File No. 33-_______
As filed with the SEC on July 20, 2004
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No.
(Check appropriate box or boxes)
FEDERATED MUNICIPAL SECURITIES INCOME TRUST
(Exact Name of Registrant as Specified in Charter)
(412) 288-1900
(Area Code and Telephone Number)
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices --
Number, Street, City, State, Zip Code)
Gail C. Jones, Esquire
Reed Smith LLP
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(Name and Address of Agent for Service --
Number, Street, City, State, Zip Code)
Copies to:
Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky, LLP
2101 L Street, NW
Washington, D.C. 20037-1526
(202) 828-2218
Approximate Date of Proposed Public Offering: As soon as
practicable after this Registration Statement becomes effective
under the Securities Act of 1933, as amended. The public offering of
shares of Registrant's series is on-going. The title of securities being
registered is shares of beneficial interest.
It is proposed that this filing will become effective
on August XX, 2004 pursuant to Rule 461.
No filing fee is due because Registrant is relying on Section 24(f) of the
Investment Company Act of 1940, as amended.
BANKNORTH FUNDS
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
Dear Shareholder,
A Special Meeting of Shareholders of Banknorth Large Cap Core Fund
("Large Cap Core Fund"), Banknorth Small/Mid Cap Core Fund ("Small/Mid Cap
Core Fund"), Banknorth Intermediate Bond Fund ("Intermediate Bond Fund")
and Banknorth Vermont Municipal Bond Fund ("Banknorth Vermont Fund") each
a portfolio of Banknorth Funds, will be held at 10:00 a.m. Eastern Time,
on August 27, 2004 at 5800 Corporate Drive, Pittsburgh, Pennsylvania
15237. Enclosed is a Prospectus/Proxy Statement regarding the Special
Meeting.
At the Special Meeting, shareholders of Large Cap Core Fund will be
asked to approve or disapprove the proposed reorganization of Large Cap
Core Fund into Federated Capital Appreciation Fund, a portfolio of
Federated Equity Funds, shareholders of Small/Mid Cap Core Fund will be
asked to approve or disapprove the proposed reorganization of Small/Mid
Cap Core Fund into Federated Kaufmann Fund, a portfolio of Federated
Equity Funds, shareholders of Intermediate Bond Fund will be asked to
approve or disapprove the proposed reorganization of Intermediate Bond
Fund into Federated Total Return Bond Fund, a portfolio of Federated Total
Return Series, Inc. and shareholders of Banknorth Vermont Fund will be
asked to approve or disapprove the proposed reorganization of Banknorth
Vermont Fund into Federated Vermont Municipal Income Fund, a portfolio of
Federated Municipal Income Securities Trust. Banknorth Investment Advisors
("BIA") is the investment adviser for each portfolio of the Banknorth
Funds. Federated Equity Management Company of Pennsylvania ("FEMCOPA") is
the investment adviser for Federated Capital Appreciation Fund and
Federated Kaufmann Fund. Federated Investment Management Company
("FIMCO") is the investment adviser for Federated Total Return Bond Fund
and Federated Vermont Municipal Income Fund. The enclosed Prospectus/Proxy
Statement describes the proposed reorganizations in detail.
The Board of Trustees of Banknorth Funds and BIA each believe that
the proposed reorganizations are in the best interests of Large Cap Core
Fund, Small/Mid Cap Core Fund, Intermediate Bond Fund and Banknorth
Vermont Fund and their respective shareholders and recommend that you vote
FOR the applicable reorganization.
Remember, your vote is important. PLEASE TAKE A MOMENT TO SIGN,
DATE AND RETURN YOUR PROXY CARD IN THE ENCLOSED POSTAGE-PAID RETURN
ENVELOPE. Information and direction about voting the proxy is included on
the next page.
If you have any questions regarding the Special Meeting, please feel
free to call your Investment Professional or the Banknorth Funds at
1-888-247-4505.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED PROMPTLY.
Sincerely,
________________
John W. McGonigle
Secretary
August XX, 2004
BANKNORTH FUNDS
Banknorth Large Cap Core Fund
Banknorth Small/Mid Cap Core Fund
Banknorth Intermediate Bond Fund
Banknorth Vermont Municipal Bond Fund
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 27, 2004
TO THE SHAREHOLDERS OF BANKNORTH LARGE CAP CORE FUND, BANKNORTH
SMALL/MID CAP CORE FUND, BANKNORTH INTERMEDIATE BOND FUND, and BANKNORTH
VERMONT MUNICIPAL BOND FUND, each a portfolio of Banknorth Funds: A
Special Meeting of Shareholders of Banknorth Large Cap Core Fund ("Large
Cap Core Fund"), Banknorth Small/Mid Cap Core Fund ("Small/Mid Cap Core
Fund"), Banknorth Intermediate Bond Fund ("Intermediate Bond Fund"), and
Banknorth Vermont Municipal Bond Fund ("Banknorth Vermont Fund") will be
held at 10:00 a.m. Eastern Time, on August 27, 2004 at 5800 Corporate
Drive, Pittsburgh, Pennsylvania 15237 for the following purposes:
1. To approve or disapprove a proposed Agreement and Plan of
Reorganization pursuant to which Federated Capital Appreciation
Fund ("Capital Appreciation Fund"), a portfolio of Federated
Equity Funds, would acquire all of the assets of Large Cap Core
Fund in exchange solely for the issuance of Class A Shares of
Capital Appreciation Fund, to be distributed pro rata by Large
Cap Core Fund to holders of its shares, in complete liquidation
and termination of Large Cap Core Fund (to be voted upon by
shareholders of Large Cap Core Fund);
2. To approve or disapprove a proposed Agreement and Plan of
Reorganization pursuant to which Federated Kaufmann Fund
("Kaufmann Fund"), a portfolio of Federated Equity Funds, would
acquire all of the assets of Small/Mid Cap Core Fund in exchange
solely for the issuance of Class A Shares of Kaufmann Fund, to be
distributed pro rata by Small/Mid Cap Core Fund to holders of its
shares, in complete liquidation and termination of Small/Mid Cap
Core Fund (to be voted upon by shareholders of Small/Mid Cap
Core Fund);
3. To approve or disapprove a proposed Agreement and Plan of
Reorganization pursuant to which Federated Total Return Bond Fund
("Total Return Bond Fund"), a portfolio of Federated Total Return
Series, Inc., would acquire all of the assets of Intermediate
Bond Fund in exchange solely for the issuance of Institutional
Service Shares of Total Return Bond Fund, to be distributed pro
rata by Intermediate Bond Fund to holders of its shares, in
complete liquidation and termination of Intermediate Bond Fund
(to be voted upon by shareholders of Intermediate Bond Fund);
4. To approve or disapprove a proposed Agreement and Plan of
Reorganization pursuant to which Federated Vermont Municipal
Income Fund ("Federated Vermont Fund"), a portfolio of Federated
Municipal Securities Income Trust, would acquire all of the
assets of Banknorth Vermont Fund in exchange solely for Federated
Vermont Fund's assumption of the Bankorth Vermont Fund's
liabilities that were incurred in the ordinary course of business
and the issuance of Class A Shares of Federated Vermont Fund, to
be distributed pro rata by Banknorth Vermont Fund to holders of
its shares, in complete liquidation and termination of Banknorth
Vermont Fund (to be voted upon by shareholders of Banknorth
Vermont Fund); and
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Trustees has fixed June 28, 2004, as the record date for the
determination of the shareholders entitled to vote at the Special Meeting.
By Order of the Board of
Trustees,
_________________
John W. McGonigle
Secretary
August XX, 2004
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You can help avoid the necessity and expense of sending follow-up letters
to ensure a quorum by promptly signing and returning the enclosed proxy
card. If you are unable to attend the meeting, please mark, sign, date
and return the enclosed proxy card 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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PROSPECTUS/PROXY STATEMENT
August XX, 2004
Acquisition of the Assets of
BANKNORTH LARGE CAP CORE FUND
a portfolio of Banknorth Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
Telephone No: 1-888-247-4505
By and in exchange for shares of
FEDERATED CAPITAL APPRECIATION FUND
a portfolio of Federated Equity Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
Telephone No: 1-800-341-7400
Acquisition of the Assets of
BANKNORTH SMALL/MID CAP CORE FUND
a portfolio of Banknorth Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
Telephone No: 1-888-247-4505
By and in exchange for shares of
FEDERATED KAUFMANN FUND
a portfolio of Federated Equity Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
Telephone No: 1-800-341-7400
Acquisition of the Assets of
BANKNORTH INTERMEDIATE BOND FUND
a portfolio of Banknorth Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
Telephone No: 1-888-247-4505
By and in exchange for shares of
FEDERATED TOTAL RETURN BOND FUND
a portfolio of Federated Total Return Series, Inc.
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
Telephone No: 1-800-341-7400
_____________________________________________________________________________
Acquisition of the Assets of
BANKNORTH VERMONT MUNICIPAL BOND FUND
a portfolio of Banknorth Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
Telephone No: 1-888-247-4505
By and in exchange for shares of
FEDERATED VERMONT MUNICIPAL INCOME FUND
a portfolio of Federated Municipal Securities Income Trust
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
Telephone No: 1-800-341-7400
This Prospectus/Proxy Statement describes four separate Agreements
and Plans of Reorganization (the "Plans") pursuant to which Federated
Capital Appreciation Fund ("Capital Appreciation Fund"), Federated
Kaufmann Fund ("Kaufmann Fund"), Federated Total Return Bond Fund ("Total
Return Bond Fund"), and Federated Vermont Municipal Income Fund
("Federated Vermont Fund"), (individually, a "Federated Fund" and
together, the "Federated Funds") would acquire all of the assets of
Banknorth Large Cap Core Fund ("Large Cap Core Fund"), Banknorth Small/Mid
Cap Core Fund ("Small/Mid Cap Core Fund"), Banknorth Intermediate Bond
Fund ("Intermediate Bond Fund"), and Banknorth Vermont Municipal Bond Fund
("Banknorth Vermont Fund") (individually, a "Banknorth Fund" and together,
the "Banknorth Funds"), respectively, in exchange for the issuance of
Class A or Institutional Service Shares of the respective Federated Fund
(each, a "Reorganization" and together, the "Reorganizations"). The
applicable Federated Fund shares will be distributed pro rata by each
Banknorth Fund to its respective shareholders in complete liquidation and
termination of the Banknorth Fund. As a result of the Reorganizations,
each owner of shares of the Banknorth Funds will become the owner of
shares of the respective Federated Fund, having a total net asset value
equal to the total net asset value of his or her holdings in the
applicable Banknorth Fund on the date of the Reorganization (the "Closing
Date"). Forms of the Plans are attached as Exhibits A, B, C and D.
The Board of Trustees of Banknorth Funds ("Board" or "Trustees") and
Banknorth Investment Advisors ("BIA"), the Banknorth Funds' investment
adviser, each believe that the proposed Reorganizations are in the best
interests of Large Cap Core Fund, Small/Mid Cap Core Fund, Intermediate
Bond Fund and Banknorth Vermont Fund and their respective shareholders.
For a comparison of the investment objectives, policies and limitations,
risks, fees and performance of the Banknorth Fund and the Federated Fund
into which your Banknorth Fund would be reorganized, see "Summary -
Comparison of Investment Objectives, Policies, and Limitations -
Comparison of Risks," - "Comparative Fee Tables" and - "Performance
Information."
This Prospectus/Proxy Statement should be retained for future
reference. It sets forth concisely the information about each Federated
Fund that a prospective investor should know before investing. This
Prospectus/Proxy Statement is accompanied by the Prospectuses of Capital
Appreciation Fund and Kaufmann Fund, each dated December 31, 2003, the
Prospectus of Total Return Bond Fund, dated January 31, 2004, and the
Prospectus of the Federated Vermont Fund, dated July 13, 2004, which are
incorporated herein by reference. Statements of Additional Information
for Capital Appreciation Fund and Kaufmann Fund (December 31, 2003), Total
Return Bond Fund (January 31, 2004), and Federated Vermont Fund (July 13,
2004), respectively, a Combined Prospectus and Statement of Additional
Information for the Banknorth Funds, each dated November 30, 2003, and a
Statement of Additional Information relating to this Prospectus/Proxy
Statement dated August XX, 2004, have been filed with the Securities and
Exchange Commission (the "Commission") and are incorporated herein by
reference. Further information about the Federated Funds' performance is
contained in their Annual Reports for the fiscal years ended October 31,
2003 (Capital Appreciation Fund and Kaufmann Fund), and November 30, 2003
(Total Return Bond Fund), and their Semi-Annual Reports for the period
ended April 30, 2004 (Capital Appreciation Fund and Kaufmann Fund), and
May 31, 2004 (Total Return Bond Fund), which are incorporated herein by
reference. Further information about the Banknorth Funds' performance is
contained in their Semi-Annual Report for the period ended February 29,
2004, and Annual Report for their fiscal year ended August 31, 2003, both
of which are incorporated herein by reference.
Copies of the Prospectuses, Statements of Additional Information,
Annual Reports and other information about the Federated Funds and
Banknorth Funds may be obtained without charge by writing or by calling
the Federated Funds or Banknorth Funds at the addresses and telephone
numbers shown on the previous pages.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES, OR PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/PROXY
STATEMENT AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND
ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE
SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY.
AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
TABLE OF CONTENTS
SUMMARY..............................................................
The Proposed Reorganizations....................................
Comparison of Investment Objectives, Policies and
Limitations.........................................
Comparison of Risks..........................................
Comparative Fee Tables........................................
Performance Information.......................................
Fund Management.............................................
Legal Proceedings............................................
Distribution Arrangements......................................
Purchases, Redemptions and Exchange Procedures......................
Dividends and Other Distributions.................................
Financial Highlights.........................................
INFORMATION ABOUT THE REORGANIZATIONS................................
Description of the Proposed Reorganizations.........................
Description of Federated Fund Shares and
Capitalization........................................
Federal Income Tax Consequences.................................
Reasons for the Reorganizations.................................
Comparative Information on Shareholder Rights and
Obligations........................................
INFORMATION ABOUT THE FEDERATED FUNDS................................
Federated Funds.............................................
INFORMATION ABOUT THE PROXY SOLICITATION AND THE SPECIAL MEETING.....
SHARE OWNERSHIP OF THE FUNDS AND CERTAIN INTERESTS...................
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY.........
FORM OF AGREEMENT AND PLAN OF REORGANIZATION (CAPITAL APPRECIATION
FUND/LARGE CAP CORE FUND)...................................Exhibit A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION (KAUFMANN
FUND/SMALL/MID CAP CORE FUND)................................Exhibit B
FORM OF AGREEMENT AND PLAN OF REORGANIZATION (TOTAL RETURN BOND
FUND/INTERMEDIATE BOND FUND)................................Exhibit C
FORM OF AGREEMENT AND PLAN OF REORGANIZATION (FEDERATED VERMONT
FUND/BANKNORTH VERMONT FUND)...............................Exhibit D
17
SUMMARY
This summary is qualified in its entirety by reference to the
additional information contained elsewhere in this Prospectus/Proxy
Statement, the Statement of Additional Information dated August XX, 2004
relating to this Prospectus/Proxy Statement, the Prospectuses and
Statements of Additional Information of the Federated Funds and the
Banknorth Funds and the Plans.
The Proposed Reorganizations
The Board of Trustees of Banknorth Funds has voted to recommend to
holders of shares of each Banknorth Fund the approval of each Plan whereby
(i) Capital Appreciation Fund would acquire all of the assets of Large Cap
Core Fund in exchange solely for the issuance of Class A Shares of Capital
Appreciation Fund to be distributed pro rata by Large Cap Core Fund to its
shareholders in complete liquidation and termination of Large Cap Core
Fund; (ii) Kaufmann Fund would acquire all of the assets of Small/Mid Cap
Core Fund in exchange solely for the issuance of Class A Shares of
Kaufmann Fund to be distributed pro rata by Small/Mid Cap Core Fund to its
shareholders in complete liquidation and termination of Small/Mid Cap Core
Fund; (iii) Total Return Bond Fund would acquire all of the assets of
Intermediate Bond Fund in exchange solely for the issuance of
Institutional Service Shares of Total Return Bond Fund to be distributed
pro rata by Intermediate Bond Fund to its shareholders in complete
liquidation and termination of Intermediate Bond Fund; and (iv) Federated
Vermont Fund would acquire all of the assets of Banknorth Vermont Fund in
exchange for Federated Vermont Fund's assumption of the Banknorth Vermont
Fund's liabilities that were incurred in the ordinary course of business
and the issuance of Class A Shares of Federated Vermont Fund to be
distributed pro rata by Banknorth Vermont Fund to its shareholders in
complete liquidation and termination of Banknorth Vermont Fund. As a
result of the Reorganizations, each shareholder of the Banknorth Funds
will become the owner of the applicable Federated Funds' shares having a
total net asset value equal to the total net asset value of his or her
holdings in the applicable Banknorth Fund on the Closing Date.
Each of the Banknorth Funds has one class of shares. Capital
Appreciation Fund and Kaufmann Fund each offer Class A, Class B, Class C
and Class K Shares. Total Return Bond Fund offers Class A, Class B, Class
C, Class K, Institutional and Institutional Service Shares. Federated
Vermont Fund offers only Class A Shares. Shareholders of Large Cap Core
Fund, Small/Mid Cap Core Fund and Banknorth Vermont Fund will receive
Class A Shares of the relevant Federated Fund. Shareholders of
Intermediate Bond Fund will receive Institutional Service Shares of Total
Return Bond Fund. Each Reorganization is independent of the other;
therefore, if the shareholders of one Banknorth Fund approve their
Reorganization, it is expected to proceed regardless of whether the
shareholders of any of the other three Banknorth Funds approve their
Reorganization.
The Board, which also serves as the Board of Trustees of the
Federated Funds, including the Trustees who are not "interested persons"
within the meaning of Section 2(a)(19) of the Investment Company Act of
1940, as amended ("1940 Act"), has concluded that the Reorganizations
would be in the best interests of each Banknorth Fund and its existing
shareholders, and that the interests of existing shareholders would not be
diluted as a result of the transactions contemplated by the
Reorganizations. In the opinion of both the Board and BIA, the low asset
levels of the Banknorth Funds cause the long term viability of the
Banknorth Funds to be questionable, particularly in light of the increased
costs associated with the need to comply with new regulations recently
adopted by the Commission requiring the appointment of a Chief Compliance
Officer for the Banknorth Funds. The Reorganizations of Large Cap Core,
Small/Mid Cap Core and Intermediate Bond Funds would give their
shareholders the opportunity to participate in larger funds with similar
investment objectives, policies and strategies and more favorable past
performance. In addition, shareholders of Banknorth Vermont Fund (after
the waiver of Rule 12b-1 fees) and Intermediate Bond Fund are expected to
experience a reduction in the annual operating expenses paid in connection
with their investment in the Federated Funds. Shareholders of Large Cap
Core Fund and Small/Mid Cap Core Fund are expected to experience an
increase in overall expenses.
In considering each proposed Reorganization, the Board took into
consideration a number of factors, including, among others: (1) the terms
and conditions of the Reorganization; (2) the compatibility of the
investment programs of the Banknorth Fund and the respective Federated
Fund; (3) the historical expense ratios of each fund and projected pro
forma estimated expense ratios; (4) the relative historical performance
record of each fund; (5) the greater long-term viability of the combined
Federated Fund that would result from the Reorganization as compared to
the continued operation of the Banknorth Fund as a separate fund; (6) the
non-recognition of any gain or loss for federal income tax purposes by the
Banknorth Fund or Federated Fund and its shareholders as a result of the
Reorganization.
As a condition to the Reorganizations, each Federated Fund and each
Banknorth Fund will receive an opinion of counsel that the respective
Reorganization will be considered a tax-free "Reorganization" under
applicable provisions of the Internal Revenue Code (the "Code"), as
amended, so that neither the Federated Fund nor the Banknorth Fund or its
shareholders will recognize any gain or loss. See "Information about the
Reorganizations - Federal Income Tax Consequences."
THE BOARD OF TRUSTEES OF BANKNORTH FUNDS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE FOR APPROVAL OF THE REORGANIZATIONS.
Comparison of Investment Objectives, Policies and Limitations
Investment Objectives and Policies of Capital Appreciation Fund and
Large Cap Core Fund. The investment objectives of Capital Appreciation
Fund and Large Cap Core Fund are similar in that Capital Appreciation Fund
seeks to provide capital appreciation, while Large Cap Core Fund seeks to
provide growth of long-term capital appreciation.
Both funds pursue their investment objective by investing
primarily in common stock. In addition, both funds are "blend" funds, in
that they invest in both the growth and value areas of the market. Growth
stocks have the potential to increase their earnings faster than the rest
of the market, carry a higher level of risk for the short-term and are
generally priced higher relative to the issuer's earnings, since the
higher growth potential means paying a higher price in the market. Value
stocks are considered "bargains"; many have records of consistently paying
dividends to shareholders, and they are considered defensive in that they
often resist the fluctuations associated with growth stocks during periods
of volatility. However, the funds differ in that Large Cap Core Fund
invests primarily in stock of large cap companies whose capitalizations
are $5 billion or more, while Capital Appreciation Fund invests primarily
in stocks of large and medium cap companies whose capitalizations are $500
million or more. Also, Capital Appreciation Fund may, as a principal
strategy, invest in American Depository Receipts (ADRs) and securities
issued in initial public offerings, while Large Cap Core Fund does not.
Investment Objectives and Policies of Kaufmann Fund and Small/Mid
Cap Core Fund. The investment objectives of Kaufmann Fund and Small/Mid
Cap Core Fund are similar in that Kaufmann Fund seeks capital
appreciation, while Small/Mid Cap Core Fund seeks to provide long-term
capital appreciation.
Both funds pursue their investment objective by investing
primarily in common stocks. Both funds invest primarily in both small and
medium capitalization companies. In addition, Kaufmann Fund may invest up
to 25% of its assets in foreign securities, while Small/Mid Fund does not
invest in foreign securities. Also, Kaufmann Fund uses the growth style
of investing, whereas Small/Mid Cap Core Fund uses a "blend" of the growth
and value styles.
Investment Objectives and Policies of Total Return Bond Fund and
Intermediate Bond Fund. The investment objectives of Total Return Bond
Fund and Intermediate Bond Fund differ in that Total Return Bond Fund
seeks to provide total return, and Intermediate Bond Fund seeks to provide
current income. Total Return Bond Fund's total return will consist of two
components: (1) changes in the market value of its portfolio (both
realized and unrealized capital appreciation); and (2) income received
from its portfolio securities. Total Return Bond Fund expects that income
will comprise the largest part of its total return.
Each fund pursues its investment objective by investing primarily
in a diversified portfolio of fixed income securities consisting primarily
of U.S. Treasury and government agency securities, including mortgage
backed securities and Collateralized Mortgage Obligations, and corporate
obligations rated BBB or higher by a national rating agency. However,
Total Return Bond Fund may also invest a portion of its assets (normally
no more than 10%, but opportunistically up to 25%) in below-investment
grade securities and may invest up to 20% of its assets in unhedged,
non-U.S. dollar securities. Also, Intermediate Bond Fund maintains a
dollar-weighted maturity of three to ten years, while Total Return Bond
Fund has no stated maturity limits.
Investment Objectives and Policies of Federated Vermont Fund and
Banknorth Vermont Fund. The funds' investment objectives are identical --
to provide current income which is exempt from federal regular income tax
and the personal income taxes imposed by the State of Vermont and Vermont
municipalities.
Interest from both funds' investments may be subject to federal
alternative minimum tax for individuals and corporations (AMT). Both
funds invest primarily in investment grade securities. Both funds have
adopted temporary defensive policies that permit them to deviate from
their investment strategy, which may result in the distribution of taxable
income to shareholders. The funds differ in that Federated Vermont Fund
does not limit itself to securities of a particular maturity range, but
currently focuses on long-term securities with maturities greater than ten
years; whereas Banknorth Vermont Fund will invest at least 65% of its
assets in securities with a maturity range of greater than one year. The
funds also differ in that Federated Vermont Fund may enter into
derivatives contracts as hedging transactions. For example, Federated
Vermont Fund may purchase derivatives contracts rather than individual
securities in order to gain exposure to the municipal bond market.
Both funds have a fundamental investment policy that the fund
will invest its assets so that at least 80% of the income that it
distributes will be exempt from federal regular income tax and the
personal income taxes imposed by the State of Vermont.
Investment Limitations of the Funds.
The following chart contains the fundamental limitations and
non-fundamental limitations of Capital Appreciation Fund, Kaufmann Fund,
Total Return Bond Fund, and Federated Vermont Fund, as compared to the
Banknorth Funds.
A policy that is fundamental may not be changed without
shareholder approval.
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INVESTMENT LIMITATIONS
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FEDERATED FUNDS BANKNORTH FUNDS
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Selling Short or Buying on Margin Buying on Margin (non-fundamental)
(Total Return Bond Fund - fundamental) The Funds will not purchase securities
The Fund will not sell any securities on margin, provided that the Funds may
short or purchase any securities on obtain short-term credits necessary
margin, but may obtain such short-term for the clearance of purchases and
credits as may be necessary for sales of securities, and further
clearance of purchases and sales of provided that the Funds may make
portfolio securities. The deposit or margin deposits in connection with its
payment by the Fund of initial or use of financial options and futures,
variation margin in connection with forward and spot currency contracts,
futures contracts or related options swap transactions and other financial
transactions is not considered the contracts or derivative instruments.
purchase of a security on margin.
(Capital Appreciation, Kaufmann and
Federated Vermont Fund -
non-fundamental)
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.
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Borrowing Money and Issuing Senior Borrowing Money and Issuing Senior
Securities (Capital Appreciation Fund, Securities (fundamental)
Kaufmann Fund and Federated Vermont The Funds may borrow money, directly
Fund - fundamental) or indirectly, and issue senior
The Fund may borrow money, directly or securities to the maximum extent
indirectly, and issue senior securities permitted under the Investment Company
to the maximum extent permitted under Act of 1940 (1940 Act), any rule or
the Investment Company Act of 1940 order thereunder, or any SEC staff
(1940 Act), any rule or order interpretation thereof.
thereunder, or any SEC staff
interpretation thereof.
(Total Return Bond Fund - fundamental)
The Fund will not issue senior
securities, except that the Fund may
borrow money directly or through
reverse repurchase agreements in
amounts up to one-third of the value of
its total assets, including the amount
borrowed. 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 Fund by enabling the
Fund to meet redemption requests when
the liquidation or portfolio securities
is deemed to be inconvenient or
disadvantageous. The Fund will not
purchase any securities while any
borrowings in excess of 5% of its total
assets are outstanding.
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Pledging Assets Pledging Assets (non-fundamental)
(Capital Appreciation Fund, Kaufmann The Funds will not mortgage, pledge,
Fund and Federated Vermont Fund - or hypothecate any of its assets,
non-fundamental) provided that this shall not apply to
The Fund will not mortgage, pledge, or the transfer of securities in
hypothecate any of its assets, provided connection with any permissible
that this shall not apply to the borrowing or to collateral
transfer of securities in connection arrangements in connection with
with any permissible borrowing or to permissible activities.
collateral arrangements in connection
with permissible activities.
(Total Return Bond Fund - fundamental)
The Fund will not mortgage, pledge, or
hypothecate any assets except to secure
permitted borrowings. For purposes of
this limitation, the following will not
be deemed to be pledges of the Fund's
assets: margin deposits for the
purchase and sale of financial 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.
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Diversification Diversification (fundamental)
(Capital Appreciation Fund, Kaufmann With respect to securities comprising
Fund, Total Return Bond Fund - 75% of the value of its total assets,
fundamental) the Funds (except the Vermont
With respect to securities comprising Municipal Fund) will not purchase
75% of the value of its total assets, securities of any one issuer (other
the Fund will not purchase securities than cash; cash items; securities
issued by any one issuer (other than issued or guaranteed by the government
cash, cash items, or securities issued of the United States or its agencies
or guaranteed by the U.S. government, or instrumentalities and repurchase
its agencies or instrumentalities, and agreements collateralized by such
repurchase agreements collateralized by U.S. government securities; and
such securities) if, as a result, more securities of other investment
than 5% of the value of its total companies) if, as a result, more than
assets would be invested in the 5% of the value of its total assets
securities of that issuer, and will not would be invested in the securities of
acquire more than 10% of the that issuer, or each Fund would own
outstanding voting securities of any more than 10% of the outstanding
one issuer. voting securities of that issuer.
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Investing in Real Estate Investing in Real Estate (fundamental)
(Capital Appreciation Fund, Kaufmann The Funds may not purchase or sell
Fund and Federated Vermont Fund - real estate, provided that this
fundamental) restriction does not prevent the Funds
The Funds may not purchase or sell real from investing in issuers which
estate, provided that this restriction invest, deal, or otherwise engage in
does not prevent the Funds from transactions in real estate or
investing in issuers which invest, interests therein, or investing in
deal, or otherwise engage in securities that are secured by real
transactions in real estate or estate or interests therein. The Funds
interests therein, or investing in may exercise their rights under
securities that are secured by real agreements relating to such
estate or interests therein. The Funds securities, including the right to
may exercise their rights under enforce security interests and to hold
agreements relating to such securities, real estate acquired by reason of such
including the right to enforce security enforcement until that real estate can
interests and to hold real estate be liquidated in an orderly manner.
acquired by reason of such enforcement
until that real estate can be
liquidated in an orderly manner.
(Total Return Bond Fund - fundamental)
The Fund will not purchase or sell real
estate, including limited partnership
interests, although it may invest in
the securities of companies whose
business involves the purchase or sale
of real estate or in securities which
are secured by real estate or interests
in real estate.
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Investing in Commodities Investing in Commodities (fundamental)
(Capital Appreciation Fund, fundamental) The Funds may not purchase or sell
The Fund may not purchase or sell physical commodities, provided that
physical commodities, provided that the the Funds may purchase securities of
Fund may purchase securities of companies that deal in commodities.
companies that deal in commodities. For purposes of this restriction,
investments in transactions involving
(Kaufmann Fund and Federated Vermont futures contracts and options, forward
Fund- fundamental) currency contracts, swap transactions
The Fund may not purchase or sell and other financial contracts that
physical commodities, provided that the settle by payment of cash are not
Fund may purchase securities of deemed to be investments in
companies that deal in commodities. commodities.
For purposes of this restriction,
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.
(Total Return Bond Fund - fundamental)
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 financial
futures contracts or options on
financial futures contracts.
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Underwriting Underwriting (fundamental)
(Capital Appreciation Fund, Kaufmann The Funds may not underwrite the
Fund, and Federated Vermont Fund - securities of other issuers, except
fundamental) that the Funds may engage in
The Funds may not underwrite the transactions involving the
securities of other issuers, except acquisition, disposition or resale of
that the Funds may engage in its portfolio securities, under
transactions involving the acquisition, circumstances where it may be
disposition or resale of its portfolio considered to be an underwriter under
securities, under circumstances where the Securities Act of 1933.
it may be considered to be an
underwriter under the Securities Act of
1933.
(Total Return Bond Fund - fundamental)
The Fund will not underwrite any issue
of securities, except as it may be
deemed to be an underwriter under the
Securities Act of 1933 in connection
with the sale of securities in
accordance with its investment
objective, policies, and limitations.
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Lending Lending (fundamental)
(Capital Appreciation Fund, Kaufmann The Funds may not make loans, provided
Fund and Federated Vermont Fund- that this restriction does not prevent
fundamental) the Funds from purchasing debt
The Fund may not make loans, provided obligations, entering into repurchase
that this restriction does not prevent agreements, lending their assets to
the Fund from purchasing debt broker/dealers or institutional
obligations, entering into repurchase investors and investing in loans,
agreements, lending its assets to including assignments and
broker/dealers or institutional participation interests.
investors and investing in loans,
including assignments and participation
interests.
(Total Return Bond Fund - fundamental)
The Fund will not lend any of its
assets, except portfolio securities.
This shall not prevent the Fund from
purchasing or holding U.S. government
obligations, 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.
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Concentration Concentration (fundamental)
(Capital Appreciation Fund -- The Funds will not make investments
fundamental) that will result in the concentration
The Fund will not make investments that of their investments in the securities
will result in the concentration of its of issuers primarily engaged in the
investments in the securities of same industry. For purposes of this
issuers primarily engaged in the same restriction, the term concentration
industry. Government securities, has the meaning set forth in the 1940
municipal securities and bank Act, any rule or order thereunder, or
instruments will not be deemed to any Securities and Exchange Commission
constitute an industry. (SEC) staff interpretation thereof.
Government securities and municipal
(Kaufmann Fund and Federated Vermont securities will not be deemed to
Fund - fundamental) constitute an industry.
The Fund will not make investments that
will result in the concentration of its Concentration (non-fundamental)
investments in the securities of In applying the concentration
issuers primarily engaged in the same restriction: (a) utility companies
industry. For purposes of this will be divided according to their
restriction, the term concentration has services, for example, gas, gas
the meaning set forth in the 1940 Act, transmission, electric and telephone
any rule or order thereunder, or any will each be considered a separate
SEC staff interpretation thereof. industry; (b) financial service
Government securities and municipal companies will be classified according
securities will not be deemed to to the end users of their services
constitute an industry. (for example, automobile finance, bank
finance and diversified finance will
(Total Return Bond Fund - fundamental) each be considered a separate
The Fund will not invest 25% or more of industry); and (c) asset backed
the value of its total assets in any securities will be classified
one industry (other than securities according to the underlying assets
issued by the U.S. government, its securing such securities. Also, to
agencies or instrumentalities). conform to the current view of the SEC
that only domestic bank instruments
Concentration may be excluded from industry
(Capital Appreciation Fund and concentration limitations, as a matter
Federated Vermont Fund - of non-fundamental policy, a Fund will
non-fundamental) not exclude foreign bank instruments
For purposes of the concentration from industry concentration limits as
limitation: (a) utility companies will long as the policy of the SEC remains
be divided according to their services in effect. Moreover, investments in
(for example, gas, gas transmission, bank instruments, and investments in
electric and telephone will each be certain industrial development bonds
considered a separate industry); (b) funded by activities in a single
financial service companies will be industry, will be deemed to constitute
classified according to the end users investment in an industry, except when
of their services (for example, held for temporary defensive purposes.
automobile finance, bank finance and The investment of more than 25% of the
diversified finance will each be value of a Fund's total assets in any
considered a separate industry); and one industry will constitute
(c) asset backed securities will be "concentration."
classified according to the underlying
assets securing such securities. 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."
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Investing in Restricted and Illiquid Illiquid Securities (non-fundamental)
Securities The Funds will not purchase securities
(Capital Appreciation Fund, Kaufmann for which there is no readily
Fund and Federated Vermont Fund - available market, or enter into
non-fundamental) repurchase agreements or purchase time
The Fund will not purchase securities deposits maturing in more than seven
for which there is no readily available days, if immediately after and as a
market, or enter into repurchase result, the value of such securities
agreements or purchase time deposits would exceed, in the aggregate, 15% of
maturing in more than seven days, if each Fund's net assets.
immediately after and as a result, the
value of such securities would exceed,
in the aggregate, 15% of the Fund's net
assets.
(Total Return Bond Fund -
non-fundamental)
The Fund will not invest more than 15%
of the value of its net assets in
illiquid securities, including
repurchase agreements providing for
settlement in more than seven days
after notice, interest rate swaps,
non-negotiable fixed time deposits with
maturities over seven days, and certain
restricted securities not determined by
the Directors to be liquid.
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Investing in Other Investment Companies Investing in Other Investment
(Kaufmann Fund - non-fundamental) Companies (non-fundamental)
The Fund may invest its assets in The Funds may invest their assets in
securities of other investment securities of other investment
companies as an efficient means of companies as an efficient means of
carrying out its investment policies. carrying out their investment
It should be noted that investment policies. It should be noted that
companies incur certain expenses, such investment companies incur certain
as management fees, and, therefore, any expenses, such as management fees,
investment by the Fund in shares of and, therefore, any investment by the
other investment companies may be Funds in shares of other investment
subject to such duplicate expenses. At companies may be subject to such
the present time, the Funds expect that duplicate expenses. At the present
their investments in other investment time, the Funds expect that their
companies may include shares of money investments in other investment
market funds, including funds companies may include shares of money
affiliated with the Fund's Adviser. market funds, including funds
The Fund may invest in the securities affiliated with the Adviser of
of affiliated money marked funds as an distributor.
efficient means of managing the Funds' The Funds may invest in the securities
uninvested cash. of affiliated money marked funds as an
efficient means of managing the Funds'
(Capital Appreciation Fund and Vermont uninvested cash.
Municipal Bond Fund - non-fundamental)
The Fund may invest its assets in
securities of other investment
companies, including the securities of
affiliated money market funds, as an
efficient means of carrying out its
investment policies and managing its
uninvested cash.
(Total Return Bond Fund -
non-fundamental)
The Fund may invest its assets in
securities of other investment
companies, including the securities of
affiliated money market funds, as an
efficient means of carrying out its
investment policies and managing its
uninvested cash.
The Fund may invest in mortgage backed,
high yield and certain international
fixed income securities primarily by
investing in other investment companies
(which are not available for general
investment by the public) that own
those securities and that are advised
by an affiliate of the Adviser. These
other investment companies are managed
independently of the Fund and may incur
additional administrative expenses.
Therefore, any such investment by the
Fund may be subject to duplicate
expenses. However, the Adviser believes
that the benefits and efficiencies of
this approach should outweigh the
potential additional expenses. The Fund
may also invest in such securities
directly.
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Restricted Securities (non-fundamental) Restricted Securities -- NA
The Funds may invest in securities
subject to restrictions or resale under
the Securities Act of 1933.
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The Federated funds' investment objectives, policies and limitations
are further described in the Prospectuses and Statements of Additional
Information of Capital Appreciation Fund and Kaufmann Fund, each dated
December 31, 2003, the Prospectus and Statement of Additional Information
of Total Return Bond Fund, each dated January 31, 2004, and the Prospectus
and Statement of Additional Information of the Federated Vermont Fund,
each dated July 13, 2004. The Banknorth Funds' investment objectives,
policies and limitations are further described in the combined Prospectus
and Statement of Additional Information each dated November 30, 2003.
These documents set forth in full the investment objectives, policies and
limitations of each Federated Fund and Banknorth Fund, all of which are
incorporated by reference herein.
Comparison of Risks
Risks of Investing in Capital Appreciation Fund and Large Cap Core
Fund. Both funds have stock market risk, which is posed by the fact that
the value of equity securities rises and falls over short or extended
periods of time. However, the risks for the funds differ in that Capital
Appreciation Fund also has risk related to company size, which is posed by
the fact that the medium capitalization companies in which Capital
Appreciation Fund invests tend to have fewer shareholders, less liquidity,
more volatility, unproven track records, limited product or service base
and limited access to capital; and risk of investing in ADRs, which is
posed by the fact that the ADRs in which Capital Appreciation Fund invests
are issued by foreign companies, and therefore Capital Appreciation Fund's
share price may be more affected by foreign economic and political
conditions, taxation policies and accounting and auditing standards than
would otherwise be the case. Both funds have liquidity risk, which is
posed by the fact that the securities in which the fund invests may be
less readily marketable and may be subject to greater fluctuation in price
than other securities. Large Cap Core Fund also differs in that it is
subject to sector risks because its portfolio may be comprised of
securities issued by companies in similar businesses, which makes the fund
more susceptible to developments that generally affect these issuers.
Risks of Investing in Kaufmann Fund and Small/Mid Cap Core Fund.
Both funds have stock market risk, which is posed by the fact that the
value of equity securities rises and falls over short or extended periods
of time; liquidity risk, which is posed by the fact that the equity
securities in which the fund invests may be less readily marketable and
may be subject to greater fluctuation in price than other securities; risk
related to company size, which is posed by mid and small market
capitalization companies tending to have fewer shareholders, less
liquidity, more volatility, unproven track records, limited product or
service base and limited access to capital. However, the risks for the
funds differ in that Kaufmann Fund also has the risk of foreign investing,
which is posed by the fact that the foreign securities in which Kaufmann
Fund invests may be more affected by foreign economic and political
conditions, taxation policies and accounting and auditing standards than
could otherwise be the case; and currency risk which is posed by the fact
that the foreign securities in which Kaufmann Fund invests are normally
denominated and traded in foreign currencies and, as a result, the value
of Kaufmann Fund's foreign investments may be affected favorably or
unfavorably by changes in currency exchange rates relative to the U.S.
dollar.
Risks of Investing in Total Return Bond Fund and Intermediate Bond
Fund. Both funds have credit risk, which is the possibility that an issuer
will default on a security by failing to pay interest or principal when
due; and interest rate risk, which is posed by the fact that prices of
fixed income securities rise and fall inversely in response to interest
rate changes. In addition, this risk increases with the length of the
maturity of the debt. Generally, prices of fixed income securities fall
when interest rates rise and vice versa. The funds are also susceptible
to liquidity risk, which occurs when the fixed income securities in which
the fund invests may be less readily marketable and may be subject to
greater fluctuation in price than other securities; and prepayment risk,
which is posed by the relative volatility of mortgage backed securities.
The likelihood of prepayments increases in a declining interest rate
environment and decreases in a rising interest rate environment. This
adversely affects the value of these securities.
The risks for the funds differ in that Total Return Bond Fund also
has risk associated with noninvestment grade securities, which occurs
because Total Return Bond Fund may invest a portion of its assets in
securities rated below investment grade, which may be subject to greater
interest rate, credit and liquidity risks than investment grade
securities; risk of foreign investing, which is posed by the fact that the
foreign securities in which Total Return Bond Fund invests may be more
affected by foreign economic and political conditions, taxation policies
and accounting and auditing standards than would otherwise be the case;
and currency risk, which is posed by the fact that the foreign securities
in which the fund invests are normally denominated and traded in foreign
currencies and, as a result, the value of the fund's foreign investments
may be affected favorably or unfavorably by changes in currency exchange
rates relative to the U.S. dollar. Intermediate Bond Fund also differs in
that it is subject to sector risks because its portfolio may be comprised
of securities issued by companies in similar businesses, which makes the
fund more susceptible to developments that generally affect these issuers.
Risks of Investing in Federated Vermont Fund and Banknorth Vermont
Fund. The funds are each subject to the same risks -- credit risk, which
is the possibility that an issuer will default on a security by failing to
pay interest or principal when due; interest rate risk, which is posed by
the fact that prices of fixed income securities rise and fall inversely in
response to interest rate changes; call risk, which is the possibility
that an issuer may redeem a fixed income security before maturity at a
price below its current market price; sector/diversification risk, which
is posed by the fact that a substantial part of the fund's portfolio could
be comprised of securities credit enhanced by insurance companies, banks
or companies with similar characteristics; liquidity risk, which occurs
when the fixed income securities in which the fund invests may be less
readily marketable and may be subject to greater fluctuation in price than
other securities; and tax risk. However, Federated Vermont Fund's tax
risk derives primarily from its use of derivatives contracts, whose tax
treatment is unclear. Consequently, Federated Vermont Fund may receive
payments that are treated as ordinary income for federal income tax
purposes. In contrast, because Banknorth Vermont Fund does not invest in
derivatives contracts, its tax risk is limited to the possibility that the
prices of tax-exempt securities may fall due to changes or proposed
changes to tax laws and the possibility that tax-exempt securities may
fail to meet certain legal requirements, which could result in the
distribution of taxable interest to shareholders. Both funds are subject
to Vermont risk because local political and economic factors may adversely
affect the value and liquidity of securities held by the fund.
A full description of the risks inherent in the investment in each
Federated Fund and each Banknorth Fund is set forth in the Prospectuses
and Statements of Additional Information of Capital Appreciation Fund and
Kaufmann Fund, each dated December 31, 2003, the Prospectus and Statement
of Additional Information of Total Return Bond Fund, each dated January
31, 2004, the Prospectus and Statement of Additional Information of the
Federated Vermont Fund, each dated July 13, 2004, and the Prospectus and
Statement of Additional Information of the Banknorth Funds each dated
November 30, 2003, all of which are incorporated by reference herein.
Comparative Fee Tables
The funds, like all mutual funds, incur certain expenses in their
operations. These expenses include management fees, as well as the costs
of maintaining accounts, providing shareholder liaison and distribution
services and other activities. Set forth in the tables below is
information regarding the fees and expenses currently incurred by each
fund.
WHAT ARE THE FUND'S FEES AND EXPENSES?
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold Banknorth Large Cap Core Fund, Federated Capital Appreciation Fund
Class A Shares and Federated Capital Appreciation Fund Class A Shares Pro
Forma Combined.
Federated
Capital
Federated Appreciation
Fund
Shareholder Fees Capital Class A
Banknorth Shares
Large Appreciat Pro
Cap Fund Forma
Core Combined
Fund Class A
Shares
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a None 5.50% 5.50%
percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a percentage of
original purchase price or redemption proceeds, as None None None
applicable)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
(and other Distributions) None None None
(as a percentage of offering price)
Redemption Fee (as a percentage of amount redeemed, if None None None
applicable)
Exchange Fee None None None
Annual Fund Operating Expenses (Before Waivers)1
Expenses That are Deducted From Fund Assets (as percentage
of average net assets)
Management Fee 0.75%2 0.75% 0.75%
Distribution (12b-1) Fee None 0.25%3 0.25%3
Shareholder Services Fee 0.25% 0.25% 0.25%
Other Expenses 0.35% 0.27% 0.27%
Total Annual Fund Operating Expenses 1.35% 1.52% 1.52%
1 With respect to the Banknorth Large Cap Core Fund, the
percentages shown are based on anticipated expenses for the
entire fiscal year ending August 31, 2004. However, the
rate at which expenses are accrued during the fiscal year
may not be constant and, at any particular point, may be
greater or less than the stated average percentage.
Although not contractually obligated to do so, the adviser
waived certain amounts. These are shown below along with
the net expenses the Fund expects to pay for the fiscal year
ending August 31, 2004. With respect to the Federated
Capital Appreciation Fund Class A Shares and the Federated
Capital Appreciation Fund Class A Shares Pro Forma Combined,
the percentages shown are based on anticipated expenses for
the entire fiscal year ended October 31, 2004. However, the
rate at which expenses are accrued during the fiscal year
may not be constant and, at any particular point, may be
greater or less than the stated average percentage.
Although not contractually obligated to do so, the
distributor expects to waive certain amounts. These are
shown below along with the net expenses the Funds
anticipates to pay for the fiscal year ending October 31,
2004.
Total Waivers of Fund Expenses 0.15% 0.25% 0.25%
Total Actual Annual Fund Operating Expenses (after waivers) 1.20% 1.27% 1.27%
.....................................................
2 For the Banknorth Large Cap Core Fund, the adviser
voluntarily waived a portion of the management fee. The
adviser can terminate this anticipated voluntary waiver at
any time. The management fee paid by the Fund (after the
anticipated voluntary waiver) was 0.60% for the fiscal year
ended August 31, 2003.
3 The Class A Shares of the Federated Capital Appreciation
Fund did not pay or accrue the distribution (12b-1) fee for
the fiscal year ended October 31, 2003. Class A Shares of
the Federated Capital Appreciation Fund Pro Forma Combined
have no present intention of paying or accruing the
distribution (12b-1) fee for the fiscal year ending October
31, 2004.
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Banknorth Large Cap Core Fund, Federated Capital Appreciation Fund Class A
Shares and Federated Capital Appreciation Fund Class A Shares Pro Forma
Combined with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in each respective Fund's
Shares for the time periods indicated and then redeem all of your shares
at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that each Fund's operating
expenses are before waivers as estimated and shown in the table and remain
the same. Although your actual costs and returns may be higher or lower,
based on these assumptions your costs would be:
<table>
<caption>
<s> <c> <c> <c> <c>
1 Year 3 Years 5 Years 10 Years
Banknorth Large Cap Core Fund $ 137 $ 428 $ 739 $ 1,624
Federated Capital Appreciation Fund Class A Shares $ 696 $1,004 $ 1,333 $ 2,263
Federated Capital Appreciation Fund Class A Shares $ 696 $1,004 $ 1,333 $ 2,263
Pro Forma Combined
</table>
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WHAT ARE THE FUND'S FEES AND EXPENSES?
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold Banknorth Small/Mid Cap Fund, Federated Kaufmann Fund Class A Shares
and Federated Kaufmann Fund Class A Shares Pro Forma Combined.
<table>
<caption>
<s> <c> <c> <c>
Federated
Kaufmann
Federated Fund
Shareholder Fees Banknorth Class A
Kaufmann Shares
Small/Mid Fund Pro Forma
Cap Combined
Core Class A
Fund
Shares
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a None 5.50% 5.50%
percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a percentage of
original purchase price or redemption proceeds, as applicable) None None None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
(and other Distributions) None None None
(as a percentage of offering price)
Redemption Fee (as a percentage of amount redeemed, if None None None
applicable)
Exchange Fee None None None
Annual Fund Operating Expenses (Before Waivers)1
Expenses That are Deducted From Fund Assets (as percentage of
average net assets)
Management Fee 0.75%2 1.43%3 1.43%3
Distribution (12b-1) Fee None 0.25%4 0.25%4
Shareholder Services Fee 0.25% 0.25% 0.25%
Other Expenses 1.09%5 0.26% 0.26%
Total Annual Fund Operating Expenses 2.09% 2.19% 2.19%
1 With respect to the Banknorth Small/Mid Cap Core Fund, the
percentages shown are based on anticipated expenses for the
entire fiscal year ending August 31, 2004. However, the rate
at which expenses are accrued during the fiscal year may not
be constant and, at any particular point, may be greater or
less than the stated average percentage. Although not
contractually obligated to do so, the adviser expects to waive
certain amounts. These are shown below along with the net
expenses the Fund expects to pay for the fiscal year ending
August 31, 2004. With respect to the Federated Kaufmann Fund
Class A Shares and the Federated Kaufmann Fund Class A Shares
Pro Forma Combined, the percentages shown are based on
anticipated expenses for the entire fiscal year ending October
31, 2004. However, the rate at which expenses are accrued
during the fiscal year may not be constant and, at any
particular point, may be greater or less than the stated
average percentage. Although not contractually obligated to
do so, the adviser, distributor and shareholder services
provider expects to waive and/or reimburse certain amounts.
These are shown below along with the net expenses the Funds
anticipates to pay for the fiscal year ending October 31,
2004.
Total Waivers of Fund Expenses 0.64% 0.24% 0.24%
Total Annual Fund Operating Expenses (after waivers) 1.45% 1.95% 1.95%
.....................................................
2 For the Banknorth Small/Mid Cap Core Fund, the adviser
expects to voluntarily waive a portion of the management fee.
The adviser can modify or terminate this voluntary waiver at
any time. The management fee paid by the Fund (after the
voluntary waiver) is anticipated to be 0.40% for the fiscal
year ending August 31, 2004.
3 For the Class A Shares of the Federated Kaufmann Fund and
the Federated Kaufmann Fund Pro Forma Combined, the adviser
expects to voluntarily waive a portion of the management fee.
The adviser can modify or terminate this voluntary waiver at
any time. The management fee paid by the Fund (after the
voluntary waiver) is anticipated to be 1.28% for the fiscal
year ending October 31, 2004.
4 For the Class A Shares of the Federated Kaufmann Fund and
the Federated Kaufmann Fund Pro Forma Combined, a portion of
the distribution (12b-1) fee is anticipated to be voluntarily
waived. The distributor can modify or terminate this
voluntary waiver at any time. The distribution (12b-1) fee
paid by the Fund's Class A Shares (after the voluntary waiver)
is anticipated to be 0.16% for the fiscal year ending October
31, 2004.
5 For the Banknorth Small/Mid Cap Core Fund, the administrator
expects to voluntarily waive a certain operating expenses of
the Fund. The administrator can modify or terminate this
anticipated voluntary waiver at any time. Total other
expenses paid by the Fund (after the voluntary waiver) is
anticipated to be 0.80% for the fiscal year ending August 31,
2004.
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Banknorth Small/Mid Cap Core Fund, Federated Kaufmann Fund Class A Shares
and Federated Kaufmann Fund Class A Shares Pro Forma Combined with the
cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in each respective Fund's
Shares for the time periods indicated and then redeem all of your shares
at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that each Fund's operating
expenses are before waivers as estimated and shown in the table and remain
the same. Although your actual costs and returns may be higher or lower,
based on these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
Banknorth Small/Mid Cap Core Fund $212 $655 $1,124 $ 2,421
Federated Kaufman Fund Class A Shares $760 $1,197 $1,660 $2,935
Federated Kaufmann Fund Class A Shares Pro Forma $760 $ 1,197 $1,659 $2,933
Combined
- ---------------------------------------------------------------------------
WHAT ARE THE FUND'S FEES AND EXPENSES?
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold Banknorth Intermediate Bond Fund, Federated Total Return Bond Fund
Institutional Service Shares and Federated Total Return Bond Institutional
Service Shares Pro Forma Combined.
Federated
Total
FederatedReturn
Bond
Shareholder Fees Banknorth Total Fund
Return Institutional
Intermediate Bond Shares
Bond Fund Pro Forma
Fund Combined
Institutional
Service
Shares
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a None None None
percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a percentage of
original purchase price or redemption proceeds, as None None None
applicable)
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends (and other Distributions) None None None
(as a percentage of offering price)
Redemption Fee (as a percentage of amount redeemed, if None None None
applicable)
Exchange Fee None None None
Annual Fund Operating Expenses (Before Waivers)1
Expenses That are Deducted From Fund Assets (as
percentage of average net assets)
Management Fee 0.60%2 0.40%3 0.40%3
Distribution (12b-1) Fee None 0.25%4 0.25%4
Shareholder Services Fee 0.25% 0.25% 0.25%
Other Expenses 0.31% 0.17%5 0.17%5
Total Annual Fund Operating Expenses 1.16% 1.07% 1.07%
1 With respect to the Banknorth Intermediate Bond Fund,
the percentages shown are based on anticipated expenses
for the entire fiscal year ending August 31, 2004.
However, the rate at which expenses are accrued during
the fiscal year may not be constant and, at any
particular point, may be greater or less than the stated
average percentage. Although not contractually obligated
to do so, the adviser expects to waive certain amounts.
These are shown below along with the net expenses the
Fund expects to pay for the fiscal year ending August 31,
2004. With respect to the Federated Total Return Bond
Fund Institutional Shares and the Federated Total Return
Bond Fund Institutional Service Shares Pro Forma
Combined, the percentages shown are based on anticipated
expenses for the entire fiscal year ending November 30,
2004. However, the rate at which expenses are accrued
during the fiscal year may not be constant and, at any
particular point, may be greater or less than the stated
average percentage. Although not contractually obligated
to do so, the adviser, distributor and the transfer and
dividend disbursing agent expects to waive certain
amounts. These are shown below along with the net
expenses the Funds anticipates to pay for the fiscal year
ending November 30, 2004.
Total Waivers of Fund Expenses 0.35% 0.42% 0.42%
Total Actual Annual Fund Operating Expenses (after 0.81% 0.65% 0.65%
waivers)....................................................
2 For the Banknorth Intermediate Bond Fund, the adviser
expects to voluntarily waive a portion of the management
fee. The adviser can terminate this voluntary waiver at
any time. The management fee paid by the Fund (after the
voluntary waiver) is anticipated to be 0.25% for the
fiscal year ending August 31, 2004.
3 For the Institutional Service Shares of the Federated
Total Return Bond Fund and Federated Total Return Bond
Fund Pro Forma Combined, the adviser expects to
voluntarily waive a portion of the management fee. The
adviser can terminate this voluntary waiver at any time.
The management fee to be paid by the Federated Total
Return Bond Fund Institutional Service Shares Pro Forma
Combined (after the voluntary waiver) is anticipated to
be 0.19% for the fiscal year ending November 30, 2004.
4 For the Institutional Service Shares of the Federated
Total Return Bond Fund and Federated Total Return Bond
Fund Pro Forma Combined, a portion of the distribution
(12b-1) fee is expected to be voluntarily waived. This
voluntary waiver can be terminated at any time. The
distribution (12b-1) fee paid by the Federated Total
Return Bond Fund Institutional Service Shares Fund Pro
Forma Combined (after the voluntary waiver) is
anticipated to be 0.05% for the fiscal year ending
November 30, 2004.
5 For the Institutional Service Shares of the Federated
Total Return Bond Fund and Federated Total Return Bond
Fund Pro Forma Combined, the transfer and dividend
disbursing agent expects to voluntarily waive a portion
of its fees. The transfer and dividend disbursing agent
can terminate this voluntary waiver at any time. Total
other expenses paid by the Federated Total Return Bond
Fund Institutional Service Shares Pro Forma Combined
(after the voluntary waiver) is anticipated to be 0.16%
for the fiscal year ended November 30, 2004.
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Banknorth Intermediate Bond Fund, Federated Total Return Bond Fund
Institutional Service Shares and Federated Total Return Bond Fund
Institutional Service Shares Pro Forma Combined with the cost of investing
in other mutual funds.
The Example assumes that you invest $10,000 in each respective Fund's
Shares for the time periods indicated and then redeem all of your shares
at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that each Fund's operating
expenses are before waivers as estimated and shown in the table and remain
the same. Although your actual costs and returns may be higher or lower,
based on these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
Banknorth Intermediate Bond Fund $118 $368 $638 $1,409
Federated Total Return Bond Fund Institutional $ 109 $ 340 $ 590 $ 1,306
Service Shares
Federated Total Return Bond Fund Institutional
Service Shares -------- $340 --------------------
- --------------------------------------------------- $109 $590 $1,306
Pro Forma Combined
WHAT ARE THE FUND'S FEES AND EXPENSES?
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold Banknorth Vermont Municipal Bond Fund Class A Shares, Federated
Vermont Municipal Income Fund Class A Shares and Federated Vermont
Municipal Income Fund Class A Shares Pro Forma Combined.
Federated
Federated Vermont
Banknorth Vermont Municipal
Shareholder Fees Vermont Municipal Income Fund
Municipal Income Fund Class A
Bond Fund Class A Shares Pro
Shares1 Forma
Combined1
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on None 4.50% 4.50%
Purchases (as a percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a
percentage of original purchase price or None 0.00% 0.00%
redemption proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends (and other None None None
Distributions)
(as a percentage of offering price)
Redemption Fee (as a percentage of amount None None None
redeemed, if applicable)
Exchange Fee None None None
Annual Fund Operating Expenses (Before
Waivers) 2
Expenses That are Deducted From Fund Assets
(as percentage of average net assets)
Management Fee3 0.50% 0.40% 0.40%
Distribution (12b-1) Fee None 0.25%4 0.25%4
Shareholder Services Fee 0.25% 0.25% 0.25%
Other Expenses 0.35% 0.41%5 0.41%5
Total Annual Fund Operating Expenses 1.10% 1.31% 1.31%
Total Contractual Waivers of Fund Expenses (0.00%) (0.25%) (0.25%)
Total Annual Fund Operating Expenses (after 1.10% 1.06% 1.06%
contractual waivers) 4
1 Class A Shares of Federated Vermont Municipal Income Fund are a newly
created share class.
2 With respect to Banknorth Vermont Municipal Bond Fund the percentages
shown are based on anticipated expenses for the entire fiscal year ending
August 31, 2004. Although not contractually obligated to do so, the
adviser expects to waive certain amounts. These are shown below along
with the net expenses the Fund expects to pay for the fiscal year ending
August 31, 2004. With respect to the Federated Vermont Municipal Income
Fund Class A Shares and Federated Vermont Municipal Income Fund Class A
Shares Pro Forma Combined, the percentages shown are based on anticipated
expenses for the entire fiscal year ending August 31, 2005. However, the
rate at which expenses are accrued during the fiscal year may not be
constant and, at any particular point, may be greater or less than the
stated average percentage. Although not contractually obligated to do so,
the adviser and administrator expect to waive certain amounts. These are
shown below along with the net expenses the Fund expects to pay for the
fiscal year ending August 31, 2005.
Total Voluntary Waivers of Fund Expenses 0.30% 0.26% 0.26%
Total Actual Annual Fund Operating Expenses 0.80% 0.80% 0.80%
(after waivers)
3 For Banknorth Vermont Municipal Bond Fund Class A Shares, the adviser
expects to voluntarily waive a portion of the management fee. The adviser
can modify or terminate this waiver at any time. The management fee paid
by the Fund (after the anticipated voluntary waiver) is anticipated to be
0.20% for the fiscal year ending August 31, 2004. For the Federated
Vermont Municipal Income Fund Class A Shares and the Federated Vermont
Municipal Income Fund Class A Shares Pro Forma Combined, the adviser
expects to voluntarily waive a portion of the management fee. The adviser
can modify or terminate this anticipated voluntary waiver at any time.
The management fee paid by the Fund (after the anticipated voluntary
waiver) will be 0.17% for the fiscal year ending August 31, 2005.
4 Pursuant to a written waiver agreement, the distributor for Class A
Shares of the Federated Vermont Municipal Income Fund and the Federated
Vermont Municipal Income Fund Pro Forma Combined will waive the
distribution (12b-1) fee. The distribution (12b-1) fee expected to be
paid by the Fund (after the anticipated contractual waiver) will be 0.00%
for the fiscal year ending August 31, 2005. The anticipated contractual
waiver will expire on August 27, 2006.
5 For the Class A Shares of the Federated Vermont Municipal Income Fund
and the Federated Vermont Municipal Income Fund Pro Forma Combined, the
administrator expects to voluntarily waive a portion of its fee. The
administrator can modify or terminate this voluntary waiver at any time.
The total other operating expenses expected to be paid by the Fund (after
the anticipated voluntary waiver) will be 0.38% for the fiscal year ending
August 31, 2005.
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Banknorth Vermont Municipal Bond Fund, Federated Vermont Municipal Income
Fund Class A Shares and Federated Vermont Municipal Income Fund Class A
Shares Pro Forma Combined with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in each respective Fund's
Shares for the time periods indicated and then redeem all of your shares
at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that each of the Fund's
respective Shares operating expenses are after the contractual waiver as
shown in the table and remain the same. Although your actual costs and
returns may be higher or lower, based on these assumptions your costs
would be:
1 Year 3 Years 5 Years 10 Years
Banknorth Vermont Municipal Bond Fund $112 $350 $606 $1,340
Class A Shares
Federated Vermont Municipal Income Fund $553 $772 $1,063 $1,892
Class A Shares
Federated Vermont Municipal Income Fund
Class A Shares Pro Forma Combined ----------- $772 $1,063 $1,892
$553
</table>
Performance Information
The bar charts and tables below show the potential risks and rewards
of investing in each Federated and Banknorth Fund. The bar charts provide
an indication of the risks of investing in the Banknorth Funds Shares and
Federated Fund's Class A or Institutional Service Shares (Total Return
Bond Fund) by showing changes in each Banknorth Fund and Federated Fund's
Class A or Institutional Service Shares (Total Return Bond Fund)
performance from year to year. The tables show how each Banknorth and
Federated Fund's average annual total returns for the one year, five years
and ten years (or start of performance) compared to the returns of a
broad-based market index. The figures assume reinvestment of dividends and
distributions. The bar chart and total return information for Federated
Vermont Fund has not been provided because the fund is newly created for
purposes of the proposed Reorganization and has not commenced operations
other than incidental to its organization.
Keep in mind that past performance does not guarantee future results.
Risk/Return Bar Chart
Federated Capital Appreciation Fund
The performance information shown below will help you analyze the Capital
Appreciation Fund's investment risks in light of its historical returns.
The bar chart shows the variability of the Capital Appreciation Fund's
Class A Shares' total returns on a calendar year-by-year basis. The
Average Annual Total Return Table shows returns averaged over the stated
periods, and includes comparative performance information. The Capital
Appreciation Fund's performance will fluctuate, and past performance
(before and after taxes) is no guarantee of future results.
The graphic presentation displayed here consists of a bar chart
representing the annual total returns of the Class A Shares of Capital
Appreciation Fund as of the calendar year-end for each of ten years.
The `y' axis reflects the "% Total Return" beginning with "-20" and
increasing in increments of 10 up to 50.
The `x' axis represents calculation periods for the last ten years of the
Capital Appreciation Fund's Class A Shares, beginning with the earliest
year. The light gray shaded chart features 10 distinct vertical bars,
each shaded in charcoal, and each visually representing by height the
total return percentages for the calendar year stated directly at its
base. The calculated total return percentage for the Class A Shares of the
Capital Appreciation Fund for each calendar year is stated directly at the
top of each respective bar. The total return percentages for the years
1993 through 2002 are 11.31%, (0.30)%, 37.17%, 18.39%, 30.62%, 20.07%,
43.39%, (3.76)%, (6.19)% and (18.76)%, respectively.
The total returns shown in the bar chart do not reflect payment of any
sales charges or recurring shareholder account fees. If these charges or
fees had been included, the returns shown would have been lower.
The Capital Appreciation Fund's Class A Shares total return for the
nine-month period from January 1, 2003 to September 30, 2003 was 10.53%
Within the period shown in the bar chart, the Capital Appreciation Fund's
Class A Shares highest quarterly return was 27.57% (quarter ended December
31, 1999). Its lowest quarterly return was (17.40)% (quarter ended
September 30, 2002).
Federated Kaufmann Fund
The Federated Kaufmann Fund is the successor to The Kaufmann Fund, Inc.
pursuant to a reorganization that took place on April 23, 2001. Prior to
that date, the Federated Kaufmann Fund had no investment operations.
Accordingly, the performance information and financial information
provided in this prospectus for periods prior to April 23, 2001, is
historical information of The Kaufmann Fund, Inc. The Kaufmann Fund, Inc.
was managed by Edgemont Asset Management Corp. and had the same investment
objectives and strategies as the Federated Kaufmann Fund and substantially
the same investment policies as the Federated Kaufmann Fund. Kaufmann
Fund, Inc. shareholders received Class K Shares of the Federated Kaufmann
Fund as a result of the reorganization.
The Federated Kaufmann Fund's Class A Shares, B Shares and C Shares
commenced operation on April 23. 2003. For the period prior to the
commencement of operations of Class A, Class B and Class C Shares, the
performance information shown in the bar chart below is for the Federated
Kaufmann Fund's Class K Shares, adjusted to reflect the expenses of Class
A Shares. The performance information will help you analyze the Federated
Kaufmann Fund's investment risks in light of its historical returns. The
bar chart shows the variability of the Federated Kaufmann Fund's Class A
Shares total returns on a calendar year-by-year basis. The Average Annual
Total Return Table shows returns averaged over the stated periods, and
includes comparative performance information. The Federated Kaufmann
Fund's performance will fluctuate, and past performance (before and after
taxes) is no guarantee of future results.
The graphic presentation displayed here consists of a bar chart
representing the annual total returns of the Class A Shares of Federated
Kaufmann Fund as of the calendar year-end for each of ten years.
The `y' axis reflects the "% Total Return" beginning with "-30" and
increasing in increments of 10 up to 40.
The `x' axis represents calculation periods for the last ten years of the
Federated Kaufmann Fund's Class A Shares, beginning with the earliest
year. The light gray shaded chart features 10 distinct vertical bars,
each shaded in charcoal, and each visually representing by height the
total return percentages for the calendar year stated directly at its
base. The calculated total return percentage for the Class A Shares of the
Federated Kaufmann Fund for each calendar year is stated directly at the
top of each respective bar. The total return percentages for the years
1993 through 2002 are 17.86%, 8.68%, 36.51%, 20.58%, 12.25%, 0.43%,
25.66%, 10.55%, 7.78% and (21.41)%, respectively.
The total returns shown in the bar chart for the Federated Kaufmann Fund's
Class A Shares do not reflect the payment of any sales charges or
recurring shareholder account fees. If these charges or fees had been
included, the returns shown would have been lower.
The Federated Kaufmann Fund's Class A Shares total return for the
nine-month period from January 1, 2003 to September 30, 2003 was 35.07%.
Within the periods shown in the bar chart, the Federated Kaufmann Fund's
Class A Shares highest quarterly return was 35.47% (quarter ended
December 31, 1999). Its lowest quarterly return was (18.76)% (quarter
ended September 30, 1998).
Federated Total Return Bond Fund
The performance information shown below will help you analyze the Total
Return Bond Fund's investment risks in light of its historical returns.
The bar chart shows the variability of the Total Return Bond Fund's
Institutional Service Shares total returns on a calendar year-by-year
basis. The Average Annual Total Return Table shows returns averaged over
the stated periods, and includes comparative performance information. The
Total Return Bond Fund's performance will fluctuate, and past performance
(before and after taxes) is no guarantee of future results.
The graphic presentation displayed here consists of a bar chart
representing the annual total returns of the Institutional Service Shares
of Total Return Bond Fund as of the calendar year-end for each of seven
years.
The `y' axis reflects the "% Total Return" beginning with "-2" and
increasing in increments of 2 up to 12.
The `x' axis represents calculation periods for the last seven years of
the Total Return Bond Fund's Institutional Service Shares, beginning with
the earliest year. The light gray shaded chart features seven distinct
vertical bars, each shaded in charcoal, and each visually representing by
height the total return percentages for the calendar year stated directly
at its base. The calculated total return percentage for the Institutional
Service Shares of the Total Return Bond Fund for each calendar year is
stated directly at the top of each respective bar. The total return
percentages for the years 1997 through 2003 are 10.25%, 8.91%, (1.15)%,
10.94%, 7.77%, 8.80% and 4.99%, respectively.
The Total Return Bond Fund's Institutional Service Shares are sold without
a sales charge (load). The total returns in the bar chart above are based
upon net asset value.
Within the period shown in the bar chart, the Total Return Bond Fund's
Institutional Service Shares highest quarterly return was 4.47% (quarter
ended September 30, 1998). Its lowest quarterly return was (0.95)%
(quarter ended June 30, 1999).
Banknorth Large Cap Core Fund
The performance information shown below will help you analyze the Large
Cap Core Fund's investment risks in light of its historical returns. The
bar chart shows the variability of the total returns on a calendar
year-by-year basis. The Average Annual Total Return Table shows returns
averaged over the stated periods, and includes comparative performance
information. The Fund's performance will fluctuate, and past performance
(before and after taxes) is no guarantee of future results.
The graphic presentation displayed here consists of a bar chart
representing the annual total returns of the Shares of Large Cap Core Fund
as of the calendar year-end for each of five years.
The `y' axis reflects the "% Total Return" beginning with "-20" and
increasing in increments of 10 up to 40.
The `x' axis represents calculation periods for the last five years of the
Large Cap Core Fund's Shares, beginning with the earliest year. The light
gray shaded chart features five distinct vertical bars, each shaded in
charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The
calculated total return percentage for the Shares of the Large Cap Core
Fund for each calendar year is stated directly at the top of each
respective bar. The total return percentages for the years 1998 through
2002 are 36.15%, 19.45%, (3.07)%, (11.44)% and (14.44)%, respectively.
The Large Cap Core Fund's Shares are sold without a sales charge (load).
The total returns shown in the bar chart above are based upon net asset
value.
The Large Cap Core Fund's total return for the nine-month period from
January 1, 2003 to September 30, 2003 was 7.99%.
Within the periods shown in the bar chart, the Large Cap Core Fund's
highest quarterly return was 26.07% (quarter ended December 31, 1998). Its
lowest quarterly return was (13.76)% (quarter ended September 30, 2001).
Banknorth Small/Mid Cap Core Fund
The performance information shown below will help you analyze the
Small/Mid Cap Core Fund's investment risks in light of its historical
returns. The bar chart shows the variability of the total returns on a
calendar year-by-year basis. The Average Annual Total Return Table shows
returns averaged over the stated periods, and includes comparative
performance information. The Small/Mid Cap Core Fund's performance will
fluctuate, and past performance (before and after taxes) is no guarantee
of future results.
The graphic presentation displayed here consists of a bar chart
representing the annual total returns of the Shares of Small/Mid Cap Core
Fund as of the calendar year-end for each of three years.
The `y' axis reflects the "% Total Return" beginning with "-15" and
increasing in increments of 5 up to 10.
The `x' axis represents calculation periods for the last three years of
the Small/Mid Cap Core Fund's Shares, beginning with the earliest year.
The light gray shaded chart features three distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total
return percentages for the calendar year stated directly at its base. The
calculated total return percentage for the Shares of the Small/Mid Cap
Core Fund for each calendar year is stated directly at the top of each
respective bar. The total return percentages for the years 2000 through
2002 are (0.82)%, (8.05)% and (12.88)%, respectively.
The Small/Mid Cap Core Fund's Shares are sold without a sales charge
(load). The total returns shown in the bar chart above are based upon net
asset value.
The Small/Mid Cap Core Fund's total return for the nine-month period from
January 1, 2003 to September 30, 2003 was 12.67%.
Within the periods shown in the bar chart, the Small/Mid Cap Core Fund's
highest quarterly return was 16.28% (quarter ended March 31, 2000). Its
lowest quarterly return was (19.70)% (quarter ended September 30, 2001).
Banknorth Intermediate Bond Fund
The performance information shown below will help you analyze the
Intermediate Bond Fund's investment risks in light of its historical
returns. The bar chart shows the variability of the total returns on a
calendar year-by-year basis. The Average Annual Total Return Table shows
returns averaged over the stated periods, and includes comparative
performance information. The Intermediate Bond Fund's performance will
fluctuate, and past performance (before and after taxes) is no guarantee
of future results.
The graphic presentation displayed here consists of a bar chart
representing the annual total returns of the Shares of Intermediate Bond
Fund as of the calendar year-end for each of ten years.
The `y' axis reflects the "% Total Return" beginning with "-5" and
increasing in increments of 5 up to 15.
The `x' axis represents calculation periods for the last ten years of the
Intermediate Bond Fund's Shares, beginning with the earliest year. The
light gray shaded chart features ten distinct vertical bars, each shaded
in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The
calculated total return percentage for the Shares of the Intermediate Bond
Fund for each calendar year is stated directly at the top of each
respective bar. The total return percentages for the years 1993 through
2002 are 6.76%, (2.40)%, 14.37%, 3.36%, 6.95%, 6.90%, (1.15)%, 6.80%,
6.42% and 8.11%, respectively.
The Intermediate Bond Fund's Shares are sold without a sales charge
(load). The total returns shown in the bar chart above are based upon net
asset value.
The Intermediate Bond Fund's total return for the nine-month period from
January 1, 2003 to September 30, 2003 was 2.36%.
Within the periods shown in the bar chart, the Intermediate Bond Fund's
highest quarterly return was 4.79% (quarter ended June 30, 1995). Its
lowest quarterly return was (1.62)% (quarter ended March 31, 1994).
Banknorth Vermont Municipal Bond Fund
The performance information shown below will help you analyze the Vermont
Municipal Bond Fund's investment risks in light of its historical returns.
The bar chart shows the variability of the total returns on a calendar
year-by-year basis. The Average Annual Total Return Table shows returns
averaged over the stated periods, and includes comparative performance
information. The Vermont Municipal Bond Fund's performance will
fluctuate, and past performance (before and after taxes) is no guarantee
of future results.
The graphic presentation displayed here consists of a bar chart
representing the annual total returns of the Shares of Vermont Municipal
Bond Fund as of the calendar year-end for each of ten years.
The `y' axis reflects the "% Total Return" beginning with "-5" and
increasing in increments of 5 up to 10.
The `x' axis represents calculation periods for the last ten years of the
Vermont Municipal Bond Fund's Shares, beginning with the earliest year.
The light gray shaded chart features ten distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total
return percentages for the calendar year stated directly at its base. The
calculated total return percentage for the Shares of the Vermont Municipal
Bond Fund for each calendar year is stated directly at the top of each
respective bar. The total return percentages for the years 1993 through
2002 are 6.58%, (1.44)%, 9.06%, 3.54%, 5.46%, 4.36%, 0.80%, 3.53%, 4.43%
and 5.45%, respectively.
The Vermont Municipal Bond Fund's Shares are sold without a sales charge
(load). The total returns shown in the bar chart above are based upon net
asset value.
The Vermont Municipal Bond Fund's total return for the nine-month period
from January 1, 2003 to September 30, 2003 was 2.36%.
Within the periods shown in the bar chart, the Vermont Municipal Bond
Fund's highest quarterly return was 3.18% (quarter ended March 31, 1995).
Its lowest quarterly return was (2.52)% (quarter ended March 31, 1994).
Average Annual Total Return Tables
The following tables represent each Federated Fund's Average Annual
Total Returns for the periods ended December 31, 2002 (Capital
Appreciation Fund and Kaufmann Fund) and December 31, 2003 (Total Return
Bond Fund). Each of the returns shown reflects applicable sales charges.
Remember, you will not be charged any sales charges in connection with the
Reorganizations of the Banknorth Funds into the Federated Funds. If the
returns shown below did not reflect applicable sales charges, the returns
would have been higher. Return Before Taxes is shown. In addition, Return
After Taxes is shown for each fund to illustrate the effect of federal
taxes on Fund returns. Actual after-tax returns depend on each investor's
personal tax situation, and are likely to differ from those shown.
The tables also show the Capital Appreciation Fund's total returns
averaged over a period of years relative to the Standard & Poor's 500
Index ("S&P 500") and the Lipper Large Cap Core Fund Average ("LLCCFA"), a
broad-based market index, and an average of funds with similar objectives;
the Kaufmann Fund's total returns averaged over a period of years relative
to the Russell Mid-Cap Growth Index ("RMGI") and the Lipper Mid-Cap Growth
Index ("LMCGI"), both broad-based market indexes; and the Total Return
Bond Funds total returns averaged over a period of years relative to the
Lehman Brothers Aggregate Bond Index ("LBAB"), a broad based market
index. Index returns do not reflect sales charges, expenses or other fees
the SEC requires to be reflected in the Fund's performance. Indexes are
unmanaged, and it is not possible to invest directly in an index.
Past performance is no guarantee of future results. The information
provides you with historical performance information so that you can
analyze whether each Fund's investment risks are balanced by its potential
returns.
FEDERATED CAPITAL
APPRECIATION FUND
(For the periods ended Start of
December 31, 2002) 1 Year 5 Years 10 Years Performance*
Class A Shares:
Return Before Taxes (23.22)% 3.60% 10.88% --
Return After Taxes on
Distributions** (23.36)% 2.77% 9.31% --
Return After Taxes on
Distributions and Sale
of Fund Shares** (14.25)% 2.89% 8.68% --
Class B Shares:
Return Before Taxes (23.81)% 3.60% -- 9.15%
Class C Shares:
Return Before Taxes (20.19)% 4.00% -- 9.15%
S&P 500 (22.10)% (0.59)% 9.34% --
LLCCFA (23.97)% (3.19)% 6.71% --
* The Fund's Class B and Class C Shares start of performance date was
January 4, 1996.
** After-tax returns are calculated using a standard set of
assumptions. The stated returns assume the highest historical federal
income and capital gains tax rates. Return After Taxes on Distributions
assumes a continued investment in the Fund and shows the effect of taxes
on Fund distributions. Return After Taxes on Distributions and Sale of
Fund Shares assumes all Shares were redeemed at the end of each
measurement period, and shows the effect of any taxable gain (or
offsetting loss) on redemption, as well as the effects of taxes on Fund
distributions. These after-tax returns do not reflect the effect of any
applicable state and local taxes. After-tax returns for Class B and Class
C Shares will differ from those shown above for Class A Shares. After-tax
returns are not relevant to investors holding Shares through tax-deferred
programs, such as IRA or 401(k) plans.
FEDERATED KAUFMANN FUND
(For the periods ended December 1 Year 5 Years 10 Years
31, 2002)
Class A Shares:*
Return Before Taxes (25.73)% 2.23% 10.21%
Return After Taxes on (25.73)% (0.94)% 8.20%
Distributions**
Return After Taxes on
Distributions and Sale of Fund (15.80)% 1.60% 8.51%
Shares**
Class B Shares:* (26.00)% 2.75% 10.39%
Class C Shares:* (22.47)% 2.94% 10.31%
RMGI (27.41)% (1.82)% 6.71%
LMCGI (28.47)% (1.49)% 6.41%
* The Fund's Class A, Class B and Class C Shares total returns for such
periods are those of the Kaufmann Fund's Class K Shares, but adjusted to
reflect the sales charge or contingent sales charge (CDSC) and expenses
applicable to that Class.
** After-tax returns are calculated using a standard set of
assumptions. The stated returns assume the highest historical federal
income and capital gains tax rates. Return After Taxes on Distributions
assumes a continued investment in the Fund and shows the effect of taxes
on Fund distributions. Return After Taxes on Distributions and Sale of
Fund Shares assumes all shares were redeemed at the end of each
measurement period, and shows the effect of any taxable gain (or
offsetting loss) on redemption, as well as the effects of taxes on Fund
distributions. These after-tax returns do not reflect the effect of any
applicable state and local taxes. After-tax returns for Class B and
Class C Shares will differ from those shown above for Class A Shares.
After-tax returns are not relevant to investors holding shares through
tax-deferred programs, such as IRA or 401(k) plans.
FEDERATED TOTAL RETURN BOND FUND
(For the periods ended December Start of
31, 2003) 1 Year 5 Years Performance*
Institutional Service Shares:
Return Before Taxes 4.99% 6.19% 7.32%
Return After Taxes on 3.39% 3.83% 4.88%
Distributions**
Return After Taxes on
Distributions and Sale of Fund 3.32% 3.80% 4.73%
Shares**
LBAB 4.10% 6.62% 7.52%
* The Fund's Institutional Service Shares start of performance date was
October 1, 1996.
** After-tax returns are calculated using a standard set of
assumptions. The stated returns assume the highest historical federal
income and capital gains tax rates. Return After Taxes on Distributions
assumes a continued investment in the Fund and shows the effect of taxes
on Fund distributions. Returns After Taxes on Distributions and Sale of
Fund Shares assumes all shares were redeemed at the end of each
measurement period, and shows the effect of any taxable gain (or
offsetting loss) on redemption, as well as the effects of taxes on Fund
distributions. These after-tax returns do not reflect the effect of any
applicable state and local taxes. After-tax returns are not relevant to
investors holding shares through tax-deferred programs, such as IRA or
401(k) plans.
The following tables represent each Banknorth Fund's Average Annual
Total Returns for the period ended December 31, 2002. Return Before Taxes
is shown. In addition, Return After Taxes is shown for each fund to
illustrate the effect of federal taxes on Fund returns. Actual after-tax
returns depend on each investor's personal tax situation, and are likely
to differ from those shown.
The tables also show the Large Cap Core Fund's total returns
averaged over a period of years relative to the Standard & Poor's 500
Index ("S&P 500"), a broad-based market index; the Small/Mid Cap Core
Fund's total returns averaged over a period of years relative to the
Russell MidCap Index ("RMCI"), a broad-based market index; the
Intermediate Bond Funds total returns averaged over a period of years
relative to the Lehman Brothers Intermediate Government/Credit Index
("LBIGC"), a broad based market index; and the Vermont Municipal Bond
Funds total returns averaged over a period of years relative to the Lehman
Brothers 5-Year Municipal Bond Index ("LB5-YMBI"), a broad market
performance benchmark for the tax exempt bond market. Index returns do
not reflect sales charges, expenses or other fees the SEC requires to be
reflected in the Fund's performance. Indexes are unmanaged, and it is not
possible to invest directly in an index.
Past performance is no guarantee of future results. The information
provides you with historical performance information so that you can
analyze whether each Fund's investment risks are balanced by its potential
returns.
(For the 1 Year
Periods
Ended Start of
December 31, 2002) 5 Years Performance*
Large Cap
Core Fund
- ------------------------------------------------------------
Return
Before Taxes (14.44)% 3.62% 3.86%
Return (14.44)%
After Taxes
on
Distributions** 2.33% 2.58%
Return
After Taxes
on
Distribution
and Sale of
Fund
Shares** s (8.87)% 3.14% 3.34%
S&P 500
(reflects
no
deduction
for fees,
expenses,
or taxes) (22.09)% (0.58)% (0.45)%
- ---------------------------------------------------------------------------
* The Fund's start of performance date was December 17, 1997.
** After-tax returns are calculated using the historical highest
individual federal marginal income tax rates and do not reflect the impact
of state and local taxes. Actual after-tax returns depend on an investor's
tax situation and may differ from those shown. After-tax returns shown are
not relevant to investors who hold their Fund Shares through tax-deferred
arrangements, such as 401(k) plans or individual retirement accounts. In
some cases the return after taxes on distributions and sale of Fund Shares
may exceed the return before taxes due to an assumed tax benefit from any
losses on a sale of Fund shares at the end of the measurement period.
The Fund is the successor to the Investor's Equity Fund (Former Fund), a
former series of Forum Funds pursuant to a reorganization that took place
on January 8, 2001. Prior to that date, the Fund had no investment
operations. Accordingly, the performance information and financial
information provided in this prospectus for periods prior to January 8,
2001, is historical information of the Former Fund. The Former Fund was
managed by the Stratevest Group, N.A. and had substantially the same
investment policies as the Fund. The reorganization was approved by the
Former Fund's shareholders, who on January 8, 2001, received Shares of the
Fund.
(For the Periods ended Start of
December 31, 2002) 1 Year Performance*
Small/Mid
Cap Core
Fund
Return Before Taxes (12.88)% (3.22)%
Return After Taxes on
Distributions** (15.07)% (3.92)%
Return After Taxes on
Distributions and Sale
of Fund Shares** (5.89)% (2.55)%
RMCI
(reflects no deduction
for fees, expenses, or
taxes) (16.18)% (1.42)%
* The Fund's start of performance date was May 31, 1999.
** After-tax returns are calculated using the historical highest
individual federal marginal income tax rates and do not reflect the impact
of state and local taxes. Actual after-tax returns depend on an investor's
tax situation and may differ from those shown. After-tax returns shown are
not relevant to investors who hold their Fund Shares through tax-deferred
arrangements, such as 401(k) plans or individual retirement accounts. In
some cases the return after taxes on distributions and sale of Fund Shares
may exceed the return before taxes due to an assumed tax benefit from any
losses on a sale of Fund shares at the end of the measurement period.
The Fund is the successor to a portfolio of assets of CF Mid/Small Cap
Fund (Former Fund), a common trust fund managed by the Adviser, which was
transferred to the Fund on October 2, 2000 in exchange for Fund shares.
The quoted returns include the returns of the Former Fund for periods
before October 2, 2000, adjusted to reflect the Fund's expenses. The
Former Fund was not registered under the Investment Company Act of 1940
("1940 Act") and therefore was not subject to certain investment
restrictions that are imposed by the 1940 Act. If the Former Fund had been
registered under the 1940 Act, returns may have been adversely affected.
(For the periods ended 1 Year 5 Years 10 Years
December 31, 2002)
Intermediate Bond
Fund
Return Before Taxes 8.11% 5.34% 5.51%
Return After Taxes on 6.08% 4.41% 5.05%
Distributions*
Return After Taxes on 4.93% 3.87% 4.35%
Distributions and Sale of
Fund Shares*
LBIGC 9.84% 7.48% 7.08%
(reflects no deduction for
fees, expenses, or taxes)
- ---------------------------------------------------------------------------
* After-tax returns are calculated using the historical highest
individual federal marginal income tax rates and do not reflect the impact
of state and local taxes. Actual after-tax returns depend on an investor's
tax situation and may differ from those shown. After-tax returns shown are
not relevant to investors who hold their Fund Shares through tax-deferred
arrangements, such as 401(k) plans or individual retirement accounts. In
some cases the return after taxes on distributions and sale of Fund Shares
may exceed the return before taxes due to an assumed tax benefit from any
losses on a sale of Fund shares at the end of the measurement period.
The Fund is the successor to a portfolio of assets of CF Max Income Bond
Fund (Former Fund), a common trust fund managed by the Adviser, which were
transferred to the Fund on October 2, 2000 in exchange for Fund shares.
The quoted performance includes the performance of the Former Fund for
periods before the date the Fund's operations commenced on October 2,
2000, adjusted to reflect the Fund's expenses. The Former Fund was not
registered under the Investment Act of 1940 ("1940 Act") and therefore was
not subject to certain investment restrictions that are imposed by the
1940 Act. If the Former Fund had been registered under the 1940 Act,
performance may have been adversely affected.
(For the Periods ended
December 31, 2002) 1 Year 5 Years 10 Years
Small/MidCap Core
Fund
Return Before Taxes 5.45% 3.71% 4.15%
Return After Taxes on
Distributions* 5.45% 3.71% 4.15%
Return After Taxes on
Distributions and Sale of
Fund Shares* 4.74% 3.35% 3.61%
Lehman Brothers 5-Year
Municipal Bond Index
(reflects no deduction for
fees, expenses, or taxes) 9.27% 5.91% 5.88%
* After-tax returns are calculated using the historical highest
individual federal marginal income tax rates and do not reflect the impact
of state and local taxes. Actual after-tax returns depend on an investor's
tax situation and may differ from those shown. After-tax returns shown are
not relevant to investors who hold their Fund Shares through tax-deferred
arrangements, such as 401(k) plans or individual retirement accounts. In
some cases the return after taxes on distributions and sale of Fund Shares
may exceed the return before taxes due to an assumed tax benefit from any
losses on a sale of Fund shares at the end of the measurement period.
The Fund is the successor to a portfolio of assets of CF Vermont Tax
Exempt Fund (Former Fund), a common trust fund managed by the Adviser,
which were transferred to the Fund on October 2, 2000 in exchange for Fund
shares. The quoted performance includes the performance of the Former Fund
for periods before the date the Fund's operations commenced on October 2,
2000, adjusted to reflect the Fund's expenses. The Former Fund was not
registered under the Investment Act of 1940 ("1940 Act") and therefore was
not subject to certain investment restrictions that are imposed by the
1940 Act. If the Former Fund had been registered under the 1940 Act,
performance may have been adversely affected.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Federated Capital Appreciation Fund
This report covers Federated Capital Appreciation Fund's fiscal year
performance period from November 1, 2002, through October 31, 2003. During
this period, the fund produced total returns of 16.89%, 15.99%, 15.95% and
17.83% for Class A, Class B, Class C and Class K shares, respectively,
based on net asset value (NAV).*
Equities' rebound following the long bear market is reflected in the
fund's performance. However, the fund underperformed its benchmark, the
Standard & Poor's 500 Index, which returned 20.80% during the same
period.** The fund lagged its peer group as measured by the Lipper Large
Cap Core Funds Average category,*** which produced an average total return
of 16.86% for the same period.
Stock selection within the Consumer Staples and Materials sectors aided
performance, while weaker stock selections within the Information
Technology, Financials and Consumer Discretionary sectors were detractors.
Our overweights in the Utilities and Industrials sectors were beneficial
during the year, with returns being limited by our underweighted position
in Financials and our overweighted positions in Energy and Consumer
Staples stocks.
Top-performing holdings for the fund included Intel Corp. (2.3% of net
assets), EMC Corp. (0.9% of net assets), Citigroup, Inc. (2.4% of net
assets), Morgan Stanley (1.6% of net assets). Positions that impacted the
fund negatively included Schering Plough Corp. (0.7% of net assets),
Lockheed Martin Corp. (0.7% of net assets), and Fifth Third Bancorp (0.3%
of net assets).
As you may recall, the split between value and growth holdings in
Federated Capital Appreciation Fund never exceeds 60%-40% either way. As
of October 31, 2003, the fund held 46% of its assets in growth stocks and
the remaining 54% in value stocks.
Our moves to increase the portfolio's exposure to more cyclically
sensitive names were correct, and we continue to be overweight in the
Information Technology and Industrials sectors, with an emphasis on the
corporate cyclicals. Our overweighted positions in the Energy and
Telecommunication Services sectors are contrarian, deeper value plays.
* Performance quoted is based on net asset value. Past performance is no
guarantee of future results. Investment return and principal value will
fluctuate so an investor's shares, when redeemed, may be worth more or
less than their original cost. Total returns for the period based on
offering price for Class A, B and C shares were 10.45%, 10.49%, and
13.80%, respectively. Current performance information is available at
www.federatedinvestors.com or by calling 1-800-341-7400.
** The S&P 500 Index is an unmanaged capitalization-weighted index of 500
stocks designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing
all major industries. Investments cannot be made in an index.
*** Lipper figures represent the average total returns reported by all
mutual funds designated by Lipper, Inc. as falling into the category
indicated. They do not reflect sales charges.
Line Graph
The graph below illustrates the hypothetical investment of $10,000* in the
Federated Capital Appreciation Fund (Class A Shares) (the "Fund") from
October 31, 1993 to October 31, 2003 compared to the Standard and Poor's
500 Index (S&P 500)** and the Lipper Large-Cap Core Funds Average
(LLCCFA).***
AVERAGE ANNUAL TOTAL RETURN**** FOR THE PERIOD ENDED OCTOBER 31, 2003
1 Year............................................10.45%
5 Years............................................6.22%
10 Years..........................................11.32%
Start of Performance (1/1/1977).............12.84%
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
corner of the line graph. The Class A Shares of Federated Capital
Appreciation Fund (the "Fund"), based on a 5.50% sales charge, are
represented by a solid line. The S&P 500 Index ("S&P 500") is represented
by a dotted line, the Lipper Large-Cap Core Funds Average ("LLCCFA") is
represented by a dash line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the
Class A Shares of the Fund, the S&P 500 and the LLCCFA. The "x" axis
reflects computation periods from 10/31/93 to 10/31/03. The "y" axis
reflects the cost of the investment. The right margin reflects the ending
value of the hypothetical investment in the Fund's Class A Shares, based
on a 5.50% sales charge, as compared to the S&P 500, and the LLCCFA. The
ending values were $30,942, $26,968, and $23,124, respectively.
Past performance is no guarantee of future results. Returns shown do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares. For after-tax returns,
visit www.federatedinvestors.com. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost. Mutual funds are not obligations of
or guaranteed by any bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the Fund with no
sales load. Effective January 1, 1996, the fiscal year end of this Fund
was changed from December 31 to October 31. Effective November 14, 1995,
the maximum sales charge was 5.50% ($10,000 investment minus $550 sales
charge = $9,450). The Fund's performance assumes the reinvestment of all
dividends and distributions. The S&P 500 and the LLCCFA have been adjusted
to reflect reinvestment of dividends on securities in the index and the
average.
** The S&P 500 is not adjusted to reflect sales charges, expenses, or
other fees that the Securities and Exchange Commission (SEC) requires to
be reflected in the Fund's performance. The index is unmanaged.
*** The LLCCFA represents the average of the total returns reported by all
of the mutual funds designated by Lipper, Inc. as falling into the
category indicated, and is not adjusted to reflect any sales charges.
However, these total returns are reported net of expenses or other fees
that the SEC requires to be reflected in a mutual fund's performance.
**** Total returns quoted reflect all applicable sales charges.
Federated Kaufmann Fund
Fiscal 2003, which ended October 31, 2003, was an excellent year for
Federated Kaufmann Fund. Total return (for the Class A, Class B and Class
C Shares, respectively) was 38.42%, 37.50% and 37.50%, respectively, at
net asset value for the year.* According to Lipper Inc., this put the fund
in the top 14% of its category, Mid-Cap Growth Funds, for the reporting
period.** The fund's Class A Shares ranked 68 out of 492 funds for the
one-year period as of 10/31/03 in the Lipper Mid-Cap Growth category based
on total returns.
In general, the stock market was very strong during the second half of
fiscal 2003, reflecting the steadily improving prospects for a strong
economic recovery. Some of the fund's biggest gainers during the
reporting period were companies that, as dominant competitors in their
fields, are helping to lead that recovery-- companies such as PETsMART,
Advance Auto Parts, Cendant and Seagate Technology.
Many of the fund's core positions are in fast-growing, highly-profitable,
conservatively-financed, well-managed companies. They are companies that
we have followed for years or are in industries that we know well. In
general, we are quite optimistic about how these companies should benefit
from a continuation of the economic upturn. Moreover, even after the
run-up some stocks have had in the last six months, valuations continue to
be attractive. The price-to earnings ratios of PETsMART, Advance Auto
Parts, Cendant and Seagate Technology, to mention again some of our
biggest recent gainers, are all well below what one might expect for such
companies in an ebullient market in a low interest rate environment. It
seems to us that the stocks of some of the highest quality companies have
lagged behind lesser names in the recent stock market run-up. This is
another reason that we are positive about the intermediate-term prospects
for Federated Kaufmann Fund's portfolio. Lastly, we have managed to build
up a good-sized cash position. This should give us good flexibility in the
months ahead, particularly if the IPO market begins to recover along with
the economy.
* Past performance is no guarantee of future results. Investment return
and principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Total return
based on offering price, (i.e. less any applicable sales charges) for
Class A, Class B, and Class C Shares were
30.81%, 32.00%, and 35.13%, respectively. Current performance information
is available at our website www.federatedinvestors.com or by calling
1-800-341-7400.
Small company stocks may be less liquid and subject to greater price
volatility than large capitalization stocks.
** Lipper figures represent the average of the total returns reported by
all the mutual funds designated by Lipper Inc. as falling into the
respective categories indicated. They do not reflect sales charges.
Line Graph
Growth of $10,000 Investment over 15 years in Federated Kaufmann Fund*
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
corner of the line graph. The Class A Shares of Federated Kaufmann Fund
(the "Fund"), based on a 5.50% sales charge, are represented by a solid
line. The Russell Mid-Cap Growth Index ("RMGI") is represented by a dotted
line, and the Lipper Mid-Cap Growth Index ("LMCGI") is represented by a
dash line. The line graph is a visual representation of a comparison of
change in value of a $10,000 hypothetical investment in the Class A Shares
of the Fund, the RMGI, and the LMCGI. The "x" axis reflects computation
periods from 10/31/88 to 10/31/03. The "y" axis reflects the cost of the
investment. The right margin reflects the ending value of the hypothetical
investment in the Fund's Class A Shares, based on a 5.50% sales charge, as
compared to the RMGI, and the LMCGI. The ending values were $101,734,
$54,303, and $49,608, respectively.
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED OCTOBER 31, 2003
<table>
<caption>
<s> <c> <c> <c> <c> <c>
1 Year 2 Years 5 Years 10 Years 15 Years
Federated Kaufmann Fund** 38.42% 12.29% 13.86% 13.27% 17.06%
Russell Mid-Cap Growth Index*** 39.30% 7.13% 4.62% 9.17% 11.78%
Lipper Mid-Cap Growth Index*** 31.17% 3.09% 5.63% 8.09% 11.27%
</table>
Past performance is no guarantee of future results. Returns shown do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares. For after-tax returns,
visit www.federatedinvestors.com. Investment return and principal value
will fluctuate, so that an investor's shares, when redeemed, may be worth
more or less than their original cost. Mutual funds are not obligations of
or guaranteed by any bank and are not federally insured.
* Represent a hypothetical investment of $10,000 in the Fund after
deducting the maximum sales charge of 5.50% ($10,000 investment minus $550
sales charge = $9,450). The Fund's performance assumes the reinvestment of
all dividends and distributions. The RMGI and the LMCGI have been adjusted
to reflect reinvestment of all dividends on securities in the index.
** Performance shown is for the Fund's Class A Shares at net asset value.
Based on the maximum sales charge of 5.50%, the Fund's Class A Shares'
average annual 1-year, 2-year, 5-year, 10-year and 15-year total returns
were 30.81%, 9.16%, 12.58%, 12.63% and 16.62%, respectively. Additional
classes of shares are available. Performance for these classes will vary
due to differences in charges and expenses. The fund is the successor to
the Kaufmann Fund, Inc. (Kaufmann Fund) pursuant to a reorganization that
took place on April 23, 2001. Prior to that date, the fund's Class A,
Class B and Class C shares had no investment operations. Accordingly, the
performance information provided is historical information of the Kaufmann
Fund, but has been adjusted to reflect the maximum sales charge or
contingent deferred sales charge and expenses applicable to the fund's
Class A, Class B, and Class C shares. Current performance information is
available at our website www.federatedinvestors.com or by calling
1-800-341-7400.
*** The RMGI and the LMCGI are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission (SEC)
requires to be reflected in the Fund's performance. These indexes are
unmanaged.
Federated Total Return Bond Fund
The Federated Total Return Bond Fund's Institutional and Institutional
Service Shares, posted total returns for the 12-month reporting period
ended November 30, 2003 of 6.21% and 5.90%, respectively, based on net
asset value, versus a 5.61% return for the Lipper Intermediate Investment
Grade Debt Category Average.*,** In addition, the fund also outperformed
the 5.18% return of its benchmark, the Lehman Brothers Aggregate Bond
Index.*** The primary reasons for the strong relative performance were the
duration and sector allocation decisions.**** Anticipating a rising rate
environment due to stronger economic activity and higher corporate
earnings, the Fund largely maintained a portfolio less sensitive to
interest rates along with greater economic sensitivity relative to its
benchmark index. This resulted in a duration target neutral to slightly
shorter than the benchmark, with a sector allocation which over-weighted
corporate bonds and under-weighted U.S. government securities. As a
result, the fund generated both above average income and total return
relative to its peer group and benchmark index.
* Past performance is no guarantee of future results. Investment return
and principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Current
performance information is available at our website
www.federatedinvestors.com or by calling 1-800-341-7400.
** Lipper figures represent the average of the total returns reported by
all the mutual funds designated by Lipper Inc. as falling into the
respective categories indicated. They do not reflect sales charges.
*** Lehman Brothers Aggregate Bond Index is an unmanaged index composed of
securities from the Lehman Brothers Government/Corporate Bond Index,
Mortgage-Backed Securities Index and the Asset-Backed Securities Index.
Total return comprises price appreciation/depreciation and income as a
percentage of the original investment. Indices are rebalanced monthly by
market capitalization.
**** Duration is a measure of a security's price sensitivity to changes in
interest rates. Securities with longer durations are more sensitive to
changes in interest rates than securities of shorter durations.
Line Graph
GROWTH OF A $25,000 INVESTMENT - INSTITUTIONAL SERVICE SHARES
The graph below illustrates the hypothetical investment of $25,000* in the
Federated Total Return Bond Fund (Institutional Service Shares) (the
"Fund") from October 1, 1996 (start of performance) to November 30, 2003
compared to the Lehman Brothers Aggregate Bond Index (LBAB)** and the
Lipper Intermediate Investment Grade Debt Category Average (LIIGDCA).***
Average Annual Total Returns for the Year Ended 11/30/2003
1 Year 5.90%
5 Years 6.00%
Start of Performance (10/1/1996) 7.23%
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
corner of the line graph. The Institutional Service Shares of Federated
Total Return Bond Fund (the "Fund"), are represented by a solid line. The
Lehman Brothers Aggregate Bond Index ("LBAB") is represented by a dotted
line, and the Lipper Intermediate Investment Grade Debt Category Average
("LIIGDCA") is represented by a dash line. The line graph is a visual
representation of a comparison of change in value of a $25,000
hypothetical investment in the Institutional Service Shares of the Fund,
the LBAB, and the LIIGDCA. The "x" axis reflects computation periods from
10/1/96 to 11/30/03. The "y" axis reflects the cost of the investment. The
right margin reflects the ending value of the hypothetical investment in
the Fund's Institutional Service Shares, as compared to the LBAB and the
LIIGDCA. The ending values were $41,242, $41,863 and $37,865,
respectively.
Past performance is no guarantee of future results. Returns shown do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares. For after-tax returns,
visit www.federatedinvestors.com. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than original cost. Mutual funds are not obligations of or
guaranteed by any bank and are not federally insured.
* The Fund's performance assumes the reinvestment of all dividends and
distributions. The LBAB and LIIGDCA have been adjusted to reflect
reinvestment of dividends on securities in the index.
** The LBAB is not adjusted to reflect taxes, sales charges, expenses, or
other fees that the SEC requires to be reflected in the Fund's
performance. The index is unmanaged.
*** The LIIGDCA represents the average of the total returns reported by
all of the mutual funds designated by Lipper, Inc. as falling into the
respective category. These total returns are reported net of expenses and
other fees that the SEC requires to be reflected in a mutual fund's
performance.
Management's Discussion of Fund Performance
Banknorth Large Cap Core Fund
The year ended August 31, 2003 provided equity investors with quite a
roller coaster ride. The Standard & Poor's 500 Index (S&P 500)* twice
tested the low of below 800 first reached in July 2002 before rebounding
to close out the period above the 1000 mark. The NASDAQ registered even
more impressive gains, up over 50% from its lows. The drivers of this
performance were an economic background of slow recovery, falling interest
rates, and outside events that included the Iraq situation, tax cuts, and
the early stages of the 2004 Presidential race. These events raised
investor uncertainty to very high levels early in 2003, causing a third
and final test of the market low in March. This was followed by a strong
recovery that provided a total return of 12.06% for the twelve-month
reporting period for the S&P 500, the fund's most appropriate benchmark,
following two years of declines.
The Banknorth Large Cap Core Fund lagged the market in these volatile
times, with a total return of 6.78%, behind the S&P 500 by approximately
5.30%. The shortfall occurred during the second quarter of calendar 2003.
While we realized positive returns during that time, the market overall
did far better. This was due to our emphasis on better quality companies
with steadier growth prospects and lower risk profiles, an approach that
served us well during the years of decline. During the second quarter the
market favored stocks of lower quality which would benefit from a robust
economic recovery. Our own outlook, although positive, was for a more
moderate pace of economic growth. We positioned the portfolio in companies
and sectors with less aggressive, more assured potential for increased
earnings. We note that the fund's performance has improved since the end
of the second quarter.
* The S&P 500 is an unmanaged capitalization-weighted index of 500 stocks
designed to measure performance of the broad domestic economy through
changes in the aggregate market value of 500 stocks representing all major
industries. Investments cannot be made in an index.
GROWTH OF $10,000 INVESTED IN BANKNORTH LARGE CAP CORE FUND*,**
The following chart reflects a hypothetical comparison in the change in
value of a $10,000 investment from December 17, 1997 to August 31, 2003,
including the maximum sales charge, in Banknorth Large Cap Core Fund,
including reinvestment of dividends and distributions, to the S&P 500.
Total returns for the index do not reflect sales charges, expenses or
other fees that the Securities and Exchange Commission (SEC) requires to
be reflected in the Fund's returns. The Fund is professionally managed
while the index is unmanaged and is not available for investment. During
the period, the Fund waived certain fees and expenses; otherwise, total
return would have been lower.
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
corner of the line graph. The Shares of Banknorth Large Cap Core Fund (the
"Fund"), based on a 5.50% sales charge, are represented by a solid line.
The Standard & Poor's 500 Index ("S&P 500") is represented by a dotted
line. The line graph is a visual representation of a comparison of change
in value of a $10,000 hypothetical investment in the Shares of the Fund
and the S&P 500. The "x" axis reflects computation periods from 12/17/97
to 8/31/03. The "y" axis reflects the cost of the investment. The right
margin reflects the ending value of the hypothetical investment in the
Fund's Shares, based on a 5.50% sales charge, as compared to the S&P 500.
The ending values were $12,542 and $11,333, respectively.
AVERAGE ANNUAL TOTAL RETURN*** FOR THE PERIOD ENDED AUGUST 31, 2003**
1 Year . . . . . . . . . . . . . . . . . . 0.95%
5 Years . . . . . . . . . . . . . . . . . .4.09%
Since Inception (12/17/97). . . . . . . . .4.05%
Investment return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more
or less than their original cost. Past performance is no guarantee of
future results. Mutual funds are not obligations of or guaranteed by any
bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the Fund after
deducting the maximum sales charge of 5.50% ($10,000 investment minus $550
sales charge = $9,450). Beginning November 30, 2003, the Fund no longer
charges a sales charge.
** The Fund is the successor to the Investors Equity Fund (Former Fund), a
former series of Forum Funds, pursuant to a reorganization that took place
on January 8, 2001. Prior to that date, the Fund had no investment
operations. The returns provided for periods prior to January 8, 2001,
are historical information of the Former Fund. The Former Fund was managed
by the Banknorth Group, N.A. and had substantially the same investment
policies as the Fund.
*** Total return quoted reflects all applicable sales charges.
Banknorth Small/Mid Cap Core Fund
The year ended August 31, 2003 provided equity investors with quite a
roller coaster ride. The Standard & Poor's 500 Index (S&P 500)* twice
tested the low of below 800 first reached in July 2002 before rebounding
to close out the period above the 1000 mark. The NASDAQ registered even
more impressive gains, up over 50% from its lows. The drivers of this
performance were an economic background of slow recovery, falling interest
rates, and outside events that included the Iraq situation, tax cuts, and
the early stages of the 2004 Presidential race. These events raised
investor uncertainty to very high levels early in 2003, causing a third
and final test of the market low in March. This was followed by a strong
recovery that provided a 12-month total return of 12.06% for the S&P 500
following two years of declines. The Russell Midcap Index (RMCI)**, the
fund's benchmark, returned 21.92%.
The Banknorth Small/Mid Cap Core Fund lagged the market in these volatile
times, recording a total return of 7.33%. The bulk of this shortfall
occurred during the second quarter of calendar 2003. While we realized
positive returns during that time, the market overall did far better. This
was due to our emphasis on better quality companies with steadier growth
prospects and lower risk profiles, an approach that served us well during
the years of decline. During the second quarter especially, the market
favored stocks of lower quality which would benefit from a robust economic
recovery. Many of the best performing companies in the RMCI fail to meet
our quality standards for consideration for purchase, and our own outlook,
although positive, was for a more moderate pace of economic growth. We
positioned the portfolio in companies and sectors with less aggressive,
more assured potential for increased earnings. These companies did well,
but not spectacularly.
* The S&P 500 is an unmanaged capitalization-weighted index of 500 stocks
designed to measure performance of the broad domestic economy through
changes in the aggregate market value of 500 stocks representing all major
industries. Investments cannot be made in an index.
** The RMCI measures the performance of the 800 smallest companies in the
Russell 1000 Index, which represent approximately 25% of the total market
capitalization of the Russell 1000 Index. The index is unmanaged, and
investments cannot be made in an index.
GROWTH OF $10,000 INVESTED IN BANKNORTH SMALL/MID CAP CORE FUND*,**
The following chart reflects a hypothetical comparison in the change in
value of a $10,000 investment from May 31, 1999 to August 31, 2003,
including the maximum sales charge, in Banknorth Small/Mid Cap Core Fund,
including reinvestment of dividends and distributions, to the Russell 2500
Index(R2500I)*** and the RMCI. Total returns for each index do not reflect
sales charges, expenses or other fees that the SEC requires to be
reflected in the Fund's returns. The Fund is professionally managed while
each index is unmanaged and is not available for investment. During the
period, the Fund waived certain fees and expenses; otherwise, total return
would have been lower.
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
corner of the line graph. The Shares of Banknorth Small/Mid Cap Core Fund
(the "Fund"), based on a 5.50% sales charge, are represented by a solid
line. The Russell Midcap Index ("RMCI") is represented by a dotted line,
and the Russell 2500 Index ("R2500I") is represented by a dash line. The
line graph is a visual representation of a comparison of change in value
of a $10,000 hypothetical investment in the Shares of the Fund, the RMCI,
and the R2500I. The "x" axis reflects computation periods from 5/31/99 to
8/31/03. The "y" axis reflects the cost of the investment. The right
margin reflects the ending value of the hypothetical investment in the
Fund's Shares, based on a 5.50% sales charge, as compared to the RMCI, and
the R2500I. The ending values were $9,572, $11,822, and $13,173,
respectively.
AVERAGE ANNUAL TOTAL RETURN**** FOR THE PERIOD ENDED AUGUST 31, 2003**
1 Year . . . . . . . . . . . . . . . . .1.40%
Since Inception (5/31/99) . . . . . . . (1.02)%
Investment return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more
or less than their original cost. Past performance is no guarantee of
future results. Mutual funds are not obligations of or guaranteed by any
bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the Fund after
deducting the maximum sales charge of 5.50% ($10,000 investment minus $550
sales charge = $9,450).
** The Fund is the successor to a portfolio of assets of CF Mid/Small Cap
Fund (Former Fund), a common trust fund managed by the Adviser, which was
transferred to the Fund on October 2, 2000 in exchange for Fund shares.
The quoted returns are the returns of the Former Fund for periods before
October 2, 2000, adjusted to reflect the Fund's expenses. The Former Fund
was not registered under the Investment Company Act of 1940 ("1940 Act")
and therefore was not subject to certain investment restrictions that are
imposed by the 1940 Act. If the Former Fund had been registered under the
1940 Act, returns may have been adversely affected.
*** The R2500I measures the performance of the 2,500 smallest companies in
the Russell 3000 Index, which represents approximately 23% of the total
market capitalization of the Russell 3000 Index. The index is unmanaged,
and investments cannot be made in an index.
**** Total return quoted reflects all applicable sales charges.
Banknorth Intermediate Bond Fund
During the last 12 months, economic uncertainty and the impending conflict
with Iraq loomed large for U.S. financial markets. By the end of the
reporting period, the mood had moved from apprehension to optimism as a
result of a successful military campaign, positive earnings growth, and
stronger economic reports. As a result the bond market experienced a
significant level of price volatility during this period. The yield of the
10-year U.S. Treasury note hit a 45-year low of 3.11% on June 13, then
went on to close at 4.46% at the end of the fiscal period. Through much of
the last three years, falling interest rates boosted returns from bonds
with the longest maturities and the highest quality ratings. Those trends
reversed themselves in the second half of the year. The fund's results
reflect these changes as falling bond prices more than offset interest
income.
For the six and 12-month reporting periods ended August 31, 2003, the fund
underperformed its benchmark, the Lehman Brothers Intermediate
Government/Credit Index (LBIGC)*. At the start of the reporting period the
fund's maturity structure was positioned for a period of rising interest
rates, a strategy that contributed positively to relative returns in the
first quarter of 2003. In the second quarter, however, this positioning
detracted from performance. During the second quarter, the U.S. Federal
Reserve announced concerns about deflation risk and as a result continued
to support an easing bias cutting the federal funds target rate by 25
basis points to 1.00% in its June meeting. In a declining rate
environment, the fund's short maturity profile relative to the LBIGC
detracted from overall results for the year. Although interest rates
increased sharply in late June and July, the change in rates served to
only partially offset the fund's overall results versus the LBIGC.
Simultaneously, a greater exposure to investment grade bonds, compared to
the benchmark, contributed positively to overall performance. Over the
reporting period, corporate bond performance improved relative to
government bonds due to the positive effects of a gradually improving
economic environment.
* The LBIGC is a market value weighted performance benchmark for
government and corporate fixed-rate debt issues with maturities between
one and ten years. The index is unmanaged, and investments cannot be made
in an index.
GROWTH OF $10,000 INVESTED IN BANKNORTH INTERMEDIATE BOND FUND*,**
The following chart reflects a hypothetical comparison in the change in
value of a $10,000* investment from August 31, 1993 to August 31, 2003,
including the maximum sales charge, in Banknorth Intermediate Bond Fund,
including reinvestment of dividends and distributions, to the Lehman
Brothers Intermediate Government/ Credit Index (LBIGC). Total returns for
the index do not reflect sales charges, expenses or other fees that the
SEC requires to be reflected in the Fund's returns. The Fund is
professionally managed while the index is unmanaged and is not available
for investment. During the period, the Fund waived certain fees and
expenses; otherwise, total return would have been lower.
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
corner of the line graph. The Shares of Banknorth Intermediate Bond Fund
(the "Fund"), are represented by a solid line. The Lehman Brothers
Intermediate Government/Credit Index ("LBIGC") is represented by a dotted
line. The line graph is a visual representation of a comparison of change
in value of a $10,000 hypothetical investment in the Shares of the Fund
and the LBIGC. The "x" axis reflects computation periods from 8/31/93 to
8/31/03. The "y" axis reflects the cost of the investment. The right
margin reflects the ending value of the hypothetical investment in the
Fund's Shares, as compared to the LBIGC. The ending values were $15,499
and $18,624, respectively.
AVERAGE ANNUAL TOTAL RETURN*** FOR PERIOD ENDED AUGUST 31, 2003**
1 Year . . . . . . . . . . (1.44)%
5 Years . . . . . . . . . .3.59%
10 Years . . . . . . . . . 4.48%
Investment return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more
or less than their original cost. Past performance is no guarantee of
future results. Mutual funds are not obligations of or guaranteed by any
bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the Fund after
deducting the maximum sales charge of 3.75% ($10,000 investment minus $375
sales charge = $9,625).
** The Fund is the successor to a portfolio of assets of CF Max Income
Bond Fund (Former Fund), a common trust fund managed by the Adviser, which
was transferred to the Fund on October 2, 2000 in exchange for Fund
shares. The quoted returns are the returns of the Former Fund for periods
before October 2, 2000, adjusted to reflect the Fund's expenses. The
Former Fund was not registered under the Investment Company Act of 1940
("1940 Act") and therefore was not subject to certain investment
restrictions that are imposed by the 1940 Act. If the Former Fund had been
registered under the 1940 Act, returns may have been adversely affected.
*** Total return quoted reflects all applicable sales charges.
Banknorth Vermont Municipal Bond Fund
During the last 12 months, interest rates have increased significantly,
except for the shorter end of the yield curve. Five years and longer, we
saw rates increase on average 20%. On the long end, fifteen to thirty
years, rates were up on average 8%. All in all, for the first time in a
long time we saw rising interest rates.
The Banknorth Vermont Municipal Bond Fund was up 1.74%. This performance
was in line with some general and state specific municipal indices; there
is no Vermont benchmark index for appropriate comparison.
The fund has an average maturity and duration* in the intermediate term
and invests primarily in high quality Vermont paper, with less than 8%
currently invested in out of state issues, excluding the money market
balance. Our largest issuers include the State of Vermont, Vermont
Municipal Bond Bank, Vermont Housing Finance Agency, Burlington Public
Improvement and Vermont Education and Health for Marlboro College.
During the reporting period, the Vermont economy continued to lag the U.S.
economy as a whole. Unemployment rates remained lower than the U.S.
average, despite the increasing number of corporate layoffs (IBM,
Blodgett, Ethan Allen and others). Like other New England states,
Vermont's fiscal policy went into deficit in 2002. Yet, the general
obligation of the state retained an AA-rating.
* Duration is a measure of a security's price sensitivity to changes in
interest rates. Securities with longer durations are more sensitive to
changes in interest rates than securities of shorter durations.
GROWTH OF $10,000 INVESTED IN BANKNORTH VERMONT MUNICIPAL BOND FUND*,**
The following chart reflects a hypothetical comparison in the change in
value of a $10,000 investment from August 31, 1993 to August 31, 2003,
including the maximum sales charge, in Banknorth Vermont Municipal Bond
Fund, including reinvestment of dividends and distributions, to the Lehman
Brothers 5-Year Municipal Bond Index.*** Total returns for the index do
not reflect sales charges, expenses or other fees that the SEC requires to
be reflected in the Fund's returns. The Fund is professionally managed
while the index is unmanaged and is not available for investment. During
the period, the Fund waived certain fees and expenses; otherwise, total
return would have been lower.
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
corner of the line graph. The Shares of Banknorth Vermont Municipal Bond
Fund (the "Fund"), are represented by a solid line. The Lehman Brothers
5-Year Municipal Bond Index ("LB5YBI") is represented by a dotted line.
The line graph is a visual representation of a comparison of change in
value of a $10,000 hypothetical investment in the Shares of the Fund and
the LB5YBI. The "x" axis reflects computation periods from 8/31/93 to
8/31/03. The "y" axis reflects the cost of the investment. The right
margin reflects the ending value of the hypothetical investment in the
Fund's Shares, as compared to the LB5YBI. The ending values were $13,789
and $16,845, respectively.
AVERAGE ANNUAL TOTAL RETURN**** FOR THE PERIOD ENDED AUGUST 31, 2003**
1 Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.. . . . . . . . . . . . . . . . . . . . . . . . (2.08)%
5 Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.. . . . . . . . . . . . . . . . . . . . . . . . . 2.37%
10 Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.. . . . . . . . . . . . . . . . . . . . . . . . 3.26%
Investment return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more
or less than their original cost. Past performance is no guarantee of
future results. Mutual funds are not obligations of or guaranteed by any
bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the Fund after
deducting the maximum sales charge of 3.75% ($10,000 investment minus $375
sales charge = $9,625).
** The Fund is the successor to a portfolio of assets of CF Vermont Tax
Exempt Fund (Former Fund), a common trust fund managed by the Adviser,
which was transferred to the Fund on October 2, 2000 in exchange for Fund
shares. The quoted returns are the returns of the Former Fund for periods
before October 2, 2000, adjusted to reflect the Fund's expenses. The
Former Fund was not registered under the Investment Company Act of 1940
("1940 Act") and therefore was not subject to certain investment
restrictions that are imposed by the 1940 Act. If the Former Fund had been
registered under the 1940 Act, returns may have been adversely affected.
*** The Lehman Brothers 5-Year Municipal Bond Index is a broad market
performance benchmark for the tax-exempt bond market. The index is
unmanaged and investments cannot be made in an index.
**** Total return quoted reflects all applicable sales charges.
Fund Management
BIA is the investment adviser to the Banknorth Funds. FEMCOPA is
the investment adviser to Capital Appreciation Fund and Kaufmann Fund and
FIMCO is the investment adviser to Total Return Bond Fund and Federated
Vermont Fund. BIA is responsible for the investment management of each
Banknorth Fund's assets, including decisions regarding the purchase and
sale of portfolio securities. FEMCOPA and FIMCO are responsible for the
investment management of each Federated Fund's assets, including decisions
regarding the purchase and sale of portfolio securities. FEMCOPA, FIMCO
and other subsidiaries of Federated have as of December 31, 2003,
approximately $198 billion in assets under management. BIA's address is
One Portland Square, Portland, ME 04112. FEMCOPA and FIMCO's address is
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA
15222-3779.
The annual investment advisory fee for Capital Appreciation Fund is
0.75% of the fund's average daily net assets. The annual investment
advisory fee for Kaufmann Fund is 1.425% of the fund's average daily net
assets. The annual investment advisory fee for Total Return Bond Fund and
Federated Vermont Fund is 0.40% of the fund's average daily net assets.
The annual investment advisory fee for Large Cap Core Fund and Small/Mid
Cap Core Fund is 0.75%, Intermediate Bond Fund is 0.60% and Banknorth
Vermont Fund is 0.50% of each fund's average daily net assets.
BIA, FEMCOPA and FIMCO may voluntarily choose to waive a portion of
their advisory fee or reimburse other expenses of each fund. These
voluntary waivers or reimbursements may be terminated at any time in the
adviser's sole discretion.
The following individuals serve as portfolio managers of Capital
Appreciation Fund:
David P. Gilmore
David P. Gilmore has been the Fund's Portfolio Manager since September
2000. Mr. Gilmore joined Federated in August 1997 as an Investment
Analyst. He was promoted to Senior Investment Analyst in July 1999 and
became a Vice President of the Fund's Adviser in July 2001. Mr. Gilmore
was a Senior Associate with Coopers & Lybrand from January 1992 to May
1995. Mr. Gilmore is a Chartered Financial Analyst and attended the
University of Virginia, where he earned his M.B.A., from September 1995 to
May 1997. Mr. Gilmore has a B.S. from Liberty University.
Linda A. Duessel
Linda A. Duessel has been the Fund's Portfolio Manager since November
2001. Ms. Duessel joined Federated in 1991 and has been a Portfolio
Manager since 1995. She became a Senior Vice President of the Fund's
Adviser in January 2000 and served as a Vice President of the Fund's
Adviser from 1995 through 1999. Ms. Duessel was a Senior Investment
Analyst and an Assistant Vice President of the Fund's Adviser from 1991
until 1995. Ms. Duessel is a Chartered Financial Analyst and received her
M.S. in Industrial Administration from Carnegie Mellon University.
The following individuals serve as portfolio managers of Kaufmann
Fund:
Lawrence Auriana
Lawrence Auriana has been the Fund's Portfolio Manager since February
1986. He is Vice President of the Trust. Mr. Auriana joined Federated in
April 2001 as Co-Head of Investments/Federated Kaufmann. From August 1984
to April 2001, Mr. Auriana was President and Treasurer of Edgemont Asset
Management Corp., and Chairman of the Board and Portfolio Manager to The
Kaufmann Fund, Inc. (predecessor to the Federated Kaufmann Fund).
Mr. Auriana earned a B.S. in Economics from Fordham University and has
been engaged in the securities business since 1965.
Hans P. Utsch
Hans P. Utsch has been the Fund's Portfolio Manager since February 1986.
He is Vice President of the Trust. Mr. Utsch joined Federated in
April 2001 as Co-Head of Investments/Federated Kaufmann. From August 1984
to April 2001, Mr. Utsch was Chairman of the Board and Secretary of
Edgemont Asset Management Corp., and President and Portfolio Manager to
The Kaufmann Fund, Inc. (predecessor to the Federated Kaufmann Fund).
Mr. Utsch graduated from Amherst College and holds an M.B.A. from Columbia
University. He has been engaged in the securities business since 1962.
Jonathan Art
Jonathan Art was named a portfolio manager of the Fund in October 2003.
Mr. Art was an investment analyst with Edgemont Asset Management Corp.,
adviser to the Kaufmann Fund (predecessor to the Federated Kaufmann Fund)
from 1995 to 2001. He has been an investment analyst with the Fund's
current adviser since April 2001. Mr. Art earned a B.E.S. in mathematical
sciences from The John Hopkins University and an M.S. in Management from
the Massachusetts Institute of Technology.
Mark Bauknight
Mark Bauknight was named a portfolio manager of the fund in October 2003.
Mr. Bauknight was an investment analyst with Edgemont Asset Management
Corp., adviser to the Kaufmann Fund (predecessor to the Federated Kaufmann
Fund) from 1997 to 2001. He has been an investment analyst with the Fund's
current adviser since April 2001. Mr. Bauknight earned a B.A. in economics
and a B.A. in political science from the University of North Carolina at
Chapel Hill and an M.B.A. from the University of Oxford.
The following individuals serve as portfolio managers of Total
Return Bond Fund:
Joseph M. Balestrino
Joseph M. Balestrino has been the Fund's Portfolio Manager since September
1996. He is Vice President of Federated Total Return Series, Inc. Mr.
Balestrino joined Federated in 1986 and has been a Senior Portfolio
Manager and Senior Vice President of the Fund's Adviser since 1998. He was
a Portfolio Manager and a Vice President of the Fund's Adviser from 1995
to 1998. Mr. Balestrino served as a Portfolio Manager and an Assistant
Vice President of the Adviser from 1993 to 1995. Mr. Balestrino is a
Chartered Financial Analyst and received his Master's Degree in Urban and
Regional Planning from the University of Pittsburgh.
Mark E. Durbiano
Mark E. Durbiano has been the Fund's Portfolio Manager since inception.
Mr. Durbiano joined Federated in 1982 and has been a Senior Portfolio
Manager and a Senior Vice President of the Fund's Adviser since 1996. From
1988 through 1995, Mr. Durbiano was a Portfolio Manager and a Vice
President of the Fund's Adviser. Mr. Durbiano is a Chartered Financial
Analyst and received his M.B.A. in Finance from the University of
Pittsburgh.
Donald T. Ellenberger
Donald T. Ellenberger has been the Fund's Portfolio Manager since November
1997. Mr. Ellenberger joined Federated in 1996 as a Portfolio Manager and
a Vice President of a Federated advisory subsidiary. He has been a Vice
President of the Fund's Adviser since 1997. From 1986 to 1996, he served
as a Trader/Portfolio Manager for Mellon Bank, N.A. Mr. Ellenberger
received his M.B.A. in Finance from Stanford University.
Christopher J. Smith
Christopher J. Smith has been the Fund's Portfolio Manager since June
2000. Mr. Smith joined Federated in 1995 as a Portfolio Manager and a Vice
President of a Federated advisory subsidiary. He has been a Vice President
of the Fund's Adviser since 1997. He was an Assistant Vice President of
Provident Life & Accident Insurance Company from 1987 through 1994. Mr.
Smith is a Chartered Financial Analyst. He received his M.A. in Economics
and Finance from the University of Kentucky.
The following individuals serve as portfolio managers of Federated
Vermont Fund:
Lee R. Cunningham II
Lee R. Cunningham II has been a Portfolio Manager of the Fund since the
Fund's inception. Mr. Cunningham joined Federated in 1995 as an Investment
Analyst and has been a Portfolio Manager since 1998. He was named an
Assistant Vice President of the Fund's Adviser in January 1998 and became
a Vice President of the Fund's Adviser in July 2000. From 1986 through
1994, Mr. Cunningham was a Project Engineer with Pennsylvania Power and
Light Company. Mr. Cunningham received his M.B.A. with concentrations in
Finance and Operations from the University of Pittsburgh.
Mary Jo Ochson
Mary Jo Ochson has been the Fund's Portfolio Manager since the Fund's
inception. Ms Ochson was named Chief Investment Officer of tax-exempt
fixed income products in 2004 and is Vice President of the Trust. She
joined Federated in 1982 and has been a Senior Portfolio Manager and a
Senior Vice President of the Fund's Adviser since 1996. Ms. Ochson is a
Chartered Financial Analyst and received her M.B.A. in Finance from the
University of Pittsburgh.
The following individuals serve as portfolio managers of the
Banknorth Funds:
The Large Cap Core Fund and Small/Mid Cap Core Fund are co-managed by
Jonathan White and Robert A. Magan. Mr. White has been a Senior Vice
President and a Chief Investment Strategist of the Adviser and/or its
predecessors since 1994. Mr. White has over 25 years of investment
management and trust services experience. He earned a B.A. from Dartmouth
University and an M.B.A. from the University of New Hampshire. Mr. White
has earned the right to use the Chartered Financial Analyst designation.
Mr. Magan has been a Vice President and Investment Consultant with the
Adviser and/or its predecessors since 1996. He has over eight years of
investment management and investment analysis experience. Mr. Magan
received his B.S. from Plymouth State College and has earned the right to
use the Chartered Financial Analyst designation.
The Banknorth Vermont Fund and Intermediate Bond Fund are co-managed by
William S. Wolff and Ms. Carol Smith. Effective June 1, 2003, the
Intermediate Bond Fund will be co-managed by Richard P. Vandale and Ms.
Smith. Mr. Wolff is a Managing Director and Executive Vice President of
the Adviser, and has been employed by the Adviser and/or its predecessors
since 1970. Mr. Wolff's 28 years of investment experience includes
management of pooled investment vehicles (such as common and collective
trust funds) with a variety of investment styles, including value
investing, large, mid and small cap investing, and fixed income
management. He earned a B.S. degree from the University of Vermont and a
CTFA designation. Ms. Smith is a Vice President and Investment Consultant
and has been employed by the Adviser and/or its predecessors since 1983.
Ms. Smith's banking and economic experience include 17 years of investment
management. She earned a B.S. in Business Administration from the
University of Vermont and is a graduate of the New York Bankers Investment
School. Mr. Vandale is an Executive Vice President and Chief Investment
Officer and has been with the Adviser since 2002. Prior to joining the
Adviser, Mr. Vandale was an Institutional Investment Consultant with
Wellington Management Company and a Portfolio Manager with Standish, Ayer
& Wood both in Boston, Massachusetts. He earned a BBA in Finance from then
University of Massachusetts-Amherst and an MBA from Northeastern
University. Additionally, Mr. Vandale has earned the right to use the
Chartered Financial Analyst designation and is a Certified
Financial Planner.
Legal Proceedings
Like many other mutual fund companies, in September 2003, Federated
Investors, Inc., the parent company of the Federated funds' advisers and
distributor (collectively, "Federated"), received detailed requests for
information on shareholder trading activities in the Federated Funds from
the SEC, the New York State Attorney General, and the National Association
of Securities Dealers. Since that time, Federated has received additional
inquiries from regulatory authorities on these and related matters, and
more such inquiries may be received in the future.
As a result of these inquiries, Federated and the Funds have
conducted an internal investigation of the matters raised, which revealed
instances in which a few investors were granted exceptions to Federated's
internal procedures for limiting frequent transactions and that one of
these investors made an additional investment in another Federated fund.
The investigation has also identified inadequate procedures which
permitted a limited number of investors (including several employees) to
engage in undetected frequent trading activities and/or the placement and
acceptance of orders to purchase shares of fluctuating net asset value
funds after the funds' closing times. Federated has issued a series of
press releases describing these matters in greater detail and emphasizing
that it is committed to compensating the Funds for any detrimental impact
these transactions may have had on them. In that regard, on February 3,
2004, Federated and the independent directors of the Funds announced the
establishment by Federated of a restoration fund that is intended to cover
any such detrimental impact. The press releases and related
communications are available in the "About Us" section of Federated's
website www.federatedinvestors.com, and any future press releases on this
subject will also be posted there.
Shortly after Federated's first public announcement concerning the
foregoing matters, and notwithstanding Federated's commitment to taking
remedial actions, Federated and various Federated Funds were named as
defendants in several class action lawsuits now pending in the United
States District Court for the District of Maryland seeking damages of
unspecified amounts. The lawsuits were purportedly filed on behalf of
people who purchased, owned and/or redeemed shares of Federated-sponsored
mutual funds during specified periods beginning November 1, 1998. The
suits are generally similar in alleging that Federated engaged in illegal
and improper trading practices including market timing and late trading in
concert with certain institutional traders, which allegedly caused
financial injury to the mutual fund shareholders. The board of the
Federated Funds has retained the law firm of Dickstein, Shapiro Morin &
Oshinsky LLP to represent the Federated Funds in these lawsuits.
Federated and the Funds, and their respective counsel, are reviewing the
allegations and will respond appropriately. Additional lawsuits based
upon similar allegations have been filed, and others may be filed in the
future. Although we do not believe that these lawsuits will have a
material adverse effect on the Federated Funds, there can be no assurance
that these suits, the ongoing adverse publicity and/or other developments
resulting from the regulatory investigations will not result in increased
redemptions, reduced sales of shares, or other adverse consequences for
the Federated Funds.
Distribution Arrangements
Federated Securities Corp. ("FSC"), is the principal distributor for
shares of the Federated Funds. All of the Federated Funds have adopted a
Rule 12b-1 Distribution Plan (the "Distribution Plan") pursuant to which
each fund may pay a fee to the distributor in an amount computed at an
annual rate of 0.25% of the average daily net assets of the funds' Class A
and Institutional Service Shares to finance any activity which is
principally intended to result in the sale of shares subject to the
Distribution Plan.
Edgewood Services, Inc. ("Edgewood") acts as the distributor of the
Banknorth Funds' shares. It is a subsidiary of Federated Investors, Inc.
Purchases, Redemptions and Exchange Procedures
State Street Bank & Trust Company is transfer agent and dividend
disbursing agent for the Federated Funds. Boston Financial Data Services
is the transfer agent and dividend disbursing agent for the Banknorth
Funds. Services provided by each transfer agent include the issuance,
cancellation and transfer of the funds' shares, and the maintenance of
records regarding the ownership of such shares. Reference is made to the
Prospectuses of Capital Appreciation Fund and Kaufmann Fund, each dated
December 31, 2003, the Prospectus of Total Return Bond Fund, dated January
31, 2004, the Prospectus of Federated Vermont Fund, dated July 13, 2004,
and the combined Prospectus of the Banknorth Funds dated November 30,
2003, for a complete description of the purchase, exchange, and redemption
procedures applicable to purchases, exchanges, and redemptions of the
Federated Funds and the Banknorth Funds' shares, respectively. Set forth
below is a brief description of the significant purchase, exchange, and
redemption procedures applicable to the Federated Funds' shares and the
Banknorth Funds' shares.
The following charts show the minimum initial and subsequent
investment amounts for each fund:
Minimum Investments - Class A Shares or Institutional Service
Shares
<table>
<caption>
<s> <c> <c> <c> <c> <c>
- -----------------------------------------------------------------------------------------------
- --------------- Initial Subsequent Retirement Plan Retirement Plan Systematic
Federated Fund Investment Investment Investment Subsequent Investment Plan
Minimum Minimum Minimum Investment Subsequent
Minimum Investment
Minimum
Capital
Appreciation
Fund $1,500 $100 $250 $100 $50
Kaufmann Fund $1,500 $100 $250 $100 $50
Total Return $25,000 $0 NA NA NA
Bond Fund
Federated
Vermont Fund
$1,500 $100 NA NA $50
- -----------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Initial Subsequent Retirement Retirement Plan Systematic
Investment Investment Plan Subsequent Investment Plan
Minimum Minimum Investment Investment Subsequent
Minimum Minimum Investment
Minimum
Banknorth $2,500 $100 $250 $100 $100
Funds
- ------------------------------------------------------------------------------------------------
</table>
Initial Investment Minimums of the Federated Funds will be waived
for purposes of the Reorganization.
Due to the high cost of maintaining accounts with low balances, the
Federated Funds may redeem shares in a shareholder's account and pay the
proceeds if the shareholder's account balance falls below the required
minimum initial investment amount. Before shares are redeemed to close an
account, the shareholder will be notified in writing and allowed 30 days
to purchase additional shares to meet the minimum.
Purchases of shares of Capital Appreciation Fund, Kaufmann Fund and
Federated Vermont Fund may be made through an investment professional,
directly from the Fund or through an exchange from another Federated
Fund. Purchases of shares of Total Return Bond Fund may be made through
an investment professional or directly from the Fund. Some authorized
dealers may charge a transaction fee for this service. Each Fund reserves
the right to reject any purchase request.
Purchases of shares of Banknorth Funds may be made through
Banknorth, through an authorized broker/dealer, or directly from the Funds.
The purchase price of the Federated Funds' shares is based on net
asset value, plus any applicable sales charges. However, shareholders of
the Banknorth Funds will not be charged these sales charges in connection
with the Reorganizations.
Class A Shares of Capital Appreciation Fund and Kaufmann Fund are
sold at NAV, plus a front end sales charge as listed below:
Amount of Transaction Sales Charge as a % of
Offering Price
Less than $50,000 5.50%
$50,000 but less than $100,000 4.50%
$100,000 but less than $250,000 3.75%
$250,000 but less than $500,000 2.50%
$500,000 but less than $1 million 2.00%
$1 million or greater 0.00%
Class A Shares of Federated Vermont Fund are sold at NAV, plus a
front end sales charge as listed below:
Amount of Transaction Sales Charge as a % of
Offering Price
Less than $100,000 4.50%
$100,000 but less than $250,000 3.75%
$250,000 but less than $500,000 2.50%
$500,000 but less than $1 million 2.00%
$1 million or greater 0.00%
Institutional Service Shares of Total Return Bond Fund do not carry
a front end sales charge.
A contingent deferred sales charge ("CDSC") of 0.75% of the
redemption amount applies to Class A Shares of Capital Appreciation Fund
and Kaufmann Fund redeemed up to 24 months after purchase under certain
investment programs where an investment professional received an advance
payment on the transaction. This charge will not be applicable to the
redemption of shares acquired in a Reorganization.
Purchase orders for each fund are effected at the offering price
next calculated after receipt of the order. The net asset value per share
for the Federated Funds and the Banknorth Funds is calculated as of the
close of trading (normally 4:00 p.m. Eastern time) on the New York Stock
Exchange, Inc. (the "NYSE") on each day on which the NYSE is open for
business ("NYSE Closing Time"). Each Fund also offers a Systematic
Investment Program. Additionally, the funds can be purchased through a
retirement account.
Capital Appreciation Fund, Kaufmann Fund and Federated Vermont Fund
offer the ability to exchange into the same class of the Federated Fund
without paying a sales charge. The new Fund shares will be the same class
as the current shares. Any contingent deferred sales charges will continue
to be calculated from the date of the shareholder's initial investment.
Redemptions of the Federated Funds may be made through an investment
professional or by telephoning the Funds at 1-800-341-7400. To redeem
shares by mail, written requests must be received in proper form and
mailed to Federated Shareholder Services Company. Shares of the Federated
Funds are redeemed at their net asset value next determined after the
redemption request is received in proper form on each day on which the
Fund computes its net asset value. Redemption proceeds normally are wired
or mailed within one business day after receiving a request in proper
form. However, payment may be delayed up to seven days to allow the
shareholder's purchase payment to clear; during periods of market
volatility; or when the shareholder's trade activity or amount adversely
impacts a fund's ability to manage its assets.
Redemptions of shares of the Banknorth Funds may be made by calling
Banknorth Funds Shareholder Services at 1-888-247-4505, by wire for Trust
customers, or by mail.
Dividends and Other Distributions
Capital Appreciation Fund and Kaufmann Fund declares and pays any
dividends annually, and capital gain distributions at least annually.
Total Return Bond Fund and Federated Vermont Fund declares dividends daily
and pays them monthly and capital gain distributions at least annually.
Unless a shareholder otherwise instructs, dividends and/or capital gain
distributions will be reinvested automatically in additional shares at net
asset value.
Large Cap Core Fund and Small/Mid Cap Core Fund declare and pay
dividends quarterly. Intermediate Bond Fund and Banknorth Vermont Fund
declare and pay dividends monthly. The Funds pay capital gains
distributions, if any, at least annually. Unless a shareholder otherwise
instructs, dividends and/or capital gain distributions will be reinvested
automatically in additional shares at net asset value.
Capital Appreciation Fund and Total Return Bond Fund distribute both
taxable dividends and capital gains. Kaufmann Fund distributes primarily
capital gains. Federated Vermont Fund distributions will be primarily
dividends that are exempt from federal regular income tax, although a
portion of the Fund's dividends may not be exempt. Capital gains and
non-exempt dividends are taxable whether paid in cash or reinvested in the
Fund. Capital gains distributions are taxable at different rates depending
upon the length of time a fund holds its assets. Redemptions and exchanges
are taxable sales. Investors should consult their tax adviser regarding
federal, state and local tax liability.
Financial Highlights
The financial highlights tables are intended to help you understand
the Banknorth Funds and the Capital Appreciation Fund's, Kaufmann Fund's
and Total Return Bond Fund's financial performance. The financial
highlights table is not available for Federated Vermont Fund since the
fund is newly created for purposes of the proposed Reorganization and has
not commenced operations other than incidental to its organization. The
financial information in the tables below is for the fiscal years ended
August 31, 2003 (Banknorth Funds), October 31, 2003 (Capital Appreciation
Fund and Kaufmann Fund) and November 30, 2003 (Total Return Bond Fund).
The information below has been derived from the financial statements of
the Banknorth Funds, Capital Appreciation Fund, and Total Return Bond
Fund, which have been audited by Deloitte & Touche LLP and derived from
financial statements of Kaufmann Fund, which have been audited by Ernst &
Young LLP. Deloitte & Touche LLP's reports on the Banknorth Funds,
Capital Appreciation Fund's and Total Return Bond Fund's financial
statements as of August 31, 2003, October 31, 2003 and November 30, 2003
are included in the Statement of Additional Information relating to this
Prospectus/Proxy Statement ("SAI") dated August 14, 2004. Ernst & Young
LLP's report on Kaufmann Fund's financial statements as of October 31,
2003 is also included in the SAI dated August 14, 2004. Some of the
information is presented on a per share basis. The total returns in the
tables represent the rate that a shareholder would have earned (or lost)
on an investment in each fund (assuming reinvestment of all dividends and
capital gains). The information should be read in conjunction with the
financial statements of the Banknorth Funds, Capital Appreciation Fund,
Kaufmann Fund and Total Return Bond Fund incorporated by reference in the
SAI.
<table>
<caption>
<s> <c> <c> <c> <c> <c>
FEDERATED CAPITAL APPRECIATION FUND
Financial Highlights - Class A Shares
(For a Share Outstanding Throughout Each Period)
Year Ended October 31 2003 2002 2001 2000 1999
Net Asset Value,
Beginning
of Period $19.40 $22.48 $29.05 $25.36 $18.73
Income From
Investment Operations:
Net investment income 0.09 0.131 0.17 0.11 0.06
Net realized and
unrealized gain
(loss) on investments,
futures
contracts and options 3.17 (3.04)1 (4.97) 4.96 7.46
TOTAL FROM
INVESTMENT OPERATIONS 3.26 (2.91) (4.80) 5.07 7.52
Less Distributions:
Distributions from net
investment income (0.08) (0.17) (0.08) (0.07) (0.07)
Distributions from net
realized gain
on investments -- -- (1.69) (1.31) (0.82)
TOTAL DISTRIBUTIONS (0.08) (0.17) (1.77) (1.38) (0.89)
Net Asset Value, End $22.58 $19.40 $22.48 $29.05 $25.36
of Period
Total Return2 16.89% (13.10)% (17.25)% 20.61% 41.17%
Ratios to Average Net
Assets:
Expenses 1.27%3 1.23%3 1.23% 1.24% 1.27%
Net investment income 0.62% 0.76%1 0.80% 0.41% 0.26%
Expense 0.00%5 0.00%5 0.00%5 0.00%5 0.00%5
waiver/reimbursement4
Supplemental Data:
Net assets, end of
period
(000 omitted) $2,179,111 $1,337,564 $699,510 $637,523 $262,083
Portfolio turnover 40% 71% 61% 126% 55%
1 Effective November 1, 2001, the Fund adopted the provisions of the
American Institute of Certified Public Accountants (AICPA) Audit and
Accounting Guide for Investment Companies and began accreting
discount/amortizing premium on long-term debt securities. For the year
ended October 31, 2002, this change had no effect on the net investment
income per share, the net realized and unrealized gain/loss on investments
per share or the ratio of net investment income to average net assets. Per
share, ratios and supplemental data for the periods prior to November 1,
2001 have not been restated to reflect this change in presentation.
2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
3 The expense ratio is calculated without reduction for fees paid
indirectly for directed brokerage arrangements.
4 This expense decrease is reflected in both the expense and the net
investment income ratios shown above.
5 Represents less than 0.01%.
Further information about the Fund's performance is contained in the
Fund's Annual Report dated October 31, 2003, which can be obtained free of
charge.
FEDERATED KAUFMANN FUND
Financial Highlights - Class A Shares
(For a Share Outstanding Throughout Each Period)
Period Ended
Year Ended October 31 2003 2002 10/31/20011
Net Asset Value, Beginning of Period $3.54 $4.23 $4.33
Income From Investment Operations:
Net operating loss (0.06)2 (0.05)2,3 (0.02)2
Net realized and unrealized gain
(loss) on investments,
options and foreign currency 1.42 (0.28)3 (0.08)
transactions
TOTAL FROM INVESTMENT OPERATIONS 1.36 (0.33) (0.10)
Less Distributions:
Distributions from net realized gain
on investments,
options and foreign currency -- (0.36) --
transactions
Net Asset Value, End of Period $4.90 $3.54 $4.23
Total Return4 38.42% (8.90)% (2.31)%
Ratios to Average Net Assets:
Expenses 1.95% 1.95% 1.95%5
Net operating loss (1.45)% (1.25)%3 (0.93)%5
Expense waiver/reimbursement6 0.24% 0.18% 0.17%5
Supplemental Data:
Net assets, end of period (000 $1,191,117 $435,500 $85,169
omitted)
Portfolio turnover 72% 65% 74%
1 Reflects operations for the period from April 23, 2001 (date of initial
public investment) to October 31, 2001.
2 Per share numbers have been calculated using the average shares method,
which more appropriately represents the per share data for the period
since the use of the undistributed income method did not accord with
results of operations.
3 Effective November 1, 2001, the Fund adopted the provisions of the
American Institute of Certified Public Accountants (AICPA) Audit and
Accounting Guide for Investment Companies and began accreting
discount/amortizing premium on long-term debt securities. For the year
ended October 31, 2002, this change had no effect on the net operating
loss per share, the net realized and unrealized gain (loss) on investments
per share, or the ratio of net operating loss to average net assets. Per
share, ratios and supplemental data for the periods prior to November 1,
2001 have not been restated to reflect this change in presentation.
4 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
5 Computed on an annualized basis.
6 This voluntary expense decrease is reflected in both the expense and the
net operating loss ratios shown above.
Further information about the Fund's performance is contained in the
Fund's Annual Report, dated October 31, 2003, which can be obtained free
of charge.
FEDERATED TOTAL RETURN BOND FUND
Financial Highlights - Institutional Service Shares
(For a Share Outstanding Throughout Each Period)
Year Ended Period Year Ended
November 30, Ended September 30,
2003 2002 2001 11/30/20001 2000 1999
Net Asset Value,
Beginning
of Period: $10.62 $10.68 $10.25 $10.16 $10.18 $10.90
Income From
Investment
Operations:
Net investment 0.48 0.61 0.64 0.11 0.66 0.60
income
Net realized and
unrealized
gain (loss) on
investments and
foreign currency 0.14 (0.02) 0.43 0.09 (0.01) (0.70)
transactions
TOTAL FROM
INVESTMENT
OPERATIONS 0.62 0.59 1.07 0.20 0.65 (0.10)
Less Distributions:
Distributions from
net
investment income (0.49) (0.60) (0.64) (0.11) (0.66) (0.60)
Distributions from
net realized
gain on investments
and
foreign currency -- (0.05) -- -- (0.01) (0.02)
transactions
TOTAL DISTRIBUTIONS (0.49) (0.65) (0.64) (0.11) (0.67) (0.62)
Net Asset Value,
End of Period $10.75 $10.62 $10.68 $10.25 $10.16 $10.18
Total Return2 5.90% 5.79% 10.66% 1.98% 6.64% (0.93)%
Ratios to Average
Net Assets:
Expenses 0.65% 0.66% 0.65% 0.65%3 0.65% 0.65%
Net investment 4.41% 5.80% 5.99% 6.58%3 6.64% 5.80%
income
Expense
waiver/reimbursement4 0.42% 0.43% 0.43% 0.45%3 0.43% 0.57%
Supplemental Data:
Net assets, end of
period
(000 omitted) $442,611 $253,207 $190,476 $82,682 $75,687 $21,376
Portfolio turnover 60% 74% 68% 9% 49% 97%
1 The fund has changed its fiscal year end from September 30 to November
30.
2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
3 Computed on an annualized basis.
4 This voluntary expense decrease is reflected in both the expense and the
net investment income ratios shown above.
Further information about the Fund's performance is contained in the
Fund's Annual Report, dated November 30, 2003, which can be obtained free
of charge.
</table>
<table>
<caption>
FINANCIAL HIGHLIGHTS
BANKNORTH FUNDS
(SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD)
Selected Data for a Single Share
Beginning Net Net Realized Distributions Ending
Net Asset Investme and Dividends from Net Net
Balue Per Income Unrealized from Net Investment Asset
Share (Loss) Gain (Loss) Investment Gains Value Per
- ------------------------------ Investments Income Share
<s> <c> <c> <c> <c> <c> <c>
- ------------------------------
Banknorth Large Cap Core Fund
September 1, 2002 to August (0.01) 8.51
31, 2003 $ 7.97 $ $ 0.55 $ -- $ -- $
September 1, 2001 to August
31, 2002 8.83 (0.02) (0.83) -- (0.01) (7.97)
June 1, 2001 to August 31,
2001 (f) 9.61 (0.01) (0.77 -- -- 8.83)
June 1, 2000 to May 31, 2001 12.15 (0.01) (1.00) -- (1.53) (9.61)
June 1, 1999 to May 31, 2000 11.49 (0.03) 1.80 -- (1.11 12.15
June 1, 1998 to May 31, 1999 10.13 (0.01) 2.31 -- (d) (0.94 11.49
- ------------------------------
Banknorth Small/Mid Cap Core
Fund
September 1, 2002 to August
31, 2003 7.18 (0.04) 0.44 -- (0.84 6.74
September 1, 2001 to August
31, 2002 7.86 (0.07) (0.61) -- -- (7.18)
October 2, 2000 (e) to August
31, 2001 10.00 (0.08) (2.04) -- (0.02) (7.86)
- ------------------------------
Banknorth Intermediate Bond
Fund
September 1, 2002 to August
31, 2003 10.49 0.48 (0.22) (0.48 ) -- (10.27)
September 1, 2001 to August
31, 2002 10.39 0.53 0.10 (0.53 ) -- 10.49
October 2, 2000 (e) to August
31, 2001 10.00 0.49 0.39 (0.49 ) -- 10.39
- ------------------------------
Banknorth Vermont Municipal
Bond Fund
September 1, 2002 to August
31, 2003 10.27 0.34 (0.17) (0.34 ) -- (10.10)
September 1, 2001 to August
31, 2002 10.22 0.38 0.05 (0.38 ) -- 10.27
October 2, 2000 (e) to August
31, 2001 10.00 0.37 0.22 (0.37 ) -- 10.22
- ---------------------------------------------------------------------------
(a) Total return calculations do not include sales charges.
(b) The ratio of Gross Expenses to Average Net Assets reflects the
expense ratio excluding any waivers and/or reimbursements.
(c) Annualized.
(d) Distributions per share were less than $0.01.
(e) Commencement of operations.
(f) The Fund changed its fiscal year end from May 31 to August 31.
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------
Ratios to Average Net Assets
Net Assets A Net Gross
- --------- End of Investment Expenses (b) Portfolio
Total Period Income Net Turnover
Return (a) (000's Omitted) (Loss) Expenses Rate
- ---------
6.78% $104,817 (0.13)% 1.34% 1.35% 59%
(9.68)% 76,020 (0.41)% 1.43% 1.48% 34%
(8.12)% 43,930 (0.43)%(c) 1.45%(c) 1.75%(c) 12%
(9.04)% 46,926 (0.14)% 1.25% 1.47% 26%
15.96% 34,398 (0.21)% 1.10% 1.42% 26%
24.21% 32,134 (0.06)% 1.10% 1.44% 16%
- ---------
7.33% 17,395 (0.45)% 1.63% 1.99% 73%
(8.65)% 20,535 (0.84)% 1.49% 1.69% 48%
(21.22)% 29,050 (1.06)%(c) 1.45%(c) 1.83%(c) 31%
- ---------
2.42% 112,934 4.50% 1.01% 1.16% 50%
6.09% 122,586 5.03% 0.99% 1.14% 11%
9.12% 141,864 5.28%(c) 1.05%(c) 1.41%(c) 9%
- ---------
1.74% 80,497 3.30% 0.84% 1.10% 20%
4.33% 82,132 3.75% 0.81% 1.11% 7%
6.00% 86,924 3.96%(c) 0.91%(c) 1.37%(c) 11%
- ---------------------------------------------------------------------------
</table>
INFORMATION ABOUT THE REORGANIZATIONS
Description of the Proposed Reorganizations
This summary is qualified in its entirety by reference to the
additional information contained elsewhere in this Prospectus/Proxy
Statement, the Statement of Additional Information relating to this
Prospectus/Proxy Statement, the Prospectuses and Statements of Additional
Information of the Federated Funds and the Banknorth Funds and the Plans.
The Plans provide for the Reorganizations to occur on or about August 27,
2004 (each, the "Closing Date"). The Plans provide that all of the assets
of each Banknorth Fund will be transferred to the corresponding Federated
Fund at the closing (the "Effective Time") on the Closing Date of the
Reorganizations. In exchange for the transfer of these assets, each
Federated Fund will simultaneously issue at the closing on the Closing
Date a number of full and fractional shares of the Federated Fund to the
corresponding Banknorth Fund equal in value to the aggregate net asset
value of the corresponding Banknorth Fund as of such time. The value of
the assets of each Banknorth Fund acquired on the Closing Date will be
valued in accordance with the valuation procedures of the acquiring
Federated Fund, which differ from the valuation procedures of the
Banknorth Funds.
Following the transfer of assets in exchange for shares of the
respective Federated Fund, each corresponding Banknorth Fund will
distribute all the shares of the respective Federated Fund pro rata to its
shareholders of record in complete liquidation and termination of the
Banknorth Fund. Shareholders of each Banknorth Fund owning shares at the
closing on the Closing Date of the Reorganizations will receive a number
of shares of the corresponding Federated Fund with the same aggregate
value as the shareholder had in the Banknorth Fund immediately before the
Reorganizations. Such distribution will be accomplished by the
establishment of accounts in the names of each Banknorth Fund's
shareholders on the share records of the corresponding Federated Fund's
transfer agent. Each account will receive the respective pro rata number
of full and fractional shares of the Federated Fund due to the
shareholders of the corresponding Banknorth Fund. The Banknorth Funds will
then be terminated.
The Federated Funds do not issue share certificates to shareholders.
Shares of each Federated Fund to be issued will have no preemptive or
conversion rights. No sales charges will be imposed in connection with the
receipt of such shares by Banknorth Funds' shareholders. Shareholders of
Large Cap Core Fund, Small/Mid Cap Core Fund and Banknorth Vermont Fund
will receive Class A Shares of the relevant Federated Fund, Shareholders
of Intermediate Bond Fund will receive Institutional Service Shares of
Total Return Bond Fund. Each Reorganization is independent of the other;
therefore, if the shareholders of one Banknorth Fund approve their
Reorganization, it is expected to proceed regardless of whether the
shareholders of the other three funds approve their Reorganization.
The Plans contain customary representations, warranties and
conditions. The Plans provide that the consummation of the Reorganizations
with respect to each Banknorth Fund and the corresponding Federated Fund
is conditioned upon, among other things: (i) approval of the
Reorganization by the relevant Banknorth Fund's shareholders; and (ii) the
receipt by the Banknorth Fund and the Federated Fund of a tax opinion to
the effect that the Reorganization will be tax-free to the Banknorth Fund,
its shareholders and the Federated Fund. The Plans may be terminated with
respect to either Reorganization if, before the Closing Date, any of the
required conditions have not been met, the representations and warranties
are not true or the Board of the Banknorth Funds or the Federated Funds,
as the case may be, determines that the Reorganization is not in the best
interests of the shareholders of the Banknorth Fund or the corresponding
Federated Fund, respectively.
To the extent described in the Plans, the expenses of each
Reorganization will be paid by FEMCOPA, FIMCO or their affiliates.
If the Reorganizations are implemented as proposed, BIA's affiliate,
Banknorth Wealth Management (BNWM), may receive from FEMCOPA, FIMCO or
their affiliates on the Closing Date a lump sum payment based primarily
upon the value of the net assets of the Banknorth Funds. The closing
payment relates to BNWM's sale to Federated of certain assets, including
its books and records relating to the Banknorth Funds, and related
matters. After the Reorganizations, BNWM, or its affiliates, may enter
into an agreement with subsidiaries of Federated under which BNWM, or its
affiliates may receive shareholder servicing and/or account administrative
fees of up to .25% of the average daily value of net assets maintained in
shareholder accounts invested in certain Federated Funds for which BNWM or
an affiliate provides services.
Description of Federated Fund Shares and Capitalization
Shares of the Federated Funds to be issued to shareholders of the
corresponding Banknorth Funds under the Plans will be fully paid and
non-assessable when issued, transferable without restrictions and will
have no preemptive or conversion rights. Reference is hereby made to the
Prospectus of each Federated Fund provided herewith for additional
information about shares of the Federated Fund.
The following tables set forth the unaudited capitalization of Large
Cap Core Fund into Capital Appreciation Fund, Small/Mid Cap Core Fund into
Kaufmann Fund, Intermediate Bond Fund into Total Return Bond Fund and
Banknorth Vermont Fund into Federated Vermont Fund as of July 13, 2004:
Banknorth Large Cap Core Fund - Federated Capital Appreciation Fund
<table>
<caption>
Federated
Federated Capital
Capital Appreciation
Appreciation Fund Class A
Banknorth Fund Class A Shares
Large Cap Core Shares Pro Forma
Fund Combined
Shares
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Net Assets $94,564,203 $2,495,662,233 $2,590,226,436
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Net Asset Value Per
Share $9.35 $23.71 $23.71
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Shares Outstanding 10,113,774 105,248,379 109,236,747
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Total Fund Net Assets $94,564,203 $3,302,803,585 $3,397,367,788
- --------------------------------------------------------------------------------------------
Banknorth Small/Mid Cap Core Fund - Federated Kaufmann Fund
- ----------------------------------------------------------------------------------------------
Federated
Kaufmann Fund
Banknorth Class A Shares
Small/Mid Cap Federated Pro Forma Combined
Core Fund Kaufmann Fund Shares
Class A Shares
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Net Assets $14,049,738 $1,650,665,448 $1,664,715,186
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Net Asset Value Per
Share $7.33 $5.00 $5.00
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Shares Outstanding 1,916,353 330,276,718 333,086,666
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Total Fund Net $14,049,738 $6,618,020,050 $6,632,069,788
Assets
- ----------------------------------------------------------------------------------------------
Banknorth Intermediate Bond Fund - Federated Total Return Bond Fund
- -------------------------------------------------------------------
Federated
Total Return
Federated Bond Fund
Banknorth Total Return Institutional
Intermediate Bond Fund Service Shares
Bond Institutional Pro Forma
Fund Service Shares Combined
Shares
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Net Assets $88,644,563 $486,876,743 $575,521,306
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Net Asset Value
Per Share $10.22 $10.67 $10.67
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Shares 8,670,096 45,612,441 53,920,273
Outstanding
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Total Fund Net $88,644,563 $1,207,764,560 $1,296,409,123
Assets
- -------------------------------------------------------------------
Banknorth Vermont Municipal Bond Fund - Federated Vermont Municipal Income
Fund
- --------------------------------------------------------------------------------------
Federated Vermont
Municipal Income
Fund
Banknorth Federated Vermont Class A Shares
Vermont Municipal Municipal Income Pro Forma Combined
Bond Fund Fund Shares
Class A Shares
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Net Assets $71,195,604 $0 $71,195,604
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Net Asset Value Per
Share $10.08 $0 $10.08
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Shares Outstanding
7,062,463 0 7,062,463
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Total Fund Net $71,195,604 $0 $71,195,604
Assets
- --------------------------------------------------------------------------------------
Federal Income Tax Consequences
As a condition to each Reorganization, each Federated Fund and each
Banknorth Fund will receive an opinion of counsel, each substantially to
the effect that, on the basis of the existing provisions of the Code and
the regulations thereunder, current administrative rules and court
decisions, for federal income tax purposes:
o the transfer of all of the Banknorth Fund's assets to the Federated
Fund solely in exchange for Federated Fund Shares (followed by
the distribution of Federated Fund Shares to the Banknorth
Fund Shareholders in dissolution and liquidation of the
Banknorth Fund) will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and the Federated Fund
and the Banknorth Fund will each be a "party to a
reorganization" within the meaning of Section 368(b) of the
Code;
o no gain or loss will be recognized by the Federated Fund upon the
receipt of the assets of the Banknorth Fund solely in exchange
for Federated Fund Shares;
o no gain or loss will be recognized by the Banknorth Fund upon the
transfer of the Banknorth Fund's assets to the Federated Fund
solely in exchange for Federated Fund Shares or upon the
distribution (whether actual or constructive) of Federated
Fund Shares to Banknorth Fund Shareholders in exchange for
their Selling Fund Shares;
o no gain or loss will be recognized by any Banknorth Fund Shareholder
upon the exchange of its Banknorth Fund Shares for Federated
Fund Shares;
o the aggregate tax basis of the Federated Fund Shares received by
each Banknorth Fund Shareholder pursuant to the Reorganization
will be the same as the aggregate tax basis of the Banknorth
Fund Shares held by it immediately prior to the
Reorganization. The holding period of Federated Fund Shares
received by each Banknorth Fund Shareholder will include the
period during which the Banknorth Fund Shares exchanged
therefor were held by such shareholder, provided the Banknorth
Fund Shares are held as capital assets at the time of the
Reorganization; and
o the tax basis of the Banknorth Fund's assets acquired by the
Federated Fund will be the same as the tax basis of such
assets to the Banknorth Fund immediately prior to the
Reorganization. The holding period of the assets of the
Banknorth Fund in the hands of the Federated Fund will include
the period during which those assets were held by the
Banknorth Fund.
Each foregoing opinion may state that no opinion is expressed as to
the effect of any Reorganization on the Federated Fund, the Banknorth Fund
or the Banknorth Fund's shareholders with respect to any asset as to which
unrealized gain or loss is required to be recognized for federal income
tax purposes at the end of a taxable year (or on the termination or
transfer thereof) under a mark-to-market system of accounting.
Shareholders of the Banknorth Funds should consult their tax
advisors regarding the effect of the Reorganizations in light of their
individual circumstances. Because the foregoing discussion only relates
to the federal income tax consequences of the Reorganizations, those
shareholders also should consult their tax advisors about state and local
tax consequences of the Reorganizations.
Reasons for the Reorganizations
The Board, which also serves as the Board of Trustees of Federated
Funds, including the Trustees who are not "interested persons" within the
meaning of Section 2(a)(19) of the Investment Company Act of 1940, as
amended ("1940 Act"), has concluded that the Reorganizations would be in
the best interests of each Banknorth Fund and its existing shareholders,
and that the interests of existing shareholders would not be diluted as a
result of the transactions contemplated by the Reorganizations. In the
opinion of both the Board and BIA the low asset levels of the Banknorth
Funds cause the long term viability of the Banknorth Funds to be
questionable, particularly in light of the increased costs associated with
the need to comply with new regulations recently adopted by the Commission
requiring the appointment of a Chief Compliance Officer for the Banknorth
Funds. The Reorganizations of Large Cap Core, Small/Mid Cap Core and
Intermediate Bond Funds would give their shareholders the opportunity to
participate in larger funds with similar investment objectives, policies
and strategies and more favorable past performance. In addition,
shareholders of Banknorth Vermont Fund (after the waiver of Rule 12b-1
fees) and Intermediate Bond Fund are expected to experience a reduction in
the annual operating expenses paid in connection with their investment in
the Federated Funds.
The Board of Trustees met on June 30, 2004 to receive information
concerning each fund, to review this information and to consider the terms
of the proposed Reorganizations. After consultation with legal counsel,
the Board, including those members who are not "interested persons",
unanimously approved the Plans with respect to each fund and recommended
its approval by the shareholders of each Banknorth Fund. In approving the
Reorganizations, the Board determined that participation in the
Reorganizations is in the best interests of each Banknorth Fund and that
the interests of the shareholders of each Banknorth Fund would not be
diluted as a result of the Reorganizations.
In approving each Reorganization, the Board took into consideration
a number of factors, including (1) the terms and conditions of the
Reorganization; (2) the compatibility of the investment programs of the
Banknorth Fund and the relevant Federated Fund; (3) the historical expense
ratios of each fund on a comparative basis and projected pro forma
estimated expense ratios; (4) the relative historical performance record
of the funds; (5) the long-term viability of each Federated Fund as
compared to the corresponding Banknorth Fund that will result from the
Reorganization as compared to the Banknorth Fund as a separate fund; and
(6) the non-recognition of any gain or loss for federal income tax
purposes as a result of the Reorganization to the fund or its shareholders.
BASED ON THIS INFORMATION, THE BOARD RECOMMENDS THAT THE SHAREHOLDERS OF
EACH BANKNORTH FUND APPROVE THE RESPECTIVE REORGANIZATION.
Comparative Information on Shareholder Rights and Obligations
General. The Federated Funds and the Banknorth Funds are series of
open-end management investment companies registered under the 1940 Act,
which continuously offer to sell shares at their current net asset value.
Capital Appreciation Fund and Kaufmann Fund are each a series of Federated
Equity Funds, which is organized as a business trust pursuant to a
Declaration of Trust under the laws of the Commonwealth of Massachusetts.
Federated Vermont Fund is a series of Federated Municipal Securities
Income Trust, which is also organized as a business trust pursuant to a
Declaration of Trust under the laws of the Commonwealth of Massachusetts.
Total Return Bond Fund, is a series of Federated Total Return Series,
Inc., which is organized as a corporation pursuant to the Articles of
Incorporation under the laws of the State of Maryland. The Federated
Funds are governed by their Declaration of Trust, Articles of
Incorporation, Bylaws and Board of Trustees or Directors, in addition to
applicable state and federal law. The Banknorth Funds are organized as a
Delaware Trust, and are governed by their Declaration of Trust, Bylaws and
Board of Trustees, in addition to applicable state and federal law. The
rights of shareholders of the Federated Funds are set forth in the
applicable Declaration of Trust, Articles of Incorporation and Bylaws. The
rights of shareholders of the Banknorth Funds are set forth in the
applicable Declaration of Trust and Bylaws. Set forth below is a brief
summary of the significant rights of shareholders of the Federated Funds
and shareholders of the Banknorth Funds.
Shares of the Federated Funds and Banknorth Funds. The Board of
Trustees of Capital Appreciation Fund, Kaufmann Fund and Federated Vermont
Fund are authorized to issue an unlimited number of shares of beneficial
interest, which have no par value. The Board of Directors of Total Return
Bond Fund has established and classified 1,000,000,000 shares of each
class of shares of Total Return Bond Fund, each share has a par value of
one tenth of one cent ($0.01). The Board of Trustees of the Federated
Funds has established four classes of shares of Capital Appreciation Fund
and Kaufmann Fund, known as Class A Shares, Class B Shares, Class C Shares
and Class K Shares. The Board of Directors of the Federated Funds has
established six classes of shares of Total Return Bond Fund, known as
Class A Shares, Class B Shares, Class C Shares, Class K Shares,
Institutional Shares and Institutional Service Shares. The Board of
Trustees has established one class of shares of Federated Vermont Fund,
known as Class A Shares.
The Board of Trustees of the Banknorth Funds are authorized to issue
an unlimited number of shares of beneficial interest, which have no par
value. Each Banknorth Fund is a portfolio of the Banknorth Funds. The
Board of Trustees of Banknorth Funds has established one class of shares
of the Banknorth Funds. Issued and outstanding shares of both the
Federated Funds and Banknorth Funds are fully paid and non-assessable.
Voting Rights. Neither the Federated Funds nor the Banknorth Funds
is required to hold annual meetings of shareholders, except as required
under the 1940 Act. Shareholder approval is necessary only for certain
changes in operations or the election of Board members under certain
circumstances. The Federated Funds and the Banknorth Funds require that a
special meeting of shareholders be called for any permissible purpose upon
the written request of the holders of at least one-tenth of the
outstanding shares of the series or class of the Federated Funds or at
least 25% of all shares of the Banknorth Funds, as the case may be,
entitled to vote. Each share of each Federated Fund and each Banknorth
Fund gives the shareholder one vote for each share and a fractional vote
for each fraction of a share in matters submitted to shareholders for
vote. All shares of each portfolio or class in each of the Federated Funds
and the Banknorth Funds have equal voting rights except that in matters
affecting only a particular portfolio or class, only shares of that
portfolio or class are entitled to vote.
Trustees and Directors. The Declaration of Trust and Articles of
Incorporation for the Federated Funds provides that the term of office of
each Trustee shall be for the lifetime of the applicable Federated Fund,
or the earlier of his or her death, resignation, retirement, removal or
mental or physical incapacity. A Trustee of the Federated Fund may be
removed by: (i) a written instrument signed by at least two-thirds of the
Trustees, (ii) a majority vote of the Trustees if the Trustee has become
mentally or physically incapacitated or (iii) a vote of two-thirds of the
outstanding shares at any special meeting of shareholders. A vacancy on
the Board may be filled by the Trustees remaining in office. A meeting of
shareholders will be required for the purpose of electing additional
Trustees whenever fewer than a majority of the Trustees then in office
were elected by shareholders.
The Declaration of Trust of the Banknorth Funds provides that each
Trustee shall serve during the continued lifetime of the Trust until he or
she dies, resigns, is declared bankrupt or incompetent by a court of
appropriate jurisdiction, or is removed, or, if sooner than any of such
events, until the next meeting of Shareholders called for the purpose of
electing Trustees and until the election and qualification of his or her
successor. The Board of Trustees, by action of a majority of the then
Trustees at a duly constituted meeting, may fill vacancies in the Board of
Trustees. The Shareholders may elect Trustees, including filling any
vacancies in the Board of Trustees, at any meeting of Shareholders called
by the Board of Trustees for that purpose. A meeting of Shareholders for
the purpose of electing one or more Trustees may be called by the Board of
Trustees or, to the extent provided by the 1940 Act and the rules and
regulations thereunder, by the Shareholders.
Liability Of Trustees And Officers. Under the Bylaws for the
Federated Funds, a Trustee/Director or officer will be personally liable
only for his or her own willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his or her
office.
Shareholder Liability. Under certain circumstances, shareholders
of the Capital Appreciation Fund, Kaufmann Fund, and Federated Vermont
Fund may be held personally liable as partners under Massachusetts law for
obligations of the applicable Federated Fund. To protect its shareholders,
the Federated Funds have filed legal documents with the Commonwealth of
Massachusetts that expressly disclaim the liability of its shareholders
for such acts or obligations of the Federated Funds. These documents
require that notice of this disclaimer be given in each agreement,
obligation or instrument that the Federated Funds or its Trustees enter
into or sign.
In the unlikely event a shareholder is held personally liable for
Federated Funds' obligations on behalf of a Federated Fund, the Federated
Funds are required to use their property to protect or compensate the
shareholder. On request, the Federated Funds will defend any claim made
and pay any judgment against a shareholder for any act or obligation of
the Federated Funds on behalf of such Federated Fund. Therefore, financial
loss resulting from liability as a shareholder will occur only if the
Federated Funds itself cannot meet its obligations to indemnify
shareholders and pay judgments against them from assets of such Federated
Fund.
Shareholders of Banknorth Funds are entitled to the same
limitation of personal liability extended to stockholders of a private
corporation organized for profit under the general corporation law of the
State of Delaware.
INFORMATION ABOUT THE FUNDS
Each fund is subject to the informational requirements of the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934,
as amended, and the 1940 Act, and in accordance therewith files reports
and other information with the Commission. Reports, the proxy and
information statements, and other information filed by such fund, can be
obtained by calling or writing such fund and can also be inspected and
copied by the public at the public reference facilities maintained by the
Commission in Washington, DC located at Room 1024, 450 Fifth Street, N.W.,
Washington, DC 20549 and at certain of its regional offices located at
Room 1204, Everett McKinley Dirksen Building, 219 South Dearborn Street,
Chicago, Illinois 60604 and 233 Broadway, New York, NY 10007. Copies of
such material can be obtained at prescribed rates from the Public
Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, DC 20549, or obtained
electronically from the SEC's Internet Web site (http://www.sec.gov).
This Prospectus/Proxy Statement, which constitutes part of a
separate Registration Statement filed by each Federated Funds, with the
Commission under the Securities Act of 1933, as amended, omits certain of
the information contained in each such Registration Statement. Reference
is hereby made to the Registration Statements and to the exhibits thereto
for further information with respect to the applicable Federated Fund and
the shares offered hereby. Statements contained herein concerning the
provisions of documents are necessarily summaries of such documents, and
each such statement is qualified in its entirety by reference to the copy
of the applicable documents filed with the Commission.
INFORMATION ABOUT THE PROXY SOLICITATION AND THE SPECIAL MEETING
Proxies are being solicited by the Board of the Banknorth Funds on
behalf of its portfolios, Banknorth Large Cap Core Fund, Banknorth
Small/Mid Cap Core Fund, Banknorth Intermediate Bond Fund and Banknorth
Vermont Municipal Bond Fund. The proxies will be voted at the special
meeting of shareholders of the Banknorth Funds to be held at 10:00 a.m.
Eastern Time, on August 27, 2004 at 5800 Corporate Drive, Pittsburgh,
Pennsylvania 15237 (such special meeting and any adjournment or
postponement thereof are referred to as the "Special Meeting").
To the extent described in the Plans, the cost of the solicitation,
including the printing and mailing of proxy materials, will be borne by
FEMCOPA, FIMCO or its affiliates. In addition to solicitations through
the mails, proxies may be solicited by officers, employees, and agents of
each fund, 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 instructions as shareholders submitting proxies in
written form. FEMCOPA, FIMCO or its respective affiliates 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 purpose of the Special Meeting is set forth in the accompanying
Notice. The Board knows of no business other than that mentioned in the
Notice that will be presented for consideration at the Special Meeting.
Should other business properly be brought before the Special Meeting,
proxies will be voted in accordance with the best judgment of the persons
named as proxies. This Prospectus/Proxy Statement and the enclosed proxy
card are expected to be mailed on or about August 19, 2004, to
shareholders of record at the close of business on June 28, 2004 (the
"Record Date").
The Annual and Semi-Annual Reports for Capital Appreciation Fund and
Kaufmann Fund, which contain audited financial statements for the fiscal
year ended October 31, 2003, and unaudited financial statements for the
six-month period ended April 30, 2004, the Annual Report for Total Return
Bond Fund, which contains audited financial statements for the fiscal year
ended November 30, 2003, and the unaudited financial statements for the
six-month period ended May 31, 2004, and the Annual and Semi-Annual
Reports for the Banknorth Funds, which contain audited financial
statements for the fiscal year ended August 31, 2003, and unaudited
financial statements for the six-month period ended February 29, 2004,
respectively, were previously mailed to shareholders of the respective
funds. The funds will promptly provide, without charge and upon request,
to each person to whom this Prospectus/Proxy Statement is delivered, a
copy of the Annual Reports and/or the Semi-Annual Reports for the
Federated Funds and the Banknorth Funds. Requests for Annual Reports or
Semi-Annual Reports for the Federated Funds and the Banknorth Funds may be
made in writing to the Federated Funds' and the Banknorth Funds' principal
executive offices or by calling the Federated Funds or the Banknorth
Funds. The principal executive offices for the Federated Funds are located
at 5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7000. The
principal executive offices for the Banknorth Funds are located at 5800
Corporate Drive, Pittsburgh, Pennsylvania 15237-7010. The Federated Funds'
toll-free telephone number is 1-800-341-7400 and the Banknorth Funds'
toll-free telephone number is 1-888-247-4505.
Only shareholders of record on the Record Date will be entitled to
vote at the Special Meeting. Each share of the Banknorth Funds is
entitled to one vote. Fractional shares are entitled to proportionate
shares of one vote.
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 Special Meeting will not revoke a proxy, a
shareholder present at the Special Meeting may withdraw his or her proxy
and vote in person. All properly executed and unrevoked proxies received
in time for the Special 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 matter set forth in the attached Notice.
Each Banknorth Fund will vote separately on the approval of the
applicable Plan. In order to hold the Special Meeting with respect to a
Banknorth Fund, a "quorum" of shareholders of that Fund must be present.
Holders of at least one-third of the total number of outstanding shares of
the applicable Banknorth Fund, present in person or by proxy, shall be
required to constitute a quorum for the purpose of voting on the proposal
relating to that Fund.
Approval of the Reorganization with respect to each Banknorth Fund
requires the vote of a "majority of the outstanding shares" of that
particular Banknorth Fund (as defined in the 1940 Act) entitled to vote on
the proposal. Under both the 1940 Act 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% of more of
the outstanding voting securities of the Trust or 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. In the event that
shareholders of one Banknorth Fund do not approve the Plan, the
Reorganization will proceed with respect to the Banknorth Fund that has
approved the applicable Plan, subject to the other conditions contained in
the Plan having been met. If no Plan is approved, the Board of Trustees
of the Banknorth Funds will determine what action, if any, is in the best
interest of shareholders.
For purposes of determining a quorum for transacting business at the
Special 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 each proposal.
If a quorum for any Fund is not present, the persons named as
proxies may vote those proxies that have been received to adjourn the
Special Meeting with respect to that Fund to a later date. In the event
that a quorum for any Fund is present but sufficient votes in favor of the
proposal have not been received, the persons named as proxies may propose
one or more adjournments of the Special Meeting with respect to that Fund
to permit further solicitations of proxies with respect to the proposal.
All such adjournments will require the affirmative vote of a majority of
the shares present in person or by proxy at the session of the Special
Meeting to be adjourned. The persons named as proxies will vote AGAINST
an adjournment those proxies that they are required to vote against the
proposal, and will vote in FAVOR of such an adjournment all other proxies
that they are authorized to vote. A shareholder vote may be taken on the
proposal in this Prospectus/Proxy Statement prior to any such adjournment
if sufficient votes have been received for approval.
SHARE OWNERSHIP OF THE FUNDS AND CERTAIN INTERESTS
Banknorth Large Cap Core Fund
At the close of business on the Record Date, the following persons owned
beneficially or of record as indicated, to the knowledge of management,
more than 5% of the outstanding shares of the Banknorth Large Cap Core
Fund:
Upon consummation of the Reorganization, such persons would own shares as
follows based upon information as of the Record Date:
In four separate accounts, Stratevest and Co., Brattleboro, VT, owned
approximately 4,846,034 Shares (47.35%); 2,037,655 Shares (19.91%);
1,698,616 Shares (16.60%); and 1,074,818 Shares (10.50%).
Shareholders owning 25% or more of outstanding shares may be in control
and be able to affect the outcome of certain matters presented for a vote
of shareholders.
Banknorth Small/Mid Cap Core Fund
At the close of business on the Record Date, the following persons owned
beneficially or of record as indicated, to the knowledge of management,
more than 5% of the outstanding shares of the Banknorth Small/Mid Cap Core
Fund:
Upon consummation of the Reorganization, such persons would own shares as
follows based upon information as of the Record Date:
In two separate accounts, Stratevest and Co., Brattleboro, VT, owned
approximately 1,239,026 Shares (64.56%); and 677,113 Shares (35.28%).
Shareholders owning 25% or more of outstanding shares may be in control
and be able to affect the outcome of certain matters presented for a vote
of shareholders.
Banknorth Intermediate Bond Fund
At the close of business on the Record Date, the following persons owned
beneficially or of record as indicated, to the knowledge of management,
more than 5% of the outstanding shares of the Banknorth Intermediate Bond
Fund:
Upon consummation of the Reorganization, such persons would own shares as
follows based upon information as of the Record Date:
Stratevest and Co., Brattleboro, VT, owned approximately 8,575,138 Shares
(95.43%).
Shareholders owning 25% or more of outstanding shares may be in control
and be able to affect the outcome of certain matters presented for a vote
of shareholders.
Banknorth Vermont Municipal Bond Fund
At the close of business on the Record Date, the following persons owned
beneficially or of record as indicated, to the knowledge of management,
more than 5% of the outstanding shares of the Banknorth Vermont Municipal
Bond Fund:
Upon consummation of the Reorganization, such persons would own shares as
follows based upon information as of the Record Date:
Stratevest and Co., Brattleboro, VT, owned approximately 7,039,972 Shares
(99.45%).
Shareholders owning 25% or more of outstanding shares may be in control
and be able to affect the outcome of certain matters presented for a vote
of shareholders.
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY
The Banknorth Funds are not required, and do 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
Banknorth Funds, 5800 Corporate Drive, Pittsburgh, Pennsylvania, 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 Special Meeting, but should any other matter requiring a
vote of shareholders arise, including any question as to an adjournment or
postponement of the Special Meeting, the persons named on the enclosed
proxy card will vote on such matters according to their best judgment in
the interests of the Banknorth Funds.
- ---------------------------------------------------------------------------
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
August XX, 2004
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
as of this 1st day of August 2004, by and between Federated Equity Funds,
a Massachusetts business trust, with its principal place of business at
5800 Corporate Drive, Pittsburgh, PA, 15237 (the "Federated Trust"), with
respect to its Federated Capital Appreciation Fund (the "Acquiring Fund"),
a series of the Federated Trust, and Banknorth Funds, a Delaware statutory
trust, with its principal place of business at 5800 Corporate Drive,
Pittsburgh, Pennsylvania 15237 (the "Trust"), with respect to its
Banknorth Large Cap Core Fund, a series of the Trust ("Acquired Fund" and,
collectively with the Acquiring Fund, the "Funds").
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368 of the United States
Internal Revenue Code of 1986, as amended (the "Code") and the Treasury
Regulations promulgated thereunder. The reorganization will consist of:
(i) the transfer of all of the assets of the Acquired Fund in exchange for
Class A Shares, no par value per share, of the Acquiring Fund ("Acquiring
Fund Shares"); and (ii) the distribution of Class A Shares of the
Acquiring Fund to the holders of Shares of the Acquired Fund and the
liquidation of the Acquired Fund as provided herein, all upon the terms
and conditions set forth in this Agreement (the "Reorganization").
WHEREAS, the Acquiring Fund and the Acquired Fund is a separate
series of the Federated Trust and the Trust, respectively, and the
Federated Trust and the Trust are open-end, registered management
investment companies and the Acquired Fund owns securities that generally
are assets of the character in which the Acquiring Fund is permitted to
invest;
WHEREAS, the Acquiring Fund and the Acquired Fund are authorized to
issue their shares of beneficial interests;
WHEREAS, the Trustees of the Federated Trust have determined that
the Reorganization, with respect to the Acquiring Fund, is in the best
interests of the Acquiring Fund and that the interests of the existing
shareholders of the Acquiring Fund will not be diluted as a result of the
Reorganization;
WHEREAS, the Trustees of the Trust have determined that the
Reorganization, with respect to the Acquired Fund, is in the best
interests of the Acquired Fund and that the interests of the existing
shareholders of the Acquired Fund will not be diluted as a result of the
Reorganization;
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties hereto
covenant and agree as follows:
Article I
TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR ACQUIRING
FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND
THE EXCHANGE. Subject to the terms and conditions contained herein
and on the basis of the representations and warranties contained herein,
the Acquired Fund agrees to transfer all of its assets, as set forth in
paragraph 1.2, to the Acquiring Fund. In exchange, the Acquiring Fund
agrees: (i) to deliver to the Acquired Fund the number of full and
fractional Acquiring Fund Shares, determined by (a) multiplying the shares
outstanding of the Acquired Fund by (b) the ratio computed by dividing
(x) the net asset value per share of the Acquired Fund by (y) the net
asset value per share of the Acquiring Fund Shares computed in the manner
and as of the time and date set forth in paragraph 2.2. Holders of the
Acquired Fund will receive Class A Shares of the Acquiring Fund. Such
transactions shall take place at the closing on the Closing Date provided
for in paragraph 3.1.
1.2 ASSETS TO BE ACQUIRED. The assets of the Acquired Fund
to be acquired by the Acquiring Fund shall consist of property having a
value equal to the total net assets of the Acquired Fund, including,
without limitation, cash, securities, commodities, interests in futures
and dividends or interest receivable, owned by the Acquired Fund and any
deferred or prepaid expenses shown as an asset on the books of the
Acquired Fund on the Closing Date.
The Acquired Fund has provided the Acquiring Fund with its most
recent audited financial statements, which contain a list of all of the
Acquired Fund's assets as of the date of such statements. The Acquired
Fund hereby represents that as of the date of the execution of this
Agreement, there have been no changes in its financial position as
reflected in such financial statements other than those occurring in the
ordinary course of business in connection with the purchase and sale of
securities, the issuance and redemption of Acquired Fund shares and the
payment of normal operating expenses, dividends and capital gains
distributions.
1.3 LIABILITIES TO BE DISCHARGED. The Acquired Fund will
discharge all of its liabilities and obligations prior to the Closing Date.
1.4 LIQUIDATION AND DISTRIBUTION. On or as soon after the
Closing Date as is conveniently practicable: (a) the Acquired Fund will
distribute in complete liquidation of the Acquired Fund, pro rata to its
shareholders of record, determined as of the close of business on the
Closing Date (the "Acquired Fund Shareholders"), all of the Acquiring Fund
Shares received by the Acquired Fund pursuant to paragraph 1.1; and
(b) the Acquired Fund will thereupon proceed to dissolve and terminate as
set forth in paragraph 1.8 below. Such distribution will be accomplished
by the transfer of Acquiring Fund Shares credited to the account of the
Acquired Fund on the books of the Acquiring Fund to open accounts on the
share records of the Acquiring Fund in the name of the Acquired Fund
Shareholders, and representing the respective pro rata number of Acquiring
Fund Shares due such shareholders. All issued and outstanding shares of
the Acquired Fund (the "Acquired Fund Shares") will simultaneously be
canceled on the books of the Acquired Fund. The Acquiring Fund shall not
issue certificates representing Acquiring Fund Shares in connection with
such transfer. After the Closing Date, the Acquired Fund shall not
conduct any business except in connection with its termination.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares
will be shown on the books of the Acquiring Fund's transfer agent.
Acquiring Fund Shares will be issued simultaneously to the Acquired Fund,
in an amount equal in value to the aggregate net asset value of the
Acquired Fund Shares, to be distributed to Acquired Fund Shareholders.
1.6 TRANSFER TAXES. Any transfer taxes payable upon the
issuance of Acquiring Fund Shares in a name other than the registered
holder of the Acquired Fund shares on the books of the Acquired Fund as of
that time shall, as a condition of such issuance and transfer, be paid by
the person to whom such Acquiring Fund Shares are to be issued and
transferred.
1.7 REPORTING RESPONSIBILITY. Any reporting responsibility
of the Acquired Fund is and shall remain the responsibility of the
Acquired Fund.
1.8 TERMINATION. The Acquired Fund shall be terminated
promptly following the Closing Date and the making of all distributions
pursuant to paragraph 1.4.
1.9 BOOKS AND RECORDS. All books and records of the
Acquired Fund, including all books and records required to be maintained
under the Investment Company Act of 1940 (the "1940 Act"), and the rules
and regulations thereunder, shall be available to the Acquiring Fund from
and after the Closing Date and shall be turned over to the Acquiring Fund
as soon as practicable following the Closing Date.
Article II
VALUATION
2.1 VALUATION OF ASSETS. The value of the Acquired Fund's assets
to be acquired by the Acquiring Fund hereunder shall be the value of such
assets at the closing on the Closing Date, using the valuation procedures
set forth in the Trust's Declaration of Trust and the Acquiring Fund's
then current prospectus and statement of additional information or such
other valuation procedures as shall be mutually agreed upon by the
parties.
2.2 VALUATION OF SHARES. The net asset value per share of
Acquiring Fund Shares shall be the net asset value per share computed at
the closing on the Closing Date, using the valuation procedures set forth
in the Federated Trust's Declaration of Trust and the Acquiring Fund's
then current prospectus and statement of additional information, or such
other valuation procedures as shall be mutually agreed upon by the parties.
2.3 SHARES TO BE ISSUED. The number of the Acquiring Fund's
shares to be issued (including fractional shares, if any) in exchange for
the Acquired Fund's assets, shall be determined by (a) multiplying the
shares outstanding of the Acquired Fund by (b) the ratio computed by
(x) dividing the net asset value per share of the Acquired Fund by (y) the
net asset value per share of the Acquiring Fund Shares determined in
accordance with paragraph 2.2.
2.4 DETERMINATION OF VALUE. All computations of value shall
be made by State Street Bank and Trust Company, on behalf of the Acquiring
Fund and by Citigroup on behalf of the Acquired Fund.
Article III
CLOSING AND CLOSING DATE
3.1 CLOSING DATE. The closing shall occur on or about August 27,
2004, or such other date(s) as the parties may agree to in writing (the
"Closing Date"). All acts taking place at the closing shall be deemed to
take place at 4:00 p.m. Eastern Time on the Closing Date unless otherwise
provided herein. The closing shall be held at the offices of Federated
Services Company, 1001 Liberty Avenue, Pittsburgh, Pennsylvania
15222-3779, or at such other time and/or place as the parties may agree.
3.2 CUSTODIAN'S CERTIFICATE. Citigroup, as custodian for the
Acquired Fund (the "Custodian"), shall deliver at the Closing a
certificate of an authorized officer stating that: (a) the Acquired
Fund's portfolio securities, cash, and any other assets have been
delivered in proper form to the Acquiring Fund on the Closing Date; and
(b) all necessary taxes including all applicable federal and state stock
transfer stamps, if any, shall have been paid, or provision for payment
shall have been made, in conjunction with the delivery of portfolio
securities by the Acquired Fund.
3.3 EFFECT OF SUSPENSION IN TRADING. In the event that on
the scheduled Closing Date, either: (a) the NYSE or another primary
exchange on which the portfolio securities of the Acquiring Fund or the
Acquired Fund are purchased or sold, shall be closed to trading or trading
on such exchange shall be restricted; or (b) trading or the reporting of
trading on the NYSE or elsewhere shall be disrupted so that accurate
appraisal of the value of the net assets of the Acquiring Fund or the
Acquired Fund is impracticable, the Closing Date shall be postponed until
the first business day after the day when trading is fully resumed and
reporting is restored.
3.4 TRANSFER AGENT'S CERTIFICATE. Boston Financial Data
Services, as transfer agent for the Acquired Fund as of the Closing Date,
shall deliver at the Closing a certificate of an authorized officer
stating that its records contain the names and addresses of Acquired Fund
Shareholders, and the number and percentage ownership of outstanding
shares owned by each such shareholder immediately prior to the Closing.
The Acquiring Fund shall issue and deliver or cause, State Street Bank and
Trust Company, its transfer agent, to issue and deliver a confirmation
evidencing Acquiring Fund Shares to be credited on the Closing Date to the
Secretary of the Trust or provide evidence satisfactory to the Acquired
Fund that the Acquiring Fund Shares have been credited to the Acquired
Fund's account on the books of the Acquiring Fund. At the Closing, each
party shall deliver to the other such bills of sale, checks, assignments,
share certificates, receipts and other documents, if any, as such other
party or its counsel may reasonably request.
Article IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE ACQUIRED FUND. The Trust, on behalf of
the Acquired Fund, represents and warrants to the Federated Trust, on
behalf of the Acquiring Fund, as follows:
a) The Acquired Fund is a legally designated, separate series of a
statutory trust duly organized, validly existing, and in good
standing under the laws of the State of Delaware.
b) The Trust is registered as an open-end management investment company
under the 1940 Act, and the Trust's registration with the Securities
and Exchange Commission (the "Commission") as an investment company
under the 1940 Act is in full force and effect.
c) The current prospectus and statement of additional information of
the Acquired Fund conform in all material respects to the applicable
requirements of the Securities Act of 1933 (the "1933 Act") and the
1940 Act, and the rules and regulations thereunder, and do not
include any untrue statement of a material fact or omit to state any
material fact required to be stated or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
d) The Acquired Fund is not, and the execution, delivery, and
performance of this Agreement (subject to shareholder approval) will
not, result in the violation of any provision of the Trust's
Declaration of Trust or By-Laws or of any material agreement,
indenture, instrument, contract, lease, or other undertaking to
which the Acquired Fund is a party or by which it is bound.
e) The Acquired Fund has no material contracts or other commitments
(other than this Agreement) that will be terminated with liability
to it before the Closing Date, except for liabilities, if any, to be
discharged as provided in paragraph 1.3 hereof.
f) Except as otherwise disclosed in writing to and accepted by the
Acquiring Fund, no litigation, administrative proceeding, or
investigation of or before any court or governmental body is
presently pending or to its knowledge threatened against the
Acquired Fund or any of its properties or assets, which, if
adversely determined, would materially and adversely affect its
financial condition, the conduct of its business, or the ability of
the Acquired Fund to carry out the transactions contemplated by this
Agreement. The Acquired Fund knows of no facts that might form the
basis for the institution of such proceedings and is not a party to
or subject to the provisions of any order, decree, or judgment of
any court or governmental body that materially and adversely affects
its business or its ability to consummate the transactions
contemplated herein.
g) The financial statements of the Acquired Fund as of August 31, 2003,
and for the fiscal year then ended have been prepared in accordance
with generally accepted accounting principles, and such statements
(copies of which have been furnished to the Acquiring Fund) fairly
reflect the financial condition of the Acquired Fund as of such
date, and there are no known contingent liabilities of the Acquired
Fund as of such date that are not disclosed in such statements.
h) The unaudited financial statements of the Acquired Fund as of
February 29, 2004, and for the six months then ended have been
prepared in accordance with generally accepted accounting
principles, and such statements (copies of which have been furnished
to the Acquiring Fund) fairly reflect the financial condition of the
Acquired Fund as of such date, and there are no known contingent
liabilities of the Acquired Fund as of such date that are not
disclosed in such statements.
i) Since the date of the financial statements referred to in
paragraph (h) above, there have been no material adverse changes in
the Acquired Fund's financial condition, assets, liabilities or
business (other than changes occurring in the ordinary course of
business), or any incurrence by the Acquired Fund of indebtedness
maturing more than one year from the date such indebtedness was
incurred, except as otherwise disclosed to and accepted by the
Acquiring Fund. For the purposes of this paragraph (i), a decline
in the net asset value of the Acquired Fund shall not constitute a
material adverse change.
j) All federal and other tax returns and reports of the Acquired Fund
required by law to be filed, have been filed, and all federal and
other taxes shown due on such returns and reports have been paid, or
provision shall have been made for the payment thereof. To the best
of the Acquired Fund's knowledge, no such return is currently under
audit, and no assessment has been asserted with respect to such
returns.
k) All issued and outstanding shares of the Acquired Fund are duly and
validly issued and outstanding, fully paid and non-assessable by the
Acquired Fund. All of the issued and outstanding shares of the
Acquired Fund will, at the time of the Closing Date, be held by the
persons and in the amounts set forth in the records of the Acquired
Fund's transfer agent as provided in paragraph 3.4. The Acquired
Fund has no outstanding options, warrants, or other rights to
subscribe for or purchase any of the Acquired Fund shares, and has
no outstanding securities convertible into any of the Acquired Fund
shares.
l) At the Closing Date, the Acquired Fund will have good and marketable
title to the Acquired Fund's assets to be transferred to the
Acquiring Fund pursuant to paragraph 1.2, and full right, power, and
authority to sell, assign, transfer, and deliver such assets
hereunder, free of any lien or other encumbrance, except those liens
or encumbrances to which the Acquiring Fund has received notice,
and, upon delivery and payment for such assets, and the filing of
any articles, certificates or other documents under the laws of the
State of Delaware, the Acquiring Fund will acquire good and
marketable title, subject to no restrictions on the full transfer of
such assets, other than such restrictions as might arise under the
1933 Act, and other than as disclosed to and accepted by the
Acquiring Fund.
m) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of the Acquired
Fund. Subject to approval by the Acquired Fund Shareholders, this
Agreement constitutes a valid and binding obligation of the Acquired
Fund, enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium,
and other laws relating to or affecting creditors' rights and to
general equity principles.
n) The information to be furnished by the Acquired Fund for use in
no-action letters, applications for orders, registration statements,
proxy materials, and other documents that may be necessary in
connection with the transactions contemplated herein shall be
accurate and complete in all material respects and shall comply in
all material respects with federal securities and other laws and
regulations.
o) From the effective date of the Registration Statement (as defined in
paragraph 5.7), through the time of the meeting of the Acquired Fund
Shareholders and on the Closing Date, any written information
furnished by the Trust with respect to the Acquired Fund for use in
the Proxy Materials (as defined in paragraph 5.7), or any other
materials provided in connection with the Reorganization, does not
and will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated or necessary to make
the statements, in light of the circumstances under which such
statements were made, not misleading.
p) The Acquired Fund has elected to qualify and has qualified as a
"regulated investment company" under the Code (a "RIC"), as of and
since its first taxable year; has been a RIC under the Code at all
times since the end of its first taxable year when it so qualified;
and qualifies and will continue to qualify as a RIC under the Code
for its taxable year ending upon its liquidation.
q) No governmental consents, approvals, authorizations or filings are
required under the 1933 Act, the Securities Exchange Act of 1934
(the "1934 Act"), the 1940 Act or Delaware law for the execution of
this Agreement by the Trust, for itself and on behalf of the
Acquired Fund, except for the effectiveness of the Registration
Statement, and the filing of any articles, certificates or other
documents that may be required under Delaware law, and except for
such other consents, approvals, authorizations and filings as have
been made or received, and such consents, approvals, authorizations
and filings as may be required subsequent to the Closing Date, it
being understood, however, that this Agreement and the transactions
contemplated herein must be approved by the shareholders of the
Acquired Fund as described in paragraph 5.2.
4.2 REPRESENTATIONS OF THE ACQUIRING FUND. The Federated Trust,
on behalf of the Acquiring Fund, represents and warrants to the Trust, on
behalf of the Acquired Fund, as follows:
a) The Acquiring Fund is a legally designated, separate series of a
business trust, duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts.
b) The Federated Trust is registered as an open-end management
investment company under the 1940 Act, and the Federated Trust's
registration with the Commission as an investment company under the
1940 Act is in full force and effect.
c) The current prospectus and statement of additional information of
the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the
rules and regulations thereunder, and do not include any untrue
statement of a material fact or omit to state any material fact
required to be stated or necessary to make such statements therein,
in light of the circumstances under which they were made, not
misleading.
d) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not, result in a violation of the
Federated Trust's Declaration of Trust or By-Laws or of any material
agreement, indenture, instrument, contract, lease, or other
undertaking to which the Acquiring Fund is a party or by which it is
bound.
e) Except as otherwise disclosed in writing to and accepted by the
Acquired Fund, no litigation, administrative proceeding or
investigation of or before any court or governmental body is
presently pending or to its knowledge threatened against the
Acquiring Fund or any of its properties or assets, which, if
adversely determined, would materially and adversely affect its
financial condition, the conduct of its business or the ability of
the Acquiring Fund to carry out the transactions contemplated by
this Agreement. The Acquiring Fund knows of no facts that might
form the basis for the institution of such proceedings and it is not
a party to or subject to the provisions of any order, decree, or
judgment of any court or governmental body that materially and
adversely affects its business or its ability to consummate the
transaction contemplated herein.
f) The financial statements of the Acquiring Fund as of October 31,
2003 and for the fiscal year then ended have been prepared in
accordance with generally accepted accounting principles, and such
statements (copies of which have been furnished to the Acquired
Funds) fairly reflect the financial condition of the Acquiring Fund
as of such date, and there are no known contingent liabilities of
the Acquiring Fund as of such date that are not disclosed in such
statements.
g) The unaudited financial statements of the Acquiring Fund as of April
30, 2004, and for the six months then ended have been prepared in
accordance with generally accepted accounting principles, and such
statements (copies of which have been furnished to the Acquired
Fund) fairly reflect the financial condition of the Acquiring Fund
as of such date, and there are no known contingent liabilities of
the Acquiring Fund as of such date that are not disclosed in such
statements.
h) Since the date of the financial statements referred to in
paragraph (g) above, there have been no material adverse changes in
the Acquiring Fund's financial condition, assets, liabilities or
business (other than changes occurring in the ordinary course of
business), or any incurrence by the Acquiring Fund of indebtedness
maturing more than one year from the date such indebtedness was
incurred, except as otherwise disclosed to and accepted by the
Acquired Fund. For the purposes of this paragraph (h), a decline in
the net asset value of the Acquiring Fund shall not constitute a
material adverse change.
i) All federal and other tax returns and reports of the Acquiring Fund
required by law to be filed, have been filed. All federal and other
taxes shown due on such returns and reports have been paid or
provision shall have been made for their payment. To the best of
the Acquiring Fund's knowledge, no such return is currently under
audit, and no assessment has been asserted with respect to such
returns.
j) All issued and outstanding Acquiring Fund Shares are duly and
validly issued and outstanding, fully paid and non-assessable by the
Acquiring Fund. The Acquiring Fund has no outstanding options,
warrants, or other rights to subscribe for or purchase any Acquiring
Fund Shares, and there are no outstanding securities convertible
into any Acquiring Fund Shares.
k) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of the Acquiring
Fund, and this Agreement constitutes a valid and binding obligation
of the Acquiring Fund, enforceable in accordance with its terms,
subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting
creditors' rights and to general equity principles.
l) Acquiring Fund Shares to be issued and delivered to the Acquired
Fund for the account of the Acquired Fund Shareholders pursuant to
the terms of this Agreement will, at the Closing Date, have been
duly authorized. When so issued and delivered, such shares will be
duly and validly issued Acquiring Fund Shares, and will be fully
paid and non-assessable.
m) The information to be furnished by the Acquiring Fund for use in
no-action letters, registration statements, proxy materials, and
other documents that may be necessary in connection with the
transactions contemplated herein shall be accurate and complete in
all material respects and shall comply in all material respects with
federal securities and other laws and regulations.
n) From the effective date of the Registration Statement (as defined in
paragraph 5.7), through the time of the meeting of the Acquired Fund
Shareholders and on the Closing Date, any written information
furnished by the Federated Trust with respect to the Acquiring Fund
for use in the Proxy Materials (as defined in paragraph 5.7), or any
other materials provided in connection with the Reorganization, does
not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated or necessary to
make the statements, in light of the circumstances under which such
statements were made, not misleading.
o) The Acquiring Fund has elected to qualify and has qualified as a RIC
under the Code as of and since its first taxable year; has been a
RIC under the Code at all times since the end of its first taxable
year when it so qualified; and qualifies and shall continue to
qualify as a RIC under the Code for its current taxable year.
p) No governmental consents, approvals, authorizations or filings are
required under the 1933 Act, the 1934 Act, the 1940 Act or
Massachusetts law for the execution of this Agreement by the
Federated Trust, for itself and on behalf of the Acquiring Fund, or
the performance of the Agreement by the Federated Trust, for itself
and on behalf of the Acquiring Fund, except for the effectiveness of
the Registration Statement, and the filing of any articles,
certificates or other documents that may be required under
Massachusetts law, and such other consents, approvals,
authorizations and filings as have been made or received, and except
for such consents, approvals, authorizations and filings as may be
required subsequent to the Closing Date.
q) The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940
Act, and any state Blue Sky or securities laws as it may deem
appropriate in order to continue its operations after the Closing
Date.
Article V
COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 OPERATION IN ORDINARY COURSE. The Acquiring Fund and the
Acquired Fund will each operate its respective business in the ordinary
course between the date of this Agreement and the Closing Date, it being
understood that such ordinary course of business will include customary
dividends and shareholder purchases and redemptions.
5.2 APPROVAL OF SHAREHOLDERS. The Trust will call a special
meeting of the Acquired Fund Shareholders to consider and act upon this
Agreement and to take all other appropriate action necessary to obtain
approval of the transactions contemplated herein.
5.3 INVESTMENT REPRESENTATION. The Acquired Fund covenants
that the Acquiring Fund Shares to be issued pursuant to this Agreement are
not being acquired for the purpose of making any distribution, other than
in connection with the Reorganization and in accordance with the terms of
this Agreement.
5.4 ADDITIONAL INFORMATION. The Acquired Fund will assist
the Acquiring Fund in obtaining such information as the Acquiring Fund
reasonably requests concerning the beneficial ownership of the Acquired
Fund's shares.
5.5 FURTHER ACTION. Subject to the provisions of this
Agreement, the Acquiring Fund and the Acquired Fund will each take or
cause to be taken, all action, and do or cause to be done, all things
reasonably necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement, including any actions
required to be taken after the Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as
practicable, but in any case within sixty days after the Closing Date, the
Acquired Fund shall furnish the Acquiring Fund, in such form as is
reasonably satisfactory to the Acquiring Fund, a statement of the earnings
and profits of the Acquired Fund for federal income tax purposes that will
be carried over by the Acquiring Fund as a result of Section 381 of the
Code, and which will be certified by the Trust's Treasurer.
5.7 PREPARATION OF REGISTRATION STATEMENT AND SCHEDULE 14A
PROXY STATEMENT. The Federated Trust will prepare and file with the
Commission a registration statement on Form N-14 relating to the Acquiring
Fund Shares to be issued to shareholders of the Acquired Fund (the
"Registration Statement"). The Registration Statement on Form N-14 shall
include a proxy statement and a prospectus of the Acquiring Fund relating
to the transaction contemplated by this Agreement. The Registration
Statement shall be in compliance with the 1933 Act, the 1934 Act and the
1940 Act, as applicable. Each party will provide the other party with the
materials and information necessary to prepare the registration statement
on Form N-14 (the "Proxy Materials"), for inclusion therein, in connection
with the meeting of the Acquired Fund's Shareholders to consider the
approval of this Agreement and the transactions contemplated herein.
5.8 The Acquired Fund shall have declared and paid a
dividend or dividends which, together with all previous such dividends,
shall have the effect of distributing to its shareholders all of the
Acquired Fund's investment company taxable income (computed without regard
to any deduction for dividends paid), if any, plus the excess, if any, of
its interest income excludible from gross income under Section 103(a) of
the Code over its deductions disallowed under Sections 265 and 171(a)(2)
of the Code for all taxable periods or years ending on or before the
Closing Date, and all of its net capital gains realized (after reduction
for any capital loss carry forward), if any, in all taxable periods or
years ending on or before the Closing Date.
Article VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance
by the Acquiring Fund of all the obligations to be performed by the
Acquiring Fund pursuant to this Agreement on or before the Closing Date,
and, in addition, subject to the following conditions:
All representations, covenants, and warranties of the
Acquiring Fund contained in this Agreement shall be true and correct in
all material respects as of the date hereof and as of the Closing Date,
with the same force and effect as if made on and as of the Closing Date.
The Acquiring Fund shall have delivered to the Acquired Fund a certificate
executed in the Acquiring Fund's name by the Federated Trust's President
or Vice President and its Treasurer or Assistant Treasurer, in form and
substance satisfactory to the Acquired Fund and dated as of the Closing
Date, to such effect and as to such other matters as the Acquired Fund
shall reasonably request.
Article VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance
by the Acquired Fund of all the obligations to be performed by the
Acquired Fund pursuant to this Agreement, on or before the Closing Date
and, in addition, shall be subject to the following conditions:
All representations, covenants, and warranties of the Acquired
Fund contained in this Agreement shall be true and correct in all material
respects as of the date hereof and as of the Closing Date, with the same
force and effect as if made on and as of such Closing Date. The Acquired
Fund shall have delivered to the Acquiring Fund on such Closing Date a
certificate executed in the Acquired Fund's name by the Trust's President
or Vice President and the Treasurer or Assistant Treasurer, in form and
substance satisfactory to the Acquiring Fund and dated as of such Closing
Date, to such effect and as to such other matters as the Acquiring Fund
shall reasonably request.
The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities, together with a
list of the Acquired Fund's portfolio securities showing the tax costs of
such securities by lot and the holding periods of such securities, as of
the Closing Date, certified by the Treasurer of the Trust.
Article VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
ACQUIRING FUND AND ACQUIRED FUND
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund,
the other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein,
with respect to the Acquired Fund, shall have been approved by the
requisite vote of the holders of the outstanding shares of the Acquired
Fund in accordance with applicable law and the provisions of the Trust's
Declaration of Trust and By-Laws. Certified copies of the resolutions
evidencing such approval shall have been delivered to the Acquiring Fund.
Notwithstanding anything herein to the contrary, neither the Acquiring
Fund nor the Acquired Fund may waive the conditions set forth in this
paragraph 8.1.
8.2 On the Closing Date, the Commission shall not have
issued an unfavorable report under Section 25(b) of the 1940 Act, or
instituted any proceeding seeking to enjoin the consummation of the
transactions contemplated by this Agreement under Section 25(c) of the
1940 Act. Furthermore, no action, suit or other proceeding shall be
threatened or pending before any court or governmental agency in which it
is sought to restrain or prohibit, or obtain damages or other relief in
connection with this Agreement or the transactions contemplated herein.
8.3 All required consents of other parties and all other
consents, orders, and permits of federal, state and local regulatory
authorities (including those of the Commission and of State securities
authorities, including any necessary "no-action" positions and exemptive
orders from such federal and state authorities) to permit consummation of
the transactions contemplated herein shall have been obtained, except
where failure to obtain any such consent, order, or permit would not
involve a risk of a material adverse effect on the assets or properties of
the Acquiring Fund or the Acquired Fund, provided that either party hereto
may waive any such conditions for itself.
8.4 The Registration Statement shall have become effective
under the 1933 Act, and no stop orders suspending the effectiveness
thereof shall have been issued. To the best knowledge of the parties to
this Agreement, no investigation or proceeding for that purpose shall have
been instituted or be pending, threatened or contemplated under the 1933
Act.
8.5 The parties shall have received an opinion of Dickstein
Shapiro Morin & Oshinsky substantially to the effect that for federal
income tax purposes:
a) The transfer of all of the Acquired Fund's assets to the Acquiring
Fund solely in exchange for Acquiring Fund Shares (followed by the
distribution of Acquiring Fund Shares to the Acquired Fund
Shareholders in dissolution and liquidation of the Acquired Fund)
will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and the Acquiring Fund and the Acquired
Fund will each be a "party to a reorganization" within the meaning
of Section 368(b) of the Code.
b) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund solely in exchange for
Acquiring Fund Shares.
c) No gain or loss will be recognized by the Acquired Fund upon the
transfer of the Acquired Fund's assets to the Acquiring Fund solely
in exchange for Acquiring Fund Shares or upon the distribution
(whether actual or constructive) of Acquiring Fund Shares to
Acquired Fund Shareholders in exchange for their Selling Fund Shares.
d) No gain or loss will be recognized by any Acquired Fund Shareholder
upon the exchange of its Acquired Fund Shares for Acquiring Fund
Shares.
e) The aggregate tax basis of the Acquiring Fund Shares received by
each Acquired Fund Shareholder pursuant to the Reorganization will
be the same as the aggregate tax basis of the Acquired Fund Shares
held by it immediately prior to the Reorganization. The holding
period of Acquiring Fund Shares received by each Acquired Fund
Shareholder will include the period during which the Acquired Fund
Shares exchanged therefor were held by such shareholder, provided
the Acquired Fund Shares are held as capital assets at the time of
the Reorganization.
f) The tax basis of the Acquired Fund's assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to
the Acquired Fund immediately prior to the Reorganization. The
holding period of the assets of the Acquired Fund in the hands of
the Acquiring Fund will include the period during which those assets
were held by the Acquired Fund.
Such opinion shall be based on customary assumptions and such
representations Reed Smith LLP may reasonably request, and the
Acquired Fund and Acquiring Fund will cooperate to make and certify
the accuracy of such representations. The foregoing opinion may
state that no opinion is expressed as to the effect of the
Reorganization on the Acquiring Fund, the Acquired Fund or any
Acquired Fund Shareholder with respect to any asset as to which
unrealized gain or loss is required to be reorganized for federal
income tax purposes at the end of a taxable year (or on the
termination or transfer thereof) under a mark-to-market system of
accounting. Notwithstanding anything herein to the contrary,
neither the Acquiring Fund nor the Acquired Fund may waive the
conditions set forth in this paragraph 8.5.
Article IX
EXPENSES
Federated Investment Management Company or its affiliates will pay
all expenses associated with Acquiring Fund's and Acquired Fund's
participation in the Reorganization, provided, however, that Acquiring
Fund shall bear expenses associated with the qualification of Acquiring
Fund Shares for sale in the various states. Reorganization expenses
include, without limitation: (a) expenses associated with the preparation
and filing of the Proxy Materials; (b) postage; (c) printing;
(d) accounting fees; (e) legal fees incurred by each Fund;
(f) solicitation costs of the transaction; and (g) other related
administrative or operational costs.
Article X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Federated Trust, on behalf of the Acquiring Fund, and the
Trust, on behalf of the Acquired Fund, agree that neither party has made
to the other party any representation, warranty and/or covenant not set
forth herein, and that this Agreement constitutes the entire agreement
between the parties.
10.2 Except as specified in the next sentence set forth in
this paragraph 10.2, the representations, warranties, and covenants
contained in this Agreement or in any document delivered pursuant to or in
connection with this Agreement, shall not survive the consummation of the
transactions contemplated hereunder. The covenants to be performed after
the Closing Date, shall continue in effect beyond the consummation of the
transactions contemplated hereunder.
Article XI
TERMINATION
This Agreement may be terminated by the mutual agreement of the
Federated Trust and the Trust. In addition, either the Federated Trust or
the Trust may at its option terminate this Agreement at or before the
Closing Date due to:
a) a breach by the other of any representation, warranty, or agreement
contained herein to be performed at or before the Closing Date, if
not cured within 30 days;
b) a condition herein expressed to be precedent to the obligations of
the terminating party that has not been met and it reasonably
appears that it will not or cannot be met; or
c) a determination by a party's Board of Trustees, as appropriate, that
the consummation of the transactions contemplated herein is not in
the best interest of the Trust or the Federated Trust, respectively,
and notice given to the other party hereto.
In the event of any such termination, in the absence of willful
default, there shall be no liability for damages on the part of either the
Acquiring Fund, the Acquired Fund, the Federated Trust, the Trust, or
their respective Trustees or officers, to the other party or its Trustees
or officers.
Article XII
AMENDMENTS
This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the officers of the
Trust and the Federated Trust as specifically authorized by their
respective Board of Trustees; provided, however, that following the
meeting of the Acquired Fund Shareholders called by the Acquired Fund
pursuant to paragraph 5.2 of this Agreement, no such amendment may have
the effect of changing the provisions for determining the number of
Acquiring Fund Shares to be issued to the Acquired Fund Shareholders under
this Agreement to the detriment of such shareholders without their further
approval.
Article XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but, except as
provided in this paragraph, no assignment or transfer hereof or of any
rights or obligations hereunder shall be made by any party without the
written consent of the other party. Nothing herein expressed or implied
is intended or shall be construed to confer upon or give any person, firm,
or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
It is expressly agreed that the obligations of the Acquiring
Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents, or employees of the Federated
Trust personally, but shall bind only the trust property of the Acquiring
Fund, as provided in the Declaration of Trust of the Federated Trust. The
execution and delivery of this Agreement have been authorized by the
Trustees of the Federated Trust on behalf of the Acquiring Fund and signed
by authorized officers of the Federated Trust, acting as such. Neither
the authorization by such Trustees nor the execution and delivery by such
officers shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, but shall bind only the
trust property of the Acquiring Fund as provided in the Federated Trust's
Declaration of Trust.
It is expressly agreed that the obligations of the Acquired
Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents, or employees of the Trust
personally, but shall bind only the trust property of the Acquired Fund,
as provided in the Declaration of Trust of the Trust. The execution and
delivery of this Agreement have been authorized by the Trustees of the
Trust on behalf of the Acquired Fund and signed by authorized officers of
the Trust, acting as such. Neither the authorization by such Trustees nor
the execution and delivery by such officers shall be deemed to have been
made by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Acquired Fund as
provided in the Trust's Declaration of Trust.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement, all as of the date first written above.
BANKNORTH FUNDS
on behalf of its portfolio,
Banknorth Large Cap Core Fund
John W. McGonigle, Secretary
FEDERATED EQUITY FUNDS
on behalf of its portfolio,
Federated Capital Appreciation Fund
John W. McGonigle, Secretary
EXHIBIT B
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
as of this 1st day of August 2004, by and between Federated Equity Funds,
a Massachusetts business trust, with its principal place of business at
5800 Corporate Drive, Pittsburgh, PA, 15237 (the "Federated Trust"), with
respect to its Federated Kaufmann Fund (the "Acquiring Fund"), a series of
the Federated Trust, and Banknorth Funds, a Delaware statutory trust, with
its principal place of business at 5800 Corporate Drive, Pittsburgh,
Pennsylvania 15237 (the "Trust"), with respect to its Banknorth Small/Mid
Cap Core Fund, a series of the Trust ("Acquired Fund" and, collectively
with the Acquiring Fund, the "Funds").
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368 of the United States
Internal Revenue Code of 1986, as amended (the "Code") and the Treasury
Regulations promulgated thereunder. The reorganization will consist of:
(i) the transfer of all of the assets of the Acquired Fund in exchange for
Class A Shares, no par value per share, of the Acquiring Fund ("Acquiring
Fund Shares"); and (ii) the distribution of Class A Shares of the
Acquiring Fund to the holders of Shares of the Acquired Fund and the
liquidation of the Acquired Fund as provided herein, all upon the terms
and conditions set forth in this Agreement (the "Reorganization").
WHEREAS, the Acquiring Fund and the Acquired Fund is a separate
series of the Federated Trust and the Trust, respectively, and the
Federated Trust and the Trust are open-end, registered management
investment companies and the Acquired Fund owns securities that generally
are assets of the character in which the Acquiring Fund is permitted to
invest;
WHEREAS, the Acquiring Fund and the Acquired Fund are authorized to
issue their shares of beneficial interests;
WHEREAS, the Trustees of the Federated Trust have determined that
the Reorganization, with respect to the Acquiring Fund, is in the best
interests of the Acquiring Fund and that the interests of the existing
shareholders of the Acquiring Fund will not be diluted as a result of the
Reorganization;
WHEREAS, the Trustees of the Trust have determined that the
Reorganization, with respect to the Acquired Fund, is in the best
interests of the Acquired Fund and that the interests of the existing
shareholders of the Acquired Fund will not be diluted as a result of the
Reorganization;
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties hereto
covenant and agree as follows:
ARTICLE I
TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR ACQUIRING FUND
SHARES AND LIQUIDATION OF THE ACQUIRED FUND
THE EXCHANGE. Subject to the terms and conditions contained herein
and on the basis of the representations and warranties contained herein,
the Acquired Fund agrees to transfer all of its assets, as set forth in
paragraph 1.2, to the Acquiring Fund. In exchange, the Acquiring Fund
agrees: (i) to deliver to the Acquired Fund the number of full and
fractional Acquiring Fund Shares, determined by (a) multiplying the shares
outstanding of the Acquired Fund by (b) the ratio computed by dividing
(x) the net asset value per share of the Acquired Fund by (y) the net
asset value per share of the Acquiring Fund Shares computed in the manner
and as of the time and date set forth in paragraph 2.2. Holders of the
Acquired Fund will receive Class A Shares of the Acquiring Fund. Such
transactions shall take place at the closing on the Closing Date provided
for in paragraph 3.1.
1.2 ASSETS TO BE ACQUIRED. The assets of the Acquired Fund
to be acquired by the Acquiring Fund shall consist of property having a
value equal to the total net assets of the Acquired Fund, including,
without limitation, cash, securities, commodities, interests in futures
and dividends or interest receivable, owned by the Acquired Fund and any
deferred or prepaid expenses shown as an asset on the books of the
Acquired Fund on the Closing Date.
The Acquired Fund has provided the Acquiring Fund with its most
recent audited financial statements, which contain a list of all of the
Acquired Fund's assets as of the date of such statements. The Acquired
Fund hereby represents that as of the date of the execution of this
Agreement, there have been no changes in its financial position as
reflected in such financial statements other than those occurring in the
ordinary course of business in connection with the purchase and sale of
securities, the issuance and redemption of Acquired Fund shares and the
payment of normal operating expenses, dividends and capital gains
distributions.
1.3 LIABILITIES TO BE DISCHARGED. The Acquired Fund will
discharge all of its liabilities and obligations prior to the Closing Date.
1.4 LIQUIDATION AND DISTRIBUTION. On or as soon after the
Closing Date as is conveniently practicable: (a) the Acquired Fund will
distribute in complete liquidation of the Acquired Fund, pro rata to its
shareholders of record, determined as of the close of business on the
Closing Date (the "Acquired Fund Shareholders"), all of the Acquiring Fund
Shares received by the Acquired Fund pursuant to paragraph 1.1; and
(b) the Acquired Fund will thereupon proceed to dissolve and terminate as
set forth in paragraph 1.8 below. Such distribution will be accomplished
by the transfer of Acquiring Fund Shares credited to the account of the
Acquired Fund on the books of the Acquiring Fund to open accounts on the
share records of the Acquiring Fund in the name of the Acquired Fund
Shareholders, and representing the respective pro rata number of Acquiring
Fund Shares due such shareholders. All issued and outstanding shares of
the Acquired Fund (the "Acquired Fund Shares") will simultaneously be
canceled on the books of the Acquired Fund. The Acquiring Fund shall not
issue certificates representing Acquiring Fund Shares in connection with
such transfer. After the Closing Date, the Acquired Fund shall not
conduct any business except in connection with its termination.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares
will be shown on the books of the Acquiring Fund's transfer agent.
Acquiring Fund Shares will be issued simultaneously to the Acquired Fund,
in an amount equal in value to the aggregate net asset value of the
Acquired Fund Shares, to be distributed to Acquired Fund Shareholders.
1.6 TRANSFER TAXES. Any transfer taxes payable upon the
issuance of Acquiring Fund Shares in a name other than the registered
holder of the Acquired Fund shares on the books of the Acquired Fund as of
that time shall, as a condition of such issuance and transfer, be paid by
the person to whom such Acquiring Fund Shares are to be issued and
transferred.
1.7 REPORTING RESPONSIBILITY. Any reporting responsibility
of the Acquired Fund is and shall remain the responsibility of the
Acquired Fund.
1.8 TERMINATION. The Acquired Fund shall be terminated
promptly following the Closing Date and the making of all distributions
pursuant to paragraph 1.4.
1.9 BOOKS AND RECORDS. All books and records of the
Acquired Fund, including all books and records required to be maintained
under the Investment Company Act of 1940 (the "1940 Act"), and the rules
and regulations thereunder, shall be available to the Acquiring Fund from
and after the Closing Date and shall be turned over to the Acquiring Fund
as soon as practicable following the Closing Date.
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of the Acquired Fund's assets
to be acquired by the Acquiring Fund hereunder shall be the value of such
assets at the closing on the Closing Date, using the valuation procedures
set forth in the Trust's Declaration of Trust and the Acquiring Fund's
then current prospectus and statement of additional information or such
other valuation procedures as shall be mutually agreed upon by the
parties.
2.2 VALUATION OF SHARES. The net asset value per share of
Acquiring Fund Shares shall be the net asset value per share computed at
the closing on the Closing Date, using the valuation procedures set forth
in the Federated Trust's Declaration of Trust and the Acquiring Fund's
then current prospectus and statement of additional information, or such
other valuation procedures as shall be mutually agreed upon by the parties.
2.3 SHARES TO BE ISSUED. The number of the Acquiring Fund's
shares to be issued (including fractional shares, if any) in exchange for
the Acquired Fund's assets, shall be determined by (a) multiplying the
shares outstanding of the Acquired Fund by (b) the ratio computed by
(x) dividing the net asset value per share of the Acquired Fund by (y) the
net asset value per share of the Acquiring Fund Shares determined in
accordance with paragraph 2.2.
2.4 DETERMINATION OF VALUE. All computations of value shall
be made by State Street Bank and Trust Company, on behalf of the Acquiring
Fund and by Citigroup on behalf of the Acquired Fund.
ARTICLE III
CLOSING AND CLOSING DATE
3.1 CLOSING DATE. The closing shall occur on or about August 27,
2004, or such other date(s) as the parties may agree to in writing (the
"Closing Date"). All acts taking place at the closing shall be deemed to
take place at 4:00 p.m. Eastern Time on the Closing Date unless otherwise
provided herein. The closing shall be held at the offices of Federated
Services Company, 1001 Liberty Avenue, Pittsburgh, Pennsylvania
15222-3779, or at such other time and/or place as the parties may agree.
3.2 CUSTODIAN'S CERTIFICATE. Citigroup, as custodian for the
Acquired Fund (the "Custodian"), shall deliver at the Closing a
certificate of an authorized officer stating that: (a) the Acquired
Fund's portfolio securities, cash, and any other assets have been
delivered in proper form to the Acquiring Fund on the Closing Date; and
(b) all necessary taxes including all applicable federal and state stock
transfer stamps, if any, shall have been paid, or provision for payment
shall have been made, in conjunction with the delivery of portfolio
securities by the Acquired Fund.
3.3 EFFECT OF SUSPENSION IN TRADING. In the event that on
the scheduled Closing Date, either: (a) the NYSE or another primary
exchange on which the portfolio securities of the Acquiring Fund or the
Acquired Fund are purchased or sold, shall be closed to trading or trading
on such exchange shall be restricted; or (b) trading or the reporting of
trading on the NYSE or elsewhere shall be disrupted so that accurate
appraisal of the value of the net assets of the Acquiring Fund or the
Acquired Fund is impracticable, the Closing Date shall be postponed until
the first business day after the day when trading is fully resumed and
reporting is restored.
3.4 TRANSFER AGENT'S CERTIFICATE. Boston Financial Data
Services, as transfer agent for the Acquired Fund as of the Closing Date,
shall deliver at the Closing a certificate of an authorized officer
stating that its records contain the names and addresses of Acquired Fund
Shareholders, and the number and percentage ownership of outstanding
shares owned by each such shareholder immediately prior to the Closing.
The Acquiring Fund shall issue and deliver or cause, State Street Bank and
Trust Company, its transfer agent, to issue and deliver a confirmation
evidencing Acquiring Fund Shares to be credited on the Closing Date to the
Secretary of the Trust or provide evidence satisfactory to the Acquired
Fund that the Acquiring Fund Shares have been credited to the Acquired
Fund's account on the books of the Acquiring Fund. At the Closing, each
party shall deliver to the other such bills of sale, checks, assignments,
share certificates, receipts and other documents, if any, as such other
party or its counsel may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE ACQUIRED FUND. The Trust, on behalf of
the Acquired Fund, represents and warrants to the Federated Trust, on
behalf of the Acquiring Fund, as follows:
r) The Acquired Fund is a legally designated, separate series of a
statutory trust duly organized, validly existing, and in good
standing under the laws of the State of Delaware.
s) The Trust is registered as an open-end management investment company
under the 1940 Act, and the Trust's registration with the Securities
and Exchange Commission (the "Commission") as an investment company
under the 1940 Act is in full force and effect.
t) The current prospectus and statement of additional information of
the Acquired Fund conform in all material respects to the applicable
requirements of the Securities Act of 1933 (the "1933 Act") and the
1940 Act, and the rules and regulations thereunder, and do not
include any untrue statement of a material fact or omit to state any
material fact required to be stated or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
u) The Acquired Fund is not, and the execution, delivery, and
performance of this Agreement (subject to shareholder approval) will
not, result in the violation of any provision of the Trust's
Declaration of Trust or By-Laws or of any material agreement,
indenture, instrument, contract, lease, or other undertaking to
which the Acquired Fund is a party or by which it is bound.
v) The Acquired Fund has no material contracts or other commitments
(other than this Agreement) that will be terminated with liability
to it before the Closing Date, except for liabilities, if any, to be
discharged as provided in paragraph 1.3 hereof.
w) Except as otherwise disclosed in writing to and accepted by the
Acquiring Fund, no litigation, administrative proceeding, or
investigation of or before any court or governmental body is
presently pending or to its knowledge threatened against the
Acquired Fund or any of its properties or assets, which, if
adversely determined, would materially and adversely affect its
financial condition, the conduct of its business, or the ability of
the Acquired Fund to carry out the transactions contemplated by this
Agreement. The Acquired Fund knows of no facts that might form the
basis for the institution of such proceedings and is not a party to
or subject to the provisions of any order, decree, or judgment of
any court or governmental body that materially and adversely affects
its business or its ability to consummate the transactions
contemplated herein.
x) The financial statements of the Acquired Fund as of August 31, 2003,
and for the fiscal year then ended have been prepared in accordance
with generally accepted accounting principles, and such statements
(copies of which have been furnished to the Acquiring Fund) fairly
reflect the financial condition of the Acquired Fund as of such
date, and there are no known contingent liabilities of the Acquired
Fund as of such date that are not disclosed in such statements.
y) The unaudited financial statements of the Acquired Fund as of
February 29, 2004, and for the six months then ended have been
prepared in accordance with generally accepted accounting
principles, and such statements (copies of which have been furnished
to the Acquiring Fund) fairly reflect the financial condition of the
Acquired Fund as of such date, and there are no known contingent
liabilities of the Acquired Fund as of such date that are not
disclosed in such statements.
z) Since the date of the financial statements referred to in
paragraph (h) above, there have been no material adverse changes in
the Acquired Fund's financial condition, assets, liabilities or
business (other than changes occurring in the ordinary course of
business), or any incurrence by the Acquired Fund of indebtedness
maturing more than one year from the date such indebtedness was
incurred, except as otherwise disclosed to and accepted by the
Acquiring Fund. For the purposes of this paragraph (i), a decline
in the net asset value of the Acquired Fund shall not constitute a
material adverse change.
aa) All federal and other tax returns and reports of the Acquired Fund
required by law to be filed, have been filed, and all federal and
other taxes shown due on such returns and reports have been paid, or
provision shall have been made for the payment thereof. To the best
of the Acquired Fund's knowledge, no such return is currently under
audit, and no assessment has been asserted with respect to such
returns.
bb) All issued and outstanding shares of the Acquired Fund are duly and
validly issued and outstanding, fully paid and non-assessable by the
Acquired Fund. All of the issued and outstanding shares of the
Acquired Fund will, at the time of the Closing Date, be held by the
persons and in the amounts set forth in the records of the Acquired
Fund's transfer agent as provided in paragraph 3.4. The Acquired
Fund has no outstanding options, warrants, or other rights to
subscribe for or purchase any of the Acquired Fund shares, and has
no outstanding securities convertible into any of the Acquired Fund
shares.
cc) At the Closing Date, the Acquired Fund will have good and marketable
title to the Acquired Fund's assets to be transferred to the
Acquiring Fund pursuant to paragraph 1.2, and full right, power, and
authority to sell, assign, transfer, and deliver such assets
hereunder, free of any lien or other encumbrance, except those liens
or encumbrances to which the Acquiring Fund has received notice,
and, upon delivery and payment for such assets, and the filing of
any articles, certificates or other documents under the laws of the
State of Delaware, the Acquiring Fund will acquire good and
marketable title, subject to no restrictions on the full transfer of
such assets, other than such restrictions as might arise under the
1933 Act, and other than as disclosed to and accepted by the
Acquiring Fund.
dd) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of the Acquired
Fund. Subject to approval by the Acquired Fund Shareholders, this
Agreement constitutes a valid and binding obligation of the Acquired
Fund, enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium,
and other laws relating to or affecting creditors' rights and to
general equity principles.
ee) The information to be furnished by the Acquired Fund for use in
no-action letters, applications for orders, registration statements,
proxy materials, and other documents that may be necessary in
connection with the transactions contemplated herein shall be
accurate and complete in all material respects and shall comply in
all material respects with federal securities and other laws and
regulations.
ff) From the effective date of the Registration Statement (as defined in
paragraph 5.7), through the time of the meeting of the Acquired Fund
Shareholders and on the Closing Date, any written information
furnished by the Trust with respect to the Acquired Fund for use in
the Proxy Materials (as defined in paragraph 5.7), or any other
materials provided in connection with the Reorganization, does not
and will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated or necessary to make
the statements, in light of the circumstances under which such
statements were made, not misleading.
gg) The Acquired Fund has elected to qualify and has qualified as a
"regulated investment company" under the Code (a "RIC"), as of and
since its first taxable year; has been a RIC under the Code at all
times since the end of its first taxable year when it so qualified;
and qualifies and will continue to qualify as a RIC under the Code
for its taxable year ending upon its liquidation.
hh) No governmental consents, approvals, authorizations or filings are
required under the 1933 Act, the Securities Exchange Act of 1934
(the "1934 Act"), the 1940 Act or Delaware law for the execution of
this Agreement by the Trust, for itself and on behalf of the
Acquired Fund, except for the effectiveness of the Registration
Statement, and the filing of any articles, certificates or other
documents that may be required under Delaware law, and except for
such other consents, approvals, authorizations and filings as have
been made or received, and such consents, approvals, authorizations
and filings as may be required subsequent to the Closing Date, it
being understood, however, that this Agreement and the transactions
contemplated herein must be approved by the shareholders of the
Acquired Fund as described in paragraph 5.2.
4.2 REPRESENTATIONS OF THE ACQUIRING FUND. The Federated Trust,
on behalf of the Acquiring Fund, represents and warrants to the Trust, on
behalf of the Acquired Fund, as follows:
r) The Acquiring Fund is a legally designated, separate series of a
business trust, duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts.
s) The Federated Trust is registered as an open-end management
investment company under the 1940 Act, and the Federated Trust's
registration with the Commission as an investment company under the
1940 Act is in full force and effect.
t) The current prospectus and statement of additional information of
the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the
rules and regulations thereunder, and do not include any untrue
statement of a material fact or omit to state any material fact
required to be stated or necessary to make such statements therein,
in light of the circumstances under which they were made, not
misleading.
u) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not, result in a violation of the
Federated Trust's Declaration of Trust or By-Laws or of any material
agreement, indenture, instrument, contract, lease, or other
undertaking to which the Acquiring Fund is a party or by which it is
bound.
v) Except as otherwise disclosed in writing to and accepted by the
Acquired Fund, no litigation, administrative proceeding or
investigation of or before any court or governmental body is
presently pending or to its knowledge threatened against the
Acquiring Fund or any of its properties or assets, which, if
adversely determined, would materially and adversely affect its
financial condition, the conduct of its business or the ability of
the Acquiring Fund to carry out the transactions contemplated by
this Agreement. The Acquiring Fund knows of no facts that might
form the basis for the institution of such proceedings and it is not
a party to or subject to the provisions of any order, decree, or
judgment of any court or governmental body that materially and
adversely affects its business or its ability to consummate the
transaction contemplated herein.
w) The financial statements of the Acquiring Fund as of October 31,
2003 and for the fiscal year then ended have been prepared in
accordance with generally accepted accounting principles, and such
statements (copies of which have been furnished to the Acquired
Funds) fairly reflect the financial condition of the Acquiring Fund
as of such date, and there are no known contingent liabilities of
the Acquiring Fund as of such date that are not disclosed in such
statements.
x) The unaudited financial statements of the Acquiring Fund as of April
30, 2004, and for the six months then ended have been prepared in
accordance with generally accepted accounting principles, and such
statements (copies of which have been furnished to the Acquired
Fund) fairly reflect the financial condition of the Acquiring Fund
as of such date, and there are no known contingent liabilities of
the Acquiring Fund as of such date that are not disclosed in such
statements.
y) Since the date of the financial statements referred to in
paragraph (g) above, there have been no material adverse changes in
the Acquiring Fund's financial condition, assets, liabilities or
business (other than changes occurring in the ordinary course of
business), or any incurrence by the Acquiring Fund of indebtedness
maturing more than one year from the date such indebtedness was
incurred, except as otherwise disclosed to and accepted by the
Acquired Fund. For the purposes of this paragraph (h), a decline in
the net asset value of the Acquiring Fund shall not constitute a
material adverse change.
z) All federal and other tax returns and reports of the Acquiring Fund
required by law to be filed, have been filed. All federal and other
taxes shown due on such returns and reports have been paid or
provision shall have been made for their payment. To the best of
the Acquiring Fund's knowledge, no such return is currently under
audit, and no assessment has been asserted with respect to such
returns.
aa) All issued and outstanding Acquiring Fund Shares are duly and
validly issued and outstanding, fully paid and non-assessable by the
Acquiring Fund. The Acquiring Fund has no outstanding options,
warrants, or other rights to subscribe for or purchase any Acquiring
Fund Shares, and there are no outstanding securities convertible
into any Acquiring Fund Shares.
bb) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of the Acquiring
Fund, and this Agreement constitutes a valid and binding obligation
of the Acquiring Fund, enforceable in accordance with its terms,
subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting
creditors' rights and to general equity principles.
cc) Acquiring Fund Shares to be issued and delivered to the Acquired
Fund for the account of the Acquired Fund Shareholders pursuant to
the terms of this Agreement will, at the Closing Date, have been
duly authorized. When so issued and delivered, such shares will be
duly and validly issued Acquiring Fund Shares, and will be fully
paid and non-assessable.
dd) The information to be furnished by the Acquiring Fund for use in
no-action letters, registration statements, proxy materials, and
other documents that may be necessary in connection with the
transactions contemplated herein shall be accurate and complete in
all material respects and shall comply in all material respects with
federal securities and other laws and regulations.
ee) From the effective date of the Registration Statement (as defined in
paragraph 5.7), through the time of the meeting of the Acquired Fund
Shareholders and on the Closing Date, any written information
furnished by the Federated Trust with respect to the Acquiring Fund
for use in the Proxy Materials (as defined in paragraph 5.7), or any
other materials provided in connection with the Reorganization, does
not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated or necessary to
make the statements, in light of the circumstances under which such
statements were made, not misleading.
ff) The Acquiring Fund has elected to qualify and has qualified as a RIC
under the Code as of and since its first taxable year; has been a
RIC under the Code at all times since the end of its first taxable
year when it so qualified; and qualifies and shall continue to
qualify as a RIC under the Code for its current taxable year.
gg) No governmental consents, approvals, authorizations or filings are
required under the 1933 Act, the 1934 Act, the 1940 Act or
Massachusetts law for the execution of this Agreement by the
Federated Trust, for itself and on behalf of the Acquiring Fund, or
the performance of the Agreement by the Federated Trust, for itself
and on behalf of the Acquiring Fund, except for the effectiveness of
the Registration Statement, and the filing of any articles,
certificates or other documents that may be required under
Massachusetts law, and such other consents, approvals,
authorizations and filings as have been made or received, and except
for such consents, approvals, authorizations and filings as may be
required subsequent to the Closing Date.
hh) The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940
Act, and any state Blue Sky or securities laws as it may deem
appropriate in order to continue its operations after the Closing
Date.
ARTICLE V
COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 OPERATION IN ORDINARY COURSE. The Acquiring Fund and the
Acquired Fund will each operate its respective business in the ordinary
course between the date of this Agreement and the Closing Date, it being
understood that such ordinary course of business will include customary
dividends and shareholder purchases and redemptions.
5.2 APPROVAL OF SHAREHOLDERS. The Trust will call a special
meeting of the Acquired Fund Shareholders to consider and act upon this
Agreement and to take all other appropriate action necessary to obtain
approval of the transactions contemplated herein.
5.3 INVESTMENT REPRESENTATION. The Acquired Fund covenants
that the Acquiring Fund Shares to be issued pursuant to this Agreement are
not being acquired for the purpose of making any distribution, other than
in connection with the Reorganization and in accordance with the terms of
this Agreement.
5.4 ADDITIONAL INFORMATION. The Acquired Fund will assist
the Acquiring Fund in obtaining such information as the Acquiring Fund
reasonably requests concerning the beneficial ownership of the Acquired
Fund's shares.
5.5 FURTHER ACTION. Subject to the provisions of this
Agreement, the Acquiring Fund and the Acquired Fund will each take or
cause to be taken, all action, and do or cause to be done, all things
reasonably necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement, including any actions
required to be taken after the Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as
practicable, but in any case within sixty days after the Closing Date, the
Acquired Fund shall furnish the Acquiring Fund, in such form as is
reasonably satisfactory to the Acquiring Fund, a statement of the earnings
and profits of the Acquired Fund for federal income tax purposes that will
be carried over by the Acquiring Fund as a result of Section 381 of the
Code, and which will be certified by the Trust's Treasurer.
5.7 PREPARATION OF REGISTRATION STATEMENT AND SCHEDULE 14A
PROXY STATEMENT. The Federated Trust will prepare and file with the
Commission a registration statement on Form N-14 relating to the Acquiring
Fund Shares to be issued to shareholders of the Acquired Fund (the
"Registration Statement"). The Registration Statement on Form N-14 shall
include a proxy statement and a prospectus of the Acquiring Fund relating
to the transaction contemplated by this Agreement. The Registration
Statement shall be in compliance with the 1933 Act, the 1934 Act and the
1940 Act, as applicable. Each party will provide the other party with the
materials and information necessary to prepare the registration statement
on Form N-14 (the "Proxy Materials"), for inclusion therein, in connection
with the meeting of the Acquired Fund's Shareholders to consider the
approval of this Agreement and the transactions contemplated herein.
5.8 The Acquired Fund shall have declared and paid a
dividend or dividends which, together with all previous such dividends,
shall have the effect of distributing to its shareholders all of the
Acquired Fund's investment company taxable income (computed without regard
to any deduction for dividends paid), if any, plus the excess, if any, of
its interest income excludible from gross income under Section 103(a) of
the Code over its deductions disallowed under Sections 265 and 171(a)(2)
of the Code for all taxable periods or years ending on or before the
Closing Date, and all of its net capital gains realized (after reduction
for any capital loss carry forward), if any, in all taxable periods or
years ending on or before the Closing Date.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance
by the Acquiring Fund of all the obligations to be performed by the
Acquiring Fund pursuant to this Agreement on or before the Closing Date,
and, in addition, subject to the following conditions:
All representations, covenants, and warranties of the
Acquiring Fund contained in this Agreement shall be true and correct in
all material respects as of the date hereof and as of the Closing Date,
with the same force and effect as if made on and as of the Closing Date.
The Acquiring Fund shall have delivered to the Acquired Fund a certificate
executed in the Acquiring Fund's name by the Federated Trust's President
or Vice President and its Treasurer or Assistant Treasurer, in form and
substance satisfactory to the Acquired Fund and dated as of the Closing
Date, to such effect and as to such other matters as the Acquired Fund
shall reasonably request.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance
by the Acquired Fund of all the obligations to be performed by the
Acquired Fund pursuant to this Agreement, on or before the Closing Date
and, in addition, shall be subject to the following conditions:
All representations, covenants, and warranties of the Acquired
Fund contained in this Agreement shall be true and correct in all material
respects as of the date hereof and as of the Closing Date, with the same
force and effect as if made on and as of such Closing Date. The Acquired
Fund shall have delivered to the Acquiring Fund on such Closing Date a
certificate executed in the Acquired Fund's name by the Trust's President
or Vice President and the Treasurer or Assistant Treasurer, in form and
substance satisfactory to the Acquiring Fund and dated as of such Closing
Date, to such effect and as to such other matters as the Acquiring Fund
shall reasonably request.
The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities, together with a
list of the Acquired Fund's portfolio securities showing the tax costs of
such securities by lot and the holding periods of such securities, as of
the Closing Date, certified by the Treasurer of the Trust.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
ACQUIRING FUND AND ACQUIRED FUND
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund,
the other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein,
with respect to the Acquired Fund, shall have been approved by the
requisite vote of the holders of the outstanding shares of the Acquired
Fund in accordance with applicable law and the provisions of the Trust's
Declaration of Trust and By-Laws. Certified copies of the resolutions
evidencing such approval shall have been delivered to the Acquiring Fund.
Notwithstanding anything herein to the contrary, neither the Acquiring
Fund nor the Acquired Fund may waive the conditions set forth in this
paragraph 8.1.
8.2 On the Closing Date, the Commission shall not have
issued an unfavorable report under Section 25(b) of the 1940 Act, or
instituted any proceeding seeking to enjoin the consummation of the
transactions contemplated by this Agreement under Section 25(c) of the
1940 Act. Furthermore, no action, suit or other proceeding shall be
threatened or pending before any court or governmental agency in which it
is sought to restrain or prohibit, or obtain damages or other relief in
connection with this Agreement or the transactions contemplated herein.
8.3 All required consents of other parties and all other
consents, orders, and permits of federal, state and local regulatory
authorities (including those of the Commission and of State securities
authorities, including any necessary "no-action" positions and exemptive
orders from such federal and state authorities) to permit consummation of
the transactions contemplated herein shall have been obtained, except
where failure to obtain any such consent, order, or permit would not
involve a risk of a material adverse effect on the assets or properties of
the Acquiring Fund or the Acquired Fund, provided that either party hereto
may waive any such conditions for itself.
8.4 The Registration Statement shall have become effective
under the 1933 Act, and no stop orders suspending the effectiveness
thereof shall have been issued. To the best knowledge of the parties to
this Agreement, no investigation or proceeding for that purpose shall have
been instituted or be pending, threatened or contemplated under the 1933
Act.
8.5 The parties shall have received an opinion of Dickstein
Shapiro Morin & Oshinsky substantially to the effect that for federal
income tax purposes:
g) The transfer of all of the Acquired Fund's assets to the Acquiring
Fund solely in exchange for Acquiring Fund Shares (followed by the
distribution of Acquiring Fund Shares to the Acquired Fund
Shareholders in dissolution and liquidation of the Acquired Fund)
will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and the Acquiring Fund and the Acquired
Fund will each be a "party to a reorganization" within the meaning
of Section 368(b) of the Code.
h) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund solely in exchange for
Acquiring Fund Shares.
i) No gain or loss will be recognized by the Acquired Fund upon the
transfer of the Acquired Fund's assets to the Acquiring Fund solely
in exchange for Acquiring Fund Shares or upon the distribution
(whether actual or constructive) of Acquiring Fund Shares to
Acquired Fund Shareholders in exchange for their Selling Fund Shares.
j) No gain or loss will be recognized by any Acquired Fund Shareholder
upon the exchange of its Acquired Fund Shares for Acquiring Fund
Shares.
k) The aggregate tax basis of the Acquiring Fund Shares received by
each Acquired Fund Shareholder pursuant to the Reorganization will
be the same as the aggregate tax basis of the Acquired Fund Shares
held by it immediately prior to the Reorganization. The holding
period of Acquiring Fund Shares received by each Acquired Fund
Shareholder will include the period during which the Acquired Fund
Shares exchanged therefor were held by such shareholder, provided
the Acquired Fund Shares are held as capital assets at the time of
the Reorganization.
l) The tax basis of the Acquired Fund's assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to
the Acquired Fund immediately prior to the Reorganization. The
holding period of the assets of the Acquired Fund in the hands of
the Acquiring Fund will include the period during which those assets
were held by the Acquired Fund.
Such opinion shall be based on customary assumptions and such
representations Reed Smith LLP may reasonably request, and the
Acquired Fund and Acquiring Fund will cooperate to make and certify
the accuracy of such representations. The foregoing opinion may
state that no opinion is expressed as to the effect of the
Reorganization on the Acquiring Fund, the Acquired Fund or any
Acquired Fund Shareholder with respect to any asset as to which
unrealized gain or loss is required to be reorganized for federal
income tax purposes at the end of a taxable year (or on the
termination or transfer thereof) under a mark-to-market system of
accounting. Notwithstanding anything herein to the contrary,
neither the Acquiring Fund nor the Acquired Fund may waive the
conditions set forth in this paragraph 8.5.
ARTICLE IX
EXPENSES
Federated Investment Management Company or its affiliates will pay
all expenses associated with Acquiring Fund's and Acquired Fund's
participation in the Reorganization, provided, however, that Acquiring
Fund shall bear expenses associated with the qualification of Acquiring
Fund Shares for sale in the various states. Reorganization expenses
include, without limitation: (a) expenses associated with the preparation
and filing of the Proxy Materials; (b) postage; (c) printing;
(d) accounting fees; (e) legal fees incurred by each Fund;
(f) solicitation costs of the transaction; and (g) other related
administrative or operational costs.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Federated Trust, on behalf of the Acquiring Fund, and the
Trust, on behalf of the Acquired Fund, agree that neither party has made
to the other party any representation, warranty and/or covenant not set
forth herein, and that this Agreement constitutes the entire agreement
between the parties.
10.2 Except as specified in the next sentence set forth in
this paragraph 10.2, the representations, warranties, and covenants
contained in this Agreement or in any document delivered pursuant to or in
connection with this Agreement, shall not survive the consummation of the
transactions contemplated hereunder. The covenants to be performed after
the Closing Date, shall continue in effect beyond the consummation of the
transactions contemplated hereunder.
ARTICLE XI
TERMINATION
This Agreement may be terminated by the mutual agreement of the
Federated Trust and the Trust. In addition, either the Federated Trust or
the Trust may at its option terminate this Agreement at or before the
Closing Date due to:
d) a breach by the other of any representation, warranty, or agreement
contained herein to be performed at or before the Closing Date, if
not cured within 30 days;
e) a condition herein expressed to be precedent to the obligations of
the terminating party that has not been met and it reasonably
appears that it will not or cannot be met; or
f) a determination by a party's Board of Trustees, as appropriate, that
the consummation of the transactions contemplated herein is not in
the best interest of the Trust or the Federated Trust, respectively,
and notice given to the other party hereto.
In the event of any such termination, in the absence of willful
default, there shall be no liability for damages on the part of either the
Acquiring Fund, the Acquired Fund, the Federated Trust, the Trust, or
their respective Trustees or officers, to the other party or its Trustees
or officers.
ARTICLE XII
AMENDMENTS
This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the officers of the
Trust and the Federated Trust as specifically authorized by their
respective Board of Trustees; provided, however, that following the
meeting of the Acquired Fund Shareholders called by the Acquired Fund
pursuant to paragraph 5.2 of this Agreement, no such amendment may have
the effect of changing the provisions for determining the number of
Acquiring Fund Shares to be issued to the Acquired Fund Shareholders under
this Agreement to the detriment of such shareholders without their further
approval.
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but, except as
provided in this paragraph, no assignment or transfer hereof or of any
rights or obligations hereunder shall be made by any party without the
written consent of the other party. Nothing herein expressed or implied
is intended or shall be construed to confer upon or give any person, firm,
or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
It is expressly agreed that the obligations of the Acquiring
Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents, or employees of the Federated
Trust personally, but shall bind only the trust property of the Acquiring
Fund, as provided in the Declaration of Trust of the Federated Trust. The
execution and delivery of this Agreement have been authorized by the
Trustees of the Federated Trust on behalf of the Acquiring Fund and signed
by authorized officers of the Federated Trust, acting as such. Neither
the authorization by such Trustees nor the execution and delivery by such
officers shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, but shall bind only the
trust property of the Acquiring Fund as provided in the Federated Trust's
Declaration of Trust.
It is expressly agreed that the obligations of the Acquired
Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents, or employees of the Trust
personally, but shall bind only the trust property of the Acquired Fund,
as provided in the Declaration of Trust of the Trust. The execution and
delivery of this Agreement have been authorized by the Trustees of the
Trust on behalf of the Acquired Fund and signed by authorized officers of
the Trust, acting as such. Neither the authorization by such Trustees nor
the execution and delivery by such officers shall be deemed to have been
made by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Acquired Fund as
provided in the Trust's Declaration of Trust.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement, all as of the date first written above.
BANKNORTH FUNDS
on behalf of its portfolio,
Banknorth Small/Mid Cap Core Fund
John W. McGonigle, Secretary
FEDERATED EQUITY FUNDS
on behalf of its portfolio,
Federated Kaufmann Fund
John W. McGonigle, Secretary
EXHIBIT C
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
as of this 1st day of August 2004, by and between Federated Total Return
Series, Inc., a Maryland corporation, with its principal place of business
at 5800 Corporate Drive, Pittsburgh, PA, 15237 (the "Corporation"), with
respect to its Federated Total Return Bond Fund (the "Acquiring Fund"), a
series of the Corporation, and Banknorth Funds, a Delaware statutory
trust, with its principal place of business at 5800 Corporate Drive,
Pittsburgh, Pennsylvania 15237 (the "Trust"), with respect to its
Banknorth Intermediate Bond Fund , a series of the Trust ("Acquired Fund"
and, collectively with the Acquiring Fund, the "Funds").
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368 of the United States
Internal Revenue Code of 1986, as amended (the "Code") and the Treasury
Regulations promulgated thereunder. The reorganization will consist of:
(i) the transfer of all of the assets of the Acquired Fund in exchange for
Institutional Service Shares, no par value per share, of the Acquiring
Fund ("Acquiring Fund Shares"); and (ii) the distribution of Institutional
Service Shares of the Acquiring Fund to the holders of Shares of the
Acquired Fund and the liquidation of the Acquired Fund as provided herein,
all upon the terms and conditions set forth in this Agreement (the
"Reorganization").
WHEREAS, the Acquiring Fund and the Acquired Fund is a separate
series of the Corporation and the Trust, respectively, and the Corporation
and the Trust are open-end, registered management investment companies and
the Acquired Fund owns securities that generally are assets of the
character in which the Acquiring Fund is permitted to invest;
WHEREAS, the Acquiring Fund and the Acquired Fund are authorized to
issue their shares of capital stock and shares of beneficial interests,
respectively;
WHEREAS, the Directors of the Corporation have determined that the
Reorganization, with respect to the Acquiring Fund, is in the best
interests of the Acquiring Fund and that the interests of the existing
shareholders of the Acquiring Fund will not be diluted as a result of the
Reorganization;
WHEREAS, the Trustees of the Trust have determined that the
Reorganization, with respect to the Acquired Fund, is in the best
interests of the Acquired Fund and that the interests of the existing
shareholders of the Acquired Fund will not be diluted as a result of the
Reorganization;
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties hereto
covenant and agree as follows:
ARTICLE I
TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR ACQUIRING FUND
SHARES AND LIQUIDATION OF THE ACQUIRED FUND
THE EXCHANGE. Subject to the terms and conditions contained herein
and on the basis of the representations and warranties contained herein,
the Acquired Fund agrees to transfer all of its assets, as set forth in
paragraph 1.2, to the Acquiring Fund. In exchange, the Acquiring Fund
agrees: (i) to deliver to the Acquired Fund the number of full and
fractional Acquiring Fund Shares, determined by (a) multiplying the shares
outstanding of the Acquired Fund by (b) the ratio computed by dividing
(x) the net asset value per share of the Acquired Fund by (y) the net
asset value per share of the Acquiring Fund Shares computed in the manner
and as of the time and date set forth in paragraph 2.2. Holders of the
Acquired Fund will receive Institutional Service Shares of the Acquiring
Fund. Such transactions shall take place at the closing on the Closing
Date provided for in paragraph 3.1.
1.2 ASSETS TO BE ACQUIRED. The assets of the Acquired Fund
to be acquired by the Acquiring Fund shall consist of property having a
value equal to the total net assets of the Acquired Fund, including,
without limitation, cash, securities, commodities, interests in futures
and dividends or interest receivable, owned by the Acquired Fund and any
deferred or prepaid expenses shown as an asset on the books of the
Acquired Fund on the Closing Date.
The Acquired Fund has provided the Acquiring Fund with its most
recent audited financial statements, which contain a list of all of the
Acquired Fund's assets as of the date of such statements. The Acquired
Fund hereby represents that as of the date of the execution of this
Agreement, there have been no changes in its financial position as
reflected in such financial statements other than those occurring in the
ordinary course of business in connection with the purchase and sale of
securities, the issuance and redemption of Acquired Fund shares and the
payment of normal operating expenses, dividends and capital gains
distributions.
1.3 LIABILITIES TO BE DISCHARGED. The Acquired Fund will
discharge all of its liabilities and obligations prior to the Closing Date.
1.4 STATE FILINGS. Prior to the Closing Date, the
Corporation shall make any filings with the State of Maryland that may be
required under the laws of the State of Maryland, effective as of the
Closing Date.
1.5 LIQUIDATION AND DISTRIBUTION. On or as soon after the
Closing Date as is conveniently practicable: (a) the Acquired Fund will
distribute in complete liquidation of the Acquired Fund, pro rata to its
shareholders of record, determined as of the close of business on the
Closing Date (the "Acquired Fund Shareholders"), all of the Acquiring Fund
Shares received by the Acquired Fund pursuant to paragraph 1.1; and
(b) the Acquired Fund will thereupon proceed to dissolve and terminate as
set forth in paragraph 1.9 below. Such distribution will be accomplished
by the transfer of Acquiring Fund Shares credited to the account of the
Acquired Fund on the books of the Acquiring Fund to open accounts on the
share records of the Acquiring Fund in the name of the Acquired Fund
Shareholders, and representing the respective pro rata number of Acquiring
Fund Shares due such shareholders. All issued and outstanding shares of
the Acquired Fund (the "Acquired Fund Shares") will simultaneously be
canceled on the books of the Acquired Fund. The Acquiring Fund shall not
issue certificates representing Acquiring Fund Shares in connection with
such transfer. After the Closing Date, the Acquired Fund shall not
conduct any business except in connection with its termination.
1.6 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares
will be shown on the books of the Acquiring Fund's transfer agent.
Acquiring Fund Shares will be issued simultaneously to the Acquired Fund,
in an amount equal in value to the aggregate net asset value of the
Acquired Fund Shares, to be distributed to Acquired Fund Shareholders.
1.7 TRANSFER TAXES. Any transfer taxes payable upon the
issuance of Acquiring Fund Shares in a name other than the registered
holder of the Acquired Fund shares on the books of the Acquired Fund as of
that time shall, as a condition of such issuance and transfer, be paid by
the person to whom such Acquiring Fund Shares are to be issued and
transferred.
1.8 REPORTING RESPONSIBILITY. Any reporting responsibility
of the Acquired Fund is and shall remain the responsibility of the
Acquired Fund.
1.9 TERMINATION. The Acquired Fund shall be terminated
promptly following the Closing Date and the making of all distributions
pursuant to paragraph 1.5.
1.10 BOOKS AND RECORDS. All books and records of the
Acquired Fund, including all books and records required to be maintained
under the Investment Company Act of 1940 (the "1940 Act"), and the rules
and regulations thereunder, shall be available to the Acquiring Fund from
and after the Closing Date and shall be turned over to the Acquiring Fund
as soon as practicable following the Closing Date.
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of the Acquired Fund's assets
to be acquired by the Acquiring Fund hereunder shall be the value of such
assets at the closing on the Closing Date, using the valuation procedures
set forth in the Trust's Declaration of Trust and the Acquiring Fund's
then current prospectus and statement of additional information or such
other valuation procedures as shall be mutually agreed upon by the
parties.
2.2 VALUATION OF SHARES. The net asset value per share of
Acquiring Fund Shares shall be the net asset value per share computed at
the closing on the Closing Date, using the valuation procedures set forth
in the Corporation's Articles of Incorporation and the Acquiring Fund's
then current prospectus and statement of additional information, or such
other valuation procedures as shall be mutually agreed upon by the parties.
2.3 SHARES TO BE ISSUED. The number of the Acquiring Fund's
shares to be issued (including fractional shares, if any) in exchange for
the Acquired Fund's assets, shall be determined by (a) multiplying the
shares outstanding of the Acquired Fund by (b) the ratio computed by
(x) dividing the net asset value per share of the Acquired Fund by (y) the
net asset value per share of the Acquiring Fund determined in accordance
with paragraph 2.2.
2.4 DETERMINATION OF VALUE. All computations of value shall
be made by State Street Bank and Trust Company, on behalf of the Acquiring
Fund and by Citigroup on behalf of the Acquired Fund.
ARTICLE III
CLOSING AND CLOSING DATE
3.1 CLOSING DATE. The closing shall occur on or about August 27,
2004, or such other date(s) as the parties may agree to in writing (the
"Closing Date"). All acts taking place at the closing shall be deemed to
take place at 4:00 p.m. Eastern Time on the Closing Date unless otherwise
provided herein. The closing shall be held at the offices of Federated
Services Company, 1001 Liberty Avenue, Pittsburgh, Pennsylvania
15222-3779, or at such other time and/or place as the parties may agree.
3.2 CUSTODIAN'S CERTIFICATE. Citigroup, as custodian for the
Acquired Fund (the "Custodian"), shall deliver at the Closing a
certificate of an authorized officer stating that: (a) the Acquired
Fund's portfolio securities, cash, and any other assets have been
delivered in proper form to the Acquiring Fund on the Closing Date; and
(b) all necessary taxes including all applicable federal and state stock
transfer stamps, if any, shall have been paid, or provision for payment
shall have been made, in conjunction with the delivery of portfolio
securities by the Acquired Fund.
3.3 EFFECT OF SUSPENSION IN TRADING. In the event that on
the scheduled Closing Date, either: (a) the NYSE or another primary
exchange on which the portfolio securities of the Acquiring Fund or the
Acquired Fund are purchased or sold, shall be closed to trading or trading
on such exchange shall be restricted; or (b) trading or the reporting of
trading on the NYSE or elsewhere shall be disrupted so that accurate
appraisal of the value of the net assets of the Acquiring Fund or the
Acquired Fund is impracticable, the Closing Date shall be postponed until
the first business day after the day when trading is fully resumed and
reporting is restored.
3.4 TRANSFER AGENT'S CERTIFICATE. Boston Financial Data
Services, as transfer agent for the Acquired Fund as of the Closing Date,
shall deliver at the Closing a certificate of an authorized officer
stating that its records contain the names and addresses of Acquired Fund
Shareholders, and the number and percentage ownership of outstanding
shares owned by each such shareholder immediately prior to the Closing.
The Acquiring Fund shall issue and deliver or cause, State Street Bank and
Trust Company, its transfer agent, to issue and deliver a confirmation
evidencing Acquiring Fund Shares to be credited on the Closing Date to the
Secretary of the Trust or provide evidence satisfactory to the Acquired
Fund that the Acquiring Fund Shares have been credited to the Acquired
Fund's account on the books of the Acquiring Fund. At the Closing, each
party shall deliver to the other such bills of sale, checks, assignments,
share certificates, receipts and other documents, if any, as such other
party or its counsel may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE ACQUIRED FUND. The Trust, on behalf of
the Acquired Fund, represents and warrants to the Corporation, on behalf
of the Acquiring Fund, as follows:
ii) The Acquired Fund is a legally designated, separate series of a
statutory trust duly organized, validly existing, and in good
standing under the laws of the State of Delaware.
jj) The Trust is registered as an open-end management investment company
under the 1940 Act, and the Trust's registration with the Securities
and Exchange Commission (the "Commission") as an investment company
under the 1940 Act is in full force and effect.
kk) The current prospectus and statement of additional information of
the Acquired Fund conform in all material respects to the applicable
requirements of the Securities Act of 1933 (the "1933 Act") and the
1940 Act, and the rules and regulations thereunder, and do not
include any untrue statement of a material fact or omit to state any
material fact required to be stated or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
ll) The Acquired Fund is not, and the execution, delivery, and
performance of this Agreement (subject to shareholder approval) will
not, result in the violation of any provision of the Trust's
Declaration of Trust or By-Laws or of any material agreement,
indenture, instrument, contract, lease, or other undertaking to
which the Acquired Fund is a party or by which it is bound.
mm) The Acquired Fund has no material contracts or other commitments
(other than this Agreement) that will be terminated with liability
to it before the Closing Date, except for liabilities, if any, to be
discharged as provided in paragraph 1.3 hereof.
nn) Except as otherwise disclosed in writing to and accepted by the
Acquiring Fund, no litigation, administrative proceeding, or
investigation of or before any court or governmental body is
presently pending or to its knowledge threatened against the
Acquired Fund or any of its properties or assets, which, if
adversely determined, would materially and adversely affect its
financial condition, the conduct of its business, or the ability of
the Acquired Fund to carry out the transactions contemplated by this
Agreement. The Acquired Fund knows of no facts that might form the
basis for the institution of such proceedings and is not a party to
or subject to the provisions of any order, decree, or judgment of
any court or governmental body that materially and adversely affects
its business or its ability to consummate the transactions
contemplated herein.
oo) The financial statements of the Acquired Fund as of August 31, 2003,
and for the fiscal year then ended have been prepared in accordance
with generally accepted accounting principles, and such statements
(copies of which have been furnished to the Acquiring Fund) fairly
reflect the financial condition of the Acquired Fund as of such
date, and there are no known contingent liabilities of the Acquired
Fund as of such date that are not disclosed in such statements.
pp) The unaudited financial statements of the Acquired Fund as of
February 29, 2004, and for the six months then ended have been
prepared in accordance with generally accepted accounting
principles, and such statements (copies of which have been furnished
to the Acquiring Fund) fairly reflect the financial condition of the
Acquired Fund as of such date, and there are no known contingent
liabilities of the Acquired Fund as of such date that are not
disclosed in such statements.
qq) Since the date of the financial statements referred to in
paragraph (h) above, there have been no material adverse changes in
the Acquired Fund's financial condition, assets, liabilities or
business (other than changes occurring in the ordinary course of
business), or any incurrence by the Acquired Fund of indebtedness
maturing more than one year from the date such indebtedness was
incurred, except as otherwise disclosed to and accepted by the
Acquiring Fund. For the purposes of this paragraph (i), a decline
in the net asset value of the Acquired Fund shall not constitute a
material adverse change.
rr) All federal and other tax returns and reports of the Acquired Fund
required by law to be filed, have been filed, and all federal and
other taxes shown due on such returns and reports have been paid, or
provision shall have been made for the payment thereof. To the best
of the Acquired Fund's knowledge, no such return is currently under
audit, and no assessment has been asserted with respect to such
returns.
ss) All issued and outstanding shares of the Acquired Fund are duly and
validly issued and outstanding, fully paid and non-assessable by the
Acquired Fund. All of the issued and outstanding shares of the
Acquired Fund will, at the time of the Closing Date, be held by the
persons and in the amounts set forth in the records of the Acquired
Fund's transfer agent as provided in paragraph 3.4. The Acquired
Fund has no outstanding options, warrants, or other rights to
subscribe for or purchase any of the Acquired Fund shares, and has
no outstanding securities convertible into any of the Acquired Fund
shares.
tt) At the Closing Date, the Acquired Fund will have good and marketable
title to the Acquired Fund's assets to be transferred to the
Acquiring Fund pursuant to paragraph 1.2, and full right, power, and
authority to sell, assign, transfer, and deliver such assets
hereunder, free of any lien or other encumbrance, except those liens
or encumbrances to which the Acquiring Fund has received notice,
and, upon delivery and payment for such assets, and the filing of
any articles, certificates or other documents under the laws of the
State of Delaware, the Acquiring Fund will acquire good and
marketable title, subject to no restrictions on the full transfer of
such assets, other than such restrictions as might arise under the
1933 Act, and other than as disclosed to and accepted by the
Acquiring Fund.
uu) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of the Acquired
Fund. Subject to approval by the Acquired Fund Shareholders, this
Agreement constitutes a valid and binding obligation of the Acquired
Fund, enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium,
and other laws relating to or affecting creditors' rights and to
general equity principles.
vv) The information to be furnished by the Acquired Fund for use in
no-action letters, applications for orders, registration statements,
proxy materials, and other documents that may be necessary in
connection with the transactions contemplated herein shall be
accurate and complete in all material respects and shall comply in
all material respects with federal securities and other laws and
regulations.
ww) From the effective date of the Registration Statement (as defined in
paragraph 5.7), through the time of the meeting of the Acquired Fund
Shareholders and on the Closing Date, any written information
furnished by the Trust with respect to the Acquired Fund for use in
the Proxy Materials (as defined in paragraph 5.7), or any other
materials provided in connection with the Reorganization, does not
and will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated or necessary to make
the statements, in light of the circumstances under which such
statements were made, not misleading.
xx) The Acquired Fund has elected to qualify and has qualified as a
"regulated investment company" under the Code (a "RIC"), as of and
since its first taxable year; has been a RIC under the Code at all
times since the end of its first taxable year when it so qualified;
and qualifies and will continue to qualify as a RIC under the Code
for its taxable year ending upon its liquidation.
yy) No governmental consents, approvals, authorizations or filings are
required under the 1933 Act, the Securities Exchange Act of 1934
(the "1934 Act"), the 1940 Act or Delaware law for the execution of
this Agreement by the Trust, for itself and on behalf of the
Acquired Fund, except for the effectiveness of the Registration
Statement, and the filing of any articles, certificates or other
documents that may be required under Delaware law, and except for
such other consents, approvals, authorizations and filings as have
been made or received, and such consents, approvals, authorizations
and filings as may be required subsequent to the Closing Date, it
being understood, however, that this Agreement and the transactions
contemplated herein must be approved by the shareholders of the
Acquired Fund as described in paragraph 5.2.
4.2 REPRESENTATIONS OF THE ACQUIRING FUND. The Corporation, on
behalf of the Acquiring Fund, represents and warrants to the Trust, on
behalf of the Acquired Fund, as follows:
ii) The Acquiring Fund is a legally designated, separate series of a
corporation, duly organized, validly existing and in good standing
under the laws of the State of Maryland.
jj) The Corporation is registered as an open-end management investment
company under the 1940 Act, and the Corporation's registration with
the Commission as an investment company under the 1940 Act is in
full force and effect.
kk) The current prospectus and statement of additional information of
the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the
rules and regulations thereunder, and do not include any untrue
statement of a material fact or omit to state any material fact
required to be stated or necessary to make such statements therein,
in light of the circumstances under which they were made, not
misleading.
ll) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not, result in a violation of the
Corporation's Articles of Incorporation or By-Laws or of any
material agreement, indenture, instrument, contract, lease, or other
undertaking to which the Acquiring Fund is a party or by which it is
bound.
mm) Except as otherwise disclosed in writing to and accepted by the
Acquired Fund, no litigation, administrative proceeding or
investigation of or before any court or governmental body is
presently pending or to its knowledge threatened against the
Acquiring Fund or any of its properties or assets, which, if
adversely determined, would materially and adversely affect its
financial condition, the conduct of its business or the ability of
the Acquiring Fund to carry out the transactions contemplated by
this Agreement. The Acquiring Fund knows of no facts that might
form the basis for the institution of such proceedings and it is not
a party to or subject to the provisions of any order, decree, or
judgment of any court or governmental body that materially and
adversely affects its business or its ability to consummate the
transaction contemplated herein.
nn) The financial statements of the Acquiring Fund as of November 30,
2003 and for the fiscal year then ended have been prepared in
accordance with generally accepted accounting principles, and such
statements (copies of which have been furnished to the Acquired
Funds) fairly reflect the financial condition of the Acquiring Fund
as of such date, and there are no known contingent liabilities of
the Acquiring Fund as of such date that are not disclosed in such
statements.
oo) The unaudited financial statements of the Acquiring Fund as of May
31, 2004, and for the six months then ended have been prepared in
accordance with generally accepted accounting principles, and such
statements (copies of which have been furnished to the Acquired
Fund) fairly reflect the financial condition of the Acquiring Fund
as of such date, and there are no known contingent liabilities of
the Acquiring Fund as of such date that are not disclosed in such
statements.
pp) Since the date of the financial statements referred to in
paragraph (g) above, there have been no material adverse changes in
the Acquiring Fund's financial condition, assets, liabilities or
business (other than changes occurring in the ordinary course of
business), or any incurrence by the Acquiring Fund of indebtedness
maturing more than one year from the date such indebtedness was
incurred, except as otherwise disclosed to and accepted by the
Acquired Fund. For the purposes of this paragraph (h), a decline in
the net asset value of the Acquiring Fund shall not constitute a
material adverse change.
qq) All federal and other tax returns and reports of the Acquiring Fund
required by law to be filed, have been filed. All federal and other
taxes shown due on such returns and reports have been paid or
provision shall have been made for their payment. To the best of
the Acquiring Fund's knowledge, no such return is currently under
audit, and no assessment has been asserted with respect to such
returns.
rr) All issued and outstanding Acquiring Fund Shares are duly and
validly issued and outstanding, fully paid and non-assessable by the
Acquiring Fund. The Acquiring Fund has no outstanding options,
warrants, or other rights to subscribe for or purchase any Acquiring
Fund Shares, and there are no outstanding securities convertible
into any Acquiring Fund Shares.
ss) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of the Acquiring
Fund, and this Agreement constitutes a valid and binding obligation
of the Acquiring Fund, enforceable in accordance with its terms,
subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting
creditors' rights and to general equity principles.
tt) Acquiring Fund Shares to be issued and delivered to the Acquired
Fund for the account of the Acquired Fund Shareholders pursuant to
the terms of this Agreement will, at the Closing Date, have been
duly authorized. When so issued and delivered, such shares will be
duly and validly issued Acquiring Fund Shares, and will be fully
paid and non-assessable.
uu) The information to be furnished by the Acquiring Fund for use in
no-action letters, registration statements, proxy materials, and
other documents that may be necessary in connection with the
transactions contemplated herein shall be accurate and complete in
all material respects and shall comply in all material respects with
federal securities and other laws and regulations.
vv) From the effective date of the Registration Statement (as defined in
paragraph 5.7), through the time of the meeting of the Acquired Fund
Shareholders and on the Closing Date, any written information
furnished by the Corporation with respect to the Acquiring Fund for
use in the Proxy Materials (as defined in paragraph 5.7), or any
other materials provided in connection with the Reorganization, does
not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated or necessary to
make the statements, in light of the circumstances under which such
statements were made, not misleading.
ww) The Acquiring Fund has elected to qualify and has qualified as a RIC
under the Code as of and since its first taxable year; has been a
RIC under the Code at all times since the end of its first taxable
year when it so qualified; and qualifies and shall continue to
qualify as a RIC under the Code for its current taxable year.
xx) No governmental consents, approvals, authorizations or filings are
required under the 1933 Act, the 1934 Act, the 1940 Act or Maryland
law for the execution of this Agreement by the Corporation, for
itself and on behalf of the Acquiring Fund, or the performance of
the Agreement by the Corporation, for itself and on behalf of the
Acquiring Fund, except for the effectiveness of the Registration
Statement, and the filing of any articles, certificates or other
documents that may be required under Maryland law, and such other
consents, approvals, authorizations and filings as have been made or
received, and except for such consents, approvals, authorizations
and filings as may be required subsequent to the Closing Date.
yy) The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940
Act, and any state Blue Sky or securities laws as it may deem
appropriate in order to continue its operations after the Closing
Date.
ARTICLE V
COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 OPERATION IN ORDINARY COURSE. The Acquiring Fund and the
Acquired Fund will each operate its respective business in the ordinary
course between the date of this Agreement and the Closing Date, it being
understood that such ordinary course of business will include customary
dividends and shareholder purchases and redemptions.
5.2 APPROVAL OF SHAREHOLDERS. The Trust will call a special
meeting of the Acquired Fund Shareholders to consider and act upon this
Agreement and to take all other appropriate action necessary to obtain
approval of the transactions contemplated herein.
5.3 INVESTMENT REPRESENTATION. The Acquired Fund covenants
that the Acquiring Fund Shares to be issued pursuant to this Agreement are
not being acquired for the purpose of making any distribution, other than
in connection with the Reorganization and in accordance with the terms of
this Agreement.
5.4 ADDITIONAL INFORMATION. The Acquired Fund will assist
the Acquiring Fund in obtaining such information as the Acquiring Fund
reasonably requests concerning the beneficial ownership of the Acquired
Fund's shares.
5.5 FURTHER ACTION. Subject to the provisions of this
Agreement, the Acquiring Fund and the Acquired Fund will each take or
cause to be taken, all action, and do or cause to be done, all things
reasonably necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement, including any actions
required to be taken after the Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as
practicable, but in any case within sixty days after the Closing Date, the
Acquired Fund shall furnish the Acquiring Fund, in such form as is
reasonably satisfactory to the Acquiring Fund, a statement of the earnings
and profits of the Acquired Fund for federal income tax purposes that will
be carried over by the Acquiring Fund as a result of Section 381 of the
Code, and which will be certified by the Trust's Treasurer.
5.7 PREPARATION OF REGISTRATION STATEMENT AND SCHEDULE 14A
PROXY STATEMENT. The Corporation will prepare and file with the
Commission a registration statement on Form N-14 relating to the Acquiring
Fund Shares to be issued to shareholders of the Acquired Fund (the
"Registration Statement"). The Registration Statement on Form N-14 shall
include a proxy statement and a prospectus of the Acquiring Fund relating
to the transaction contemplated by this Agreement. The Registration
Statement shall be in compliance with the 1933 Act, the 1934 Act and the
1940 Act, as applicable. Each party will provide the other party with the
materials and information necessary to prepare the registration statement
on Form N-14 (the "Proxy Materials"), for inclusion therein, in connection
with the meeting of the Acquired Fund's Shareholders to consider the
approval of this Agreement and the transactions contemplated herein.
5.8 The Acquired Fund shall have declared and paid a
dividend or dividends which, together with all previous such dividends,
shall have the effect of distributing to its shareholders all of the
Acquired Fund's investment company taxable income (computed without regard
to any deduction for dividends paid), if any, plus the excess, if any, of
its interest income excludible from gross income under Section 103(a) of
the Code over its deductions disallowed under Sections 265 and 171(a)(2)
of the Code for all taxable periods or years ending on or before the
Closing Date, and all of its net capital gains realized (after reduction
for any capital loss carry forward), if any, in all taxable periods or
years ending on or before the Closing Date.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance
by the Acquiring Fund of all the obligations to be performed by the
Acquiring Fund pursuant to this Agreement on or before the Closing Date,
and, in addition, subject to the following conditions:
All representations, covenants, and warranties of the
Acquiring Fund contained in this Agreement shall be true and correct in
all material respects as of the date hereof and as of the Closing Date,
with the same force and effect as if made on and as of the Closing Date.
The Acquiring Fund shall have delivered to the Acquired Fund a certificate
executed in the Acquiring Fund's name by the Corporation's President or
Vice President and its Treasurer or Assistant Treasurer, in form and
substance satisfactory to the Acquired Fund and dated as of the Closing
Date, to such effect and as to such other matters as the Acquired Fund
shall reasonably request.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance
by the Acquired Fund of all the obligations to be performed by the
Acquired Fund pursuant to this Agreement, on or before the Closing Date
and, in addition, shall be subject to the following conditions:
All representations, covenants, and warranties of the Acquired
Fund contained in this Agreement shall be true and correct in all material
respects as of the date hereof and as of the Closing Date, with the same
force and effect as if made on and as of such Closing Date. The Acquired
Fund shall have delivered to the Acquiring Fund on such Closing Date a
certificate executed in the Acquired Fund's name by the Trust's President
or Vice President and the Treasurer or Assistant Treasurer, in form and
substance satisfactory to the Acquiring Fund and dated as of such Closing
Date, to such effect and as to such other matters as the Acquiring Fund
shall reasonably request.
The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities, together with a
list of the Acquired Fund's portfolio securities showing the tax costs of
such securities by lot and the holding periods of such securities, as of
the Closing Date, certified by the Treasurer of the Trust.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
ACQUIRING FUND AND ACQUIRED FUND
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund,
the other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein,
with respect to the Acquired Fund, shall have been approved by the
requisite vote of the holders of the outstanding shares of the Acquired
Fund in accordance with applicable law and the provisions of the Trust's
Declaration of Trust and By-Laws. Certified copies of the resolutions
evidencing such approval shall have been delivered to the Acquiring Fund.
Notwithstanding anything herein to the contrary, neither the Acquiring
Fund nor the Acquired Fund may waive the conditions set forth in this
paragraph 8.1.
8.2 On the Closing Date, the Commission shall not have
issued an unfavorable report under Section 25(b) of the 1940 Act, or
instituted any proceeding seeking to enjoin the consummation of the
transactions contemplated by this Agreement under Section 25(c) of the
1940 Act. Furthermore, no action, suit or other proceeding shall be
threatened or pending before any court or governmental agency in which it
is sought to restrain or prohibit, or obtain damages or other relief in
connection with this Agreement or the transactions contemplated herein.
8.3 All required consents of other parties and all other
consents, orders, and permits of federal, state and local regulatory
authorities (including those of the Commission and of State securities
authorities, including any necessary "no-action" positions and exemptive
orders from such federal and state authorities) to permit consummation of
the transactions contemplated herein shall have been obtained, except
where failure to obtain any such consent, order, or permit would not
involve a risk of a material adverse effect on the assets or properties of
the Acquiring Fund or the Acquired Fund, provided that either party hereto
may waive any such conditions for itself.
8.4 The Registration Statement shall have become effective
under the 1933 Act, and no stop orders suspending the effectiveness
thereof shall have been issued. To the best knowledge of the parties to
this Agreement, no investigation or proceeding for that purpose shall have
been instituted or be pending, threatened or contemplated under the 1933
Act.
8.5 The parties shall have received an opinion of Dickstein
Shapiro Morin & Oshinsky substantially to the effect that for federal
income tax purposes:
m) The transfer of all of the Acquired Fund's assets to the Acquiring
Fund solely in exchange for Acquiring Fund Shares (followed by the
distribution of Acquiring Fund Shares to the Acquired Fund
Shareholders in dissolution and liquidation of the Acquired Fund)
will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and the Acquiring Fund and the Acquired
Fund will each be a "party to a reorganization" within the meaning
of Section 368(b) of the Code.
n) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund solely in exchange for
Acquiring Fund Shares.
o) No gain or loss will be recognized by the Acquired Fund upon the
transfer of the Acquired Fund's assets to the Acquiring Fund solely
in exchange for Acquiring Fund Shares or upon the distribution
(whether actual or constructive) of Acquiring Fund Shares to
Acquired Fund Shareholders in exchange for their Selling Fund Shares.
p) No gain or loss will be recognized by any Acquired Fund Shareholder
upon the exchange of its Acquired Fund Shares for Acquiring Fund
Shares.
q) The aggregate tax basis of the Acquiring Fund Shares received by
each Acquired Fund Shareholder pursuant to the Reorganization will
be the same as the aggregate tax basis of the Acquired Fund Shares
held by it immediately prior to the Reorganization. The holding
period of Acquiring Fund Shares received by each Acquired Fund
Shareholder will include the period during which the Acquired Fund
Shares exchanged therefor were held by such shareholder, provided
the Acquired Fund Shares are held as capital assets at the time of
the Reorganization.
r) The tax basis of the Acquired Fund's assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to
the Acquired Fund immediately prior to the Reorganization. The
holding period of the assets of the Acquired Fund in the hands of
the Acquiring Fund will include the period during which those assets
were held by the Acquired Fund.
Such opinion shall be based on customary assumptions and such
representations Reed Smith LLP may reasonably request, and the
Acquired Fund and Acquiring Fund will cooperate to make and certify
the accuracy of such representations. The foregoing opinion may
state that no opinion is expressed as to the effect of the
Reorganization on the Acquiring Fund, the Acquired Fund or any
Acquired Fund Shareholder with respect to any asset as to which
unrealized gain or loss is required to be reorganized for federal
income tax purposes at the end of a taxable year (or on the
termination or transfer thereof) under a mark-to-market system of
accounting. Notwithstanding anything herein to the contrary,
neither the Acquiring Fund nor the Acquired Fund may waive the
conditions set forth in this paragraph 8.5.
ARTICLE IX
EXPENSES
Federated Investment Management Company or its affiliates will pay
all expenses associated with Acquiring Fund's and Acquired Fund's
participation in the Reorganization, provided, however, that Acquiring
Fund shall bear expenses associated with the qualification of Acquiring
Fund Shares for sale in the various states. Reorganization expenses
include, without limitation: (a) expenses associated with the preparation
and filing of the Proxy Materials; (b) postage; (c) printing;
(d) accounting fees; (e) legal fees incurred by each Fund;
(f) solicitation costs of the transaction; and (g) other related
administrative or operational costs.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Corporation, on behalf of the Acquiring Fund, and the
Trust, on behalf of the Acquired Fund, agree that neither party has made
to the other party any representation, warranty and/or covenant not set
forth herein, and that this Agreement constitutes the entire agreement
between the parties.
10.2 Except as specified in the next sentence set forth in
this paragraph 10.2, the representations, warranties, and covenants
contained in this Agreement or in any document delivered pursuant to or in
connection with this Agreement, shall not survive the consummation of the
transactions contemplated hereunder. The covenants to be performed after
the Closing Date, shall continue in effect beyond the consummation of the
transactions contemplated hereunder.
ARTICLE XI
TERMINATION
This Agreement may be terminated by the mutual agreement of the
Corporation and the Trust. In addition, either the Corporation or the
Trust may at its option terminate this Agreement at or before the Closing
Date due to:
g) a breach by the other of any representation, warranty, or agreement
contained herein to be performed at or before the Closing Date, if
not cured within 30 days;
h) a condition herein expressed to be precedent to the obligations of
the terminating party that has not been met and it reasonably
appears that it will not or cannot be met; or
i) a determination by a party's Board of Trustees, as appropriate, that
the consummation of the transactions contemplated herein is not in
the best interest of the Trust or the Corporation, respectively, and
notice given to the other party hereto.
In the event of any such termination, in the absence of willful
default, there shall be no liability for damages on the part of either the
Acquiring Fund, the Acquired Fund, the Corporation, the Trust, or their
respective Trustees or officers, to the other party or its Trustees or
officers.
ARTICLE XII
AMENDMENTS
This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the officers of the
Trust and the Corporation as specifically authorized by their respective
Board of Trustees or Board of Directors, as the case may be; provided,
however, that following the meeting of the Acquired Fund Shareholders
called by the Acquired Fund pursuant to paragraph 5.2 of this Agreement,
no such amendment may have the effect of changing the provisions for
determining the number of Acquiring Fund Shares to be issued to the
Acquired Fund Shareholders under this Agreement to the detriment of such
shareholders without their further approval.
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but, except as
provided in this paragraph, no assignment or transfer hereof or of any
rights or obligations hereunder shall be made by any party without the
written consent of the other party. Nothing herein expressed or implied
is intended or shall be construed to confer upon or give any person, firm,
or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
It is expressly agreed that the obligations of the Acquired
Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents, or employees of the Trust
personally, but shall bind only the trust property of the Acquired Fund,
as provided in the Declaration of Trust of the Trust. The execution and
delivery of this Agreement have been authorized by the Trustees of the
Trust on behalf of the Acquired Fund and signed by authorized officers of
the Trust, acting as such. Neither the authorization by such Trustees nor
the execution and delivery by such officers shall be deemed to have been
made by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Acquired Fund as
provided in the Trust's Declaration of Trust.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement, all as of the date first written above.
BANKNORTH FUNDS
on behalf of its portfolio,
Banknorth Intermediate Bond Fund
John W. McGonigle, Secretary
FEDERATED TOTAL RETURN SERIES, INC.
on behalf of its portfolio,
Federated Total Return Bond Fund
John W. McGonigle, Secretary
Exhibit D
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated as of August 1, 2004,
(the "Agreement") between Banknorth Funds, a Delaware Statutory trust
("Banknorth Funds), with its principal place of business at 5800 Corporate
Drive, Pittsburgh, Pennsylvania 15237-7010, with respect to its portfolio,
Banknorth Vermont Municipal Bond Fund (the "Fund") and Federated Municipal
Income Securities Trust, a Massachusetts business trust (the "Trust"),
with its principal place of business located at 5800 Corporate Drive,
Pittsburgh, Pennsylvania 15237-7000, on behalf of its newly-organized
portfolio, Federated Vermont Municipal Income Fund (the "Successor Fund").
WHEREAS, the Board of Trustees of the Fund and the Board of
Trustees of the Trust have determined that it is in the best interests of
the Fund and the Trust, respectively, that the assets of the Fund be
acquired by the Successor Fund pursuant to this Agreement; and
WHEREAS, the parties desire to enter into a plan of exchange
which would constitute a reorganization within the meaning of Section
368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (the "Code"):
NOW THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties hereto agree
as follows:
1. Plan of Exchange.
(a) Subject to the terms and conditions set forth herein,
the Fund shall assign, transfer and convey its assets, including all
securities and cash held by the Fund (subject to the liabilities of the
Fund that were incurred in the ordinary course of business and which shall
be assumed by the Successor Fund) to the Successor Fund, and the Successor
Fund shall acquire all of the assets of the Fund (subject as aforesaid to
the liabilities of the Fund) in exchange for full and fractional shares of
beneficial interest of the Successor Fund (the "Successor Fund Shares"),
to be issued by the Trust, having an aggregate number equal to the number
of shares of the Fund then outstanding, and having an aggregate net asset
value equal to the net assets of the Fund. The value of the assets of the
Fund and the net asset value per share of the Successor Fund Shares shall
be computed as of the close of the New York Stock Exchange (normally 4:00
p.m. Eastern time) on the Exchange Date (such time and date being
hereinafter called the "Valuation Time") in accordance with the procedures
for determining the value of the Successor Fund's assets set forth in the
Successor Fund's organizational documents and the then-current prospectus
and statement of additional information for the Successor Fund that forms
a part of the Successor Fund's Registration Statement on Form N-1A (the
"Registration Statement"). Successor Fund will not issue certificates
representing Successor Fund Shares in connection with the Reorganization.
In lieu of delivering certificates for the Successor Fund Shares, the
Trust shall credit the Successor Fund Shares to the Fund's account on the
share record books of the Trust and shall deliver a confirmation thereof
to the Fund. The Fund shall then deliver written instructions to the
Trust's transfer agent to establish accounts for the shareholders on the
share record books relating to the Successor Fund.
(b) When the Successor Fund Shares are distributed pursuant
to paragraph 1(a), all outstanding shares of the Fund, including any
represented by certificates, shall be canceled on the Fund's share
transfer books. No redemption or repurchase of Successor Fund Shares
credited to a shareholder's account in respect of shares of the Fund
represented by unsurrendered share certificates shall be permitted until
such certificates have been surrendered to the Trust for cancellation or,
if such certificates are lost or misplaced, lost certificate affidavits
and/or such other documentation that is satisfactory to the Trust or its
transfer agent have been executed and delivered thereto.
(c) Delivery of the assets of the Fund to be transferred
shall be made on the Exchange Date (as defined herein). Assets
transferred shall be delivered to State Street Bank and Trust Company, the
Trust's custodian (the "Custodian"), for the account of the Trust and the
Successor Fund with all securities not in bearer or book entry form duly
endorsed, or accompanied by duly executed separate assignments or stock
powers, in proper form for transfer, with signatures guaranteed, and with
all necessary stock transfer stamps, sufficient to transfer good and
marketable title thereto (including all accrued interest and dividends and
rights pertaining thereto) to the Custodian for the account of the Trust
and the Successor Fund free and clear of all liens, encumbrances, rights,
restrictions and claims. All cash delivered shall be in the form of
immediately available funds payable to the order of the Custodian for the
account of the Trust and the Successor Fund.
(d) The Fund will pay or cause to be paid to the Trust any
interest received on or after the Exchange Date with respect to assets
transferred from the Fund to the Successor Fund hereunder and to the Trust
and any distributions, rights or other assets received by the Fund after
the Exchange Date as distributions on or with respect to the securities
transferred from the Fund to the Successor Fund hereunder. All such
assets shall be deemed included in assets transferred to the Successor
Fund on the Exchange Date and shall not be separately valued.
(e) The Exchange Date shall be August 27, 2004, or such
earlier or later date as may be mutually agreed upon by the parties.
(f) As soon as practicable after the Exchange Date, the Fund
shall distribute all of the Successor Fund Shares received by it among the
shareholders of shares of the Fund in numbers equal to the number of
shares that each such shareholder holds in the Fund, and shall take all
other steps necessary to effect its dissolution and termination. After
the Exchange Date, the Fund shall not conduct any business except in
connection with its dissolution and termination.
2. Banknorth Funds' Representations and Warranties. Banknorth
Funds, on behalf of the Fund, represents and warrants to and agrees with
the Trust on behalf of the Successor Fund as follows:
(a) Banknorth Funds is a Delaware Statutory trust duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has power to own all of its properties and assets
and, subject to the approval of its shareholders as contemplated hereby,
to carry out this Agreement.
(b) This Agreement has been duly authorized, executed and
delivered by Banknorth Funds and is valid and binding on Banknorth Funds,
enforceable in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, and other similar laws of
general applicability relating to or affecting creditors' rights and to
general principles of equity. The execution and delivery of this
Agreement does not and will not, and the consummation of the transactions
contemplated by this Agreement will not, violate the Banknorth Funds'
Declaration of Trust or By-Laws or any agreement or arrangement to which
it is a party or by which it is bound.
(c) Banknorth Funds is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company, and such registration has not been revoked
or rescinded and is in full force and effect.
(d) Except as shown on the audited financial statements of
the Fund for its most recently completed fiscal period and as incurred in
the ordinary course of the Fund's business since then, the Fund has no
known liabilities of a material amount, contingent or otherwise, and there
are no legal, administrative or other proceedings pending or, to the
Fund's knowledge, threatened against the Fund.
(e) On the Exchange Date, the Fund will have full right,
power and authority to sell, assign, transfer and deliver the Fund's
assets to be transferred by it hereunder.
3. The Trust's Representations and Warranties. The Trust, on
behalf of the Successor Fund, represents and warrants to and agrees with
Banknorth Funds, on behalf of the Fund, as follows:
(a) The Trust is a business trust duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts; the Successor Fund is a duly organized portfolio of the
Trust; and the Trust has the power to carry on its business as it is now
being conducted and to carry out this Agreement.
(b) This Agreement has been duly authorized, executed and
delivered by the Trust and is valid and binding on the Trust, enforceable
in accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, and other similar laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity. The execution and delivery of this Agreement does
not and will not, and the consummation of the transactions contemplated by
this Agreement will not, violate the Trust's Declaration of Trust or
By-Laws or any agreement or arrangement to which it is a party or by which
it is bound.
(c) The Trust is registered under the 1940 Act as an
open-end management investment company and such registration has not been
revoked or rescinded and is in full force and effect.
(d) The Successor Fund does not have any known liabilities
of a material amount, contingent or otherwise, and there are no legal,
administrative or other proceedings pending or, to the Trust's knowledge,
threatened against the Successor Fund. Other than organizational
activities, the Successor Fund has not engaged in any business activities.
(e) At the Exchange Date, the Successor Fund Shares to be
issued to the Fund (the only Successor Fund shares to be issued as of the
Exchange Date) will have been duly authorized and, when issued and
delivered pursuant to this Agreement, will be legally and validly issued
and will be fully paid and non-assessable by the Trust. No Trust or
Successor Fund shareholder will have any preemptive right of subscription
or purchase in respect thereof.
4. The Trust's Conditions Precedent. The obligations of the
Trust hereunder shall be subject to the following conditions:
(a) The Fund shall have furnished to the Trust a statement
of the Fund's assets, including a list of securities owned by the Fund
with their respective tax costs and values determined as provided in
Section 1 hereof, all as of the Exchange Date.
(b) As of the Exchange Date, all representations and
warranties of Banknorth Funds and the Fund made in this Agreement shall be
true and correct as if made at and as of such date, and Banknorth Funds
and the Fund shall have complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied at or prior to
such date.
(c) A vote of the shareholders of the Fund approving this
Agreement and the transactions and exchange contemplated hereby shall have
been adopted by the vote required by applicable law.
5. Banknorth Funds' Conditions Precedent. The obligations of the
Banknorth Funds hereunder with respect to the Fund shall be subject to the
condition that as of the Exchange Date all representations and warranties
of the Trust and the Successor Fund made in this Agreement shall be true
and correct as if made at and as of such date, and that the Trust and the
Successor Fund shall have complied with all of the agreements and
satisfied all the conditions on its part to be performed or satisfied at
or prior to such date.
6. The Trust's and the Fund's Conditions Precedent. The
obligations of both the Trust and the Fund hereunder shall be subject to
the following conditions:
(a) The post-effective amendment to the Trust's Registration
Statement on Form N-1A relating to the Successor Fund under the Securities
Act of 1933, as amended, and the 1940 Act, if applicable, shall have
become effective, and any additional post-effective amendments to such
Registration Statement as are determined by the Trustees of the Trust to
be necessary and appropriate shall have been filed with the Securities and
Exchange Commission and shall have become effective.
(b) No action, suit or other proceeding shall be threatened
or pending before any court or governmental agency which seeks to restrain
or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transaction contemplated herein.
(c) Each party shall have received an opinion of Dickstein
Shapiro Morin & Oshinsky to the effect that the reorganization
contemplated by this Agreement qualifies as a "reorganization" under
Section 368(a)(1)(F) of the Code.
Provided, however, that at any time prior to the Exchange Date, any
of the foregoing conditions in this Section 6 may be waived by the parties
if, in the judgment of the parties, such waiver will not have a material
adverse effect on the benefits intended under this Agreement to the
shareholders of the Fund.
7. Termination of Agreement. This Agreement and the transactions
contemplated hereby may be terminated and abandoned by resolution of the
Board of Trustees of Banknorth Funds or the Board of Trustees of the Trust
at any time prior to the Exchange Date (and notwithstanding any vote of
the shareholders of the Fund) if circumstances should develop that, in the
opinion of either the Board of Trustees of Banknorth Funds or the Board of
Trustees of the Trust, make proceeding with this Agreement inadvisable.
If this Agreement is terminated and the exchange contemplated hereby
is abandoned pursuant to the provisions of this Section 7, this Agreement
shall become void and have no effect, without any liability on the part of
any party hereto or the Trustees, officers or shareholders of the Trust or
the Directors, officers or shareholders of Banknorth Funds, in respect of
this Agreement.
8. Waiver and Amendments. At any time prior to the Exchange
Date, any of the conditions set forth in Section 4 may be waived by the
Board of the Trust, and any of the conditions set forth in Section 5 may
be waived by the Board of Banknorth Funds, if, in the judgment of the
waiving party, such waiver will not have a material adverse effect on the
benefits intended under this Agreement to the shareholders of the Fund or
the shareholders of the Successor Fund, as the case may be. In addition,
prior to the Exchange Date, any provision of this Agreement may be amended
or modified by the Boards of Banknorth Funds and the Trust if such
amendment or modification would not have a material adverse effect upon
the benefits intended under this Agreement and would be consistent with
the best interests of shareholders of the Fund and the Successor Fund.
9. No Survival of Representations. None of the representations
and warranties included or provided for herein shall survive consummation
of the transactions contemplated hereby.
10. Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the Commonwealth of Pennsylvania, without
giving effect to principles of conflict of laws.
11. Capacity of Trustees, Etc.
(a) The names "Federated Municipal Income Securities Trust"
and "Board of Trustees of Federated Municipal Income Securities Trust"
refer, respectively, to the trust created and the trustees, as trustees
but not individually or personally, acting from time to time under the
Trust's Declaration of Trust, which is hereby referred to and a copy of
which is on file at the office of the State Secretary of the Commonwealth
of Massachusetts and at the principal office of the Trust. The
obligations of the Trust entered into in the name or on behalf of the
Successor Fund by any of the trustees, representatives or agents are made
not individually, but in such capacities, and are not binding upon any of
the trustees, shareholders or representatives of the Trust personally, but
bind only the Successor Fund's trust property, and all persons dealing
with any portfolio of shares of the Trust must look solely to the trust
property belonging to such portfolio for the enforcement of any claims
against the Trust.
(b) Both parties specifically acknowledge and agree that any
liability of the Trust under this Agreement, or in connection with the
transactions contemplated herein, shall be discharged only out of the
assets of the Successor Fund and that no other portfolio of the Trust
shall be liable with respect thereto.
12. Counterparts. This Agreement may be executed in counterparts,
each of which, when executed and delivered, shall be deemed to be an
original.
IN WITNESS WHEREOF, Banknorth Funds and the Trust have caused this
Agreement and Plan of Reorganization to be executed as of the date above
first written.
BANKNORTH FUNDS,
on behalf of its portfolio,
Banknorth Vermont Municipal Bond Fund
By:
Title:
FEDERATED MUNICIPAL INCOME SECURITIES
TRUST,
i.
on behalf of its portfolio,
Federated Vermont Municipal Income
Fund
By:
Title:
STATEMENT OF ADDITIONAL INFORMATION
August XX, 2004
Acquisition of the Assets of
BANKNORTH LARGE CAP CORE FUND
a portfolio of Banknorth Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
Telephone No: 1-888-247-0505
By and in exchange for shares of
FEDERATED CAPITAL APPRECIATION FUND
a portfolio of Federated Equity Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
Telephone No: 1-800-341-7400
Acquisition of the Assets of
BANKNORTH SMALL/MID CAP CORE FUND
a portfolio of Banknorth Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
Telephone No: 1-888-247-0505
By and in exchange for shares of
FEDERATED KAUFMANN FUND
a portfolio of Federated Equity Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
Telephone No: 1-800-341-7400
Acquisition of the Assets of
BANKNORTH INTERMEDIATE BOND FUND
a portfolio of Banknorth Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
Telephone No: 1-888-247-0505
By and in exchange for shares of
FEDERATED TOTAL RETURN BOND FUND
a portfolio of Federated Total Return Series, Inc.
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
Telephone No: 1-800-341-7400
Acquisition of the Assets of
BANKNORTH VERMONT MUNICIPAL BOND FUND
a portfolio of Banknorth Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
Telephone No: 1-888-247-0505
By and in exchange for shares of
FEDERATED VERMONT MUNICIPAL INCOME FUND
a portfolio of Federated Municipal Securities Income Trust
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
Telephone No: 1-800-341-7400
This Statement of Additional Information, dated August XX, 2004, is
not a prospectus. A Combined Proxy Statement and Prospectus, dated August
XX, 2004, related to the above-referenced matter may be obtained from
Federated Funds, on behalf of Federated Capital Appreciation Fund,
Federated Kaufmann Fund, Federated Total Return Bond Fund and Federated
Vermont Municipal Bond Fund, respectively, at 5800 Corporate Drive,
Pittsburgh, Pennsylvania 15237-7000. This Statement of Additional
Information should be read in conjunction with such Combined Proxy
Statement and Prospectus.
TABLE OF CONTENTS
1. Statement of Additional Information of Federated Capital
Appreciation Fund, a portfolio of Federated Equity Funds, dated
December 31, 2003.
2. Statement of Additional Information of Banknorth Large Cap Core
Fund, a portfolio of Banknorth Funds, dated November 30, 2003.
3. Financial Statements of Federated Capital Appreciation Fund, a
portfolio of Federated Equity Funds, dated October 31, 2003.
4. Financial Statements of Banknorth Large Cap Core Fund, a portfolio
of Banknorth Funds, dated August 31, 2003.
5. Unaudited Financial Statements of Federated Capital Appreciation
Fund, a portfolio of Federated Equity Funds, dated April 30, 2004.
6. Unaudited Financial Statements of Banknorth Large Cap Core Fund, a
portfolio of Banknorth Funds, dated February 29, 2004.
7. Statement of Additional Information of Federated Kaufmann Fund, a
portfolio of Federated Equity Funds, dated December 31, 2003.
8. Statement of Additional Information of Banknorth Small/Mid Cap Core
Fund, a portfolio of Banknorth Funds, dated November 30, 2003.
9. Financial Statements of Federated Kaufmann Fund, a portfolio of
Federated Equity Funds, dated October 31, 2003.
10. Financial Statements of Banknorth Small/Mid Cap Core Fund, a
portfolio of Banknorth Funds, dated August 31, 2003.
11. Unaudited Financial Statements of Federated Kaufmann Fund, a
portfolio of Federated Equity Funds, dated April 30, 2004.
12. Unaudited Financial Statements of Banknorth Small/Mid Cap Core Fund,
a portfolio of Banknorth Funds, dated February 29, 2004.
13. Statement of Additional Information of Federated Total Return Bond
Fund, a portfolio of Federated Total Return Series, Inc., dated
January 31, 2004.
14. Statement of Additional Information of Banknorth Intermediate Bond
Fund, a portfolio of Banknorth Funds, dated November 30, 2003.
15. Financial Statements of Federated Total Return Bond Fund, a
portfolio of Federated Total Return Series, Inc., dated November 30,
2003.
16. Financial Statements of Banknorth Intermediate Bond Fund, a
portfolio of Banknorth Funds, dated August 31, 2003.
17. Unaudited Financial Statements of Banknorth Intermediate Bond Fund,
a portfolio of Banknorth Funds, dated February 29, 2004.
18. Statement of Additional Information of Federated Vermont Municipal
Income Fund, a portfolio of Federated Municipal Securities Income
Trust, dated July 13, 2004.
19. Statement of Additional Information of Banknorth Vermont Municipal
Bond Fund, a portfolio of Banknorth Funds, dated November 30, 2003.
20. Financial Statements of Banknorth Vermont Municipal Bond Fund, a
portfolio of Banknorth Funds, dated August 31, 2003.
21. Unaudited Financial Statements of of Banknorth Vermont Municipal
Bond Fund, a portfolio of Banknorth Funds, dated February 29, 2004.
22. Pro Forma Financial Information for acquisition of Banknorth Vermont
Municipal Bond Fund by Federated Vermont Municipal Income Fund.
Pursuant to Item 14(a) of Form N-14, the pro forma financial statements
required by Rule 11-01 or Regulation S-K have not been prepared to reflect
the proposed acquisition of the assets of Banknorth Large Cap Core Fund,
Banknorth Small/Mid Cap Core Fund and Banknorth Intermediate Bond Fund by
Federated Capital Appreciation Fund, Federated Kaufmann Fund and Federated
Total Return Bond Fund because the net assets of Banknorth Large Cap Core
Fund, Banknorth Small/Mid Cap Core Fund and Banknorth Intermediate Bond
Fund do not exceed ten percent of the Federated Capital Appreciation Fund,
Federated Kaufmann Fund and Federated Total Return Bond Fund net assets,
respectively.
INFORMATION INCORPORATED BY REFERENCE
1. Statement of Additional Information of Federated Capital
Appreciation Fund, a portfolio of Federated Equity Funds, dated
December 31, 2003.
The Statement of Additional Information of Federated Capital
Appreciation Fund, a portfolio of Federated Equity Funds, is incorporated
by reference to Post-Effective Amendment No. 64 on Form N-1A, which was
filed with the Securities and Exchange Commission on or about December 31,
2003.
2. Statement of Additional Information of Banknorth Large Cap Core
Fund, a portfolio of Banknorth Funds, dated November 30, 2003.
The Statement of Additional Information Banknorth Large Cap Core
Fund, a portfolio of Banknorth Funds, is incorporated by reference to
Post-Effective Amendment No. 5 on Form N-1A, which was filed with the
Securities and Exchange Commission on or about December 1, 2003.
3. Financial Statements of Federated Capital Appreciation Fund, a
portfolio of Federated Equity Funds, dated October 31, 2003.
The audited financial statements of the Federated Capital
Appreciation Fund dated October 31, 2003, including the Deloitte & Touche
LLP Independent Auditors' Report dated December 12, 2003, related thereto,
are incorporated by reference to the Annual Report to Shareholders of the
Federated Capital Appreciation Fund, a portfolio of Federated Equity
Funds, that was filed with the Securities and Exchange Commission on Form
N-CSR on or about January 6, 2004.
4. Financial Statements of Banknorth Large Cap Core Fund, a portfolio
of Banknorth Funds, dated August 31, 2003.
The audited financial statements of the Banknorth Large Cap Core
Fund dated August 31, 2003, including the Deloitte & Touche LLP
Independent Auditors' Report dated October 17, 2003 related thereto, are
incorporated by reference to the Annual Report to Shareholders of the
Banknorth Large Cap Core Fund, a portfolio of Banknorth Funds, that was
filed with the Securities and Exchange Commission on Form N-CSR on or
about November 6, 2003.
5. Unaudited Financial Statements of Federated Capital Appreciation
Fund, a portfolio of Federated Equity Funds, dated April 30, 2004.
The unaudited financial statements of the Federated Capital
Appreciation Fund dated April 30, 2004, are incorporated by reference to
the Semi-Annual Report to Shareholders of the Federated Capital
Appreciation Fund, a portfolio of Federated Equity Funds, that was filed
with the Securities and Exchange Commission on Form N-CSR on or about June
24, 2004.
6. Unaudited Financial Statements of Banknorth Large Cap Core Fund, a
portfolio of Banknorth Funds, dated February 29, 2004.
The unaudited financial statements of the Banknorth Large Cap Core
Fund dated February 29, 2004, are incorporated by reference to the
Semi-Annual Report to Shareholders of the Banknorth Large Cap Core Fund, a
portfolio of Banknorth Funds, that was filed with the Securities and
Exchange Commission on Form N-CSR on or about May 5, 2004.
7. Statement of Additional Information of Federated Kaufmann Fund, a
portfolio of Federated Equity Funds, dated December 31, 2003.
The Statement of Additional Information of Federated Kaufmann Fund,
a portfolio of Federated Equity Funds, is incorporated by reference to
Post-Effective Amendment No. 65 on Form N-1A, which was filed with the
Securities and Exchange Commission on or about January 6, 2004.
8. Statement of Additional Information of Banknorth Small/Mid Cap Core
Fund, a portfolio of Banknorth Funds, dated November 30, 2003.
The Statement of Additional Information Banknorth Small/Mid Cap Core
Fund, a portfolio of Banknorth Funds, is incorporated by reference to
Post-Effective Amendment No. 5 on Form N-1A, which was filed with the
Securities and Exchange Commission on or about December 1, 2003.
9. Financial Statements of Federated Kaufmann Fund, a portfolio of
Federated Equity Funds, dated October 31, 2003.
The audited financial statements of the Federated Kaufmann Fund
dated October 31, 2003, including the Ernst & Young LLP Independent
Auditors' Report dated December 10, 2003, related thereto, are
incorporated by reference to the Annual Report to Shareholders of the
Federated Kaufmann Fund, a portfolio of Federated Equity Funds, that was
filed with the Securities and Exchange Commission on Form N-CSR on or
about January 6, 2004.
10. Financial Statements of Banknorth Small/Mid Cap Core Fund, a
portfolio of Banknorth Funds, dated August 31, 2003.
The audited financial statements of the Banknorth Small/Mid Cap Core
Fund dated August 31, 2003, including the Deloitte & Touche LLP
Independent Auditors' Report dated October 17, 2003 related thereto, are
incorporated by reference to the Annual Report to Shareholders of the
Banknorth Small/Mid Cap Core Fund, a portfolio of Banknorth Funds, that
was filed with the Securities and Exchange Commission on Form N-CSR on or
about November 6, 2003.
11. Unaudited Financial Statements of Federated Kaufmann Fund, a
portfolio of Federated Equity Funds, dated April 30, 2004.
The unaudited financial statements of the Federated Kaufmann Fund
dated April 30, 2004, are incorporated by reference to the Semi-Annual
Report to Shareholders of the Federated Kaufmann Fund, a portfolio of
Federated Equity Funds, that was filed with the Securities and Exchange
Commission on Form N-CSR on or about June 24, 2004.
12. Unaudited Financial Statements of Banknorth Small/Mid Cap Core Fund,
a portfolio of Banknorth Funds, dated February 29, 2004.
The unaudited financial statements of the Banknorth Small/Mid Cap
Core Fund dated February 29, 2004, are incorporated by reference to the
Semi-Annual Report to Shareholders of the Banknorth Small/Mid Cap Core
Fund, a portfolio of Banknorth Funds, that was filed with the Securities
and Exchange Commission on Form N-CSR on or about May 5, 2004.
13. Statement of Additional Information of Federated Total Return Bond
Fund, a portfolio of Federated Total Return Series, Inc., dated
January 31, 2004.
The Statement of Additional Information of Federated Total Return
Bond Fund, a portfolio of Federated Total Return Series, Inc., is
incorporated by reference to Post-Effective Amendment No. 34 on Form N-1A,
which was filed with the Securities and Exchange Commission on or about
January 29, 2004.
14. Statement of Additional Information of Banknorth Intermediate Bond
Fund, a portfolio of Banknorth Funds, dated November 30, 2003.
The Statement of Additional Information Banknorth Intermediate Bond
Fund, a portfolio of Banknorth Funds, is incorporated by reference to
Post-Effective Amendment No. 5 on Form N-1A, which was filed with the
Securities and Exchange Commission on or about December 1, 2003.
15. Financial Statements of Federated Total Return Bond Fund, a
portfolio of Federated Total Return Series, Inc., dated November 30,
2003.
The audited financial statements of the Federated Total Return Bond
Fund dated November 30, 2003, including the Deloitte & Touche LLP
Independent Auditors' Report dated January 23, 2003, related thereto, are
incorporated by reference to the Annual Report to Shareholders of the
Federated Total Return Bond Fund, a portfolio of Federated Total Return
Series, Inc., that was filed with the Securities and Exchange Commission
on Form N-CSR on or about January 29, 2004.
16. Financial Statements of Banknorth Intermediate Bond Fund, a
portfolio of Banknorth Funds, dated August 31, 2003.
The audited financial statements of the Banknorth Intermediate Bond
Fund dated August 31, 2003, including the Deloitte & Touche LLP
Independent Auditors' Report dated October 17, 2003 related thereto, are
incorporated by reference to the Annual Report to Shareholders of the
Banknorth Intermediate Bond Fund, a portfolio of Banknorth Funds, that was
filed with the Securities and Exchange Commission on Form N-CSR on or
about November 6, 2003.
17. Unaudited Financial Statements of Banknorth Intermediate Bond Fund,
a portfolio of Banknorth Funds, dated February 29, 2004.
The unaudited financial statements of the Banknorth Intermediate
Bond Fund dated February 29, 2004, are incorporated by reference to the
Semi-Annual Report to Shareholders of the Banknorth Intermediate Bond
Fund, a portfolio of Banknorth Funds, that was filed with the Securities
and Exchange Commission on Form N-CSR on or about May 5, 2004.
18. Statement of Additional Information of Federated Vermont Municipal
Income Fund, a portfolio of Federated Municipal Securities Income
Trust, dated July 13, 2004.
The Statement of Additional Information of Federated Vermont
Municipal Income Fund, a portfolio of Federated Municipal Securities
Income Trust, is incorporated by reference to Post-Effective Amendment No.
36 on Form N-1A, which was filed with the Securities and Exchange
Commission on or about May 14, 2004.
19. Statement of Additional Information of Banknorth Vermont Municipal
Bond Fund, a portfolio of Banknorth Funds, dated November 30, 2003.
The Statement of Additional Information Banknorth Vermont Municipal
Bond Fund, a portfolio of Banknorth Funds, is incorporated by reference to
Post-Effective Amendment No. 5 on Form N-1A, which was filed with the
Securities and Exchange Commission on or about December 1, 2003.
20. Financial Statements of Banknorth Vermont Municipal Bond Fund, a
portfolio of Banknorth Funds, dated August 31, 2003.
The audited financial statements of the Banknorth Vermont Municipal
Bond Fund dated August 31, 2003, including the Deloitte & Touche LLP
Independent Auditors' Report dated October 17, 2003 related thereto, are
incorporated by reference to the Annual Report to Shareholders of the
Banknorth Vermont Municipal Bond Fund, a portfolio of Banknorth Funds,
that was filed with the Securities and Exchange Commission on Form N-CSR
on or about November 6, 2003.
21. Unaudited Financial Statements of of Banknorth Vermont Municipal
Bond Fund, a portfolio of Banknorth Funds, dated February 29, 2004.
The unaudited financial statements of the Banknorth Vermont
Municipal Bond Fund dated February 29, 2004, are incorporated by reference
to the Semi-Annual Report to Shareholders of the Banknorth Vermont
Municipal Bond Fund, a portfolio of Banknorth Funds, that was filed with
the Securities and Exchange Commission on Form N-CSR on or about May 5,
2004.
22. The Pro Forma Financial Information for the acquisition of Banknorth
Vermont Municipal Bond Fund by Federated Vermont Municipal Income
Fund, dated August 31, 2003, is included herein.
Banknorth Vermont Municipal Bond Fund
Federated Vermont Municipal Income Fund
Notes to Pro Forma Financial Statements
Six Months Ended February 29, 2004 (Unaudited)
Note 1. Basis of Combination
The accompanying unaudited Pro Forma Combining Portfolios of Investments,
Statements of Assets and Liabilities and Statements of Operations (Pro
Forma Financial Statements) reflect the accounts of Banknorth Vermont
Municipal Bond Fund and Federated Vermont Municipal Income Fund
(individually referred to as the "Fund", or collectively as the "Funds"),
for the six months ended February 29, 2004. These statements have been
derived from the books and records utilized in calculating daily net asset
values at February 29, 2004.
The Pro Forma Financial Statements should be read in conjunction with the
historical financial statements of the Funds which have been incorporated
by reference in the Statement of Additional Information. The Funds follow
generally accepted accounting principles in the United States of America
applicable to management investment companies which are disclosed in the
historical financial statements of each fund.
The Pro Forma Financial Statements give effect to the proposed exchange of
assets of Banknorth Vermont Municipal Bond Fund for shares of Federated
Vermont Municipal Income Fund. Under generally accepted accounting
principles, Banknorth Vermont Municipal Bond Fund will be the surviving
entity for accounting purposes with its historical cost of investment
securities and results of operations being carried forward.
The Pro Forma Financial Statements have been adjusted to reflect the
anticipated advisory fee arrangement for the surviving entity. Certain
other operating costs have also been adjusted to reflect anticipated
expenses of the combined entity. Other costs which may change as a result
of the reorganization are currently undeterminable.
For the six months ended February 29, 2004, Banknorth Vermont Municipal
Bond Fund paid and Federated Vermont Municipal Income Fund would have paid
investment advisory fees computed at the annual rate of 0.50% and 0.40%,
respectively, as a percentage of average daily net assets.
All costs with respect to the exchange will be borne by Federated
Investment Management Company or its affiliates.
Note 2. Portfolio of Investments
The Federated Vermont Municipal Income Fund had not become effective with
the Securities and Exchange Commission until July 13, 2004. The Portfolio
of Investments provided is for the Banknorth Vermont Municipal Bond Fund
as of February 29, 2004, and it is not anticipated to change significantly
in connection with the proposed reorganization.
Note 3. Shares of Beneficial Interest
The Pro Forma Class A Shares net asset value per share assumes the
issuance of 7,743,037 Class A Shares of Federated Vermont Municipal Income
Fund in exchange for 7,743,037 Class A Shares of Banknorth Vermont
Municipal Bond Fund which would have been issued at February 29, 2004 in
connection with the proposed reorganization.
Note 4. Proforma Adjustments
(a) Federated Investment Management Company, the Fund's investment
adviser (the "Adviser") receives for its services an annual investment
advisory fee equal to 0.40% of the Fund's average daily net assets. The
Adviser may voluntarily choose to waive a portion of its fee. The Adviser
can modify or terminate this voluntary waiver at any time at its sole
discretion. Adjustment to reflect the investment adviser fee under the
Federated fund's investment advisory contract.
(b) Federated Administrative Services (FAS), provides the Fund with
certain administrative personnel and services necessary to operate the
Fund. The fee paid to FAS is based on the level of average aggregate
daily net assets of the Federated Funds. The administrative fee received
during any fiscal year shall be at least $150,000 per fund. Prior to
November 1, 2003, the minimum fee was $125,000 per fund. FAS may
voluntarily choose to waive the fee and can modify or terminate its
voluntary waiver at any time at its sole discretion. Adjustment to
reflect the administrative personnel and services fee being brought in
line at the minimum annual fee charged for Federated funds.
(c) Adjustment to reflect the custodian fees reduction due to the fee
structure after converting to a Federated fund.
(d) Federated Services Company (FServ) through its subsidiary, Federated
Shareholder Services Company (FSSC), serves as transfer and dividend
disbursing agent for the Fund. The fee paid to FSSC is based on the number
of share classes and accounts per fund and the level of average aggregate
net assets of the Fund for the period. The adjustment is due to the fee
structure after converting to a Federated fund.
(e) Adjustment to reflect the directors' fee reduction due to the fee
structure after converting to a Federated fund.
(f) Adjustment to reflect the auditing fee reduction due to the fee
structure after converting to a Federated fund.
(g) Adjustment to reflect the legal fee reduction due to the fee
structure after converting to a Federated fund.
(h) The portfolio accounting fee is based on the level of average daily
net assets of the Fund for the period, plus out-of-pocket
expenses. Adjustment is due to the fee structure after
converting to a Federated fund.
(i) The Federated Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under
the terms of the Plan, the Fund will compensate Federated Securities Corp.
(FSC), the principal distributor, from the daily net assets of the Fund's
Class A Shares to finance activities intended to result in the sale of
these shares. The Plan provides that the Fund may incur distribution
expenses up to 0.25% of average daily net assets of the Fund's Class A
Shares. Adjustment to reflect Class A Shares distribution services fee
after converting to a Federated fund.
(j) Adjustment to reflect the reduction in Share registration costs due
to the fee structure after converting to a Federated fund.
(k) Printing and postage expenses are adjusted to reflect costs due to
the fee structure after converting to a Federated fund.
(l) Insurance expenses are adjusted to reflect costs due to the fee
structure after converting to a Federated fund.
(m) Miscellaneous expenses are adjusted to reflect costs due to the fee
structure after converting to a Federated fund.
(n) Adjustment to reflect waiver of investment adviser fee based on the
fee structure after converting to a Federated fund.
(o) Pursuant to a written waiver agreement, the distributor for the
Federated fund will waive the distribution (12b-1) fee. The contractual
waiver will expire on August 27, 2006.
(p) Adjustment to reflect elimination of the waiver of shareholder
services fee after converting to a Federated fund.
BANKNORTH VERMONT MUNICIPAL BOND FUND
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Principal Security Name Interest MatuValueDate
Rate
- -------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - 95.3%
Louisiana - 0.5%
$184,000 Jefferson Parish, LA, Home Mortgage Authority, SFH 7.10% 08/01/10 $232,070
RV, FGIC/FHA/VA insured
150,000 Monroe-West Monroe, LA, Public Transportation 7.20 08/01/10 174,747
Financing Authority, SFH RV
406,817
Puerto Rico - 2.9%
2,000,000 Commonwealth of Puerto Rico, GO Bonds, MBIA-IBC 5.50 07/01/09 2,327,180
insured
Vermont - 91.9%
565,000 Burlington, VT, Airport RV, Series A, MBIA insured 3.63 07/01/17 547,502
1,250,000 Burlington, VT, Airport RV, Series A, MBIA insured 5.00 07/01/23 1,323,100
500,000 Burlington, VT, Electric RV, Series A, MBIA insured 5.00 07/01/04 506,895
415,000 Burlington, VT, GO Bonds, Series A 5.00 12/01/04 427,628
800,000 Burlington, VT, GO Bonds, Series A 5.10 12/01/05 855,432
785,000 Burlington, VT, GO Bonds, Series A 5.20 12/01/06 836,849
130,000 Burlington, VT, Public Improvement Project, GO 3.50 11/01/04 132,211
Bonds, Series A
135,000 Burlington, VT, Public Improvement Project, GO 3.50 11/01/05 140,358
Bonds, Series A
135,000 Burlington, VT, Public Improvement Project, GO 3.50 11/01/06 142,526
Bonds, Series A
140,000 Burlington, VT, Public Improvement Project, GO 3.50 11/01/07 148,987
Bonds, Series A
145,000 Burlington, VT, Public Improvement Project, GO 3.50 11/01/08 154,383
Bonds, Series A
150,000 Burlington, VT, Public Improvement Project, GO 3.50 11/01/09 159,182
Bonds, Series A
155,000 Burlington, VT, Public Improvement Project, GO 3.50 11/01/10 163,799
Bonds, Series A
90,000 Burlington, VT, Public Improvement Project, GO 3.50 11/01/11 94,437
Bonds, Series A
170,000 Burlington, VT, Public Improvement Project, GO 3.50 11/01/12 175,894
Bonds, Series A
125,000 Burlington, VT, Public Improvement Project, GO 3.60 11/01/13 128,778
Bonds, Series A
185,000 Burlington, VT, Public Improvement Project, GO 3.75 11/01/14 189,755
Bonds, Series A
190,000 Burlington, VT, Public Improvement Project, GO 3.75 11/01/15 192,880
Bonds, Series A
200,000 Burlington, VT, Public Improvement Project, GO 4.00 11/01/16 204,784
Bonds, Series A
210,000 Burlington, VT, Public Improvement Project, GO 4.00 11/01/17 213,303
Bonds, Series A
220,000 Burlington, VT, Public Improvement Project, GO 4.00 11/01/18 222,163
Bonds, Series A
400,000 Burlington, VT, Waterworks System, Water RV, 4.50 07/01/04 404,804
Series A, FGIC insured
300,000 Burlington, VT, Waterworks System, Water RV, 4.65 07/01/06 322,803
Series A, FGIC insured
150,000 Burlington, VT, Waterworks System, Water RV, 4.75 07/01/07 164,939
Series A, FGIC insured
300,000 Burlington, VT, Waterworks System, Water RV, 4.80 07/01/08 326,679
Series A, FGIC insured
95,000 Champlain Valley, VT, Union SD No. 15, GO Bonds 5.00 06/01/08 95,294
145,000 Champlain Valley, VT, Union SD No. 15, GO Bonds 5.13 06/01/12 145,464
110,000 Chittenden, VT, Solid Waste District, Resource 2.50 01/01/07 112,787
Recovery RV, Series A, AMBAC insured
100,000 Chittenden, VT, Solid Waste District, Resource 3.30 01/01/10 104,406
Recovery RV, Series A, AMBAC insured
310,000 Chittenden, VT, Solid Waste District, Resource 3.40 01/01/11 322,977
Recovery RV, Series A, AMBAC insured
205,000 Chittenden, VT, Solid Waste District, Resource 3.50 01/01/12 212,620
Recovery RV, Series A, AMBAC insured
90,000 Fair Haven, VT, Union SD, GO Bonds, AMBAC insured 4.95 12/01/04 92,635
90,000 Fair Haven, VT, Union SD, GO Bonds, AMBAC insured 5.00 12/01/05 95,949
90,000 Fair Haven, VT, Union SD, GO Bonds, AMBAC insured 5.05 12/01/06 95,500
25,000 Norwich, VT, SD, GO Bonds, AMBAC insured 4.50 07/15/09 27,712
120,000 Pawlett/Rupert, VT, Union Elementary SD No. 47, GO 5.00 11/01/04 123,170
Bonds, MBIA insured
30,000 Shelburne, VT, SD, GO Bonds 5.00 06/01/08 30,093
145,000 Shelburne, VT, SD, GO Bonds 5.10 06/01/10 145,461
120,000 Shelburne, VT, SD, GO Bonds 5.13 06/01/11 120,384
135,000 Shelburne, VT, SD, GO Bonds 5.13 06/01/12 135,432
510,000 St. Johnsbury, VT, SD, GO Bonds, AMBAC insured 4.50 09/01/04 518,930
500,000 St. Johnsbury, VT, SD, GO Bonds, AMBAC insured 4.50 09/01/05 525,215
520,000 St. Johnsbury, VT, SD, GO Bonds, AMBAC insured 4.55 09/01/06 559,624
515,000 St. Johnsbury, VT, SD, GO Bonds, AMBAC insured 4.65 09/01/07 565,110
520,000 St. Johnsbury, VT, SD, GO Bonds, AMBAC insured 4.80 09/01/08 580,388
805,000 University of Vermont & State & Agricultural 4.10 10/01/11 874,697
College, Educational Facilities RV, AMBAC insured
500,000 University of Vermont & State & Agricultural 4.20 10/01/12 542,190
College, Educational Facilities RV, AMBAC insured
500,000 University of Vermont & State & Agricultural 5.50 10/01/18 572,335
College, Educational Facilities RV, AMBAC insured
500,000 University of Vermont & State & Agricultural 5.50 10/01/19 569,040
College, Educational Facilities RV, AMBAC insured
250,000 University of Vermont & State & Agricultural 5.25 10/01/21 273,575
College, Educational Facilities RV, AMBAC insured
1,150,000 University of Vermont & State & Agricultural 5.25 10/01/23 1,245,370
College, Educational Facilities RV, AMBAC insured
164,164 Vermont Economic & Development Authority, 6.18 08/31/06 160,880
Industrial RV, Tubbs Project 1
90,000 Vermont Educational & Health Buildings Financing 5.60 10/01/04 91,955
Agency, Educational Facilities RV, Champlain
College Project, Series A, Merchants Bank, LOC
190,000 Vermont Educational & Health Buildings Financing 7.15 11/01/14 196,264
Agency, Educational Facilities RV, Landmark
College Project, Series A, Remarketed 11/1/94,
Vermont National Bank, LOC
4,650,000 Vermont Educational & Health Buildings Financing 5.25 04/01/19 4,650,837
Agency, Educational Facilities RV, Marlboro
College Project 1
770,000 Vermont Educational & Health Buildings Financing 5.30 11/01/08 856,594
Agency, Educational Facilities RV, Middlebury
College Project
190,000 Vermont Educational & Health Buildings Financing 5.38 11/01/26 205,639
Agency, Educational Facilities RV, Middlebury
College Project
400,000 Vermont Educational & Health Buildings Financing 4.00 11/01/13 425,064
Agency, Educational Facilities RV, Middlebury
College Project, Series A
3,000 Vermont Educational & Health Buildings Financing 1.10 11/01/27 3,021
Agency, Educational Facilities RV, Middlebury
College Project, Series A 2
130,000 Vermont Educational & Health Buildings Financing 5.30 04/01/04 130,537
Agency, Educational Facilities RV, St. Michaels
College Project
20,000 Vermont Educational & Health Buildings Financing 5.75 10/01/04 20,570
Agency, Educational Facilities RV, St. Michaels
College Project
140,000 Vermont Educational & Health Buildings Financing 5.40 04/01/05 146,647
Agency, Educational Facilities RV, St. Michaels
College Project
50,000 Vermont Educational & Health Buildings Financing 3.25 10/01/09 51,589
Agency, Educational Facilities RV, St. Michaels
College Project
100,000 Vermont Educational & Health Buildings Financing 3.60 10/01/10 104,356
Agency, Educational Facilities RV, St. Michaels
College Project
140,000 Vermont Educational & Health Buildings Financing 3.88 10/01/11 147,095
Agency, Educational Facilities RV, St. Michaels
College Project
195,000 Vermont Educational & Health Buildings Financing 4.00 10/01/12 204,467
Agency, Educational Facilities RV, St. Michaels
College Project
125,000 Vermont Educational & Health Buildings Financing 4.13 10/01/13 130,985
Agency, Educational Facilities RV, St. Michaels
College Project
385,000 Vermont Educational & Health Buildings Financing 4.25 10/01/14 401,486
Agency, Educational Facilities RV, St. Michaels
College Project
370,000 Vermont Educational & Health Buildings Financing 4.38 10/01/15 385,599
Agency, Educational Facilities RV, St. Michaels
College Project
100,000 Vermont Educational & Health Buildings Financing 5.90 10/01/06 104,927
Agency, Educational Facilities RV, St Michaels
College Project, Prerefunded 10/01/04 @ 102
1,190,000 Vermont Educational & Health Buildings Financing 6.50 10/01/14 1,252,856
Agency, Educational Facilities RV, St Michaels
College Project, Prerefunded 10/01/04 @ 102
555,000 Vermont Educational & Health Buildings Financing 4.38 11/15/04 567,909
Agency, Healthcare RV, Central Vermont Hospital &
Nursing Project, AMBAC insured
60,000 Vermont Educational & Health Buildings Financing 4.40 11/15/05 63,241
Agency, Healthcare RV, Central Vermont Hospital &
Nursing Project, AMBAC insured
605,000 Vermont Educational & Health Buildings Financing 4.50 11/15/06 651,954
Agency, Healthcare RV, Central Vermont Hospital &
Nursing Project, AMBAC insured
200,000 Vermont Educational & Health Buildings Financing 4.63 11/15/07 217,878
Agency, Healthcare RV, Central Vermont Hospital &
Nursing Project, AMBAC insured
65,000 Vermont Educational & Health Buildings Financing 5.30 12/01/08 73,559
Agency, Healthcare RV, Fletcher Allen Health
Project, Series A, AMBAC insured
55,000 Vermont Educational & Health Buildings Financing 5.30 12/01/09 62,520
Agency, Healthcare RV, Fletcher Allen Health
Project, Series A, AMBAC insured
110,000 Vermont Educational & Health Buildings Financing 6.00 09/01/22 112,599
Agency, Healthcare RV, Medical Center Hospital of
Vermont Project, FGIC insured
1,284,000 Vermont Educational & Health Buildings Financing 2.20 10/01/11 1,307,870
Agency, Healthcare RV, North Country Hospital
Project 1
1,100,000 Vermont Housing Finance Agency, 64 School Street 2.40 10/30/04 1,100,374
LP 1,3
130,000 Vermont Housing Finance Agency, Home Mortgage 7.40 12/01/05 130,477
Program, Series B, FHA/VA insured 2
205,000 Vermont Housing Finance Agency, MFH RV, Series A, 4.45 02/15/08 217,550
HUD/Section 8 insured
130,000 Vermont Housing Finance Agency, MFH RV, Series A, 4.55 02/15/09 138,251
HUD/Section 8 insured
522,500 Vermont Housing Finance Agency, Rutland West 2.30 08/30/04 522,552
Housing LP 1,3
155,000 Vermont Housing Finance Agency, SFH RV, Series 4.60 11/01/04 157,871
11A, FSA insured
150,000 Vermont Housing Finance Agency, SFH RV, Series 4.70 11/01/05 156,572
11A, FSA insured
205,000 Vermont Housing Finance Agency, SFH RV, Series 4.85 11/01/06 217,335
11A, FSA insured
155,000 Vermont Housing Finance Agency, SFH RV, Series 4.95 11/01/07 165,695
11A, FSA insured
205,000 Vermont Housing Finance Agency, SFH RV, Series 5.05 11/01/08 219,826
11A, FSA insured
275,000 Vermont Housing Finance Agency, SFH RV, Series 5.15 11/01/09 295,281
11A, FSA insured
175,000 Vermont Housing Finance Agency, SFH RV, Series 5.50 11/01/08 178,764
12B, FSA insured
225,000 Vermont Housing Finance Agency, SFH RV, Series 5.60 11/01/09 230,011
12B, FSA insured
50,000 Vermont Housing Finance Agency, SFH RV, Series 5 5.90 05/01/04 50,045
55,000 Vermont Housing Finance Agency, SFH RV, Series 5 5.90 11/01/04 55,213
90,000 Vermont Housing Finance Agency, SFH RV, Series 5 6.88 11/01/16 92,362
135,000 Vermont Housing Finance Agency, SFH RV, Series 9, 5.00 05/01/05 139,398
MBIA insured
50,000 Vermont Housing Finance Agency, SFH RV, Series 9, 5.10 05/01/06 52,652
MBIA insured
110,000 Vermont Housing Finance Agency, SFH RV, Series 9, 4.55 05/01/08 118,099
Remarketed 08/26/98, MBIA insured
2,230,000 Vermont Housing Finance Agency, Smallest City 2.50 12/31/04 2,230,178
Housing LP 1,3
1,400,000 Vermont Housing Finance Agency, Templeton Project 1.60 04/30/04 1,400,252
1,3
1,650,000 Vermont Housing Finance Agency, Wall Street 2.45 11/10/04 1,650,083
Housing LP 1,3
1,350,000 Vermont Housing Finance Agency, Whetstone Housing 2.50 11/30/04 1,350,014
LP 1,3
2,123,000 Vermont Housing Finance Authority, Mountainview 2.75 04/30/05 2,123,382
St. Jay Housing LP 1,3
80,000 Vermont Municipal Bond Bank, Series 1 5.70 12/01/04 82,714
250,000 Vermont Municipal Bond Bank, Series 1 3.00 12/01/07 261,148
250,000 Vermont Municipal Bond Bank, Series 1 3.30 12/01/08 263,648
250,000 Vermont Municipal Bond Bank, Series 1 3.50 12/01/09 264,723
250,000 Vermont Municipal Bond Bank, Series 1 3.70 12/01/10 266,510
250,000 Vermont Municipal Bond Bank, Series 1 3.80 12/01/11 266,820
30,000 Vermont Municipal Bond Bank, Series 1, AMBAC 5.10 12/01/04 30,936
insured
250,000 Vermont Municipal Bond Bank, Series 1, AMBAC 3.90 12/01/12 265,470
insured
250,000 Vermont Municipal Bond Bank, Series 1, AMBAC 4.00 12/01/13 263,758
insured
1,500,000 Vermont Municipal Bond Bank, Series 1, FSA insured 4.30 12/01/06 1,617,000
1,000,000 Vermont Municipal Bond Bank, Series 1, FSA insured 4.40 12/01/07 1,095,300
860,000 Vermont Municipal Bond Bank, Series 1, MBIA insured 4.60 12/01/07 948,520
100,000 Vermont Municipal Bond Bank, Series 1, MBIA insured 4.80 12/01/08 111,005
340,000 Vermont Municipal Bond Bank, Series 1, MBIA insured 4.80 12/01/09 382,571
50,000 Vermont Municipal Bond Bank, Series 1, MBIA insured 3.30 12/01/10 52,071
520,000 Vermont Municipal Bond Bank, Series 1, MBIA insured 3.60 12/01/11 547,409
550,000 Vermont Municipal Bond Bank, Series 1, MBIA insured 3.75 12/01/12 577,742
500,000 Vermont Municipal Bond Bank, Series 1, MBIA insured 3.90 12/01/13 523,730
2,000,000 Vermont Municipal Bond Bank, Series 1, MBIA insured 5.38 12/01/16 2,279,560
750,000 Vermont Municipal Bond Bank, Series 2, AMBAC 6.00 12/01/04 778,380
insured
500,000 Vermont Municipal Bond Bank, Series 2, AMBAC 5.20 12/01/07 543,535
insured
165,000 Vermont Municipal Bond Bank, Series 2, FSA insured 4.30 12/01/06 177,870
665,000 Vermont Municipal Bond Bank, Series 2, FSA insured 4.40 12/01/07 728,375
1,000,000 Vermont Municipal Bond Bank, Series 2, MBIA insured 5.00 12/01/17 1,109,530
1,000,000 Vermont Municipal Bond Bank, Series 2, MBIA insured 5.00 12/01/18 1,101,760
100,000 Vermont Public Power Supply Authority, Power RV, 4.40 07/01/04 101,166
McNeil Project, Series D, AMBAC insured
1,000,000 Vermont Public Power Supply Authority, Power RV, 4.50 07/01/05 1,045,580
McNeil Project, Series D, AMBAC insured
840,000 Vermont Public Power Supply Authority, Power RV, 5.00 07/01/11 961,582
McNeil Project, Series E, MBIA insured
500,000 Vermont Public Power Supply Authority, Power RV, 5.25 07/01/15 576,510
McNeil Project, Series E, MBIA insured
500,000 Vermont State Colleges, Educational Facilities RV, 2.00 07/01/05 506,290
FGIC Insured
500,000 Vermont State Colleges, Educational Facilities RV, 2.25 07/01/06 510,520
FGIC Insured
1,065,000 Vermont State, GO Bonds, Series A 5.00 01/15/05 1,102,967
50,000 Vermont State, GO Bonds, Series A 4.50 02/01/05 50,594
500,000 Vermont State, GO Bonds, Series A 4.40 01/15/07 540,055
1,000,000 Vermont State, GO Bonds, Series A 2.00 02/01/07 1,012,770
1,000,000 Vermont State, GO Bonds, Series A 2.13 02/01/08 1,008,400
250,000 Vermont State, GO Bonds, Series A 4.75 08/01/20 262,678
1,600,000 Vermont State, GO Bonds, Series A, Prerefunded 5.00 01/15/08 1,742,640
01/15/06 @102
1,300,000 Vermont State, GO Bonds, Series A, Prerefunded 5.00 01/15/10 1,415,895
01/15/06 @102
1,100,000 Vermont State, GO Bonds, Series B 4.30 10/15/04 1,123,166
500,000 Vermont State, GO Bonds, Series C 4.60 01/15/13 541,300
500,000 Vermont State, Student Assistance Corp., 6.40 06/15/04 506,955
Educational Loan RV, Financing Program, Series
A-3, FSA insured
135,000 Vermont State, Student Assistance Corp., 6.40 12/15/04 136,895
Educational Loan RV, Financing Program, Series
A-3, FSA insured
150,000 Vermont State, Student Assistance Corp., 6.50 06/15/05 152,169
Educational Loan RV, Financing Program, Series
A-3, FSA insured
300,000 Vermont State, Student Assistance Corp., 6.13 06/15/04 304,062
Educational Loan RV, Financing Program, Series B,
FSA insured
315,000 Vermont State, Student Assistance Corp., 6.13 12/15/04 322,277
Educational Loan RV, Financing Program, Series B,
FSA insured
480,000 Vermont State, Student Assistance Corp., 6.25 12/15/05 491,261
Educational Loan RV, Financing Program, Series B,
FSA insured
1,095,000 Vermont State, Student Assistance Corp., 6.35 06/15/06 1,121,006
Educational Loan RV, Financing Program, Series B,
FSA insured
160,000 Vermont State, Student Assistance Corp., 5.40 12/15/04 164,885
Educational Loan RV, Financing Program, Series D,
FSA insured
400,000 Vermont State, Student Assistance Corp., 5.60 12/15/06 411,740
Educational Loan RV, Financing Program, Series D,
FSA insured
73,241,012
TOTAL MUNICIPAL BONDS (Cost $72,836,161) 75,975,005
Shares
SHORT-TERM INVESTMENT - 3.8%
3,046,146 Scudder Tax Free Money Fund 3,046,146
TOTAL SHORT-TERM INVESTMENT (Cost $3,046,146) 3,046,146
TOTAL INVESTMENTS IN SECURITIES (Cost 75,882,307) 79,021,151
- 99.1%
Other Assets & Liabilities, Net - 0.9% 704,234
TOTAL NET ASSETS - 100.0%
$79,725,385
- -------------------------------------------------------------------------------------------------------
1 Denotes a restricted security which is subject to restrictions on
resale under federal securities law. At February 29, 2004, these
securities amounted to $16,496,422
which represents 20.7% of Net Assets. Included in these amounts are
securities which have been deemed liquid that amounted to
$10,376,835, which represents
13.0% of Net Assets.
2 Variable rate security. The reate reported is the rate in effect
on February 29, 2004. The date reported is the stated maturity.
3 Denotes a restricted security that has been deemed liquid by
criteria approved by the Board of Trustees.
See Notes to Financial Statements
Notes to Portfolios of Investments
The following abbreviations were used in these
portfolios:
AMBAC ---American Municipal Bond Assurance
Corporation
FGIC --- Financial Guaranty Insurance
Corporation
FHA --- Federal Housing Authority
FSA --- Financial Security Assurance,
Incorporated
GO --- General Obligation
HUD --- Housing and Urban Development
LOC --- Letter of Credit
LP --- Limited Partnership
MBIA --- Municipal Bond Insurance Association
MFH --- Multi-Family Housing
RV --- Revenue Bonds
SD --- School District
SFH --- Single Family Housing
VA --- Veterans Administration
- ------------------------------------------------------------------------------------------------------------------
Banknorth Vermont Municipal Bond Fund
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Federated Vermont Municipal Income Fund
- ------------------------------------------------------------------------------------------------------------------
Pro Forma Combining Statements of Assets and Liabilities
- ----------------------------------------------------------------------------------------------------------
February 29, 2004 (Unaudited)
- ----------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
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Banknorth Federated
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Vermont Municipal Vermont Municipal Pro Forma Proforma
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Bond Fund Income Fund (1) Adjustment Combined
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Assets:
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Investments in securities, at value $ $
79,021,151 - - 79,021,151
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Cash
13,079 - - 13,079
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Income receivable
789,869 - - 789,869
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Receivable for shares sold
150,208 - - 150,208
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Total assets
79,974,307 - - 79,974,307
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Liabilities:
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Income distribution payable
193,537 - - 193,537
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Payable for investment adviser fee
12,609 - - 12,609
- ------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Payable for administrative personnel and
services fee 9,457 - - 9,457
- --------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Payable for transfer and dividend disbursing
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
agent fees and expenses
6,681 - - 6,681
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Payable for shareholder services fee
15,761 - - 15,761
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Accrued expenses
10,877 - - 10,877
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities
248,922 - - 248,922
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Net Assets $ $ $ $
79,725,385 - - 79,725,385
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Net Assets Consists of:
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Paid in capital $ $ $
76,573,287 - - 76,573,287
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
3,138,844 - - 3,138,844
- ------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Distributions in excess of net investment
income (97) - - (97)
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments
13,351 - - 13,351
- --------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Total Net Assets $ $ $ $
79,725,385 - - 79,725,385
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Shares Outstanding:
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Class A Shares
7,743,037 - - 7,743,037
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value Per Share
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Class A Shares $ 10.30 $ $ $ 10.30
- -
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Offering Price Per Share
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Class A Shares $ $ $ 10.79 (2)
- -
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Redemption Proceeds Per Share
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Class A Shares $ 10.30 $ $ $ 10.30
- -
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Investments, at identified cost $ $ $ $
75,882,307 - - 75,882,307
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
(1) Federated fund was not effective with the Securities and Exchange Commission until July 13, 2004.
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
(2) Computation of offering price per share 100/95.5 of net asset value.
- --------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
(See Notes to Pro Forma Financial Statements)
- --------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Banknorth Vermont Municipal Bond Fund
Federated Vermont Municipal Income Fund
Pro Forma Combining Statements of Operations
For the six months ended February 29, 2004 (Unaudited)
- ----------------------------------------------------------------------------------------------------------
Banknorth Federated
Vermont
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Vermont Municipal
Municipal Income Pro Forma Proforma
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Bond Fund Fund Adjustment Combined
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Investment Income:
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Interest $ $ $ $
1,565,303 - - 1,565,303
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Dividend 9,745 - - 9,745
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Total investment income 1,575,048 - - 1,565,303
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Expenses: -
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Investment adviser fee 199,095 - (39,819) 159,276
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Administrative personnel and services fee 59,729 - 24,548 84,277
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Custodian fees 6,991 - (4,646) 2,345
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
fees and expenses 11,849 - (1,015) 10,834
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Directors'/Trustees' fees 3,237 - (2,137) 1,100
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Auditing fees 9,721 - (2,721) 7,000
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Legal fees 5,788 - (2,888) 2,900
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Portfolio accounting fees 22,701 - 4,529 27,230
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Distribution services fee - Class A shares - - 99,548 99,548
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Shareholder services fee - Class A Shares 99,548 - - 99,548
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Share registration costs 11,210 - 4,068 15,278
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Printing and postage - - 9,760 9,760
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Insurance premiums - - 3,870 3,870
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Miscellaneous 176 - 321 497
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Total expenses 430,045 - 93,418 523,463
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Waivers:
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Waiver of investment adviser fee (119,457) - 16,045 (103,412)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Waiver of distribution services fee - - (99,548) (99,548)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Waiver of shareholder services fee (7,547) - 7,547 -
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Total Waivers (127,004) - (75,956) (202,960)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Net Expenses 303,041 - 17,462 320,503
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Net investment income 1,272,007 - (17,462) 1,254,545
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain/(Loss) on
Investments
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Net realized gain on investments 152,929 - - 152,929
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of 1,465,461 - - 1,465,461
investments
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 1,618,390 - - 1,618,390
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Change in net assets resulting from $ $ $ $
operations 2,890,397 - (17,462) 2,872,935
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
(See Notes to Pro Forma Financial Statements)
Banknorth Vermont Municipal Bond Fund
Federated Vermont Municipal Income Fund
Notes to Pro Forma Financial Statements
Year Ended August 31, 2003 (Unaudited)
Note 1. Basis of Combination
The accompanying unaudited Pro Forma Combining Portfolios of Investments,
Statements of Assets and Liabilities and Statements of Operations (Pro
Forma Financial Statements) reflect the accounts of Banknorth Vermont
Municipal Bond Fund and Federated Vermont Municipal Income Fund,
collectively (the "Funds"), for the year ended August 31, 2003. These
statements have been derived from the books and records utilized in
calculating daily net asset values at August 31, 2003.
The Pro Forma Financial Statements should be read in conjunction with the
historical financial statements of the Funds which have been incorporated
by reference in the Statement of Additional Information. The Funds follow
generally accepted accounting principles in the United States of America
applicable to management investment companies which are disclosed in the
historical financial statements of each fund.
The Pro Forma Financial Statements give effect to the proposed exchange of
assets of Banknorth Vermont Municipal Bond Fund for shares of Federated
Vermont Municipal Income Fund. Under generally accepted accounting
principles, Banknorth Vermont Municipal Bond Fund will be the surviving
entity for accounting purposes with its historical cost of investment
securities and results of operations being carried forward.
The Pro Forma Financial Statements have been adjusted to reflect the
anticipated advisory fee arrangement for the surviving entity. Certain
other operating costs have also been adjusted to reflect anticipated
expenses of the combined entity. Other costs which may change as a result
of the reorganization are currently undeterminable.
For the year ended August 31, 2003, Banknorth Vermont Municipal Bond Fund
paid and Federated Vermont Municipal Income Fund would have paid
investment advisory fees computed at the annual rate of 0.50% and 0.40%,
respectively, as a percentage of average daily net assets.
All costs with respect to the exchange will be borne by Federated
Investment Management Company or its affiliates.
Note 2. Portfolio of Investments
The Federated Vermont Municipal Income Fund had not become effective with
the Securities and Exchange Commission until July 13, 2004. The Portfolio
of Investments provided is for the Banknorth Vermont Municipal Bond Fund
as of August 31, 2003, and it is not anticipated to change significantly
in connection with the proposed reorganization.
Note 3. Shares of Beneficial Interest
The Pro Forma Class A Shares net asset value per share assumes the
issuance of 7,743,037 Class A Shares of Federated Vermont Municipal Income
Fund in exchange for 7,743,037 Class A Shares of Banknorth Vermont
Municipal Bond Fund which would have been issued at August 31, 2003 in
connection with the proposed reorganization.
Note 4. Proforma Adjustments
(a) Federated Investment Management Company, the Fund's investment
adviser (the "Adviser") receives for its services an annual investment
advisory fee equal to 0.40% of the Fund's average daily net assets. The
Adviser may voluntarily choose to waive a portion of its fee. The Adviser
can modify or terminate this voluntary waiver at any time at its sole
discretion. Adjustment to reflect the investment adviser fee under the
Federated fund's investment advisory contract.
(b) Federated Administrative Services (FAS), provides the Fund with
certain administrative personnel and services necessary to operate the
Fund. The fee paid to FAS is based on the level of average aggregate
daily net assets of the Federated Funds. The administrative fee received
during any fiscal year shall be at least $150,000 per fund. Prior to
November 1, 2003, the minimum fee was $125,000 per fund. FAS may
voluntarily choose to waive the fee and can modify or terminate its
voluntary waiver at any time at its sole discretion. Adjustment to
reflect the administrative personnel and services fee being brought in
line at the minimum annual fee charged for Federated funds.
(c) Adjustment to reflect the custodian fees reduction due to the fee
structure after converting to a Federated fund.
(d) Federated Services Company (FServ) through its subsidiary, Federated
Shareholder Services Company (FSSC), serves as transfer and dividend
disbursing agent for the Fund. The fee paid to FSSC is based on the number
of share classes and accounts per fund and the level of average aggregate
net assets of the Fund for the period. The adjustment is due to the fee
structure after converting to a Federated fund.
(e) Adjustment to reflect the directors' fee reduction due to the fee
structure after converting to a Federated fund.
(f) Adjustment to reflect the auditing fee reduction due to the fee
structure after converting to a Federated fund.
(g) Adjustment to reflect the legal fee reduction due to the fee
structure after converting to a Federated fund.
(h) The portfolio accounting fee is based on the level of average daily
net assets of the Fund for the period, plus out-of-pocket
expenses. Adjustment is due to the fee structure after
converting to a Federated fund.
(i) The Federated Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under
the terms of the Plan, the Fund will compensate Federated Securities Corp.
(FSC), the principal distributor, from the daily net assets of the Fund's
Class A Shares to finance activities intended to result in the sale of
these shares. The Plan provides that the Fund may incur distribution
expenses up to 0.25% of average daily net assets of the Fund's Class A
Shares. Adjustment to reflect Class A Shares distribution services fee
after converting to a Federated fund.
(j) Adjustment to reflect the reduction in Share registration costs due
to the fee structure after converting to a Federated fund.
(k) Printing and postage expenses are adjusted to reflect costs due to
the fee structure after converting to a Federated fund.
(l) Insurance expenses are adjusted to reflect costs due to the fee
structure after converting to a Federated fund.
(m) Miscellaneous expenses are adjusted to reflect costs due to the fee
structure after converting to a Federated fund.
(n) Adjustment to reflect waiver of investment adviser fee based on the
fee structure after converting to a Federated fund.
(o) Pursuant to a written waiver agreement, the distributor for the
Federated fund will waive the distribution (12b-1) fee. The contractual
waiver will expire on August 27, 2006.
(p) Adjustment to reflect elimination of the waiver of shareholder
services fee after converting to a Federated fund.
BANKNORTH VERMONT MUNICIPAL BOND FUND
- -------------------------------------------------------------------------------------------------
Principal Security Name Interest Maturity Value
Rate Date
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - 96.7%
Indiana - 0.3%
$ Indianapolis, IN, Public Improvement Project, 4.50% 02/01/06 $
200,000 Series E 211,378
Louisiana - 0.8%
184,000 Jefferson Parish, LA, Home Mortgage Authority, SFH 7.10 08/01/10 223,543
RV, FGIC/FHA/VA insured
165,000 Lafayette, LA, Public Transportation Financing 7.20 04/01/10 187,862
Authority, SFH RV, FHA/VA insured
150,000 Monroe-West Monroe, LA, Public Transportation 7.20 08/01/10 173,921
Financing Authority, SFH RV
585,326
Puerto Rico - 2.8%
2,000,000 Commonwealth of Puerto Rico, GO Bonds, MBIA-IBC 5.50 07/01/09 2,266,460
insured
South Carolina - 2.6%
2,000,000 South Carolina State, School Facilities, GO Bonds, 4.00 01/01/07 2,114,900
Series A
Vermont - 89.0%
565,000 Burlington, VT, Airport RV, Series A, MBIA insured 3.63 07/01/17 499,302
1,250,000 Burlington, VT, Airport RV, Series A, MBIA insured 5.00 07/01/23 1,242,913
500,000 Burlington, VT, Electric RV, Series A, MBIA insured 5.00 07/01/04 516,765
415,000 Burlington, VT, GO Bonds, Series A 5.00 12/01/04 435,559
800,000 Burlington, VT, GO Bonds, Series A 5.10 12/01/05 865,328
785,000 Burlington, VT, GO Bonds, Series A 5.20 12/01/06 841,457
130,000 Burlington, VT, Public Improvement Project, GO 3.50 11/01/04 133,758
Bonds, Series A
135,000 Burlington, VT, Public Improvement Project, GO 3.50 11/01/05 141,037
Bonds, Series A
135,000 Burlington, VT, Public Improvement Project, GO 3.50 11/01/06 141,553
Bonds, Series A
140,000 Burlington, VT, Public Improvement Project, GO 3.50 11/01/07 146,234
Bonds, Series A
145,000 Burlington, VT, Public Improvement Project, GO 3.50 11/01/08 150,333
Bonds, Series A
150,000 Burlington, VT, Public Improvement Project, GO 3.50 11/01/09 153,555
Bonds, Series A
155,000 Burlington, VT, Public Improvement Project, GO 3.50 11/01/10 155,307
Bonds, Series A
90,000 Burlington, VT, Public Improvement Project, GO 3.50 11/01/11 88,363
Bonds, Series A
170,000 Burlington, VT, Public Improvement Project, GO 3.50 11/01/12 163,724
Bonds, Series A
125,000 Burlington, VT, Public Improvement Project, GO 3.60 11/01/13 119,648
Bonds, Series A
185,000 Burlington, VT, Public Improvement Project, GO 3.75 11/01/14 177,326
Bonds, Series A
190,000 Burlington, VT, Public Improvement Project, GO 3.75 11/01/15 179,358
Bonds, Series A
200,000 Burlington, VT, Public Improvement Project, GO 4.00 11/01/16 193,222
Bonds, Series A
210,000 Burlington, VT, Public Improvement Project, GO 4.00 11/01/17 200,453
Bonds, Series A
220,000 Burlington, VT, Public Improvement Project, GO 4.00 11/01/18 206,488
Bonds, Series A
400,000 Burlington, VT, Waterworks System, Water RV, 4.50 07/01/04 411,780
Series A, FGIC insured
300,000 Burlington, VT, Waterworks System, Water RV, 4.65 07/01/06 322,905
Series A, FGIC insured
150,000 Burlington, VT, Waterworks System, Water RV, 4.75 07/01/07 163,166
Series A, FGIC insured
300,000 Burlington, VT, Waterworks System, Water RV, 4.80 07/01/08 322,647
Series A, FGIC insured
95,000 Champlain Valley, VT, Union SD No. 15, GO Bonds 5.00 06/01/08 95,270
145,000 Champlain Valley, VT, Union SD No. 15, GO Bonds 5.13 06/01/12 145,434
110,000 Chittenden, VT, Solid Waste District, Resource 2.50 01/01/07 111,251
Recovery RV, Series A, AMBAC insured
100,000 Chittenden, VT, Solid Waste District, Resource 3.30 01/01/10 100,139
Recovery RV, Series A, AMBAC insured
310,000 Chittenden, VT, Solid Waste District, Resource 3.40 01/01/11 309,051
Recovery RV, Series A, AMBAC insured
205,000 Chittenden, VT, Solid Waste District, Resource 3.50 01/01/12 202,581
Recovery RV, Series A, AMBAC insured
90,000 Fair Haven, VT, Union SD, GO Bonds, AMBAC insured 4.85 12/01/03 90,877
90,000 Fair Haven, VT, Union SD, GO Bonds, AMBAC insured 4.95 12/01/04 94,282
90,000 Fair Haven, VT, Union SD, GO Bonds, AMBAC insured 5.00 12/01/05 97,046
90,000 Fair Haven, VT, Union SD, GO Bonds, AMBAC insured 5.05 12/01/06 96,147
25,000 Norwich, VT, SD, GO Bonds, AMBAC insured 4.50 07/15/09 26,998
70,000 Pawlett/Rupert, VT, Union Elementary SD No. 47, GO 5.00 11/01/03 70,477
Bonds, MBIA insured
120,000 Pawlett/Rupert, VT, Union Elementary SD No. 47, GO 5.00 11/01/04 125,408
Bonds, MBIA insured
30,000 Shelburne, VT, SD, GO Bonds 5.00 06/01/08 30,085
145,000 Shelburne, VT, SD, GO Bonds 5.10 06/01/10 145,431
120,000 Shelburne, VT, SD, GO Bonds 5.13 06/01/11 120,359
135,000 Shelburne, VT, SD, GO Bonds 5.13 06/01/12 135,404
510,000 St. Johnsbury, VT, SD, GO Bonds, AMBAC insured 4.50 09/01/04 527,452
500,000 St. Johnsbury, VT, SD, GO Bonds, AMBAC insured 4.50 09/01/05 530,425
520,000 St. Johnsbury, VT, SD, GO Bonds, AMBAC insured 4.55 09/01/06 560,560
515,000 St. Johnsbury, VT, SD, GO Bonds, AMBAC insured 4.65 09/01/07 560,459
520,000 St. Johnsbury, VT, SD, GO Bonds, AMBAC insured 4.80 09/01/08 570,856
805,000 University of Vermont & State Agricultural 4.10 10/01/11 826,292
College, Educational Facilities RV, AMBAC insured
500,000 University of Vermont & State Agricultural 4.20 10/01/12 511,370
College, Educational Facilities RV, AMBAC insured
500,000 University of Vermont & State Agricultural 5.50 10/01/18 539,845
College, Educational Facilities RV, AMBAC insured
500,000 University of Vermont & State Agricultural 5.50 10/01/19 536,360
College, Educational Facilities RV, AMBAC insured
250,000 University of Vermont & State Agricultural 5.25 10/01/21 259,035
College, Educational Facilities RV, AMBAC insured
1,150,000 University of Vermont & State Agricultural 5.25 10/01/23 1,183,005
College, Educational Facilities RV, AMBAC insured
1,341,250 Vermont Economic Development Authority, Industrial 6.18 08/31/06 1,140,063
RV, Tubbs Project1
90,000 Vermont Educational & Health Buildings Financing 5.60 10/01/04 92,048
Agency, Educational Facilities RV, Champlain
College Project, Series A, Merchants Bank, LOC
70,000 Vermont Educational & Health Buildings Financing 6.20 11/01/03 70,472
Agency, Educational Facilities RV, Landmark
College Project, Series A, Remarketed 11/1/94,
Vermont National Bank, LOC
190,000 Vermont Educational & Health Buildings Financing 7.15 11/01/14 196,656
Agency, Educational Facilities RV, Landmark
College Project, Series A, Remarketed 11/1/94,
Vermont National Bank, LOC
4,650,000 Vermont Educational & Health Buildings Financing 5.25 04/01/19 4,488,087
Agency, Educational Facilities RV, Marlboro
College Project1
350,000 Vermont Educational & Health Buildings Financing 5.55 11/01/03 352,755
Agency, Educational Facilities RV, Middlebury
College Project
770,000 Vermont Educational & Health Buildings Financing 5.30 11/01/08 853,322
Agency, Educational Facilities RV, Middlebury
College Project
190,000 Vermont Educational & Health Buildings Financing 5.38 11/01/26 195,130
Agency, Educational Facilities RV, Middlebury
College Project
260,000 Vermont Educational & Health Buildings Financing 5.80 11/01/05 267,350
Agency, Educational Facilities RV, Middlebury
College Project, Prerefunded 11/01/03 @ 102
160,000 Vermont Educational & Health Buildings Financing 5.90 11/01/06 164,550
Agency, Educational Facilities RV, Middlebury
College Project, Prerefunded 11/01/03 @ 102
150,000 Vermont Educational & Health Buildings Financing 6.00 11/01/07 154,291
Agency, Educational Facilities RV, Middlebury
College Project, Prerefunded 11/01/03 @ 102
400,000 Vermont Educational & Health Buildings Financing 4.00 11/01/13 400,500
Agency, Educational Facilities RV, Middlebury
College Project, Series A
3,000 Vermont Educational & Health Buildings Financing 1.80 11/01/27 3,017
Agency, Educational Facilities RV, Middlebury
College Project, Series A4
130,000 Vermont Educational & Health Buildings Financing 5.30 04/01/04 133,301
Agency, Educational Facilities RV, St. Michaels
College Project
20,000 Vermont Educational & Health Buildings Financing 5.75 10/01/04 21,014
Agency, Educational Facilities RV, St Michaels
College Project
140,000 Vermont Educational & Health Buildings Financing 5.40 04/01/05 149,030
Agency, Educational Facilities RV, St. Michaels
College Project
50,000 Vermont Educational & Health Buildings Financing 3.25 10/01/09 49,007
Agency, Educational Facilities RV, St. Michaels
College Project
100,000 Vermont Educational & Health Buildings Financing 3.60 10/01/10 97,278
Agency, Educational Facilities RV, St. Michaels
College Project
140,000 Vermont Educational & Health Buildings Financing 3.88 10/01/11 136,219
Agency, Educational Facilities RV, St. Michaels
College Project
195,000 Vermont Educational & Health Buildings Financing 4.00 10/01/12 188,832
Agency, Educational Facilities RV, St. Michaels
College Project
125,000 Vermont Educational & Health Buildings Financing 4.13 10/01/13 120,617
Agency, Educational Facilities RV, St. Michaels
College Project
385,000 Vermont Educational & Health Buildings Financing 4.25 10/01/14 372,245
Agency, Educational Facilities RV, St. Michaels
College Project
370,000 Vermont Educational & Health Buildings Financing 4.38 10/01/15 357,239
Agency, Educational Facilities RV, St. Michaels
College Project
100,000 Vermont Educational & Health Buildings Financing 5.90 10/01/06 107,208
Agency, Educational Facilities RV, St Michaels
College Project, Prerefunded 10/1/04 @ 102
1,190,000 Vermont Educational & Health Buildings Financing 6.50 10/01/14 1,283,486
Agency, Educational Facilities RV, St Michaels
College Project, Prerefunded 10/1/04 @ 102
430,000 Vermont Educational & Health Buildings Financing 4.25 11/15/03 432,808
Agency, Healthcare RV, Central Vermont Hospital &
Nursing Project, AMBAC insured
555,000 Vermont Educational & Health Buildings Financing 4.38 11/15/04 575,430
Agency, Healthcare RV, Central Vermont Hospital &
Nursing Project, AMBAC insured
60,000 Vermont Educational & Health Buildings Financing 4.40 11/15/05 63,399
Agency, Healthcare RV, Central Vermont Hospital &
Nursing Project, AMBAC insured
605,000 Vermont Educational & Health Buildings Financing 4.50 11/15/06 645,759
Agency, Healthcare RV, Central Vermont Hospital &
Nursing Project, AMBAC insured
200,000 Vermont Educational & Health Buildings Financing 4.63 11/15/07 214,684
Agency, Healthcare RV, Central Vermont Hospital &
Nursing Project, AMBAC insured
65,000 Vermont Educational & Health Buildings Financing 5.30 12/01/08 72,023
Agency, Healthcare RV, Fletcher Allen Health
Project, Series A, AMBAC insured
55,000 Vermont Educational & Health Buildings Financing 5.30 12/01/09 60,805
Agency, Healthcare RV, Fletcher Allen Health
Project, Series A, AMBAC insured
110,000 Vermont Educational & Health Buildings Financing 6.00 09/01/22 112,561
Agency, Healthcare RV, Medical Center Hospital of
Vermont Project, FGIC insured
1,346,000 Vermont Educational & Health Buildings Financing 2.17 10/01/11 1,329,269
Agency, Healthcare RV, North Country Hospital
Project1,2
150,000 Vermont Housing Finance Agency, Home Mortgage 7.75 06/15/16 150,381
Program, Series A
170,000 Vermont Housing Finance Agency, Home Mortgage 7.40 12/01/05 171,396
Program, Series B, FHA/VA insured2
205,000 Vermont Housing Finance Agency, MFH RV, Series A, 4.45 02/15/08 211,761
HUD/Section 8 insured
130,000 Vermont Housing Finance Agency, MFH RV, Series A, 4.55 02/15/09 132,757
HUD/Section 8 insured
1,025,000 Vermont Housing Finance Agency, MFH RV, Series B1,3 1.30 02/15/35 1,023,678
10,000 Vermont Housing Finance Agency, SFH RV, Series 1, 6.25 11/01/03 10,031
Remarketed 7/1/92
240,000 Vermont Housing Finance Agency, SFH RV, Series 4.60 11/01/04 247,010
11A, FSA insured
230,000 Vermont Housing Finance Agency, SFH RV, Series 4.70 11/01/05 240,343
11A, FSA insured
325,000 Vermont Housing Finance Agency, SFH RV, Series 4.85 11/01/06 340,918
11A, FSA insured
245,000 Vermont Housing Finance Agency, SFH RV, Series 4.95 11/01/07 256,302
11A, FSA insured
325,000 Vermont Housing Finance Agency, SFH RV, Series 5.05 11/01/08 338,780
11A, FSA insured
430,000 Vermont Housing Finance Agency, SFH RV, Series 5.15 11/01/09 444,538
11A, FSA insured
295,000 Vermont Housing Finance Agency, SFH RV, Series 5.50 11/01/08 310,765
12B, FSA insured
385,000 Vermont Housing Finance Agency, SFH RV, Series 5.60 11/01/09 396,758
12B, FSA insured
120,000 Vermont Housing Finance Agency, SFH RV, Series 5 5.80 11/01/03 120,108
75,000 Vermont Housing Finance Agency, SFH RV, Series 5 5.90 05/01/04 75,235
85,000 Vermont Housing Finance Agency, SFH RV, Series 5 5.90 11/01/04 85,463
135,000 Vermont Housing Finance Agency, SFH RV, Series 5 6.88 11/01/16 137,961
135,000 Vermont Housing Finance Agency, SFH RV, Series 9, 5.00 05/01/05 139,971
MBIA insured
50,000 Vermont Housing Finance Agency, SFH RV, Series 9, 5.10 05/01/06 52,216
MBIA insured
110,000 Vermont Housing Finance Agency, SFH RV, Series 9, 4.55 05/01/08 115,258
Remarketed 8/26/98, MBIA insured
1,400,000 Vermont Housing Finance Agency, Templeton 1.60 04/30/04 1,400,210
Project1,3
235,000 Vermont Municipal Bond Bank, Series 1 5.60 12/01/03 237,611
80,000 Vermont Municipal Bond Bank, Series 1 5.70 12/01/04 84,259
250,000 Vermont Municipal Bond Bank, Series 1 3.00 12/01/07 256,150
250,000 Vermont Municipal Bond Bank, Series 1 3.30 12/01/08 256,740
250,000 Vermont Municipal Bond Bank, Series 1 3.50 12/01/09 255,637
250,000 Vermont Municipal Bond Bank, Series 1 3.70 12/01/10 253,490
250,000 Vermont Municipal Bond Bank, Series 1 3.80 12/01/11 251,062
100,000 Vermont Municipal Bond Bank, Series 1, AMBAC 4.75 12/01/03 100,967
insured
30,000 Vermont Municipal Bond Bank, Series 1, AMBAC 5.10 12/01/04 31,527
insured
250,000 Vermont Municipal Bond Bank, Series 1, AMBAC 3.90 12/01/12 249,315
insured
250,000 Vermont Municipal Bond Bank, Series 1, AMBAC 4.00 12/01/13 249,280
insured
1,500,000 Vermont Municipal Bond Bank, Series 1, FSA insured 4.30 12/01/06 1,611,375
1,000,000 Vermont Municipal Bond Bank, Series 1, FSA insured 4.40 12/01/07 1,080,920
860,000 Vermont Municipal Bond Bank, Series 1, MBIA insured 4.60 12/01/07 936,514
100,000 Vermont Municipal Bond Bank, Series 1, MBIA insured 4.80 12/01/08 109,978
340,000 Vermont Municipal Bond Bank, Series 1, MBIA insured 4.80 12/01/09 372,218
50,000 Vermont Municipal Bond Bank, Series 1, MBIA insured 3.30 12/01/10 49,205
520,000 Vermont Municipal Bond Bank, Series 1, MBIA insured 3.60 12/01/11 512,959
550,000 Vermont Municipal Bond Bank, Series 1, MBIA insured 3.75 12/01/12 540,133
500,000 Vermont Municipal Bond Bank, Series 1, MBIA insured 3.90 12/01/13 492,205
2,000,000 Vermont Municipal Bond Bank, Series 1, MBIA insured 5.38 12/01/16 2,159,160
750,000 Vermont Municipal Bond Bank, Series 2, AMBAC 6.00 12/01/04 796,192
insured
500,000 Vermont Municipal Bond Bank, Series 2, AMBAC 5.20 12/01/07 546,520
insured
165,000 Vermont Municipal Bond Bank, Series 2, FSA insured 4.30 12/01/06 177,251
665,000 Vermont Municipal Bond Bank, Series 2, FSA insured 4.40 12/01/07 718,812
1,000,000 Vermont Municipal Bond Bank, Series 2, MBIA insured 5.00 12/01/17 1,046,930
1,000,000 Vermont Municipal Bond Bank, Series 2, MBIA insured 5.00 12/01/18 1,038,560
100,000 Vermont Public Power Supply Authority, Power RV, 4.40 07/01/04 102,862
McNeil Project, Series D, AMBAC insured
1,000,000 Vermont Public Power Supply Authority, Power RV, 4.50 07/01/05 1,056,720
McNeil Project, Series D, AMBAC insured
840,000 Vermont Public Power Supply Authority, Power RV, 5.00 07/01/11 911,299
McNeil Project, Series E, MBIA insured
500,000 Vermont Public Power Supply Authority, Power RV, 5.25 07/01/15 544,405
McNeil Project, Series E, MBIA insured
1,065,000 Vermont State, GO Bonds, Series A 5.00 01/15/05 1,119,624
50,000 Vermont State, GO Bonds, Series A 4.50 02/01/05 51,122
500,000 Vermont State, GO Bonds, Series A 4.40 01/15/07 535,390
1,600,000 Vermont State, GO Bonds, Series A 5.00 01/15/08 1,731,312
1,300,000 Vermont State, GO Bonds, Series A 5.00 01/15/10 1,393,522
250,000 Vermont State, GO Bonds, Series A 4.75 08/01/20 250,727
2,000,000 Vermont State, GO Bonds, Series B 5.00 01/15/04 2,030,480
1,100,000 Vermont State, GO Bonds, Series B 4.30 10/15/04 1,126,598
1,250,000 Vermont State, GO Bonds, Series B, Prerefunded 4.60 10/15/07 1,279,675
10/15/03 @ 102
2,750,000 Vermont State, GO Bonds, Series B, Prerefunded 4.75 10/15/09 2,816,192
10/15/03 @ 102
500,000 Vermont State, GO Bonds, Series C 4.60 01/15/13 519,270
155,000 Vermont State, Student Assistance Corp., 6.25 12/15/03 157,029
Educational Loan RV, Financing Program, Series
A-3, FSA insured
500,000 Vermont State, Student Assistance Corp., 6.40 06/15/04 511,740
Educational Loan RV, Financing Program, Series
A-3, FSA insured
135,000 Vermont State, Student Assistance Corp., 6.40 12/15/04 138,132
Educational Loan RV, Financing Program, Series
A-3, FSA insured
150,000 Vermont State, Student Assistance Corp., 6.50 06/15/05 153,483
Educational Loan RV, Financing Program, Series
A-3, FSA insured
300,000 Vermont State, Student Assistance Corp., 6.13 06/15/04 306,804
Educational Loan RV, Financing Program, Series B,
FSA insured
315,000 Vermont State, Student Assistance Corp., 6.13 12/15/04 322,056
Educational Loan RV, Financing Program, Series B,
FSA insured
480,000 Vermont State, Student Assistance Corp., 6.25 12/15/05 490,781
Educational Loan RV, Financing Program, Series B,
FSA insured
1,095,000 Vermont State, Student Assistance Corp., 6.35 06/15/06 1,119,922
Educational Loan RV, Financing Program, Series B,
FSA insured
120,000 Vermont State, Student Assistance Corp., 5.30 12/15/03 121,336
Educational Loan RV, Financing Program, Series D,
FSA insured
160,000 Vermont State, Student Assistance Corp., 5.40 12/15/04 164,818
Educational Loan RV, Financing Program, Series D,
FSA insured
400,000 Vermont State, Student Assistance Corp., 5.60 12/15/06 411,112
Educational Loan RV, Financing Program, Series D,
FSA insured
71,657,756
Wisconsin - 1.2%
50,000 Kenosha, WI, GO Bonds, Series B, AMBAC insured 5.35 12/01/03 50,559
900,000 Wisconsin State, GO Bonds, Series A 3.50 05/01/05 931,653
982,212
TOTAL MUNICIPAL BONDS (Cost $76,144,649) 77,818,032
Shares SHORT-TERM INVESTMENTS - 5.3%
- ------------
145,719 Deutsche Tax Free Money Fund 145,719
4,143,456 Dreyfus Municipal Cash Management Plus Fund 4,143,456
TOTAL SHORT-TERM INVESTMENTS (Cost $4,289,175) 4,289,175
TOTAL INVESTMENTS IN SECURITIES (Cost $80,433,824) 82,107,207
- 102.0%
Other Assets and Liabilities, Net - (2.0%) (1,609,967)
TOTAL NET ASSETS - 100.0% 80,497,240
=========
- -------------------------------------------------------------------------------------------------
1 Denotes a restricted security which is subject to restrictions on resale under
federal securities law. At August 31, 2003, these securities amounted to
$9,381,307,
which represents 11.7% of Net Assets. Included in these amounts are securities
which have been deemed liquid that amounted to $2,423,888, which represents 3.0%
of Net Assets.
2 Variable rate security. The rate reported is the rate
in effect on August 31, 2003. The date reported is the
stated maturity.
3 Denotes a restricted security that has been deemed
liquid by criteria approved by the Board of Trustees.
4 These variable rate securities are subject to a put and
demand feature. The date reported is the stated maturity.
-----------------------------------------------------------
Notes to Portfolios of Investments
-----------------------------------------------------------
The following abbreviations were used in these portfolios:
AMBAC - American Municipal Bond Assurance Corporation
FGIC - Financial Guaranty Insurance Corporation
FHA - Federal Housing Authority
FSA - Financial Security Assurance, Incorporated
GO - General Obligation
HUD - Housing and Urban Development
IBC - insured Bond Certificates
LOC - Letter of Credit
MBIA - Municipal Bond Insurance Association
MFH - Multi-Family Housing
RV - Revenue Bonds
SD - School District
SFH - Single Family Housing
VA - Veterans Administration
Banknorth Vermont Municipal Bond Fund
Federated Vermont Municipal Income Fund
Pro Forma Combining Statements of Assets and Liabilities
August 31, 2003 (Unaudited)
Banknorth Federated
Vermont Vermont Pro Forma Proforma
Municipal Municipal
Bond Fund Income Fund AdjustmentCombined
(1)
Assets:
Investments in securities, at value - -
$82,107,207 $82,107,207
Cash - - - -
Income receivable - - 882,764
882,764
Total assets - - 82,989,971
82,989,971
Liabilities:
Payable for shares redeemed - - 2,205,799
2,205,799
Income distribution payable - - 212,781
212,781
Payable for investment adviser fee 17,740 - - 17,740
Payable for administrative personnel and 10,644 - - 10,644
services fee
Payable for transfer and dividend
disbursing
agent fees and expenses 3,554 - - 3,554
Payable for shareholder services fee 17,740 - - 17,740
Accrued expenses 24,473 - - 24,473
Total liabilities - - 2,492,731
2,492,731
Net Assets $- $-
$80,497,240 $80,497,240
Net Assets Consists of:
Paid in capital $- $- 78,864,024
$78,864,024
Net unrealized appreciation of investments - - 1,673,383
1,673,383
Undistributed net investment income 5,934 - - 5,934
Accumulated net realized loss on investments (46,101) - - (46,101)
Total Net Assets $- $-
$80,497,240 $80,497,240
Shares Outstanding:
Class A Shares - - 7,967,194
7,967,194
Net Asset Value Per Share
Class A Shares $10.10 $- $- $10.10
Offering Price Per Share
Class A Shares $10.49 (2) $- $- $10.58 (3)
Redemption Proceeds Per Share
Class A Shares $10.10 $- $- $10.10
Investments, at identified cost $- $-
$80,433,824 $80,433,824
(1) Federated fund was not effective with the Securities and Exchange Commission until July 13,
2004.
(2) Computation of offering price per share 100/96.25 of net asset value.
(3) Computation of offering price per share 100/95.55 of net asset value.
(See Notes to Pro Forma Financial Statements)
Banknorth Vermont Municipal Bond Fund
Federated Vermont Municipal Income Fund
Pro Forma Combining Statements of Operations
For the year ended August 31, 2003 (Unaudited)
Banknorth Federated
Vermont Vermont
Municipal Municipal Income Pro Forma Proforma
Bond Fund Fund (1) AdjustmentCombined
Investment Income:
Interest $ $ $ $
3,398,327 - - 3,398,327
Dividend
45,755 - - 45,755
Total investment income
3,444,082 - - 3,398,327
Expenses:
Investment adviser fee
416,575 - (83,315) 333,260
Administrative personnel and services
fee 124,973 - 25,027 150,000
Custodian fees
15,352 - (10,562) 4,790
Transfer and dividend disbursing agent
-
fees and expenses
25,912 - (4,244) 21,668
Directors'/Trustees' fees
3,421 - (1,221) 2,200
Auditing fees
20,538 - (6,538) 14,000
Legal fees
3,534 - 2,266 5,800
Portfolio accounting fees
52,597 - 1,863 54,460
Distribution servives fee - Class A
shares - - 208,288 208,288
Shareholder services fee - Class A
Shares 208,288 - - 208,288
Share registration costs
16,521 - 14,035 30,556
Printing and postage
8,000 - 11,520 19,520
Insurance premiums
4,100 - 3,639 7,739
Miscellaneous
17,255 - (16,255) 1,000
Total expenses
917,066 - 144,503 1,061,569
Waivers:
Waiver of investment adviser fee
(208,288) - 25,609 (182,679)
Waiver of distribution services
fee - - (208,288) (208,288)
Waiver of shareholder services fee
(10,225) - 10,225 -
Total Waivers
(218,513) - (172,454) (390,967)
Net Expenses
698,553 - (27,951) 670,602
Net investment income
2,745,529 - 27,951 2,773,480
Realized and Unrealized Gain/(Loss) on Investments
Net realized gain on investments
15,633 - - 15,633
Net change in unrealized
appreciation/(depreciation) of (1,386,452) - - (1,386,452)
investments
Net realized and unrealized loss on
investments (1,370,819) - - (1,370,819)
Change in net assets $ $ $ $
resulting from operations 1,374,710 - 27,951 1,402,661
(1) Federated fund was not effective with the Securities and Exchange Commission until
July 13, 2004.
(See Notes to Pro Forma Financial Statements)
BANKNORTH FUNDS
Banknorth Large Cap Core Fund
Banknorth Small/Mid Cap Core Fund
Banknorth Intermediate Bond Fund
Banknorth Vermont Municipal Bond Fund
Investment Adviser
BANKNORTH INVESTMENT ADVISORS
One Portland Square
Portland, ME 04112
Distributor
EDGEWOOD SERVICES, INC.
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7002
Administrator
FEDERATED SERVICES COMPANY
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
PART C. OTHER INFORMATION.
Item 15. Indemnification:
Indemnification is provided to Trustees and officers of the
Registrant pursuant to the Registrant's Declaration of Trust and Bylaws,
except where such indemnification is not permitted by law. However, the
Declaration of Trust and Bylaws do not protect the Trustees or officers
from liability based on willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of their
office. Trustees and officers of the Registrant are insured against
certain liabilities, including liabilities arising under the Securities
Act of 1933 (the "Act").
Insofar as indemnification for liabilities arising under the Act may
be permitted to Trustees, officers, and controlling persons of the
Registrant by the Registrant pursuant to the Declaration of Trust or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by
Trustees, officers, or controlling persons of the Registrant in connection
with the successful defense of any act, suit, or proceeding) is asserted
by such Trustees, officers, or controlling persons in connection with the
shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Insofar as indemnification for liabilities may be permitted pursuant
to Section 17 of the Investment Company Act of 1940 for Trustees,
officers, or controlling persons of the Registrant by the Registrant
pursuant to the Declaration of Trust or otherwise, the Registrant is aware
of the position of the Securities and Exchange Commission as set forth in
Investment Company Act Release No. IC-11330. Therefore, the Registrant
undertakes that in addition to complying with the applicable provisions of
the Articles of Incorporation or otherwise, in the absence of a final
decision on the merits by a court or other body before which the
proceeding was brought, that an indemnification payment will not be made
unless in the absence of such a decision, a reasonable determination based
upon factual review has been made (i) by a majority vote of a quorum of
non-party Trustees who are not interested persons of the Registrant or
(ii) by independent legal counsel in a written opinion that the
indemnitee was not liable for an act of willful misfeasance, bad faith,
gross negligence, or reckless disregard of duties. The Registrant further
undertakes that advancement of expenses incurred in the defense of a
proceeding (upon undertaking for repayment unless it is ultimately
determined that indemnification is appropriate) against an officer,
Trustee, or controlling person of the Registrant will not be made absent
the fulfillment of at least one of the following conditions: (i) the
indemnitee provides security for his undertaking; (ii) the Registrant is
insured against losses arising by reason of any lawful advances; or
(iii) a majority of a quorum of disinterested non-party Trustees or
independent legal counsel in a written opinion makes a factual
determination that there is reason to believe the indemnitee will be
entitled to indemnification.
Item 16. Exhibits.
1 Conformed copy of Amended and Restated Declaration of Trust
of the Registrant (including Amendment Nos. 1-17); (26)
1.1 Conformed copies of Amendment Nos. 18 and 19 to the
Declaration of Trust of the Registrant; (28)
1.2 Conformed copy of Amendment No. 20 to the Declaration of
Trust of the Registrant; (29)
2 Copy of By-Laws of the Registrant; (1)
2.1 Copies of Amendment Nos. 1-4 to the By-Laws of the
Registrant; (23)
2.2 Copies of Amendment Nos. 5 and 6 to the By-Laws of the
Registrant; (31)
3 Not Applicable
4 Agreement and Plan of Reorganization is included as Exhibit
D to the Prospectus/Proxy Statement of the Registration
Statement; *
5 Copy of Specimen Certificate for Shares of Beneficial
Interest for:
5.1 Federated Pennsylvania Municipal Income Fund-Class A Shares;
(19)
5.2 Federated Pennsylvania Municipal Income Fund- Class B
Shares; (22)
5.3 Federated Ohio Municipal Income Fund-Class F Shares; (19)
5.4 Federated California Municipal Income Fund-Class F Shares;
(19)
5.5 Federated New York Municipal Income Fund-Class F Shares; (19)
5.6 Federated Michigan Intermediate Municipal Trust; (19)
6 Conformed copy of Investment Advisory Contract including
Exhibits A through F of the Registrant; (21)
6.1 Conformed copy of Exhibit G to the Investment Advisory
Contract of the Registrant; (27)
6.2 Conformed copy of Amendment to Investment Advisory Contract
of the Registrant; (28)
6.3 Form of Exhibit H to the Investment Advisory Contract of the
Registrant; (32)
7 Conformed copy of Distributor's Contract including Exhibits
A through N of the Registrant; (21)
7.1 Conformed copy of Exhibit O to the Distributor's Contract;
(23)
7.2 Conformed copy of Distributor's Contract (Class B Shares);
(23)
7.3 The Registrant hereby incorporates the conformed copy of the
specimen Mutual Fund Sales and Service Agreement; Mutual
Funds Service Agreement; and Plan Trustee/Mutual Funds
Service Agreement from Item 24(b)(6) of the Cash Trust
Series II Registration Statement on Form N-1A filed with the
Commission on July 24, 1995. (File Number 33-38550 and
811-6269).
7.4 Conformed copy of Exhibit P to the Distributor's Contract;
(27)
7.5 Conformed copy of Amendment to Distributor's Contract of the
Registrant; (28)
7.6 Conformed copy of Amendment to Distributor's Contract of the
Registrant (Class B Shares); (28)
7.7 Form of copy of Exhibit R to the Distributor's Contract; (32)
8 Not Applicable;
9 Conformed copy of Custodian Contract of the Registrant; (18)
9.1 Conformed copy of Custodian Fee Schedule; (22)
9.2 Conformed copy of Amendment to Custodian Contract of the
Registrant; (29)
10 Conformed copy of Distribution Plan of the Registrant,
including Exhibits A, B and C; (32)
10.1 Form of copy of Exhibit D to the Distribution Plan of the
Registrant; (32)
10.2 The responses described in Item 23(e)(iv) are hereby
incorporated by reference;
11 Form of Opinion and Consent of Counsel regarding the
legality of shares being issued (Federated Vermont Municipal
Income Fund); *
12 Opinion regarding tax consequences of Reorganization (to be
filed by Amendment);
13 Conformed copy of Second Amended and Restated Shareholder
Services Agreement; (29)
13.1 Conformed copy of Principal Shareholder Services Agreement
(Class B Shares); (23)
13.2 Conformed copy of Shareholder Services Agreement (Class B
Shares); (23)
13.3 Conformed copy of Amended and Restated Agreement for Fund
Accounting Services, Administrative Services, Transfer
Agency Services and Custody Services Procurement; (23)
13.4 With regard to Federated Pennsylvania Municipal Income Fund,
Federated Ohio Municipal Income Fund, Federated California
Municipal Income Fund and Federated New York Municipal
Income Fund, the Registrant hereby incorporates the
conformed copy of the Second Amended and Restated Services
Agreement from Item (h)(v) of the Investment Series Funds,
Inc. Registration Statement on Form N-1A, filed with the
Commission on January 23, 2002. (File Nos. 33-48847 and
811-07021).
13.5 The responses described in Item 23(e)(iv) are hereby
incorporated by reference;
13.6 Conformed copy of Amendment to Agreement for Fund Accounting
Services, Administrative Services, Transfer Agency Services,
and Custody Services Procurement; (28)
13.7 The Registrant hereby incorporates by reference the
conformed copy of the Agreement for Administrative Services
from Item 23 (h)(vix) of the Federated Index Trust
Registration Statement on Form N-1A, filed with the
Commission on December 30, 2003. (File Nos. 33-33852 and
811-6061)
13.8 The Registrant hereby incorporates by reference the
conformed copy of the Financial Administration and
Accounting Services Agreement from Item 23(h)(v) of the
Federated Limited Duration Government Fund, Inc.
Registration Statement on Form N-1A, filed with the
Commission on April 26, 2004. (File Nos. 33-41004 and
811-6307)
14 Conformed copy of the Opinion and Consent of Counsel
regarding legality of shares being registered; (1)
14.1 Conformed copy of consent of Independent Registered Public
Accounting Firm of Banknorth Vermont Municipal Bond Fund,
Deloitte & Touche LLP; *
15 Not Applicable;
16 Conformed copy of Power of Attorney of the Registrant;(30)
16.1 Conformed copy of Power of Attorney of Chief Investment
Officer of the Registrant; (27)
17 Form of Proxy of Banknorth Vermont Municipal Bond Fund; *
.....
* Filed electronically
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed August 31, 1990. (File
Nos. 33-36729 and 811-6165)
18. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed on October 30, 1995. (File Nos.
33-36729 and 811-6165)
19. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 21 on Form N-1A filed on October 23, 1996. (File Nos.
33-36729 and 811-6165)
21. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 24 on Form N-1A filed on October 15, 1997. (File Nos.
33-36729 and 811-6165)
22. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 25 on Form N-1A filed on October 31, 1997. (File Nos.
33-36729 and 811-6165)
23. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 26 on Form N-1A filed on August 28, 1998. (File Nos.
33-36729 and 811-6165)
26. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 30 on Form N-1A filed on October 29, 1999. (File Nos.
33-36729 and 811-6165)
27. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 31 on Form N-1A filed on October 26, 2000. (File Nos.
33-36729 and 811-6165)
28. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 32 on Form N-1A filed on October 26, 2001. (File Nos.
33-36729 and 811-6165)
29. Response is incorporated by reference to Registrant's Post Effective
Amendment No. 33 on Form N-1A filed on August 29, 2002. (File Nos.
33-36729 and 811-6165)
30. Response is incorporated by reference to Registrant's Post Effective
Amendment No. 34 on Form N-1A filed on October 28, 2002. (File Nos.
33-36729 and 811-6165)
31. Response is incorporated by reference to Registrant's Post Effective
Amendment No. 35 on Form N-1A filed on October 28, 2003. (File Nos.
33-36729 and 811-6165)
32. Response is incorporated by reference to Registrant's Post Effective
Amendment No. 36 on Form N-1A filed on May 14, 2004. (File Nos.
33-36729 and 811-6165)
Item 17. Undertakings.
(1)..The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus
which is a part of this Registration Statement by any person or party who
is deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act of 1933, the reoffering prospectus will contain the
information called for by the applicable registration form for reofferings
by persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2)..The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to
the Registration Statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act
of 1933, each post-effective amendment shall be deemed to be a new
Registration Statement for the securities offered therein, and the
offering of the securities at that time shall be deemed to be the initial
bona fide offering of them.
(3)..The undersigned Registrant agrees to file by Post-Effective
Amendment the opinion of counsel regarding the tax consequences of the
proposed reorganization required by Item 16(12) of Form N-14 within a
reasonable time after receipt of such opinion.
SIGNATURES
As required by the Securities Act of 1933, the Registration Statement
has been signed on behalf of the Registrant, in the City of Pittsburgh,
and the Commonwealth of Pennsylvania on July 20, 2004.
FEDERATED MUNICIPAL SECURITIES
INCOME TRUST
By: /s/ Todd P. Zerega
Name: Todd P. Zerega
Title: Assistant Secretary
Attorney-In-Fact for John F.
Donahue
July 20, 2004
[Signatures Continued Next Page]
As required by the Securities Act of 1933, this Registration Statement
has been signed below by the following persons in the capacities and on
the date indicated:
NAME TITLE DATE
/s/ Todd P. Zerega Attorney-In-Fact for July 20, 2004
Todd P. Zerega the Persons Listed
ASSISTANT SECRETARY Below
John F. Donahue * Chairman and Trustee
Richard B Fisher * Vice Chairman
J. Christopher Donahue* President and Trustee
(Principal Executive
Officer)
Treasurer
Richard J. Thomas* (Principal Financial
Officer)
Chief Investment
William D. Dawson, III* Officer
Thomas G. Bigley* Trustee
John T. Conroy, Jr.* Trustee
Nicholas P. Constantakis* Trustee
John F. Cunningham* Trustee
Lawrence D. Ellis, M.D.* Trustee
Peter F. Madden* Trustee
Charles F. Mansfield, Jr.* Trustee
John E. Murray, Jr., Trustee
J.D., S.J.D.*
Marjorie P. Smuts* Trustee
John S. Walsh* Trustee
* By Power of Attorney
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