1933 Act File No. 33-52149
1940 Act File No. 811-7141
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. ....................
Post-Effective Amendment No. 13 .................... X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 14 ................................... X
WORLD INVESTMENT SERIES, INC.
(Exact Name of Registrant as Specified in Charter)
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) on _______________
pursuant to paragraph (b)(1)(v) 60 days after filing pursuant to paragraph
(a) (i)
_ on _______________ pursuant to paragraph (a) (i)
X 75 days after filing pursuant to paragraph (a)(ii)
on _________________ pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Copies to:
Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037
<PAGE>
CROSS-REFERENCE SHEET
This amendment to the Registration Statement of WORLD INVESTMENT SERIES,
INC., which is comprised of eight portfolios: (1) Federated World Utility Fund
consisting of four classes of shares (a) Class A Shares, (b) Class F Shares, (c)
Class B Shares, and (d) Class C Shares; (2) Federated Asia Pacific Growth Fund
consisting of three classes of shares (a) Class A Shares, (b) Class B Shares,
and (c) Class C Shares; (3) Federated Emerging Markets Fund consisting of three
classes of shares (a) Class A Shares, (b) Class B Shares, and (c) Class C
Shares; (4) Federated European Growth Fund consisting of three classes of shares
(a) Class A Shares, (b) Class B Shares, and (c) Class C Shares; (5) Federated
International Small Company Fund consisting of three classes of shares (a) Class
A Shares, (b) Class B Shares, and (c) Class C Shares; (6) Federated Latin
American Growth Fund consisting of three classes of shares (a) Class A Shares,
(b) Class B Shares, and (c) Class C Shares; (7) Federated International High
Income Fund consisting of three classes of shares (a) Class A Shares, (b) Class
B Shares, and (c) Class C Shares, (8) Federated International Growth Fund
consisting of three classes of shares (a) Class A Shares, (b) Class B Shares,
and (c) Class C Shares and (9) Federated global Equity Income Fund consisting of
three classes of shares (a) Class A Shares, (b) Class B Shares, and (c) Class C
Shares. This filing relates only to Federated Global Equity Income Fund and is
comprised of the following (The remaining references to other portfolios, with
exception of Item 23, have been kept for easier cross-referencing):
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
<TABLE>
<CAPTION>
<S> <C> <C>
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page....................(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c, 8a-c,9a-c) Cover Page.
Item 2. Synopsis......................(1a-d, 2a-c,3a-c,4a-c,5a-c,6a-c,7a-c,8a-c, 9a-c) Summary of Fund
Expenses.
Item 3. Condensed Financial
Information
..................(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c,8a-c,
9a-c) Performance Information; (1a,
2a, 3a, 4a, 5a, 6a, 7a,) Financial
Highlights-Class A Shares; (1b)
Financial Highlights-Class F Shares;
(1c,2b,3b,4b,5b,6b,7b) Financial
Highlights-Class B Shares; (1d,2c,
3c,4c,5c,6c,7c) Financial
Highlights-Class C Shares.
Item 4. General Description
of Registrant ...............(1a-d, 9a-c) General Information; (2a-c,3a-c,4a-c,5a-c,6a-c,7a-c,8a-c)
Synopsis; (1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c,8a-c) Investment
Information; (1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c,8a-c, 9a-c)
Investment Objective;(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c,8a-c,
9a-c) Investment Policies; (1a-d) Risk Factors and
Investment Considerations; (9a-c) Risk of Futures and Options
Transactions; (9a-c )Risk Characteristics of Foreign Securities;
(9a-c) currency Risks; (9a-c) risk Factors Relating to
Investing in High Yield Securities; (7a-c, 9a-c) Risk Considerations
in Emerging Markets;(1a-d)Other Investment Practices; (1a-d,2a-c,3a-c,4a-c,
5a-c,6a-c,7a-c,8a-c, 9a-c) Investment Limitations.
<PAGE>
Item 5. Management of the Fund (1a-d,7a-c) Fund Information; (2a-c, 3a-c,4a-c,5a-c,6a-c,8a-c,
9a-c) Corporation Information; (1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,
7a-c,8a-c, 9a-c) Management of the Corporation; (1a,c,d,
2a-c,3a-c,4a-c,5a-c,6a-c, 7a-c, 8a-c, 9a-c) Distribution of Shares;
(1b) Distribution of Class F Shares; (1a-d,2a-c,3a-c,4a-c,5a-c,6a-
c,7a-c, 8a-c, 9a-c) Administration of the Fund;
(2a-c,3a-c,4a-c,5a-c,6a-c,7a-c, 8a-c, 9a-c) Expenses of the Fund
and Class A Shares, Class B Shares, and Class C Shares; (1a-d,2a-
c,3a-c,4a-c,5a-c,6a-c, 7a-c, 8a-c, 9a-c) Brokerage
Transactions.
Item 6. Capital Stock and
Other Securities ............(1a-d, 7a-c, 9a-c) Dividends and Distributions; (2a-c,3a-c,4a-c,
5a-c,6a-c,8a-c)Dividends; (1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c,8a-
c, 9a-c) Account and Share Information;(1a-d,2a-c,3a-c,4a-c,5a-c,
6a-c,7a-c,8a-c, 9a-c) Shareholder Information;
(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c,8a-c, 9a-c) Voting Rights;
(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c,8a-c, 9a-c) Tax Information;
(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c,8a-c, 9a-c) Federal Income
Tax;(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c,8a-c, 9a-c) State and
Local Taxes; (1a-d,2a,3a,4a,5a,6a) Other
Classes of Shares.
Item 7. Purchase of Securities Being
Offered
......................(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c,
8a-c, 9a-c) Net Asset Value;
(1a,1c,1d,
2a-c,3a-c,4a-c,5a-c,6a-c,7a-c,8a-c,
9a-c) Investing in the Fund;
(1a,1c,1d, 2a-c,3a-c,4a-c,5a-c,6a-c,
7a-c, 8a-c) How To Purchase Shares;
(9a-c)Purchasing Shares;
(1a,2a,3a,4a,5a,6a,7a,8a) Investing in
Class A Shares; (1b) Investing in
Class F Shares;
(1c,2b,3b,4b,5b,6b,7b,8b) Investing in
Class B Shares;
(1d,2c,3c,4c,5c,6c,7c,8c) Investing in
Class C Shares; (1a,c,d,
2a-c,3a-c,4a-c,5a-c,6a-c,7a-c, 8a-c)
Special Purchase Features; (1b) Share
Purchases; (1b) Minimum Investment
Required; (1b) What Shares Cost; (1b,
2a-c,3a-c,4a-c,5a-c,6a-c, 7a, 8a-c)
Reducing or Eliminating the Sales
Charge; (1b,
2a-c,3a-c,4a-c,5a-c,6a-c,7a-c,8a-c,
9a-c) Systematic Investment Program;
(1b) Exchanging Securities for Fund
Shares; (1a-d,
2a-c,3a-c,4a-c,5a-c,6a-c, 7a-c, 8a-c)
Certificates and Confirmations; 9a-c
Confirmations and Account Statements;
(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c,
8a-c) Exchange Privilege.
<PAGE>
Item 8. Redemption or Repurchase (1a,1c,1d, 2a-c,3a-c,4a-c,5a-c,6a-c,7a-c,8a-c) How To Redeem
Shares; (9a-c) Redeeming and Exchanging Shares;(1b) Redeeming
Class F Shares; (1b,7a-c) Through a Financial Institution; (9a-c)
Redeeming or Exchanging Through a Financial Intermediary;(1b,2a-c,
3a-c,4a-c,5a-c,6a-c,7a-c,8a-c)Redeeming Shares by Telephone;
(9a-c) Redeeming or Exchanging Shares by Telephone;
(1b,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c,8a-c) Redeeming Shares by Mail;
(9a-c) Redeeming or Exchanging Shares by Mail; (9a-c) Requirements
for Redemption; (9a-c) Requirments for Exchange;
(1a,1c,1d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c,8a-c) Special Redemption
Features;(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c,8a-c, 9a-c)
Contingent Deferred Sales Charge; (1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,
7a-c, 8a-c, 9a-c) Elimination of Contingent Deferred Sales Charge;
(1b,7a-c, 9a-c) Systematic Withdrawal Program; (1a-d, 2a-c,3a-c,
4a-c,5a-c,6a-c,7a-c,8a-c, 9a-c) Accounts With Low Balances.
Item 9. Pending Legal Proceedings None
<PAGE>
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page....................(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c, 8a-c, 9a-c) Cover Page.
Item 11. Table of Contents.............(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c, 8a-c, 9a-c) Table of
Contents.
Item 12. General Information
and History...................(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c, 8a-c, 9a-c) General Information
About the Fund; (1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c, 8a-c, 9a-c)
About Federated Investors.
Item 13. Investment Objectives
and Policies..................(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c, 8a-c, 9a-c) Investment
Objective and Policies.
Item 14. Management of the Corporation.(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c, 8a-c, 9a-c) World Investment
Series, Inc. Management; Directors Compensation.
Item 15. Control Persons and Principal
Holders of Securities.........(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c,
8a-c) Fund Ownership.
Item 16. Investment Advisory and Other
Services......................(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c, 8a-c, 9a-c) Investment
Advisory Services; (1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c, 8a-c,
9a-c) Other Services.
Item 17. Brokerage Allocation..........(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c,
8a-c, 9a-c) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities. Not applicable.
Item 19. Purchase, Redemption
and Pricing of Securities
Being Offered.................(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c, 8a-c, 9a-c) Purchasing
Shares;(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c, 8a-c, 9a-c)
Determining Net Asset Value; (1b) Exchange
Privilege; (1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c, 8a-c, 9a-c)
Redeeming Shares.
Item 20. Tax Status....................(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c, 8a-c, 9a-c) Tax Status.
Item 21. Underwriters..................(1b-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c, 8a-c, 9a-c) Distribution
Plan and Shareholder Services Agreement.
<PAGE>
Item 22. Calculation of
Performance Data..............(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c, 8a-c) Total Return;
(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c, 8a-c) Yield;
(1a-d,2a-c,3a-c,4a-c,5a-c,6a-c,7a-c, 8a-c) Performance
Comparisons.
Item 23. Financial Statements. (9a-c) Not Applicable
</TABLE>
Federated Global Equity Income Fund
(A Portfolio of World Investment Series, Inc.)
Class A Shares
Class B Shares
Class C Shares
Prospectus
The shares of Federated Global Equity Income Fund (the "Fund") represent
interests in a diversified investment portfolio of World Investment Series, Inc.
(the "Corporation"), an open-end management investment company (a mutual fund).
The investment objective of the Fund is to provide capital appreciation and
above-average income. The Fund pursues its investment objective by investing
primarily in a professionally managed and diversified portfolio of
income-producing global equity securities.
The shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank, and are not insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in these shares involves investment risks,
including the possible loss of principal.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information for Class A
Shares, Class B Shares and Class C Shares dated _____________, 1998, with the
Securities and Exchange Commission ("SEC"). The information contained in the
Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information or
a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-341-7400. To obtain other
information or to make inquiries about the Fund, contact the Fund at the address
listed in the back of this prospectus. The Statement of Additional Information,
material incorporated by reference into this document, and other information
regarding the Fund are maintained electronically with the SEC at Internet Web
site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Prospectus dated _______________, 1998
<PAGE>
Table of Contents
<PAGE>
FEDERATED GLOBAL EQUITY INCOME FUND
Summary of Fund Expenses
<TABLE>
<CAPTION>
Class A Shares
Shareholder Transaction Expenses
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 0.00%
Maximum Sales Charge Imposed on Reinvested Dividends .......... (as a percentage of offering price)
None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable) .................. None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee................................................... None
</TABLE>
Annual Operating Expenses
(As a percentage of projected average net assets)*
Management Fee (after waiver) (1).............................. 0.00%
12b-1 Fee (2).................................................. 0.00%
Total Other Expenses........................................... 0.00%
Shareholder Services Fee........................ 0.00%
Total Operating Expenses (3)................................... 0.00%
(1) The estimated management fee 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 0.00%.
(2) Class A Shares has no present intention of paying or accruing the 12b-1 fee
during the fiscal year ending November 30, 1998. If Class A Shares were paying
or accruing the 12b-1 fee, Class A Shares would be able to pay up to 0.00% of
its average daily net assets for the 12b-1 fee. See "Corporation Information".
(3) The total operating expenses are estimated to be 0.00% absent the
anticipated voluntary waiver of a portion of the management fee.
*Total operating expenses are estimated based on average expenses expected to be
incurred during the period ending November 30, 1998. During the course of this
period, expenses may be more or less than the average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class A Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Corporation Information". Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
EXAMPLE............................. 1 year 3 years
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return,
(2) redemption at the end of each time period,
and (3) payment of the maximum sales charge. $00 $000
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 the Class A Shares fiscal year ending November
30, 1998.
<PAGE>
FEDERATED GLOBAL EQUITY INCOME FUND
Summary of Fund Expenses............
Class B Shares
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends .......... (as a percentage of offering price)
None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable) (1)............... 0.00%
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee................................................... None
</TABLE>
Annual Operating Expenses
(As a percentage of projected average net assets)*
Management Fee (after waiver) (2).............................. 0.00%
12b-1 Fee...................................................... 0.00%
Total Other Expenses........................................... 0.00%
Shareholder Services Fee ....................... 0.00%
Total Operating Expenses (3) (4)............................... 0.00%
(1) The contingent deferred sales charge is 0.00% in the first year, declining
to 0.00% in the sixth year and 0.00% thereafter. (See "Contingent Deferred
Sales Charge").
(2) The estimated management fee 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 0.00%.
(3) Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase.
(4) The total operating expenses are estimated to be 0.00% absent the
anticipated voluntary waiver of a portion of the management fee.
*Total operating expenses are estimated based on average expenses expected to be
incurred during the period ending November 30, 1998. During the course of this
period, expenses may be more or less than the average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class B Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Corporation Information". Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
Long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted under the rules of the National Association of
Securities Dealers, Inc.
EXAMPLE............................. 1 year 3 years
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return,
(2) redemption at the end of each time period, and
(3) payment of the maximum sales charge. $00 $000
You would pay the following expenses on the same
investment, assuming no redemption.. $00 $00
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 the Class B Shares fiscal year ending November
30, 1998.
<PAGE>
FEDERATED GLOBAL EQUITY INCOME FUND
Summary of Fund Expenses............
<TABLE>
<CAPTION>
Class C Shares
Shareholder Transaction Expenses
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends .......... (as a percentage of offering price)
None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable) (1)............... 0.00%
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee................................................... None
</TABLE>
Annual Operating Expenses
(As a percentage of projected average net assets)*
Management Fee (after waiver) (2).............................. 0.00%
12b-1 Fee...................................................... 0.00%
Total Other Expenses........................................... 0.00%
Shareholder Services Fee........................ 0.00%
Total Operating Expenses (3)................................... 0.00%
(1) The contingent deferred sales charge assessed is 0.00% of the lesser of the
original purchase price or the net asset value of Shares redeemed within one
year of their purchase date. (See "Contingent Deferred Sales Charge").
(2) The estimated management fee 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 0.00%.
(3) The total operating expenses are estimated to be 0.00% absent the
anticipated voluntary waiver of a portion of the management fee.
*Total operating expenses are estimated based on average expenses expected to be
incurred during the period ending November 30, 1998. During the course of this
period, expenses may be more or less than the average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class C Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Corporation Information". Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
Long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted under the rules of the National Association of
Securities Dealers, Inc.
EXAMPLE............................. 1 year 3 years
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return,
(2) redemption at the end of each time period, and
(3) payment of the maximum sales charge. $00 $00
You would pay the following expenses on the same
investment, assuming no redemption.. $00 $00
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 the Class C Shares fiscal year ending November
30, 1998.
<PAGE>
General Information
The Corporation was incorporated under the laws of the State of Maryland on
January 25, 1994. Class A Shares, Class B Shares and Class C Shares of the Fund
("Shares") are designed for individuals and institutions as a convenient means
of accumulating an interest in a professionally managed, diversified portfolio
of foreign and domestic equity securities.
The Fund's current net asset value and offering price may be found in the mutual
funds section of local newspapers under "Federated" and the appropriate class
designation listing.
Calling the Fund Call the Fund at 1-800-341-7400.
Investment Information
Investment Objective
The Fund's objective is to provide capital appreciation and above-average
income. The investment objective cannot be changed without the approval of
shareholders. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by following the investment policies
described in this prospectus.
Investment Policies
The Fund pursues its investment objective by investing primarily in a
professionally managed and diversified portfolio of income-producing global
equity securities. Global equity securities are equity securities of issuers
located in three or more countries, including the United States. Under normal
market conditions, the Fund will invest at least 65% of its total assets in
income producing global equity securities, both dollar and non-dollar
denominated. The Fund will invest in common and preferred stock and
equity-linked securities, typically convertible preferred stock, of companies
whose stock has strong relative yields and/or strong prospects for dividend
growth and which are located in at least three or more developed and emerging
markets. The Fund may also invest in convertible bonds issued by international
and domestic borrowers. However, as an operational policy, the Fund anticipates
investing substantially all of its assets in global equity securities. The Fund
will diversify its portfolio across 150-200 issuers determined primarily by
dividend yield and growth potential. Using proprietary software and research
models which incorporate important attributes of potential capital appreciation
and income, the Adviser creates a universe of appropriate companies. Then, using
fundamental research, the Adviser evaluates each company's earnings quality and
assesses the sustainability of the company's current trends. Through this highly
disciplined process, the Adviser seeks to construct investment portfolios which
possess strong capital appreciation and above-average income characteristics.
While the Adviser considers both industrialized and emerging countries eligible
for investment, the Fund will not be invested in all such markets at all times.
Furthermore, the Fund may not pursue investment in some countries due to lack of
adequate custody for the Fund's assets, overly burdensome restrictions and
repatriation, lack of an organized and liquid market, or unacceptable political
and other risks. The Fund intends to allocate its investments among at least
three countries at all times and does not expect to concentrate investments in
any particular industry.
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. Furthermore, the Adviser considers emerging market countries
to be all countries considered by the International Bank for Reconstruction and
Development (more commonly known as the World Bank) and the International
Finance Corporation, as well as countries that are classified by the United
Nations or otherwise regarded by their authorities, as developing.
The Fund also may enter into forward commitments, repurchase agreements, and
foreign currency transactions; maintain reserves in foreign or U.S. money market
instruments; and purchase options and financial futures contracts.
Unless indicated otherwise, the investment policies of the Fund may be changed
by the Directors without approval of shareholders. Shareholders will be notified
before any material changes in these policies become effective.
Acceptable Investments. The equity securities in which the Fund may invest
include common stock, preferred stock (either convertible or non-convertible),
sponsored or unsponsored depositary receipts or shares, and warrants, including
other substantially similar forms of equity with comparable risk characteristics
as well as other forms which may be developed in the future. Securities may be
purchased on securities exchanges, traded over-the-counter, or have no organized
market. The Fund may also purchase corporate and government fixed income
securities; 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.
Common and Preferred Stock. Stocks represent shares of ownership in a company.
Generally, preferred stock has a specified dividend and ranks after bonds and
before common stocks in its claim on income for dividend payments and on assets
should the company be liquidated. After other claims are satisfied, common
stockholders participate in company profits on a pro rata basis; profits may be
paid out in dividends or reinvested in the company to help it grow. Increases
and decreases in earnings are usually reflected in a company's stock price, so
common stocks generally have the greatest appreciation and depreciation
potential of all corporate securities. While most preferred stocks pay a
dividend, the Fund may purchase preferred stock where the issuer has omitted, or
is in danger of omitting, payment of its dividend. Such investments would be
made primarily for their capital appreciation potential.
Convertible Securities. Convertible securities include a spectrum of securities
which can be exchanged for or converted into common stock. Convertible
securities may include, but are not limited to: convertible bonds or debentures;
convertible preferred stock; units consisting of usable bonds and warrants; or
securities which cap or otherwise limit returns to the convertible security
holder, such as DECS- (Dividend Enhanced Convertible Stock, or Debt Exchangeable
for Common Stock when issued as a debt security), LYONS- (Liquid Yield Option
Notes, which are corporate bonds that are purchased at prices below par with no
coupons and are convertible into stock), PERCS- (Preferred Equity Redemption
Cumulative Stock (an equity issue that pays a high cash dividend, has a cap
price and mandatory conversion to common stock at maturity), and PRIDES-
(Preferred Redeemable Increased Dividend Securities (which are essentially the
same as DECS; the difference is little more than who initially underwrites the
issue).
Convertible securities are often rated below investment grade or not rated
because they fall below debt obligations and just above common equity in order
of preference or priority on the issuer's balance sheet. Hence, an issuer with
investment grade senior debt may issue convertible securities with ratings less
than investment grade or not rated. Convertible securities rated below
investment grade may be subject to some of the same risks as those inherent in
junk bonds. The Fund does not limit convertible securities by rating, and there
is no minimal acceptance rating for a convertible security to be purchased or
held in the Fund. Therefore, the Fund invests in convertible securities
irrespective of their ratings. This could result in the Fund purchasing and
holding, without limit, convertible securities rated below investment grade by a
nationally recognized statistical rating organization or in the Fund holding
such securities where they have acquired a rating below investment grade after
the Fund has purchased it.
The Fund's investments in convertible securities will not be subject to the
quality rating limit on other securities in which the Fund invests.
Depositary Receipts. The Fund may invest in foreign issuers by purchasing
sponsored or unsponsored securities representing underlying international
securities such as American Depositary Receipts ("ADRs"), American Depositary
Shares ("ADSs"), European Depositary Receipts ("EDRs"), Global Depositary
Receipts ("GDRs"), Global Depositary Certificates ("GDCs"), International
Depositary Receipts ("IDRs"), and Russian Depositary Certificates ("RDCs") or
securities convertible into foreign equity securities. ADRs and ADSs typically
are issued by a United States bank or trust company and evidence ownership of
underlying securities issued by a foreign corporation. EDRs, which are sometimes
referred to as Continental Depositary Receipts ("CDRs"), GDRs, GDCs, IDRs and
RDCs are typically issued by foreign banks or trust companies, although they
also may be issued by United States banks or trust companies, and evidence
ownership of underlying securities issued by either a foreign or a United States
corporation. ADRs, ADSs, CDRs, EDRs, GDRs, GDCs, IDRs, and RDCs are collectively
known as "Depositary Receipts." Depositary Receipts may be available for
investment through "sponsored" or "unsponsored" facilities. A sponsored facility
is established jointly by the issuer of the security underlying the receipt and
a depositary, whereas an unsponsored facility may be established by a depositary
without participation by the issuer of the receipt's underlying security.
Holders of an unsponsored Depositary Receipt generally bear all the costs of the
unsponsored facility. The depositary of an unsponsored facility frequently is
under no obligation to distribute shareholder communications received from the
issuer of the deposited security or to pass through to the holders of the
receipts voting rights with respect to the deposited securities.
Investing in Securities of Other Investment Companies. The Fund may invest its
assets in securities of other investment companies as an efficient means of
carrying out its investment policy. It should be noted that investment companies
incur certain expenses, such as management fees, and, therefore, any investment
by the Fund in shares of other investment companies may be subject to such
duplicate expenses.
Restricted and Illiquid Securities. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies but which are
subject to restrictions on resale under federal securities law. Securities that
can be traded without restrictions in non-U.S. securities markets will not be
treated as restricted, even if they cannot be traded in U.S. securities markets
without restriction. Restricted securities may be issued by new and early stage
companies which may include a high degree of business and financial risk that
can result in substantial losses. As a result of the absence of a public trading
market for these securities, they may be less liquid than publicly traded
securities. Although these securities may be resold in privately negotiated
transactions, the prices realized from these sales could be less than those
originally paid by the Fund, or less than what may be considered the fair value
of such securities. Further, companies whose securities are not publicly traded
may not be subject to the disclosure and other investor protection requirements
which might be applicable if their securities were publicly traded. If such
securities are required to be registered under the securities laws of one or
more jurisdictions before being resold, the Fund may be required to bear the
expense of registration. The Fund will limit investments in illiquid securities,
including certain restricted securities not determined by the Directors to be
liquid, over-the counter options, swap agreements not determined to be liquid,
and repurchase agreements providing for settlement in more than seven days after
notice, to 15% of its net assets.
Repurchase Agreements. The Fund may invest in repurchase agreements. Repurchase
agreements are arrangements by which the Fund purchases a security for cash and
obtains a simultaneous commitment from the seller (usually a bank or
broker/dealer) to repurchase the security at an agreed-upon price and specified
future date. The repurchase price reflects an agreed-upon interest rate for the
time period of the agreement. The Fund's risk is the inability of the seller to
pay the agreed-upon price on the delivery date. However, this risk is tempered
by the ability of the Fund to sell the security in the open market in the case
of a default. In such a case, the Fund may incur costs in disposing of the
security which would increase Fund expenses. The Adviser will monitor the
creditworthiness of the firms with which the Fund enters into repurchase
agreements.
When-Issued and Delayed Delivery Transactions. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for
different times in the future. The seller's failure to complete these
transactions may cause the Fund to miss a price or yield considered to be
advantageous. Settlement dates may be a month or more after entering into these
transactions, and the market values of the securities purchased may vary from
the purchase prices.
The Fund may dispose of a commitment prior to settlement if the Adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
Lending of Portfolio Securities. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or long-term basis, to
broker/dealers, banks, or other institutional borrowers of securities. The Fund
will only enter into loan arrangements with broker/ dealers, banks, or other
institutions which the Adviser has determined are creditworthy under guidelines
established by the Directors and will receive collateral in the form of cash or
U.S. government securities equal to at least 100% of the value of the securities
loaned at all times.
Temporary Investments. For temporary defensive purposes, when the Adviser
determines that market conditions warrant (up to 100% of total assets) and to
maintain liquidity (up to 35% of total assets), the Fund may invest in U.S. and
foreign debt instruments as well as cash or cash equivalents, including foreign
and domestic money market instruments, short-term government and corporate
obligations, and repurchase agreements.
Debt Securities. In pursuit of the Fund's objective of capital appreciation, the
Fund may invest up to 35% of its total assets in debt securities. Capital
appreciation in debt securities may arise as a result of favorable changes in
the creditworthiness of issuers, relative interest rate levels, or relative
foreign exchange rates. Any income received from debt securities will be
incidental to the Fund's objective of capital appreciation and above-average
income. These debt obligations consist of U.S. and foreign government securities
and corporate debt securities, including, but not limited to, Samurai and Yankee
bonds, Eurobonds, Brady Bonds, Local Currency Bonds and depositary receipts. The
issuers of such debt securities may or may not be domiciled in emerging
countries.
The debt securities in which the Fund may invest may be rated, at the time of
purchase, as low as C by Standard & Poor's Ratings Services ("S&P") or Fitch
Investors Service ("Fitch") or by Moody's Investors Service, Inc. ("Moody's"),
or, if unrated, are of comparable quality as determined by the Adviser. Such
debt securities are commonly known as "junk bonds." Downgraded securities will
be evaluated on a case-by-case basis by the Adviser. The Adviser will determine
whether or not the security continues to be an acceptable investment. If not,
the security will be sold. The prices of fixed income securities generally
fluctuate inversely to the direction of interest rates. Please refer to the
Appendix in this prospectus for a description of these ratings.
Forward Commitments. Forward commitments are contracts to purchase securities
for a fixed price at a date beyond customary settlement time. The Fund may enter
into these contracts if liquid securities in amounts sufficient to meet the
purchase price are segregated on the Fund's records at the trade date and
maintained until the transaction has been settled. Risk is involved if the value
of the security declines before settlement. Although the Fund enters into
forward commitments with the intention of acquiring the security, it may dispose
of the commitment prior to settlement and realize short-term profit or loss.
Foreign Currency Transactions. The Fund will enter into foreign currency
transactions to obtain the necessary currencies to settle securities
transactions. Currency transactions may be conducted either on a spot or cash
basis at prevailing rates or through forward foreign currency exchange
contracts.
The Fund may also enter into foreign currency transactions to protect Fund
assets against adverse changes in foreign currency exchange rates or exchange
control regulations. Such changes could unfavorably affect the value of Fund
assets which are denominated in foreign currencies, such as foreign securities
or funds deposited in foreign banks, as measured in U.S. dollars. Although
foreign currency exchanges may be used by the Fund to protect against a decline
in the value of one or more currencies, such efforts may also limit any
potential gain that might result from a relative increase in the value of such
currencies and might, in certain cases, result in losses to the Fund. Further,
the Fund may be affected either unfavorably or favorably by fluctuations in the
relative rates of exchange between the currencies of different nations.
Cross-hedging transactions by the Fund involve the risk of imperfect correlation
between changes in the values of the currencies to which such transactions
relate and changes in the value of the currency or other asset or liability that
is the subject of the hedge.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract ("forward contract") is an obligation to purchase or sell an amount of
a particular currency at a specific price and on a future date agreed upon by
the parties.
Generally, no commission charges or deposits are involved. At the time the Fund
enters into a forward contract, Fund assets with a value equal to the Fund's
obligation under the forward contract are segregated on the Fund's records and
are maintained until the contract has been settled. The Fund will not enter into
a forward contract with a term of more than one year. The Fund will generally
enter into a forward contract to provide the proper currency to settle a
securities transaction at the time the transaction occurs ("trade date"). The
period between the trade date and settlement date will vary between 24 hours and
60 days, depending upon local custom.
The Fund may also protect against the decline of a particular foreign currency
by entering into a forward contract to sell an amount of that currency
approximating the value of all or a portion of the Fund's assets denominated in
that currency ("hedging"). The success of this type of short-term hedging
strategy is highly uncertain due to the difficulties of predicting short-term
currency market movements and of precisely matching forward contract amounts and
the constantly changing value of the securities involved. Although the Adviser
will consider the likelihood of changes in currency values when making
investment decisions, the Adviser believes that it is important to be able to
enter into forward contracts when it believes the interests of the Fund will be
served. The Fund will not enter into forward contracts for hedging purposes in a
particular currency in an amount in excess of the value of the Fund's assets
denominated in that currency at the time the contract was initiated, but as
consistent with their other investment policies and as not otherwise limited in
their ability to use this strategy.
Options. The Fund may deal in options on foreign currencies, securities, and
securities indices, and on futures contracts involving these items, which
options may be listed for trading on an international securities exchange or
traded over-the-counter. The Fund may use options to manage interest rate and
currency risks. The Fund may also write covered call options and secured put
options to seek to generate income or lock in gains.
A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying currency, security or other asset at the
exercise price during the option period. A put option gives the purchaser the
right to sell, and the writer the obligation to buy, the underlying currency,
security or other asset at the exercise price during the option period. The
writer of a covered call owns assets that are acceptable for escrow, and the
writer of a secured put invests an amount not less than the exercise price in
eligible assets to the extent that it is obligated as a writer. If a call
written by the Fund is exercised, the Fund foregoes any possible profit from an
increase in the market price of the underlying asset over the exercise price
plus the premium received. In writing puts, there is the risk that the Fund may
be required to take delivery of the underlying asset at a disadvantageous price.
Over-the-counter options ("OTC options") differ from exchange traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation, and there is a risk of nonperformance by the dealer as a
result of the insolvency of such dealer or otherwise, in which event the Fund
may experience material losses. However, in writing options, the premium is paid
in advance by the dealer. OTC options, which may not be continuously liquid, are
available for a greater variety of assets, and with a wider range of expiration
dates and exercise prices, than are exchange traded options.
It is not certain that a secondary market for positions in options, or futures
contracts (see below), will exist at all times. Although the Adviser will
consider liquidity before entering into these transactions, there is no
assurance that a liquid secondary market on an exchange or otherwise will exist
for any particular futures contract or option at any particular time. The Fund's
ability to establish and close out futures and options positions depends on this
secondary market.
Futures and Options on Futures. The Fund may enter into futures contracts
involving foreign currency, securities, and securities indices, or options
thereon, for bona fide hedging purposes. The Fund may also enter into such
futures contracts or related options for purposes other than bona fide hedging
if the aggregate amount of initial margin deposits exclusive of the margin
needed for foreign currency hedging, on the Fund's futures and related options
positions would not exceed 5% of the net liquidation value of the Fund's assets,
provided further that in the case of an option that is in-the-money at the time
of the purchase, the in-the-money amount may be excluded in calculating the 5%
limitation. In addition, the Fund may not sell futures contracts if the value of
such futures contracts exceeds the total market value of the Fund's portfolio
securities. Futures contracts and options thereon sold by the Fund are generally
subject to segregation and coverage requirements established by either the
Commodities Futures Trading Commission ("CFTC") or the SEC, with the result
that, if the Fund does not hold the instrument underlying the futures contract
or option, the Fund will be required to segregate on an ongoing basis with its
custodian cash, U.S. government securities, or other liquid high grade debt
obligations in an amount at least equal to the Fund's obligations with respect
to such instruments.
The Fund may enter into securities index futures contracts and purchase and
write put and call options on securities index futures contracts that are traded
on regulated exchanges, including non-U.S. exchanges, to the extent permitted by
the CFTC. Securities index futures contracts are based on indexes that reflect
the market value of securities of the firms included in the indexes. An index
futures contract is an agreement pursuant to which two parties agree to take or
make delivery of an amount of cash equal to the differences between the value of
the index at the close of the last trading day of the contract and the price at
which the index contract was originally written.
The Fund may enter into securities index futures contracts to sell a securities
index in anticipation of or during a market decline to attempt to offset the
decrease in market value of securities in its portfolio that might otherwise
result. When the Fund is not fully invested and anticipates a significant market
advance, it may enter into futures contracts to purchase the index in order to
gain rapid market exposure that may in part or entirely offset increases in the
cost of securities that it intends to purchase. In many of these transactions,
the Fund will purchase such securities upon termination of the futures position
but, depending on market conditions, a futures position may be terminated
without the corresponding purchases of common stock. The Fund may also invest in
securities index futures contracts when the Adviser believes such investment is
more efficient, liquid, or cost-effective than investing directly in the
securities underlying the index.
An option on a securities index futures contract gives the purchaser the right,
in return for the premium paid, to assume a position in a securities index
futures contract. The Fund may purchase and write put and call options on
securities index futures contracts in order to hedge all or a portion of its
investment and may enter into closing purchase transactions with respect to
written options in order to terminate existing positions. There is no guarantee
that such closing transactions can be effected. The Fund may also invest in
options on securities index futures contracts when the Adviser believes such
investment is more efficient, liquid or cost-effective than investing directly
in the futures contract or in the securities underlying the index, or when the
futures contract or underlying securities are not available for investment upon
favorable terms.
The use of futures and related options involves special consideration and risks,
for example, (1) the ability of the Fund to utilize futures successfully will
depend on the Adviser's ability to predict pertinent market movements; (2) there
might be imperfect correlation, or even no correlation, between the change in
market value of the securities held by the Fund and the prices of the futures
and options thereon relating to the securities purchased or sold by the Fund.
The use of futures and related options may reduce risk of loss by wholly or
partially offsetting the negative effect of unfavorable price movements but they
can also reduce the opportunity for gain by offsetting the positive effect of
favorable price movements in positions. No assurance can be given that the
Adviser's judgment in this respect will be correct.
It is not certain that a secondary market for positions in futures contracts or
for options will exist at all times. Although the Adviser will consider
liquidity before entering into these transactions, there is no assurance that a
liquid secondary market on an exchange or otherwise will exist for any
particular futures contract or option at any particular time. The Fund's ability
to establish and close out futures and options positions depends on this
secondary market.
New futures contracts, options thereon, and other financial products and risk
management techniques continue to be developed. The Fund may use these
investments and techniques to the extent consistent with its investment
objectives and regulatory and federal tax considerations.
Risks of Futures and Options Transactions. When the Fund uses futures and
options on futures as hedging devices, there is a risk that the prices of the
securities subject to the futures contracts may not correlate perfectly with the
prices of the securities in the Fund's portfolio. This may cause the futures
contract and any related options to react differently than the portfolio
securities to market changes. In addition, the Adviser could be incorrect in its
expectations about the direction or extent of market factors such as stock price
movements. In these events, the Fund may lose money on the futures contract or
option.
It is not certain that a secondary market for positions in futures contracts or
for options will exist at all times. Although the Adviser will consider
liquidity before entering into these transactions, there is no assurance that a
liquid secondary market on an exchange or otherwise will exist for any
particular futures contract or option at any particular time. The Fund's ability
to establish and close out futures and options positions depends on this
secondary market.
Swap Agreements. As one way of managing its exposure to different types of
investments, the Fund may enter into interest rate swaps, currency swaps, and
other types of swap agreements such as caps, collars, and floors. Depending on
how they are used, swap agreements may increase or decrease the overall
volatility of the Fund's investments, its share price and yield.
Swap agreements are sophisticated instruments that typically involve a small
investment of cash relative to the magnitude of risks assumed. As a result,
swaps can be highly volatile and may have a considerable impact on the Fund's
performance. Swap agreements are subject to risks related to the counterparty's
ability to perform, and may decline in value if the counterparty's
creditworthiness deteriorates. The Fund may also suffer losses if it is unable
to terminate outstanding swap agreements to reduce its exposure through
offsetting transactions. When the Fund enters into a swap agreement, assets of
the Fund equal to the value of the swap agreement will be segregated by the
Fund.
Risk Characteristics of Foreign Securities. Investing in non-U.S. securities
carries substantial risks in addition to those associated with domestic
investments. In an attempt to reduce some of these risks, the Fund diversifies
its investments broadly among foreign countries which may include both developed
and developing countries.
The Fund may take advantage of the unusual opportunities for higher returns
available from investing in developing countries. These investments carry
considerably more volatility and risk because they generally are associated with
less mature economies and less stable political systems.
The economies of foreign countries may differ from the U.S. economy in such
respects as growth of gross domestic product, rate of inflation, currency
depreciation, capital reinvestment, resource self-sufficiency, and balance of
payments position. Further, the economies of developing countries generally are
heavily dependent on international trade and, accordingly, have been, and may
continue to be, adversely affected by trade barriers, exchange controls, managed
adjustments in relative currency values, and other protectionist measures
imposed or negotiated by the countries with which they trade. These economies
also have been, and may continue to be, adversely affected by economic
conditions in the countries with which they trade.
Prior governmental approval for foreign investments may be required under
certain circumstances in some countries, and the extent of foreign investment in
certain debt securities and domestic companies may be subject to limitation.
Foreign ownership limitations also may be imposed by the charters of individual
companies to prevent, among other concerns, violation of foreign investment
limitations.
Repatriation of investment income, capital, and the proceeds of sales by foreign
investors may require governmental registration and/or approval in some
countries. The Fund could be adversely affected by delays in, or a refusal to
grant, any required governmental registration or approval for such repatriation.
Any investment subject to such repatriation controls will be considered illiquid
if it appears reasonably likely that this process will take more than seven
days.
With respect to any foreign country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political changes,
governmental regulation, social instability or diplomatic developments
(including war) which could affect adversely the economies of such countries or
the value of the Fund's investments in those countries. In addition, it may be
difficult to obtain and enforce a judgment in a court outside of the United
States.
Brokerage commissions, custodial services, and other costs relating to
investment may be more expensive than in the United States. Foreign markets may
have different clearance and settlement procedures such as requiring payment for
securities before delivery. In certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. The inability of
the Fund to make intended security purchases due to settlement problems could
cause the Fund to miss attractive investment opportunities. Inability to dispose
of a portfolio security due to settlement problems could result either in losses
to the Fund due to subsequent declines in value of the portfolio security or, if
the Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser.
Currency Risks. Because the majority of securities purchased by the Fund are
denominated in currencies other than the U.S. dollar, changes in foreign
currency exchange rates will affect the Fund's net asset value; the value of
interest earned; gains and losses realized on the sale of securities; and net
investment income and capital gain, if any, to be distributed to shareholders by
the Fund. If the value of a foreign currency rises against the U.S. dollar, the
value of Fund assets denominated in the currency will increase; correspondingly,
if the value of a foreign currency declines against the U.S. dollar, the value
of Fund assets denominated in that currency will decrease. Under the United
States Internal Revenue Code, (the "Code"), the Fund is required to separately
account for the foreign currency component of gains or losses, which will
usually be viewed under the Code as items of ordinary and distributable income
or loss, thus affecting the Fund's distributable income. (See "Federal Income
Tax").
The exchange rates between the U.S. dollar and foreign currencies are a function
of such factors as supply and demand in the currency exchange markets,
international balances of payments, governmental intervention, speculation and
other economic and political conditions. Although the Fund values its assets
daily in U.S. dollars, the Fund will not convert its holdings of foreign
currencies to U.S. dollars daily. When the Fund converts its holdings to another
currency, it may incur conversion costs. Foreign exchange dealers may realize a
profit on the difference between the price at which they buy and sell
currencies.
Foreign Companies. Other differences between investing in foreign and U.S.
companies include:
o less publicly available information about foreign companies;
o the lack of uniform accounting, auditing, and financial reporting
standards and practices or regulatory requirements comparable to those
applicable to U.S. companies;
o less readily available market quotations on foreign companies;
o differences in government regulation and supervision of foreign stock
exchanges, brokers, listed companies, and banks;
o differences in legal systems which may affect the ability to enforce
contractual obligations or obtain court judgments;
o the limited size of many foreign securities markets and limited trading
volume in issuers compared to the volume of trading in U.S. securities
could cause prices to be erratic for reasons apart from factors that
affect the quality of securities;
o the likelihood that foreign securities may be less liquid or more
volatile;
o foreign brokerage commissions may be higher;
o unreliable mail service between countries;
o political or financial changes which adversely affect investments in
some countries;
o increased risk of delayed settlements of portfolio transactions or loss
of certificates for portfolio securities;
o certain markets may require payment for securities before delivery;
o religious and ethnic instability; and
o certain national policies which may restrict the Fund's investment
opportunities, including restrictions on investment in issuers or
industries deemed sensitive to national interests.
U.S. Government Policies. In the past, U.S. government policies have discouraged
or restricted certain investments abroad by investors such as the Fund.
Investors are advised that when such policies are instituted, the Fund will
abide by them.
Risk Considerations in Emerging Markets. 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 regulatory protection for investors.
Risk Factors Relating to Investing in High Yield Securities. The debt securities
in which the Fund invests are usually not in the three highest rating categories
of a nationally recognized statistical rating organization (AAA, AA, or A for
S&P or Fitch and Aaa, Aa, or A for Moody's), but are in the lower rating
categories or are unrated, but are of comparable quality and have speculative
characteristics or are speculative. Lower-rated bonds or unrated bonds are
commonly referred to as "junk bonds." A description of the rating categories is
contained in the Appendix of this prospectus.
Debt obligations that are not determined to be investment grade are high-yield,
high-risk bonds, typically subject to greater market fluctuations and greater
risk of loss of income and principal due to an issuer's default. To a greater
extent than investment grade bonds, lower-rated bonds tend to reflect short-term
corporate, economic, and market developments, as well as investor perceptions of
the issuer's credit quality. In addition, lower-rated bonds may be more
difficult to dispose of or to value than higher-rated, lower-yielding bonds.
The Fund's Adviser attempts to reduce the risks described above through
diversification of the portfolio and by credit analysis of each issuer as well
as by monitoring broad economic trends and corporate and legislative
developments.
Investment Limitations
The Fund will not:
o borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow up to one-third of the value of its total assets and pledge
its assets to secure such borrowings; or
o with respect to 75% of its total assets, invest more than 5% of the
value of its total assets in securities of any one issuer (other than
cash, cash items, or securities issued or guaranteed by the U.S.
government and its agencies or instrumentalities, and repurchase
agreements collateralized by such securities) or acquire more than 10%
of the outstanding voting securities of any one issuer.
The above investment limitations cannot be changed without shareholder approval.
Portfolio Turnover
Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities in the Fund's portfolio will be sold whenever the
Adviser believes it is appropriate to do so in light of the Fund's investment
objective, without regard to the length of time a particular security may have
been held. Generally, a high portfolio turnover rate results in increased
transaction costs and higher taxes paid by the Fund's shareholders. In addition,
a high rate of portfolio turnover may result in the realization of a larger
amount of capital gains which, when distributed to the Fund's shareholders, are
taxable to them. Transactions for the Fund's portfolio will be based only upon
investment considerations and will not be limited by any other considerations
when the Fund's Adviser deems it appropriate to make changes in the Fund's
portfolio.
Hub and Spoke(R) Option
If the Directors determine it to be in the best interest of the Fund and its
shareholders, the Fund may in the future seek to achieve its investment
objective by investing all of its assets in another investment company having
the same investment objective and substantially the same investment policies and
restrictions as those applicable to the Fund. It is expected that any such
investment company would be managed in substantially the same manner as the
Fund.
The initial shareholder of the Fund (who is an affiliate of Federated Global
Research) voted to vest authority to use this investment structure in the sole
discretion of the Directors. No further approval of shareholders is required.
Shareholders will receive at least 30 days prior notice of any such investment.
In making its determination, the Directors will consider, among other things,
the benefits to shareholders and/or the opportunity to reduce costs and achieve
operational efficiencies. Although it is expected that the Directors will not
approve an arrangement that is likely to result in higher costs, no assurance is
given that costs will remain the same or be materially reduced if this
investment structure is implemented. Net Asset Value
The Fund's net asset value ("NAV") per Share fluctuates and is based on the
market value of all securities and other assets of the Fund. The NAV for each
class of Shares may differ due to the variance in daily net income realized by
each class. Such variance will reflect only accrued net income to which the
shareholders of a particular class are entitled.
All purchases, redemptions and exchanges are processed at the NAV next
determined after the request in proper form is received by the Fund. The NAV is
determined as of the close of trading on the New York Stock Exchange (normally
4:00 p.m., Eastern time) every day the New York Stock Exchange is open.
This prospectus offers three classes of Shares each with the characteristics
described below.
Class AClass BClass C
Minimum and Subsequent $500/$100 $1500/$100 $1500/$100
Investment Amounts
Minimum and Subsequent $50 $50 $50
Investment Amount
for Retirement Plans
Maximum Sales Charge 5.50%* None None
Maximum Contingent None 5.50 1.00%#
Deferred Sales
Charge**
Conversion Feature No Yes No * Class A Shares are sold at NAV, plus a sales
charge as follows:
Sales Charge Dealer
as a PercentageConcession as
Public Neta Percentage of
OfferingAmountPublic Offering
Amount of Transaction Price Invested Price
Less than $50,000 5.50% 5.82% 5.00%
$50,000 but less
than $100,000 4.50% 4.71% 4.00%
$100,000 but less
than $250,000 3.75% 3.90% 3.25%
$250,000 but less
than $500,000 2.50% 2.56% 2.25%
$500,000 but less
than $1 million 2.00% 2.04% 1.80%
$1 million or greater 0.00% 0.00% 0.25%
** Computed on the lesser of the NAV of the redeemed Shares at the time of
purchase or the NAV of the redeemed Shares at the time of redemption.
The following contingent deferred sales charge schedule applies to Class B
Shares:
Year of RedemptionContingent Deferred
After PurchaseSales Charge
First 5.50%
Second 4.75%
Third 4.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter 0.00%
Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase. See "Conversion of Class B Shares."
# The contingent deferred sales charge is assessed on Shares redeemed within one
year of their purchase date.
Shares of the Fund are sold on days on which the New York Stock Exchange is
open. Shares of the Fund may be purchased as described below, either through a
financial intermediary (such as a bank or broker/dealer) or by sending a wire or
check directly to the Fund. Financial intermediaries may impose different
minimum investment requirements on their customers. An account must be
established with a financial intermediary or by completing, signing, and
returning the new account form available from the Fund before Shares can be
purchased. Shareholders in certain other funds advised and distributed by
affiliates of Federated Investors ("Federated Funds") may exchange their Shares
for Shares of the corresponding class of the Fund. The Fund reserves the right
to reject any purchase or exchange request.
In connection with any sale, Federated Securities Corp. may, from time to time,
offer certain items of nominal value to any shareholder or investor.
Purchasing Shares Through a Financial Intermediary
Orders placed through a financial intermediary are considered received when the
Fund is notified of the purchase order or when payment is converted into federal
funds. Purchase orders through a broker/dealer must be received by the broker
before 4:00 p.m. (Eastern time) and must be transmitted by the broker to the
Fund before 5:00 p.m. (Eastern time) in order for Shares to be purchased at that
day's price. Purchase orders through other financial intermediaries must be
received by the financial intermediary and transmitted to the Fund before 4:00
p.m. (Eastern time) in order for Shares to be purchased at that day's price. It
is the financial intermediary's responsibility to transmit orders promptly.
Financial intermediaries may charge fees for their services.
The financial intermediary which maintains investor accounts in Class B Shares
or Class C Shares with the Fund must do so on a fully disclosed basis unless it
accounts for share ownership periods used in calculating the contingent deferred
sales charge (see "Contingent Deferred Sales Charge"). In addition, advance
payments made to financial intermediaries may be subject to reclaim by the
distributor for accounts transferred to financial intermediaries which do not
maintain investor accounts on a fully disclosed basis and do not account for
share ownership periods.
Purchasing Shares by Wire
Shares may be purchased by Federal Reserve wire by calling the Fund. All
information needed will be taken over the telephone, and the order is considered
received when State Street Bank receives payment by wire. Federal funds should
be wired as follows: Federated Shareholder Services Company, c/o State Street
Bank and Trust Company, Boston, MA 02266-8600; Attention; EDGEWIRE; For Credit
to: (Fund Name) (Fund Class); (Fund Number--this number can be found on the
account statement or by contacting the Fund); Account Number; Trade Date and
Order Number; Group Number or Dealer Number; Nominee or Institution Name; and
ABA Number 011000028. Shares cannot be purchased by wire on holidays when wire
transfers are restricted.
Purchasing Shares by Check
Shares may be purchased by mailing a check made payable to the name of the Fund
(designate class of Shares and account number) to: Federated Shareholder
Services Company, P.O. Box 8600, Boston, MA 02266-8600. Orders by mail are
considered received when payment by check is converted into federal funds
(normally the business day after the check is received).
Systematic Investment Program
Under this program, funds may be automatically withdrawn periodically from the
shareholder's checking account at an Automated Clearing House ("ACH") member and
invested in the Fund. Shareholders should contact their financial intermediary
or the Fund to participate in this program.
Retirement Plans
Fund Shares can be purchased as an investment for retirement plans or IRA
accounts. For further details, contact the Fund and consult a tax adviser.
Class A Shares
Class A Shares are sold at NAV, plus a sales charge. However:
No sales charge is imposed for Class A Shares purchased:
n through financial intermediaries that do not receive sales charge
dealer concessions;
n by Federated Life Members who maintain a $500 minimum balance in at
least one of the Federated Funds; or
n through "wrap accounts" or similar programs under which clients pay a
fee for services.
In addition, the sales charge can be reduced or eliminated by:
n purchasing in quantity and accumulating purchases at the levels in the
table under "Investing in the Fund";
n combining concurrent purchases of two or more funds;
n signing a letter of intent to purchase a specific quantity of shares
within 13 months; or
n using the reinvestment privilege.
Consult a financial intermediary or Federated Securities Corp. for details on
these programs. In order to eliminate the sales charge or receive sales charge
reductions, Federated Securities Corp. must be notified by the shareholder in
writing or by a financial intermediary at the time of purchase.
Dealer Concession
For sales of Class A Shares, a dealer will normally receive up to 90% of the
applicable sales charge. Any portion of the sales charge which is not paid to a
dealer will be retained by the distributor. However, the distributor may offer
to pay dealers up to 100% of the sales charge retained by it. Such payments may
take the form of cash or promotional incentives, such as reimbursement of
certain expenses of qualified employees and their spouses to attend
informational meetings about the Fund or other special events at
recreational-type facilities, or items of material value. In some instances,
these incentives will be made available only to dealers whose employees have
sold or may sell a significant amount of Shares. On purchases of $1 million or
more, the investor pays no sales charge; however, the distributor will make
twelve monthly payments to the dealer totaling 0.25% of the public offering
price over the first year following the purchase. Such payments are based on the
original purchase price of Shares outstanding at each month end. The sales
charge for Shares sold other than through registered broker/dealers will be
retained by Federated Securities Corp.
Federated Securities Corp. may pay fees to banks out of the sales charge in
exchange for sales and/or administrative services performed on behalf of the
bank's customers in connection with the establishment of customer accounts and
purchases of Shares.
Class B Shares
Class B Shares are sold at NAV. Under certain circumstances, a contingent
deferred sales charge will be assessed at the time of a redemption. Orders for
$250,000 or more of Class B Shares will automatically be invested in Class A
Shares.
Conversion of Class B Shares
Class B Shares will automatically convert into Class A Shares after eight full
years from the purchase date. Such conversion will be on the basis of the
relative NAVs per Share, without the imposition of any charges. Class B Shares
acquired by exchange from Class B Shares of another Federated Fund will convert
into Class A Shares based on the time of the initial purchase.
Class C Shares
Class C Shares are sold at NAV. A contingent deferred sales charge of 1.00% will
be charged on assets redeemed within the first full 12 months following
purchase.
Shares of the Fund may be redeemed for cash or exchanged for Shares of the same
class of other Federated Funds on days on which the Fund computes its NAV.
Shares are redeemed at NAV less any applicable contingent deferred sales charge.
Redemption proceeds will normally be sent the following day. However, in order
to protect shareholders of the Fund from possible detrimental effects of
redemptions, the Adviser may cause a delay of two to seven days in sending
redemption proceeds during certain periods of market volatility or for certain
shareholders. Exchanges are made at NAV. Shareholders who desire to
automatically exchange Shares, of a like class, in a pre-determined amount on a
monthly, quarterly, or annual basis may take advantage of a systematic exchange
privilege. Information on this privilege is available from the Fund or your
financial intermediary. Depending upon the circumstances, a capital gain or loss
may be realized when Shares are redeemed or exchanged.
Redeeming or Exchanging Shares Through a Financial Intermediary
Shares of the Fund may be redeemed or exchanged by contacting your financial
intermediary before 4:00 p.m. (Eastern time). In order for these transactions to
be processed at that day's NAV, financial intermediaries (other than
broker/dealers) must transmit the request to the Fund before 4:00 p.m. (Eastern
time), while broker/dealers must transmit the request to the Fund before 5:00
p.m. (Eastern time). The financial intermediary is responsible for promptly
submitting transaction requests and providing proper written instructions.
Customary fees and commissions may be charged by the financial intermediary for
this service. Appropriate authorization forms for these transactions must be on
file with the Fund.
Redeeming or Exchanging Shares by Telephone
Shares acquired directly from the Fund may be redeemed in any amount, or
exchanged, by calling 1-800-341-7400. Appropriate authorization forms for these
transactions must be on file with the Fund. Shares held in certificate form must
first be returned to the Fund as described in the instructions under "Redeeming
or Exchanging Shares by Mail." Redemption proceeds will either be mailed in the
form of a check to the shareholder's address of record or wire-transferred to
the shareholder's account at a domestic commercial bank that is a member of the
Federal Reserve System. The minimum amount for a wire transfer is $1,000.
Proceeds from redeemed Shares purchased by check or through ACH will not be
wired until that method of payment has cleared.
Telephone instructions will be recorded. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. In the event of drastic economic or market
changes, a shareholder may experience difficulty in redeeming by telephone. If
this occurs, "Redeeming or Exchanging Shares By Mail" should be considered. The
telephone transaction privilege may be modified or terminated at any time.
Shareholders would be promptly notified.
Redeeming or Exchanging Shares by Mail
Shares may be redeemed in any amount, or exchanged, by mailing a written request
to: Federated Shareholder Services Company, Fund Name, Fund Class, P.O. Box
8600, Boston, MA 02266-8600.
All written requests should state: Fund Name and the Share Class name; the
account name as registered with the Fund; the account number; and the number of
Shares to be redeemed or the dollar amount of the transaction. An exchange
request should also state the name of the Fund into which the exchange is to be
made. All owners of the account must sign the request exactly as the Shares are
registered. Dividends are paid up to and including the day that a redemption or
exchange request is processed.
Requirements for Redemption
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund, or a redemption payable other than to
the shareholder of record, must have their signatures guaranteed by a commercial
or savings bank, trust company or savings association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
Requirements for Exchange
Shareholders must exchange Shares having an NAV equal to the minimum investment
requirements of the fund into which the exchange is being made. Contact your
financial intermediary directly or the Fund for free information on and
prospectuses for the Federated Funds into which your Shares may be exchanged.
Before the exchange, the shareholder must receive a prospectus of the fund for
which the exchange is being made.
Upon receipt of proper instructions and required supporting documents, Shares
submitted for exchange are redeemed and proceeds invested in the same class of
shares of the other fund. Signature guarantees will be required to exchange
between fund accounts not having identical shareholder registrations. The
exchange privilege may be modified or terminated at any time. Shareholders will
be notified of the modification or termination of the exchange privilege.
Systematic Withdrawal Program
Under this program, Shares are redeemed to provide for periodic withdrawal
payments in an amount directed by the shareholder. To be eligible to participate
in this program, a shareholder must have an account value of at least $10,000,
other than retirement accounts subject to required minimum distributions. A
shareholder may apply for participation in this program through his financial
intermediary or by calling the Fund.
Because participation in this program may reduce, and eventually deplete the
shareholder's investment in the Fund, payments under this program should not be
considered as yield or income. It is not advisable for shareholders to continue
to purchase Class A Shares subject to a sales charge while participating in this
program. A contingent deferred sales charge may be imposed on Class B and C
Shares.
Contingent Deferred Sales Charge
The contingent deferred sales charge will be deducted from the redemption
proceeds otherwise payable to the shareholder and will be retained by the
distributor. Redemptions will be processed in a manner intended to maximize the
amount of redemption which will not be subject to a contingent deferred sales
charge. The contingent deferred sales charge will not be imposed with respect to
Shares acquired through the reinvestment of dividends or distributions of
long-term capital gains. In determining the applicability of the contingent
deferred sales charge, the required holding period for your new Shares received
through an exchange will include the period for which your original Shares were
held.
Eliminating the Contingent Deferred Sales Charge
Upon written notification to Federated Securities Corp. or the transfer agent,
no contingent deferred sales charge will be imposed on redemptions:
n following the death or disability, as defined in Section 72(m)(7) of
the Internal Revenue Code of 1986, of the last surviving shareholder;
n representing minimum required distributions from an Individual
Retirement Account or other retirement plan to a shareholder who has
attained the age of 70 1/2;
n which are involuntary redemptions of shareholder accounts that do not
comply with the minimum balance requirements;
n which are qualifying redemptions of Class B Shares under a Systematic
Withdrawal Program;
n which are reinvested in the Fund under the reinvestment privilege;
n of Shares held by Directors, employees and sales representatives of the
Fund, the distributor, or affiliates of the Fund or distributor, employees
of any financial intermediary that sells Shares of the Fund pursuant to a
sales agreement with the distributor, and their immediate family members
to the extent that no payments were advanced for purchases made by these
persons; and
n of Shares originally purchased through a bank trust department, an
investment adviser registered under the Investment Advisers Act of 1940 or
retirement plans where the third party administrator has entered into
certain arrangements with Federated Securities Corp. or its affiliates, or
any other financial intermediary, to the extent that no payments were
advanced for purchases made through such entities.
For more information regarding the elimination of the contingent deferred sales
charge through a Systematic Withdrawal Program, or any of the above provisions,
contact your financial intermediary or the Fund. The Fund reserves the right to
discontinue or modify these provisions. Shareholders will be notified of such
action.
Confirmations and Account Statements
Shareholders will receive detailed confirmations of transactions (except for
systematic program transactions) In addition, shareholders will receive periodic
statements reporting all account activity, including dividends paid. The Fund
will not issue share certificates.
Dividends and Distributions
Dividends are declared quarterly and paid quarterly to all shareholders invested
in the Fund on the record date. Net long-term capital gains realized by the
Fund, if any, will be distributed at least once every twelve months. Dividends
and distributions are automatically reinvested in additional Shares of the Fund
on payment dates at the ex-dividend date without a sales charge, unless
shareholders request cash payments on the new account form or by contacting the
transfer agent.
Accounts with Low Balances
Due to the high cost of maintaining accounts with low balances, the Fund may
close an account by redeeming all Shares and paying the proceeds to the
shareholder if the account balance falls below the applicable minimum investment
amount. Retirement plan accounts and accounts where the balance falls below the
minimum due to NAV changes will not be closed in this manner. Before an account
is closed, the shareholder will be notified and allowed 30 days to purchase
additional Shares to meet the minimum.
Each Share of the Fund gives the shareholder one vote in Director elections and
other matters submitted to shareholders for vote. All Shares of each portfolio
or class in the Fund have equal voting rights, except that in matters affecting
only a particular portfolio or class, only Shares of that portfolio or class are
entitled to vote.
Directors may be removed by the Directors or shareholders at a special meeting.
A special meeting of shareholders shall be called by the Directors upon the
written request of shareholders owning at least 10% of the Fund's outstanding
Shares of all series entitled to vote.
Corporation Information
Management of the Corporation
Board Of Directors. The Corporation is managed by a Board of Directors. The
Directors are responsible for managing the Corporation's business affairs and
for exercising all the Corporation's powers except those reserved for the
shareholders. An Executive Committee of the Board of Directors handles the
Board's responsibilities between meetings of the Board.
Adviser. Investment decisions for the Fund are made by Federated Global Research
Corp., the Fund's Adviser, subject to direction by the Directors. The Adviser
continually conducts investment research and supervision for the Fund and is
responsible for the purchase or sale of portfolio instruments, for which it
receives an annual fee from the Fund.
Advisory Fees. The Adviser receives an annual investment advisory fee equal to
1.00% of the Fund's average daily net assets. The fee paid by the Fund, while
higher than the advisory fee paid by other mutual funds in general, is
comparable to fees paid by other mutual funds with similar objectives and
policies. Under the investment advisory contract, which provides for the
voluntary waiver of the advisory fee by the Adviser, the Adviser may voluntarily
waive some or all of its fee. This does not include reimbursement to the Fund of
any expenses incurred by shareholders who use the transfer agent's subaccounting
facilities. The Adviser can terminate this voluntary waiver at any time in its
sole discretion.
Adviser's Background. Federated Global Research Corp., incorporated in Delaware
on May 12, 1995, is a registered investment adviser under the Advisers Act of
1940. It is a subsidiary of Federated Investors. All of the Class A (voting)
shares of Federated Investors are owned by a trust, the trustees of which are
John F. Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's
wife, and Mr. Donahue's son, J. Christopher Donahue, who is President and
Trustee of Federated Investors.
Federated Global Research Corp. and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to a
number of investment companies. With over $110 billion invested across more than
300 funds under management and/or administration by its subsidiaries, as of
December 31, 1996, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 2,000 employees,
Federated continues to be led by the management who founded the company in 1955.
Federated Funds are presently at work in and through 4,500 financial
institutions nationwide.
Drew J. Collins has been the Fund's portfolio manager since inception. Mr.
Collins joined Federated Investors in 1995 as a Senior Vice President of the
Fund's Adviser. Mr. Collins served as a Vice President/Portfolio Manager of
international equity portfolios at Arnhold and S. Bleichroeder, Inc. from 1994
to 1995. He served as an Assistant Vice President/ Portfolio Manager for
international equities at the College Retirement Equities Fund from 1986 to
1994. Mr. Collins is a Chartered Financial Analyst and received his M.B.A. in
finance from the Wharton School of The University of Pennsylvania.
Henry A. Frantzen has been the Fund's portfolio manager since inception. Mr.
Frantzen joined Federated Investors in 1995 as an Executive Vice President of
the Fund's Adviser. Mr. Frantzen served as Chief Investment Officer of
international equities at Brown Brothers Harriman & Co. from 1992 until 1995.
Both the Corporation and the Adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Fund and its portfolio
securities. These codes recognize that such persons owe a fiduciary duty to the
Fund's shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of these codes are subject to review by the Directors, and
could result in severe penalties.
Distribution of Shares
Federated Securities Corp. is the principal distributor for Shares of the Fund.
Federated Securities Corp. is located at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. It is a Pennsylvania corporation organized on November
14, 1969, and is the principal distributor for a number of investment companies.
Federated Securities Corp. is a subsidiary of Federated Investors.
The distributor may offer to pay financial institutions an amount equal to 1% of
the net asset value of Class C Shares purchased by their clients or customers at
the time of purchase. These payments will be made directly by the distributor
from its assets, and will not be made from assets of the Fund. Financial
institutions may elect to waive the initial payment described above; such waiver
will result in the waiver by the Fund of the otherwise applicable contingent
deferred sales charge.
The distributor will pay dealers an amount equal to 5.5% of the net asset value
of Class B Shares purchased by their clients or customers. These payments will
be made directly by the distributor from its assets, and will not be made from
the assets of the Fund. Dealers may voluntarily waive receipt of all or any
portion of these payments. The distributor may pay a portion of the distribution
fee discussed below to financial institutions that waive all or any portion of
the advance payments.
Distribution Plan and Shareholder Services. Under a distribution plan adopted in
accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"), the
distributor may be paid a fee in an amount computed at an annual rate of up to
0.25% for Class A Shares and up to 0.75% for Class B Shares and Class C Shares
of the average daily net assets of each class of Shares to finance any activity
which is principally intended to result in the sale of Shares subject to the
Distribution Plan. The Fund does not currently make payments to the distributor
or charge a fee under the Distribution Plan for Class A Shares, and shareholders
of Class A Shares will be notified if the Fund intends to charge a fee under the
Distribution Plan. For Class A Shares and Class C Shares, the distributor may
select financial institutions such as banks, fiduciaries, custodians for public
funds, investment advisers, and broker/ dealers to provide sales services or
distribution-related support services as agents for their clients or customers.
With respect to Class B Shares, because distribution fees to be paid by the Fund
to the distributor may not exceed an annual rate of 0.75% of Class B Shares'
average daily net assets, it will take the distributor a number of years to
recoup the expenses it has incurred for its sales services and
distribution-related support services pursuant to the Plan.
The Distribution Plan is a compensation type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by Shares
under the Plan.
In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Fund may make payments up to 0.25% of the average daily net asset value of
Class A Shares, Class B Shares, and Class C Shares to obtain certain personal
services for shareholders and for the maintenance of shareholder accounts
("Shareholder Services"). Under the Shareholder Services Agreement, Federated
Shareholder Services will either perform Shareholder Services directly or will
select financial institutions to perform Shareholder Services. Financial
institutions will receive fees based upon Shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Fund and Federated Shareholder
Services.
In addition to payments made pursuant to the Distribution Plan and Shareholder
Services Agreement, Federated Securities Corp. and Federated Shareholder
Services, from their own assets, may pay financial institutions supplemental
fees for the performance of sales services, distribution-related support
services, or shareholder services.
Other Payments to Financial Institutions. Federated Securities Corp. will pay
financial institutions, at the time of purchase of Class A Shares, an amount
equal to 0.50% of the net asset value of Class A Shares purchased by their
clients or customers under certain qualified retirement plans as approved by
Federated Securities Corp. (Such payments are subject to a reclaim from the
financial institution should the assets leave the program within 12 months after
purchase.)
Furthermore, with respect to Class A Shares, Class B Shares, and Class C Shares,
Federated Securities Corp. and Federated Shareholder Services may offer to pay a
fee from their own assets to financial institutions as financial assistance for
providing substantial sales services, distribution related support services or
shareholder services. The support may include sponsoring sales, educational and
training seminars for their employees, providing sales literature, and
engineering computer software programs that emphasize the attributes of the
Fund. Such assistance will be predicated upon the amount of Shares the financial
institution sells or may sell, and/or upon the type and nature of sales or
marketing support furnished by the financial institution. Any payments made by
the distributor may be reimbursed by the Fund's Adviser or its affiliates.
Administration Of The Fund
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Corporation and the Fund. Federated
Services Company provides these at an annual rate which relates to the average
aggregate daily net assets of all funds advised by affiliates of Federated
Investors as specified below:
Maximum Average Aggregate Daily Net
Administrative Fee Assets
.15% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% on 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.
Federated Services Company may choose voluntarily to waive a portion of its fee.
Expenses of the Fund and Class A Shares, Class B Shares, and Class C Shares
Holders of Class A, Class B, and Class C Shares pay their allocable portion of
Corporation and portfolio expenses.
The Corporation expenses for which holders of Class A, Class B, and Class C
Shares pay their allocable portion include, but are not limited to: the cost of
organizing the Corporation and continuing its existence; registering the
Corporation with federal and state securities authorities; Directors' fees;
auditors' fees; the cost of meetings of Directors; legal fees of the
Corporation; association membership dues; and such non-recurring and
extraordinary items as may arise from time to time.
The portfolio expenses for which holders of Class A, Class B, and Class C Shares
pay their allocable portion include, but are not limited to: registering the
portfolio and Shares of the portfolio; investment advisory services; taxes and
commissions; custodian fees; insurance premiums; auditors' fees; and such
non-recurring and extraordinary items as may arise from time to time.
At present, the only expenses which are allocated specifically to Class A, Class
B, and Class C Shares as classes are expenses under the Corporation's
Distribution Plan and fees for Shareholder Services. However, the Directors
reserve the right to allocate certain other expenses to holders of Class A,
Class B, and Class C Shares as it deems appropriate ("Class Expenses"). In any
case, Class Expenses would be limited to: distribution fees; transfer agent fees
as identified by the transfer agent as attributable to holders of Class A, Class
B, and Class C Shares; fees for Shareholder Services; printing and postage
expenses related to preparing and distributing materials such as shareholder
reports, prospectuses and proxies to current shareholders; registration fees
paid to the Securities and Exchange Commission and registration fees paid to
state securities commissions; expenses related to administrative personnel and
services as required to support holders of Class A, Class B, and Class C Shares;
legal fees relating solely to Class A, Class B, and Class C Shares and
Directors' fees incurred as a result of issues relating solely to Class A, Class
B, and Class C Shares.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet this criteria, the Adviser may give consideration to those
firms which have sold or are selling Shares of the Fund and other funds
distributed by Federated Securities Corp. The Adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Directors.
Shareholder Information
Voting Rights
Each Share of the Fund gives the shareholder one vote in Director elections and
other matters submitted to shareholders for vote. All Shares of each portfolio
or class in the Corporation have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that particular Fund
or class are entitled to vote.
As a Maryland corporation, the Corporation is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Fund's operation and for the election of Directors under certain
circumstances.
Directors may be removed by the Directors or by shareholders at a special
meeting. The Directors shall call a special meeting of shareholders upon the
written request of shareholders owning at least 10% of the Corporation's
outstanding shares entitled to vote.
Tax Information
Federal Income Tax
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code, as amended (the "Code"), applicable to regulated
investment companies and to receive the special tax treatment afforded to such
companies. However, the Fund may invest in the stock of certain foreign
corporations which would constitute a Passive Foreign Investment Company
("PFIC"). Federal income taxes may be imposed on the Fund upon disposition of
PFIC investments.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Corporation's other portfolios, if any, will not be combined for tax purposes
with those realized by the Fund.
Investment income received by the Fund from sources within foreign countries may
be subject to foreign taxes withheld at the source. The United States has
entered into tax treaties with many foreign countries that entitle the Fund to
reduced tax rates or exemptions on this income. The effective rate of foreign
tax cannot be predicted since the amount of Fund assets to be invested within
various countries is unknown. However, the Fund intends to operate so as to
qualify for treaty-reduced tax rates where applicable.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional Shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held the Shares. No federal income tax is due on any
dividends earned in an IRA or qualified retirement plan until distributed.
State and Local Taxes
Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
Performance Information
From time to time, the Fund advertises the total return for each class of
Shares.
Total return represents the change, over a specified period of time, in the
value of an investment in each class of Shares after reinvesting all income and
capital gains distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage.
The performance information reflects the effect of non-recurring charges, such
as the maximum sales charge and contingent deferred sales charges, which, if
excluded, would increase the total return.
Total return will be calculated separately for Class A Shares, Class B Shares,
and Class C Shares. Expense differences between Class A Shares, Class B Shares
and Class C Shares may affect the performance of each class.
From time to time, advertisements for Class A Shares, Class B Shares and Class C
Shares of the Fund may refer to ratings, rankings, and other information in
certain financial publications and/or compare the performance of Class A Shares,
Class B Shares and Class C Shares to certain indices.
<PAGE>
Appendix
Standard and Poor's Ratings Services Long Term Debt Rating Definitions
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's Ratings
Group. Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB--Debt rated BB has less near-term, vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB-rating.
B--Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC--Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B-rating.
CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.
C--The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC-debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
Moody's Investors Service, Inc. Long Term Bond Rating Definitions
AAA--Bonds which are rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA--Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in AAA securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
BAA--Bonds which are rated BAA are considered as medium grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA--Bonds which are BA are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA--Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA--Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Fitch Investors Service, Inc. Long-Term Debt Rating Definitions
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC--Bonds have certain indentifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C--Bonds are imminent default in payment of interest or principal.
Moody's Investors Service, Inc. Commercial Paper Ratings
Prime-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following characteristics:
o Leading market positions in well established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
o Broad margins in earning coverage of fixed financial charges and high
internal cash generation.
o Well established access to a range of financial markets and assured
sources of alternate liquidity.
Prime-2--Issuers rated PRIME-1 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
Standard and Poor's Ratings Services Commercial Paper Ratings
A-1--This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
Fitch Investors Service, Inc. Commercial Paper Rating Definitions
FITCH-1--(Highest Grade) Commercial paper assigned this rating is regarded as
having the strongest degree of assurance for timely payment.
FITCH-2--(Very Good Grade) Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.
<PAGE>
Addresses
Federated Global Equity Income Fund
Class A Shares Federated Investors Funds
Class B Shares 5800 Corporate Drive
Class C Shares Pittsburgh, Pennsylvania 15237-7000
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Adviser
Federated Global Research Corp. 175 Water Street
New York, New York 10038-4965
Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, Massachusetts 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder P.O. Box 8600
Services Company Boston, Massachusetts 02266-8600
Independent Public Accountants
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
<PAGE>
Federated Global Equity Income Fund
(A Portfolio Of World Investment Series, Inc.)
Class A Shares
Class B Shares
Class C Shares
Prospectus
An Open-End, Diversified
Management Investment Company
_________, 1997
Cusip
Cusip
Cusip
G0-ABC(/97)
Federated Global Equity Income Fund
(A Portfolio of World Investment Series, Inc.)
Class A Shares
Class B Shares
Class C Shares
Statement of Additional Information
This Statement of Additional Information should be read with the prospectus
for Class A Shares, Class B Shares, and Class C Shares of Federated Global
Equity Income Fund (the "Fund") dated _____________, 1998. This Statement is
not a prospectus itself. You may request a copy of the prospectus or a paper
copy of this Statement of Additional Information, if you have received it
electronically, free of charge by calling 1-800-341-7400.
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
Statement dated____________, 1998
Cusip
G0 (/98)
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
I
General Information About the Fund 1
Investment Objective and Policies 1
Convertible Securities 1
Warrants 1
Sovereign Debt Obligations 1
When-Issued and Delayed Delivery Transactions 2
Lending of Portfolio Securities 2
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Restricted and Illiquid Securities 2
Futures and Options Transactions 3
Risks 6
Foreign Currency Transactions 8
Special Considerations Affecting Emerging
Markets 10
Additional Risk Considerations 11
Portfolio Turnover 11
Investment Limitations 11
World Investment Series, Inc. Management 13
Fund Ownership 17
Directors' Compensation 18
Investment Advisory Services 19
Adviser to the Fund 19
Advisory Fees 19
Other Related Services 19
Brokerage Transactions 19
Other Services 19
Fund Administration 19
Custodian 20
Transfer Agent and Dividend Disbursing Agent 20
Independent Auditors 20
Purchasing Shares 20
Distribution Plan and Shareholder Services Agreement 20
Conversion to Federal Funds 20
Purchases by Sales Representatives, Directors,
and Employees of the Fund 21
Determining Net Asset Value 21
Determining Market Value of Securities21
Trading in Foreign Securities 21
Redeeming Shares 21
Redemption in Kind 22
Elimination of the Contingent Deferred Sales
Charge 22
Tax Status 22
The Fund's Tax Status 22
Foreign Taxes 23
Shareholders' Tax Status 23
Total Return 23
Yield 23
Performance Comparisons 24
Economic and Market Information 26
About Federated Investors 26
Mutual Fund Market 26
Institutional Clients 26
Bank Marketing 26
Broker/Dealers and Bank Broker/Dealer Subsidiaries 26
<PAGE>
General Information About the Fund
The Fund is a portfolio of World Investment Series, Inc. (the "Corporation"),
which was incorporated under the laws of the State of Maryland on January 25,
1994.
Shares of the Fund are offered in three classes known as Class A Shares, Class B
Shares, and Class C Shares (individually and collectively referred to as
"Shares" as the context may require). This Statement of Additional Information
relates to all three classes of the above-mentioned Shares.
Investment Objective and Policies
The investment objective of the Fund is to provide capital appreciation and
above-average income. The Fund pursues its investment objective by investing
primarily in a professionally managed and diversified portfolio of
income-producing global equity securities. The investment objective cannot be
changed without approval of shareholders.
Convertible Securities
DECS, or similar instruments marketed under different names, offer a substantial
dividend advantage with the possibility of unlimited upside potential if the
price of the underlying common stock exceeds a certain level. DECS convert to
common stock at maturity. The amount received is dependent on the price of the
common stock at the time of maturity. DECS contain two call options at different
strike prices. The DECS participate with the common stock up to the first call
price. They are effectively capped at that point unless the common stock rises
above a second price point, at which time they participate with unlimited upside
potential. PERCS, or similar instruments marketed under different names, offer a
substantial dividend advantage, but capital appreciation potential is limited to
a predetermined level. PERCS are less risky and less volatile than the
underlying common stock because their superior income mitigates declines when
the common stock falls, while the cap price limits gains when the common stock
rises. Warrants
The Fund may invest in warrants. Warrants are options to purchase common stock
at a specific price (usually at a premium above the market value of the optioned
common stock at issuance) valid for a specific period of time. Warrants may have
a life ranging from less than a year to twenty years or may be perpetual.
However, most warrants have expiration dates after which they are worthless. In
addition, if the market price of the common stock does not exceed the warrant's
exercise price during the life of the warrant, the warrant will expire as
worthless. Warrants have no voting rights, pay no dividends, and have no rights
with respect to the assets of the corporation issuing them. The percentage
increase or decrease in the market price of the warrant may tend to be greater
than the percentage increase or decrease in the market price of the optioned
common stock.
Sovereign Debt Obligations
The Fund may purchase sovereign debt instruments issued or guaranteed by foreign
governments or their agencies, including debt of countries with emerging markets
or developing countries. Sovereign debt may be in the form of conventional
securities or other types of debt instruments, such as loans or loan
participations. Sovereign debt of emerging market or developing countries may
involve a high degree of risk, and may be in default or present the risk of
default. Governmental entities responsible for repayment of the debt may be
unable or unwilling to repay principal and interest when due, and may require
renegotiation or rescheduling of debt payments. In addition, prospects for
repayment of principal and interest may depend on political as well as economic
factors. The Fund may also invest in debt obligations of supranational entities,
which include international organizations designed or supported by governmental
entities to promote economic reconstruction or development, and international
banking institutions and related government agencies. Examples of these include,
but are not limited to, the International Bank for Reconstruction and
Development (World Bank), European Investment Bank and Inter-American
Development Bank.
When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund`s
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.
Lending of Portfolio Securities
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
There is the risk that when lending portfolio securities, the securities may not
be available to the Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
Repurchase Agreements
The Fund or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are found by the Fund's investment
adviser to be creditworthy pursuant to guidelines established by the
Corporation's Board of Directors (the "Directors").
Reverse Repurchase Agreements
The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future, the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but the ability to
enter into reverse repurchase agreements does not ensure that the Fund will be
able to avoid selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and are maintained until the transaction is settled.
Restricted and Illiquid Securities
The ability of the Directors to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission ("SEC") staff
position set forth in the adopting release for Rule 144A under the Securities
Act of 1933, as amended (the "Rule"). The Rule is a non-exclusive safe-harbor
for certain secondary market transactions involving registration for resales of
otherwise restricted securities to qualified institutional buyers. The Rule was
expected to further enhance the liquidity of the secondary market for securities
eligible for resale under the Rule. The Fund believes that the staff of the SEC
has left the question of determining the liquidity of all restricted securities
to the Directors. The Directors may consider the following criteria in
determining the liquidity of certain restricted securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace trades.
Notwithstanding the foregoing, securities of foreign issuers which are not
listed on a recognized domestic or foreign exchange or for which a bona fide
market does not exist at the time of purchase or subsequent transaction shall be
treated as illiquid securities by the Directors.
Futures and Options Transactions
The Fund may attempt to hedge all or a portion of its portfolio or gain
relatively rapid, liquid, and cost-effective exposure to certain markets by
buying and selling futures contracts and options on futures contracts.
Futures Contracts
The Fund may engage in futures contracts. A futures contract is a firm
commitment by two parties, the seller who agrees to make delivery of the
specific type of security called for in the contract ("going short") and the
buyer who agrees to take delivery of the security ("going long") at a
certain time in the future. However, a securities index futures contract is
an agreement pursuant to which two parties agree to take or make delivery of
an amount of cash equal to the difference between the value of the index at
the close of the last trading day of the contract and the price at which the
index was originally written. No physical delivery of the underlying
securities in the index is made.
The purpose of the acquisition or sale of a futures contract by the Fund is
to protect the Fund from fluctuations in the value of its securities caused
by unanticipated changes in interest rates or market conditions without
necessarily buying or selling the securities. For example, in the fixed
income securities market, price generally moves inversely to interest rates.
A rise in rates generally means a drop in price. Conversely, a drop in rates
generally means a rise in price. In order to hedge its holdings of fixed
income securities against a rise in market interest rates, the Fund could
enter into contracts to deliver securities at a predetermined price (i.e.,
"go short") to protect itself against the possibility that the prices of its
fixed income securities may decline during the anticipated holding period.
The Fund would "go long" (i.e., agree to purchase securities in the future
at a predetermined price) to hedge against a decline in market interest
rates. The Fund may also invest in securities index futures contracts when
the investment adviser believes such investment is more efficient, liquid,
or cost-effective than investing directly in the securities underlying the
index.
Stock Index Options
The Fund may purchase put options on stock indices listed on national
securities exchanges or traded in the over-the-counter market. A stock index
fluctuates with changes in the market values of the stocks included in the
index.
The effectiveness of purchasing stock index options will depend upon the
extent to which price movements in the Fund's portfolio correlate with price
movements of the stock index selected. Because the value of an index option
depends upon movements in the level of the index rather than the price of a
particular stock, whether the Fund will realize a gain or loss from the
purchase of options on an index depends upon movements in the level of stock
prices in the stock market generally or, in the case of certain indices, in
an industry or market segment, rather than movements in the price of a
particular stock. Accordingly, successful use by the Fund of options on
stock indices will be subject to the ability of the investment adviser to
predict correctly movements in the direction of the stock market generally
or of a particular industry.
Put Options on Financial Futures Contracts
The Fund may purchase listed or over-the-counter put options on financial
futures contracts. The Fund would use these options only to protect
portfolio securities against decreases in value resulting from market
factors such as anticipated increase in interest rates, or when the
investment adviser believes such investment is more efficient, liquid or
cost-effective than investing directly in the futures contract or the
underlying securities or when such futures contracts or securities are
unavailable for investment upon favorable terms.
Unlike entering directly into a futures contract, which requires the
purchaser to buy a financial instrument on a set date at a specified price,
the purchase of a put option on a futures contract entitles (but does not
obligate) its purchaser to decide on or before a future date whether to
assume a short position at the specified price. Generally, if the hedged
portfolio securities decrease in value during the term of an option, the
related futures contracts will also decrease in value and the option will
increase in value. In such an event, the Fund will normally close out its
option by selling an identical option. If the hedge is successful, the
proceeds received by the Fund upon the sale of the second option will be
large enough to offset both the premium paid by the Fund for the original
option plus the realized decrease in value of the hedged securities.
Alternatively, the Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures contract of
the type underlying the option (for a price less than the strike price of
the option) and exercise the option. The Fund would then deliver the futures
contract in return for payment of the strike price. If the Fund neither
closes out nor exercises an option, the option will expire on the date
provided in the option contract, and only the premium paid for the contract
will be lost.
The Fund may write listed or over-the counter put options on financial
futures contracts to hedge its portfolio or when the investment adviser
believes such investment is more efficient, liquid or cost-effective than
investing directly in the futures contract or the underlying securities or
when such futures contracts or securities are unavailable for investment
upon favorable terms. When the Fund writes a put option on a futures
contract, it receives a cash premium which can be used in whatever way is
deemed most advantageous to the Fund. In exchange for such premium, the Fund
grants to the purchaser of the put the right to receive from the Fund, at
the strike price, a short position in such futures contract, even though the
strike price upon exercise of the option is greater than the value of the
futures position received by such holder. If the value of the underlying
futures position is not such that exercise of the option would be profitable
to the option holder, the option will generally expire without being
exercised. The Fund has no obligation to return premiums paid to it whether
or not the option is exercised. It will generally be the policy of the Fund,
in order to avoid the exercise of an option sold by it, to cancel its
obligation under the option by entering into a closing purchase transaction,
if available, unless it is determined to be in the Fund's interest to
deliver the underlying futures position. A closing purchase transaction
consists of the purchase by the Fund of an option having the same term as
the option sold by the Fund, and has the effect of canceling the Fund's
position as a seller. The premium which the Fund will pay in executing a
closing purchase transaction may be higher than the premium received when
the option was sold, depending in large part upon the relative price of the
underlying futures position at the time of each transaction.
Call Options on Financial and Stock Index Futures Contracts
In addition to purchasing put options on futures, the Fund may write listed
call options or over-the-counter call options on financial and stock index
futures contracts (including cash-settled stock index options), to hedge its
portfolio against an increase in market interest rates, a decrease in stock
prices, or when the investment adviser believes such investment is more
efficient, liquid or cost-effective than investing directly in the futures
contract or the underlying securities or when such futures contracts or
securities are unavailable for investment upon favorable terms. When the
Fund writes a call option on a futures contract, it is undertaking the
obligation of assuming a short futures position (selling a futures contract)
at the fixed strike price at any time during the life of the option if the
option is exercised. As stock prices fall or market interest rates rise and
cause the price of futures to decrease, the Fund's obligation under a call
option on a future (to sell a futures contract) costs less to fulfill,
causing the value of the Fund's call option position to increase.
In other words, as the underlying futures price goes down below the strike
price, the buyer of the option has no reason to exercise the call, so that
the Fund keeps the premium received for the option. This premium can
substantially offset the drop in value of the Fund's portfolio securities.
Prior to the expiration of a call written by the Fund, or exercise of it by
the buyer, the Fund may close out the option by buying an identical option.
If the hedge is successful, the cost of the second option will be less than
the premium received by the Fund for the initial option. The net premium
income of the Fund may then substantially offset the realized decrease in
value of the hedged securities.
When the Fund purchases a call on a financial futures contract, it receives
in exchange for the payment of a cash premium the right, but not the
obligation, to enter into the underlying futures contract at a strike price
determined at the time the call was purchased, regardless of the comparative
market of such futures position at the time the option is exercised. The
holder of a call option has the right to receive a long (or buyer's)
position in the underlying futures contract.
The Fund generally will not maintain open positions in futures contracts it
has sold or call options it has written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds the
current market value of its securities portfolio plus the unrealized loss or
minus the unrealized gain on those open positions, adjusted for the
correlation between the hedged securities and the futures contracts. If this
limitation is exceeded at any time, the Fund will take prompt action to
close out a sufficient number of open contracts to bring its open futures
and options positions within this limitation.
"Margin" in Futures Transactions
Unlike the purchase or sale of a security, the Fund does not pay or receive
money upon the purchase or sale of a futures contract. Rather, the Fund is
required to deposit an amount of "initial margin" in cash or U.S. Treasury
bills with its custodian (or the broker, if legally permitted). The nature
of initial margin in futures transactions is different from that of margin
in securities transactions in that initial margin in futures transactions
does not involve the borrowing of funds by the Fund to finance the
transactions. Initial margin is in the nature of a performance bond or good
faith deposit on the contract which is returned to the Fund upon termination
of the futures contract, assuming all contractual obligations have been
satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund
pays or receives cash, called "variation margin," equal to the daily change
in value of the futures contract. This process is known as "marking to
market." Variation margin does not represent a borrowing or loan by the Fund
but is instead settlement between the Fund and the broker of the amount one
would owe the other if the futures contract expired. In computing its daily
net asset value, the Fund will mark to market its open futures positions.
The Fund is also required to deposit and maintain margin when it writes call
options on futures contracts.
Purchasing Put and Call Options on Portfolio Securities
The Fund may purchase put and call options on portfolio securities to
protect against price movements in particular securities in its portfolio. A
put option gives the Fund, in return for a premium, the right to sell the
underlying security to the writer (seller) at a specified price during the
term of the option. A call option gives the Fund, in return for a premium,
the right to buy the underlying securities from the seller.
Writing Covered Put and Call Options on Portfolio Securities
The Fund may write covered put and call options to generate income and
thereby protect against price movements in particular securities in the
Fund's portfolio. As the writer of a call option, the Fund has the
obligation upon exercise of the option during the option period to deliver
the underlying security upon payment of the exercise price. As the writer of
a put option, the Fund has the obligation to purchase a security from the
purchaser of the option upon the exercise of the option.
The Fund may only write call options either on securities held in its
portfolio or on securities which it has the right to obtain without payment
of further consideration (or has segregated cash in the amount of any
additional consideration). In the case of put options, the Fund will
segregate cash or U.S. Treasury obligations with a value equal to or greater
than the exercise price of the underlying securities.
Over-the-Counter Options
The Fund may purchase and write over-the-counter options ("OTC options") on
portfolio securities or in securities indexes in negotiated transactions
with the buyers or writers of the options when options on the portfolio
securities held by the Fund or when the securities indexes are not traded on
an exchange.
OTC options are two-party contracts with price and terms negotiated between
buyer and seller. In contrast, exchange-traded options are third-party
contracts with standardized strike prices and expiration dates and are
purchased from a clearing corporation. Exchange-traded options have a
continuous liquid market while OTC options may not.
Risks
Options
Certain hedging vehicles have risks associated with them including possible
default by the other party to the transaction, illiquidity and, to the
extent the investment adviser's view as to certain market movements is
incorrect, the risk that the use of such hedging strategies could result in
losses greater than if they had not been used. Use of put and call options
may result in losses to the Fund, force the sale or purchase of portfolio
securities at inopportune times or for prices higher than (in the case of
put options) or lower than (in the case of call options) current market
values, limit the amount of appreciation the Fund can realize on its
investments or cause the Fund to hold a security it might otherwise sell.
The use of currency transactions can result in the Fund incurring losses as
a result of a number of factors including the imposition of exchange
controls, suspension of settlements, or the inability to deliver or receive
a specified currency. The use of options and futures transactions entails
certain other risks. In particular, the variable degree of correlation
between price movements of futures contracts and price movements in the
related portfolio position of the Fund creates the possibility that losses
on the hedging instrument may be greater than gains in the value of the
Fund's position. In addition, futures and options markets may both be liquid
in all circumstances and certain over-the-counter options may have not
markets. As a result, in certain markets, the Fund might not be able to
close out a transaction without incurring substantial losses, if at all.
Although the use of futures and options transactions for hedging should tend
to minimize the risk of loss due to a decline in the value of the hedged
position, at the same time they tend to limit any potential gain which might
result from an increase in value of such position. Finally, the daily
variation margin requirements for futures contracts would create a greater
ongoing potential financial risk than would purchase of options, where the
exposure is limited to the cost of the initial premium. Losses resulting
from the use of hedging strategies would reduce net asset value, and
possibly income, and such losses can be greater than if the hedging
strategies had not been utilized.
Combined Transactions
The Fund may enter into multiple transactions, including multiple options
transactions, multiple futures transactions, multiple currency transaction
(including forward currency contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest
rate transactions ("component" transactions), instead of a single hedging
strategy, as part of a single or combined strategy when, in the opinion of
the investment adviser, it is in the best interests of the Fund to do so. A
combined transaction will usually contain elements of risk that are present
in each of its component transactions. Although combined transactions are
normally entered into based on the investment adviser's judgment that the
combined strategies will reduce risk or otherwise more effectively achieve
the desired portfolio management goal, it is possible that the combination
will instead increase such risks or hinder achievement of the portfolio
management objective.
Swaps, Caps, Floors and Collars
Among the hedging strategies into which the Fund may enter are interest
rate, currency and index swaps and the purchase or sale of related caps,
floors, and collars. The Fund expects to enter into these transactions
primarily to preserve a return or spread on a particular investment or
portion of its portfolio, to protect against currency fluctuations, as a
duration management technique or to protect against any increase in the
price of securities the Fund anticipates purchasing at a later date. The
Fund intends to use these transactions as hedges and not as speculative
investments and will not sell interest rate caps or floors where it does not
own securities or other instruments providing the income stream the Fund may
be obligated to pay. Interest rate swaps involve the exchange by the Fund
with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating rating payments of fixed rate
payments with respect to a notional amount of principal. A currency swap is
an agreement to exchange cash flows on a notional amount of two or more
currencies based on the relative value differential among them and an index
swap is an agreement to swap cash flows on a notional amount based on
changes in the values of the reference indices. The purchase of a cap
entitles the purchaser to receive payments on a notional principal amount
from the party selling such cap to the extent that a specified index exceeds
a predetermined interest rate or amount. The purchase of a floor entitles
the purchaser to receive payments on a notional principal amount from the
party selling such floor to the extent that specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap
and a floor that preserves a certain return within a predetermined range of
interest rates or values.
The Fund will usually enter into swaps on a net basis, i.e., the two payment
streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case
may be, only the net amount of the two payments. Inasmuch as these swaps,
caps, floors, and collars are entered into for good faith hedging purposes,
the investment adviser and the Fund believe such obligations do not
constitute senior securities under the Investment Company Act of 1940, as
amended, and, accordingly, will not treat them as being subject to its
borrowing restrictions. There is no minimal acceptable rating for a swap,
cap, floor, or collar to be purchased or held in the Fund's portfolio. If
there is a default by the counterparty, the Fund may have contractual
remedies pursuant to the agreements related to the transaction. The swap
market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
Risks of Hedging Strategies Outside the U.S.
When conducted outside the U.S., hedging strategies may not be regulated as
rigorously as in the U.S., may not involve a clearing mechanism and related
guarantees, and are subject to the risk of governmental actions affecting
trading in, or the prices of, foreign securities, currencies and other
instruments. The value of such positions also could be adversely affected
by: (i) other complex foreign political, legal and economic factors, (ii)
lesser availability than in the U.S. of data on which to make trading
decisions, (iii) delays in the Fund's ability to act upon economic events
occurring in foreign markets during non-business hours in the U.S., (iv) the
imposition of different exercise and settlement terms and procedures and the
margin requirements than in the U.S., and (v) lower trading volume and
liquidity.
Use of Segregated and Other Special Accounts
Many hedging strategies, in addition to other requirements, require that the
Fund segregate liquid high grade assets with its custodian to the extent
Fund obligations are not otherwise "covered" through ownership of the
underlying security, financial instrument or currency. In general, either
the full amount of any obligation by the Fund to pay or deliver securities
or assets must be covered at all times by the securities, instruments or
currency required to be delivered, or, subject to any regulatory
restrictions, an amount of cash or liquid high grade securities at least
equal to the current amount of the obligation must be segregated with the
custodian. The segregated assets cannot be sold or transferred unless
equivalent assets are substituted in their place or it is no longer
necessary to segregate them. For example, a call option written by the Fund
will require the Fund to hold the securities subject to the call (or
securities convertible into the needed securities without additional
consideration) or to segregate liquid high grade securities sufficient to
purchase and deliver the securities if the call is exercised. A call option
sold by the Fund on an index will require the Fund to own portfolio
securities which correlate with the index or to segregate liquid high grade
assets equal to the excess of the index value over the exercise price on a
current basis. A put option written by the Fund requires the Fund to
segregate liquid high grade assets equal to the exercise price.
Except when the Fund enters into a forward contract for the purchase or sale
of a security denominated in a particular currency, a currency contract
which obligates the Fund to buy or sell currency will generally require the
Fund to hold an amount of that currency or liquid securities denominated in
that currency equal to the Fund's obligations or to segregate liquid high
grade assets equal to the amount of the Fund's obligations.
OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices and OTC issued and exchange
listed index options, will generally provide for cash settlement. As a
result, when the Fund sells these instruments it will only segregate an
amount of assets equal to its accrued net obligations, as there is no
requirement for payment or delivery of amounts in excess of the net amount.
These amounts will equal 100% of the exercise price in the case of a non
cash-settled put, the same as an OTC guaranteed listed option sold by the
Fund, or the in-the-money amount plus any sell-back formula amount in the
case of a cash-settled put or call. In addition, when the Fund sells a call
option on an index at a time when the in-the-money amount exceeds the
exercise price, the Fund will segregate, until the option expires or is
closed out, cash or cash equivalents equal in value to such excess. OTC
issued and exchange listed options sold by the Fund other than those above
generally settle with physical delivery, and the Fund will segregate an
equal amount of assets equal to the full value of the option. OTC options
settling with physical delivery, or with an election of either physical
delivery or cash settlement will be treated the same as other options
settling with physical delivery.
In the case of a futures contract or an option thereon, the Fund must
deposit initial margin and possible daily variation margin in addition to
segregating assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such assets may consist of cash, cash
equivalents, liquid debt or equity securities or other acceptable assets.
With respect to swaps, the Fund will accrue the net amount of the excess, if
any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid high grade
securities having a value equal to the accrued excess. Caps, floors and
collars require segregation of assets with a value equal to the Fund's net
obligation, if any.
Strategic transactions may be covered by other means when consistent with
applicable regulatory policies. The Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated
assets, equals its net outstanding obligation in related options and hedging
strategies. For example, the Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put
option sold by the Fund. Moreover, instead of segregating assets if the Fund
held a futures or forward contract, it could purchase a put option on the
same futures or forward contract with a strike price as high or higher than
the price of the contract held. Other hedging strategies may also be offset
in combinations. If the offsetting transaction terminates at the time of or
after the primary transaction no segregation is required, but if it
terminates prior to such time, assets equal to any remaining obligation
would need to be segregated.
The Fund's activities involving hedging strategies may be limited by the
requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code") for qualification as a regulated investment company.
(See "Tax Status")
Foreign Currency Transactions
Currency Risks
The exchange rates between the U.S. dollar and foreign currencies are a
function of such factors as supply and demand in the currency exchange
markets, international balances of payments, governmental intervention,
speculation and other economic and political conditions. Although the Fund
values its assets daily in U.S. dollars, the Fund may not convert its
holdings of foreign currencies to U.S. dollars daily. The Fund may incur
conversion costs when it converts its holdings to another currency. Foreign
exchange dealers may realize a profit on the difference between the price at
which the Fund buys and sells currencies.
The Fund will engage in foreign currency exchange transactions in connection
with its portfolio investments. The Fund will conduct its foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market or through forward
contracts to purchase or sell foreign currencies.
Forward Foreign Currency Exchange Contracts
The Fund may enter into forward foreign currency exchange contracts in order
to protect against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and a foreign currency involved in an
underlying transaction. However, forward foreign currency exchange contracts
may limit potential gains which could result from a positive change in such
currency relationships. The investment adviser believes that it is important
to have the flexibility to enter into forward foreign currency exchange
contracts whenever it determines that it is in the Fund's best interest to
do so. The Fund will not speculate in foreign currency exchange.
The Fund will not enter into forward foreign currency exchange contracts or
maintain a net exposure in such contracts when it would be obligated to
deliver an amount of foreign currency in excess of the value of its
portfolio securities or other assets denominated in that currency or, in the
case of a "cross-hedge" denominated in a currency or currencies that the
investment adviser believes will tend to be closely correlated with that
currency with regard to price movements. Generally, the Fund will not enter
into a forward foreign currency exchange contract with a term longer than
one year.
Foreign Currency Options
A foreign currency option provides the option buyer with the right to buy or
sell a stated amount of foreign currency at the exercise price on a
specified date or during the option period. The owner of a call option has
the right, but not the obligation, to buy the currency. Conversely, the
owner of a put option has the right, but not the obligation, to sell the
currency.
When the option is exercised, the seller (i.e., writer) of the option is
obligated to fulfill the terms of the sold option. However, either the
seller or the buyer may, in the secondary market, close its position during
the option period at any time prior to expiration.
A call option on foreign currency generally rises in value if the underlying
currency appreciates in value, and a put option on foreign currency
generally rises in value if the underlying currency depreciates in value.
Although purchasing a foreign currency option can protect the Fund against
an adverse movement in the value of a foreign currency, the option will not
limit the movement in the value of such currency. For example, if the Fund
was holding securities denominated in a foreign currency that was
appreciating and had purchased a foreign currency put to hedge against a
decline in the value of the currency, the Fund would not have to exercise
its put option. Likewise, if the Fund were to enter into a contract to
purchase a security denominated in foreign currency and, in conjunction with
that purchase, were to purchase a foreign currency call option to hedge
against a rise in value of the currency, and if the value of the currency
instead depreciated between the date of purchase and the settlement date,
the Fund would not have to exercise its call. Instead, the Fund could
acquire in the spot market the amount of foreign currency needed for
settlement.
Special Risks Associated with Foreign Currency Options
Buyers and sellers of foreign currency options are subject to the same risks
that apply to options generally. In addition, there are certain risks
associated with foreign currency options. The markets in foreign currency
options are relatively new, and the Fund's ability to establish and close
out positions on such options is subject to the maintenance of a liquid
secondary market. Although the Fund will not purchase or write such options
unless and until, in the opinion of the investment adviser, the market for
them has developed sufficiently to ensure that the risks in connection with
such options are not greater than the risks in connection with the
underlying currency, there can be no assurance that a liquid secondary
market will exist for a particular option at any specific time.
In addition, options on foreign currencies are affected by all of those
factors that influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of
the option position may vary with changes in the value of either or both
currencies and may have no relationship to the investment merits of a
foreign security. Because foreign currency transactions occurring in the
interbank market involve substantially larger amounts than those that may be
involved in the use of foreign currency options, investors may be
disadvantaged by having to deal in an odd lot market (generally consisting
of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively
smaller transactions (i.e., less than $1 million) where rates may be less
favorable. The interbank market in foreign currencies is a global,
around-the-clock market. To the extent that the U.S. option markets are
closed while the markets for the underlying currencies remain open,
significant price and rate movements may take place in the underlying
markets that cannot be reflected in the options markets until they reopen.
Foreign Currency Futures Transactions
By using foreign currency futures contracts and options on such contracts,
the Fund may be able to achieve many of the same objectives as it would
through the use of forward foreign currency exchange contracts. The Fund may
be able to achieve these objectives possibly more effectively and at a lower
cost by using futures transactions instead of forward foreign currency
exchange contracts.
Special Risks Associated with Foreign Currency Futures Contracts and
Related Options Buyers and sellers of foreign currency futures
contracts are subject to the same risks that apply to the use of
futures generally. In addition, there are risks associated with
foreign currency futures contracts and their use as a hedging
device similar to those associated with options on currencies, as
described above.
Options on foreign currency futures contracts may involve certain additional
risks. Trading options on foreign currency futures contracts is relatively
new. The ability to establish and close out positions on such options is
subject to the maintenance of a liquid secondary market. To reduce this
risk, the Fund will not purchase or write options on foreign currency
futures contracts unless and until, in the opinion of the investment
adviser, the market for such options has developed sufficiently that the
risks in connection with such options are not greater than the risks in
connection with transactions in the underlying foreign currency futures
contracts. Compared to the purchase or sale of foreign currency futures
contracts, the purchase of call or put options on futures contracts involves
less potential risk to the Fund because the maximum amount at risk is the
premium paid for the option (plus transaction costs). However, there may be
circumstances when the purchase of a call or put option on a futures
contract would result in a loss, such as when there is no movement in the
price of the underlying currency or futures contract.
Special Considerations Affecting Emerging Markets
Investing in equity securities of companies in emerging markets may entail
greater risks than investing in equity securities in developed countries. These
risks include (i) less social, political and economic stability; (ii) the small
current size of the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (iii) certain national policies which may restrict the
Fund's investment opportunities, including restrictions on investment in issuers
or industries deemed sensitive to national interests; (iv) foreign taxation; and
(v) the absence of developed structures governing private or foreign investment
or allowing for judicial redress for injury to private property. Investing in
the securities of companies in emerging markets, may entail special risks
relating to the potential political and economic instability and the risks of
expropriation, nationalization, confiscation or the imposition of restrictions
on foreign investment, convertibility of currencies into U.S. dollars and on
repatriation of capital invested. In the event of such expropriation,
nationalization or other confiscation by any country, the Fund could lose its
entire investment in any such country.
Settlement mechanisms in emerging markets may be less efficient and reliable
than in more developed markets. In such emerging securities markets there may be
share registration and delivery delays or failures.
Most Latin American countries have experienced substantial, and in some periods
extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates and corresponding currency devaluations have had
any may continue to have negative effects on the economies and securities
markets of certain Latin American countries.
Political, Social and Economic Risks. Even though opportunities for investment
may exist in emerging markets, any change in the leadership or policies of the
governments of those countries or in the leadership or policies of any other
government which exercises a significant influence over those countries, may
halt the expansion of or reverse the liberalization of foreign investment
policies now occurring and thereby eliminate any investment opportunities which
may currently exist.
Investors should note that upon the accession to power of authoritarian regimes,
the governments of a number of Latin American countries previously expropriated
large quantities of real and personal property similar to the property which
will be represented by the securities purchased by the Fund. The claims of
property owners against those governments were never finally settled. There can
be no assurance that any property represented by securities purchased by the
Fund will not also be expropriated, nationalized, or otherwise confiscated. If
such confiscation were to occur, the Fund could lose its entire investment in
such countries. The Fund's investments would similarly be adversely affected by
exchange control regulation in any of those countries.
Certain countries in which the Fund may invest may have groups that advocate
radical religious or revolutionary philosophies or support ethnic independence.
Any disturbance on the part of such individuals could carry the potential for
widespread destruction or confiscation of property owned by individuals and
entities foreign to such country and could cause the loss of the Fund's
investment in those countries. Instability may also result from, among other
things: (i) authoritarian governments or military involvement in political and
economic decision-making, including changes in government through
extraconsititutional means; (ii) popular unrest associated with demands for
improved political, economic and social conditions; and (iii) hostile relations
with neighboring or other countries. Such political, social and economic
instability could disrupt the principal financial markets in which the Fund
invests and adversely affect the value of the Fund's assets.
Additional Risk Considerations
The Directors consider at least annually the likelihood of the imposition by any
foreign government of exchange control restrictions which would affect the
liquidity of the Fund's assets maintained with custodians in foreign countries,
as well as the degree of risk from political acts of foreign governments to
which such assets may be exposed. The Directors also consider the degree of risk
involved through the holding of portfolio securities in domestic and foreign
securities depositories. However, in the absence of willful misfeasance, bad
faith or gross negligence on the part of the investment adviser, any losses
resulting from the holding of the Fund's portfolio securities in foreign
countries and/or with securities depositories will be at the risk of
shareholders. No assurance can be given that the Directors' appraisal of the
risks will always be correct or that such exchange control restrictions or
political acts of foreign governments might not occur.
Portfolio Turnover
Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities in its portfolio will be sold whenever the
investment adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular security
may have been held. The investment adviser does not anticipate that portfolio
turnover will result in adverse tax consequences. It is not anticipated that the
portfolio trading engaged in by the Fund will result in its annual rate of
portfolio turnover exceeding 100%; however, the relative performance of the
Fund's investments may make a realignment of the Fund's portfolio desirable from
time to time. The frequency of such portfolio realignments will be determined by
market conditions. Higher portfolio turnover involves correspondingly greater
brokerage commissions and other transaction costs that the Fund will bear
directly.
Investment Limitations
The following investment limitations are fundamental (except that no investment
limitation of the Fund shall prevent the Fund from investing substantially all
of its assets (except for assets which are not considered "investment
securities" under the Investment Company Act of 1940, as amended, or assets
exempted by the SEC) in an open-end investment company with substantially the
same investment objectives):
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as are necessary for the
clearance of purchases and sales of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
financial futures contracts or related options transactions is not
considered the purchase of a security on margin.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities, except that the Fund may borrow
money directly or through reverse repurchase agreements in amounts up to
one-third of the value of its total assets, including the amount borrowed,
and except to the extent that the Fund may enter into futures contracts. The
Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure or to facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio securities is
deemed to be inconvenient or disadvantageous. The Fund will not purchase any
securities while any borrowings in excess of 5% of its total assets are
outstanding.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In these cases, the Fund may pledge assets as
necessary to secure such borrowings. For purposes of this limitation, the
following will not be deemed to be pledges of the Fund's assets: (a) the
deposit of assets in escrow in connection with the writing of covered put or
call options and the purchase of securities on a when-issued basis; and (b)
collateral arrangements with respect to: (i) the purchase and sale of
securities options (and options on securities indexes) and (ii) initial or
variation margin for futures contracts.
Concentration of Investments
The Fund will not invest 25% or more of the value of its total assets in any
one industry, except that the Fund may invest 25% or more of the value of
its total assets in securities issued or guaranteed by the U.S. government,
its agencies or instrumentalities, and repurchase agreements collateralized
by such securities.
Investing in Commodities
The Fund will not invest in commodities, except that the Fund reserves the
right to engage in transactions involving futures contracts, options, and
forward contracts with respect to securities, securities indexes or
currencies.
Investing in Real Estate
The Fund will not purchase or sell real estate, including limited
partnership interests, although it may invest in the securities of companies
whose business involves the purchase or sale of real estate or in securities
which are secured by real estate or interests in real estate.
Lending Cash or Securities
The Fund will not lend any of its assets, except portfolio securities. This
shall not prevent the Fund from purchasing or holding U.S. government
obligations, corporate bonds, money market instruments, debentures, notes,
certificates of indebtedness, or other debt securities, entering into
repurchase agreements, or engaging in other transactions where permitted by
the Fund's investment objective, policies, and limitations or the
Corporation's Articles of Incorporation.
Underwriting
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.
Diversification of Investments
With respect to securities comprising 75% of the value of its total assets,
the Fund will not purchase securities issued by any one issuer (other than
cash, cash items, or securities issued or guaranteed by the U.S. government,
its agencies or instrumentalities, and repurchase agreements collateralized
by such securities, and securities of other investment companies) if, as a
result, more than 5% of the value of its total assets would be invested in
the securities of that issuer, and will not acquire more than 10% of the
outstanding voting securities of any one issuer.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Directors without
shareholder approval (except that no investment limitation of the Fund shall
prevent the Fund from investing substantially all of its assets (except for
assets which are not considered "investment securities" under the Investment
Company Act of 1940, as amended, or assets exempted by the SEC) in an open-end
investment company with substantially the same investment objectives).
Shareholders will be notified before any material changes in these limitations
become effective.
Investing in Illiquid Securities
The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements providing for
settlement in more than seven days after notice, non-negotiable time
deposits with maturities over seven days, over-the-counter options, swap
agreements not determined to be liquid, and certain restricted securities
not determined by the Directors to be liquid.
Purchasing Securities to Exercise Control
The Fund will not purchase securities of a company for the purpose of
exercising control or management.
Investing in Put Options
The Fund will not purchase put options on securities or futures contracts,
unless the securities or futures contracts are held in the Fund's portfolio
or unless the Fund is entitled to them in deliverable form without further
payment or after segregating cash in the amount of any further payment.
Writing Covered Call Options
The Fund will not write call options on securities unless the securities or
futures contracts are held in the Fund's portfolio or unless the Fund is
entitled to them in deliverable form without further payment or after
segregating cash in the amount of any further payment.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
The Fund has no present intent to borrow money, pledge securities, or invest in
reverse repurchase agreements in excess of 5% of the value of its total assets
in the coming fiscal year. In addition, the Fund expects to lend not more than
5% of its total assets in the coming fiscal year.
For purposes of its policies and limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings associations having capital, surplus, and undivided profits in excess
of $100,000,000 at the time of investment to be "cash items."
World Investment Series, Inc. Management
Officers and Directors are listed with their addresses, birthdates, present
positions with World Investment Series, Inc., and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Director and Chairman
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director or Trustee of the Funds. Mr. Donahue is the
father of J. Christopher Donahue, Executive Vice President of the Company .
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Director
Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Trustee, University
of Pittsburgh; Director or Trustee of the Funds.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Director
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; Partner or Trustee in private real estate
ventures in Southwest Florida; formerly, President, Naples Property Management,
Inc. and Northgate Village Development Corporation; Director or Trustee of the
Funds.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Director
Director and Member of the Executive Committee, Michael Baker, Inc.; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; Director, Ryan
Homes, Inc.; Director or Trustee of the Funds.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Director
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or Trustee
of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Director
Professor of Medicine, University of Pittsburgh; Medical Director, University of
Pittsburgh Medical Center - Downtown; Member, Board of Directors, University of
Pittsburgh Medical Center; formerly, Hematologist, Oncologist, and Internist,
Presbyterian and Montefiore Hospitals; Director or Trustee of the Funds.
Richard B. Fisher *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Director and President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of the
Funds; Director or Trustee of some of the Funds.
Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Director
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western Region;
Director or Trustee of the Funds.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Director
Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Director
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Director
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University, U.S. Space Foundation and Czech
Management Center; President Emeritus, University of Pittsburgh; Founding
Chairman, National Advisory Council for Environmental Policy and Technology,
Federal Emergency Management Advisory Board and Czech Management Center;
Director or Trustee of the Funds.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Director
Public relations/Marketing/Conference Planning, Manchester Craftsmen's Guild;
Restaurant Consultant, Frick Art & History Center; Conference Coordinator,
University of Pittsburgh Art History Department; Director or Trustee of the
Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global Research Corp.; President, Passport Research, Ltd.;
Trustee, Federated Shareholder Services Company and Federated Shareholder
Services; Director, Federated Services Company; President or Executive Vice
President of the Funds; Director or Trustee of some of the Funds. Mr. Donahue is
the son of John F. Donahue, Director and Chairman of the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company; Trustee or Director of some of the Funds;
President, Executive Vice President and Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President , Secretary and Treasurer
Executive Vice President, Secretary, and Trustee, Federated Investors; Trustee,
Federated Advisers, Federated Management, and Federated Research; Director,
Federated Research Corp. and Federated Global Research Corp.; Trustee, Federated
Shareholder Services Company; Director, Federated Services Company; President
and Trustee, Federated Shareholder Services; Director, Federated Securities
Corp.; Executive Vice President and Secretary of the Funds; Treasurer of some of
the Funds.
* This Director is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board of
Directors handles the responsibilities of the Board between meetings of the
Board. As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Automated Government Money Trust;
Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust Series II;
Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily
Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity
Funds; Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income Securities,
Inc.; High Yield Cash Trust; Intermediate Municipal Trust; International Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty Term
Trust, Inc. - 1999; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; RIMCO Monument Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds; The
Virtus Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; Wesmark Funds; WCT Funds; and World Investment Series,
Inc.
<PAGE>
Directors' Compensation
<TABLE>
<CAPTION>
<S> <C> <C>
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
CORPORATION CORPORATION *# FROM FUND COMPLEX +
John F. Donahue $0 $0 for the Corporation and
Chairman and Director 56 other investment companies in the Fund Complex
Thomas G. Bigley $1,018.27 $108,725 for the Corporation and
Director 56 other investment companies in the Fund Complex
John T. Conroy, Jr. $1,120.27 $119,615 for the Corporation and
Director 56 other investment companies in the Fund Complex
William J. Copeland $1,120.27 $119,615 for the Corporation and
Director 56 other investment companies in the Fund Complex
James E. Dowd $1,120.27 $119,615 for the Corporation and
Director 56 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D. $1,018.27 $108,725 for the Corporation and
Director 56 other investment companies in the Fund Complex
Richard B. Fisher $0 $0 for the Corporation and
President and Director 6 other investment companies in the Fund Complex
Edward L. Flaherty, Jr. $1,120.27 $119,615 for the Corporation and
Director 56other investment companies in the Fund Complex
Peter E. Madden $1,018.27 $108,725 for the Corporation and
Director 56other investment companies in the Fund Complex
John E. Murray, Jr. $1,018.27 $108,725 for the Corporation and
Director 56 other investment companies in the Fund Complex
Wesley W. Posvar $1,018.27 $108,725 for the Corporation and
Director 56 other investment companies in the Fund Complex
Marjorie P. Smuts $1,018.27 $108,725 for the Corporation and
Director 56 other investment companies in the Fund Complex
</TABLE>
*Information is furnished for the fiscal year ended November 30, 1997.
#The aggregate compensation is provided for the Corporation, which was comprised
of 7 portfolios, as of November 30, 1997.
+The information is provided for the last calendar year end.
<PAGE>
Investment Advisory Services
Adviser to the Fund
The Fund's investment adviser is Federated Global Research Corp. (the
"Adviser"). It is a subsidiary of Federated Investors. All the voting securities
of Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, his wife, and his son, J. Christopher Donahue.
The Adviser shall not be liable to the Corporation, the Fund, or any shareholder
of the Fund for any losses that may be sustained in the purchase, holding, or
sale of any security or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Corporation.
Advisory Fees
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of shares of funds offered by Federated Securities Corp.
Brokerage Transactions
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the Adviser
and may include: advice as to the advisability of investing in securities;
security analysis and reports; economic studies; industry studies; receipt of
quotations for portfolio evaluations; and similar services. Research services
provided by brokers and dealers may be used by the Adviser or its affiliates in
advising the Fund and other accounts. To the extent that receipt of these
services may supplant services for which the Adviser or its affiliates might
otherwise have paid, it would tend to reduce their expenses. The Adviser and its
affiliates exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are reasonable
in relationship to the value of the brokerage and research services provided.
Although investment decisions for the Fund are made independently from those of
the other accounts managed by the Adviser, investments of the type the Fund may
make may also be made by those other accounts. When the Fund and one or more
other accounts managed by the Adviser are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the Adviser to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received by
the Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
The Adviser may engage in other non-U.S. transactions that may have adverse
effects on the market for securities in the Fund's portfolio. The Adviser is not
obligated to obtain any material non-public ("inside") information about any
securities issuer, or to base purchase or sale recommendations on such
information.
Other Services
Fund Administration
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in each
prospectus.
Custodian
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank. Federated Services Company, Pittsburgh, PA provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments. The fee
paid for this service is based upon the level of the Fund's average net assets
for the period, plus out-of-pocket expenses.
Transfer Agent and Dividend Disbursing Agent
Federated Services Company, through its registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on the size, type, and
number of accounts and transactions made by shareholders.
Independent Auditors
The independent auditors for the Fund are Ernst & Young LLP, Pittsburgh,
Pennsylvania.
Except under certain circumstances described in the prospectus, Shares are sold
at their net asset value (plus a sales charge on Class A Shares only) on days
the New York Stock Exchange is open for business. The procedure for purchasing
Shares is explained in the prospectus under "Investing in the Fund" and
"Purchasing Shares."
Quantity Discounts and Accumulated Purchases
As described in the prospectus, larger purchases reduce the sales charge paid.
The Fund will combine purchases of Class A Shares made on the same day by the
investor, the investor's spouse, and the investor's children under age 21 when
it calculates the sales charge. In addition, the sales charge, if applicable, is
reduced for purchases made at one time by a trustee or fiduciary for a single
trust estate or a single fiduciary account.
If an additional purchase of Class A Shares is made, the Fund will consider the
previous purchases still invested in the Fund. For example, if a shareholder
already owns Class A Shares having a current value at the public offering price
of $90,000 and he purchases $10,000 more at the current public offering price,
the sales charge on the additional purchase according to the schedule now in
effect would be 3.75%, not 4.50%.
To receive the sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial intermediary at the
time the purchase is made that Class A Shares are already owned or that
purchases are being combined. The Fund will reduce or eliminate the sales charge
after it confirms the purchases.
Concurrent Purchases
For purposes of qualifying for a sales charge reduction, a shareholder has the
privilege of combining concurrent purchases of Class A Shares of two or more
funds for which affiliates of Federated Investors serve as investment adviser
and principal underwriter (the "Federated Funds"), the purchase price of which
includes a sales charge. For example, if a shareholder concurrently invested
$30,000 in the Class A Shares of one of the other Federated Funds with a sales
charge, and $70,000 in this Fund, the sales charge would be reduced.
To receive this sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial intermediary at the
time the concurrent purchases are made. The Fund will reduce the sales charge
after it confirms the purchases.
Letter of Intent
If a shareholder intends to purchase at least $100,000 of Class A Shares of
Federated Funds (excluding money market funds) over the next 13 months, the
sales charge may be reduced by signing a letter of intent to that effect. This
letter of intent includes a provision for a sales charge adjustment depending on
the amount actually purchased within the 13-month period and a provision for the
custodian to hold up to 4.50% of the total amount intended to be purchased in
escrow (in Shares) until such purchase is completed.
The Shares held in escrow in the shareholder's account will be released upon
fulfillment of the letter of intent or the end of the 13-month period, whichever
comes first. If the amount specified in the letter of intent is not purchased,
an appropriate number of escrowed Shares may be redeemed in order to realize the
difference in the sales charge.
While this letter of intent will not obligate the shareholder to purchase
Shares, each purchase during the period will be at the sales charge applicable
to the total amount intended to be purchased. At the time a letter of intent is
established, current balances in accounts in any Class A Shares of any Federated
Funds, excluding money market accounts, will be aggregated to provide a purchase
credit towards fulfillment of the letter of intent. Prior trade prices will not
be adjusted.
Reinvestment Privilege
The reinvestment privilege is available for all Shares of the Fund. If Class A
Shares in the Fund have been redeemed, the shareholder has the privilege, within
120 days, to reinvest the redemption proceeds at the next-determined net asset
value without any sales charge. Similarly, shareholders who redeem Class B
Shares or Class C Shares may be reinvested in the same Share class within 120
days but would not be entitled to a reimbursement of the contingent deferred
sales charge if paid at the time of redemption. However, such reinvested shares
would not be subject to a contingent deferred sales charge upon later
redemption. In addition, if the Class B or Class C Shares were reinvested
through a financial intermediary, the financial intermediary would not be
entitled to an advanced payment from Federated Securities Corp. on the
reinvested Shares. Federated Securities Corp. must be notified by the
shareholder in writing or by his financial intermediary of the reinvestment in
order to eliminate a sales charge or a contingent deferred sales charge. If the
shareholder redeems Shares in the Fund, there may be tax consequences.
Conversion of Class B Shares
Class B Shares will automatically convert into Class A Shares on or around the
15th of the month eight full years from the purchase date and will no longer be
subject to a fee under the distribution plan. For purposes of conversion to
Class A Shares, Shares purchased through the reinvestment of dividends and
distributions paid on Class B Shares will be considered to be held in a separate
sub-account. Each time any Class B Shares in the shareholder's account (other
than those in the sub-account) convert to Class A Shares, an equal pro rata
portion of the Class B Shares in the sub-account will also convert to Class A
Shares. The conversion of Class B Shares to Class A Shares is subject to the
continuing availability of a ruling from the Internal Revenue Service or an
opinion of counsel that such conversions will not constitute taxable events for
federal tax purposes. There can be no assurance that such ruling or opinion will
be available, and the conversion of Class B Shares to Class A Shares will not
occur if such a ruling or opinion is not available. In such event, Class B
Shares would continue to be subject to higher expenses than Class A Shares for
an indefinite period.
Purchases by Sales Representatives, Fund Directors, and Employees
The following individuals and their immediate family members may buy Class A
Shares at net asset value without a sales charge:
o Directors, employees, and sales representatives of the Fund, Federated
Global Research, and Federated Securities Corp. and its affiliates;
o Federated Life Members; and
o any associated person of an investment dealer who has a sales agreement with
Federated Securities Corp. Shares may also be sold without a sales charge to
trusts, pensions, or profit-sharing plans for these individuals.
These sales are made with the purchaser's written assurance that the purchase is
for investment purposes and that the securities will not be resold except
through redemption by the Fund.
Conversion to Federal Funds
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds before shareholders begin to
earn dividends. Federated Shareholder Services Company acts as the shareholder's
agent in depositing checks and converting them to federal funds.
Distribution Plan and Shareholder Services Agreement
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services as appropriate, to stimulate
distribution activities and to cause services to be provided to shareholders by
a representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; providing office space, equipment, telephone facilities, and
various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses.
By adopting the Distribution Plan, the Directors expect that the Class A Shares,
Class B Shares, and Class C Shares of the Fund will be able to achieve a more
predictable flow of cash for investment purposes and to meet redemptions. This
will facilitate more efficient portfolio management and assist the Fund in
pursuing its investment objective. By identifying potential investors whose
needs are served by the Fund's objective, and properly servicing these accounts,
it may be possible to curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include: (1)
providing personal services to shareholders; (2) investing shareholder assets
with a minimum of delay and administrative detail; (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts.
Class A Shares have no present intention of paying or accruing distribution
services fees during the fiscal year ending November 30, 1998.
Federated Investors and its subsidiaries may benefit from arrangements where the
Rule 12b-1 Plan fees related to Class B Shares may be paid to third-party
financial providers who have advanced commissions to financial intermediaries.
The Fund's net asset value per Share fluctuates and is based on the market value
of all securities and other assets of the Fund. The net asset value for each
class of Shares may differ due to the variance in daily net income realized by
each class.
Net asset value is not determined on (i) days on which there are not sufficient
changes in the value of the Fund's portfolio securities that its net asset value
might be materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; or (iii) the following
holidays: New Year's Day, Martin Luther King Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Determining Market Value of Securities
Dividend income is recorded on the ex-dividend date, except that certain
dividends from foreign securities where the ex-dividend date may have passed are
recorded as soon as the Fund is informed of the ex-dividend date.
Market values of the Fund's portfolio securities, other than options, are
determined as follows:
o for equity securities, according to the last sale price in the market in
which they are primarily traded (either a national securities exchange
or the over-the-counter market), if available;
o in the absence of recorded sales for equity securities, according to
the mean between the last closing bid and asked prices;
o for bonds and other fixed income securities, as determined by an
independent pricing service;
o for short-term obligations, according to the prices as furnished by an
independent pricing service, except that short-term obligations with
remaining maturities of less than 60 days at the time of purchase may be
valued at amortized cost; and
o for all other securities, at fair value as determined in good faith by
the Directors.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider: institutional trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data.
The Fund will value futures contracts and options at their market values
established by the exchanges on which they are traded at the close of trading on
such exchanges unless the Directors determine in good faith that another method
of valuing such investments is necessary.
Trading in Foreign Securities
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange. In computing the net asset value, the
Fund values foreign securities at the latest closing price on the exchange on
which they are traded immediately prior to the closing of the New York Stock
Exchange. Certain foreign currency exchange rates may also be determined at the
latest rate prior to the closing of the New York Stock Exchange. Foreign
securities quoted in foreign currencies are translated into U.S. dollars at
current rates. Occasionally, events that affect these values and exchange rates
may occur between the times at which they are determined and the closing of the
New York Stock Exchange. If such events materially affect the value of portfolio
securities, these securities may be valued at their fair value as determined in
good faith by the Directors, although the actual calculation may be done by
others.
The Fund redeems Shares at the next computed net asset value after the Fund
receives the redemption request. Shareholder redemptions may be subject to a
contingent deferred sales charge. Redemption procedures are explained in the
prospectus under "Redeeming and Exchanging Shares." Although the transfer agent
does not charge for telephone redemptions, it reserves the right to charge a fee
for the cost of wire-transferred redemptions of less than $5,000.
Redemption in Kind
Although the Fund intends to redeem Shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable SEC rules, taking
such securities at the same value employed in determining net asset value and
selecting the securities in a manner the Directors determine to be fair and
equitable.
The Fund has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Fund is obligated to redeem Shares for any shareholder
in cash up to the lesser of $250,000 or 1% of the Fund's net asset value during
any 90-day period.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
Contingent Deferred Sales Charge
In computing the amount of the applicable contingent deferred sales charge,
redemptions are deemed to have occurred in the following order: (1) Shares
acquired through the reinvestment of dividends and long-term capital gains; (2)
Shares held for more than six full years from the date of purchase with respect
to Class B Shares and one full year from the date of purchase with respect to
Class C Shares; (3) Shares held for fewer than six years with respect to Class B
Shares and for less than one full year from the date of purchase with respect to
Class C Shares on a first-in, first-out basis.
Elimination of the Contingent Deferred Sales Charge--Class B Shares
To qualify for elimination of the contingent deferred sales charge through a
Systematic Withdrawal Program, the redemptions of Class B Shares must be
from an account that is at least 12 months old, has all Fund distributions
reinvested in Fund Shares, and has an account value of at least $10,000 when
the Systematic Withdrawal Program is established. Qualifying redemptions may
not exceed 1.00% monthly of the account value as periodically determined by
the Fund. The amounts that a shareholder may withdraw under a Systematic
Withdrawal Program that qualify for elimination of the contingent deferred
sales charge may not exceed 12% annually with reference initially to the
value of the Class B Shares upon establishment of the Systematic Withdrawal
Program and then as calculated at the annual valuation date. Redemptions on
a qualifying Systematic Withdrawal Program can be made at a rate of 1.00%
monthly, 3.00% quarterly, or 6.00% semi-annually with reference to the
applicable account valuation amount. Amounts that exceed the 12.00% annual
limit for redemption, as described, may be subject to the contingent
deferred sales charge. To the extent that a shareholder exchanges Shares for
Class B Shares of other Federated Funds, the time for which the
exchanged-for Shares are to be held will be added to the time for which
exchanged-from Shares were held for purposes of satisfying the 12-month
holding requirement. However, for purposes of meeting the $10,000 minimum
account value requirement, Class B Share accounts will be not be aggregated.
Any Shares purchased prior to the termination of this program would have the
contingent deferred sales charge eliminated as provided in the Fund's
prospectus at the time of the purchase of the Shares.
Tax Status
The Fund's Tax Status
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code of 1986, as amended,
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, the Fund
must, among other requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
However, the Fund may invest in the stock of certain foreign corporations which
would constitute a Passive Foreign Investment Company ("PFIC"). Federal income
taxes may be imposed on the Fund upon disposition of PFIC investments.
Foreign Taxes
Investment income on certain foreign securities in which the Fund may invest may
be subject to foreign withholding or other taxes that could reduce the return on
these securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign taxes to which the Fund
would be subject.
Shareholders' Tax Status
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional Shares. The Fund's dividends, and any short-term
capital gains, are taxable as ordinary income.
Capital Gains
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have held the
Fund Shares.
The average annual total return for all classes of Shares of the Fund is the
average compounded rate of return for a given period that would equate a $1,000
initial investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of Shares owned at the
end of the period by the offering price per Share at the end of the period. The
number of Shares owned at the end of the period is based on the number of Shares
purchased at the beginning of the period with $1,000, less any applicable sales
charge, adjusted over the period by any additional Shares, assuming a quarterly
reinvestment of all dividends and distributions. Any applicable contingent
deferred sales charge is deducted from the ending value of the investments based
on the lesser of the original purchase price or the offering price of Shares
redeemed.
The yield for all classes of Shares of the Fund is determined by dividing the
net investment income per Share (as defined by the SEC) earned by any class of
Shares over a thirty-day period by the maximum offering price per Share of any
class of Shares on the last day of the period. This value is then annualized
using semi-annual compounding. This means that the amount of income generated
during the thirty-day period is assumed to be generated each month over a
twelve-month period and is reinvested every six months. The yield does not
necessarily reflect income actually earned by any class of Shares because of
certain adjustments required by the SEC and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in any class
of Shares, the performance will be reduced for those shareholders paying those
fees.
<PAGE>
Performance Comparisons
The performance of each of the classes of Shares depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in the Fund's or any class of Shares' expenses; and
o various other factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and offering price per Share fluctuate daily. Both net earnings and offering
price per Share are factors in the computation of yield and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
o Lipper Analytical Services, Inc., ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a
specified period of time. From time to time, the Fund will quote its
Lipper ranking in advertising and sales literature.
o Morgan Stanley Capital International World Index is comprised of 22
countries including the United States and is constructed by first
defining the local market including all listed securities. The matrix
is sorted by industry and 60% of the market capitalization of each
group is captured by selecting the most investable stocks in each
industry. Full market capitalization weights are then applied to each
stock in the index.
o Standard & Poor's Daily Stock Price Index of 500 Common Stocks, a
composite index of common stocks in industry, transportation, and
financial and public utility companies, can be used to compare to the
total returns of funds whose portfolios are invested primarily in common
stocks. In addition, the Standard & Poor's index assumes reinvestments
of all dividends paid by stocks listed on its index. Taxes due on any of
these distributions are not included, nor are brokerage or other fees
calculated in Standard & Poor's figures.
o Morningstar, Inc. , an independent rating service, is the publisher of
the bi-weekly Mutual Fund Values. Mutual Fund Values rates more than
1,000 NASDAQ-listed mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings are
effective for two weeks.
From time to time, the Fund may quote information including but not limited to
data regarding: individual countries, regions, world stock exchanges, and
economic and demographic statistics from sources deemed reliable.
Advertisements and other sales literature for any class of Shares may quote
total returns which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment in any
class of Shares based on annual reinvestment of dividends over a specified
period of time.
From time to time as it deems appropriate, the Fund may advertise the
performance of any class of Shares using charts, graphs, and descriptions,
compared to federally insured bank products including certificates of deposit
and time deposits and to money market funds using the Lipper Analytical Services
money market instruments average. In addition, advertising and sales literature
for the Fund may use charts and graphs to illustrate the principles of
dollar-cost averaging and may disclose the amount of dividends paid by the Fund
over certain periods of time.
Advertisements may quote performance information which does not reflect the
effect of the sales charge on Class A Shares.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in which it
invests, to a variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.
Economic and Market Information
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Fund portfolio managers and their views and analysis on how such
developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute. About Federated Investors
Federated Investors is dedicated to meeting investor needs which is reflected in
its investment decision making--structured, straightforward, and consistent.
This has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands of
clients and their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment decisions
are made and executed by teams of portfolio managers, analysts, and traders
dedicated to specific market sectors. These traders handle trillions of dollars
in annual trading volume.
J. Thomas Madden, Executive Vice President, oversees Federated Investors' equity
and high yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated Investors' domestic fixed income management. Henry
A. Frantzen, Executive Vice President, oversees the management of Federated
Investors' global portfolios.
In the equity sector, Federated Investors has more than 25 years' experience. As
of December 31, 1996, Federated managed 31 equity funds totaling approximately
$7.6 billion in assets across growth, value, equity income, international, index
and sector (i.e. utility) styles. Federated's value-oriented management style
combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Mutual Fund Market
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $3.5 trillion to the more than 6,000 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
Institutional Clients
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.
Bank Marketing
Other institutional clients include close relationships with more than 1,600
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Timothy C.
Pillion, Senior Vice President, Bank Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated's services to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Federated Securities Corp..
- -------------
*source: Investment Company Institute
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements to be filed by amendment.
(b) Exhibits:
(1) (i) Conformed Copy of Articles of Incorporation of the
Registrant; (1)
(ii) Conformed Copy of Articles Supplementary;(5)
(2) Copy of By-Laws of the Registrant; (1)
(3) Not applicable;
(4) (i) Copies of Specimen Certificates for Shares of
Capital Stock of Federated World Utility Fund;
Federated Asia Pacific Growth Fund, Federated
Emerging Markets Fund, Federated European Growth
Fund, Federated International Small Company Fund,
and Federated Latin American Growth Fund; (7)
(ii) Copies of Specimen Certificates for Shares of Capital Stock
of Federated International High Income Fund Class A Shares,
Class B Shares, and Class C Shares; (8)
(5) (i) Conformed Copy of Investment Advisory Contract of the
Registrant through and including Exhibit F; (5)
(ii) Conformed Copy of Assignment of Investment Advisory
Contract; (5)
(iii) Conformed Copy of Exhibit G to the Investment Advisory
Contract of the Registrant; (8)
(iv) Conformed Copy of Exhibit H to the Investment Advisory
Contract of the Registrant; (10)
(v) Form of Exhibit I to the Investment Advisory Contract of
the Registrant;+
(6) (i) Conformed Copy of Distributor's Contract of the
Registrant including Exhibit S;(5) (ii) Conformed Copy
of Exhibits T, U, and V to the Distributor's Contract of
the Registrant; (8)
+ All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed February 4, 1994. (File Nos. 33-52149
and 811-7141)
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed January 26, 1996. (File Nos. 33-52149
and 811-7141)
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed July 31, 1996. (File Nos. 33-52149 and
811-7141)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed January 30, 1997. (File Nos. 33-52149
and 811-7141)
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 11 on Form N-1A filed May 21, 1997. (File Nos. 33-52149 and
811-7141)
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed November 26, 1997. (File Nos. 33-52149
and 811-7141)
<PAGE>
(iii) Conformed Copy of Exhibits W,X, and Y to the
Distributor's Contract of the Registrant; (9) (iv) Form
of Exhibit Z and Exhibit AA to Distributor's Contract;+
(v) Conformed copy of Distributor's Contract (Class B
Shares) including Exhibit 1 and Schedule A;+ (vi) The
Registrant hereby incorporates the conformed copy of the
Specimen Mutual Funds Sales and Service Agreement;
Mutual
Funds Service Agreement; and Plan Trustee/Mutual Funds
Service Agreement from Item 24(b)6 of the Cash Trust Series
II Registration Statement on Form N-1A, filed with the
Commission on July 24, 1995. (File Nos. 33-38550 and
811-6269)
(7) Not applicable;
(8) (i) Conformed copy of Custodian Agreement of the
Registrant; (3) (ii) Conformed copy of Custodian Fee
Schedule; (10) (iii) Addendum to Custodian Fee Schedule;
(10) (iv) Conformed copy of Domestic Custodian Fee
Schedule; + (v) Conformed copy of Global Custodian Fee
Schedule; + (vi) Addendum to Global Custodian Fee
Schedule;+
(9) (i) Conformed copy of Principal Shareholder Servicer's
Agreement (Class B Shares) including Exhibit 1 and
Schedule A;+ (ii) Conformed copy of Shareholder Services
Agreement (Class B Shares) including Exhibit 1 and
Schedule A;+ (iii) Conformed copy of Amended and
Restated Shareholder Services Agreement; (10) (iv) Copy
of Exhibit to Amended and Restated Shareholder Services
Agreement;+ (v) Conformed copy of Agreement for Fund
Accounting Services, Administrative Services, Transfer
Agency Services, and Custody Services .Procurement; (7)
+ All exhibits have been filed electronically.
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed March 24, 1994. (File Nos. 33-52149 and
811-7141)
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed July 25, 1994. (File Nos. 33-52149 and
811-7141)
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed July 31, 1996. (File Nos. 33-52149 and
811-7141)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed January 30, 1997. (File Nos. 33-52149
and 811-7141)
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 11 on Form N-1A filed May 21, 1997. (File Nos. 33-52149 and
811-7141)
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed November 26, 1997. (File Nos. 33-52149
and 811-7141)
<PAGE>
(vi) The responses described in Item 24(b)6 are hereby
incorporated by reference.
(vii) On behalf of Federated World Utility Fund, the
Registrant hereby incorporates the conformed copy of the
Shareholder Services Sub-Contract between Fidelity and
Federated Shareholder Services from Item 24(b)(9)(iii)
of the Federated GNMA Trust Registration Statement on
Form N-1A, filed with the Commission of March 25, 1996.
(File nos. 2-75670 and 811-3375);
(10) Conformed copy of Opinion and Consent of Counsel as to
legality of shares being registered; (2)
(11) Not applicable;
(12) Not applicable;
(13) Conformed copy of Initial Capital Understanding;
(2)
(14) Not applicable;
(15) (i) Conformed Copy of Rule 12b-1 Distribution Plan
through and including Exhibit R;(5) (ii) Conformed Copy
of Exhibits S, T, and U to the Rule 12b-1 Distribution
Plan of the Registrant; (8) (iii) Conformed Copy of
Exhibits V,W, and X to the Rule 12b-1 Distribution Plan
of the Registrant; (9) (iv) Form of Exhibit Z and
Exhibit AA to the 12b-1 Distribution Plan of the
Registrant;+ (v) Conformed copy of Exhibit 1 to the
12b-1 Distribution Plan of the Registrant;+
(16) Copy of Schedule for Computation of Fund Performance
Data for World Utility Fund; (3)
(i) Copy of Schedule for Computation of Fund
Performance Data for Federated Asia Pacific Growth
Fund, Federated Emerging Market Fund, Federated
European Growth Fund, Federated Small Company
Fund, Federated Latin American Growth Fund; (7)
(ii) Copy of Schedule for Computation of Fund
Performance Data for Federated International High
Income Fund; (8)
(17) Copy of Financial Data Schedules; (8)
(18) Conformed Copy of Multiple Class Plan; (5)
(19) Conformed copy of Power of Attorney; (8)
+ All exhibits have been filed electronically.
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed July 25, 1994. (File Nos. 33-52149 and
811-7141)
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed January 26, 1996. (File Nos. 33-52149
and 811-7141)
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed July 31, 1996. (File Nos. 33-52149 and
811-7141)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed January 30, 1997. (File Nos. 33-52149
and 811-7141)
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 11 on Form N-1A filed May 21, 1997. (File Nos. 33-52149 and
811-7141)
<PAGE>
Item 25. Persons Controlled by or Under Common Control with Registrant.
None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of November 7, 1997
Shares of capital stock
($0.001 per Share par value)
Federated World Utility Fund
a) Class A Shares 1,835
b) Class B Shares 1,492
c) Class C Shares 522
d) Class F Shares 513
Federated Asia Pacific Growth Fund
a) Class A Shares 1,608
b) Class B Shares 1,729
c) Class C Shares 1,109
Federated Emerging Markets Fund
a) Class A Shares 4,576
b) Class B Shares 4,160
c) Class C Shares 1,507
Federated European Growth Fund
a) Class A Shares 1,736
b) Class B Shares 1,762
c) Class C Shares 1,127
Federated International Small Company Fund
a) Class A Shares 5,922
b) Class B Shares 10,792
c) Class C Shares 2,414
Federated Latin American Growth Fund
a) Class A Shares 2,580
b) Class B Shares 2,439
c) Class C Shares 1,234
Federated International High Income Fund:
a) Class A Shares 1,172
b) Class B Shares 3,222
c) Class C Shares 1,246
Federated International Growth Fund:
a) Class A Shares 1,652
b) Class B Shares 1,506
c) Class C Shares 1,093
Federated global Equity Income Fund:
a) Class A Shares 0
b) Class B Shares 0
c) Class C Shares 0
Item 27. Indemnification (1).
1. Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed February 4, 1994. (File Nos. 33-52149 and
811-7141)
<PAGE>
Item 28. Business and Other Connections of Investment Adviser:
(a) For a description of the other business of the investment adviser, see
the section entitled "FUND INFORMATION - Management of the Corporation"
in Part A. The affiliations with the Registrant of four of the Trustees
and one of the Officers of the investment adviser are included in Part
B of this Registration Statement under "WORLD INVESTMENT SERIES, INC.
MANAGEMENT." The remaining Trustee of the investment adviser, his
position with the investment adviser, and, in parentheses, his
principal occupation is: Mark D. Olson (Partner, Wilson, Halbrook &
Bayard), 107 W. Market Street, Georgetown, Delaware 19947.
The remaining Officers of the investment adviser are:
Executive Vice Presidents: William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden
Senior Vice Presidents: Peter R. Anderson
Drew J. Collins
Jonathan C. Conley
Deborah A. Cunningham
Mark E. Durbiano
J. Alan Minteer
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski
Vice Presidents: J. Scott Albrecht
Joseph M. Balestrino
Randall S. Bauer
David F. Belton
David A. Briggs
Kenneth J. Cody
Alexandre de Bethmann
Michael P. Donnelly
Linda A. Duessel
Donald T. Ellenberger
Kathleen M. Foody-Malus
Thomas M. Franks
Edward C. Gonzales
James E. Grefenstette
Susan R. Hill
Stephen A. Keen
Robert K. Kinsey
Robert M. Kowit
Jeff A. Kozemchak
Steven Lehman
Marian R. Marinack
Sandra L. McInerney
Charles A. Ritter
Scott B. Schermerhorn
Frank Semack
Aash M. Shah
Christopher Smith
William F. Stotz
Tracy P. Stouffer
Edward J. Tiedge
Paige M. Wilhelm
Jolanta M. Wysocka
<PAGE>
Assistant Vice Presidents: Todd A. Abraham
Stefanie L. Bachhuber
Arthur J. Barry
Micheal W. Casey
Robert E. Cauley
Donna M. Fabiano
John T. Gentry
William R. Jamison
Constantine Kartsonsas
Joseph M. Natoli
Keith J. Sabol
Michael W. Sirianni
Gregg S. Tenser
Secretary: Stephen A. Keen
Treasurer: Thomas R. Donahue
Assistant Secretaries: Thomas R. Donahue
Richard B. Fisher
Christine I. McGonigle
Assistant Treasurer: Richard B. Fisher
The business address of each of the Officers of the investment adviser
is Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779.
These individuals are also officers of a majority of the investment
advisers to the Funds listed in Part B of this Registration Statement.
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the following open-end
investment companies: 111 Corcoran Funds; Automated Government Money Trust;
Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust Series II;
Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily
Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity
Funds; Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income Securities,
Inc.; High Yield Cash Trust; Independence One Mutual Funds; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Marshall Funds, Inc.; Money Market Management,
Inc.; Money Market Obligations Trust; Money Market Obligations Trust II; Money
Market Trust; Municipal Securities Income Trust; Newpoint Funds; Peachtree
Funds; RIMCO Monument Funds; SouthTrust Vulcan Funds; Star Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; The Planters Funds; The Virtus
Funds; The Wachovia Funds; The Wachovia Municipal Funds; Tower Mutual Funds;
Trust for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations;
Vision Group of Funds, Inc.; and World Investment Series, Inc.
Federated Securities Corp. also acts as principal underwriter for the following
closed-end investment company: Liberty Term Trust, Inc.- 1999.
<PAGE>
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Richard B. Fisher Director, Chairman, Chief President and
Federated Investors Tower Executive Officer, Chief Director
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice Executive Vice
Federated Investors Tower President, Federated, President
Pittsburgh, PA 15222-3779 Securities Corp.
Thomas R. Donahue Director, Assistant Secretary
Federated Investors Tower and Assistant Treasurer
Pittsburgh, PA 15222-3779 Federated Securities Corp
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian G. Kelly Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
George D. Riedel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard Suder Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Shareholder Services Company P.O. Box 8600
(Transfer Agent, Dividend Boston, MA 02266-8600
Disbursing Agent and Portfolio
Recordkeeper)
Federated Services Company Federated Investors Tower
(Administrator) Pittsburgh, PA 15222-3779
Federated Global Research Corp. 175 Water Street
(Adviser) New York, NY 10038-4965
State Street Bank and Trust Company P.O. Box 8600
(Custodian) Boston, MA 02266-8600
Item 31. Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to file a post-effective amendment,
using financial statements which need not be certified, within four
to six months from effective date of Registrant's 1933 Act
Registration Statement, Post-Effective Amendment Number 13.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Directors and the calling of special shareholder meetings by
shareholders.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, WORLD INVESTMENT SERIES, INC.,
has duly caused this Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Pittsburgh
and Commonwealth of Pennsylvania, on the 23rd day of December, 1997.
WORLD INVESTMENT SERIES, INC.
BY: /s/Karen M. Brownlee
Karen M. Brownlee, Assistant Secretary
Attorney in Fact for John F. Donahue
December 23, 1997
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:
NAME TITLE DATE
By: /s/Karen M. Brownlee Attorney In Fact December 23, 1997
Karen M. Brownlee For the Persons
ASSISTANT SECRETARY Listed Below
NAME TITLE
John F. Donahue* Chairman and Director
(Chief Executive Officer)
Richard B. Fisher* President and Director
John W. McGonigle* Executive Vice
President, Secretary, and
Treasurer
(Principal Financial and
Accounting Officer)
Thomas G. Bigley* Director
John T. Conroy, Jr.* Director
William J. Copeland* Director
James E. Dowd* Director
Lawrence D. Ellis, M.D.* Director
Edward L. Flaherty, Jr.* Director
Peter E. Madden* Director
John E. Murray, Jr.* Director
Wesley W. Posvar* Director
Marjorie P. Smuts* Director
* By Power of Attorney
Exhibit 5(v) under Form N-1A
Exhibit 10(i) under Item 601/Reg. S-K
EXHIBIT I
to the
Investment Advisory Contract
WORLD INVESTMENT SERIES, INC.
Federated Global Equity Income Fund
For all services rendered by Adviser hereunder, the above-named Fund of
the World Investment Series, Inc. shall pay to Adviser and Adviser agrees to
accept as full compensation for all services rendered hereunder, an annual
investment advisory fee equal to 1.00 of 1% of the average daily net assets of
the Fund.
The portion of the fee based upon the average daily net assets of the Fund
shall be accrued daily at the rate of 1/365th of 1.00 of 1% applied to the daily
net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this ___ day of ______, 1997.
Attest: Federated Global Research
/s/ By: /s/
Assistant Secretary Vice President
Attest: World Investment Series, Inc.
/s/ By: /s/
Secretary Executive Vice President
Exhibit 6(iv) under Form N-1A
Exhibit 1(i) under Item 601/Reg. S-K
Exhibit Z
to the
Distributor's Contract
WORLD INVESTMENT SERIES, INC.
Federated Global Equity Income Fund
Class A Shares
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated March 1, 1994, between World Investment Series,
Inc. and Federated Securities Corp. with respect to the Class of shares set
forth above.
1. The Corporation hereby appoints FSC to engage in activities principally
intended to result in the sale of shares of the above-listed Class
("Shares"). Pursuant to this appointment, FSC is authorized to select a
group of financial institutions ("Financial Institutions") to sell Shares
at the current offering price thereof as described and set forth in the
respective prospectuses of the Corporation.
2. During the term of this Agreement, the Corporation will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the annual
rate of .25% of the average aggregate net asset value of the Shares held
during the month. For the month in which this Agreement becomes effective
or terminates, there shall be an appropriate proration of any fee payable
on the basis of the number of days that the Agreement is in effect during
the month.
3. FSC may from time-to-time and for such periods as it deems appropriate
reduce its compensation to the extent any Class' expenses exceed such
lower expense limitation as FSC may, by notice to the Corporation,
voluntarily declare to be effective.
4. FSC will enter into separate written agreements with various firms to
provide certain of the services set forth in Paragraph 1 herein. FSC, in
its sole discretion, may pay Financial Institutions a periodic fee in
respect of Shares owned from time to time by their clients or customers.
The schedules of such fees and the basis upon which such fees will be paid
shall be determined from time to time by FSC in its sole discretion.
5. FSC will prepare reports to the Board of Directors of the Corporation on a
quarterly basis showing amounts expended hereunder including amounts paid to
Financial Institutions and the purpose for such expenditures.
In consideration of the mutual covenants set forth in the Distributor's
Contract dated March 1, 1994 between World Investment Series, Inc. and Federated
Securities Corp., World Investment Series, Inc. executes and delivers this
Exhibit on Global Equity Income Fund, and with respect to the Class A Shares
thereof, first set forth in this Exhibit.
<PAGE>
Witness the due execution hereof this 1st day of March, 1997.
ATTEST: World Investment Series, Inc.
/s/ By: /s/
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ By: /s/
Secretary Executive Vice President
(SEAL)
<PAGE>
Exhibit AA
to the
Distributor's Contract
WORLD INVESTMENT SERIES, INC.
Federated Global EquityIncome Fund
Class C Shares
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated March 1, 1994, between World Investment Series,
Inc. and Federated Securities Corp. with respect to the Class of shares set
forth above.
1. The Corporation hereby appoints FSC to engage in activities principally
intended to result in the sale of shares of the above-listed Class
("Shares"). Pursuant to this appointment, FSC is authorized to select a
group of financial institutions ("Financial Institutions") to sell Shares
at the current offering price thereof as described and set forth in the
respective prospectuses of the Corporation.
2. During the term of this Agreement, the Corporation will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the annual
rate of .75% of the average aggregate net asset value of the Shares held
during the month. For the month in which this Agreement becomes effective
or terminates, there shall be an appropriate proration of any fee payable
on the basis of the number of days that the Agreement is in effect during
the month.
3. FSC may from time-to-time and for such periods as it deems appropriate
reduce its compensation to the extent any Class' expenses exceed such
lower expense limitation as FSC may, by notice to the Corporation,
voluntarily declare to be effective.
4. FSC will enter into separate written agreements with various firms to
provide certain of the services set forth in Paragraph 1 herein. FSC, in
its sole discretion, may pay Financial Institutions a periodic fee in
respect of Shares owned from time to time by their clients or customers.
The schedules of such fees and the basis upon which such fees will be paid
shall be determined from time to time by FSC in its sole discretion.
5. FSC will prepare reports to the Board of Directors of the Corporation on a
quarterly basis showing amounts expended hereunder including amounts paid to
Financial Institutions and the purpose for such expenditures.
In consideration of the mutual covenants set forth in the Distributor's
Contract dated March 1, 1994 between World Investment Series, Inc. and Federated
Securities Corp., World Investment Series, Inc. executes and delivers this
Exhibit on behalf of Federated Global Equity Income Fund, and with respect to
the Class C Shares thereof, first set forth in this Exhibit.
<PAGE>
Witness the due execution hereof this ___ day of _______, 1997.
ATTEST: World Investment Series, Inc.
/s/ By: /s/
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ By: /s/
Secretary Executive Vice President
(SEAL)
Exhibit 6(v) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
DISTRIBUTOR'S CONTRACT
AGREEMENT made this 24th day of October, 1997, by and between those
Investment Companies on behalf of the Portfolios and Classes of Shares
listed on Schedule A to Exhibit 1, as may be amended from time to time,
having their principal place of business at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779, and who have approved this form of
Agreement, and FEDERATED SECURITIES CORP. ("FSC"), a Pennsylvania
Corporation. Each of the Exhibits hereto is incorporated herein in its
entirety and made a part hereof. In the event of any inconsistency between
the terms of this Agreement and the terms of any applicable Exhibit, the
terms of the applicable Exhibit shall govern.
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. Each of the Investment Companies hereby appoint FSC as agent to sell and
distribute shares of the Investment Companies which may be offered in
one or more series (the "Funds") consisting of one or more classes (the
"Classes") of shares (the "Shares"), as described and set forth on one
or more exhibits to this Agreement, at the current offering price
thereof as described and set forth in the current Prospectuses of the
Funds. FSC hereby accepts such appointment and agrees to provide such
other services for the Investment Companies, if any, and accept such
compensation from the Investment Companies, if any, as set forth in the
applicable exhibits to this Agreement.
2. The sale of any Shares may be suspended without prior notice whenever in
the judgment of the applicable Investment Company it is in its best
interest to do so.
3. Neither FSC nor any other person is authorized by the Investment Companies
to give any information or to make any representation relative to any
Shares other than those contained in the Registration Statement,
Prospectuses, or Statements of Additional Information ("SAIs") filed with
the Securities and Exchange Commission, as the same may be amended from
time to time, or in any supplemental information to said Prospectuses or
SAIs approved by the Investment Companies. FSC agrees that any other
information or representations other than those specified above which it or
any dealer or other person who purchases Shares through FSC may make in
connection with the offer or sale of Shares, shall be made entirely without
liability on the part of the Investment Companies. No person or dealer,
other than FSC, is authorized to act as agent for the Investment Companies
for any purpose. FSC agrees that in offering or selling Shares as agent of
the Investment Companies, it will, in all respects, duly conform to all
applicable state and federal laws and the rules and regulations of the
National Association of Securities Dealers, Inc., including its Rules of
Fair Practice. FSC will submit to the Investment Companies copies of all
sales literature before using the same and will not use such sales
literature if disapproved by the Investment Companies.
4. This Agreement is effective with respect to each Class as of the date of
execution of the applicable exhibit and shall continue in effect with
respect to each Class presently set forth on an exhibit and any subsequent
Classes added pursuant to an exhibit during the initial term of this
Agreement for one year from the date set forth above, and thereafter for
successive periods of one year if such continuance is approved at least
annually by the Trustees/Directors of the Investment Companies including a
majority of the members of the Board of Trustees/Directors of the
Investment Companies who are not interested persons of the Investment
Companies and have no direct or indirect financial interest in the
operation of any Distribution Plan relating to the Investment Companies or
in any related documents to such Plan ("Disinterested Trustees/Directors")
cast in person at a meeting called for that purpose. If a Class is added
after the first annual approval by the Trustees/Directors as described
above, this Agreement will be effective as to that Class upon execution of
the applicable exhibit and will continue in effect until the next annual
approval of this Agreement by the Trustees/Directors and thereafter for
successive periods of one year, subject to approval as described above.
5. This Agreement may be terminated with regard to a particular Fund or
Class at any time, without the payment of any penalty, by the vote of a
majority of the Disinterested Trustees/Directors or by a majority of the
outstanding voting securities of the particular Fund or Class on not
more than sixty (60) days' written notice to any other party to this
Agreement.
6. This Agreement may not be assigned by FSC and shall automatically
terminate in the event of an assignment by FSC as defined in the
Investment Company Act of 1940, as amended, provided, however, that FSC
may employ such other person, persons, corporation or corporations as it
shall determine in order to assist it in carrying out its duties under
this Agreement.
7. FSC shall not be liable to the Investment Companies for anything done or
omitted by it, except acts or omissions involving willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties imposed
by this Agreement.
8. This Agreement may be amended at any time by mutual agreement in writing
of all the parties hereto, provided that such amendment is approved by
the Trustees/Directors of the Investment Companies including a majority
of the Disinterested Trustees/Directors of the Investment Companies cast
in person at a meeting called for that purpose.
9. This Agreement shall be construed in accordance with and governed by the
laws of the Commonwealth of Pennsylvania.
10. (a) Subject to the conditions set forth below, the Investment Companies
agree to indemnify and hold harmless FSC and each person, if any, who
controls FSC within the meaning of Section 15 of the Securities Act of 1933
and Section 20 of the Securities Act of 1934, as amended, against any and
all loss, liability, claim, damage and expense whatsoever (including but
not limited to any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement, any Prospectuses or SAIs (as from time to
time amended and supplemented) or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading, unless such statement or
omission was made in reliance upon and in conformity with written
information furnished to the Investment Companies about FSC by or on behalf
of FSC expressly for use in the Registration Statement, any Prospectuses
and SAIs or any amendment or supplement thereof.
If any action is brought against FSC or any controlling person
thereof with respect to which indemnity may be sought against any
Investment Company pursuant to the foregoing paragraph, FSC shall
promptly notify the Investment Company in writing of the
institution of such action and the Investment Company shall assume
the defense of such action, including the employment of counsel
selected by the Investment Company and payment of expenses. FSC or
any such controlling person thereof shall have the right to employ
separate counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of FSC or such controlling
person unless the employment of such counsel shall have been
authorized in writing by the Investment Company in connection with
the defense of such action or the Investment Company shall not
have employed counsel to have charge of the defense of such
action, in any of which events such fees and expenses shall be
borne by the Investment Company. Anything in this paragraph to the
contrary notwithstanding, the Investment Companies shall not be
liable for any settlement of any such claim of action effected
without their written consent. The Investment Companies agree
promptly to notify FSC of the commencement of any litigation or
proceedings against the Investment Companies or any of their
officers or Trustees/Directors or controlling persons in
connection with the issue and sale of Shares or in connection with
the Registration Statement, Prospectuses, or SAIs.
(b) FSC agrees to indemnify and hold harmless the Investment Companies,
each of its Trustees/Directors, each of its officers who have signed
the Registration Statement and each other person, if any, who controls
the Investment Companies within the meaning of Section 15 of the
Securities Act of 1933, but only with respect to statements or
omissions, if any, made in the Registration Statement or any
Prospectus, SAI, or any amendment or supplement thereof in reliance
upon, and in conformity with, information furnished to the Investment
Companies about FSC by or on behalf of FSC expressly for use in the
Registration Statement or any Prospectus, SAI, or any amendment or
supplement thereof. In case any action shall be brought against any
Investment Company or any other person so indemnified based on the
Registration Statement or any Prospectus, SAI, or any amendment or
supplement thereof, and with respect to which indemnity may be sought
against FSC, FSC shall have the rights and duties given to the
Investment Companies, and the Investment Companies and each other
person so indemnified shall have the rights and duties given to FSC by
the provisions of subsection (a) above.
(c) Nothing herein contained shall be deemed to protect any person
against liability to the Investment Companies or their
shareholders to which such person would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in
the performance of the duties of such person or by reason of the
reckless disregard by such person of the obligations and duties of
such person under this Agreement.
(d) Insofar as indemnification for liabilities may be permitted pursuant
to Section 17 of the Investment Company Act of 1940, as amended, for
Trustees/Directors, officers, FSC and controlling persons of the
Investment Companies by the Trustees/Directors pursuant to this
Agreement, the Investment Companies are aware of the position of the
Securities and Exchange Commission as set forth in the Investment
Company Act Release No. IC-11330. Therefore, the Investment Companies
undertakes that in addition to complying with the applicable
provisions of this Agreement, in the absence of a final decision on
the merits by a court or other body before which the proceeding was
brought, that an indemnification payment will not be made unless in
the absence of such a decision, a reasonable determination based upon
factual review has been made (i) by a majority vote of a quorum of
non-party Disinterested Trustees/Directors, or (ii) by independent
legal counsel in a written opinion that the indemnitee was not liable
for an act of willful misfeasance, bad faith, gross negligence or
reckless disregard of duties. The Investment Companies further
undertakes that advancement of expenses incurred in the defense of a
proceeding (upon undertaking for repayment unless it is ultimately
determined that indemnification is appropriate) against an officer,
Trustees/Directors, FSC or controlling person of the Investment
Companies will not be made absent the fulfillment of at least one of
the following conditions: (i) the indemnitee provides security for his
undertaking; (ii) the Investment Companies is insured against losses
arising by reason of any lawful advances; or (iii) a majority of a
quorum of non-party Disinterested Trustees/Directors or independent
legal counsel in a written opinion makes a factual determination that
there is reason to believe the indemnitee will be entitled to
indemnification.
Error! Reference source not found.=*trust "11.FSC is hereby expressly put
on notice of the limitation of liability as set forth in the Declaration of
Trust and agrees that the obligations assumed by the Trust pursuant to this
Agreement shall be limited "
11. If at any time the Shares of any Fund are offered in two or more
Classes, FSC agrees to adopt compliance standards as to when a class of
shares may be sold to particular investors.
12. This Agreement will become binding on the parties hereto upon the
execution of the attached exhibits to the Agreement.
<PAGE>
Exhibit 1
to the
Distributor's Contract
The following provisions are hereby incorporated and made part of the
Distributor's Contract (the "Distributor's Contract") dated October 24, 1997,
between the Investment Companies and Federated Securities Corp. as principal
distributor (the "Principal Distributor") with respect to the Class B Shares of
the portfolios (the "Funds") set forth on the attached Schedule A. References
herein to this Distributor's Contract refer to the Distributor's Contract as
supplemented hereby and made applicable hereby to the Class B Shares of the
Funds. In the event of any inconsistency between the terms of this Exhibit and
the terms of the Distributor's Contract, the terms of this Exhibit will govern.
Once effective in respect of the Class of Shares of any Fund set forth above,
the Distributors Contract as amended by this Exhibit shall be effective in
respect of all shares of such class outstanding whether issued prior to or after
such effectiveness.
1. The Investment Companies hereby appoints the Principal Distributor to
engage in activities principally intended to result in the sale of Class B
Shares ("Class B Shares") of each Fund. Pursuant to this appointment, the
Principal Distributor is authorized to select a group of financial
institutions ("Financial Institutions") to sell Class B Shares of a Fund
at the current offering price thereof as described and set forth in the
respective prospectuses of the Fund.
2. (a) In consideration of the Principal Distributor's services under this
Distributor's Contract in respect of each Fund the Investment Companies
on behalf of the Fund agree: (I) to pay the Principal Distributor or at
its direction its "Allocable Portion" (as hereinafter defined) of a fee
(the "Distribution Fee") equal to 0.75 of 1% per annum of the average
daily net asset value of the Class B Shares of the Fund outstanding
from time to time, and (II) to withhold from redemption proceeds in
respect of Class B Shares of the Fund such Principal Distributor's
Allocable Portion of the Contingent Deferred Sales Charges ("CDSCs")
payable in respect of such redemption as provided in the Prospectus for
the Fund and to pay the same over to such Principal Distributor or at
its direction at the time the redemption proceeds in respect of such
redemption are payable to the holder of the Class B Shares redeemed.
(b)The Principal Distributor will be deemed to have performed all
services required to be performed in order to be entitled to receive
its Allocable Portion of the Distribution Fee payable in respect of the
Class B Shares of a Fund upon the settlement of each sale of a
"Commission Share" (as defined in the Allocation Schedule attached
hereto as Schedule B) of the Fund taken into account in determining
such Principal Distributor's Allocable Portion of such Distribution
Fees.
(c)Notwithstanding anything to the contrary set forth in this Exhibit,
the Distributor's Contract or (to the extent waiver thereof is
permitted thereby) applicable law, the Investment Companies' obligation
to pay the Principal Distributor's Allocable Portion of the
Distribution Fees payable in respect of the Class B Shares of a Fund
shall not be terminated or modified for any reason (including a
termination of this Distributor's Contract as it relates to Class B
Shares of a Fund) except to the extent required by a change in the
Investment Company Act of 1940 (the "Act") or the Conduct Rules of the
National Association of Securities Dealers, Inc., in either case
enacted or promulgated after May 1, 1997, or in connection with a
"Complete Termination" (as hereinafter defined) of the Distribution
Plan in respect of the Class B Shares of a Fund.
(d)The Investment Companies will not take any action to waive or change
any CDSC in respect of the Class B Shares of a Fund, except as provided
in the Investment Companies' prospectus or statement of additional
information as in effect as of the date hereof without the consent of
the Principal Distributor and the permitted assigns of all or any
portion of its right to its Allocable Portion of the CDSCs.
(e)Notwithstanding anything to the contrary set forth in this Exhibit,
the Distributor's Contract, or (to the extent waiver thereof is
permitted thereby) applicable law, neither the termination of the
Principal Distributor's role as principal distributor of the Class B
Shares of a Fund, nor the termination of this Distributor's Contract
nor the termination of the Distribution Plan will terminate such
Principal Distributor's right to its Allocable Portion of the CDSCs in
respect of the Class B Shares of a Fund.
(f)Notwithstanding anything to the contrary in this Exhibit, the
Distributor's Contract, or (to the extent waiver thereof is permitted
thereby) applicable law, the Principal Distributor may assign, sell or
pledge (collectively, a "Transfer") its rights to its Allocable Portion
of the Distribution Fees and CDSCs earned by it (but not its
obligations to the Investment Companies under this Distributor's
Contract) in respect of the Class B Shares of a Fund to raise funds to
make the expenditures related to the distribution of Class B Shares of
the Fund and in connection therewith upon receipt of notice of such
Transfer, the Investment Companies shall pay, or cause to be paid to
the assignee, purchaser or pledgee (collectively with their subsequent
transferees, "Transferees") such portion of the Principal Distributor's
Allocable Portion of the Distribution Fees and CDSCs in respect of the
Class B Shares of the Fund so Transferred. Except as provided in (c)
above and notwithstanding anything to the contrary set forth elsewhere
in this Exhibit, the Distributor's Contract, or (to the extent waiver
thereof is permitted thereby) applicable law, to the extent the
Principal Distributor has Transferred its rights thereto to raise funds
as aforesaid, the Investment Companies' obligation to pay to the
Principal Distributor's Transferees the Principal Distributor's
Allocable Portion of the Distribution Fees payable in respect of the
Class B Shares of each Fund shall be absolute and unconditional and
shall not be subject to dispute, offset, counterclaim or any defense
whatsoever, including without limitation, any of the foregoing based on
the insolvency or bankruptcy of the Principal Distributor (it being
understood that such provision is not a waiver of the Investment
Companies' right to pursue such Principal Distributor and enforce such
claims against the assets of such Principal Distributor other than the
Distributor's right to the Distribution Fees, CDSCs and servicing fees,
in respect of the Class B Shares of any Fund which have been so
transferred in connection with such Transfer). The Fund agrees that
each such Transferee is a third party beneficiary of the provisions of
this clause (f) but only insofar as those provisions relate to
Distribution Fees and CDSCs transferred to such Transferee.
(g)For purposes of this Distributor's Contract, the term Allocable
Portion of Distribution Fees payable in respect of the Class B Shares
of any Fund shall mean the portion of such Distribution Fees allocated
to such Principal Distributor in accordance with the Allocation
Schedule attached hereto as Schedule B.
(h)For purposes of this Distributor's Contract, the term "Complete
Termination" of the Plan in respect of any Fund means a termination of
the Plan involving the complete cessation of the payment of
Distribution Fees in respect of all Class B Shares of such Fund, and
the termination of the distribution plans and the complete cessation of
the payment of distribution fees pursuant to every other Distribution
Plan pursuant to rule 12b-1 of the Investment Companies in respect of
such Fund and any successor Fund or any Fund acquiring a substantial
portion of the assets of such Fund and for every future class of shares
which has substantially similar characteristics to the Class B Shares
of such Fund including the manner of payment and amount of sales
charge, contingent deferred sales charge or other similar charges borne
directly or indirectly by the holders of such shares.
3. The Principal Distributor may enter into separate written agreements with
various firms to provide certain of the services set forth in Paragraph 1
herein. The Principal Distributor, in its sole discretion, may pay
Financial Institutions a lump sum fee on the settlement date for the sale
of each Class B Share of the Fund to their clients or customers for
distribution of such share. The schedules of fees to be paid such firms or
Financial Institutions and the basis upon which such fees will be paid
shall be determined from time to time by the Principal Distributor in its
sole discretion.
4. The Principal Distributor will prepare reports to the Board of
Trustees/Directors of the Investment Companies on a quarterly basis
showing amounts expended hereunder including amounts paid to Financial
Institutions and the purpose for such expenditures.
In consideration of the mutual covenants set forth in the Distributor's
Contract between the Investment Companies and the Principal Distributor, the
Principal Distributor and the Investment Companies hereby execute and deliver
this Exhibit with respect to the Class B Shares of the Fund.
<PAGE>
Witness the due execution hereof this 24th day of October, 1997.
ATTEST: INVESTMENT COMPANIES (listed on Schedule A)
By: /s/ S. Elliott Cohan By: /s/ John W. McGonigle
Title: Assistant Secretary` Title: Executive Vice President
ATTEST: FEDERATED SECURITIES CORP.
By: /s/ Leslie K. Platt By: /s/ Byron F. Bowman
Title: Assistant Secretary Title: Vice President
<PAGE>
Schedule A
Date: 10/24/97 DISTRIBUTOR'S CONTRACT
Federated American Leaders Fund, Inc.
Class B Shares
Federated Equity Funds
Federated Aggressive Growth Fund
Class B Shares
Federated Growth Strategies Fund
Class B Shares
Federated Small Cap Strategies Fund
Class B Shares
Federated Capital Appreciation Fund
Class B Shares
Federated Equity Income Fund, Inc.
Class B Shares
Federated Fund for U.S. Government Securities, Inc.
Class B Shares
Federated Government Income Securities, Inc.
Class B Shares
Federated High Income Bond Fund, Inc.
Class B Shares
Federated Municipal Opportunities Fund, Inc.
Class B Shares
Federated Municipal Securities Fund, Inc.
Class B Shares
Federated Stock and Bond Fund, Inc.
Class B Shares
Federated Utility Fund, Inc.
Class B Shares
Fixed Income Securities, Inc.
Federated Strategic Income Fund
Class B Shares
International Series, Inc.
Federated International Equity Fund
Class B Shares
Federated International Income Fund
Class B Shares
<PAGE>
Investment Series Funds, Inc.
Federated Bond Fund
Class B Shares
Liberty U.S. Government Money Market Trust
Class B Shares
Municipal Securities Income Trust
Federated Pennsylvania Municipal Income Fund
Class B Shares
World Investment Series, Inc.
Federated World Utility Fund
Class B Shares
Federated Asia Pacific Growth Fund
Class B Shares
Federated Emerging Markets Fund
Class B Shares
Federated European Growth Fund
Class B Shares
Federated International Small Company Fund
Class B Shares
Federated Latin American Growth Fund
Class B Shares
Federated International High Income Fund
Class B Shares
Federated International Growth Fund
Class B Shares
The following Funds were added as of December 1, 1997:
Municipal Securities Income Trust
Federated California Municipal Income Fund
Class B Shares
World Investment Series, Inc.
Federated Global Equity Income Fund
Class B shares
Exhibit 8(iv) under Form N-1A
Exhibit 10 (ii) under Item 601/Reg. S.K.
STATE STREET
DOMESTIC CUSTODY
FEE SCHEDULE
Federated Funds
I. Custody Services
Maintain custody of fund assets. Settle portfolio purchases and sales.
Report buy and sell fails. Determine and collect portfolio income. Make
cash disbursements and report cash transactions. Monitor corporate
actions.
ANNUAL FEES
ASSET
Per Fund .25 Basis Points
Wire Fees $3.00 per wire
Settlements:
o Each DTC Transaction $5.00
o Each Federal Reserve Book Entry Transaction $3.75
o Each Repo Transaction (All Repo) $3.75
o Each Physical Transaction (NY/Boston, Private Placement) $15.00
o Each Option Written/Exercised/Expired $18.75
Each Book Entry Muni (Sub-custody) Transaction $15.00
o Government Paydowns $5.00
o Maturity Collections $8.00
o PTC Transactions $6.00
II. Special Services
Fees for activities of a non-recurring nature such as fund consolidation
or reorganization, extraordinary security shipments and the preparation of
special reports will be subject to negotiation.
III. Balance Credit
Municipal Funds
A balance credit equal to 75% of the average demand deposit account
balance in the custodian account for the month billed times the 30 day
T-Bill Rate on the last Monday of the month billed, will be applied
against the month's custodian bill.
Transfer Agent
A balance credit equal to 100% of the average balance in the transfer
agent demand deposit accounts, less the reserve requirement and applicable
related expenses, times 75% of the 30 average Fed Funds Rate.
IV. Payment
The above fees will be charged against the funds' custodian checking
account thirty (30) days after the invoice is mailed to the funds' offices.
V. Term of Contract
The parties agree that this fee schedule shall become effective January 1,
1997.
FEDERATED SERVICES COMPANY STATE STREET
BY: /s/ Douglas L. Hein BY: /s/ Michael E. Hagerty
TITLE: Senior Vice President TITLE: Vice President
DATE: April 15, 1997 DATE: April 8, 1997
Exhibit 8(v) under Form N-1A
Exhibit 10 (iii) under Item 601/Reg. S.K.
STATE STREET BANK AND TRUST COMPANY
GLOBAL CUSTODY FEE SCHEDULE
Federated Funds
=============================================================================
I. Global Custody Services
=============================================================================
Maintain custody of fund assets. Settle portfolio purchases and sales.
Reporting buy and sell fails. Determining and collecting portfolio income.
Make cash disbursements and reporting cash transactions in local and base
currency. Monitor corporate actions. Withholding foreign taxes. File
foreign tax reclaims. Report portfolio positions.
A. Holding Fees (basis points per portfolio per annum)
B. Trading (US Dollars)
==============---------=========--==================------------------
Countries Holdings Trades Countries Holdings Trades
==============---------=========--==================------------------
Argentina 30.0 $65.00 Korea 13.0 $50.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Australia 3.0 $50.00 Luxembourg 10.0 $75.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Austria 4.0 $50.00 Malaysia 13.0 $70.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Bangladesh 40.0 $175.00 Mauritius 40.0 $150.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Belgium 6.0 $50.00 Mexico 10.0 $25.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Bolivia 40.0 $150.00 Morocco 30.0 $150.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Botswana 40.0 $150.00 Namibia 40.0 $150.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Brazil 30.0 $75.00 Netherlands 6.0 $25.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Canada 1.5 $12.00 New Zealand 6.0 $50.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Chile 30.0 $75.00 Norway 3.0 $65.00
----------------------------------------------------------------------
----------------------------------------------------------------------
China 21.0 $150.00 Pakistan 21.0 $150.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Columbia 40.0 $150.00 Peru 40.0 $150.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Cypress 40.0 $150.00 Philippines 13.0 $100.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Czech 30.0 $150.00 Poland 30.0 $150.00
Republic
----------------------------------------------------------------------
----------------------------------------------------------------------
Denmark 3.0 $60.00 Portugal 21.0 $100.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Ecuador 21.0 $100.00 Singapore 6.0 $65.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Egypt 30.0 $125.00 Slovak Republic 30.0 $150.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Euroclear 3.0 $25.00 South Africa 3.0 $25.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Finland 6.0 $60.00 Spain 6.0 $65.00
----------------------------------------------------------------------
----------------------------------------------------------------------
France 6.0 $60.00 Sri Lanka 13.0 $70.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Germany 3.0 $25.00 Swaziland 40.0 $100.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Ghana 40.0 $150.00 Sweden 3.0 $60.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Greece 30.0 $125.00 Switzerland 3.0 $50.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Hong Kong 6.0 $50.00 Taiwan 13.0 $60.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Hungary 30.0 $150.00 Thailand 10.0 $40.00
----------------------------------------------------------------------
----------------------------------------------------------------------
India 30.0 $175.00 Trinidad and 40.0 $150.00
Tobago
----------------------------------------------------------------------
----------------------------------------------------------------------
Indonesia 13.0 $75.00 Tunisia 40.0 $150.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Ireland 3.0 $45.00 Turkey 30.0 $95.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Israel 13.0 $125.00 United Kingdom 3.0 $30.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Italy 6.0 $60.00 Uruguay 21.0 $100.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Jamaica 40.0 $150.00 Venezuela 30.0 $150.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Japan 3.0 $25.00 Zambia 40.0 $150.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Jordan 40.0 $150.00 Zimbabwe 40.0 $150.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Kenya 40.0 $150.00
----------------------------------------------------------------------
=============================================================================
II. Other Transaction Charges
=============================================================================
Per Domestic Fee Schedule.
=============================================================================
III. Special Services
=============================================================================
Fees for activities of a non-recurring nature such as fund consolidations
or reorganizations, extraordinary security shipments and the preparation of
special reports will be subject to negotiation.
=============================================================================
IV. Out of Pocket Expenses
=============================================================================
A billing for the recovery of applicable out of pocket expenses on
international transactions, e.g., stamp duty, registration fees, telex
messages, etc., will be made as of the end of each month.
=============================================================================
V. Payment
=============================================================================
The above fees will be charged against the fund's custodian DDA thirty (30)
days after the invoice is mailed to the fund's offices.
=============================================================================
VI. Term of the Contract
=============================================================================
The parties agree that this fee schedule shall become effective January 1,
1997.
FEDERATED SERVICES COMPANY STATE STREET BANK AND TRUST CO.
Name: /s/ Douglas L. Hein Name: /s/ Michael E. Hagerty
Title: Sr. Vice President/Fed. Services Co. Title: Vice President
Date: April 15, 1997 Date: April 8, 1997
Exhibit 8(vi) under Form N-1A
Exhibit 10 (iv) under Item 601/Reg. S.K.
STATE STREET
GLOBAL CUSTODY
FEE SCHEDULE
Addendum to Global Custody Fee Schedule Executed on January 1, 1997
Federated Funds
Country Holdings Charge Trading Charge
Russia 55 Basis Points $300
FEDERATED SERVICES COMPANY STATE STREET BANK & TRUST CO.
BY: /s/ Arthur Cherry BY: /s/ Michael E. Hagerty
TITLE: President & CEO TITLE: Vice President
DATE: August 25, 1997 DATE: August 13, 1997
Exhibit 9(i) under Form N-1A
Exhibit 10 (v) under Item 601/Reg. S-K
PRINCIPAL SHAREHOLDER SERVICER'S AGREEMENT
THIS AGREEMENT, is made as of the 24th day of October, 1997, by and between
those Investment Companies on behalf of the Portfolios (individually referred to
herein as a "Fund" and collectively as "Funds") and Classes of Shares
("Classes") listed on Schedule A to Exhibit 1, as may be amended from time to
time, having their principal office and place of business at Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779, and who have approved this form of
Agreement and Federated Securities Corp. as the principal shareholder servicer
(the "Principal Servicer"). Each of the Exhibits hereto is incorporated herein
in its entirety and made a part hereof. In the event of any inconsistency
between the terms of this Agreement and the terms of any applicable Exhibit, the
terms of the applicable Exhibit shall govern.
In consideration of the mutual covenants hereinafter contained it is hereby
agreed by and between the parties hereto as follows.
1. The Investment Companies hereby appoint the Principal Servicer as their
agent to select, negotiate and contract for the performance of and arrange
for the rendition of personal services to shareholders and/or the
maintenance of accounts of shareholders of each Class of the Funds as to
which this Agreement is made applicable (The Principal Servicer's duties
hereunder are referred to as "Services"). The Principal Servicer hereby
accepts such appointment and agrees to perform or cause to be performed the
Services in respect of the Classes of the Funds to which this Agreement has
been made applicable by an Exhibit. The Principal Servicer agrees to cause
to be provided shareholder services which, in its best judgment (subject to
supervision and control of the Investment Companies' Boards of Trustees or
Directors, as applicable), are necessary or desirable for shareholders of
the Funds. The Principal Servicer further agrees to provide the Investment
Companies, upon request, a written description of the shareholder services
for which the Principal Servicer is arranging hereunder.
2. During the term of this Agreement, each Investment Company will pay the
Principal Servicer and the Principal Servicer agrees to accept as full
compensation for its services rendered hereunder a fee as set forth on the
Exhibit applicable to the Class of each Fund subject to this Agreement.
For the payment period in which this Agreement becomes effective or
terminates with respect to any Class of a Fund, there shall be an
appropriate proration of the monthly fee on the basis of the number of
days that this Agreement is in effect with respect to such Class of the
Fund during the month.
3. This Agreement is effective with respect to each Class of a Fund as of the
date of execution of the applicable Exhibit and shall continue in effect
for one year from the date of its execution, and thereafter for successive
periods of one year only if the form of this Agreement is approved at
least annually by the Board of each Investment Company, including a
majority of the members of the Board of the Investment Company who are not
interested persons of the Investment Company ("Independent Board Members")
cast in person at a meeting called for that purpose.
4. Notwithstanding paragraph 3, this Agreement may be terminated with regard to
a particular Class of a Fund as follows:
(a) at any time, without the payment of any penalty, by the vote of a
majority of the Independent Board Members of any Investment Company
or by a vote of a majority of the outstanding voting securities of
any Fund as defined in the Investment Company Act of 1940 on sixty
(60) days' written notice to the parties to this Agreement;
(b) automatically in the event of the Agreement's assignment as defined in
the Investment Company Act of 1940; and
5. The Principal Servicer agrees to arrange to obtain any taxpayer
identification number certification from each shareholder of the Funds to
which it provides Services that is required under Section 3406 of the
Internal Revenue Code, and any applicable Treasury regulations, and to
provide each Fund or its designee with timely written notice of any
failure to obtain such taxpayer identification number certification in
order to enable the implementation of any required backup withholding.
6. The Principal Servicer shall not be liable for any error of judgment or
mistake of law or for any loss suffered by any Investment Company in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Agreement. the Principal Servicer
shall be entitled to rely on and may act upon advice of counsel (who may be
counsel for such Investment Company) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such
advice. Any person, even though also an officer, trustee, partner, employee
or agent of the Principal Servicer, who may be or become a member of such
Investment Company's Board, officer, employee or agent of any Fund, shall
be deemed, when rendering services to such Fund or acting on any business
of such Fund (other than services or business in connection with the duties
of the Principal Servicer hereunder) to be rendering such services to or
acting solely for such Fund and not as an officer, trustee, partner,
employee or agent or one under the control or direction of the Principal
Servicer even though paid by the Principal Servicer.
This Section 6 shall survive termination of this Agreement.
7. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the
party against which an enforcement of the change, waiver, discharge or
termination is sought.
8. The Principal Servicer is expressly put on notice of the limitation of
liability as set forth in the Declaration of Trust of each Investment
Company that is a Massachusetts business trust and agrees that the
obligations assumed by each such Investment Company pursuant to this
Agreement shall be limited in any case to such Investment Company and its
assets and that the Principal Servicer shall not seek satisfaction of any
such obligations from the shareholders of such Investment Company, the
Trustees, Officers, Employees or Agents of such Investment Company, or any
of them.
9. The execution and delivery of this Agreement have been authorized by the
Directors of the Principal Servicer and signed by an authorized officer of
the Principal Servicer, acting as such, and neither such authorization by
such Directors nor such execution and delivery by such officer shall be
deemed to have been made by any of them individually or to impose any
liability on any of them personally, and the obligations of this Agreement
are not binding upon any of the Directors or shareholders of the Principal
Servicer, but bind only the property of the Principal Servicer as provided
in the Articles of Incorporation of the Principal Servicer.
10. Notices of any kind to be given hereunder shall be in writing (including
facsimile communication) and shall be duly given if delivered to any
Investment Company at the following address: Federated Investors Tower,
Pittsburgh, PA 15222-3779, Attention: President and if delivered to the
Principal Servicer at Federated Investors Tower, Pittsburgh, PA
15222-3779, Attention: President.
11. This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof
whether oral or written. If any provision of this Agreement shall be held
or made invalid by a court or regulatory agency decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
Subject to the provisions of Sections 3 and 4, hereof, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and shall be governed by Pennsylvania law;
provided, however, that nothing herein shall be construed in a manner
inconsistent with the Investment Company Act of 1940 or any rule or
regulation promulgated by the Securities and Exchange Commission
thereunder.
12. This Agreement may be executed by different parties on separate
counterparts, each of which, when so executed and delivered, shall be an
original, and all such counterparts shall together constitute one and the
same instrument.
13. This Agreement shall not be assigned by any party without the prior
written consent of the Principal Servicer in the case of assignment by any
Investment Company, or of the Investment Companies in the case of
assignment by the Principal Servicer, except that any party may assign to
a successor all of or a substantial portion of its business to a party
controlling, controlled by, or under common control with such party.
Nothing in this Section 13 shall prevent the Principal Servicer from
delegating its responsibilities to another entity to the extent provided
herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
Investment Companies (listed on Schedule
A)
Attest: /s/ S. Elliott Cohan By: /s/ John W. McGonigle
Title: Assistant Secretary Title: Executive Vice President
Federated Securities Corp.
Attest:/s/ Leslie K. Platt By: /s/ Byron F. Bowman
Title: Assistant Secretary Title: Vice President
<PAGE>
Exhibit 1
to the
Principal Shareholder Servicer's Agreement
Related to Class B Shares of
the Funds
The following provisions are hereby incorporated and made part of the
Principal Shareholder Servicer's Agreement (the "Principal Shareholder
Servicer's Agreement") as of the 24th day of October, 1997, by and between those
Investment Companies on behalf of the Portfolios (individually referred to
herein as a "Fund" and collectively as "Funds") and Classes of Shares
("Classes") listed on Schedule A to Exhibit 1, as may be amended from time to
time, having their principal office and place of business at Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779, and who have approved this form of
Agreement and Federated Securities Corp. as the principal shareholder servicer
(the "Principal Servicer"). Each of the Exhibits hereto is incorporated herein
in its entirety and made a part hereof. In the event of any inconsistency
between the terms of this Exhibit and the terms of the Principal Shareholder
Servicer's Agreement, the terms of this Exhibit shall govern.
1. Each Investment Company hereby appoints the Principal Servicer to arrange
for the rendition of the shareholder services in respect of Class B Shares
("Class B Shares") of each Fund. Pursuant to this appointment, the
Principal Servicer is authorized to select various companies including but
not limited to Federated Shareholder Services ("Companies or a Company ")
to provide such services.
2. (a) In consideration of the Principal Servicer's Services under this
Agreement in respect of the Class B Shares each Fund agrees to pay the
Principal Servicer or at its direction its "Allocable Portion" (as
hereinafter defined) of a fee (the "Servicing Fee") equal to 0.25 of 1%
per annum of the average daily net asset value of the Class B Shares of
the Fund outstanding from time to time, provided however, that in the
event the Fund operates as a fund of funds (a "FOF Fund") by investing
the proceeds of the issuance of its Class B Shares in Class A Shares of
another fund (the "Other Fund") and the Principal Shareholder Servicer
receives a servicing fee in respect of the Class A Shares of the Other
Fund so acquired by the FOF Fund, the Servicing Fee payable in respect
of such Class B Shares of the FOF Fund will be reduced by the amount of
the servicing fee actually received by the Principal Shareholder
Servicer or its assign from the Other Fund in respect of the Class A
Shares of the Other Fund acquired with the proceeds of such Class B
Shares of the FOF Fund.
(b)(i) The Principal Servicer will be deemed to have fully earned its
Allocable Portion (computed as of any date) of the Servicing Fee
payable in respect of the Class B Shares of a Fund (and to have
satisfied its obligation to arrange for shareholder services in respect
of such Class B Shares) on the date it has arranged for shareholder
services to be performed by Federated Shareholder Services by payment
of the lump sum contemplated by Alternative A to Exhibit 1 to the
Shareholder Services Agreement among the Principal Servicer, Federated
Shareholder Services and the Fund dated as of the date hereof (the
"Shareholder Services Agreement") to Federated Shareholder Services
(whose obligations are fully supported by its parent company) in
respect of each "Commission Share" (as defined in the Allocation
Schedule attached hereto in Schedule B) of the Fund, taken into account
in determining such Principal Servicer's Allocable Portion of such
Servicing Fees as of such date. The Principal Servicer shall not be
deemed to have any other duties in respect of the Shares and its
Allocable Portion of the Servicing Fees to which the preceding sentence
applies and such arrangements shall be deemed a separate and distinct
contractual arrangement from that described in clause (ii).
(ii) The Principal Servicer will be deemed to have fully earned any
Servicing Fees not included in its Allocable Portion (i.e., those
attributable to Shares in respect of which Alternative A under Exhibit
1 to the Shareholder Services Agreement is not applicable) as such
services are performed in respect of such Shares.
(c)Notwithstanding anything to the contrary set forth in this Exhibit,
the Principal Shareholder Agreement, or (to the extent waiver thereof
is permitted thereby) applicable law, each Investment Company's
obligation to pay the Principal Servicer's Allocable Portion of the
Servicing Fees payable in respect of the Class B Shares of a Fund shall
not be terminated or modified for any reason (including a termination
of this Principal Shareholder Servicer's Agreement as it relates to the
Fund) except to the extent required by a change in the Investment
Company Act of 1940 (the "Act") or the Conduct Rules of the National
Association of Securities Dealers, Inc., in either case enacted or
promulgated after May 1, 1997, or in connection with a "Complete
Termination" (as hereinafter defined) in respect of the Class B Shares
of such Fund.
(d)Notwithstanding anything to the contrary in this Exhibit, the
Principal Shareholder Agreement, or (to the extent waiver thereof is
permitted thereby) applicable law, the Principal Servicer may assign,
sell or pledge (collectively, "Transfer") its rights to its Allocable
Portion of the Servicing Fees (but not its obligations to the
Investment Companies under this Principal Shareholder Servicer's
Agreement) in respect of the Class B Shares of a Fund to raise funds to
make the expenditures related to the Services and in connection
therewith upon receipt of notice of such Transfer, the Investment
Company shall pay to the assignee, purchaser or pledgee (collectively
with their subsequent transferees, "Transferees") such portion of the
Principal Servicer's Allocable Portion of the Servicing Fees in respect
of the Class B Shares of the Fund so Transferred. Except as provided in
(c) above and notwithstanding anything to the contrary set forth
elsewhere in this Exhibit, the Principal Shareholder Agreement, or (to
the extent waiver thereof is permitted thereby) applicable law, to the
extent the Principal Servicer has Transferred its rights thereto to
raise funds as aforesaid, the Investment Companies' obligation to pay
to the Principal Servicer's Transferees the Principal Servicer's
Allocable Portion of the Servicing Fees payable in respect of the Class
B Shares of each Fund shall be absolute and unconditional and shall not
be subject to dispute, offset, counterclaim or any defense whatsoever,
including without limitation, any of the foregoing based on the
insolvency or bankruptcy of the Principal Servicer, Federated
Shareholder Services (or its parent) or the failure of Federated
Shareholder Services (or its parent) to perform its Irrevocable Service
Commitment (it being understood that such provision is not a waiver of
the Investment Companies' right to pursue such Principal Servicer and
enforce such claims against the assets of such Principal Servicer other
than the Principal Servicer's right to the Distribution Fees, Servicing
Fees and CDSCs in respect of the Class B Shares of the Fund which have
been so transferred in connection with such Transfer). The Fund agrees
that each such Transferee is a third party beneficiary of the
provisions of this clause (d) but only insofar as those provisions
relate to Servicing Fees transferred to such Transferee.
(e)For purposes of this Principal Shareholder Servicer's Agreement, the
term Allocable Portion of Servicing Fees payable in respect of the
Class B Shares of any Fund shall mean the portion of such Servicing
Fees allocated to such Principal Servicer in accordance with the
Allocation Schedule attached hereto as Schedule B.
(f)For purposes of this Principal Shareholder Servicer's Contract, the
term "Complete Termination" of shareholder servicing arrangements in
respect of Class B Shares of a Fund means a termination of shareholder
servicing arrangements involving the complete cessation of payments of
Servicing Fees in respect of all Class B Shares, and the complete
cessation of payments of servicing fees for every existing and future
class of shares of the Fund and any successor Fund or any Fund
acquiring a substantial portion of the assets of the Fund ,which has
substantially similar characteristics to the Class B Shares taking into
account the manner and amount of sales charge, servicing fee,
contingent deferred sales charge or other similar charge borne directly
or indirectly by the holders of such shares.
3. The Principal Servicer may enter into separate written agreements with
Companies to provide the services set forth in Paragraph 1 herein. The
schedules of fees to be paid such Companies and the basis upon which such
fees will be paid shall be determined from time to time by the Principal
Servicer in its sole discretion.
4. The Principal Servicer will prepare reports to the Board of
Trustees/Directors of the Investment Companies on a quarterly basis
showing amounts expended hereunder including amounts paid to Companies and
the purpose for such expenditures.
In consideration of the mutual covenants set forth in the Principal
Shareholder Servicer's Contract, the Principal Servicer and the Investment
Companies hereby execute and deliver this Exhibit with respect to the Class B
Shares of each Fund.
<PAGE>
Witness the due execution hereof this 24th day of October, 1997.
ATTEST: INVESTMENT COMPANIES (listed on Schedule A)
By: /s/ S. Elliott Cohan By: /s/ John W. McGonigle
Title: Assistant Secretary Title: Executive Vice President
ATTEST: FEDERATED SECURITIES CORP.
By: /s/ Leslie K. Platt By: /s/ Byron F. Bowman
Title: Assistant Secretary Title: Vice President
<PAGE>
Schedule A
Date: 10/24/97 PRINCIPAL SHAREHOLDER SERVICER'S AGREEMENT
Federated American Leaders Fund, Inc.
Class B Shares
Federated Equity Funds
Federated Aggressive Growth Fund
Class B Shares
Federated Growth Strategies Fund
Class B Shares
Federated Small Cap Strategies Fund
Class B Shares
Federated Capital Appreciation Fund
Class B Shares
Federated Equity Income Fund, Inc.
Class B Shares
Federated Fund for U.S. Government Securities, Inc.
Class B Shares
Federated Government Income Securities, Inc.
Class B Shares
Federated High Income Bond Fund, Inc.
Class B Shares
Federated Municipal Opportunities Fund, Inc.
Class B Shares
Federated Municipal Securities Fund, Inc.
Class B Shares
Federated Stock and Bond Fund, Inc.
Class B Shares
Federated Utility Fund, Inc.
Class B Shares
Fixed Income Securities, Inc.
Federated Strategic Income Fund
Class B Shares
International Series, Inc.
Federated International Equity Fund
Class B Shares
Federated International Income Fund
Class B Shares
<PAGE>
Investment Series Funds, Inc.
Federated Bond Fund
Class B Shares
Liberty U.S. Government Money Market Trust
Class B Shares
Municipal Securities Income Trust
Federated Pennsylvania Municipal Income Fund
Class B Shares
World Investment Series, Inc.
Federated World Utility Fund
Class B Shares
Federated Asia Pacific Growth Fund
Class B Shares
Federated Emerging Markets Fund
Class B Shares
Federated European Growth Fund
Class B Shares
Federated International Small Company Fund
Class B Shares
Federated Latin American Growth Fund
Class B Shares
Federated International High Income Fund
Class B Shares
Federated International Growth Fund
Class B Shares
The following Funds were added as of December 1, 1997:
Municipal Securities Income Trust
Federated California Municipal Income Fund
Class B Shares
World Investment Series, Inc.
Federated Global Equity Income Fund
Class B Shares
Exhibit 9(ii) under Form N-1A
Exhibit 10(vi) under Item 601/Reg. S-K
SHAREHOLDER SERVICES AGREEMENT
THIS AGREEMENT, is made as of the 24th day of October, 1997, by and between
those Investment Companies on behalf of the Portfolios (individually referred to
herein as a "Fund" and collectively as "Funds") and Classes of Shares
("Classes") listed on Schedule A to Exhibit 1, as it may be amended from time to
time, having their principal office and place of business at Federated Investors
Tower, Pittsburgh, PA 15222-3779 and who have approved this form of Agreement
and Federated Securities Corp.("FSC"), a Pennsylvania Corporation, having its
principal office and place of business at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779 and Federated Shareholder Services, a Delaware business
trust, having its principal office and place of business at Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779 ("FSS"). Each of the Exhibits hereto
is incorporated herein in its entirety and made a part hereof. In the event of
any inconsistency between the terms of this Agreement and the terms of any
applicable Exhibit, the terms of the applicable Exhibit shall govern.
1. FSC as Principal Servicer (Principal Servicer") hereby contracts with FSS
to render or cause to be rendered personal services to shareholders and/or
the maintenance of accounts of shareholders of each Class of the Funds to
which this Agreement is made applicable by an Exhibit hereto ("Services").
In addition to providing Services directly to shareholders of the Funds,
FSS is hereby appointed the Investment Companies' agent to select,
negotiate and subcontract for the performance of Services. FSS hereby
accepts such appointment. FSS agrees to provide or cause to be provided
Services which, in its best judgment (subject to supervision and control of
the Investment Companies' Boards of Trustees or Directors, as applicable),
are necessary or desirable for shareholders of the Funds. FSS further
agrees to provide the Investment Companies, upon request, a written
description of the Services which FSS is providing hereunder. The
Investment Companies, on behalf of the Funds and each Class subject hereto
consents to the appointment of FSS to act in its capacity as described
herein and agrees to look solely to FSS for performance of the Services.
2. The term of the undertaking of FSS to render services hereunder in respect
of any Class of any Fund and the manner and amount of compensation to be
paid in respect thereof shall be specified in respect of each Class of the
Funds to which this Agreement is made applicable by an Exhibit hereto. FSS
agrees to look solely to the Principal Servicer for its compensation
hereunder.
3. This Agreement shall become effective in respect of any Class of Shares of
a Fund upon execution of an Exhibit relating to such Class of the Fund.
Once effective in respect of any Class of shares, this Agreement shall
continue in effect for one year from the date of its execution, and
thereafter for successive periods of one year only if the form of this
Agreement is approved at least annually by the Board of each Investment
Company, including a majority of the members of the Board of the
Investment Company who are not interested persons of the Investment
Company ("Independent Board Members") cast in person at a meeting called
for that purpose.
4. Notwithstanding paragraph 3, this Agreement may be terminated as follows:
(a) By any Investment Company as to any Fund at any time, without the
payment of any penalty, by the vote of a majority of the Independent
Board Members of any Investment Company or by a vote of a majority of
the outstanding voting securities of any Fund as defined in the
Investment Company Act of 1940 on sixty (60) days' written notice to
the parties to this Agreement;
(b) automatically in the event of the Agreement's assignment as defined in
the Investment Company Act of 1940; and
5. FSS agrees to obtain any taxpayer identification number certification from
each shareholder of the Funds to which it provides Services that is
required under Section 3406 of the Internal Revenue Code, and any
applicable Treasury regulations, and to provide each Investment Company or
its designee with timely written notice of any failure to obtain such
taxpayer identification number certification in order to enable the
implementation of any required backup withholding.
6. FSS shall not be liable for any error of judgment or mistake of law or for
any loss suffered by any Investment Company in connection with the matters
to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance
of its duties or from reckless disregard by it of its obligations and
duties under this Agreement. FSS shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for such Investment Company) on
all matters, and shall be without liability for any action reasonably taken
or omitted pursuant to such advice. Any person, even though also an
officer, trustee, partner, employee or agent of FSS, who may be or become a
member of such Investment Company's Board, officer, employee or agent of
any Investment Company, shall be deemed, when rendering services to such
Investment Company or acting on any business of such Investment Company
(other than services or business in connection with the duties of FSS
hereunder) to be rendering such services to or acting solely for such
Investment Company and not as an officer, trustee, partner, employee or
agent or one under the control or direction of FSS even though paid by FSS.
This Section 6 shall survive termination of this Agreement.
7. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the
party against which an enforcement of the change, waiver, discharge or
termination is sought.
8. FSS is expressly put on notice of the limitation of liability as set forth
in the Declaration of Trust of each Investment Company that is a
Massachusetts business trust and agrees that the obligations assumed by
each such Investment Company pursuant to this Agreement shall be limited
in any case to such Investment Company and its assets and that FSS shall
not seek satisfaction of any such obligations from the shareholders of
such Investment Company, the Trustees, Officers, Employees or Agents of
such Investment Company, or any of them.
9. The execution and delivery of this Agreement have been authorized by the
Trustees of FSS and signed by an authorized officer of FSS, acting as
such, and neither such authorization by such Trustees nor such execution
and delivery by such officer shall be deemed to have been made by any of
them individually or to impose any liability on any of them personally,
and the obligations of this Agreement are not binding upon any of the
Trustees or shareholders of FSS, but bind only the trust property of FSS
as provided in the Declaration of Trust of FSS.
<PAGE>
10. Notices of any kind to be given hereunder shall be in writing (including
facsimile communication) and shall be duly given if delivered to any
Investment Company at the following address: Federated Investors Tower,
Pittsburgh, PA 15222-3779, Attention: President and if delivered to FSS at
Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President.
11. This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof
whether oral or written. If any provision of this Agreement shall be held
or made invalid by a court or regulatory agency decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
Subject to the provisions of Sections 3 and 4, hereof, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and shall be governed by Pennsylvania law;
provided, however, that nothing herein shall be construed in a manner
inconsistent with the Investment Company Act of 1940 or any rule or
regulation promulgated by the Securities and Exchange Commission
thereunder.
12. This Agreement may be executed by different parties on separate
counterparts, each of which, when so executed and delivered, shall be an
original, and all such counterparts shall together constitute one and the
same instrument.
13. This Agreement shall not be assigned by any party without the prior
written consent of the parties hereto. Nothing in this Section 13 shall
prevent FSS from delegating its responsibilities to another entity to the
extent provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
Investment Companies (listed on Schedule
A)
Attest: /s/ S. Elliott Cohan By: /s/ John W. McGonigle
Title: Assistant Secretary Title: Executive Vice President
Federated Shareholder Services
Attest:/s/ Leslie K. Platt By: /s/ Byron F. Bowman
Title: Assistant Secretary Title: Vice President
Federated Securities Corp.
Attest: /s/ Leslie K. Platt By: /s/ Byron F. Bowman
Title: Assistant Secretary Title: Vice President
<PAGE>
EXHIBIT 1
TO SHAREHOLDER SERVICES AGREEMENT
FOR CLASS B SHARES OF
THE INVESTMENT COMPANIES
1. The Shareholder Services Agreement for Shares of the Investment
Companies on behalf of the portfolios (individually referred to as a "Fund" and
collectively as "Funds") and the classes of shares ("Classes") listed on the
attached Schedule A dated October 24, 1997 among Federated Securities Corp.
("Principal Servicer"), Federated Shareholder Services ("Class Servicer") and
the Investment Companies is hereby made applicable on the terms set forth herein
to the Class B Shares of the above-referenced Funds. In the event of any
inconsistency between the terms of this Exhibit and the Shareholder Services
Agreement, the terms of this Exhibit shall govern.
2. In connection with the Services to be rendered to holders of Class B
Shares of each Fund, the Principal Servicer and Class Servicer agree that the
Principal Servicer shall retain and compensate the Class Servicer for its
Services in respect of the Class B Shares of the Fund on one of the following
alternative basis as the Principal Servicer shall elect:
ALTERNATIVE A3: The Principal Servicer shall pay the Class Servicer
a dollar amount as set forth on Schedule A per Class B Commission Share
(as defined in the Principal Shareholder Servicer's Agreement) of the
Fund. Class Servicer agrees that upon receipt of such payment (which shall
be deemed to be full and adequate consideration for an irrevocable service
commitment (the "Irrevocable Service Commitment") of Class Servicer
hereunder), Class Servicer shall be unconditionally bound and obligated to
either: (1) provide the Services in respect of such Commission Share and
all other Shares derived therefrom via reinvestment of dividends, free
exchanges or otherwise for so long as the same is outstanding or (2) in
the event the Class Servicer for the Class B Shares is terminated by the
Investment Company, to arrange for a replacement Class Servicer
satisfactory to the Investment Company to perform such services, at no
additional cost to the Fund.
ALTERNATIVE B4: If Alternative A is not elected, the Principal
Servicer shall pay the Class Servicer twenty five basis points (0.25%) per
annum on the average daily net asset value of each Class B Share of the
Fund monthly in arrears. The Class Servicer agrees that such payment is
full and adequate consideration for the Services to be rendered by it to
the holder of such Class B Share.
3. In the event pursuant to paragraph 2 above, Alternative A has been
elected and the Class Servicer is terminated as Class Servicer for the Class B
Shares of the Fund, the Class Servicer agrees to pay to any successor Class
Servicer for the Class B Shares of the Fund any portion of the excess, if any,
of (A) the Servicing Fees received by it hereunder in respect of Class B Shares
of the Fund plus interest thereon at the percent as set forth on Schedule A per
annum minus (B) the costs it incurred hereunder in respect of the Class B Shares
of the Fund prior to such termination.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year first
above written.
Attest: FEDERATED SECURITIES CORP.
By: /s/ Leslie K. Platt By: /s/ Byron F. Bowman
Title: Assistant Secretary Title: Vice President
Attest: FEDERATED SHAREHOLDER SERVICES
By:/s/ Leslie K. Platt By: /s/ Byron F. Bowman
Title: Assistant Secretary Title: Vice President
Attest: INVESTMENT COMPANIES
(listed on Schedule A)
By: /s/ S. Elliott Cohan By: /s/ John W. McGonigle
Title: Assistant Secretary Title: Executive Vice President
<PAGE>
Schedule A
Date: 10/24/97 SHAREHOLDER SERVICES AGREEMENT
Federated American Leaders Fund, Inc.
Class B Shares
Federated Equity Funds
Federated Aggressive Growth Fund
Class B Shares
Federated Growth Strategies Fund
Class B Shares
Federated Small Cap Strategies Fund
Class B Shares
Federated Capital Appreciation Fund
Class B Shares
Federated Equity Income Fund, Inc.
Class B Shares
Federated Fund for U.S. Government Securities, Inc.
Class B Shares
Federated Government Income Securities, Inc.
Class B Shares
Federated High Income Bond Fund, Inc.
Class B Shares
Federated Municipal Opportunities Fund, Inc.
Class B Shares
Federated Municipal Securities Fund, Inc.
Class B Shares
Federated Stock and Bond Fund, Inc.
Class B Shares
Federated Utility Fund, Inc.
Class B Shares
Fixed Income Securities, Inc.
Federated Strategic Income Fund
Class B Shares
International Series, Inc.
Federated International Equity Fund
Class B Shares
Federated International Income Fund
Class B Shares
<PAGE>
Investment Series Funds, Inc.
Federated Bond Fund
Class B Shares
Liberty U.S. Government Money Market Trust
Class B Shares
Municipal Securities Income Trust
Federated Pennsylvania Municipal Income Fund
Class B Shares
World Investment Series, Inc.
Federated World Utility Fund
Class B Shares
Federated Asia Pacific Growth Fund
Class B Shares
Federated Emerging Markets Fund
Class B Shares
Federated European Growth Fund
Class B Shares
Federated International Small Company Fund
Class B Shares
Federated Latin American Growth Fund
Class B Shares
Federated International High Income Fund
Class B Shares
Federated International Growth Fund
Class B Shares
The following Funds were added as of December 1, 1997:
Municipal Securities Income Trust
Federated California Municipal Income Fund
Class B Shares
World Investment Series, Inc.
Federated Global Equity Income Fund
Class B Shares
Exhibit 9(iv) under Form N-1A
Exhibit 10(vii) under Item 601/Reg. S-K
Automated Government Money Trust
Cash Trust Series, Inc.:
Government Cash Series
Municipal Cash Series
Prime Cash Series
Treasury Cash Series
Federated Adjustable Rate U.S. Government Fund, Inc.
Federated American Leaders Fund, Inc.
Class A Shares
Class C Shares
Class F Shares
Federated ARMs Fund
Institutional Service Shares
Institutional Shares
Federated Core Trust:
High Yield Bond Portfolio
Federated Equity Funds:
Federated Aggressive Growth Fund
Class A Shares
Class C Shares
Federated Capital Appreciation Fund
Class A Shares
Class C Shares
Federated Growth Strategies Fund
Class A Shares
Class C Shares
Federated Small Cap Strategies Fund
Class A Shares
Class C Shares
Federated Equity Income Fund, Inc.
Class A Shares
Class C Shares
Class F Shares
Federated Fund for U.S. Government Securities, Inc.
Class A Shares
Class C Shares
Federated GNMA Trust
Institutional Service Shares
Institutional Shares
Federated Government Income Securities, Inc.
Class A Shares
Class C Shares
Class F Shares
Federated Government Trust"
Automated Government Cash Reserves
Automated Treasury Cash Reserves
U.S. Treasury Cash Reserves
Institutional Service Shares
Institutional Shares
Federated High Income Bond Fund, Inc.
Class A Shares
Class C Shares
Federated High Yield Trust
Federated Income Securities Trust:
Federated Short-Term Income Fund
Institutional Service Shares
Institutional Shares
Federated Intermediate Income Fund
Institutional Service Shares
Institutional Shares
Federated Income Trust
Institutional Service Shares
Institutional Shares
Federated Index Trust:
Federated Max-Cap Fund
Class C Shares
Institutional Service Shares
Institutional Shares
Federated Mid-Cap Fund
Federated Mini-Cap Fund
Class C Shares
Institutional Shares
Federated Institutional Trust:
Federated Institutional Short-Term Government Fund
Federated Investment Trust:
Federated Bond Index Fund
Institutional Shares
Institutional Service Shares
Federated Master Trust
Federated Municipal Opportunities Fund, Inc.
Class A Shares
Class C Shares
Class F Shares
Federated Municipal Securities Fund, Inc.
Class A Shares
Class C Shares
Federated Municipal Trust:
Alabama Municipal Cash Trust
California Municipal Cash Trust
Institutional Service Shares
Institutional Shares
Connecticut Municipal Cash Trust
Institutional Service Shares
Florida Municipal Cash Trust
Cash II Shares
Institutional Shares
Georgia Municipal Cash Trust
Maryland Municipal Cash Trust
Massachusetts Municipal Cash Trust
Institutional Service Shares
Boston 1784 Funds Shares
Michigan Municipal Cash Trust
Institutional Service Shares
Institutional Shares
Minnesota Municipal Cash Trust
Cash Series Shares
Institutional Shares
New Jersey Municipal Cash Trust
Institutional Service Shares
Institutional Shares
New York Municipal Cash Trust
Cash II Shares
Institutional Service Shares
North Carolina Municipal Cash Trust
Ohio Municipal Cash Trust
Cash II Shares
Institutional Shares
Institutional Service Shares
Pennsylvania Municipal Cash Trust
Cash Series Shares
Institutional Service Shares
Institutional Shares
Tennessee Municipal Cash Trust
Institutional Shares
Institutional Service Shares
Virginia Municipal Cash Trust
Institutional Service Shares
Institutional Shares
Federated Short-Term Municipal Trust
Institutional Service Shares
Institutional Shares
Federated Short-Term U.S. Government Trust
Federated Stock and Bond Fund, Inc.
Class A Shares
Class C Shares
Federated Stock Trust
Federated Tax-Free Trust
Federated U.S. Government Bond Fund
Federated U.S. Government Securities Fund: 1-3 Years
Institutional Service Shares
Institutional Shares
Federated U.S. Government Securities Fund: 2-5 Years
Institutional Service Shares
Institutional Shares
Federated U. S. Government Securities Fund: 5-10 Years
Institutional Service Shares
Institutional Shares
Fixed Income Securities, Inc.:
Federated Limited Term Fund
Class A Shares
Class F Shares
Federated Limited Term Municipal Fund
Class A Shares
Class F Shares
<PAGE>
Federated Strategic Income Fund
Class A Shares
Class C Shares
Class F Shares
Federated Total Return Series, Inc.:
Federated Limited Duration Government Fund
Institutional Shares
Institutional Service Shares
Federated Total Return Bond Fund
Institutional Shares
Institutional Service Shares
Federated Total Return Government Fund
Institutional Shares
Institutional Service Shares
Federated Total Return Limited Duration Fund
Institutional Shares
Institutional Service Shares
Federated Utility Fund, Inc.
Class A Shares
Class C Shares
Class F Shares
Intermediate Municipal Trust:
Federated Intermediate Municipal Trust
Federated Pennsylvania Intermediate Municipal Trust
International Series, Inc.:
Federated International Equity Fund
Class A Shares
Class C Shares
Federated International Income Fund
Class A Shares
Class C Shares
Investment Series Funds, Inc.:
Federated Bond Fund
Class A Shares
Class C Shares
Class F Shares
Edward D. Jones & Co. Daily Passport Cash Trust
Liberty Term Trust, Inc. -- 1999
Liberty U.S. Government Money Market Trust
Class A Shares
Liquid Cash Trust
Managed Series Trust:
Federated Aggressive Growth Fund
Institutional Shares
Select Shares
Federated Managed Growth and Income Fund
Institutional Shares
Select Shares
Federated Managed Growth Fund
Institutional Shares
Select Shares
<PAGE>
Federated Managed Income Fund
Institutional Shares
Select Shares
Money Market Management, Inc.
Money Market Obligations Trust:
Automated Cash Management Trust
Cash II Shares
Institutional Shares
Government Obligations Fund
Institutional Shares
Institutional Service Shares
Government Obligations Tax-Managed Fund
Institutional Shares
Institutional Service Shares
Prime Obligations Fund
Institutional Shares
Institutional Service Shares
Tax-Free Obligations Fund
Institutional Shares
Institutional Service Shares
Treasury Obligations Fund
Institutional Capital Shares
Institutional Shares
Institutional Service Shares
Money Market Obligations Trust II:
Municipal Obligations Fund
Institutional Capital Shares
Institutional Service Shares
Institutional Shares
Prime Cash Obligations Fund
Institutional Capital Shares
Institutional Service Shares
Institutional Shares
Prime Value Obligations Fund
Institutional Capital Shares
Institutional Service Shares
Institutional Shares
Money Market Trust
Municipal Securities Income Trust:
Federated California Municipal Income Fund
Class F Shares
Federated Michigan IntermediateMunicipal Trust
Federated New York Municipal Income Fund
Class F Shares
Federated Ohio Municipal Income Fund
Class F Shares
Federated Pennsylvania Municipal Income Fund
Class A Shares
<PAGE>
Tax-Free Instruments Trust
Institutional Service Shares
Investment Shares
Trust for Government Cash Reserves
Trust for Short-Term U.S. Government Securities
Trust for U.S. Treasury Obligations
World Investment Series, Inc.:
Federated Asia Pacific Growth Fund
Class A Shares
Class C Shares
Federated Emerging Markets Fund
Class A Shares
Class C Shares
Federated European Growth Fund
Class A Shares
Class C Shares
Federated Global Equity Income Fund
Class A Shares
Class C Shares
Federated International Growth Fund
Class A Shares
Class C Shares
Federated International High Income Fund
Class A Shares
Class C Shares
Federated International Small Company Fund
Class A Shares
Class C Shares
Federated Latin American Growth Fund
Class A Shares
Class C Shares
Federated World Utility Fund
Class A Shares
Class C Shares
Class F Shares
Exhibit 15(iv) under Form N-1A
Exhibit 1(ii) under Item 601/Reg. S-K
EXHIBIT Z
to the
Distribution Plan
World Investment Series, Inc.
Federated Global Equity Income Fund
Class A Shares
This Distribution Plan is adopted by between World Investment Series, Inc.
with respect to the Class of Shares of the Federated Global Equity Income Fund
set forth above.
In compensation for the services provided pursuant to this Plan, FSC
will be paid a monthly fee computed at the annual rate of .25% of the
average aggregate net asset value of the Class A Shares of Federated
Global Equity Income Fund held during the month.
Witness the due execution hereof this ____ day of _______, 1997.
World Investment Series, Inc.
By: /s/
President
<PAGE>
EXHIBIT AA
to the
Distribution Plan
World Investment Series, Inc.
Federated Global Equity Income Fund
Class C Shares
This Distribution Plan is adopted by between World Investment Series, Inc.
with respect to the Class of Shares of the Federated Global Equity Income Fund
set forth above.
In compensation for the services provided pursuant to this Plan, FSC
will be paid a monthly fee computed at the annual rate of .75% of the
average aggregate net asset value of the Class C Shares of Federated
global Equity Income Fund held during the month.
Witness the due execution hereof this _____ day of ________, 1997.
World Investment Series, Inc.
By: /s/
President
Exhibit 15(v) under Form N-1A
Exhibit 1(iii) under Item 601/Reg. S-K
Exhibit 1
Amendment to the
Distribution Plan for
the Investment Companies
Class B Shares
1. This amendment to the Distribution Plan, ("Plan") is adopted by the
Board of Trustees/Directors of the Investment Companies with respect to the
Class of Shares of the portfolios ("Funds") of the Investment Companies set
forth on the attached Schedule A as to which the Plan has been adopted. This
Exhibit is hereby incorporated into the Plan in its entirety and made a part
thereof. In the event of any inconsistency between the terms of this Exhibit and
the terms of the Plan, the terms of this Exhibit shall govern. References herein
to the Plan shall mean the Plan as amended by this Exhibit. The terms of the
Plan as amended when effective in respect of the Class of Shares set forth above
shall apply to all amounts payable to the Principal Distributor in respect of
such Class of Shares whether arising out of sales of such Class of Shares before
or after such effective date.
2. In compensation for the services provided pursuant to this Plan, the
Investment Companies on behalf of the Fund shall pay the Principal Distributor
its "Allocable Portion" (as defined in its Distributor's Contract as it relates
to the Class B Shares of the Fund) of a fee (the "Distribution Fee") computed at
the annual rate of 0.75 of 1% per annum on the average daily aggregate net asset
value of the Class B Shares of those Funds listed on Schedule A outstanding,
which fee shall be paid monthly in arrears.
3. The Distributor's Contract in respect of the Class B Shares of each
Fund set forth above shall provide that: (I) the Principal Distributor in
respect of such Distributor's Contract will be deemed to have performed all
services required to be performed in order to be entitled to receive its
Allocable Portion of the Distribution Fees payable in respect of the Class B
Shares of such Fund upon the settlement date of each sale of a "Commission
Share" (as defined below) of such Fund taken into account in determining such
Principal Distributor's Allocable Portion of such Distribution Fees; (II) the
Investment Companies' obligation to pay such Principal Distributor its Allocable
Portion of the Distribution Fees payable in respect of the Class B Shares of
such Fund shall not be terminated or modified for any reason (including a
termination of the Distributor's Contract between such Principal Distributor and
such Fund) except to the extent required by a change in the Act or the Conduct
Rules of the National Association of Securities Dealers, Inc., in each case
enacted or promulgated after May 1, 1997, or in connection with a "Complete
Termination" (as hereinafter defined) of this Plan in respect of the Class B
Shares of such Fund; (III) the Investment Companies will not take any action to
waive or change any CDSC in respect of the Class B Shares of such Fund, except
as provided in the Funds' prospectus or statement of additional information
without the consent of the Principal Distributor and its assigns; (IV) neither
the termination of such Principal Distributor's role as Principal Distributor of
the Class B Shares of such Fund, nor the termination of such Distributor's
Contract nor the termination of this Plan will terminate such Principal
Distributor's right to its Allocable Portion of the CDSCs; and (V) such
Principal Distributor may assign, sell or pledge (collectively, "Transfer") its
rights to its Allocable Portion of the Distribution Fees and CDSCs (but not such
Principal Distributor's obligations to the Investment Companies under the
Distributor's Contract) to raise funds to make the expenditures related to the
distribution of Class B Shares of such Fund and in connection therewith, upon
receipt of notice of such Transfer, the Investment Companies shall pay to the
assignee, purchaser or pledgee (collectively with their subsequent transferees,
"Transferees") or third party beneficiaries such portion of the Principal
Distributor's Allocable Portion of the Distribution Fees or CDSCs in respect of
the Class B Shares of such Fund so sold or pledged and except as provided in
(II) above and notwithstanding anything of the contrary set forth in this
Exhibit or the Plan or in the Distributor's Contract, to the extent the
Principal Distributor has Transferred its right thereto as aforesaid, the
Investment Companies' obligation to pay to the Principal Distributor's
Transferee such Principal Distributor's Allocable Portion of the Distribution
Fees and CDSCs payable in respect of the Class B Shares of such Fund shall be
absolute and unconditional and shall not be subject to dispute, offset,
counterclaim or any defense whatsoever, including without limitation, any of the
foregoing based on the insolvency or bankruptcy of the Principal Distributor (it
being understood that such provision is not a waiver of the Investment
Companies' right to pursue such Principal Distributor and enforce such claims
against the assets of such Principal Distributor other than its right to the
Distribution Fees, CDSCs and servicing fees, in respect of the Class B Shares of
any Fund transferred in connection with such Transfer. For purposes of this
Plan, the term Allocable Portion of Distribution Fees or CDSCs payable in
respect of the Class B Shares of any Fund as applied to any Principal
Distributor shall mean the portion of such Distribution Fees or CDSCs payable in
respect of such Fund allocated to such Principal Underwriter in accordance with
the Allocation Schedule (as defined in the Distributor's Contract as it relates
to the Class B Shares of the Fund)). For purposes of this Plan, the term
"Complete Termination" of this Plan in respect of any Fund means a termination
of this Plan involving the complete cessation of the payment of Distribution
Fees in respect of all Class B Shares of such Fund, and the termination of the
distribution plans and the complete cessation of the payment of distribution
fees pursuant to every other Distribution Plan pursuant to rule 12b-1 of the
Investment Companies in respect of such Fund and any successor Fund or any Fund
acquiring a substantial portion of the assets of such Fund and for every future
class of shares which has substantially similar characteristics to the Class B
Shares of such Fund taking into account the manner of payment and amount of
sales charge, contingent deferred sales charge or other similar charges borne
directly or indirectly by the holders of such shares.
Witness the due execution hereof this execution date.
Investment Companies (listed on Schedule A)
By: /s/ John W. McGonigle
Title: Executive Vice President
Date: October 24,1997
<PAGE>
Schedule A
Date: 10/24/97 DISTRIBUTION PLAN
Federated American Leaders Fund, Inc.
Class B Shares
Federated Equity Funds
Federated Aggressive Growth Fund
Class B Shares
Federated Growth Strategies Fund
Class B Shares
Federated Small Cap Strategies Fund
Class B Shares
Federated Capital Appreciation Fund
Class B Shares
Federated Equity Income Fund, Inc.
Class B Shares
Federated Fund for U.S. Government Securities, Inc.
Class B Shares
Federated Government Income Securities, Inc.
Class B Shares
Federated High Income Bond Fund, Inc.
Class B Shares
Federated Municipal Opportunities Fund, Inc.
Class B Shares
Federated Municipal Securities Fund, Inc.
Class B Shares
Federated Stock and Bond Fund, Inc.
Class B Shares
Federated Utility Fund, Inc.
Class B Shares
Fixed Income Securities, Inc.
Federated Strategic Income Fund
Class B Shares
International Series, Inc.
Federated International Equity Fund
Class B Shares
Federated International Income Fund
Class B Shares
<PAGE>
Investment Series Funds, Inc.
Federated Bond Fund
Class B Shares
Liberty U.S. Government Money Market Trust
Class B Shares
Municipal Securities Income Trust
Federated Pennsylvania Municipal Income Fund
Class B Shares
World Investment Series, Inc.
Federated World Utility Fund
Class B Shares
Federated Asia Pacific Growth Fund
Class B Shares
Federated Emerging Markets Fund
Class B Shares
Federated European Growth Fund
Class B Shares
Federated International Small Company Fund
Class B Shares
Federated Latin American Growth Fund
Class B Shares
Federated International High Income Fund
Class B Shares
Federated International Growth Fund
Class B Shares
The following Funds were added as of December 1, 1997:
Municipal Securities Income Trust
Federated California Municipal Income Fund
Class B Shares
World Investment Series, Inc.
Federated Global Equity Income Fund
Class B Shares
