SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
FEDERATED INCOME TRUST
(Name of Registrant as Specified In Its Charter)
FEDERATED INVESTORS
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary proxy materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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FEDERATED INCOME TRUST
PROXY STATEMENT - PLEASE VOTE!
TIME IS OF THE ESSENCE... VOTING ONLY TAKES A FEW MINUTES AND YOUR
PARTICIPATION IS IMPORTANT! ACT NOW TO HELP THE TRUST AVOID ADDITIONAL EXPENSE.
Federated Income Trust will hold a special meeting of shareholders on June 28,
1999. It is important for you to vote on the issues described in this Proxy
Statement. We recommend that you read the Proxy Statement in its entirety; the
explanations will help you to decide on the issues.
Following is an introduction to the proposals and the process.
WHY AM I BEING ASKED TO VOTE?
Mutual funds are required to obtain shareholders' votes for certain types
of changes, like those included in this Proxy Statement. You have a right to
vote on these changes.
WHAT ISSUES AM I BEING ASKED TO VOTE ON? The proposals include:
o the election of Trustees;
o ratification of independent auditors;
o changes to the Trust's fundamental investment policies; and
O an amendment to the Declaration of Trust.
WHY ARE INDIVIDUALS RECOMMENDED FOR ELECTION TO THE BOARD OF TRUSTEES?
The Trust is devoted to serving the needs of its shareholders, and the Board is
responsible for managing the Trust's business affairs to meet those needs. The
Board represents the shareholders and can exercise all of the Trust's powers,
except those reserved only for shareholders.
Trustees are selected on the basis of their education and professional
experience. Candidates are chosen based on their distinct interest in, and
capacity for understanding the complexities of, the operation of a mutual fund.
These individuals bring considerable experience to the impartial oversight of a
fund's operation.
The Proxy Statement includes a brief description of each nominee's history and
current position with the Trust, if applicable.
WHY AM I BEING ASKED TO VOTE ON THE RATIFICATION OF INDEPENDENT AUDITORS?
The independent auditors conduct a professional examination of accounting
documents and supporting data to render an opinion on the material fairness of
the information. Because financial reporting involves discretionary decision
making, the auditors' opinion is an important assurance to both the Trust and
its investors. The Board of Trustees approved the selection of Deloitte & Touche
LLP, long-time auditors of the Trust, for the current fiscal year.
WHY ARE THE TRUST'S "FUNDAMENTAL POLICIES" BEING CHANGED?
Every mutual fund has certain investment policies that can be changed only with
the approval of its shareholders. These are referred to as "fundamental"
investment policies.
In some cases, these policies were adopted to reflect regulatory, business, or
industry conditions that no longer exist or no longer are necessary. In other
cases, advances in the securities markets and the economy have created different
procedures and techniques that affect the Trust's operations.
By reducing the number of "fundamental policies," the Trust may be able to
minimize the costs and delays associated with frequent shareholder meetings.
Also, the investment adviser's ability to manage the Trust's assets may be
enhanced and investment opportunities increased.
The proposed amendments will:
o reclassify as operating policies those fundamental policies that are not
required to be fundamental by the Investment Company Act of 1940, as amended
("1940 Act");
o simplify and modernize the policies that are required to be "fundamental" by
the 1940 Act; and o remove fundamental policies that are no longer required
by the securities laws of individual states.
Federated Investment Management Company, the Trust's adviser, is a conservative
money manager. Its highly trained professionals are dedicated to making
investment decisions in the best interest of the Trust and its shareholders. The
Board believes that the proposed changes will be applied responsibly by the
Trust's adviser.
WHY ARE SOME "FUNDAMENTAL POLICIES" BEING RECLASSIFIED AS "OPERATING POLICIES?"
As noted above, some "fundamental policies" have been redefined as "operating
policies." Operating policies do not require shareholder approval to be changed.
This gives the Trust's Board additional flexibility to determine whether to
participate in new investment opportunities and to meet industry changes
promptly.
WHY ARE THE TRUSTEES RECOMMENDING AN AMENDMENT TO THE DECLARATION OF TRUST?
The Declaration organizing the Trust was prepared many years ago. Since then,
developments in the investment company industry and changes in the law resulted
in many improvements. The Board is recommending a change to the Declaration of
Trust that permits the Trust to benefit from these developments.
HOW DO I VOTE MY SHARES?
You may vote in person at the special meeting of shareholders or complete and
return the enclosed Proxy Card. IF YOU SIGN AND RETURN THE PROXY CARD WITHOUT
INDICATING A PREFERENCE, YOUR VOTE WILL BE CAST "FOR" ALL THE PROPOSALS.
You may also vote by telephone at 1-800-690-6903, or through the Internet at
WWW.PROXYVOTE.COM. If you choose to help save the Trust time and postage costs
by voting through the Internet or by telephone, please don't return your Proxy
Card. If you do not respond at all, we may contact you by telephone to request
that you cast your vote.
WHO DO I CALL IF I HAVE QUESTIONS ABOUT THE PROXY STATEMENT?
Call your Investment Professional or a Federated Client Service
Representative. Federated's toll-free number is 1-800-341-7400.
After careful consideration, the Board of Trustees has unanimously approved
these proposals. The Board recommends that you read the enclosed materials
carefully and vote FOR all proposals.
DEFINITIVE
FEDERATED INCOME TRUST
NOTICE OF SPECIAL MEETING
IN LIEU OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 28, 1999
A Special Meeting in lieu of Annual Meeting of the shareholders of
Federated Income Trust (the "Trust") will be held at 5800 Corporate Drive,
Pittsburgh, Pennsylvania 15237-7000, at 2:00 p.m. (Eastern time), on June 28,
1999 to consider proposals:
(1) To elect seven Trustees.
(2) To ratify the selection of the Trust's independent
auditors.
(3) To make changes to the Trust's fundamental investment
policies:
(a) To amend the Trust's fundamental investment policy
regarding borrowing money and issuing senior securities;
(b) To amend the Trust's fundamental investment policy
regarding lending by the Trust;
(c) To amend, and to make non-fundamental, the Trust's
fundamental investment policy regarding buying securities on margin;
(d) To amend, and to make non-fundamental, the Trust's
fundamental investment policy regarding pledging assets;
(e) To amend, and to make non-fundamental, the Trust's
fundamental investment policy regarding investing in other investment companies;
(f) To amend, and to make non-fundamental, the Trust's
fundamental investment policy regarding investments in U.S. government
securities;
(g) To amend, and to make non-fundamental, the Trust's
fundamental investment policy regarding investments
in collateralized mortgage obligations and
mortgage-related securities;
(h) To make non-fundamental the Trust's fundamental
investment policy regarding dollar roll transactions;
(i) To make non-fundamental the Trust's fundamental
investment policy regarding investing in repurchase agreements;
(j) To make non-fundamental the Trust's fundamental
investment policy regarding engaging in when-issued and delayed delivery
transactions; and
(k) To make non-fundamental the Trust's fundamental
investment policy regarding lending portfolio securities.
(4) To eliminate certain of the Trust's fundamental investment
policies:
(a) To remove the Trust's fundamental investment policy
regarding selling securities short; and
(b) To remove the Trust's fundamental investment policy on
engaging in portfolio transactions.
(5) To amend and restate the Trust's fundamental investment
objective.
(6) To approve an amendment and restatement to the Trust's
Declaration of Trust:
(a) To require the approval of a majority of the
outstanding voting shares in the event of the sale
and conveyance of the assets of the Trust to
another trust or corporation;
(b) To permit the Board of Trustees to liquidate the
assets of the Trust without seeking shareholder approval; and
(c) To permit the Board of Trustees to change the name of
the Trust without seeking shareholder approval.
To transact such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Trustees has fixed April 30, 1999 as the record date for
determination of shareholders entitled to vote at the meeting.
By Order of the Board of Trustees,
John W. McGonigle
Secretary
May 14, 1999
YOU CAN HELP THE TRUST AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP
LETTERS TO ENSURE A QUORUM BY PROMPTLY SIGNING AND RETURNING THE ENCLOSED PROXY.
IF YOU ARE UNABLE TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY SO THAT THE NECESSARY QUORUM MAY BE REPRESENTED AT THE SPECIAL
MEETING IN LIEU OF ANNUAL MEETING. THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
TABLE OF CONTENTS
ABOUT THE PROXY SOLICITATION AND THE MEETING...................................4
ELECTION OF SEVEN TRUSTEES.....................................................4
ABOUT THE ELECTION OF TRUSTEES ...............................................5
TRUSTEES STANDING FOR ELECTION.................................................5
NOMINEES NOT PRESENTLY SERVING AS TRUSTEES.....................................6
RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS..........................7
APPROVAL OF CHANGES TO THE TRUST'S FUNDAMENTAL INVESTMENT
POLICIES...................................................................7
APPROVAL OF THE ELIMINATION OF CERTAIN FUNDAMENTAL INVESTMENT POLICIES
OF THE TRUST..............................................................15
APPROVAL OF AN AMENDMENT AND RESTATEMENT TO THE TRUST'S FUNDAMENTAL
INVESTMENT OBJECTIVE......................................................16
APPROVAL OF AN AMENDMENT AND RESTATEMENT TO THE TRUST'S
DECLARATION OF TRUST......................................................17
INFORMATION ABOUT THE TRUST.................................................. 19
PROXIES, QUORUM AND VOTING AT THE MEETING.....................................19
SHARE OWNERSHIP OF THE TRUSTEES...............................................20
TRUSTEE COMPENSATION..........................................................21
OFFICERS OF THE TRUST.........................................................22
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY..................24
DEFINITIVE
PROXY STATEMENT
FEDERATED INCOME TRUST
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
ABOUT THE PROXY SOLICITATION AND THE MEETING
The enclosed proxy is solicited on behalf of the Board of Trustees of
the Trust (the "Board" or "Trustees"). The proxies will be voted at the special
meeting in lieu of annual meeting of shareholders of the Trust to be held on
June 28, 1999, at 5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7000, at
2:00 p.m. (such special meeting in lieu of annual meeting and any adjournment or
postponement thereof are referred to as the "Meeting").
The cost of the solicitation, including the printing and mailing of
proxy materials, will be borne by the Trust. In addition to solicitations
through the mails, proxies may be solicited by officers, employees, and agents
of the Trust or, if necessary, a communications firm retained for this purpose.
Such solicitations may be by telephone, telegraph, through the Internet or
otherwise. Any telephonic solicitations will follow procedures designed to
ensure accuracy and prevent fraud, including requiring identifying shareholder
information, recording the shareholder's instructions, and confirming to the
shareholder after the fact. Shareholders who communicate proxies by telephone or
by other electronic means have the same power and authority to issue, revoke, or
otherwise change their voting instruction as shareholders submitting proxies in
written form. The Trust may reimburse custodians, nominees, and fiduciaries for
the reasonable costs incurred by them in connection with forwarding solicitation
materials to the beneficial owners of shares held of record by such persons.
The Board has reviewed the changes recommended in the investment
policies and investment objective of the Trust, and the proposed Amended and
Restated Declaration of Trust, and approved them, subject to shareholder
approval. The purposes of the Meeting are set forth in the accompanying Notice.
The Trustees know of no business other than that mentioned in the Notice that
will be presented for consideration at the Meeting. Should other business
properly be brought before the Meeting, proxies will be voted in accordance with
the best judgment of the persons named as proxies. This proxy statement and the
enclosed proxy card are expected to be mailed on or about May 14, 1999, to
shareholders of record at the close of business on April 30, 1999 (the "Record
Date"). On the Record Date, the Trust had outstanding 73,246,207.616 shares of
beneficial interest.
The Trust's annual prospectus, which includes audited financial
statements for the fiscal year ended January 31, 1999, was previously mailed to
shareholders. The Trust's principal executive offices are located at Federated
Investors Funds, 5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7000. The
Trust's toll-free telephone number is 1-800-341-7400.
PROPOSAL #1: ELECTION OF SEVEN TRUSTEES
The persons named as proxies intend to vote in favor of the election of
Thomas G. Bigley, Nicholas P. Constantakis, John F. Cunningham, J. Christopher
Donahue, Charles F. Mansfield, Jr., John E. Murray, Jr. and John S. Walsh
(collectively, the "Nominees") as Trustees of the Trust. Messrs. Bigley,
Constantakis, Mansfield and Murray are presently serving as Trustees. If elected
by shareholders, Messrs. Cunningham, Donahue and Walsh are expected to assume
their responsibilities as Trustees effective July 1, 1999. Please see "ABOUT THE
ELECTION OF TRUSTEES" below for current information about the Nominees.
Messrs. Bigley and Murray were appointed Trustees on November 15, 1994
and February 14, 1995, respectively, to fill vacancies created by the decision
to expand the size of the Board. Messrs. Constantakis and Mansfield were
appointed Trustees on February 23, 1998 and January 1, 1999, respectively, also
to fill vacancies resulting from the decision to expand the size of the Board.
Messrs. Cunningham, Donahue and Walsh are being proposed for election as
Trustees to fill vacancies anticipated to result from the resignations of three
current Trustees. The anticipated resignations will not occur if Messrs.
Cunningham, Donahue and Walsh are not elected as Trustees.
All Nominees have consented to serve if elected. If elected, the
Trustees will hold office without limit in time until death, resignation,
retirement, or removal or until the next meeting of shareholders to elect
Trustees and the election and qualification of their successors. Election of a
Trustee is by a plurality vote, which means that the seven individuals receiving
the greatest number of votes at the Meeting will be deemed to be elected.
If any Nominee for election as a Trustee named above shall by reason of
death or for any other reason become unavailable as a candidate at the Meeting,
votes pursuant to the enclosed proxy will be cast for a substitute candidate by
the proxies named on the proxy card, or their substitutes, present and acting at
the Meeting. Any such substitute candidate for election as a Trustee who is an
"interested person" (as defined in the Investment Company Act of 1940, as
amended (the "1940 Act")) of the Trust shall be nominated by the Executive
Committee. The selection of any substitute candidate for election as a Trustee
who is not an "interested person" shall be made by a majority of the Trustees
who are not "interested persons" of the Trust. The Board has no reason to
believe that any Nominee will become unavailable for election as a Trustee.
THE BOARD OF TRUSTEES RECOMMENDS THAT
SHAREHOLDERS VOTE TO ELECT AS TRUSTEES THE NOMINEES FOR
ELECTION TO THE BOARD OF TRUSTEES OF THE TRUST
ABOUT THE ELECTION OF TRUSTEES
When elected, the Trustees will hold office during the lifetime of the
Trust except that: (a) any Trustee may resign; (b) any Trustee may be removed by
written instrument signed by at least two-thirds of the number of Trustees prior
to such removal; (c) any Trustee who requests to be retired or who has become
mentally or physically incapacitated may be retired by written instrument signed
by a majority of the other Trustees; and (d) a Trustee may be removed at any
special meeting of the shareholders by a vote of two-thirds of the outstanding
shares of the Trust. In case a vacancy shall exist for any reason, the remaining
Trustees will fill such vacancy by appointment of another Trustee. The Trustees
will not fill any vacancy by appointment if, immediately after filling such
vacancy, less than two-thirds of the Trustees then holding office would have
been elected by the shareholders. If, at any time, less than a majority of the
Trustees holding office have been elected by the shareholders, the Trustees then
in office will call a shareholders' meeting for the purpose of electing Trustees
to fill vacancies. Otherwise, there will normally be no meeting of shareholders
called for the purpose of electing Trustees.
Set forth below is a listing of: (i) Trustees standing for election, and
(ii) Nominees standing for election who are not presently serving as Trustees,
along with their addresses, birthdates, present positions with the Trust, if
applicable, and principal occupations during the past five years:
TRUSTEES STANDING FOR ELECTION
THOMAS G. BIGLEY
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director or Trustee of the Federated Fund Complex; Director and Member of
Executive Committee, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Director and Member
of Executive Committee, University of Pittsburgh.
NICHOLAS P. CONSTANTAKIS
175 Woodshire Drive
Pittsburgh, PA
Birthdate: September 3, 1939
Trustee
Director or Trustee of the Federated Fund Complex; formerly, Partner, Andersen
Worldwide SC.
CHARLES F. MANSFIELD, JR.
80 South Road
Westhampton, NY
Birthdate: April 10, 1945
Trustee
Director or Trustee of some of the Funds in the Federated Fund Complex;
management consultant.
JOHN E. MURRAY, JR., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
Director or Trustee of the Federated Fund Complex; President, Law Professor,
Duquesne University; Consulting Partner, Mollica & Murray.
NOMINEES NOT PRESENTLY SERVING AS TRUSTEES
JOHN F. CUNNINGHAM
353 El Brillo Way
Palm Beach, FL
Birthdate: March 5, 1943
Director or Trustee of some of the Funds in the Federated Fund Complex;
Chairman, President and Chief Executive Officer, Cunningham & Co., Inc.
(specialized financial consulting organization); Trustee Associate, Boston
College; Director, EMC Corporation; formerly, Director, Redgate Communications.
J. CHRISTOPHER DONAHUE
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President or Executive Vice President of the Federated Fund Complex; Director or
Trustee of some of the Funds in the Federated Fund Complex; President and
Director, Federated Investors, Inc.; President and Trustee, Federated Investment
Management Company, 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; Director, Federated Services Company. Mr. Donahue is the son of John F.
Donahue, Chairman and Trustee of the Trust.
JOHN S. WALSH
2007 Sherwood Drive
Valparaiso, IN
Birthdate: November 28, 1957
Director or Trustee of some of the Funds in the Federated Fund Complex;
President and Director, Heat Wagon, Inc.; President and Director, Manufacturers
Products, Inc.; President, Portable Heater Parts, a division of Manufacturers
Products, Inc.; Director, Walsh & Kelly, Inc.; formerly, Vice President, Walsh &
Kelly, Inc.
PROPOSAL #2: RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
The 1940 Act requires that the Trust's independent auditors be selected
by the Board, including a majority of those Board members who are not
"interested persons" (as defined in the 1940 Act) of the Trust, and submitted
for ratification or rejection at the next succeeding meeting of shareholders.
The Board of the Trust, including a majority of its members who are not
"interested persons" of the Trust, approved the selection of Deloitte & Touche
LLP (the "Auditors") for the current fiscal year at a Board meeting held on
February 15, 1999.
The selection by the Board of the Auditors as independent auditors for
the current fiscal year is submitted to the shareholders for ratification. Apart
from their fees as independent auditors and certain consulting fees, neither the
Auditors nor any of their partners have a direct, or material indirect,
financial interest in the Trust or its investment adviser. The Auditors are a
major international independent accounting firm. The Board believes that the
continued employment of the services of the Auditors for the current fiscal year
would be in the Trust's best interests.
Representatives of the Auditors are not expected to be present at the
Meeting. If a representative is present, he or she will have the opportunity to
make a statement and would be available to respond to appropriate questions. The
ratification of the selection of the Auditors will require the affirmative vote
of a majority of the shares present and voting on the proposal at the Meeting.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE TO RATIFY THE SELECTION OF INDEPENDENT AUDITORS
APPROVAL OF CHANGES TO THE TRUST'S
FUNDAMENTAL INVESTMENT POLICIES
INTRODUCTION TO PROPOSALS #3(A) TO #3(K) AND #4(A) TO #4(B).
The 1940 Act (which was adopted to protect mutual fund shareholders)
requires investment companies such as the Trust to adopt certain specific
investment policies or restrictions that can be changed only by shareholder
vote. An investment company may also elect to designate other policies or
restrictions that may be changed only by shareholder vote. Both types of
policies and restrictions are often referred to as "fundamental policies." These
policies and restrictions limit the investment activities of the Trust's
investment adviser.
After the Trust was formed in 1981, legal and regulatory requirements
applicable to mutual funds changed. For example, certain restrictions imposed by
state laws and regulations were preempted by the National Securities Markets
Improvement Act of 1996 ("NSMIA") and no longer apply. As a result, the Trust is
subject to fundamental policies that are no longer required to be fundamental,
and to other policies that are no longer required at all. Accordingly, the
Trustees have authorized the submission to the Trust's shareholders for their
approval, and recommend that shareholders approve, the amendment,
reclassification and/or elimination of certain of the Trust's fundamental
policies.
The proposed amendments would:
(i) simplify, modernize and standardize the fundamental policies that are
required to be stated under the 1940 Act;
(ii) reclassify as operating policies those fundamental policies that are
not required to be fundamental under the 1940 Act; and
(iii) eliminate those fundamental policies that are no longer required by
the securities laws of the various states.
By reducing the number of policies that can be changed only by
shareholder vote, the Trustees believe that the Trust would be able to minimize
the costs and delays associated with holding future shareholder meetings to
revise fundamental policies that become outdated or inappropriate. The Trustees
also believe that the investment adviser's ability to manage the Trust's assets
in a changing investment environment will be enhanced and that investment
management opportunities will be increased by these changes. The chart that
follows briefly describes the differences between fundamental policies and
non-fundamental policies.
FUNDAMENTAL POLICIES NON-FUNDAMENTAL POLICIES
------------------------------- --------------------------------
Who must approve changes in Board of Trustees and Board of Trustees
the policies? shareholders
How quickly can a change in Fairly slowly, since a vote Fairly quickly, because the
the policies be made? of shareholders is required change can be accomplished by
action of the Board of Trustees
What is the relative cost Costly to change because a Less costly to change because
to change a policy? shareholder vote requires a change can be accomplished
holding a meeting of by action of the Board of
shareholders Trustees
The recommended changes are specified below. Each Proposal will be voted
on separately, and the approval of each Proposal will require the approval of a
majority of the outstanding voting shares of the Trust as defined in the 1940
Act. (See "PROXIES, QUORUM AND VOTING AT THE MEETING" below.)
DESCRIPTION OF PROPOSED CHANGES
The proposed standardized fundamental investment policies cover those
areas for which the 1940 Act requires the Trust to have a fundamental
restriction. They satisfy current regulatory requirements and are written to
provide flexibility to respond to future legal, regulatory, market or technical
changes. THE PROPOSED STANDARDIZED CHANGES WILL NOT AFFECT THE TRUST'S
INVESTMENT OBJECTIVE. ALTHOUGH THE PROPOSED CHANGES IN FUNDAMENTAL POLICIES WILL
ALLOW THE TRUST GREATER FLEXIBILITY TO RESPOND TO FUTURE INVESTMENT
OPPORTUNITIES, THE BOARD OF TRUSTEES OF THE TRUST DOES NOT ANTICIPATE THAT THE
CHANGES, INDIVIDUALLY OR IN THE AGGREGATE, WILL RESULT AT THIS TIME IN A
MATERIAL CHANGE IN THE LEVEL OF INVESTMENT RISK ASSOCIATED WITH INVESTMENT IN
THE TRUST. NOR DOES THE BOARD OF TRUSTEES ANTICIPATE THAT THE PROPOSED CHANGES
IN FUNDAMENTAL INVESTMENT POLICIES WILL, INDIVIDUALLY OR IN THE AGGREGATE,
CHANGE MATERIALLY THE MANNER IN WHICH THE TRUST IS MANAGED.
The following is the text and a summary description of the proposed
changes to the Trust's fundamental policies and restrictions. Any
non-fundamental policy may be modified or eliminated by the Trustees at any
future date without any further approval of shareholders. Shareholders should
note that certain of the fundamental policies that are treated separately below
currently are combined within a single existing fundamental policy.
Presently, if the Trust adheres to a fundamental or non-fundamental
percentage restriction at the time of an investment or transaction, a later
increase or decrease in the percentage resulting from a change in the value of
the Trust's portfolio securities or the amount of its total assets does not
create a violation of the policy.
This policy will continue to apply for any of the proposed changes that are
approved.
PROPOSAL #3: APPROVAL OF AMENDMENTS TO THE TRUST'S
FUNDAMENTAL INVESTMENT POLICIES
PROPOSAL #3(A): TO AMEND THE TRUST'S FUNDAMENTAL INVESTMENT POLICY
REGARDING BORROWING MONEY AND ISSUING SENIOR SECURITIES
The 1940 Act requires the Trust to have a fundamental investment policy
defining its ability to borrow money or issue senior securities. In general,
limitations on borrowing are designed to protect shareholders and their
investments by restricting the Trust's ability to subject its assets to any
claims of creditors or senior security holders who would be entitled to
dividends or rights on liquidation of the Trust prior to the rights of
shareholders.
Shareholders of the Trust are being asked to approve a new standardized
fundamental policy for borrowing and the issuance of senior securities designed
to reflect all current regulatory requirements. The Trust's current policy
states:
"The Trust will not issue senior securities except as permitted by its
investment objective and policies. 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 nor will the Trust be required to make any
changes in portfolio holdings.
The Trust will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts not in
excess of 5% of the value of its total assets or in an amount up to
one-third of the value of its total assets, including the amount
borrowed, in order to meet redemption requests without immediately
selling portfolio securities. This borrowing provision is not for
investment leverage but solely to facilitate management of the portfolio
by enabling the Trust to meet redemption requests when the liquidation
of portfolio securities would be inconvenient or disadvantageous.
Interest paid by the Trust on borrowed funds will not be available for
investment. The Trust will liquidate any such borrowings as soon as
possible and may not purchase any portfolio securities while any
borrowings are outstanding." SENIOR SECURITIES-GENERALLY. A "senior
security" is an obligation of an investment company with respect to its
earnings or assets that takes precedence over the
claims of the fund's shareholders with respect to the same earnings or assets.
The 1940 Act generally prohibits a fund from issuing senior securities, in order
to limit the use of leverage. In general, an investment company uses leverage
when it borrows money to enter into securities transactions, or acquires an
asset without being required to make payment until a later time.
SEC staff interpretations allow a fund to engage in a number of types of
transactions which might otherwise be considered to create "senior securities"
or "leverage," so long as the fund meets certain collateral requirements
designed to protect shareholders. For example, some transactions that may create
senior security concerns include short sales, certain options and futures
transactions, reverse repurchase agreements and securities transactions that
obligate the fund to pay money at a future date (such as when-issued, forward
commitment or delayed delivery transactions). When engaging in such
transactions, the fund must set aside money or securities to meet the SEC
staff's collateralization requirements. This procedure effectively eliminates
the fund's ability to engage in leverage for these types of transactions.
BORROWING-GENERALLY. Under the 1940 Act, an investment company is permitted to
borrow up to 5% of its total assets for temporary purposes. A fund may borrow
only from banks. If borrowings exceed 5%, the fund must have assets totaling at
least 300% of the borrowing when the amount of the borrowing is added to the
fund's other assets. The effect of this provision is to allow the fund to borrow
from banks in amounts up to one-third (33 1/3%) of its total assets (including
the amount borrowed). Investment companies typically borrow money to meet
redemptions in order to avoid a forced, unplanned sale of portfolio securities.
This technique allows the fund greater flexibility to buy and sell portfolio
securities for investment or tax considerations, rather than for cash flow
considerations. The costs of borrowing, however, can also reduce the fund's
total return.
The borrowing restriction of the Trust permits borrowing only as a
temporary measure for extraordinary purposes and prohibits the purchase of any
portfolio securities while borrowings are outstanding. The proposed investment
policy would provide greater flexibility to the Trust, and would permit the
Trust to borrow money, directly or indirectly (such as through reverse
repurchase agreements), and issue senior securities within the limits
established under the 1940 Act or under any rule or regulation of the
Commission, or any SEC staff interpretation thereof. As a matter of operating
policy, the Trust does not intend to engage in leveraging. Upon shareholder
approval, the fundamental investment policy governing borrowing money and
issuing senior securities will state:
"The Trust may borrow money, directly or indirectly, and issue senior
securities to the maximum extent permitted under the 1940 Act."
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(B): TO AMEND THE TRUST'S FUNDAMENTAL INVESTMENT POLICY
REGARDING LENDING BY THE TRUST
Under the 1940 Act, the Trust's policy concerning lending must be
fundamental. The Trust currently is subject to a fundamental investment
restriction limiting its ability to make loans which states:
"The Trust will not lend any assets except portfolio securities. (This
will not prevent the purchase or holding of bonds, debentures, notes,
certificates of indebtedness or other debt securities of an issuer,
repurchase agreements or other transactions which are permitted by the
Trust's investment objective and policies or Declaration of Trust)."
In order to ensure that the Trust may invest in certain debt
securities or repurchase agreements, which could technically be
characterized as the making of loans,
the Trust's current fundamental restriction specifically permits such
investments. In addition, the Trust's fundamental policy explicitly permits the
Trust to lend its portfolio securities to broker-dealers or institutional
investors. Securities lending is a practice that has become common in the mutual
fund industry and involves the temporary loan of portfolio securities to parties
who use the securities for the settlement of securities transactions. The
collateral delivered to the Trust in connection with such a transaction is then
invested to provide the Trust with additional income it might not otherwise
have.
Securities lending involves certain risks if the borrower fails to
return the securities. However, management believes that with appropriate
controls, such as 100% or greater collateralization of the loan and regular
monitoring of the creditworthiness of the counterparty, the ability to engage in
securities lending does not materially increase the risks to which the Trust
currently is subject. In addition, securities on loan cannot generally be sold
until the term of the loan is over. Upon approval of the Trust's shareholders,
the fundamental investment policy governing lending assets will state:
"The Trust may not make loans, provided that this restriction does not
prevent the Trust from purchasing debt obligations, entering into
repurchase agreements, lending its assets to broker/dealers or
institutional investors and investing in loans, including assignments
and participation interests."
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(C): TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE TRUST'S
FUNDAMENTAL INVESTMENT POLICY REGARDING BUYING SECURITIES ON MARGIN
The Trust is not required to have a fundamental restriction on margin
transactions. Accordingly, it is proposed that the Trust's existing fundamental
policy be replaced with a non-fundamental restriction. The Trust's current
policy provides:
"The Trust will not purchase any portfolio instruments on margin but may
obtain such short-term credits as may be necessary for clearance of
purchases and sales of portfolio securities." The proposed
non-fundamental policy makes minor changes in wording from the existing
fundamental restriction and expands the list of margin transactions
excepted
from the prohibition to include margin deposits in connection with financial
options and futures, forward and spot currency contracts, swap transactions and
other financial contracts or derivative instruments. Upon the approval of the
elimination of the existing fundamental policy on engaging in margin
transactions, the Trust would become subject to the following non-fundamental
policy:
"The Trust will not purchase securities on margin, provided that the
Trust may obtain short-term credits necessary for the clearance of
purchases and sales of securities, and further provided that the Trust
may make margin deposits in connection with its use of financial options
and futures, forward and spot currency contracts, swap transactions and
other financial contracts or derivative instruments."
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(D): TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE TRUST'S
FUNDAMENTAL INVESTMENT POLICY REGARDING PLEDGING ASSETS
The Trust is not required to have a fundamental investment restriction
with respect to the pledging of assets. To maximize the Trust's flexibility in
this area, the Board of the Trust believes the policy on pledging assets should
be made non-fundamental. The non-fundamental policy would be similar to the
fundamental policy proposed to be eliminated, which states:
"The Trust will not mortgage, pledge, or hypothecate any assets of the
Trust except to secure permitted borrowings. In those cases, it may
mortgage, pledge, or hypothecate assets having a market value not
exceeding 10% of the value of total assets at the time of such
borrowing." The Board does not expect this change to have a
material impact on the Trust's operations. Establishing the policy as
non-fundamental, however, would enable the
Board to change this policy in the future without shareholder approval.
While the Trust is proposing to eliminate the 10% limitation on the amount of
Trust assets that can be pledged, the Trust does not presently intend to exceed
this limitation in the future.
Upon the approval of the elimination of the existing fundamental policy
on pledging assets, the Trust would become subject to the following
non-fundamental policy:
"The Trust will not mortgage, pledge, or hypothecate any of its assets,
provided that this shall not apply to the transfer of securities in
connection with any permissible borrowing or to collateral arrangements
in connection with permissible activities."
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(E): TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE TRUST'S
FUNDAMENTAL INVESTMENT POLICY REGARDING INVESTING IN
OTHER INVESTMENT COMPANIES
The Trust currently has a fundamental investment policy generally
prohibiting investment in the securities issued by any other open-end investment
company, and which states:
"The Trust may not own securities of open-end investment companies. The
Trust can acquire up to 3% of the total outstanding stock of closed-end
investment companies. The Trust will not be subject to any other
limitations with regard to the acquisition of securities of closed-end
investment companies so long as the public offering price of the Trust's
shares does not include a sales load exceeding 1 1/2%. The Trust will
purchase securities of closed-end investment companies only in
open-market transactions involving only customary broker's commissions.
However, these limitations are not applicable if the securities are
acquired in a merger, consolidation, or acquisition of assets."
The Trust's investment adviser believes, and the Board has concluded,
that this prohibition unnecessarily limits the Trust's investments. Amending
this policy would expand the investment opportunities available to the Trust by
allowing the Trust to invest in other investment companies. Investments in other
investment companies are limited under the 1940 Act and, in the case of the
Trust, by an exemptive order issued by the Commission (the "Order"). The 1940
Act and the Order limit both the portion of the Trust's assets which may be so
invested in a particular fund, and the percentage of such a fund which may be
owned by the Trust. Normally, each investment company in which the Trust invests
will have its own operating expenses, including advisory fees; however, the
Trust's investment adviser will waive the portion of its advisory fee
attributable to assets invested in other investment companies. It is expected
that the other duplicative expenses are justified by the benefit of having
access to the markets in which such funds invest, or in the investment
techniques or advisers of such funds.
If shareholders approve this item, the new operating policy will read as
follows:
"The Trust may invest its assets in securities of other investment
companies, including securities of affiliated investment companies, as
an efficient means of carrying out its investment policies and managing
its uninvested cash."
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(F): TO AMEND, AND TO MAKE NON-FUNDAMENTAL,
THE TRUST'S FUNDAMENTAL INVESTMENT POLICY REGARDING
INVESTMENTS IN U.S. GOVERNMENT SECURITIES
The Trust is subject to a fundamental investment policy regarding the
description of the U.S. government securities that it may purchase that states:
"The Trust may invest in U.S. government securities. The term "U.S.
government securities" as used herein refers to (1) obligations of the United
States and (2) obligations issued or fully guaranteed as to principal and
interest by a Federal Home Loan Bank, the Federal National Mortgage Association,
the Government National Mortgage Association, a Bank for Cooperatives (including
the Central Bank for Cooperatives), a Federal Land Bank, a Federal Intermediate
Credit Bank, The Tennessee Valley Authority, the Export-Import Bank of the
United States, The Commodity Credit Corporation, The Federal Financing Bank, The
Student Loan Marketing Association, The Federal Home Loan Mortgage Association
or The National Credit Union Administration. U.S. government securities are
generally supported by one of the following: (a) the full faith and credit of
the United States Treasury, (b) the right to borrow an amount limited to a
specific line of credit from the U.S. Treasury, (c) discretionary authority of
the U.S. government to purchase certain obligations of the U.S. government
agency or instrumentality, or (d) the credit of the instrumentality. Other than
as set forth above, there is no assurance that in the future the U.S. government
will provide financial support to the U.S. government agencies or
instrumentalities as described above since it is not obligated to do so by law."
This investment policy was initially adopted as a fundamental policy.
However, under the 1940 Act, the Trust is not required to have such a
fundamental policy. Accordingly, the Trust's management has proposed that the
Trust's existing fundamental policy be replaced with a similar, but not
identical, non-fundamental policy.
The Trust's investment adviser has recommended, and the Board has
approved, amending the investment policy to eliminate the final two sentences of
the present policy, which state:
"U.S. government securities are generally supported by one of the
following: (a) the full faith and credit of the United States Treasury, (b) the
right to borrow an amount limited to a specific line of credit from the U.S.
Treasury, (c) discretionary authority of the U.S. government to purchase certain
obligations of the U.S. government agency or instrumentality, or (d) the credit
of the instrumentality. Other than as set forth above, there is no assurance
that in the future the U.S. government will provide financial support to the
U.S. government agencies or instrumentalities as described above since it is not
obligated to do so by law."
These sentences merely restate the nature and extent of the U.S.
government's financial support of the securities issued by certain U.S.
government agencies and instrumentalities, and do not serve to more precisely
describe or clarify the types of U.S. government securities that the Trust may
purchase. As such, they are unnecessary, and it is proposed that they be
eliminated.
Establishing the investment policy as non-fundamental will enable the
Trust to change the policy in the future. However, the Trust has no present
intention to materially modify the amended policy.
Upon shareholder approval, the Trust's amended, non-fundamental policy will
read:
"The Trust may invest in U.S. government securities. The term "U.S.
government securities" as used herein refers to (1) obligations of the
United States and (2) obligations issued or fully guaranteed as to
principal and interest by a Federal Home Loan Bank, the Federal National
Mortgage Association, the Government National Mortgage Association, a
Bank for Cooperatives (including the Central Bank for Cooperatives), a
Federal Land Bank, a Federal Intermediate Credit Bank, The Tennessee
Valley Authority, the Export-Import Bank of the United States, The
Commodity Credit Corporation, The Federal Financing Bank, The Student
Loan Marketing Association, The Federal Home Loan Mortgage Association
or The National Credit Union Administration."
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(G): TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE TRUST'S
FUNDAMENTAL INVESTMENT POLICY REGARDING INVESTMENTS IN COLLATERALIZED MORTGAGE
OBLIGATIONS AND MORTGAGE-RELATED SECURITIES
The Trust currently has a fundamental investment policy pertaining to
investing in collateralized mortgage obligations. The policy states that:
"The Trust may invest only in CMOs which are rated AAA by a recognized
rating agency, and which may be: (a) collateralized by pools of
mortgages in which each mortgage is guaranteed as to payment of
principal and interest by an agency or instrumentality of the U.S.
government; (b) collateralized by pools of mortgages in which payment of
principal and interest is guaranteed by the issuer and such guarantee is
collateralized by U.S. government securities; and (c) securities in
which the proceeds of the issuance are invested in mortgage securities
and payment of the principal and interest are supported by the credit of
an agency or instrumentality of the U.S. government." This
investment policy was initially adopted as a fundamental policy.
However, the Trust is not required under the 1940 Act to have a
fundamental policy relating
to this activity. Accordingly, it is proposed that the Trust's existing
fundamental policy be replaced with a similar non-fundamental policy, and
amended to allow the Trust to invest in privately issued, mortgage-related
securities, including non-agency mortgage-backed securities.
The Trust's investment adviser has recommended that the Trust's
investment policy be expanded to permit the Trust to invest in mortgage-related
securities, as defined in Section 3(a)(41) of the Securities Exchange Act of
1934, which are issued by private entities such as investment banking firms and
companies related to the construction industry. The privately issued
mortgage-related securities in which the Trust would invest may include:
privately issued securities which are collateralized by pools of mortgages in
which each mortgage is guaranteed as to payment of principal and interest by an
agency or instrumentality of the U.S. government; privately issued securities
which are collateralized by pools of mortgages in which payment of principal and
interest are guaranteed by the issuer and such guarantee is collateralized by
U.S. government securities; and other privately issued securities in which the
proceeds of the issuance are invested in mortgage-backed securities and payment
of the principal and interest are supported by the credit of an agency or an
instrumentality of the U.S. government. In addition, the Trust would be
permitted to invest in mortgage-related securities that are not supported by the
credit of any agency or instrumentality of the U.S. government.
Like other mortgage-backed securities, privately issued mortgage-related
securities provide for a periodic payment consisting of both interest and
principal. The interest portion of these payments would be distributed by the
Trust as income, and the capital would be reinvested. As a consequence, these
securities are a less-effective means of "locking in" attractive long-term
interest rates than fixed-income securities that pay only a stated amount of
interest until maturity, when the entire principal amount is returned. This is
caused by the need to reinvest at lower interest rates both distributions of
principal generally and significant prepayments which become more likely as
mortgage interest rates decline. Since comparatively high interest rates cannot
be effectively "locked in," mortgage-related securities may have less potential
for capital appreciation during periods of declining interest rates than other
non-callable fixed-income securities of comparable stated maturities.
However, these securities may experience less pronounced declines in value
during periods of rising interest rates.
Establishing the investment policy as non-fundamental will enable the
Trust to change the policy in the future. However, the Trust has no present
intention to materially modify this policy.
If approved by shareholders, the amended, non-fundamental investment
policy will state:
"The Trust may invest only in CMOs which are rated AAA by a recognized
rating agency, and which may be: (a) collateralized by pools of
mortgages in which each mortgage is guaranteed as to payment of
principal and interest by an agency or instrumentality of the U.S.
government; (b) collateralized by pools of mortgages in which payment of
principal and interest is guaranteed by the issuer and such guarantee is
collateralized by U.S. government securities; and (c) securities in
which the proceeds of the issuance are invested in mortgage securities
and payment of the principal and interest are supported by the credit of
an agency or instrumentality of the U.S. government. In addition, the
Trust may invest in mortgage-related securities, as defined in Section
3(a)(41) of the Securities Exchange Act of 1934, which are issued by
private entities, such as investment banking firms and companies related
to the construction industry."
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(H): TO MAKE NON-FUNDAMENTAL THE TRUST'S FUNDAMENTAL
INVESTMENT POLICY REGARDING DOLLAR ROLL TRANSACTIONS
The Trust currently has a fundamental investment policy pertaining to
its investments in dollar roll transactions. The policy states that:
"The Trust may purchase dollar roll transactions."
This investment policy was initially adopted as a fundamental policy.
However, the Trust is not required under the 1940 Act to have a fundamental
policy relating to this activity. Accordingly, it is proposed that the Trust's
existing fundamental policy be replaced with an identical non-fundamental
policy. Establishing the investment policy as non-fundamental will enable the
Trust to change the policy in the future. However, the Trust has no present
intention to materially modify this policy.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(I): TO MAKE NON-FUNDAMENTAL THE TRUST'S FUNDAMENTAL
INVESTMENT POLICY REGARDING INVESTING IN REPURCHASE AGREEMENTS
The Trust currently has a fundamental investment policy regarding its
investments in repurchase agreements. The policy states that:
"The Trust may enter into repurchase agreements, under which the Trust
may acquire U.S. government securities subject to an obligation of the
seller to repurchase and the Trust to resell the instrument at a fixed
price, time and interest payment. The Trust may enter into repurchase
agreements with financial institutions such as banks and brokers."
This investment policy was initially adopted as a fundamental policy.
However, the Trust is not required under the 1940 Act to have a
fundamental policy relating
to this activity. Accordingly, it is proposed that the Trust's existing
fundamental policy be replaced with an identical non-fundamental policy.
Establishing the investment policy as non-fundamental will enable the Trust to
change the policy in the future. However, the Trust has no present intention to
materially modify this policy.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(J): TO MAKE NON-FUNDAMENTAL THE TRUST'S FUNDAMENTAL
INVESTMENT POLICY REGARDING ENGAGING IN WHEN-ISSUED AND DELAYED DELIVERY
TRANSACTIONS
The Trust currently has a fundamental investment policy pertaining to
engaging in when-issued and delayed delivery transactions. The policy states
that:
"The Trust may purchase U.S. government securities and collateralized
mortgage obligations on a when-issued or delayed delivery basis."
This investment policy was initially adopted as a fundamental policy.
However, the Trust is not required under the 1940 Act to have a fundamental
policy relating to this activity. Accordingly, it is proposed that the Trust's
existing fundamental policy be replaced with an identical non-fundamental
policy. Establishing the investment policy as non-fundamental will enable the
Trust to change the policy in the future. However, the Trust has no present
intention to materially modify this policy.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(K): TO MAKE NON-FUNDAMENTAL THE TRUST'S FUNDAMENTAL
INVESTMENT POLICY REGARDING LENDING PORTFOLIO SECURITIES
The Trust currently has a fundamental investment policy that permits the
Trust to lend its portfolio securities. The policy states that:
"In order to generate additional income, the Trust may lend its
portfolio securities on a short-term or long-term basis to
broker/dealers, banks, or other institutional borrowers of securities.
The Trust will only enter into loan arrangements with broker/dealers,
banks, or other institutions which the Trust's investment adviser has
determined are creditworthy under guidelines established by the Trustees
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." This investment policy was initially adopted as a
fundamental policy. However, the Trust is not required under the 1940
Act to have a fundamental policy relating
to this activity. Accordingly, it is proposed that the Trust's existing
fundamental policy be replaced with an identical non-fundamental policy.
Establishing the investment policy as non-fundamental will enable the Trust to
change the policy in the future. However, the Trust has no present intention to
materially modify this policy.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #4: ELIMINATION OF CERTAIN OF THE TRUST'S
FUNDAMENTAL INVESTMENT POLICIES
The Board has determined that certain of the current fundamental
investment policies are unnecessary and should be removed. Until NSMIA was
adopted in 1996, the securities laws of several states required every investment
company which intended to sell its shares in those states to adopt policies
governing a variety of operational issues, including investment in certain
securities. As a consequence of those restrictions, the Trust adopted the
investment policies described below and agreed that they would be changed only
upon the approval of shareholders. Since these prohibitions are no longer
required under current law, the management of the Trust has recommended, and the
Board has determined, that these policies should be removed. The removal of
these policies would provide greater flexibility in the management of the Trust
by permitting the Trust to purchase a broader range of securities that are
permitted investments and that are consistent with its investment objective and
policies.
The policies being removed are listed below. Each Proposal will be voted
on separately, and the approval of each change will require the affirmative vote
of a majority of the outstanding voting shares of the Trust as defined in the
1940 Act. (See "PROXIES, QUORUM AND VOTING AT THE MEETING" below.)
PROPOSAL #4(A): TO REMOVE THE TRUST'S FUNDAMENTAL INVESTMENT
POLICY REGARDING SELLING SECURITIES SHORT
The Trust is not required to have a fundamental restriction with respect
to short sales of securities. To maximize the Trust's flexibility in this area,
the Board believes that the Trust's restriction on short sales of securities,
which provides that the Trust will not engage in short sales of securities,
should be eliminated. This restriction was imposed by state laws and NSMIA
preempts that requirement. Notwithstanding the elimination of this fundamental
restriction, the Trust expects to continue not to engage in short sales of
securities, except to the extent that the Trust contemporaneously owns or has
the right to acquire at no additional cost securities identical to, or
convertible into or exchangeable for, those sold short.
Upon the approval of Proposal #4(a), the existing fundamental investment
restriction on selling securities short for the Trust will be eliminated.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #4(B): TO REMOVE THE TRUST'S FUNDAMENTAL INVESTMENT POLICY
ON ENGAGING IN PORTFOLIO TRANSACTIONS
The Trust currently has a fundamental investment policy pertaining to
portfolio transactions that states:
"Portfolio transactions are undertaken principally to accomplish the
Trust's objective in relation to movement in the general level of
interest rates, to invest new money obtained from the sale of Trust
shares, and to meet redemptions of Trust shares. The Trust is free to
dispose of portfolio securities at any time when changes in
circumstances or conditions make such a move desirable in light of the
investment objective and policies heretofore stated."
This policy was initially adopted as a fundamental policy. However, the
Trust is not required under the 1940 Act to have such a fundamental policy.
Accordingly it is proposed that the Trust's existing fundamental policy be
eliminated. The Trust's investment adviser intends to continue to manage the
Trust's portfolio in the same manner as presently, and the Trust will engage in
securities transactions only in order to attempt to achieve its investment
objective.
Upon approval of Proposal #4(b), the existing fundamental investment
policy regarding portfolio transactions of the Trust will be eliminated.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #5: TO AMEND AND RESTATE THE TRUST'S FUNDAMENTAL INVESTMENT OBJECTIVE
The Trust's fundamental investment objective as originally adopted by
the Board of Trustees states:
"The investment objective of the Trust is current income. The Trust pursues
this investment objective by investing in U.S. government securities and certain
collateralized mortgage obligations ("CMOs"). While there is no assurance that
the Trust will achieve its investment objective, it will endeavor to do so by
way of the policies described [herein]."
The Trust's management has proposed certain non-substantive changes to
the fundamental investment objective that will simplify it. The second sentence
of the objective as originally formulated - "The Trust pursues this investment
objective by investing in U.S. government securities and certain collateralized
mortgage obligations ("CMOs")" - actually describes permissible investments for
the Trust in seeking to achieve its investment objective. These policies do not
need to be included in the statement of the Trust's investment objective. As
discussed elsewhere in this Proxy Statement, the Trust intends to continue to
pursue its investment objective by investing in U.S. government securities and
CMOs, and the Trust is not proposing to eliminate these policies. The final
sentence of the objective - "While there is no assurance that the Trust will
achieve its investment objective, it will endeavor to do so by way of the
policies described [herein]" - merely makes clear that there is no guarantee
that the Trust will meet its investment objective, and reiterates that the Trust
will follow its stated investment policies. The final sentence does not serve to
more precisely describe or clarify the Trust's investment objective, and, as
such, is unnecessary. Thus, the Trust's management has proposed that the final
sentence be eliminated.
The Trust's management believes that the proposed restatement and
amendment of the Trust's fundamental investment objective will not change the
manner in which the Trust is managed. The Trust's investment objective will
continue to be fundamental, which means that it may not be changed in the future
without shareholder approval.
Upon the approval of shareholders, the amended and restated fundamental
investment objective of the Trust will provide:
"The investment objective of the Trust is current income."
The approval of this Proposal requires the affirmative vote of a majority
of the outstanding voting shares of the Trust, as defined in the 1940 Act. (See
"PROXIES, QUORUM AND "VOTING AT THE MEETING" below.)
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #6: TO APPROVE AN AMENDMENT AND RESTATEMENT TO THE TRUST'S
DECLARATION OF TRUST
Mutual funds, such as the Trust, are required to organize under the laws
of a state and to create and be bound by organizational documents outlining how
they will operate. In the case of the Trust, these organizational documents are
the Declaration of Trust and the By-Laws. Since the adoption of the Trust's
current Declaration of Trust, the market for mutual funds has evolved, requiring
mutual funds to be more flexible in their operation to respond quickly to
changes in the market. Certain items in the current Declaration of Trust,
described below, prohibit the Trust from responding quickly and favorably to
changing markets without going to the expense and delay of holding a shareholder
meeting.
Accordingly, the Trustees have approved, and have authorized the
submission to the Trust's shareholders for their approval, certain amendments to
the Trust's Declaration of Trust. The approval of each amendment will require
the affirmative vote of a majority of the outstanding voting securities of the
Trust as described in the Declaration of Trust. (See "PROXIES, QUORUM AND VOTING
AT THE MEETING" below.)
PROPOSAL #6(A): TO AMEND AND RESTATE THE
TRUST'S DECLARATION OF TRUST TO
REQUIRE THE APPROVAL OF A
MAJORITY OF THE OUTSTANDING
VOTING SHARES IN THE EVENT OF THE
SALE AND CONVEYANCE OF THE ASSETS
OF THE TRUST TO ANOTHER TRUST OR
CORPORATION
Article XII, Section 4(b) of the Declaration of Trust currently requires
the approval of the holders of at least two-thirds of all of the outstanding
shares of the Trust to approve any sale and conveyance of the assets of the
Trust to another open-end management investment company. To reduce the
likelihood of greater expenses in a proposed solicitation for the approval of
any sale and conveyance, the Trustees have adopted an amendment that would
permit a majority vote to approve such a transaction. A majority vote means the
affirmative vote of: (a) 67% or more of the voting securities present at the
meeting if the holders of more than 50% of the outstanding voting securities are
present or represented by proxy; or (b) more than 50% of the outstanding voting
securities, whichever is less. The amendment would provide the Trust with
greater flexibility, and in the event circumstances warrant the approval of the
Board, the Trustees could determine that a sale and conveyance of assets would
be in the best interest of the Trust. The Trustees are recommending that
shareholders approve the adoption of this proposed amendment to the Declaration
of Trust.
If approved by shareholders, Article XII, Section 4(b) of the
Declaration of Trust would be amended to read as follows:
"(b) The Trustees, with the approval of a Majority Shareholder Vote, may
sell and convey the assets of the Trust, or a class or series of the
Trust, to another trust or corporation organized under the laws of any
state of the United States, which is a diversified open-end management
investment company as defined in the 1940 Act, for an adequate
consideration which may include the assumption of all outstanding
obligations, taxes and other liabilities, accrued or contingent, of the
Trust, or a class or series of the Trust, and which may include shares
of beneficial interest or stock of such trust or corporation. Upon
making provision for the payment of all such liabilities, by such
assumption or otherwise, the Trustees shall distribute the remaining
proceeds ratably among the holders of the Shares of the Trust, or a
class or series of the Trust, then outstanding. For the purposes of this
provision, a "Majority Shareholder Vote" means the affirmative vote of
the lesser of: (a) more than 50% of the outstanding voting securities
entitled to vote upon the matter, or (b) 67% or more of the voting
securities present at the meeting if the holders of 50% or more of the
outstanding voting securities entitled to vote on the matter are present
at the meeting in person or by proxy."
In the event that the amendment to Article XII, Section 4(b) is not
approved by shareholders, this section of the Declaration of Trust will remain
as it currently exists, and the Board of Trustees will consider what action, if
any, should be taken.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #6(B): TO AMEND AND RESTATE THE TRUST'S DECLARATION OF
TRUST TO PERMIT THE BOARD OF TRUSTEES TO LIQUIDATE THE ASSETS
OF THE TRUST WITHOUT SEEKING SHAREHOLDER APPROVAL
Shareholders are being asked to approve an amendment to the Trust's
Declaration of Trust to permit the Trustees to sell and convert into money
(i.e., liquidate) all the assets of the Trust, or any series or class of the
Trust, and then redeem all outstanding shares of any series or class of the
Trust. Currently, a majority vote of shareholders is required to liquidate the
Trust, or an affected series or class of which shares are outstanding. The
Trustees have determined that the current restriction presents a cumbersome
structure under which the best interest of all of the Trust's shareholders may
not be served. By requiring the Trustees to solicit a shareholder vote, by
means of a proxy solicitation and special meeting of shareholders, the
Declaration of Trust greatly hinders the Trustees' ability to effectively act
on decisions about the continued viability of the Trust. If it is determined
that it is no longer advisable to continue the Trust, or a series or class of
the Trust, it may not be in the best interest of shareholders to incur the
substantial additional expense of a shareholder meeting when it is more
important to preserve those assets that remain. If this proposal is approved by
shareholders, the Trustees will be authorized to liquidate a series or class of
the Trust by Board action without a further shareholder vote. The Trustees have
no present intention of liquidating the Trust.
If approved by shareholders, Article XII, Section 4(c) of the
Declaration of Trust will be amended to read as follows:
"The Trustees may at any time sell and convert into money all the assets
of the Trust or any Series or Class, without shareholder approval,
unless otherwise required by applicable law. Upon making provision for
the payment of all outstanding obligations, taxes and other liabilities,
accrued or contingent, belonging to each Series or Class, the Trustees
shall distribute the remaining assets belonging to each Series or Class
ratably among the holders of the outstanding Shares of that Series or
Class."
The Trustees believe that the interest of the shareholders is adequately
protected by this provision, as the liquidation would require the conversion of
the assets of the Trust to cash, which will thereafter be distributed to
shareholders pro rata. It is believed that this will result in the return to
shareholders of substantially the same value as would be provided to the
shareholders by a redemption resulting in the payment to the shareholders of the
then current net asset value of the shares owned by the shareholders.
Accordingly, the Trustees have approved, and have authorized the submission to
the Trust's shareholders for their approval, an amendment to the Trust's
Declaration of Trust.
In the event that the amendment to the Declaration of Trust to allow
the Trustees to liquidate assets is not approved by the shareholders, the
Declaration of Trust will remain as it currently exists and the Trustees will
consider what action, if any, should be taken.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #6(C): TO AMEND AND RESTATE THE TRUST'S DECLARATION OF
TRUST TO PERMIT THE BOARD OF TRUSTEES TO CHANGE THE NAME
OF THE TRUST WITHOUT SEEKING SHAREHOLDER APPROVAL
Shareholders are being asked to approve an amendment to the Trust's
Declaration of Trust to permit the Trustees to change the name of the Trust, or
the name of any class or series of the Trust, without first seeking shareholder
approval. Under the current Declaration of Trust, it is not explicitly clear
that the name of the Trust, or the name of any class or series of the Trust,
may be changed without a prior shareholder vote. The Trustees have determined
that it would be a cumbersome requirement to solicit shareholder approval for a
name change, and hence, that the best interests of the Trust's shareholders
would not be served. The requirement that the Trustees solicit a shareholder
vote, by means of a proxy solicitation for a meeting of shareholders, hinders
the Trust's ability to efficiently act on decisions about the continued
effective marketing of the Trust. If it is determined to be advisable to change
the name of the Trust, or of any class or series of the Trust, it would not be
in the best interests of shareholders to incur the substantial expense and
delay of a shareholder meeting to approve the change.
In order to eliminate any ambiguity under the current Declaration of
Trust, shareholders are being asked to approve an amendment to the Declaration
of Trust that will specify that the Trustees may change the name of the Trust,
or of any class or series, without seeking shareholder approval. The proposed
amendment would provide the Trust with greater flexibility, so that, in the
event that circumstances warrant changing a name, the modification could be
effected relatively quickly and inexpensively. The Trustees are recommending
that shareholders approve the proposed amendment.
In the event that the amendment to the Declaration of Trust to allow the
Trustees to change the name of the Trust, or of any class or series thereof, is
not approved by the shareholders, the Declaration of Trust will remain as it
currently exists and the Trustees will consider what action, if any, should be
taken.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
INFORMATION ABOUT THE TRUST
PROXIES, QUORUM AND VOTING AT THE MEETING
Only shareholders of record on the Record Date will be entitled to vote
at the Meeting. Each share of the Trust is entitled to one vote. Fractional
shares are entitled to proportionate shares of one vote. Under both the
Investment Company Act of 1940 and the Declaration of Trust, the favorable vote
of a "majority of the outstanding voting shares" of the Trust means: (a) the
holders of 67% or more of the outstanding voting securities present at the
Meeting, if the holders of 50% or more of the outstanding voting securities of
the Trust are present or represented by proxy; or (b) the vote of the holders of
more than 50% of the outstanding voting securities, whichever is less. The
favorable vote of a majority of the outstanding voting shares of the Trust is
required to approve each Proposal, except the election of Trustees, the
ratification of the selection of the Auditors, and the amendment of the
Declaration of Trust.
Any person giving a proxy has the power to revoke it any time prior to
its exercise by executing a superseding proxy or by submitting a written notice
of revocation to the Secretary of the Trust. In addition, although mere
attendance at the Meeting will not revoke a proxy, a shareholder present at the
Meeting may withdraw his or her proxy and vote in person. All properly executed
and unrevoked proxies received in time for the Meeting will be voted in
accordance with the instructions contained in the proxies. IF NO INSTRUCTION IS
GIVEN ON THE PROXY, THE PERSONS NAMED AS PROXIES WILL VOTE THE SHARES
REPRESENTED THEREBY IN FAVOR OF THE MATTERS SET FORTH IN THE ATTACHED NOTICE.
In order to hold the Meeting, a "quorum" of shareholders must be
present. Holders of one-fourth of the total number of outstanding shares of the
Trust, present in person or by proxy, shall be required to constitute a quorum
for the purpose of voting on the proposals made.
For purposes of determining a quorum for transacting business at the
Meeting, abstentions and broker "non-votes" (that is, proxies from brokers or
nominees indicating that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares on a particular matter
with respect to which the brokers or nominees do not have discretionary power)
will be treated as shares that are PRESENT but which have not been VOTED. For
this reason, abstentions and broker non-votes will have the effect of a "no"
vote for purposes of obtaining the requisite approval of some of the proposals.
If a quorum is not present, the persons named as proxies may vote those
proxies which have been received to adjourn the Meeting to a later date. In the
event that a quorum is present but sufficient votes in favor of one or more of
the proposals have not been received, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitations of
proxies with respect to such proposal(s). All such adjournments will require the
affirmative vote of a majority of the shares present in person or by proxy at
the session of the Meeting to be adjourned. The persons named as proxies will
vote AGAINST any such adjournment those proxies which they are required to vote
against the proposal and will vote in FAVOR of the adjournment other proxies
which they are authorized to vote. A shareholder vote may be taken on other
proposals in this Proxy Statement prior to any such adjournment if sufficient
votes have been received for approval.
As referred to in this Proxy Statement, the "Federated Fund Complex,"
"The Funds" or "Funds" include the following investment companies: Automated
Government Money Trust; Cash Trust Series II; Cash Trust Series, Inc.; CCB
Funds; 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 Core Trust; Federated Equity Funds;
Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated 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.; Fixed Income Securities, Inc.; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds, Inc.;
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; Regions Funds; RIGGS Funds;
Tax-Free Instruments Trust; The Planters Funds; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; WesMark Funds; WCT Funds; World Investment Series, Inc.;
Blanchard Funds; Blanchard Precious Metals Fund, Inc.; High Yield Cash Trust;
Investment Series Trust; Targeted Duration Trust; The Virtus Funds; and Trust
for Financial Institutions. SHARE OWNERSHIP OF THE TRUSTEES Officers and
Trustees of the Trust own less than 1% of the Trust's outstanding shares.
At the close of business on the Record Date, the following person owned, to the
knowledge of management, more than 5% of the outstanding shares of the
Institutional Shares class of the Trust: Charles Schwab & Co., Inc., San
Francisco, CA, on behalf of various customer accounts, owned approximately
3,582,716.387 shares (5.26%). At the close of business on the Record Date, the
following persons owned, to the knowledge of management, more than 5% of the
outstanding shares of the Institutional Service Shares class of the Trust: CPB
Trust Division Fiduciary Account 102007, Honolulu, HI, owned approximately
620,262.859 shares (11.95%); First National Bank & Trust of McAlester,
McAlester, OK, on behalf of various customer accounts, owned approximately
559,908.278 shares (10.79%); Forethought National Trustbank, Batesville, IN, on
behalf of various customer accounts, owned approximately 429,179.975 shares
(8.27%); Linway and Company, Denver, CO, owned approximately 404,105.21 shares
(7.78%); Community First National Bank, Fargo, ND, on behalf of various customer
accounts, owned approximately 403,997.852 shares (7.78%); Citizens' Scholarship
FOA Inc., St. Peter, MN, on behalf of various customer accounts, owned
approximately 320,536.626 shares (6.17%); and Charles Schwab & Co., Inc., San
Francisco, CA, on behalf of various customer accounts, owned approximately
299,334.668 shares (5.77%).
TRUSTEE COMPENSATION
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST1# FROM FUND COMPLEX+
- --------------------------- -------------------- ------------------------------------------------
John F. Donahue*@ $0 $0 for the Trust and
Chairman and Trustee 56 other investment companies in the Fund Complex
Thomas G. Bigley $1,698 $113,860.22 for the Trust and
Trustee 56 other investment companies in the Fund Complex
John T. Conroy, Jr. $1,868 $125,264.48 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Nicholas P. Constantakis++ $0 $47,958.02 for the Trust and
Trustee 34 other investment companies in the Fund Complex
William J. Copeland $1,868 $125,264.48 for the Trust and
Trustee 56 other investment companies in the Fund Complex
James E. Dowd $1,868 $125,264.48 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D.* $1,698 $113,860.22 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Edward L. Flaherty, Jr.@ $1,868 $125,264.48 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Glen R. Johnson* $0 $0 for the Trust and
President and Trustee 8 other investment companies in the Fund Complex
Peter E. Madden $1,698 $113,860.22 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Charles F. Mansfield** $0 $0 for the Trust and
Trustee 56 other investment companies in the Fund Complex
John E. Murray, Jr. $1,698 $113,860.22 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Wesley W. Posvar $1,698 $113,860.22 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Marjorie P. Smuts $1,698 $113,860.22 for the Trust and
Trustee 56 other investment companies in the Fund Complex
1 Information is furnished for the fiscal year ended January 31, 1999.
# The aggregate compensation is provided for the Trust which is comprised of
one portfolio.
+ The information is provided for the last calendar year.
* The Trustee is deemed to be an "interested person" as defined in the 1940 Act.
@ Member of the Executive Committee.
++ Mr. Constantakis was appointed to the Board of Trustees on February 23, 1998.
** Mr. Mansfield became a member of the Board of Trustees on January 1, 1999.
Mr. Mansfield did not receive any fees from the Fund Complex as of the last
calendar year.
During the fiscal year ended January 31, 1999, there were four meetings
of the Board of Trustees. The interested Trustees, other than Dr. Ellis, do not
receive fees from the Trust. Dr. Ellis is an interested person by reason of the
employment of his son-in-law by Federated Securities Corp. All Trustees were
reimbursed for expenses for attendance at Board of Trustees meetings.
The Executive Committee of the Board of Trustees handles the
responsibilities of the Board between meetings of the Board. Other than its
Executive Committee, the Trust has one Board committee, the Audit Committee.
Generally, the function of the Audit Committee is to assist the Board of
Trustees in fulfilling its duties relating to the Trust's accounting and
financial reporting practices and to serve as a direct line of communication
between the Board of Trustees and the independent auditors. The specific
functions of the Audit Committee include recommending the engagement or
retention of the independent auditors, reviewing with the independent auditors
the plan and the results of the auditing engagement, approving professional
services provided by the independent auditors prior to the performance of such
services, considering the range of audit and non-audit fees, reviewing the
independence of the independent auditors, reviewing the scope and results of the
Trust's procedures for internal auditing, and reviewing the Trust's system of
internal accounting controls.
For the most recently completed fiscal year, Messrs. Flaherty, Conroy,
Copeland and Dowd served on the Audit Committee. These Trustees are not
interested Trustees of the Trust. During the fiscal year ended January 31, 1999,
there were four meetings of the Audit Committee. All of the members of the Audit
Committee were present for each meeting. Each member of the Audit Committee
receives an annual fee of $100 plus $25 for attendance at each meeting and is
reimbursed for expenses of attendance.
OFFICERS OF THE TRUST
The executive officers of the Trust are elected annually by the Board of
Trustees. Each officer holds the office until qualification of his successor.
The names and birthdates of the executive officers of the Trust and their
principal occupations during the last five years are as follows:
John F. Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Investment Management
Company, 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 Trust and Nominee for Trustee.
Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President or Executive Vice President of the Federated Fund Complex; Director or
Trustee of some of the Funds in the Federated Fund Complex; President and
Director, Federated Investors, Inc.; President and Trustee, Federated Investment
Management Company, 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; Director, Federated Services Company. Mr. Donahue is the son of John F.
Donahue, Chairman and Trustee of the Trust.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Trustee or Director of some of the Funds in the Federated Fund Complex;
President, Executive Vice President and Treasurer of some of the Funds in the
Federated Fund Complex; Vice Chairman, Federated Investors, Inc.; Vice
President, Federated Investment Management Company, Federated 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.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President and Secretary of the Federated Fund Complex; Executive
Vice President, Secretary, and Director, Federated Investors, Inc.; Trustee,
Federated Investment Management Company, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global Research
Corp.; Director, Federated Services Company; Director, Federated Securities
Corp.
William D. Dawson, III
Federated Investors Tower
Pittsburgh, PA
Birthdate: March 3, 1949
Chief Investment Officer
Chief Investment Officer of the Trust and various other Funds in the Federated
Fund Complex; Executive Vice President, Federated Investment Counseling,
Federated Global Research Corp., Federated Investment Management Company,
Federated Management, Federated Research, and Passport Research, Ltd.;
Registered Representative, Federated Securities Corp.; Portfolio Manager,
Federated Administrative Services; Vice President, Federated Investors, Inc.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
President or Vice President of some of the Funds in the Federated Fund Complex;
Director or Trustee of some of the Funds in the Federated Fund Complex;
Executive Vice President, Federated Investors, Inc.; Chairman and Director,
Federated Securities Corp.
Kathleen M. Foody-Malus
Federated Investors Tower
Pittsburgh, PA
Birthdate: March 26, 1960
Vice President
Senior Vice President, Federated Investment Management Company.
Edward J. Tiedge
Federated Investors Tower
Pittsburgh, PA
Birthdate: June 14, 1959
Vice President
Vice President, Federated Investment Management Company.
Richard J. Thomas
Federated Investors Tower
Pittsburgh, PA
Birthdate: June 17, 1954
Treasurer
Treasurer of the Federated Fund Complex; Vice President - Funds Financial
Services Division, Federated Investors, Inc.
None of the Officers of the Trust received salaries from the Trust
during the fiscal year ended January 31, 1999.
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY
The Trust is not required, and does not intend, to hold regular annual
meetings of shareholders. Shareholders wishing to submit proposals for
consideration for inclusion in a proxy statement for the next meeting of
shareholders should send their written proposals to Federated Income Trust,
Federated Investors Funds, 5800 Corporate Drive, Pittsburgh, Pennsylvania
15237-7000, so that they are received within a reasonable time before any such
meeting.
No business other than the matters described above is expected to come
before the Meeting, but should any other matter requiring a vote of shareholders
arise, including any question as to an adjournment or postponement of the
Meeting, the persons named on the enclosed proxy card will vote on such matters
according to their best judgment in the interests of the Trust.
SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD
AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE
UNITED STATES.
By Order of the Board of Trustees,
John W. McGonigle
Secretary
May 14, 1999
FEDERATED INCOME TRUST
INVESTMENT ADVISER
FEDERATED INVESTMENT MANAGEMENT COMPANY
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
DISTRIBUTOR
FEDERATED SECURITIES CORP.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
ADMINISTRATOR
FEDERATED SERVICES COMPANY
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Cusip
(_____/99)
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned Shareholders of
Federated Income Trust (the "Trust"), hereby appoint Patricia F. Conner, Gail
Cagney, William Haas, Susan M. Jones and Ann M. Scanlon, or any one of them,
true and lawful attorneys, with the power of substitution of each, to vote all
shares of the Trust which the undersigned is entitled to vote at the Special
Meeting in lieu of Annual Meeting of Shareholders (the "Meeting") to be held on
June 28, 1999, at 5800 Corporate Drive, Pittsburgh, Pennsylvania, at 2:00 p.m.
and at any adjournment thereof.
The attorneys named will vote the shares represented by this proxy in accordance
with the choices made on this ballot. If no choice is indicated as to the item,
this proxy will be voted affirmatively on the matters. Discretionary authority
is hereby conferred as to all other matters as may properly come before the
Meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF FEDERATED INCOME
TRUST. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE PROPOSALS.
BY CHECKING THE BOX "FOR" BELOW, YOU WILL VOTE TO APPROVE EACH OF THE PROPOSED
ITEMS IN THIS PROXY, AND TO ELECT EACH OF THE NOMINEES AS TRUSTEES OF THE TRUST
FOR [ ]
PROPOSAL 1 TO ELECT THOMAS G. BIGLEY, NICHOLAS P. CONSTANTAKIS, JR.,
JOHN F. CUNNINGHAM, J. CHRISTOPHER DONAHUE,
CHARLES F. MANSFIELD, JR., JOHN E. MURRAY, JR. AND JOHN S. WALSH
AS TRUSTEES OF THE TRUST
FOR [ ]
WITHHOLD AUTHORITY
TO VOTE [ ]
VOTE FOR ALL
EXCEPT [ ]
If you do not wish your shares to be voted "FOR" a
particular nominee, mark the "VOTE FOR ALL EXCEPT" box
and strike a line through the name of each nominee for
whom you are NOT voting. Your shares will be voted for
the remaining nominees.
PROPOSAL 2 TO RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP AS THE TRUST'S
INDEPENDENT AUDITORS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
PROPOSAL 3 TO MAKE CHANGES TO THE TRUST'S FUNDAMENTAL INVESTMENT POLICIES:
3(A) TO AMEND THE TRUST'S FUNDAMENTAL INVESTMENT POLICY
REGARDING BORROWING MONEY AND ISSUING SENIOR
SECURITIES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(B) TO AMEND THE TRUST'S FUNDAMENTAL INVESTMENT POLICY
REGARDING LENDING BY THE TRUST
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(C) TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE TRUST'S
FUNDAMENTAL INVESTMENT POLICY REGARDING BUYING
SECURITIES ON MARGIN
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(D) TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE TRUST'S
FUNDAMENTAL INVESTMENT POLICY REGARDING PLEDGING
ASSETS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(E) TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE TRUST'S FUNDAMENTAL
INVESTMENT POLICY REGARDING INVESTING IN OTHER INVESTMENT
COMPANIES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(F) TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE TRUST'S FUNDAMENTAL
INVESTMENT POLICY REGARDING INVESTMENTS IN U.S. GOVERNMENT
SECURITIES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(G) TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE TRUST'S FUNDAMENTAL
INVESTMENT POLICY REGARDING INVESTMENTS IN COLLATERALIZED
MORTGAGE OBLIGATIONS AND MORTGAGE-RELATED SECURITIES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(H) TO MAKE NON-FUNDAMENTAL THE TRUST'S FUNDAMENTAL
INVESTMENT POLICY PERMITTING INVESTMENTS IN DOLLAR
ROLL TRANSACTIONS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(I) TO MAKE NON-FUNDAMENTAL THE TRUST'S FUNDAMENTAL
INVESTMENT POLICY REGARDING INVESTMENTS IN
REPURCHASE AGREEMENTS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(J) TO MAKE NON-FUNDAMENTAL THE TRUST'S FUNDAMENTAL INVESTMENT
POLICY REGARDING ENGAGING IN WHEN-ISSUED AND DELAYED DELIVERY
TRANSACTIONS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(K) TO MAKE NON-FUNDAMENTAL THE TRUST'S FUNDAMENTAL
INVESTMENT POLICY REGARDING LENDING PORTFOLIO
SECURITIES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
PROPOSAL 4 TO ELIMINATE CERTAIN OF THE TRUST'S FUNDAMENTAL INVESTMENT POLICIES:
4(A) TO REMOVE THE TRUST'S FUNDAMENTAL INVESTMENT POLICY
REGARDING SELLING SECURITIES SHORT
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
4(B) TO REMOVE THE TRUST'S FUNDAMENTAL INVESTMENT POLICY
ON ENGAGING IN PORTFOLIO TRANSACTIONS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
PROPOSAL 5 TO APPROVE AN AMENDMENT AND RESTATEMENT OF THE TRUST'S
FUNDAMENTAL INVESTMENT OBJECTIVE
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
PROPOSAL 6 TO APPROVE AMENDMENTS AND RESTATEMENTS TO THE TRUST'S DECLARATION OF
TRUST:
6(A) TO APPROVE AN AMENDMENT OF THE TRUST'S DECLARATION OF TRUST TO
REQUIRE THE APPROVAL BY A MAJORITY OF THE OUTSTANDING VOTING
SHARES IN THE EVENT OF THE SALE OR CONVEYANCE OF THE ASSETS OF
THE TRUST TO ANOTHER TRUST OR CORPORATION
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
6(B) TO APPROVE AN AMENDMENT AND RESTATEMENT OF THE TRUST'S
DECLARATION OF TRUST TO PERMIT THE BOARD OF TRUSTEES PERMIT THE
BOARD OF TRUSTEES TO LIQUIDATE ASSETS OF THE TRUST WITHOUT
SEEKING SHAREHOLDER APPROVAL
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
6(C) TO APPROVE AN AMENDMENT AND RESTATEMENT OF THE TRUST'S
DECLARATION OF TRUST TO PERMIT THE BOARD OF TRUSTEES TO CHANGE
THE NAME OF THE TRUST WITHOUT SEEKING SHAREHOLDER APPROVAL
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
YOUR VOTE IS IMPORTANT Please
complete, sign and return
this card as soon as
possible.
Dated
Signature
Signature (Joint Owners)
Please sign this proxy exactly as your name appears on the books of the Trust.
Joint owners should each sign personally. Directors and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
YOU MAY ALSO VOTE YOUR SHARES BY TOUCHTONE PHONE BY CALLING 1-800-690-6903
OR THROUGH THE INTERNET AT WWW.PROXYVOTE.COM