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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule]
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
FTI FUNDS
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(Name of Registrant as Specified In Its Charter)
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(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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5
FTI FUNDS
FTI MUNICIPAL BOND FUND
FTI BOND FUND
FTI LARGE CAPITALIZATION GROWTH FUND
FTI LARGE CAPITALIZATION GROWTH AND INCOME FUND
FTI SMALL CAPITALIZATION EQUITY FUND
FTI INTERNATIONAL EQUITY FUND
PROXY STATEMENT - PLEASE VOTE!
TIME IS OF THE ESSENCE... VOTING ONLY TAKES A FEW MINUTES AND YOUR
PARTICIPATION IS IMPORTANT! ACT NOW TO HELP THE TRUST AVOID ADDITIONAL EXPENSE.
FTI Funds (the "Trust") will hold a special meeting of shareholders FTI
Municipal Bond Fund, FTI Bond Fund, FTI Large Capitalization Growth Fund, FTI
Large Capitalization Growth and Income Fund, FTI Small Capitalization Equity
Fund and FTI International Equity Fund (collectively, the "Funds") on November
21, 2000. It is important for you to vote on the issues described in this Proxy
Statement. We recommend that you read the Proxy Statement in its entirety; the
explanations will help you to decide on the issues.
Following is an introduction to the proposals and the process.
WHY AM I BEING ASKED TO VOTE?
Mutual funds are required to obtain shareholders' votes for certain types of
changes, like those included in this Proxy Statement. You have a right to vote
on these changes.
WHAT ARE THE ISSUES?
The proposals include the election of Trustees and changes to the Funds'
fundamental investment policies.
WHY ARE INDIVIDUALS RECOMMENDED FOR ELECTION TO THE BOARD OF TRUSTEES? The Trust
is devoted to serving the needs of its shareholders, and the Board is
responsible for managing the Trust's business affairs to meet those needs. The
Board represents the shareholders and can exercise all of the Trust's powers,
except those reserved only for shareholders.
Trustees are selected on the basis of their education and professional
experience. Candidates are chosen based on their distinct interest in, and
capacity for understanding the complexities of, the operation of a mutual fund.
These individuals bring considerable experience to the impartial oversight of a
fund's operation.
The Proxy Statement includes a brief description of each nominee's history and
current position with the Trust, if applicable.
WHY 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 the Funds' 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 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 is a conservative money manager. Our highly trained professionals are
dedicated to making investment decisions in the best interest of the Trust and
its shareholders. The Board believes that the proposed changes will be applied
responsibly by the Funds' investment adviser.
HOW DO I VOTE MY SHARES?
You may vote in person at the special meeting of shareholders or complete and
return the enclosed Proxy Card. IF YOU SIGN AND RETURN THE PROXY CARD WITHOUT
INDICATING A PREFERENCE, YOUR VOTE WILL BE CAST "FOR" ALL THE PROPOSALS.
You may also vote by telephone at 1-800-690-6903, or through the Internet at
WWW.PROXYVOTE.COM. If you choose to help save the Trust time and postage costs
by voting through the Internet or by telephone, please don't return your Proxy
Card. If you do not respond at all, we may contact you by telephone to request
that you cast your vote.
WHO DO I CALL IF I HAVE QUESTIONS ABOUT THE PROXY STATEMENT? Call your
Investment Professional or a Federated Client Service Representative.
Federated's toll-free number is 1-800-341-7400.
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After careful consideration, the Board of Trustees has unanimously approved
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these proposals. The Board recommends that you read the enclosed materials
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carefully and vote FOR all proposals.
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PRELIMINARY
FTI FUNDS
FTI MUNICIPAL BOND FUND
FTI BOND FUND
FTI LARGE CAPITALIZATION GROWTH FUND
FTI LARGE CAPITALIZATION GROWTH AND INCOME FUND
FTI SMALL CAPITALIZATION EQUITY FUND
FTI INTERNATIONAL EQUITY FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 21, 2000
A special meeting of the shareholders of FTI Funds (the "Trust"), which
presently consists of six portfolios or series, FTI Municipal Bond Fund, FTI
Bond Fund, FTI Large Capitalization Growth Fund, FTI Large Capitalization Growth
and Income Fund, FTI Small Capitalization Equity Fund and FTI International
Equity Fund (individually a "Fund," and collectively the "Funds"), will be held
at the offices of Fiduciary International, Inc., the Funds' investment adviser,
located at Two World Trade Center, 94th floor, New York, New York, at 10:00 a.m.
(Eastern time), on November 21, 2000 to consider the following proposals:
(1) To elect five Trustees.
(2) To amend the Funds' fundamental investment policies:
(a)Toamend the Funds' fundamental investment policy regarding
diversification;
(b) To amend the Funds' fundamental investment policy regarding issuing
senior securities and borrowing money;
(c) To amend the Funds' fundamental investment policy regarding
investments in real estate;
(d) To amend the Funds' fundamental investment policy regarding
investments in commodities;
(e) To amend the Funds' fundamental investment policy regarding
underwriting securities;
(f) To amend the Funds' fundamental investment policy regarding lending by
the Funds;
(g) To amend the Funds' fundamental investment policy regarding
concentration of the Funds' investments in the securities of companies
in the same industry;
(h) To remove the Funds' fundamental investment policy on selling
securities short and to amend, and to make non-fundamental, the Funds'
fundamental investment policy regarding buying securities on margin;
(i)Toamend, and to make non-fundamental, the Funds' fundamental investment
policy regarding pledging assets.
(3)Toapprove an Amendment to the Funds' Declaration of Trust.
(4) To ratify the selection of Ernst & Young LLP as independent accountants for
each of the Funds for the fiscal year ending in 2001.
To transact such other business as may properly come before the meeting or
any adjournment thereof.
The Board of Trustees has fixed October 11, 2000, as the record date for
determination of shareholders entitled to vote at the meeting.
By Order of the Board of Trustees,
Gail Cagney
Secretary
October 11, 2000
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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.
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PRELIMINARY
PROXY STATEMENT
FTI FUNDS
FTI MUNICIPAL BOND FUND
FTI BOND FUND
FTI LARGE CAPITALIZATION GROWTH FUND
FTI LARGE CAPITALIZATION GROWTH AND INCOME FUND
FTI SMALL CAPITALIZATION EQUITY FUND
FTI INTERNATIONAL EQUITY FUND
5800 Corporate Drive
Pittsburgh, PA 15237-7010
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") of FTI Funds (the "Trust"), which presently
consists of six portfolios or series, FTI Municipal Bond Fund (the "Municipal
Bond Fund'), FTI Bond Fund (the "Bond Fund"), FTI Large Capitalization Growth
Fund (the "Large Capitalization Growth Fund"), FTI Large Capitalization Growth
and Income Fund (the "Large Capitalization Growth and Income Fund"), FTI Small
Capitalization Equity Fund (the "Small Capitalization Equity Fund") and FTI
International Equity Fund (the "International Equity 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 21, 2000, at the
offices of Fiduciary International, Inc., the Funds' investment adviser, located
at Two World Trade Center, 94th Floor, New York, New York, at 10:00 a.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. [IF IT IS
DETERMINED THAT A FIRM WILL BE USED, FURTHER DISCLOSURE IS REQUIRED]. Such
solicitations may be by telephone, through the Internet or otherwise. Any
telephonic or Internet 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 and approved the proposed changes to the investment
policies of the Funds and recommends that the shareholders approve them. The
Board has also reviewed and approved the proposed Amendment to the Funds'
Declaration of Trust and recommends that shareholders approve it. 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 11, 2000, to shareholders of record at
the close of business on October 11, 2000 (the "Record Date").
On the Record Date, the Funds had outstanding the following number of
shares of beneficial interest:
MUNICIPAL BOND FUND: __________SHARES
BOND FUND: __________SHARES
LARGE CAPITALIZATION GROWTH FUND: __________SHARES
LARGE CAPITALIZATION GROWTH AND INCOME FUND: __________SHARES
SMALL CAPITALIZATION EQUITY FUND: __________SHARES
INTERNATIONAL EQUITY FUND: __________SHARES
The Funds' annual report, which includes audited financial statements for
the fiscal year ended November 30, 1999, was previously mailed to shareholders.
The Funds' semi-annual report, which contains unaudited financial statements for
the period ended May 31, 2000, was also 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 REPORT
AND/OR SEMI-ANNUAL REPORT. REQUESTS FOR AN ANNUAL REPORT OR A SEMI-ANNUAL REPORT
FOR THE FUNDS MAY BE MADE BY WRITING TO THE TRUST'S PRINCIPAL EXECUTIVE OFFICES
OR BY CALLING THE TRUST. THE TRUST'S PRINCIPAL ADMINISTRATIVE OFFICES ARE
LOCATED AT FTI FUNDS, 5800 CORPORATE DRIVE, PITTSBURGH, PENNSYLVANIA 15237-7010.
THE TRUST'S TOLL-FREE TELEPHONE NUMBER IS 1-888-FIDUCIARY (888-343-8242).
PROPOSAL #1: ELECTION OF FIVE TRUSTEES
The Board of Trustees has nominated the individuals listed below to serve
as Trustees of the Trust until their successors have been elected and qualified.
The Board presently consists of four Trustees (three of whom are not "interested
persons" of the Trust (as defined in the Investment Company Act of 1940 (the
"1940 Act")). All of the individuals presently serving as Trustees are standing
for election. If authority is granted on the accompanying proxy to vote in the
election of Trustees, the persons named as proxies intend to vote in favor of
the election of Peter A. Aron, Joseph A. Cajigal, James C. Goodfellow, Burton J.
Greenwald and Kevin J. O'Donnell (collectively, the "Nominees") as Trustees of
the Trust. Messrs. Aron, Goodfellow, Greenwald and O'Donnell are presently
serving as Trustees. If elected by shareholders, Mr. Cajigal is expected to
assume his responsibilities as a Trustee effective November 21, 2000. Please see
"ABOUT THE ELECTION OF TRUSTEES" below for current information about the
Nominees.
Mr. O'Donnell was appointed Trustee on July 15, 1999, to fill a vacancy
created by the resignation of Nancy L. Close. Messrs. Aron, Goodfellow and
Greenwald have served as Trustees since the Trust's inception and were elected
by the Trust's initial shareholder on December 22, 1995. Mr. Cajigal is being
proposed for election as a Trustee to fill a vacancy created by the resignation
of Edward C. Gonzales.
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.
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 shall be
selected 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
during the lifetime of the Trust and until its termination, 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 may 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 Nominees standing for election who
presently serve as Trustees, and (ii) the Nominee standing for election who is
not presently serving as a Trustee, along with their addresses, birth dates,
present positions with the Trust and principal occupations during the past five
years:
NOMINEES STANDING FOR ELECTION WHO PRESENTLY SERVE AS TRUSTEES
PETER A. ARON
126 East 56th Street
New York, NY 10022
Birth date: May 26, 1946
Trustee
Vice President, Lafayette Enterprises, Inc. (privately owned Investment
Advisory Company); President, J. Aron Charitable Foundation, Inc.; Asset Manager
and Trustee of certain private trusts.
JAMES C. GOODFELLOW*
Two World Trade Center
94th Floor
New York, NY 10048-0772
Birth date: April 6, 1945
Trustee
Executive Vice President, Fiduciary Trust Company International, Managing
Director, J.P. Morgan and Co.
BURTON J. GREENWALD
2009 Spruce Street
Philadelphia, PA 19103
Birth date: December 6, 1929
Chairman and Trustee
Managing Director, B.J. Greenwald Associates, Management Consultants to the
Financial Services Industry; Director, Fiduciary Emerging Markets Bond Fund PLC;
Director, Fiduciary International Ireland Limited.
KEVIN J. O'DONNELL
25 Independence Boulevard
Warren, NJ 07059-6747
Birth date: September 1, 1948
Trustee
Partner, Herold & Haines, PA (a law firm); previously, Partner, Pitney
Hardin Kipp & Szuch (a law firm)
NOMINEE NOT PRESENTLY SERVING AS A TRUSTEE
JOSEPH A. CAJIGAL*
Two World Trade Center
95th Floor
New York, NY 10048-0772
Birth date: November 15, 1953
Senior Vice President and Management Committee member, Fiduciary Trust
Company, International.
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* Mr. Goodfellow and Mr. Cajigal are deemed to be "interested persons" of
the Trust, as defined in the 1940 Act.
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended November 30, 1999, there were four regular
meetings and one telephonic meeting of the Board of Trustees. All Trustees were
reimbursed for expenses for attendance at Board meetings and Committee meetings.
All Trustees attended all meetings held during the last fiscal year.
The Trust has two Board Committees, the Audit Committee and the Nominating
Committee. Generally, the function of the Audit Committee is to assist the Board
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 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.
The function of the Nominating Committee, which was formed in May 2000, is
to recommend candidates to serve as Trustees. The Nominating Committee also
reviews Trustee performance and compensation. The Nominating Committee generally
will identify candidates for nomination from the Trustees' own sources;
therefore, the Nominating Committee will generally not consider nominees for
Trustees recommended by shareholders of the Funds. Mr. O'Donnell was nominated
by the Nominating Committee comprised of the Trustees who are not "interested
persons" of the Trust.
For the most recently completed fiscal year, Messrs. Aron, Greenwald and
O'Donnell served on the Audit Committee and the Nominating Committee. These
Trustees are not "interested persons" of the Trust. During the fiscal year ended
November 30, 1999, each Committee met once.
TRUSTEE COMPENSATION
Each Trustee (except Messrs. Greenwald and Goodfellow) receives an annual
fee of $8,000, paid quarterly, as a retainer. Since August 2000, Mr. Greenwald,
as Chairman of the Board, receives an annual fee of $11,000, paid quarterly, as
a retainer. Each Trustee (except Mr. Goodfellow) receives $1,750 as compensation
for attendance at each regularly scheduled meeting. In addition, they each
receive a fee of $500 for attendance at any special meeting of the Board. Each
disinterested Trustee received a "one-time" payment of $5,000 as an orientation
fee upon becoming a Trustee. If elected, Mr. Cajigal will not receive an
orientation fee since he will be an interested Trustee. Mr. Goodfellow does not
receive fees from the Trust, nor will Mr. Cajigal, if elected as a Trustee.
The following table indicates the compensation received by each Trustee
for the fiscal year ended November 30, 1999:
NAME AND POSITION AGGREGATE
WITH TRUST COMPENSATION
FROM
TRUST1#
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Peter A. Aron
Trustee
James C. Goodfellow*
Trustee
Burton J. Greenwald
Trustee
Kevin J. O'Donnell
Trustee
1 Information is furnished for the fiscal year ended November 30, 1999.
# The aggregate compensation is provided for the Trust which comprises six
portfolios.
* The Trustee is deemed to be an "interested person" of the Trust, as defined in
the 1940 Act.
PROPOSAL #2: APPROVE AMENDMENTS TO THE FUNDS'
FUNDAMENTAL INVESTMENT POLICIES
INTRODUCTION TO PROPOSALS #2(A) TO #2(I)
The 1940 Act (which was adopted to protect investment company 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 1995, 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 (i) unnecessarily lengthy and
detailed; (ii) no longer required to be fundamental; or (iii) 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 or elimination of certain of the Funds' fundamental
policies.
The proposed amendments would:
(i) simplify and modernize 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 a fundamental policy that is 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 may 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
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Who must approve Board of Trustees and Board of Trustees
changes in the shareholders
policies?
How quickly can a Fairly slowly, since a Fairly quickly, because
change in the policies vote of shareholders is the change can be
be made? required accomplished by action of
the Board of Trustees
The recommended changes are specified below. Each Proposal will be voted
on separately by shareholders of each Fund, 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 fundamental investment policies, in the form proposed, 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 OR THE INVESTMENT MANAGEMENT OF THE FUNDS. ALTHOUGH THE PROPOSED
CHANGES IN FUNDAMENTAL POLICIES WILL ALLOW THE FUNDS GREATER FLEXIBILITY TO
RESPOND TO FUTURE INVESTMENT OPPORTUNITIES, THE BOARD 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 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.
Presently, if the Funds adhere 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 Funds' 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.
DEFINED TERM: Several of the proposed fundamental policies include the
defined term "1940 Act Laws, Interpretations and Exemptions." This term
means: the Investment Company Act of 1940 as amended, and the rules and
regulations promulgated thereunder, as such statute, rules and regulation
are amended from time to time or are interpreted from time to time by the
staff of the Securities and Exchange Commission ("SEC") and any exemptive
order or similar relief granted to the Funds.
PROPOSAL #2(A): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT
POLICY REGARDING DIVERSIFICATION
Under the 1940 Act, the Funds' policy 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 policy regarding diversification states:
"With respect to 75% of the value of its total assets, each Fund will not
purchase securities issued by any other 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. No Fund will acquire more than 10% of the outstanding voting
securities of any one issuer."
In order to afford the Funds' investment adviser maximum flexibility in
managing the Funds' assets, the Trustees propose to amend the Funds'
diversification policy to be consistent with the definition of a diversified
investment company under the 1940 Act. The proposed change in the
diversification policy of the Funds does not constitute a substantive change.
Upon approval of the Funds' shareholders, the fundamental investment
policy governing diversification will be amended as follows:
"The Fund is a "diversified company" within the meaning of the 1940 Act.
The Fund will not purchase the securities of any issuer if, as a result,
the Fund would fail to be a diversified company within the meaning of the
1940 Act Laws, Interpretations and Exemptions."
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL
PROPOSAL #2(B): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICY
REGARDING ISSUING SENIOR SECURITIES AND BORROWING MONEY
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 fundamental
policy for borrowing and the issuance of senior securities designed to reflect
all current regulatory requirements. The Funds' current policy states:
"The Funds will not issue senior securities, except that a Fund may borrow
money directly or through reverse repurchase agreements in amounts up to
one-third of the value of its total assets, including the amount borrowed;
and except to the extent that a Fund may enter into futures contracts. The
Funds will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or
emergency measure or to facilitate management of the portfolio by enabling
a Fund to meet redemption requests when the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous. A Fund will
not purchase any securities while any borrowings in excess of 5% of its
total assets are outstanding. During the period any reverse repurchase
agreements are outstanding, a Fund will restrict the purchase of portfolio
securities to money market instruments maturing on or before the
expiration date of the reverse repurchase agreements, but only to the
extent necessary to assure completion 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 prohibit the purchase of
securities while borrowings in excess of 5% of their total assets 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 have no present intention to engage in
leveraging and will adopt a restrictive non-fundamental policy to that effect.
Upon shareholder approval, the Funds' fundamental investment policy
governing borrowing money and issuing senior securities will state:
"The Funds may borrow money, directly or indirectly, and issue senior
securities to the maximum extent permitted under the 1940 Act, Laws,
Interpretations and Exemptions."
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL
PROPOSAL #2(C): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICY REGARDING
INVESTMENTS IN REAL ESTATE
Under the 1940 Act, the Funds' policy concerning investments in real
estate must be fundamental. The Funds currently have a fundamental investment
policy prohibiting the purchase or sale of real estate. The current policy,
however, allows the Funds to invest in securities that are secured by real
estate, and states:
"None of the Funds will purchase or sell real estate, including limited
partnership interests, although the Funds may invest in securities of
issuers 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 Funds' fundamental investment policy
governing investments in real estate will state:
"The Funds may not purchase or sell real estate, provided that this
restriction does not prevent the Funds 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 Funds may exercise their 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 POLICY
REGARDING INVESTMENTS IN COMMODITIES
Under the 1940 Act, the Funds' policy concerning investments in
commodities must be fundamental. The Funds are currently subject to a
fundamental restriction prohibiting the purchase or sale of commodities and
which provides:
"None of the Funds will invest in commodities, except to the extent that
the Funds may engage in transactions involving futures contracts or
options on 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'
prospectus or statement 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 prospectus. 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 Funds' fundamental investment policy
governing investments in commodities will state:
"The Funds may not purchase or sell physical commodities, provided that
the Funds 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
POLICY REGARDING UNDERWRITING SECURITIES
Under the 1940 Act, the Funds' policy relating to underwriting is 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, and which states:
"A Fund will not underwrite any issue of securities, except as a Fund may
be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations."
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 Funds' fundamental investment policy
concerning underwriting will state:
"The Funds may not underwrite the securities of other issuers, except that
the Funds 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' policy.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL
PROPOSAL #2(F): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICY
REGARDING LENDING BY THE FUNDS
Under the 1940 Act, the Funds' policy concerning lending must be
fundamental. The Funds currently are subject to a fundamental investment
restriction limiting their ability to make loans, which states:
"The Funds will not lend any of their respective assets except portfolio
securities up to one-third of the value of total assets. This shall not
prevent a Fund from purchasing or holding U.S. government obligations,
money market instruments, bonds, debentures, notes, certificates of
indebtedness, or other debt securities, entering into repurchase
agreements, or engaging in other transactions where permitted by a Fund's
investment objective, policies, and limitations, or the Trust's
Declaration of Trust."
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 restriction specifically permits such
investments. In addition, the Funds' fundamental policy explicitly permits 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 Funds' fundamental
investment policy governing the lending of assets will state:
"The Funds may not make loans, except to the extent permitted by the 1940
Act Laws, Interpretations and Exemptions. This restriction does not
prevent the Funds 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. This restriction will not prevent the Funds from
lending to each other consistent with any exemption the Funds might obtain
or as permitted by the 1940 Act Laws, Interpretations and Exemptions"
This does not constitute a substantive change in the Funds' policy.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL
PROPOSAL #2(G): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICY REGARDING
CONCENTRATION OF THE FUNDS' INVESTMENTS IN THE SECURITIES OF COMPANIES IN THE
SAME INDUSTRY
Under the 1940 Act, the Funds' policy 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 which states:
"No Fund will invest 25% or more of the value of its respective total
assets in any one industry (other than securities issued by the U.S.
government, its agencies, or instrumentalities or repurchase agreements
collateralized by these securities and, in the case of the Municipal Bond
Fund, tax-exempt securities issued by governments or their political
subdivisions)."
In order to afford the Funds' investment adviser maximum flexibility in
managing the Funds' assets, the Trustees propose to amend the Funds'
concentration policy. The proposed change does not constitute a substantive
change in the Funds' concentration policy.
Upon the approval by the Funds' shareholders, the fundamental investment
policy governing concentration will provide:
"The Funds will not make investments that will result in the concentration
(as that term may be defined or interpreted by the 1940 Act Laws,
Interpretations and Exemptions) of their investments in the securities of
issuers primarily engaged in the same industry. This restriction does not
limit the Funds' investments in (i) obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, or (ii) tax-exempt
obligations issued by governments or political subdivisions of
governments. In complying with this restriction, the Funds will not
consider a bank-issued guaranty or financial guaranty insurance as a
separate security."
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL
PROPOSAL #2(H): TO REMOVE THE FUNDS' FUNDAMENTAL INVESTMENT POLICY ON
SELLING SECURITIES SHORT AND TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE FUNDS'
FUNDAMENTAL INVESTMENT POLICY REGARDING BUYING SECURITIES ON MARGIN
The Funds currently each have the following fundamental policy concerning
selling securities short and buying securities on margin which states:
"The Funds will not sell any securities short or purchase any securities
on margin, but may obtain such short-term credits as are necessary for
clearance of purchases and sale of securities. The deposit or payment by
the Funds 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 SALES. The Board believes that the Funds' prohibition against short sales
should be eliminated. Restrictions on short sales were imposed by state laws and
NSMIA preempts that requirement. Notwithstanding the elimination of this
restriction, the Funds expect to continue not to engage in short sales, 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 approval by shareholders of this
Proposal 2(h), the existing fundamental restriction prohibiting selling
securities short will be eliminated.
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 policy be replaced with a non-fundamental restriction. The
proposed non-fundamental policy makes some changes in wording from the existing
fundamental restriction, and contemplates that the Funds may engage in the same
types of transactions as they are presently authorized to engage in.
Upon the approval of this Proposal 2(h), the Funds would become subject to the
following non-fundamental policy with respect to buying securities on margin:
"The Funds will not purchase securities on margin, provided that the Funds
may obtain short-term credits necessary for the clearance of purchases and
sales of securities, and further provided that the Funds 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 Funds have no present intention in engaging in short selling transactions.
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 POLICY 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' policy on pledging
assets should be made non-fundamental. The non-fundamental policy would be
similar to the fundamental policy proposed to be eliminated, which states:
"The Funds will not mortgage, pledge, or hypothecate any assets, except to
secure permitted borrowings. In these cases, the Funds may pledge assets
having a value of 15% of assets taken at cost. For purposes of this
restriction: (a) the deposit of assets in escrow in connection with the
writing of covered put or call options and the purchase of securities on a
when-issued basis, and (b) collateral arrangements with respect to (i) the
purchase and sale of stock options and (ii) initial or variation margin
for futures contracts, will not be deemed to be pledges of a Fund's
assets. Margin deposits for the purchase and sale of futures contracts and
related options are not deemed to be a pledge."
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 policy on
pledging assets, the Funds would become subject to the following non-fundamental
policy:
"The Funds will not mortgage, pledge, or hypothecate any of their assets,
provided that this shall not apply to the transfer of securities in
connection with any permissible borrowing or to collateral arrangements in
connection with permissible activities."
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL
PROPOSAL #3: APPROVAL OF AN AMENDMENT TO THE FUNDS' DECLARATION OF TRUST
The Trust was established as a business trust under the laws of the
Commonwealth of Massachusetts in 1995. The operations of the Trust are governed
by a Declaration of Trust dated October 18, 1995 (the "Declaration"). The
Declaration currently provides for shareholder voting rights that are based upon
the number of shares owned by each shareholder. Under this "share-based" system,
each Fund provides shareholders with one vote for each whole share that they own
and a fractional vote for each fractional share that they own. This system
treats shareholders equitably so long as all shares of the various Funds have
approximately the same share price. However, the share prices of the Funds will
vary significantly over time due to their different investment programs.
Consequently, when issues are voted on at the Trust level (such as the election
of Trustees), shareholders who own shares worth lower prices have relatively
greater voting power than shareholders whose shares are valued at a higher
price.
If approved by shareholders, the amended Declaration would make
shareholders' voting rights "dollar-based." Under this system, each share will
entitle the shareholder to one vote for each dollar (or fraction of a dollar) of
the Trust's assets owned by the shareholder on the Record Date. The Board of
Trustees believes that this change will ensure that shareholders' voting rights
are proportionate to their financial interests in the Funds. The Trust currently
offers only one class of shares; however, dollar-based voting rights would apply
to any additional share classes or funds that the Trust may offer in the future.
If the proposed amendment is approved by shareholders, the provision of
the Declaration that relates to shareholder voting rights will be removed and
replaced with the following:
"SECTION 1. VOTING POWERS. Subject to the provisions set forth in
Article III, Section 5(d), the Shareholders shall have power to
vote, (i) for the election of Trustees as provided in Article IV,
Section 2, (ii) for the removal of Trustees as provided in Article
IV, Section 3(d); (iii) with respect to any investment adviser or
sub-investment adviser as provided in Article VII, Section 1; (iv)
with respect to the amendment of this Declaration of Trust as
provided in Article XII, Section 7; and (v) with respect to such
additional matters relating to the Trust as may be required by law,
by this Declaration of Trust, or the By-Laws of the Trust or any
regulation of the Trust or the Securities and Exchange commission or
any State, or as the Trustees may consider desirable. Each Share
shall entitle the holder thereof to one vote for each dollar (and
each fractional dollar thereof) of net asset value (number of Shares
owned times net asset value per share) of Shares outstanding in such
holder's name on the books of the Trust, irrespective of the
Portfolio or Class thereof, and all Shares shall be voted in the
aggregate and not by Class; provided, however, that to the extent
Portfolio or Class voting is required by the 1940 Act, or otherwise
directed by the Trustees, as to any such matter, Shares shall be
voted by individual Portfolio or Class. There shall be no cumulative
voting in the election of Trustees. Shares may be voted in person or
by proxy. A proxy with respect to Shares held in the name of two or
more persons shall be valid if executed by any one of them unless at
or prior to exercise of the proxy the Trust receives a specific
written notice to the contrary from any one of them. A proxy
purporting to be executed by or on behalf of a shareholder shall be
deemed valid unless challenged at or prior to its exercise and the
burden of proving invalidity shall rest on the challenger. At all
meetings of Shareholders, unless inspectors of election have been
appointed, all questions relating to the qualification of votes and
the validity of proxies and the acceptance or rejection of votes
shall be decided by the chairman of the meeting. Unless otherwise
specified in the proxy, the proxy shall apply to all shares of the
Trust (or each Series or Class) owned by the Shareholder). Any proxy
may be in written form, telephonic or electronic form, including
facsimile, and all such forms shall be valid when in conformance
with procedures established and implemented by the officers of the
Trust. Until Shares of a Series or Class are issued, the Trustees
may exercise all rights of Shareholders of such Series or Class with
respect to matters affecting such Series or Class, and may take any
action with respect to the Trust or such Series or Class required or
permitted by law, this Declaration of Trust or any By-Laws of the
Trust to be taken by Shareholders."
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL
PROPOSAL #4: RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board has selected Ernst & Young LLP as independent accountants for
each Fund for its fiscal year ending November 30, 2001. As each Fund's
independent accountant, Ernst & Young LLP will examine and verify the accounts
and securities of the Fund and report on them to the Board and to that Fund's
shareholders. The Board's selection will be submitted for ratification by the
Funds' shareholders at the Meeting.
The Board expects that a representative of Ernst & Young LLP will be
present at the Meeting. The representative will have an opportunity to make a
statement should he or she desire to do so and will be available to respond to
appropriate questions from the Funds' shareholders.
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 currently entitled to one vote.
Fractional shares are entitled to proportionate shares of one vote. Under both
the 1940 Act and the Declaration of Trust, the term "Majority Shareholder Vote"
of the Trust or a Fund means favorable vote of: (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. A Majority Shareholder
Vote of each Fund is required to approve Proposals 2(a) through 2(i). The
election of the Trustees requires a plurality vote and the approval of the
Amendment to the Declaration requires the favorable vote of the majority of
shareholders entitled to vote on the Proposal. The ratification of the Board's
selection of Ernst & Young LLP as the Funds' independent accountants requires
the favorable vote of a majority of votes cast.
Any person giving a proxy has the power to revoke it any time prior to its
exercise by executing a superseding proxy or by submitting a written notice of
revocation to the Secretary of the Trust. In addition, although mere attendance
at the Meeting will not revoke a proxy, a shareholder present at the Meeting may
withdraw his or her proxy and vote in person. All properly executed and
unrevoked proxies received in time for the Meeting will be voted in accordance
with the instructions contained in the proxies. IF NO INSTRUCTION IS GIVEN ON
THE PROXY, THE PERSONS NAMED AS PROXIES WILL VOTE THE SHARES REPRESENTED THEREBY
IN FAVOR OF THE MATTERS SET FORTH IN THE ATTACHED NOTICE.
In order to hold the Meeting, a "quorum" of shareholders must be present.
Holders of one-third 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 Trustees and the approval
of the Amendment to the Declaration. Holders of one-half 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 Proposals
2(a) through 2(i).
For purposes of determining a quorum for transacting business at the
Meeting, abstentions and broker "non-votes" (that is, proxies from brokers or
nominees indicating that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares on a particular matter
with respect to which the brokers or nominees do not have discretionary power)
will be treated as shares that are PRESENT but which have not been VOTED. For
this reason, abstentions and broker non-votes will have the effect of a "no"
vote for purposes of obtaining the requisite approval of some of the proposals.
If a quorum is not present, the persons named as proxies may vote those
proxies which have been received to adjourn the Meeting to a later date. In the
event that a quorum is present but sufficient votes in favor of one or more of
the proposals have not been received, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitations of
proxies with respect to such proposal(s). All such adjournments will require the
affirmative vote of a majority of the shares present in person or by proxy at
the session of the Meeting to be adjourned. The persons named as proxies will
vote AGAINST any such adjournment those proxies which they are required to vote
against the proposal and will vote in FAVOR of the adjournment other proxies
which they are authorized to vote. A shareholder vote may be taken on other
proposals in this Proxy Statement prior to any such adjournment if sufficient
votes have been received for approval.
SHARE OWNERSHIP OF THE TRUSTEES
At the close of business on the Record Date, 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
Municipal Bond Fund:
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 Bond
Fund:
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 Large
Capitalization Growth Fund:
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 Large
Capitalization Growth and Income Fund:
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 Small
Capitalization Equity Fund:
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
International Equity Fund:
OFFICERS OF THE TRUST
The executive officers of the Trust are elected annually by the Board of
Trustees. Each officer holds the office until qualification of his successor.
The names and birth dates of the executive officers of the Trust, and their
principal occupations during the last five years, are set forth below:
- ------------------------------------------------------------------------------
NAME BIRTH DATE PRINCIPAL OCCUPATIONS
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Peter J. Germain September 3, 1959 Senior Vice President
and Director of
President and Treasurer Proprietary Funds
Services, Federated
Services Company;
formerly, Senior
Corporate Counsel,
Federated Services
Company.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Jeffrey W. Sterling February 5, 1947 Vice President and
Assistant Treasurer of
Vice President certain funds
and Assistant Treasurer distributed by Edgewood
Services, Inc. or its
affiliates.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
George Polatas March 3, 1962 Assistant Vice President
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
October 26, 1953
Gail Cagney Corporate Counsel,
Federated Services
Secretary Company.
- ------------------------------------------------------------------------------
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 FTI Funds, 5800 Corporate
Drive, Pittsburgh, Pennsylvania 15237-7010, 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,
Gail Cagney
Secretary
October 11, 2000
FTI FUNDS
FTI MUNICIPAL BOND FUND
FTI BOND FUND
FTI LARGE CAPITALIZATION GROWTH FUND
FTI LARGE CAPITALIZATION GROWTH AND INCOME FUND
FTI SMALL CAPITALIZATION EQUITY FUND
FTI INTERNATIONAL EQUITY FUND
INVESTMENT ADVISER
FIDUCIARY INTERNATIONAL, INC.
Two World Trade Center
New York, New York 10048-0772
DISTRIBUTOR
EDGEWOOD SERVICES, INC.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
FEDERATED SERVICES COMPANY
P.O. Box 8600
Boston, MA 02116-5072
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned Shareholders of the FTI
Funds (the "Funds"), hereby appoint Gail Cagney, Ruta M. Dragunas, George
Polatas, Jeffrey W. Sterling, or any one of them, true and lawful attorneys,
with the power of substitution of each, to vote all shares of the Funds which
the undersigned is entitled to vote at the Special Meeting of Shareholders (the
"Meeting") to be held on November 21, 2000, at 10:00 a.m. and at any adjournment
thereof, at the offices of Fiduciary International, Inc., the Funds' investment
adviser, located at Two World Trade Center, 94th floor, New York, New York.
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 FTI FUNDS. 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 OF PETER A. ARON, JOSEPH A. CAJIGAL, JAMES C.
GOODFELLOW, BURTON J. GREENWALD AND KEVIN J. O'DONNELL 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 AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICIES:
2(A) TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICY REGARDING
DIVERSIFICATION
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(B) TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICY REGARDING ISSUING
SENIOR SECURITIES AND BORROWING MONEY
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(C) TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICY REGARDING
INVESTMENTS IN REAL ESTATE
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(D) TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICY REGARDING
INVESTMENTS IN COMMODITIES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(E) TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICY REGARDING
UNDERWRITING SECURITIES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(F) TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICY REGARDING LENDING BY
THE FUNDS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(G) TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT POLICY REGARDING
CONCENTRATION OF THE FUNDS' INVESTMENTS IN THE SECURITIES OF COMPANIES IN THE
SAME INDUSTRY
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(H) TO REMOVE THE FUNDS' FUNDAMENTAL INVESTMENT POLICY ON SELLING
SECURITIES SHORT AND TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE FUNDS'
FUNDAMENTAL INVESTMENT POLICY REGARDING BUYING SECURITIES ON MARGIN
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
2(I) TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE FUNDS' FUNDAMENTAL
INVESTMENT POLICY REGARDING PLEDGING ASSETS.
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
PROPOSAL 3 TO APPROVE AN AMENDMENT TO THE FUNDS' DECLARATION OF TRUST
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
PROPOSAL 4 TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT
ACCOUNTANTS FOR EACH OF THE FUNDS FOR THE FISCAL YEAR ENDING 2001.
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