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 SECURITIES TRUST
(Name of Registrant as Specified In Its Charter)
(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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iii
FEDERATED INCOME SECURITIES TRUST
FEDERATED INTERMEDIATE INCOME FUND
FEDERATED SHORT-TERM INCOME FUND
PROXY STATEMENT - PLEASE VOTE!
TIME IS OF THE ESSENCE. . .VOTING NLY TAKES A FEW MINUTES AND YOUR
PARTICIPATION IS IMPORTANT! ACT NOW TO HELP THE FUNDS AVOID ADDITIONAL EXPENSE.
Federated Income Securities Trust (the "Trust") will hold a special meeting of
shareholders of Federated Intermediate Income Fund and Federated Short-Term
Income Fund (the "Funds") on November 15, 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.
HOW DO I VOTE MY SHARES?
You may vote by telephone at 1-800-690-6903, or through the Internet at
WWW.PROXYVOTE.COM. You may also vote in person at the meeting or complete and
return the enclosed Proxy Card. If you:
1. choose to help save the Funds time and postage costs by voting through the
Internet or by telephone, please don't return your Proxy Card.
2. do not respond at all, we may contact you by telephone to request that you
cast your vote.
3. sign and return the Proxy Card without indicating a preference, your vote
will be cast "for" all the proposals.
WHAT ARE THE ISSUES?
The proposals include:
o the election of Trustees;
o changes to the Funds' fundamental investment policies; and
o an amendment to and restatement of 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 Trusts' business affairs to meet those needs. The
Board represents the shareholders and can exercise all of the Trusts' 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 ARE THE FUNDS' "FUNDAMENTAL POLICIES" BEING CHANGED OR ELIMINATED?
Every mutual fund has certain investment policies that can be changed only with
the approval of its shareholders. These are referred to as "fundamental"
investment policies.
In some cases, these policies were adopted to reflect regulatory, business, or
industry conditions that no longer exist or no longer are necessary. In other
cases, advances in the securities markets and the economy have created different
procedures and techniques that affect the Funds' operations.
By reducing the number of "fundamental policies," the Funds may be able to
minimize the costs and delays associated with frequent shareholder meetings.
Also, the investment adviser's ability to manage assets may be enhanced and
investment opportunities increased.
The proposed amendments will:
o reclassify as operating policies those fundamental policies that are not
required to be fundamental by the Investment Company Act of 1940, as
amended ("1940 Act");
o simplify and modernize the policies that are required to be "fundamental"
by the 1940 Act; and
o eliminate fundamental policies that are no longer required by the
securities laws of individual states.
Federated Investment Management Company, the Funds' adviser, is a conservative
money manager. Its highly trained professionals are dedicated to making
investment decisions in the best interest of shareholders and the Funds. The
Board believes that the proposed changes will be applied responsibly by the
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 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 of Trust organizing the Funds 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 that permits the Funds to benefit from these developments.
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.
IF YOU CHECK MORE THAN ONE BOX FOR EACH PROPOSAL, YOU INVALIDATE YOUR VOTE
FOR THAT PROPOSAL.
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.
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DEFINITIVE
FEDERATED INCOME SECURITIES TRUST
FEDERATED INTERMEDIATE INCOME FUND
FEDERATED SHORT-TERM INCOME FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 15, 1999
A special meeting of the shareholders of Federated Income
Securities Trust (the "Trust"), which presently consists of two portfolios or
series, Federated Intermediate Income Fund (the "Intermediate Income Fund') and
Federated Short-Term Income Fund (the "Short-Term Income Fund") (individually a
"Fund," and collectively the "Funds"), will be held at 5800 Corporate Drive,
Pittsburgh, Pennsylvania 15237-7000, at 2:00 p.m. (Eastern time), on November
15, 1999 to consider proposals:
(1) To elect seven Trustees.
(2) To make changes to the Funds' fundamental investment
policies:
(a) To amend the Funds' fundamental investment policies
regarding diversification;
(b) To amend the Funds' fundamental investment policies
regarding borrowing money and issuing senior securities;
(c) To amend the Funds' fundamental investment policies
regarding investments in real estate;
(d) To amend the Funds' fundamental investment policies
regarding investments in commodities;
(e) To amend the Funds' fundamental investment policies
regarding underwriting securities;
(f) To amend the Funds' fundamental investment policies
regarding lending by the Funds;
(g) To amend the Funds' fundamental investment policies
regarding concentration of the Funds' investments in
the securities of companies in the same industry;
(h) To amend, and to make non-fundamental, the Funds'
fundamental investment policies regarding buying securities on margin;
(i) To amend, and to make non-fundamental, the Funds'
fundamental investment policies regarding pledging assets; and
(j)
To make non-fundamental the Short-Term Income Fund's
fundamental investment policy regarding the maturity
and quality parameters of its permissible investments
(Short-Term Income Fund ONLY).
(3) To eliminate certain of the Funds' fundamental investment
policies:
(a) To remove the Funds' fundamental investment policies
regarding selling securities short;
(b) To remove the Short-Term Income Fund's fundamental
investment policy regarding investing in oil, gas and minerals (Short-Term
Income Fund ONLY);
(c) To remove the Short-Term Income Fund's fundamental
investment policy on investing in securities of new issuers (Short-Term Income
Fund ONLY);
(d) To remove the Short-Term Income Fund's fundamental
investment policy on investing in issuers whose
securities are owned by officers and Trustees
(Short-Term Income Fund ONLY);
(e) To remove the Short-Term Income Fund's fundamental
investment policy on investing for the purpose of
exercising control (Short-Term Income Fund ONLY); and
(f) To remove the Short-Term Income Fund's fundamental
investment policy regarding engaging in when-issued
and delayed delivery transactions (Short-Term Income
Fund ONLY).
(4) To amend the Trust's Declaration of Trust to permit the
Board of Trustees to liquidate assets of the Trust, its
series or classes, and distribute the proceeds of such
assets to the holders of such shares representing such
interests, 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 September 16, 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
October 1, 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. THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
4
TABLE OF CONTENTS
ABOUT THE PROXY SOLICITATION AND THE MEETING...................................4
ELECTION OF SEVEN TRUSTEES.....................................................5
ABOUT THE ELECTION OF TRUSTEES.................................................5
TRUSTEES STANDING FOR ELECTION.................................................6
NOMINEES NOT PRESENTLY SERVING AS TRUSTEES.....................................6
APPROVAL OF CHANGES TO THE FUNDS' FUNDAMENTAL INVESTMENT
POLICIES...................................................................7
APPROVAL OF THE ELIMINATION OF CERTAIN FUNDAMENTAL INVESTMENT
POLICIES OF THE FUNDS.....................................................16
APPROVAL OF AN AMENDMENT TO THE TRUST'S DECLARATION OF TRUST..................19
INFORMATION ABOUT THE TRUST...................................................20
PROXIES, QUORUM AND VOTING AT THE MEETING.....................................20
SHARE OWNERSHIP OF THE TRUSTEES...............................................21
TRUSTEE COMPENSATION..........................................................21
OFFICERS AND INCUMBENT TRUSTEES OF THE TRUST..................................22
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY..................25
DEFINITIVE
PROXY STATEMENT
FEDERATED INCOME SECURITIES TRUST
FEDERATED INTERMEDIATE INCOME FUND
FEDERATED SHORT-TERM INCOME FUND
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"), which presently consists of two
portfolios or series, Federated Intermediate Income Fund (the "Intermediate
Income Fund") and Federated Short-Term Income Fund (the "Short-Term Income
Fund") (individually a "Fund," and collectively the "Funds"). The proxies will
be voted at the special meeting of shareholders of the Trust to be held on
November 15, 1999, at 5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7000,
at 2:00 p.m. (such special meeting and any adjournment or postponement thereof
are referred to as the "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 proposed changes recommended in the
investment policies of the Funds and the proposed amendment to the 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 October 1, 1999, to shareholders of record at
the close of business on September 16, 1999 (the "Record Date").
On the Record Date, the Funds had outstanding shares of beneficial
interest as follows:
Intermediate Income Fund:33,884,243 shares
Short-Term Income Fund: 26,047,922 shares
The Funds' annual reports, which include audited financial statements
for the fiscal year ended April 30, 1999, were previously mailed to
shareholders. The Trust will promptly provide, without charge and upon request,
to each person to whom this Proxy Statement is delivered, a copy of the Funds'
annual reports. Requests for an annual report for a Fund may be made by writing
to the Trust's principal executive offices or by calling the Trust. 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, Cunningham and Murray are presently serving as Trustees. If
elected by shareholders, Messrs. Donahue, Mansfield and Walsh are expected to
assume their responsibilities as Trustees effective January 1, 2000. Please see
"ABOUT THE ELECTION OF TRUSTEES" below for current information about the
Nominees, and "OFFICERS AND INCUMBENT TRUSTEES OF THE Trust" in this Proxy
Statement for current information about the incumbent Trustees who have
previously been elected by shareholders.
Messrs. Murray and Bigley were appointed Trustees on February 14, 1995
and October 1, 1995, respectively, to fill vacancies created by the decision to
expand the size of the Board. Messrs. Constantakis and Cunningham 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.
Donahue, Mansfield and Walsh are being proposed for election as Trustees also as
a result of a decision to expand the size of the Board.
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
The Declaration of Trust provides that Trustees will continue in office
until their respective successors are elected, and therefore, when elected,
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) the Trustees standing for election,
and (ii) the Nominees standing for election who are not presently serving as
Trustees, along with their addresses, birth dates, 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
Birth date: February 3, 1934
Trustee
Director or Trustee of the Federated Fund Complex; Director, Member of
Executive Committee, Children's Hospital of Pittsburgh; Director, Robroy
Industries, Inc. (coated steel conduits/computer storage equipment); formerly,
Senior Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc. (physician
practice management); Director, Member of Executive Committee, University of
Pittsburgh.
NICHOLAS P. CONSTANTAKIS
175 Woodshire Drive
Pittsburgh, PA
Birth date: September 3, 1939
Trustee
Director or Trustee of the Federated Fund Complex; formerly, Partner, Andersen
Worldwide SC.
JOHN F. CUNNINGHAM
353 El Brillo Way
Palm Beach, FL
Birth date: March 5, 1943
Trustee
Director or Trustee of some of the Funds in the Federated Fund Complex;
Chairman, President and Chief Executive Officer, Cunningham & Co., Inc.
(strategic business consulting); Trustee Associate, Boston College; Director,
Iperia Corp. (communications/software); formerly, Director, Redgate
Communications and EMC Corporation (computer storage systems). Previous
Positions: Chairman of the Board and Chief Executive Officer, Computer Consoles,
Inc.; President and Chief Operating Officer, Wang Laboratories; Director, First
National Bank of Boston; Director, Apollo Computer, Inc.
JOHN E. MURRAY, JR., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birth date: December 20, 1932
Trustee
Director or Trustee of the Federated Fund Complex; President, Law
Professor, Duquesne University; Consulting Partner, Mollica & Murray; Director,
Michael Baker Corp. (engineering, construction, operations, and technical
services). Previous Positions: Dean and Professor of Law, University of
Pittsburgh School of Law; Dean and Professor of Law, Villanova University School
of Law.
NOMINEES NOT PRESENTLY SERVING AS TRUSTEES
J. CHRISTOPHER DONAHUE
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birth date: 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, Chief
Executive Officer and Director, Federated Investors, Inc.;, President and
Trustee, Federated Investment Management Company; President and Trustee,
Federated Investment Counseling; President and Director, Federated Global
Investment Management 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.
CHARLES F. MANSFIELD, JR.
80 South Road
Westhampton Beach, NY
Birth date: April 10, 1945
Director or Trustee of some of the Funds in the Federated Fund Complex;
Management Consultant. Previous Positions: Chief Executive Officer, PBTC
International Bank; Partner, Arthur Young & Company (now Ernst & Young LLP);
Chief Financial Officer of Retail Banking Sector, Chase Manhattan Bank; Senior
Vice President, Marine Midland Bank; Vice President, Citibank; Assistant
Professor of Banking and Finance, Frank G. Zarb School of Business, Hofstra
University.
JOHN S. WALSH
2007 Sherwood Drive
Valparaiso, IN
Birth date: November 28, 1957
Director or Trustee of some of the Funds in the Federated Fund Complex;
President and Director, Heat Wagon, Inc. (manufacturer of construction temporary
heaters); President and Director, Manufacturers Products, Inc. (distributor of
portable construction heaters); President, Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh & Kelly, Inc. (heavy highway
contractor); formerly, Vice President, Walsh & Kelly, Inc.
APPROVAL OF CHANGES TO THE FUNDS'
FUNDAMENTAL INVESTMENT POLICIES
INTRODUCTION TO PROPOSALS #2(A) TO #2(J) AND #3(A) TO #3(F).
The 1940 Act (which was adopted to protect mutual fund shareholders)
requires investment companies such as the Funds to adopt certain specific
investment policies or restrictions that can be changed only by shareholder
vote. An investment company may also elect to designate other policies or
restrictions that may be changed only by shareholder vote. Both types of
policies and restrictions are often referred to as "fundamental policies." These
policies and restrictions limit the investment activities of the Funds'
investment adviser.
After the Trust was formed in 1986, legal and regulatory requirements
applicable to mutual funds changed. For example, certain restrictions imposed by
state laws and regulations were preempted by the National Securities Markets
Improvement Act of 1996 ("NSMIA") and no longer apply. As a result, the Funds
are subject to fundamental policies that are no longer required to be
fundamental, and to other policies that are no longer required at all.
Accordingly, the Trustees have authorized the submission to the Funds'
shareholders for their approval, and recommend that shareholders approve, the
amendment, reclassification and/or elimination of certain of the Funds'
fundamental policies.
The proposed amendments would:
(i) simplify, modernize and standardize the fundamental policies that are
required to be stated under the 1940 Act;
(ii) reclassify as operating policies those fundamental policies that are not
required to be fundamental under the 1940 Act; and
(iii)eliminate those fundamental policies that are no longer required by the
securities laws of the various states.
By reducing the number of policies that can be changed only by
shareholder vote, the Trustees believe that the Funds would be able to minimize
the costs and delays associated with holding future shareholder meetings to
revise fundamental policies that become outdated or inappropriate. The Trustees
also believe that the investment adviser's ability to manage the Funds' assets
in a changing investment environment will be enhanced and that investment
management opportunities will be increased by these changes. The chart that
follows briefly describes the differences between fundamental policies and
non-fundamental policies.
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 by shareholders of each Fund (unless otherwise noted), and the
approval of each Proposal by each Fund will require the approval of a majority
of the outstanding voting shares of the Fund as defined in the 1940 Act. (See
"PROXIES, QUORUM AND VOTING AT THE MEETING" below.)
DESCRIPTION OF PROPOSED CHANGES
The proposed standardized fundamental investment policies cover those
areas for which the 1940 Act requires the Funds to have a fundamental
restriction. They satisfy current regulatory requirements and are written to
provide flexibility to respond to future legal, regulatory, market or technical
changes. THE PROPOSED STANDARDIZED CHANGES WILL NOT AFFECT THE FUNDS' INVESTMENT
OBJECTIVES. ALTHOUGH THE PROPOSED CHANGES IN FUNDAMENTAL POLICIES WILL ALLOW THE
FUNDS GREATER FLEXIBILITY TO RESPOND TO FUTURE INVESTMENT OPPORTUNITIES, THE
BOARD OF 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 INVESTMENTS IN THE FUNDS. 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 FUNDS ARE MANAGED.
The following is the text and a summary description of the proposed
changes to the Funds' fundamental policies and restrictions. Any non-fundamental
policy may be modified or eliminated by the 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 a Fund adheres to a fundamental or non-fundamental
percentage restriction at the time of an investment or transaction, a later
increase or decrease in the percentage resulting from a change in the value of
the Fund's portfolio securities or the amount of its total assets does not
create a violation of the policy. This policy will continue to apply for any of
the proposed changes that are approved.
PROPOSAL #2: APPROVAL OF AMENDMENTS TO THE FUNDS' FUNDAMENTAL INVESTMENT
POLICIES
PROPOSAL #2(A): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT
POLICIES REGARDING DIVERSIFICATION
Under the 1940 Act, the Funds' policies relating to the diversification
of their investments must be fundamental. The 1940 Act prohibits a "diversified"
mutual fund from purchasing securities of any one issuer if, at the time of
purchase, more than 5% of the fund's total assets would be invested in
securities of that issuer or the fund would own or hold more than 10% of the
outstanding voting securities of that issuer, except that up to 25% of the
fund's total assets may be invested without regard to this limitation. The 5%
limitation does not apply to securities issued by or guaranteed by the U.S.
government, its agencies or instrumentalities or to securities issued by other
open-end investment companies.
The Funds' present policies regarding diversification state:
INTERMEDIATE INCOME FUND:
"With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities issued by any one issuer
(other than cash, cash items or securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities and
repurchase agreements collateralized by such securities) if as a result
more than 5% of the value of its total assets would be invested in the
securities of that issuer. Also, the Fund will not acquire more than 10%
of the outstanding voting securities of any one issuer."
SHORT-TERM INCOME FUND:
"The Fund will not purchase the securities of any issuer (other than the
U.S. government, its agencies, or instrumentalities or instruments
secured by the securities of such issuers, such as repurchase
agreements) if, as a result, more than 5% of the value of its assets
would be invested in the securities of such issuer with respect to 75%
of its total assets, or acquire more than 10% of any class of voting
securities of any issuer. For these purposes the Fund takes all common
stock and all preferred stock of an issuer each as a single class,
regardless of priorities, series, designations, or other differences."
In order to afford the Funds' investment adviser maximum flexibility in
managing the Funds' assets, the Trustees propose to amend the Funds'
diversification policies to be consistent with the definition of a diversified
investment company under the 1940 Act. The amended policy complies with the U.S.
Securities and Exchange Commission's (the "SEC" or "Commission") general
definition of diversification. The new policy would specifically add securities
of other investment companies to the list of issuers which are excluded from the
5% limitation to the investment policies for both Funds.
Upon approval of the Funds' shareholders, the fundamental investment
policy governing diversification for each Fund will be amended as follows:
"With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities of any one issuer (other
than cash; cash items; securities issued or guaranteed by the government
of the United States or its agencies or instrumentalities and repurchase
agreements collateralized by such U.S. government securities; and
securities of other investment companies) if, as a result, more than 5%
of the value of its total assets would be invested in securities of that
issuer, or the Fund would own more than 10% of the outstanding voting
securities of that issuer."
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(B): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICIES
REGARDING BORROWING MONEY AND ISSUING SENIOR SECURITIES
The 1940 Act requires the Funds to have a fundamental investment policy
defining their ability to borrow money or issue senior securities. In general,
limitations on borrowing are designed to protect shareholders and their
investments by restricting a Fund's ability to subject its assets to any claims
of creditors or senior security holders who would be entitled to dividends or
rights on liquidation of the Fund prior to the rights of shareholders.
Shareholders of the Funds are being asked to approve a new standardized
fundamental policy for borrowing and the issuance of senior securities designed
to reflect all current regulatory requirements. The Funds' current policies
state:
INTERMEDIATE INCOME FUND:
"The Fund will not issue senior securities except that the Fund may
borrow money and engage in reverse repurchase agreements in amounts up
to one-third of the value of its total assets, including the amounts
borrowed. The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while
borrowings, in excess of 5% of the value of the Fund's total assets, are
outstanding." SHORT-TERM INCOME FUND: "The Fund will not issue senior
securities, except that the Fund may borrow money and engage in reverse
repurchase agreements in amounts up to one-third of the value of its
total assets, including the amounts borrowed. The Fund will not borrow
money or engage in reverse repurchase agreements for investment
leverage, but rather as a temporary, extraordinary, or emergency measure
to facilitate management of the portfolio by enabling the Fund to meet
redemption requests when the liquidation of portfolio securities is
deemed to be inconvenient or disadvantageous. The Fund will not purchase
any securities while any borrowings, other than reverse repurchase
agreements, are outstanding. During the period any reverse repurchase
agreements are outstanding, but only to the extent necessary to assure
completion of the reverse repurchase agreements, the Fund will restrict
the purchase of portfolio instruments to money market instruments
maturing on or before the expiration date of the reverse repurchase
agreements."
SENIOR SECURITIES-GENERALLY. A "senior security" is an obligation of 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.
The Commission's 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 restrictions of the Funds permit borrowing only as a
temporary measure for extraordinary purposes, and, in the case of the Short-Term
Income Fund, its policy restricts the types of securities that may be purchased
while borrowings are outstanding. The proposed investment policy would provide
greater flexibility to the Funds, and would permit the Funds 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. If the new policy is approved by shareholders, the Funds do not
presently anticipate changing their current practices relating to borrowing
money and issuing senior securities. As a matter of operating policy, the Funds
do not intend to engage in leveraging.
Upon shareholder approval, the fundamental investment policy governing
borrowing money and issuing senior securities by each Fund will state:
"The Fund may borrow money, directly or indirectly, and issue senior
securities to the maximum extent permitted under the 1940 Act."
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(C): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICIES
REGARDING INVESTMENTS IN REAL ESTATE
Under the 1940 Act, the Funds' policies concerning investments in real
estate must be fundamental. The Funds currently have fundamental investment
policies prohibiting the purchase or sale of real estate. The current policies,
however, allow the Funds to invest in securities that are secured by real
estate, and state:
INTERMEDIATE INCOME FUND:
"The Fund will not buy or sell real estate, including limited
partnership interests, although it may invest in the securities of
companies whose business involves the purchase or sale of real estate or
in securities which are secured by real estate or interests in real
estate."
SHORT-TERM INCOME FUND:
"The Fund will not purchase or sell real estate including limited
partnership interests in real estate, although it may invest in the
securities of companies whose business involves the purchase or sale of
real estate or in securities which are secured by real estate or
interests in real estate."
The proposed fundamental investment policy will not permit the Funds to
purchase real estate directly, but will permit the purchase of securities whose
payments of interest or principal are secured by mortgages or other rights to
real estate in the event of default. The investment policy will also enable the
Funds to invest in companies within the real estate industry, provided such
investments are consistent with the Funds' investment objectives and policies.
If the new policy is approved by shareholders, the Funds do not presently
anticipate changing their current practices relating to investing in real
estate.
Upon shareholder approval, the fundamental investment policy governing
investments in real estate by each Fund will state:
"The Fund may not purchase or sell real estate, provided that this
restriction does not prevent the Fund from investing in issuers which
invest, deal, or otherwise engage in transactions in real estate or
interests therein, or investing in securities that are secured by real
estate or interests therein. The Fund may exercise its rights under
agreements relating to such securities, including the right to enforce
security interests and to hold real estate acquired by reason of such
enforcement until that real estate can be liquidated in an orderly
manner."
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(D): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICIES
REGARDING INVESTMENTS IN COMMODITIES
Under the 1940 Act, the Funds' policies concerning investments in
commodities must be fundamental. The Funds are currently subject to fundamental
restrictions prohibiting the purchase or sale of commodities and commodities
contracts which provide:
INTERMEDIATE INCOME FUND:
"The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts except to the extent that the Fund may
engage in transactions involving futures contracts and related options."
SHORT-TERM INCOME FUND:
"The Fund will not purchase or sell commodities or commodity contracts,
including futures contracts."
Historically, the most common types of commodities have been physical
commodities such as wheat, cotton, rice and corn. However, under federal law,
futures contracts are considered to be commodities and, therefore, financial
futures contracts, such as futures contracts related to currencies, stock
indices or interest rates are considered to be commodities. Financial futures
contracts enable an investment company to buy (or sell) the right to receive the
cash difference between the contract price for an underlying asset or index and
the future market price, if the market price is higher. If the future price is
lower, the investment company is obligated to pay (or, if the investment company
sold the contract, the investment company receives) the amount of the decrease.
Investment companies often desire to invest in financial futures contracts and
options related to such contracts for hedging or other investment reasons.
The proposed policy would provide appropriate flexibility for the Funds
to invest in financial futures contracts and related options. As proposed, the
policy is broad enough to permit investment in financial futures instruments for
either investment or hedging purposes, which is broader than the Funds' current
policies. Using financial futures instruments can involve substantial risks, and
would be utilized only if the Funds' investment adviser determined that such
investments are advisable and such practices were disclosed in the Funds'
prospectuses or statements of additional information. Gains or losses on
investments in financial futures instruments depend on the direction of
securities prices, interest rates and other economic factors, and losses from
engaging in these types of transactions are potentially limited. At the present
time, the Funds do not intend to engage in these activities beyond what is
disclosed in the Funds' current prospectuses. As a matter of non-fundamental
operating policy, for purposes of the proposed policy, investments in
transactions involving futures contracts and options, forward currency
contracts, swap transactions and other financial contracts that settle by
payment of cash are not deemed to be investments in commodities.
Upon shareholder approval, the fundamental investment policy for each
Fund governing investments in commodities will state:
"The Fund may not purchase or sell physical commodities, provided that
the Fund may purchase securities of companies that deal in commodities."
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(E): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT
POLICIES REGARDING UNDERWRITING SECURITIES
Under the 1940 Act, the Funds' policies relating to underwriting are
required to be fundamental. Each Fund currently is subject to a fundamental
investment policy prohibiting it from acting as an underwriter of the securities
of other issuers. It states that:
"The Fund will not underwrite any issue of securities, except as it may
be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of restricted securities which the Fund may
purchase pursuant to its investment objective, policies, and
limitations."
A person or company generally is considered an underwriter under the
federal securities laws if it participates in the public distribution of
securities of OTHER ISSUERS, usually by purchasing the securities from the
issuer and re-selling the securities to the public. From time to time, a mutual
fund may purchase a security for investment purposes which it later sells or
redistributes to institutional investors or others under circumstances where the
fund could possibly be considered to be an underwriter under the technical
definition of underwriter contained in the securities laws.
Upon shareholder approval, the fundamental investment policy concerning
underwriting for each Fund will state:
"The Fund may not underwrite the securities of other issuers, except
that the Fund may engage in transactions involving the acquisition,
disposition or resale of its portfolio securities, under circumstances
where it may be considered to be an underwriter under the Securities Act
of 1933."
This does not constitute a substantive change in the Funds' policies.
Rather, it reflects a restatement to standardized language now to be used by the
Federated Funds, and is submitted to shareholders to comply with the 1940 Act's
requirements.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(F): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICIES
REGARDING LENDING BY THE FUNDS
Under the 1940 Act, the Funds' policies concerning lending must be
fundamental. The Funds currently are subject to fundamental investment
restrictions limiting their ability to make loans which state:
INTERMEDIATE INCOME FUND:
"The Fund will not lend any of its assets, except portfolio securities
up to one-third of the value of its total assets. This shall not prevent
the Fund from purchasing or holding U.S. government obligations, money
market instruments, variable rate demand notes, bonds, debentures,
notes, certificates of indebtedness, or other debt securities, entering
into repurchase agreements, or engaging in other transactions where
permitted by the Fund's investment objective, policies, and
limitations."
SHORT-TERM INCOME FUND:
"The Fund will not lend any of its assets except portfolio securities up
to one-third of the value of its total assets. This shall not prevent
the purchase or holding of corporate bonds, debentures, notes,
certificates of indebtedness or other debt securities of an issuer,
repurchase agreements or other transactions which are permitted by the
Fund's investment objective and policies or Declaration of Trust. The
Fund will only enter into loan arrangements with broker/dealers, banks,
or other institutions which the investment adviser has determined are
creditworthy under guidelines established by the Trustees and will
receive collateral equal to at least 100% of the value of the securities
loaned."
In order to ensure that each Fund may invest in certain debt securities
or repurchase agreements, which could technically be characterized as the making
of loans, the Funds' current fundamental restrictions specifically permit such
investments. In addition, the Funds' fundamental policies explicitly permit the
Funds to lend their portfolio securities. Securities lending is a practice that
has become common in the mutual fund industry and involves the temporary loan of
portfolio securities to parties who use the securities for the settlement of
securities transactions. The collateral delivered to a Fund in connection with
such a transaction is then invested to provide the Fund with additional income
it might not otherwise have.
Securities lending involves certain risks if the borrower fails to
return the securities. However, management believes that with appropriate
controls, such as 100% or greater collateralization of the loan and regular
monitoring of the creditworthiness of the counterparty, the ability to engage in
securities lending does not materially increase the risks to which the Funds
currently are subject. In addition, securities on loan cannot generally be sold
until the term of the loan is over.
Upon approval of the Funds' shareholders, the fundamental investment
policy governing the lending of assets for each Fund will state:
"The Fund may not make loans, provided that this restriction does not
prevent the Fund from purchasing debt obligations, entering into
repurchase agreements, lending its assets to broker/dealers or
institutional investors and investing in loans, including assignments
and participation interests."
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(G): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICIES
REGARDING CONCENTRATION OF THE FUNDS' INVESTMENTS IN THE SECURITIES OF COMPANIES
IN THE SAME INDUSTRY
Under the 1940 Act, the Funds' policies relating to the concentration of
their investments in securities of companies in a single industry must be
fundamental. The SEC staff considers a mutual fund to "concentrate" its
investments if 25% or more of its total assets are invested in a particular
industry (not counting U.S. government securities, bank instruments issued by
domestic banks and municipal securities).
The Funds currently have a fundamental investment policy prohibiting
them from concentrating their investments in a single industry:
INTERMEDIATE INCOME FUND:
"The Fund will not invest 25% or more of the value of its total assets
in any one industry except that the Fund may invest 25% of more of the
value of its total assets in securities issued or guaranteed by the U.S.
government, it agencies or instrumentalities, and repurchase agreements
collateralized by such securities."
SHORT-TERM INCOME FUND:
"The Fund will not purchase securities if as a result of such purchase
25% or more of the value of its total assets would be invested in any one
industry."
Upon the approval by the Funds' shareholders, the fundamental investment
policy governing concentration for each Fund will provide:
"The Fund will not make investments that will result in the
concentration of its investments in the securities of issuers primarily
engaged in the same industry. Government securities, municipal
securities and bank instruments will not be deemed to constitute an
industry. To conform to the current view of the SEC that only domestic
bank instruments may be excluded from industry concentration
limitations, as a matter of non-fundamental policy, the Fund will not
exclude foreign bank instruments from industry concentration limits as
long as the policy of the SEC remains in effect. In addition,
investments in bank instruments, and investments in certain industrial
development bonds funded by activities in a single industry, will be
deemed to constitute investment in an industry, except when held for
temporary defensive purposes. The investment of more than 25% of the
value of the Fund's total assets in any one industry will constitute
`concentration.'"
The Trust's Board has also approved related non-fundamental policies for
the Funds, which will be adopted if the new fundamental policy is approved by
shareholders. These policies provide that in applying the concentration
restriction: (1) utility companies will be divided according to their services,
for example, gas, gas transmission, electric and telephone will each be
considered a separate industry; (2) financial service companies will be
classified according to the end users of their services, for example, automobile
finance, bank finance and diversified finance will each be considered a separate
industry; and (3) asset-backed securities will be classified according to the
underlying assets securing such securities.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(H): TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE FUNDS'
FUNDAMENTAL INVESTMENT POLICIES REGARDING BUYING SECURITIES ON MARGIN
The Funds are not required to have a fundamental restriction on margin
transactions. Accordingly, it is proposed that the Funds' existing fundamental
policies be replaced with non-fundamental restrictions. The Funds' current
policies provide:
INTERMEDIATE INCOME FUND:
"The Fund will not purchase any securities on margin, but may obtain
such short-term credits as may be necessary for the clearance of
purchases and sales of portfolio securities. The deposit or payment by
the Fund of initial or variation margin in connection with futures
contracts or related options transactions is not considered the purchase
of a security on margin."
SHORT-TERM INCOME FUND:
"The Fund will not purchase any securities on margin but may obtain such
short-term credits as are necessary for the clearance of transactions."
The proposed non-fundamental policy makes some changes in wording from
the existing fundamental restrictions, and contemplates that the Funds may
engage in the same types of transactions as they are presently authorized to do.
Upon the approval of the elimination of the existing fundamental policy on
engaging in margin transactions, the Funds would become subject to the following
non-fundamental policy:
"The Fund will not purchase securities on margin, provided that the Fund
may obtain short-term credits necessary for the clearance of purchases
and sales of securities, and further provided that the Fund may make
margin deposits in connection with its use of financial options and
futures, forward and spot currency contracts, swap transactions and
other financial contracts or derivative instruments."
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #2(I): TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE FUNDS'
FUNDAMENTAL INVESTMENT POLICIES REGARDING PLEDGING ASSETS
The Funds are not required to have a fundamental investment restriction
with respect to the pledging of assets. To maximize the Funds' flexibility in
this area, the Board of the Trust believes that the Funds' policies on pledging
assets should be made non-fundamental. The non-fundamental policies would be
similar to the fundamental policies proposed to be eliminated that state:
INTERMEDIATE INCOME FUND:
"The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge or
hypothecate assets having a market value not exceeding the lesser of the
dollar amounts borrowed or 15% of the value of total assets at the time
of borrowing. For purposes of this limitation, the following are not
deemed to be pledges: margin deposits for the purchase and sale of
futures contracts and related options, and segregation or collateral
arrangements made in connection with options activities or the purchase
of securities on a when-issued basis."
SHORT-TERM INCOME FUND:
"The Fund will not mortgage, pledge, or hypothecate any assets 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 borrowing."
The Board does not expect this change to have a material impact on
the Funds' operations. Establishing the policy as non-fundamental, however,
would enable the Board to change this policy in the future without shareholder
approval. Upon the approval of the elimination of the existing fundamental
investment policies on pledging assets, each Fund would become subject to the
following non-fundamental investment policy:
"The Fund will not mortgage, pledge, or hypothecate any of its assets,
provided that this shall not apply to the transfer of securities in
connection with any permissible borrowing or to collateral arrangements
in connection with permissible activities."
PROPOSAL #2(J): TO MAKE NON-FUNDAMENTAL THE SHORT-TERM INCOME
FUND'S FUNDAMENTAL INVESTMENT POLICY REGARDING THE MATURITY AND QUALITY
PARAMETERS OF ITS PERMISSIBLE INVESTMENTS
THIS PROPOSAL PERTAINS TO THE SHORT-TERM INCOME FUND ONLY.
The Short-Term Income Fund currently is subject to a fundamental
investment policy governing the maturity and credit quality standards for its
permissible investments. The policy states:
"The Fund will invest primarily in a diversified portfolio of short and
medium-term high grade debt securities."
This investment policy was initially adopted as a fundamental policy.
However, the Short-Term Income Fund is not required under the 1940 Act to have
such a fundamental investment policy. Accordingly, it is proposed that the
Fund's existing fundamental policy be replaced with an identical non-fundamental
policy. Establishing this policy as a non-fundamental policy will allow the Fund
to change the policy without shareholder approval. However, the Fund has no
present intention to change this policy, and the Fund's investment adviser
intends to continue to manage the Fund in the same manner as presently.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3: ELIMINATION OF CERTAIN OF THE FUNDS'
FUNDAMENTAL INVESTMENT POLICIES
The Board has determined that certain of the Funds' 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 investments in certain
securities. As a consequence of those restrictions, the Funds adopted the
investment policies described below and agreed that the policies 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
Funds by permitting the Funds to purchase a broader range of securities that are
permitted investments and that are consistent with the Funds' investment
objectives and policies.
The policies being removed are listed below. Each Proposal will be voted
on separately by each Fund (unless otherwise noted), and the approval of each
change by each Fund will require the affirmative vote of a majority of the
outstanding voting shares of the Fund as defined in the 1940 Act. (See "PROXIES,
QUORUM AND VOTING AT THE MEETING" below.)
PROPOSAL #3(A): TO REMOVE THE FUNDS' FUNDAMENTAL INVESTMENT
POLICIES ON SELLING SECURITIES SHORT
The Funds are not required to have a fundamental investment restriction
with respect to short sales of securities. The Funds' restrictions state:
INTERMEDIATE INCOME FUND:
"The Fund will not sell any securities short."
SHORT-TERM INCOME FUND:
"The Fund will not sell securities short unless during the time the
short position is open, it owns an equal amount of the securities sold
or securities readily and freely convertible into or exchangeable,
without payment of additional consideration, for securities of the same
issue as, and equal in amount to, the securities sold short; and not
more than 10% of the Fund's net assets (taken at current value) is held
as collateral for such sales at any one time."
To maximize the Funds' flexibility in this area, the Board believes that
the Funds' restrictions on short sales of securities should be eliminated. These
restrictions were imposed by state laws and NSMIA preempts that requirement.
Notwithstanding the elimination of these fundamental restrictions, the Funds
expect to continue not to engage in short sales of securities, except to the
extent that the Funds contemporaneously own or have the right to acquire, at no
additional cost, securities identical to, or convertible into or exchangeable
for, those sold short.
Upon the approval by shareholders of Proposal #3(a), the existing
fundamental prohibition on selling securities short for the Funds will be
eliminated.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(B): TO REMOVE THE SHORT-TERM INCOME FUND'S FUNDAMENTAL
INVESTMENT POLICY ON INVESTING IN OIL, GAS AND MINERALS
THIS PROPOSAL PERTAINS TO THE SHORT-TERM INCOME FUND ONLY.
The Short-Term Income Fund is not required to have a fundamental
restriction with respect to investments in oil, gas and minerals. To maximize
the Fund's flexibility in this area, management of the Trust believes that the
Short-Term Income Fund's fundamental investment policy prohibiting oil, gas and
mineral investments should be eliminated. This restriction was imposed by state
laws and NSMIA preempts that requirement. Notwithstanding the elimination of
this fundamental policy, the Fund does not expect to invest, at this time, in
oil, gas and mineral exploration or development programs or leases.
Upon the approval by shareholders of the Short-Term Income Fund of
Proposal #3(b), the following fundamental policy prohibiting investments in oil,
gas and minerals for the Fund will be eliminated:
"The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs, or leases, although it may purchase
the securities of issuers which invest in or sponsor such programs."
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(C): TO REMOVE THE SHORT-TERM INCOME FUND'S FUNDAMENTAL
INVESTMENT POLICY ON INVESTING IN SECURITIES OF NEW ISSUERS
THIS PROPOSAL PERTAINS TO THE SHORT-TERM INCOME FUND ONLY.
The Short-Term Income Fund is not required to have a fundamental
restriction with respect to investing in securities of companies that have been
in operation for less than three years. This limitation was imposed by state
laws and NSMIA preempts that requirement. To maximize the Short-Term Income
Fund's investment flexibility, the Board believes that the Fund's policy
prohibiting investments in such companies should be eliminated.
Upon the approval by shareholders of Proposal #3(c), the following
fundamental investment policy of the Short-Term Income Fund will be eliminated:
"The Fund will not invest more than 5% of the value of its total assets in
securities of companies, including their predecessors, that have been in
operation for less than three years."
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(D): TO REMOVE THE SHORT-TERM INCOME FUND'S FUNDAMENTAL
INVESTMENT POLICY ON INVESTING IN ISSUERS WHOSE SECURITIES ARE
OWNED BY OFFICERS AND TRUSTEES
THIS PROPOSAL PERTAINS TO THE SHORT-TERM INCOME FUND ONLY.
There is no legal requirement that the Short-Term Income Fund have this
fundamental policy. This restriction was imposed by state laws and was preempted
by NSMIA. Moreover, the Board of the Trust and the Fund's investment adviser do
not believe that this policy provides any safeguards against conflicts of
interest that are not already effectively covered under the Trust's Code of
Ethics. Accordingly, the Board believes this restriction should be eliminated.
Upon the approval by shareholders of Proposal #3(d), the following
fundamental investment policy of the Short-Term Income Fund will be eliminated:
"The Fund will not purchase or retain the securities of any issuer if
the officers and Trustees of the Trust or its investment adviser owning
individually more than 1/2 of 1% of the issuer's securities together own
more than 5% of the issuer's securities."
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(E): TO REMOVE THE SHORT-TERM INCOME FUND'S FUNDAMENTAL
INVESTMENT POLICY ON INVESTING FOR THE PURPOSE OF EXERCISING CONTROL
THIS PROPOSAL PERTAINS TO THE SHORT-TERM INCOME FUND ONLY.
The Short-Term Income Fund's current policy prohibits the acquisition of
the securities of an issuer for the purpose of exercising control over, or
management of, any company. The policy states:
"The Fund will not purchase securities of a company for the purpose of
exercising control or management."
"Control" is defined under the 1940 Act as owning 25% or more of the voting
securities of an issuer. A controlling ownership is likely to have an effect on
the outcome of any shareholder voting on changes related to the operation of the
issuing company.
When the Short-Term Income Fund adopted this investment policy, it was
required to be fundamental by certain state securities regulators. Since the
enactment of NSMIA, those requirements no longer apply. Elimination of this
policy would clarify the Short-Term Income Fund's ability to exercise freely its
rights as a shareholder of the companies in which it invests. The Short-Term
Income Fund, however, does not currently intend to become involved in directing
or administering the day-to-day operations of any company.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(F): TO REMOVE THE SHORT-TERM INCOME FUND'S FUNDAMENTAL
INVESTMENT LIMITATION REGARDING ENGAGING IN WHEN-ISSUED AND DELAYED DELIVERY
TRANSACTIONS
THIS PROPOSAL PERTAINS TO THE SHORT-TERM INCOME FUND ONLY.
The Fund currently has a fundamental investment policy pertaining to
engaging in when-issued and delayed delivery transactions. The policy states
that:
"The Fund will limit its purchase of securities on a when-issued or
delayed delivery basis to no more than 20% of the value of its total assets."
This investment limitation was initially adopted as a fundamental
policy. However, the Fund is not required under the 1940 Act to have such a
fundamental policy. Accordingly, it is proposed that the Fund's existing
fundamental policy limiting purchases of securities on a when-issued or delayed
delivery basis be eliminated. Notwithstanding the removal of the fundamental
limitation, the Short-Term Income Fund intends to continue to engage in these
types of transactions in the same manner as it currently does.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #4: TO AMEND THE TRUST'S
DECLARATION OF TRUST TO PERMIT THE BOARD OF TRUSTEES
TO LIQUIDATE ASSETS OF THE TRUST, ITS SERIES OR CLASSES, AND DISTRIBUTE THE
PROCEEDS OF SUCH ASSETS TO THE HOLDERS OF SUCH SHARES REPRESENTING SUCH
INTERESTS, WITHOUT SEEKING SHAREHOLDER APPROVAL
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. One item in the current Declaration of Trust, described
below, prohibits the Trust from responding quickly and favorably to changing
markets without going to the expense and delay of holding a shareholder meeting.
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 or either of the Funds.
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 Funds' shareholders for their approval, an amendment to the Trust's
Declaration of Trust. The approval of the amendment will require the affirmative
vote of a majority of the outstanding voting shares of the Trust, as described
in the Declaration of Trust. (See "PROXIES, QUORUM AND VOTING AT THE MEETING"
below.)
In the event that the amendment to the Declaration of Trust to allow the
Trustees to liquidate assets of the Trust 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 or a Fund 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 or the Fund 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 each
Fund is required to approve each of the Proposals, except the election of the
Trustees 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 more than 50% of the total number of outstanding shares of
the Trust entitled to vote, present in person or by proxy, shall be required to
constitute a quorum for the purpose of voting on the election of Directors and
the amendment to the Declaration of Trust. Holders of more than 50% of the total
number of outstanding shares of each Fund entitled to vote, present in person or
by proxy, shall be required to constitute a quorum for the purpose of voting on
the other proposals.
For purposes of determining a quorum for transacting business at the
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 plurality 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: Cash Trust
Series, Inc.; Cash Trust Series II; CCB Funds; Federated Adjustable Rate U.S.
Government Fund, Inc.; Federated American Leaders Fund, Inc.; Federated ARMs
Fund; Federated Core Trust; Federated Income Securities Trust; Federated Equity
Income Fund, Inc.; Federated Fund for U.S. Government Securities, Inc.;
Federated GNMA Trust; Federated Government Income Securities, Inc.; Federated
Government Trust; Federated High Income Bond Fund, Inc.; Federated High Yield
Trust; Federated Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Institutional Trust; Federated Insurance Series;
Federated Municipal Opportunities Fund, Inc.; Federated Municipal Securities
Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal Trust;
Federated Stock and Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free
Trust; Federated Total Return Series, Inc.; Federated U.S. Government Bond Fund;
Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S. Government
Securities Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10
Years; Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds, Inc.;
Edward D. Jones & Co. Daily Passport Cash Trust; Liberty Term Trust, Inc. -
1999; Liberty U.S. Government Money Market Trust; Managed Series Trust; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market
Obligations Trust II; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Regions Funds; RIGGS Funds; Tax-Free Instruments Trust; The
Planters Funds; WesMark Funds; WCT Funds; and World Investment Series, Inc.
SHARE OWNERSHIP OF THE TRUSTEES
Officers and Trustees of the Trust own less than 1% of each Fund's outstanding
shares.
At the close of business on the Record Date, the following persons owned, to the
knowledge of management, more than 5% of the outstanding shares of the
Intermediate Income Fund: Central Carolina Bank & Trust, Durham, NC, on behalf
of various customer accounts, owned approximately 7,580,703 Institutional Shares
(23.62%); Stockyards Bank & Trust, Louisville, KY, on behalf of various customer
accounts, owned approximately 2,386,346 Institutional Shares (7.44%); Charles
Schwab & Company, Inc., San Francisco, CA, on behalf of various customer
accounts, owned approximately 2,283,395 Institutional Shares (7.12%); Comerica
Bank, Detroit, MI, on behalf of various customer accounts, owned approximately
167,250 Institutional Service Shares (9.32%); Hudson United Bank, Darien, CT, on
behalf of various customer accounts, owned approximately 134,376 Institutional
Service Shares (7.49%); Merchants National Bank, Aurora, IL, on behalf of
various customer accounts, owned approximately 130,942 Institutional Service
Shares (7.30%); and FNB Nominee Co., Indiana, PA, owned approximately 98,747
Institutional Service Shares (5.50%).
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
Short-Term Income Fund: Charles Schwab & Company, Inc., San Francisco, CA, on
behalf of various customer accounts, owned approximately 2,695,021 Institutional
Shares (11.52%); Community Savings FA, Riviera Beach, FL, owned approximately
1,734,785 Institutional Shares (7.41%); Milards & Co., Oaks, PA, owned
approximately 1,240,858 Institutional Shares (5.30%); Planmember Services Corp.,
Beverly Hills, CA, owned approximately 1,143,817 Institutional Service Shares
(43.19%); and Trucojo, St. Joseph, MO, owned approximately 635,802 Institutional
Service Shares (24.01%).
TRUSTEE COMPENSATION
NAME AND POSITION AGGREGATE TOTAL COMPENSATION PAID
WITH TRUST COMPENSATION FROM FUND COMPLEX+
FROM TRUST 1 #
- -------------------------------- ------------------ ------------------------------------------------
John F. Donahue*@ $0 $0 for the Trust and 54 other
Chairman and Trustee investment companies in the Fund Complex
Thomas G. Bigley $1,286.01 $113,860.22 for the Trust and 54 other
Trustee investment companies in the Fund Complex
John T. Conroy, Jr. $1,414.81 $125,264.48 for the Trust and 54 other
Trustee investment companies in the Fund Complex
Nicholas P. Constantakis $329.67 $47,958.02 for the Trust and 29 other
Trustee investment companies in the Fund Complex
John F. Cunningham** $0 $0 for the Trust and 46 other
Trustee investment companies in the Fund Complex
Lawrence D. Ellis, M.D.* $1,286.01 $113,860.22 for the Trust and 54 other
Trustee investment companies in the Fund Complex
Peter E. Madden $1,286.01 $113,860.22 for the Trust and 54 other
Trustee investment companies in the Fund Complex
John E. Murray, Jr., J.D., $1,286.01 $113,860.22 for the Trust and 54 other
S.J.D. @ investment companies in the Fund Complex
Trustee
Marjorie P. Smuts $1,286.01 $113,860.22 for the Trust and 54 other
Trustee investment companies in the Fund Complex
1 Information is furnished for the fiscal year ended April 30, 1999.
# The aggregate compensation is provided for the Trust which is comprised
of two portfolios.
+ 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. Cunningham became a member of the Board of Trustees on January 1,
1999. He did not receive any fees from the Fund Complex as of the last calendar
year.
During the fiscal year ended April 30, 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. Conroy, Madden and
Murray served on the Audit Committee. These Trustees are not interested Trustees
of the Trust. During the fiscal year ended April 30, 1999, there were two
meetings of the Audit Committee. All of the members of the Audit Committee were
present for each meeting. Each member of the Audit Committee receives an annual
fee of $100 plus $25 for attendance at each meeting and is reimbursed for
expenses of attendance.
OFFICERS AND INCUMBENT TRUSTEES 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 birth dates of the executive officers of the Trust, as well as of
the incumbent Trustees who have previously been elected by shareholders, and
their principal occupations during the last five years, are set forth below:
JOHN F. DONAHUE
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birth date: July 28, 1924
Chairman and Trustee
Date Became an Officer and a Trustee: January 29, 1986 and January 24, 1986
Chief Executive Officer and Director or Trustee of the Federated Fund
Complex; Chairman and Director, Federated Investors, Inc.; Chairman and Trustee,
Federated Investment Management Company; Chairman and Director, Federated
Investment Counseling and Federated Global Investment Management Corp.;
Chairman, Passport Research, Ltd. Mr. Donahue is the father of J. Christopher
Donahue, Executive Vice President of the Trust and Nominee for Trustee.
JOHN T. CONROY, JR.
Wood/IPC Commercial Dept.
John R. Wood Associates, Inc. Realtors
3255 Tamiami Trail North
Naples, FL
Birth date: June 23, 1937
Trustee
Date Became a Trustee: November 13, 1991
Director or Trustee of the Federated Fund Complex; President, Investment
Properties Corporation; Senior Vice President, John R. Wood and Associates,
Inc., Realtors; Partner or Trustee in private real estate ventures in Southwest
Florida; formerly: President, Naples Property Management, Inc. and Northgate
Village Development
Corporation.
LAWRENCE D. ELLIS, M.D.
3471 Fifth Avenue
Suite 1111
Pittsburgh, PA
Birth date: October 11, 1932
Trustee
Date Became a Trustee: August 26, 1987
Director or Trustee of the Federated Fund Complex; Professor of Medicine,
University of Pittsburgh; Medical Director, University of Pittsburgh Medical
Center-Downtown; Hematologist, Oncologist, and Internist, University of
Pittsburgh Medical Center; Member, National Board of Trustees, Leukemia Society
of America.
PETER E. MADDEN
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birth date: March 16, 1942
Trustee
Date Became a Trustee: November 13, 1991
Director or Trustee of the Federated Fund Complex; formerly:
Representative, Commonwealth of Massachusetts General Court; President, State
Street Bank and Trust Company and State Street Corporation. Previous Positions:
Director, VISA USA and VISA International; Chairman and Director, Massachusetts
Bankers Association; Director, Depository Trust Corporation; Director, The
Boston Stock Exchange.
MARJORIE P. SMUTS
4905 Bayard Street
Pittsburgh, PA
Birth date: June 21, 1935
Trustee
Date Became a Trustee: January 24, 1986
Director or Trustee of the Federated Fund Complex; Public
Relations/Marketing/Conference Planning. Previous Positions: National
Spokesperson, Aluminum Company of America; television producer; business owner.
GLEN R. JOHNSON
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birth date: May 2, 1929
President
Date Became an Officer: January 29, 1986
Staff member, Federated Securities Corp.
J. CHRISTOPHER DONAHUE
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birth date: April 11, 1949
Executive Vice President
Date Became an Officer: July 1, 1995
President or Executive Vice President of the Federated Fund Complex; Director or
Trustee of some of the Funds in the Federated Fund Complex; President, Chief
Executive Officer and Director, Federated Investors, Inc.;, President and
Trustee, Federated Investment Management Company; President and Trustee,
Federated Investment Counseling; President and Director, Federated Global
Investment Management 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
1001 Liberty Avenue
Pittsburgh, PA
Birth date: October 22, 1930
Executive Vice President
Date Became an Officer: July 1, 1995
Trustee or Director of some of the Funds in the Federated Fund Complex;
President, Executive Vice President and Treasurer of some of the Funds in the
Federated Fund Complex; Vice Chairman, Federated Investors, Inc.; Vice
President, Federated Investment Management Company, Federated Investment
Counseling, Federated Global Investment Management Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company.
JOHN W. MCGONIGLE
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birth date: October 26, 1938
Executive Vice President and Secretary
Date Became an Officer: January 29, 1986
Executive Vice President and Secretary of the Federated Fund Complex; Executive
Vice President, Secretary, and Director, Federated Investors, Inc.; Trustee,
Federated Investment Management Company; Trustee, Federated Investment
Counseling; Director, Federated Global Investment Management Corp.; Director,
Federated Services Company; Director, Federated Securities Corp.
RICHARD B. FISHER
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birth date: May 17, 1923
Vice President
Date Became an Officer: January 29, 1986
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.
RICHARD J. THOMAS
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birth date: June 17, 1954
Treasurer
Date Became an Officer: November 19, 1998
Treasurer of the Federated Fund Complex; Vice President - Funds Financial
Services Division, Federated Investors, Inc.; formerly: various management
positions with Funds Financial Services Division of Federated Investors, Inc.
WILLIAM D. DAWSON, III
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birth date: March 3, 1949
Chief Investment Officer
Date Became an Officer: November 19, 1998
Chief Investment Officer of the Trust and various other Funds in the Federated
Fund Complex; Executive Vice President, Federated Investment Counseling,
Federated Global Investment Management Corp., Federated Investment Management
Company and Passport Research, Ltd.; Registered Representative, Federated
Securities Corp.; Portfolio Manager, Federated Administrative Services, Vice
President, Federated Investors, Inc.; formerly: Executive Vice President and
Senior Vice President, Federated Investment Counseling Institutional Portfolio
Management Services Division; Senior Vice President, Federated Investment
Management Company and Passport Research, Ltd.
JOSEPH M. BALESTRINO
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birth date: November 3, 1954
Vice President
Date Became an Officer: November 19, 1998
Senior Vice President, Federated Investment Management Company; formerly, Vice
President and Assistant Vice President, Federated Investment Management Company.
RANDALL S. BAUER
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birth date: November 16, 1957
Vice President
Date Became an Officer: November 19, 1998
Vice President, Federated Investment Management Company.
None of the Officers of the Trust received salaries from the Trust
during the fiscal year ended April 30, 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 Securities
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
October 1, 1999
FEDERATED INCOME SECURITIES TRUST
FEDERATED INTERMEDIATE INCOME FUND
FEDERATED SHORT-TERM INCOME FUND
INVESTMENT ADVISER
FEDERATED INVESTMENT MANAGEMENT COMPANY
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
DISTRIBUTOR
FEDERATED SECURITIES CORP.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
ADMINISTRATOR
FEDERATED SERVICES COMPANY
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned Shareholders of
Federated Intermediate Income Fund (the "Fund"), a portfolio of Federated Income
Securities Trust (the "Trust"), hereby appoint Patricia F. Conner, Gail Cagney,
William Haas, Suzanne W. Land and Ann M. Scanlon, or any one of them, true and
lawful attorneys, with the power of substitution of each, to vote all shares of
the Fund which the undersigned is entitled to vote at the Special Meeting of
Shareholders (the "Meeting") to be held on November 15, 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
SECURITIES 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,
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 MAKE CHANGES TO THE FUND'S FUNDAMENTAL INVESTMENT POLICIES:
2(A) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY REGARDING
DIVERSIFICATION
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(B) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING BORROWING MONEY AND ISSUING SENIOR
SECURITIES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(C) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING INVESTMENTS IN REAL ESTATE
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(D) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING INVESTMENTS IN COMMODITIES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(E) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING UNDERWRITING SECURITIES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(F) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING LENDING BY THE FUND
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(G) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY REGARDING
CONCENTRATION OF THE FUND'S INVESTMENTS IN THE SECURITIES OF
COMPANIES IN THE SAME INDUSTRY
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(H) TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE FUND'S
FUNDAMENTAL INVESTMENT POLICY REGARDING BUYING
SECURITIES ON MARGIN
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(I) TO AMEND, AND MAKE NON-FUNDAMENTAL, THE FUND'S
FUNDAMENTAL INVESTMENT POLICY REGARDING PLEDGING
ASSETS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
PROPOSAL 3 TO ELIMINATE CERTAIN OF THE FUND'S FUNDAMENTAL INVESTMENT POLICIES:
3(A) TO REMOVE THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING SELLING SECURITIES SHORT
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
PROPOSAL 4 TO AMEND THE TRUST'S DECLARATION OF TRUST TO PERMIT THE BOARD
OF TRUSTEES TO LIQUIDATE ASSETS OF THE TRUST, ITS SERIES OR
CLASSES, AND DISTRIBUTE THE PROCEEDS OF SUCH ASSETS TO THE
HOLDERS OF SUCH SHARES REPRESENTING SUCH INTERESTS, 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
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned Shareholders of
Federated Short-Term Income Fund (the "Fund"), a portfolio of Federated Income
Securities Trust (the "Trust"), hereby appoint Patricia F. Conner, Gail Cagney,
William Haas, Suzanne W. Land and Ann M. Scanlon, or any one of them, true and
lawful attorneys, with the power of substitution of each, to vote all shares of
the Fund which the undersigned is entitled to vote at the Special Meeting of
Shareholders (the "Meeting") to be held on November 15, 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
SECURITIES 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,
JOHN F. CUNNINGHAM, J. CHRISTOPHER DONAHUE, CHARLES F.
MANSFIELD, 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 MAKE CHANGES TO THE FUND'S FUNDAMENTAL INVESTMENT POLICIES:
2(A) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY REGARDING
DIVERSIFICATION
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(B) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING BORROWING MONEY AND ISSUING SENIOR
SECURITIES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(C) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING INVESTMENTS IN REAL ESTATE
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(D) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING INVESTMENTS IN COMMODITIES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(E) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING UNDERWRITING SECURITIES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(F) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING LENDING BY THE FUND
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(G) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY REGARDING
CONCENTRATION OF THE FUND'S INVESTMENTS IN THE SECURITIES OF
COMPANIES IN THE SAME INDUSTRY
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(H) TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE FUND'S
FUNDAMENTAL INVESTMENT POLICY REGARDING BUYING
SECURITIES ON MARGIN
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(I) TO AMEND, AND MAKE NON-FUNDAMENTAL, THE FUND'S
FUNDAMENTAL INVESTMENT POLICY REGARDING PLEDGING
ASSETS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(J) TO MAKE NON-FUNDAMENTAL THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING THE MATURITY AND QUALITY PARAMETERS OF ITS PERMISSIBLE
INVESTMENTS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
PROPOSAL 3 TO ELIMINATE CERTAIN OF THE FUND'S FUNDAMENTAL INVESTMENT POLICIES:
3(A) TO REMOVE THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING SELLING SECURITIES SHORT
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(B) TO REMOVE THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING INVESTING IN OIL, GAS AND MINERALS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(C) TO REMOVE THE FUND'S FUNDAMENTAL INVESTMENT POLICY
ON INVESTING IN SECURITIES OF NEW ISSUERS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(D) TO REMOVE THE FUND'S FUNDAMENTAL INVESTMENT POLICY ON INVESTING
IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(E) TO REMOVE THE FUND'S FUNDAMENTAL INVESTMENT POLICY
ON INVESTING FOR THE PURPOSE OF EXERCISING CONTROL
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(F) TO REMOVE THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING ENGAGING IN WHEN-ISSUED AND DELAYED
DELIVERY TRANSACTIONS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
PROPOSAL 4 TO AMEND THE TRUST'S DECLARATION OF TRUST TO PERMIT THE BOARD
OF TRUSTEES TO LIQUIDATE ASSETS OF THE TRUST, ITS SERIES OR
CLASSES, AND DISTRIBUTE THE PROCEEDS OF SUCH ASSETS TO THE
HOLDERS OF SUCH SHARES REPRESENTING SUCH INTERESTS, 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