1940 Act File No.811-08519
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 2 ..........................................X
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FEDERATED CORE TRUST
(Exact Name of Registrant as Specified in Charter)
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent for Service)
Copies To:
Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP
2101 L. Street, N.W.
Washington, D.C. 20037
FEDERATED MORTGAGE CORE PORTFOLIO
A Portfolio of Federated Core Trust
CONFIDENTIAL PRIVATE OFFERING MEMORANDUM
PART A
(INFORMATION REQUIRED IN A PROSPECTUS)
FEBRUARY 18, 1999
Please read this Confidential Private offering Memorandum carefully before
investing and retain it for future reference. It contains important information
about the Portfolio that investors should know before investing.
A copy of a Subscription Agreement for use in subscribing to purchase shares of
the Portfolio accompanies delivery of this Memorandum. In order to purchase
shares of the Portfolio, a prospective investor must satisfactorily complete,
execute and deliver the Subscription Agreement to the Portfolio's Transfer
Agent.
Items 1,2 3, 5 and 9 of Part A are omitted pursuant to Item B(2)(b)of the
General Instructions to Form N-1A.
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
INVESTMENT OBJECTIVE
The investment objective of the Portfolio is to provide total return. While
there is no assurance that the Portfolio will achieve its investment objective,
it endeavors to do so by following the strategies and policies described in this
offering memorandum.
INVESTMENT STRATEGY
The Portfolio pursues its investment objective by investing primarily in
mortgage backed securities, including collateralized mortgage obligations
(CMOs).
The adviser manages the portfolio by targeting a dollar weighted average
duration relative to that of the Lehman Brothers Mortgage Backed Securities
Index. Duration measures the price sensitivity of a portfolio of fixed income
securities to changes in interest rates. The adviser targets this range based
upon its interest rate outlook.
The adviser formulates its interest rate outlook by analyzing a variety of
factors, such as:
o current U.S. economic activity and the economic outlook,
o
o current short-term interest rates,
o
o the Federal Reserve Board's policies regarding short-term interest rates,
and
o potential effects of foreign economic activity on interest rates.
o
The adviser generally shortens the portfolio's average duration when it
expects interest rates to rise and extends the duration when it expects interest
rates to fall.
The adviser selects securities used to lengthen or shorten the portfolio's
average duration by comparing the returns currently offered by different
investments to their historical and expected returns. In selecting mortgage
backed securities, including CMOs, the analysis also focuses on the expected
cash flows from the pool of mortgage obligations supporting the security. The
Adviser attempts to assess the relative returns and risks of these securities by
analyzing how the timing, amount and division of cash flows from the pool might
change in response to changing economic and market conditions. The adviser may
use CMOs with more predictable cash flows (such as sequential pay, planned
amortization class and targeted amortization class) to improve the Portfolio's
performance in volatile markets. The adviser may also use combinations of CMOs
or CMOs and pass-through certificates to provide a higher yielding investment
with market risks similar to a pass-through certificate or a Treasury security.
The combination may involve different mortgage pools. Unanticipated differences
in prepayment rates of the pools may reduce the return of the combined
investment. Combinations may also include CMOs (such as IOs, POs, and inverse
floaters) that have complex terms or less predictable cash flows.
In addition to buying mortgage backed securities outright, the Portfolio may
acquire securities on a "to be announced" basis in order to enhance yield. The
Portfolio engages in dollar roll transactions to increase income. The Portfolio
uses repurchase agreements to secure its obligations in these transactions.
SECURITIES AND TECHNIQUES
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the
Portfolio principally invests:
AGENCY SECURITIES
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The
United States supports some GSEs with its full, faith and credit. Other GSEs
receive support through federal subsidies, loans or other benefits. A few
GSEs have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities. Agency
securities are generally regarded as having low credit risks, but not as low
as treasury securities.
The Portfolio treats mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risks, it does
not reduce the MARKET AND PREPAYMENT RISKS of these mortgage backed
securities.
MORTGAGE BACKED SECURITIES
Mortgage backed securities represent interests in pools of mortgages. The
mortgages that comprise a pool normally have similar interest rates,
maturities and other terms. Mortgages may have fixed or adjustable interest
rates. Interests in pools of adjustable rate mortgages are known as ARMs.
Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. An issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer
deducts its fees and expenses and passes the balance of the payments onto
the certificate holders once a month. Holders of pass-through certificates
receive a pro rata share of all payments and pre-payments from the
underlying mortgages. As a result, the holders assume all the PREPAYMENT
RISKS of the underlying mortgages.
The Portfolio may invest in both agency mortgage backed securities and in
mortgage backed securities that are issued by a private entity. Securities
issued by private entities must be rated investment grade by one or more
nationally recognized rating services. The ability to invest in securities
issued by a private entity creates CREDIT RISK.
COLLATERALIZED MORTGAGE OBLIGATIONS
CMOs, including interests in real estate mortgage investment conduits
(REMICs), allocate payments and prepayments from an underlying
pass-through certificate among holders of different classes of mortgage
backed securities. This creates different PREPAYMENT AND MARKET RISKS
for each CMO class.
SEQUENTIAL CMOS
In a sequential pay CMO, one class of CMOs receives all principal
payments and prepayments. The next class of CMOs receives all principal
payments after the first class is paid off. This process repeats for
each sequential class of CMO. As a result, each class of sequential pay
CMOs reduces the prepayment risks of subsequent classes.
PACS, TACS AND COMPANION CLASSES
More sophisticated CMOs include planned amortization classes (PACs) and
targeted amortization classes (TACs). PACs and TACs are issued with
companion classes. PACs and TACs receive principal payments and
prepayments at a specified rate. The companion classes receive principal
payments and prepayments in excess of the specified rate. In addition,
PACs will receive the companion classes' share of principal payments, if
necessary, to cover a shortfall in the prepayment rate. This helps PACs
and TACs to control prepayment risks by increasing the risks to their
companion classes.
IOS AND POS
CMOs may allocate interest payments to one class (Interest Only or IOs)
and principal payments to another class (Principal Only or POs). POs
increase in value when prepayment rates increase. In contrast, IOs
decrease in value when prepayments increase, because the underlying
mortgages generate less interest payments. However, IOs tend to increase
in value when interest rates rise (and prepayments decrease), making IOs
a useful hedge against market risks.
FLOATERS AND INVERSE FLOATERS
Another variant allocates interest payments between two classes of CMOs.
One class (Floaters) receives a share of interest payments based upon a
market index such as LIBOR. The other class (Inverse Floaters) receives
any remaining interest payments from the underlying mortgages. Floater
classes receive more interest (and Inverse Floater classes receive
correspondingly less interest) as interest rates rise. This shifts
PREPAYMENT AND MARKET RISKS from the Floater to the Inverse Floater
class, reducing the price volatility of the Floater class and increasing
the price volatility of the Inverse Floater class.
Z CLASSES
CMOs must allocate all payments received from the underlying mortgages
to some class. To capture any unallocated payments, CMOs generally have
an accrual (Z) class. Z classes do not receive any payments from the
underlying mortgages until all other CMO classes have been paid off.
Once this happens, holders of Z class CMOs receive all payments and
prepayments. Similarly, REMICs have residual interests that receive any
mortgage payments not allocated to another REMIC class.
The degree of increased or decreased prepayment risks depends upon the
structure of the CMOs. However, the actual returns on any type of
mortgage backed security depend upon the performance of the underlying
pool of mortgages, which no one can predict and will vary among pools.
SPECIAL TRANSACTIONS
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Portfolio buys a
security from a dealer or bank and agrees to sell the security back at a
mutually agreed upon time and price. The repurchase price exceeds the sale
price, reflecting the Portfolio's return on the transaction. This return is
unrelated to the interest rate on the underlying security. The Portfolio
will enter into repurchase agreements only with banks and other recognized
financial institutions, such as securities dealers, deemed creditworthy by
the Adviser.
The Portfolio's custodian or subcustodian will take possession of the
securities subject to repurchase agreements. The Adviser or subcustodian
will monitor the value of the underlying security each day to ensure that
the value of the security always equals or exceeds the repurchase price.
Repurchase agreements are subject to CREDIT RISKS.
DELAYED DELIVERY TRANSACTIONS
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Portfolio buys securities for a set price, with
payment and delivery of the securities scheduled for a future time. During
the period between purchase and settlement, no payment is made by the
Portfolio to the issuer and no interest accrues to the Portfolio. The
Portfolio records the transaction when it agrees to buy the securities and
reflects their value in determining the price of its shares. Settlement
dates may be a month or more after entering into these transactions so that
the market values of the securities bought may vary from the purchase
prices. Therefore, delayed delivery transactions create market risks for the
Portfolio. Delayed delivery transactions also involve CREDIT RISKS in the
event of a counterparty default.
TO BE ANNOUNCED SECURITIES (TBAS)
As with other delayed delivery transactions, a seller agrees to issue a
TBA security at a future date. However, the seller does not specify the
particular securities to be delivered. Instead, the Portfolio agrees to
accept any security that meets specified terms. For example, in a TBA
mortgage backed transaction, the Portfolio and the seller would agree
upon the issuer, interest rate and terms of the underlying mortgages.
The seller would not identify the specific underlying mortgages until it
issues the security. TBA mortgage backed securities increase market
risks because the underlying mortgages may be less favorable than
anticipated by the Portfolio.
DOLLAR ROLLS
Dollar rolls are transactions where the Portfolio sells mortgage-backed
securities with a commitment to buy similar, but not identical,
mortgage-backed securities on a future date at a lower price. Normally,
one or both securities involved are TBA mortgage backed securities.
Dollar rolls are subject to market risks and credit risks.
SECURITIES LENDING
The Portfolio may lend portfolio securities to borrowers that the Adviser
deems creditworthy. In return, the Portfolio receives cash or liquid
securities from the borrower as collateral. The borrower must furnish
additional collateral if the market value of the loaned securities
increases. Also, the borrower must pay the Portfolio the equivalent of any
dividends or interest received on the loaned securities.
The Portfolio will reinvest cash collateral in securities that qualify as an
acceptable investment for the Portfolio. However, the Portfolio must pay
interest to the borrower for the use of cash collateral.
Loans are subject to termination at the option of the Portfolio or the
borrower. The Portfolio will not have the right to vote on securities while
they are on loan, but it will terminate a loan in anticipation of any
important vote. The Portfolio may pay administrative and custodial fees in
connection with a loan and may pay a negotiated portion of the interest
earned on the cash collateral to a securities lending agent or broker.
Securities lending activities are subject to market risks and credit risks.
ASSET COVERAGE
In order to secure its obligations in connection with derivatives contracts
or special transactions, the Portfolio will either own the underlying
assets, enter into an offsetting transaction or set aside readily marketable
securities with a value that equals or exceeds the Portfolio's obligations.
Unless the Portfolio has other readily marketable assets to set aside, it
cannot trade assets used to secure such obligations entering into an
offsetting derivative contract or terminating a special transaction. This
may cause the Portfolio to miss favorable trading opportunities or to
realize losses on derivative contracts or special transactions.
PORTFOLIO TURNOVER
Prepayment of mortgage backed securities owned by the Portfolio could result in
a high portfolio turnover rate, which is likely to generate shorter-term gains
(losses) for its shareholders. Short-term gains are taxed at a higher rate than
longer-term gains. High portfolio turnover increases the Portfolio's trading
costs and may have an adverse impact on the Portfolio's performance.
TEMPORARY DEFENSIVE INVESTMENTS
The Portfolio may temporarily depart from its principal investment strategies by
investing its assets in cash, cash items, and shorter-term, higher quality debt
securities and similar obligations. It may do this to minimize potential losses
and maintain liquidity to meet shareholder redemptions during adverse market
conditions. This may cause the Portfolio to give up greater investment returns
to maintain the safety of principal, that is, the original amount invested by
shareholders.
<PAGE>
INVESTMENT RISKS
BOND MARKET RISKS
o Prices of fixed income securities rise and fall in response to interest rate
changes for similar securities. Generally, when interest rates rise, prices
of fixed income securities fall.
o
o Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of
a fixed income security to changes in interest rates.
o
CREDIT RISKS
o Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the
Portfolio will lose money.
o
PREPAYMENT RISKS
o Generally, homeowners have the option to prepay their mortgages at any time
without penalty. Homeowners frequently refinance high interest rate
mortgages when mortgage rates fall. This results in the prepayment of
mortgage backed securities with higher interest rates. Conversely,
prepayments due to refinancings decrease when mortgage rates increase. This
extends the life of mortgage backed securities with lower interest rates. As
a result, increases in prepayments of high interest rate mortgage backed
securities, or decreases in prepayments of lower interest rate mortgage
backed securities, may reduce their yield and price. This relationship
between interest rates and mortgage prepayments makes the price of mortgage
backed securities more volatile than most other types of fixed income
securities with comparable credit risks.
o
o Mortgage backed securities generally compensate for greater prepayment risk
by paying a higher yield. The difference between the yield of a mortgage
backed security and the yield of a U.S. Treasury security with a comparable
maturity (the spread) measures the additional interest paid for risk.
Spreads may increase generally in response to adverse economic or market
conditions. A security's spread may also increase if the security is
perceived to have increased prepayment risk or less market demand. An
increase in the spread may cause the price of the security to decline.
o
o If a fixed income security is called, the Portfolio may have to reinvest the
proceeds in other fixed income securities with lower interest rates, higher
credit risks, or other less favorable characteristics.
o
LIQUIDITY RISKS
o Trading opportunities are more limited for CMOs that have complicated terms
or that are not widely held. These features may make it more difficult to
sell or buy a security at a favorable price or time. Consequently, the
Portfolio may have to accept a lower price to sell a security, sell other
securities to raise cash or give up an investment opportunity, any of which
could have a negative effect on the Portfolio's performance. Infrequent
trading of securities may also lead to an increase in their price
volatility.
o
o Liquidity risk also refers to the possibility that the Portfolio may not be
able to sell a security when it wants to. If this happens, the Portfolio
will be required to continue to hold the security, and the Portfolio could
incur losses.
o
RISKS ASSOCIATED WITH COMPLICATED CMOS
o CMOs with complicated terms, such as companion classes, IOs, POs and Inverse
Floaters, generally entail greater market, prepayment and liquidity risks
than other mortgage backed securities. For example, their prices are more
volatile and their trading market may be more limited.
o
INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES
The Adviser will determinate whether a security is investment grade based upon
the credit ratings given by one or more nationally recognized rating services.
For example, Standard and Poor's, a rating service, assigns ratings to
investment grade securities (AAA, AA, A, and BBB) based on their assessment of
the likelihood of the issuer's inability to pay interest or principal (default)
when due on each security. Lower credit ratings correspond to higher credit
risk. If a security has not received a rating, the Portfolio must rely entirely
upon the Adviser's credit assessment that the security is comparable to
investment grade.
<PAGE>
YEAR 2000 READINESS
The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999. The Year 2000 problem may cause systems to process information incorrectly
and could disrupt businesses that rely on computers, like the Portfolio.
While it is impossible to determine in advance all of the risks to the
Portfolio, the Portfolio could experience interruptions in basic financial and
operational functions. Portfolio shareholders could experience errors or
disruptions in Portfolio share transactions or Portfolio communications.
The Portfolio's service providers are making changes to their computer
systems to fix any Year 2000 problems. In addition, they are working to gather
information from third-party providers to determine their Year 2000 readiness.
Year 2000 problems would also increase the risks of the Portfolio's investments.
To assess the potential effect of the Year 2000 problem, the Adviser is
reviewing information regarding the Year 2000 readiness of issuers of securities
the Portfolio may purchase.
The financial impact of these issues for the Portfolio is still being
determined. There can be no assurance that potential Year 2000 problems would
not have a material adverse effect on the Portfolio.
MANAGEMENT ORGANIZATION AND CAPITAL STRUCTURE
INVESTMENT ADVISER
A Board of Directors governs the Trust. The Board selects and oversees the
Adviser, Federated Research Corp. The Adviser manages the Portfolio's assets
including buying and selling portfolio securities. The Adviser's address is
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779. The
Adviser will not receive a fee for its investment advisory services.
The Adviser and other subsidiaries of Federated advise more than 175 mutual
funds and private accounts, which total over $111 billion in assets as of
December 31, 1998. Federated was established in 1955 and is one of the largest
mutual fund investment managers in the United States with approximately 1,900
employees. Over 4,000 investment professionals make Federated Funds available to
their customers.
PORTFOLIO MANAGERS
The Portfolio's managers are: Kathleen Foody-Malus, Edward Tiedge and Todd
Abraham.
Kathleen M. Foody-Malus has been the Portfolio's portfolio manager since
inception. Ms. Foody-Malus joined Federated Investors in 1983 and has been a
Vice President of the Adviser since 1993. Ms. Foody-Malus served as an Assistant
Vice President of the investment adviser from 1990 until 1992. Ms. Foody-Malus
received her M.B.A. in Accounting/Finance from the University of Pittsburgh.
Edward J. Tiedge has been the Portfolio's portfolio manager since
inception. Mr. Tiedge joined Federated Investors in 1993 and has been a Vice
President of the Adviser since January 1996. He served as an Assistant Vice
President of the Portfolio's investment adviser in 1995, and an Investment
Analyst during 1993 and 1994. Mr. Tiedge served as Director of Investments at
Duquesne Light Company from 1990 to 1993. Mr. Tiedge is a Chartered Financial
Analyst and received his M.S. in Industrial Administration from Carnegie Mellon
University.
Todd A. Abraham has been the Portfolio's portfolio manager since inception.
Mr. Abraham has been a Vice President of the Adviser since July 1997. Mr.
Abraham joined Federated Investors in 1993 as an Investment Analyst and served
as Assistant Vice President from 1995 to 1997. Mr. Abraham served as a Portfolio
Analyst at Ryland Mortgage Co. from 1992 to 1993. Mr. Abraham is a Chartered
Financial Analyst and received his M.B.A. in finance from Loyola College.
SHAREHOLDER INFORMATION
Beneficial interests in the Portfolio are issued solely in private placement
transactions which do not involve any "public offering" within the meaning of
Section 4(2) of the Securities Act of 1933 (1933 Act). Investments in the
Portfolio may only be made by investment companies, insurance company separate
accounts, common or commingled trust funds or similar organizations or entities
that are "accredited investors" within the meaning of Regulation D of the 1933
Act. This Registration Statement does not constitute an offer to sell, or the
solicitation of an offer to buy, any "security" within the meaning of the 1933
Act.
PRICING OF PORTFOLIO SHARES
The net asset value (NAV) of the Portfolio is determined as of the end of
regular trading (normally, 4:00 p.m., Eastern time) each day the NYSE is open.
The NAV per share of the Portfolio is computed by dividing the value of the
Portfolio's assets, less all liabilities, by the total number of shares
outstanding.
PURCHASE OF PORTFOLIO SHARES
Shares of the Portfolio may be purchased any day the New York Stock Exchange
(NYSE) is open.
Purchases should be made in accordance with procedures established by the
Transfer Agent.
Purchase orders for Shares of the Portfolio will receive the NAV next determined
after the purchase order is received in proper form by the Portfolio's Transfer
Agent, Federated Shareholder Services Company.
Payment by federal funds must be received by the Trust's custodian, State
Street Bank and Trust Company, by 3:00 p.m. (Eastern time) the next business day
following the
receipt of the purchase order.
There is no minimum required initial or subsequent investment amount.
The Portfolio reserves the right to cease accepting investments in the Portfolio
at any time or to reject any investment order.
REDEMPTION OF PORTFOLIO SHARES
Shares of the Portfolio may be redeemed any day the NYSE is open.
Redemption requests should be made in accordance with procedures established by
the Transfer Agent.
Redemption requests will receive the NAV next determined after the request is
received in proper form by the Transfer Agent.
Redemption proceeds will normally be delivered within one business day after a
request is received in proper form. Payment may be delayed up to seven days:
o to allow a purchase order to clear;
o
o during periods of market volatility; or
o
o when a shareholder's trade activity or amount adversely impacts the
Portfolio's ability to manage its assets.
o
REDEMPTION IN KIND
Although the Portfolio intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Portfolio's portfolio securities.
CONFIRMATIONS AND ACCOUNT STATEMENTS
Shareholders will receive confirmation of purchases and redemptions. In
addition, shareholders will receive periodic statements reporting all account
activity including dividends paid. The Trust will not issue share certificates.
DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares dividends daily and pays them monthly to shareholders.
Purchases made by wire begin earning dividends on the day the wire is received.
Purchases made by check begin earning dividends on the business day after the
Portfolio receives the check. In either case, dividends are earned through the
day a redemption request is received.
Dividends will be automatically reinvested in additional Shares unless the
shareholder has elected cash payments.
TAX CONSEQUENCES
Portfolio distributions are taxable to the shareholder whether paid in cash or
reinvested in the Portfolio. Dividends are taxable as ordinary income; capital
gains are taxable at different rates depending upon the length of time the
Portfolio holds its assets.
Portfolio distributions are expected to be both dividends and capital gains.
Redemptions are taxable sales.
DISTRIBUTION ARRANGEMENTS
Federated Securities Corp., is the Trust's Placement Agent. It receives no fee
for its services.
FEDERATED MORTGAGE CORE PORTFOLIO
A Portfolio of Federated Core Trust
CONFIDENTIAL PRIVATE OFFERING MEMORANDUM
PART B
(INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION)
FEBRUARY 18, 1999
This Part B is not a prospectus, Read this Part B in conjunction with the Part A
for Federated Mortgage Core Portfolio dated February 18, 1999. Obtain Part A
without charge by calling 1-800-341-7400.
TABLE OF CONTENTS
Portfolio History 1
Investments, Techniques, Risks and Limitations 2
Management of the Trust 7
Investment Advisory and Other Services 10
Brokerage Allocation and Other Practices 11
Capital Stock and Other Securities 11
Shareholder Information 12
Taxation of the Portfolio 12
Financial Statements 12
Appendix 13
Addresses 15
PORTFOLIO HISTORY
The Portfolio is a diversified portfolio of Federated Core Trust (the Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on August 21, 1996. The
Trust may offer separate series of shares of beneficial interest representing
interests in separate portfolios of securities.
<PAGE>
INVESTMENTS, TECHNIQUES, RISKS AND LIMITATIONS
SECURITIES IN WHICH THE PORTFOLIO INVESTS
Following is a table that indicates which types of securities are a:
o P= PRINCIPAL investment of the Portfolio; (shaded in chart)
- -------------------------------------------------------- ------------
SECURITIES MORTGAGE
CORE
PORTFOLIO
- -------------------------------------------------------- ------------
- -------------------------------------------------------- ------------
FIXED INCOME SECURITIES P
- -------------------------------------------------------- ------------
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TREASURY SECURITIES A
- --------------------------------------------------------
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AGENCY SECURITIES P
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ZERO COUPON SECURITIES A
- -------------------------------------------------------- ------------
- --------------------------------------------------------
MORTGAGE BACKED SECURITIES P
- --------------------------------------------------------
- -------------------------------------------------------- ------------
CMOS P
- --------------------------------------------------------
- -------------------------------------------------------- ------------
ASSET BACKED SECURITIES (home equity, manufactured A
housing)
- --------------------------------------------------------
- -------------------------------------------------------- ------------
CREDIT ENHANCEMENT (home equity, manufactured A
housing)
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DERIVATIVE CONTRACTS A
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FUTURES CONTRACTS A
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OPTIONS A
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SWAPS A
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INTEREST RATE SWAPS A
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CAPS AND FLOORS A
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SPECIAL TRANSACTIONS P
- -------------------------------------------------------- ------------
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REPURCHASE AGREEMENTS P
- --------------------------------------------------------
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REVERSE REPURCHASE AGREEMENTS A
- -------------------------------------------------------- ------------
- -------------------------------------------------------- ------------
WHEN ISSUED TRANSACTIONS P
- -------------------------------------------------------- ------------
- -------------------------------------------------------- ------------
TO BE ANNOUNCED SECURITIES P
- -------------------------------------------------------- ------------
- -------------------------------------------------------- ------------
DOLLAR ROLLS P
- --------------------------------------------------------
- -------------------------------------------------------- ------------
SECURITIES LENDING P
- -------------------------------------------------------- ------------
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SECURITIES OF OTHER INVESTMENT COMPANIES A
- --------------------------------------------------------
- -------------------------------------------------------- ------------
ASSET COVERAGE P
- -------------------------------------------------------- ------------
<PAGE>
o A= ACCEPTABLE (but not principal) investment of the Portfolio
o
SECURITIES DESCRIPTIONS AND TECHNIQUES
In addition to the principal securities listed in Part A, the Portfolio may also
invest in the following:
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
<PAGE>
The following describes the types of fixed income securities in which the
Portfolio invests:
TREASURY SECURITIES
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
CREDIT RISKS.
ZERO COUPON SECURITIES
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred
to as a coupon payment). Investors buy zero coupon securities at a price
below the amount payable at maturity. The difference between the purchase
price and the amount paid at maturity represents interest on the zero coupon
security. Investors must wait until maturity to receive interest and
principal, which increases the market and credit risks of a zero coupon
security.
There are many forms of zero coupon securities. Some are issued at a
discount and are referred to as zero coupon or capital appreciation bonds.
Others are created from interest bearing bonds by separating the right to
receive the bond's coupon payments from the right to receive the bond's
principal due at maturity, a process known as coupon stripping. Treasury
STRIPs, IOs and POs are the most common forms of stripped zero coupon
securities. In addition, some securities give the issuer the option to
deliver additional securities in place of cash interest payments, thereby
increasing the amount payable at maturity. These are referred to as
pay-in-kind or PIK securities.
MORTGAGE RELATED ASSET BACKED SECURITIES
Asset backed securities are payable from pools of obligations other than
mortgages. Most asset backed securities involve consumer or commercial
debts. The Portfolio will purchase only mortgage-related asset backed
securities such as home equity loans, second mortgages and manufactured
housing obligations. Asset backed securities have PREPAYMENT RISKS. Like
CMOs, asset backed securities may be structured like Floaters, Inverse
Floaters, IOs and POs.
Like mortgage backed securities, asset backed securities may be issued by a
private entity and, although these securities must be rated investment
grade, they present CREDIT RISK.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to
pay amounts due on a fixed income security if the issuer defaults. In some
cases the company providing credit enhancement makes all payments directly
to the security holders and receives reimbursement from the issuer.
Normally, the credit enhancer has greater financial resources and liquidity
than the issuer. For this reason, the Adviser usually evaluates the credit
risk of a fixed income security based solely upon its credit enhancement.
Common types of credit enhancement include guarantees, letters of credit,
bond insurance and surety bonds. Credit enhancement also includes
arrangements where securities or other liquid assets secure payment of a
fixed income security. If a default occurs, these assets may be sold and the
proceeds paid to security's holders. Either form of credit enhancement
reduces credit risks by providing another source of payment for a fixed
income security.
DERIVATIVE CONTRACTS
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty.
Many derivative contracts are traded on securities or commodities exchanges. In
this case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make
(or collect) daily payments to the margin accounts to reflect losses (or gains)
in the value of their contracts. This protects investors against potential
defaults by the counterparty. Trading contracts on an exchange also allows
investors to close out their contracts by entering into offsetting contracts.
For example, the Portfolio could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Portfolio realizes a gain; if it is less, the Portfolio realizes a
loss. Exchanges may limit the amount of open contracts permitted at any one
time. Such limits may prevent the Portfolio from closing out a position. If this
happens, the Portfolio will be required to keep the contract open (even if it is
losing money on the contract), and to make any payments required under the
contract (even if it has to sell portfolio securities at unfavorable prices to
do so). Inability to close out a contract could also harm the Portfolio by
preventing it from disposing of or trading any assets it has been using to
secure its obligations under the contract.
The Portfolio may trade in the following types of derivative contracts:
FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified
price, date, and time. Entering into a contract to buy an underlying asset
is commonly referred to as buying a contract or holding a long position in
the asset. Entering into a contract to sell an underlying asset is commonly
referred to as selling a contract or holding a short position in the asset.
Futures contracts are considered to be commodity contracts.
The Portfolio may buy/sell financial futures contracts.
OPTIONS
Options are rights to buy or sell an underlying asset for a specified price
(the exercise price) during, or at the end of, a specified period. A call
option gives the holder (buyer) the right to buy the underlying asset from
the seller (writer) of the option. A put option gives the holder the right
to sell the underlying asset to the writer of the option. The writer of the
option receives a payment, or premium, from the buyer, which the writer
keeps regardless of whether the buyer uses (or exercises) the option.
The Portfolio may:
o Buy put options on financial futures contracts in anticipation of a
decrease in the value of the underlying asset; and
o Buy or write options to close out existing options positions.
The Portfolio may also write call options on financial futures contracts to
generate income from premiums, and in anticipation of a decrease or only
limited increase in the value of the underlying asset. If a call written by
the Portfolio is exercised, the Portfolio foregoes any possible profit from
an increase in the market price of the underlying asset over the exercise
price plus the premium received.
When the Portfolio writes options on futures contracts, it will be subject
to margin requirements similar to those applied to futures contracts.
SWAPS
Swaps are contracts in which two parties agree to pay each other (swap) the
returns derived from underlying assets with differing characteristics. Most
swaps do not involve the delivery of the underlying assets by either party,
and the parties might not own the assets underlying the swap. The payments
are usually made on a net basis so that, on any given day, the Portfolio
would receive (or pay) only the amount by which its payment under the
contract is less than (or exceeds) the amount of the other party's payment.
Swap agreements are sophisticated instruments that can take many different
forms, and are known by a variety of names including caps, floors, and
collars. Common swap agreements that the Portfolio may use include:
INTEREST RATE SWAPS
Interest rate swaps are contracts in which one party agrees to make
regular payments equal to a fixed or floating interest rate times a
stated principal amount of fixed income securities, in return for
payments equal to a different fixed or floating rate times the same
principal amount, for a specific period. For example, a $10 million
LIBOR swap would require one party to pay the equivalent of the London
Interbank Offer Rate of interest (which fluctuates) on $10 million
principal amount in exchange for the right to receive the equivalent of
a stated fixed rate of interest on $10 million principal amount.
CAPS AND FLOORS
Caps and Floors are contracts in which one party agrees to make payments
only if an interest rate or index goes above (Cap) or below (Floor) a
certain level in return for a fee from the other party.
<PAGE>
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are repurchase agreements in which the Portfolio
is the seller (rather than the buyer) of the securities, and agrees to
repurchase them at an agreed upon time and price. A reverse repurchase agreement
may be viewed as a type of borrowing by the Portfolio. Reverse repurchase
agreements are subject to CREDIT RISKS. In addition, reverse repurchase
agreements create LEVERAGE RISKS because the Portfolio must repurchase the
underlying security at a higher price, regardless of the market value of the
security at the time of repurchase.
SECURITIES OF OTHER INVESTMENT COMPANIES
The Portfolio may invest its assets in securities of other investment companies,
as an efficient means of carrying out its investment policies and managing its
uninvested cash. It should be noted that investment companies incur certain
expenses, such as management fees, and, therefore, any investment by the
Portfolio in shares of other investment companies may be subject to such
duplicate expenses. The Portfolio will limit its investment in other investment
companies to not more than 3% of the total outstanding voting stock of any
investment company, will invest no more than 5% of its total assets in any one
investment company, and will invest no more than 10% of its total assets in
investment companies in general.
INVESTMENT RISKS
There are many factors which may effect an investment in the Portfolio. The
Portfolio's principal risks are described in Part A. Risk factors of the
acceptable investments listed above are as follows.
BOND MARKET RISKS
o Prices of fixed income securities rise and fall in response to interest rate
changes for similar securities. Generally, when interest rates rise, prices
of fixed income securities fall.
o
o Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of
a fixed income security to changes in interest rates.
o
CREDIT RISKS
o Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the
Portfolio will lose money.
o Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investor Services. These services assign
ratings to securities by assessing the likelihood of issuer default. Lower
credit ratings correspond to higher credit risk. If a security has not
received a rating, the Portfolio must rely entirely upon the Adviser's
credit assessment.
o Fixed income securities generally compensate for greater credit risk by
paying interest at a higher rate. The difference between the yield of a
security and the yield of a U.S. Treasury security with a comparable
maturity (the spread) measures the additional interest paid for risk.
Spreads may increase generally in response to adverse economic or market
conditions. A security's spread may also increase if the security's rating
is lowered, or the security is perceived to have an increased credit risk.
An increase in the spread will cause the price of the security to decline.
o
o Credit risk includes the possibility that a party to a transaction involving
the Portfolio will fail to meet its obligations. This could cause the
Portfolio to lose the benefit of the transaction or prevent the Portfolio
from selling or buying other securities to implement its investment
strategy.
o
LIQUIDITY RISKS
o Trading opportunities are more limited for fixed income securities that have
not received any credit ratings, have received ratings below investment
grade or are not widely held. These features may make it more difficult to
sell or buy a security at a favorable price or time. Consequently, the
Portfolio may have to accept a lower price to sell a security, sell other
securities to raise cash or give up an investment opportunity, any of which
could have a negative effect on the Portfolio's performance. Infrequent
trading of securities may also lead to an increase in their price
volatility.
o Liquidity risk also refers to the possibility that the Portfolio may not be
able to sell a security or close out a derivative contract when it wants to.
If this happens, the Portfolio will be required to continue to hold the
security or keep the position open, and the Portfolio could incur losses.
o
<PAGE>
SECTOR RISKS
o A substantial part of the Portfolio's portfolio may be comprised of
securities issued or credit enhanced by companies in similar businesses, or
with other similar characteristics. As a result, the Portfolio will be more
susceptible to any economic, business, political, or other developments
which generally affect these issuers.
LEVERAGE RISKS
o Leverage risk is created when an investment exposes the Portfolio to a
level of risk that exceeds the amount invested. Changes in the value of
such an investment magnify the Portfolio's risk of loss and potential for
gain.
o The Portfolio may invest in instruments whose returns are based on a
multiple of a specified index, security, or other benchmark. Such
performance multiplication may increase leverage risks.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Portfolio will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for clearance
of purchases and sales of portfolio securities.
ISSUING SENIOR SECURITIES
The Portfolio will not issue senior securities, except as permitted by its
investment objective and policies.
BORROWING MONEY
The Portfolio will not borrow money, except to the extent permitted under the
1940 Act (which currently limits borrowings to no more than 33 1/3% of the value
of the Portfolio's total assets). For purposes of this investment restriction,
the entry into options, futures contracts and dollar roll transactions shall not
constitute borrowing.
PLEDGING ASSETS
The Portfolio will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge or
hypothecate assets having a market value not exceeding the lesser of the dollar
amounts borrowed or 15% of the value of its total assets at the time of
borrowing.
CONCENTRATION OF INVESTMENTS
The Portfolio will not purchase securities if, as a result of such purchase, 25%
or more of its total assets would be invested in any one industry. However, the
Portfolio may at any time invest 25% or more of its assets in cash or cash items
and securities issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities.
INVESTING IN COMMODITIES
The Portfolio will not purchase or sell commodities, commodity contracts, or
commodity futures contracts except to the extent that the Portfolio may engage
in transactions involving futures contracts and related options.
INVESTING IN REAL ESTATE
The Portfolio will not purchase or sell real estate, although it may invest in
securities of companies whose business involves the purchase or sale of real
estate or in securities secured by real estate or interests in real estate.
LENDING CASH OR SECURITIES
The Portfolio will not lend any of its assets, except portfolio securities up to
one-third of its total assets. This shall not prevent the Portfolio from
purchasing or holding corporate or U.S. government bonds, debentures, notes,
certificates of indebtedness or other debt securities of an issuer, entering
into repurchase agreements, or engaging in other transactions which are
permitted by the Portfolio's investment objective and policies or the Trust's
Declaration of Trust.
UNDERWRITING
The Portfolio will not underwrite any issue of securities, except as it may
be deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of its total assets, the Portfolio will not purchase the
securities of any one issuer (other than cash, cash items, or securities issued
and/or guaranteed by the U.S. government, its agencies or instrumentalities, and
repurchase agreements collateralized by such securities) if, as a result, more
than 5% of its total assets would be invested in the securities of that issuer.
Also, the Portfolio will not purchase more than 10% of any class of the
outstanding voting securities of any one issuer. For these purposes, the
Portfolio considers common stock and all preferred stock of an issuer each as a
single class, regardless of priorities, series, designations, or other
differences.
The above limitations cannot be changed unless authorized by the "vote of a
majority of its outstanding voting securities," as defined by the Investment
Company Act. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
RESTRICTED AND ILLIQUID SECURITIES
The Portfolio will not invest more than 15% of its total assets in illiquid
securities, including repurchase agreements providing for settlement in more
than seven days after notice and certain restricted securities not determined by
the Trustees to be liquid.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value of total or net assets will not result in a violation
of such restriction.
The Portfolio has no present intention to borrow money in excess of 5% of the
value of its net assets during the coming fiscal year.
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES, MANAGEMENT INFORMATION, COMPENSATION
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birthdate, present position(s) held with the Trust,
principal occupations for the past five years and other notable positions held,
total compensation received as a Trustee from the Trust for its most recent
fiscal year, and the total compensation received from the Federated Fund Complex
for the most recent calendar year. The Trust is comprised of two portfolios and
the Federated Fund Complex is comprised of 54 investment companies, whose
investment advisers are affiliated with the Portfolio's Adviser.
An asterisk (*) denotes a Trustee who is deemed to be an interested person as
defined in the Investment Company Act of 1940. The following symbol (#) denotes
a Member of the Board's Executive Committee, which handles the Board's
responsibilities between its meetings.
<TABLE>
<CAPTION>
NAME TOTAL
BIRTHDATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM TRUST AND
POSITION WITH TRUST FOR PAST 5 YEARS FROM TRUST FUND COMPLEX
<S> <C> <C> <C>
JOHN F. DONAHUE*+ Chief Executive Officer and Director or $0 $0 for the
Trustee of the Federated Fund Complex; Trust and 54
Birthdate: July 28, 1924 Chairman and Director, Federated Investors, other
Federated Investors Inc.; Chairman and Trustee, Federated investment
Tower Advisers, Federated Management, and companies in
1001 Liberty Avenue Federated Research; Chairman and Director, the Fund
Pittsburgh, PA Federated Research Corp., and Federated Complex
CHAIRMAN AND TRUSTEE Global Research Corp.; Chairman, Passport
Research, Ltd.
- --------------------------
THOMAS G. BIGLEY Director or Trustee of the Federated Fund $0 $113,860.22 for
Birthdate: February 3, Complex; Director, Member of Executive the Trust/ and
1934 Committee, Children's Hospital of 54 other
15 Old Timber Trail Pittsburgh; formerly: Senior Partner, Ernst investment
Pittsburgh, PA & Young LLP; Director, MED 3000 Group, companies in
TRUSTEE Inc.; Director, Member of Executive the Fund Complex
Committee, University of Pittsburgh.
- --------------------------
JOHN T. CONROY, JR. Director or Trustee of the Federated Fund $0 $125,264.48 for
Birthdate: June 23, 1937 Complex; President, Investment Properties the Trust and
Wood/IPC Commercial Dept. Corporation; Senior Vice President, 54 other
John R. Wood Associates, John R. Wood and Associates, Inc., investment
Inc. Realtors Realtors; Partner or Trustee in private companies in
3255 Tamiami Trial North real estate ventures in Southwest Florida; the Fund Complex
Naples, FL formerly: President, Naples Property
TRUSTEE Management, Inc. and Northgate Village
Development Corporation.
- --------------------------
NICHOLAS CONSTANTAKIS Director or Trustee of the Federated Fund $0 $47,958.02 for
Birthdate: September 3, Complex; formerly: Partner, Andersen the Trust and
1939 Worldwide SC. 29 other
175 Woodshire Drive investment
Pittsburgh, PA companies in
TRUSTEE the Fund Complex
- --------------------------
WILLIAM J. COPELAND Director or Trustee of the Federated Fund $0 $125,264.48for
Birthdate: July 4, 1918 Complex; Director and Member of the the Trust and
One PNC Plaza-23rd Floor Executive Committee, Michael Baker, Inc.; 54 other
Pittsburgh, PA formerly: Vice Chairman and Director, PNC investment
TRUSTEE Bank, N.A., and PNC Bank Corp.; Director, companies
Ryan Homes, Inc. in the Fund
Complex
Previous Positions: Director, United
Refinery; Director, Forbes Fund; Chairman,
Pittsburgh Foundation; Chairman, Pittsburgh
Civic Light Opera.
- --------------------------
JOHN F. CUNNINGHAM Director or Trustee of some of the $0 $0 for the
Birthdate: March 5, 1943 Federated Funds; Chairman, President and Trust and 26
353 El Brillo Way Chief Executive Officer, Cunningham & Co., other
Palm Beach, FL Inc. ; Trustee Associate, Boston College; investment
TRUSTEE Director, EMC Corporation; formerly: companies in
Director, Redgate Communications. the Fund Complex
Previous Positions: Chairman of the Board
and Chief Executive Officer, Computer
Consoles, Inc.; President and Chief
Operating Officer, Wang Laboratories;
Director, First National Bank of Boston;
Director, Apollo Computer, Inc.
- --------------------------
LAWRENCE D. ELLIS, M.D.* Director or Trustee of the Federated Fund $0 $113,860.22 for
Birthdate: October 11, Complex; Professor of Medicine, University the Trust and
1932 of Pittsburgh; Medical Director, University 54 other
3471 Fifth Avenue of Pittsburgh Medical Center - Downtown; investment
Suite 1111 Hematologist, Oncologist, and Internist, companies in
Pittsburgh, PA University of Pittsburgh Medical Center; the Fund Complex
TRUSTEE Member, National Board of Trustees,
Leukemia Society of America.
- --------------------------
PETER E. MADDEN Director or Trustee of the Federated Fund $0 $113,860.22 for
Birthdate: March 16, 1942 Complex; formerly: Representative, the Trust and
One Royal Palm Way Commonwealth of Massachusetts General 54 other
100 Royal Palm Way Court; President, State Street Bank and investment
Palm Beach, FL Trust Company and State Street Corporation. companies in
TRUSTEE the Fund Complex
Previous Positions: Director, VISA USA and
VISA International; Chairman and Director,
Massachusetts Bankers Association;
Director, Depository Trust Corporation.
- --------------------------
CHARLES F. MANSFIELD, JR. Director or Trustee of some of the $0 $0 for the
Federated Funds; Management Consultant. Trust and 25
Birthdate: April 10, 1945 other
80 South Road investment
Westhampton Beach, NY Previous Positions: Chief Executive companies in
TRUSTEE Officer, PBTC International Bank; Chief the Fund Complex
Financial Officer of Retail Banking Sector, Chase
Manhattan Bank; Senior Vice President, Marine
Midland Bank; Vice President, Citibank; Assistant
Professor of Banking and Finance, Frank G. Zarb
School of Business, Hofstra University.
- --------------------------
JOHN E. MURRAY, JR., Director or Trustee of the Federated Fund $0 $113,860.22 for
J.D., S.J.D. Complex; President, Law Professor, Duquesne the Trust and
Birthdate: December 20, University; Consulting Partner, Mollica & 54 other
1932 Murray. investment
President, Duquesne companies in
University Previous Positions: Dean and Professor of the Fund Complex
Pittsburgh, PA Law, University of Pittsburgh School of
TRUSTEE Law; Dean and Professor of Law, Villanova
University School of Law.
- --------------------------
MARJORIE P. SMUTS Director or Trustee of the Federated Fund $0 $113,860.22 for
Birthdate: June 21, 1935 Complex; Public the Trust and
4905 Bayard Street Relations/Marketing/Conference Planning. 54 other
Pittsburgh, PA investment
TRUSTEE Previous Positions: National Spokesperson, companies in
Aluminum Company of America; business owner. the Fund Complex
JOHN S. WALSH Director or Trustee of some of the $0 $0 for the
Birthdate: November 28, Federated Funds; President and Director, Trust and
1957 Heat Wagon, Inc.; President and Director, 22 other
2007 Sherwood Drive Manufacturers Products, Inc.; President, investment
Valparaiso, IN Portable Heater Parts, a division of companies in
TRUSTEE Manufacturers Products, Inc.; Director, the Fund Complex
Walsh & Kelly, Inc.; formerly: Vice
President, Walsh & Kelly, Inc.
J. CHRISTOPHER DONAHUE+ President or Executive Vice President of $0 $0 for the
the Federated Fund Complex; Director or Trust and
Birthdate: April 11, 1949 Trustee of some of the Funds in the 16 other
Federated Investors Tower Federated Fund Complex; President and investment
1001 Liberty Avenue Director, Federated Investors, Inc.; companies in
Pittsburgh, PA President and Trustee, Federated Advisers, the Fund Complex
PRESIDENT Federated Management, and Federated
Research; President and Director, Federated
Research Corp. and Federated Global
Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated
Shareholder Services Company; Director,
Federated Services Company.
<PAGE>
EDWARD C. GONZALES Trustee or Director of some of the Funds in $0 $0 for the
the Federated Fund Complex; President, Trust and
Birthdate: October 22, Executive Vice President and Treasurer of 1 other
1930 some of the Funds in the Federated Fund investment
Federated Investors Tower Complex; Vice Chairman, Federated companies
1001 Liberty Avenue Investors, Inc.; Vice President, Federated in the Fund
Pittsburgh, PA Advisers, Federated Management, Federated Complex
EXECUTIVE VICE PRESIDENT Research, Federated Research Corp.,
Federated Global Research Corp. and
Passport Research, Ltd.; Executive Vice
President and Director, Federated
Securities Corp.; Trustee, Federated
Shareholder Services Company.
JOHN W. MCGONIGLE Executive Vice President and Secretary of $0 $0 for the
Birthdate: October 26, the Federated Fund Complex; Executive Vice Trust and
1938 President, Secretary, and Director, 54 other
Federated Investors Tower Federated Investors, Inc.; Trustee, investment
1001 Liberty Avenue Federated Advisers, Federated Management, companies in
Pittsburgh, PA and Federated Research; Director, Federated the Fund Complex
EXECUTIVE VICE PRESIDENT Research Corp. and Federated Global
AND SECRETARY Research Corp.; Director, Federated
Services Company; Director, Federated
Securities Corp.
RICHARD J. THOMAS Treasurer of the Federated Fund Complex; $0 $0 for the
Birthdate: June 17, 1954 Vice President - Funds Financial Services Trust and
Federated Investors Tower Division, Federated Investors, Inc.; 54 other
1001 Liberty Avenue Formerly: various management positions investment
Pittsburgh, PA within Funds Financial Services Division of companies in
TREASURER Federated Investors, Inc. the Fund Complex
RICHARD B. FISHER President or Vice President of some of the $0 $0 for the
Funds in the Federated Fund Complex; Trust and
Birthdate: May 17, 1923 Director or Trustee of some of the Funds in 6 other
Federated Investors Tower the Federated Fund Complex; Executive Vice investment
1001 Liberty Avenue President, Federated Investors, Inc.; companies in
Pittsburgh, PA Chairman and Director, Federated Securities the Fund Complex
VICE PRESIDENT Corp.
MARK E. DURBIANO Mark E. Durbiano is a Vice President of the $0 $0 for the
Trust. Mr. Durbiano joined Federated Trust and
Birthdate: September 21, Investors, Inc. in 1982 and has been a no other
1959 Senior Portfolio Manager and a Senior Vice investment
Federated Investors Tower President of the Portfolio's investment companies in
1001 Liberty Avenue adviser since 1996. From 1998 through 1995, the Fund Complex
Pittsburgh, PA Mr. Durbiano was a Portfolio Manager and a
VICE PRESIDENT Vice President of the Portfolio's Adviser.
Mr. Durbiano is a Chartered Financial
Analyst and received his M.B.A. in Finance
from the University of Pittsburgh.
J. THOMAS MADDEN Chief Investment Officer of this Fund and $0 $0 for the
Birthdate: October 22, various other Funds in the Federated Fund Trust and
1945 Complex; Executive Vice President, 12 other
Federated Investors Tower Federated Investment Counseling, Federated investment
1001 Liberty Avenue Global Research Corp., Federated Advisers, companies in
Pittsburgh, PA Federated Management, Federated Research, the Fund Complex
CHIEF INVESTMENT OFFICER and Passport Research, Ltd.; Vice
President, Federated Investors, Inc.;
Formerly: Executive Vice President and
Senior Vice President, Federated Investment
Counseling Institutional Portfolio
Management Services Division; Senior Vice
President, Federated Research Corp.,
Federated Advisers, Federated Management,
Federated Research, and Passport Research,
Ltd.
</TABLE>
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
As of February 1, 1999 the Portfolio's Board and Officers as a group owned less
than 1% of the Portfolio's outstanding Shares.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for
the Portfolio. The Adviser is a wholly-owned subsidiary of Federated Investors,
Inc. (Federated).
The Adviser shall not be liable to the Trust or any Portfolio shareholder for
any losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
The Adviser will provide investment advisory services at no fee.
PRINCIPAL UNDERWRITER
The Portfolio's placement agent is Federated Securities Corp., located at
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Portfolio. Federated Services Company
provides these services at the following annual rate of the average daily net
assets of all Federated Funds as specified below:
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE FEDERATED FUNDS
0.150 of 1% on the first $250 million
- -------------------------
0.125 of 1% on the next $250 million
- -------------------------
0.100 of 1% on the next $250 million
- -------------------------
0.075 of 1% on assets in excess of $750
million
- -------------------------
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Portfolio's portfolio investments for a fee based
on Portfolio assets plus out-of-pocket expenses.
Federated Services Company will voluntarily waive all or a portion of the
administrative fee paid by the Portfolio. Federated Services Company may
terminate this voluntary waiver at any time.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Portfolio.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Portfolio pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITOR
Ernst & Young LLP is the independent auditor for the Portfolio.
BROKERAGE ALLOCATION AND OTHER PRACTICES
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. The Adviser will generally use those who are recognized dealers in
specific portfolio instruments, except when a better price and execution of the
order can be obtained elsewhere. The Adviser may select brokers and dealers
based on whether they also offer research services (as described below). In
selecting among firms believed to meet these criteria, the Adviser may give
consideration to those firms which have sold or are selling Shares of the
Portfolio and other funds distributed by the Distributor and its affiliates. The
Adviser makes decisions on portfolio transactions and selects brokers and
dealers subject to review by the Portfolio's Board.
RESEARCH SERVICES
Research services may include advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services. Research
services may be used by the Adviser or by affiliates of Federated in advising
other accounts. To the extent that receipt of these services may replace
services for which the Adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The Adviser and its affiliates exercise
reasonable business judgment in selecting those brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided.
Investment decisions for the Portfolio are made independently from those of
other accounts managed by the Adviser. When the Portfolio and one or more of
those accounts invests in, or disposes of, the same security, available
investments or opportunities for sales will be allocated among the Portfolio and
the account(s) in a manner believed by the Adviser to be equitable. While the
coordination and ability to participate in volume transactions may benefit the
Portfolio, it is possible that this procedure could adversely impact the price
paid or received and/or the position obtained or disposed of by the Portfolio.
CAPITAL STOCK AND OTHER SECURITIES
CAPITAL STOCK
Holders of the Portfolio's shares of beneficial interest will have equal rights
to participate in distributions made by the Portfolio, equal rights to the
Portfolio's assets upon dissolution and equal voting rights; the Portfolio does
not allow cumulative voting. Investors will have no preemptive or other right to
subscribe to any additional shares of beneficial interest or other securities
issued by the Trust. Shares may be redeemed at any time at NAV with no charge.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
In the unlikely event a shareholder is held personally liable for the Trust
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Trust. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Trust itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.
SHAREHOLDER INFORMATION
Beneficial interests in the Portfolio are issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act.
OFFERING PRICE
The Portfolio's net asset value (NAV) per Share fluctuates and is based on the
market value of all securities and other assets of the Portfolio.
Market values of the Portfolio's portfolio securities are determined as follows:
o for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;
o for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service, except that
short-term obligations with remaining maturities of less than 60 days at
the time of purchase may be valued at amortized cost or at fair market
value as determined in good faith by the Board; and
o for all other securities, at fair value as determined in good faith by the
Board.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider: institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker-dealers or
other financial institutions that trade the securities.
The Portfolio values futures contracts and options at their market values
established by the exchanges on which they are traded at the close of trading on
such exchanges. The Board may determine in good faith that another method of
valuing such investments is necessary to appraise their fair market value.
REDEMPTION IN KIND
Although the Portfolio intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Portfolio's portfolio securities.
Because the Portfolio has elected to be governed by Rule 18f-1 under the
Investment Company Act of 1940, the Portfolio is obligated to pay Share
redemptions to any one shareholder in cash only up to the lesser of $250,000 or
1% of the net assets represented by such Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Portfolio's Board determines that payment should be in kind. In such
a case, the Portfolio will pay all or a portion of the remainder of the
redemption in portfolio securities, valued in the same way as the Portfolio
determines its NAV. The portfolio securities will be selected in a manner that
the Portfolio's Board deems fair and equitable and, to the extent available,
such securities will be readily marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
TAXATION OF THE PORTFOLIO
The Portfolio intends to meet requirements of Subchapter M of the Internal
Revenue Code applicable to regulated investment companies. If these requirements
are not met, it will not receive special tax treatment and will pay federal
income tax.
FINANCIAL STATEMENTS
Investors of record will receive annual reports audited by the Portfolio's
independent auditor and unaudited semi-annual reports.
<PAGE>
APPENDIX
STANDARD AND POOR'S LONG-TERM DEBT RATING DEFINITIONS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB--Debt rated BB has less near-term, vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB-rating.
B--Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC--Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B-rating.
CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.
C--The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC-debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
MOODY'S INVESTORS SERVICE, INC. LONG-TERM BOND RATING DEFINITIONS
AAA--Bonds which are rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as gilt
edged. Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA--Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in AAA securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
BAA--Bonds which are rated BAA are considered as medium grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA--Bonds which are BA are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA--Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA--Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
FITCH IBCA, INC. LONG-TERM DEBT RATING DEFINITIONS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C--Bonds are imminent default in payment of interest or principal.
<PAGE>
ADDRESSES
FEDERATED MORTGAGE CORE PORTFOLIO
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
PLACEMENT AGENT
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue,
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Research Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
(2/99)
PART C. OTHER INFORMATION.
ITEM 23. FINANCIAL STATEMENTS AND EXHIBITS:
(a) Conformed copy of of Declaration of Trust of the
Registrant; 1
(b) Copy of By-Laws of the Registrant; 1
(c) Not applicable;
(d) Conformed copy of Investment Advisory Contract of
the Registrant; 2
(e) Conformed copy of Placement Agent Agreement ; 2
(f) Not applicable;
(g) Conformed copy of Custodian Agreement of the
Registrant; 1
(h) Conformed copy of Agreement for Fund Accounting
Services, Administrative Services, Shareholder
Transfer Agency Services and Custody Services
Procurement ; 2
(i) Not applicable;
(j) Not applicable;
(k) Not applicable;
(l) Form of Written Assurances from Initial Shareholders;
2 (m) Not applicable; (n) Not applicable; (o) Not
applicable; (p) Conformed Copy of Power of Attorney; 1
- --------------------------------
+ Exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed December 30, 1997 (File No. 811-08519).
2. Response is incorporated by reference to Registrant's Amandement No. 1 on
Form N-1A filed (File No. 811-08519).
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 25. INDEMNIFICATION:
Indemnification is provided to Officers and Trustees of the
Registrant pursuant to Section 2 of Article XII of Registrant's
Declaration of Trust. The Investment Advisory Contract between
the Registrant and Federated Research Corp. ("Adviser") provides
that, in the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the obligations or duties
under the Investment Advisory Contract on the part of Adviser,
Adviser shall not be liable to the Registrant or to any
shareholder for any act or omission in the course of or connected
in any way with rendering services or for any losses that may be
sustained in the purchase, holding, or sale of any security.
Registrant's Trustees and Officers are covered by an Investment
Trust Errors and Omissions Policy.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 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
is aware that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Act and, therefore, is 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 issues.
Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940 for
Trustees, Officers, and 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
Declaration of Trust 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 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER:
(a) For a description of the other business of the investment adviser,
see the section entitled "Management Organizaton and Capital
Structure"in Part A. The affiliations with the Registrant of four of
the Trustees and one of the Officers of the investment adviser are
included in Part B of this Registration Statement under "Management
of the Trust" The remaining Trustee of the investment adviser, his
position with the investment adviser, and, in parentheses, his
principal occupation is: Mark D. Olson (Partner, Wilson, Halbrook &
Bayard), 107 W. Market Street, Georgetown, Delaware 19947.
The remaining Officers of the investment adviser are:
Executive Vice Presidents: William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden
Senior Vice Presidents: Joseph M. Balestrino
Drew J. Collins
Jonathan C. Conley
Deborah A. Cunningham
Mark E. Durbiano
Sandra L. McInerney
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski
Vice Presidents: Todd A. Abraham
J. Scott Albrecht
Arthur J. Barry
Randall S. Bauer
David A. Briggs
Micheal W. Casey
Kenneth J. Cody
Alexandre de Bethmann
Michael P. Donnelly
Linda A. Duessel
Donald T. Ellenberger
Kathleen M. Foody-Malus
Thomas M. Franks
Edward C. Gonzales
James E. Grefenstette
Susan R. Hill
Stephen A. Keen
Robert K. Kinsey
Robert M. Kowit
Jeff A. Kozemchak
Richard J. Lazarchic
Steven Lehman
Marian R. Marinack
Keith J. Sabol
Frank Semack
Aash M. Shah
Christopher Smith
Tracy P. Stouffer
Edward J. Tiedge
Paige M. Wilhelm
Jolanta M. Wysocka
Marc Halperin
Assistant Vice Presidents: Nancy J. Belz
Robert E. Cauley
Lee R. Cunningham, II
B. Anthony Delserone, Jr.
Paul S. Drotch
Salvatore A. Esposito
Donna M. Fabiano
John T. Gentry
William R. Jamison
Constantine Kartsonsas
John C. Kerber
Grant K. McKay
Natalie F. Metz
Joseph M. Natoli
John Sheehy
Michael W. Sirianni
Leonardo A. Vila
Lori A. Wolff
Gary Farwell
Secretary: Stephen A. Keen
Treasurer: Thomas R. Donahue
Assistant Secretaries: Thomas R. Donahue
Richard B. Fisher
Christine I. Newcamp
Assistant Treasurer: Richard B. Fisher
The business address of each of the Officers of the investment
adviser is Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3779. These individuals are also
officers of a majority of the investment advisers to the investment
companies in the Federated Fund Complex described in Part B of this
Registration Statement.
ITEM 27. PRINCIPAL UNDERWRITERS:
(a) Federated Securities Corp. the Placement Agent for shares of the
Registrant, acts as principal underwriter for the following open-end
investment companies, including the Registrant:
Automated Government Money Trust; Cash Trust Series II; Cash Trust Series, Inc.;
CCB Funds; Edward D. Jones & Co. Daily Passport Cash Trust; Federated Adjustable
Rate U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Core Trust; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fund for U.S. Government Securities, Inc.;
Federated GNMA Trust; Federated Government Income Securities, Inc.; Federated
Government Trust; Federated High Income Bond Fund, Inc.; Federated High Yield
Trust; Federated Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Institutional Trust; Federated Insurance Series;
Federated Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated
Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term
Municipal Trust; Federated Short-Term U.S. Government Trust; Federated Stock and
Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated
Total Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; ; Hibernia Funds;
Independence One Mutual Funds; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.; Liberty U.S. Government Money
Market Trust; Liquid Cash Trust; Managed Series Trust; Marshall Funds, Inc.;
Money Market Management, Inc.; Money Market Obligations Trust; Money Market
Obligations Trust II; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Regions Funds; RIGGS Funds; SouthTrust Funds; Tax-Free
Instruments Trust; The Planters Funds; The Wachovia Funds; The Wachovia
Municipal FundsTrust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; Vision Group of
Funds, Inc.; World Investment Series, Inc.; Blanchard Funds; Blanchard Precious
Metals Fund, Inc.; DG Investor Series; High Yield Cash Trust; Investment Series
Trust; Star Funds; Targeted Duration Trust; The Virtus Funds; Trust for
Financial Institutions;
Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.
<TABLE>
<CAPTION>
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
<S> <C> <C>
Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
1001 Liberty Avenue Operating Officer, Asst.
Pittsburgh, PA 15222-3779 Secretary and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice Executive Vice
Federated Investors Tower President, President
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas R. Donahue Director, Assistant Secretary
Federated Investors Tower and Assistant Treasurer
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Raymond Hanley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert M. Rossi Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Matthew S. Hardin Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Leslie K. Ross Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(c) Not Applicable
</TABLE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Registrant Federated Investors Tower
1001 Liberty Avenu
Pittsburgh, PA 1522-3779
(Notices should be sent to the Agent of Service at above address)
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Federated Shareholder Federated Investors Tower
Services Company Pittsburgh, PA 15222-3779
("Transfer Agent and Dividend
Disbursing Agent")
Federated Services Company Federated Investors Tower
("Administrator") 1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Federated Research Corp. Federated Investors Tower
("Adviser") 1001 Liberty Avenue
Pittsburgh, PA 15222-3779
State Street Bank and Trust Company P.O. Box 8600
("Custodian") Boston, MA 02266-8600
ITEM 29. MANAGEMENT SERVICES:
Not applicable.
ITEM 30. UNDERTAKINGS:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant, Federated Core Trust, has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereto duly authorized, in the City
of Pittsburgh and Commonwealth of Pennsylvania, on the 18th day of February,
1999.
FEDERATED CORE TRUST
BY: /s/ Anthony R. Bosch
Anthony R. Bosch, Assistant Secretary
Attorney in Fact for John F. Donahue
February 18th, 1999