[LOGO OF BLANCHARD GROUP OF FUNDS]
BLANCHARD GROUP OF FUNDS
VERY IMPORTANT
Enclosed is an important proxy statement and proxy vote card which requires
your signature.
They relate to the transfer of assets of Blanchard Worldwide Emerging Markets
Fund to Federated Emerging Markets Fund.
PLEASE REVIEW AND CAST YOUR VOTE TODAY!
Dear Valued Shareholder,
As you may be aware, there have been a number of exciting developments in
regards to the Blanchard Group of Funds in the past year. One of the benefits
has been that the management and Trustees have identified a number of changes
which they feel will either enhance performance, reduce expenses or expand the
services offered to Blanchard mutual fund shareholders.
We're writing you today to inform you of a recommended change which affects
your Blanchard Worldwide Emerging Markets Fund.
.Namely, the Board of Trustees has unanimously recommended a tax-free
merger of the BLANCHARD WORLDWIDE EMERGING MARKETS FUND into the
FEDERATED EMERGING MARKETS FUND (CLASS A SHARES).
SIMILAR INVESTMENT OBJECTIVES
In recommending this merger, the Board of Trustees considered the fact that
the Federated Emerging Markets Fund has an investment objective similar to
that of the Blanchard Worldwide Emerging Markets Fund.
The Federated Emerging Markets Fund seeks to provide long-term growth of
capital, while the Blanchard Worldwide Emerging Markets Fund seeks to provide
capital appreciation and current income.
Each Fund pursues its objective by investing primarily in equity securities
of issuers and companies located in emerging market countries (generally,
including all countries in the world except Australia, Canada, Japan, New
Zealand, the United States, and most western European countries).
POTENTIAL ECONOMIES OF SCALE AND LOWER EXPENSE RATIOS
The Board of Trustees has also concluded that economies of scale and
potentially lower expense ratios are likely to be realized by merging the
assets of the Blanchard Worldwide Emerging Markets Fund into the Federated
Emerging Markets Fund.
Currently, the projected annual expenses of the Federated Emerging Markets
Fund are at 1.97%, which is lower than the 3.59% assessed by the Blanchard
Worldwide Emerging Markets Fund.
NO TAXABLE CONSEQUENCES--SAME SHAREHOLDER PRIVILEGES
Because this merger of assets is tax-free, there are no taxable consequences
for you. And you'll continue to enjoy all of the same shareholder privileges
that you do now. These include free telephone exchanges between any Blanchard
and Virtus mutual fund, as well as free telephone redemptions.
A WORD ABOUT FEDERATED
Federated Emerging Markets Fund is advised by Federated Global Research
Corp., a subsidiary of Federated Investors. Federated Investors is one of the
largest investment management and financial services organizations in the
country, with approximately $86 billion in assets under management or
administration. The company sells its products to and through financial
intermediaries under the Federated brand name. No-load products are sold
primarily to and through bank trust departments, insurance companies,
government entities, and corporate and advisory firms. Federated offers a wide
array of pricing options for its load funds which target the bank
broker/dealer and broker/dealer markets. More than 100,000 investment
professionals representing banks, broker/dealers, and other institutional
clients invest in or sell Federated products on behalf of their institutions,
employees or customers.
Federated Investors, through its subsidiaries, is a partner with Virtus
Capital Management. Federated subsidiaries have provided distribution,
administration, transfer agency and portfolio accounting services to the
Virtus Funds since their inception in October 1990. More recently, in July
1995, Federated and the Blanchard Funds entered into an arrangement through
which Federated provides these services to the Blanchard Funds.
PLEASE VOTE TODAY!
For all of the reasons cited in this letter, the Board of Trustees has
unanimously voted to recommend that you vote "FOR" this merger.
Because shareholder approval is required for this Fund reorganization, your
individual vote is of critical importance. This gives you an important say in
the management of your investment.
.A voting card is enclosed. It is essential that you mark your card in
the appropriate space and return it in the postage-paid envelope
provided.
Once shareholder approval has been received, the reorganization of the
Blanchard Worldwide Emerging Markets Fund into the Federated Emerging Markets
Fund is scheduled to occur on or about August 16, 1996.
If a majority of shareholders do not return their votes, additional proxy
statements must be sent out, costing money as well as valuable time. So
please, take a few moments now to fill out and return the enclosed proxy
voting card, while the material is at hand.
Before voting, please refer to the enclosed prospectus for the Federated
Emerging Markets Fund for more complete details on its investment objective,
management fees, risks and expenses.
If you have any additional questions on the voting process, or on the Fund,
please call 1-800-829-3863. A friendly and experienced Investor's Services
representative will be standing by between 9:00 a.m. and 5:30 p.m., EDT.
Thank you for your continued confidence in the Blanchard Group of Funds.
Sincerely,
The Blanchard Group of Funds
The Blanchard Group of Funds and the Virtus Funds are distributed by Federated
Securities Corp. and are advised by Virtus Capital Management, Inc.
THE BLANCHARD FUNDS AND THE VIRTUS FUNDS ARE NOT DEPOSITS, OBLIGATIONS OF,
OR GUARANTEED BY ANY BANK OR OTHER FINANCIAL INSTITUTION, AND ARE NOT
INSURED BY THE FDIC OR ANY FEDERAL AGENCY. IN ADDITION, THEY INVOLVE RISK,
INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTED.
[LOGO OF FEDERATED INVESTORS]
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and a subsidiary of Federated Investors.
[LOGO OF BLANCHARD FUNDS]
BLANCHARD FUNDS
FEDERATED INVESTORS TOWER PITTSBURGH, PENNSYLVANIA 15222-3779
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS TO SHAREHOLDERS OF BLANCHARD
WORLDWIDE EMERGING MARKETS FUND:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Blanchard
Worldwide Emerging Markets Fund ("Worldwide Emerging Markets"), a portfolio of
Blanchard Funds, will be held at 2:00 p.m. on August 16, 1996 at Federated
Investors Tower, 19th Floor, Pittsburgh, Pennsylvania 15222-3779 for the
following purposes:
1. To approve or disapprove a proposed agreement pursuant to which
Federated Emerging Markets Fund ("Federated Emerging Markets"),
a portfolio of World Investment Series, Inc., would acquire all
of Worldwide Emerging Markets' assets in exchange for Class A
Shares of Federated Emerging Markets. Worldwide Emerging Markets
would then distribute the shares of Federated Emerging Markets
so received pro rata to its shareholders and would liquidate and
terminate its existence; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
By Order of the Board of Trustees,
John W. McGonigle
Dated: June 23, 1996 Secretary
Shareholders of record at the close of business June 20, 1996 are entitled to
vote at the meeting. Whether or not you plan to attend the meeting, please
sign and return the enclosed proxy card or call 1-800-829-3863. YOUR VOTE IS
IMPORTANT.
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AND TO SAVE THE EXPENSE OF
FURTHER MAILINGS, PLEASE MARK YOUR PROXY CARD, SIGN IT, AND RETURN IT IN
THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. YOU MAY REVOKE YOUR PROXY AT ANY TIME AT OR BEFORE THE MEETING OR
VOTE IN PERSON IF YOU ATTEND THE MEETING.
PROSPECTUS/PROXY STATEMENT
JUNE 23, 1996
ACQUISITION OF THE ASSETS OF BLANCHARD WORLDWIDE EMERGING MARKETS FUND
("WORLDWIDE EMERGING MARKETS"), A PORTFOLIO OF BLANCHARD FUNDS FEDERATED
INVESTORS TOWER PITTSBURGH, PENNSYLVANIA 15222-3779 TELEPHONE NUMBER: 1-800-
829-3863
BY AND IN EXCHANGE FOR CLASS A SHARES OF FEDERATED EMERGING MARKETS FUND
("FEDERATED EMERGING MARKETS"), A PORTFOLIO OF WORLD INVESTMENT SERIES, INC.
FEDERATED INVESTORS TOWER PITTSBURGH, PENNSYLVANIA 15222-3779 TELEPHONE
NUMBER: 1-800-235-4669
This Prospectus/Proxy Statement describes the proposed Agreement and Plan of
Reorganization (the "Plan") whereby Federated Emerging Markets would acquire
all of the assets of Worldwide Emerging Markets, in exchange for Class A
Shares of Federated Emerging Markets. These shares would then be distributed
pro rata by Worldwide Emerging Markets to its shareholders, and, as a result,
each Worldwide Emerging Markets shareholder will own Class A Shares of
Federated Emerging Markets having a total net asset value equal to the total
net asset value of his or her holdings in Worldwide Emerging Markets. The Plan
would result in the complete liquidation and the termination of Worldwide
Emerging Markets.
Blanchard Funds is an open-end management investment company which currently
includes nine portfolios, each of which has a distinct investment objective.
The investment objective of Worldwide Emerging Markets is capital appreciation
and current income. The World Investment Series, Inc. is an open-end
management investment company which currently includes six portfolios, each of
which has a distinct investment objective. The investment objective of
Federated Emerging Markets is to provide long-term growth of capital. For a
comparison of the investment policies of the Funds, see "Summary--Investment
Objectives, Policies, and Limitations."
This Prospectus/Proxy Statement should be retained for future reference. It
sets forth concisely the information about World Investment Series, Inc. and
Federated Emerging Markets that a prospective investor should know before
investing in Federated Emerging Markets. This Prospectus/Proxy Statement is
accompanied by the Prospectus of Federated Emerging Markets dated January 31,
1996, which is incorporated herein by reference. The Prospectus of Worldwide
Emerging Markets dated August 7, 1995, and the Statements of Additional
Information for Federated Emerging Markets and Worldwide Emerging Markets,
dated January 31, 1996 and August 7, 1995, respectively (relating to the
Prospectuses of Federated Emerging Markets and Worldwide Emerging Markets,
respectively, of the same date) and June 23, 1996 (relating to this
Prospectus/Proxy Statement) containing additional information have been filed
with the Securities and Exchange Commission and are incorporated herein by
reference. Copies of the Statements of Additional Information may be obtained
without charge by calling the Funds at the telephone numbers shown above.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary.................................................................... 1
Risk Factors............................................................... 8
Information About the Reorganization....................................... 9
Information About Blanchard Funds, World Investment Series, Inc., Worldwide
Emerging Markets, and Federated Emerging Markets.......................... 12
Voting Information......................................................... 13
Exhibit A--Agreement and Plan of Reorganization............................ A-1
</TABLE>
I
SUMMARY
ABOUT THE PROPOSED REORGANIZATION
The Board of Trustees of Blanchard Funds has voted to recommend to
shareholders of Worldwide Emerging Markets the approval of a Plan whereby
Federated Emerging Markets would acquire all of the assets of Worldwide
Emerging Markets in exchange for Class A Shares of Federated Emerging Markets.
These shares would thereupon be distributed pro rata by Worldwide Emerging
Markets to its shareholders and, as a result, each shareholder of Worldwide
Emerging Markets will become the owner of Class A Shares of Federated Emerging
Markets having a total net asset value equal to the total net asset value of
his or her holdings in Worldwide Emerging Markets. These transactions
(referred to as the "Reorganization") would result in the complete liquidation
and the termination of Worldwide Emerging Markets.
As a condition to the Reorganization transactions, World Investment Series,
Inc. and Blanchard Funds will receive an opinion of counsel that the
Reorganization will be considered a tax-free "reorganization" under applicable
provisions of the Internal Revenue Code so that no gain or loss will be
recognized by either Federated Emerging Markets or Worldwide Emerging Markets
or their shareholders. The tax basis of the Class A Shares of Federated
Emerging Markets received by Worldwide Emerging Markets shareholders will be
the same as the tax basis of their shares in Worldwide Emerging Markets.
In recommending the Reorganization, the Blanchard Funds' investment adviser,
Virtus Capital Management, Inc., World Investment Series, Inc.'s investment
adviser, Federated Global Research Corp., the Board of Trustees of Blanchard
Funds and the Board of Directors of World Investment Series, Inc., considered
the cost structure, market presence and performance of Worldwide Emerging
Markets and have concluded that economies of scale, and potentially lower
expense ratios, could be realized by transferring the assets of Worldwide
Emerging Markets into Federated Emerging Markets. There is, however, no
assurance that such benefits will be realized.
The following discussion compares certain key aspects of Worldwide Emerging
Markets and Federated Emerging Markets (collectively, the "Funds").
1
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
FEDERATED EMERGING
WORLDWIDE MARKETS
EMERGING MARKETS CLASS A SHARES(6)
---------------- ------------------
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)(1)..... None 5.50%
Maximum Sales Charge Imposed on Reinvested
Dividends (as a percentage of offering
price)..................................... None None
Contingent Deferred Sales Charge (as a
percentage of original purchase price or
redemption proceeds, as applicable)(2)..... None 0.00%
Redemption Fee (as a percentage of amount
redeemed, if applicable)................... None None
Exchange Fee................................ None None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)*
Management Fee (after waiver)(3)............ 0.59% 0.60%
12b-1 Fee(4)................................ 0.50% 0.00%
Total Other Expenses........................ 2.50% 1.37%
Shareholder Services Fee................... None 0.25%
Total Operating Expenses(5)............. 3.59% 1.97%
</TABLE>
(1) No sales charge is imposed on purchases of Class A Shares of Federated
Emerging Markets through certain financial intermediaries, such as Signet
Financial Services, Inc. Additionally, no sales charge will be imposed on
shares of Federated Emerging Markets distributed to Worldwide Emerging
Markets' shareholders as a result of Federated Emerging Markets'
acquisition of the assets of Worldwide Emerging Markets.
(2) Class A Shares of Federated Emerging Markets purchased with the proceeds
of a redemption of shares of an unaffiliated investment company purchased
or redeemed with a sales charge and not distributed by Federated
Securities Corp. may be charged a contingent deferred sales charge of
0.50% for redemptions made within one full year of purchase. See
"Contingent Deferred Sales Charge."
(3) The management fee for Worldwide Emerging Markets has been reduced to
reflect the voluntary waiver of a portion of the management fee. The
adviser can terminate this voluntary waiver at any time at its sole
discretion. The maximum management fee is 1.25%. The estimated management
fee of Federated Emerging Markets has been reduced to reflect the
anticipated voluntary waiver of a portion of the management fee. The
adviser can terminate this voluntary waiver at any time at its sole
discretion. The maximum management fee is 1.25%.
(4) Federated Emerging Markets Class A Shares has no present intention of
paying or accruing the 12b-1 fee during the fiscal year ending November
30, 1996. If the Class A Shares were paying or accruing the 12b-1 fee, the
Class A Shares would be able to pay up to 0.25% of its average daily net
assets for the 12b-1 fee. See "Fund Information."
(5) The total Worldwide Emerging Markets operating expenses would have been
4.25% absent the voluntary waiver of a portion of the management fee. The
total Federated Emerging Markets Class A Shares operating expenses are
estimated to be 2.62% absent the anticipated voluntary waiver of a portion
of the management fee.
(6) No changes to the expenses of Federated Emerging Markets Class A Shares
are anticipated as a result of the Reorganization.
* As a percentage of projected average net assets with respect to Class A
Shares of Federated Emerging Markets. Total Class A Shares operating
expenses in the table above are estimated based on average expenses
expected to be incurred during the period ending November 30, 1996. During
the course of this period, expenses may be more or less than the average
amount shown.
2
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Worldwide Emerging Markets
and Federated Emerging Markets Class A Shares will bear, either directly or
indirectly. Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.
<TABLE>
<CAPTION>
FEDERATED FEDERATED
EMERGING EMERGING
WORLDWIDE MARKETS WORLDWIDE MARKETS
EMERGING CLASS A EMERGING CLASS A
EXAMPLE MARKETS SHARES MARKETS+ SHARES+
- ------- --------- --------- --------- ---------
<S> <C> <C> <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
1 year................................ $ 36 $ 79 $ 36 $ 74
3 years............................... $110 $113 $110 $113
5 years............................... $186 -- $186 --
10 years.............................. $385 -- $385 --
</TABLE>
+You would pay the following expenses on the same investment, assuming no
redemption
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR CLASS A SHARES' FISCAL YEAR ENDING
NOVEMBER 30, 1996.
3
INVESTMENT OBJECTIVES, POLICIES, AND LIMITATIONS
The investment objectives of Worldwide Emerging Markets and Federated
Emerging Markets are substantially identical. Worldwide Emerging Markets seeks
to provide capital appreciation and current income. Federated Emerging Markets
seeks to provide long-term growth of capital.
Federated Emerging Markets pursues its investment objective by investing
primarily (i.e., at least 65% of its assets under normal conditions) in equity
securities of issuers and companies located in countries having emerging
markets, and may also invest in preferred stocks (either convertible or non-
convertible), sponsored or unsponsored depository receipts or shares,
warrants, and corporate and government fixed income securities rated as low as
C by Standard and Poor's Rating Group, Fitch Investors Service, or Moody's
Investors Service, Inc. Such fixed income securities may be denominated in
currencies other than U.S. dollars. Federated Emerging Markets may also enter
into forward commitments, repurchase agreements and foreign currency
transactions; maintain reserves in foreign or U.S. money market instruments
and cash; and purchase options and financial futures contracts. Federated
Emerging Markets may also enter into interest rate swaps, currency swaps, and
other types of swap agreements, which can be highly volatile and may have an
impact on performance, as set forth in its Prospectus and Statement of
Additional Information dated January 31, 1996, which are incorporated herein
by reference thereto. Worldwide Emerging Markets pursues its investment
objective by investing, under normal circumstances, a minimum of 65% in equity
and equity-related securities which include common and preferred stock
(including convertible preferred stock), convertible bonds and notes, warrants
and rights, interests in trusts and partnerships and American, European,
Global or any other types of Depository Receipts. Additionally, Worldwide
Emerging Markets may invest in emerging market fixed income securities, which
include fixed income securities of both governmental and corporate issuers
(other than convertibles) of any quality or maturity. Worldwide Emerging
Markets may invest up to 15% of its total assets in repurchase agreements,
borrow money, and enter into forward foreign currency exchange contracts and
foreign currency futures contracts, as well as purchase put or call options on
foreign currency.
Both funds consider emerging markets to be those countries considered by the
International Bank for Reconstruction and Development (commonly known as the
World Bank) as developing. Generally included in emerging markets are all
countries in the world except Australia, Canada, Japan, New Zealand, the
United States, and most western European countries.
Both funds invest primarily in securities (i) of issuers for which the
principal securities trading market is an emerging market country; (ii) of
issuers organized under the laws of, or with a principal office in, an
emerging market country; or (iii) traded in any market, which derive (directly
or indirectly through subsidiaries) at least 50% of their total assets,
capitalization, gross revenue or profit from its most current year from goods
produced, services performed, or sales made in such emerging market countries.
Federated Emerging Markets is a diversified management investment company.
It is not permitted, therefore, with respect to securities comprising 75% of
the value of its total assets, to purchase securities issued by any one issuer
if, as a result, more than 5% of the value of its total assets would be
invested in the securities of that issuer, and it will not acquire more than
10% of the
4
outstanding voting securities of any one issuer. Worldwide Emerging Markets is
a non-diversified management investment company. As such, it is not limited in
the proportion of assets that may be invested in the securities of a single
issuer. Since Worldwide Emerging Markets may invest in a smaller number of
issuers than a diversified investment company, an investment in Worldwide
Emerging Markets may, under certain circumstances, present greater risks to an
investor than would an investment in a diversified company.
Both funds may invest in other investment companies, enter into repurchase
agreements, foreign currency transactions, forward foreign currency exchange
contracts, options on foreign currencies, individual securities, and
securities indices, and in futures contracts involving these items. As noted
above, both funds may invest in lower-quality fixed income securities.
Federated Emerging Markets and Worldwide Emerging Markets are subject to
certain investment limitations. The investment limitations of the two funds
are substantially identical. These limitations include provisions that, in
effect, prohibit either fund from: selling any securities short or purchasing
securities on margin; issuing senior securities, except that the funds may
borrow up to one-third of the value of their total assets; mortgaging,
pledging, or hypothecating any assets except to secure permitted borrowings;
lending any of their respective assets, except, in the case of Federated
Emerging Markets, portfolio securities up to one-third of the value of its
total assets; or investing more than 15% of their respective assets in
illiquid securities.
Reference is hereby made to the Prospectus and Statement of Additional
Information of Worldwide Emerging Markets, dated August 7, 1995, and the
Prospectus and Statement of Additional Information of Federated Emerging
Markets, dated January 31, 1996, which set forth in full the investment
objectives, policies and investment limitations of both funds and which are
incorporated by reference herein.
DISTRIBUTION ARRANGEMENTS
Federated Securities Corp. is the principal distributor for shares of
Blanchard Funds and World Investment Series, Inc. Under distribution plans
adopted in accordance with Investment Company Act Rule 12b-1 (the "12b-1
Plan"), Federated Emerging Markets (with respect to Class A Shares) and
Worldwide Emerging Markets may pay to Federated Securities Corp. an amount
computed at an annual rate of 0.25 of 1% and 0.50 of 1% of each respective
fund's average daily net assets to finance any activity which is principally
intended to result in the sale of shares subject to the 12b-1 Plan. Currently,
Federated Emerging Markets (with respect to Class A Shares) is not paying or
accruing fees under the 12b-1 Plan. Worldwide Emerging Markets incurs fees
under its 12b-1 Plan at an annual rate of 0.50 of 1% of average daily net
assets. Federated Emerging Markets will not, as a result of the
Reorganization, assume any liabilities or make any voluntary reimbursements on
account of Worldwide Emerging Markets' 12b-1 Plan.
ADVISORY AND OTHER FEES
Federated Global Research Corp., a Delaware corporation and a subsidiary of
Federated Investors ("Fed Global"), serves as investment adviser to Federated
Emerging Markets. Fed Global is entitled to receive an annual investment
advisory fee equal to 1.25% of Federated Emerging Markets' average
5
daily net assets. Under its investment advisory contract, which provides for
the voluntary waiver of the advisory fee by Fed Global, Fed Global may
voluntarily waive some or all of its fee. Fed Global can terminate this
voluntary waiver at any time in its sole discretion. Fed Global has also
undertaken to reimburse Federated Emerging Markets for operating expenses in
excess of limitations established by certain states.
Virtus Capital Management, Inc. ("VCM"), a Maryland corporation and a
wholly-owned subsidiary of Signet Banking Corporation, provides overall
management services for Blanchard funds. VCM is entitled to receive an annual
management fee equal to 1.25% of Worldwide Emerging Markets' average net
assets, of which such fund's equity sector portfolio adviser, Martin Currie
Inc., is entitled to receive an annual subadvisory fee of 0.50% of the first
$150 million of such fund's equity sector's average daily net assets; and
0.40% of the sector's average daily net assets in excess of $150 million.
Worldwide Emerging Markets' fixed income securities sector portfolio adviser,
OFFITBANK, is entitled to receive an annual subadvisory fee of 0.45% of the
first $150 million of such fund's fixed income sector's average daily net
assets and 0.35% of the sector's average daily net assets in excess of $150
million. Worldwide Emerging Markets has not invested in fixed income
securities during its current fiscal year and has no present intention of
investing in fixed income securities. Worldwide Emerging Markets has,
therefore, incurred no fees payable to OFFITBANK and has no intent to do so.
See also the "Summary of Portfolio Expenses." VCM has undertaken to reimburse
Worldwide Emerging Markets, up to the amount of its management fee, for
operating expenses in excess of limitations established by certain states. VCM
may further voluntarily waive a portion of its fee or reimburse Worldwide
Emerging Markets for certain operating expenses. This agreement to waive fees
or reimburse expenses may be terminated by VCM at any time in its discretion.
Federated Administrative Services, a subsidiary of Federated Investors,
provides the funds with certain administrative personnel and services
necessary to operate the funds. The rate charged to Blanchard Funds for such
administrative services is 0.15 of 1% of the first $250 million of average
aggregate daily net assets of The Virtus Funds, which are advised by VCM, and
Blanchard Funds combined, 0.125 of 1% on the next $250 million, 0.10 of 1% on
the next $250 million and 0.075 of 1% of assets in excess of $750 million. The
administrative fee received during any fiscal year shall be at least $75,000
per fund. The rate charged to Federated Emerging Markets for such
administrative services is 0.15 of 1% of the first $250 million of average
aggregate daily net assets of all Federated Funds, 0.125 of 1% on the next
$250 million, 0.10 of 1% on the next $250 million and 0.075 of 1% of assets in
excess of $750 million. The administrative fee received during any fiscal year
shall be at least $125,000 per portfolio and $30,000 per each additional class
of shares. Worldwide Emerging Markets estimates that its administrative fee
expense for the current fiscal year will be 0.27 of 1% of its average
aggregate daily net assets. Federated Emerging Markets estimates that its
administrative fee expense for the current fiscal year will be 0.66 of 1% of
its average aggregate daily net assets.
The total annual operating expenses for Worldwide Emerging Markets are
expected to be 3.59% of average daily net assets, and would be 4.25% absent
the voluntary waivers of management fees and 12b-1 fees. The total annual
operating expenses for Federated Emerging Markets Class A Shares are expected
to be 1.97% of average daily net assets and would be 2.62% of average daily
net assets absent the voluntary waivers of management fees and 12b-1 fees.
6
PURCHASE AND REDEMPTION PROCEDURES
Procedures for the purchase and redemption of Class A Shares of Federated
Emerging Markets are similar to procedures applicable to the purchase and
redemption of Worldwide Emerging Markets shares. For a complete description of
the purchase and redemption procedures applicable to purchases and redemptions
of shares, refer to the Prospectus of Blanchard Funds dated August 7, 1995,
and the Prospectus of the Federated Emerging Markets dated January 31, 1996,
which are incorporated herein by reference. Any questions about such
procedures may be directed to, and assistance in effecting purchases,
redemptions, or exchanges of shares may be obtained by calling 1-800-829-3863.
Class A Shares of Federated Emerging Markets are sold on all business days
except on days on which the New York Stock Exchange is closed. Shares are sold
at their net asset value next determined after an order is received, plus a
maximum sales charge of 5.50%. No sales charge will be imposed on the receipt
by current Worldwide Emerging Markets shareholders of Class A Shares of
Federated Emerging Markets pursuant to the reorganization, moreover, no sales
charge is imposed on Class A Shares of Federated Emerging Markets purchased by
current Worldwide Emerging Market Fund shareholders or others, through Signet
Financial Services, Inc.
The net asset value is calculated as of the close of the New York Stock
Exchange (normally 4:00 p.m., Eastern time) on days shares are sold. Purchases
of shares of either Fund may be made by wire, by ACH or by check. Orders are
considered received after payment is converted into federal funds. The minimum
initial investment in Class A Shares of Federated Emerging Markets is $500.
Redemption requests cannot be executed on days which the New York Stock
Exchange is closed and federal or state holidays restricting wire transfers.
Class A Shares of Worldwide Emerging Markets are redeemed at their net asset
value next determined after the redemption request is received. Proceeds will
be distributed by wire or check. Requests for redemption can be made by
telephone or by mail as more particularly described in the above-referenced
Prospectuses.
EXCHANGE PRIVILEGES
Shareholders of Class A Shares of Federated Emerging Markets may exchange
Class A Shares of Federated Emerging Markets for Class A Shares of certain
other Federated Funds at net asset value. Shareholders must exchange Shares
having a net asset value equal to the minimum investment requirements of the
fund into which the exchange is being made.
Shareholders of Worldwide Emerging Markets may exchange shares of Worldwide
Emerging Markets for shares of another Blanchard Fund or for Investment Shares
of any Virtus Fund at net asset value. No fees are charged in connection with
any such exchange. The dollar amount of an exchange into a Blanchard Fund must
meet the initial investment requirement of the Fund into which the exchange is
being made. All subsequent exchanges into that fund must be at least $1,000.
The dollar amount of any exchanges into a Virtus Fund must be at least $1,000.
TAX CONSEQUENCES
As a condition to the Reorganization transactions, Blanchard Funds and World
Investment Series, Inc. will receive an opinion of counsel that the
Reorganization will be considered a tax-free
7
"reorganization" under applicable provisions of the Internal Revenue Code so
that no gain or loss will be recognized by either Federated Emerging Markets
or Worldwide Emerging Markets or their respective shareholders. The tax basis
of Federated Emerging Markets shares received by Worldwide Emerging Markets
shareholders will be the same as the tax basis of their shares in Worldwide
Emerging Markets.
RISK FACTORS
Investment in Federated Emerging Markets is subject to certain risks that
are set forth in its Prospectus and Statement of Additional Information dated
January 31, 1996 which are incorporated herein by reference thereto. Briefly,
these risks include, but are not limited to, fluctuation of the value of
shares of Federated Emerging Markets; with respect to foreign securities, the
risks of currency fluctuation and imposition of currency exchange control
regulation, the lack of information available concerning foreign issuers, the
fact that foreign issuers are not subject to financial reporting standards
comparable to those in the U.S. and the possibility of expropriation of assets
and political instability; the risk that when lending portfolio securities,
the securities may not be available to Federated Emerging Markets on a timely
basis and Federated Emerging Markets may, therefore, lose the opportunity to
sell the securities at a desirable price; the risk that a borrower of
securities may file for bankruptcy or become insolvent, thus delaying the
disposition of the securities pending court action; uncertainty that a
secondary market for options or for positions in futures contracts will exist
at all times; imperfect correlation between the prices of financial futures
and options on financial futures, on the one hand, and prices of the
securities subject to the options and futures contracts, on the other hand,
which could cause a futures contract and any related options to react
differently than the underlying portfolio securities to market changes; and,
greater market fluctuations and greater risk of loss of income and principal
due to default of an issuer of lower-rated bonds. Investing in securities of
issuers in emerging market countries involves exposure to significantly higher
risk than investing in countries with developed markets. Emerging market
countries may have economic structures that are generally less diverse and
mature and political systems that can be expected to be less stable than those
of developed countries. Securities prices in emerging market countries can be
significantly more volatile than in developed countries, reflecting the
greater uncertainties of investing in lesser developed markets and economies.
In particular, emerging market countries may have relatively unstable
governments, and may present the risk of nationalization of businesses,
expropriation, confiscatory taxation or, in certain instances, reversion to
closed market, centrally planned economies. Such countries may also have
restrictions on foreign ownership or prohibitions on the repatriation of
assets, and may have less protection of property rights than developed
countries. The economies of emerging market countries may be predominantly
based on only a few industries or dependent on revenues from particular
commodities or on international aid or development assistance, may be highly
vulnerable to changes in local or global trade conditions, and may suffer from
extreme and volatile debt burdens or inflation rates. In addition, securities
markets in emerging market countries may trade a small number of securities
and may be unable to respond effectively to increases in trading volume,
potentially resulting in a lack of liquidity and in volatility in the price of
securities traded on those markets. Also, securities markets in emerging
market countries typically offer less
8
regulatory protection for investors. Investment in Worldwide Emerging Markets
carries risks of a substantially similar nature, as more fully described in
its Prospectus and its Statement of Additional Information dated August 7,
1995.
INFORMATION ABOUT THE REORGANIZATION
BACKGROUND AND REASONS FOR THE PROPOSED REORGANIZATION
On July 12, 1995, VCM acquired the assets and business of Sheffield
Management Co. ("Sheffield"), which was, until that time, manager of the
Blanchard Funds. Upon succeeding Sheffield as manager, VCM conducted a review
and evaluation of the cost structure, market presence and performance of
Worldwide Emerging Markets. VCM concluded that Worlwide Emerging Markets'
performance was unsatisfactory in light of its low level of assets and high
level of expenses. As a consequence, VCM and the Board of Worldwide Emerging
Markets considered many initiatives to reduce the Worldwide Emerging Markets'
expenses, to improve its performance and to attract additional assets to
Worldwide Emerging Markets. As a result of this review, VCM and the Board
concluded that economies of scale, and potentially lower expense ratios, could
(but will not necessarily) be realized by transferring the assets of Worldwide
Emerging Markets into Federated Emerging Markets. Additionally, VCM and the
Board concluded that Fed Global's investment style might produce better
overall investment returns for Worldwide Emerging Markets' shareholders.
The Trustees of Blanchard Funds and the Directors of World Investment
Series, Inc., including the independent Trustees and Directors, have
unanimously concluded that consummation of the Reorganization is in the best
interests of Blanchard Funds and World Investment Series, Inc. and the
shareholders of Worldwide Emerging Markets and Federated Emerging Markets and
that the interests of Worldwide Emerging Markets and Federated Emerging
Markets shareholders would not be diluted as a result of effecting the
Reorganization and have unanimously approved the Plan. The Trustees and
Directors also noted that the shareholders of Worldwide Emerging Markets would
receive the same quality investment management services from Fed Global as
shareholders of Federated Emerging Markets.
DESCRIPTION OF THE PLAN OF REORGANIZATION
The Plan provides that on or about August 16, 1996 (the "Closing Date")
Federated Emerging Markets will acquire all of the assets of Worldwide
Emerging Markets in exchange for Class A Shares of Federated Emerging Markets
to be distributed pro rata by Worldwide Emerging Markets to its shareholders
in complete liquidation and termination of Worldwide Emerging Markets.
Shareholders of Worldwide Emerging Markets will become shareholders of
Federated Emerging Markets as of 4:00 p.m. (Eastern time) on the Closing Date
and will begin accruing dividends on the next day. Shares of Federated
Emerging Markets received by Worldwide Emerging Markets shareholders in
connection with the acquisition of the assets of Worldwide Emerging Markets
will not be subject to a sales load. Shareholders of Worldwide Emerging
Markets will earn their last dividend from Worldwide Emerging Markets on the
Closing Date.
9
Consummation of the Reorganization is subject to the conditions set forth in
the Plan, including receipt of an opinion in form and substance satisfactory
to Blanchard Funds and World Investment Series, Inc., as described under the
caption "Federal Income Tax Consequences" below. The Plan may be terminated
and the Reorganization may be abandoned at any time before or after approval
by shareholders of Worldwide Emerging Markets prior to the Closing Date by
Blanchard Funds or World Investment Series, Inc. if it believes that
consummation of the Reorganization would not be in the best interests of the
shareholders of either Worldwide Emerging Markets or Federated Emerging
Markets.
Fed Global is responsible for the payment of all expenses of the
Reorganization incurred by either Fund, whether or not the Reorganization is
consummated. Such expenses include, but are not limited to, legal fees,
registration fees, transfer taxes (if any), the fees of banks and transfer
agents and the costs of preparing, printing, copying and mailing proxy
solicitation materials to shareholders of Worldwide Emerging Markets and the
costs of holding the Special Meeting of Shareholders.
The foregoing brief summary of the Plan entered into between Worldwide
Emerging Markets and Federated Emerging Markets is qualified in its entirety
by the terms and provisions of the Plan, a copy of which is attached hereto as
Exhibit A and incorporated herein by reference.
DESCRIPTION OF CLASS A SHARES OF FEDERATED EMERGING MARKETS
Class A Shares of Federated Emerging Markets to be issued to shareholders of
Worldwide Emerging Markets under the Plan will be fully paid and non
assessable when issued and transferable without restriction and will have no
preemptive or conversion rights. Federated Emerging Markets offers three
classes of shares. Class B Shares are sold primarily to customers of financial
institutions, subject to a maximum contingent deferred sales charge of 5.50%.
The fund has also adopted a Distribution Plan whereby the distributor is paid
a fee of up to 0.75 of 1% and a Shareholder Services fee of up to 0.25 of 1%
of the Class B Shares' average daily net assets with respect to Class B
Shares. Investments in Class B 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.
Class C Shares are sold primarily to customers of financial institutions at
net asset value with no initial sales charge. Class C Shares are distributed
pursuant to a Distribution Plan adopted by the fund whereby the distributor is
paid a fee of up to 0.75 of 1%, in addition to a Shareholder Services fee of
0.25 of 1% of the Class C Shares' average daily net assets. In addition, Class
C Shares may be subject to certain contingent deferred sales charges.
Investments in Class C 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.
Class A Shares, Class B Shares, and Class C Shares are subject to certain of
the same expenses. Expense differences, however, among Class A Shares, Class B
Shares, and Class C Shares may affect the performance of each class. The
stated advisory fee is the same for all three classes of shares. Reference is
hereby made to the Prospectus of Federated Emerging Markets dated January 31,
1996 provided herewith for additional information about Class A Shares of
Federated Emerging Markets.
10
FEDERAL INCOME TAX CONSEQUENCES
As a condition to the Reorganization, Blanchard Funds and World Investment
Series, Inc. will receive an opinion from Dickstein, Shapiro & Morin, L.L.P.,
counsel to Blanchard Funds and World Investment Series, Inc., to the effect
that, on the basis of the existing provisions of the Internal Revenue Code of
1986, as amended (the "Code"), current administrative rules and court
decisions, for federal income tax purposes: (1) the Reorganization as set
forth in the Plan will constitute a tax-free reorganization under section
368(a)(1)(C) of the Code; (2) no gain or loss will be recognized by Federated
Emerging Markets upon its receipt of Worldwide Emerging Markets' assets solely
in exchange for Class A Shares of Federated Emerging Markets; (3) no gain or
loss will be recognized by Worldwide Emerging Markets upon the transfer of its
assets to Federated Emerging Markets in exchange for Class A Shares of
Federated Emerging Markets or upon the distribution (whether actual or
constructive) of Class A Shares of Federated Emerging Markets to Worldwide
Emerging Markets shareholders in exchange for their shares of Worldwide
Emerging Markets; (4) no gain or loss will be recognized by shareholders of
Worldwide Emerging Markets upon the exchange of their Worldwide Emerging
Markets shares for Class A Shares of Federated Emerging Markets; (5) the tax
basis of Worldwide Emerging Markets' assets acquired by Federated Emerging
Markets will be the same as the tax basis of such assets to Worldwide Emerging
Markets immediately prior to the Reorganization; (6) the tax basis of Class A
Shares of Federated Emerging Markets received by each shareholder of Worldwide
Emerging Markets pursuant to the Plan will be the same as the tax basis of
Worldwide Emerging Markets shares held by such shareholder immediately prior
to the Reorganization; (7) the holding period of the assets of Worldwide
Emerging Markets in the hands of Federated Emerging Markets will include the
period during which those assets were held by Worldwide Emerging Markets; and
(8) the holding period of Class A Shares of Federated Emerging Markets
received by each shareholder of Worldwide Emerging Markets will include the
period during which the Worldwide Emerging Markets shares exchanged therefor
were held by such shareholder, provided the Worldwide Emerging Markets shares
were held as capital assets on the date of the Reorganization.
Prior to the date of the Reorganization, Worldwide Emerging Markets will
restructure its portfolio so that its investments will conform more closely to
those expected to be held by Federated Emerging Markets at the effective time
of the Reorganization.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS AND OBLIGATIONS
Blanchard Funds is organized as a business trust pursuant to a Declaration
of Trust under the laws of the Commonwealth of Massachusetts. World Investment
Series, Inc. is established as a corporation pursuant to Articles of
Incorporation under the laws of the State of Maryland. The rights of
shareholders of Worldwide Emerging Markets and Federated Emerging Markets as
set forth in their respective Declaration of Trust or Articles of
Incorporation are substantially identical. Set forth below is a brief summary
of the significant rights of shareholders of Worldwide Emerging Markets and
Federated Emerging Markets.
Neither fund is required to hold annual meetings of shareholders.
Shareholder approval is necessary only for certain changes in operations or
the election of trustees or directors under certain
11
circumstances. A special meeting of shareholders of either fund for any
permissible purpose is required to be called by the Trustees or Directors upon
the written request of the holders of at least 10% of the outstanding shares
of the relevant fund.
Under certain circumstances, shareholders of Worldwide Emerging Markets, or
any other portfolio of Blanchard Funds may be held personally liable as
partners under Massachusetts law for obligations of Blanchard Funds. To
protect shareholders of all portfolios of Blanchard Funds, Blanchard Funds has
filed legal documents with the Commonwealth of Massachusetts that expressly
disclaim the liability of shareholders of portfolios of Blanchard Funds for
such acts or obligations of Blanchard Funds. These documents require that
notice of this disclaimer be given in each agreement, obligation or instrument
that Blanchard Funds or their trustees enter into or sign on behalf of
Blanchard Funds.
In the unlikely event a shareholder of a portfolio of Blanchard Funds is
held personally liable for obligations of Blanchard Funds, Blanchard Funds are
required to use their property to protect or compensate the shareholder. On
request, Blanchard Funds will defend any claims made and pay any judgment
against a shareholder of a portfolio of Blanchard Funds for any act or
obligation of Blanchard Funds. Therefore, financial loss resulting from
liability as a shareholder of a portfolio of Blanchard Funds will occur only
if Blanchard Funds cannot meet its obligation to indemnify shareholders and
pay judgments against them from the assets of Blanchard Funds.
CAPITALIZATION
The following table sets forth the capitalization of Worldwide Emerging
Markets and Federated Emerging Markets as of March 31, 1996 and on a pro forma
basis as of that date:
<TABLE>
<CAPTION>
WORLDWIDE FEDERATED
EMERGING EMERGING PRO FORMA
MARKETS MARKETS COMBINED*
--------- --------- ----------
<S> <C> <C> <C>
Net Assets....................................... 7,975,839 5,011,788 12,987,627
Shares Outstanding............................... 1,265,547 501,760 1,299,852
Price Per Share.................................. 6.30 9.99 9.99
</TABLE>
- --------
* Adjustment to reflect share balance as a result of the combination based on
exchange ratio of 0.63063063 (the net asset value of $6.30 divided by the
net asset value of $9.99).
INFORMATION ABOUT BLANCHARD FUNDS, WORLD INVESTMENT SERIES, INC., WORLDWIDE
EMERGING MARKETS, AND FEDERATED EMERGING MARKETS
Information about Blanchard Funds, World Investment Series, Inc., Worldwide
Emerging Markets, and Federated Emerging Markets is contained in their
respective Prospectuses dated (in the case of Blanchard Funds and Worldwide
Emerging Markets) August 7, 1995 and (in the case of World Investment Series,
Inc. and Federated Emerging Markets) January 31, 1996, which are incorporated
by reference herein. A copy of the Prospectus for Federated Emerging Markets
is included herewith. Additional information about World Investment Series,
Inc. and Federated Emerging Markets is included in the Statement of Additional
Information of Federated Emerging Markets dated January 31, 1996 (relating to
the Prospectus of Federated Emerging Markets of the same
12
date), and June 23, 1996 (relating to this Prospectus/Proxy Statement) which
are incorporated herein by reference. Additional information about Worldwide
Emerging Markets is included in the Statement of Additional Information of
Worldwide Emerging Markets dated August 7, 1995, and June 23, 1996 (relating
to this Prospectus/Proxy Statement) which are incorporated herein by
reference. Copies of the Statements of Additional Information of Worldwide
Emerging Markets and Federated Emerging Markets, which have been filed with
the Securities and Exchange Commission (the "SEC"), may be obtained without
charge by contacting Blanchard Funds at 1-800-829-3863 or by writing to Signet
Financial Services, Inc., 41 Madison Avenue, 24th Floor, New York, NY 10010 or
by contacting Federated Emerging Markets at 1-800-235-4669.
Blanchard Funds and World Investment Series, Inc., on behalf of the funds,
are subject to the informational requirements of the Securities Act of 1933
(the "1933 Act"), the Securities Exchange Act of 1934 (the "1934 Act") and the
Investment Company Act of 1940 (the "1940 Act") and in accordance therewith
file reports and other information with the SEC. Reports, proxy and
information statements and other information filed by Blanchard Funds and
World Investment Series, Inc., on behalf of the funds, can be obtained by
calling or writing to Blanchard Funds or World Investment Series, Inc. and can
also be inspected and copied by the public at the public reference facilities
maintained by the SEC in Washington, D.C. located at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at certain of its regional offices
located at Suite 1400, Northwestern Atrium Center, 500 West Madison Street,
Chicago, IL 60621 and 13th Floor, Seven World Trade Center, New York, NY
10048. Copies of such material also may be obtained at prescribed rates from
the Public Reference Branch, Office of Consumer Affairs and Information
Services, SEC, 450 Fifth Street, N.W., Washington, D.C. 20549.
This Prospectus/Proxy Statement and the related Statement of Additional
Information do not contain all of the information set forth in the
registration statement that World Investment Series, Inc. has filed with the
SEC under the 1933 Act to which reference is hereby made. Statements contained
herein concerning the provisions of documents are necessarily summaries of
such documents, and each such statement is qualified in its entirety by
reference to the copy of the applicable documents filed with the SEC. The SEC
file number for Blanchard Funds' prospectuses and related Statements of
Additional Information which are incorporated by reference herein is
Registration No. 33-3165. The SEC file number for World Investment Series,
Inc's. prospectuses and related Statements of Additional Information which are
incorporated by reference herein is Registration No. 33-52149.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the
solicitation by the Board of Trustees of Worldwide Emerging Markets of proxies
for use at the Special Meeting of Shareholders (the "Meeting") to be held on
August 16, 1996 and at any adjournment thereof. The proxy confers
discretionary authority on the persons designated therein to vote on other
business not currently contemplated which may properly come before the
Meeting. A proxy, if properly executed, duly returned and not revoked, will be
voted in accordance with the specifications thereon; if no instructions are
given, such proxy will be voted in favor of the Plan. A shareholder may revoke
a proxy at any time prior to use by filing with the Secretary of Blanchard
Funds an instrument revoking the proxy, by submitting a proxy bearing a later
date or by attending and voting at the Meeting.
13
The cost of the solicitation, including the printing and mailing of proxy
materials, will be borne by Fed Global. In addition to solicitations through
the mails, proxies may be solicited by officers, employees and agents of
Blanchard Funds and Federated Securities Corp. at no additional cost to
Blanchard Funds. Such solicitations may be made by telephone. Federated
Securities Corp. will reimburse custodians, nominees and fiduciaries for the
reasonable costs incurred by them in connection with forwarding solicitation
materials to the beneficial owners of shares held of record by such persons.
OUTSTANDING SHARES AND VOTING REQUIREMENTS
The Board of Trustees has fixed the close of business on June 20, 1996 as
the record date for the determination of shareholders entitled to notice of,
and to vote at, the Special Meeting of Shareholders and any adjournment
thereof. As of the record date, there were 1,180,639 shares of Worldwide
Emerging Markets outstanding. Each Worldwide Emerging Markets share is
entitled to one vote and fractional shares have proportionate voting rights.
On the record date, no shareholder or other person owned of record, or to the
knowledge of VCM, beneficially owned, 5% or more of Worldwide Emerging
Markets' outstanding shares. On the record date, the trustees and officers of
Blanchard Funds as a group owned less than 1% of the outstanding shares of
Worldwide Emerging Markets.
The votes of the shareholders of Federated Emerging Markets are not being
solicited, since their approval or consent is not necessary for approval of
the Reorganization. As of the record date, there were 426,029 Class A Shares,
71,758 Class B Shares and 20,833 Class C Shares of Federated Emerging Markets
outstanding. On the record date, Federated Securities Corp. owned of record
approximately 92,234 (21.65%) of the outstanding Class A Shares of Federated
Emerging Markets, and State Street Bank & Trust Co. owned of record
approximately 40,530 (9.51%) of the outstanding Class A Shares of Federated
Emerging Markets; Merrill Lynch Pierce Fenner & Smith owned of record
approximately 10,509 (14.64%) of the outstanding Class B Shares of Federated
Emerging Markets; and Merrill Lynch Pierce Fenner & Smith owned of record
approximately 15,949 (76.56%) of the outstanding Class C Shares. On such date,
no other person owned of record, or to the knowledge of Fed Global,
beneficially owned, 5% or more of Federated Emerging Markets' outstanding
Class A, Class B or Class C Shares.
Approval of the Plan requires the affirmative vote of the majority of
Worldwide Emerging Markets' outstanding shares. The votes of shareholders of
Federated Emerging Markets are not being solicited since their approval is not
required in order to effect the Reorganization.
A majority of the outstanding shares of Worldwide Emerging Markets,
represented in person or by proxy, will be required to constitute a quorum at
the Special Meeting for the purpose of voting on the proposed Reorganization.
For purposes of determining the presence of a quorum, shares represented by
abstentions and "broker non-votes" will be counted as present, but not as
votes cast, at the Special Meeting. Under the Declaration of Trust, the
approval of any action submitted to shareholders is determined on the basis of
a majority of votes entitled to be cast at the Special Meeting.
If at the time any session of the Special Meeting is called to order, a
quorum is not present in person or by proxy, the persons named as proxies may
vote those proxies which have been received to adjourn the Special Meeting to
a later date. In the event that a quorum is present but sufficient votes in
favor of one or more of the proposals have not been received, the persons
named as proxies may
14
propose one or more adjournments of the Special Meeting to permit further
solicitation of proxies with respect to any such proposal. All such
adjournments will require the affirmative vote of a majority of the shares
present in person or by proxy at the session of the Special Meeting to be
adjourned. The persons named as proxies will vote those proxies which they are
entitled to vote in favor of the proposal, in favor of such an adjournment,
and will vote those proxies required to be voted against the proposal, against
any such adjournment. A vote may be taken on one or more of the proposals in
this proxy statement prior to any such adjournment if sufficient votes for its
approval have been received and it is otherwise appropriate.
DISSENTER'S RIGHT OF APPRAISAL
Shareholders of Worldwide Emerging Markets objecting to the Reorganization
have no appraisal or dissenter's rights under the Declaration of Trust or
Massachusetts law. Under the Plan, if approved by Worldwide Emerging Markets'
shareholders, each Worldwide Emerging Markets shareholder will become the
owner of Class A Shares of Federated Emerging Markets having a total net asset
value equal to the total net asset value of his or her holdings in Worldwide
Emerging Markets at the Closing Date.
OTHER MATTERS
Management of Worldwide Emerging Markets knows of no other matters that may
properly be, or which are likely to be, brought before the meeting. However,
if any other business shall properly come before the meeting, the persons
named in the proxy intend to vote thereon in accordance with their best
judgment.
So far as management is presently informed, there is no litigation pending
or threatened against Blanchard Funds or World Investment Series, Inc.
Whether or not shareholders expect to attend the meeting, all shareholders
are urged to sign, fill in and return the enclosed proxy form promptly.
15
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated May 22, 1996 (the "Agreement"),
between WORLD INVESTMENT SERIES, INC., a Maryland corporation ("World"), on
behalf of its portfolio, Federated Emerging Markets Fund (hereinafter called
the "Acquiring Fund"), and BLANCHARD FUNDS, a Massachusetts business trust
("Blanchard"), on behalf of its portfolio Blanchard Worldwide Emerging Markets
Fund (hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a)(1)(C) of the United
States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of
the assets of the Acquired Fund in exchange solely for Class A Shares of the
Acquiring Fund (the "Acquiring Fund Shares") and the distribution, after the
Closing Date hereinafter referred to, of the Acquiring Fund Shares to the
shareholders of the Acquired Fund in liquidation of the Acquired Fund as
provided herein, all upon the terms and conditions hereinafter set forth in
this Agreement.
WHEREAS, World and Blanchard are registered open-end management investment
companies and the Acquired Fund owns securities in which the Acquiring Fund is
permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are authorized to
issue their shares of beneficial interest;
WHEREAS, the Board of Directors, including a majority of the Directors who
are not "interested persons" (as defined under the Investment Company Act of
1940, as amended (the "1940 Act")), of World has determined that the exchange
of all of the assets of the Acquired Fund for Acquiring Fund Shares is in the
best interests of the Acquiring Fund shareholders and that the interests of
the existing shareholders of the Acquiring Fund would not be diluted as a
result of this transaction; and
WHEREAS, the Board of Trustees, including a majority of the Trustees who are
not "interested persons" (as defined under the 1940 Act), of Blanchard has
determined that the exchange of all of the assets of the Acquired Fund for
Acquiring Fund Shares is in the best interests of the Acquired Fund
shareholders and that the interests of the existing shareholders of the
Acquired Fund would not be diluted as a result of this transaction;
NOW THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund agrees to assign, transfer and convey to the Acquiring Fund all of the
assets of the Acquired Fund, including all securities and cash other than
cash in an amount necessary to pay any unpaid dividends and distributions
as provided in paragraph 1.5, and the Acquiring Fund agrees in exchange
therefor (i) to deliver to the Acquired Fund the number of Acquiring Fund
Shares, including fractional
A-1
Acquiring Fund Shares, determined as set forth in paragraph 2.3. Such
transaction shall take place at the closing (the "Closing") on the closing
date (the "Closing Date") provided for in paragraph 3.1. In lieu of
delivering certificates for the Acquiring Fund Shares, the Acquiring Fund
shall credit the Acquiring Fund Shares to the Acquired Fund's account on
the stock record books of the Acquiring Fund and shall deliver a
confirmation thereof to the Acquired Fund.
1.2 The Acquired Fund will discharge all of its liabilities and
obligations prior to the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred shall
be made on the Closing Date and shall be delivered to State Street Bank and
Trust Company, Boston, Massachusetts, the Acquiring Fund's custodian (the
"Custodian"), for the account of the Acquiring Fund, together with proper
instructions and all necessary documents to transfer to the account of the
Acquiring Fund, free and clear of all liens, encumbrances, rights,
restrictions and claims. All cash delivered shall be in the form of
currency and immediately available funds payable to the order of the
Custodian for the account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring Fund
any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund hereunder. The Acquired
Fund will transfer to the Acquiring Fund any distributions, rights or other
assets received by the Acquired Fund after the Closing Date as
distributions on or with respect to the securities transferred. Such assets
shall be deemed included in assets transferred to the Acquiring Fund on the
Closing Date and shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable (the
"Liquidation Date"), the Acquired Fund will liquidate and distribute pro
rata to the Acquired Fund's shareholders of record, determined as of the
close of business on the Closing Date (the "Acquired Fund Shareholders"),
the Acquiring Fund Shares received by the Acquired Fund pursuant to
paragraph 1.1. In addition, each shareholder of record of the Acquired Fund
shall have the right to receive any unpaid dividends or other distributions
which were declared before the Valuation Date with respect to the shares of
the Acquired Fund that are held by the shareholder on the Valuation Date.
Such liquidation and distribution will be accomplished by the transfer of
the Acquiring Fund Shares then credited to the account of the Acquired Fund
on the books of the Acquiring Fund to open accounts on the share record
books of the Acquiring Fund in the names of the Acquired Fund Shareholders
and representing the respective pro rata number of the Acquiring Fund
Shares due such shareholders. All issued and outstanding shares of the
Acquired Fund will simultaneously be canceled on the books of the Acquired
Fund. Share certificates representing interests in the Acquired Fund will
represent a number of Acquiring Fund Shares after the Closing Date as
determined in accordance with Section 2.3. The Acquiring Fund shall not
issue certificates representing the Acquiring Fund Shares in connection
with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus
and statement of additional information.
A-2
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund Shares
in a name other than the registered holder of the Acquired Fund shares on
the books of the Acquired Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring
Fund Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall remain
the responsibility of the Acquired Fund up to and including the Closing
Date and such later dates, with respect to liquidation and termination of
the Acquired Fund, on which the Acquired Fund is liquidated and terminated.
2. VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of
the close of the New York Stock Exchange (normally 4:00 p.m., Eastern time)
on the Closing Date (such time and date being hereinafter called the
"Valuation Date"), using the valuation procedures set forth in the
Acquiring Fund's then-current prospectus or statement of additional
information.
2.2 The net asset value of an Acquiring Fund Share shall be the net asset
value per share computed as of the close of the New York Stock Exchange
(normally 4:00 p.m., Eastern time) on the Valuation Date, using the
valuation procedures set forth in the Acquiring Fund's then-current
prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in
paragraph 2.1 by the net asset value of one Acquiring Fund Share determined
in accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be August 16, 1996 or such later date as the
parties may mutually agree. All acts taking place at the Closing Date shall
be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held at 4:00
p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place
as the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for portfolio
securities of the Acquiring Fund or the Acquired Fund shall be closed to
trading or trading thereon shall be restricted; or (b) trading or the
reporting of trading shall be disrupted so that accurate appraisal
A-3
of the value of the net assets of the Acquiring Fund or the Acquired Fund
is impracticable, the Closing Date shall be postponed until the first
business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
3.3 Federated Shareholder Services Company of Boston, as transfer agent
for the Acquired Fund, shall deliver at the Closing a certificate of an
authorized officer stating that its records contain the names and addresses
of the Acquired Fund Shareholders and the number and percentage ownership
of outstanding shares owned by each such shareholder immediately prior to
the Closing. The Acquiring Fund shall issue and deliver a confirmation
evidencing the Acquiring Fund Shares to be credited on the Closing Date to
the Secretary of the Acquired Fund, or provide evidence satisfactory to the
Acquired Fund that such Acquiring Fund Shares have been credited to the
Acquired Fund's account on the books of the Acquiring Fund. At the Closing,
each party shall deliver to the other such bills of sale, checks,
assignments, assumption agreements, share certificates, if any, receipts or
other documents as such other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 Blanchard represents and warrants to World as follows:
(a) Blanchard is a business trust duly organized, validly existing
and in good standing under the laws of the Commonwealth of
Massachusetts and has power to own all of its properties and assets and
to carry out this Agreement.
(b) Blanchard is registered under the 1940 Act, as an open-end,
management investment company, and such registration has not been
revoked or rescinded and is in full force and effect.
(c) Blanchard is not, and the execution, delivery and performance of
this Agreement will not result, in material violation of its
Declaration of Trust or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquired
Fund is a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other commitments
outstanding (other than this Agreement) which will result in liability
to it after the Closing Date.
(e) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or to its
knowledge threatened against the Acquired Fund or any of its properties
or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its
business. The Acquired Fund knows of no facts which might form the
basis for the institution of such proceedings, and is not a party to or
subject to the provisions of any order, decree or judgment of any court
or governmental body which materially and adversely affects its
business or its ability to consummate the transactions herein
contemplated.
A-4
(f) The current prospectus and statement of additional information of
the Acquired Fund conform in all material respects to the applicable
requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities
and Exchange Commission (the "Commission") thereunder and do not
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein as necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(g) The Statement of Assets and Liabilities of the Acquired Fund at
April 30, 1995 and April 30, 1994 have been audited by Price Waterhouse
LLP, independent accountants, and have been prepared in accordance with
generally accepted accounting principles, consistently applied, and
such statement (copies of which have been furnished to the Acquiring
Fund) fairly reflects the financial condition of the Acquired Fund as
of such dates, and there are no known contingent liabilities of the
Acquired Fund as of such date not disclosed therein.
(h) The unaudited Statements of Assets and Liabilities of the
Acquired Fund at October 31, 1995 and October 31, 1994 have been
prepared in accordance with the generally accepted accounting
principles, consistently applied, and such statements (copies of which
have been supplied to the Acquiring Fund) fairly reflect the financial
condition of the Acquired Fund as of such dates.
(i) Since October 31, 1995, there has not been any material adverse
change in the Acquired Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquired Fund of indebtedness
maturing more than one year from the date such indebtedness was
incurred, except as otherwise disclosed to and accepted by the
Acquiring Fund.
(j) At the Closing Date, all Federal and other tax returns and
reports of the Acquired Fund required by law to have been filed by such
date shall have been filed, and all Federal and other taxes shall have
been paid so far as due, or provision shall have been made for the
payment thereof, and to the best of the Acquired Fund's knowledge no
such return is currently under audit and no assessment has been
asserted with respect to such returns.
(k) For each fiscal year of its operation, the Acquired Fund has met
the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company.
(l) All issued and outstanding shares of the Acquired Fund are, and
at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. All of the issued and outstanding shares
of the Acquired Fund will, at the time of the Closing, be held by the
persons and in the amounts set forth in the records of the transfer
agent as provided in paragraph 3.3. The Acquired Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquired Fund shares, nor is there outstanding any
security convertible into any of the Acquired Fund shares.
A-5
(m) On the Closing Date, the Acquired Fund will have full right,
power and authority to sell, assign, transfer and deliver the assets to
be transferred by it hereunder.
(n) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of Blanchard's
Trustees and, subject to the approval of the Acquired Fund
Shareholders, this Agreement constitutes the valid and legally binding
obligation of the Acquired Fund enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws relating to or
affecting creditors' rights generally and court decisions with respect
thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a
proceeding in equity or at law).
(o) The prospectus/proxy statement of the Acquired Fund (the
"Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (other than information therein
that relates to the Acquiring Fund) will, on the effective date of the
Registration Statement and on the Closing Date, not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not
misleading.
(p) The Acquired Fund has entered into an agreement under which
Federated Global Research Corp. will assume the expenses of the
reorganization including accountants' fees, legal fees, registration
fees, transfer taxes (if any), the fees of banks and transfer agents
and the costs of preparing, printing, copying and mailing proxy
solicitation materials to the Acquired Fund's shareholders and the
costs of holding the Special Meeting of Shareholders.
4.2 World represents and warrants to Blanchard as follows:
(a) World is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maryland and has the power
to carry on its business as it is now being conducted and to carry out
this Agreement.
(b) World is registered under the 1940 Act as an open-end, management
investment company, and such registration has not been revoked or
rescinded and is in full force and effect.
(c) The current prospectus and statement of additional information of
the Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(d) World is not, and the execution, delivery and performance of this
Agreement will not result, in material violation of its Articles of
Incorporation or By-Laws or of any agreement,
A-6
indenture, instrument, contract, lease or other undertaking to which
the Acquiring Fund is a party or by which it is bound.
(e) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or to its
knowledge threatened against the Acquiring Fund or any of its
properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquiring Fund knows of no facts which might form the
basis for the institution of such proceedings, and is not a party to or
subject to the provisions of any order, decree or judgment of any court
or governmental body which materially and adversely affects its
business or its ability to consummate the transactions contemplated
herein.
(f) The Statement of Assets and Liabilities of the Acquiring Fund at
March 31, 1996, has been prepared in accordance with generally accepted
accounting principles, consistently applied, and such statement (copies
of which have been furnished to the Acquired Fund) fairly reflects the
financial condition of the Acquiring Fund as of such date.
(g) Since March 31, 1996, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness,
except as otherwise disclosed to and accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns and
reports of the Acquiring Fund required by law then to be filed shall
have been filed, and all Federal and other taxes shown as due on said
returns and reports shall have been paid or provision shall have been
made for the payment thereof.
(i) For each fiscal year of its operation, the Acquiring Fund has met
the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company.
(j) All issued and outstanding shares of the Acquiring Fund are, and
at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other right to subscribe for or
purchase any of the Acquiring Fund Shares, nor is there outstanding any
security convertible into any Acquiring Fund Shares.
(k) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action, if any, on the part of
World's Directors, and this Agreement constitutes the valid and legally
binding obligation of the Acquiring Fund enforceable in accordance with
its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar
laws relating to or affecting creditors' rights generally and court
decisions with respect thereto, and to general principles of equity and
the discretion of the court (regardless of whether the enforceability
is considered in a proceeding in equity or at law).
A-7
(l) The Prospectus/Proxy Statement to be included in the Registration
Statement (only insofar as it relates to the Acquiring Fund) will, on
the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
such statements were made, not misleading.
(m) The Acquiring Fund has entered into an agreement under which
Federated Global Research Corp. will assume the expenses of the
reorganization including accountants' fees, legal fees, registration
fees, transfer taxes (if any), the fees of banks and transfer agents
and the costs of preparing, printing, copying and mailing proxy
solicitation materials to the Acquired Fund's shareholders and the
costs of holding the Special Meeting of Shareholders.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing
Date, it being understood that such ordinary course of business will
include customary dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated
herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund and
the Acquired Fund will each take, or cause to be taken, all action, and do
or cause to be done, all things reasonably necessary, proper or advisable
to consummate and make effective the transactions contemplated by this
Agreement.
5.4 As promptly as practicable, but in any case within sixty days after
the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in
such form as is reasonably satisfactory to the Acquiring Fund, a statement
of the earnings and profits of the Acquired Fund for Federal income tax
purposes which will be carried over to the Acquiring Fund as a result of
Section 381 of the Code and which will be certified by the Acquired Fund's
President and its Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(n),
all to be included in a Registration Statement on Form N-14 of the
Acquiring Fund (the "Registration Statement"), in compliance with the 1933
Act, the Securities Exchange Act of 1934, as amended, and the 1940 Act in
connection with the meeting of the Acquired Fund Shareholders to consider
approval of this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
A-8
5.7 Prior to the Valuation Date, the Acquired Fund shall have declared a
dividend or dividends, with a record date and ex-dividend date prior to the
Valuation Date, which, together with all previous dividends, shall have the
effect of distributing to its shareholders all of its investment company
taxable income, if any, plus the excess of its interest income, if any,
excludable from gross income under Code section 103(a) over its deductions
disallowed under Code sections 265 and 171(a)(2) for the taxable periods or
years ended on or before April 30, 1996 and for the period from said date
to and including the Closing Date (computed without regard to any deduction
for dividends paid), and all of its net capital gain, if any, realized in
taxable periods or years ended on or before April 30, 1996 and in the
period from said date to and including the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance
by the Acquired Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
6.1 All representations and warranties of Blanchard contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
by this Agreement, as of the Closing Date with the same force and effect as
if made on and as of the Closing Date.
6.2 Blanchard shall have delivered to the Acquiring Fund a statement of
the Acquired Fund's assets, together with a list of the Acquired Fund's
portfolio securities showing the tax costs of such securities by lot and
the holding periods of such securities, as of the Closing Date, certified
by the Treasurer of Blanchard.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by Blanchard's President or
Vice President and Blanchard's Treasurer or Assistant Treasurer, in form
and substance satisfactory to Blanchard, to the effect that the
representations and warranties of Blanchard made in this Agreement are true
and correct at and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement, and as to such other
matters as the Acquiring Fund shall reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by
the Acquiring Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
7.1 All representations and warranties of World contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by
A-9
the transactions contemplated by this Agreement, as of the Closing Date
with the same force and effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on the
Closing Date a certificate executed in its name by World's President or
Vice President and World's Treasurer or Assistant Treasurer, in form and
substance reasonably satisfactory to the Acquired Fund, to the effect that
the representations and warranties of World made in this Agreement are true
and correct at and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement, and as to such other
matters as the Acquired Fund shall reasonably request.
8. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding
shares of the Acquired Fund in accordance with the provisions of the
Acquired Fund's Declaration of Trust.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those
of the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit
consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring Fund or the Acquired
Fund, provided that either party hereto may for itself waive any of such
conditions.
8.4 The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 Blanchard and World shall have received an opinion of Dickstein,
Shapiro & Morin, L.L.P. substantially to the effect that for Federal income
tax purposes:
(a) The transfer of all of the Acquired Fund assets in exchange for
the Acquiring Fund Shares and the distribution of the Acquiring Fund
Shares to the Acquired Fund Shareholders in liquidation of the Acquired
Fund will constitute a "reorganization" within the meaning of
A-10
Section 368(a)(1)(C) of the Code; (b) No gain or loss will be
recognized by the Acquiring Fund upon the receipt of the assets of the
Acquired Fund solely in exchange for the Acquiring Fund Shares; (c) No
gain or loss will be recognized by the Acquired Fund upon the transfer
of the Acquired Fund assets to the Acquiring Fund in exchange for the
Acquiring Fund Shares or upon the distribution (whether actual or
constructive) of the Acquiring Fund Shares to Acquired Fund
Shareholders in exchange for their shares of the Acquired Fund; (d) No
gain or loss will be recognized by the Acquired Fund Shareholders upon
the exchange of their Acquired Fund shares for the Acquiring Fund
Shares; (e) The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization; (f) The tax
basis of the Acquiring Fund Shares received by each of the Acquired
Fund Shareholders pursuant to the Reorganization will be the same as
the tax basis of the Acquired Fund shares held by such shareholder
immediately prior to the Reorganization; (g) The holding period of the
assets of the Acquired Fund in the hands of the Acquiring Fund will
include the period during which those assets were held by the Acquired
Fund; and (h) The holding period of the Acquiring Fund Shares to be
received by each Acquired Fund Shareholder will include the period
during which the Acquired Fund shares exchanged therefor were held by
such shareholder (provided the Acquired Fund shares were held as
capital assets on the date of the Reorganization).
9. TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Trustees of the
Acquired Fund or the Board of Directors of the Acquiring Fund at any time
prior to the Closing Date (and notwithstanding any vote of the Board of
Trustees of the Acquired Fund) if circumstances should develop that, in the
opinion of either of the parties' Board of Trustees or Directors, make
proceeding with the Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated hereby
is abandoned pursuant to the provisions of this Section 9, this Agreement
shall become void and have no effect, without any liability on the part of
any party hereto or the directors, trustees, officers or shareholders of
the Acquiring Fund or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing conditions
may be waived by the Board of Directors of the Acquiring Fund or the Board
of Trustees of the Acquired Fund, if, in the judgment of either, such
waiver will not have a material adverse effect on the benefits intended
under this Agreement to the shareholders of the Acquiring Fund or of the
Acquired Fund, as the case may be.
A-11
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided for
herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings
of every kind and nature between them relating to the subject matter
hereof. Neither party shall be bound by any condition, definition, warranty
or representation, other than as set forth or provided in this Agreement or
as may be set forth in a later writing signed by the party to be bound
thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the Commonwealth of Massachusetts, without giving
effect to principles of conflict of laws.
11.4 This Agreement may be executed in any number of counterparts, each
of which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
11.6 The Acquiring Fund is hereby expressly put on notice of the
limitation of liability as set forth in Article XI of the Declaration of
Trust of the Acquired Fund and agrees that the obligations assumed by the
Acquired Fund pursuant to this Agreement shall be limited in any case to
the Acquired Fund and its assets and the Acquiring Fund shall not seek
satisfaction of any such obligation from the shareholders of the Acquired
Fund, the trustees, officers, employees or agents of the Acquired Fund or
any of them.
A-12
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have caused this
Agreement and Plan of Reorganization to be executed and attested on its behalf
by its duly authorized representatives as of the date first above written.
Acquired Fund:
BLANCHARD FUNDS, on behalf of its
Portfolio,
BLANCHARD WORLDWIDE EMERGING MARKETS
FUND
Attest:
/s/ C. Grant Anderson By: /s/ Joseph S. Machi
...................................... ...................................
Assistant Secretary
Name: Joseph S. Machi
................................
Title:Vice President
.................................
Acquiring Fund:
WORLD INVESTMENT SERIES, INC. on
behalf of its Portfolio,
FEDERATED EMERGING MARKETS FUND
Attest:
/s/ John McGonigle By: /s/ J. Christopher Donahue
...................................... ...................................
Assistant Secretary
Name: J. Christopher Donahue
................................
Title:Executive Vice President
.................................
A-13
(1946) Cusip 093212702 G01686-03 (7/96)
[LOGO OF BLANCHARD]
ACQUISITION OF THE ASSETS OF
BLANCHARD WORLDWIDE EMERGING MARKETS FUND,
A PORTFOLIO OF BLANCHARD FUNDS
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TELEPHONE NUMBER 1-800-829-3863
BY AND IN EXCHANGE FOR CLASS A SHARES OF
FEDERATED EMERGING MARKETS FUND, A PORTFOLIO OF WORLD INVESTMENT
SERIES, INC.
FDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TELEPHONE NUMBER 1-800-235-4669
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information dated June 23, 1996 is not a
prospectus. A Prospectus/Proxy Statement dated June 23, 1996 related
to the above-referenced matter may be obtained from World Investment
Series, Inc. on behalf of its portfolio, Federated Emerging Markets
Fund, at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-
3779. This Statement of Additional Information should be read in
conjunction with such Prospectus/Proxy Statement.
FEDERATED INVESTORS TOWER PITTSBURGH, PA 15222-3779
Statement dated June 23, 1996
[LOGO OF FEDERATED INVESTORS]
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and a subsidiary of Federated Investors.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
1. Statement of Additional Information of Federated Emerging Markets Fund,
dated January 31, 1996
2. Statement of Additional Information of Blanchard Worldwide Emerging Markets
Fund, dated August 7, 1995
3. Financial Statements of Federated Emerging Markets Fund, dated March 31,
1996
4. Financial Statements of Blanchard Worldwide Emerging Markets Fund, dated
April 30, 1995
5. Financial Statements of Blanchard American Equity Fund, dated October 31,
1995
6. Pro Forma Financial Statements
I
The Statement of Additional Information of Federated Emerging Markets Fund
dated January 31, 1996 is incorporated herein by reference to Post-Effective
Amendment No 4 to the World Investment Series, Inc.'s Registration Statement
on Form N-1A (File No. 33-52149) which was filed with the Securities and
Exchange Commission on or about December 1, 1995. A copy may be obtained from
World Investment Series, Inc. at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. Telephone Number: 1-800-235-4669.
The Statement of Additional Information of Blanchard Worldwide Emerging
Markets Fund dated August 7, 1995 is incorporated herein by reference to Post-
Effective Amendment No 29 to the Virtus Funds' Registration Statement on Form
N-1A (File No. 33-3165) which was filed with the Securities and Exchange
Commission on or about August 7, 1995. A copy may be obtained from Signet
Financial Services, Inc. at 41 Madison Avenue, 24th Floor, New York, New York,
10010. Telephone Number: 1-800-829-3863.
The financial statements of Federated Emerging Markets Fund dated March 31,
1996 are presented in this Statement of Additional Information.
The audited financial statements of Blanchard Worldwide Emerging Markets Fund
dated April 30, 1995 are incorporated herein by reference to the Statement of
Additional Information dated August 7, 1995, and filed with the Securities and
Exchange Commission on or about August 7, 1995.
1
Blanchard Worldwide Emerging Markets Fund,
a Portfolio of Blanchard Funds
Portfolio of Investments
March 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares Value
----------------------------- -----------------------------
Blanchard Blanchard
Federated Worldwide Federated Worldwide
Emerging Emerging Emerging Emerging
Markets Markets Pro Forma Markets Markets Pro Forma
Fund Fund Combined Fund Fund Combined
--------- --------- --------- --------- --------- ---------
<C> <C> <C> <S> <C> <C> <C>
EMERGING MARKETS
SECURITIES--88.4%
ARGENTINA--3.5%
BANKING--0.2%
3,000 3,000 (a)Bansud S.A. $ 26,250 $ 26,250
-------- --------
BEVERAGE & TOBACCO--0.2%
Nobleza Piccardo
7,500 7,500 S.A.I.C. y F. 24,900 24,900
-------- --------
CONSUMER GOODS &
RELATED--0.7%
4,900 4,900 Quilmes Industrial S.A. $ 58,800 58,800
Quilmes Industrial
2,450 2,450 (Quinsa) S.A., ADR 26,337 26,337
-------- --------
Total 85,137 85,137
-------- --------
METALS--STEEL--0.2%
50,000 50,000 (a)Acindar Industria 29,250 29,250
-------- --------
MULTI-INDUSTRY--1.6%
Compania Naviera Perez
6,000 24,996 30,996 Companc S.A., Class B 33,960 141,477 175,437
21,700 21,700 Ledesma Agricola S.A. 27,559 27,559
-------- -------- --------
Total 61,519 141,477 202,996
-------- -------- --------
TELECOMMUNICATIONS--0.2%
Telefonica de Argentina
11,000 11,000 S.A., Class B 28,270 28,270
-------- --------
TRANSPORTATION--0.2%
Transportadora de Gas de
2,400 2,400 Sur S.A., Class B, ADR 28,800 28,800
-------- --------
UTILITIES--ELECTRICAL &
GAS--0.2%
Central Puerto S.A.,
8,000 8,000 Class B 25,600 25,600
-------- -------- --------
Total Argentina 224,589 226,614 451,203
-------- -------- --------
BRAZIL--10.2%
BANKING--0.4%
Banco Bradesco S.A.,
2,700,000 2,700,000 Preference 28,287 28,287
Banco Itau S.A.,
80,000 80,000 Preference 28,424 28,424
-------- --------
Total 56,711 56,711
-------- --------
BASIC INDUSTRY--2.2%
Cia Acos Especiais
9,920 9,920 Itabira-Acesita., ADR 114,080 114,080
Companhia Vale Do Rio
4,000 4,000 Doce, ADR 156,932 156,932
Cia Acos Especiais
1,995,000 1,995,000 Itabira-Acesita., Pfd. 11,814 11,814
-------- --------
Total 282,826 282,826
-------- --------
BEVERAGE & TOBACCO--0.2%
Cia Cervejaria Brahma,
50,000 50,000 Preference 24,142 24,142
-------- --------
CAPITAL GOODS--0.5%
7,087 7,087 Rhodia-Ster S.A., GDR 64,577 64,577
-------- --------
ENERGY SOURCES--0.2%
Petroleo Brasileiro
270,000 270,000 S.A., Preference 32,250 32,250
-------- --------
ENERGY RELATED--1.0%
Centrais Eletricas
Brasileiras, Preference,
100,000 100,000 Series B 27,331 27,331
(a)Companhia Energetica
3,641 3,641 de Minas Gerais, ADR 101,948 101,948
-------- -------- --------
Total 27,331 101,948 129,279
-------- -------- --------
</TABLE>
2
Blanchard Worldwide Emerging Markets Fund,
a Portfolio of Blanchard Funds
Portfolio of Investments
March 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares Value
------------------------------- -------------------------------
Blanchard Blanchard
Federated Worldwide Federated Worldwide
Emerging Emerging Emerging Emerging
Markets Markets Pro Forma Markets Markets Pro Forma
Fund Fund Combined Fund Fund Combined
---------- --------- ---------- --------- ---------- ----------
<C> <C> <C> <S> <C> <C> <C>
IRON/STEEL--0.9%
8,100 8,100 Usinas Uni Sd Mg., ADR $ 85,779 $ 85,779
Usinas Siderurgicas De
27,000,000 27,000,000 Minas Gerais, Pfd. $ 29,790 29,790
-------- ---------- ----------
Total 29,790 85,779 115,569
-------- ---------- ----------
MANUFACTURING--0.1%
(a)Usiminas USI Sd Mg,
1,700 1,700 ADR 18,190 18,190
---------- ----------
RETAIL--0.9%
(a)Lojas Americanas
1,200,000 9,000,000 10,200,000 S.A., Preference 28,909 84,725 113,634
-------- ---------- ----------
TELECOMMUNICATIONS--2.6%
Telecomunicacoes
6,220 6,220 Brasileras, ADR 309,445 309,445
Telecomunicacoes de Sao
180,000 180,000 Paulo S.A., Preference 30,610 30,610
-------- ---------- ----------
Total 30,610 309,445 340,055
-------- ---------- ----------
UTILITIES--ELECTRICAL &
GAS--1.2%
573,000 573,000 Eletrobras 149,645 149,645
-------- ---------- ----------
Total Brazil 229,743 1,097,135 1,326,878
-------- ---------- ----------
CHILE--3.1%
BANKING--0.2%
1,200 1,200 Banco O'Higgins, ADR 29,550 29,550
-------- ----------
BASIC INDUSTRY--0.7%
17,500 17,500 Antofagasta Holdings PLC 95,887 95,887
---------- ----------
BEVERAGE & TOBACCO--0.4%
Compania Cervecerias
1,400 1,400 Unidas S.A., ADR 29,750 29,750
Embotelladora Andina
800 800 S.A., ADR 27,600 27,600
-------- ----------
Total 57,350 57,350
-------- ----------
CAPITAL GOODS--0.2%
1,000 1,000 Madeco S.A., ADR 25,000 25,000
-------- ----------
METALS--NON FERROUS--
0.3%
Sociedad Quimica Y
600 600 Minera De Chile, ADR 31,350 31,350
-------- ----------
PHARMACEUTICALS--0.3%
2,400 2,400 Laboratorio Chile, ADR 33,300 33,300
-------- ----------
RETAIL--0.6%
(a)Santa Isabel S.A.,
2,800 2,800 ADR 71,050 71,050
---------- ----------
TELECOMMUNICATIONS--0.2%
3,200 3,200 Telex-Chile S.A., ADR 30,400 30,400
-------- ----------
UTILITIES--ELECTRICAL &
GAS--0.2%
1,100 1,100 Enersis S.A., ADR 31,075 31,075
-------- ---------- ----------
Total Chile 238,025 166,937 404,962
-------- ---------- ----------
CHINA--0.9%
FINANCIAL SERVICES--0.9%
(a)China North
Industries Investment,
150,000 150,000 Ltd. 116,250 116,250
---------- ----------
COLOMBIA--0.9%
BASIC INDUSTRY--0.4%
Cementos Diamante S.A.,
4,000 4,000 GDR 60,000 60,000
---------- ----------
FINANCIAL SERVICES--0.5%
Banco Industrial
3,400 3,400 Colombiano, ADR 62,900 62,900
---------- ----------
Total Colombia 122,900 122,900
---------- ----------
</TABLE>
3
Blanchard Worldwide Emerging Markets Fund,
a Portfolio of Blanchard Funds
Portfolio of Investments
March 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares Value
----------------------------- -----------------------------
Blanchard Blanchard
Federated Worldwide Federated Worldwide
Emerging Emerging Emerging Emerging
Markets Markets Pro Forma Markets Markets Pro Forma
Fund Fund Combined Fund Fund Combined
--------- --------- --------- --------- --------- ---------
<C> <C> <C> <S> <C> <C> <C>
CZECHOSLOVAKIA--1.9%
INSURANCE--0.3%
200 200 (a)Ceska Pojistovna $ 33,580 $ 33,580
-------- --------
MACHINERY &
ENGINEERING--0.3%
(a)CKD Praha Holding
5,400 5,400 A.S. 40,561 40,561
-------- --------
MULTI-INDUSTRY--0.3%
(a)Skoda Koncern Plzen
1,200 1,200 A.S. 35,347 35,347
-------- --------
TELECOMMUNICATIONS--0.3%
300 300 (a) SPT Telekom A.S. 34,408 34,408
-------- --------
UNASSIGNED--0.3%
500 500 Vodni Stavby Praha A.S. 37,649 37,649
-------- --------
UTILITIES--ELECTRICAL &
GAS--0.4%
800 800 (a)CEZ A.S. 30,193 30,193
900 900 (a)Prvni Severozapadni 33,801 33,801
-------- --------
Total 63,994 63,994
-------- --------
Total Czechoslovakia 245,539 245,539
-------- --------
ECUADOR--0.3%
CONSTRUCTION--0.3%
(a)LA Cemento Nacional
256 256 C.A., GDR $43,520 43,520
------- --------
GREECE--1.4%
BANKING--0.3%
500 500 Alpha Credit Bank 35,940 35,940
-------- --------
BEVERAGE & TOBACCO--0.2%
Hellenic Bottling Co.,
800 800 S.A. 29,882 29,882
-------- --------
BUILDING MATERIALS &
COMPONENTS--0.2%
600 600 Titan Cement Co. 28,744 28,744
-------- --------
ENGINEERING--0.2%
2,900 2,900 Ergas 28,075 28,075
-------- --------
METALS--NON FERROUS--
0.2%
700 700 Aluminum of Greece S.A. 29,957 29,957
-------- --------
MISCELLANEOUS MATERIALS
& COMMODITIES--0.3%
Hellas Can Packaging
1,400 1,400 Manufacturers, S.A. 31,731 31,731
-------- --------
Total Greece 184,329 184,329
-------- --------
HONG KONG--0.7%
ENGINEERING--0.7%
(a)New World
45,000 45,000 Infrastructure 96,005 96,005
------- --------
MANUFACTURING--0.0%
(a)Star Paging
International Holding,
40,000 40,000 Ltd., Warrants 729 729
------- --------
Total Hong Kong 96,734 96,734
------- --------
HUNGARY--1.7%
CONSUMER GOODS &
RELATED--0.1%
2,800 2,800 (a)Kekut Asvanyiz, GDR 18,462 18,462
------- --------
ENERGY SOURCES--0.2%
(a)MOL Magyar Olaj-es
2,600 2,600 Gazipari RT 27,655 27,655
-------- --------
</TABLE>
4
Blanchard Worldwide Emerging Markets Fund,
a Portfolio of Blanchard Funds
Portfolio of Investments
March 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares Value
----------------------------- -----------------------------
Blanchard Blanchard
Federated Worldwide Federated Worldwide
Emerging Emerging Emerging Emerging
Markets Markets Pro Forma Markets Markets Pro Forma
Fund Fund Combined Fund Fund Combined
--------- --------- --------- --------- --------- ---------
<C> <C> <C> <S> <C> <C> <C>
FINANCIAL SERVICES--0.0%
(a)Konzum Ker ES Ipari
3,100 3,100 RT $ 7,479 $ 7,479
-------- --------
FOOD PROCESSING--0.3%
700 700 (a)Pick Szeged RT $ 33,224 33,224
-------- --------
LEISURE & TOURISM--0.3%
2,800 2,800 (a)Danubius Hotels RT 34,176 34,176
-------- --------
MANUFACTURING--0.2%
900 900 (a)Zalakeramia RT 31,700 31,700
-------- --------
PHARMACEUTICALS--0.6%
900 900 (a)EGIS 39,139 39,139
900 900 Gedeon Richter RT 32,956 32,956
-------- --------
Total 72,095 72,095
-------- -------- --------
Total Hungary 198,850 25,941 224,791
-------- -------- --------
INDIA--6.5%
AUTOMOBILE--0.7%
1,100 1,100 (a)Bajaj Auto, Ltd., GDR 34,375 34,375
(a)Mahindra and Mahindra
3,500 3,500 , GDR 33,250 33,250
2,000 2,000 Tata Eng & Loco Co., GDR 32,000 32,000
-------- --------
Total 99,625 99,625
-------- --------
BASIC INDUSTRY--0.8%
5,880 5,880 (a)Gujarat Ambuja
Cements, GDR, Conv.
Bond, 3.50%, 6/30/1999 71,266 71,266
(a)Hindalco Industries,
800 800 Ltd., GDR 29,400 29,400
-------- -------- --------
Total 29,400 71,266 100,666
-------- -------- --------
CHEMICALS--0.4%
(b)Indo Gulf Fetrilizer
18,200 18,200 & Chemical 144-A, GDR 30,030 30,030
2,000 2,000 Reliance Industries, GDR 28,750 28,750
-------- --------
Total 58,780 58,780
-------- --------
CONSUMER--0.8%
4,800 4,800 (a)DCW, Ltd., GDR 22,800 22,800
(a)Dr. Reddy's
10,000 10,000 Laboratories, GDR 81,250 81,250
-------- --------
Total 104,050 104,050
-------- --------
INVESTMENT COMPANIES--
2.9%
(a)IS Himalayan Fund
7,803 7,803 N.V. 110,802 110,802
(a)IS Himalayan Fund
1,180 1,180 N.V., Warrants 425 425
(a)Indian Opportunities
27,307 27,307 Fund, Ltd. 273,074 273,074
-------- --------
Total 384,301 384,301
-------- --------
PHARMACEUTICALS--0.2%
(b)Ranbaxy Laboratories,
1,100 1,100 GDR 144-A, GDR 24,640 24,640
-------- --------
TEXTILES & APPAREL--0.2%
(a)Indian Rayon &
2,100 2,100 Industries, Ltd., GDR 32,298 32,298
-------- --------
TOBACCO--0.2%
3,000 3,000 (a)Itc, GDR 22,140 22,140
-------- --------
UTILITIES--ELECTRICAL &
GAS--0.2%
(a)Cesc Limited-
7,000 7,000 Sponsored, GDR 25,550 25,550
-------- -------- --------
Total India 292,433 559,617 852,050
-------- -------- --------
</TABLE>
5
Blanchard Worldwide Emerging Markets Fund,
a Portfolio of Blanchard Funds
Portfolio of Investments
March 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares Value
----------------------------- -----------------------------
Blanchard Blanchard
Federated Worldwide Federated Worldwide
Emerging Emerging Emerging Emerging
Markets Markets Pro Forma Markets Markets Pro Forma
Fund Fund Combined Fund Fund Combined
--------- --------- --------- --------- --------- ---------
<C> <C> <C> <S> <C> <C> <C>
INDONESIA--5.2%
AUTOMOBILE--0.2%
14,000 14,000 PT United Tractors $ 28,144 $ 28,144
-------- --------
BANKING--2.4%
105,000 105,000 PT Bank Dagang Nasional $ 90,943 90,943
PT Bank International
7,000 41,000 48,000 Indonesia 29,491 172,733 202,224
24,000 24,000 PT Bank Tiara Asia 27,716 27,716
-------- -------- --------
Total 57,207 263,676 320,883
-------- -------- --------
BEVERAGE & TOBACCO--0.2%
PT Hanjaya Mandala
2,500 2,500 Sampoerna 26,117 26,117
-------- --------
BUILDING MATERIALS &
COMPONENTS--0.2%
8,000 8,000 PT Semen Gresik 28,315 28,315
-------- --------
CHEMICALS--0.1%
Keramika Indonesia
41,000 41,000 Associates 21,482 21,482
-------- --------
CONSUMER GOODS &
RELATED--0.9%
68,000 68,000 PT Andayani Megah 48,717 48,717
PT Concord Benefit
39,000 39,000 Textile 12,511 12,511
84,000 84,000 PT Gadjah Tunggal 51,198 51,198
-------- --------
Total 112,426 112,426
-------- --------
ENGINEERING &
CONSTRUCTION--0.6%
55,000 55,000 (a)PT Bukaka Teknik Utam 82,335 82,335
-------- --------
HEALTH & PERSONAL CARE--
0.2%
(a)PT Darya Varia
13,000 13,000 Laboratoria 28,358 28,358
-------- --------
TELECOMMUNICATIONS--0.2%
18,000 18,000 Telekomunikasi Ind 28,293 28,293
-------- -------- --------
Total Indonesia 196,434 479,919 676,353
-------- -------- --------
ISRAEL--0.3%
FINANCIAL SERVICES--0.3%
(a)Ampal-American Israel
2,200 2,200 Corp., Class A 12,650 12,650
1,000 1,000 (a)Koor Industries, Ltd. 19,375 19,375
-------- --------
Total 32,025 32,025
-------- --------
Total Israel 32,025 32,025
-------- --------
KOREA--3.7%
BASIC INDUSTRY--0.3%
(a)Kumho Construction &
8,000 8,000 Engineering Co., Pfd. 44,998 44,998
-------- --------
CAPITAL GOODS--0.7%
(a)Anam Industrial Co.,
5,092 5,092 Ltd., Pfd. 50,774 50,774
(a)Daewoo Heavy
6,000 6,000 Industries, Pfd. 35,283 35,283
-------- --------
Total 86,057 86,057
-------- --------
CONSUMER GOODS &
RELATED--0.0%
(a)Samsung Electronics
2 2 Co., Pfd. 144 144
-------- --------
TRANSPORTATION--0.3%
(a)Dong Bang Forwarding
1,342 1,342 Co. 34,826 34,826
-------- --------
</TABLE>
6
Blanchard Worldwide Emerging Markets Fund,
a Portfolio of Blanchard Funds
Portfolio of Investments
March 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares Value
----------------------------- -----------------------------
Blanchard Blanchard
Federated Worldwide Federated Worldwide
Emerging Emerging Emerging Emerging
Markets Markets Pro Forma Markets Markets Pro Forma
Fund Fund Combined Fund Fund Combined
--------- --------- --------- --------- --------- ---------
<C> <C> <C> <S> <C> <C> <C>
UTILITIES & RELATED--
2.4%
(a)Korea Electric Power
6,000 6,000 Corp. $233,941 $233,941
2,239 2,239 (a)Yukong, Ltd. 74,991 74,991
-------- --------
Total 308,932 308,932
-------- --------
Total Korea 474,957 474,957
-------- --------
MALAYSIA--7.8%
BUILDING MATERIALS &
COMPONENTS--0.3%
8,000 8,000 Sungei Way Hldgs $ 34,783 34,783
-------- --------
CONSUMER GOODS &
RELATED--0.8%
11,000 11,000 Edaran Otomobil Nasional 98,696 98,696
-------- --------
ENGINEERING--1.2%
22,000 22,000 United Engineers, Ltd. 152,174 152,174
-------- --------
FINANCIAL SERVICES--3.4%
Commerce Asset Holdings
5,000 31,000 36,000 Bhd 28,656 177,668 206,324
9,000 9,000 Rashid Hussain Bhd 28,636 28,636
55,000 55,000 Renong Berhad 89,565 89,565
(a)Renong Berhad,
6,875 6,875 Warrants 1,820 1,820
50,000 50,000 Westmont Berhad 106,719 106,719
(a)Westmont Berhad,
10,000 10,000 Right 4,150 4,150
-------- -------- --------
Total 57,292 379,922 437,214
-------- -------- --------
MACHINERY &
ENGINEERING--0.3%
Tractors Malaysia
20,000 20,000 Holdings Bhd 37,312 37,312
-------- --------
RETAIL--1.6%
LARUT Consolidated
133,000 133,000 Berhad 208,174 208,174
-------- --------
TRANSPORTATION--
SHIPPING--0.2%
Kelang Container
12,000 12,000 Terminal 30,119 -------- 30,119
-------- --------
Total Malaysia 159,506 838,966 998,472
-------- -------- --------
MEXICO--8.2%
AUTO PARTS--1.0%
Corporacion Industrial
Sanluis, S.A. de C.V.,
20,000 20,000 CPO 107,896 107,896
(a)Corporacion
Industrial Sanluis, S.A.
500 500 de C.V., ADR 15,935 15,935
-------- --------
Total 123,831 123,831
-------- --------
BANKING--1.0%
Grupo Financiero
15,900 43,000 58,900 Banamex, Class B 33,973 91,878 125,851
-------- -------- --------
BEVERAGE & TOBACCO--0.3%
Fomento Economico
Mexicano, S.A. de C.V.,
13,500 13,500 Class B 38,162 38,162
-------- --------
BROADCASTING &
PUBLISHING--0.2%
2,300 2,300 Grupo Televisa S.A. 28,845 28,845
-------- --------
BUILDING MATERIALS--0.7%
11,900 11,900 Apasco S.A. de CV 60,013 60,013
8,000 8,000 Cemex S.A., Class B 30,630 30,630
-------- -------- --------
Total 30,630 60,013 90,643
-------- -------- --------
ENGINEERING--0.7%
Empresas ICA Sociedad
2,300 4,700 7,000 Controladora S.A., ADR 30,097 61,100 91,197
-------- -------- --------
FINANCIAL SERVICES--0.9%
(a)Grupo Carso S.A. de
4,500 5,600 10,100 CV, ADR 35,116 87,039 122,155
-------- -------- --------
</TABLE>
7
Blanchard Worldwide Emerging Markets Fund,
a Portfolio of Blanchard Funds
Portfolio of Investments
March 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares Value
----------------------------- ------------------------------
Blanchard Blanchard
Federated Worldwide Federated Worldwide
Emerging Emerging Emerging Emerging
Markets Markets Pro Forma Markets Markets Pro Forma
Fund Fund Combined Fund Fund Combined
--------- --------- --------- --------- --------- ----------
<C> <C> <C> <S> <C> <C> <C>
FOREST PRODUCTS--0.6%
(a)Grupo Industrial
11,400 11,400 Durango S.A. de CV, ADR $ 78,375 $ 78,375
-------- ----------
HEALTH & PERSONAL CARE--
0.3%
1,800 1,800 Kimberly-Clark de Mexico $ 34,399 34,399
-------- ----------
HOME APPLIANCES--1.0%
Ceteco Holdings N.V.,
3,200 3,200 ADR 132,644 132,644
-------- ----------
MINING--0.6%
18,000 18,000 Industrial Penoles, S.A. 77,877 77,877
-------- ----------
MULTI-INDUSTRY--0.6%
Alfa, S.A. de C.V.,
2,400 4,000 6,400 Class A 31,851 53,086 84,937
-------- -------- ----------
TRANSPORTATION--
SHIPPING--0.3%
(a)Transportacion
Maritima Mexicana S.A.,
4,000 4,000 Class A 32,913 32,913
-------- ----------
Total Mexico 295,986 765,843 1,061,829
-------- -------- ----------
PERU--3.7%
BANKING--0.2%
16,100 16,100 (a)Banco Wiese 28,613 28,613
-------- ----------
BEVERAGE & TOBACCO--0.2%
Cervecer Backus &
20,000 20,000 Johnson, Class T 26,276 26,276
-------- ----------
FOOD PROCESSING--0.2%
65,000 65,000 D'Onofrino S.A. 26,531 26,531
-------- ----------
METALS--NON FERROUS--
0.2%
CIA DE Minas
4,025 4,025 Buenaventura 30,290 30,290
-------- ----------
MINING--0.0%
2 2 Peruvian Nouveau Sol 1 1
-------- ----------
REAL ESTATE--1.0%
345,000 345,000 (a)Peru Real Estate S.A. 127,650 127,650
-------- ----------
TELECOMMUNICATIONS--1.7%
Telefonica Del Peru,
14,000 43,874 57,874 CPT, Class B 28,869 90,471 119,340
1,500 1,500 Perusahaan Per Ind Sat 51,188 51,188
(a)Tele 2000 S.A.-La
27,000 27,000 Nueva Com de Telefonos 42,934 42,934
-------- -------- ----------
Total 71,803 141,659 213,462
-------- -------- ----------
WHOLESALE &
INTERNATIONAL TRADE--
0.2%
20,800 20,800 Enrique Ferreyros S.A. 26,088 26,088
-------- ----------
Total Peru 209,601 269,310 478,911
-------- -------- ----------
PHILIPPINES--3.2%
BANKING--1.0%
3,800 3,800 Metro Bank and Trust Co. 94,347 94,347
(a)Philippine National
2,200 2,200 Bank 28,782 28,782
-------- -------- ----------
Total 28,782 94,347 123,129
-------- -------- ----------
</TABLE>
8
Blanchard Worldwide Emerging Markets Fund,
a Portfolio of Blanchard Funds
Portfolio of Investments
March 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares Value
----------------------------- -----------------------------
Blanchard Blanchard
Federated Worldwide Federated Worldwide
Emerging Emerging Emerging Emerging
Markets Markets Pro Forma Markets Markets Pro Forma
Fund Fund Combined Fund Fund Combined
--------- --------- --------- --------- --------- ---------
<C> <C> <C> <S> <C> <C> <C>
BUILDING MATERIALS &
COMPONENTS--0.0%
10,000 10,000 Sanitary Wares Mfg $ 3,323 $ 3,323
-------- --------
ELECTRICAL &
ELECTRONICS--0.2%
400,000 400,000 EEI Corp. 28,418 28,418
-------- --------
MULTI-INDUSTRY--0.2%
First Philippine
16,000 16,000 Holdings Corp., Class B 29,641 29,641
-------- --------
OIL GAS/EXPLORATION--
0.8%
750,000 750,000 (a)Belle Corporation $ 97,403 97,403
-------- --------
REAL ESTATE--0.8%
Ayala Land, Inc., Class
22,000 22,000 B 35,714 35,714
200,000 200,000 Guoco Holdings 33,613 33,613
(a)Robinson's Land
172,000 172,000 Corp., Class B 30,550 30,550
-------- --------
Total 99,877 99,877
-------- --------
UTILITIES--ELECTRICAL &
GAS--0.2%
Manila Electric Co.,
3,400 3,400 Class B 30,000 30,000
-------- --------
Total Philippines 220,041 191,750 411,791
-------- -------- --------
POLAND--4.9%
CAPITAL GOODS--1.3%
(a)Bydgoska Fabryka
3,000 3,000 Kabli S.A. 73,038 73,038
4,000 4,000 (a)Debica S.A. 97,384 97,384
-------- --------
Total 170,422 170,422
-------- --------
CONSUMER GOODS &
RELATED--1.2%
(a)Huta Szkla
1,400 1,400 Gospodarczego Irena 15,257 15,257
18,550 18,550 (a)Mostostal Export 54,481 54,481
(a)Zyweic Powowarskiew
1,019 1,019 PLZ 83,876 83,876
-------- --------
Total 153,614 153,614
-------- --------
FINANCIAL SERVICES--2.4%
(a)Bank Rozwoju Eksportu
7,200 7,200 S.A. 153,032 153,032
895 895 (a)Bank Slaski S.A. 63,294 63,294
(a)Elektrim Towarzystwo
15,760 15,760 Handlowe S.A. 93,182 93,182
-------- --------
Total 309,508 309,508
-------- --------
Total Poland 633,544 633,544
-------- --------
PORTUGAL--1.7%
AUTOMOBILE--0.3%
Salvador Caetano
Industrias Metalurgicas
e Veiculos de Transporte
2,800 2,800 S.A. 33,045 33,045
-------- --------
BANKING--0.5%
Banco Commerical
2,200 2,200 Portugues, Class R 30,219 30,219
Banco Totta & Acores
1,500 1,500 Nationalisiert, Class B 29,209 29,209
-------- --------
Total 59,428 59,428
-------- --------
</TABLE>
9
Blanchard Worldwide Emerging Markets Fund,
a Portfolio of Blanchard Funds
Portfolio of Investments
March 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares Value
----------------------------- -----------------------------
Blanchard Blanchard
Federated Worldwide Federated Worldwide
Emerging Emerging Emerging Emerging
Markets Markets Pro Forma Markets Markets Pro Forma
Fund Fund Combined Fund Fund Combined
--------- --------- --------- --------- --------- ---------
<C> <C> <C> <S> <C> <C> <C>
CHEMICALS--0.2%
CIN-Corparacao
1,200 1,200 Industrial do Norte S.A. $ 30,291 $ 30,291
-------- --------
CONSTRUCTION & HOUSING--
0.2%
6,000 6,000 Somague-Sgps 31,314 31,314
-------- --------
FOOD & HOUSEHOLD
PRODUCTS--0.3%
Estabelecimentos
Jeronimo Martins & Filho
500 500 SGPS, S.A. 37,113 37,113
-------- --------
TELECOMMUNICATIONS--0.2%
1,200 1,200 (a)Portugal Telecom S.A. 27,105 27,105
-------- --------
Total Portugal 218,296 218,296
-------- --------
RUSSIA--1.7%
TELECOMMUNICATIONS--0.8%
Nizhnyu Novgordo
20,000 20,000 Svyazinfor 30,000 30,000
(a)Petersburg Long
11,000 11,000 Distance, Inc. $ 54,312 54,312
30,000 30,000 (a)Rostelekom 27,900 27,900
-------- -------- --------
Total 57,900 54,312 112,212
-------- -------- --------
UTILITIES--ELECTRICAL &
GAS--0.6%
10,000 10,000 Irkutsk Entergo 46,300 46,300
4,300 4,300 (a)Mosenergo, ADR 31,175 31,175
-------- --------
Total 77,475 77,475
-------- --------
UTILITIES--OIL & GAS--
0.3%
1,800 1,800 (a)Lukoil Oil Co., ADR 34,650 34,650
-------- -------- --------
Total Russia 170,025 54,312 224,337
-------- -------- --------
SLOVENIA--0.4%
BANKING--0.4%
210 210 Slovenia Kredit Bank 50,106 50,106
-------- --------
SOUTH AFRICA--5.8%
BASIC INDUSTRY--0.8%
10,000 10,000 Sasol, Ltd. 97,578 97,578
-------- --------
CONSUMER GOODS &
RELATED--0.5%
11,242 11,242 (a)JD Group, Ltd. 65,380 65,380
-------- --------
ENTERTAINMENT--0.7%
66,000 66,000 Sun International, Ltd. 89,631 89,631
-------- --------
FINANCIAL SERVICES--1.0%
6,500 6,500 Barlow Limited 83,369 83,369
7,000 7,000 (a)Malbak Limited 41,370 41,370
-------- --------
Total 124,739 124,739
-------- --------
INDUSTRIAL--0.4%
Anglo American
1,000 1,000 Industrial Corp., Ltd. 48,035 48,035
-------- --------
</TABLE>
10
Blanchard Worldwide Emerging Markets Fund,
a Portfolio of Blanchard Funds
Portfolio of Investments
March 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares Value
----------------------------- -----------------------------
Blanchard Blanchard
Federated Worldwide Federated Worldwide
Emerging Emerging Emerging Emerging
Markets Markets Pro Forma Markets Markets Pro Forma
Fund Fund Combined Fund Fund Combined
--------- --------- --------- --------- --------- ---------
<C> <C> <C> <S> <C> <C> <C>
INVESTMENT COMPANIES--
0.8%
Liberty Life Strategic
27,000 27,000 Investments, Ltd. $103,551 $103,551
-------- --------
METALS & MINING--0.4%
Free State Consolidated
5,500 5,500 Gold Mines, Ltd. 53,599 53,599
-------- --------
MINING--0.2%
Anglo American Coal
500 500 Corp. 30,807 30,807
-------- --------
PHARMACEUTICALS--0.4%
South African Druggists,
5,500 5,500 Ltd. 53,253 53,253
-------- --------
RETAIL--0.6%
6,300 6,300 Q Data, Ltd. 82,388 82,388
-------- --------
Total South Africa 748,961 748,961
-------- --------
TAIWAN--0.1%
BASIC INDUSTRY--0.1%
(a)Tuntex Distinct
1,700 1,700 Corp., GDR 10,625 10,625
-------- --------
THAILAND--6.4%
CAPITAL GOODS--1.6%
(a)Hana Microelectronics
5,400 12,000 17,400 Co., Ltd. $ 30,371 67,490 97,861
21,000 21,000 TPI Polene Co., Ltd. 113,950 113,950
-------- -------- --------
Total 30,371 181,440 211,811
-------- -------- --------
FINANCIAL SERVICES--1.9%
(a)Industrial Finance
8,400 8,400 Corporation of Thailand 30,608 30,608
6,700 21,000 27,700 Krung Thai Bank PLC 31,579 98,978 130,557
31,500 31,500 MDX Co., Ltd.--Foreign 46,162 46,162
2,900 2,900 Thai Farmers Bank Co. 33,999 33,999
-------- -------- --------
Total 96,186 145,140 241,326
-------- -------- --------
HOUSEHOLD APPLIANCES--
0.2%
3,100 3,100 Singer Thailand 24,802 24,802
-------- --------
INDUSTRIAL--1.2%
180,000 180,000 Siam Sindhorn, Conv.
Bond, Series WW, 2.00%,
7/31/2000 160,200 160,200
-------- --------
MINING--0.2%
Banpu Public Company,
1,200 1,200 Ltd. 30,228 30,228
--------
TELECOMMUNICATIONS--0.2%
Advanced Information
1,500 1,500 Services 28,161 28,161
--------
TRANSPORTATION--1.1%
24,000 24,000 Precious Shipping, Ltd. 140,684 140,684
-------- -------- --------
Total Thailand 209,748 627,464 837,212
-------- -------- --------
TURKEY--3.7%
BANKING--0.3%
900,000 900,000 Demirbank T.A.S. 34,734 34,734
-------- --------
</TABLE>
11
Blanchard Worldwide Emerging Markets Fund,
a Portfolio of Blanchard Funds
Portfolio of Investments
March 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Shares Value
------------------------------- ---------------------------------
Blanchard Blanchard
Federated Worldwide Federated Worldwide
Emerging Emerging Emerging Emerging
Markets Markets Pro Forma Markets Markets Pro Forma
Fund Fund Combined Fund Fund Combined
---------- --------- ---------- ---------- ---------- -----------
<C> <C> <C> <S> <C> <C> <C>
BEVERAGE & TOBACCO--0.2%
Erciyas Biracilik Ve
45,000 45,000 Malt Sanayii $ 27,156 $ 27,156
---------- -----------
CHEMICALS--0.4%
Aksa Akrilik Kimya
73,000 73,000 Sanayii A.S. 26,637 26,637
(a)Petkim Petrokimya
32,000 32,000 Holding A.S. 23,353 23,353
---------- -----------
Total 49,990 49,990
---------- -----------
CONSUMER GOODS &
RELATED--1.2%
28,000 122,400 150,400 (a)Migros Turk 29,865 $ 130,551 160,416
---------- ---------- -----------
ELECTRICAL &
ELECTRONICS--0.2%
85,000 85,000 Netas Telekomunik 26,244 26,244
---------- -----------
FOREST PRODUCTS &
PAPER--0.2%
Kartonsan Karton Sanayi
80,000 80,000 Ve Ticaret A.S. 30,314 30,314
---------- -----------
IRON/STEEL--0.8%
Eregli Demir Ve Celik
860,000 860,000 Fabrikalari T.A.S. 100,175 100,175
---------- -----------
MULTI-INDUSTRY--0.4%
(a)Koc Yatirim Ve Sanayi
120,000 120,000 Mamulleri Pazarlama S.A. 33,682 33,682
90,000 90,000 (a)EnkaHolding Yatirim 23,683 23,683
---------- -----------
Total 57,365 57,365
---------- -----------
Total Turkey 255,668 230,726 486,394
---------- ---------- -----------
URUGUAY--0.5%
FINANCIAL SERVICES--0.5%
Banco Comerical S.A.,
4,700 4,700 GDR 71,675 71,675
---------- -----------
TOTAL EMERGING MARKETS
SECURITIES (IDENTIFIED
COST $12,252,344) 3,548,813 7,935,831 11,484,644
---------- ---------- -----------
(C)REPURCHASE AGREEMENT--11.1%
BT Securities
Corporation, 5.43%,
dated 3/29/1996, due
4/1/1996 (at amortized
$1,435,000 $1,435,000 cost) 1,435,000 1,435,000
---------- -----------
TOTAL INVESTMENTS
(IDENTIFIED COST
$13,687,344)(D) $4,983,813 $7,935,831 $12,919,644
---------- ---------- -----------
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resales
under Federal Securities laws. At the end of the period, these securities
amounted to $54,670 which represents 0.4% of net assets.
(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
The investment in the repurchase agreement is through participation in a
joint account with other Federated Funds.
(d) The cost of investments for federal tax purposes amounts to $13,687,344.
The net unrealized depreciation of investments on a federal tax basis
amounts to $767,700 which is comprised of $1,217,058 depreciation and
$449,358 appreciation at March 31, 1996.
The following acronyms are used throughout this portfolio:
ADR--American Depository Receipt GDR--Global Depository Receipts PLC--Public
Limited Company SA--Support Agreement
Note: The categories of investments are shown as a percentage of net assets
($12,987,627) at March 31, 1996.
(See Notes which are an integral part of the Financial Statements)
12
Federated Emerging Markets Fund
Blanchard Worldwide Emerging Markets Fund
Pro Forma Combining Statement of Assets and Liabilities
March 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Blanchard
Federated Worldwide
Emerging Emerging Pro Forma Pro Forma
Markets Fund Markets Fund Adjustment Combined
------------ ------------ ---------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments in repurchase
agreements, at amotized
cost and value........... $1,435,000 $ -- -- $ 1,435,000
Investments in securities,
at value................. 3,548,813 7,935,830 -- 11,484,643
---------- ----------- -----------
Total investments, at
amortized cost and value
(identified cost,
$13,687,344)............. 4,983,813 7,935,830 -- 12,919,643
Cash...................... 183 -- -- 183
Cash denominated in
foreign currencies (at
cost, $1,473)............ -- 1,483 -- 1,483
Income receivable......... 6,256 22,022 -- 28,278
Receivable for investments
sold..................... -- 13,744 -- 13,744
Prepaid expenses.......... 15,002 93,594 -- 108,596
Receivable for shares
sold..................... 6,890 -- -- 6,890
---------- ----------- --------- -----------
Total assets.............. 5,012,144 8,066,673 -- 13,078,817
LIABILITIES:
Payable to Bank........... -- 17,971 -- 17,971
Payable for:
Taxes withheld........... 356 2,334 -- 2,690
Investments purchased.... -- 18,338 -- 18,338
Foreign currency
purchased............... -- 236 -- 236
Shares redeemed.......... -- 997 -- 997
Accrued expenses.......... -- 50,958 -- 50,958
---------- ----------- --------- -----------
Total liabilities........ 356 90,834 -- 91,190
---------- ----------- --------- -----------
Net Assets................ $5,011,788 $ 7,975,839 -- $12,987,627
---------- ----------- --------- -----------
NET ASSETS CONSISTS OF:
Paid in capital........... $5,017,478 $12,250,432 -- 17,267,910
Net unrealized
depreciation of
investments and
translation of assets
and liabilities in
foreign currency......... (10,937) (756,966) -- (767,903)
Accumulated net realized
loss on investments and
foreign
currency transactions.... -- (3,085,092) -- (3,085,092)
Distributions in excess of
net investment income.... -- (432,535) -- (432,535)
Undistributed net
investment income........ 5,247 -- -- 5,247
---------- ----------- --------- -----------
Total Net Assets.......... $5,011,788 $ 7,975,839 -- $12,987,627
---------- ----------- --------- -----------
NET ASSETS:
Class A Shares............ $4,921,068 $ 7,975,839 $ -- $12,896,907
Class B Shares............ $ 76,024 $ -- $ -- $ 76,024
Class C Shares............ $ 14,696 $ -- $ -- $ 14,696
SHARES OUTSTANDING:
Class A Shares............ 492,676 1,265,547 (467,455)(a) 1,290,768
Class B Shares............ 7,613 -- -- 7,613
Class C Shares............ 1,471 -- -- 1,471
NET ASSET VALUE, OFFERING
PRICE, AND REDEMPTION
PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share. $9.99 -- -- $9.99
---------- ----------- --------- -----------
CLASS B SHARES:
Net Asset Value Per Share. $9.99 -- -- $9.99
---------- ----------- --------- -----------
CLASS C SHARES:
Net Asset Value Per Share. $9.99 -- -- $9.99
---------- ----------- --------- -----------
BLANCHARD WORLDWIDE
EMERGING MARKETS SHARES
Net Asset Value Per Share. -- $6.30 -- $9.99
---------- ----------- --------- -----------
</TABLE>
(a)Adjustment to reflect share balance as a result of the combination, based on
an exchange ratio of 0.63063063 ($6.30/$9.99).
(See Notes to Pro Forma Financial Statements)
13
Federated Emerging Markets Fund
Blanchard Worldwide Emerging Markets Fund
Pro Forma Combining Statement of Operations
For the period from January 31, 1996 to March 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Blanchard
Federated Worldwide
Emerging Emerging Pro Forma Pro Forma
Markets Fund Markets Fund Adjustments Notes Combined
------------ ------------ ----------- ----- ---------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of
foreign taxes
withheld of $47,441)... $ 6,880 $ 64,935 $ -- $ 71,815
Interest................ 7,437 -- -- 7,437
-------- --------- -------- ---------
Total income.......... 14,317 64,935 -- 79,252
EXPENSES:
Investment advisory fee. 5,727 18,727 -- 24,454
Administrative personnel
and services fee....... 30,833 12,500 (12,500) (a) 30,833
Custodian fees.......... 8,624 4,160 (2,285) (c) 10,499
Transfer agent and
dividend disbursing
agent fees and
expenses............... 6,473 17,416 -- 23,889
Directors'/Trustees'
fees................... -- 391 (391) (f) --
Auditing fees........... -- 5,069 (5,069) (f) --
Legal fees.............. 1,066 3,733 (799) (e) 4,000
Portfolio accounting
fees................... 9,250 10,213 (10,213) (b) 9,250
Distribution services
fee.................... -- 7,491 (7,491) (g) --
Share registration
costs.................. 924 1,933 -- 2,857
Printing and postage.... 1,882 3,848 (1,730) (d) 4,000
Insurance premiums...... 627 -- 627
Miscellaneous........... 668 5,103 (1,030) (g) 4,741
-------- --------- -------- ---------
Total expenses........ 66,074 90,584 (41,508) 115,150
-------- --------- -------- ---------
Waivers and
reimbursements--
Waiver of investment
advisory fee.......... (5,727) (18,727) 2,468 (h) (21,986)
Waiver of
administrative
personnel and services
fee................... -- (11,090) 11,090 (a) --
Reimbursement of other
operating expenses.... (52,406) (6,983) -- (59,389)
-------- --------- -------- ---------
Total waivers and
reimbursements....... (58,133) (36,800) 13,558 (81,375)
-------- --------- -------- ---------
Net expenses.......... 7,941 53,784 (27,950) 33,775
-------- --------- -------- ---------
Net investment
income.............. 6,376 11,151 27,950 45,477
-------- --------- -------- ---------
REALIZED AND UNREALIZED
GAIN/(LOSS) ON
INVESTMENTS:
Net realized loss on
investments and foreign
currency transactions.. -- (532,720) -- (532,720)
Net change in unrealized
depreciation of
investments and
translation of assets
and liabilities in
foreign currency....... (10,937) (190,952) -- (201,889)
-------- --------- -------- ---------
Net realized and
unrealized loss on
investments and
foreign currency..... (10,937) (723,672) -- (734,609)
-------- --------- -------- ---------
Change in net assets
resulting from
operations.......... $ (4,561) $(712,521) $ 27,950 $(689,132)
-------- --------- -------- ---------
</TABLE>
(See legend to the Statement of Operations)
(See Notes to Pro Forma Financial Statements)
14
Federated Emerging Markets Fund
Blanchard Worldwide Emerging Markets Fund
Pro Forma Combining Statement of Operations (continued)
For The Period January 31, 1996 Through March 31, 1996
(a) Administrative personnel services for the combined fund would be charged
an annual rate of 0.15 of 1% on the first $250 million of average aggregate
daily net assets of the Federated Funds; 0.125 of 1% on the next $250 million;
0.10 of 1% on the next $250 million; and 0.075 of 1% on the average aggregate
daily net assets of the Federated Funds in excess of $750 million, subject to
a minimum charge of $125,000 per portfolio and $30,000 per each additional
class of shares.
(b) Federated Services Company maintains the Fund accounting records for which
it receives a fee. The fee is based on the level of Fund's average daily net
assets for the period plus out-of-pocket expenses.
(c) State Street Bank and Trust Company is custodian for the securities and
cash of the Fund. The custodian fee is based on a percentage of assets, plus
out-of-pocket expenses.
(d) Printing and postage expenses are adjusted to reflect estimated savings to
be realized by combining two portfolios into a single portfolio.
(e) Legal expenses are adjusted to reflect estimated savings to be realized by
combining two portfolios into a single portfolio.
(f) These costs for the first year are deferred.
(g) Other expenses are adjusted to reflect estimated savings to be realized by
combining two portfolios into a single portfolio.
(h) Federated Global Research Corp. is entitled to receive for its services an
annual investment advisory fee equal to 1.25% of the fund's average daily net
assets. The advisor may voluntarily choose to waive its fee and reimburse a
portion of certain other operating expenses. The advisor can modify or
terminate this voluntary waiver and/or reimbursement at any time at its sole
discretion.
15
Federated Emerging Markets Fund
Blanchard Worldwide Emerging Markets Fund
Notes to Pro Forma Financial Statements (unaudited)
1.BASIS OF COMBINATION
The unaudited Pro Forma Combining Portfolio of Investments, Statement of
Operations, and the Statement of Assets and Liabilities ("Pro Forma
Financial Statements") reflect the accounts of Federated Emerging Markets
Fund and Blanchard Worldwide Emerging Markets Fund, (collectively, the
"Funds") for the period from January 31, 1996 to March 31, 1996, and as of
March 31, 1996, with the regard to the Statement of Assets and Liabilities.
These statements have been derived from the books and records utilized in
calculating daily net asset values at March 31, 1996.
The Pro Forma Combining Portfolio of Investments, Statement of Assets and
Liabilities and Statement of Operations should be read in conjunction with
the historical financial statements of the Funds incorporated by reference
in the Statement of Additional Information. The Funds follow generally
accepted accounting principles applicable to management investment
companies which are disclosed in the historical financial statements of
each Fund.
The Pro Forma Financial Statements give effect to the proposed transfer of
the assets of Blanchard Worldwide Emerging Markets Fund in exchange for
Class A Shares of Federated Emerging Markets Fund. Under generally accepted
accounting principles, Federated Emerging Markets Fund will be the
surviving entity for accounting purposes with its historical cost of
investment securities and results of operations being carried forward.
The Pro Forma Financial Statements have been adjusted to reflect the
anticipated advisory and administration fee arrangements for the surviving
entity. Certain other operating costs have also been adjusted to reflect
anticipated expenses of the combined entity. Other costs which may change
as a result of the reorganization are currently undeterminable.
For the period ended March 31, 1996, Federated Emerging Markets Fund and
Blanchard Worldwide Emerging Markets Fund paid investment advisory fees
computed at the annual rate of 1.25% of the Fund's average net assets,
respectively.
The advisor and administrator may voluntarily choose to waive a portion of
their fees and reimburse certain operating expenses of Federated Emerging
Markets Fund and Blanchard Worldwide Emerging Markets Fund.
2.SHARES OF BENEFICIAL INTEREST
The Pro Forma net asset value per share assumes the issuance of 798,092
shares of the Federated Emerging Markets Fund's Class A Shares in exchange
for 1,265,547 shares from the Blanchard Worldwide Emerging Markets Fund
which would have been issued at March 31, 1996, in connection with the
proposed reorganization.
G01686-04 (7/96)
