws of any other jurisdiction.
Very truly yours,
/s/ Charles H. Field
Charles H. Field
