FEDERATED INVESTORS LEHMAN BROTHERS
Federated Investors Tower Three World Financial Center
Pittsburgh, PA 15222-3779 New York, NY 10285
October 18, 1996
Dear Shareholder,
Enclosed please find proxy materials relating to the proposed asset
management alliance between Federated Investors and Lehman Brothers Global
Asset Management. As announced in a press release dated September 6, 1996,
Federated Investors and Lehman Brothers have reached a definitive
agreement enabling Federated to assume the investment management
responsibilities for the six institutional money market funds of Lehman
Brothers Institutional Funds Group Trust. The funds encompassed within
this agreement are as follows:
Prime Value Money Market Fund
Prime Money Market Fund
Municipal Money Market Fund
Tax-Free Money Market Fund
Government Obligations Money Market Fund
Treasury Instruments Money Market Fund II
The management teams at both Federated Investors and Lehman Brothers
believe that
an affirmative reply will best serve the interests of the shareholders of
Lehman Brothers Institutional Funds Group Trust. The shareholder benefits
which may be realized as a
result of the proposed alliance are many and include: increased economies
of scale, an extended array of available investment products and the
expanded services of a company whose core capabilities lie in managing
money market funds.
MATERIALS CONTAINED WITHIN THE ENCLOSED ENVELOPE(S) DESCRIBE THE PROPOSED
TRANSACTION IN DETAIL AND ASK YOU TO VOTE IN TIME FOR A SHAREHOLDER MEETING
ON NOVEMBER 13, 1996. PLEASE BE SURE TO RESPOND AT YOUR EARLIEST
CONVENIENCE IN ORDER TO ENSURE THAT YOUR VOTE IS REGISTERED AT THE
SHAREHOLDER MEETING. PROXY CARDS MAY BE RETURNED VIA FAX AT (617)573-1985
OR IN THE ENCLOSED POSTAGE PAID ENVELOPE.
Again, we encourage you to vote as soon as possible. Please do not
hesitate to call us
directly at 1(800)245-5000 for Federated or (212)526-7496 for Lehman
Brothers with
any questions or comments.
Sincerely,
/s/ John B. Fisher /s/ Andrew D. Gordon
John B. Fisher Andrew D. Gordon
President, Institutional Sales Managing Director
Federated Investors Lehman Brothers
/s/ Mark Gensheimer
Mark Gensheimer
Executive Vice President, Bank Marketing
Federated Investors
LEHMAN BROTHERS INSTITUTIONAL FUNDS GROUP TRUST{PRIVATE }
TAX-FREE MONEY MARKET FUND
ONE EXCHANGE PLACE
53 STATE STREET
BOSTON, MASSACHUSETTS 02109-2873
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO SHAREHOLDERS OF TAX-FREE MONEY MARKET FUND, A PORTFOLIO OF
LEHMAN BROTHERS INSTITUTIONAL FUNDS GROUP TRUST: A Special Meeting of
Shareholders of Tax-Free Money Market Fund (the "Fund") will be held at
11:20 a.m. on November 13, 1996, at the offices of Lehman Brothers Inc., 3
World Financial Center-26th Floor, New York, New York 10285, for the
following purposes:
To approve a proposed Agreement and Plan of Reorganization between Lehman
Brothers Institutional Funds Group Trust, on behalf of the Fund, and Money
Market Obligations Trust (the "Trust"), on behalf of its portfolio, Tax-
Free Obligations Fund (the "Portfolio"), whereby the Trust would acquire
all of the assets and known liabilities of the Fund in exchange for
Institutional Shares and Institutional Service Shares of the Portfolio to
be distributed pro rata by the Fund to holders of Class A Shares and Class
B Shares, respectively, in complete liquidation of the Fund;
2. Election of thirteen Trustees to serve until the next Annual
Meeting of Shareholders and until their successors have been elected and
qualified; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
By Order of the Board of Trustees
Patricia L. Bickimer
Secretary
Dated: October 15, 1996
SHAREHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON OCTOBER 11,
1996 ARE ENTITLED TO VOTE AT THE MEETING. WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD. YOUR
VOTE IS IMPORTANT.
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AND TO SAVE THE
EXPENSE OF FURTHER MAILINGS, PLEASE MARK YOUR PROXY CARD, SIGN IT, AND
RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES. YOU MAY REVOKE YOUR PROXY AT ANY TIME AT OR BEFORE THE
MEETING OR VOTE IN PERSON IF YOU ATTEND THE MEETING.
1
PROSPECTUS/PROXY STATEMENT
OCTOBER 15, 1996
ACQUISITION OF THE ASSETS OF
TAX-FREE MONEY MARKET FUND,
A PORTFOLIO OF LEHMAN BROTHERS INSTITUTIONAL FUNDS GROUP TRUST
One Exchange Place
53 State Street
Boston, Massachusetts 02109-2873
Telephone Number: 1-800-851-3134
BY AND IN EXCHANGE FOR SHARES OF
TAX-FREE OBLIGATIONS FUND,
A PORTFOLIO OF MONEY MARKET OBLIGATIONS TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
This Prospectus/Proxy Statement describes the proposed Agreement and
Plan of Reorganization (the "Plan") whereby Money Market Obligations Trust,
a Massachusetts business trust (the "Trust"), on behalf of its portfolio,
Tax-Free Obligations Fund (the "Portfolio"), would acquire all of the
assets and known liabilities of Tax-Free Money Market Fund (the "Fund"), a
portfolio of Lehman Brothers Institutional Funds Group Trust, in exchange
for Portfolio shares to be distributed pro rata by the Fund to its
shareholders in complete liquidation of the Fund. As a result of the Plan,
each shareholder of the Fund will become the owner of Portfolio shares
having a total net asset value equal to the total net asset value of his or
her holdings in the Fund. This Prospectus/Proxy Statement also describes a
proposal to elect Trustees of Lehman Brothers Institutional Funds Group
Trust, in connection with certain related transactions.
The Trust is among over 100 funds managed by subsidiaries of
Federated Investors, including 48 money market funds with assets of $43
billion. Federated Investors is one of the largest institutional service
providers in the United States. It has been providing advisory services
for over 41 years and has been managing the short-term assets of
institutional investors for over 20 years, having created one of the first
institutional money market funds in 1976.
The Trust is an open-end, diversified management investment company
which currently includes six portfolios: Automated Cash Management Trust,
Government Obligations Fund, Government Obligations Tax Managed Fund, Prime
Obligations Fund, Tax-Free Obligations Fund and Treasury Obligations Fund.
The investment objective of the Portfolio is to provide dividend income
exempt from federal regular income tax consistent with stability of
principal. The investment objective of the Fund is to provide as high a
level of current income exempt from federal taxation as is consistent with
relative stability of principal. Both the Portfolio and the Fund pursue
their investment objectives by investing at least 80% of their total assets
in obligations issued by or on behalf of states, territories, and
possessions of the United States, including the District of Columbia, and
their respective political subdivisions or financing authorities, which pay
income exempt from federal regular income tax. Both the Portfolio and the
Fund are money market mutual funds which seek to stabilize their offering
and redemption prices at $1.00 per share. There can be no assurance that
the Portfolio or the Fund will be able to do so. Shares in the Portfolio
and the Fund are not insured or guaranteed by the U.S. government or any
agency thereof. For a comparison of the investment policies of the
Portfolio and the Fund, see "Comparison of Investment Policies and Risk
Factors."
The Portfolio is offered with two classes of shares: Institutional
Shares and Institutional Service Shares. Holders of Class A Shares of the
Fund will receive Institutional Shares of the Portfolio and holders of
Class B Shares of the Fund will receive Institutional Service Shares of the
Portfolio if the Reorganization is approved by shareholders. Information
concerning Institutional Shares and Institutional Service Shares of the
Portfolio, as compared to Class A Shares and Class B Shares of the Fund, is
included in this Prospectus/Proxy Statement in the sections entitled
"SUMMARY - Comparative Fee Tables" and "INFORMATION ABOUT THE
REORGANIZATION - Description of the Plan of Reorganization."
This Prospectus/Proxy Statement should be retained for future
reference. It sets forth concisely the information about the Trust and the
Portfolio that a prospective investor should know before investing. This
Prospectus/Proxy Statement is accompanied by the Prospectus of the
Portfolio dated September 30, 1996, which is incorporated herein by
reference. Statements of Additional Information for the Portfolio dated
September 30, 1996 (relating to the Portfolio's prospectus of the same
date) and October 15, 1996 (relating to this Prospectus/Proxy Statement)
containing additional information have been filed by the Trust with the
Securities and Exchange Commission and are incorporated herein by
reference. Copies of the Statements of Additional Information may be
obtained without charge by writing or by calling the Trust at the address
and telephone number shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/PROXY
STATEMENT AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR THE PORTFOLIO.
SHARES OF THE PORTFOLIO ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK. SHARES OF THE PORTFOLIO ARE NOT
FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED
BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN
THE PORTFOLIO INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL AMOUNT INVESTED. THERE IS NO ASSURANCE THAT THE PORTFOLIO WILL
BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
TABLE OF CONTENTS
PAGE
PROPOSAL 1. REORGANIZATION 1
SUMMARY 1
COMPARISON OF INVESTMENT POLICIES AND RISK FACTORS 6
INFORMATION ABOUT THE REORGANIZATION 7
INFORMATION ABOUT THE PORTFOLIO AND THE FUND 11
PROPOSAL 2. ELECTION OF TRUSTEES 12
VOTING INFORMATION 19
AGREEMENT AND PLAN OF REORGANIZATION Exhibit A
PROPOSAL 1. REORGANIZATION
SUMMARY
ABOUT THE PROPOSED REORGANIZATION
The Board of Trustees of Lehman Brothers Institutional Funds Group
Trust, including its members who are not "interested persons" within the
meaning of the Investment Company Act of 1940, as amended (the "1940 Act"),
on behalf of one of its portfolios, Tax-Free Money Market Fund (the
"Fund"), has voted to recommend to shareholders of the Fund the approval of
an Agreement and Plan of Reorganization (the "Plan"), whereby Money Market
Obligations Trust, a Massachusetts business trust (the "Trust"), on behalf
of its portfolio, Tax-Free Obligations Fund (the "Portfolio"), would
acquire all of the assets and known liabilities of the Fund in exchange for
Portfolio shares to be distributed pro rata by the Fund to its shareholders
in complete liquidation and dissolution of the Fund (the "Reorganization").
As a result of the Reorganization, each shareholder of Class A Shares or
Class B Shares of the Fund will become the owner of Institutional Shares or
Institutional Service Shares, respectively, of the Portfolio having a total
net asset value equal to the total net asset value of his or her holdings
in the Fund on the date of the Reorganization (the "Closing Date").
As a condition to the Reorganization transactions, the Trust and the
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 of 1986, as amended, so that no gain or loss will be
recognized by either the Trust or the Fund or their respective
shareholders. The tax cost basis of the Portfolio shares received by Fund
shareholders will be the same as the tax cost-basis of their shares in the
Fund.
After the acquisition is completed, the Fund will no longer be
available as an investment portfolio of Lehman Brothers Institutional Funds
Group Trust.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Portfolio is to provide dividend
income exempt from federal regular income tax consistent with stability of
principal, while the Fund's investment objective is to provide as high a
level of current income exempt from federal taxation as is consistent with
relative stability of principal. Both the Portfolio and the Fund pursue
their respective investment objectives by investing in a portfolio
consisting primarily of obligations issued by or on behalf of states,
territories, and possessions of the United States, including the District
of Columbia, and their respective political subdivisions or financing
authorities, which pay income exempt from federal regular income tax.
Since the Portfolio and the Fund invest in similar securities, an
investment in the Portfolio presents similar investment risks as investing
in the Fund.
ADVISORY FEES AND EXPENSE RATIOS
The maximum annual investment advisory fee for the Portfolio is 0.20%
of average daily net assets. The maximum annual investment advisory fee
for the Fund is also 0.20% of average daily net assets.
For its fiscal year ended July 31, 1996, the Portfolio's ratio of
expenses to average daily net assets was 0.20% for Institutional Shares and
0.45% for Institutional Service Shares. During this period the Portfolio's
investment adviser, Federated Management ("Federated"), voluntarily waived
a portion of its management fees and reimbursed the Portfolio for certain
operating expenses. Absent such waiver and reimbursement, the ratio of
expenses to average daily net assets would have been 0.31% for
Institutional Shares of the Portfolio and 0.56% for Institutional Service
Shares of the Portfolio. This undertaking to waive management fees and/or
reimburse operating expenses may be terminated by Federated at any time in
its discretion. If the proposals described in this Prospectus/Proxy
Statement are approved by shareholders of the Fund, Federated has
undertaken to waive its fee and/or reimburse the Portfolio's total
operating expenses in excess of .35% and .60% of average daily net assets
of Institutional Shares and Institutional Service Shares, respectively, for
a period of two years following completion of the Reorganization, which is
equal to the current contractual caps on total Fund operating expenses of
Class A Shares and Class B Shares of the Fund.
For its fiscal year ended January 31, 1996, the Fund's ratio of
expenses to average daily net assets was 0.18% for Class A Shares and 0.43%
for Class B Shares. During this period the Fund's investment adviser,
Lehman Brothers Global Asset Management Inc. (`Lehman''), voluntarily
waived a portion of its management fees and reimbursed the Fund for certain
operating expenses. Absent such waiver and reimbursement, the ratio of
expenses to average daily net assets would have been 0.35% for Class A
Shares of the Fund and 0.60% for Class B Shares of the Fund. This
undertaking to waive management fees and/or reimburse operating expenses
may be terminated by Lehman at any time in its discretion. If the proposals
described in the Prospectus/Proxy Statement are approved by shareholders of
the Fund, Federated has undertaken to waive its fee and/or reimburse the
Portfolio's total operating expenses in excess of .35% and .60% of average
daily net assets of Institutional Shares and Institutional Service Shares,
respectively, for a period of two years following completion of the
Reorganization, which is equal to the current contractual caps on total
Fund operating expenses of Class A Shares and Class B Shares of the Fund.
SERVICES PROVIDERS TO THE TRUST AND PORTFOLIO
Administrative services to the Trust and Portfolio are provided by
Federated Administrative Services ("FAS"). FAS is a wholly-owned subsidiary
of Federated Services Company which, in turn, is a wholly-owned subsidiary
of Federated Investors. For its services to the Portfolio, FAS receives as
fee at an annual rate which relates to the average aggregate daily net
assets of the Portfolio, determined as follows: 0.15% on the first $250
million in assets; 0.125% of 1% on the next $250 million in assets; 0.10%
of 1% on the next $250 million in assets; and 0.075% of 1% on assets in
excess of $750 million. The minimum annual administrative fee for the
Portfolio is $125,000 plus $30,000 per each additional class of shares.
For the fiscal year ended July 31, 1996, FAS received administrative fees
at the effective rate of 0.08% of the average daily net assets of the
Portfolio.
Federated Services Company ("Federated Services") serves as the
Portfolio's transfer agent and dividend disbursing agent. Federated
Services also provides certain accounting and recordkeeping services with
respect to the portfolio investments of the Portfolio.
Federated Securities Corp. ("FSC"), a wholly-owned subsidiary of
Federated Investors, is the principal distributor of the Trust and
Portfolio. Under the distribution agreement, FSC acts as the Trust's agent
in connection with the offering of shares of the Portfolio.
RISKS
An investment in the Fund and an investment in the Portfolio present
substantially similar risks. Neither the Fund nor the Portfolio invests in
securities or participates in investment techniques that present
significant additional risk as compared to the other. Of course, shares of
neither the Fund nor the Portfolio are federally insured by, guaranteed by,
or supported by the U.S. government, the Federal Deposit Insurance
Corporation, or any other government agency. Although the Fund and the
Portfolio both attempt to maintain a stable net asset value of $1.00 per
share, there can be no assurance that either will do so.
COMPARATIVE FEE TABLES
Set forth in the tables below is information regarding the fees and
expenses paid by the separate classes of the Fund and the Portfolio as of
July 31, 1996, and pro forma information for the Portfolio assuming that
the Reorganization had taken place on July 31, 1996.
Tax-Free Tax-Free
Money Obligations Fund Pro Forma Combined
Market Fund
Fund
Class A Institutional Institutional
Shares Shares Shares
ANNUAL FUND
OPERATING
EXPENSES
(as a percentage
of average net
assets)
Management
Fees/Advisory .0 .0 .09%(1)
Fees (after fee 3%(1) 9%(1)
waivers)
12b-1 Fees None None None
Shareholder
Services Fee None .00%(2) .00%(2)
(after waiver)
Other Expenses
(after fee
waivers and/or .15% .11% .11%
expense
reimbursements)
Total Operating
Expenses (after
fee waivers .18%(3) .20%(4) .20%(4)
and/or expense
reimbursements)
(1) The management fee 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
.20%.
(2) The maximum shareholder services fee is .25%.
(3) The total operating expenses would have been .45% absent the voluntary
waiver of a portion of the management fee and the reimbursement of certain
expenses.
(4) The total operating expenses would have been .31% absent the voluntary
waiver of a portion of the management fee and the shareholder services fee.
Federated has undertaken to waive its fee and/or reimburse the Portfolio's
total operating expenses in excess of .35% of average daily net assets of
the Portfolio for a period of two years following completion of the
Reorganization, which is equal to the current contractual cap on Class A
Shares expenses of the Fund.
<TABLE>
<CAPTION>
Tax-Free Money Tax-Free
Market Fund Obligations Fund Pro
Forma
Combined
Fund
Class B Institutional Institutional
Shares Service Shares Service Shares
<S> <C> <C> <C>
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of
average net assets)
Management
Fees/Advisory Fees .03%(1) .09%(1) .09%(1)
(after fee waivers)
12b-1 Fees .25% None None
Shareholder Services
Fee (after waiver) None .25% .25%
Other Expenses
(after fee waivers
and/or expense .15% .15% .15%
Total
Expenses (after fee
waivers and/or .43%(2) .45%(3) .45%(3)
expense
reimbursements)
</TABLE>
(1) The management fee 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
.20%.
(2) The total operating expenses would have been .70% absent the voluntary
waiver of a portion of the management fee and the reimbursement of certain
expenses.
(3) The total operating expenses would have been .56% absent the voluntary
waiver of a portion of the management fee and the shareholder services fee.
Federated has undertaken to waive its fee and/or reimburse the Portfolio's
total operating expenses in excess of .60% of average daily net assets of
the Portfolio for a period of two years following completion of the
Reorganization, which is equal to the current contractual cap on Class B
Shares expenses of the Fund.
EXAMPLE: An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return, and (2) redemption at the end of
the following periods:
1 Year 3 Years 5 Years 10 Years
Treasury Instruments Money
Market Fund II
Class A Shares $2 $6 $10 $23
Class B Shares $4 $14 $24 $54
Treasury Obligations Fund
Institutional Shares $2 $6 $11 $26
Institutional Service Shares $5 $14 $25 $57
Pro Forma Combined
Institutional Shares $2 $6 $11 $26
Institutional Service Shares $5 $14 $25 $57
As a result of the Reorganization, the expense ratio of the Fund will
increase by .02%, although the contractual advisory fee of Federated
Management is the same as that of Lehman.
PURCHASE AND REDEMPTION PROCEDURES
Procedures for the purchase and redemption of Portfolio shares are
similar, but not identical, to procedures applicable to the purchase and
redemption of Fund shares. In anticipation that the Reorganization will be
consummated, shareholders of the Fund will receive information with respect
to the various services provided by the Portfolio, as well as a detailed
explanation of the options available to shareholders for effecting
purchases and redemptions of Portfolio shares. Any questions about such
procedures may be directed to, and assistance in effecting purchases or
redemptions of Portfolio shares may be obtained from Federated at 1-800-
245-5000.
Reference is made to the Prospectuses of the Portfolio dated September
30, 1996, and the Prospectuses of the Fund for a complete description of
the purchase and redemption procedures applicable to purchases and
redemptions of Portfolio and Fund shares, respectively, each of which is
incorporated herein by reference thereto. Set forth below is a brief
listing of the more significant differences between the purchase and
redemption procedures of the Portfolio as compared to the Fund.
The minimum initial investment in the Portfolio is $25,000. The
minimum initial investment by an institution in the Lehman Brothers
Institutional Funds Group Trust is $1 million, with not less than $25,000
invested in any one of its portfolios, including the Fund. The minimum
aggregate initial investment by a high net worth investor in the Lehman
Brothers Institutional Funds Group Trust is $5 million. To meet the
minimum investment requirements, purchases of shares of the Lehman Brothers
Institutional Funds Group Trust may be aggregated over a period of six
months.
The Portfolio's net asset values are calculated at 12:00 noon (Eastern
time), 3:00 p.m. (Eastern time) and 4:00 p.m. (Eastern time), on each day
on which the Portfolio computes its net asset value. The Fund's net asset
values are calculated twice each day on which it computes its net asset
value, at 12:00 noon (Eastern time) and 4:00 p.m. (Eastern time). Purchase
orders received by either the Portfolio or the Fund by wire before 3:00
p.m. (Eastern time) begin earning dividends that day. Purchase orders
received by check by either the Portfolio or the Fund begin earning
dividends the day after such check is converted into federal funds, which
ordinarily occurs one day after receipt by State Street Bank and Trust
Company, the Portfolio's custodian (in the case of the Portfolio), or by
Boston Safe Deposit and Trust Company, the Fund's custodian (in the case of
the Fund).
Shares of both the Portfolio and the Fund may be redeemed by mail or
by telephone. Shares of the Portfolio and the Fund are redeemed at the net
asset value per share next determined after receiving the redemption order.
COMPARISON OF INVESTMENT POLICIES AND RISK FACTORS
The Portfolio and the Fund have similar investment objectives. The
Portfolio seeks to provide current income consistent with stability of
principal, while the Fund seeks to provide current income with liquidity
and security of principal. Both the Portfolio and the Fund are money
market mutual funds.
Each of the Portfolio and the Fund invests at least 80% of its total
assets in obligations issued by or on behalf of states, territories and
possessions of the United States, including the District of Columbia, and
their respective political subdivision or financing authorities which pay
income that is exempt from federal regular income tax ("Municipal
Securities"). Although it has no current intention to do so, the
Portfolio, but not the Fund, may invest in securities for which the income
may be a tax preference item for federal individual or corporate
alternative minimum tax purposes, and may invest in certain taxable
obligations during temporary defensive periods.
The securities in which the Portfolio currently invests are rated in
the highest short-term rating category by one or more nationally
reorganized statistical rating organizations ("NRSRO") or are of comparable
quality to securities having such ratings. Other permissible investments
include securities which are rated MIG-2 or VMIG-2 by Moody's Investors
Service, Inc. ("Moody's"), SP-2 by Standard & Poor's Ratings Group ("S&P")
or FIN-2 by Fitch Investor's Service, Inc. ("Fitch"), tax-exempt commercial
paper rated P-2 by Moody's, A-2 by S&P or F-2 by Fitch, and unrated
securities of comparable quality. The Portfolio does not currently intend
to invest in securities that are not rated in the highest short-term rating
category by an NRSRO.
The Fund may also invest in tax-exempt commercial paper rated at least
P-2 by Moody's or A-2 by S&P. For all other securities, the Fund requires
that at least two NRSROs assign the highest rating category, unless the
security is only rated by one NRSRO or is unrated, in which case the
security is determined by the investment adviser to be of comparable
quality.
Each of the Portfolio and the Fund may invest in repurchase
agreements, provided that no more than 10% of total assets of each,
respectively, is invested in repurchase agreements whose terms exceed seven
days. For both the Portfolio and the Fund, borrowings, including reverse
repurchase agreements, must not exceed one-third of total assets and may
only be used for temporary purposes. The Portfolio and the Fund also
impose the additional restriction that no purchases of securities can be
made while outstanding borrowings exceed 5% of total assets.
Lending of portfolio securities is permitted by both the Portfolio and
the Fund, provided that they receive collateral equal to at least 100% of
the value of securities loaned. Each of the Portfolio and the Fund may
invest up to 10% of its assets in illiquid securities, including Rule 144A
securities and Section 4(2) obligations.
Both the Portfolio and the Fund may acquire securities subject to puts
and standby commitments ("demand features"). The Fund, however, restricts
any amount paid for a standby commitment over and above the price for the
security to which it relates, to less than 1/2 of 1% of the value of the
Fund's total assets calculated immediately after the acquisition.
Each of the Portfolio and the Fund is permitted to purchase
participation interests from financial institutions, subject to certain
requirements. If the participation interest is subject to a demand
feature, i.e., the right to demand payment of principal and accrued
interest on short notice (usually 7 days), the Portfolio treats the
participation interest as maturing on the later of the next interest rate
adjustment or the date on which the Portfolio may next tender the security
for repurchase. All participation interests purchased by the Fund must
contain a demand feature. In addition, the Fund requires all unrated
participation interests to be backed by Trustee-approved bank guarantees or
letters of credit or to be collateralized by obligations of the U.S.
government, its agencies or instrumentalities, and no more than 5% of the
total assets of the Fund may be invested in participation interests.
Variable and floating rate demand notes are also permissible
investments for the Portfolio and the Fund. Such instruments are treated
as maturing on the later of the date of the next interest rate adjustment
or the date on which the Portfolio or the Fund may next make a demand for
payment of principal and accrued interest. The Fund only authorizes
investment in variable or floating rate demand instruments with maturities
of greater than 13 months if demand may be made during intervals not
exceeding 13 months upon giving the prescribed notice (which may not exceed
30 days) and if interest rates are adjusted at periodic intervals not
exceeding 13 months.
Specifically authorized by the Portfolio, but not by the Fund, are
when-issued and delayed delivery securities, tax and revenue anticipation
notes, and bond anticipation notes. Specifically authorized by the Fund,
but not by the Portfolio, are tender option bonds, and zero coupon and
capital appreciation bonds.
The Portfolio's investment objective and policies are more fully
described in its current Prospectus dated September 30, 1995, a copy of
which accompanies this Prospectus/Proxy Statement. The Portfolio's
investment objective, as described in its current Prospectus, may not be
changed without the approval of the Portfolio's shareholders.
The investment restrictions and investment policies of the Portfolio
and the Fund are similar. The significant differences are as follows.
Although neither the Portfolio nor the Fund will knowingly invest more than
10% of its assets in securities that may be illiquid because of the legal
or contractual restrictions on resale ("restricted securities") or
securities for which there are no readily available market quotations, only
the Portfolio requires majority shareholder approval in order to change the
limitation relating to restricted securities. Even though the Fund is not
required to seek shareholder approval to change its limitation relating to
restricted securities, it could not do so at the present time under
interpretations of the Securities and Exchange Commission. While both the
Portfolio and the Fund may not mortgage, pledge or hypothecate assets,
except in connection with borrowing for temporary or emergency purposes and
executing reverse repurchase agreements, the Fund provides that no more
than one-third of the Fund's assets may be so committed. The Portfolio, by
contrast, may pledge assets having a market value not exceeding the lesser
of the dollar amounts borrowed or 15% of the value of the total assets of
the Portfolio at the time of the pledge.
In addition to the Portfolio's and the Fund's shared investment
limitations, the Fund may not invest in warrants. The Portfolio will not
invest in securities of a company for the purpose of exercising control or
management. The Portfolio also will not purchase or retain the securities
of any issuer if the officers or trustees of the Trust or the Portfolio's
investment adviser, owning more than 1/2 of 1% of the issuer's securities,
together own more than 5% of the issuer's securities. Furthermore, the
Portfolio will not purchase or sell interests in oil, gas, or other mineral
exploration or development programs or leases, although it may purchase the
securities of issuers which invest or sponsor such programs.
Reference is hereby made to the Portfolio's Statement of Additional
Information dated September 30, 1996, and the Fund's Statement of
Additional Information dated May 30, 1996, for a complete description of
the investment practices and restrictions of the Portfolio and the Fund.
Copies of such Statements are available upon request at no charge. See
`Information About the Portfolio and the Fund.''
INFORMATION ABOUT THE REORGANIZATION
BACKGROUND AND REASONS FOR THE PROPOSED ACQUISITION
The Reorganization is undertaken as part of a business agreement by
and between Federated Investors and Lehman pursuant to which Lehman has
entered into a non-compete agreement whereby Lehman will discontinue
advising money market funds, subject to certain conditions. Following the
transactions, Lehman will assist Federated Investors in providing services
to shareholders for which Lehman may receive fees paid by Federated
Investors and/or mutual funds in which the shareholders are invested.
The Fund commenced operations on February 8, 1993, in order to provide
institutional and high net worth individuals (through Class A Shares) and
institutions purchasing on behalf of individuals (through Class B Shares)
with an investment vehicle which provided high current income exempt from
federal taxation with liquidity and security of principal. Federated
Securities Corp. (`FSC''), the distributor of shares of the Portfolio, has
proposed to representatives of the Fund that the Fund consider a sale of
all of the Fund's assets to the Trust, acting on behalf of the Portfolio.
In considering the proposed Reorganization, the Board took into
consideration a number of factors, including (1) the comparatively larger
size of the Portfolio, (2) the capabilities and resources of Federated, (3)
expense ratios and published information regarding the fees and expenses of
the Portfolio in relation to similar funds, (4) the comparative investment
performance of the Portfolio and the Fund as well as the performance of
similar funds, (5) the terms and conditions of the Reorganization and
whether the Reorganization would result in the dilution of shareholder
interests, (6) the tax consequences of the Reorganization, (7) the
compatibility of the Portfolio's and the Fund's investment objectives,
policies, restrictions and portfolios, as well as service features
available to shareholders in the respective funds, (8) the commitment of
Federated to maintain and enhance its position in the money fund business
and (9) the decision by Lehman to seek to discontinue managing money market
funds.
The Board concluded to recommend that the shareholders of the
Portfolio vote to approve the Reorganization. This conclusion was based on
a number of factors, including the following:
1. The Reorganization would permit the shareholders of the Fund to
pursue substantially the same investment goals in a larger fund. A larger
fund should enhance the ability of portfolio managers to effect their
portfolio transactions on more favorable terms and give portfolio managers
greater investment flexibility and the ability to select a larger number of
portfolio securities, with the attendant ability to spread investment risks
over a larger number of portfolio issues. In addition, the larger
aggregate net assets should enable the Portfolio to obtain the benefits of
economies of scale. However, there is no assurance that larger portfolios
will result in economies of scale.
The Reorganization would secure for the shareholders of the Fund the
investment advisory services of Federated. Federated manages over 100
mutual funds, including 48 money market funds with assets of $43 billion.
It is one of the largest institutional service providers in the United
States. Federated has been providing advisory services for over 41 years
and has been managing the short-term assets of institutional investors for
over 20 years, having created one of the first institutional money market
funds in 1976.
As stated above, the contractual fees for investment advice payable to
Federated are the same as those for the Fund. The actual expense ratio for
the Portfolio for its most recent fiscal year was .02% higher than that for
the Fund for its most recent fiscal year. The differential in expense
ratios between the Portfolio and the Fund is due to the differing waivers
of fees by the advisers to the Portfolio and the Fund, which waivers were
done on a voluntary basis and could have been terminated by the relevant
adviser at any time. Federated has undertaken to cap the Portfolio's total
operating expense ratio after the Reorganization at .20% which could be
changed at any time. Federated has agreed, however, for the two-year
period following the Reorganization to cap the Portfolio's expense ratio
(other than the Shareholder Services Fee applicable to Institutional
Service Shares) at .35%, which is equal to the current contractual cap on
Class A expenses of the Fund.
The seven-day net yields of the Insitutional Shares and Institutional
Service Shares of the Portfolio for the seven-day period ended July 31,
1996 were 3.38% and 3.13%, respectively. The seven-day net yields of the
Class A Shares and Class B Shares of the Fund for the seven-day period
ended July 31, 1996 were 3.47% and 3.22%, respectively Over other periods
the performance of the Portfolio and the Fund in relation to each other
have varied, in part due to differing expense waivers by Federated and
Lehman..
DESCRIPTION OF THE PLAN OF REORGANIZATION
The Plan provides that the Trust, on behalf of the Portfolio, will
acquire all of the assets and known liabilities of the Fund in exchange for
Institutional Shares and Institutional Service Shares of Portfolio to be
distributed pro rata by the Fund to the holders of Class A Shares and Class
B Shares, respectively, in complete liquidation of the Fund on or about
November 15, 1996. Because both the Portfolio and the Fund seek to
maintain a constant net asset value of $1.00 per share, it is expected that
Fund shareholders will receive the same number of shares in the Portfolio
as they held in the Fund immediately prior to the Closing. Shareholders of
the Fund will become shareholders of the Portfolio as of 12:00 Noon
(Eastern time) on the Closing Date and will begin accruing dividends as of
such day. Shareholders of the Fund will earn their last dividend from the
Fund on the day preceding the Closing Date, which Closing Date is expected
to be November 15, 1996.
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 Lehman Brothers Institutional Funds Group Trust, on behalf
of the Fund, and the Trust, on behalf of the Portfolio, as described under
the caption `Federal Income Tax Consequences'' below. The Plan may be
terminated and the Reorganization may be abandoned at any time before or
after approval by shareholders of the Fund prior to the Closing Date by
either party if it believes that consummation of the Reorganization would
not be in the best interests of its shareholders.
Federated is responsible for the payment of all expenses of the
Reorganization, whether or not the Reorganization is consummated. Such
expenses include, but are not limited to, certain 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 Fund's shareholders and the costs of holding the Special
Meeting of Shareholders.
The foregoing description of the Plan entered into between the Trust,
on behalf of the Portfolio, and Lehman Brothers Institutional Funds Group
Trust, on behalf of the Fund, is qualified in its entirety by the terms and
provisions of the Plan, a copy of which is attached hereto as Exhibit A and
incorporated herein by reference.
DESCRIPTION OF PORTFOLIO SHARES
Shares of the Portfolio to be issued to shareholders of the Fund under
the Plan will be fully paid and nonassessable when issued and transferable
without restrictions and will have no preemptive or conversion rights.
Reference is hereby made to the Prospectus of the Portfolio provided
herewith for additional information about Portfolio shares.
FEDERAL INCOME TAX CONSEQUENCES
As a condition to the Reorganization transactions, the Trust, on
behalf of the Portfolio, and Lehman Brothers Institutional Funds Group
Trust, on behalf of the Fund, will receive an opinion from Howard & Howard
Attorneys, P.C., to the effect that, on the basis of the existing
provisions of the Internal Revenue Code of 1986, as amended (the `Code''),
current administrative rules and court decisions, for federal income tax
purposes: (1) the Reorganization as set forth in the Plan will constitute a
tax-free reorganization under section 368(a)(1)(C) of the Code; (2) no gain
or loss will be recognized by the Portfolio upon its receipt of the Fund's
assets in exchange for Portfolio shares; (3) the holding period and basis
for the Fund's assets acquired by the Portfolio will be the same as the
holding period and the basis to the Fund immediately prior to the
Reorganization; (4) no gain or loss will recognized by the Fund upon
transfer of its assets to the Portfolio in exchange for Portfolio shares or
upon the distribution of the Portfolio shares to the Fund's shareholders in
exchange of their Fund shares; (5) no gain or loss will be recognized by
shareholders of the Fund upon exchange of their Fund shares for Portfolio
shares; (6) the holding period of Portfolio shares received by shareholders
of the Fund pursuant to the Plan will be the same as the holding period of
Fund shares held immediately prior to the Reorganization, provided the Fund
shares were held as capital assets on the date of the Reorganization; and
(7) the basis of Portfolio shares received by shareholders of the Fund
pursuant to the Plan will be the same as the basis of Fund shares held
immediately prior to the Reorganization.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS AND OBLIGATIONS
The Trust is organized as a Massachusetts business trust pursuant to a
Declaration of Trust dated October 3, 1988, under the laws of the
Commonwealth of Massachusetts. Lehman Brothers Institutional Funds Group
Trust is also organized as a Massachusetts business trust under a
Declaration of Trust dated November 16, 1992. The rights of shareholders
of the Trust and of Lehman Brothers Institutional Funds Group Trust are
similar, although not identical. Set forth below is a brief summary of the
more significant similarities and differences between rights of
shareholders of the Fund and the Portfolio.
Special meetings of both the Fund's and the Portfolio's shareholders
may be called for any purpose on the written request of shareholders
entitled to cast at least ten percent (10%) of all votes entitled to be
cast at the meeting. Special meetings of the Fund's shareholders may also
be called at any time by the Chairman of the Board of Trustees, the
President, or upon the request of a majority of the Trustees of Lehman
Brothers Institutional Funds Group Trust. Special meetings of the
Portfolio's shareholders may also be called by the Trustees or the Chief
Executive Officer of the Trust. Shareholders of the Portfolio are entitled
to at least fifteen days' notice of any meeting.
The Declaration of Trust of both Lehman Brothers Institutional Funds
Group Trust and the Trust provide that shareholders shall have the
following voting powers: (i) to vote for the election of Trustees; (ii) to
vote with respect to any investment advisory or sub-advisory contract
entered into on behalf of any series; (iii) to vote to the same extent as
shareholders of a Massachusetts business corporation as to whether or not a
court action, proceeding, or claim should or should not be brought
derivatively or as a class action on behalf of the trust, any series, or
the shareholders; and (iv) to vote on such additional matters as required
by the Declaration of Trust, the By-laws, the registration statement, or
the Securities and Exchange Commission.
Shareholders of the Fund, but not of the Portfolio, are also
specifically provided with the following voting rights under the
Declaration of Trust: (i) to vote on the termination of Lehman Brothers
Institutional Funds Group Trust or any of its series; (ii) to vote on any
amendment to the Declaration of Trust that materially affects the rights of
shareholders; (iii) to vote with respect to any merger, consolidation, or
sale of assets; (iv) to vote with respect to the incorporation of Lehman
Brothers Institutional Funds Group Trust; and (v) to vote with respect to
the adoption of a plan under Rule 12b-1 of the 1940 Act and related
matters.
Shareholders of the Portfolio, but not of the Fund, are also
specifically provided with the power to vote for the removal of Trustees
and with respect to amendments or supplements to the Trust's Declaration of
Trust.
Although there are some differences in the enumerated list of
shareholder voting powers between the Fund and the Portfolio, the 1940 Act
and the Securities and Exchange Commission impose requirements that would
eliminate most of the variations in shareholder rights described above.
Under certain circumstances, shareholders of the Fund or the Portfolio
may be held personally liable as partners under Massachusetts law for acts
or obligations of Lehman Brothers Institutional Funds Group Trust or the
Trust, respectively. To protect shareholders of the Fund and the
Portfolio, the Declarations of Trust expressly disclaim the liability of
shareholders for acts or obligations of the Fund and the Portfolio. The
Declarations of Trust provide that a notice of the disclaimer of liability
may be included in each agreement, obligation, or instrument that either
Lehman Brothers Institutional Funds Group Trust or the Trust may enter
into.
In the unlikely event that a shareholder of either the Fund or the
Portfolio is held personally liable for obligations of the Fund or the
Portfolio, the Declarations of Trust provide that property of the Fund or
the Portfolio will be used to protect or compensate the shareholder. On
request, claims are defended and judgments against shareholders are paid
that arise out of any act or obligation of Lehman Brothers Institutional
Funds Group Trust or the Trust on behalf of the Fund or the Portfolio,
respectively. Therefore, financial loss resulting from liability as a
shareholder will occur only if Lehman Brothers Institutional Funds Group
Trust or the Trust cannot meet its obligations to indemnify shareholders
and pay judgments against them from the assets of the Fund or the
Portfolio, respectively.
CAPITALIZATION
The following table shows the capitalization of the Portfolio and the
Fund as of July 31, 1996, and on a pro forma basis as of that date:
<TABLE>
<CAPTION>
Portfolio Fund Pro Forma Combined
Institutional Institutional Class A Class B Institutional Institutional
Shares Service Shares Shares Shares Shares Service Shares
<S> <C> <C> <C> <C> <C> <C>
Net Assets $1,514,978,944 $406,408,178 $114,690,694 $100 $1,629,669,638 $406,408,278
Price Per
Share $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Shares
Outstanding 1,514,978,944 406,408,178 114,690,694 100 1,629,669,638 406,408,278
</TABLE>
INFORMATION ABOUT THE PORTFOLIO AND THE FUND
TAX-FREE OBLIGATIONS FUND, A PORTFOLIO OF MONEY MARKET OBLIGATIONS TRUST
Information about the Trust and the Portfolio is contained in the
Portfolio's current Prospectuses for Institutional Shares and Institutional
Service Shares. A copy of either prospectus is included herewith and
incorporated by reference herein. Additional information about the Trust
and the Portfolio is included in the Portfolio's Combined Statement of
Additional Information dated September 30, 1996, which is incorporated
herein by reference. Copies of the Combined Statement of Additional
Information, which has been filed with the Securities and Exchange
Commission, may be obtained without charge by contacting the Trust at 1-
800-245-5000 or by writing to the Trust at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779. The Trust, on behalf of the
Portfolio, is subject to the informational requirements of the Securities
Act of 1933, as amended, the Securities Exchange Act of 1934, as amended,
and the Investment Company Act of 1940, as amended, and in accordance
therewith files reports and other information with the Securities and
Exchange Commission. Reports, proxy and information statements, and other
information filed by the Trust, on behalf of the Portfolio, can be obtained
by calling or writing the Trust and can also be inspected and copied by the
public at the public reference facilities maintained by the Securities and
Exchange Commission 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 Room 1204, Everett McKinley Dirksen Building, 219 South Dearborn
Street, Chicago, Illinois 60604 and 14th Floor, 75 Park Place, New York, NY
10007. Copies of such material can be obtained at prescribed rates from
the Public Reference Branch, Office of Consumer Affairs and Information
Services, Securities and Exchange Commission, Washington D.C. 20549.
This Prospectus/Proxy Statement, which constitutes part of a
Registration Statement filed by the Trust, on behalf of the Portfolio, with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended, omits certain of the information contained in the Registration
Statement. Reference is hereby made to the Registration Statement and to
the exhibits thereto for further information with respect to the Trust, the
Portfolio and the shares offered hereby. Statements contained herein
concerning the provisions of documents are necessarily summaries of such
documents, and each such statement is qualified in its entirety by
reference to the copy of the applicable documents filed with the Securities
and Exchange Commission.
TAX-FREE MONEY MARKET FUND, A PORTFOLIO OF LEHMAN BROTHERS INSTITUTIONAL
FUNDS GROUP TRUST
Information about the Fund may be found in the Fund's current
Prospectuses dated May 30, 1996, and its Statement of Additional
Information dated May 30, 1996, which are incorporated herein by reference.
Financial Statements for the Fund for the year ended January 31, 1996, may
be found in the Statement of Additional Information dated October 15, 1996,
relating to this Prospectus/Proxy Statement, which has been filed by the
Trust with the Securities and Exchange Commission. Copies of the Fund's
Prospectuses and Statement of Additional Information may be obtained
without charge from the Fund by calling 1-800-851-3134 or by writing to the
Fund at One Exchange Place, 53 State Street, Boston, Massachusetts 02109-
2873. A copy of the Statement of Additional Information relating to this
Prospectus/Proxy Statement may be obtained without charge from Lehman
Brothers Institutional Funds Group Trust by calling 1-800-851-3134 or by
writing to Lehman Brothers Institutional Funds Group Trust at One Exchange
Place, 53 State Street, Boston, Massachusetts 02109-2873. The Fund is
subject to the information requirements of the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, and the
Investment Company Act of 1940, as amended, and in accordance therewith
files reports and other information with the Securities and Exchange
Commission. Reports, proxy and information statements, and other
information filed by the Fund can be obtained by calling or writing the
Fund and can also be inspected at the public reference facilities
maintained by the Securities and Exchange Commission at the addresses
listed in the previous section.
PROPOSAL 2. ELECTION OF TRUSTEES
The Board of Trustees currently consists of six Trustees serving until
the election and qualification of their successors. In connection with the
proposed business agreement between Federated Investors and Lehman
described above, it is proposed that thirteen Trustees be elected to the
Board of Lehman Brothers Institutional Funds Group Trust in connection with
the change of the investment adviser of certain portfolios to Federated
Management. None of the current Trustees will stand for re-election. Three
of the nominees are affiliated with Federated Investors as discussed
further below. All of the other nominees are Trustees or Directors of
other investment companies managed by Federated Management.
NOMINEES, TRUSTEES AND EXECUTIVE OFFICERS OF THE FUND
The following is a list of the nominees, Trustees and executive
officers of the Fund. Information provided regarding the name, age,
current position with the Fund and term of office, if any, principal
occupation during the past five years, family relationships and
directorships is required by law.
NOMINEES FOR TRUSTEES
NAME, AGE AND RELATION TO FEDERATED INVESTORS
FAMILY OR ANY OF ITS SUBSIDIARIES
RELATIONSHIPS
John F. Donahue Trustee and Chairman of the Board of
Age 71 the Trust; Chairman and Trustee,
Father of J. Federated Investors, Federated
Christopher Advisers, Federated Management;
Donahue, Chairman and Director, Federated
President of the Research Corp. and Federated Global
Trust Research Corp.; Chairman, Passport
Research Ltd.; Chief Executive
Officer and Director, Trustee or
Managing General Partner of 74
investment companies for which
subsidiaries of Federated Investors
serve as investment adviser,
administrator and/or distributor (the
``Federated Fund Complex').
Thomas G. Bigley* Trustee of the Trust; Director, Ober
Age 61 Manufacturing Co.; Chairman of the
Board, Children's Hospital of
Pittsburgh; Director, Trustee, or
Managing General Partner of 74
investment companies within the
Federated Fund Complex; formerly,
Senior Partner Ernst & Young LLP.
John T. Conroy, Trustee of the Trust; President,
Jr.* Investment Properties Corporation;
Age 58 Senior Vice President, John R. Wood
and Associates, Inc., Realtors;
President, Northgate Village
Development Corporation; Partner or
Trustee in private real estate
ventures in Southwest Florida;
Director, Trustee, or Managing
General Partner of 74 investment
companies within the Federated Fund
Complex; formerly, President Naples
Property Management, Inc.
William J. Trustee of the Trust; Director and
Copeland* member of the Executive Committee,
Age 77 Michael Baker, Inc.; Director,
Trustee or Managing General Partner
of 74 investment companies within the
Federated Fund Complex; formerly,
Vice Chairman and Director, PNC Bank,
N.A., and PNC Bank Corp. and
Director, Ryan Homes, Inc.
J. Christopher Trustee and President of the Trust,
Donahue President and Trustee, Federated
Age 46 Investors, Federated Advisers,
Son of John F. Federated Management and Federated
Donahue, Research; President and Director,
Chairman of the Federated Research Corp. and
Trust Federated Global Research Corp.;
President Passport Research Ltd.;
Trustee, Federated Administrative
Services, Federated Services Company,
and Federated Shareholder Services;
President or Executive Vice President
of the Funds; Director, Trustee, or
Managing General Partner of certain
investment companies within the
Federated Fund Complex.
James E. Dowd* Trustee of the Trust; Attorney-at-
Age 73 law; Director, The Emerging Germany,
Inc., Director, Trustee, or Managing
General Partner of 74 investment
companies within the Federated Fund
Complex.
Lawrence D. Ellis, Trustee of the Trust; Professor of
M.D. Medicine and Member Board of
Age 62 Trustees, University of Pittsburgh
Medical Center-Downtown; Member,
Board of Directors, University of
Pittsburgh Medical Center; formerly
Hematologist, Oncologist, and
Internist, Presbyertain and
Montefiore Hospitals; Director,
Trustee, or Managing General Partner
of 74 investment companies within the
Federated Fund Complex.
Edward L. Trustee of the Trust; Attorney-at-
Flaherty, Jr.* law; Shareholder, Henny, Kochuba,
Age 71 Meyer and Flaherty; Director, Eat `N
Park Restaurants, Inc., and Statewide
Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner
of 74 investment companies within the
Federated Fund Complex; formerly,
Counsel, Horizon Financial, F.A.,
Western Region.
Peter E. Madden* Trustee of the Trust; Consultant;
Age 53 State Representative, Commonwealth of
Massachusetts; Director, Trustee, or
Managing General Partner of 74
investment companies within the
Federated Fund Complex; formerly
President, State Street Bank and
Trust Company and State Street Boston
Corporation.
Gregor F. Meyer* Trustee of the Trust; Attorney-at-
Age 68 law; Shareholder, Henny, Kochuba,
Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat `N
Park Restaurants, Inc.; Director,
Trustee or Managing General Partner
of 74 investment companies within the
Federated Fund Complex.
John E. Murray, Trustee of the Trust; President and
Jr.* Law Professor, Duquesne University;
Age 62 Consulting Partner, Mollica, Murray
and Hogue; Director, Trustee or
Managing General Partner of 74
investment companies within the
Federated Fund Complex.
Wesley W. Posvar* Trustee of the Trust; Professor,
Age 70 International Politics and Management
Consultant; Trustee, Carnegie
Endowment for International Peace,
RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space
Foundation; Chairman, Czecho
Management Center; Director, Trustee
or Managing General Partner of 74
investment companies within the
Federated Fund Complex; President
Emeritus, University of Pittsburgh,
founding Chairman, National Advisory
Council for Environmental Policy and
Technology and Federal Emergency
Management Advisory Board.
Marjorie P. Smuts* Trustee of the Trust; Public
Age 60 relations/marketing consultant;
Conference Coordinator, Non-profit
entities; Director, Trustee, or
Managing General Partner of 74
investment companies within the
Federated Fund Complex.
----------
* Independent
Trustee
The foregoing individuals are being nominated as trustees in
connection with the transaction between Federated Investors and Lehman
referred to under Proposal 1 whereby Federated Management would assume the
role of the investment adviser of certain other portfolios of Lehman
Brothers Institutional Funds Group Trust. If Federated Management becomes
the investment adviser to such portfolios, the Trustees believe that
appointing representatives from other areas within the Federated Investors'
organization would help the transition run smoothly. Furthermore, the
Trustees consider the addition of personnel of Federated Investors to be a
means of facilitating day-to-day management of the Lehman Brothers
Institutional Funds Group Trust.
Federated Management has been recommended to assume the role of
investment adviser with respect to three portfolios of Lehman Brothers
Institutional Funds Group Trust, the Prime Money Market Fund, the Prime
Value Money Market Fund and the Municipal Money Market Fund. Also pursuant
to that agreement, the assets of two other portfolios of Lehman Brothers
Institutional Funds Group Trust, the Government Obligations Money Market
Fund, Treasury Instruments Money Market Fund II and the Fund, are proposed
to be reorganized into Federated Investors portfolios which are part of its
Money Market Obligations Trust. A third part of the transaction involves
the transfer of assets from Lehman Brothers' retail money market funds to
funds of Federated Investors with similar objectives through a negative
consent process.
Because the Reorganization is part of a business agreement between
Lehman and Federated Investors that includes the election of new Trustees
of Lehman Brothers Institutional Funds Group Trust, and because all
shareholders of the Trust, including those of the Fund, are entitled to
elect Trustees of Lehman Brothers Institutional Funds Group Trust,
shareholders of the Fund are asked to vote for the election of the nominees
for Trustee of Lehman Brothers Institutional Funds Group Trust even though
the consummation of the Reorganization would result in the Fund's
shareholders receiving shares of the Portfolio and becoming shareholders of
another entity.
Some of the nominees for election as Trustees are executive
officers of and employed by Federated Investors. To the extent that
employees of Federated will benefit from the entire transaction with
Lehman, the nominees may be deemed to have an indirect material interest in
such arrangement. Similarly, Mr. Gordon, Trustee, and Messrs. Winters and
Rabiecki, Executive Officers, are employees of Lehman Brothers and Lehman,
respectively, and as such may be deemed to have an indirect material
interest in the transaction.
TRUSTEES NOT STANDING FOR ELECTION
POSITIONS RELATION TO
NAME AND WITH FEDERATED
AGE REGISTRANT INVESTORS
AND OR ANY OF
BUSINES ITS SUBSIDIARIES
S EXPERIENCE
Andrew Gordon, Chairman of None
42 the Board,
Trustee and
President of
Lehman
Brothers
Institutiona
l Funds
Group Trust;
Managing
Director,Leh
man Brothers
Charles Trustee*, None
Barber,* 79 Lehman
Brothers
Institutiona
l Funds
Group Trust;
former
Chairman of
the Board,
ASARCO, Inc.
Burt N. Trustee*, None
Dorsett,* 65 Lehman
Brothers
Institutiona
l Funds
Group Trust;
Managing
Partner,
Dorsett
McCabe
Capital
Management,
Inc., an
investment
counseling
firm;
Director,
Research
Corporation
Technologies
, a non-
profit
patent-
clearing and
licensing
operation;
formerly
President,
Westinghouse
Pension
Investments
Corporation;
formerly
Executive
Vice
President
and Trustee,
College
Retirement
Equities
Fund, Inc.,
a variable
annuity
fund; and
formerly
Investment
Officer,
University
of Rochester
Edward J. Trustee*, None
Kaier,* 50 Lehman
Brothers
Institutiona
l Funds
Group Trust;
Partner with
the law firm
of Hepburn,
Willcox,
Hamilton &
Putnam
S. Donald Trustee*, None
Wiley,* 69 Lehman
Brothers
Institutiona
l Funds
Group Trust;
Vice
Chairman and
Trustee,
H.J. Heinz
Company
Foundation
* Independent Trustee
None of the nominees and none of the current Trustees, except Mr.
Gordon, have any material direct or indirect interest in the Fund's current
principal underwriter or administrator. Except as described above, none
of the nominees has any material direct or indirect interest in the
investment adviser or any person controlling, controlled by, or under
common control with the investment adviser.
During the fiscal year ended January 31, 1996, the Trust's Board met
four times. All Trustees attended at least 75 percent of the meetings.
The Trust has a standing Audit Committee which consists of
Messrs. Barber, Dorsett, Kaier and Wiley, all of whom are Independent
Trustees. The function of the Audit Committee is to meet annually with the
Trust's independent auditors to review the financial statements of the
Trust's portfolios. The Audit Committee met one time during the fiscal
year ended January 31, 1996.
The Trust also has a Nominating Committee consisting of
Messrs. Barber, Dorsett, Kaier and Wiley. Its function is to nominate
independent trustees to fill vacancies that occur on the Board of Trustees
of Lehman Brothers Institutional Funds Group Trust. The Committee did not
meet during the fiscal year ended January 31, 1996.
EXECUTIVE OFFICERS
POSITIONS RELATION TO
NAME AND AGE WITH FEDERATED
REGISTRANT INVESTORS
AND OR ANY OF
BUSINESS ITS SUBSIDIARIES
EXPERIENCE
John M. Winters Vice President None
46 and Investment Officer,
Lehman Brothers
Institutional Funds
Group Trust; Investment
Officer, Senior Vice
President and Senior
Money Market Portfolio
Manager, Lehman
Brothers Global Asset
Management, Inc.;
formerly Product
Manager with Lehman
Brothers Capital
Markets Group
Nicholas Rabiecki III Vice President None
and Investment
Officer, Lehman
Brothers Institutional Funds
Group Trust; Vice
President and Senior
Portfolio Manager,
Lehman Brothers
Global Asset Management,
Inc.; formerly Senior
Fixed-Income Portfolio
Manager with Chase
Private Banking
Michael C. Kardok Treasurer, Lehman Brothers
36 Institutional Funds
Group Trust; Vice
President, First Data
Investor Services
Group, Inc.; prior to May
1994, Vice President,
The Boston Company
Advisors, Inc.
Patricia L. Bickimer Secretary, None
42 Lehman
Brothers
Institutional Funds
Group Trust; Vice President
and Associate General
Counsel, First Data
Investor Services
Group, Inc.; prior to May
1994, Vice President
and Associate General Counsel, The
Boston Company Advisors, Inc.
None of the executive officers was selected as such pursuant to any
agreements nor has any executive officer entered into an employment
contract or other compensatory agreement with the Fund.
The Declaration of Trust provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in
connection with litigation in which they may be involved because of their
offices with the Fund unless it is finally adjudicated that they engaged in
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in their offices.
The following table describes the compensation paid during the fiscal
year ending January 31, 1996, to each member of the Board of Trustees of
the Trust.
COMPENSATION TABLE
The following table presents, for the fiscal year ended January 31,
1996, the compensation paid to, or accrued for, each of the Trust's
Trustees. None of the Fund's most highly compensated executive officers
had aggregate compensation of over $60,000 during this period.
COMPENSATION TABLE
Total
Compensation
Pension or from Fund
Retirement Estimated and Fund
Benefits Annual Complex
Aggregate Accrued Benefits (10 Funds)
Compensation as part of Upon Paid to
Name and Position From Fund Fund Expenses Retirement Directors
Andrew Gordon
Trustee,
Chairman of the $0 $0 N/A $0
Board and President
Charles Barber
Trustee $25,000 $0 N/A $25,000
Burt N. Dorsett
Trustee $25,000 $0 N/A $52,500
Edward J. Kaier
Trustee $25,000 $0 N/A $25,000
S. Donald Wiley
Trustee $25,000 $0 N/A $25,000
The Fund does not have any compensation plans, including pension or
retirement plans or any other defined benefit or actuarial plan in place.
Trustees who are "interested persons" receive no compensation from the
Fund for service as Trustees. Independent Trustees receive $20,000 in
retainer fees per year, plus $1,250 per regular or special Board meeting
attended. Trustees are also reimbursed for travel and out-of-pocket
expenses.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the
solicitation by the Board of Trustees of the Fund of proxies for use at the
Special Meeting of Shareholders (the "Meeting") to be held on November 13,
1996 and at any adjournment thereof. The proxy confers discretionary
authority on the persons designated therein to vote on other business not
currently contemplated which may properly come before the Meeting. A
proxy, if properly executed, duly returned, and not revoked, will be voted
in accordance with the specifications thereon; if no instructions are
given, such proxy will be voted in favor of the Plan. A shareholder may
revoke a proxy at any time prior to use by filing with the Secretary of the
Fund an instrument revoking the proxy, or by submitting a proxy bearing a
later date, or by attending and voting at the Meeting.
The cost of the solicitation, including the printing and mailing of
proxy materials, will be borne by Federated. In addition to solicitations
through the mails, proxies may be solicited by officers, employees, and
agents of the Fund and Lehman at no additional costs to the Fund. Such
solicitations may be by telephone, telegraph, or otherwise. Federated will
reimburse custodians, nominees, and fiduciaries for the reasonable costs
incurred by them in connection with forwarding solicitation materials to
the beneficial owners of shares held of record by such persons.
OUTSTANDING SHARES AND VOTING REQUIREMENTS
The Board of Trustees of the Fund has fixed the close of business on
October 11, 1996, as the record date for the determination of shareholders
entitled to notice of and to vote at the Special Meeting of Shareholders
and any adjournment thereof. As of the record, date, there were
134,629,398 shares of the Fund outstanding, constituting 123,924,345 Class
A Shares and 10,704,842 Class B Shares. Each Fund share is entitled to one
vote and fractional shares have proportionate voting rights. On the record
date, the following shareholders of record owned 5% or more of the
outstanding Class A Shares of the Fund: Bank of Boston owned approximately
16,924,341 (13.6%) shares, Daniel R. Lee owned approximately 31,586,866
(25.4%) shares, Trulin & Co owned approximately 18,806,918 (15.1%) shares,
The Park Associates, Inc. owned approximately 19,522,509 (15.7%) shares,
and Paychex Pooled Cash owned approximately 20,000,500 (16.1%) shares. On
the record date, Hare & Co. owned approximately 10,704,742 (99.9%) of the
Class B Shares of the Fund. On such date, no other person owned of record,
or to the knowledge of Lehman, beneficially owned, 5% or more of the Fund's
outstanding shares. On the record date, the Trustees and officers of the
Fund as a group owned less than 1% of the outstanding shares of the Fund.
On the record date, the following shareholders of record owned 5% or
more of the Portfolio's outstanding Institutional Shares: First Union
National Bank owned approximately 230,907,569 (14.9%) shares, Var & Co
owned approximately 223,612,301 (14.43%) shares, Wachovia Bank of North
Carolina owned approximately 138,845,387 (8.96%) shares, and Maril & Co
owned approximately 92,731,274 (5.98%) shares. On the record date, the
following shareholders of record owned 5% or more of the Porfolio's
outstanding Institutional Service Shares: Naidot & Co. owned approximately
74,940,300 (17.14%) shares, HAMAC owned approximately 39,420,284 (9.02%)
shares, F M Co owned approximately 38,108,112 (8.72%) shares, First Union
National Bank owned approximately 27,913,212 (6.38%) shares, and Saxon & Co
owned approximately 23,359,138 (5.34%) shares. On the record date, the
Trustees and officers of the Trust as a group owned less than 1% of the
outstanding shares of the Portfolio.
The votes of shareholders of the Portfolio are not being solicited
since their approval is not required in order to effect the Reorganization.
Approval of Proposal 1, relating to the Reorganization, requires the
affirmative vote of a majority of the Fund's outstanding shares. Approval
of Proposal 2, relating to the election of Trustees, requires the
affirmative vote of a majority of the outstanding shares of Lehman Brothers
Institutional Funds Group Trust and is conditioned upon shareholder
approval of Proposal 1. In determining whether the required vote is
obtained, shares of the Fund are voted in the aggregate, without regard to
the designated class of shares of the Fund, with regard to Proposal 1, and
shares of Lehman Brothers Institutional Funds Group Trust are voted in the
aggregate, without regard to the designated series or class of any shares,
with regard to Proposal 2. As used herein, the term "majority of the
Fund's outstanding shares" means the lesser of: (a) 67% of the shares of
the Fund or Lehman Brothers Institutional Funds Group Trust, as the case
may be, present at the Special Meeting if the holders of more than 50% of
the outstanding shares of the Fund, or Lehman Brothers Institutional Funds
Group Trust, as the case may be, are present in person or by proxy, or (b)
more than 50% of the outstanding shares of the Fund, or Lehman Brothers
Institutional Funds Group Trust, as the case may be.
In tallying shareholder votes, abstentions and broker non-votes (i.e.,
proxies sent in by brokers and other nominees that cannot be voted on a
proposal because instructions have been received from the beneficial
owners) will be counted for purposes of determining whether or not a quorum
is present for purposes of convening the meeting. On each proposal, broker
non-votes will be considered to be abstentions on the vote regarding each
proposal.
NO DISSENTER'S RIGHT OF APPRAISAL
Shareholders of the Fund objecting to the Reorganization have no
appraisal rights under the Fund's Declaration of Trust or under the laws of
the Commonwealth of Massachusetts. Shareholders have the right, however,
to redeem their Fund shares at net asset value until the Closing Date, and
thereafter shareholders may redeem Portfolio shares acquired by them in the
Reorganization at net asset value.
QUORUM
In the event that a quorum is not present at the Special Meeting, or
in the event that a quorum is present at the Special Meeting, but
sufficient votes to approve the Plan and the transactions contemplated
thereby are not received, the persons named as proxies may propose one or
more adjournments of the Special Meeting to permit further solicitation of
proxies. Any such adjournment will require the affirmative vote of a
majority of shares that are represented at the Meeting in person or by
proxy. If a quorum is present, the persons named as proxies will vote
those proxies which they are entitled to vote FOR the Plan in favor of such
adjournments, and will vote those proxies required to be voted AGAINST such
proposal against any adjournment. A quorum is constituted with respect to
the Fund by the presence in person or by proxy of the holders of more than
50% of the outstanding shares of the Fund entitled to vote at the Meeting.
Proxies properly executed and marked with a negative vote or an abstention
will be considered to be present at the Meeting for purposes of determining
the existence of a quorum for the transaction of business.
OTHER MATTERS
Management of the 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.
So far as management is presently informed, there is no litigation
pending or threatened against the Trust.
Whether or not shareholders expect to attend the meeting, all
shareholders are urged to sign, fill in and return the enclosed proxy form
promptly.
AGREEMENT AND PLAN OF REORGANIZATION Exhibit A
AGREEMENT AND PLAN OF REORGANIZATION dated as of September 6, 1996
(the `Agreement''), by and between MONEY MARKET OBLIGATIONS TRUST, a
Massachusetts business trust, on behalf of its portfolio, Tax-Free
Obligations Fund (hereinafter called the `Acquiring Fund''), FEDERATED
MANAGEMENT, a Delaware business trust (`Federated''), LEHMAN BROTHERS
INSTITUTIONAL FUNDS GROUP TRUST, a Massachusetts business trust, on behalf
of its portfolio, Tax-Free Money Market Fund (hereinafter called the
`Acquired Fund'') and LEHMAN BROTHERS GLOBAL ASSET MANAGEMENT, INC., a
corporation (`Lehman'').
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 and known liabilities of the Acquired Fund in
exchange solely for Institutional Shares and Institutional Service Shares
of beneficial interest of the Acquiring Fund (collectively, the `Acquiring
Fund Shares') and the distribution, after the Closing Date as hereinafter
defined, of Institutional Shares and Institutional Service Shares of the
Acquiring Fund to the shareholders of the Class A Shares and Class B
Shares, respectively, 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, diversified, management investment companies and the Acquired Fund
owns securities which generally are assets of the character in which the
Acquiring Fund is permitted to invest;
WHEREAS, the Acquiring Fund is authorized to issue the Acquiring Fund
Shares and the Acquired Fund is authorized to issue its shares of
beneficial interest;
WHEREAS, Federated, an investment adviser registered as such under the
Investment Advisers Act of 1940, as amended, serves as investment adviser
to the Acquiring Fund;
WHEREAS, Lehman, an investment adviser registered as such under the
Investment Advisers Act of 1940, as amended, serves as investment adviser
to the Acquired Fund;
WHEREAS, the Board of Trustees, including a majority of the Trustees
who are not `interested persons'' as defined under the Investment Company
Act of 1940, as amended (the `1940 Act'') of the Acquiring Fund has
determined that the exchange of all of the assets and known liabilities 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 Trustees, including a majority of the Trustees
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 [and
known liabilities] of the Acquired Fund for Acquiring Fund Shares is in the
best interests of the Acquired Fund shareholders, that the interests of the
shareholders of the Acquired Fund would not be diluted as a result of this
transaction and determined that subsequent to the consummation of the
transaction contemplated by this Agreement, the Acquired Fund will cease
operations;
NOW THEREFORE, for and in consideration of the mutual 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 and known liabilities of the Acquired Fund at the time of
the Closing (defined below), including without limitation all securities
and cash, 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, representing Institutional Shares and Institutional
Service Shares, determined as set forth in paragraph 2.3 of this Agreement.
Such transactions shall take place at the closing (the `Closing'') on the
closing date (the `Closing Date''), as provided in paragraph 3.1 of this
Agreement. 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's
transfer agent and shall deliver a confirmation thereof to the Acquired
Fund.
1.2 The Acquired Fund will discharge all of its liabilities and
obligations prior to the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be
transferred shall be made on the Closing Date and shall be delivered to
State Street Bank and Trust Company (hereinafter referred to as `State
Street'), Boston, Massachusetts, the Acquiring Fund's custodian (the
`Custodian''), for the account of the Acquiring Fund, together with proper
instructions and all documents necessary to transfer such assets to the
account of the Acquiring Fund, free and clear of all liens, encumbrances,
rights, restrictions and claims, except as may be indicated in a schedule
delivered by the Acquired Fund to the Acquiring Fund immediately prior to
the Closing. All cash delivered shall be in the form of currency or
immediately available funds payable to the order of Custodian for 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 hereunder.
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 practicable (the
"Liquidation Date"), 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. Such liquidation and distribution will be accomplished by
the transfer (by the Acquiring Fund or its transfer agent) of the Acquiring
Fund Shares into an account for each shareholder on the books of the
Acquiring Fund's transfer agent in the name of each Acquired Fund
Shareholder and representing the pro rata number of the Acquiring Fund
Shares due each Acquired Fund Shareholder. 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 paragraph 2.3. The Acquiring
Fund will issue certificates representing the Acquiring Fund Shares in
connection with such exchange only for, and upon receipt of, certificated
shares of the Acquired Fund.
1.6 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 the Closing Date 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.
1.7 Any reporting responsibility of the Acquired Fund is and
shall remain the responsibility of the Acquired Fund up to and including
the Closing Date and such later dates with respect to dissolution and
deregistration of the Acquired Fund with federal and blue sky authorities.
2. VALUATION.
2.1 The value of the Acquired Fund's assets to be acquired by
the Acquiring Fund hereunder shall be the amortized cost value of such
assets computed as of the close of business 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 business 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) of the Institutional Shares and the
Institutional Service Shares classes in exchange for the Acquired Fund's
assets shall be determined by dividing the value of the assets attributable
to Class A Shares and Class B Shares 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. Institutional Shares of the Acquiring Fund shall be issued for Class
A Shares of the Acquired Fund and Institutional Service Shares of the
Acquiring Fund shall be issued for Class B Shares of the Acquired Fund.
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 Closing Date shall be November 8, 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 the close of business at the offices of the Acquired Fund, One
Exchange Place, 53 State Street, Boston, Massachusetts 02109, 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 The Acquired Fund shall instruct First Data Investor
Services Group, Inc., as transfer agent for the Acquired Fund, to deliver
to the Acquiring Fund 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 of outstanding Class A Shares and
Class B Shares owned by each such shareholder immediately prior to the
Closing. The Acquiring Fund shall issue and deliver a confirmation
evidencing the Institutional Shares and the Institutional Services Shares
of the Acquiring Fund to be credited on the Closing Date to the Secretary
of the Acquired Fund or provide evidence satisfactory to the Acquired Fund
that such Institutional Shares and the Institutional Service Shares of the
Acquiring Fund have been credited to the respective accounts of the
Acquired Fund Shareholders on the books of the Acquiring Fund. At the
Closing, each party shall deliver to the other such bills of sale, checks,
assignments, share certificates, if any, receipts or other documents as
such other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 Each of the Acquired Fund and Lehman represents and warrants
to the Acquiring Fund as follows:
(a) The Acquired Fund is a portfolio of a business trust
organized, validly existing, and in good standing under the laws of the
Commonwealth of Massachusetts and has power to carry on its business as it
is now being conducted.
(b) The Acquired 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 Acquired Fund is not, and the execution, delivery,
and performance of this Agreement will not result, in a material violation
of its Declaration of Trust 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 contracts or other commitments
outstanding which will result in liability to it after the Closing Date not
reflected on the Acquired Fund's balance sheet other than liabilities in
the ordinary course of business or otherwise disclosed to Federated and the
Acquiring Fund.
(e) No material 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
the Acquired Fund's properties or assets which, if adversely determined,
would materially and adversely affect its financial condition or the
conduct of its business. Neither Lehman nor the Acquired Fund knows of any
facts which might form the basis for the institution of such proceedings,
and the Acquired Fund 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 Statement of Assets and Liabilities of the Acquired
Fund at January 31, 1996, has been audited by Ernst & Young, LLP,
independent auditors, and has been prepared in accordance with generally
accepted accounting principles, consistently applied, and such statement
(copies of which have been furnished to the Acquiring Fund) fairly reflect
the financial condition of the Acquired Fund as of such date, and there are
no liabilities of the Acquired Fund, known to the Acquired Fund or to
Lehman, contingent or otherwise, as of such date not disclosed therein.
(g) The unaudited Statement of Assets and Liabilities of
the Acquired Fund at July 31, 1996, has been prepared in accordance with
generally accepted accounting principles, consistently applied, and on a
basis consistent with the Statement of Assets and Liabilities of the
Acquired Fund at January 31, 1996, which has been audited by Ernst & Young,
LLP, and such statement (copies of which have been furnished to the
Acquiring Fund) fairly reflects the financial condition of the Acquired
Fund as of such date, and there are no liabilities of the Acquired Fund
known to the Acquired Fund or to Lehman, contingent or otherwise, as of
such date not disclosed therein.
(h) Since January 31, 1996, 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 any
indebtedness for borrowed money, except as otherwise disclosed to Federated
and the Acquiring Fund
(i) At the Closing Date, all federal and other tax returns
and reports of the Acquired Fund required by law (or permitted extensions
thereto) to have been filed shall have been filed, and to the best of the
Acquired Fund's knowledge all federal and other taxes shall have been paid
so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquired Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to
such returns
(j) For each fiscal year (or part thereof) of its
operation, the Acquired Fund has met the requirements of Subchapter M of
the Code for qualification and treatment as a regulated investment company
(k) All issued and outstanding shares of each class 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 each class 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 of this
Agreement. The Acquired Fund does not have outstanding options, warrants
or other rights to subscribe for or purchase any of the Acquired Fund
shares, nor is there outstanding any security convertible into Acquired
Fund shares
(l) On the Closing Date, all issued and outstanding shares
of the Acquired Fund will have been duly registered under the Securities
Act of 1933, as amended (the "1933 Act"), and registered, or exempt from
registration, to the extent required thereby under each state securities or
"blue sky" law of every state in which the Acquired Fund has offered or
sold its 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 has been duly authorized by all necessary action on the part of
the Acquired Fund's Board of Trustees and, subject to the approval of the
Acquired Fund Shareholders, this Agreement constitutes 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 before which a proceeding is brought (regardless of
whether the enforceability is considered in a proceeding in equity or at
law
(o) On the effective date of the Registration Statement and
on the Closing Date, the Prospectus/Proxy Statement (only insofar as it
relates to the Acquired Fund) will 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 will have provided the Acquiring Fund
with information reasonably necessary for the preparation of the
Prospectus/Proxy Statement
4.2 Each of Federated and the Acquiring Fund represents and warrants
to the Acquired Fund as follows:
(a) The Acquiring Fund is a business trust duly organized,
validly existing, and in good standing under the laws of the Commonwealth
of Massachusetts and has the power to carry on its business as it is now
being conducted and to carry out this Agreement.
(b) The 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 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
regulation of the SEC 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.
(d) At the Closing Date, the Acquiring Fund will have good
and marketable title to its assets.
(e) The Acquiring Fund has no material contracts or other
commitments outstanding which will result in liability to it after the
Closing Date not reflected in the Acquiring Fund's balance sheet dated as
of July 31, 1996, other than liabilities in the ordinary course of business
or otherwise disclosed to Lehman and the Acquired Fund.
(f) The Acquiring Fund is not, and the execution, delivery,
and performance of this Agreement will not result in violation of its
Declaration of Trust or By-Laws or of any agreement, indenture, instrument,
contract, lease, or other undertaking to which the Acquiring Fund is a
party or by which it is bound.
(g) 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
the Acquiring Fund's properties or assets which, if adversely determined,
would affect the Acquiring Fund's financial condition or the conduct of its
business. Neither Federated nor the Acquiring Fund knows of any facts
which might form the basis for the institution of such proceedings, and the
Acquiring Fund is not a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body which affects its
business or its ability to consummate the transactions contemplated herein.
(h) The Statement of Assets and Liabilities of the
Acquiring Fund at July 31, 1996, has been audited by Arthur Andersen, LLP,
independent auditors, and has been prepared in accordance with generally
accepted accounting principles, consistently applied, and such statement
(copies of which have been furnished to the Acquired Fund) fairly reflects
the financial condition of the Acquiring Fund as of such date, and there
are no liabilities of the Acquiring Fund, contingent or otherwise, as of
such date not disclosed therein.
(i) Since July 31, 1996, there has not been any 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 any indebtedness for borrowed
money.
(j) At the Closing Date, all federal and other tax returns
and reports of the Acquiring Fund required by law then to be filed 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.
(k) For each fiscal year (or part thereof) 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.
(l) All issued and outstanding shares of each class of the
Acquiring Fund are, and including the Acquiring Fund Shares issued to the
Acquired Fund Shareholders pursuant hereto, 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.
(m) All issued and outstanding shares of each class of the
Acquiring Fund are, and, including the Acquiring Fund Shares issues to the
Acquired Fund Shareholders pursuant hereto, at the Closing Date will be,
duly registered under the 1933 Act and registered, or exempt from
registration, to the extent required thereby under each state securities or
"blue sky" law of every state in which the Acquiring Fund has offered or
sold its shares.
(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 Acquiring Fund's Board of Trustees, and
this Agreement will constitute the valid and legally binding obligation of
the Acquiring Fund enforceable in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws relating to or affecting creditors'
rights generally and court decisions with respect thereto, and to general
principles of equity and the discretion of the court before which a
proceeding is brought (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(o) 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 be true and correct in all material respects. Further, on the
effective date of the Registration Statement and on the Closing Date, the
Prospectus/Proxy Statement (only insofar as it relates to the Acquiring
Fund) will not contain any untrue statement of 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 Acquiring Fund has entered into an agreement under
which Federated will assume the expenses of the Reorganization, including
legal fees of the Acquiring Fund, registration fees, transfer tax (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.
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 and appropriate 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 its Treasurer.
5.5 The Acquiring Fund shall have filed with the SEC a
Registration Statement on Form N-14 complying in all material respects with
the requirements of the 1933 Act, the Securities Exchange Act of 1934, as
amended, the 1940 Act, and applicable rules and regulations thereunder,
relating to a meeting of the shareholders of the Acquired Fund to be called
to consider and act upon the transactions contemplated herein, and such
Registration Statement shall have been declared effective by the SEC. The
Acquired Fund agrees to provide the Acquiring Fund with information
relating to the Acquired Fund required under such Acts, rules and
regulations for inclusion in the Registration Statement on Form N-14.
5.6 For a period of two years after the Closing Date, Federated
and the Acquiring Fund agree to waive fees and/or reimburse expenses in
order to maintain actual expense ratios of the Institutional Shares Class
and Institutional Service Shares Class as follows:
CLASS ACTUAL EXPENSE RATIO
Institutional Shares Class .35%
Institutional Service Shares Class .60%
5.7 The Acquiring Fund agrees to use all best 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.
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 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 Lehman and 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 and known liabilities, 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 or the Assistant
Treasurer of the Acquired Fund.
6.3 The Acquired Fund and Lehman shall have delivered to the
Acquiring Fund on the Closing Date a certificate executed in their names by
their respective Presidents or Vice Presidents and their Treasurers or
Assistant Treasurers, in form and substance reasonably satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of
the Acquired Fund and Lehman 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 for herein shall be subject 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 and
Federated 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 and Federated shall have delivered to the
Acquired Fund on the Closing Date a certificate executed in their names by
their respective Presidents or Vice Presidents and their Treasurers or
Assistant Treasurers, in form and substance reasonably satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund and Federated 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.
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 beneficial
interest of the Acquired Fund in accordance with the laws of the
Commonwealth of Massachusetts and the Acquired Fund's Declaration of Trust
and By-Laws.
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 parties hereto and all other consents,
orders, permits, and exemptions of federal, state, and local regulatory
authorities (including those of the Securities and Exchange 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 Reserved.
8.5 The Form N-14 shall have become effective under the 1933 Act
by the SEC 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.
8.6 The Acquiring Fund and the Acquired Fund shall have received
an opinion of Howard & Howard Attorneys, P.C., substantially to the effect
that, on the basis of the existing provisions of the Code, current
administrative rules, and court decisions, for federal income tax purposes:
(a) The transfer of all or substantially all of the
Acquired Fund assets in exchange for the Acquiring Fund Shares and the
distribution of the Acquiring Fund Shares to the shareholders of the
Acquired Fund 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).
8.7 The Acquired Fund and Lehman shall have received the opinion
of counsel to the Acquiring Fund, dated as of the date of the Closing,
addressed to and in form and substance satisfactory to the Acquired Fund
and Lehman to the effect that: (i) the Acquiring Fund is a business trust
duly organized and existing under the laws of the Commonwealth of
Massachusetts, has the power to own all its properties and assets and to
carry on its business as a registered investment company, and each of its
Portfolios is a validly existing series of shares of such business trust;
(ii) the Acquiring Fund is an open-end investment company of the management
type registered under the Investment Company Act of 1940; (iii) this
Agreement and the Reorganization provided for herein and the execution of
this Agreement have been duly authorized and approved by all requisite
action of the Acquiring Fund and this Agreement has been duly executed and
delivered by the Acquiring Fund and is a valid and binding obligation of
the Acquiring Fund enforceable against the Acquiring Fund in accordance
with its terms, except as affected by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing; (iv) the Registration Statement on
Form N-14 has been declared effective under the Securities Act of 1933 and
to such counsel's knowledge after reasonable investigation no stop order
has been issued or threatened suspending its effectiveness and no order
pursuant to Section 8(e) of the 1940 Act has been issued; (v) to such
counsel's knowledge, no consent, approval, order or other authorization of
any federal or Massachusetts state court or administrative or regulatory
agency is required for the Acquiring Fund to enter into this Agreement or
carry out its term that has not already been obtained, other than where the
failure to obtain any such consent, approval, order or authorization would
not have a material adverse effect on the operations of the Acquiring Fund;
(vi) to such counsel's knowledge, the Acquiring Fund is not in breach or
violation of any material contract to which it is a party, which breach or
violation would (a) affect the ability of the Acquiring Fund to enter into
this Agreement or consummate the transactions contemplated hereby,
including the Reorganization, or (b) have a material adverse effect on the
business or financial condition of the Acquiring Fund; (vii) to such
counsel's knowledge, no federal or Massachusetts state administrative or
regulatory proceeding is pending or threatened against the Acquiring Fund
which would (a) affect the ability the Acquiring Fund to enter into this
Agreement or consummate the transactions contemplated hereby, including the
Reorganization; or (b) have a material adverse effect on the business or
financial condition of the Acquiring Fund; and (viii) the Shares to be
issued in the Reorganization have been duly authorized and upon issuance
thereof in accordance with this Agreement, will be validly issued, fully
paid and nonassessable and no Acquiring Fund Shareholder has any preemptive
rights to subscription or purchase in respect thereof; (ix) the
Registration Statement on Form N-14 (except as to financial data contained
therein as to which no opinion is given) complies as to form in all
material respects with the requirements of the Securities Act of 1933, the
Securities Exchange Act of 1934 and the 1940 Act and the rules and
regulations thereunder; (x) such counsel does not know of any legal,
administrative or governmental proceedings, investigation, order, decree or
judgment of any court or governmental body, only insofar as they relate to
the Acquiring Fund or its assets or property, pending, threatened or
otherwise existing on or before the effective date of the Registration
Statement on Form N-14 or the Closing Date, which are required to be
described in such Registration Statement or to be filed as exhibits thereto
which are not described and filed as required; (xi) the execution and
delivery of this Agreement did not, and the consummation of the
transactions contemplated hereby will not result in a violation of the
Acquiring Fund's Declaration of Trust or By-laws or in violation of any
material agreement to which the Acquiring Fund is a party or by which it or
its property is bound.
9. TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may
be terminated and abandoned by resolution of the Board of Trustees of the
Acquired Fund or the Board of Trustees of the Acquiring Fund, at any time
prior to the Closing Date without liability on the part of either party
hereto, if circumstances should develop that, in the opinion of the Board
of Directors or Trustees, as the case may be, of either party hereto,
determines that proceeding with the Agreement is not in the best interests
of that party's shareholders.
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 (other than the agreement of
Federated to assume the expenses of the Reorganization) or the trustees,
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
(other than that set forth in Section 8.6) may be waived by the Board of
Trustees of the Acquiring Fund or the Board of Trustees 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. AMENDMENT.
This Agreement and Plan of Reorganization may be amended at any time
by the mutual agreement of the Acquired Fund and the Acquiring Fund,
authorized by their respective Boards of Trustees and notwithstanding
approval thereof by the Acquired Fund Shareholders; provided, that if so
approved by the Acquired Fund Shareholders, no amendment shall be made
which substantially changes the terms hereof.
12. NO BROKER'S OR FINDER'S FEE.
The Acquired Fund and the Acquiring Fund each represents that there is
no person with whom it has dealt who by reason of such dealings is entitled
to any broker's or finder's or other similar fee or commission arising out
of the transactions contemplated by this Agreement and Plan of
Reorganization.
13. MISCELLANEOUS.
13.1 The representations and warranties included or provided for
herein shall not survive consummation of the transactions contemplated
hereby
13.2 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.
13.3 This Agreement shall be governed and construed in accordance
with the internal laws of the State of New York, without giving effect to
such jurisdiction's conflicts of laws principles.
13.4 This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered, shall be deemed
to be an original.
13.5 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 or 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.
13.6 The Acquired Fund is hereby expressly put on notice of the
limitation of liability as set forth in the Declaration of Trust of the
Acquiring Fund and agrees that the obligations assumed by the Acquiring
Fund pursuant to this Agreement shall be limited in any case to the
Acquiring Fund and its assets and the Acquired Fund shall not seek
satisfaction of any such obligation from the shareholders of the Acquiring
Fund, the Trustees, officers, employees, or agents of the Acquiring Fund or
any of them.
13.7 The Acquiring Fund is hereby expressly put on notice of the
limitation of liability as set forth in the Declaration of Trust of the
Acquired Fund and agrees that the obligations assumed by the Acquired Fund
pursuant to this Agreement shall be limited in any case to the Acquired
Fund and its assets and the Acquiring Fund shall not seek satisfaction of
any such obligation from the shareholders of the Acquired Fund, the
Trustees, officers, employees, or agents of the Acquired Fund or any of
them.
13.8 If the transactions contemplated by this Agreement and Plan
of Reorganization have not been completed by January 31, 1997, the
Agreement shall automatically terminate on that date unless a later date is
agreed to in writing by the parties hereto.
IN WITNESS WHEREOF, each of the Acquired Fund, Lehman, the
Acquiring Fund, and Federated have 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.
Attest
Chris Ritch
Assistant Secretary
Attest:
Chris Ritch
Assistant Secretary
Attest:
J. Crilley Kelly
Assistant Secretary
Attest:
Stephen A. Keen
Secretary
Acquired Fund:
LEHMAN BROTHERS INSTITUTIONAL FUNDS GROUP TRUST, ON BEHALF OF ITS
PORTFOLIO, GOVERNMENT OBLIGATIONS MONEY MARKET FUND
By: /s/ Andrew D.Gordon
Name: Andrew D. Gordon
Title: President
Lehman:
LEHMAN BROTHERS GLOBAL ASSET MANAGEMENT INC.
By: /s/ Andrew D.Gordon
Name: Andrew D. Gordon
Title: President
Acquiring Fund:
MONEY MARKET OBLIGATIONS TRUST ON BEHALF OF ITS PORTFOLIO, GOVERNMENT
OBLIGATIONS FUND
By: /s/Richard B. Fisher
Vice President
Federated:
FEDERATED MANAGEMENT
By: /s/William D. Dawson, III
Name: William D. Dawson, III
Title: Executive Vice President
I:\b358\rcr\federated\agreement.reo
STATEMENT OF ADDITIONAL INFORMATION{PRIVATE }
October 15, 1996
Acquisition of the assets of TAX-FREE OBLIGATIONS MONEY
MARKET FUND, a portfolio of Lehman Brothers Institutional Funds Group Trust
53 State Street
Boston, Massachusetts 02109-2873
Telephone No: 1-800-851-3134
By and in exchange for shares of
TAX-FREE OBLIGATIONS FUND, a portfolio of Money Market
Obligations Trust
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone No. 1-800-245-5000
This Statement of Additional Information dated October 15, 1996 is not a
prospectus. A Prospectus/Proxy Statement dated October 15, 1996, related
to the above-referenced matter may be obtained from Money Market
Obligations Trust, on behalf of its portfolio, Tax-Free Obligations Fund,
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. This
Statement of Additional Information should be read in conjunction with such
Prospectus/Proxy Statement.
TABLE OF CONTENTS
Statement of Additional Information of Tax-Free Obligations Fund, a
portfolio of Money Market Obligations Trust, dated September 30, 1995.
Statement of Additional Information of Tax-Free Money Market Fund, a
portfolio of Lehman Brothers Institutional Funds Group Trust, dated May 30,
1996.
Financial Statements of Tax-Free Obligations Fund, a portfolio of Money
Market Obligations Trust, dated July 31, 1996.
Financial Statements of Tax-Free Money Market Fund, a portfolio of Lehman
Brothers Institutional Funds Group Trust, dated January 31, 1996.
Unaudited Financial Statements of Tax-Free Money Market Fund, a portfolio
of Lehman Brothers Institutional Funds Group Trust, dated July 31, 1996.
The Statement of Additional Information of Tax-Free Obligations Fund
(the "Portfolio"), a portfolio of Money Market Obligations Trust (the
"Trust"), is incorporated by reference to the Trust's Post-Effective
Amendment No. 20 to its Registration Statement on Form N-1A (File No. 33-
31602) which was filed with the Securities and Exchange Commission on or
about
September 23, 1996.
The Statement of Additional Information of Tax-Free Money Market Fund (the
"Fund"), a portfolio of Lehman Brothers Institutional Funds Group Trust, is
incorporated by reference to Lehman Brothers Institutional Funds Group
Trust's Post-Effective Amendment No. 11 to its Registration Statement on
Form N-1A (File No. 33-55034) which was filed with the Securities and
Exchange Commission on or about March 29, 1996. A copy may be obtained
from the Trust at Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779. Telephone Number: 1-800-245-5000.
The audited financial statements of the Portfolio dated July 31, 1996, are
incorporated by reference to the Annual Report to Shareholders of the
Portfolio which was filed with the Securities and Exchange Commission
pursuant to Section 30(b) of the Investment Company Act of 1940, as
amended, on or about September 29, 1996.
The audited financial statements of the Fund dated January 31, 1996, are
incorporated by reference to the Annual Report to Shareholders of the Fund
which was filed with the Securities and Exchange Commission pursuant to
Section 30(b) of the Investment Company Act of 1940, as amended, on or
about March 27, 1996.
The unaudited financial statements of the Fund dated July 31, 1996, are
incorporated by reference to the Semi-Annual Report to Shareholders of the
Fund which was filed with the Securities and Exchange Commission pursuant
to Section 30(b) of the Investment Company Act of 1940, as amended, on or
about October 2, 1996.
Pro forma financial statements have not been prepared because, as of
September 9, 1996, the net asset value of the Fund did not exceed ten
percent of the net asset value of the Registrant's Portfolio.
IF YOU WISH TO RETURN YOUR BALLOT BY FAX, PLEASE SEND TO:
PROXY ADVANTAGE
FAX NUMBER: (617) 573-1985
ATTN: PETER DALY
FIRST DATA INVESTOR
SERVICES GROUP, INC.
ONE EXCHANGE PLACE
53 STATE STREET
BOSTON, MASSACHUSETTS 02109
TAX-FREE MONEY MARKET FUND
SPECIAL MEETING OF SHAREHOLDERS
NOVEMBER 13, 1996
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned Shareholder of the
above referenced fund, a portfolio of Lehman Brothers Institutional Funds
Group Trust, hereby appoints Andy Gordon and Jennifer Marre or any of them,
true and lawful attorneys, with power of substitution of each, to vote all
shares of the above-referenced fund, a portfolio of Lehman Brothers
Institutional Funds Group Trust, which the undersigned is entitled to vote,
at the Special Meeting of Shareholders to be held on November 13, 1996, at
Lehman Brothers, 3 World Financial Center-26th Floor, New York, New York
10285 at 11:20 a.m., and at any adjournment thereof.
Discretionary authority is hereby conferred as to all other manners as may
properly come before the Special Meeting.
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
CHOICE MADE ON THIS BALLOT. IF THIS PROXY IS RETURNED AND NO CHOICE IS
INDICATED AS TO ANY MATTER, THIS PROXY WILL BE VOTED AFFIRMATIVELY ON THE
MATTER PRESENTED.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND
RETAIN THE TOP PORTION.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS X KEEP
THIS PORTION FOR YOUR RECORDS
FOR THE TREASURY INSTRUMENTS MONEY MARKET FUND II, TAX-FREE MONEY MARKET
FUND,
AND GOVERNMENT OBLIGATIONS MONEY MARKET FUND DETACH AND RETURN THIS PORTION
ONLY
VOTE ON PROPOSAL
APPROVEDISAPPROVEABSTAIN
" " "
1. APPROVAL OF A PROPOSED AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN LEHMAN BROTHERS INSTITUTIONAL FUNDS GROUP TRUST, ON
BEHALF OF THE ABOVE-NAMED FUND AND MONEY MARKET OBLIGATIONS
TRUST (THE "TRUST"), ON BEHALF OF ITS PORTFOLIO, TAX-FREE
OBLIGATIONS FUND (THE ``PORTFOLIO'') WHEREBY THE TRUST WOULD
ACQUIRE ALL OF THE ASSETS AND KNOWN LIABILITIES OF THE FUND IN
EXCHANGE FOR INSTITUTIONAL SHARES AND INSTITUTIONAL SERVICE
SHARES OF THE PORTFOLIO TO BE DISTRIBUTED PRO RATA BY THE FUND
TO HOLDERS OF CLASS A SHARES AND CLASS B SHARES, RESPECTIVELY,
IN COMPLETE LIQUIDATION OF THE FUND.
" " " 2. ELECTION OF TRUSTEES TO SERVE UNTIL THE NEXT ANNUAL MEETING
OF SHAREHOLDERS AND UNTIL THEIR SUCCESSORS HAVE BEEN ELECTED
AND QUALIFIED. VOTE IS MADE FOR THE ELECTION OF ALL NOMINATED
TRUSTEES LISTED EXCEPT THOSE WHOSE NAME(S) ARE WRITTEN BELOW:
J.F. DONAHUE, T.G. BIGLEY, J.T. CONROY, JR., W.J. COPELAND,
J.C. DONAHUE, J.E. DOWD, L.D. ELLIS, M.D., E.L. FLAHERTY, JR.,
P.E. MADDEN, G.F. MEYER, J.E. MURRAY, JR., W.W. POSVAR, AND
M.P. SMUTS
(NOTE: To withhold authority to vote for one or more nominees, write the
nominee(s) name(s) on the line below.)
PLEASE SIGN EXACTLY YOUR NAME(S) AS IT APPEARS BELOW. 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 SHARES
ARE OWNED JOINTLY, ALL PARTIES SHOULD SIGN.
SIGNATURE SIGNATURE (JOINT OWNERS) DATE
