SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [ X ] Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
FIXED INCOME SECURITIES, INC.
(Name of Registrant as Specified In Its Charter)
FEDERATED INVESTORS
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary proxy materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------
4) Date Filed:
FIXED INCOME SECURITIES, INC.
Federated Limited Term Fund
Federated Limited Term Municipal Fund
Federated Strategic Income Fund
PROXY STATEMENT - PLEASE VOTE!
TIME IS OF THE ESSENCE ...VOTING ONLY TAKES A FEW MINUTES AND YOUR
PARTICIPATION IS IMPORTANT! ACT NOW TO HELP THE COMPANY AVOID ADDITIONAL
EXPENSE.
Fixed Income Securities, Inc. (the "Company") will hold a special meeting of
shareholders of Federated Limited Term Fund, Federated Limited Term Municipal
Fund and Federated Strategic Income Fund (collectively, the "Funds") on
_____________, 1999. It is important for you to vote on the issues described in
this Proxy Statement. We recommend that you read the Proxy Statement in its
entirety; the explanations will help you to decide on the issues.
Following is an introduction to the proposals and the process.
WHY AM I BEING ASKED TO VOTE?
Mutual funds are required to obtain shareholders' votes for certain types
of changes, like those included in this Proxy Statement. As a shareholder, you
have a right to vote on these changes.
WHAT ISSUES AM I BEING ASKED TO VOTE ON?
The proposals include the election of Directors and changes to the Funds'
fundamental investment policies. The Board also recommends amendments to the
Articles of Incorporation.
WHY ARE INDIVIDUALS RECOMMENDED FOR ELECTION TO THE BOARD OF DIRECTORS?
The Funds are devoted to serving the needs of their shareholders, and the Board
is responsible for managing the Company's business affairs to meet those needs.
The Board represents the shareholders and can exercise all of the Funds' powers,
except those reserved only for shareholders.
Directors are selected on the basis of their education and professional
experience. Candidates are chosen based on their distinct interest in, and
capacity for understanding the complexities of, the operation of a mutual fund.
These individuals bring considerable experience to the impartial oversight of a
fund's operation.
The Proxy Statement includes a brief description of each nominee's history and
current position with the Company, if applicable.
WHY ARE THE FUNDS' "FUNDAMENTAL POLICIES" BEING CHANGED OR ELIMINATED?
Every mutual fund has certain investment policies that can be changed only with
the approval of its shareholders. These are referred to as "fundamental"
investment policies.
In some cases, these policies were adopted to reflect regulatory, business, or
industry conditions that no longer exist or no longer are necessary. In other
cases, advances in the securities markets and the economy have created different
procedures and techniques that affect the Funds' operations.
By reducing the number of "fundamental policies," the Funds may be able to
minimize the costs and delays associated with frequent shareholder meetings.
Also, the investment adviser's ability to manage the Funds' assets may be
enhanced and investment opportunities increased.
The proposed amendments will:
o reclassify as operating policies those fundamental policies that are not
required to be fundamental by the Investment Company Act of 1940, as
amended ("1940 Act");
o simplify and modernize the policies that are required to be "fundamental"
by the 1940 Act; and
o eliminate fundamental policies that are no longer required by the
securities laws of individual states.
Federated is a conservative money manager. Our highly trained professionals are
dedicated to making investment decisions in the best interest of the Funds and
their shareholders. The Board believes that the proposed changes will be applied
responsibly by the Funds' investment adviser.
WHY ARE SOME "FUNDAMENTAL POLICIES" BEING RECLASSIFIED AS "OPERATING POLICIES?"
As noted above, some "fundamental policies" have been redefined as "operating
policies." Operating policies do not require shareholder approval to be changed.
This gives the Company's Board additional flexibility to determine whether to
participate in new investment opportunities and to meet industry changes
promptly.
WHY IS THE BOARD RECOMMENDING AMENDMENTS TO THE ARTICLES OF INCORPORATION?
The Articles organizing the Company were prepared many years ago. Since then,
developments in the investment company industry and changes in the law have
resulted in many improvements. The Board is recommending a change to the
Articles of Incorporation that permits the Funds to benefit from these
developments.
HOW DO I VOTE MY SHARES?
You may vote in person at the special meeting of shareholders or complete and
return the enclosed Proxy Card. IF YOU SIGN AND RETURN THE PROXY CARD WITHOUT
INDICATING A PREFERENCE, YOUR VOTE WILL BE CAST "FOR" ALL THE PROPOSALS.
You may also vote by telephone at 1-800-690-6903, or through the Internet at
WWW.PROXYVOTE.COM. If you choose to help save the Company time and postage costs
by voting through the Internet or by telephone, please don't return your Proxy
Card. If you do not respond at all, we may contact you by telephone to request
that you cast your vote.
WHO DO I CALL IF I HAVE QUESTIONS ABOUT THE PROXY STATEMENT?
Call your Investment Professional or a Federated Client Service
Representative. Federated's toll-free number is 1-800-341-7400.
After careful consideration, the Board of Directors has unanimously approved
these proposals. The Board recommends that you read the enclosed materials
carefully and vote FOR all proposals.
PRELIMINARY
FIXED INCOME SECURITIES, INC.
FEDERATED LIMITED TERM FUND
FEDERATED LIMITED TERM MUNICIPAL FUND
FEDERATED STRATEGIC INCOME FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ___________, 1999
A special meeting of the shareholders of Federated Limited Term
Fund (the "Limited Term Fund"), Federated Limited Term Municipal Fund (the
"Municipal Fund") and Federated Strategic Income Fund (the "Income Fund")
(individually referred to as a "Fund," and collectively referred to as the
"Funds"), portfolios of Fixed Income Securities, Inc. (the "Company"), will be
held at 5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7000, at 2:00 p.m.
(Eastern time), on __________, 1999 to consider proposals:
(1) To elect seven Directors.
(2) To make changes to the Funds' fundamental investment
policies:
(a) To amend the Funds' fundamental investment policies
regarding diversification;
(b) To amend the Funds' fundamental investment policies
regarding borrowing money and issuing senior securities;
(c) To amend the Funds' fundamental investment policies
regarding investments in real estate;
(d) To amend the Funds' fundamental investment policies
regarding investments in commodities;
(e) To amend the Funds' fundamental investment policies
regarding underwriting securities;
(f) To amend the Funds' fundamental investment policies
regarding lending by the Funds (Limited Term Fund and Income Fund ONLY);
(g) To amend the Funds' fundamental investment policies
regarding concentration of the Funds' investments in
the securities of companies in the same industry;
(h) To amend, and to make non-fundamental, the Funds'
fundamental investment policies regarding buying securities on margin; and
(i) To amend, and to make non-fundamental, the Funds'
fundamental investment policies regarding pledging assets.
(3) To eliminate the Funds' fundamental investment policies on
selling securities short (Limited Term Fund and Income Fund ONLY).
(4) To approve amendments to and a restatement of the
Company's Articles of Incorporation:
(a) To permit the Board of Directors to liquidate assets
of a series or class without seeking shareholder
approval to the extent permitted under Maryland law;
and
(b) To permit the Company to change the name of a series
or class without shareholder approval.
To transact such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed ___________, 1999 as the record date for
determination of shareholders entitled to vote at the meeting.
By Order of the Board of Directors,
John W. McGonigle
Secretary
__________, 1999
YOU CAN HELP THE COMPANY AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP
LETTERS TO ENSURE A QUORUM BY PROMPTLY SIGNING AND RETURNING THE ENCLOSED PROXY.
IF YOU ARE UNABLE TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY SO THAT THE NECESSARY QUORUM MAY BE REPRESENTED AT THE SPECIAL
MEETING. THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
<PAGE>
TABLE OF CONTENTS
ABOUT THE PROXY SOLICITATION AND THE SPECIAL MEETING............................
ELECTION OF SEVEN DIRECTORS.....................................................
ABOUT THE ELECTION OF DIRECTORS.................................................
DIRECTORS STANDING FOR ELECTION.................................................
NOMINEES NOT PRESENTLY SERVING AS DIRECTORS.....................................
APPROVAL OF CHANGES TO THE FUNDS' FUNDAMENTAL INVESTMENT
POLICIES....................................................................
APPROVAL OF THE ELIMINATION OF THE FUNDS' FUNDAMENTAL INVESTMENT
POLICIES ON SELLING SECURITIES SHORT........................................
APPROVAL OF AMENDMENTS TO AND A RESTATEMENT OF THE COMPANY'S
ARTICLES OF INCORPORATION...................................................
INFORMATION ABOUT THE COMPANY...................................................
PROXIES, QUORUM AND VOTING AT THE SPECIAL MEETING...............................
SHARE OWNERSHIP OF THE DIRECTORS................................................
DIRECTOR COMPENSATION...........................................................
OFFICERS AND INCUMBENT DIRECTORS OF THE COMPANY.................................
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY....................
<PAGE>
PRELIMINARY
PROXY STATEMENT
FIXED INCOME SECURITIES, INC.
FEDERATED LIMITED TERM FUND
FEDERATED LIMITED TERM MUNICIPAL FUND
FEDERATED STRATEGIC INCOME FUND
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
ABOUT THE PROXY SOLICITATION AND THE SPECIAL MEETING
The enclosed proxy is solicited on behalf of the Board of Directors of
the Company (the "Board" or "Directors"). The proxies will be voted at a special
meeting of shareholders of the Company, which presently consists of three
portfolios or series, Federated Limited Term Fund (the "Limited Term Fund"),
Federated Limited Term Municipal Fund (the "Municipal Fund") and Federated
Strategic Income Fund (the "Income Fund"), to be held on ___________, 1999, at
5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7000, at 2:00 p.m. (such
special meeting and any adjournment or postponement thereof are referred to as
the "Special Meeting").
The cost of the solicitation, including the printing and mailing of
proxy materials, will be borne by the Company. In addition to solicitations
through the mails, proxies may be solicited by officers, employees, and agents
of the Company or, if necessary, a communications firm retained for this
purpose. Such solicitations may be by telephone, telegraph, through the Internet
or otherwise. Any telephonic solicitations will follow procedures designed to
ensure accuracy and prevent fraud, including requiring identifying shareholder
information, recording the shareholder's instructions, and confirming to the
shareholder after the fact. Shareholders who communicate proxies by telephone or
by other electronic means have the same power and authority to issue, revoke, or
otherwise change their voting instruction as shareholders submitting proxies in
written form. The Company may 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.
The Board has reviewed the proposed changes recommended in the
investment policies of the Funds, and the proposed amendment to the Company's
Articles of Incorporation, and has approved them, subject to shareholder
approval. The purposes of the Special Meeting are set forth in the accompanying
Notice. The Directors know of no business other than that mentioned in the
Notice that will be presented for consideration at the Special Meeting. Should
other business properly be brought before the Special Meeting, proxies will be
voted in accordance with the best judgment of the persons named as proxies. This
Proxy Statement and the enclosed proxy card are expected to be mailed on or
about ___________, 1999, to shareholders of record at the close of business on
___________, 1999 (the "Record Date"). On the Record Date, the Funds had
outstanding the following number of shares of common stock:
Limited Term Fund __________ shares
Municipal Fund __________ shares
Income Fund __________ shares
The Funds' annual reports, which include audited financial statements
for each Fund for the fiscal year ended November 30, 1998, were previously
mailed to shareholders. The Funds' semi-annual reports, which contain unaudited
financial statements for the period ended May 31, 1999, were also previously
mailed to shareholders. The Company will promptly provide, without charge and
upon request, to each person to whom this Proxy Statement is delivered, a copy
of a Fund's annual report and/or semi-annual report. Requests for an annual
report or semi-annual report for each Fund may be made by writing to the
Company's principal executive offices or by calling the Company. The Company's
principal executive offices are located at Federated Investors Funds, 5800
Corporate Drive, Pittsburgh, Pennsylvania 15237-7000. The Company's toll-free
telephone number is 1-800-341-7400.
PROPOSAL #1: ELECTION OF SEVEN DIRECTORS
The persons named as proxies intend to vote in favor of the election of
Thomas G. Bigley, Nicholas P. Constantakis, John F. Cunningham, J. Christopher
Donahue, Charles F. Mansfield, Jr., John E. Murray, Jr. and John S. Walsh
(collectively, the "Nominees") as Directors of the Company. Messrs. Bigley,
Constantakis, Mansfield and Murray are presently serving as Directors. If
elected by shareholders, it is anticipated that Messrs. Cunningham, Donahue and
Walsh will assume their responsibilities as Directors on January 1, 2000. Please
see "ABOUT THE ELECTION OF DIRECTORS" below for current information about the
Nominees, and "OFFICERS AND INCUMBENT DIRECTORS OF THE COMPANY" in this Proxy
Statement for information about the Directors who have previously been elected
by shareholders. Except as otherwise provided in this Proxy Statement, it is
anticipated that each of the incumbent Directors will continue to serve as a
Director after the Special Meeting.
Messrs. Bigley and Murray were appointed Directors on November 15, 1994
and February 14, 1995, respectively, to fill vacancies created by the decision
to expand the size of the Board. Messrs. Constantakis and Mansfield were
appointed Directors on February 23, 1998 and January 1, 1999, respectively, also
to fill vacancies resulting from the decision to expand the size of the Board.
Messrs. Cunningham, Donahue and Walsh are being proposed for election as
Directors to fill vacancies anticipated to result from the resignations of three
current Directors, Messrs. Fisher, Flaherty and Posvar.
All Nominees have consented to serve if elected. If elected, the
Directors will hold office without limit in time until death, resignation,
retirement, or removal or until the next meeting of shareholders to elect
Directors and the election and qualification of their successors. Election of a
Director is by a plurality of the votes cast by shareholders of the Funds at the
Special Meeting. The seven individuals receiving the greatest number of votes at
the Special Meeting will be deemed to be elected Directors.
If any Nominee for election as a Director named above shall by reason of
death or for any other reason become unavailable as a candidate at the Special
Meeting, votes pursuant to the enclosed proxy will be cast for a substitute
candidate by the proxies named on the proxy card, or their substitutes, present
and acting at the Special Meeting. Any such substitute candidate for election as
a Director who is an "interested person" (as such term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act")) of the Company
shall be nominated by the Executive Committee. The selection of any substitute
candidate for election as a Director who is not an "interested person" shall be
made by a majority of the Directors who are not "interested persons" of the
Company. The Board has no reason to believe that any Nominee will become
unavailable for election as a Director.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE TO ELECT AS DIRECTORS THE NOMINEES FOR ELECTION
TO THE BOARD OF DIRECTORS OF THE COMPANY
ABOUT THE ELECTION OF DIRECTORS
Maryland law does not require the election of the Company's Directors
each year, and shareholders should anticipate that, prior to election of
successor Directors, incumbent Directors will hold office during the lifetime of
the Company, except that: (a) any Director may resign; (b) any Director may be
removed by written instrument signed by at least two-thirds of the number of
Directors prior to such removal; (c) any Director who requests to be retired or
who has become mentally or physically incapacitated may be retired by written
instrument signed by a majority of the other Directors; and (d) a Director may
be removed at any special meeting of the shareholders by a vote of two-thirds of
the outstanding shares of the Company. In case a vacancy shall exist for any
reason, the remaining Directors will fill such vacancy by appointment of another
Director. The Directors will not fill any vacancy by appointment if, immediately
after filling such vacancy, less than two-thirds of the Directors then holding
office would have been elected by the shareholders. If, at any time, less than a
majority of the Directors holding office have been elected by the shareholders,
the Directors then in office will call a shareholders' meeting for the purpose
of electing Directors to fill vacancies. Otherwise, there will normally be no
meeting of shareholders called for the purpose of electing Directors.
Set forth below is a listing of: (i) Directors standing for election,
and (ii) Nominees standing for election who are not presently serving as
Directors, along with their addresses, birthdates, present positions with the
Company, if applicable, and principal occupations during the past five years:
DIRECTORS STANDING FOR ELECTION
THOMAS G. BIGLEY
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Director
Director or Trustee of the Federated Fund Complex; Director and Member of the
Executive Committee, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Director and Member
of Executive Committee, University of Pittsburgh.
NICHOLAS P. CONSTANTAKIS
175 Woodshire Drive
Pittsburgh, PA
Birthdate: September 3, 1939
Director
Director or Trustee of the Federated Fund Complex; formerly, Partner, Andersen
Worldwide SC.
CHARLES F. MANSFIELD, JR.
80 South Road
Westhampton Beach, NY
Birthdate: April 10, 1945
Director or Trustee of some of the Funds in the Federated Fund Complex;
management consultant.
JOHN E. MURRAY, JR., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Director
Director or Trustee of the Federated Fund Complex; President, Law Professor,
Duquesne University; Consulting Partner, Mollica & Murray.
NOMINEES NOT PRESENTLY SERVING AS DIRECTORS
JOHN F. CUNNINGHAM
353 El Brillo Way
Palm Beach, FL
Birthdate: March 5, 1943
Director or Trustee of some of the Funds in the Federated Fund Complex;
Chairman, President and Chief Executive Officer, Cunningham & Co., Inc.
(specialized financial consulting organization); Trustee Associate, Boston
College; Director, EMC Corporation; formerly, Director, Redgate Communications.
J. CHRISTOPHER DONAHUE
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President or Executive Vice President of the Federated Fund Complex; Director or
Trustee of some of the Funds in the Federated Fund Complex; President and
Director, Federated Investors, Inc., Federated Investment Management Company and
Federated Global Research Corp.; President, Passport Research, Ltd.; Trustee,
Federated Shareholder Services Company; Director, Federated Services Company.
Mr. Donahue is the son of John F. Donahue, Chairman and Director of the Company.
JOHN S. WALSH
2007 Sherwood Drive
Valparaiso, IN
Birthdate: November 28, 1957
Director or Trustee of some of the Funds in the Federated Fund Complex;
President and Director, Heat Wagon, Inc.; President and Director, Manufacturers
Products, Inc.; President, Portable Heater Parts, a division of Manufacturers
Products, Inc.; Director, Walsh & Kelly, Inc.; formerly, Vice President, Walsh &
Kelly, Inc.
APPROVAL OF CHANGES TO THE FUNDS'
FUNDAMENTAL INVESTMENT POLICIES
INTRODUCTION TO PROPOSALS #2(A) TO #2(I) AND #3
The 1940 Act (which was adopted to protect mutual fund shareholders)
requires investment companies such as the Funds to adopt certain specific
investment policies or restrictions that can be changed only by shareholder
vote. An investment company may also elect to designate other policies or
restrictions that may be changed only by shareholder vote. Both types of
policies and restrictions are often referred to as "fundamental policies." These
policies and restrictions limit the investment activities of the Funds'
investment adviser.
After the Company was formed in 1991, legal and regulatory requirements
applicable to mutual funds changed. For example, certain restrictions imposed by
state laws and regulations were preempted by the National Securities Markets
Improvement Act of 1996 ("NSMIA") and no longer apply. As a result, the Funds
are subject to fundamental policies that are no longer required to be
fundamental, and to other policies that are no longer required at all.
Accordingly, the Directors have authorized the submission to the Funds'
shareholders for their approval, and recommend that shareholders approve, the
amendment, reclassification and/or elimination of certain of the Funds'
fundamental policies.
The proposed amendments would:
(i) simplify, modernize and standardize the fundamental policies that are
required to be stated under the 1940 Act;
(ii) reclassify as operating policies those fundamental policies that are not
required to be fundamental under the 1940 Act; and
(iii)eliminate those fundamental policies that are no longer required by the
securities laws of the various states.
By reducing the number of policies that can be changed only by
shareholder vote, the Directors believe that the Funds would be able to minimize
the costs and delays associated with holding future shareholder meetings to
revise fundamental policies that become outdated or inappropriate. The Directors
also believe that the investment adviser's ability to manage the Funds' assets
in a changing investment environment will be enhanced and that investment
management opportunities will be increased by these changes. The chart that
follows briefly describes the differences between fundamental policies and
non-fundamental policies.
<TABLE>
<CAPTION>
FUNDAMENTAL POLICIES NON-FUNDAMENTAL POLICIES
<S> <C> <C>
Who must approve changes in Board of Directors and Board of Directors
the policies? shareholders
How quickly can a change in Fairly slowly, since a vote Fairly quickly, because the
the policies be made? of shareholders is required change can be accomplished by
action of the Board of
Directors
What is the relative cost Costly to change because a Less costly to change because
to change a policy? shareholder vote requires a change can be accomplished
holding a meeting of by action of the Board of
shareholders Directors
</TABLE>
The recommended changes are specified below. Each Proposal will be voted
on separately by each Fund (unless otherwise noted), and the approval of each
Proposal for each Fund will require the approval of a majority of the
outstanding voting shares of the Fund as defined in the 1940 Act. (See "PROXIES,
QUORUM AND VOTING AT THE SPECIAL MEETING" below.)
DESCRIPTION OF PROPOSED CHANGES
The proposed standardized fundamental investment policies cover those
areas for which the 1940 Act requires the Funds to have a fundamental
restriction. They satisfy current regulatory requirements and are written to
provide flexibility to respond to future legal, regulatory, market or technical
changes. THE PROPOSED STANDARDIZED CHANGES WILL NOT AFFECT THE FUNDS' INVESTMENT
OBJECTIVES. ALTHOUGH THE PROPOSED CHANGES IN FUNDAMENTAL POLICIES WILL ALLOW THE
FUNDS GREATER FLEXIBILITY TO RESPOND TO FUTURE INVESTMENT OPPORTUNITIES, THE
BOARD OF DIRECTORS OF THE COMPANY DOES NOT ANTICIPATE THAT THE CHANGES,
INDIVIDUALLY OR IN THE AGGREGATE, WILL RESULT AT THIS TIME IN A MATERIAL CHANGE
IN THE LEVEL OF INVESTMENT RISK ASSOCIATED WITH INVESTMENTS IN THE FUNDS. NOR
DOES THE BOARD OF DIRECTORS ANTICIPATE THAT THE PROPOSED CHANGES IN FUNDAMENTAL
INVESTMENT POLICIES WILL, INDIVIDUALLY OR IN THE AGGREGATE, CHANGE MATERIALLY
THE MANNER IN WHICH THE FUNDS ARE MANAGED.
The following is the text and a summary description of the proposed
changes to the Funds' fundamental policies and restrictions. Any non-fundamental
policy may be modified or eliminated by the Directors at any future date without
any further approval of shareholders. Shareholders should note that certain of
the fundamental policies that are treated separately below currently are
combined within a single existing fundamental policy.
Presently, if a Fund adheres to a fundamental or non-fundamental
percentage restriction at the time of an investment or transaction, a later
increase or decrease in the percentage resulting from a change in the value of
the Fund's portfolio securities or the amount of its total assets does not
create a violation of the policy. This policy will continue to apply for any of
the proposed changes that are approved.
PROPOSAL #2: APPROVAL OF AMENDMENTS TO THE FUNDS'
FUNDAMENTAL INVESTMENT POLICIES
PROPOSAL #2(A): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT
POLICIES REGARDING DIVERSIFICATION
Under the 1940 Act, the Funds' policies relating to the diversification
of their investments must be fundamental. The 1940 Act prohibits a "diversified"
mutual fund from purchasing securities of any one issuer if, at the time of
purchase, more than 5% of the fund's total assets would be invested in
securities of that issuer or the fund would own or hold more than 10% of the
outstanding voting securities of that issuer, except that up to 25% of the
fund's total assets may be invested without regard to this limitation. The 5%
limitation does not apply to securities issued by or guaranteed by the U.S.
government, its agencies or instrumentalities or to securities issued by other
open-end investment companies.
The Funds' present policies regarding diversification state:
LIMITED TERM FUND:
"With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities of any one issuer (other
than cash, cash items (including instruments issued by a U.S. branch of
a domestic bank or savings and loan having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment)
or securities issued or guaranteed by the government of the United
States or its agencies or instrumentalities and repurchase agreements
collateralized by U.S. government securities) if as a result more than
5% of the value of its total assets would be invested in the securities
of that issuer."
MUNICIPAL FUND AND INCOME FUND:
"With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities of any one issuer (other
than cash, cash items or securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities and
repurchase agreements collateralized by U.S. government securities) if
as a result more than 5% of the value of its total assets would be
invested in the securities of that issuer or the Fund would own more
than 10% of the outstanding voting securities of that issuer."
In order to afford the Funds' investment adviser maximum flexibility in
managing the Funds' assets, the Directors propose to amend the Funds'
diversification policy to be consistent with the definition of a diversified
investment company under the 1940 Act. The restated policy complies with the
U.S. Securities and Exchange Commission's (the "SEC" or the "Commission")
general definition of diversification. The new policy would specifically add
securities of other investment companies to the list of issuers which are
excluded from the 5% limitation. Upon approval of the Funds' shareholders, the
fundamental investment policy governing diversification for each Fund will be
amended as follows:
"With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities of any one issuer (other
than cash; cash items; securities issued or guaranteed by the government
of the United States or its agencies or instrumentalities and repurchase
agreements collateralized by such U.S. government securities; and
securities of other investment companies) if, as a result, more than 5%
of the value of its total assets would be invested in securities of that
issuer, or the Fund would own more than 10% of the outstanding voting
securities of that issuer."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(B): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICIES
REGARDING BORROWING MONEY AND ISSUING SENIOR SECURITIES
The 1940 Act requires a Fund to have a fundamental investment policy
defining its ability to borrow money or issue senior securities. In general,
limitations on borrowing are designed to protect shareholders and their
investments by restricting a Fund's ability to subject its assets to any claims
of creditors or senior security holders who would be entitled to dividends or
rights on liquidation of the Fund prior to the rights of shareholders.
Shareholders of the Funds are being asked to approve a new standardized
fundamental policy for borrowing and the issuance of senior securities designed
to reflect all current regulatory requirements. The Funds' current policies
state:
LIMITED TERM FUND:
"The Fund will not issue senior securities except that the Fund may
borrow money and engage in reverse repurchase agreements in amounts up
to one-third of the value of its total assets, including the amounts
borrowed. The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure or to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while
borrowings in excess of 5% of its total assets are outstanding. During
the period any reverse repurchase agreements are outstanding, but only
to the extent necessary to assure completion of the reverse repurchase
agreements, the Fund will restrict the purchase of portfolio instruments
to money market instruments maturing on or before the expiration date of
the reverse repurchase agreements."
MUNICIPAL FUND:
"The Fund will not issue senior securities except that the Fund may
borrow money and engage in reverse repurchase agreements in amounts up
to one-third of the value of its total assets, including the amounts
borrowed. The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure or to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while
borrowings in excess of 5% of its total assets are outstanding."
INCOME FUND:
"The Fund will not issue senior securities except as required by forward
commitments to purchase securities or currencies and except that the
Fund may borrow money and engage in reverse repurchase agreements in
amounts up to one-third of the value of its total assets, including the
amounts borrowed. The Fund will not borrow money or engage in reverse
repurchase agreements for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate
management of the portfolio by enabling the Fund to meet redemption
requests when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of its total assets are
outstanding. During the period any reverse repurchase agreements are
outstanding, but only to the extent necessary to assure completion of
the reverse repurchase agreements, the Fund will restrict the purchase
of portfolio instruments to money market instruments maturing on or
before the expiration date of the reverse repurchase agreements."
SENIOR SECURITIES-GENERALLY. A "senior security" is an obligation of a mutual
fund with respect to its earnings or assets that takes precedence over the
claims of the fund's shareholders with respect to the same earnings or assets.
The 1940 Act generally prohibits a fund from issuing senior securities, in order
to limit the use of leverage. In general, an investment company uses leverage
when it borrows money to enter into securities transactions, or acquires an
asset without being required to make payment until a later time.
SEC staff interpretations allow a fund to engage in a number of types of
transactions which might otherwise be considered to create "senior securities"
or "leverage," so long as the fund meets certain collateral requirements
designed to protect shareholders. For example, some transactions that may create
senior security concerns include short sales, certain options and futures
transactions, reverse repurchase agreements and securities transactions that
obligate a fund to pay money at a future date (such as when-issued, forward
commitment or delayed delivery transactions). When engaging in such
transactions, a fund must set aside money or securities to meet the SEC staff's
collateralization requirements. This procedure effectively eliminates a fund's
ability to engage in leverage for these types of transactions.
BORROWING-GENERALLY. Under the 1940 Act, an investment company is permitted to
borrow up to 5% of its total assets for temporary purposes. A fund may borrow
only from banks. If borrowings exceed 5%, the fund must have assets totaling at
least 300% of the borrowing when the amount of the borrowing is added to the
fund's other assets. The effect of this provision is to allow a fund to borrow
from banks in amounts up to one-third (33 1/3%) of its total assets (including
the amount borrowed). Investment companies typically borrow money to meet
redemptions in order to avoid a forced, unplanned sale of portfolio securities.
This technique allows a fund greater flexibility to buy and sell portfolio
securities for investment or tax considerations, rather than for cash flow
considerations. The costs of borrowing, however, can also reduce the fund's
total return.
The borrowing restrictions of the Funds permit borrowing only as a
temporary, extraordinary or emergency measure, and restrict the purchase of new
securities while reverse repurchase agreements are outstanding (in the case of
the Limited Term Fund and the Municipal Fund). The proposed investment policy
would provide greater flexibility, and would permit the Funds to borrow money,
directly or indirectly (such as through reverse repurchase agreements, as
permitted by the Funds' policies), and issue senior securities within the limits
established under the 1940 Act or under any rule or regulation of the
Commission, or any SEC staff interpretation thereof. As a matter of operating
policy, the Funds do not presently intend to engage in leveraging. Upon
shareholder approval, the fundamental investment policy governing borrowing
money and issuing senior securities for each Fund will state:
"The Fund may borrow money, directly or indirectly, and issue senior
securities to the maximum extent permitted under the 1940 Act."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(C): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICIES
REGARDING INVESTMENTS IN REAL ESTATE
Under the 1940 Act, a Fund's policy concerning investments in real
estate must be fundamental. The Funds currently have fundamental investment
policies prohibiting the purchase or sale of real estate, and which state:
LIMITED TERM FUND AND INCOME FUND:
"The Fund will not buy or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or sale of
real estate or in securities which are secured by real estate or
interests in real estate."
MUNICIPAL FUND:
"The Fund will not buy or sell real estate, including limited
partnership interests in real estate, although it may invest in
municipal securities which are secured by real estate or interests in
real estate."
The proposed fundamental investment policy will not permit a Fund to
purchase real estate directly, but will permit the purchase of securities whose
payments of interest or principal are secured by mortgages or other rights to
real estate in the event of default. The investment policy will also enable the
Funds to invest in companies within the real estate industry, provided such
investments are consistent with the Funds' investment objectives and policies.
Upon shareholder approval, the fundamental investment policies of the Funds
governing investments in real estate will state:
"The Fund may not purchase or sell real estate, provided that this
restriction does not prevent the Fund from investing in issuers which
invest, deal, or otherwise engage in transactions in real estate or
interests therein, or investing in securities that are secured by real
estate or interests therein. The Fund may exercise its rights under
agreements relating to such securities, including the right to enforce
security interests and to hold real estate acquired by reason of such
enforcement until that real estate can be liquidated in an orderly
manner."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(D): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICIES
REGARDING INVESTMENTS IN COMMODITIES
Under the 1940 Act, a Fund's policy concerning investments in
commodities must be fundamental. Each Fund is currently subject to a fundamental
restriction prohibiting the purchase or sale of commodities, which states:
LIMITED TERM FUND:
"The Fund will not purchase or sell commodities except that the Fund may
purchase and sell financial futures contracts and related options."
MUNICIPAL FUND:
"The Fund will not purchase or sell commodities, except that the Fund
may purchase and sell financial futures contracts and related options to
the extent that obligations under such contracts or transactions
represent not more than 20% of the Fund's total assets."
INCOME FUND:
"The Fund will not purchase or sell commodities, except that the Fund
may purchase and sell financial futures contracts and related options.
Further, the Fund may engage in transactions in foreign currencies and
may purchase and sell options on foreign currencies and indices for
hedging purposes."
Historically, the most common types of commodities have been physical
commodities such as wheat, cotton, rice and corn. However, under federal law,
futures contracts are considered to be commodities and, therefore, financial
futures contracts, such as futures contracts related to currencies, stock
indices or interest rates are considered to be commodities. Financial futures
contracts enable an investment company to buy (or sell) the right to receive the
cash difference between the contract price for an underlying asset or index and
the future market price, if the market price is higher. If the future price is
lower, the investment company is obligated to pay (or, if the investment company
sold the contract, the investment company receives) the amount of the decrease.
Investment companies often desire to invest in financial futures contracts and
options related to such contracts for hedging or other investment reasons.
The proposed policy would provide appropriate flexibility for the Funds
to invest in financial futures contracts and related options. As proposed, the
policy is broad enough to permit investment in financial futures instruments for
either investment or hedging purposes. Using financial futures instruments can
involve substantial risks, and would be utilized only if the Funds' investment
adviser determined that such investments are advisable and such practices were
disclosed in the Funds' prospectuses or statement of additional information. As
a matter of non-fundamental operating policy, for purposes of the proposed
policy, investments in transactions involving futures contracts and options,
forward currency contracts, swap transactions and other financial contracts that
settle by payment of cash are not deemed to be investments in commodities.
Upon shareholder approval, the standardized fundamental investment
policy governing investments in commodities for the Funds will state:
"The Fund may not purchase or sell physical commodities, provided that
the Fund may purchase securities of companies that deal in commodities."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(E): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT
POLICIES REGARDING UNDERWRITING SECURITIES
Under the 1940 Act, a Fund's policy relating to underwriting is required
to be fundamental. Each Fund currently is subject to a fundamental investment
policy prohibiting it from acting as an underwriter of the securities of other
issuers, and states:
"The Fund will not underwrite any issue of securities, except as it may
be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of restricted securities which the Fund may
purchase pursuant to its investment objective, policies, and
limitations."
A person or company generally is considered an underwriter under the
federal securities laws if it participates in the public distribution of
securities of OTHER ISSUERS, usually by purchasing the securities from the
issuer and re-selling the securities to the public. From time to time, a mutual
fund may purchase a security for investment purposes which it later sells or
redistributes to institutional investors or others under circumstances where a
Fund could possibly be considered to be an underwriter under the technical
definition of underwriter contained in the securities laws.
Upon shareholder approval, the fundamental investment policy concerning
underwriting will state:
"The Fund may not underwrite the securities of other issuers, except
that the Fund may engage in transactions involving the acquisition,
disposition or resale of its portfolio securities, under circumstances
where it may be considered to be an underwriter under the Securities Act
of 1933."
This does not constitute a substantive change in the Funds' fundamental policy.
Rather, it reflects a restatement to the standardized language now to be used by
the Federated Funds, and is submitted to shareholders for approval as a result
of the 1940 Act's requirements.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(F): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICIES
REGARDING LENDING BY THE FUNDS
THIS PROPOSAL PERTAINS TO THE LIMITED TERM FUND AND THE INCOME FUND ONLY.
Under the 1940 Act, a Fund's policy concerning lending must be
fundamental. The Limited Term Fund and the Income Fund currently are subject to
fundamental investment policies limiting their ability to make loans which
state:
"The Fund will not lend any of its assets, except portfolio securities
up to one-third of the value of its total assets. This shall not prevent
the Fund from purchasing or holding U.S. government obligations, money
market instruments, variable rate demand notes, bonds, debentures,
notes, certificates of indebtedness, or other debt securities, entering
into repurchase agreements, or engaging in other transactions where
permitted by the Fund's investment objective, policies and limitations."
In order to ensure that the Funds may invest in certain debt securities
or repurchase agreements, which could technically be characterized as the making
of loans, the Funds' current fundamental policies specifically permit such
investments. In addition, the Funds' fundamental policies, explicitly permit the
Funds to lend their portfolio securities to broker-dealers or institutional
investors. Securities lending is a practice that has become common in the mutual
fund industry and involves the temporary loan of portfolio securities to parties
who use the securities for the settlement of securities transactions. The
collateral delivered to a Fund in connection with such a transaction is then
invested to provide the Fund with additional income it might not otherwise have.
Securities lending involves certain risks if the borrower fails to
return the securities. However, management believes that with appropriate
controls, such as 100% or greater collateralization of the loan and regular
monitoring of the creditworthiness of the counterparty, the ability to engage in
securities lending does not materially increase the risks to which the Funds
currently are subject. In addition, securities on loan cannot generally be sold
until the term of the loan is over.
Upon approval of the Funds' shareholders, the fundamental investment
policy governing lending assets by the Limited Term Fund and the Income Fund
will state:
"The Fund may not make loans, provided that this restriction does not
prevent the Fund from purchasing debt obligations, entering into
repurchase agreements, lending its assets to broker/dealers or
institutional investors and investing in loans, including assignments
and participation interests."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(G): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICIES
REGARDING CONCENTRATION OF THE FUNDS' INVESTMENTS IN THE SECURITIES OF COMPANIES
IN THE SAME INDUSTRY
Under the 1940 Act, a Fund's policy relating to the concentration of its
investments in securities of companies in a single industry must be fundamental.
The SEC staff considers a mutual fund to "concentrate" its investments if 25% or
more of its total assets are invested in a particular industry (not counting
U.S. government securities, bank instruments issued by domestic banks and
municipal securities).
The Funds currently are subject to fundamental investment policies
prohibiting them from concentrating their investments in a single industry.
These policies provide:
LIMITED TERM FUND:
"The Fund will not invest 25% or more of the value of its total assets
in any one industry, except it may invest 25% or more of the value of
its total assets in securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities."
INCOME FUND:
"The Fund will not invest 25% or more of the value of its total assets
in any one industry or in government securities of any one foreign
country, except it may invest 25% or more of the value of its total
assets in securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities."
MUNICIPAL FUND:
"The Fund will not generally invest 25% or more of the value of its
total assets in any one industry. Governmental issuers of municipal
securities are not considered part of any "industry." The Fund may
invest more than 25% of the value of its total assets in a broader
segment of the municipal securities market, such as revenue obligations
of hospitals or other health care facilities, housing agency revenue
obligations, or airport revenue obligations. In addition, for temporary
defensive purposes, the Fund may invest 25% or more of the value of its
total assets in securities issued or guaranteed by the U.S. government,
its agencies, or instrumentalities."
Upon the approval by the Funds' shareholders, the fundamental investment
policy governing concentration for the Funds will provide:
"The Fund will not make investments that will result in the
concentration of its investments in the securities of issuers primarily
engaged in the same industry. Government securities, municipal
securities and bank instruments will not be deemed to constitute an
industry. To conform to the current view of the SEC staff that only
domestic bank instruments may be excluded from industry concentration
limitations, as a matter of non-fundamental policy, the Fund will not
exclude foreign bank instruments from industry concentration limitation
tests as long as the policy of the SEC remains in effect. As a
non-fundamental operating policy, the Fund will consider concentration
to be the investment of more than 25% of the value of its total assets
in any one industry."
The Company's Board has also approved related non-fundamental policies
for each of the Funds, which will be adopted if the new fundamental policy is
approved by shareholders. These policies provide that in applying the
concentration restriction: (1) utility companies will be divided according to
their services, for example, gas, gas transmission, electric and telephone will
each be considered a separate industry; (2) financial service companies will be
classified according to the end users of their services, for example, automobile
finance, bank finance and diversified finance will each be considered a separate
industry; and (3) asset-backed securities will be classified according to the
underlying assets securing such securities.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(H): TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE FUNDS'
FUNDAMENTAL INVESTMENT POLICIES REGARDING BUYING SECURITIES ON MARGIN
The Funds are not required to have a fundamental restriction on margin
transactions. Accordingly, it is proposed that each Fund's existing fundamental
policy be replaced with a non-fundamental restriction. Each Fund's current
policy provides:
LIMITED TERM FUND:
"The Fund will not purchase securities on margin, provided that the Fund
may obtain short-term credits necessary for the clearance of purchases
and sales of securities, and further provided that the Fund may make
margin deposits in connection with its use of financial options and
futures, forward and spot currency contracts, swap transactions and
other financial contracts or derivative instruments."
MUNICIPAL FUND:
"The Fund will not purchase any securities on margin, other than in
connection with the purchase and sale of financial futures, but may
obtain such short-term credits as are necessary for clearance of
transactions."
INCOME FUND:
"The Fund will not purchase securities on margin, other than in
connection with the purchase and sale of options, financial futures and
options on financial futures, but may obtain such short-term credits as
are necessary for clearance of transactions."
The proposed non-fundamental policy makes some changes in wording from
the existing fundamental restriction, and contemplates that the Funds may engage
in the same types of transactions as they are presently authorized to do. Upon
the approval of the elimination of the existing fundamental policy on engaging
in margin transactions, each Fund would become subject to the following
non-fundamental policy:
"The Fund will not purchase securities on margin, provided that the Fund
may obtain short-term credits necessary for the clearance of purchases
and sales of securities, and further provided that the Fund may make
margin deposits in connection with its use of financial options and
futures, forward and spot currency contracts, swap transactions, and
other financial contracts or derivative instruments."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(I): TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE FUNDS'
FUNDAMENTAL INVESTMENT POLICIES REGARDING PLEDGING ASSETS
The Funds are not required to have a fundamental investment restriction
with respect to the pledging of assets. To maximize the Funds' flexibility in
this area, the Board of the Company believes the policy on pledging assets
should be made non-fundamental. The non-fundamental policy would be similar to
the fundamental policies proposed to be eliminated, which state:
LIMITED TERM FUND AND INCOME FUND:
"The Fund will not mortgage, pledge, or hypothecate any of its assets,
provided that this shall not apply to the transfer of securities in
connection with any permissible borrowing or to collateral arrangements
in connection with permissible activities."
MUNICIPAL FUND:
"The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may pledge assets having
a market value not exceeding the lesser of the dollar amounts borrowed
or 10% of the value of total assets at the time of the borrowing."
The Board does not expect this change to have a material impact on the
Funds' operations. Establishing the policy as non-fundamental, however, would
enable the Board to change this policy in the future without shareholder
approval. Although the Municipal Fund is eliminating the 10% limitation on
pledging assets, the Municipal Fund, along with the Limited Term Fund and the
Income Fund, intend, as a matter of operating policy, to engage in these
transactions in the same manner as presently.
Upon the approval of the elimination of the existing fundamental policy
on pledging assets, each Fund would become subject to the following
non-fundamental policy:
"The Fund will not mortgage, pledge, or hypothecate any of its assets,
provided that this shall not apply to the transfer of securities in
connection with any permissible borrowing or to collateral arrangements
in connection with permissible activities."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3: ELIMINATION OF THE FUNDS'
FUNDAMENTAL INVESTMENT POLICIES ON SELLING SECURITIES SHORT
THIS PROPOSAL PERTAINS TO THE LIMITED TERM FUND AND THE INCOME FUND ONLY.
The Board has determined that the Limited Term Fund's and the Income
Fund's current fundamental investment policies pertaining to selling securities
short are unnecessary and should be removed. Until NSMIA was adopted in 1996,
the securities laws of several states required every investment company which
intended to sell its shares in those states to adopt policies governing a
variety of operational issues, including a policy prohibiting short sales of
securities. As a consequence of those restrictions, the Limited Term Fund and
the Income Fund each adopted an investment policy related to selling securities
short, and agreed that the policies would be changed only upon the approval of
shareholders. These policies provide:
LIMITED TERM FUND:
"The Fund will not sell securities short unless: (i) during the time the
short position is open, it owns an equal amount of the securities sold
or securities readily and freely convertible into or exchangeable,
without payment of additional consideration for securities of the same
issue as, and equal in amount to, the securities sold short; and not
more than 10% of the Fund's net assets (taken at current value) is held
as collateral for such sales at any one time."
INCOME FUND:
"The Fund will not sell securities short."
Since the prohibition on short sales is no longer required under current
law, and in order to maximize the Limited Term Fund's and the Income Fund's
flexibility in this area, the management of the Company has recommended, and the
Board has determined, that the policy should be removed. Notwithstanding the
elimination of this fundamental restriction, the Funds expect to continue not to
engage in short sales of securities, except to the extent that the Fund's
contemporaneously own or have the right to acquire, at no additional cost,
securities identical to, or convertible into or exchangeable for, those sold
short.
This Proposal will be voted on separately by each of the Limited Term
Fund and the Income Fund, and the approval of the change for each Fund will
require the affirmative vote of a majority of the outstanding voting shares of
the Fund as defined in the 1940 Act. (See "PROXIES, QUORUM AND VOTING AT THE
SPECIAL MEETING" below.)
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #4: TO APPROVE AMENDMENTS TO AND A RESTATEMENT OF THE
COMPANY'S ARTICLES OF INCORPORATION
Mutual funds, such as the Company, are required to organize under the
laws of a state and to create and be bound by organizational documents outlining
how they will operate. In the case of the Company, these organizational
documents are the Articles of Incorporation and the By-Laws. Since the adoption
of the Articles of Incorporation in 1991, the market for mutual funds has
evolved, requiring mutual funds to be more flexible in their operation so that
they may respond quickly to changes in the market. Certain items in the
Company's current Articles of Incorporation prohibit the Company from responding
quickly and favorably to changing markets without going to the expense and delay
of holding a shareholder meeting.
Accordingly, the Directors have approved, and have authorized the
submission to the shareholders of the Company for their approval, certain
amendments to the Company's Articles of Incorporation. If these amendments are
approved by shareholders, and in light of other amendments that have been
adopted to the Articles of Incorporation that do not require shareholder
approval, it is contemplated that the Amended and Restated Articles of
Incorporation will, following Board approval, be filed in Maryland following the
Special Meeting. The approval of each of the proposed amendments will require
the affirmative vote of a majority of the aggregate number of shares entitled to
be cast thereon. (See "PROXIES, QUORUM AND VOTING AT THE SPECIAL MEETING"
below.)
PROPOSAL #4(A): TO AMEND AND
RESTATE THE COMPANY'S
ARTICLES OF INCORPORATION
TO PERMIT THE BOARD OF
DIRECTORS TO LIQUIDATE
THE ASSETS OF A SERIES OR
CLASS WITHOUT SEEKING
SHAREHOLDER APPROVAL TO
THE EXTENT PERMITTED
UNDER MARYLAND LAW
Shareholders are being asked to approve amendments to the Company's
Amended and Restated Articles of Incorporation to permit the Directors, to the
extent permissible under Maryland law from time to time, to sell and convert
into money (i.e., liquidate) all of the assets of the Company, or a class or
series of the Company, and then redeem all outstanding shares of any series or
class of the Company. Currently, a vote of shareholders is required to
liquidate the Company. The Directors have determined that the current
restriction presents a cumbersome structure under which the best interest of
all of the Company's shareholders may not be served. By requiring the Directors
to solicit a shareholder vote, by means of a proxy solicitation for a meeting
of shareholders, the Articles of Incorporation as currently in effect greatly
hinder the Directors' ability to effectively act on decisions about the
continued viability of the Company or a series of class thereof. If it is
determined that it is no longer advisable to continue the Company, or a series
or class thereof, it may not be in the best interest of shareholders to incur
the substantial additional expense of a shareholder meeting when it is more
important to preserve for shareholders those assets that remain. Depending on
the terms of Maryland corporate law, which may change from time to time, if
this proposal is approved by shareholders, the Directors may be authorized to
liquidate a class or series of the Company by Board action without a further
shareholder vote. The Directors have no present intention of liquidating the
Company or any Fund.
If approved by shareholders, the Amended and Restated Articles of
Incorporation would provide substantially to the effect that:
"To the extent permitted under Maryland law, without the vote of the
shares of any class of stock of the Company then outstanding, the
Corporation may, upon approval of a majority of the Board of Directors,
sell and convert into money all the assets of any class or series of the
Corporation. Upon making provision for the payment of all outstanding
obligations, taxes and other liabilities, accrued or contingent,
belonging to the Corporation, or any class or series thereof, the
Directors shall distribute the remaining assets of the Corporation
ratably among the holders of the outstanding shares of the Corporation,
or any affected class or series thereof."
In the event that the amendments to the Amended and Restated Articles
of Incorporation to allow the Directors to liquidate the Company, or a series
or class thereof, as set forth above are not approved by the shareholders, the
provisions of the Amended and Restated Articles of Incorporation shall remain
as they are presently in the Articles of Restatement, and the Directors will
consider what action, if any, should be taken.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #4(B): TO AMEND AND RESTATE THE ARTICLES OF INCORPORATION TO
PERMIT THE BOARD OF DIRECTORS TO CHANGE THE NAME OF THE COMPANY WITHOUT SEEKING
SHAREHOLDER APPROVAL
Shareholders are being asked to approve an amendment to the Company's
Articles of Incorporation to permit the Directors to change the name of the
Company, or the name of any class or series of the Company, without first
seeking shareholder approval. Under the current Articles of Incorporation, it is
not explicitly clear that the name of the Company, or the name of any class or
series of the Company, may be changed without a prior shareholder vote. The
Directors have determined that it would be a cumbersome requirement to solicit
shareholder approval for a name change and hence, that the best interests of the
Company's shareholders would not be served. The requirement that the Directors
solicit a shareholder vote, by means of a proxy solicitation for a meeting of
shareholders, hinders the Company's ability to efficiently act on decisions
about the continued effective marketing of the Company. If it is determined to
be advisable to change the name of the Company, or of any class or series of the
Company, it would not be in the best interests of shareholders to incur the
substantial expense and delay of a shareholder meeting to approve the change.
In order to eliminate any ambiguity under the current Articles of
Incorporation, shareholders are being asked to approve an amendment to the
Articles of Incorporation that will specify that the Directors may change the
name of the Company, or of any class or series, without seeking shareholder
approval. The proposed amendment would provide the Company with greater
flexibility, so that, in the event that circumstances warrant changing a name,
the modification could be effected relatively quickly and inexpensively. The
Directors are recommending that shareholders approve the proposed amendment.
If approved by shareholders, the Amended and Restated Articles of
Incorporation would provide substantially to the effect that:
"The Board of Directors may redesignate a class of stock whether or not
shares of such class are issued and outstanding, provided that such
redesignation does not affect the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption of such class of
stock."
In the event that the amendment to the Articles of Incorporation to
allow the Directors to change the name of the Company, or of any class or series
thereof, is not approved by the shareholders, the Articles of Incorporation will
remain as it currently exists and the Directors will consider what action, if
any, should be taken.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
INFORMATION ABOUT THE COMPANY
PROXIES, QUORUM AND VOTING AT THE SPECIAL MEETING
Only shareholders of record on the Record Date will be entitled to vote
at the Special Meeting. Each share of each Fund is entitled to one vote.
Fractional shares are entitled to proportionate shares of one vote. Under the
Investment Company Act of 1940, the favorable vote of: (a) the holders of 67% or
more of the outstanding voting securities present at the Special Meeting, if the
holders of 50% or more of the outstanding voting securities of the Funds are
present or represented by proxy; or (b) the vote of the holders of more than 50%
of the outstanding voting securities, whichever is less, is required to approve
all of the proposals, except the election of Directors and the amendments to the
Articles of Incorporation.
Any person giving a proxy has the power to revoke it any time prior to
its exercise by executing a superseding proxy or by submitting a written notice
of revocation to the Secretary of the Company. In addition, although mere
attendance at the Special Meeting will not revoke a proxy, a shareholder present
at the Special Meeting may withdraw his or her proxy and vote in person. All
properly executed and unrevoked proxies received in time for the Special Meeting
will be voted in accordance with the instructions contained in the proxies. IF
NO INSTRUCTION IS GIVEN ON THE PROXY, THE PERSONS NAMED AS PROXIES WILL VOTE THE
SHARES REPRESENTED THEREBY IN FAVOR OF THE MATTERS SET FORTH IN THE ATTACHED
NOTICE.
In order to hold the Special Meeting, a "quorum" of shareholders must be
present. Holders of one-third of the total number of outstanding shares of the
Company, present in person or by proxy, shall be required to constitute a quorum
for the purpose of voting on the proposals made pertaining to the election of
Directors and the amendments to the Articles of Incorporation. Holders of
one-third of the total number of outstanding shares of each Fund, present in
person or by proxy, shall be required to constitute a quorum for the purpose of
voting on the other proposals.
For purposes of determining a quorum for transacting business at the
Special Meeting, abstentions and broker "non-votes" (that is, proxies from
brokers or nominees indicating that such persons have not received instructions
from the beneficial owner or other persons entitled to vote shares on a
particular matter with respect to which the brokers or nominees do not have
discretionary power) will be treated as shares that are PRESENT but which have
not been VOTED. For this reason, abstentions and broker non-votes will have the
effect of a "no" vote for purposes of obtaining the requisite approval of some
of the proposals.
If a quorum is not present, the persons named as proxies may vote those
proxies that have been received to adjourn the Special Meeting to a later date.
In the event that a quorum is present but sufficient votes in favor of one or
more of the proposals have not been received, the persons named as proxies may
propose one or more adjournments of the Special Meeting to permit further
solicitations of proxies with respect to such proposal(s). All such adjournments
will require the affirmative vote of a majority of the shares present in person
or by proxy at the session of the Special Meeting to be adjourned. The persons
named as proxies will vote AGAINST an adjournment those proxies that they are
required to vote against the proposal, and will vote in FAVOR of such an
adjournment all other proxies that they are authorized to vote. A shareholder
vote may be taken on the proposals in this proxy statement prior to any such
adjournment if sufficient votes have been received for approval.
As referred to in this Proxy Statement, the "Federated Fund Complex,"
"The Funds" or "Funds" includes the following investment companies: Cash Trust
Series, Inc.; Cash Trust Series II; CCB Funds; Federated Adjustable Rate U.S.
Government Fund, Inc.; Federated American Leaders Fund, Inc.; Federated ARMs
Fund; Federated Core Trust; Federated Equity Funds; Federated Equity Income
Fund, Inc.; Federated Fund for U.S. Government Securities, Inc.; Federated GNMA
Trust; Federated Government Income Securities, Inc.; Federated Government Trust;
Federated High Income Bond Fund, Inc.; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Insurance Series; Federated Municipal
Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated
Municipal Trust; Federated Short-Term Municipal Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds, Inc.;
Edward D. Jones & Co. Daily Passport Cash Trust; Liberty Term Trust, Inc. -
1999; Liberty U.S. Government Money Market Trust; Managed Series Trust; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market
Obligations Trust II; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Regions Funds; RIGGS Funds; Tax-Free Instruments Trust; The
Planters Funds; WesMark Funds; WCT Funds; and World Investment Series, Inc.
SHARE OWNERSHIP OF THE DIRECTORS
Officers and Directors of the Company own less than 1% of the Company's
outstanding shares.
At the close of business on the Record Date, the following persons owned, to the
knowledge of management, more than 5% of the outstanding shares of the Funds:
LIMITED TERM FUND: [TO BE INSERTED]
MUNICIPAL FUND: [TO BE INSERTED]
INCOME FUND: [TO BE INSERTED]
<TABLE>
<CAPTION>
DIRECTOR COMPENSATION
NAME AND POSITION AGGREGATE TOTAL COMPENSATION PAID FROM FUND COMPLEX+
WITH COMPANY COMPENSATION
FROM COMPANY1#
<S> <C> <C>
John F. Donahue*@ $0 $0 for the Company and 54 other
Chairman and Director investment companies in the Fund Complex
Thomas G. Bigley $688.14 $113,860.22 for the Company and 54
Director other investment companies in the Fund Complex
John T. Conroy, Jr. $757.08 $125,264.48 for the Company and 54
Director other investment companies in the Fund Complex
Nicholas P. Constantakis $688.14 $47,958.02 for the Company and 29 other
Director investment companies in the Fund Complex
William J. Copeland $757.08 $125,264.48 for the Company and 54
Director other investment companies in the Fund Complex
Lawrence D. Ellis, M.D.* $688.14 $113,860.22 for the Company and 54
Director other investment companies in the Fund Complex
Richard B. Fisher*++ $0 $0 for the Company and 6 other
President and Director investment companies in the Fund Complex
Edward L. Flaherty, Jr., $757.08 $125,264.48 for the Company and 54
Esq.@ ++ other investment companies in the Fund
Director Complex
Peter E. Madden $688.14 $113,860.22 for the Company and 54
Director other investment companies in the Fund Complex
Charles F. Mansfield, Jr.** $0 $0 for the Company and 26 other
Director investment companies in the Fund Complex
John E. Murray, Jr., J.D., $688.14 $113,860.22 for the Company and 54
S.J.D.@ other investment companies in the Fund
Director Complex
Wesley W. Posvar++ $688.14 $113,860.22 for the Company and 54
Director other investment companies in the Fund Complex
Marjorie P. Smuts $688.14 $113,860.22 for the Company and 54
Director other investment companies in the Fund Complex
</TABLE>
1 Information is furnished for the fiscal year ended November 30, 1998.
# The aggregate compensation is provided for the Company which is comprised of
three portfolios.
+ The information is provided for the last calendar year.
* This Director is deemed to be an "interested person" as defined in the
1940 Act.
** Mr. Mansfield became a Director of the Company on January 1, 1999. He
did not receive any fees from the Fund Complex as of the last calendar year.
++ If the Nominees are elected by shareholders at the Special Meeting, it
is anticipated that Messrs. Fisher, Flaherty and Posvar will resign as
Directors.
@ Member of the Executive Committee.
During the fiscal year ended November 30, 1998, there were four meetings
of the Board of Directors. The interested Directors, other than Dr. Ellis, do
not receive fees from the Company. Dr. Ellis is an interested person by reason
of the employment of his son-in-law by Federated Securities Corp. All Directors
were reimbursed for expenses for attendance at Board of Directors meetings.
The Executive Committee of the Board of Directors handles the
responsibilities of the Board between meetings of the Board. Other than its
Executive Committee, the Company has one Board committee, the Audit Committee.
Generally, the function of the Audit Committee is to assist the Board of
Directors in fulfilling its duties relating to the Company's accounting and
financial reporting practices and to serve as a direct line of communication
between the Board of Directors and the independent auditors. The specific
functions of the Audit Committee include recommending the engagement or
retention of the independent auditors, reviewing with the independent auditors
the plan and the results of the auditing engagement, approving professional
services provided by the independent auditors prior to the performance of such
services, considering the range of audit and non-audit fees, reviewing the
independence of the independent auditors, reviewing the scope and results of the
Company's procedures for internal auditing, and reviewing the Company's system
of internal accounting controls.
Messrs. Conroy, Copeland, and Murray serve on the Audit Committee. These
Directors are not interested Directors of the Company. During the fiscal year
ended November 30, 1998, there were four meetings of the Audit Committee. All of
the members of the Audit Committee were present for each meeting. Each member of
the Audit Committee receives an annual fee of $100 plus $25 for attendance at
each meeting and is reimbursed for expenses of attendance.
OFFICERS AND INCUMBENT DIRECTORS OF THE COMPANY
The executive officers of the Company are elected annually by the Board
of Directors. Each officer holds the office until qualification of his
successor. The names and birthdates of the executive officers of the Company, as
well as the incumbent Directors of the Company who have previously been elected
by shareholders, and their principal occupations during the last five years, are
set forth below:
John F. Donahue
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Director
Date Became a Director and an Officer: October 15, 1991
Chief Executive Officer and Director or Trustee of the Federated Fund
Complex; Chairman and Director, Federated Investors, Inc.; Chairman and Trustee,
Federated Investment Management Company, Federated Management, and Federated
Research; Chairman and Director, Federated Research Corp. and Federated Global
Research Corp.; Chairman, Passport Research, Ltd. Mr. Donahue is the father of
J. Christopher Donahue, Executive Vice President of the Company and Nominee for
Director.
Richard B. Fisher
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birthdate: May 17, 1923
President and Director
Date Became a Director and an Officer: October 28, 1991 and November 4, 1991
President or Vice President of some of the Funds in the Federated Fund Complex;
Director or Trustee of some of the Funds in the Federated Fund Complex;
Executive Vice President, Federated Investors, Inc.; Chairman and Director,
Federated Securities Corp.
John T. Conroy, Jr.
Wood/IPC Commercial Dept.
John R. Wood Associates, Inc. Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Director
Date Became a Director: October 15, 1991
Director or Trustee of the Federated Fund Complex; President, Investment
Properties Corporation; Senior Vice President, John R. Wood and Associates,
Inc., Realtors; Partner or Trustee in private real estate ventures in Southwest
Florida; formerly: President, Naples Property Management, Inc. and Northgate
Village Development
Corporation.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Director
Date Became a Director: October 15, 1991
Director or Trustee of the Federated Fund Complex; Director and Member of
the Executive Committee, Michael Baker, Inc; formerly: Vice Chairman and
Director, PNC Bank, N.A. and PNC Bank Corp.; Director, Ryan Homes, Inc. Previous
Positions: Director, United Refinery; Director, Forbes Fund; Chairman,
Pittsburgh Foundation; Chairman,
Pittsburgh Civic Light Opera.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue
Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Director
Date Became a Director: October 15, 1991
Director or Trustee of the Federated Fund Complex; Professor of Medicine,
University of Pittsburgh; Medical Director, University of Pittsburgh Medical
Center-Downtown; Hematologist, Oncologist, and Internist, University of
Pittsburgh Medical Center; Member, National Board of Trustees, Leukemia Society
of America.
Edward L. Flaherty, Jr., Esq.
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Director
Date Became a Director: October 15, 1991
Director or Trustee of the Federated Fund Complex; Attorney of Counsel, Miller,
Ament, Henny & Kochuba; Director Emeritus, Eat'N Park Restaurants, Inc.;
formerly: Counsel, Horizon Financial, F.A., Western Region; Partner, Meyer and
Flaherty.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Director
Date Became a Director: October 15, 1991
Director or Trustee of the Federated Fund Complex; formerly:
Representative, Commonwealth of Massachusetts General Court; President, State
Street Bank and Trust Company and State Street Corporation. Previous Positions:
Director, VISA USA and VISA International; Chairman and Director, Massachusetts
Bankers Association; Director,
Depository Trust Corporation.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Director
Date Became a Director: October 15, 1991
Director or Trustee of the Federated Fund Complex; President, World Society of
Ekistics (metropolitan planning), Athens; Professor, International Politics;
Management Consultant; Trustee, Carnegie Endowment for International Peace, RAND
Corporation, Online Computer Library Center, Inc., National Defense University
and U.S. Space Foundation; President Emeritus, University of Pittsburgh;
Founding Chairman, National Advisory Council for Environmental Policy and
Technology, and Federal Emergency Management Advisory Board; Trustee, Czech
Management Center, Prague. Previous Positions: Professor, United States Military
Academy; Professor, United States Air Force Academy.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Director
Date Became a Director: October 15, 1991
Director or Trustee of the Federated Fund Complex; Public
Relations/Marketing/Conference Planning. Previous Positions: National
Spokesperson, Aluminum Company of
America; business owner.
J. Christopher Donahue
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
Date Became an Officer: July 14, 1995
President or Executive Vice President of the Federated Fund Complex; Director or
Trustee of some of the Funds in the Federated Fund Complex; President and
Director, Federated Investors, Inc., Federated Investment Management Company and
Federated Global Research Corp.; President, Passport Research, Ltd.; Trustee,
Federated Shareholder Services Company; Director, Federated Services Company.
Mr. Donahue is the son of John F. Donahue, Chairman and Director of the Company.
Edward C. Gonzales
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Date Became an Officer: July 14, 1995
Trustee or Director of some of the Funds in the Federated Fund Complex;
President, Executive Vice President and Treasurer of some of the Funds in the
Federated Fund Complex; Vice Chairman, Federated Investors, Inc.; Vice
President, Federated Investment Management Company, Federated Global Research
Corp. and Passport Research, Ltd.; Executive Vice President and Director,
Federated Securities Corp.; Trustee, Federated Shareholder Services Company.
John W. McGonigle
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Date Became an Officer: November 4, 1991
Executive Vice President and Secretary of the Federated Fund Complex; Executive
Vice President, Secretary and Director, Federated Investors, Inc. and Federated
Investment Management Company; Director, Federated Global Research Corp.;
Director, Federated Services Company; Director, Federated Securities Corp.
Richard J. Thomas
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birthdate: June 17, 1954
Treasurer
Date Became an Officer: November 19, 1998
Treasurer of the Federated Fund Complex; Vice President - Funds Financial
Services Division, Federated Investors, Inc.; formerly: various management
positions within Funds Financial Services Division of Federated Investors, Inc.
William D. Dawson, III
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birthdate: March 3, 1949
Chief Investment Officer
Date Became an Officer: November 19, 1998
Chief Investment Officer of the Company and various other Funds in the Federated
Fund Complex; Executive Vice President, Federated Investment Counseling,
Federated Global Research Corp., Federated Investment Management Company and
Passport Research, Ltd.; Registered Representative, Federated Securities Corp.;
Portfolio Manager, Federated Administrative Services, Vice President, Federated
Investors, Inc.; formerly: Executive Vice President and Senior Vice President,
Federated Investment Counseling Institutional Portfolio Management Services
Division; Senior Vice President, Federated Research Corp., Federated Advisers,
Federated Management, Federated Research, and Passport Research, Ltd.
Joseph M. Balestrino
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birthdate: November 3, 1954
Vice President
Date Became an Officer: November 19, 1998
Senior Vice President, Federated Investment Management Company; formerly, Vice
President and Assistant Vice President, Federated Investment Management Company.
Jeff A. Kozemchak
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birthdate: January 15, 1960
Vice President
Date Became an Officer: November 19, 1998
Senior Vice President, Federated Investment Management Company; formerly, Vice
President and Assistant Vice President, Federated Investment Management Company.
None of the Officers of the Company received salaries from the Company
during the fiscal year ended November 30, 1998.
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY
The Company is not required, and does not intend, to hold regular annual
meetings of shareholders. Shareholders wishing to submit proposals for
consideration for inclusion in a proxy statement for the next meeting of
shareholders should send their written proposals to Fixed Income Securities,
Inc., Federated Investors Funds, 5800 Corporate Drive, Pittsburgh, Pennsylvania
15237-7000, so that they are received within a reasonable time before any such
meeting.
No business other than the matters described above is expected to come
before the Special Meeting, but should any other matter requiring a vote of
shareholders arise, including any question as to an adjournment or postponement
of the Special Meeting, the persons named on the enclosed proxy card will vote
on such matters according to their best judgment in the interests of the
Company.
SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
CARD AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN
THE UNITED STATES.
By Order of the Board of Directors,
John W. McGonigle
Secretary
__________, 1999
<PAGE>
FIXED INCOME SECURITIES, INC.
FEDERATED LIMITED TERM FUND
FEDERATED LIMITED TERM MUNICIPAL FUND
FEDERATED STRATEGIC INCOME FUND
INVESTMENT ADVISER
FEDERATED INVESTMENT MANAGEMENT COMPANY
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
DISTRIBUTOR
FEDERATED SECURITIES CORP.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
ADMINISTRATOR
FEDERATED SERVICES COMPANY
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned Shareholders of
Federated Limited Term Fund (the "Fund"), a portfolio of Fixed Income
Securities, Inc. (the "Company"), hereby appoint Patricia F. Conner, Gail
Cagney, William Haas, Suzanne W. Land and Ann M. Scanlon, or any one of them,
true and lawful attorneys, with the power of substitution of each, to vote all
shares of the Fund which the undersigned is entitled to vote at the Special
Meeting of Shareholders (the "Special Meeting") to be held on __________, 1999,
at 5800 Corporate Drive, Pittsburgh, Pennsylvania, at 2:00 p.m., and at any
adjournment thereof.
The attorneys named will vote the shares represented by this proxy in accordance
with the choices made on this ballot. If no choice is indicated as to the item,
this proxy will be voted affirmatively on the matters. Discretionary authority
is hereby conferred as to all other matters as may properly come before the
Special Meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FIXED INCOME
SECURITIES, INC. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" THE PROPOSALS.
BY CHECKING THE BOX "FOR" BELOW, YOU WILL VOTE TO APPROVE EACH OF THE PROPOSED
ITEMS IN THIS PROXY, AND TO ELECT EACH OF THE NOMINEES AS DIRECTORS OF THE
COMPANY
FOR [ ]
PROPOSAL 1 TO ELECT THOMAS G. BIGLEY, NICHOLAS P. CONSTANTAKIS,
JOHN F. CUNNINGHAM, J. CHRISTOPHER DONAHUE,
CHARLES F. MANSFIELD, JR., JOHN E. MURRAY, JR. AND JOHN S. WALSH
AS DIRECTORS OF THE COMPANY
FOR [ ]
AGAINST [ ]
WITHHOLD AUTHORITY
TO VOTE [ ]
FOR ALL EXCEPT [ ]
If you do not wish your shares to be voted "FOR" a
particular nominee, mark the "For All Except" box and
strike a line through the name of each nominee for
whom you are NOT voting. Your shares will be voted for
the remaining nominees.
PROPOSAL 2 TO MAKE CHANGES TO THE FUND'S FUNDAMENTAL INVESTMENT POLICIES:
2(A) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY REGARDING
DIVERSIFICATION
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(B) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING BORROWING MONEY AND ISSUING SENIOR
SECURITIES FOR [ ] AGAINST [ ] ABSTAIN [ ]
2(C) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING INVESTMENTS IN REAL ESTATE FOR [ ]
AGAINST [ ] ABSTAIN [ ]
2(D) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING INVESTMENTS IN COMMODITIES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(E) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING UNDERWRITING SECURITIES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(F) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING LENDING ASSETS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(G) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY REGARDING
CONCENTRATION OF THE FUND'S INVESTMENTS IN THE SECURITIES OF
COMPANIES IN THE SAME INDUSTRY
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(H) TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE FUND'S
FUNDAMENTAL INVESTMENT POLICY REGARDING BUYING
SECURITIES ON MARGIN
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(I) TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE FUND'S
FUNDAMENTAL INVESTMENT POLICY REGARDING PLEDGING
ASSETS FOR [ ] AGAINST [ ] ABSTAIN [ ]
PROPOSAL 3: TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON SELLING
SECURITIES SHORT
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
PROPOSAL 4: TO APPROVE AMENDMENTS TO AND A RESTATEMENT OF THE COMPANY'S ARTICLES
OF INCORPORATION:
4(A) TO PERMIT THE BOARD OF DIRECTORS TO LIQUIDATE ASSETS OF A SERIES
OR CLASS WITHOUT SEEKING SHAREHOLDER APPROVAL TO THE EXTENT
PERMITTED UNDER MARYLAND LAW
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
4(B) TO PERMIT THE COMPANY TO MAKE NAME CHANGES WITHOUT
SHAREHOLDER APPROVAL
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
YOUR VOTE IS IMPORTANT
Please complete, sign
and return this card
as soon as possible.
Dated
Signature
Signature (Joint Owners)
Please sign this proxy exactly as your name appears on the books of the Company.
Joint owners should each sign personally. Directors and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
YOU MAY ALSO VOTE YOUR SHARES BY TOUCHTONE PHONE BY CALLING 1-800-690-6903,
OR THROUGH THE INTERNET AT WWW.PROXYVOTE.COM.
<PAGE>
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned Shareholders of
Federated Limited Term Municipal Fund (the "Fund"), a portfolio of Fixed Income
Securities, Inc. (the "Company"), hereby appoint Patricia F. Conner, Gail
Cagney, William Haas, Suzanne W. Land and Ann M. Scanlon, or any one of them,
true and lawful attorneys, with the power of substitution of each, to vote all
shares of the Fund which the undersigned is entitled to vote at the Special
Meeting of Shareholders ("Special Meeting") to be held on __________, 1999, at
5800 Corporate Drive, Pittsburgh, Pennsylvania, at 2:00 p.m., and at any
adjournment thereof.
The attorneys named will vote the shares represented by this proxy in accordance
with the choices made on this ballot. If no choice is indicated as to the item,
this proxy will be voted affirmatively on the matters. Discretionary authority
is hereby conferred as to all other matters as may properly come before the
Special Meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FIXED INCOME
SECURITIES, INC. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" THE PROPOSALS.
BY CHECKING THE BOX "FOR" BELOW, YOU WILL VOTE TO APPROVE EACH OF THE PROPOSED
ITEMS IN THIS PROXY, AND TO ELECT EACH OF THE NOMINEES AS DIRECTORS OF THE
COMPANY
FOR [ ]
PROPOSAL 1 TO ELECT THOMAS G. BIGLEY, NICHOLAS P. CONSTANTAKIS,
JOHN F. CUNNINGHAM, J. CHRISTOPHER DONAHUE,
CHARLES F. MANSFIELD, JR., JOHN E. MURRAY, JR. AND JOHN S. WALSH
AS DIRECTORS OF THE COMPANY
FOR [ ]
AGAINST [ ]
WITHHOLD AUTHORITY
TO VOTE [ ]
FOR ALL EXCEPT [ ]
If you do not wish your shares to be voted "FOR" a
particular nominee, mark the "For All Except" box and
strike a line through the name of each nominee for
whom you are NOT voting. Your shares will be voted for
the remaining nominees.
PROPOSAL 2 TO MAKE CHANGES TO THE FUND'S FUNDAMENTAL INVESTMENT POLICIES:
2(A) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY REGARDING
DIVERSIFICATION
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(B) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING BORROWING MONEY AND ISSUING SENIOR
SECURITIES FOR [ ] AGAINST [ ] ABSTAIN [ ]
2(C) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING INVESTMENTS IN REAL ESTATE
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(D) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING INVESTMENTS IN COMMODITIES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(E) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING UNDERWRITING SECURITIES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(G) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY REGARDING
CONCENTRATION OF THE FUND'S INVESTMENTS IN THE SECURITIES OF
COMPANIES IN THE SAME INDUSTRY
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(H) TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE FUND'S
FUNDAMENTAL INVESTMENT POLICY REGARDING BUYING
SECURITIES ON MARGIN FOR [ ] AGAINST [ ] ABSTAIN [
]
2(I) TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE FUND'S
FUNDAMENTAL INVESTMENT POLICY REGARDING PLEDGING
ASSETS FOR [ ] AGAINST [ ] ABSTAIN [ ]
PROPOSAL 4: TO APPROVE AMENDMENTS TO AND A RESTATEMENT OF THE COMPANY'S ARTICLES
OF INCORPORATION:
4(A) TO PERMIT THE BOARD OF DIRECTORS TO LIQUIDATE ASSETS OF A SERIES
OR CLASS WITHOUT SEEKING SHAREHOLDER APPROVAL TO THE EXTENT
PERMITTED UNDER MARYLAND LAW
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
4(B) TO PERMIT THE COMPANY TO MAKE NAME CHANGES WITHOUT
SHAREHOLDER APPROVAL FOR [ ] AGAINST [ ] ABSTAIN [ ]
YOUR VOTE IS IMPORTANT
Please complete, sign
and return this card
as soon as possible.
Dated
Signature
Signature (Joint Owners)
Please sign this proxy exactly as your name appears on the books of the Company.
Joint owners should each sign personally. Directors and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
YOU MAY ALSO VOTE YOUR SHARES BY TOUCHTONE PHONE BY CALLING 1-800-690-6903,
OR THROUGH THE INTERNET AT WWW.PROXYVOTE.COM.
<PAGE>
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned Shareholders of
Federated Strategic Income Fund (the "Fund"), a portfolio of Fixed Income
Securities, Inc. (the "Company"), hereby appoint Patricia F. Conner, Gail
Cagney, William Haas, Suzanne W. Land and Ann M. Scanlon, or any one of them,
true and lawful attorneys, with the power of substitution of each, to vote all
shares of the Fund which the undersigned is entitled to vote at the Special
Meeting of Shareholders (the "Special Meeting") to be held on _____________,
1999, at 5800 Corporate Drive, Pittsburgh, Pennsylvania, at 2:00 p.m., and at
any adjournment thereof.
The attorneys named will vote the shares represented by this proxy in accordance
with the choices made on this ballot. If no choice is indicated as to the item,
this proxy will be voted affirmatively on the matters. Discretionary authority
is hereby conferred as to all other matters as may properly come before the
Special Meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FIXED INCOME
SECURITIES, INC. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" THE PROPOSALS.
BY CHECKING THE BOX "FOR" BELOW, YOU WILL VOTE TO APPROVE EACH OF THE PROPOSED
ITEMS IN THIS PROXY, AND TO ELECT EACH OF THE NOMINEES AS DIRECTORS OF THE
COMPANY
FOR [ ]
PROPOSAL 1 TO ELECT THOMAS E. BIGLEY, NICHOLAS P. CONSTANTAKIS,
JOHN F. CUNNINGHAM, J. CHRISTOPHER DONAHUE, CHARLES F.
MANSFIELD, JR., JOHN E. MURRAY, JR. AND JOHN S. WALSH AS
DIRECTORS OF THE COMPANY
FOR [ ]
AGAINST [ ]
WITHHOLD AUTHORITY
TO VOTE [ ]
FOR ALL EXCEPT [ ]
If you do not wish your shares to be voted "FOR" a
particular nominee, mark the "For All Except" box and
strike a line through the name of each nominee for
whom you are NOT voting. Your shares will be voted for
the remaining nominees.
PROPOSAL 2 TO MAKE CHANGES TO THE FUND'S FUNDAMENTAL INVESTMENT POLICIES:
2(A) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY REGARDING
DIVERSIFICATION
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(B) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING BORROWING MONEY AND ISSUING SENIOR
SECURITIES FOR [ ] AGAINST [ ] ABSTAIN [ ]
2(C) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING INVESTMENTS IN REAL ESTATE FOR [ ]
AGAINST [ ] ABSTAIN [ ]
2(D) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING INVESTMENTS IN COMMODITIES FOR [ ]
AGAINST [ ] ABSTAIN [ ]
2(E) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING UNDERWRITING SECURITIES FOR [ ] AGAINST [
] ABSTAIN [ ]
2(F) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING LENDING ASSETS FOR [ ] AGAINST [ ]
ABSTAIN [ ]
2(G) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY REGARDING
CONCENTRATION OF THE FUND'S INVESTMENTS IN THE SECURITIES OF
COMPANIES IN THE SAME INDUSTRY
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(H) TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE FUND'S
FUNDAMENTAL INVESTMENT POLICY REGARDING BUYING
SECURITIES ON MARGIN FOR [ ] AGAINST [ ] ABSTAIN []
2(I) TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE FUND'S
FUNDAMENTAL INVESTMENT POLICY REGARDING PLEDGING
ASSETS FOR [ ] AGAINST [ ] ABSTAIN [ ]
PROPOSAL 3: TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON SELLING
SECURITIES SHORT
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
PROPOSAL 4: TO APPROVE AMENDMENTS TO AND A RESTATEMENT OF THE COMPANY'S ARTICLES
OF INCORPORATION:
4(A) TO PERMIT THE BOARD OF DIRECTORS TO LIQUIDATE ASSETS OF A SERIES
OR CLASS WITHOUT SEEKING SHAREHOLDER APPROVAL TO THE EXTENT
PERMITTED UNDER MARYLAND LAW
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
4(B) TO PERMIT THE TRUST TO MAKE NAME CHANGES WITHOUT
SHAREHOLDER APPROVAL FOR [ ] AGAINST [ ] ABSTAIN []
YOUR VOTE IS IMPORTANT
Please complete, sign
and return this card
as soon as possible.
Dated
Signature
Signature (Joint Owners)
Please sign this proxy exactly as your name appears on the books of the Company.
Joint owners should each sign personally. Directors and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
YOU MAY ALSO VOTE YOUR SHARES BY TOUCHTONE PHONE BY CALLING 1-800-690-6903,
OR THROUGH THE INTERNET AT WWW.PROXYVOTE.COM.
