World Utility Fund
(A Portfolio of World Investment Series, Inc.)
Class A Shares
Fortress Shares
Combined Statement of Additional Information
This Combined Statement of Additional Information should be read with the
respective prospectuses for Class A Shares and Fortress Shares of World
Utility Fund (the "Fund") dated January 31, 1995. This Combined Statement
is not a prospectus itself. To receive a copy of either prospectus, write
or call the Fund.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3776
Statement dated January 31, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
General Information About the Fund 1
Investment Objective and Policies 1
Types of Investments 1
When-Issued and Delayed Delivery
Transactions 1
Repurchase Agreements 1
Lending Portfolio Securities 1
Portfolio Turnover 1
Investment Limitations 2
Lending Cash or Securities 2
Diversification of Investments 2
Concentration of Investments 2
Issuing Senior Securities and
Borrowing Money 2
Pledging Securities 2
Buying on Margin 2
Underwriting 2
Investing in Real Estate 2
Investing in Commodities 2
Lending Cash or Securities 2
Investing in Minerals 3
Purchasing Securities to Exercise
Control 3
Investing in Warrants 3
Investing in Securities of Other
Investment Companies 3
Investing in New Issuers 3
Investing in Illiquid Securities 3
Investing in Restricted Securities 3
Puts and Calls 3
Investing in Issuers Whose
Securities are Owned by Officers
and Directors of the Corporation 4
The Funds 4
Fund Ownership 4
Officers and Directors Compensation 5
Investment Advisory Services 6
Adviser to the Fund 6
Advisory Fees 6
State Expense Limitations 6
Transfer Agent and Dividend
Disbursing Agent 6
Brokerage Transactions 6
Purchasing Shares 7
Distribution of Shares 7
Distribution and Shareholder
Services Plans 7
Conversion to Federal Funds 7
Purchases by Sales Representatives,
Directors of the Corporation, and
Employees 7
Exchanging Securities for Fund
Shares 8
Tax Consequences 8
Determining Net Asset Value 8
Determining Market Value of
Securities 8
Trading in Foreign Securities 8
Exchange Privilege (Fortress Shares
Only) 9
Reduced Sales Load 9
Requirements for Exchange 9
Tax Consequences 9
Making an Exchange 9
Redeeming Shares 9
Redemption in Kind 10
Tax Status 10
The Fund's Tax Status 10
United Kingdom Taxes 10
Shareholders' Tax Status 10
Capital Gains 10
Total Return 10
Yield 11
Performance Comparisons 11
Appendix 13
General Information About the Fund
The Fund is a portfolio in World Investment Series, Inc. (the "Corporation")
which was established as a corporation under the laws of the state of Maryland
on January 25, 1994.
Shares of the Fund are offered in two classes, known as Class A Shares and
Fortress Shares (individually and collectively referred to as "Shares," as the
context may require). This Combined Statement of Additional Information relates
to both classes of the above mentioned Shares.
Investment Objective and Policies
The Fund's investment objective is to provide total return.
Types of Investments
The Fund will seek to achieve its investment objective by investing at least 65%
of its total assets in securities issued by domestic and foreign companies in
the utilities industries. The Fund may also purchase fixed income securities and
foreign government securities; enter into forward commitments, repurchase
agreements, and, without limit, foreign currency transactions; and maintain
reserves in foreign or U.S. money market instruments.
When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.
Repurchase Agreements
The Fund or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers which are deemed by the Fund's adviser to
be creditworthy.
Lending Portfolio Securities
In order to generate additional income, the Fund may lend its portfolio
securities to broker-dealers, banks, or other institutional borrowers of
securities. The Fund will only enter into loan arrangements with broker-dealers,
banks, or other institutions which the investment adviser has determined are
creditworthy under guidelines established by the Corporation's Board of
Directors and will receive collateral equal to at least 100% of the value of the
securities loaned. The Fund does not intend to lend portfolio securities in the
current fiscal year.
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
Portfolio Turnover
It is not anticipated that the portfolio trading engaged in by the Fund will
result in its annual rate of portfolio turnover exceeding 100%. The Fund's
investment adviser does not anticipate that portfolio turnover will result in
adverse tax consequences. However, relatively high portfolio turnover may result
in high transaction costs to the Fund. During the period from April 21, 1994
(date of initial public investment) through November 30, 1994, the Fund's
portfolio turnover rate was 7%.
Investment Limitations
Lending Cash or Securities
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
purchase or holding of corporate bonds, debentures, notes, certificates of
indebtedness or other debt securities of an issuer, repurchase agreements,
or other transactions which are permitted by the Fund's investment
objective and policies.
Diversification of Investments
With respect to 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) if as a result more than 5% of the
value of its total assets would be invested in the securities of that
issuer, and the Fund will not acquire more than 10% of the outstanding
voting securities of any one issuer.
Concentration of Investments
The Fund will not invest more than 25% of its total assets in securities
of issuers having their principal business activities in one industry,
except the utilities industry.
Issuing Senior Securities and Borrowing Money
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 amount 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 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 exceed 5% of the value of its
total assets are outstanding.
Pledging Securities
The Fund will not mortgage, pledge, or hypothecate securities, except when
necessary for permissible borrowings. In those cases, it may pledge assets
having a value of 15% of its assets taken at cost.
Buying on Margin
The Fund will not purchase any securities on margin but may obtain such
short-term credits as may be necessary for clearance of purchases and
sales of securities.
Underwriting
The Fund will not underwrite or participate in the marketing of securities
of other issuers, except as it may be deemed to be an underwriter under
federal securities law in connection with the disposition of its portfolio
securities.
Investing in Real Estate
The Fund will not invest in real estate or real estate limited
partnerships, although it may invest in securities secured by real estate
or interests in real estate or issued by companies, including real estate
investment trusts, which invest in real estate or interests therein.
Investing in Commodities
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts except that the Fund may purchase or sell
forward contracts with respect to foreign securities or currencies.
Lending Cash or Securities
The Fund will not lend any assets except portfolio securities in an amount
up to one-third of the value of its total assets. This shall not prevent
the purchase or holding of bonds, debentures, notes, certificates of
indebtedness, or other debt securities of an issuer, repurchase agreements
or other transactions which are permitted by the Fund's investment
objective and policies or its Articles of Incorporation.
Except as noted, the above investment limitations cannot be changed without
shareholder approval. The following limitations, however, may be changed by the
Directors without shareholder approval. Except as noted, shareholders will be
notified before any material change in these limitations becomes effective.
Investing in Minerals
The Fund will not invest in interests in oil, gas, or other mineral
exploration or development programs or leases, other than debentures or
equity stock interests.
Purchasing Securities to Exercise Control
The Fund will not purchase securities of a company for purpose of
exercising control or management.
Investing in Warrants
The Fund will not invest more than 5% of its assets in warrants, including
those acquired in units or attached to other securities. To comply with
certain state restrictions, the Fund will limit its investment in such
warrants not listed on recognized stock exchanges to 2% of its total
assets. (If state restrictions change, this latter restriction may be
revised without notice to shareholders.) For purposes of this investment
restriction, warrants acquired by the Fund in units or attached to
securities may be deemed to be without value.
Investing in Securities of Other Investment Companies
The Fund will not own more than 3% of the total outstanding voting stock
of any investment company, invest more than 5% of its total assets in any
investment company, and invest no more than 10% of its total assets in
investment companies in general. The Fund will purchase securities of
closed-end investment companies only in open-market transactions involving
only customary broker's commissions. However, these limitations are not
applicable if the securities are acquired in a merger, consolidation,
reorganization, or acquisition of assets.
The Fund will limit its investment in other investment companies to those
with a sales load of less than 1% that have investment objectives and
policies similar to its own. While it is the Fund's policy to waive its
investment advisory fee on assets invested in securities of open-end
investment companies, it should be noted that investment companies incur
certain expenses such as custodian and transfer agent fees, and,
therefore, any investment by the Fund in shares of another investment
company would be subject to such duplicate expenses.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers which have records of less than three years of
continuous operations, including the operation of any predecessor.
Investing in Illiquid Securities
The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including securities not determined by the Board of
Directors to be liquid, and repurchase agreements with maturities longer
than seven days after notice.
Investing in Restricted Securities
The Fund will not invest more than 5% of its total assets in securities
subject to restriction on resale under federal securities law, except for
Section 4(2) commercial paper and other restricted securities deemed to be
liquid under criteria established by the Board of Directors.
Puts and Calls
The Fund will not write call options on securities unless the securities
are held in the Fund's portfolio or unless the Fund is entitled to them in
deliverable form without further payment or after segregating cash in the
amount of any further payment. The Fund's investment in put or call
options, straddles, spreads, or any combination thereof shall not exceed
5% of the Fund's total assets.
Investing in Issuers Whose Securities are Owned by Officers and Directors of
the Corporation
The Fund will not purchase or retain the securities of any issuer if the
officers and Directors of the Corporation or its investment adviser owning
individually more than 1/2 of 1% of the issuer's securities together own
more than 5% of the issuer's securities.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
For purposes of its policies and limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings and loan having capital, surplus, and individual profits in excess of
$100,000,000 at the time of investment to be "cash items".
The Fund does not intend to borrow money, pledge securities, or invest in
securities of other investment companies in excess of 5% of the value of its
total assets during the coming fiscal year. In addition, in order to comply with
investment restrictions of certain states, the Fund will not invest more than
10% of its total assets in the securities of one or more real estate investment
trusts.
The Fund reserves the right to convert to a master/feeder arrangement. The
Fund's portfolio may, notwithstanding any investment policy or limitation,
invest all of its assets in the securities of a single open-end management
investment company with substantially the same investment objectives, policies
and limitations as the Fund.
The Funds
As referred to in the list of Directors and Officers, "Funds" includes the
following investment companies:
"The Funds" and "Funds" mean the following investment companies: American
Leaders Fund, Inc.; Annuity Management Series; Arrow Funds; Automated Cash
Management Trust; Automated Government Money Trust; California Municipal Cash
Trust; Cash Trust Series II; Cash Trust Series, Inc.; DG Investors Series;
Edward D. Jones & Co. Daily Passport Cash Trust; Federated ARMs Fund; Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government Trust; Federated
Growth Trust; Federated High Yield Trust; Federated Income Securities Trust;
Federated Income Trust; Federated Index Trust; Federated Institutional Trust;
Federated Intermediate Government Trust; Federated Master Trust; Federated
municipal Trust; Federated Short-Intermediate Government Trust; Federated Short-
Term U.S. Government Trust; Federated Stock Trust; Federated Tax-Free Trust;
Federated U.S. Government Bond Fund; First Priority Funds; Fixed Income
Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.; Fortress
Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S.
Government Securities Inc.; Government Income Securities Inc.; High Yield Cash
Trust; Insight Institutional Series, Inc.; Insurance Management Series;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
U.S. Government Money Market Trust; Liberty Term Trust, Inc. - 1999; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; The Medalist Funds;
Money Market Management, Inc.; Money Market Obligations Trust; Money Market
Trust; Municipal Securities Income Trust; New York Municipal Cash Trust; 111
Corcoran Funds; Peachtree Funds; The Planters Funds; Portage Funds; RIMCO
Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds;
Trust for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations;
World Investment Series, Inc.
Fund Ownership
As of January 10, 1995, the following shareholders of record owned 5% or more of
the outstanding Class A Shares of the Fund: Merrill Lynch Pierce Fenner & Smith
(as record owner holding Class A Shares for its clients), Jacksonville, Florida,
owned approximately 63,865 Class A Shares (11.95%)
Also, as of January 10, 1995, the following shareholders of record owned 5% or
more of the outstanding Fortress Shares of the Fund: Merrill Lynch Pierce Fenner
& Smith (as record owner holding Fortress Shares for its clients), Jacksonville,
Florida, owned approximately 293,537 Fortress Shares (56.17%).
Officers and Directors Compensation
NAME , AGGREGATE TOTAL COMPENSATION PAID
POSITION WITH COMPENSATION FROM TO DIRECTORS FROM
CORPORATION CORPORATION CORPORATION AND FUND COMPLEX
John F. Donahue,
Chairman and Director $ -0- $ -0- for the Corporation and
69 investment companies
Thomas G. Bigley,
Director $ -0- $ 24,991 for the Corporation and
50 investment companies
John T. Conroy, Jr.,
Director $ -0- $ 136,100 for the Corporation
and
65 investment companies
William J. Copeland,
Director $ -0- $ 136,100 for the Corporation
and
65 investment companies
James E. Dowd,
Director $ -0- $ 136,100 for the Corporation
and
65 investment companies
Lawrence D. Ellis, M.D.,
Director $ -0- $ 123,600 for the Corporation
and
65 investment companies
Richard B. Fisher,
President and Director $ -0- $ -0- for the Corporation and
9 investment companies
Edward L. Flaherty, Jr.,
Director $ -0- $ 136,100 for the Corporation
and
65 investment companies
Peter E. Madden,
Director $ -0- $ 104,880 for the Corporation
and
65 investment companies
Gregor F. Meyer,
Director $ -0- $ 123,600 for the Corporation
and
65 investment companies
Wesley W. Posvar,
Director $ -0- $ 123,600 for the Corporation
and
65 investment companies
Marjorie P. Smuts,
Director $ -0- $ 123,600 for the Corporation
and
65 investment companies
Investment Advisory Services
Adviser to the Fund
The Fund's investment adviser is Federated Management. It is a subsidiary of
Federated Investors. All the voting securities of Federated Investors are owned
by a trust, the trustees of which are John F. Donahue, his wife, and his son, J.
Christopher Donahue.
The adviser shall not be liable to the Fund, the Corporation or any shareholder
of the Fund for any losses that may be sustained in the purchase, holding, or
sale of any security or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Corporation.
Advisory Fees
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus.
During the period from March 17, 1994, (start of business) through November 30,
1994, the adviser earned $36,237 all of which was waived.
State Expense Limitations
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses) exceed
2 1/2% per year of the first $30 million of average net assets, 2% per
year of the next $70 million of average net assets, and 1 1/2% per year of
the remaining average net assets, the adviser will reimburse the Fund for
its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this limitation,
the investment advisory fee paid will be reduced by the amount of the
excess, subject to an annual adjustment. If the expense limitation is
exceeded, the amount to be reimbursed by the adviser will be limited, in
any fiscal year, by the amount of the investment advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
Administrative Services
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. Dr. Henry J. Gailliot, an officer of Federated Management, the
adviser to the Fund, holds approximately 20%, of the outstanding common stock
and serves as a director of Commercial Data Services, Inc., a company which
provides computer processing services to Federated Administrative Services.
During the period from March 17, 1994, (start of business) through November 30,
1994 the Fund incurred administrative services costs of $38,643.
Transfer Agent and Dividend Disbursing Agent
Federated Services Company serves as transfer agent and dividend disbursing
agent for the Fund. The fee paid to the transfer agent is based upon the size,
type and number of accounts and transactions made by shareholders.
Federated Services Company also maintains the Trust's accounting records. The
fee paid for this service is based upon the level of the Fund's average net
assets for the period plus out-of-pocket expenses.
Brokerage Transactions
The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the adviser
and may include:
- advice as to the advisability of investing in securities;
- security analysis and reports;
- economic studies;
- industry studies;
- receipt of quotations for portfolio evaluations; and
- similar services.
The adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such person are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers may be used by the adviser or by
affiliates of Federated Investors in advising Federated Funds and other
accounts. To the extent that receipt of these services may supplant services for
which the adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.
During the period from April 21, 1994 (date of initial public investment) to
November 30, 1994 the Fund paid $21,932 in brokerage commissions for brokerage
transactions.
Purchasing Shares
Except under certain circumstances described in the prospectus, Shares are sold
at their net asset value plus a sales load on days the New York Stock Exchange
is open for business. The procedure for purchasing Shares is explained in the
respective prospectus under "Investing in Class A Shares" or "Investing in
Fortress Shares."
Distribution of Shares
Federated Securities Corp. is the principal distributor for Shares of the Fund.
Distribution and Shareholder Services Plans
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; providing office space, equipment, telephone facilities, and
various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses.
With respect to Fortress Shares of the Fund, by adopting the Distribution Plan,
the Board of Directors expects that the Fund will be able to achieve a more
predictable flow of cash for investment purposes and to meet redemptions. This
will facilitate more efficient portfolio management and assist the Fund in
pursuing its investment objective. By identifying potential investors whose
needs are served by the Fund's objective, and properly servicing these accounts,
it may be possible to curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include: (1)
providing personal services to shareholders; (2) investing shareholder assets
with a minimum of delay and administrative detail; and (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts.
For the fiscal period from March 17, 1994 (start of business) to November 30,
1994, payments in the amount of $4,464 for Fortress Shares were made pursuant to
the Distribution Plan, all of which was paid to financial institutions. In
addition, for this period, payments in the amount of $4,595 for Class A Shares
and $4,464 for Fortress Shares, respectively, were made pursuant to the
Shareholder Services Plan.
Conversion to Federal Funds
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds before shareholders begin to
earn dividends. Federated Services Company acts as the shareholder's agent in
depositing checks and converting them to federal funds.
Purchases by Sales Representatives, Directors of the Corporation, and Employees
Directors, employees, and sales representatives of the Fund, Federated
Management, and Federated Securities Corp. or their affiliates, or any
investment dealer who has a sales agreement with Federated Securities Corp., and
their spouses and children under 21, may buy Shares at net asset value without a
sales load or contingent deferred sales charge. Shares may also be sold without
a sales load to trusts or pension or profit-sharing plans for these persons.
These sales are made with the purchaser's written assurance that the purchase is
for investment purposes and that the securities will not be resold except
through redemption by the Fund.
Exchanging Securities for Fund Shares
Investors may exchange securities they already own for Shares, or they may
exchange a combination of securities and cash for Shares. Any securities to be
exchanged must meet the investment objective and policies of the Fund, must have
readily ascertainable market value, must be liquid, and must not be subject to
restrictions on resale.
The Fund will prepare a list of securities which are eligible for acceptance and
furnish this list to brokers upon request. The Fund reserves the right to reject
any security, even though it appears on the list, and the right to amend the
list of acceptable securities at any time without notice to brokers or
investors.
An investment broker acting for an investor should forward the securities in
negotiable form with an authorized letter of transmittal to Federated Securities
Corp. Federated Securities Corp. will determine that transmittal papers are in
good order and forward to the Fund's custodian, State Street Bank. The Fund will
notify the broker of its acceptance and valuation of the securities within five
business days of their receipt by State Street Bank.
The Fund values such securities in the same manner as the Fund values its
portfolio securities. The basis of the exchange will depend upon the net asset
value of Shares on the day the securities are valued. One Share will be issued
for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be considered
in valuing the securities. All interest, dividends, subscription, conversion, or
other rights attached to the securities become the property of the Fund, along
with the securities.
Tax Consequences
Exercise of this exchange privilege is treated as a sale for federal income tax
purposes. Depending upon the cost basis of the securities exchanged for Shares,
a gain or loss may be realized by the investor.
Determining Net Asset Value
Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the respective prospectuses.
Determining Market Value of Securities
Market or fair values of the Fund's portfolio securities are determined as
follows:
- according to the last reported sale price on a recognized securities
exchange, if available. (If a security is traded on more than one
exchange, the price on the primary market for that security, as determined
by the adviser, is used.);
- according to the last reported bid price, if no sale on the recognized
exchange is reported or if the security is traded over-the-counter;
- at fair value as determined in good faith by the Corporation's Board of
Directors; or
- for short-term obligations with remaining maturities of 60 days or less at
the time of purchase, at amortized cost, which approximates value.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider: institutional trading in
similar groups of securities; yield; quality; coupon rate; maturity; type of
issue; trading characteristics; and other market data.
Trading in Foreign Securities
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange. In computing the net asset value, the
Fund values foreign securities at the latest closing price on the exchange on
which they are traded immediately prior to the closing of the New York Stock
Exchange. Certain foreign currency exchange rates may also be determined at the
latest rate prior to the closing of the New York Stock Exchange. Foreign
securities quoted in foreign currencies are translated into U.S. dollars at
current rates. Occasionally, events that affect these values and exchange rates
may occur between the times at which they are determined and the closing of the
New York Stock Exchange. If such events materially affect the value of portfolio
securities, these securities may be valued at their fair value as determined in
good faith by the Board of Directors, although the actual calculation may be
done by others.
Exchange Privilege (Fortress Shares Only)
This section relates only to Fortress Shares of the Fund. For information
regarding the Exchange Privilege for Class A Shares of the Fund, please see the
prospectus for Class A Shares.
The Securities and Exchange Commission has issued an order exempting the Fund
from certain provisions of the Investment Company Act of 1940, as amended. As a
result, Fund shareholders are allowed to exchange all or some of their shares
for shares in other Fortress Funds or certain funds distributed by Federated
Investors ( "Federated Funds") which are sold with a sales load different from
that of the Fund or with no sales load. These exchanges are made at net asset
value plus the difference between the Fund's sales load already paid and any
sales load of the fund into which the Shares are to be exchanged, if higher.
The order also allows certain other funds, including funds that are not advised
by subsidiaries or affiliates of Federated Investors, which do not have a sales
load, to exchange their shares for Shares on a basis other than the current
offering price. These exchanges may be made to the extent that such shares were
acquired in a prior exchange, at net asset value, for shares of a Federated Fund
carrying a sales load.
Reduced Sales Load
If a shareholder making such an exchange qualifies for a reduction or
elimination of the sales load, the shareholder must notify Federated Securities
Corp.
Requirements for Exchange
Shareholders using this privilege must exchange Shares having a net asset value
which at least meets the minimum investment required for the fund into which the
exchange is being made. Before the exchange, the shareholder must receive a
prospectus of the fund for which the exchange is being made.
This privilege is available to shareholders resident in any state in which the
fund shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
the proceeds invested in shares of the other fund.
Further information on the exchange privilege and prospectuses for Fortress
Funds or certain Federated Funds are available by calling the Fund.
Tax Consequences
Exercise of this exchange privilege is treated as a sale for federal income tax
purposes. Depending on the circumstances, a short-term or long-term capital gain
or loss may be realized.
Making an Exchange
Instructions for exchanges for Fortress Funds or certain Federated Funds may be
given in writing or by telephone. Written instructions may require a signature
guarantee.
Redeeming Shares
The Fund redeems Shares at the next computed net asset value after the Fund
receives the redemption request. Shareholder redemptions may be subject to a
contingent deferred sales charge. Redemption procedures are explained in the
respective prospectuses under "Redeeming Class A Shares" and "Redeeming Fortress
Shares." Although the transfer agent does not charge for telephone redemptions,
it reserves the right to charge a fee for the cost of wire-transferred
redemptions of less than $5,000.
Since portfolio securities of the Fund may be traded on foreign exchanges which
trade on Saturdays or on holidays on which the Fund will not make redemptions,
the net asset value each class of Shares of the Fund may be significantly
affected on days when shareholders do not have an opportunity to redeem their
Shares.
Fortress Shares redeemed within one to four years of purchase may be subject to
a contingent deferred sales charge. The amount of the contingent deferred sales
charge is based upon the amount of the administrative fee paid at the time of
purchase by the distributor to the financial institution for services rendered,
and the length of time the investor remains a shareholder in the Fund. Should
financial institutions elect to receive an amount less than the administrative
fee that is stated in the prospectus for servicing a particular shareholder, the
contingent deferred sales charge and/or holding period for that particular
shareholder will be reduced accordingly.
Redemption in Kind
Although the Corporation intends to redeem Shares in cash, it reserves the right
under certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the
Directors determine to be fair and equitable.
The Corporation has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940 under which the Corporation is obligated to redeem Shares
for any one shareholder in cash only up to the lesser of $250,000 or 1% of the
Corporation's net asset value during any 90-day period.
Tax Status
The Fund's Tax Status
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:
- derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
- derive less than 30% of its gross income from the sale of securities held
less than three months;
- invest in securities within certain statutory limits; and
- distribute to its shareholders at least 90% of its net income earned
during the year.
However, the Fund may invest in the stock of certain foreign corporations which
would constitute a Passive Foreign Investment Company (PFIC). Federal income
taxes may be imposed on the Fund upon disposition of PFIC investments.
United Kingdom Taxes
The adviser currently understands that an investment company such as the
Fund is not taxable under the laws of the United Kingdom as long as the
adviser follows certain operating procedures. To comply with these
procedures, the adviser will make all investment decisions for the Fund
and execute all portfolio transactions outside the United Kingdom.
Shareholders' Tax Status
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional Shares. The Fund's dividends, and any short-term
capital gains, are taxable as ordinary income.
Capital Gains
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have held
the Fund Shares.
Total Return
The Fund's cumulative total return from April 21, 1994, (date of initial public
investment) to November 30, 1994 was (8.33%) for Class A Shares. The cumulative
total return from April 21, 1994 (date of initial public investment) to November
30, 1994 for Fortress Shares was (5.01%). Cumulative total return reflects the
Fund's total performance over a specific period of time. This total return
assumes and is reduced by the payment of the maximum sales load. The Fund's
total return is representative of approximately 7 1/2 months of fund activity
since the Fund's effective date.
The average annual total return for both classes of shares of the Fund is the
average compounded rate of return for a given period that would equate a $1,000
initial investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of Shares owned at the
end of the period by the net asset value per Share at the end of the period. The
number of Shares owned at the end of the period is based on the number of Shares
purchased at the beginning of the period with $1,000, less any applicable sales
load, adjusted over the period by any additional Shares, assuming the annual
reinvestment of all dividends and distributions. Any applicable contingent
deferred sales charge is deducted from the ending value of the investment based
on the lesser of the original purchase price or the net asset value of Shares
redeemed. Occasionally, total return which does not reflect the effect of the
sales load may be quoted in advertising.
Yield
For the period ended November 30, 1994, the thirty day yields for Class A Shares
and Fortress Shares were 4.32% and 4.27%, respectively.
The yield for both classes of Shares of the Fund is determined each day by
dividing the net investment income per share (as defined by the Securities and
Exchange Commission) earned by either class of Shares over a thirty-day period
by the maximum offering price per share of the respective class on the last day
of the period. This value is then annualized using semi-annual compounding. This
means that the amount of income generated during the thirty-day period is
assumed to be generated each month over 12-month period and is reinvested every
six months. The yield does not necessarily reflect income actually earned by the
Fund because of certain adjustments required by the Securities and Exchange
Commission and therefore, may not correlate to the dividends or other
distributions paid to the shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in either
class of Shares, the performance will be reduced for those shareholders paying
those fees.
Performance Comparisons
The Fund's performance of both classes of Shares depends upon such variables as:
- portfolio quality;
- average portfolio maturity;
- type of instruments in which the portfolio is invested;
- changes in interest rates on money market instruments;
- changes in the Fund's or either class of Shares' expenses; and
- various other factors.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
- Lipper Analytical Services, Inc. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes
the reinvestment of all capital gains distributions and income dividends
and takes into account any change in net asset value over a specific
period of time.
- Europe, Australia, and Far East (EAFE) is a market capitalization weighted
foreign securities index, which is widely used to measure the performance
of European, Australian, New Zealand and Far Eastern stock markets. The
index covers approximately 1,020 companies drawn from 18 countries in the
above regions. The index values its securities daily in both U.S. dollars
and local currency and calculates total returns monthly. EAFE U.S. dollar
total return is a net dividend figure less Luxembourg withholding tax. The
EAFE is monitored by Capital International, S.A., Geneva, Switzerland.
- Standard & Poor's Daily Stock Price Index of 500 Common Stocks, a
composite index of common stocks in industry, transportation, and
financial and public utility companies, can be used to compare to the
total returns of funds whose portfolios are invested primarily in common
stocks. In addition, the Standard & Poor's index assumes reinvestments of
all dividends paid by stocks listed on its index. Taxes due on any of
these distributions are not included, nor are brokerage or other fees
calculated in Standard & Poor's figures.
- Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDQ-listed mutual funds of all types according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
- Dow Jones Composite Average or its component averages--an unmanaged index
composed of 30 blue-chip industrial corporation stocks (Dow Jones
Industrial Average), 15 utilities company stocks (Dow Jones Utilities
Average), and 20 transportation company stocks. Comparisons of performance
assume reinvestment of dividends.
- Dow Jones World Industry Index or its component indices, including, among
others, the utility sector.
- Standard & Poor's 500 Stock Index or its component indices--an unmanaged
index composed of 400 industrial stocks, 40 financial stocks, 40 utilities
stocks, and 20 transportation stocks. Comparisons of performance assume
reinvestment of dividends.
- The New York Stock Exchange composite or component indices--unmanaged
indices of all industrial, utilities, transportation, and finance stocks
listed on the New York Stock Exchange.
- Financial Times Actuaries Indices--including the FTA-World Index (and
components thereof), which are based on stocks in major world equity
markets.
- Lipper-Mutual Fund Performance Analysis and Lipper-Fixed Income Fund
Performance Analysis--measure of total return and average current yield
for the mutual fund industry. Rank individual mutual fund performance over
specified time periods, assuming reinvestment of all distributions,
exclusive of any applicable sales charges.
- Value Line Mutual Fund Survey, published by Value Line Publishing, Inc.--
analyzes price, yield, risk, and total return for equity and fixed income
mutual funds.
- Mutual Fund Source Book, published by Morningstar, Inc.--analyzes price,
yield, risk, and total return for equity and fixed income funds.
- CDA Mutual Fund Report, published by CDA Investment Technologies, Inc.--
analyzes price, current yield, risk, total return, and average rate of
return (average annual compounded growth rate) over specified time periods
for the mutual fund industry.
- Value Line Index--an unmanaged index which follows the stocks of
approximately 1,700 companies.
- Wilshire 5000 Equity Index--represents the return on the market value of
all common equity securities for which daily pricing is available.
Comparisons of performance assume reinvestment of dividends.
- Historical data supplied by the research departments of First Boston
Corporation, the J. P. Morgan companies, Salomon Brothers, Merrill Lynch,
Pierce, Fenner & Smith, Smith Barney Shearson and Bloomberg L.P.
- Financial publications: The Wall Street Journal, Business Week, Changing
Times, Financial World, Forbes, Fortune and Money magazines, among others-
-provide performance statistics over specified time periods.
- Morgan Stanley Capital International World Indices, including, among
others, the Morgan Stanley Capital International Europe, Australia, Far
East Index ( "EAFE Index"). The EAFE index is an unmanaged index of more
than 1,000 companies of Europe, Australia and the Far East.
- Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics--a statistical measure of change, over time, in
the price of goods and services in major expenditure groups.
Advertisements and sales literature for both classes of shares may quote total
returns which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment in
either class of shares based on annual reinvestment of dividends over a
specified period of time.
Advertisements may quote performance information which does reflect the effect
of the sales load.
Appendix
Standard & Poor's Ratings Group Commercial Paper Rating Definitions
A-1--This highest category designation indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+) designation.
Moody's Commercial Paper Ratings
Prime-1--Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
- Leading market positions in well established industries.
- High rates of returns on funds employed.
- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
- Broad margins in earning coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
981487101
981487200
4021404B (1/95)
WORLD UTILITY FUND
(A PORTFOLIO OF WORLD INVESTMENT SERIES, INC.)
CLASS A SHARES
PROSPECTUS
The Class A Shares of World Utility Fund (the "Fund") offered by this prospectus
represent interests in the Fund, which is a diversified investment portfolio in
World Investment Series, Inc. (the "Corporation"), an open-end, management
investment company (a mutual fund).
The Fund's investment objective is to provide total return. The Fund invests
primarily in securities issued by domestic and foreign companies in the
utilities industries.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENTS RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in Class A Shares of the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information for Class
A Shares and Fortress Shares dated January 31, 1995, with the Securities and
Exchange Commission. The information contained in the Combined Statement of
Additional Information is incorporated by reference into this prospectus. You
may request a copy of the Combined Statement of Additional Information free of
charge by calling 1-800-235-4669. To obtain other information or make inquiries
about the Fund, contact your financial institution.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated January 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CLASS A SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
LIBERTY FAMILY OF FUNDS 3
- ------------------------------------------------------
INVESTMENT INFORMATION 4
- ------------------------------------------------------
Investment Objective 4
Investment Policies 5
RISK FACTORS AND INVESTMENT CONSIDERATIONS 6
- ------------------------------------------------------
Other Investment Practices 8
Investment Limitations 10
NET ASSET VALUE 11
- ------------------------------------------------------
INVESTING IN CLASS A SHARES 11
- ------------------------------------------------------
Share Purchases 11
Minimum Investment Required 12
What Shares Cost 12
Reducing or Eliminating the Sales Load 13
Systematic Investment Program 14
Exchanging Securities for Fund Shares 15
Certificates and Confirmations 15
Dividends and Distributions 15
Retirement Plans 15
EXCHANGE PRIVILEGE 15
- ------------------------------------------------------
Reduced Sales Load 16
Requirements for Exchange 16
Tax Consequences 16
Making an Exchange 16
REDEEMING CLASS A SHARES 17
- ------------------------------------------------------
Through a Financial Institution 17
Directly from the Fund 17
Contingent Deferred Sales Charge 18
Systematic Withdrawal Program 18
Accounts with Low Balances 19
WORLD INVESTMENT SERIES, INC. INFORMATION 19
- ------------------------------------------------------
Management of the Corporation 19
DISTRIBUTION OF CLASS A SHARES 24
- ------------------------------------------------------
Administration of the Fund 24
Brokerage Transactions 26
Expenses of the Fund and
Class A Shares 26
SHAREHOLDER INFORMATION 26
- ------------------------------------------------------
Voting Rights 26
TAX INFORMATION 27
- ------------------------------------------------------
Federal Income Tax 27
Pennsylvania Corporate and
Personal Property Taxes 27
PERFORMANCE INFORMATION 28
- ------------------------------------------------------
OTHER CLASSES OF SHARES 28
- ------------------------------------------------------
Financial Highlights--Fortress Shares 29
FINANCIAL STATEMENTS 30
- ------------------------------------------------------
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS 41
- ------------------------------------------------------
APPENDIX 42
- ------------------------------------------------------
ADDRESSES 44
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES--CLASS A SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).................... 5.50%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)......... None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)........................................ 0.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)............................. None
Exchange Fee................................................................................... None
ANNUAL CLASS A SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1).............................................................. 0.00%
12b-1 Fee...................................................................................... None
Total Other Expenses (after expense reimbursement)............................................. 1.50%
Shareholder Services Fee................................................................... 0.25%
Total Class A Shares Operating Expenses (2)........................................... 1.50%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of the
management fee. The adviser can terminate this voluntary waiver at any time
at its sole discretion. The maximum management fee is 1.00%.
(2) The Total Class A Shares Operating Expenses in the table above are based on
expenses expected during the fiscal year ending November 30, 1995. The total
operating expenses were 0.25% for the fiscal period ended November 30, 1994
and would have been 4.68% absent the waiver of the management fee and the
reimbursement of certain other expenses.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class A Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Investing in Class A Shares" and "World
Investment Series, Inc. Information". Wire-transferred redemptions of less than
$5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming
(1) 5% annual return and (2) redemption at the end of each time period....................... $69 $100
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The information set forth in the foregoing table and example relates only to
Class A Shares of the Fund. The Fund also offers another class of shares called
Fortress Shares. Class A Shares and Fortress Shares are subject to certain of
the same expenses; however, Fortress Shares are subject to a maximum sales load
of 1.00%, a contingent deferred sales charge of 1.00%, and a 12b-1 fee of 0.25%.
See "Other Classes of Shares".
WORLD UTILITY FUND
FINANCIAL HIGHLIGHTS--CLASS A SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent Auditors on
page 41.
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1994**
<S> <C>
-----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.06
- -----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------
Net investment income 0.24
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
and foreign currency transactions (0.46)
- ----------------------------------------------------------------------------------------------- -------
Total from investment operations (0.22)
- -----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.17)
- ----------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 9.67
- ----------------------------------------------------------------------------------------------- -------
TOTAL RETURN* (3.00%)
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------
Expenses 0.25%(b)
- -----------------------------------------------------------------------------------------------
Net investment income 5.10%(b)
- -----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (a) 4.43%(b)
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $4,948
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate 7%
- -----------------------------------------------------------------------------------------------
</TABLE>
* Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
** Reflects operations for the period from April 21, 1994 (date of initial
public investment) to November 30, 1994. For the period from the start of
business, March 17, 1994, to April 20, 1994, Class A Shares had no public
investment.
(a) The Adviser waived all of its investment advisory fee, 1.00%, and
reimbursed other operating expenses, 0.86%, to comply with certain state
expense limitations. The remainder of the reimbursement was voluntary. This
expense decrease is reflected in both the expense and net investment income
ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal period ended November 30, 1994, which can be
obtained free of charge.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Corporation was established as a corporation under the laws of the state of
Maryland on January 25, 1994. The Corporation's address is Liberty Center,
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. The Articles of
Incorporation permit the Corporation to offer separate series of shares
representing interests in separate portfolios of securities. The shares in any
one portfolio may be offered in separate classes. With respect to this Fund, as
of the date of this prospectus, the Board of Directors ("Directors") has
established two classes of shares, known as Class A Shares and Fortress Shares.
This prospectus relates only to Class A Shares ("Shares") of the Corporation's
portfolio known as World Utility Fund.
Shares of the Fund are designed to give institutions and individuals a
convenient means of seeking total return without undue risk through a
professionally managed, diversified portfolio comprised primarily of foreign and
domestic utility securities. The Fund is not intended to provide a complete
investment program for an investor. A minimum initial investment of $500 is
required, unless the investment is in a retirement account, in which case the
minimum investment is $50.
In general, Shares are sold at net asset value plus an applicable sales load and
are redeemed at net asset value. However, a contingent deferred sales charge is
imposed on certain Shares. For a more complete description, see "Redeeming Class
A Shares."
The Fund's current net asset value and offering price can be found in the mutual
funds section of local newspapers under "Federated Liberty Funds."
LIBERTY FAMILY OF FUNDS
- --------------------------------------------------------------------------------
This class of Shares is a member of a family of mutual funds, collectively known
as the Liberty Family of Funds. The other funds in the Liberty Family of Funds
are:
American Leaders Fund, Inc., providing growth of capital and income
through high-quality stocks;
Capital Growth Fund, providing appreciation of capital primarily through
equity securities;
Fund for U.S. Government Securities, Inc., providing current income
through long-term U.S. government securities;
International Equity Fund, providing long-term capital growth and income
through international securities;
International Income Fund, providing a high level of current income
consistent with prudent investment risk through high-quality debt
securities denominated primarily in foreign currencies;
Liberty Equity Income Fund, Inc., providing above-average income and
capital appreciation through income producing equity securities;
Liberty High Income Bond Fund, Inc., providing high current income
through high-yielding lower-rated corporate bonds;
Liberty Municipal Securities Fund, Inc., providing a high level of
current income exempt from federal regular income tax through municipal
bonds;
Liberty U.S. Government Money Market Trust, providing current income
consistent with stability of principal through high-quality U.S.
government securities;
Liberty Utility Fund, Inc., providing current income and long-term growth
of income, primarily through electric, gas, and communications utilities;
Limited Term Fund, providing a high level of current income consistent
with minimum fluctuation in principal value through investment grade
securities;
Limited Term Municipal Fund, providing a high level of current income
exempt from federal regular income tax consistent with the preservation
of principal, primarily limited to municipal securities;
Michigan Intermediate Municipal Trust, providing current income exempt
from federal regular income tax and the personal income taxes imposed by
the state of Michigan and Michigan municipalities, primarily through
Michigan municipal securities;
Pennsylvania Municipal Income Fund, providing current income exempt from
federal regular income tax and the personal income taxes imposed by the
Commonwealth of Pennsylvania, primarily through Pennsylvania municipal
securities;
Strategic Income Fund, providing a high level of current income,
primarily through domestic and foreign corporate debt obligations; and
Tax-Free Instruments Trust, providing current income consistent with
stability of principal and exempt from federal income tax, through
high-quality, short-term municipal securities.
Prospectuses for these funds are available by writing to Federated Securities
Corp.
Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus.
The Liberty Family of Funds provides flexibility and diversification for an
investor's long-term investment planning. It enables an investor to meet the
challenges of changing market conditions by offering convenient exchange
privileges which give access to various investment vehicles and by providing the
investment services of a proven, professional investment adviser.
Shareholders of Class A shares participating in The Liberty Account, are
designated as Liberty Life Members. Liberty Life Members are exempt from sales
loads on future purchases in and exchanges between the Class A Shares of any
funds in the Liberty Family of Funds, as long as they maintain a $500 balance in
one of the Liberty Funds.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide total return. The investment
objective may be changed by the Directors without the approval of shareholders.
Shareholders will be notified in writing at least 30 days prior to any change in
the investment objective. Any such change may result
in the Fund having an investment objective different from the investment
objective which a shareholder considered appropriate at the time of investment
in the Fund. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by following the policies described
in this prospectus. Unless indicated otherwise, the policies may be changed by
the Directors without the approval of shareholders. Shareholders will be
notified before any material changes in these policies become effective.
INVESTMENT POLICIES
The Fund will seek to achieve its investment objective by investing at least 65%
of its total assets in securities issued by domestic and foreign companies in
the utilities industries. For these purposes, companies will be considered to be
in the utilities industries if, in the opinion of Federated Management ("the
Investment Adviser"), they are primarily engaged in the ownership or operation
of facilities used to generate, transmit, or distribute electricity, telephone
communications, cable and other pay television services, radio-telephone
communications, gas, or water.
The Fund's portfolio will at all times include issuers located in at least three
countries, although the Investment Adviser expects to invest in more than three
countries. It is expected that, under normal circumstances, the assets of the
Fund invested in the U.S. securities will be higher than that invested in
securities of any other single country. At times, the Fund may have more than
65% of its total assets invested in foreign securities.
The Fund may invest up to 35% of its total assets in securities of issuers that
are outside the utilities industries. Such investments may consist of common
stocks, debt securities, preferred stocks, or other securities issued by either
U.S. or foreign companies, governments, or governmental instrumentalities. Some
of these issuers may be in industries related to the utilities industries and,
therefore, may be subject to similar considerations. The prices of fixed income
securities fluctuate inversely to the direction of interest rates. The prices of
longer term bonds fluctuate more widely in response to market interest rate
changes.
Debt obligations in the portfolio, at the time they are purchased, generally
will be limited to those which fall in one of the following categories: (i)
rated BBB or better by Standard & Poor's Ratings Group ("S&P") or Baa by Moody's
Investors Service, Inc., ("Moody's") or (ii) determined by the Investment
Adviser to be of investment grade and not rated by either of the aforementioned
rating services. However, the Fund may invest up to 35% of the value of its
total assets in lower-rated convertible and non-convertible debt obligations
that are not investment grade bonds (i.e., "junk bonds"), but are rated CCC or
better by S&P or Caa or better by Moody's or are not rated but are determined by
the Investment Adviser to be of comparable quality. Securities rated BB, B, and
CCC by S&P or Ba, B, and Caa by Moody's either have speculative characteristics
or are predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligations. Debt
obligations that are not determined to be investment grade are high-yield
high-risk bonds, typically subject to greater market fluctuations, and
securities in the lowest rating category may be in danger of loss of income and
principal due to an issuer's default. To a greater extent than investment grade
bonds, the value of lower-rated bonds tends to reflect short-term corporate,
economic and market developments, as well as investor perceptions of the
issuer's credit quality. In addition, lower rated bonds may be more difficult to
dispose of or to value than high-
rated, lower-yielding bonds. The Investment Adviser attempts to reduce the risks
described above through diversification of the portfolio and by credit analysis
of each issuer as well as by monitoring broad economic trends and corporate and
legislative developments. In the event the rating on an issue held in the Fund's
portfolio is changed by the ratings services (or, for an unrated issue, in the
determination of the Investment Adviser), such event will be considered by the
Investment Adviser in its evaluation of the overall investment merits of that
security, but will not necessarily result in the automatic sale of the security.
A description of the rating categories is contained in the Appendix to the
Prospectus.
For temporary defensive purposes and to maintain liquidity in anticipation of
favorable investment opportunities, the Fund may invest in short-term money
market instruments including securities of other investment companies,
certificates of deposit, obligations issued or guaranteed by the United States
government or its agencies or instrumentalities, commercial paper rated not
lower than A-1 by S&P, Prime-1 by Moody's or repurchase agreements.
RISK FACTORS AND INVESTMENT CONSIDERATIONS
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The Fund will attempt to meet its investment objective by being at least 65%
invested in securities issued by companies in the domestic and foreign utilities
industries. There exist certain risks associated with the utilities industries
and with foreign securities of which investors in the Fund should be aware.
CONSIDERATIONS OF UTILITY SECURITIES. There are certain risks and considerations
affecting utility companies, and the holders of utility company securities,
which an investor should take into account when investing in those securities.
Factors which may adversely affect utility companies include: difficulty in
financing large construction programs during inflationary periods; technological
innovations which may cause existing plants, equipment, or products to become
less competitive or obsolete; the impact of natural or man-made disasters
(especially on regional utilities); increased costs or reductions in production
due to the unavailability of appropriate types of fuel; seasonally or
occasionally reduced availability or higher cost of natural gas; and reduced
demand due to energy conservation among consumers. Furthermore, the revenues of
domestic and foreign utility companies generally reflect the economic growth and
developments in the geographic areas in which they do business.
In addition, most utility companies in the United States and in foreign
countries are subject to government regulation. Generally, the purpose of such
regulation is to ensure desirable levels of service and adequate capacity to
meet public demand. To this end, prices are often regulated to enable consumers
to obtain service at what is perceived to be a fair price, while attempting to
provide utility companies with a rate of return sufficient to attract capital
investment necessary for continued operation and necessary growth. Recently,
utility regulators have permitted utilities to diversify outside of their
original geographic regions and their traditional lines of business. While the
Investment Adviser believes that these opportunities will permit certain utility
companies to earn more than their traditional regulated rates of return, other
companies may be forced to defend their core businesses and may be less
profitable. Of course, there can be no assurance that all of the regulatory
policies described in this paragraph will continue in the future.
In addition to the effects of regulation described in the previous paragraph,
utility companies may also be adversely affected by the following regulatory
considerations: the development and implementation of a national energy policy;
the differences between regulatory policies of different jurisdictions (or
different regulators which have concurrent jurisdiction); shifts in regulatory
policies; adequacy of rate increases; and future regulatory legislation.
Foreign utility companies may encounter different risks and opportunities than
those located in the United States. Foreign utility companies may be more
heavily regulated than their United States counterparts. Many foreign utility
companies currently use fuels which cause more pollution than fuels used by
United States utilities; in the future, it may be necessary for such foreign
utility companies to invest heavily in pollution control equipment or otherwise
meet pollution restrictions. Rapid growth in certain foreign economies may
encourage the growth of utility industries in those countries. Although many
foreign utility companies are currently government-owned, the Investment Adviser
believes that it is likely that some foreign governments will seek to
"privatize" their utility companies, (i.e., transfer ownership to private
investors).
In addition to the foregoing considerations which affect most utility companies,
there are specific considerations which affect specific utility industries:
ELECTRIC. The electric utility industry is made up of companies that are
engaged in the generation, transmission, and sale of electric energy.
Domestic electric utility companies have generally been favorably affected
by lower fuel and financing costs and the completion of major construction
programs. Some electric utilities are able to sell power outside of their
traditional geographic areas. Electric utility companies have historically
been subject to increases in fuel and other operating costs, high interest
costs on borrowings needed for capital construction programs, compliance
with environmental and safety regulations, and changes in the regulatory
climate.
In the United States, the construction and operation of nuclear power
facilities is subject to a high degree of regulatory oversight by the
Nuclear Regulatory Commission and state agencies with concurrent
jurisdiction. In addition, the design, construction, licensing and
operation of nuclear power facilities have been subject to lengthy delays
and unanticipated costs due to changes in regulatory policy, regional
political actions, and lawsuits. Furthermore, during rate authorizations,
utility regulators may disallow the inclusion in electric rates of the
higher operating costs and capital expenditures resulting from these delays
and unanticipated costs, including the costs of a nuclear facility which a
utility company may never be able to use.
TELECOMMUNICATIONS. The telephone industry is large and highly
concentrated. The greatest portion of this segment is comprised of
companies which distribute telephone services and provide access to the
telephone networks. While many telephone utility companies have diversified
into other businesses in recent years, the profitability of telephone
utility companies could be adversely affected by increasing competition,
technological innovations, and other structural changes in the industry.
Cable television companies are typically local monopolies, subject to
scrutiny by both utility regulators and municipal governments. Emerging
technologies and legislation encouraging local competition are combining to
threaten these
monopolies and may slow future growth rates of these companies. The radio
telecommunications segment of this industry, including cellular telephone,
is in its early developmental phases and is characterized by emerging,
rapidly growing companies.
GAS. Gas transmission and distribution companies are undergoing
significant changes. In the United States, the Federal Energy Regulatory
Commission is reducing its regulation of interstate transmission of gas.
While gas utility companies have in the recent past been adversely affected
by disruptions in the oil industry, increased concentration, and increased
competition, the Investment Adviser believes that environmental
considerations should benefit the gas industry in the future.
WATER. Water utility companies purify, distribute, and sell water. This
industry is highly fragmented because most of the water supplies are owned
by local authorities. Water utility companies are generally mature and are
experiencing little or no per capita volume growth. The Investment Adviser
believes that favorable investment opportunities may result if anticipated
consolidation and foreign participation in this industry occur.
The Fund occasionally takes advantage of the unusual opportunities for higher
returns available from investing in developing countries. These investments,
however, carry considerably more volatility and risk because they are associated
with less mature economies and less stable political systems.
EXCHANGE RATES. Foreign securities are denominated in foreign currencies.
Therefore, the value in U.S. dollars of the Fund's assets and income may be
affected by changes in exchange rates and regulations. Although the Fund values
its assets daily in U.S. dollars, it will not convert its holding of foreign
currencies to U.S. dollars daily. When the Fund converts its holdings to another
currency, it may incur conversion costs. Foreign exchange dealers realize a
profit on the difference between the prices at which they buy and sell
currencies.
FOREIGN COMPANIES. Other differences between investing in foreign and U.S.
companies include: less publicly available information about foreign companies;
the lack of uniform financial accounting standards applicable to foreign
companies; less readily available market quotations on foreign companies;
differences in government regulation and supervision of foreign stock exchanges,
brokers, listed companies, and banks; generally lower foreign stock market
volume; the likelihood that foreign securities may be less liquid or more
volatile; foreign brokerage commissions may be higher; unreliable mail service
between countries; political or financial changes which adversely affect
investments in some countries; and difficulties which may be encountered in
obtaining or enforcing a court judgment abroad.
U.S. GOVERNMENT POLICIES. In the past, U.S. government policies have discouraged
or restricted certain investment abroad by investors such as the Fund. Although
the Fund is unaware of any current restrictions, investors are advised that
these policies could be reinstituted.
OTHER INVESTMENT PRACTICES
FOREIGN CURRENCY TRANSACTIONS. The Fund will enter into foreign currency
transactions to obtain the necessary currencies to settle securities
transactions. Currency transactions may be conducted
either on a spot or cash basis at prevailing rates or through forward foreign
currency exchange contracts.
The Fund may also enter into foreign currency transactions to protect Fund
assets against adverse changes in foreign currency exchange rates or exchange
control regulations. Such changes could unfavorably affect the value of Fund
assets which are denominated in foreign currencies, such as foreign securities
or funds deposited in foreign banks, as measured in U.S. dollars. Although
foreign currency transactions may be used by the Fund to protect against a
decline in the value of one or more currencies, such efforts may also limit any
potential gain that might result from a relative increase in the value of such
currencies and might, in certain cases, result in losses to the Fund.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency exchange
contract ("forward contract") is an obligation to purchase or sell an amount of
a particular currency at a specific price and on future date agreed upon by the
parties.
Generally, no commission charges or deposits are involved. At the time the Fund
enters into a forward contract, Fund assets with a value equal to the Fund's
obligation under the forward contract are segregated on the Fund's records and
are maintained until the contract has been settled. The Fund will generally
enter into a forward contract to provide the proper currency to settle a
securities transaction at the time the transaction occurs ("trade date"). The
period between the trade date and settlement date will vary between twenty-four
hours and thirty days, depending upon local custom.
The Fund may also protect against the decline of a particular foreign currency
by entering into a forward contract to sell an amount of that currency
approximating the value of all or a portion of the Fund's assets denominated in
that currency ("hedging"). The success of this type of short-term hedging
strategy is highly uncertain due to the difficulties of predicting short-term
currency market movements and of precisely matching forward contract amounts and
the constantly changing value of the securities involved. Although the
Investment Adviser will consider the likelihood of changes in currency values
when making investment decisions, the Investment Adviser believes that it is
important to be able to enter into forward contracts when it believes the
interests of the Fund will be served. The Fund will not enter into forward
contracts for hedging purposes in a particular currency in an amount in excess
of the Fund's assets denominated in that currency. No more than 30% of the
Fund's assets will be committed to forward contracts for hedging purposes at any
time. (This restriction does not include forward contracts entered into to
settle securities transactions.)
REPURCHASE AGREEMENTS. Certain securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell U.S. government securities or other securities to the Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price. To the extent that the original seller does not repurchase the securities
from the Fund, the Fund could receive less than the repurchase price on any sale
of such securities.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will limit the amount of
portfolio securities it may lend to not more than one-third of its total assets.
The Fund will only enter into loan arrangements with broker/dealers, banks, or
other institutions
which the Investment Adviser has determined are creditworthy under guidelines
established by the Fund's Board of Directors and will receive collateral in cash
or United States government securities that will be maintained in an amount
equal to at least 100% of the current market value of the securities loaned.
There is the risk that when lending portfolio securities, the securities may not
be available to the Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies but which are
subject to restriction on resale under federal securities law. To the extent
these securities are deemed to be illiquid, the Fund will limit its purchases
together with other securities considered to be illiquid to 15% of its net
assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more/less than the market value of the securities
on the settlement date.
The Fund may dispose of a commitment prior to settlement if the Investment
Adviser deems it appropriate to do so. In addition, the Fund may enter in
transactions to sell its purchase commitments to third parties at current market
values and simultaneously acquire other commitments to purchase similar
securities at later dates. The Fund may realize short-term profits or losses
upon the sale of such commitments.
COVERED CALL OPTIONS. The Fund may also write call options on all or any portion
of its portfolio to generate income for the Fund. Call options written by the
Fund give the holder the right to buy the underlying securities of the Fund at
the stated exercise price. The Fund will write call options only on securities
either held in its portfolio or for which it has the right to obtain without
payment of further consideration or for which it has segregated cash in the
amount of any additional consideration. The call options which the Fund writes
and sells must be listed on a recognized options exchange. The Fund's investment
in call options shall not exceed 5% of the Fund's total assets.
INVESTMENT LIMITATIONS
The Fund will not:
with respect to 75% of its total assets, invest more than 5% of its total
assets in the securities of any one issuer, except that this restriction
does not apply to cash and cash items, repurchase agreements, and
securities issued or guaranteed by the United States government or its
agencies or instrumentalities, or acquire more than 10% of the
outstanding voting securities of any one issuer;
borrow money, issue senior securities, or pledge assets, except that
under certain circumstances the Fund may borrow money and engage in
reverse repurchase transactions in amounts up to one-third of the value
of its total assets, including the amounts borrowed, and pledge up to 10%
of the value of those assets to secure such borrowings.
The above investment limitations cannot be changed without shareholder approval.
The following limitation, however, may be changed by the Directors without the
approval of shareholders. Shareholders will be notified before any material
change in this limitation becomes effective.
The Fund will not invest more than 25% of its total assets in securities of
companies engaged principally in any one industry other than the utilities
industry, except that this restriction does not apply to cash or cash items and
securities issued or guaranteed by the United States government or its agencies
or instrumentalities.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of the Class A Shares in the market value
of all securities and other assets of the Fund, subtracting the interest of the
Class A Shares in the liabilities of the Fund and those attributable to the
Class A Shares, and dividing the remainder by the number of Class A Shares
outstanding. The net asset value for Class A Shares may differ from that of
Fortress Shares due to the variance in daily net income realized by each class.
Such variance will reflect only accrued net income to which the shareholders of
a particular class are entitled.
INVESTING IN CLASS A SHARES
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SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open. Shares may
be purchased through a financial institution which has a sales agreement with
Federated Securities Corp. (the "Distributor") or directly from Federated
Securities Corp. once an account has been established. In connection with the
sale of Shares, Federated Securities Corp. may from time to time offer certain
items of nominal value to any shareholder or investor. The Fund reserves the
right to reject any purchase request.
THROUGH A FINANCIAL INSTITUTION. An investor may call his financial institution
(such as a bank or an investment dealer) to place an order to purchase Shares.
It is the financial institution's responsibility to transmit orders promptly.
Purchase orders through a registered broker/dealer must be received by the
broker before 4:00 P.M (Eastern time) and must be transmitted by the broker to
the Fund before 5:00 P.M. (Eastern time) in order for Shares to be purchased at
that day's price. Purchase orders through other financial institutions must be
received by the financial institution and transmitted to the Fund before 4:00
P.M. (Eastern time) in order for Shares to be purchased at that day's price.
Orders placed through a financial institution are considered received when the
Fund is notified of the purchase order.
DIRECTLY BY MAIL. An investor may place an order to purchase Shares directly
from the Distributor once an account has been established. To do so, mail a
check made payable to World Utility Fund-- Class A Shares to Federated Services
Company, c/o State Street Bank and Trust Company, P.O. Box 8604, Boston, MA
02266-8604.
Orders by mail are considered received after payment by check is converted by
the transfer agent's bank, State Street Bank and Trust Company ("State Street
Bank"), into federal funds. This is generally the next business day after State
Street Bank receives the check.
DIRECTLY BY WIRE. To purchase Shares directly from the Distributor by Federal
Reserve wire once an account has been established, call the Fund. All
information needed will be taken over the telephone, and the order is considered
received when State Street Bank receives payment by wire. Federal funds should
be wired as follows: Federated Services Company, c/o State Street Bank and Trust
Company, Boston, Massachusetts 02105; Attention: EDGEWIRE; For Credit to: World
Utility Fund--Class A Shares; Fund Number (this number can be found on the
account statement or by contacting the Fund); Group Number or Order Number;
Nominee or Institution Name; ABA Number 011000028. Shares cannot be purchased by
wire on Columbus Day, Veterans' Day, or Martin Luther King Day.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares is $500 unless the investment is in a
retirement plan, in which case the minimum initial investment is $50. Subsequent
investment must be in amounts of at least $100, except for retirement plans,
which must be in amounts of at least $50.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received, plus a sales load as follows:
<TABLE>
<CAPTION>
SALES LOAD AS SALES LOAD AS DEALER CONCESSION
A PERCENTAGE A PERCENTAGE AS A PERCENTAGE
OF PUBLIC OF NET OF PUBLIC
AMOUNT OF TRANSACTION OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
<S> <C> <C> <C>
Less than $50,000 5.50% 5.82% 5.00%
$50,000 but less than $100,000 4.50% 4.71% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.25%
$250,000 but less than $500,000 2.50% 2.56% 2.25%
$500,000 but less than $1,000,000 2.00% 2.04% 1.80%
$1,000,000 or greater 0.00% 0.00% 0.25%*
</TABLE>
*See sub-section entitled "Dealer Concession" below.
The net asset value is determined at 4:00 P.M. (Eastern time) or at the close of
the New York Stock Exchange, Monday through Friday, except on: (i) days on which
there are not sufficient changes in the value of the Fund's portfolio securities
that its net asset value might be materially affected; (ii) days during which no
Shares are tendered for redemption and no orders to purchase Shares are
received; or (iii) the following holidays; New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
Shareholders designated as Liberty Life Members are exempt from sales loads.
No sales load is imposed for Shares purchased through bank trust departments or
investment advisers registered under the Investment Advisers Act of 1940, as
amended, or retirement plans where the third party administrator has entered
into certain arrangements with Federated Securities Corp. or its affiliates.
However, investors who purchase Shares through a trust department or Investment
Adviser may be charged an additional service fee by that institution.
DEALER CONCESSION. For sales of Shares a dealer will normally receive up to 90%
of the applicable sales load. Any portion of the sales load which is not paid to
the dealer will be retained by the Distributor. However, the Distributor may
offer to pay dealers up to 100% of the sales load retained by it. Such payments
may take the form of cash or promotional incentives, such as reimbursement of
certain expenses of qualified employees and their spouses to attend
informational meetings about the Fund or other special events at
recreational-type facilities, or items of material value. In some instances,
these incentives will be made available only to dealers whose employees have
sold or may sell significant amount of Shares.
REDUCING OR ELIMINATING THE SALES LOAD
The sales load can be reduced on the purchase of Shares through:
quantity discounts and accumulated purchases;
signing a 13-month letter of intent;
using the reinvestment privilege;
purchases with proceeds from redemptions of unaffiliated mutual fund
shares; or
concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table on the
previous page, larger purchases reduce the sales load paid. The Fund will
combine purchases of Shares made on the same day by the investor, the investor's
spouse, and the investor's children under age 21 when it calculates the sales
load. In addition, the sales load, if applicable, is reduced for purchases made
at one time by a trustee or fiduciary for a single trust estate or a single
fiduciary account.
If an additional purchase of Shares is made, the Fund will consider the previous
purchases still invested in the Fund. For example, if a shareholder already owns
Shares having a current value at the public offering price of $90,000 and he
purchases $10,000 more at the current public offering price, the sales load on
the additional purchase according to the schedule now in effect would be 3.75%,
not 4.50%.
To receive the sales load reduction, Federated Securities Corp. must be notified
by the shareholder in writing or by his financial institution at the time the
purchase is made that Shares are already owned or that purchases are being
combined. The Fund will reduce the sales load after it confirms the purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $50,000 of
shares of funds in the Liberty Family of Funds over the next 13 months, the
sales load may be reduced by signing a letter of intent to that effect. This
letter of intent includes a provision for a sales load adjustment depending on
the amount actually purchased within the 13-month period and a provision for the
custodian to hold 5.50% of the total amount intended to be purchased in escrow
(in Shares) until such purchase is completed.
The 5.50% held in escrow will be applied to the shareholder's account at the end
of the 13-month period unless the amount specified in the letter of intent is
not purchased. In this event, an appropriate number of escrowed Shares may be
redeemed in order to realize the difference in the sales load.
This letter of intent will not obligate the shareholder to purchase Shares, but
if he does, each purchase during the period will be at the sales load applicable
to the total amount intended to be purchased. This letter may be dated as of a
prior date to include any purchases made within the past 90 days toward the
dollar fulfillment of the letter of intent. Prior trade prices will not be
adjusted.
REINVESTMENT PRIVILEGE. If Shares in the Fund have been redeemed, the
shareholder has a one-time right, within 120 days, to reinvest the redemption
proceeds at the next-determined net asset value without any sales load.
Federated Securities Corp. must be notified by the shareholder in writing or by
his financial institution of the reinvestment in order to eliminate a sales
load. If the shareholder redeems his Shares in the Fund, there may be tax
consequences.
PURCHASES WITH PROCEEDS FROM REDEMPTIONS OF UNAFFILIATED INVESTMENT COMPANIES.
Investors may purchase Shares at net asset value, without a sales load, with
proceeds from the redemption of shares of an investment company which were sold
with a sales load or commission and were not distributed by Federated Securities
Corp. The purchase must be made within 60 days of the redemption, and Federated
Securities Corp. must be notified by the investor in writing, or by his
financial institution, at the time the purchase is made.
CONCURRENT PURCHASES. For purposes of qualifying for a sales load reduction, a
shareholder has the privilege of combining concurrent purchases of two or more
funds in the Liberty Family of Funds, the purchase price of which includes a
sales load. For example, if a shareholder concurrently invested $30,000 in one
of the other Liberty Funds with a sales load, and $20,000 in this Fund, the
sales load would be reduced.
To receive this sales load reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at the
time the concurrent purchases are made. The Fund will reduce the sales load
after it confirms the purchases.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund has been opened, shareholders may add to their investment on a
regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Shares at the net asset value next determined after an order is
received by the Fund plus the applicable sales load. A shareholder may
apply for participation in this program through his financial institution or
directly through the Fund.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange certain securities or a combination of securities and
cash for Shares. The securities and any cash must have a market value of at
least $25,000. From time to time the Fund will prepare a list of securities
which may be eligible for acceptance and furnish this list to brokers upon
request. Securities accepted by the Fund are valued in the same manner as the
Fund values its portfolio securities. Investors wishing to exchange securities
should first contact their investment broker, who will contact Federated
Securities Corp.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a Share
account for each shareholder. Share certificates are not issued unless requested
on the application or by contacting the Fund.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Quarterly statements are sent to report dividends paid during the
year.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Distributions of any net realized capital gains will be
made at least once every twelve months. Dividends and distributions are
automatically reinvested in additional Shares on the payment date, at the
ex-dividend date net asset value without a sales load, unless shareholders
request cash payments on the new account form or by writing to the transfer
agent. All shareholders on the record date are entitled to the dividend. If
Shares are redeemed or exchanged prior to the record date or purchased after the
record date, those Shares are not entitled to that quarter's dividend.
RETIREMENT PLANS
Shares of the Fund can be purchased as an investment for retirement plans or for
IRA accounts. For further details, contact the Fund and consult a tax advisor.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Class A shareholders may exchange all or some of their Shares for Class A Shares
of other funds in the Liberty Family of Funds at net asset value. They may also
exchange into certain other funds for which affiliates of Federated Investors
serve as principal underwriter ("Federated Funds"). Certain Federated Funds are
sold with a sales load different from that of the Fund or with no sales load;
exchanges into these Federated Funds are made at net asset value plus the
difference between the Fund's sales load already paid and any sales load of the
Federated Fund into which the Shares are to be exchanged, if higher, or at full
load if applicable. Neither the Fund nor any of the funds in the Liberty Family
of Funds imposes any additional fees on exchanges. Shareholders in certain other
Federated Funds may exchange their shares in the Federated Funds for Class A
shares. Participants in a plan under the Liberty Family Retirement Program may
exchange all or some of their shares for
Class A Shares of other funds offered under the plan at net asset value without
a contingent deferred sales charge.
REDUCED SALES LOAD
If a shareholder making such an exchange qualifies for a reduction of the sales
load, Federated Securities Corp. must be notified in writing by the shareholder
or by his financial institution.
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange Shares having a net asset value
which at least meets the minimum investment required for the fund into which the
exchange is being made. Before the exchange, the shareholder must receive a
prospectus of the fund for which the exchange is being made.
This privilege is available to shareholders resident in any state in which the
fund Shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
the proceeds invested in Class A shares of the other fund. The exchange
privilege may be modified or terminated at any time. Shareholders will be
notified of the modification or termination of the exchange privilege.
Further information on the exchange privilege and prospectuses for the Liberty
Family of Funds or certain Federated Funds are available by contacting the Fund.
TAX CONSEQUENCES
An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending on the circumstances, a short-term or long-term capital
gain or loss may be realized.
MAKING AN EXCHANGE
Instructions for exchanges for the Liberty Family of Funds and certain Federated
Funds may be given in writing or by telephone. Telephone exchange instructions
may be recorded. If reasonable procedures are not followed by the Fund, it may
be liable for losses due to unauthorized or fraudulent telephone instructions.
Written instructions may require a signature guarantee. Shareholders of the Fund
may have difficulty in making exchanges by telephone through brokers and other
financial institutions during times of drastic economic or market changes. If a
shareholder cannot contact his broker or financial institution by telephone, it
is recommended that an exchange request be made in writing and sent by overnight
mail to Federated Services Company, 500 Victory Road--2nd Floor, Quincy,
Massachusetts 02171.
TELEPHONE INSTRUCTIONS. Shares may be exchanged between two funds by telephone
only if the two funds have identical shareholder registrations.
Any Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Services Company, in care of State Street Bank and
deposited to the shareholder's account before being exchanged. Telephone
exchange instructions are recorded and will be binding upon the shareholder.
Such instructions will be processed as of 4:00 P.M. (Eastern time) and must be
received by the transfer agent's bank before that time for Shares to be
exchanged the same day.
Shareholders exchanging into a fund will not receive any dividend that is
payable to shareholders of record on that date. This privilege may be modified
or terminated at any time.
REDEEMING CLASS A SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemptions can be made through a financial
institution or directly from the Fund by written request. Redemption requests
must be received in proper form.
THROUGH A FINANCIAL INSTITUTION
A shareholder may redeem Shares by calling his financial institution (such as a
bank or an investment dealer) to request the redemption. Shares will be redeemed
at the net asset value next determined after the Fund receives the redemption
request from the financial institution less any applicable contingent deferred
sales charge. Redemption requests through a registered broker/dealer must be
received by the broker before 4:00 P.M. (Eastern time) and must be transmitted
by the broker to the Fund before 5:00 P.M. (Eastern time) in order for Shares to
be redeemed at that day's net asset value. Redemption requests through other
financial institutions must be received by the financial institution and
transmitted to the Fund before 4:00 P.M. (Eastern time) in order for Shares to
be redeemed at that day's net asset value. The financial institution is
responsible for promptly submitting redemption requests and providing proper
written redemption instructions to the Fund. The financial institution may
charge customary fees and commissions for this service.
DIRECTLY FROM THE FUND
BY TELEPHONE. Shareholders who have not purchased through a financial
institution may redeem their Shares by telephoning the Fund. The proceeds will
be mailed to the shareholder's address of record or wire transferred to the
shareholder's account at a domestic commercial bank that is a member of the
Federal Reserve System, normally within one business day, but in no event longer
than seven days after the request. The minimum amount for a wire transfer is
$1,000. If at any time the Fund shall determine it necessary to terminate or
modify this method of redemption, shareholders would be promptly notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp. Telephone redemption instructions may
be recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as redeeming by mail, should be considered.
BY MAIL. Any shareholder may redeem Shares by sending a written request to
Federated Services Company, c/o State Street Bank and Trust Company, P.O. Box
8604, Boston, MA 02266-8604. The written request should include the
shareholder's name, the Fund name and class of shares name,
the account number, and the Share or dollar amount requested and should be
signed exactly as the Shares are registered.
If Share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail to Federated Services Company,
500 Victory Road--2nd Floor, Quincy, MA 02171 with the written request.
Shareholders should call the Fund for assistance in redeeming by mail.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.
CONTINGENT DEFERRED SALES CHARGE
Shareholders who purchase Shares with proceeds of a redemption of shares of a
mutual fund sold with a sales load and not distributed by Federated Securities
Corp. may be charged a contingent deferred sales charge by the Fund's
distributor of .50 of 1% for redemptions made within one year. The contingent
deferred sales charge will be calculated based upon the lesser of the original
purchase price of Shares or the net asset value of the Shares when redeemed.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount not less
than $100 may take advantage of the Systematic Withdrawal Program. Under this
program, Shares are redeemed to provide for periodic withdrawal payments in an
amount directed by the shareholder. Depending upon the amount of the withdrawal
payments, the amount of dividends paid and capital gains distributions with
respect to Shares, and the fluctuation of the net asset value of Shares redeemed
under this program, redemptions may reduce, and eventually deplete, the
shareholder's investment in Shares. For this reason, payments under this program
should not be considered as yield or income on the shareholder's investment in
Shares. To be eligible to participate in this program, a
shareholder must have an account value of at least $10,000. A shareholder may
apply for participation in this program through his financial institution. Due
to the fact that Shares are sold with a sales load, it is not advisable for
shareholders to be purchasing Shares while participating in this program.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the required minimum value of
$500. This requirement does not apply, however, if the balance falls below $500
because of changes in the Fund's net asset value.
Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional Shares to meet the minimum
requirement.
WORLD INVESTMENT SERIES, INC. INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE CORPORATION
BOARD OF DIRECTORS. The Corporation is managed by a Board of Directors. The
Directors are responsible for managing the Corporation's business affairs and
for exercising all the Corporation's powers except those reserved for the
shareholders. An Executive Committee of the Board of Directors handles the
Board's responsibilities between meetings of the Board.
OFFICERS AND DIRECTORS. Officers and Directors are listed with their addresses,
present positions with World Investment Series, Inc., and principal occupations,
including those with Federated Management, its affiliates, and the "Funds"
described in the Statement of Additional Information.
- --------------------------------------------------------------------------------
John F. Donahue+*
Federated Investors Tower
Pittsburgh, PA
Chairman and Director
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, tna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or Managing General
Partner of the Funds. Mr. Donahue is the father of J. Christopher Donahue,
President and Director of the Company.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Thomas G. Bigley
28th Floor
One Oxford Centre
Pittsburgh, PA
Director
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital of
Pittsburgh; Director, Trustee or Managing General Partner of the Funds;
formerly, Senior Partner, Ernst & Young LLP.
- --------------------------------------------------------------------------------
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Director
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds; formerly,
President, Naples Property Management, Inc.
- --------------------------------------------------------------------------------
William J. Copeland
One PNC Plaza--23rd Floor
Pittsburgh, PA
Director
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.
- --------------------------------------------------------------------------------
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
President and Director
Executive Vice President and Trustee, Federated Investors; Director, Federated
Research Corp.; Chairman and Director, Federated Securities Corp.; President or
Vice President of the Funds; Director or Trustee of some of the Funds.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
James E. Dowd
571 Hayward Mill Road
Concord, MA
Director
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds; formerly, Director, Blue Cross of
Massachusetts, Inc.
- --------------------------------------------------------------------------------
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Director
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore Hospitals;
Professor of Medicine and Trustee, University of Pittsburgh; Director of
Corporate Health, University of Pittsburgh Medical Center; Director, Trustee, or
Managing General Partner of the Funds.
- --------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+
Henny, Koehuba, Meyer & Flaherty
Two Gateway Center--Suite 674
Pittsburgh, PA
Director
Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park Restaurants,
Inc., and Statewide Settlement Agency, Inc.; Director, Trustee, or Managing
General Partner of the Funds; formerly, Counsel, Horizon Financial, F.A.,
Western Region.
- --------------------------------------------------------------------------------
Peter E. Madden
225 Franklin Street
Boston, MA
Director
Consultant; State Representative, Commonwealth of Massachusetts: Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation and Trustee,
Lahey Clinic Foundation, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Gregor F. Meyer
Henny, Koehuba, Meyer & Flaherty
Two Gateway Center--Suite 674
Pittsburgh, PA
Director
Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or Managing General
Partner of the Funds; formerly, Vice Chairman, Horizon Financial, F.A.
- --------------------------------------------------------------------------------
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Director
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie Endowment
for International Peace, RAND Corporation, Online Computer Library Center, Inc.,
and U.S. Space Foundation; Chairman, Czecho Slovak Management Center; Director,
Trustee, or Managing General Partner of the Funds; President Emeritus,
University of Pittsburgh; formerly, Chairman, National Advisory Council for
Environmental Policy and Technology.
- --------------------------------------------------------------------------------
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Director
Public relations/marketing consultant; Director, Trustee, or Managing General
Partner of the Funds.
- --------------------------------------------------------------------------------
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice President and
Treasurer, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research Ltd.; Executive Vice President,
Treasurer, and Director, Federated Securities Corp.; Trustee, Federated Services
Company and Federated Shareholder Services; Chairman, Treasurer, and Trustee,
Federated Administrative Services; Trustee or Director of some of the Funds;
Vice President and Treasurer of the Funds.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and Secretary, Federated
Research Corp. and Passport Research, Ltd.; Trustee, Federated Services Company;
Executive Vice President, Secretary, and Trustee, Federated Administrative
Services; Secretary and Trustee, Federated Shareholder Services; Executive Vice
President and Director, Federated Securities Corp.; Vice President and Secretary
of the Funds.
- --------------------------------------------------------------------------------
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Director and President, Federated Research
Corp.; President, Passport Research Ltd.; Trustee, Federated Administrative
Services, Federated Services Company, and Federated Shareholder Services;
President or Vice President of the Funds; Director, Trustee, or Managing General
Partner of some of the Funds. Mr. Donahue is the son of John F. Donahue,
Chairman and Director of the Fund.
- --------------------------------------------------------------------------------
* This Director is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
+ Member of the Executive Committee. The Executive Committee of the Board of
Directors handles the responsibilities of the Board of Directors between
meetings of the Board.
Officers and Directors, as a group, own 1.63% of the Fund's outstanding shares.
INVESTMENT ADVISER. Under the terms of an Advisory Agreement between the
Corporation and Federated Management, Federated Management will furnish to the
Fund such investment advice, statistical and other factual information as may
from time to time be reasonably requested by the Fund.
ADVISORY FEES. The Fund's investment adviser receives an annual investment
advisory fee equal to 1.00% of average daily net assets of the Fund. The
fee paid by the Fund, while higher than the advisory fee paid by other
mutual funds in general, is comparable to fees paid by other mutual funds
with similar objectives and policies. The Investment Adviser may
voluntarily choose to waive a portion of its fee or reimburse the Fund for
certain operating expenses. The Investment Adviser can terminate this
voluntary reimbursement of expenses at any time at its sole discretion. The
Investment Adviser has also undertaken to reimburse the Fund for operating
expenses in excess of limitations established by certain states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private accounts.
Certain other subsidiaries also provide administrative services to a number of
investment companies. Total assets under management or administration by these
and other subsidiaries of Federated Investors are approximately $70 billion.
Federated Investors, which was founded in 1956 as Federated Investors, Inc.,
develops and manages mutual funds primarily for the financial industry.
Federated Investors' track record of competitive performance and its
disciplined, risk-averse investment philosophy serve approximately 3,500 client
institutions nationwide. Through these same client institutions, individual
shareholders also have access to this same level of investment expertise.
Christopher H. Wiles has been the Fund's portfolio manager since its inception.
Mr. Wiles joined Federated Investors in 1990 and has been a Vice President of
the Investment Adviser since 1992.
Mr. Wiles served as Assistant Vice President of the Fund's investment adviser
from 1990 until 1992.
Mr. Wiles was a portfolio manager at Mellon Bank from 1986 until 1990. Mr. Wiles
is a Chartered Financial Analyst and received his M.B.A. in Finance from
Cleveland State University.
DISTRIBUTION OF CLASS A SHARES
- --------------------------------------------------------------------------------
Federated Securities Corp. is the principal distributor for Shares. Federated
Securities Corp. is located at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. It is a Pennsylvania corporation organized on November
14, 1969, and is the principal distributor for a number of investment companies.
Federated Securities Corp. is a subsidiary of Federated Investors.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors ("Federated Funds") as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
<C> <S>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services Plan (the
"Services Plan") under which it may make payments up to 0.25 of 1% of the
average daily net asset value of Shares to obtain certain personal services for
shareholders and the maintenance of shareholder accounts ("shareholder
services"). The Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
Federated Shareholder Services will either perform shareholder services directly
or will select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Fund and Federated Shareholder
Services.
The Glass-Steagall Act limits the ability of a depository institution (such as a
commercial bank or a savings and loan association) to become an underwriter or
distributor of securities. In the event the Glass-Steagall Act is deemed to
prohibit depository institutions from acting in the administrative capacities
described above or should Congress relax current restrictions on depository
institutions, the Board of Directors will consider appropriate changes in the
administrative services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to periodic payments to
financial institutions under the Shareholder Services Plan, certain financial
institutions may be compensated by the Investment Adviser or its affiliates for
the continuing investment of customers' assets in certain funds, including the
Fund, advised by those entities. These payments will be made directly by the
Distributor or Investment Adviser from their assets, and will not be made from
the assets of the Fund by the assessment of a sales load on Shares.
Furthermore, the Distributor may offer to pay a fee from its own assets to
financial institutions as financial assistance for providing substantial
marketing and sales support. The support may include sponsoring sales,
educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance will be predicated upon the amount of
Shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution. Any
payments made by the Distributor may be reimbursed by the Fund's investment
adviser or its affiliates.
CUSTODIAN. State Street Bank and Trust Company, P.O Box 8604, Boston,
Massachusetts 02266-8604, is custodian for the securities and cash of the Fund.
Foreign instruments purchased by the Fund are held by foreign banks
participating in a network coordinated by State Street Bank.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779, is transfer
agent for the Shares of the Fund and dividend disbursing agent for the Fund.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young
LLP, One Oxford Centre, Pittsburgh, Pennsylvania 15219.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Investment Adviser looks for prompt execution of the order at a
favorable price. In working with dealers, the Investment Adviser will generally
utilize those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained elsewhere.
In selecting among firms believed to meet this criteria, the Investment Adviser
may give consideration to firms which have sold or are selling Shares of the
Fund and other funds distributed by Federated Securities Corp. The Investment
Adviser makes decisions on portfolio transactions and selects brokers and
dealers subject to review by the Board of Directors.
EXPENSES OF THE FUND AND CLASS A SHARES
Holders of each class of shares pay their allocable portion of Fund and
Corporation expenses.
The Corporation expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Corporation and
continuing its existence; registering the Corporation with federal and state
securities authorities; Directors' fees; auditors' fees; the cost of meetings of
Directors; legal fees of the Corporation; association membership dues; and such
non-recurring and extraordinary items as may arise from time to time.
The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the Fund and Shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such non-recurring and extraordinary items as may
arise from time to time.
At present, the only expenses which are allocated specifically to Shares as a
class are expenses under the Services Plan. However, the Directors reserve the
right to allocate certain other expenses to holders of Shares as it deems
appropriate ("Class Expenses"). In any case, Class Expenses would be limited to:
distribution fees; transfer agent fees as identified by the transfer agent as
attributable to holders of Shares; fees under the Services Plan; printing and
postage expenses related to preparing and distributing materials such as
shareholder reports, prospectuses and proxies to current shareholders;
registration fees paid to the Securities and Exchange Commission and
registration fees paid to state securities commissions; expenses related to
administrative personnel and services as required to support holders of Shares;
legal fees relating solely to Shares; and Directors' fees incurred as a result
of issues relating solely to Shares.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share gives the shareholder one vote in Director elections and other
matters submitted to shareholders for vote. All shares of each portfolio or
class in the Corporation have equal voting
rights, except that only shares of that particular Fund or class are entitled to
vote in matters affecting that Fund or class.
As a Maryland corporation, the Corporation is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Fund's operation and for the election of Directors under certain
circumstances.
Directors may be removed by a two-thirds vote of the number of Directors prior
to such removal or by a two-thirds vote of the shareholders at a special
meeting. The Directors shall call a Special Meeting of Shareholders upon the
written request of shareholders owning at least 10% of the Corporation's
outstanding shares entitled to vote.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code, as amended, applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
However, the Fund may invest in the stock of certain foreign corporations which
would constitute a Passive Foreign Investment Company (PFIC). Federal income
taxes may be imposed on the Fund upon disposition of PFIC investments.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Corporation's other portfolios, if any, will not be combined for tax purposes
with those realized by the Fund.
Investment income received by the Fund from sources within foreign countries may
be subject to foreign taxes withheld at the source. The United States has
entered into tax treaties with many foreign countries that entitle the Fund to
reduced tax rates or exemptions on this income. The effective rate of foreign
tax cannot be predicted since the amount of Fund assets to be invested within
various countries is unknown. However,the Fund intends to operate so as to
qualify for treaty-reduced tax rates where applicable.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional Shares.
If more than 50% of the value of the Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund intends to
qualify for certain Internal Revenue Code stipulations that would allow
shareholders to claim a foreign tax credit or deduction on their U.S. income tax
returns. The Internal Revenue Code may limit a shareholder's ability to claim a
foreign tax credit. Furthermore, shareholders who elect to deduct their portion
of the Fund's foreign taxes rather than take the foreign tax credit must itemize
deductions on their income tax returns.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
The Fund is not subject to Pennsylvania corporate or personal property taxes.
Fund shares may be subject to personal property taxes imposed by counties,
municipalities, and school districts in
Pennsylvania to the extent that the portfolio securities in the Fund would be
subject to such taxes if owned directly by residents of those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund advertises the total return for Class A Shares.
Total return represents the change, over a specified period of time, in the
value of an investment in Shares after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of Shares is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by Shares
over a thirty-day period by the offering price per share of Shares on the last
day of the period. This number is then annualized using semi-annual compounding.
The yield does not necessarily reflect income actually earned by Shares and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.
The performance information reflects the effect of the maximum sales load and
other similar non-recurring charges which, if excluded, would increase the total
return.
Total return and yield will be calculated separately for Class A Shares and
Fortress Shares. Because Fortress Shares are subject to Rule 12b-1 fees, the
total return and yield for Class A Shares, for the same period may exceed that
of Fortress Shares.
From time to time, the Fund may advertise the performance of Class A Shares
using certain financial publications and/or compare its performance to certain
indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Fortress Shares, the other class of shares offered by the Fund, are sold
primarily to customers of financial institutions with an initial sales load of
1.00%. Fortress Shares are distributed pursuant to a Rule 12b-1 Plan adopted by
the Fund whereby the Distributor is paid a fee of up to .25 of 1% and a
shareholder servicing fee of .25 of 1% of the Fortress Shares' average daily net
assets. Fortress Shares are subject to a contingent deferred sales charge of up
to 1.00% under certain circumstances. Investments in Fortress Shares are subject
to a minimum initial investment of $1,500, unless the investment is in a
retirement account, in which case the minimum investment is $50.
The amount of dividends payable to Class A Shares will generally exceed that of
Fortress Shares by the difference between Class Expenses and distribution and
shareholder service expenses borne by shares of each respective class.
The stated advisory fee is the same for both classes of shares.
WORLD UTILITY FUND
FINANCIAL HIGHLIGHTS--FORTRESS SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent Auditors on
page 41.
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1994**
<S> <C>
-----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.04
- -----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------
Net investment income 0.21
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
and foreign currency transactions (0.43)
- ----------------------------------------------------------------------------------------------- -------
Total from investment operations (0.22)
- -----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.16)
- ----------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 9.66
- ----------------------------------------------------------------------------------------------- -------
TOTAL RETURN* (3.07%)
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------
Expenses 0.50%(b)
- -----------------------------------------------------------------------------------------------
Net investment income 4.59%(b)
- -----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (a) 4.43%(b)
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $4,821
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate 7%
- -----------------------------------------------------------------------------------------------
</TABLE>
* Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
** Reflects operations for the period from April 21, 1994 (date of initial
public investment) to November 30, 1994. For the period from the start of
business, March 28, 1994, to April 20, 1994, Fortress Shares had no public
investment.
(a) The Adviser waived all of its investment advisory fee, 1.00%, and
reimbursed other operating expenses, 0.86%, to comply with certain state
expense limitations. The remainder of the reimbursement was voluntary.
This expense decrease is reflected in both the expense and net investment
income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal period ended November 30, 1994, which can be
obtained free of charge.
WORLD UTILITY FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------------- ------------
COMMON STOCKS--76.4%
- ----------------------------------------------------------------------------------------------------
UTILITY--62.3%
-------------------------------------------------------------------------------------
5,000 AT & T Corp. $ 245,625
-------------------------------------------------------------------------------------
70,000 Australian Gas and Light Co. 225,407
-------------------------------------------------------------------------------------
5,000 BCE, Inc. 166,875
-------------------------------------------------------------------------------------
4,000 BellSouth Corp. 207,500
-------------------------------------------------------------------------------------
2,500 British Telecommunications PLC, ADR 148,438
-------------------------------------------------------------------------------------
10,000 China Light and Power 43,058
-------------------------------------------------------------------------------------
25,000 China Light and Power, ADR 107,650
-------------------------------------------------------------------------------------
9,000 Cinergy Corp. 200,250
-------------------------------------------------------------------------------------
9,000 Compania Boliviana 207,000
-------------------------------------------------------------------------------------
10,000 DPL, Inc. 203,750
-------------------------------------------------------------------------------------
4,800 DQE, Inc. 145,200
-------------------------------------------------------------------------------------
4,500 Duke Power Co. 183,375
-------------------------------------------------------------------------------------
4,000 Empresa Nacional, ADR 181,000
-------------------------------------------------------------------------------------
6,000 Enron Corp. 162,000
-------------------------------------------------------------------------------------
8,000 Enron Global Power & Pipelines L.L.C. 185,000
-------------------------------------------------------------------------------------
6,000 Equitable Resources, Inc. 162,000
-------------------------------------------------------------------------------------
5,000 FPL Group, Inc. 176,875
-------------------------------------------------------------------------------------
6,000 GTE Corp. 183,750
-------------------------------------------------------------------------------------
7,000 Hong Kong Telecommunications, ADR 135,625
-------------------------------------------------------------------------------------
20,000 National Power Co., PLC 155,340
-------------------------------------------------------------------------------------
6,000 NIPSCO Industries, Inc. 175,500
-------------------------------------------------------------------------------------
9,000 Pacific Enterprises 192,375
-------------------------------------------------------------------------------------
10,000 PacifiCorp 185,000
-------------------------------------------------------------------------------------
10,000 Pinnacle West Capital Corp. 193,750
-------------------------------------------------------------------------------------
6,000 Sonat, Inc. 168,750
-------------------------------------------------------------------------------------
</TABLE>
WORLD UTILITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------------- ------------
COMMON STOCKS--CONTINUED
- ----------------------------------------------------------------------------------------------------
UTILITY--CONTINUED
-------------------------------------------------------------------------------------
8,000 Southern Co. $ 166,000
-------------------------------------------------------------------------------------
20,000 Southern Electric PLC 248,982
-------------------------------------------------------------------------------------
80,000 Stet Societa Finanziaria Telefonica 232,110
-------------------------------------------------------------------------------------
6,000 Telefonos De Mexico, Series A, Class L, ADR 318,000
-------------------------------------------------------------------------------------
40,000 Tenaga Nasional Berhad 172,164
-------------------------------------------------------------------------------------
6,000 Utilicorp United, Inc. 154,500
-------------------------------------------------------------------------------------
600 Veba AG 196,690
-------------------------------------------------------------------------------------
15,000 Westcoast Energy, Inc. 255,000
------------------------------------------------------------------------------------- ------------
Total 6,084,539
------------------------------------------------------------------------------------- ------------
NON-UTILITY--14.1%
-------------------------------------------------------------------------------------
3,000 American Home Products Corp. 195,375
-------------------------------------------------------------------------------------
3,000 Bankers Trust New York Corp. 177,750
-------------------------------------------------------------------------------------
5,000 Elf Aquitaine, ADR 170,000
-------------------------------------------------------------------------------------
10,000 Hanson, PLC, ADR 182,500
-------------------------------------------------------------------------------------
7,000 Meditrust, REIT 208,250
-------------------------------------------------------------------------------------
2,000 Royal Dutch Petroleum Co. 217,250
-------------------------------------------------------------------------------------
10,000 YPF Sociedad Anonima, ADR 226,250
------------------------------------------------------------------------------------- ------------
Total 1,377,375
------------------------------------------------------------------------------------- ------------
TOTAL COMMON STOCKS(IDENTIFIED COST $7,711,574) 7,461,914
------------------------------------------------------------------------------------- ------------
CONVERTIBLE SECURITIES--17.0%
- ----------------------------------------------------------------------------------------------------
UTILITY--4.8%
-------------------------------------------------------------------------------------
3,000 (a)Cointel/Telefonia De Argentina SA, PRIDES, $5.04 161,250
-------------------------------------------------------------------------------------
4,000 (a)Philippine Long Distance, Conv. Pfd., Series II, $1.44 121,852
-------------------------------------------------------------------------------------
$ 200,000 (a)Telekom Malaysia Berhad, Conv. Bond, 4.00%, 10/3/2004 184,376
------------------------------------------------------------------------------------- ------------
Total 467,478
------------------------------------------------------------------------------------- ------------
</TABLE>
WORLD UTILITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------------- ------------
CONVERTIBLE SECURITIES--CONTINUED
- ----------------------------------------------------------------------------------------------------
NON-UTILITY--12.2%
-------------------------------------------------------------------------------------
$ 10,000,000 Bank of Tokyo, Cayman Finance, Conv. Bond, 4.25%, 3/31/2049 $ 114,675
-------------------------------------------------------------------------------------
3,000 (a)Freeport McMoRan, Inc., Conv. Pfd., $4.38 142,125
-------------------------------------------------------------------------------------
10,000 Kaufman and Broad Homes, Inc., Conv. Pfd., Series B, $8.74 146,250
-------------------------------------------------------------------------------------
20,000 RJR Nabisco Holdings Corp., Conv. Pfd., Series C, $0.60 135,000
-------------------------------------------------------------------------------------
4,000 Reynolds Metals Co., PRIDES, $3.31 187,000
-------------------------------------------------------------------------------------
2,000 Sears, Roebuck & Co., Conv. Pfd., Series A, $3.75 111,000
-------------------------------------------------------------------------------------
4,000 Tenneco, Inc., Conv. Pfd., Series A, $2.80 150,500
-------------------------------------------------------------------------------------
15,000 (a)Westinghouse Electric Corp., PEPS, Series C, $1.30 206,250
------------------------------------------------------------------------------------- ------------
Total 1,192,800
------------------------------------------------------------------------------------- ------------
TOTAL CONVERTIBLE SECURITIES (IDENTIFIED COST $1,802,233) 1,660,278
------------------------------------------------------------------------------------- ------------
*REPURCHASE AGREEMENT--6.1%
- ----------------------------------------------------------------------------------------------------
$ 595,000 J.P. Morgan Securities, Inc., 5.77%, dated 11/30/94,
due 12/1/94 (at amortized cost) 595,000
------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED $10,108,807) $ 9,717,192+
------------------------------------------------------------------------------------- ------------
</TABLE>
The following abbreviations are used in this portfolio:
ADR--American Depository Receipts
PEPS--Participating Equity Preferred Stock
PRIDES--Preferred Redeemable Increased Dividend Equity Securities
REIT--Real Estate Investment Trust
(a) Restricted securities--Investments in securities not registered under the
Securities Act of 1933. At the end of the period, these securities amounted
to $815,853 which represents 8.4% of net assets.
The cost of investments for federal tax purposes amounts to $10,108,807. The
net unrealized depreciation of investments on a federal tax basis amounts to
$391,615, which is comprised of $178,677 appreciation and $570,292
depreciation at November 30, 1994.
* The repurchase agreement is fully collateralized by U. S. government and/or
agency obligations. The investment in the repurchase agreement is through
participation in joint accounts with other Federated funds.
Note: The categories of investments are shown as a percentage of net assets
($9,769,409) at November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
WORLD UTILITY FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost; $10,108,807) $ 9,717,192
- -----------------------------------------------------------------------------------------------------
Cash 763
- -----------------------------------------------------------------------------------------------------
Receivable for capital stock sold 58,255
- -----------------------------------------------------------------------------------------------------
Dividend and interest receivable 48,689
- -----------------------------------------------------------------------------------------------------
Deferred expenses 15,827
- ----------------------------------------------------------------------------------------------------- ------------
Total assets 9,840,726
- -----------------------------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------------------------------------------
Payable for capital stock redeemed $ 1,511
- ------------------------------------------------------------------------------------------
Tax withholding liability 499
- ------------------------------------------------------------------------------------------
Accrued expenses 69,307
- ------------------------------------------------------------------------------------------ ---------
Total liabilities 71,317
- ----------------------------------------------------------------------------------------------------- ------------
NET ASSETS for 1,010,647 shares of capital stock outstanding $ 9,769,409
- ----------------------------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------------------
Paid-in capital $ 10,140,809
- -----------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments and translation of assets and
liabilities in foreign currency (391,629)
- -----------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investment and foreign currency transactions (42,265)
- -----------------------------------------------------------------------------------------------------
Undistributed net investment income 62,494
- ----------------------------------------------------------------------------------------------------- ------------
Total Net Assets $ 9,769,409
- ----------------------------------------------------------------------------------------------------- ------------
NET ASSET VALUE PER SHARE:
- -----------------------------------------------------------------------------------------------------
Class A Shares (net assets of $4,948,082 / 511,506 shares of capital stock outstanding) $9.67
- ----------------------------------------------------------------------------------------------------- ------------
Fortress Shares (net assets of $4,821,327 / 499,141 shares of capital stock outstanding) $9.66
- ----------------------------------------------------------------------------------------------------- ------------
OFFERING PRICE PER SHARE:*
- -----------------------------------------------------------------------------------------------------
Class A Shares (100/94.5 of $9.67) $10.23
- ----------------------------------------------------------------------------------------------------- ------------
Fortress Shares (100/99 of $9.66) $9.76
- ----------------------------------------------------------------------------------------------------- ------------
REDEMPTION PROCEEDS PER SHARE:**
- -----------------------------------------------------------------------------------------------------
Class A Shares $9.67
- ----------------------------------------------------------------------------------------------------- ------------
Fortress Shares (99/100 of $9.66) $9.56
- ----------------------------------------------------------------------------------------------------- ------------
</TABLE>
* See "What Shares Cost" in the prospectus.
** See "Contingent Deferred Sales Charge" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
WORLD UTILITY FUND
STATEMENT OF OPERATIONS
PERIOD ENDED NOVEMBER 30, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------------------------
Dividend income (net of foreign taxes withheld of $4,614) $ 165,756
- -----------------------------------------------------------------------------------------------------
Interest income 23,447
- ----------------------------------------------------------------------------------------------------- ----------
Total investment income 189,203
- -----------------------------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------------------------
Investment advisory fee $ 36,237
- ------------------------------------------------------------------------------------------
Administrative personnel and services fees 38,643
- ------------------------------------------------------------------------------------------
Custodian and portfolio accounting fees 50,483
- ------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 9,912
- ------------------------------------------------------------------------------------------
Distribution services fee 4,464
- ------------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 4,595
- ------------------------------------------------------------------------------------------
Shareholder services fee--Fortress Shares 4,464
- ------------------------------------------------------------------------------------------
Capital stock registration costs 2,793
- ------------------------------------------------------------------------------------------
Legal fees 4,000
- ------------------------------------------------------------------------------------------
Printing and postage 8,000
- ------------------------------------------------------------------------------------------
Taxes 2,500
- ------------------------------------------------------------------------------------------
Insurance premiums 4,784
- ------------------------------------------------------------------------------------------
Miscellaneous 3,204
- ------------------------------------------------------------------------------------------ ---------
Total expenses 174,079
- ------------------------------------------------------------------------------------------
Deduct--
- -------------------------------------------------------------------------------
Waiver of investment advisory fee $ 36,237
- -------------------------------------------------------------------------------
Reimbursement of other operating expenses 124,319 160,556
- ------------------------------------------------------------------------------- --------- ---------
Net expenses 13,523
- ----------------------------------------------------------------------------------------------------- ----------
Net investment income 175,680
- ----------------------------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- -----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment and foreign currency transactions (identified cost basis) (46,782)
- -----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments and translation of assets and
liabilities in foreign currency (391,629)
- ----------------------------------------------------------------------------------------------------- ----------
Net realized and unrealized gain (loss) on investments and foreign currency (438,411)
- ----------------------------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $ (262,731)
- ----------------------------------------------------------------------------------------------------- ----------
</TABLE>
*For the period from March 17, 1994 (start of business) to November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
WORLD UTILITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1994*
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------------------------------
Net investment income $ 175,680
- -----------------------------------------------------------------------------------------------
Net realized gain (loss) on investment and foreign currency transactions
($42,265 net loss as computed for federal tax purposes) (46,782)
- -----------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments
and translation of assets and liabilities in foreign currency (391,629)
- ----------------------------------------------------------------------------------------------- -----------------
Change in net assets resulting from operations (262,731)
- ----------------------------------------------------------------------------------------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income
- -----------------------------------------------------------------------------------------------
Class A Shares (54,743)
- -----------------------------------------------------------------------------------------------
Fortress Shares (53,926)
- ----------------------------------------------------------------------------------------------- -----------------
Change in net assets resulting from distributions to shareholders (108,669)
- ----------------------------------------------------------------------------------------------- -----------------
CAPITAL STOCK TRANSACTIONS--
- -----------------------------------------------------------------------------------------------
Proceeds from sale of shares 11,113,812
- -----------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends declared 57,563
- -----------------------------------------------------------------------------------------------
Cost of shares redeemed (1,130,566)
- ----------------------------------------------------------------------------------------------- -----------------
Change in net assets resulting from capital stock transactions 10,040,809
- ----------------------------------------------------------------------------------------------- -----------------
Change in net assets 9,669,409
- -----------------------------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------------------------
Beginning of period 100,000
- ----------------------------------------------------------------------------------------------- -----------------
End of period (including undistributed net investment income of $62,494) $ 9,769,409
- ----------------------------------------------------------------------------------------------- -----------------
</TABLE>
*For the period from March 17, 1994 (start of business) to November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
WORLD UTILITY FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
World Investment Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended, as an open-end, management
investment company. The Corporation consists of one diversified portfolio, World
Utility Fund (the "Fund")
The Fund provides two classes of shares Class A Shares and Fortress Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Listed equity securities and fixed income securities
are valued at the last sale price reported on national securities
exchanges. Unlisted securities and short-term obligations (and private
placement securities) are generally valued at the prices provided by an
independent pricing service. Short-term securities with remaining
maturities of sixty days or less may be stated at amortized cost, which
approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines established
by the Board of Directors (the "Directors").
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income and expenses are accrued daily. Bond premium and discount,
if applicable, are amortized as required by the Internal Revenue Code, as
amended (the "Code").
D. FOREIGN CURRENCY TRANSLATION--The accounting records of the funds are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences
WORLD UTILITY FUND
- --------------------------------------------------------------------------------
between income and expense amounts recorded and collected or paid are
adjusted when reported by the custodian bank. The Fund does not isolate
that portion of the results of operations resulting from changes in foreign
exchange rates on investments from the fluctuations arising from changes in
market prices of securities held. Such fluctuations are included with the
net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of FC's, currency gains or
losses realized between the trade date and settlement dates on withholding
taxes recorded on the Fund's books, and the U.S. dollar equivalent of the
amounts actually received or paid. Net unrealized foreign exchange gains
and losses arise from changes in the value of assets and liabilities other
than investments in securities at fiscal year end, resulting from changes
in the exchange rate.
E. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. However, federal
taxes may be imposed on the Fund upon the disposition of certain
investments in Passive Foreign Investment Companies. Withholding taxes on
foreign dividends have been provided for in accordance with the Fund's
understanding of the applicable country's tax rules and rates. At November
30, 1994, the Fund, for federal tax purposes, had a capital loss
carryforward of $42,265, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire in 2002.
F. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
G. CONCENTRATION OF CREDIT RISK--The Fund invests in equity and fixed income
securities of non-U.S. issuers. Although the Fund maintains a diversified
investment portfolio, the political or economic developments within a
particular country or region may have an adverse effect on the ability of
domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
WORLD UTILITY FUND
- --------------------------------------------------------------------------------
At November 30, 1994, the Fund's portfolio included investments within the
following countries:
<TABLE>
<S> <C>
Argentina 2.3%
Australia 2.3
France 1.7
Germany 2.0
Hong Kong 2.9
Italy 2.4
Japan 1.2
Malaysia 1.8
Mexico 3.2
Spain 1.8
United Kingdom 7.5
</TABLE>
H. RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under Federal securities laws or in
transactions exempt from such registration. In some cases, the issuer of
restricted securities has agreed to register such securities for resale, at
the issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Directors. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no
market prices are available, at the fair value as determined by the Fund's
pricing committee. Additional information on each restricted security held
at November 30, 1994 is as follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATES COST
<S> <C> <C>
Cointel/Telefonica De Argentina SA, PRIDES 4/15/94-9/15/94 $ 203,575
Philippine Long Distance, Conv. Pfd. 4/15/94-7/6/94 152,690
Telekom Malaysia Berhad, Conv. Bond 9/22/94 200,000
Freeport McMoRan, Inc., Conv. Pfd. 11/15/94 144,000
Westinghouse Electric Corp., PEPS 4/15/94-9/28/94 205,750
</TABLE>
I. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
J. RECLASSIFICATION--During the current period ended November 30, 1994, the
Fund adopted Statement of Position 93-2, Determination, Disclosure, and
Financial Statement Presentation of
WORLD UTILITY FUND
- --------------------------------------------------------------------------------
Income, Capital Gain, and Return of Capital Distributions by Investment
Companies. Accordingly, permanent book and tax differences have been
reclassified. These differences are due to differing treatments for foreign
currency transactions. Amounts as of November 30, 1994, have been
reclassified to reflect a decrease in undistributed net investment income
of $4,517, and an increase in accumulated net realized gain (loss) of
$4,517. Net investment income, net realized gains, and net assets were not
affected by this change.
K. OTHER--Investment transactions are accounted for on the trade date.
(3) CAPITAL STOCK
At November 30, 1994, there were 1,000,000,000 shares of $0.001 par value
capital stock authorized for Class A Shares and Fortress Shares, respectively.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,1994*
<S> <C> <C>
CLASS A SHARES SHARES DOLLARS
- --------------------------------------------------------------------------------------- --------- -------------
Shares sold 603,819 $ 6,052,720
- ---------------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 4,034 40,152
- ---------------------------------------------------------------------------------------
Shares redeemed (106,347) (1,072,939)
- --------------------------------------------------------------------------------------- --------- -------------
Net change resulting from Class A Shares transactions 501,506 $ 5,019,933
- --------------------------------------------------------------------------------------- --------- -------------
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994**
FORTRESS SHARES SHARES DOLLARS
<S> <C> <C>
- -------------------------------------------------------------------------------------- ---------- -------------
Shares sold 503,245 $ 5,061,092
- --------------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 1,751 17,411
- --------------------------------------------------------------------------------------
Shares redeemed (5,855) (57,627)
- -------------------------------------------------------------------------------------- ---------- -------------
Net change resulting from Fortress Shares transactions 499,141 $ 5,020,876
- -------------------------------------------------------------------------------------- ---------- -------------
Net change resulting from capital stock transactions 1,000,647 $ 10,040,809
- -------------------------------------------------------------------------------------- ---------- -------------
</TABLE>
* For the period from March 17, 1994 (start of business) to November 30, 1994.
** For the period from March 28, 1994 (start of business) to November 30, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 1.00% of the Fund's
WORLD UTILITY FUND
- --------------------------------------------------------------------------------
average daily net assets.The Adviser waived its fee and reimbursed a portion of
other operating expenses to be in compliance with certain state expense
limitations. The Adviser may also voluntarily choose to reimburse certain other
operating expenses of the Fund. The Adviser can modify or terminate this
voluntary reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
administrative personnel and services. The fee is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors for the period. The administrative fee received during any fiscal year
shall be at least $125,000 per portfolio and $30,000 per each additional class
of shares.
DISTRIBUTION AND SHAREHOLDER SERVICES FEE--The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940. Under the terms of the Plan, the Fund will compensate Federated Securities
Corp. ("FSC"), the principal distributor, from the net assets of the Fund to
finance activities intended to result in the sale of the Fund's Fortress Shares.
The Plan provides that the Fund may incur distribution expenses up to 0.25 of 1%
of the average daily net assets of the Fortress Shares, annually, to compensate
FSC.
Under the terms of a shareholder services agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25 of 1% of average net assets
of the Fund for the period. This fee is to obtain certain personal services for
shareholders and the maintenance of shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT--Federated Services Company ("FServ")
serves as transfer and dividend disbursing agent for the Fund. The fee is based
on the size, type and number of accounts and transactions made by shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses ($39,069) and start-up
administrative service expenses ($75,061) were borne by the Administrator. The
Fund has agreed to reimburse the Administrator for the organizational expenses
and start-up administrative expenses during the five year period following April
12, 1994 (date the Fund first became effective). For the period ended November
30, 1994, the Fund paid $1,250 and $1,953, respectively, pursuant to this
agreement.
Certain of the Officers and Directors of the Fund are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended
November 30, 1994, were as follows:
<TABLE>
<S> <C>
PURCHASES $ 9,908,196
- ---------------------------------------------------------------------------------------------------- ------------
SALES $ 400,084
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Directors and Shareholders of
WORLD INVESTMENT SERIES, INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of World Utility Fund (a portfolio of World
Investment Series, Inc.) as of November 30, 1994, and the related statement of
operations and the statement of changes in net assets for the period from March
17, 1994 (start of business) to November 30, 1994, and the financial highlights
(see pages 2 and 29 of this prospectus) for the period from April 21, 1994 (date
of initial public investment) to November 30, 1994. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of November 30, 1994, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of World
Utility Fund of World Investment Series, Inc. at November 30, 1994, and the
results of its operations and the changes in its net assets for the period from
March 17, 1994 (start of business) to November 30, 1994, and financial
highlights for the period from April 21, 1994 to November 30, 1994, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January 12, 1995
APPENDIX
- --------------------------------------------------------------------------------
STANDARD & POOR'S RATINGS GROUP ("S&P") CORPORATE BOND RATING DEFINITIONS
AAA--Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB--Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
B--Debt rated "B" has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "BB" or "BB-"
rating.
CCC--Debt rated "CCC" has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned and actual or implied
"B" or "B-" rating.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATING DEFINITIONS
Aaa--Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa--Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group, they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities
or fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long term risks appear somewhat larger
than in Aaa securities.
A--Bonds which are rated "A" possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated "Baa" are considered as medium grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are rated "Ba" are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated "B" generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
World Utility Fund Federated Investors Tower
Class A Shares Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8604
Trust Company Boston, Massachusetts 02266-8604
- ---------------------------------------------------------------------------------------------------------------------
Transfer Agent and
Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
WORLD UTILITY FUND
CLASS A SHARES
PROSPECTUS
A Diversified Portfolio of
World Investment Series, Inc.
An Open-End Management
Investment Company
January 31, 1995
981487101
4021404A-A (1/95)
WORLD UTILITY FUND
(A PORTFOLIO OF WORLD INVESTMENT SERIES, INC.)
FORTRESS SHARES
PROSPECTUS
The Fortress Shares of World Utility Fund (the "Fund") offered by this
prospectus represent interests in the Fund, which is a diversified investment
portfolio in World Investment Series, Inc. (the "Corporation"), an open-end,
management investment company (a mutual fund).
The Fund's investment objective is to provide total return. The Fund invests
primarily in securities issued by domestic and foreign companies in the
utilities industries.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENTS RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in Fortress Shares of the Fund. Keep this prospectus for future
reference.
The Fund has also filed a Combined Statement of Additional Information for
Fortress Shares and Class A Shares dated January 31, 1995, with the Securities
and Exchange Commission. The information contained in the Combined Statement of
Additional Information is incorporated by reference into this prospectus. You
may request a copy of the Combined Statement of Additional Information free of
charge by calling 1-800-235-4669. To obtain other information or make inquiries
about the Fund, contact your financial institution.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated January 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--FORTRESS SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
FORTRESS INVESTMENT PROGRAM 3
- ------------------------------------------------------
INVESTMENT INFORMATION 4
- ------------------------------------------------------
Investment Objective 4
Investment Policies 5
RISK FACTORS AND INVESTMENT CONSIDERATIONS 6
- ------------------------------------------------------
Other Investment Practices 8
Investment Limitations 10
NET ASSET VALUE 11
- ------------------------------------------------------
INVESTING IN FORTRESS SHARES 11
- ------------------------------------------------------
Share Purchases 11
Minimum Investment Required 12
What Shares Cost 12
Eliminating the Sales Load 13
Systematic Investment Program 14
Exchanging Securities for Fund Shares 14
Exchange Privilege 15
Certificates and Confirmations 15
Dividends and Distributions 15
REDEEMING FORTRESS SHARES 15
- ------------------------------------------------------
Through a Financial Institution 16
Directly by Mail 16
Contingent Deferred Sales Charge 17
Systematic Withdrawal Program 18
Accounts With Low Balances 18
WORLD INVESTMENTS SERIES, INC. INFORMATION 18
- ------------------------------------------------------
Management of the Corporation 18
DISTRIBUTION OF FORTRESS SHARES 24
- ------------------------------------------------------
Administration of the Fund 25
Brokerage Transactions 26
Expenses of the Fund and
Fortress Shares 26
SHAREHOLDER INFORMATION 26
- ------------------------------------------------------
Voting Rights 26
TAX INFORMATION 27
- ------------------------------------------------------
Federal Income Tax 27
Pennsylvania Corporate and
Personal Property Taxes 27
PERFORMANCE INFORMATION 28
- ------------------------------------------------------
OTHER CLASSES OF SHARES 28
- ------------------------------------------------------
Financial Highlights--Class A Shares 29
FINANCIAL STATEMENTS 30
- ------------------------------------------------------
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS 41
- ------------------------------------------------------
APPENDIX 42
- ------------------------------------------------------
ADDRESSES 44
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES--FORTRESS SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
FORTRESS SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)................................. 1.00%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)...................... None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) (l)............................................... 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable).......................................... None
Exchange Fee................................................................................................ None
ANNUAL FORTRESS SHARES OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fee (after waiver) (2)........................................................................... 0.00%
12b-l Fee................................................................................................... 0.25%
Total Other Expenses (after expense reimbursement).......................................................... 1.50%
Shareholder Services Fee..................................................................... 0.25%
Total Fortress Shares Operating Expenses (3)....................................................... 1.75%
</TABLE>
(l) The contingent deferred sales charge assessed is 1.00% of the lesser of the
original purchase price or the net asset value of Shares redeemed within
four years of their purchase date. For a more complete description see
"Redeeming Fortress Shares."
(2) The management fee has been reduced to reflect the voluntary waiver of the
management fee. The adviser can terminate this voluntary waiver at any time
at its sole discretion. The maximum management fee is 1.00%.
(3) The Total Fortress Shares Operating Expenses in the table above are based on
expenses expected during the fiscal year ending November 30, 1995. The total
operating expenses were 0.50% for the fiscal period ended November 30, 1994
and would have been 4.93% absent the waiver of the management fee and the
reimbursement of certain other operating expenses.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Fortress Shares of the Fund
will bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Investing in Fortress Shares" and "World
Investment Series, Inc. Information". Wire-transferred redemptions of less than
$5,000 may be subject to additional fees.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales loads permitted under the rules of the National
Association of Securities Dealers, Inc.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
<S> <C> <C>
You would pay the following expenses on a $l,000 investment, assuming
(l) 5% annual return and (2) redemption at the end of each time period......................... $38 $75
You would pay the following expenses on the same
investment, assuming no redemption............................................................. $28 $65
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The information set forth in the foregoing table and example relates only to
Fortress Shares of the Fund. The Fund also offers another class of shares called
Class A Shares. Fortress Shares and Class A Shares are subject to certain of the
same expenses; however, Class A Shares are subject to a maximum sales load of
5.50%, but are not subject to a 12b-l fee, but may be subject to a contingent
deferred sales charge. See "Other Classes of Shares".
WORLD UTILITY FUND
FINANCIAL HIGHLIGHTS--FORTRESS SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent Auditors on
page 41.
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1994**
<S> <C>
-----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.04
- -------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------
Net investment income 0.21
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment and foreign currency transactions (0.43)
- ------------------------------------------------------------------------------------------------- -------
Total from investment operations (0.22)
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.16)
- ------------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 9.66
- ------------------------------------------------------------------------------------------------- -------
TOTAL RETURN* (3.07%)
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------
Expenses 0.50%(b)
- -------------------------------------------------------------------------------------------------
Net investment income 4.59%(b)
- -------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (a) 4.43%(b)
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $4,821
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate 7%
- -------------------------------------------------------------------------------------------------
</TABLE>
* Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
** Reflects operations for the period from April 21, 1994 (date of initial
public investment) to November 30, 1994. For the period from the start of
business, March 28, 1994, to April 20, 1994, Fortress Shares had no public
investments.
(a) The Adviser waived all of its investment advisory fee, 1.00%, and
reimbursed other operating expenses, 0.86%, to comply with certain state
expense limitations. The remainder of the reimbursement was voluntary. This
expense decrease is reflected in both the expense and net investment income
ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal period ended November 30, 1994, which can be
obtained free of charge.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Corporation was established as a corporation under the laws of the state of
Maryland on January 25, 1994. The Corporation's address is Liberty Center,
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. The Articles of
Incorporation permit the Corporation to offer separate series of shares
representing interests in separate portfolios of securities. The shares in any
one portfolio may be offered in separate classes. With respect to this Fund, as
of the date of this prospectus, the Board of Directors ("Directors") has
established two classes of shares, known as Fortress Shares and Class A Shares.
This prospectus relates only to Fortress Shares ("Shares") of the Corporation's
portfolio known as World Utility Fund.
Shares of the Fund are designed to give institutions and individuals a
convenient means of seeking total return without undue risk through a
professionally managed, diversified portfolio comprised primarily of foreign and
domestic utility securities. The Fund is not intended to provide a complete
investment program for an investor. A minimum initial investment of $1,500 is
required, unless the investment is in a retirement account, in which case the
minimum investment is $50.
In general, Shares are sold at net asset value plus an applicable sales load and
are redeemed at net asset value. However, a contingent deferred sales charge is
imposed on Shares, other than Shares purchased through reinvestment of
dividends, which are redeemed within one to four years of their purchase date.
For a more complete description, see "Redeeming Fortress Shares."
FORTRESS INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
This class of Shares is a member of a family of funds, collectively known as the
Fortress Investment Program (the "Program"). The other funds in the Program are:
AMERICAN LEADERS FUND, INC., providing growth of capital and income through
high-quality stocks;
CALIFORNIA MUNICIPAL INCOME FUND, providing current income exempt from
federal regular income tax and California personal income taxes;
FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC., providing current
income consistent with lower volatility of principal through a diversified
portfolio of adjustable and floating rate mortgage securities which are
issued or guaranteed by the U.S. government, its agencies or
instrumentalities;
FORTRESS BOND FUND, providing current income primarily through high-quality
corporate debt;
FORTRESS MUNICIPAL INCOME FUND, providing a high level of current income
generally exempt from federal regular income tax by investing primarily in
a diversified portfolio of municipal bonds;
FORTRESS UTILITY FUND, providing high current income and moderate
appreciation primarily through equity and debt securities of utility
companies;
GOVERNMENT INCOME SECURITIES, INC., providing current income through
long-term U.S. government securities;
LIBERTY EQUITY INCOME FUND, INC., providing above average income and
capital appreciation through income producing equity securities;
LIMITED TERM FUND, providing a high level of current income consistent with
minimum fluctuation in principal value;
LIMITED TERM MUNICIPAL FUND, providing a high level of current income which
is exempt from federal regular income tax consistent with the preservation
of capital;
MONEY MARKET MANAGEMENT, INC., providing current income consistent with
stability of principal through high-quality money market instruments;
NEW YORK MUNICIPAL INCOME FUND (FORTRESS SHARES ONLY), providing current
income exempt from federal regular income tax, New York personal income
taxes, and New York City income taxes;
OHIO MUNICIPAL INCOME FUND (FORTRESS SHARES ONLY), providing current income
exempt from federal regular Income tax and Ohio personal taxes; and
STRATEGIC INCOME FUND (FORTRESS SHARES ONLY), a fund providing high current
income through investing in domestic corporate debt obligations, U.S.
government securities, and foreign government and corporate debt
obligations.
Prospectuses for these funds are available by writing to Federated Securities
Corp.
Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus.
The Fortress Investment Program provides flexibility and diversification for
investor's long-term investment planning. It enables an investor to meet the
challenges of changing market conditions by offering convenient exchange
privileges which give access to various investment vehicles, and by providing
the investment services of proven, professional investment advisers.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide total return. The investment
objective may be changed by the Directors without the approval of shareholders.
Shareholders will be notified in writing at least 30 days prior to any change in
the investment objective. Any such change may result in the Fund having an
investment objective different from the investment objective which a shareholder
considered appropriate at the time of investment in the Fund. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by following the policies described in this prospectus. Unless indicated
otherwise, the policies may be changed by the Directors without the approval of
shareholders. Shareholders will be notified before any material changes in these
policies become effective.
INVESTMENT POLICIES
The Fund will seek to achieve its investment objective by investing at least 65%
of its total assets in securities issued by domestic and foreign companies in
the utilities industries. For these purposes, companies will be considered to be
in the utilities industries if, in the opinion of Federated Management ("the
Investment Adviser"), they are primarily engaged in the ownership or operation
of facilities used to generate, transmit, or distribute electricity, telephone
communications, cable and other pay television services, radio-telephone
communications, gas, or water.
The Fund's portfolio will at all times include issuers located in at least three
countries, although the Investment Adviser expects to invest in more than three
countries. It is expected that, under normal circumstances, the assets of the
Fund invested in U.S. securities will be higher than that invested in securities
of any other single country. At times, the Fund may have more than 65% of its
total assets invested in foreign securities.
The Fund may invest up to 35% of its total assets in securities of issuers that
are outside the utilities industries. Such investments may consist of common
stocks, debt securities, preferred stocks, or other securities issued by either
U.S. or foreign companies, governments, or governmental instrumentalities. Some
of these issuers may be in industries related to the utilities industries and,
therefore, may be subject to similar considerations. The prices of fixed income
securities fluctuate inversely to the direction of interest rates. The prices of
longer term bonds fluctuate more widely in response to market interest rate
changes.
Debt obligations in the portfolio, at the time they are purchased, generally
will be limited to those which fall in one of the following categories: (i)
rated BBB or better by Standard & Poor's Ratings Group ("S&P") or Baa by Moody's
Investors Service, Inc., ("Moody's") or (ii) determined by the Investment
Adviser to be of investment grade and not rated by either of the aforementioned
rating services. However, the Fund may invest up to 35% of the value of its
total assets in lower-rated convertible and non-convertible debt obligations
that are not investment grade bonds, (i.e.,, "junk bonds") but are rated CCC or
better by S&P or Caa or better by Moody's, or are not rated but are determined
by the Investment Adviser to be of comparable quality. Securities rated BB, B,
and CCC by S&P or Ba, B, and Caa by Moody's have speculative characteristics or
are predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligations. Debt obligations that
are not determined to be investment grade are high-yield high-risk bonds,
typically subject to greater market fluctuations, and securities in the lowest
rating category may be in danger of loss of income and principal due to an
issuer's default. To a greater extent than investment grade bonds, the value of
lower-rated bonds tends to reflect short-term corporate, economic, and market
developments, as well as investor perceptions of the issuer's credit quality. In
addition, lower rated bonds may be more difficult to dispose of or to value than
high-rated, lower-yielding bonds. The Investment Adviser attempts to reduce the
risks described above through diversification of the portfolio and by credit
analysis of each issuer as well as by monitoring broad economic trends and
corporate and legislative developments. In the event the rating on an issue held
in the Fund's portfolio is changed by the ratings services (or, for an unrated
issue, in the determination of the Investment Adviser), such event will be
considered by the Investment Adviser in its evaluation of the overall investment
merits of that security, but will not necessarily result in
the automatic sale of the security. A description of the rating categories is
contained in the Appendix to the Prospectus.
For temporary defensive purposes and to maintain liquidity in anticipation of
favorable investment opportunities, the Fund may invest in short-term money
market instruments including securities of other investment companies,
certificates of deposit, obligations issued or guaranteed by the United States
government or its agencies or instrumentalities, commercial paper rated not
lower than A-1 by S&P, Prime-1 by Moody's or repurchase agreements.
RISK FACTORS AND INVESTMENT CONSIDERATIONS
- --------------------------------------------------------------------------------
The Fund will attempt to meet its investment objective by being at least 65%
invested in securities issued by companies in the domestic and foreign utilities
industries. There exist certain risks associated with the utilities industries
and with foreign securities of which investors in the Fund should be aware.
CONSIDERATIONS OF UTILITY SECURITIES. There are certain risks and considerations
affecting utility companies, and the holders of utility company securities,
which an investor should take into account when investing in those securities.
Factors which may adversely affect utility companies include: difficulty in
financing large construction programs during inflationary periods; technological
innovations which may cause existing plants, equipment, or products to become
less competitive or obsolete; the impact of natural or man-made disasters
(especially on regional utilities); increased costs or reductions in production
due to the unavailability of appropriate types of fuel; seasonally or
occasionally reduced availability or higher cost of natural gas; and reduced
demand due to energy conservation among consumers. Furthermore, the revenues of
domestic and foreign utility companies generally reflect the economic growth and
developments in the geographic areas in which they do business.
In addition, most utility companies in the United States and in foreign
countries are subject to government regulation. Generally, the purpose of such
regulation is to ensure desirable levels of service and adequate capacity to
meet public demand. To this end, prices are often regulated to enable consumers
to obtain service at what is perceived to be a fair price, while attempting to
provide utility companies with a rate of return sufficient to attract capital
investment necessary for continued operation and necessary growth. Recently,
utility regulators have permitted utilities to diversify outside of their
original geographic regions and their traditional lines of business. While the
Investment Adviser believes that these opportunities will permit certain utility
companies to earn more than their traditional regulated rates of return, other
companies may be forced to defend their core businesses and may be less
profitable. Of course, there can be no assurance that all of the regulatory
policies described in this paragraph will continue in the future.
In addition to the effects of regulation described in the previous paragraph,
utility companies may also be adversely affected by the following regulatory
considerations: the development and implementation of a national energy policy;
the differences between regulatory policies of different jurisdictions (or
different regulators which have concurrent jurisdiction); shifts in regulatory
policies; adequacy of rate increases; and future regulatory legislation.
Foreign utility companies may encounter different risks and opportunities than
those located in the United States. Foreign utility companies may be more
heavily regulated than their United States counterparts. Many foreign utility
companies currently use fuels which cause more pollution than fuels used by
United States utilities; in the future, it may be necessary for such foreign
utility companies to invest heavily in pollution control equipment or otherwise
meet pollution restrictions. Rapid growth in certain foreign economies may
encourage the growth of utility industries in those countries. Although many
foreign utility companies are currently government-owned, the Investment Adviser
believes that it is likely that some foreign governments will seek to
"privatize" their utility companies, (i.e., transfer ownership to private
investors).
In addition to the foregoing considerations which affect most utility companies,
there are specific considerations which affect specific utility industries:
ELECTRIC. The electric utility industry is made up of companies that are
engaged in the generation, transmission, and sale of electric energy.
Domestic electric utility companies have generally been favorably affected
by lower fuel and financing costs and the completion of major construction
programs. Some electric utilities are able to sell power outside of their
traditional geographic areas. Electric utility companies have historically
been subject to increases in fuel and other operating costs, high interest
costs on borrowings needed for capital construction programs, compliance
with environmental and safety regulations, and changes in the regulatory
climate.
In the United States, the construction and operation of nuclear power
facilities is subject to a high degree of regulatory oversight by the
Nuclear Regulatory Commission and state agencies with concurrent
jurisdiction. In addition, the design, construction, licensing, and
operation of nuclear power facilities have been subject to lengthy delays
and unanticipated costs due to changes in regulatory policy, regional
political actions, and lawsuits. Furthermore, during rate authorizations,
utility regulators may disallow the inclusion in electric rates of the
higher operating costs and capital expenditures resulting from these delays
and unanticipated costs, including the costs of a nuclear facility which a
utility company may never be able to use.
TELECOMMUNICATIONS. The telephone industry is large and highly
concentrated. The greatest portion of this segment is comprised of
companies which distribute telephone services and provide access to the
telephone networks. While many telephone utility companies have diversified
into other businesses in recent years, the profitability of telephone
utility companies could be adversely affected by increasing competition,
technological innovations, and other structural changes in the industry.
Cable television companies are typically local monopolies, subject to
scrutiny by both utility regulators and municipal governments. Emerging
technologies and legislation encouraging local competition are combining to
threaten these monopolies and may slow future growth rates of these
companies. The radio telecommunications segment of this industry, including
cellular telephone, is in its early developmental phases and is
characterized by emerging, rapidly growing companies.
GAS. Gas transmission and distribution companies are undergoing
significant changes. In the United States, the Federal Energy Regulatory
Commission is reducing its regulation of interstate transmission of gas.
While gas utility companies have in the recent past been adversely
affected by disruptions in the oil industry, increased concentration, and
increased competition, the Investment Adviser believes that environmental
considerations should benefit the gas industry in the future.
WATER. Water utility companies purify, distribute, and sell water. This
industry is highly fragmented because most of the water supplies are owned
by local authorities. Water utility companies are generally mature and are
experiencing little or no per capita volume growth. The Investment Adviser
believes that favorable investment opportunities may result if anticipated
consolidation and foreign participation in this industry occur.
The Fund occasionally takes advantage of the unusual opportunities for higher
returns available from investing in developing countries. These investments,
however, carry considerably more volatility and risk because they are associated
with less mature economies and less stable political systems.
EXCHANGE RATES. Foreign securities are denominated in foreign currencies.
Therefore, the value in U.S. dollars of the Fund's assets and income may be
affected by changes in exchange rates and regulations. Although the Fund values
its assets daily in U.S. dollars, it will not convert its holding of foreign
currencies to U.S. dollars daily. When the Fund converts its holdings to another
currency, it may incur conversion costs. Foreign exchange dealers realize a
profit on the difference between the prices at which they buy and sell
currencies.
FOREIGN COMPANIES. Other differences between investing in foreign and U.S
companies include: less publicly available information about foreign companies;
the lack of uniform financial accounting standards applicable to foreign
companies; less readily available market quotations on foreign companies;
differences in government regulation and supervision of foreign stock exchanges,
brokers, listed companies, and banks; generally lower foreign stock market
volume; the likelihood that foreign securities may be less liquid or more
volatile; foreign brokerage commissions may be higher; unreliable mail service
between countries; political or financial changes which adversely affect
investments in some countries; and difficulties which may be encountered in
obtaining or enforcing a court judgment abroad.
U.S. GOVERNMENT POLICIES. In the past, U.S. government policies have discouraged
or restricted certain investments abroad by investors such as the Fund. Although
the Fund is unaware of any current restrictions, investors are advised that
these policies could be reinstituted.
OTHER INVESTMENT PRACTICES
FOREIGN CURRENCY TRANSACTIONS. The Fund will enter into foreign currency
transactions to obtain the necessary currencies to settle securities
transactions. Currency transactions may be conducted either on a spot or cash
basis at prevailing rates or through forward foreign currency exchange
contracts.
The Fund may also enter into foreign currency transactions to protect Fund
assets against adverse changes in foreign currency exchange rates or exchange
control regulations. Such changes could unfavorably affect the value of Fund
assets which are denominated in foreign currencies, such as foreign securities
or funds deposited in foreign banks, as measured in U.S. dollars. Although
foreign currency transactions may be used by the Fund to protect against a
decline in the value of
one or more currencies, such efforts may also limit any potential gain that
might result from a relative increase in the value of such currencies and might,
in certain cases, result in losses to the Fund.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency exchange
contract ("forward contract") is an obligation to purchase or sell an amount of
a particular currency at a specific price and on a future date agreed upon by
the parties.
Generally, no commission charges or deposits are involved. At the time the Fund
enters into a forward contract, Fund assets with a value equal to the Fund's
obligation under the forward contract are segregated on the Fund's records and
are maintained until the contract has been settled. The Fund will generally
enter into a forward contract to provide the proper currency to settle a
securities transaction at the time the transaction occurs ("trade date"). The
period between trade date and settlement date will vary between twenty-four
hours and thirty days, depending upon local custom.
The Fund may also protect against the decline of a particular foreign currency
by entering into a forward contract to sell an amount of that currency
approximating the value of all or a portion of the Fund's assets denominated in
that currency ("hedging"). The success of this type of short-term hedging
strategy is highly uncertain due to the difficulties of predicting short-term
currency market movements and of precisely matching forward contract amounts and
the constantly changing value of the securities involved. Although the
Investment Adviser will consider the likelihood of changes in currency values
when making investment decisions, the Investment Adviser believes that it is
important to be able to enter into forward contracts when it believes the
interests of the Fund will be served. The Fund will not enter into forward
contracts for hedging purposes in a particular currency in an amount in excess
of the Fund's assets denominated in that currency. No more than 30% of the
Fund's assets will be committed to forward contracts for hedging purposes at any
time. (This restriction does not include forward contracts entered into to
settle securities transactions.)
REPURCHASE AGREEMENTS. Certain securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell U.S. government securities or other securities to the Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price. To the extent that the original seller does not repurchase the securities
from the Fund, the Fund could receive less than the repurchase price on any sale
of such securities.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will limit the amount of
portfolio securities it may lend to not more than one-third of its total assets.
The Fund will only enter into loan arrangements with broker/dealers, banks, or
other institutions which the Investment Adviser has determined are creditworthy
under guidelines established by the Fund's Board of Directors and will receive
collateral in cash or United States government securities that will be
maintained in an amount equal to at least 100% of the current market value of
the securities loaned.
There is the risk that when lending portfolio securities, the securities may not
be available to the Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a
desirable price. In addition, in the event that a borrower of securities would
file for bankruptcy or become insolvent, disposition of the securities may be
delayed pending court action.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies but which are
subject to restriction on resale under federal securities law. To the extent
these securities are deemed to be illiquid, the Fund will limit its purchases
together with other securities considered to be illiquid to 15% of its net
assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more/less than the market value of the securities
on the settlement date.
The Fund may dispose of a commitment prior to settlement if the Investment
Adviser deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current market
values and simultaneously acquire other commitments to purchase similar
securities at later dates. The Fund may realize short-term profits or losses
upon the sale of such commitments.
COVERED CALL OPTIONS. The Fund may also write call options on all or any portion
of its portfolio to generate income for the Fund. Call options written by the
Fund give the holder the right to buy the underlying securities of the Fund at
the stated exercise price. The Fund will write call options only on securities
either held in its portfolio or for which it has the right to obtain without
payment of further consideration or for which it has segregated cash in the
amount of any additional consideration. The call options which the Fund writes
and sells must be listed on a recognized options exchange. The Fund's investment
in call options shall not exceed 5% of the Fund's total assets.
INVESTMENT LIMITATIONS
The Fund will not:
with respect to 75% of its total assets, invest more than 5% of its total
assets in the securities of any one issuer, except that this restriction
does not apply to cash and cash items, repurchase agreements, and
securities issued or guaranteed by the United States government or its
agencies or instrumentalities, or acquire more than 10% of the
outstanding voting securities of any one issuer;
borrow money, issue senior securities, or pledge assets, except that
under certain circumstances the Fund may borrow money and engage in
reverse repurchase transactions in amounts up to one-third of the value
of its total assets, including the amounts borrowed, and pledge up to 10%
of the value of those assets to secure such borrowings.
The above investment limitations cannot be changed without shareholder approval.
The following limitation, however, may be changed by the Directors without the
approval of shareholders. Shareholders will be notified before any material
change in this limitation becomes effective.
The Fund will not invest more than 25% of its total assets in securities of
companies engaged principally in any one industry other than the utilities
industry, except that this restriction does not apply to cash or cash items and
securities issued or guaranteed by the United States government or its agencies
or instrumentalities.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of the Fortress Shares in the market value
of all securities and other assets of the Fund, subtracting the interest of the
Fortress Shares in the liabilities of the Fund and those attributable to the
Fortress Shares, and dividing the remainder by the number of Fortress Shares
outstanding. The net asset value for Fortress Shares may differ from that of
Class A Shares due to the variance in daily net income realized by each class.
Such variance will reflect only accrued net income to which the shareholders of
a particular class are entitled.
INVESTING IN FORTRESS SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open. Shares may
be purchased through a financial institution who has a sales agreement with
Federated Securities Corp. (the "Distributor") or directly from Federated
Securities Corp. once an account has been established. In connection with the
sale of Shares, Federated Securities Corp. may from time to time offer certain
items of nominal value to any shareholder or investor. The Fund reserves the
right to reject any purchase request.
THROUGH A FINANCIAL INSTITUTION. An investor may call his financial institution
(such as a bank or an investment dealer) to place an order to purchase Shares.
It is the financial institution's responsibility to transmit orders promptly.
Purchase orders through a registered broker/dealer must be received by the
broker before 4:00 P.M. (Eastern time) and must be transmitted by the broker to
the Fund before 5:00 P.M. (Eastern time) in order for Shares to be purchased at
that day's price. Purchase orders through other financial institutions must be
received by the financial institution and transmitted to the Fund before 4:00
P.M. (Eastern time) in order for Shares to be purchased at that day's price.
Orders placed through a financial institution are considered received when the
Fund is notified of the purchase order.
The financial institution which maintains investor accounts with the Fund must
do so on a fully disclosed basis unless it accounts for share ownership periods
used in calculating the contingent deferred sales charge (see "Contingent
Deferred Sales Charge"). In addition, advance payments made to financial
institutions may be subject to reclaim by the Distributor for accounts
transferred to financial institutions which do not maintain investor accounts on
a fully disclosed basis and do not account for share ownership periods (see
"Other Payments to Financial Institutions").
DIRECTLY BY MAIL. An investor may place an order to purchase Shares directly by
mail from the Distributor once an account has been established. To do so, mail a
check made payable to World
Utility Fund-Fortress Shares to Federated Services Company, c/o State Street
Bank and Trust Company, P.O. Box 8604, Boston, MA 02266-8604.
Purchases by mail are considered received after payment by check is converted by
the transfer agent's bank, State Street Bank and Trust Company ("State Street
Bank"), into federal funds. This is generally the next business day after State
Street Bank receives the check.
DIRECTLY BY WIRE. To purchase Shares directly from the distributor by Federal
Reserve wire once an account has been established, call the Fund. All
information needed will be taken over the telephone, and the order is considered
received when State Street Bank receives payment by wire. Federal funds should
be wired as follows: Federated Services Company, c/o State Street Bank and Trust
Company, Boston, Massachusetts 02105; Attention: EDGEWIRE; For Credit to: World
Utility Fund--Fortress Shares; Fund Number (this number can be found on the
account statement or by contacting the Fund); Group Number or Order Number;
Nominee or Institution Name; ABA Number 011000028. Shares cannot be purchased by
wire on Columbus Day, Veteran's Day, or Martin Luther King Day.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares is $1,500 unless the investment is in a
retirement plan, in which case the minimum initial investment is $50. Subsequent
investments must be in amounts of at least $100, except for retirement plans,
which must be in amounts of at least $50.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received, plus a sales load of 1% of the offering price (which is 1.01% of the
net amount invested). There is no sales load for purchases of $1 million or
more. In addition, no sales load is imposed for Shares purchased through bank
trust departments or investment advisers registered under the Investment
Advisers Act of 1940 purchasing on behalf of their clients, or by sales
representatives, Directors, and employees of the Fund, Federated Management, and
Federated Securities Corp., or their affiliates, or any investment dealer who
has a sales agreement with Federated Securities Corp., their spouses and
children under age 21, or any trusts or pension or profit-sharing plans for
these persons. Unaffiliated institutions through whom Shares are purchased may
charge fees for services provided which may be related to the ownership of Fund
Shares. This prospectus should, therefore, be read together with any agreement
between the customer and the institution with regard to services provided, the
fees charged for these services, and any restriction and limitation imposed.
The net asset value is determined at 4:00 p.m. (Eastern time), Monday through
Friday, except on:
(i) days on which there are not sufficient changes in the value of the Fund's
portfolio securities that its net asset value might be materially affected; (ii)
days during which no Shares are tendered for redemption and no orders to
purchase Shares are received; or (iii) the following holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day.
Under certain circumstances, described under "Redeeming Fortress Shares,"
shareholders may be charged a contingent deferred sales charge by the
Distributor at the time Shares are redeemed.
DEALER CONCESSION. For sales of Shares, broker/dealers will normally receive
100% of the applicable sales load. Any portion of the sales load which is not
paid to a broker/dealer will be retained by the Distributor. However, from time
to time, and at the sole discretion of the Distributor, all or a part of that
portion may be paid to a dealer. The sales load for Shares sold other than
through registered broker/dealers will be retained by Federated Securities Corp.
Federated Securities Corp. may pay fees to banks out of the sales load in
exchange for sales and/or administrative services performed on behalf of the
bank's customers in connection with the initiation of customer accounts and
purchases of Shares.
ELIMINATING THE SALES LOAD
The sales load can be eliminated on the purchase of Shares through:
quantity discounts and accumulated purchases;
signing a 13-month letter of intent;
using the reinvestment privilege; or
concurrent purchases
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. There is no sales load for
purchases of
$1 million or more. The Fund will combine purchases of Shares made on the same
day by the investor, the investor's spouse, and the investor's children under
age 21 when it calculates the sales load. In addition, the sales load is
eliminated for purchases of $1 million or more made at one time by a trustee or
fiduciary for a single trust estate or a single fiduciary account.
If an additional purchase of Shares is made, the Fund will consider the previous
purchases still invested in the Fund. For example, if a shareholder already owns
Shares having a current value at the public offering price of $900,000 and he
purchases $100,000 more at the current public offering price, there will be no
load on the additional purchase.
The Fund will also combine purchases for the purpose of reducing the contingent
deferred sales charge imposed on some Share redemptions. For example, if a
shareholder already owns Shares having a current value at public offering price
of $1 million and purchases an additional $1 million at the current public
offering price, the applicable contingent deferred sales charge would be reduced
to 0.50% of those additional Shares. For more information on the levels of
contingent deferred sales charges and holding periods, see the section entitled
"Contingent Deferred Sales Charge."
To receive the sales load elimination and/or the contingent deferred sales
charge reduction, Federated Securities Corp. must be notified by the shareholder
in writing or by his financial institution at the time the purchase is made that
Shares are already owned or that purchases are being combined. The Fund will
eliminate the sales load after it confirms the purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $1 million of
Shares over the next 13 months, the sales load may be eliminated by signing a
letter of intent to that effect. This letter of intent includes a provision for
a sales load elimination depending on the amount actually purchased within the
13-month period and a provision for the Fund's custodian to hold 1.00% of the
total amount intended to be purchased in escrow (in Shares) until such purchase
is completed.
The 1.00% held in escrow will be applied to the shareholder's account at the end
of the 13-month period unless the amount specified in the letter of intent,
which must be $1 million or more Shares, is not purchased. In this event, an
appropriate number of escrowed Shares may be redeemed in order to realize the
1.00% sales load.
This letter of intent will not obligate the shareholder to purchase Shares. This
letter may be dated as of a prior date to include any purchases made within the
past 90 days (purchases within the prior 90 days may be used to fulfill the
requirements of the letter of intent; however, the sales load on such purchases
will not be adjusted to reflect a lower sales load).
REINVESTMENT PRIVILEGE. If Shares in the Fund have been redeemed, the
shareholder has a one-time right, within 120 days, to reinvest the redemption
proceeds at the next-determined net asset value without any sales load.
Federated Securities Corp. must be notified by the shareholder in writing or by
his financial institution of the reinvestment in order to receive this
elimination of the sales load. If the shareholder redeems his Shares in the
Fund, there may be tax consequences.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge elimination,
a shareholder has the privilege of combining concurrent purchases of two or more
funds in the Fortress Investment Program, the purchase price of which includes a
sales load. For example, if a shareholder concurrently invested $400,000 in one
of the other Fortress Funds, and $600,000 in Shares, the sales load would be
eliminated.
To receive this sales load elimination, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at the
time the concurrent purchases are made. The Fund will reduce the sales load
after it confirms the purchases.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis. Under this program, funds may be automatically withdrawn
periodically from the shareholder's checking account and invested in Shares at
the net asset value next determined after an order is received by State Street
Bank, plus the 1.00% sales load for purchases under $1 million. A shareholder
may apply for participation in this program through Federated Securities Corp.
or his financial institution.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange certain securities or a combination of securities and
cash for Shares. The securities and any cash must have a market value of at
least $25,000. From time to time the Fund will prepare a list of securities
which may be eligible for acceptance and furnish this list to brokers upon
request. Securities accepted by the Fund are valued in the same manner as the
Fund values its portfolio securities. Investors wishing to exchange securities
should first contact their investment broker, who will contact Federated
Securities Corp.
EXCHANGE PRIVILEGE
Shares may be exchanged for shares in other Fortress Funds at net asset value
without a sales load (if previously paid) or a contingent deferred sales charge.
The exchange privilege is available to shareholders residing in any state in
which the shares being acquired may be legally sold.
Shares may also be exchanged into certain other funds for which affiliates of
Federated Investors serves as the principal underwriter ("Federated Funds").
With the exception of exchanges into other Fortress Funds, such exchanges will
be subject to a contingent deferred sales charge and possibly a sales load.
Shareholders in certain Federated Funds may exchange their shares into the
Federated Funds for Fortress Shares.
Shareholders using this privilege must exchange Shares having a net asset value
which at least meets the minimum investment required for the fund into which the
exchange is being made. A shareholder may obtain information on the exchange
privilege, and may obtain prospectuses for other Fortress Funds and all funds
advised by subsidiaries of Federated Investors ("Federated Fund's") by calling
Federated Securities Corp. or his financial institution.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a Share
account for each shareholder. Share certificates are not issued unless requested
on the application or by contacting the Fund.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Quarterly statements are sent to report dividends paid during the
quarter.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Distributions of any net realized capital gains will be
made at least once every twelve months. Dividends and distributions are
automatically reinvested in additional Shares on the payment date, at the
ex-dividend date net asset value without a sales charge, unless shareholders
request cash payments on the new account form or by writing to the transfer
agent. All shareholders on the record date are entitled to the dividend. If
Shares are redeemed or exchanged prior to the record date or purchased after the
record date, those Shares are not entitled to that quarter's dividend.
REDEEMING FORTRESS SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value, less any applicable contingent
deferred sales charge, next determined after the Fund receives the redemption
request. Redemptions will be made on days on which the Fund computes its net
asset value. Redemption requests must be received in proper form and can be made
through a financial institution or directly from the Fund by written request.
THROUGH A FINANCIAL INSTITUTION
A shareholder may redeem Shares by calling his financial institution (such as a
bank or an investment dealer) to request the redemption. Shares will be redeemed
at the net asset value, less any applicable contingent deferred sales charge,
next determined after the Fund receives the redemption request from the
financial institution. Redemption requests through a registered broker/dealer
must be received by the broker before 4:00 P.M. (Eastern time) and must be
transmitted by the broker to the Fund before 5:00 P.M. (Eastern time) in order
for Shares to be redeemed at that day's
net asset value. Redemption requests through other financial institutions must
be received by the financial institution and transmitted to the Fund before 4:00
P.M. (Eastern time) in order for Shares to be redeemed at that day's net asset
value. The financial institution is responsible for promptly submitting
redemption requests and providing proper written redemption instructions to the
Fund. The financial institution may charge customary fees and commissions for
this service. If at any time the Fund shall determine it necessary to terminate
or modify this method of redemption, shareholders will be promptly notified.
Before a financial institution may request redemption by telephone on behalf of
a shareholder, an authorization form permitting the Fund to accept telephone
requests must first be completed. Telephone redemption instructions may be
recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "Directly by Mail," should be considered.
DIRECTLY BY MAIL
Shareholders may also redeem Shares by sending a written request to Federated
Services Company, c/o State Street Bank, P.O. Box 8604, Boston, MA 02266-8604.
The written request must include the shareholder's name, the Fund name and class
of shares name, the account number, the Share or dollar amount to be redeemed,
and should be signed exactly as Shares are registered.
If Share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail to Federated Services Company,
500 Victory Road-2nd Floor, Quincy, MA 02171 with the written request.
Shareholders should call the Fund for assistance in redeeming by mail.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. A check for the proceeds is mailed within one business day,
but in no event more than seven days, after receipt of a proper written
redemption request.
CONTINGENT DEFERRED SALES CHARGE
Shareholders redeeming Shares from their Fund accounts within certain time
periods from the purchase dates of those Shares will be charged a contingent
deferred sales charge by the Fund's distributor of the lesser of the original
purchase price or the net asset value of the Shares redeemed as follows:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
AMOUNT OF PURCHASE SHARES HELD SALES CHARGE
<S> <C> <C>
Up to $1,999,999 less than 4 years 1%
$2,000,000 to $4,999,999 less than 2 years .50%
$5,000,000 or more less than 1 year .25%
</TABLE>
In instances in which Shares have been acquired in exchange for shares in other
Fortress Funds,
(i) the purchase price of the shares when originally purchased and (ii) the time
period during which the shares are held will run from the date of the original
purchase. The contingent deferred sales charge will not be imposed on Shares
acquired through the reinvestment of dividends or distributions of short-term or
long-term capital gains. In computing the amount of contingent deferred sales
charge for accounts with shares subject to a single holding period, if any,
redemptions are deemed to have occurred in the following order: 1) first of
Shares acquired through the reinvestment of dividends and long-term capital
gains, 2) second of purchases of Shares occurring prior to the number of years
necessary to satisfy the applicable holding period, and 3) finally of purchases
of Shares occurring within the current holding period.
The contingent deferred sales charge will not be imposed when a redemption
results from a tax-free return under the following circumstances: (i) a total or
partial distribution from a qualified plan, other than an IRA, Keogh Plan, or a
custodial account, following retirement; (ii) a total or partial distribution
from an IRA, Keogh Plan, or a custodial account, after the beneficial owner
attains age 59-1/2; or (iii) from the death or total and permanent disability of
the beneficial owner. The exemption from the contingent deferred sales charge
for qualified plans, an IRA, Keogh Plan or a custodial account does not extend
to account transfers, rollovers, and other redemptions made for purposes of
reinvestment. Contingent deferred sales charges are not charges in connection
with exchanges of Shares for shares in other Fortress Funds, or in connection
with redemptions by the Fund of accounts with low balances. Shares of the Fund
originally purchased through a bank trust department or investment adviser
registered under the Investment Advisers Act of 1940 are not subject to the
contingent deferred sales charge, to the extent that no payment was advanced for
purchases made by such entities. For more information, see "Other Payments to
Financial Institutions."
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive monthly or quarterly payments of a
predetermined amount may take advantage of the Systematic Withdrawal Program.
Under this program, Shares are redeemed
to provide for periodic withdrawal payments in an amount directed by the
shareholder; the minimum withdrawal amount is $100. Depending upon the amount of
the withdrawal payments, the amount of dividends paid and capital gains
distributions with respect to Shares, and the fluctuation of the net asset value
of Shares redeemed under this program, redemptions may reduce, and eventually
deplete, the shareholder's investment in Shares. For this reason, payments under
this program should not be considered as yield or income on the shareholder's
investment in Shares. To be eligible to participate in this program, a
shareholder must have an account value of at least $10,000 at current offering
price.
A shareholder may apply for participation in this program through Federated
Securities Corp. Due to the fact that Shares are sold with a sales load, it is
not advisable for shareholders to be purchasing Shares while participating in
this program.
Contingent deferred sales charges are charged for Shares redeemed through this
program within four years of their purchase dates.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the required minimum value of
$1,500. This requirement does not apply, however, if the balance falls below
$500 because of changes in the Fund's net asset value.
Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional Shares to meet the minimum
requirement.
WORLD INVESTMENTS SERIES, INC. INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE CORPORATION
BOARD OF DIRECTORS. The Corporation is managed by a Board of Directors. The
Directors are responsible for managing the Corporation's business affairs and
for exercising all the Corporation's powers except those reserved for the
shareholders. An Executive Committee of the Board of Directors handles the
Board's responsibilities between meetings of the Board.
OFFICERS AND DIRECTORS. Officers and Directors are listed with their addresses,
present positions with World Investment Series, Inc. and principal occupations,
including those with Federated Management, its affiliates, and the "Funds"
described in the Statement of Additional Information.
- --------------------------------------------------------------------------------
John F. Donahue+*
Federated Investors Tower
Pittsburgh, PA
Chairman and Director
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, tna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or Managing General
Partner of the Funds. Mr. Donahue is the father of J. Christopher Donahue,
President and Director of the Company.
- --------------------------------------------------------------------------------
Thomas G. Bigley
28th Floor
One Oxford Centre
Pittsburgh, PA
Director
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital of
Pittsburgh; Director, Trustee or Managing General Partner of the Funds;
formerly, Senior Partner Ernst & Young LLP.
- --------------------------------------------------------------------------------
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Director
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds; formerly,
President, Naples Property Management, Inc.
- --------------------------------------------------------------------------------
William J. Copeland
One PNC Plaza--23rd Floor
Pittsburgh, PA
Director
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
President and Director
Executive Vice President and Trustee, Federated Investors; Director, Federated
Research Corp.; Chairman and Director, Federated Securities Corp.; President or
Vice President of some of the Funds; Director or Trustee of some of the Funds.
- --------------------------------------------------------------------------------
James E. Dowd
571 Hayward Mill Road
Concord, MA
Director
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds; formerly, Director, Blue Cross of
Massachusetts, Inc.
- --------------------------------------------------------------------------------
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Director
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore Hospitals;
Professor of Medicine and Trustee, University of Pittsburgh; Director of
Corporate Health, University of Pittsburgh Medical Center; Director, Trustee, or
Managing General Partner of the Funds.
- --------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+
Henny, Koehuba, Meyer & Flaherty
Two Gateway Center--Suite 674
Pittsburgh, PA
Director
Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park Restaurants,
Inc., and Statewide Settlement Agency, Inc.; Director, Trustee, or Managing
General Partner of the Funds; formerly, Counsel, Horizon Financial, F.A.,
Western Region.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Peter E. Madden
225 Franklin Street
Boston, MA
Director
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation and Trustee,
Lahey Clinic Foundation, Inc.
- --------------------------------------------------------------------------------
Gregor F. Meyer
Henny, Koehuba, Meyer & Flaherty
Two Gateway Center--Suite 674
Pittsburgh, PA
Director
Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or Managing General
Partner of the Funds; formerly, Vice Chairman, Horizon Financial, F.A.
- --------------------------------------------------------------------------------
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Director
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie Endowment
for International Peace, RAND Corporation, Online Computer Library Center, Inc.,
and U.S. Space Foundation; Chairman, Czecho Slovak Management Center; Director,
Trustee, or Managing General
Partner of the Funds; President Emeritus, University of Pittsburgh; formerly,
Chairman, National Advisory Council for Environmental Policy and Technology.
- --------------------------------------------------------------------------------
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Director
Public relations/marketing consultant; Director, Trustee, or Managing General
Partner of the Funds.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice President and
Treasurer, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Executive Vice President,
Treasurer, and Director, Federated Securities Corp.; Trustee, Federated Services
Company and Federated Shareholder Services; Chairman, Treasurer, and Trustee,
Federated Administrative Services; Trustee or Director of some of the Funds;
Vice President and Treasurer of the Funds.
- --------------------------------------------------------------------------------
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and Secretary, Federated
Research Corp. and Passport Research, Ltd.; Trustee, Federated Services Company;
Executive Vice President, Secretary, and Trustee, Federated Administrative
Services; Secretary and Trustee, Federated Shareholder Services; Executive Vice
President and Director, Federated Securities Corp.; Vice President and Secretary
of the Funds.
- --------------------------------------------------------------------------------
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Director and President, Federated Research
Corp.; President, Passport Research, Ltd.; Trustee Federated Administrative
Services, Federated Services Company, and Federated Shareholder Services;
President or Vice President of the Funds; Director, Trustee or Managing General
Partner of some of the Funds. Mr. Donahue is the son of John F. Donahue,
Chairman and Director of the Fund.
- --------------------------------------------------------------------------------
* This Director is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
+ Member of the Executive Committee. The Executive Committee of the Board of
Directors handles the responsibilities of the Board of Directors between
meetings of the Board.
Officers and Directors as a group own 1.63% of the Fund's outstanding shares.
INVESTMENT ADVISER. Under the terms of an Advisory Agreement between the
Corporation and Federated Management, Federated Management will furnish to the
Fund such investment advice, statistical and other factual information as may
from time to time be reasonably requested by the Fund.
ADVISORY FEES. The Fund's investment adviser receives an annual investment
advisory fee equal to 1.00% of average daily net assets of the Fund. The
fee paid by the Fund, while higher than the advisory fee paid by other
mutual funds in general, is comparable to fees paid by other mutual funds
with similar objectives and policies. The Investment Adviser may
voluntarily choose to waive a portion of its fee or reimburse the Fund for
certain operating expenses. The Investment Adviser can terminate this
voluntary reimbursement of expenses at any time at its sole discretion. The
Investment Adviser has also undertaken to reimburse the Fund for operating
expenses in excess of limitations established by certain states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk-averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
Christopher H. Wiles has been the Fund's portfolio manager since its
inception. Mr. Wiles joined Federated Investors in 1990 and has been a Vice
President of the Investment Adviser since 1992. Mr. Wiles served as
Assistant Vice President of the Fund's investment adviser from 1990 until
1992. Mr. Wiles was a portfolio manager at Mellon Bank from 1986 until
1990.
Mr. Wiles is a Chartered Financial Analyst and received his M.B.A. in
Finance from Cleveland State University.
DISTRIBUTION OF FORTRESS SHARES
- --------------------------------------------------------------------------------
Federated Securities Corp. is the principal distributor for Shares. Federated
Securities Corp. is located at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. It is a Pennsylvania corporation organized on November
14, 1969, and is the principal distributor for a number of investment companies.
Federated Securities Corp. is a subsidiary of Federated Investors.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the Fund may pay to the Distributor an amount, computed at an annual rate of
0.25 of 1% of the average daily net asset value of Shares to finance any
activity which is principally intended to result in the sale of shares subject
to the Distribution Plan. The Distributor may select financial institutions such
as banks, fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide sales support services as agents for their clients or
customers.
The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the Distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the Distributor, including amounts expended
by the Distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the Distributor's overhead expenses. However, the Distributor may be able to
recover such amount or may earn a profit from future payments made by the Fund
under the Distribution Plan.
In addition, the Fund has adopted a Shareholder Services Plan (the "Services
Plan") under which it may make payments up to 0.25 of 1% of the average daily
net asset value of Shares to obtain certain personal services for shareholders
and the maintenance of shareholder accounts ("shareholder services"). The Fund
has entered into a Shareholder Services Agreement with Federated Shareholder
Services, a subsidiary of Federated Investors, under which Federated Shareholder
Services will either perform shareholder services directly or will select
financial institutions to perform shareholder services. Financial institutions
will receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition, the Distributor will pay
financial institutions, for distribution and/or administrative services, an
amount equal to 1.00% of the offering price of the Shares acquired by their
clients or customers on purchases up to $1,999,999, .50% of the offering price
on purchases of $2,000,000 to $4,999,999, and .25% of the offering price on
purchases of $5,000,000 or more. (This fee is in addition to the 1.00% sales
load on purchases of less than
$1 million.) The financial institutions may elect to receive amounts less than
those stated, which would reduce the stated contingent deferred sales charge
and/or the holding period used to calculate the fee.
Furthermore, the Distributor may offer to pay a fee from its own assets to
financial institutions as financial assistance for providing substantial
marketing and sale support. The support may include participating in sales,
educational and training seminars at recreational-type facilities, providing
sales literature, and engineering computer software programs that emphasize the
attributes of the
Fund. Such assistance will be predicated upon the amount of Shares the financial
institution sells or may sell, and/or upon the type and nature of sales or
marketing support furnished by the financial institution. Any payments made by
the Distributor may be reimbursed by the Fund's investment adviser or its
affiliates.
The Glass-Steagall Act limits the ability of a depository institution (such as a
commercial bank or a savings and loan association) to become an underwriter or
distributor of securities. In the event the Glass-Steagall Act is deemed to
prohibit depository institutions from acting in the administrative capacities
described above or should Congress relax current restrictions on depository
institutions, the Board of Directors will consider appropriate changes in the
administrative services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of the Federated Funds as specified
below.
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
<C> <S>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
CUSTODIAN. State Street Bank and Trust Company, P.O. Box 8604, Boston,
Massachusetts 02266-8604, is custodian for the securities and cash of the Fund.
Foreign instruments purchased by the Fund are held by foreign banks
participating in a network coordinated by State Street Bank.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, is transfer
agent for the Shares of the Fund and dividend disbursing agent for the Fund.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young
LLP, One Oxford Centre, Pittsburgh, Pennsylvania 15219.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Investment Adviser looks for prompt execution of the order at a
favorable price. In working with dealers, the Investment Adviser will generally
utilize those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained elsewhere.
In selecting among firms believed to meet this criteria, the Investment Adviser
may give consideration to those firms which have sold or are selling Shares of
the Fund and other funds distributed by Federated Securities Corp. The
Investment Adviser makes decisions on portfolio transactions and selects brokers
and dealers subject to review by the Board of Directors.
EXPENSES OF THE FUND AND FORTRESS SHARES
Holders of each class of shares pay their allocable portion of Fund and
Corporation expenses.
The Corporation expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Corporation and
continuing its existence; registering the Corporation with federal and state
securities authorities; Directors' fees; auditors' fees; the cost of meetings of
Directors; legal fees of the Corporation; association membership dues; and such
nonrecurring and extraordinary items as may arise from time to time.
The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the Fund and Shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such non-recurring and extraordinary items as may
arise from time to time.
At present, the only expenses which are allocated specifically to Shares as a
class are expenses under the Services Plan and Distribution Plan. However, the
Directors reserve the right to allocate certain other expenses to holders of
Shares as it deems appropriate ("Class Expenses"). In any case, Class Expenses
would be limited to: distribution fees; transfer agent fees as identified by the
transfer agent as attributable to holders of Shares; fees under the Services
Plan; printing and postage expenses related to preparing and distributing
materials such as shareholder reports, prospectuses and proxies to current
shareholders; registration fees paid to the Securities and Exchange Commission
and registration fees paid to state securities commissions; expenses related to
administrative personnel and services as required to support holders of Shares;
legal fees relating solely to Shares; and Directors' fees incurred as a result
of issues relating solely to Shares.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share gives the shareholder one vote in Director elections and other
matters submitted to shareholders for vote. All shares of each portfolio or
class in the Corporation have equal voting rights, except that only shares of
that particular Fund or class are entitled to vote in matters affecting that
Fund or class.
As a Maryland corporation, the Corporation is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Fund's operation and for the election of Directors under certain
circumstances.
Directors may be removed by a two-thirds vote of the number of Directors prior
to such removal or by a two-thirds vote of the shareholders at a special
meeting. The Directors shall call a Special Meeting of Shareholders upon the
written request of shareholders owning at least 10% of the Corporation's
outstanding shares entitled to vote.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code, as amended, applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
However, the Fund may invest in the stock of certain foreign corporations which
would constitute a Passive Foreign Investment Company (PFIC). Federal income
taxes may be imposed on the Fund upon disposition of PFIC investments.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Corporation's other portfolios, if any, will not be combined for tax purposes
with those realized by the Fund.
Investment income received by the Fund from sources within foreign countries may
be subject to foreign taxes withheld at the source. The United States has
entered into tax treaties with many foreign countries that entitle the Fund to
reduced tax rates or exemptions on this income. The effective rate of foreign
tax cannot be predicted since the amount of Fund assets to be invested within
various countries is unknown. However, the Fund intends to operate so as to
qualify for treaty-reduced tax rates where applicable.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional Shares.
If more than 50% of the value of the Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund intends to
qualify for certain Internal Revenue Code stipulations that would allow
shareholders to claim a foreign tax credit or deduction on their U.S. income tax
returns. The Internal Revenue Code may limit a shareholder's ability to claim a
foreign tax credit. Furthermore, shareholders who elect to deduct their portion
of the Fund's foreign taxes rather than take the foreign tax credit must itemize
deductions on their income tax returns.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
The Fund is not subject to Pennsylvania Corporate or personal property taxes.
Fund Shares may be subject to personal property taxes imposed by counties,
municipalities and school districts in Pennsylvania to the extent that the
portfolio securities in the Fund would be subject to such taxes if owned
directly by residents of those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund advertises the total return for Fortress Shares.
Total return represents the change, over a specified period of time, in the
value of an investment in Shares after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of Shares is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by Shares
over a thirty-day period by the offering price per share of Shares on the last
day of the period. This number is then annualized using semi-annual compounding.
The yield does not necessarily reflect income actually earned by Shares and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.
The performance information reflects the effect of the maximum sales load and
other similar nonrecurring charges, such as the contingent deferred sales
charge, which, if excluded, would increase the total return.
Total return and yield will be calculated separately for Fortress Shares and
Class A Shares. Because Fortress Shares are subject to Rule 12b-1 fees, the
total return and yield for Class A Shares, for the same period may exceed that
of Fortress Shares.
From time to time, the Fund may advertise the performance of Fortress Shares
using certain financial publications and/or compare its performance to certain
indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Class A Shares offered by the Fund are sold to customers of financial
institutions subject to a front-end sales load of up to 5.50%. Investments in
Class A Shares are subject to a minimum initial investment of $500, unless the
investment is in a retirement account, in which case the minimum investment is
$50.
The amount of dividends payable to Class A Shares will generally exceed that of
Fortress Shares by the difference between Class Expenses and distribution and
shareholder service expenses borne by shares of each respective class.
The stated advisory fee is the same for both classes of shares.
WORLD UTILITY FUND
FINANCIAL HIGHLIGHTS--CLASS A SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent Auditors on
page 41.
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1994**
<S> <C>
-----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.06
- -----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------
Net investment income 0.24
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment and foreign
currency transactions (0.46)
- ----------------------------------------------------------------------------------------------- -------
Total from investment operations (0.22)
- -----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.17)
- ----------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 9.67
- ----------------------------------------------------------------------------------------------- -------
TOTAL RETURN* (3.00%)
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------
Expenses 0.25%(b)
- -----------------------------------------------------------------------------------------------
Net investment income 5.10%(b)
- -----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (a) 4.43%(b)
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $4,948
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate 7%
- -----------------------------------------------------------------------------------------------
</TABLE>
* Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
** Reflects operations for the period from April 21, 1994 (date of initial
public investment) to November 30, 1994. For the period from the start of
business, March 17, 1994, to April 20, 1994, Class A Shares had no public
investment.
(a) The Adviser waived all of its investment advisory fee, 1.00%, and
reimbursed other operating expenses, 0.86%, to comply with certain state
expense limitations. The remainder of the reimbursement was voluntary. This
expense decrease is reflected in both the expense and net investment income
ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal period ended November 30, 1994, which can be
obtained free of charge.
WORLD UTILITY FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------------- ------------
COMMON STOCKS--76.4%
- ----------------------------------------------------------------------------------------------------
UTILITY--62.3%
-------------------------------------------------------------------------------------
5,000 AT & T Corp. $ 245,625
-------------------------------------------------------------------------------------
70,000 Australian Gas and Light Co. 225,407
-------------------------------------------------------------------------------------
5,000 BCE, Inc. 166,875
-------------------------------------------------------------------------------------
4,000 BellSouth Corp. 207,500
-------------------------------------------------------------------------------------
2,500 British Telecommunications PLC, ADR 148,438
-------------------------------------------------------------------------------------
10,000 China Light and Power 43,058
-------------------------------------------------------------------------------------
25,000 China Light and Power, ADR 107,650
-------------------------------------------------------------------------------------
9,000 Cinergy Corp. 200,250
-------------------------------------------------------------------------------------
9,000 Compania Boliviana 207,000
-------------------------------------------------------------------------------------
10,000 DPL, Inc. 203,750
-------------------------------------------------------------------------------------
4,800 DQE, Inc. 145,200
-------------------------------------------------------------------------------------
4,500 Duke Power Co. 183,375
-------------------------------------------------------------------------------------
4,000 Empresa Nacional, ADR 181,000
-------------------------------------------------------------------------------------
6,000 Enron Corp. 162,000
-------------------------------------------------------------------------------------
8,000 Enron Global Power & Pipelines L.L.C. 185,000
-------------------------------------------------------------------------------------
6,000 Equitable Resources, Inc. 162,000
-------------------------------------------------------------------------------------
5,000 FPL Group, Inc. 176,875
-------------------------------------------------------------------------------------
6,000 GTE Corp. 183,750
-------------------------------------------------------------------------------------
7,000 Hong Kong Telecommunications, ADR 135,625
-------------------------------------------------------------------------------------
20,000 National Power Co., PLC 155,340
-------------------------------------------------------------------------------------
6,000 NIPSCO Industries, Inc. 175,500
-------------------------------------------------------------------------------------
9,000 Pacific Enterprises 192,375
-------------------------------------------------------------------------------------
10,000 PacifiCorp 185,000
-------------------------------------------------------------------------------------
10,000 Pinnacle West Capital Corp. 193,750
-------------------------------------------------------------------------------------
6,000 Sonat, Inc. 168,750
-------------------------------------------------------------------------------------
</TABLE>
WORLD UTILITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------------- ------------
COMMON STOCKS--CONTINUED
- ----------------------------------------------------------------------------------------------------
UTILITY--CONTINUED
-------------------------------------------------------------------------------------
8,000 Southern Co. $ 166,000
-------------------------------------------------------------------------------------
20,000 Southern Electric PLC 248,982
-------------------------------------------------------------------------------------
80,000 Stet Societa Finanziaria Telefonica 232,110
-------------------------------------------------------------------------------------
6,000 Telefonos De Mexico, Series A, Class L, ADR 318,000
-------------------------------------------------------------------------------------
40,000 Tenaga Nasional Berhad 172,164
-------------------------------------------------------------------------------------
6,000 Utilicorp United, Inc. 154,500
-------------------------------------------------------------------------------------
600 Veba AG 196,690
-------------------------------------------------------------------------------------
15,000 Westcoast Energy, Inc. 255,000
------------------------------------------------------------------------------------- ------------
Total 6,084,539
------------------------------------------------------------------------------------- ------------
NON-UTILITY--14.1%
-------------------------------------------------------------------------------------
3,000 American Home Products Corp. 195,375
-------------------------------------------------------------------------------------
3,000 Bankers Trust New York Corp. 177,750
-------------------------------------------------------------------------------------
5,000 Elf Aquitaine, ADR 170,000
-------------------------------------------------------------------------------------
10,000 Hanson, PLC, ADR 182,500
-------------------------------------------------------------------------------------
7,000 Meditrust, REIT 208,250
-------------------------------------------------------------------------------------
2,000 Royal Dutch Petroleum Co. 217,250
-------------------------------------------------------------------------------------
10,000 YPF Sociedad Anonima, ADR 226,250
------------------------------------------------------------------------------------- ------------
Total 1,377,375
------------------------------------------------------------------------------------- ------------
TOTAL COMMON STOCKS (IDENTIFIED COST $7,711,574) 7,461,914
------------------------------------------------------------------------------------- ------------
CONVERTIBLE SECURITIES--17.0%
- ----------------------------------------------------------------------------------------------------
UTILITY--4.8%
-------------------------------------------------------------------------------------
3,000 (a)Cointel/Telefonia De Argentina SA, PRIDES, $5.04 161,250
-------------------------------------------------------------------------------------
4,000 (a)Philippine Long Distance, Conv. Pfd., Series II, $1.44 121,852
-------------------------------------------------------------------------------------
$ 200,000 (a)Telekom Malaysia Berhad, Conv. Bond, 4.00%, 10/3/2004 184,376
------------------------------------------------------------------------------------- ------------
Total 467,478
------------------------------------------------------------------------------------- ------------
</TABLE>
WORLD UTILITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------------- ------------
CONVERTIBLE SECURITIES--CONTINUED
- ----------------------------------------------------------------------------------------------------
NON-UTILITY--12.2%
-------------------------------------------------------------------------------------
$ 10,000,000 Bank of Tokyo, Cayman Finance, Conv. Bond, 4.25%, 3/31/2049 $ 114,675
-------------------------------------------------------------------------------------
3,000 (a)Freeport McMoRan, Inc., Conv. Pfd., $4.38 142,125
-------------------------------------------------------------------------------------
10,000 Kaufman and Broad Homes, Inc., Conv. Pfd., Series B, $8.74 146,250
-------------------------------------------------------------------------------------
20,000 RJR Nabisco Holdings Corp., Conv. Pfd., Series C, $0.60 135,000
-------------------------------------------------------------------------------------
4,000 Reynolds Metals Co., PRIDES, $3.31 187,000
-------------------------------------------------------------------------------------
2,000 Sears, Roebuck & Co., Conv. Pfd., Series A, $3.75 111,000
-------------------------------------------------------------------------------------
4,000 Tenneco, Inc., Conv. Pfd., Series A, $2.80 150,500
-------------------------------------------------------------------------------------
15,000 (a)Westinghouse Electric Corp., PEPS, Series C, $1.30 206,250
------------------------------------------------------------------------------------- ------------
Total 1,192,800
------------------------------------------------------------------------------------- ------------
TOTAL CONVERTIBLE SECURITIES (IDENTIFIED COST $1,802,233) 1,660,278
------------------------------------------------------------------------------------- ------------
*REPURCHASE AGREEMENT--6.1%
- ----------------------------------------------------------------------------------------------------
$ 595,000 J.P. Morgan Securities, Inc., 5.77%, dated 11/30/94,
due 12/1/94 (at amortized cost) 595,000
------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED $10,108,807) $ 9,717,192+
------------------------------------------------------------------------------------- ------------
</TABLE>
The following abbreviations are used in this portfolio:
ADR--American Depository Receipts
PEPS--Participating Equity Preferred Stock
PRIDES--Preferred Redeemable Increased Dividend Equity Securities
REIT--Real Estate Investment Trust
(a) Restricted securities--Investments in securities not registered under the
Securities Act of 1933. At the end of the period, these securities amounted
to $815,853 which represents 8.4% of net assets.
The cost of investments for federal tax purposes amounts to $10,108,807. The
net unrealized depreciation of investments on a federal tax basis amounts to
$391,615, which is comprised of $178,677 appreciation and $570,292
depreciation at November 30, 1994.
* The repurchase agreement is fully collateralized by U. S. government and/or
agency obligations. The investment in the repurchase agreement is through
participation in joint accounts with other Federated funds.
Note: The categories of investments are shown as a percentage of net
assets ($9,769,409) at November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
WORLD UTILITY FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost; $10,108,807) $ 9,717,192
- -----------------------------------------------------------------------------------------------------
Cash 763
- -----------------------------------------------------------------------------------------------------
Receivable for capital stock sold 58,255
- -----------------------------------------------------------------------------------------------------
Dividend and interest receivable 48,689
- -----------------------------------------------------------------------------------------------------
Deferred expenses 15,827
- ----------------------------------------------------------------------------------------------------- ------------
Total assets 9,840,726
- -----------------------------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------------------------------------------
Payable for capital stock redeemed $ 1,511
- ------------------------------------------------------------------------------------------
Tax withholding liability 499
- ------------------------------------------------------------------------------------------
Accrued expenses 69,307
- ------------------------------------------------------------------------------------------ ---------
Total liabilities 71,317
- ----------------------------------------------------------------------------------------------------- ------------
NET ASSETS for 1,010,647 shares of capital stock outstanding $ 9,769,409
- ----------------------------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------------------
Paid-in capital $ 10,140,809
- -----------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments and translation of assets and
liabilities in foreign currency (391,629)
- -----------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investment and foreign currency transactions (42,265)
- -----------------------------------------------------------------------------------------------------
Undistributed net investment income 62,494
- ----------------------------------------------------------------------------------------------------- ------------
Total Net Assets $ 9,769,409
- ----------------------------------------------------------------------------------------------------- ------------
NET ASSET VALUE PER SHARE:
- -----------------------------------------------------------------------------------------------------
Class A Shares (net assets of $4,948,082 / 511,506 shares of capital stock outstanding) $9.67
- ----------------------------------------------------------------------------------------------------- ------------
Fortress Shares (net assets of $4,821,327 / 499,141 shares of capital stock outstanding) $9.66
- ----------------------------------------------------------------------------------------------------- ------------
OFFERING PRICE PER SHARE:*
- -----------------------------------------------------------------------------------------------------
Class A Shares (100/94.5 of $9.67) $10.23
- ----------------------------------------------------------------------------------------------------- ------------
Fortress Shares (100/99 of $9.66) $9.76
- ----------------------------------------------------------------------------------------------------- ------------
REDEMPTION PROCEEDS PER SHARE:**
- -----------------------------------------------------------------------------------------------------
Class A Shares $9.67
- ----------------------------------------------------------------------------------------------------- ------------
Fortress Shares (99/100 of $9.66) $9.56
- ----------------------------------------------------------------------------------------------------- ------------
</TABLE>
* See "What Shares Cost" in the prospectus.
** See "Contingent Deferred Sales Charge" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
WORLD UTILITY FUND
STATEMENT OF OPERATIONS
PERIOD ENDED NOVEMBER 30, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------------------------
Dividend income (net of foreign taxes withheld of $4,614) $ 165,756
- -----------------------------------------------------------------------------------------------------
Interest income 23,447
- ----------------------------------------------------------------------------------------------------- ----------
Total investment income 189,203
- -----------------------------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------------------------
Investment advisory fee $ 36,237
- ------------------------------------------------------------------------------------------
Administrative personnel and services fees 38,643
- ------------------------------------------------------------------------------------------
Custodian and portfolio accounting fees 50,483
- ------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 9,912
- ------------------------------------------------------------------------------------------
Distribution services fee 4,464
- ------------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 4,595
- ------------------------------------------------------------------------------------------
Shareholder services fee--Fortress Shares 4,464
- ------------------------------------------------------------------------------------------
Capital stock registration costs 2,793
- ------------------------------------------------------------------------------------------
Legal fees 4,000
- ------------------------------------------------------------------------------------------
Printing and postage 8,000
- ------------------------------------------------------------------------------------------
Taxes 2,500
- ------------------------------------------------------------------------------------------
Insurance premiums 4,784
- ------------------------------------------------------------------------------------------
Miscellaneous 3,204
- ------------------------------------------------------------------------------------------ ---------
Total expenses 174,079
- ------------------------------------------------------------------------------------------
Deduct--
- -------------------------------------------------------------------------------
Waiver of investment advisory fee $ 36,237
- -------------------------------------------------------------------------------
Reimbursement of other operating expenses 124,319 160,556
- ------------------------------------------------------------------------------- --------- ---------
Net expenses 13,523
- ----------------------------------------------------------------------------------------------------- ----------
Net investment income 175,680
- ----------------------------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- -----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment and foreign currency transactions (identified cost basis) (46,782)
- -----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments and translation of assets and
liabilities in foreign currency (391,629)
- ----------------------------------------------------------------------------------------------------- ----------
Net realized and unrealized gain (loss) on investments and foreign currency (438,411)
- ----------------------------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $ (262,731)
- ----------------------------------------------------------------------------------------------------- ----------
</TABLE>
* For the period from March 17, 1994 (start of business) to November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
WORLD UTILITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1994*
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------------------------------
Net investment income $ 175,680
- -----------------------------------------------------------------------------------------------
Net realized gain (loss) on investment and foreign currency transactions
($42,265 net loss as computed for federal tax purposes) (46,782)
- -----------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments
and translation of assets and liabilities in foreign currency (391,629)
- ----------------------------------------------------------------------------------------------- -----------------
Change in net assets resulting from operations (262,731)
- ----------------------------------------------------------------------------------------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income
- -----------------------------------------------------------------------------------------------
Class A Shares (54,743)
- -----------------------------------------------------------------------------------------------
Fortress Shares (53,926)
- ----------------------------------------------------------------------------------------------- -----------------
Change in net assets resulting from distributions to shareholders (108,669)
- ----------------------------------------------------------------------------------------------- -----------------
CAPITAL STOCK TRANSACTIONS--
- -----------------------------------------------------------------------------------------------
Proceeds from sale of shares 11,113,812
- -----------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends declared 57,563
- -----------------------------------------------------------------------------------------------
Cost of shares redeemed (1,130,566)
- ----------------------------------------------------------------------------------------------- -----------------
Change in net assets resulting from capital stock transactions 10,040,809
- ----------------------------------------------------------------------------------------------- -----------------
Change in net assets 9,669,409
- -----------------------------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------------------------
Beginning of period 100,000
- ----------------------------------------------------------------------------------------------- -----------------
End of period (including undistributed net investment income of $62,494) $ 9,769,409
- ----------------------------------------------------------------------------------------------- -----------------
</TABLE>
* For the period from March 17, 1994 (start of business) to November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
WORLD UTILITY FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
World Investment Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended, as an open-end, management
investment company. The Corporation consists of one diversified portfolio, World
Utility Fund (the "Fund")
The Fund provides two classes of shares Class A Shares and Fortress Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Listed equity securities and fixed income securities
are valued at the last sale price reported on national securities
exchanges. Unlisted securities and short-term obligations (and private
placement securities) are generally valued at the prices provided by an
independent pricing service. Short-term securities with remaining
maturities of sixty days or less may be stated at amortized cost, which
approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines established
by the Board of Directors (the "Directors").
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income and expenses are accrued daily. Bond premium and discount,
if applicable, are amortized as required by the Internal Revenue Code, as
amended (the "Code").
D. FOREIGN CURRENCY TRANSLATION--The accounting records of the funds are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences
WORLD UTILITY FUND
- --------------------------------------------------------------------------------
between income and expense amounts recorded and collected or paid are
adjusted when reported by the custodian bank. The Fund does not isolate
that portion of the results of operations resulting from changes in foreign
exchange rates on investments from the fluctuations arising from changes in
market prices of securities held. Such fluctuations are included with the
net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of FC's, currency gains or
losses realized between the trade date and settlement dates on withholding
taxes recorded on the Fund's books, and the U.S. dollar equivalent of the
amounts actually received or paid. Net unrealized foreign exchange gains
and losses arise from changes in the value of assets and liabilities other
than investments in securities at fiscal year end, resulting from changes
in the exchange rate.
E. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. However, federal
taxes may be imposed on the Fund upon the disposition of certain
investments in Passive Foreign Investment Companies. Withholding taxes on
foreign dividends have been provided for in accordance with the Fund's
understanding of the applicable country's tax rules and rates. At November
30, 1994, the Fund, for federal tax purposes, had a capital loss
carryforward of $42,265, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire in 2002.
F. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
G. CONCENTRATION OF CREDIT RISK--The Fund invests in equity and fixed income
securities of non-U.S. issuers. Although the Fund maintains a diversified
investment portfolio, the political or economic developments within a
particular country or region may have an adverse effect on the ability of
domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
WORLD UTILITY FUND
- --------------------------------------------------------------------------------
At November 30, 1994, the Fund's portfolio included investments within the
following countries:
<TABLE>
<S> <C> <C> <C>
Argentina-- 2.3% Japan-- 1.2%
Australia-- 2.3 Malaysia-- 1.8
France-- 1.7 Mexico-- 3.2
Germany-- 2.0 Spain-- 1.8
Hong Kong-- 2.9 United Kingdom-- 7.5
Italy-- 2.4
</TABLE>
H. RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under Federal securities laws or in
transactions exempt from such registration. In some cases, the issuer of
restricted securities has agreed to register such securities for resale, at
the issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Directors. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no
market prices are available, at the fair value as determined by the Fund's
pricing committee. Additional information on each restricted security held
at November 30, 1994 is as follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATES COST
<S> <C> <C>
Cointel/Telefonica De Argentina SA, PRIDES 4/15/94-9/15/94 $ 203,575
Philippine Long Distance, Conv. Pfd. 4/15/94-7/6/94 152,690
Telekom Malaysia Berhad, Conv. Bond 9/22/94 200,000
Freeport McMoRan, Inc., Conv. Pfd. 11/15/94 144,000
Westinghouse Electric Corp., PEPS 4/15/94-9/28/94 205,750
</TABLE>
I. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
J. RECLASSIFICATION--During the current period ended November 30, 1994, the
Fund adopted Statement of Position 93-2, Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of
Capital Distributions by Investment Companies. Accordingly, permanent book
and tax differences have been reclassified. These differences are due to
differing treatments for foreign currency transactions. Amounts as of
November 30, 1994, have been reclassified to reflect a decrease in
undistributed net investment income of $4,517, and an increase in
accumulated net realized gain (loss) of $4,517. Net investment income, net
realized gains, and net assets were not affected by this change.
WORLD UTILITY FUND
- --------------------------------------------------------------------------------
K. OTHER--Investment transactions are accounted for on the trade date.
(3) CAPITAL STOCK
At November 30, 1994, there were 1,000,000,000 shares of $0.001 par value
capital stock authorized for Class A Shares and Fortress Shares, respectively.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,1994*
CLASS A SHARES SHARES DOLLARS
<S> <C> <C>
- --------------------------------------------------------------------------------------- --------- -------------
Shares sold 603,819 $ 6,052,720
- ---------------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 4,034 40,152
- ---------------------------------------------------------------------------------------
Shares redeemed (106,347) (1,072,939)
- --------------------------------------------------------------------------------------- --------- -------------
Net change resulting from Class A Shares transactions 501,506 $ 5,019,933
- --------------------------------------------------------------------------------------- --------- -------------
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994**
FORTRESS SHARES SHARES DOLLARS
<S> <C> <C>
- -------------------------------------------------------------------------------------- ---------- -------------
Shares sold 503,245 $ 5,061,092
- --------------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 1,751 17,411
- --------------------------------------------------------------------------------------
Shares redeemed (5,855) (57,627)
- -------------------------------------------------------------------------------------- ---------- -------------
Net change resulting from Fortress Shares transactions 499,141 $ 5,020,876
- -------------------------------------------------------------------------------------- ---------- -------------
Net change resulting from capital stock transactions 1,000,647 $ 10,040,809
- -------------------------------------------------------------------------------------- ---------- -------------
</TABLE>
* For the period from March 17, 1994 (start of business) to November 30, 1994.
** For the period from March 28, 1994 (start of business) to November 30, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 1.00% of the Fund's average daily net assets. The Adviser waived its
fee and reimbursed a portion of other operating expenses to be in compliance
with certain state expense limitations. The Adviser may also voluntarily choose
to reimburse certain other operating expenses of the Fund. The Adviser can
modify or terminate this voluntary reimbursement at any time at its sole
discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
administrative personnel and services. The fee is based on the level of average
aggregate daily net assets of all
WORLD UTILITY FUND
- --------------------------------------------------------------------------------
funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during any fiscal year shall be at least $125,000
per portfolio and $30,000 per each additional class of shares.
DISTRIBUTION AND SHAREHOLDER SERVICES FEE--The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940. Under the terms of the Plan, the Fund will compensate Federated Securities
Corp. ("FSC"), the principal distributor, from the net assets of the Fund to
finance activities intended to result in the sale of the Fund's Fortress Shares.
The Plan provides that the Fund may incur distribution expenses up to 0.25 of 1%
of the average daily net assets of the Fortress Shares, annually, to compensate
FSC.
Under the terms of a shareholder services agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25 of 1% of average net assets
of the Fund for the period. This fee is to obtain certain personal services for
shareholders and the maintenance of shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT--Federated Services Company ("FServ")
serves as transfer and dividend disbursing agent for the Fund. The fee is based
on the size, type and number of accounts and transactions made by shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses ($39,069) and start-up
administrative service expenses ($75,061) were borne by the Administrator. The
Fund has agreed to reimburse the Administrator for the organizational expenses
and start-up administrative expenses during the five year period following April
12, 1994 (date the Fund first became effective). For the period ended
November 30, 1994, the Fund paid $1,250 and $1,953, respectively, pursuant to
this agreement.
Certain of the Officers and Directors of the Fund are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended
November 30, 1994, were as follows:
<TABLE>
<S> <C>
PURCHASES $ 9,908,196
- ---------------------------------------------------------------------------------------------------- ------------
SALES $ 400,084
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Directors and Shareholders of
WORLD INVESTMENT SERIES, INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of World Utility Fund (a portfolio of World
Investment Series, Inc.) as of November 30, 1994, and the related statement of
operations and the statement of changes in net assets for the period from March
17, 1994 (start of business) to November 30, 1994, and the financial highlights
(see pages 2 and 29 of this prospectus) for the period from April 21, 1994 (date
of initial public investment) to November 30, 1994. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of November 30, 1994, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of World
Utility Fund of World Investment Series, Inc. at November 30, 1994, and the
results of its operations and the changes in its net assets for the period from
March 17, 1994 (start of business) to November 30, 1994, and financial
highlights for the period from April 21, 1994 to November 30, 1994, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January 12, 1995
APPENDIX
- --------------------------------------------------------------------------------
STANDARD & POOR'S RATINGS GROUP ("S&P") CORPORATE BOND RATING DEFINITIONS
AAA--Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB--Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
B--Debt rated "B" has greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "BB" or "BB-"
rating.
CCC--Debt rated "CCC" has currently identifiable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.
MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATING DEFINITIONS
Aaa--Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa--Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group, they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities
or fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long term risks appear somewhat larger
than in Aaa securities.
A--Bonds which are rated "A" possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa--Bonds which are rated "Baa" are considered as medium grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are "Ba" are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest and
principal payments may be very moderate, and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B--Bonds which are rated "B" generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
ADDRESSES
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
World Utility Fund
Fortess Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8604
Trust Company Boston, Massachusetts 02266-8604
- ---------------------------------------------------------------------------------------------------------------------
Transfer Agent and
Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
WORLD UTILITY FUND
FORTRESS SHARES
PROSPECTUS
A Diversified Portfolio of
World Investment Series, Inc.
an Open-End, Management
Investment Company
January 31, 1995
981487200
4021404A-FS (1/95)
WORLD UTILITY FUND
- --------------------------------------------------------------------------------
ANNUAL REPORT FOR FISCAL YEAR ENDED NOVEMBER 30, 1994
MANAGEMENT DISCUSSION AND ANALYSIS
---------------------------------------------------------------------------
YEAR-IN-REVIEW: WORLD UTILITY FUND
The World Utility Fund was launched in April of 1994 in order to
provide conservative investors with a method of participating in the growth
prospects of foreign markets with below average levels of risk. The
following is a region by region view of the international utility markets.
SOUTH AMERICA--South American utilities have generally declined
recently along with the broader market sell-offs experienced after the
Mexican peso devaluation. It is possible that there may be continued
weakness in this region and sector until confidence is restored in Mexico
and money begins to flow back to emerging markets. It is important to note
that macroeconomic environments across Latin America differ markedly, and
the general sell-off has produced some very undervalued equities.
Investors are likely to focus on potential for currency devaluations
and remain on Latin America's sidelines for the next three to six months.
Fears of further devaluations will remain in Argentina, Brazil and Chile.
They will persist despite the facts that Argentina has sound macroeconomic
fundamentals, Brazil has $40 billion in reserves to support its currency
and the will to do so, and Chile's peso has been appreciating versus the
U.S. dollar.
As the crisis/panic state of mind subsides, probably toward the end of
the first quarter, investors may begin to focus on the growth opportunities
and relative undervaluation of South American utilities. Additionally,
Brazilian utilities may attract special interest due to anticipated
privatizations.
In the near term, South American utilities may underperform their U.S.
counterparts. As confidence is restored, and interest rate increases in the
U.S. slow in number and magnitude, relative performance could likely favor
South American utilities.
EUROPE--European utilities will be affected by a variety of factors in
the first six months of 1995. Privatizations and refinement of the
regulatory regimes will occupy the headlines. Elections in France, Spain
and possibly Italy will also influence the markets. Finally, a changing
interest rate scenario should affect all markets.
The final sales of generating companies and the sale of National Grid
Co. by the United Kingdom government will focus attention on the
attractiveness of the United Kingdom electric sector. The pending
privatization of Deutsch Bundespost Telekom (1996) will keep attention on
relative telecom valuations.
Elections in southern European countries should influence the markets
positively if the outcomes favor pro-business parties that continue to
steer Spain and Italy away from their socialist heritage. Although slow by
American standards, movement in this direction is proceeding.
The Nordic (ex. Norway) and Austrian economies should see continued
benefits from full integration into the European Community.
With the notable exception of the United Kingdom, short-term interest
rates were generally stable to declining across Europe in 1994. Long-term
rates moved in conjunction with the U.S. long bond. In local currency terms
most major markets responded poorly to increased long-term rates. We
believe that while short-term rates may rise, long-term rates are likely to
move in conjunction with those of the U.S. Continued reduction of long-term
rates may influence European utility stocks favorably.
We believe that privatizations, political events and interest rate
movements will eclipse continued strong earnings growth for European
utilities over the next six months. United Kingdom utilities should
outperform their continental counterparts. Those on the continent will
likely perform in line with those of the Standard and Poor's Utility Index.
ASIA/PACIFIC--We believe that utilities will continue to experience
high earnings growth rates throughout 1995 relative to their U.S. peers.
Many Asian utilities have reached levels that are very attractive given
their anticipated growth rates. The performance of those in emerging
markets will be influenced by flows of funds from U.S. investors. Those
operating in the more developed nations (Japan, Australia, and New Zealand)
should see earnings growth and performance track positive Gross Domestic
Product growth.
A variety of factors caused the Asian markets to fare poorly during
1994. China's economic difficulties and trade disputes with the U.S.
hampered both Shanghai's and Hong Kong's performances. Smaller markets were
hurt as funds moved from overvalued securities back to the U.S. as interest
rates rose here. Japan was one of the world's best performers, but most of
that gain was registered in the first half.
As relative valuations decline due to poor price performance,
investors will increasingly focus on utilities' values given anticipated
levels of growth. In many cases, this growth component is still very high.
However, investors are likely to demand higher risk premiums in the
emerging market equities due to the Mexican peso crisis. This, along with
further interest rate increases in the U.S. and their effect on Asian
currencies could dampen returns for Asian utilities over the next six
months.
In conclusion, the scenario is similar to that of South America. Once
investor sentiment overcomes the apprehensiveness toward smaller markets
brought on by the peso crisis, funds should flow back into most Asian
markets. Utilities, often the largest and most liquid of many stocks,
should then outperform local indices. We believe that Japanese utilities
are likely to perform in line with the local market.
WORLD UTILITY FUND (CLASS A SHARES)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN WORLD UTILITY FUND (CLASS A SHARES)
The graph below illustrates the hypothetical investment of $10,000 in World
Utility Fund (Class A Shares) (the "Fund") from April 21, 1994 (start of
performance) to November 30, 1994 compared to the Standard & Poor's 500 Stock
Index (S&P500)+ and the FT-Actuaries World Utility Index (FTWUI)+.
[GRAPH APPEARS HERE]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
This report must be preceeded or accompanied by the Fund's prospectus dated
January 31, 1995, and, together with financial statements contained therein,
constitutes the Fund's annual report.
*Represents a hypothetical investment of $9,450 in the Fund after deducting the
maximum sales load of 5.50% ($10,000 investment minus $550 sales load =
$9,450). The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P500 and the FTWUI have been adjusted to reflect
reinvestment of dividends on securities in the indices.
+The S&P500 and the FTWUI are not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance.
WORLD UTILITY FUND (FORTRESS SHARES)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN WORLD UTILITY FUND (FORTRESS SHARES)
The graph below illustrates the hypothetical investment of $10,000 in World
Utility Fund (Fortress Shares) (the "Fund") from April 21, 1994 (start of
performance) to November 30, 1994 compared to the Standard & Poors 500 Stock
Index (S&P500)+ and the FT-Actuaries World Utility Index (FTWUI)+.
[GRAPH APPEARS HERE]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
This report must be preceeded or accompanied by the Fund's prospectus dated
January 31, 1995, and, together with financial statements contained therein,
constitutes the Fund's annual report.
*Represents a hypothetical investment of $9,900 in the Fund after deducting the
maximum sales load of 1.00% ($10,000 investment minus $100 sales load =
$9,900). The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P500 and the FTWUI have been adjusted to reflect
reinvestment of dividends on securities in the indices.
**The ending value of the Fund reflects a contingent deferred sale charge of
1.00% on any redemption less than 4 years from the purchase date.
The S&P500 and the FTWUI are not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance.
[LOGO] FEDERATED SECURITIES CORP.
------------------------------------------------------------------------
Distributor
941487101
981487200
G00959-01 (1/95)
APPENDIX
A-1.
The graphic presentation here displayed consists of the components of a line
graph. World Utility Fund, Class A Shares, (the "Fund") is represented by a
solid broken line. The Standard and Poor's 500 Index ( "S&P 500") is represented
by a solid line and the FT-Actuaries World Utility Index ("FTWUI") is
represented by a bold broken line. The line graph is a visual representation of
a comparison of change in value of a hypothetical $10,000 purchase in the Fund,
the S&P 500, and the FTWUI. The "y" axis reflects the cost of the investment.
The "x" axis reflects computation periods from the Fund's start of performance,
4/21/94 through 11/30/94. The right margin reflects the ending value of the
hypothetical investment in the Fund as compared to the S&P 500 and the FTWUI;
the ending values were $9,167, $10,245, and $9,560, respectively. The Average
Annual Total Return for the period beginning with the start of performance date
of the Fund, 4/21/94, and ending November 30, 1994, was -8.33%.
A-2.
The graphic presentation here displayed consists of the components of a line
graph. World Utility Fund, Fortress Shares, (the "Fund") is represented by a
solid broken line. The Standard and Poor's 500 Index ( "S&P 500") is represented
by a solid line and the FT-Actuaries World Utility Index ("FTWUI") is
represented by a bold broken line. The line graph is a visual representation of
a comparison of change in value of a hypothetical $10,000 purchase in the Fund,
the S&P 500, and the FTWUI. The "y" axis reflects the cost of the investment.
The "x" axis reflects computation periods from the Fund's start of performance,
4/21/94 through 11/30/94. The right margin reflects the ending value of the
hypothetical investment in the Fund as compared to the S&P 500 and the FTWUI;
the ending values were $9,499, $10,245, and $9,560, respectively. The Average
Annual Total Return for the period beginning with the start of performance date
of the Fund, 4/21/94, and ending November 30, 1994, was -5.01%.
