SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ [X] ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
FEDERATED UTILITY FUND, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary proxy materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously.
Identify the previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------
4) Date Filed:
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FEDERATED UTILITY FUND, INC.
PROXY STATEMENT - PLEASE VOTE!
TIME IS OF THE ESSENCE ...VOTING ONLY TAKES A FEW MINUTES AND YOUR
PARTICIPATION IS IMPORTANT! ACT NOW TO HELP THE FUND AVOID ADDITIONAL EXPENSE.
Federated Utility Fund, Inc. will hold an annual meeting of shareholders on
March 26, 1999. It is important for you to vote on the issues described in this
Proxy Statement. We recommend that you read the Proxy Statement in its entirety;
the explanations will help you to decide on the issues.
Following is an introduction to the proposals and the process.
WHY AM I BEING ASKED TO VOTE?
Mutual funds are required to obtain shareholders' votes for certain types
of changes, like those included in this Proxy Statement. You have a right to
vote on these changes.
WHAT ISSUES AM I BEING ASKED TO VOTE ON?
The proposals include the election of Directors, ratification of
independent auditors, and changes to the Fund's fundamental investment policies.
The Board also recommends an amendment to the Articles of Incorporation.
WHY ARE INDIVIDUALS RECOMMENDED FOR ELECTION TO THE BOARD OF DIRECTORS?
The Fund is devoted to serving the needs of its shareholders, and the Board
is responsible for managing the Fund's business affairs to meet those needs. The
Board represents the shareholders and can exercise all of the Fund's powers,
except those reserved only for shareholders.
Directors are selected on the basis of their education and professional
experience. Candidates are chosen based on their distinct interest in, and
capacity for understanding the complexities of, the operation of a mutual fund.
These individuals bring considerable experience to the impartial oversight of a
fund's operation.
The Proxy Statement includes a brief description of each nominee's history
and current position with the Fund, if applicable.
WHY AM I BEING ASKED TO VOTE ON THE RATIFICATION OF INDEPENDENT AUDITORS?
The independent auditors conduct a professional examination of accounting
documents and supporting data to render an opinion on the material fairness of
the information. Because financial reporting involves discretionary decision
making, the auditors' opinion is an important assurance to both the Fund and its
investors.
The Board of Directors approved the selection of Ernst & Young LLP,
long-time auditors of the Fund, for the current fiscal year and believes that
the continued employment of this firm is in the Fund's best interests.
WHY ARE THE FUND'S "FUNDAMENTAL POLICIES" BEING CHANGED OR REMOVED?
Every mutual fund has certain investment policies that can be changed only
with the approval of its shareholders. These are referred to as "fundamental"
investment policies.
In some cases, these policies were adopted to reflect regulatory, business,
or industry conditions that no longer exist or no longer are necessary. In other
cases, advances in the securities markets and the economy have created different
procedures and techniques that affect the Fund's operations.
By reducing the number of "fundamental policies," the Fund may be able to
minimize the costs and delays associated with frequent shareholder meetings.
Also, the investment adviser's ability to manage the Fund's assets may be
enhanced and investment opportunities increased.
The proposed amendments will:
o reclassify as operating policies those fundamental policies that are not
required to be fundamental by the Investment Company Act of 1940, as
amended ("1940 Act");
o simplify and modernize the policies that are required to be "fundamental"
by the 1940 Act; and
o remove fundamental policies that are no longer required by the securities
laws of individual states.
Federated is a conservative money manager. Our highly trained professionals
are dedicated to making investment decisions in the best interest of the Fund
and its shareholders. The Board believes that the proposed changes will be
applied responsibly by the Fund's investment adviser.
WHY ARE SOME "FUNDAMENTAL POLICIES" BEING RECLASSIFIED AS "OPERATING POLICIES?"
As noted above, some "fundamental policies" have been redefined as
"operating policies." Operating policies do not require shareholder approval to
be changed. This gives the Fund's Board additional flexibility to determine
whether to participate in new investment opportunities and to meet industry
changes promptly.
WHY IS THE BOARD RECOMMENDING AN AMENDMENT TO THE ARTICLES OF INCORPORATION?
The Articles organizing the Fund were prepared many years ago. Since then,
developments in the investment company industry and changes in the law resulted
in many improvements. The Board is recommending a change to the Articles of
Incorporation that permits the Fund to benefit from these developments.
HOW DO I VOTE MY SHARES?
You may vote in person at the annual meeting of shareholders or complete
and return the enclosed Proxy Card. If you sign and return the Proxy Card
without indicating a preference, your vote will be cast "for" all the proposals.
You may also vote by telephone at 1-800-690-6903, or through the Internet
at WWW.PROXYVOTE.COM. If you choose to help save the Fund time and postage costs
by voting through the Internet or by telephone, please don't return your Proxy
Card. If you do not respond at all, we may contact you by telephone to request
that you cast your vote.
WHO DO I CALL IF I HAVE QUESTIONS ABOUT THE PROXY STATEMENT?
Call your Investment Professional or a Federated Client Service
Representative. Federated's toll-free number is 1-800-341-7400.
After careful consideration, the Board of Directors has unanimously approved
these proposals. The Board recommends that you read the enclosed materials
carefully and vote FOR all proposals.
FEDERATED UTILITY FUND, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 26, 1999
An annual meeting of the shareholders of Federated Utility Fund, Inc. (the
"Fund") will be held at 5800 Corporate Drive, Pittsburgh, Pennsylvania
15237-7000, at 2:00 p.m. (Eastern time), on March 26, 1999 to consider
proposals:
(1) To elect nine Directors.
(2) To ratify the selection of the Fund's independent auditors.
(3) To make changes to the Fund's fundamental investment policies:
(a) To amend the Fund's fundamental investment policy on
diversification of its investments;
(b) To make non-fundamental, and to amend, the Fund's
fundamental investment policy regarding [GOVERNING
INVESTMENTS IN] restricted securities;
(c) To make non-fundamental the Fund's fundamental investment
policy prohibiting investment in securities to exercise
control of an issuer;
(d) To make non-fundamental and to amend the Fund's fundamental
investment policy to permit the Fund to invest in the
securities of other investment companies;
(e) To amend the Fund's fundamental investment policy regarding
borrowing to permit the purchase of securities while
borrowings are outstanding; and
(f) To make non-fundamental the Fund's fundamental investment
policy on investing in securities of foreign issuers.
(4) To eliminate certain of the Fund's fundamental investment
policies:
(a) To remove the Fund's fundamental investment policy on
investing in new issuers;
(b) To remove the Fund's fundamental investment policy on
investing in oil, gas, and minerals;
(c) To remove the Fund's fundamental investment policy on
investing in issuers whose securities are owned by Officers
and Directors; and
(d) To remove the Fund's fundamental investment policy on
investing in warrants.
(5) To remove the 5% limitation on writing call options, and to
authorize the Fund to purchase options.
(6) To approve amendments to the Fund's Amended and Restated Articles
of Incorporation:
(a) To require the approval of a "1940 Act" majority of
shareholders in the event of the sale or conveyance of the
assets of the Fund to another fund or corporation; and
(b) To permit the Board of Directors to liquidate assets of a
series or class without seeking shareholder approval to the
extent permitted under Maryland law.
To transact such other business as may properly come before the meeting or
any adjournment thereof.
The Board of Directors has fixed January 12, 1999, as the record date for
determination of shareholders entitled to vote at the meeting.
By Order of the Board of Directors,
John W. McGonigle
Secretary
January 25, 1999
YOU CAN HELP THE FUND AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP
LETTERS TO ENSURE A QUORUM BY PROMPTLY SIGNING AND RETURNING THE ENCLOSED PROXY.
IF YOU ARE UNABLE TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY SO THAT THE NECESSARY QUORUM MAY BE REPRESENTED AT THE ANNUAL
MEETING. THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
TABLE OF CONTENTS
ABOUT THE PROXY SOLICITATION AND THE ANNUAL MEETING..........................[4]
ELECTION OF NINE DIRECTORS...................................................[4]
[** 1] ABOUT THE ELECTION OF DIRECTORS.......................................[5]
[** 2] DIRECTORS STANDING FOR ELECTION.......................................[5]
[** 3] NOMINEES NOT PRESENTLY SERVING AS DIRECTORS...........................[6]
RATIFICATION OF THE SELECTION OF THE INDEPENDENT AUDITORS....................[7]
APPROVAL OR DISAPPROVAL OF CHANGES TO THE FUND'S FUNDAMENTAL INVESTMENT
POLICIES.................................................................[8]
APPROVAL OR DISAPPROVAL OF THE ELIMINATION OF CERTAIN FUNDAMENTAL
INVESTMENT POLICIES [12]
APPROVAL OR DISAPPROVAL OF THE ABILITY TO PURCHASE OPTIONS..................[13]
APPROVAL OR DISAPPROVAL OF AMENDMENTS TO THE FUND'S AMENDED AND RESTATED
ARTICLES OF INCORPORATION [14]
INFORMATION ABOUT THE FUND..................................................[16]
PROXIES, QUORUM AND VOTING AT THE ANNUAL MEETING............................[16]
* 1 MOVED FROM HERE; TEXT NOT SHOWN
* 2 MOVED FROM HERE; TEXT NOT SHOWN
* 3 MOVED FROM HERE; TEXT NOT SHOWN
PREVIOUSLY ELECTED DIRECTORS
SHARE OWNERSHIP OF THE DIRECTORS............................................[17]
DIRECTOR COMPENSATION.......................................................[17]
OFFICERS OF THE FUND........................................................[18]
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY..............[20]
DEFINITIVE
PROXY STATEMENT
FEDERATED UTILITY FUND, INC.
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
ABOUT THE PROXY SOLICITATION AND THE ANNUAL MEETING
The enclosed proxy is solicited on behalf of the Board of Directors of the
Fund (the "Board" or "Directors"). The proxies will be voted at the annual
meeting of shareholders of the Fund to be held on March 26, 1999, at 5800
Corporate Drive, Pittsburgh, Pennsylvania 15237-7000, at 2:00 p.m. (such annual
meeting and any adjournment or postponement thereof are referred to as the
"Annual Meeting").
The cost of the solicitation, including the printing and mailing of proxy
materials, will be borne by the Fund. In addition to solicitations through the
mails, proxies may be solicited by officers, employees, and agents of the Fund
or, if necessary, a communications firm retained for this purpose. Such
solicitations may be by telephone, telegraph, or otherwise. Any telephonic
solicitations will follow procedures designed to ensure accuracy and prevent
fraud, including requiring identifying shareholder information, recording the
shareholder's instructions, and confirming to the shareholder after the fact.
Shareholders who communicate proxies by telephone or by other electronic means
have the same power and authority to issue, revoke, or otherwise change their
voting instruction as shareholders submitting proxies in written form. The Fund
will reimburse custodians, nominees, and fiduciaries for the reasonable costs
incurred by them in connection with forwarding solicitation materials to the
beneficial owners of shares held of record by such persons.
At its meeting on November 17, 1998, the Board reviewed both the proposed
amendments to the Amended and Restated Articles of Incorporation and the changes
recommended in the investment policies of the Fund, and approved them subject to
shareholder approval. The purposes of the Annual Meeting are set forth in the
accompanying Notice. The Directors know of no business other than that mentioned
in the Notice that will be presented for consideration at the Annual Meeting.
Should other business properly be brought before the Annual Meeting, proxies
will be voted in accordance with the best judgment of the persons named as
proxies. This proxy statement and the enclosed proxy card are expected to be
mailed on or about January 25, 1999, to shareholders of record at the close of
business on January 12, 1999 (the "Record Date"). On the Record Date, the Fund
had outstanding _________[122,508,227.483] shares of common stock.
The Fund's annual report, which includes audited financial statements for
the fiscal year ended February 28, 1998, was previously mailed to shareholders.
Requests for a semi-annual report which contains unaudited financial statements
for the period ended August 31, 1998, may be made in writing to the Fund's
principal executive offices, which are located at Federated Investors Funds,
5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7000 or by calling
toll-free 1-800-341-7400.
PROPOSAL #1: ELECTION OF NINE DIRECTORS
The persons named as proxies intend to vote in favor of the election of
Thomas G. Bigley, John T. Conroy, Jr., Nicholas P. Constantakis, John F.
Cunningham, J. Christopher Donahue, Peter E. Madden, Charles F. Mansfield, Jr.,
John E. Murray, Jr. and John S. Walsh (collectively, the "Nominees") as
Directors of the Fund. Messrs. Bigley, Conroy, Madden and Murray are presently
serving as Directors. If elected by shareholders, Messrs. Constantakis,
Cunningham, Donahue, Mansfield and Walsh will [ARE EXPECTED TO] assume their
responsibilities as Directors effective April 1, 1999. Please see "Information
about the Fund"["ABOUT THE ELECTION OF DIRECTORS" BELOW] for current information
about the Nominees.
Messrs. Conroy and Madden were appointed Directors on August 21, 1991, to
fill vacancies created by the resignation of Mr. Joseph Maloney and the decision
to expand the size of the Board. Messrs. Murray and Bigley were appointed
Directors on February 14, 1995 and October 1, 1995, respectively, also to fill
vacancies resulting from the decision to expand the size of the Board. [MESSRS.
CUNNINGHAM, MANSFIELD AND WALSH ARE BEING PROPOSED FOR ELECTION AS DIRECTORS TO
FILL VACANCIES ANTICIPATED TO RESULT FROM THE RESIGNATION OF THREE CURRENT
DIRECTORS. THE ANTICIPATED RESIGNATIONS WILL NOT OCCUR IF MESSRS. CUNNINGHAM,
MANSFIELD AND WALSH ARE NOT ELECTED AS DIRECTORS.]
All Nominees have consented to serve if elected. If elected, the Directors
will hold office without limit in time until death, resignation, retirement, or
removal or until the next meeting of shareholders to elect Directors and the
election and qualification of their successors. The nine individuals receiving
the greatest number of votes at the Annual Meeting will be deemed to be elected
Directors.
If any Nominee for election as a Director named above shall by reason of
death or for any other reason become unavailable as a candidate at the Annual
Meeting, votes pursuant to the enclosed proxy will be cast for a substitute
candidate by the proxies named on the proxy card, or their substitutes, present
and acting at the Annual Meeting. Any such substitute candidate for election as
a Director who is an "interested person" (as defined in the Investment Company
Act of 1940, as amended (the "1940 Act")), of the Fund shall be nominated by the
Executive Committee. The selection of any substitute candidate for election as a
Director who is not an "interested person" shall be made by a majority of the
Directors who are not "interested persons" of the Fund. The Board has no reason
to believe that any Nominee will become unavailable for election as a Director.
THE BOARD OF DIRECTORS RECOMMENDS THAT
SHAREHOLDERS VOTE TO ELECT AS DIRECTORS THE NOMINEES FOR
ELECTION TO THE BOARD OF DIRECTORS OF THE FUND
[ABOUT THE ELECTION OF DIRECTORS]
[** 4] When elected, the Directors will hold office during the lifetime of
the Fund except that: (a) any Director may resign; (b) any Director may be
removed by written instrument signed by at least two-thirds of the number of
Directors prior to such removal; (c) any Director who requests to be retired or
who has become mentally or physically incapacitated may be retired by written
instrument signed by a majority of the other Directors; and (d) a Director may
be removed at any special meeting of the shareholders by a vote of two-thirds of
the outstanding shares of the Fund. In case a vacancy shall exist for any
reason, the remaining Directors will fill such vacancy by appointment of another
Director. The Directors will not fill any vacancy by appointment if, immediately
after filling such vacancy, less than two-thirds of the Directors then holding
office would have been elected by the shareholders. If, at any time, less than a
majority of the Directors holding office have been elected by the shareholders,
the Directors then in office will call a shareholders' meeting for the purpose
of electing Directors to fill vacancies. Otherwise, there will normally be no
meeting of shareholders called for the purpose of electing Directors.
[** 5] Set forth below is a listing of: (i) Directors standing for
election, [AND] (ii) Nominees standing for election who are not presently
serving as Directors, and (iii) Directors previously elected, along with their
addresses, birthdates, present positions with the Fund, if applicable, and
principal occupations during the past five years:
[DIRECTORS STANDING FOR ELECTION
THOMAS G. BIGLEY
15 OLD TIMBER TRAIL
PITTSBURGH, PA
BIRTHDATE: FEBRUARY 3, 1934
DIRECTOR
DIRECTOR OR TRUSTEE OF THE FEDERATED FUND COMPLEX; DIRECTOR AND MEMBER OF
EXECUTIVE COMMITTEE, CHILDREN'S HOSPITAL OF PITTSBURGH; FORMERLY, SENIOR
PARTNER, ERNST & YOUNG LLP; DIRECTOR, MED 3000 GROUP, INC.; DIRECTOR AND MEMBER
OF EXECUTIVE COMMITTEE, UNIVERSITY OF PITTSBURGH.
JOHN T. CONROY, JR.
WOOD/IPC COMMERCIAL DEPARTMENT
JOHN R. WOOD AND ASSOCIATES, INC. REALTORS
3255 TAMIAMI TRAIL NORTH
NAPLES, FL
BIRTHDATE: JUNE 23, 1937
DIRECTOR]
[** 6] [DIRECTOR OR TRUSTEE OF THE FEDERATED FUND COMPLEX;] President,
Investment Properties Corporation; Senior Vice -President, John R. Wood and
Associates, Inc., Realtors; Partner or Trustee in private real estate ventures
in Southwest Florida; formerly, President, Naples Property Management, Inc. and
Northgate Village Development Corporation; Director or Trustee of the Funds.
[PETER E. MADDEN
ONE ROYAL PALM WAY
100 ROYAL PALM WAY
PALM BEACH, FL
BIRTHDATE: MARCH 16, 1942
DIRECTOR
DIRECTOR OR TRUSTEE OF THE FEDERATED FUND COMPLEX; FORMERLY,
REPRESENTATIVE, COMMONWEALTH OF MASSACHUSETTS GENERAL COURT; PRESIDENT, STATE
STREET BANK AND TRUST COMPANY AND STATE STREET
CORPORATION.
JOHN E. MURRAY, JR., J.D., S.J.D.
PRESIDENT, DUQUESNE UNIVERSITY
PITTSBURGH, PA
BIRTHDATE: DECEMBER 20, 1932
DIRECTOR
DIRECTOR OR TRUSTEE OF THE FEDERATED FUND COMPLEX; PRESIDENT, LAW
PROFESSOR, DUQUESNE UNIVERSITY; CONSULTING PARTNER, MOLLICA & MURRAY.
NOMINEES NOT PRESENTLY SERVING AS DIRECTORS
NICHOLAS P. CONSTANTAKIS
175 WOODSHIRE DRIVE
PITTSBURGH, PA
BIRTHDATE: SEPTEMBER 3, 1939
DIRECTOR OR TRUSTEE OF THE FEDERATED FUND COMPLEX; FORMERLY, PARTNER,
ANDERSEN WORLDWIDE SC.
JOHN F. CUNNINGHAM
353 EL BRILLO WAY
PALM BEACH, FL
BIRTHDATE: MARCH 5, 1943
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, CUNNINGHAM & CO., INC.;
TRUSTEE ASSOCIATE, BOSTON COLLEGE; DIRECTOR, EMC CORPORATION; FORMERLY,
DIRECTOR, REDGATE COMMUNICATIONS.
J. CHRISTOPHER DONAHUE
FEDERATED INVESTORS TOWER
PITTSBURGH, PA
BIRTHDATE: APRIL 11, 1949
EXECUTIVE VICE PRESIDENT
PRESIDENT OR EXECUTIVE VICE PRESIDENT OF THE FEDERATED FUND COMPLEX;
DIRECTOR OR TRUSTEE OF SOME OF THE FUNDS IN THE FEDERATED FUND COMPLEX;
PRESIDENT AND DIRECTOR, FEDERATED INVESTORS, INC.; PRESIDENT AND TRUSTEE,
FEDERATED ADVISERS, FEDERATED MANAGEMENT, AND FEDERATED RESEARCH; PRESIDENT AND
DIRECTOR, FEDERATED RESEARCH CORP. AND FEDERATED GLOBAL RESEARCH CORP.;
PRESIDENT, PASSPORT RESEARCH, LTD.; TRUSTEE, FEDERATED SHAREHOLDER SERVICES
COMPANY; DIRECTOR, FEDERATED SERVICES COMPANY. MR. DONAHUE IS THE SON OF JOHN F.
DONAHUE, CHAIRMAN AND DIRECTOR OF THE FUND.
CHARLES F. MANSFIELD, JR.
80 SOUTH ROAD
WESTHAMPTON BEACH, NY
BIRTHDATE: APRIL 10, 1945
MANAGEMENT CONSULTANT.
JOHN S. WALSH
2007 SHERWOOD DRIVE
VALPARAISO, IN
BIRTHDATE: NOVEMBER 28, 1957
PRESIDENT AND DIRECTOR, HEAT WAGON, INC.; PRESIDENT AND DIRECTOR,
MANUFACTURERS PRODUCTS, INC.; PRESIDENT, PORTABLE HEATER PARTS, A DIVISION OF
MANUFACTURERS PRODUCTS, INC.; DIRECTOR, WALSH &
KELLY, INC.; FORMERLY, VICE PRESIDENT, WALSH & KELLY, INC.]
PROPOSAL #2: RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
The 1940 Act requires that the Fund's independent auditors be selected by
the Board, including a majority of those Board members who are not "interested
persons" (as defined in the 1940 Act) of the Fund, and that the employment of
such independent auditors be conditioned on the right of the Fund, by vote of a
majority of its outstanding securities at any meeting called for that purpose,
to terminate such employment forthwith without penalty. The Board [SUBMITTED FOR
RATIFICATION OR REJECTION AT THE NEXT SUCCEEDING MEETING OF SHAREHOLDERS. THE
BOARD OF DIRECTORS] of the Fund, including a majority of its members who are not
"interested persons" of the Fund, approved the selection of Ernst & Young LLP
(the "Auditors") for the current fiscal year at a Board meeting held on May 12,
1998.
The selection by the Board of the Auditors as independent auditors for the
current fiscal year is submitted to the shareholders for ratification. Apart
from their fees as independent auditors and certain consulting fees, neither the
Auditors nor any of their partners have a direct, or material indirect,
financial interest in the Fund or its investment adviser. The Auditors are a
major international independent accounting firm. The Board believes that the
continued employment of the services of the Auditors for the current fiscal year
would be in the Fund's best interests.
Representatives of the Auditors are not expected to be present at the
Annual Meeting. If a representative is present, he or she will have the
opportunity to make a statement and would be available to respond to appropriate
questions. The ratification of the selection of the Auditors will require the
affirmative vote of a majority of the shares present and voting at the Annual
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL [TO RATIFY THE SELECTION OF THE INDEPENDENT AUDITORS]
PROPOSAL #3: APPROVAL OF CHANGES TO THE FUND'S
FUNDAMENTAL INVESTMENT POLICIES
The 1940 Act requires investment companies such as the Fund to adopt
certain specific investment policies that can be changed only by shareholder
vote. An investment company may also elect to designate other policies that may
be changed only by shareholder vote. Both types of policies are often referred
to as "fundamental policies." Certain of the Fund's fundamental policies had
been adopted in the past to reflect regulatory, business or industry conditions
that are no longer in effect. Accordingly, the Directors have authorized the
submission to the Fund's shareholders for their approval, and recommend that
shareholders approve, the removal, amendment and/or reclassification of certain
of the Fund's fundamental policies.
The proposed amendments would:
(i) simplify and modernize the fundamental policies that are required
to be stated under the 1940 Act;
(ii) reclassify as operating policies those fundamental policies that
are not required to be fundamental under the 1940 Act; and
(iii) remove those fundamental policies which are no longer required
by the securities laws of individual states as a result of the
National Securities Markets Improvement Act ("NSMIA"), dated
October 11, 1996.
By reducing to a minimum those policies that can be changed only by
shareholder vote, the Directors believe that the Fund would be able to minimize
the costs and delay associated with holding future shareholder meetings to
revise fundamental policies that become outdated or inappropriate. The Directors
also believe that the investment adviser's ability to manage the Fund's assets
in a changing investment environment will be enhanced and that investment
management opportunities will be increased by these changes. The recommended
changes are specified below. Each sub-item will be voted on separately, and the
approval of any item will require the approval of a majority of the outstanding
shares of the Fund. [VOTING SHARES OF THE FUND A DEFINED IN THE 1940 ACT. (SEE
"PROXIES, QUORUM AND VOTING AT THE ANNUAL MEETING" BELOW.)]
PROPOSAL #3(A): TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON
DIVERSIFICATION OF ITS INVESTMENTS
The Fund's current fundamental investment policy regarding diversification
of its investments states:
"The Fund will not invest more than 5% of its total assets (valued at the
time of investment) in the securities of any one issuer, except that this
restriction does not apply to cash and cash items, repurchase agreements, and
securities issued or guaranteed by the United States government or its agencies
or instrumentalities."
In order to afford the Fund's investment adviser maximum flexibility in
managing the Fund's assets, the Directors propose to amend the Fund's
diversification policy to be consistent with the definition of a diversified
investment company under the 1940 Act. Such amendment would specifically: (i)
add securities of other investment companies to the list of issuers which are
excluded from the 5% limitation, and (ii) make clear that the diversification
test is applied to 75% of the Fund's total assets, rather than 100% of its total
assets.
Upon approval of the Fund's shareholders, the fundamental investment policy
governing diversification will be amended to read as follows:
"With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities of any one issuer (other than
cash, cash items, securities issued or guaranteed by the government of the
United States or its agencies or instrumentalities and repurchase agreements
collateralized by such U.S. government securities, and securities of other
investment companies) if as a result more than 5% of the value of its total
assets would be invested in the securities of that issuer, or it would own more
than 10% of the outstanding voting securities of that issuer."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(B): TO AMEND AND TO CHANGE FROM FUNDAMENTAL TO AN OPERATING
POLICY THE FUNDS [MAKE NON-FUNDAMENTAL, AND TO AMEND,
THE FUND'S FUNDAMENTAL INVESTMENT] POLICY GOVERNING
INVESTMENTS IN RESTRICTED SECURITIES
The Fund's current policy on restricted securities reads as follows:
"The Fund will not invest more than 10% of its total assets in securities
subject to restrictions on resale under federal securities laws (except for
commercial paper issued under Section 4(2) of the Securities Act of 1933)."
This policy was adopted because historically, restricted securities were
viewed as illiquid since they could not be sold within seven days. Investment
companies, such as the Fund, are required to meet a shareholder's redemption
request at the current net asset value within seven days of receiving the
request for redemption. In order to do this, some portion of the securities in
the Fund's portfolio must be "liquid" so that the securities can be sold in
sufficient time to obtain the necessary cash to meet redemption requests. It is
important to note that many restricted securities are, in fact, quite LIQUID and
can be purchased without jeopardizing the liquidity of the Fund's portfolio.
Certain state securities regulators previously required mutual funds to
have a fundamental policy limiting investment in restricted securities. Since
the enactment of NSMIA, states no longer have the jurisdiction to impose such
requirements. Furthermore, rules adopted by the U.S. Securities and Exchange
Commission (the "SEC" or the "Commission") have substantially increased the
number of restricted securities that can now be considered liquid and, in
addition, have given to the Directors the ability to determine, under specific
guidelines, that a security is liquid. The Directors may delegate this duty to
the investment adviser provided the investment adviser's determination of
liquidity is made in accordance with the guidelines established and monitored by
the Directors.
The Fund's current policy prevents the Fund from acquiring a restricted
security that may be viewed by the [FUND'S INVESTMENT] adviser as liquid, other
than Section 4(2) commercial paper. If this proposal is approved, the Fund will
be able to invest to an unlimited extent in restricted securities as long as
they meet the Directors' guidelines for liquidity and the Fund's operating
policy on restricted securities would read substantially as follows:
"The Fund may invest in restricted securities. Restricted securities are
any securities in which the Fund may invest pursuant to its investment objective
and policies but which [THAT] are subject to restrictions on resale under
federal securities law. Under criteria established by the Directors certain
restricted securities are determined to be liquid. To the extent that restricted
securities are not determined to be liquid the Fund will limit their purchase,
together with other illiquid securities, to 15% of its net assets."
Under the Fund's current policy on investing in illiquid securities, if a
restricted security is determined not to be liquid, the purchase of that
security, together with other illiquid securities, may not exceed 10% of the
Fund's total assets.
If shareholders do not approve the removal of the policy on restricted
securities, the Fund will continue to invest no more than 10% of the value of
its total assets in restricted securities of any kind, except Section 4(2)
commercial paper.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(C): TO MAKE NON-FUNDAMENTAL THE PROHIBITION ON THE FUND'S
INVESTMENTS IN SECURITIES TO EXERCISE CONTROL OF AN ISSUER
The Fund's current policy prohibits the acquisition of the securities of
any issuer for the purpose of exercising control over, or management of, any
company. "Control" is defined under the 1940 Act as owning 25% or more of the
voting securities of an issuer. A controlling ownership is likely to have an
effect on the outcome of any shareholder voting on changes related to the
operation of the issuing company.
When the Fund adopted this investment policy, it was required to be
fundamental by certain state securities regulators. Since NSMIA, those
requirements no longer apply. By making the policy a non-fundamental operating
policy, the Directors will have maximum flexibility to make changes in the
policy to benefit the Fund and its shareholders without the expense and delay of
holding a shareholder meeting. [THIS WILL ENABLE THE FUND TO ENJOY THE BENEFITS
OF AN EXEMPTIVE ORDER ISSUED BY THE COMMISSION (THE "ORDER") THAT ALLOWS THE
FUND TO INVEST IN AFFILIATED MONEY MARKET FUNDS UNDER LIMITED CIRCUMSTANCES.] As
an operating policy, the policy would continue to prohibit the Fund from
investing in an issuer for the purpose of exercising control. The Fund does not
currently anticipate that it would employ investment techniques the objective of
which will be to exercise control of the [OVER, OR] management[,] of a [ANY]
company.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(D): TO MAKE NON-FUNDAMENTAL[,] AND TO AMEND[,] THE FUND'S
[FUNDAMENTAL INVESTMENT] POLICY TO PERMIT THE FUND TO INVEST IN THE SECURITIES
OF OTHER INVESTMENT COMPANIES
The Fund currently has a fundamental investment policy that prohibits the
purchase or retention of shares of any open-end investment company, exclusive of
[EXCEPT FOR] shares acquired as a result of a merger, consolidation or other
plan of reorganization. The [FUND'S INVESTMENT] adviser believes, and the Board
has concluded, that this prohibition unnecessarily limits the Fund's
investments. Amending this policy would expand the investment opportunities
available to the Fund by allowing the Fund to invest in other investment
companies, including investing the Fund's temporary cash reserves in shares of
money market funds. The 1940 Act limits [INVESTMENTS IN OTHER INVESTMENT
COMPANIES ARE LIMITED UNDER THE 1940 ACT AND BY THE ORDER. THE 1940 ACT AND THE
ORDER LIMIT] both the portion of the Fund's assets that may be so invested in a
particular fund, and the portfolio of such a fund that may be owned by the Fund.
Normally, each investment company in which the Fund invests will have its own
operating expenses, including advisory fees[; HOWEVER, THE FUND'S INVESTMENT
ADVISER WILL WAIVE THAT PORTION OF ITS ADVISORY FEE ATTRIBUTABLE TO ASSETS
INVESTED IN OTHER INVESTMENT COMPANIES]. It is expected that the [OTHER]
duplicative expense [EXPENSES] are justified by the benefit of having access to
the markets in which such a fund invests [FUNDS INVEST], or in the investment
techniques or advisers of such funds.
[AT THE PRESENT TIME, THE BOARD EXPECTS TO UTILIZE THE AUTHORITY PROVIDED
BY THIS PROPOSAL TO INVEST THE FUND'S TEMPORARY CASH RESERVES IN SHARES OF MONEY
MARKET FUNDS.] These cash reserves typically arise from the receipt of dividend
and interest income from portfolio securities, the receipt of payment for sale
of portfolio securities, defensive cash positions and the decision to hold cash
to meet redemptions or make anticipated dividend payments. Further, by changing
the policy from fundamental to an operating policy, the Directors believe that
maximum flexibility will be afforded to the Fund to amend the policy as
appropriate in the future without the burden and delay to the Fund and its
shareholders of holding a special meeting.
The money market funds in which the Fund plans to invest pay an advisory
fee. However, the Funds investment adviser and the Directors believe that the
benefits derived from having the cash invested outweigh any reduction in the
amount earned as a result of such a fee. The ability to purchase shares of money
market funds would be beneficial because it would provide the Fund additional
investment opportunities late in each business day, when opportunities to
acquire money market instruments are limited. Otherwise, the Fund would be
forced to hold some of its cash uninvested, resulting in little or no investment
income.
If shareholders approve this item, the new operating policy will read as
follows in: (a) the Prospectus, and (b) the Statement of Additional Information:
(a)...."INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment
companies as an efficient means of carrying out its investment
policies. It should be noted that investment companies incur certain
expenses, such as management fees, and, therefore, any investment by
the Fund in shares of other investment companies may be subject to
such duplicate expenses. At the present time, the Fund expects that
its investments in other investment companies will be limited to
shares of money market funds, including funds affiliated with the
Fund's investment adviser."
(b)...."INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest in the securities of affiliated money market funds
as an efficient means of managing the Fund's uninvested cash."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(E): TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING BORROWING TO PERMIT THE PURCHASE OF
SECURITIES WHILE BORROWINGS ARE OUTSTANDING
The Fund's current fundamental investment policy on borrowing states that:
"The Fund will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts not in excess of
5%[, ISSUE SENIOR SECURITIES, OR PLEDGE ASSETS, EXCEPT THAT UNDER CERTAIN
CIRCUMSTANCES THE FUND MAY BORROW MONEY AND ENGAGE IN REVERSE REPURCHASE
TRANSACTIONS IN AMOUNTS UP TO ONE-THIRD] of the value of its total assets. In
addition, the Fund may enter into reverse repurchase agreements and otherwise
borrow up to one-third of the value of its total assets, including the amount
borrowed, in order to meet redemption requests without immediately selling
portfolio instruments... The Fund will liquidate any such borrowings as soon as
possible and may not purchase any portfolio securities while the [NET ASSETS,
INCLUDING THE AMOUNTS BORROWED, AND PLEDGE UP TO 10% OF THE VALUE OF THOSE
ASSETS TO SECURE SUCH BORROWINGS.
THE FUND WILL NOT BORROW MONEY OR ENGAGE IN REVERSE REPURCHASE AGREEMENTS
FOR INVESTMENT LEVERAGE, BUT RATHER AS A TEMPORARY, EXTRAORDINARY, OR EMERGENCY
MEASURE TO FACILITATE MANAGEMENT OF THE PORTFOLIO BY ENABLING THE FUND TO MEET
REDEMPTION REQUESTS WHEN THE LIQUIDATION OF PORTFOLIO SECURITIES IS DEEMED TO BE
INCONVENIENT OR DISADVANTAGEOUS. THE FUND WILL NOT PURCHASE ANY SECURITIES WHILE
ANY SUCH] borrowings are outstanding. However, during the period any reverse
repurchase agreements are outstanding, but only to the extent necessary to
assure completion of the reverse repurchase agreements, the Fund will restrict
the purchase of portfolio investments [INSTRUMENTS] to money market instruments
maturing on or before the expiration date of the reverse repurchase
agreements."[AGREEMENTS. "]
Management has recommended that the Directors consider approving a revision
to the fundamental policy that would permit the Fund to purchase securities
while its borrowings are outstanding, as the Fund's investment adviser believes
that the current policy unnecessarily limits the Fund's investments. If approved
by shareholders, the phrase [SENTENCE] "The Fund ... maY [WILl] not purchase any
portfolio securities while thE [ANY SUCh] borrowings are outstanding" will be
deleted. The Fund would continue to be subject to the same percentage limitation
on its borrowings --5% of the value of the Fund's total assets -- if the
proposed change is approved.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(F): TO MAKE NON-FUNDAMENTAL THE FUND'S [FUNDAMENTAL INVESTMENT]
POLICY REGARDING INVESTMENT IN SECURITIES OF FOREIGN ISSUERS
The Fund is currently subject to a fundamental investment policy that
prohibits the Fund from investing more than 15% of its total assets in
securities of foreign issuers not listed on recognized exchanges. The management
of the Fund would like to have the ability to invest in such securities in
excess of the current percentage limitation because of the high credit quality
of such instruments and the enhanced yield of foreign securities versus the
yield on similar domestic securities. Such investments also offer opportunities
for further diversification and flexibility in portfolio management.
For the reasons cited above, and in the event of any future policy
revisions by the SEC, the Directors also believe that this policy should be made
an operating policy, subject to amendment only by the Directors. In doing so,
the Directors can give the Fund's investment adviser maximum flexibility in
managing the Fund's assets without the expense and delay of holding a
shareholder meeting.
Therefore, the Directors are recommending that the Fund's current
investment policy respecting investing in foreign securities be revised by
deleting the fundamental policy and percentage limitation described above. It
will be replaced by an operating policy that will allow the Fund to invest in
securities of foreign issuers that are not listed on recognized exchanges
without limitation.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #4: REMOVAL OF CERTAIN OF THE FUND'S
FUNDAMENTAL INVESTMENT POLICIES
The Board has determined that certain of the current fundamental investment
policies are unnecessary and should be removed. Until NSMIA, the securities laws
of several states had prohibited an investment company whose shares would be
sold in those states from investing in certain securities. As a consequence of
those restrictions, the Fund adopted the investment policies described below
which [THAT] can be changed only upon the approval of shareholders. Since these
prohibitions are no longer required under state law, the management of the Fund
has recommended, and the Board has determined, that these policies should be
removed. The removal of these policies would provide greater flexibility in the
management of the Fund by permitting the Fund to purchase a broader range of
securities which are permitted investments and which are consistent with its
investment objective and policies.
PROPOSAL #4(A): TO REMOVE THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON
INVESTING IN NEW ISSUERS (UNSEASONED ISSUERS)
The Directors have determined that the Fund's current policy on investment
in new issuers is unnecessary. New issuers are those issuers that are considered
"unseasoned" because they have been in operation for less than three years.
Therefore, the Directors are recommending that the following policy be deleted:
"The Fund will not invest more than 5% of the value of its total assets in
securities of companies, including their predecessors, which have been in
operation for less than three years."
If approved, the Fund will be able to invest in unseasoned companies
without limit.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #4(B): TO REMOVE THE FUND'S FUNDAMENTAL INVESTMENT
POLICY ON INVESTING IN OIL, GAS AND MINERALS
The Directors have determined that the Fund's current investment policy on
investment in oil, gas and minerals is unnecessary and are recommending that it
be removed by deleting the following:
"The Fund will not purchase interests in oil, gas, or mineral exploration
or development programs, except it may purchase the securities of issuers which
invest in and sponsor such programs."
Like the policy in proposal #4(a), this policy originated many years ago
with now obsolete state securities laws. In the event of shareholder approval,
the Fund, while being permitted to purchase securities of issuers which invest
in or sponsor such programs, will continue to be subject to the Fund's current
credit quality standards.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #4(C): TO REMOVE THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND DIRECTORS
The Directors have determined that the Fund's current policy on investment
in issuers whose securities are owned by Officers and Directors of the Fund is
unnecessary and are recommending that it be removed by deleting the following:
"The Fund will not purchase or retain the securities of any issuer if the
Officers and Directors of the Fund or its Adviser owning individually of
1% of the issuer's securities together own more than 5% of the issuer's
securities."
This policy originated many years ago with now obsolete state securities
laws that were intended to prevent conflicts of interest in the management of
mutual funds. Preventing conflicts of interest in Fund management is a
critically important objective. Management believes that the Fund's Code of
Ethics provides the best way to accomplish this goal. The Code of Ethics, which
has been adopted in accordance with SEC rules, restricts the private investment
activities of Officers, Directors and key advisory personnel and a wide range of
employees of the Fund's investment adviser. If approved, the Fund will be able
to invest in issuers without regard to whether the Officers or Directors of the
Fund or its adviser own any securities of those issuers. However, because of the
types of securities purchased by the Fund, it is highly unlikely that the Fund
will purchase securities of any issuers whose securities are owned in material
amounts by Officers or Directors of the Fund or its adviser.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #4(D): TO REMOVE THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON
INVESTING IN WARRANTS
The Directors have determined that the Fund's current investment policy on
investment in options is unnecessary and are recommending that it be removed by
deleting the following:
"The Fund will not invest more than 5% of its assets on [IN] warrants, not
more than 2% of which can be warrants which are not listed on recognized ====
exchanges."
Like the proposals above, this policy originated in now obsolete state
securities laws.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #5: TO APPROVE [APPROVAL OF] THE REMOVAL OF THE 5% LIMITATION ON
WRITING CALL OPTIONS AND TO APPROVE THE AUTHORITY TO PURCHASE OPTIONS
The Fund is presently permitted to write call options on all or any portion
of its portfolio to generate revenue for the Fund. Call options written by the
Fund give the holder the right to buy the underlying securities of the Fund at a
stated exercise price. The Fund's investments in call options are currently
subject to a limitation that provides that the Fund's investment in call options
shall not exceed 5% of the Fund's total assets.
The Fund's investment adviser has recommended that the Fund's investment
policies be expanded to permit the purchase of put options on financial futures
contracts and put options on portfolio securities. Financial futures may include
index futures. These options will be used as a hedge to attempt to protect
securities which the Fund holds against decreases in value. If approved by
shareholders, the Fund will enter into futures contracts directly only when it
desires to exercise a financial futures put option in its portfolio rather than
either closing out the option or allowing it to expire. The Fund will only
purchase puts on financial futures contracts which are traded on a nationally
recognized exchange.
If approved by shareholders, the Fund will generally purchase
over-the-counter put options on portfolio securities in negotiated transactions
with the writers of the options since options on the portfolio securities held
by the Fund are typically not traded on an exchange. The Fund will purchase
options only from investment dealers and other financial associations (such as
commercial banks or savings associations) deemed creditworthy by the Fund's
investment adviser.
In general, over-the-counter put options differ from exchange traded put
options in the following respects. Over-the-counter put options are two party
contracts with price and terms negotiated between buyer and seller, and such
options are endorsed and/or guaranteed by third parties (such as a New York
Stock Exchange member). Additionally, over-the-counter strike prices are
adjusted to reflect dividend payments, initial strike prices are generally set
at market, and option premiums (which are all time premiums) are amortized on a
straight line basis over the life of the option. In contrast, exchange traded
options are third-party contracts with standardized strike prices and expiration
dates and are purchased from the Options Clearing Corporation. Strike prices are
not adjusted for dividends, and options are marked to market, thereby obviating
the need to amortize the time premium. Exchange traded options have a continuous
liquid market while over-the-counter options do not.
If approved by shareholders, the current 5% limitation on investments in
call options will be eliminated. Although it is expected that the Fund will
reserve the right to write covered call options on its entire portfolio, it will
not write such options on more than 25% of its total assets unless a higher
limit is authorized by the Directors.
The Fund's proposed investments in options present certain risks. If the
Fund purchases puts on financial futures contracts to protect against declines
in prices of portfolio securities, there is a risk that the prices of the
securities subject to the futures contracts may not correlate perfectly with the
prices of the securities in the Fund's portfolio of investments. This may cause
the futures contract and its corresponding put to react differently than the
portfolio securities to market changes. In addition, the Fund's investment
adviser could be incorrect in its expectations about the direction or extent of
market factors such as interest rate movements. In such an event, the Fund may
lose the purchase price of the put option. Finally, it is not certain that a
secondary market for options will exist at all times. Although the Fund's
investment adviser will consider liquidity before entering into option
transactions, there is no assurance that a liquid secondary market on an
exchange will exist for any particular option or at any particular time. The
Fund's ability to establish and close out option positions depends on this
secondary market.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #6: TO APPROVE [APPROVAL OF] AMENDMENTS TO THE FUND'S
ARTICLES OF INCORPORATION
Mutual funds, such as the Fund, are required to organize under the laws of
a state and to create and be bound by organizational documents outlining how
they will operate. In the case of the Fund, these organizational documents are
the Articles of Incorporation and the By-Laws. Since the adoption of the
Articles of Restatement to the Fund's Articles of Incorporation in 1993, the
market for mutual funds has evolved, requiring mutual funds to be more flexible
in their operation so that they may respond quickly to changes in the market.
Several items in the Fund's current Articles of Restatement prohibit the Fund
from responding quickly and favorably to changing markets without going to the
expense and delay of holding a shareholder meeting. Accordingly, the Directors
have approved, and have authorized the submission to the Fund's shareholders for
their approval, of certain amendments to the Fund's Articles of Incorporation.
If these amendments are approved by shareholders, and in light of other
amendments that have been adopted to the Articles of Incorporation that do not
require shareholder approval, it is contemplated that the Amended and Restated
Articles of Incorporation will, following Board approval, be filed in Maryland
following the Annual Meeting. The approval of each proposed amendment will
require the affirmative vote of 75% of the shares entitled to be voted on the
respective amendment.
PROPOSAL #6(A): TO AMEND THE FUND'S ARTICLES OF INCORPORATION TO REQUIRE
THE APPROVAL OF A "1940 ACT" MAJORITY OF SHAREHOLDERS IN THE EVENT OF THE SALE
AND [OR] CONVEYANCE OF THE ASSETS OF THE FUND TO ANOTHER FUND OR CORPORATION
The Articles of Restatement currently require the favorable vote of the
holders of at least 75% of the outstanding shares of the Fund to approve, adopt
or authorize: (i) a merger or consolidation of the Fund with any other
corporation, or (ii) a sale of all or substantially all of the assets of the
Fund (other than in the regular course of its investment activities), unless
such action has previously been approved, adopted or authorized by the
affirmative vote of at least 75% of the total number of Directors fixed in
accordance with the By-Laws, in which case a favorable vote of the holders of a
majority of the shares of the Fund shall be sufficient. To reduce the likelihood
of greater expenses in a proposed solicitation for the approval of such a sale
and conveyance, the Directors have adopted an amendment that would permit a
"1940 Act" majority vote to approve these types of transactions. A "1940 Act"
majority vote means the affirmative vote of: (a) 67% or more of the voting
securities present at the meeting if the holders of more than 50% of the
outstanding voting securities are present or represented by proxy; or (b) more
than 50% of the outstanding voting securities, whichever is less.
There is currently no plan to sell and convey shares of the Fund to any
other open-end management investment company. To provide the Fund with maximum
[GREATER] flexibility, and in the event circumstances would change, and the
Directors would determine that a sale and conveyance of assets would be in the
best interest of the Fund, the Directors are recommending that shareholders
approve the adoption of this proposed amendment to the Amended and Restated
Articles of Incorporation.
If approved by shareholders, the Amended and Restated Articles of
Incorporation would provide substantially to the effect that:
"The Directors, with the approval of a vote of the holders of a majority of
the shares of the Fund may by unanimous action sell and convey the assets of the
Fund to another trust or corporation organized under the laws of any state of
the United States, which is a diversified open-end management investment company
as defined in the 1940 Act, for an adequate consideration which may include the
assumption of all outstanding obligations, taxes and other liabilities, accrued
or contingent, of the Fund and which may include shares of beneficial interest
or stock of such trust or corporation. Upon making provision for the payment of
all such liabilities, by such assumption or otherwise, the Directors shall
distribute the remaining proceeds ratably among the holders of the shares of the
Fund then outstanding."
In the event that the amendment to the Amended and Restated Articles of
Incorporation is not approved by shareholders, the provisions of the Amended and
Restated Articles of Incorporation shall remain as they are presently in the
Articles of Restatement, and the Board of Directors will consider what action,
if any, should be taken.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #6(B): TO AMEND THE FUND'S ARTICLES OF INCORPORATION TO PERMIT THE
BOARD OF DIRECTORS TO LIQUIDATE ASSETS OF A SERIES OR CLASS WITHOUT [SEEKING]
SHAREHOLDER APPROVAL [TO THE EXTENT PERMITTED UNDER MARYLAND LAW]
Shareholders are being asked to approve an amendment to the Fund's Amended
and Restated Articles of Incorporation to permit the Directors, to the extent
permissible under Maryland law from time to time, to sell and convert into money
(i.e., liquidate) all of the assets of the Fund, or a class or series of the
Fund, and then redeem all outstanding shares of any portfolio or class of the
Fund. Currently, a vote of shareholders is required to liquidate the Fund. The
Directors have determined that the current restriction presents a cumbersome
structure under which the best interest of all of the Fund's shareholders may
not be served. By requiring the Directors to solicit a shareholder vote, by
means of a proxy solicitation for a meeting of shareholders, the Articles of
Restatement as currently in effect greatly hinder the Directors' ability to
effectively act on decisions about the continued viability of the Fund. If it is
determined that it is no longer advisable to continue the Fund, it may not be in
the best interest of shareholders to incur the substantial additional expense of
a shareholder meeting when it is more important to preserve for shareholders
those assets that remain.
If approved by shareholders, the Amended and Restated Articles of
Incorporation would provide substantially to the effect that:
"To the extent permitted under Maryland law, without the vote of the shares
of any class of stock of the Fund then outstanding, the Fund may, upon approval
of a majority of the Board of Directors, sell and convert into money all the
assets of any class or series of the Fund. Upon making provision for the payment
of all outstanding obligations, taxes and other liabilities, accrued or
contingent, belonging to the Fund, or any class or series thereof, the Directors
shall distribute the remaining assets of the Fund ratably among the holders of
the outstanding shares of the Fund, or any affected class or series thereof."
In the event that the amendment to the Amended and Restated Articles of
Incorporation to allow the Directors to liquidate the Fund as set forth above is
not approved by the shareholders, the provisions of the Amended and Restated
Articles of Incorporation shall remain as they are presently in the Articles of
Restatement, and the Directors will consider what action, if any, should be
taken.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
INFORMATION ABOUT THE FUND
PROXIES, QUORUM AND VOTING AT THE ANNUAL MEETING
The favorable vote of: (a) the holders of 67% or more of the outstanding
voting securities present at the Annual Meeting, if the holders of 50% or more
of the outstanding voting securities of the Fund are present or represented by
proxy; or (b) the vote of the holders of more than 50% of the outstanding voting
securities, whichever is less, is required to approve all of the proposals,
except the election of Directors, the ratification of the selection of the
Auditors, and the amendments of the charter.
Only shareholders of record on the Record Date will be entitled to vote at
the Annual Meeting. Each share of the Fund is entitled to one vote. Fractional
shares are entitled to proportionate shares of one vote.
Any person giving a proxy has the power to revoke it any time prior to its
exercise by executing a superseding proxy or by submitting a written notice of
revocation to the Secretary of the Fund. In addition, although mere attendance
at the Annual Meeting will not revoke a proxy, a shareholder present at the
Annual Meeting may withdraw his or her proxy and vote in person. All properly
executed and unrevoked proxies received in time for the Annual Meeting will be
voted in accordance with the instructions contained in the proxies. IF NO
INSTRUCTION IS GIVEN ON THE PROXY, THE PERSONS NAMED AS PROXIES WILL VOTE THE
SHARES REPRESENTED THEREBY IN FAVOR OF THE MATTERS SET FORTH IN THE ATTACHED
NOTICE.
In order to hold the Annual Meeting, a "quorum" of shareholders must be
present. Holders of one-third of the total number of outstanding shares of the
Fund, present in person or by proxy, shall be required to constitute a quorum
for the purpose of voting on the proposals made.
For purposes of determining a quorum for transacting business at the Annual
Meeting, abstentions and broker "non-votes" (that is, proxies from brokers or
nominees indicating that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares on a particular matter
with respect to which the brokers or nominees do not have discretionary power)
will be treated as shares that are PRESENT but which have not been VOTED. For
this reason, abstentions and broker non-votes will have the effect of a "no"
vote for purposes of obtaining the requisite approval of some of the proposals.
If a quorum is not present, the persons named as proxies may vote those
proxies that have been received to adjourn the Annual 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 Annual Meeting to permit further
solicitations of proxies with respect to such proposal(s). All such adjournments
will require the affirmative vote of a majority of the shares present in person
or by proxy at the session of the Annual Meeting to be adjourned. The persons
named as proxies will vote AGAINST an adjournment those proxies that they are
required to vote against the proposal, and will vote in FAVOR of such an
adjournment all other proxies that they are authorized to vote. A shareholder
vote may be taken on the proposals in this proxy statement prior to any such
adjournment if sufficient votes have been received for approval.
About the Election of Directors
* 4 moved from here; text not shown
* 5 moved from here; text not shown
Directors Standing for Election
Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Director
Chairman of the Board, Childrens Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Director, Member of
Executive
Committee, University of Pittsburgh; Director or Trustee of theFunds.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Director
* 6 moved from here; text not shown
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Director
Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation;
Director or Trustee of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Director
President, Law Professor, Duquesne University; Consulting Partner, Mollica
& Murray; Director or Trustee of theFunds. Nominees Not Presently Serving as
Directors Nicholas P. Constantakis 175 Woodshire Drive
Pittsburgh, PA
Birthdate: September 3, 1998
Formerly, Partner, Andersen Worldwide SC; Director or Trustee of the Funds.
John F. Cunningham
353 El Brillo Way
Palm Beach, FL
Birthdate: March 5, 1943
Chairman, President and Chief Executive Officer, Cunningham & Co., Inc.
(consulting organization to high technology and computer companies in the
financial community); Director, EMC Corporation. J. Christopher Donahue
Federated Investors Tower Pittsburgh, PA Birthdate: April 11, 1949 Executive
Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global Research Corp.; President, Passport Research, Ltd.;
Trustee, Federated Shareholder Services Company and Federated Shareholder
Services; Director, Federated Services Company; President or Executive Vice
President of the Funds; Director or Trustee of some of the Funds. Mr.Donahue is
the son of John F. Donahue, Chairman and Director of the Fund.
Charles F. Mansfield, Jr.
54 Pine Street
Garden City, NY
Birthdate: April 10, 1945
Management consultant.
John S. Walsh
2007 Sherwood Drive
Valparaiso, IN
Birthdate: November 28, 1957
President, Heat Wagon, Inc., Manufacturers Products, Inc. ("MPI") and the
Portable Heater Parts division of MPI (engineering, manufacturing and
distribution of portable, temporary heating equipment) (1996-present); Director,
Walsh & Kelly, Inc., asphalt road construction business; formerly, Vice
President, Walsh & Kelly, Inc. (1984-1996).
Previously Elected Directors
John F. Donahue#*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Director
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director or Trustee of the Funds. Mr. Donahue is the
father of J.Christopher Donahue, Executive Vice President of the Fund and
Nominee for Director. William J. Copeland One PNC Plaza - 23rd Floor Pittsburgh,
PA Birthdate: July 4, 1918 Director Director and Member of the Executive
Committee, Michael Baker, Inc.; formerly, Vice Chairman and Director, PNC Bank,
N.A., and PNC Bank Corp.; Director, Ryan Homes, Inc.; Director or Trustee of the
Funds. James E. Dowd 571 Hayward Mill Road Concord, MA Birthdate: May 18, 1922
Director Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds. Lawrence D. Ellis, M.D.* 3471 Fifth Avenue, Suite 1111
Pittsburgh, PA Birthdate: October 11, 1932 Director Professor of Medicine,
University of Pittsburgh; Medical Director, University of Pittsburgh Medical
CenterDowntown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian and
Montefiore Hospitals; Director or Trustee of the Funds. Edward L. Flaherty, Jr.#
Miller, Ament, Henny & Kochuba 205 Ross Street Pittsburgh, PA Birthdate: June
18, 1924 Director Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director,
EatN Park Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds. Wesley W. Posvar 1202 Cathedral of
Learning University of Pittsburgh Pittsburgh, PA
Birthdate: September 14, 1925
Director
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board and Czech Management Center, Prague; Director or Trustee of the Funds.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Director
Public Relations/Marketing/Conference Planning; Director or Trustee of the
Funds.
* This Director is deemed to be an "interested person" as defined in the 1940
Act.
# Member of the Executive Committee. The Executive Committee of the Board of
Directors handles the responsibilities of the Board between meetings of the
Board.
As referred to above, [AS REFERRED TO IN THIS PROXY STATEMENT, THE
"FEDERATED FUND COMPLEX,"] "The Funds" or "Funds" include the following
investment companies: Automated Government Money Trust; Cash Trust Series II;
Cash Trust Series, Inc.; CCB Funds; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Core
Trust; Federated Equity Funds; Federated Equity Income Fund, Inc.; Federated
Fund for U.S. Government Securities, Inc.; Federated GNMA Trust; Federated
Government Income Securities, Inc.; Federated Government Trust; Federated High
Income Bond Fund, Inc.; Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Insurance Series; Federated Master Trust; Federated Municipal
Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated
Municipal Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock and Bond Fund, Inc.; Federated Stock Trust;
Federated Tax-Free Trust; Federated Total Return Series, Inc.; Federated U.S.
Government Bond Fund; Federated U.S. Government Securities Fund: 1-3 Years;
Federated U.S. Government Securities Fund: 2-5 Years; Federated U.S. Government
Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; Fixed Income
Securities, Inc.; Intermediate Municipal Trust; International Series, Inc.;
Investment Series Funds, Inc.; Liberty Term Trust, Inc. - 1999; Liberty U.S.
Government Money Market Trust; Liquid Cash Trust; Managed Series Trust; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market
Obligations Trust II; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Regions Funds; RIGGS Funds; Tax-Free Instruments Trust; The
Planters Funds; Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; WesMark Funds; WCT
Funds; World Investment Series, Inc.; Blanchard Funds; Blanchard Precious Metals
Fund, Inc.; High Yield Cash Trust; Investment Series Trust; Targeted Duration
Trust; The Virtus Funds; and Trust for Financial Institutions.
SHARE OWNERSHIP OF THE FUND [DIRECTORS]
Officers and Directors of the Fund own less than 1% of the Fund's
outstanding shares.
At the close of business on the Record Date, the following persons owned,
to the knowledge of management, more than 5% of the outstanding shares of the
Fund: [INSERT 5% HOLDERS] [MERRILL LYNCH PIERCE FENNER & SMITH, JACKSONVILLE FL,
ACTING IN VARIOUS CAPACITIES ON BEHALF OF ITS CUSTOMERS, OWNED APPROXIMATELY
1,034,741.9870 CLASS B SHARES (9.26%); 1,352,846.3450 CLASS C SHARES (29.17%);
AND 10,123,064.1650 CLASS F SHARES (22.19%).]
DIRECTOR COMPENSATION
AGGREGATE
<TABLE>
<CAPTION>
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
FUND FUND*[FUND1]# FROM FUND COMPLEX+
<S> <C> <C>
John F. Donahue[*@] $0 $-0- for the Fund and
====
Chairman and Director 56 other investment companies in the Fund Complex
Thomas G. Bigley $2,141.95 $_______[$113,860.22] for the Fund and
=============
Director 56 other investment companies in the Fund Complex
John T. Conroy, Jr. $2,356.48 $_______[$125,264.48] for the Fund and
=============
Director 56 other investment companies in the Fund Complex
William J. Copeland $2,356.48 $_______[$125,264.48] for the Fund and
=============
Director 56 other investment companies in the Fund Complex
James E. Dowd $2,356.48 $_______[$125,264.48] for the Fund and
=============
Director 56 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D.[*] $2,141.95 $_______[$113,860.22] for the Fund and
Director 56 other investment companies in the Fund Complex
Edward L. Flaherty, Jr.[@] $2,356.48 $_______[$125,264.48] for the Fund and
Director 56 other investment companies in the Fund Complex
Peter E. Madden $2,141.95 $_______[$113,860.22] for the Fund and
=============
Director 56 other investment companies in the Fund Complex
John E. Murray, Jr. $2,141.95 $_______[$113,860.22] for the Fund and
=============
Director 56 other investment companies in the Fund Complex
Wesley W. Posvar $2,141.95 $_______[$113,860.22] for the Fund and
=============
Director 56 other investment companies in the Fund Complex
Marjorie P. Smuts $2,141.95 $_______[$113,860.22] for the Fund and
=============
Director 56 other investment companies in the Fund Complex
</TABLE>
*[1] Information is furnished for the fiscal year ended February 28, 1998.
# The aggregate compensation is provided for the Fund which is comprised of
one portfolio.
+ The[+ THE] information is provided for the last calendar year.
[* THIS DIRECTOR IS DEEMED TO BE AN "INTERESTED PERSON" AS DEFINED IN THE
1940 ACT.
@ MEMBER OF THE EXECUTIVE COMMITTEE.]
During the fiscal year ended February 28, 1998, there were four meetings of
the Board of Directors. The interested Directors, other than Dr. Ellis, do not
receive fees from the Fund. Dr. Ellis is an interested person by reason of the
employment of his son-in-law by Federated Securities Corp. All Directors were
reimbursed for expenses for attendance at Board of Directors meetings.
[THE EXECUTIVE COMMITTEE OF THE BOARD OF DIRECTORS HANDLES THE
RESPONSIBILITIES OF THE BOARD BETWEEN MEETINGS OF THE BOARD.] Other than its
Executive Committee, the Fund has one Board committee, the Audit Committee.
Generally, the function of the Audit Committee is to assist the Board of
Directors in fulfilling its duties relating to the Fund's accounting and
financial reporting practices and to serve as a direct line of communication
between the Board of Directors and the independent auditors. The specific
functions of the Audit Committee include recommending the engagement or
retention of the independent auditors, reviewing with the independent auditors
the plan and the results of the auditing engagement, approving professional
services provided by the independent auditors prior to the performance of such
services, considering the range of audit and non-audit fees, reviewing the
independence of the independent auditors, reviewing the scope and results of the
Fund's procedures for internal auditing, and reviewing the Fund's system of
internal accounting controls.
Messrs. Flaherty, Conroy, Copeland, and Dowd serve on the Audit Committee.
These Directors are not interested Directors of the Fund. During the fiscal year
ended February 28, 1998, there were four meetings of the Audit Committee. All of
the members of the Audit Committee were present for each meeting. Each member of
the Audit Committee receives an annual fee of $100 plus $25 for attendance at
each meeting and is reimbursed for expenses of attendance.
OFFICERS OF THE FUND
The executive officers of the Fund are elected annually by the Board of
Directors. Each officer holds the office until qualification of his successor.
The names and birthdates of the executive officers of the Fund and their
principal occupations during the last five years are as follows:
John F. Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Director
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director or Trustee of the Funds. Mr. Donahue is the
father of J.Christopher [J. CHRISTOPHER] Donahue, Executive Vice President of
the Fund and [A] Nominee for Director.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee [OR EXECUTIVE VICE PRESIDENT OF THE FEDERATED FUND
COMPLEX; DIRECTOR OR TRUSTEE OF SOME OF THE FUNDS IN THE FEDERATED FUND COMPLEX;
PRESIDENT AND DIRECTOR], Federated Investors, [INC.; PRESIDENT AND TRUSTEE,]
Federated Advisers, Federated Management, and Federated Research; President and
Director, Federated Research Corp. and Federated Global Research Corp.;
President, Passport Research, Ltd.; Trustee, Federated Shareholder Services
Company and Federated Shareholder Services; Director, Federated Services
Company; President or Executive Vice President of the Funds; Director or Trustee
of some of the Funds. Mr. Donahue is the son of John F.
Donahue, Chairman and Director of the Fund.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
[PRESIDENT OR VICE PRESIDENT OF SOME OF THE FUNDS IN THE FEDERATED FUND
COMPLEX; DIRECTOR OR TRUSTEE OF SOME OF THE FUNDS IN THE FEDERATED FUND
COMPLEX;] Executive Vice President and Trustee, Federated Investors[, INC.];
Chairman and Director, Federated Securities Corp.; President or Vice President
of some of the Funds; Director or Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors [TRUSTEE OR
DIRECTOR OF SOME OF THE FUNDS IN THE FEDERATED FUND COMPLEX; PRESIDENT,
EXECUTIVE VICE PRESIDENT AND TREASURER OF SOME OF THE FUNDS IN THE FEDERATED
FUND COMPLEX; VICE CHAIRMAN, FEDERATED INVESTORS, INC.]; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company; Trustee or Director of some of the Funds;
President, Executive Vice President and Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President, Secretary and Treasurer
[, AND TREASURER
EXECUTIVE VICE PRESIDENT AND SECRETARY OF THE FEDERATED FUND COMPLEX;]
Executive Vice President, Secretary, and Trustee, [DIRECTOR,] Federated
Investors[, INC.]; Trustee, Federated Advisers, Federated Management, and
Federated Research; Director, Federated Research Corp. and Federated Global
Research Corp.; Trustee, Federated Shareholder Services Company; Director,
Federated Services Company; President and Trustee, Federated Shareholder
Services; Director, Federated Securities Corp.; Executive Vice President and
Secretary of the Funds; Treasurer of some of the Funds.
None of the Officers of the Fund received salaries from the Fund during the
fiscal year ended February 28, 1998.
FEDERATED SERVICES COMPANY, A SUBSIDIARY OF FEDERATED INVESTORS, IS THE
FUNDS ADMINISTRATOR AND PROVIDES ADMINISTRATIVE PERSONNEL AND SERVICES TO THE
FUND FOR A FEE AS DESCRIBED IN THE PROSPECTUS. FOR THE FISCAL YEAR ENDED
FEBRUARY 28, 1998, FEDERATED SERVICES COMPANY EARNED $1,145,447.
FEDERATED SECURITIES CORP., A SUBSIDIARY OF FEDERATED INVESTORS, INC., IS
THE PRINCIPAL DISTRIBUTOR OF THE FUNDS SHARES. FEDERATED SECURITIES CORP.
RECEIVES NO COMPENSATION FROM THE FUND FOR ITS SERVICES.
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY
The Fund is not required, and does not intend, to hold regular annual
meetings of shareholders. Shareholders wishing to submit proposals for
consideration for inclusion in a proxy statement for the next meeting of
shareholders should send their written proposals to Federated Utility Fund,
Inc., Federated Investors Funds, 5800 Corporate Drive, Pittsburgh, Pennsylvania
15237-7000, so that they are received within a reasonable time before any such
meeting.
No business other than the matters described above is expected to come
before the Annual Meeting, but should any other matter requiring a vote of
shareholders arise, including any question as to an adjournment or postponement
of the Annual Meeting, the persons named on the enclosed proxy card will vote on
such matters according to their best judgment in the interests of the Fund.
SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
CARD AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN
THE UNITED STATES.
By Order of the Board of Directors
John W. McGonigle
Secretary
January 25, 1999
<PAGE>
FEDERATED UTILITY FUND, INC.
INVESTMENT ADVISER
PASSPORT RESEARCH, LTD.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
DISTRIBUTOR
FEDERATED SECURITIES CORP.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
ADMINISTRATOR
FEDERATED SERVICES COMPANY
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Cusip
(_____/99)
<PAGE>
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned Shareholders of
Federated Utility Fund, Inc. hereby appoint Patricia F. Conner, Gail Cagney,
Susan M. Jones and Ann M. Scanlon, or any one of them, true and lawful
attorneys, with the power of substitution of each, to vote all shares of
Federated Utility Fund, Inc. which the undersigned is entitled to vote at the
Annual Meeting of Shareholders to be held on March 26, 1999, at 5800 Corporate
Drive, Pittsburgh, Pennsylvania, at 2:00 p.m., and at any adjournment thereof.
The attorneys named will vote the shares represented by this proxy in
accordance with the choices made on this ballot. If no choice is indicated as to
the item, this proxy will be voted affirmatively on the matters. Discretionary
authority is hereby conferred as to all other matters as may properly come
before the Annual Meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FEDERATED
UTILITY FUND, INC. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" THE PROPOSALS.
BY CHECKING THE BOX "FOR" BELOW, YOU WILL VOTE TO APPROVE EACH OF THE
PROPOSED ITEMS IN THIS PROXY, AND TO ELECT EACH OF THE NOMINEES AS DIRECTORS OF
THE FUND
FOR [ ]
PROPOSAL 1 TO ELECT THOMAS G. BIGLEY, JOHN T. CONROY, JR., NICHOLAS P.
CONSTANTAKIS, JOHN F. CUNNINGHAM, J. CHRISTOPHER DONAHUE,
PETER E. MADDEN, CHARLES F. MANSFIELD, JR.,
JOHN E. MURRAY, JR. AND JOHN S. WALSH AS DIRECTORS OF
THE FUND
FOR [ ]
AGAINST [ ]
WITHHOLD AUTHORITY
TO VOTE [ ]
FOR ALL EXCEPT [ ]
If you do not wish your shares to be voted "FOR" a particular nominee, mark
the "For All Except" box and strike a line through the name of each nominee for
whom you are NOT voting. Your shares will be voted for the remaining nominees.
PROPOSAL 2 TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS THE FUND'S
INDEPENDENT AUDITORS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
PROPOSAL 3 TO MAKE CHANGES TO THE FUND'S FUNDAMENTAL INVESTMENT POLICIES:
3(A) TO APPROVE A REVISION IN THE FUND'S FUNDAMENTAL INVESTMENT
POLICY WITH REGARD TO DIVERSIFICATION OF ITS INVESTMENTS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(B) TO APPROVE MAKING NON-FUNDAMENTAL, AND AMENDING, THE FUND'S
FUNDAMENTAL INVESTMENT POLICY REGARDING INVESTING IN RESTRICTED
SECURITIES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(C) TO APPROVE MAKING NON-FUNDAMENTAL THE FUND'S FUNDAMENTAL
INVESTMENT POLICY PROHIBITING INVESTMENT IN SECURITIES TO
EXERCISE CONTROL OF AN ISSUER
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(D) TO APPROVE MAKING NON-FUNDAMENTAL, AND AMENDING, THE FUND'S
FUNDAMENTAL INVESTMENT POLICY TO PERMIT THE FUND TO INVEST IN
THE SECURITIES OF OTHER INVESTMENT COMPANIES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(E) TO APPROVE A REVISION IN THE FUND'S FUNDAMENTAL INVESTMENT
POLICY REGARDING BORROWING TO PERMIT THE PURCHASE OF SECURITIES
WHILE BORROWINGS ARE OUTSTANDING
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(F) TO APPROVE CHANGING FROM FUNDAMENTAL TO A NON-FUNDAMENTAL
OPERATING POLICY, AND AMENDING, THE FUND'S FUNDAMENTAL
INVESTMENT POLICY ON INVESTING IN SECURITIES OF FOREIGN ISSUERS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
PROPOSAL 4: TO ELIMINATE CERTAIN OF THE FUND'S FUNDAMENTAL INVESTMENT
POLICIES:
4(A) TO APPROVE REMOVING THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON
INVESTING IN NEW ISSUERS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
4(B) TO APPROVE REMOVING THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON
INVESTING IN OIL, GAS, AND MINERALS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
4(C) TO APPROVE REMOVING THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND
DIRECTORS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
4(D) TO APPROVE REMOVING THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON
INVESTING IN WARRANTS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
PROPOSAL 5 TO APPROVE THE ADDITION OF [REMOVAL OF THE 5% LIMITATION ON
WRITING CALL OPTIONS AND TO APPROVE] THE AUTHORITY TO
PURCHASE OPTIONS AND TO REMOVE THE 5% LIMITATION ON INVESTING
IN OPTIONS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
PROPOSAL 6 TO APPROVE AMENDMENTS TO THE FUND'S AMENDED AND RESTATED
ARTICLES OF INCORPORATION:
6(A) TO APPROVE AN AMENDMENT TO THE FUND'S AMENDED AND RESTATED
ARTICLES OF INCORPORATION REQUIRING THE APPROVAL BY A "1940
ACT" MAJORITY OF SHAREHOLDERS IN THE EVENT OF THE SALE OR
CONVEYANCE OF THE ASSETS OF THE FUND TO ANOTHER FUND OR
CORPORATION
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
6(B) TO APPROVE AN AMENDMENT TO THE FUND'S AMENDED AND RESTATED
ARTICLES OF INCORPORATION TO PERMIT THE BOARD OF DIRECTORS TO
LIQUIDATE ASSETS OF A SERIES OR CLASS WITHOUT [SEEKING]
SHAREHOLDER APPROVAL TO THE EXTENT PERMITTED UNDER MARYLAND LAW
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
YOUR VOTE IS IMPORTANT
Please complete, sign and return
this card as soon as possible[.
DATED] mark with an X in the box.
Signature
Signature (Joint Owners)
Please sign this proxy exactly as your name appears on the books of the
Fund. Joint owners should each sign personally. Directors and other fiduciaries
should indicate the capacity in which they sign, and where more than one name
appears, a majority must sign. If a corporation, this signature should be that
of an authorized officer who should state his or her title.
YOU MAY ALSO VOTE YOUR PROXY BY TELEPHONE [SHARES BY TOUCHTONE PHONE]
BY CALLING 1-800-________[890-8903], OR THROUGH THE
INTERNET AT PROXYVOTE.COM [WWW.PROXYVOTE.COM].
------------------ COMPARISON OF FOOTERS ------------------
