1933 Act File No. 2-74191
1940 Act File No. 811-3266
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. ..........
Post-Effective Amendment No. 32 .......... X
-
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 23 ......................... X
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
on pursuant to paragraph (b)
----------------
X 60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i).
75 days after filing pursuant to paragraph (a)(ii)
on pursuant to paragraph (a)(ii) of Rule 485.
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If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed with the Securities and Exchange Commission a declaration
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and:
filed the Notice required by that Rule on ; or
---------------
intends to file the Notice required by that Rule on or about ;
------------
or
X during the most recent fiscal year did not sell any securities pursuant to
Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to
Rule 24f-2(b)(2), need not file the Notice.
Copies to:
Charles H. Morin, Esquire
Dickstein, Shapiro & Morin,
2101 L Street, N.W.
Washington, D.C. 20037
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of FEDERATED GOVERNMENT
INCOME SECURITIES, INC., which is comprised of four classes of shares, (1)
Class F Shares, (2) Class A Shares, (3) Class B Shares, and (4) Class C
Shares, and is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page...............(1-4) Cover Page.
Item 2. Synopsis.................(1-4) Summary of Fund Expenses.
Item 3. Condensed Financial
Information..............(1)Financial Highlights; (1-4) Performance
Information.
Item 4. General Description of
Registrant...............(1) General Information; (2-4) Synopsis;
(1-4) Investment Information; (1-4)
Investment Objective; (1-4) Investment
Policies; (1-4) Investment Limitations.
Item 5. Management of the Fund...(1-4) Fund Information; (1-4) Management of
the Fund; (1) Distribution of Class F
Shares;
(2-4) Distribution of Fund Shares;
(3,4) Distribution Plan; (1-4)
Administration of the Fund; (2-4) Expenses
of the Fund.
Item 6. Capital Stock and Other
Securities...............(1-4) Dividends and Distributions; (1-4)
Shareholder Information;
(1-4) Voting Rights; (1-4) Tax
Information; (1-4) Federal Income Tax; (1-
4) State and Local Taxes.
Item 7. Purchase of Securities Being
Offered..................(1-4) Net Asset Value; (1-4) Investing in
the Fund; (1-4) Share Purchases; (1)
Minimum Investment Required; (1) What
Shares Cost;
(1-4) Eliminating the Sales Charge;
(1-4) Systematic Investment Program; (1-4)
Exchange Privilege; (1-4) Certificates and
Confirmations; (1) Retirement Plans.
Item 8. Redemption or Repurchase.(1) Redeeming Class F Shares; (2-4) How to
Redeem Shares; (1-4) Through a Financial
Institution; (1-4) Directly by Mail; (1-4)
Contingent Deferred Sales Charge; (1-4)
Systematic Withdrawal Program; (1-4)
Accounts with Low Balances; (1) Exchanges
for Shares of Other Funds.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page...............(1-4) Cover Page.
Item 11. Table of Contents........(1-4) Table of Contents.
Item 12. General Information and
History..................(1-4) General Information About the Fund.
Item 13. Investment Objectives and
Policies.................(1-4) Investment Objective and Policies.
Item 14. Management of the Fund...(1-4) Federated Government Income
Securities, Inc. Management.
Item 15. Control Persons and Principal
Holders of Securities....(1-4) Fund Ownership.
Item 16. Investment Advisory and Other
Services.................(1-4) Investment Advisory Services; (1-4)
Other Services.
Item 17. Brokerage Allocation.....(1-4) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities...............Not Applicable.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered..................(1-4) Purchasing Shares; (1-4) Determining
Net Asset Value; (1-4) Exchange Privilege;
(1-4) Redeeming Shares.
Item 20. Tax Status...............(1-4) Tax Status.
Item 21. Underwriters.............Not Applicable.
Item 22. Calculation of Performance
Data.....................(1-4) Total Return; (1-4) Yield;
(1-4) Performance Comparisons.
Item 23. Financial Statements.....(1-4) The Financial Statements for the
fiscal year ended February 29, 1996, are
incorporated herein by reference to the
Fund's Annual Report dated February 29,
1996.
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)
CLASS F SHARES
PROSPECTUS
The Class F Shares of Federated Government Income Securities, Inc. (the
"Fund") (formerly, Government Income Securities, Inc.), represent interests in
an open-end, diversified management investment company (a mutual fund) that
seeks current income by investing in a professionally managed, diversified
portfolio limited primarily to securities guaranteed as to payment of
principal and interest by the U.S. government or its agencies or
instrumentalities.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENTAL AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before
you invest in the Class F Shares of the Fund. Keep this prospectus for future
reference.
The Fund has also filed a Statement of Additional Information for Class A
Shares, Class B Shares, Class C Shares, and Class F Shares dated May ,
---
1996, with the Securities and Exchange Commission. The information contained
in the Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of the Statement of Additional
Information or a paper copy of this prospectus, if you have received your
prospectus electronically, free of charge by calling 800-245-5051. To obtain
other information or to make inquiries about the Fund, contact your financial
institution.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Prospectus dated May , 1996
---
TABLE OFCONTENTS
Table of Contents will be
generated when document is
complete.
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)
SUMMARY OF FUND EXPENSES
CLASS F SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering
price) ................................................... 1.00%
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of
offering price) ...............None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable)(1) .......... 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)
.........................................................None
Exchange Fee.................................................. None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(2) ......................... 0.50%
12b-1 Fee ................................................ None
Total Other Expenses .................................... 0.46%
Shareholder Services Fee ..... 0.25%
Total Operating Expenses (3).................................. 0.96%
(1) The contingent deferred sales charge assessed is 1.00% of the lesser of
the originial purchase price or the net asset value of shares redeemed within
four years of their purchase date. For a more complete description, see
"Contingent Deferred Sales Charge."
(2) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.75%.
(3) The total operating expenses would have been 1.21% absent the voluntary
waiver of a portion of the management fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Fund will bear, either
directly or indirectly. For more complete descriptions of the various costs
and expenses, see "Investing in the Fund", "Redeeming Shares" and "Fund
Information." Wire-transferred redemptions of less than $5,000 may be subject
to additional fees.
EXAMPLE
1 year3 years5 years10 years
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period........... $30 $51 $63
$127
You would pay the following expenses on the same
investment, assuming no redemption........................ $20 $40
$63$127
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY,GOVERNMENT INCOME SECURITIES, INC.)
FINANCIAL HIGHLIGHTS - CLASS F SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated April 18, 1996,
on the Fund's financial statements for the year ended February 29, 1996, and
on the following table for each of the periods presented,
is included in the Annual Report, which is incorporated by reference. This
table should be read in conjunction with the Fund's
financial statements and notes thereto, which may be obtained from the Fund.
Year Ended February 28 or 29,
1996 1995
1994 1993 1992 1991 1990 1989 19881987(a)
NET ASSET VALUE, BEGINNING OF PERIOD $8.55$9.00 $ 9.44 $ 9.48$
9.32 $ 9.19$9.00$ 9.49$ 9.76$ 9.99
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.62 0.63
0.68 0.79 0.83 0.87 0.87 0.86 0.88 0.94
Net realized and unrealized gain
(loss) on investments 0.20 (0.46)
(0.44) (0.05) 0.17 0.15 0.24 (0.53)(0.27)(0.23)
Total from investment operations 0.82 0.17 0.24
0.74 1.00 1.02 1.11 0.33 0.61 0.71
LESS DISTRIBUTIONS
Distributions from net
investment income (0.62) (0.62)
(0.68) (0.78)(0.83)(0.87)(0.91)(0.82)(0.88)(0.94)
Distributions in excess of net
investment income - -
- - - (0.01) (b)(0.02) (b) (0.01) (b) - -
-
Total distributions (0.62) (0.62)
(0.68) (0.78)(0.84)(0.89)(0.92)(0.82)(0.88)(0.94)
NET ASSET VALUE, END OF PERIOD $8.75 $8.55 $ 9.00$
9.44 $ 9.48$ 9.32$ 9.19$ 9.00$ 9.49$ 9.76
Total Return (c) 9.87% 2.11%
2.63% 8.08%11.12%11.63%12.81% 3.65% 6.80% 6.76%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.96% 0.97%
0.97% 0.90% 0.92% 0.90% 0.93% 0.88% 0.81% 0.95% *
Net investment income 6.96% 7.34%
7.39% 8.27% 8.86% 9.43% 9.42% 9.33% 9.47% 9.18% *
Expense waiver/reimbursement (d) 0.25% 0.23% 0.19% -
- - - - - -
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $2,264,374 $ 2,538,013
$3,542,078 $ 3,643,180$ 2,261,762 $ 1,322,749$ 1,320,710 $ 1,482,030 $
1,846,198 $ 3,183,612
Portfolio Turnover 161%143% 134% 43% 36%
* Computed on an annualized basis.
(a) Reflects operations for the period from April 4, 1986 (date of initial
public investment) to February 28, 1987.
(b) Distributions in excess of net investment income for the years endeed
February 29, 1992, February 28, 1991, and 1990 were a result of
certain book and tax timing differences. These distributions did not
represent a return of capital for federal income tax purposes.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and
net investment income ratios shown above.
Further information about the Fund's performance is contained in the Fund's
Annual Report dated February 29, 1996, which can be obtained
free of charge.
GENERAL INFORMATION
The Fund was established as a Massachusetts business trust on September 23,
1981, and reorganized as a corporation under the laws of the State of Maryland
on February 4, 1986. The Fund's address is Liberty Center, Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779. The Articles of Incorporation
permit the Fund to offer separate series of shares representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. With respect to this Fund, as of the date of this
prospectus, the Board of Directors (the "Directors") has established four
classes of shares, known as Class A Shares, Class B Shares, Class C Shares,
and Class F Shares. This prospectus relates only to the Class F Shares
("Shares" or "Class F Shares", as the context requires) of the Fund.
Class F Shares of the Fund are designed primarily for individuals and
institutions seeking current income through a professionally managed,
diversified portfolio of U.S. government securities. A minimum initial
investment of $1,500 is required, except for retirement plans, in which case
the minimum initial investment is $50.
Shares are sold at net asset value plus an applicable sales charge and are
redeemed at net asset value. However, a contingent deferred sales charge is
imposed on Shares, other than Shares purchased through reinvestment of
dividends, which are redeemed within one to four years of their purchase
dates.
In addition, the Fund also pays a shareholder services fee at an annual
rate not to exceed 0.25% of average daily net assets.
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income. The
investment objective cannot be changed without approval of shareholders. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the investment policies described in this
prospectus.
INVESTMENT POLICIES
The investment policies described below may be changed by the Directors
without shareholder approval. Shareholders will be notified before any
material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in securities which are
guaranteed as to payment of principal and interest by the U.S. government or
U.S. government agencies or instrumentalities. Under normal circumstances, the
Fund will invest at least 65% of the value of its total assets in U.S.
government securities.
The U.S. government securities in which the Fund invests include:
o direct obligations of the U.S. Treasury, such as U.S. Treasury
bills, notes, and bonds (including zero coupon bonds); and
o notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as the: Farm Credit System, including the
National Bank for Cooperatives, Farm Credit Banks, and Banks for
Cooperatives; Farmers Home Administration, Federal Home Loan Banks,
Farm Credit Banks, Federal Home Loan Mortgage Corporation, Federal
National Mortgage Association, Government National Mortgage
Association, and Student Loan Marketing Association.
The obligations of U.S. government agencies or instrumentalities which the
Fund may buy are backed in a variety of ways by the U.S. government or its
agencies or instrumentalities. Some of these obligations, such as Government
National Mortgage Association ("Ginnie Mae") mortgage-backed securities and
obligations of the Farmers Home Administration, are backed by the full faith
and credit of the U.S. Treasury. Obligations of the Farmers Home
Administration are also backed by the issuer's right to borrow from the U.S.
Treasury. Obligations of Federal Home Loan Banks and the Farmers Home
Administration are backed by the discretionary authority of the U.S.
government to purchase certain obligations of agencies or instrumentalities.
Obligations of Federal Home Loan Banks, Farmers Home Administration, Farm
Credit Banks, Federal National Mortgage Association ("Fannie Mae"), and
Federal Home Loan Mortgage Corporation ("Freddie Mac") are backed by the
credit of the agency or instrumentality issuing the obligations. Some of the
securities purchased by the Fund may represent an interest solely in the
principal repayments or solely in the interest payments on mortgage-backed
securities. These securities are usually structured with two classes and
receive different proportions of the interest and principal distributions on
the pool of underlying mortgage-backed securities ("IOs and POs"). In
addition, the Fund may engage in certain strategies and transactions as
described in the prospectus.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). CMOs are debt obligations
collateralized by mortgage loans or mortgage pass-through securities.
Typically, CMOs are collateralized by Ginnie Mae, Fannie Mae or Freddie Mac
certificates, but may be collateralized by whole loans or private pass-through
securities. CMOs may have fixed or floating rates of interest.
The Fund will invest only in CMOs that are rated AAA by a nationally
recognized statistical rating organization. The Fund may also invest in
certain CMOs which are issued by private entities such as investment banking
firms and companies related to the construction industry. The CMOs in which
the Fund may invest may be: (i) securities which are collateralized by pools
of mortgages in which each mortgage is guaranteed as to payment of principal
and interest by an agency or instrumentality of the U.S. government; (ii)
securities which are collateralized by pools of mortgages in which payment of
principal and interest is guaranteed by the issuer and such mortgages in which
payment of principal and interest is guaranteed by the issuer and such
guarantee is collateralized by U.S. government securities; or (iii) other
securities in which the proceeds of the issuance are invested in mortgage-
backed securities and payment of the principal and interest is supported by
the credit of an agency or instrumentality of the U.S. government.
CMOs that include a class bearing a floating rate of interest also may include
a class whose yield floats inversely against a specified index rate. These
"inverse floaters" are more volatile than conventional fixed or floating rate
classes of a CMO and the yield thereon, as well as the value thereof, will
fluctuate in inverse proportion to changes in the index on which interest rate
adjustments are based. As a result, the yield on an inverse floater class of a
CMO will generally increase when market yields (as reflected by the index)
decrease and decrease when market yields increase. The extent of the
volatility of inverse floaters depends on the extent of anticipated changes in
market rates of interest. Generally, inverse floaters provide for interest
rate adjustments based upon a multiple of the specified interest index, which
further increases their volatility. The degree of additional volatility will
be directly proportional to the size of the multiple used in determining
interest rate adjustments.
TEMPORARY INVESTMENTS. The Fund may invest temporarily in cash and cash items
during times of unusual market conditions for defensive purposes and to
maintain liquidity.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which
banks, broker/dealers, and other recognized financial institutions sell
U.S. government securities or other securities to the Fund and agree at
the time of sale to repurchase them at a mutually agreed upon time and
price. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions are
arrangements in which the Fund purchases securities with payment and delivery
scheduled for a future time. The yields generally available on comparable
securities when delivery occurs may be higher than yields on securities
obtained pursuant to such transactions. Settlement dates may be a month or
more after entering into these transactions, and the market values of the
securities purchased may vary from the purchase prices as interest rates
fluctuate. Accordingly, the Fund may pay more/less than the market value of
the securities on the settlement date. In addition, the seller's failure to
complete these transactions may cause the Fund to miss a price or yield
considered to be advantageous.
The Fund may dispose of a commitment prior to settlement if the adviser deems
it appropriate to do so. In addition, the Fund may enter in transactions to
sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at
later dates. The Fund may realize short-term profits or losses upon the sale
of such commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or a long-term basis up to
one-third of the value of its total assets to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the
investment adviser has determined are creditworthy under guidelines
established by the Fund's Directors and will receive collateral in the form of
cash or U.S. government securities equal to at least 100% of the value of the
securities loaned.
There is the risk that when lending portfolio securities, the securities may
not be available to the Fund on a timely basis and the Fund may, therefore,
lose the opportunity to sell the securities at a desirable price. In addition,
in the event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
Securities lending transactions typically require the Fund to pay interest
on any cash collateral received. The Fund will seek to earn interest and
additional returns by investing cash collateral in repurchase agreements or
liquid high grade securities. The Fund will bear the risk of any losses on
such investments and the risk that the income from such investments are less
than the interest payable to the borrower.
SPECIAL CONSIDERATIONS OF FIXED INCOME SECURITIES
There is no limit to portfolio maturity. The prices of fixed income government
securities fluctuate inversely in relation to the direction of interest rates.
A decline in market interest rates results in a rise in the market prices of
outstanding debt obligations. Conversely, an increase in market interest rates
results in a decline in market prices of outstanding debt obligations. In
either case, the amount of change in market prices of debt obligations in
response to changes in market interest rates generally depends on the maturity
of the debt obligations: the debt obligations with the longest maturities will
experience the greatest market price changes. The prices of zero coupon
securities, IOs and POs, and certain structures of CMOs are more sensitive to
fluctuations in interest rates than are conventional bonds.
The market value of debt obligations, and therefore the Fund's net asset
value, will fluctuate due to changes in economic conditions and other market
factors such as interest rates which are beyond the control of the Fund's
investment adviser. The Fund's investment adviser could be incorrect in its
expectations about the direction or extent of these market factors. Although
debt obligations with longer maturities offer potentially greater returns,
they have greater exposure to market price fluctuation. Consequently, to the
extent the Fund is significantly invested in debt obligations with longer
maturities, there is a greater possibility of fluctuation in the Fund's net
asset value.
CMOs are generally subject to higher prepayment risks than most other types of
debt instruments. Prepayment risks on mortgage securities tend to increase
during periods of declining mortgage interest rates because many borrowers
refinance their mortgages to take advantage of the more favorable rates.
Depending upon market conditions, the yield that the Fund receives from the
reinvestment of such prepayments, or any scheduled principal payments, may be
lower than the yield on the original mortgage security. As a consequence,
mortgage securities may be a less effective means of "locking in" interest
rates than other types of debt securities having the same stated maturity and
may also have less potential for capital appreciation.
With respect to securities that represent an interest solely in the interest
payments on mortgage-backed securities, because the yield to maturity is
extremely sensitive to the rate of principal payments (including prepayments)
on the related underlying mortgage-backed securities, it is possible that the
Fund might not recover its original investment on these securities if there
are substantial prepayments on the underlying mortgage.
In addition, the Fund may, but is not required to, utilize various other
investment strategies as described herein to manage the effective maturity or
duration of the Fund's fixed income securities or to enhance potential gain.
Such strategies are generally accepted by modern portfolio managers and are
regularly utilized by mutual funds and other institutional investors. These
techniques may increase the volatility of the Fund and may
involve a small investment of cash relative to the magnitude of the risk
assumed.
PUT AND CALL OPTIONS. The Fund may purchase put and call options on its
portfolio securities. These options will be used as a hedge to attempt to
protect securities which the Fund holds, or will be purchasing, against
decreases or increases in value. The Fund may also write (sell) put and call
options on all or any portion of its portfolio to generate income for the
Fund. The Fund will write call options on securities either held in its
portfolio or for which it has the right to obtain without payment of further
consideration or for which it has segregated cash in the amount of any
additional consideration.
In the case of put options, the Fund will segregate cash or U.S. Treasury
obligations with a value equal to or greater than the exercise price of the
underlying securities.
The Fund may generally purchase and write over-the-counter options on
portfolio securities in negotiated transactions with the buyers or writers of
the options since options on the portfolio securities held by the Fund are not
traded on an exchange. The Fund purchases and writes options only with
investment dealers and other financial institutions (such as commercial banks
or savings and loan associations) deemed creditworthy by the Fund's adviser.
Over-the-counter options are two-party contracts with price and terms
negotiated between buyer and seller. In contrast, exchange-traded options are
third-party contracts with standardized strike prices and expiration dates and
are purchased from a clearing corporation. Exchange-traded options have a
continuous liquid market while over-the-counter options may not.
FINANCIAL FUTURES AND OPTIONS ON FUTURES. The Fund may purchase and sell
financial futures contracts to hedge all or a portion of its portfolio of
long-term debt securities against changes in interest rates. Financial futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or instrumentalities
of the U.S. government at a certain time in the future. The seller of the
contract agrees to make delivery of the type of instrument called for in the
contract and the buyer agrees to take delivery of the instrument at the
specified future time.
The Fund may write call options and purchase put options on financial futures
contracts as a hedge to attempt to protect securities in its portfolio against
decreases in value resulting from anticipated increases in market interest
rates. When the Fund writes a call option on a futures contract, it is
undertaking the obligation of selling the futures contract at a fixed price at
any time during a specified period if the option is exercised. Conversely, as
purchaser of a put option on a futures contract, the Fund is entitled (but not
obligated) to sell a futures contract at the fixed price during the life of
the option.
The Fund may also write put options and purchase call options on financial
futures contracts as a hedge against rising purchase prices of portfolio
securities resulting from anticipated decreases in market interest rates. The
Fund will use these transactions to attempt to protect its ability to purchase
portfolio securities in the future at price levels existing at the time it
enters into the transactions. When the Fund writes a put option on a futures
contract, it is undertaking to buy a particular futures contract at a fixed
price at any time during a specified period if the option is exercised. As a
purchaser of a call option on a futures contract, the Fund is entitled (but
not obligated) to purchase a futures contract at a fixed price at any time
during the life of the option.
The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed
5% of the market value of the Fund's total assets.
RISKS. When the Fund uses financial futures and options on financial
futures as hedging devices, there is a risk that the prices of the
securities subject to the futures contracts may not correlate perfectly
with the prices of the securities in the Fund's portfolio. This may
cause the futures contract and any related options to react differently
than the portfolio securities to market changes. In addition, the
Fund's investment adviser could be incorrect in its expectations about
the direction or extent of market factors such as interest rate
movements. In these events, the Fund may lose money on the futures
contract or option. It is not certain that a secondary market for
positions in futures contracts or for options will exist at all times.
Although the investment adviser will consider liquidity before entering
into options transactions, there is no assurance that a liquid
secondary market on an exchange will exist for any particular futures
contract or option at any particular time. The Fund's ability to
establish and close out futures and options positions depends on this
secondary market.
PORTFOLIO TURNOVER. Although the Fund does not intend to invest for the
purpose of seeking short-term profits, securities in its portfolio will be
sold whenever the Fund's investment adviser believes it is appropriate to do
so in light of the Fund's investment objective, without regard to the length
of time a particular security may have been held.
INVESTMENT LIMITATIONS
The Fund will not:
o borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a
set date) or pledge securities except, under certain circumstances,
the Fund may borrow up to one-third of the value of its net assets
and pledge up to 10% of the value of its total assets to secure such
borrowings; or
o invest more than 10% of its total assets in securities subject
to restrictions on resale under the Securities Act of 1933, except
for certain restricted securities which meet the criteria for
liquidity as established by the Directors.
The above investment limitations cannot be changed without shareholder
approval. The following limitation, however, may be changed by the Directors
without shareholder approval. Shareholders will be notified before any
material change in this limitation becomes effective.
The Fund will not:
o invest more than 10% of its net assets in securities which are not
readily marketable or which are otherwise considered illiquid,
including over-the-counter options and repurchase agreements
providing for settlement in more than seven days after notice.
NET ASSET VALUE
The Fund's net asset value per Share fluctuates. The net asset value for
Class F Shares is determined by adding the interest of the Class F Shares in
the market value of all securities and other assets of the Fund, subtracting
the interest of the Class F Shares in the liabilities of the Fund and those
attributable to the Class F Shares, and dividing the remainder by the total
number of Class F Shares outstanding. The net asset value for Class F Shares
may differ from that of Class A Shares, Class B Shares, and Class C Shares due
to the variance in daily net income realized by each class. Such variance will
reflect only accrued net income to which the shareholders of a particular
class are entitled.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days during which no shares are tendered for redemption and no
orders to purchase shares are received; and (iii) the following holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day.
INVESTING IN CLASS F SHARES
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open.
Shares may be purchased through a financial institution which has a sales
agreement with Federated Securities Corp. (the "Distributor") or directly from
Federated Securities Corp. once an account has been established. In connection
with the sale of Shares, Federated Securities Corp. may from time to time
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request.
THROUGH A FINANCIAL INSTITUTION. An investor may call his financial
institution (such as a bank or an investment dealer) to place an order to
purchase Shares. Orders placed through a financial institution are considered
received when the Fund is notified of the purchase order. It is the financial
institution's responsibility to transmit orders promptly. Purchase orders
through a registered broker/dealer must be received by the broker before 4:00
p.m. (Eastern time) and must be transmitted by the broker to the Fund before
5:00 p.m. (Eastern time) in order for Shares to be purchased at that day's
price. Purchase orders through other financial institutions must be received
by the financial institution and transmitted to the Fund before 4:00 p.m.
(Eastern time) in order for Shares to be purchased at that day's price.
The financial institution which maintains investor accounts with the
Fund must do so on a fully disclosed basis unless it accounts for share
ownership periods used in calculating the contingent deferred sales
charge, (see "Contingent Deferred Sales Charge"). In addition, advance
payments made to financial institutions may be subject to reclaim by the
distributor for accounts transferred to financial institutions which do
not maintain investor accounts on a fully disclosed basis and do not
account for share ownership periods (see "Other Payments to Financial
Institutions").
DIRECTLY BY MAIL. An investor may place an order to purchase Shares
directly by mail from the Distributor once an account has been
established. To do so, mail a check made payable to Federated Government
Income Securities, Inc.- Class F Shares to Federated Services Company,
P.O. Box 8600, Boston, MA 02266-8600.
Purchases by mail are considered received after payment by check is
converted by the tranfer agent's bank, State Street Bank and Trust Company
("State Street Bank"), into federal funds. This is generally the next business
day after the transfer agent's bank receives the check.
DIRECTLY BY WIRE. To purchase Shares directly from the Distribtuor by
Federal Reserve wire once an account has been established, call the Fund. All
information needed will be taken over the telephone, and the order is
considered received when the transfer agent's bank receives payment by wire.
Federal funds should be wired as follows: Federated Shareholder Services
Company, c/o State Street Bank and Trust Company, Boston, Massachusetts 02105;
Attention EDGEWIRE; for Credit to: Federated Government Income Securities,
Inc.-Class F Shares; Fund Number (this number can be found on the account
statement or by contacting the Fund); Group Number or Order Number; Nominee or
Institution Name; and ABA Number 011000028. Shares cannot be purchased by wire
on holidays when wire transfers are restricted. Questions on wire purchases
should be directed to your shareholder services representative at the
telephone number listed on your account statement.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares is $1,500 unless the investment is
in a retirement plan, in which case the minimum initial investment is $50.
Subsequent investments must be in amounts of at least $100, except for
retirement plans which must be in amounts of at least $50.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received, plus a sales charge of 1% of the offering price (which is 1.01% of
the net amount invested). There is no sales charge for purchases of $1 million
or more. In addition, no sales charge is imposed for Shares purchased through
bank trust departments or investment advisers registered under the Investment
Advisers Act of 1940 purchasing on behalf of their clients, or by sales
representatives, Directors, and employees of the Fund, Federated Advisers, and
Federated Securities Corp., or their affiliates, or any investment dealer who
has a sales agreement with Federated Securities Corp., their spouses and
children under age 21, or any trusts or pension or profit-sharing plans for
these persons, or retirement plans where the third party administrator has
entered into certain arrangements with Federated Securities Corp. or its
affiliates, to the extent that no payment was advanced for purchases made by
such entities. Unaffiliated institutions through whom Shares are purchased may
charge fees for services provided, which may be related to the ownership of
Shares. This prospectus should, therefore, be read together with any agreement
between the customer and institution with regard to services provided, the
fees charged for these services, and any restrictions and limitations
imposed.
Under certain circumstances, described under "Redeeming Class F Shares,"
shareholders may be charged a contingent deferred sales charge by the
distributor at the time Shares are redeemed.
DEALER CONCESSION. For sales of Shares, broker/dealers will normally
receive 100% of the applicable sales charge. Any portion of the sales charge
which is not paid to a broker/dealer will be retained by the distributor.
However, from time to time, and at the sole discretion of the distributor, all
or part of that portion may be paid to a dealer. The sales charge for Shares
sold other than through registered broker/dealers will be retained by
Federated Securities Corp. Federated Securities Corp. may pay fees to banks
out of the sales charge in exchange for sales and/or administrative services
performed on behalf of the bank's customers in connection with the initiation
of customer accounts and purchases of Shares.
ELIMINATING THE SALES CHARGE
The sales charge can be eliminated on the purchase of Shares through:
o quantity discounts and accumulated purchases;
o signing a 13-month letter of intent;
o using the reinvestment privilege; or
o concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. There is no sales charge for
purchases of $1 million or more. The Fund will combine purchases made on the
same day by the investor, his spouse, and his children under age 21 when it
calculates the sales charge. In addition, the sales charge is eliminated for
purchases of $1 million or more made at one time by a trustee or fiduciary for
a single trust estate or a single fiduciary account.
If an additional purchase of Shares is made, the Fund will consider the
previous purchases still invested in the Fund. For example, if a shareholder
already owns Shares having a current value at the public offering price of
$900,000 and purchases $100,000 more at the current public offering price,
there will be no sales charges on the additional purchase.
The Fund will also combine purchases for the purpose of reducing the
contingent deferred sales charge imposed on some Share redemptions. For
example, if a shareholder already owns Shares having a current value at the
public offering price of $1 million and purchases an additional $1 million at
the current public offering price, the applicable contingent deferred sales
charge would be reduced to .50% for those additional shares. For more
information on the levels of contingent deferred sales charges and holding
periods, see the section entitled "Contingent Deferred Sales Charge."
To receive the sales charge elimination and/or the contingent deferred
sales charge reduction, Federated Securities Corp. must be notified by the
shareholder in writing or by their financial institution at the time the
purchase is made that Shares are already owned or that purchases are being
combined. The Fund will eliminate the sales charge and/or reduce the
contingent deferred sales charge after it confirms the purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $1 million
of Shares over the next 13 months, the sales charge may be eliminated by
signing a letter of intent to that effect. This letter of intent includes a
provision for a sales charge elimination depending on the amount actually
purchased within the 13-month period and a provision for the Fund's custodian
to hold 1.00% of the total amount intended to be purchased in escrow (in
Shares) until such purchase is completed.
The 1.00% held in escrow will be applied to the shareholder's account at
the end of the 13-month period unless the amount specified in the letter of
intent, which must be $1 million or more of Shares, is not purchased. In this
event, an appropriate number of escrowed Shares may be redeemed in order to
realize the 1.00% sales charge.
This letter of intent will not obligate the shareholder to purchase Shares.
This letter may be dated as of a prior date to include any purchases made
within the past 90 days (purchases within the prior 90 days may be used to
fulfill the requirements of the letter of intent; however, the sales charge on
such purchases will not be adjusted to reflect a lower sales charge).
REINVESTMENT PRIVILEGE. If Shares in the Fund have been redeemed, the
shareholder has a one-time right, within 120 days, to reinvest the redemption
proceeds at the next-determined net asset value without any sales charge.
Federated Securities Corp. must be notified by the shareholder in writing or
by his financial institution of the reinvestment in order to receive this
elimination of the sales charge. If the shareholder redeems his Shares in the
Fund, there may be tax consequences.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge
elimination, a shareholder has the privilege of combining concurrent purchases
of two or more of certain funds offering Class F Shares, the purchase prices
of which include a sales charge. For example, if a shareholder concurrently
invested $400,000 in Class F Shares of one of the other funds advised by
subsidiaries of Federated Investors (the "Federated Funds"), and $600,000 in
Shares, the sales charge would be eliminated.
To receive this sales charge elimination, Federated Securities Corp. must
be notified by the shareholder in writing or by his financial institution at
the time the concurrent purchases are made. The Fund will eliminate the sales
charge after it confirms the purchases.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their
investment on a regular basis. Under this program, funds may be automatically
withdrawn monthly from the shareholder's checking account and invested in
Shares at the net asset value next determined after an order is received by
the transfer agent's bank, plus the 1.00% sales charge for purchases under $1
million. A shareholder may apply for participation in this program through
Federated Securities Corp. or his financial institution.
EXCHANGE PRIVILEGE
Class F Shares may be exchanged for shares in certain of the Federated
Funds at net asset value without a sales charge (if previously paid) or a
contingent deferred sales charge. The exchange privilege is available to
shareholders residing in any state in which the Class F Shares being acquired
may be legally sold.
Shareholders using this privilege must exchange Shares having a net asset
value which at least meets the minimum investment required for the fund into
which the exchange is being made. A shareholder may obtain information on the
exchange privilege, and may obtain prospectuses for other Federated Funds by
calling Federated Securities Corp. or their financial institution.
Before making an exchange, a shareholder must receive a prospectus of the
fund for which the exchange is being made.
Class F Shares of this Fund have exchange privileges with Class F Shares of
the following Federated Funds: Federated American Leaders Fund, Inc.;
Federated California Municipal Income Fund; Federated Bond Fund; Federated
Limited Term Municipal Fund; Federated Strategic Income Fund; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated Municipal Income Fund,
Inc.; Federated Utility Fund, Inc.; Federated Equity Income Fund, Inc.; Money
Market Management, Inc.; Federated New York Municipal Income Fund; and
Federated Ohio Municipal Income Fund.
Prospectuses for these funds are available by writing to Federated
Securities Corp. Each of the funds may also invest in certain other types of
securities as described in each fund's prospectus.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Shareholder Services Company
maintains a share account for each shareholder. Share certificates are not
issued unless requested on the application or by contacting the Fund.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly statements are sent to report dividends paid during the
month.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and paid monthly to all shareholders invested in the
Fund on the record date. Distributions of any net realized long-term capital
gains will be made at least once every twelve months.
RETIREMENT PLANS
Shares of the Fund can be purchased as an investment for retirement plans or
for IRA accounts. For further details contact Federated Securities Corp. and
consult a tax adviser.
REDEEMING CLASS F SHARES
The Fund redeems Shares at their net asset value, less any applicable
contingent deferred sales charge, next determined after the Fund receives the
redemption request. Redemptions will be made on days on which the Fund
computes its net asset value. Redemption requests must be received in proper
form and can be made through a financial institution or directly from the Fund
by written request.
THROUGH A FINANCIAL INSTITUTION
A shareholder may redeem Shares by calling his financial institution (such
as a bank or an investment dealer) to request the redemption. Shares will be
redeemed at the net asset value, less any applicable contingent deferred sales
charge, next determined after the Fund receives the redemption request from
the financial institution. Redemption requests through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time)
and must be transmitted by the broker to the Fund before 5:00 p.m. (Eastern
time) in order for Shares to be redeemed at that day's net asset value.
Redemption requests through other financial institutions must be received by
the financial institution and transmitted to the Fund before 4:00 p.m.
(Eastern time) in order for Shares to be redeemed at that day's net asset
value. The financial institution is responsible for promptly submitting
redemption requests and providing proper written redemption instructions to
the Fund. The financial institution may charge customary fees and commissions
for this service. If at any time the Fund shall determine it necessary to
terminate or modify this method of redemption, shareholders will be promptly
notified.
REDEEMING SHARES BY TELEPHONE
Shares may be redeemed in any amount by calling the Fund provided the Fund has
a properly completed authorization form. These forms can be obtained from
Federated Securities Corp. Proceeds will be mailed in the form of a check, to
the shareholder's address of record or wire transferred to the shareholder's
account at a domestic commercial bank that is a member of the Federal Reserve
System. The minimum amount for a wire transfer is $1,000. Proceeds from
redeemed Shares purchased by check or through an Automated Clearing House
member will not be wired until that method of payment has cleared. Proceeds
from redemption requests received on holidays when wire transfers are
restricted will be wired the following business day. Questions about telephone
redemptions on days when wire transfers are restricted should be directed to
your sharehlder services representative at the telephone number listed on your
acount statement.
Telephone instructions will be recorded. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. In the event of drastic economic or market
changes, a shareholder may experience difficulty in redeeming by telephone. If
this occurs, "Redeeming Shares By Mail" should be considered. If at any time
the Fund shall determine it necessary to terminate or modify the telephone
redemption privilege, shareholders would be promptly notified.
REDEEMING SHARES BY MAIL
Shares may be redeemed in any amount by mailing a written request to:
Federated Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-8600.
If share certificates have been issued, they should be sent unendorsed with
the written request by registered or certified mail to the address noted
above.
The written request should state: the Fund name and Class designation; the
account name as registered with the Fund; the account number; and the number
of Shares to be redeemed or the dollar amount requested. All owners of the
account must sign the request exactly as the Shares are registered. Normally,
a check for the proceeds is mailed within one business day, but in no event
more than seven days, after the receipt of a proper written redemption
request. Dividends are paid up to and including the day that a redemption
request is processed.
Shareholders requesting a redemption of any amount to be sent to an
address other than that on record with the Fund or a redemption payable other
than to the shareholder of record must have their signatures guaranteed by a
commercial or savings bank, trust company, or savings association whose
deposits are insured by an organization which is administered by the Federal
Deposit Insurance Corporation; a member firm of a domestic stock exchange; or
any other "eligible guarantor institution," as defined in the Securities Act
of 1934. The Fund does not accept signatures guaranteed by a notary
public.
CONTINGENT DEFERRED SALES CHARGE
Shareholders redeeming Shares from their Fund accounts within certain time
periods of the purchase date of those Shares will be charged a contingent
deferred sales charge by the Fund's Distributor of the lesser of the original
purchase price or the net asset value of the Shares redeemed as follows:
CONTINGENT DEFERRED
AMOUNT OF PURCHASE SHARES HELD SALES CHARGE
Up to $1,999,999 less than 4 years 1.00%
$2,000,000 to $4,999,999 less than 2 years
.50%
Over $5,000,000 less than 1 year .25%
In instances in which Shares have been acquired in exchange for Class F
Shares in other Federated Funds, (i) the purchase price is the price of the
Shares when originally purchased and (ii) the time period during which the
Shares are held will run from the date of the original purchase. The
contingent deferred sales charge will not be imposed on Shares acquired
through the reinvestment of dividends or distributions of short-term or long-
term capital gains. In computing the amount of contingent deferred sales
charge for accounts with Shares subject to a single holding period, if any,
redemptions are deemed to have occurred in the following order: (1) Shares
acquired through the reinvestment of dividends and long-term capital gains;
(2) purchases of Shares occurring prior to the number of years necessary to
satisfy the applicable holding period; and (3) purchases of Shares occurring
within the current holding period.
The contingent deferred sales charge will not be imposed when a redemption
results from a tax-free return under the following circumstances: (i) a total
or partial distribution from a qualified plan, other than an IRA, Keogh Plan,
or a custodial account, following retirement; (ii) a total or partial
distribution from an IRA, Keogh Plan, or a custodial account after the
beneficial owner attains age 59-1/2; or (iii) from the death or total and
permanent disability of the beneficial owner. The exemption from the
contingent deferred sales charge for qualified plans, an IRA, Keogh Plan, or a
custodial account does not extend to account transfers, rollovers, and other
redemptions made for purposes of reinvestment. Contingent deferred sales
charges are not charged in connection with exchanges of Shares for shares in
other Federated Funds, or in connection with redemptions by the Fund of
accounts with low balances. Shares of the Fund originally purchased through a
bank trust department or investment adviser registered under the Investment
Advisers Act of 1940, and third party administrators acting on behalf of
defined contribution plans, are not subject to the contingent deferred sales
charge, to the extent that no payment was advanced for purchases made by such
entities. For more information, see "Other Payments to Financial
Institutions."
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive monthly or quarterly payments of a
predetermined amount may take advantage of the Systematic Withdrawal Program.
Under this program, Shares are redeemed to provide for periodic withdrawal
payments in an amount directed by the shareholder; the minimum withdrawal
amount is $100. Depending upon the amount of the withdrawal payments, the
amount of dividends paid and capital gains distributions with respect to
Shares, and the fluctuation of the net asset value of Shares redeemed under
this program, redemptions may reduce, and eventually deplete, the
shareholder's investment in Shares. For this reason, payments under this
program should not be considered as yield or income on the shareholder's
investment in Shares. To be eligible to participate in this program, a
shareholder must have an account value of at least $10,000 at current offering
price.
A shareholder may apply for participation in this program through Federated
Securities Corp. Due to the fact that Shares are sold with a sales charge, it
is not advisable for shareholders to be purchasing Shares while participating
in this program.
Contingent deferred sales charges are charged for Shares redeemed through
this program within four years of their purchase dates.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$1,000. This requirement does not apply, however, if the balance falls below
$1,000 because of changes in the Fund's net asset value.
Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional Shares to meet the minimum
requirement.
FUND INFORMATION
MANAGEMENT OF THE FUND
DIRECTORS. The Fund is managed by a Board of Directors. The Directors are
responsible for managing the Fund's business affairs and for exercising all
the Fund's powers except those reserved for the shareholders. An Executive
Committee of the Directors handles the Directors' responsibilities between
meetings of the Directors.
INVESTMENT ADVISER. Under the terms of an Advisory Agreement between the
Fund and Federated Advisers, Federated Advisers will furnish to the Fund such
investment advice, statistical and other factual information as may from time
to time be reasonably requested from the Fund.
Both the Fund and the Adviser have adopted strict codes of ethics governing
the conduct of all employees who manage the Fund and its portfolio securities.
These codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance
and periodic reporting of personal securities transactions; prohibit personal
transactons in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial
public offerings; and prohibit taking profits on securities held for less than
sixty days. Violations of the codes are subject to review by the Directors,
and could result in severe penalties.
ADVISORY FEES. The Fund's adviser receives an annual investment
advisory fee equal to .75 of 1% of the Fund's average daily net assets.
Under the investment advisory contract, which provides for the
voluntary waiver and reimbursement of expenses by the adviser, the
adviser may voluntarily waive all or a portion of the advisory fee and
reimburse some of the operating expenses of the Fund. The adviser can
terminate this voluntary waiver of its fee or reimbursement of expenses
at any time at its sole discretion. The adviser may also undertake to
reimburse the Fund for operating expenses in excess of limitations
established by certain states.
ADVISER'S BACKGROUND. Federated Advisers, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under
the Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors. All of the Class A (voting) shares of Federated Investors
are owned by a trust, the trustees of which are John F. Donahue,
Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee
of Federated Investors.
Federated Advisers and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies and
private accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. With over
$80 billion invested across more than 250 funds under management and/or
administration by its subsidiaries, as of December 31, 1995, Federated
Investors is one of the largest mutual fund investment managers in the
United States. With more than 1,800 employees, Federated continues to
be led by the management who founded the company in 1955. Federated
funds are presently at work in and through 4,000 financial institutions
nationwide. More than 100,000 investment professionals have elected
Federated funds for their clients.
PORTFOLIO MANAGER'S BACKGROUND. James D. Roberge has been the Fund's
portfolio manager since March 1995. Mr. Roberge joined Federated
Investors in 1990 and has been a Vice President of the Fund's
investment adviser since 1994. Mr. Roberge served as an Assistant Vice
President of the Fund's investment adviser from 1992 to 1994 and as an
investment analyst from 1990 to 1992. Mr. Roberge is a Chartered
Financial Analyst and received his M.B.A. in Finance from The Wharton
School of the University of Pennsylvania.
Kathleen M. Foody-Malus has been the Fund's portfolio manager since
July 1993. Ms. Foody-Malus joined Federated Investors in 1983 and has
been a Vice President of the Fund's investment 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.
DISTRIBUTION OF CLASS F SHARES
Federated Securities Corp. is the principal distributor for Shares of the
Fund. Federated Securities Corp. is located at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779. It is a Pennsylvania corporation
organized on November 14, 1969, and is the principal distributor for a number
of investment companies. Federated Securities Corp. is a subsidiary of
Federated Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
SHAREHOLDER SERVICES
The Fund has entered into a Shareholder Services Agreement with Federated
Shareholder Services, a subsidiary of Federated Investors, under which the
Fund may make payments up to 0.25 of 1% of the average daily net asset value
of Shares to obtain certain personal services for shareholders and for the
maintenance of shareholder accounts ("Shareholder Services"). Under the
Shareholder Services Agreement, Federated Shareholder Services will either
perform shareholder services directly or will select financial institutions to
perform shareholder services. Financial institutions will receive fees based
upon Shares owned by their clients or customers. The schedules of such fees
and the basis upon which such fees will be paid will be determined from time
to time by the Fund and Federated Shareholder Services.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS
In addition, the Distributor will pay financial institutions, for distribution
and/or administrative services, an amount equal to 1.00% of the offering price
of the Shares acquired by their clients or customers on purchases up to
$1,999,999, .50% of the offering price on purchases of $2,000,000 to
$4,999,999, and .25% of the offering price on purchases of $5,000,000 or more.
(This fee is in addition to the 1.00% sales charge on purchases of less than
$1 million). The financial institutions may elect to receive amounts less than
those stated, which would reduce the stated contingent deferred sales charge
and/or the holding period used to calculate the fee.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS
Federated Securities Corp. and Federated Shareholder Services may offer to pay
a fee, from their own assets, to financial institutions as financial
assistance for providing substantial sales services, distribution-related
support services, or shareholder services. The support may include sponsoring
sales, educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance will be predicated upon the amount of
Shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution.
Any payments made by the Distributor may be reimbursed by the Adviser or its
affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Services Company provides these at an annual rate which relates to
the average aggregate daily net assets of the Federated Funds as specified
below:
MAXIMUM AVERAGE AGGREGATE DAILY NET ASSETS
ADMINISTRATIVE FEE OF THE FEDERATED
FUNDS
---------
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Services Company may choose voluntarily to waive a portion of its
fee.
EXPENSES OF THE FUND AND SHARES
Holders of Class F Shares pay their allocable portion of Fund and portfolio
expenses.
The Fund expenses for which holders of Class F Shares pay their allocable
portion include, but are not limited to: the cost of organizing the Fund and
continuing its existence; registering the Fund with federal and state
securities authorities; Directors' fees; auditors' fees; the cost of meetings
of Directors; legal fees of the Fund; association membership dues; and such
non-recurring and extraordinary items as may arise from time to time.
The portfolio expenses for which holders of Class F Shares pay their allocable
portion include, but are not limited to: registering the portfolio and Shares
of the portfolio; investment advisory services; taxes and commissions;
custodian fees; insurance premiums; auditors' fees; and such non-recurring and
extraordinary items as may arise from time to time.
At present, the only expenses which are allocated specifically to Class F
Shares as a class are expenses under the Fund's Distribution Plan and fees for
Shareholder Services. However, the Directors reserve the right to allocate
certain other expenses to holders of Class F Shares as it deems appropriate
("Class Expenses"). In any case, Class Expenses would be limited to:
distribution fees; transfer agent fees as identified by the transfer agent as
attributable to holders of Class F Shares; fees for Shareholder Services;
printing and postage expenses related to preparing and distributing materials
such as shareholder reports, prospectuses and proxies to current shareholders;
registration fees paid to the Securities and Exchange Commission and
registration fees paid to state securities commissions; expenses related to
administrative personnel and services as required to support holders of Class
F Shares; legal fees relating solely to Class F Shares and Directors' fees
incurred as a result of issues relating solely to Class F Shares.
SHAREHOLDER INFORMATION
VOTING RIGHTS
Each Share gives the shareholder one vote in Director elections and other
matters submitted for vote. All shares of each portfolio or class in the Fund
have equal voting rights, except that only shares of that particular Fund or
class are entitled to vote in matters affecting that Fund or class.
As a Maryland corporation, the Fund is not required to hold annual shareholder
meetings. Shareholder approval will be sought only for certain changes in the
Fund's operation and for the election of Directors under certain
circumstances.
Directors may be removed by the Directors or by shareholders at a special
meeting. A special meeting of shareholders shall be called by the Directors
upon the request of shareholders owning at least 10% of the Fund's outstanding
shares of all series entitled to vote.
As of April 3, 1996, Merrill Lynch, Pierce, Fenner & Smith (as record owner
holding Class F Shares for its clients), owned 110,453,218 of Class F Shares
(43.35%) of voting securities of the Fund, and therefore, may, for certain
purposes, be deemed to control the Fund and be able to affect the outcome of
certain matter presented for a vote of shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code, as amended, (the "Code") applicable
to regulated investment companies and to receive the special tax treatment
afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal income tax
on any dividends and other distributions, including capital gains
distributions, received. This applies whether dividends and distributions are
received in cash or as additional Shares. Distributions representing long-term
capital gains, if any, will be taxable to shareholders as long-term capital
gains no matter how long the shareholders have held their Shares. No federal
income tax is due on any dividends earned in an IRA or qualified retirement
plan until distributed, so long as such IRA or qualified retirement plan meets
the applicable requirements of the Code.
STATE AND LOCAL TAXES
Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.
Shareholders are urged to consult their own tax advisers regarding the status
of their accounts under state and local tax laws.
PERFORMANCE INFORMATION
From time to time the Fund advertises its total return and yield for Class
F Shares.
Total return represents the change, over a specified period of time, in the
value of an investment in Shares after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of Shares is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by Shares
over a thirty-day period by the maximum offering price per share of Shares on
the last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
Shares, and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
The performance information reflects the effect of the maximum sales charge
and other similar non-recurring charges, such as the contingent deferred sales
charge, which, if excluded, would increase the total return and yield.
Total return and yield will be calculated separately for Class F Shares,
Class A Shares, Class B Shares, and Class C Shares.
From time to time, the Fund may advertise the performance of Class F Shares
using certain financial publications and/or compare its performance to certain
indices.
OTHER CLASSES OF SHARES
The Fund also offers other classes of shares called Class A Shares, Class B
Shares, and Class C Shares which are all sold primarily to customers of
financial institutions subject to certain differences.
Class A Shares are sold subject to a front-end sales charge and a Shareholder
Services Agreement. Investments in Class A Shares are subject to a minimum
initial investment of $500, unless the investment is in a retirement account,
in which case the minimum investment is $50.
Class B Shares are sold at net asset value subject to a contingent deferred
sales charge, a Rule 12b-1 Plan and a Shareholder Services Agreement.
Investments in Class B Shares are subject to a minimum initial investment of
$1,500, unless the investment is in a retirement account, in which case the
minimum investment is $50.
Class C Shares are sold at net asset value subject to a contingent deferred
sales charge, a Rule 12b-1 Plan and a Shareholder Services Agreement.
Investments in Class C Shares are subject to a minimum investment of $1,500,
unless the investment is in a retirement account, in which case the minimum
investment is $50.
Class A Shares, Class B Shares, Class C Shares, and Class F Shares are subject
to certain of the same expenses. Expense differences, however, between Class A
Shares, Class B Shares, Class C Shares, and Class F Shares may affect the
performance of each class.
To obtain more information and a combined prospectus for Class A Shares, Class
B Shares, and Class C Shares, investors may call 800-245-5051 or contact their
financial institution.
ADDRESSES
Federated Government Income Securities, Inc.
Class F Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Custodian
State Street Bank and Trust Company P.O. Box
8600
Boston, Massachusetts 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services
Company P.O. Box 8600
Boston, Massachusetts 02266-8600
Independent Public Accountants
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(formerly, Government Income Securities, Inc.)
Class F Shares
PROSPECTUS
An Open-End, Diversified Management
Investment Company
May , 1996
----
383733102
8040406A (5/96)
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
PROSPECTUS
The shares of Federated Government Income Securities, Inc. (the "Fund")
(formerly, Government Income Securities, Inc.) represent interests in an open-
end, diversified management investment company (a mutual fund) that seeks
current income by investing in a professionally managed, diversified portfolio
limited primarily to securities guaranteed as to payment of principal and
interest by the U.S. government or its agencies or instrumentalities.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in the Class A Shares, Class B Shares, and Class C Shares of the Fund.
Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information for Class A
Shares, Class B Shares, Class C Shares, and Class F Shares dated May ,
---
1996, with the Securities and Exchange Commission. The information contained
in the Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of the Statement of Additional
Information or a paper copy of this prospectus, if you have received your
prospectus electronically, free of charge by calling 800-245-5051. To obtain
other information or to make inquiries about the Fund, contact your financial
institution.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Prospectus dated May , 1996
----
TABLE OFCONTENTS
Table of Contents will be generated
when document is complete.
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)
SUMMARY OF FUND EXPENSES
CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering
price) ................................................... 4.50%
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of
offering price) ...............None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable) ............. None
Redemption Fee (as a percentage of amount redeemed, if applicable)
.........................................................None
Exchange Fee.................................................. None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)*
Management Fee (after waiver)(1) ......................... 0.50%
12b-1 Fee (2) ........................................... 0.00%
Total Other Expenses .................................... 0.46%
Shareholder Services Fee ..... 0.25%
Total Operating Expenses (3).................................. 0.96%
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The advisor can
terminate this voluntary waiver at any time at its sole discretion. The
maximum management fee is 0.75%.
(2) The Fund has no present intention of paying or accruing the 12b-1 fee
during the fiscal year ending August 31, 1996. If the Fund were paying or
accruing the 12b-1 fee, the Fund would be able to pay up to 0.25% of its
average daily net assets for the 12b-1 fee. See "Fund Information."
(3) The operating expenses are estimated to be 1.21% absent the anticipated
voluntary waiver of a portion of the management fee.
*Total operating expenses in the table above are estimated based on average
expenses expected to be incurred during the period ending February 28, 1997.
During the course of this period, expenses may be more or less than the
average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class A Shares will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see "Investing in Class A Shares" and "Fund Information."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
EXAMPLE
1 year3 years
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period........... $54 $74
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FEDERATED GOVERNMENT INCOME SECURITIES,INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)
SUMMARY OF FUND EXPENSES
CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering
price) ................................................... None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of
offering price) ...............None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable)(1) .......... 5.50%
Redemption Fee (as a percentage of amount redeemed, if applicable)
.........................................................None
Exchange Fee.................................................. None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)*
Management Fee (after waiver)(2) ......................... 0.50%
12b-1 Fee ................................................ 0.75%
Total Other Expenses .................................... 0.46%
Shareholder Services Fee ..... 0.25%
Total Operating Expenses (3)(4)............................... 1.71%
(1) The contingent deferred sales charge is 5.50% in the first year declining
to 1.00% in the sixth year and 0.00% thereafter. (See "Contingent Deferred
Sales Charge").
(2) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The advisor can
terminate this voluntary waiver at any time at its sole discretion. The
maximum management fee is 0.75%.
(3) Class B Shares convert to Class A Shares (which pay lower ongoing
expenses) approximately eight years after purchase.
(4) The operating expenses are estimated to be 1.96% absent the anticipated
voluntary waiver of portion of the management fee.
*Total Class B Shares operating expenses in the table above are estimated
based on average expenses expected to be incurred during the period ending
February 28, 1997. During the course of this period, expenses may be more or
less than the average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class B Shares will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see "Investing in Class B Shares" and "Fund Information."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted under the rules of the National
Association of Securities Dealers, Inc.
EXAMPLE
1 year3 yearss
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period........... $74 $98
You would pay the following expenses on the same
investment, assuming no redemption........................ $17 $54
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)
SUMMARY OF FUND EXPENSES
CLASS C SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering
price) ................................................... None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of
offering price) ...............None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable)(1) .......... 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)
.........................................................None
Exchange Fee.................................................. None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)*
Management Fee (after waiver)(2) ......................... 0.50%
12b-1 Fee ................................................ 0.75%
Total Other Expenses .................................... 0.46%
Shareholder Services Fee ..... 0.25%
Total Operating Expenses (3).................................. 1.71%
(1) The contingent deferred sales charge assessed is 1.00% of the lesser of
the original purchase price or the net asset value of Shares redeemed within
one year of their purchase date. For a more complete description, see
"Redeeming Class C Shares".
(2) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The advisor can
terminate this voluntary waiver at any time at its sole discretion. The
maximum management fee is 0.75%.
(3) The operating expenses are estimated to be 1.96% absent the anticipated
voluntary waiver of a portion of the management fee.
*Total operating expenses in the table above are estimated based on average
expenses expected to be incurred during the period ending February 28, 1997.
During the course of this period, expenses may be more or less than the
average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class C Shares will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see "Investing in Class C Shares" and "Fund Information."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted under the rules of the National
Association of Securities Dealers, Inc.
EXAMPLE
1 year3 yearss
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period........... $28 $54
You would pay the following expenses on the same
investment, assuming no redemption........................ $17 $54
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
GENERAL INFORMATION
The Fund was established as a Massachusetts business trust on September 23,
1981, and reorganized as a corporation under the laws of the State of Maryland
on February 4, 1986. The Fund's address is Liberty Center, Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779. The Articles of Incorporation
permit the Fund to offer separate series of shares representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. As of the date of this prospectus, the Board of
Directors (the "Directors") has established four classes of shares, known as
Class A Shares, Class B Shares, Class C Shares, and Class F Shares. This
prospectus relates only to the Class A Shares, Class B Shares, and Class C
Shares of the Fund (individually and collectively as the context requires,
"Shares").
Shares of the Fund are designed primarily for individuals and institutions
seeking current income through a professionally managed, diversified portfolio
of U.S. government securities.
For information on how to purchase the Shares offered by this prospectus,
please refer to "How to Purchase Shares." The minimum initial investment for
Class A Shares is $500. The minimum initial investment for Class B Shares and
Class C Shares is $1,500. However, the minimum initial investment for a
retirement account in any class is $50. Subsequent investments in any class
must be in amounts of at least $100, except for retirement plans which must be
in amounts of at least $50.
Class A Shares are sold at net asset value plus an applicable sales charge and
are redeemed at net asset value. However, a contingent deferred sales charge
is imposed under certain circumstances. For a more complete description, see
"How to Redeem Shares."
Class B Shares are sold at net asset value and are redeemed at net asset
value. However, a contingent deferred sales charge is imposed on certain
Shares which are redeemed within six full years of purchase. See "How to
Redeem Shares."
Class C Shares are sold at net asset value. A contingent deferred sales charge
of 1.00% will be charged on assets redeemed within the first 12 months
following purchase. See "How to Redeem Shares."
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income. The
investment objective cannot be changed without approval of shareholders. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the investment policies described in this
prospectus.
INVESTMENT POLICIES
The investment policies described below may be changed by the Directors
without shareholder approval. Shareholders will be notified before any
material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in securities which are
guaranteed as to payment of principal and interest by the U.S. government or
U.S. government agencies or instrumentalities. Under normal circumstances, the
Fund will invest at least 65% of the value of its total assets in U.S.
government securities.
The U.S. government securities in which the Fund invests include:
o direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds (including zero coupon bonds); and
o notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as the: Farm Credit System, including the
National Bank for Cooperatives, Farm Credit Banks, and Banks for
Cooperatives; Farmers Home Administration, Federal Home Loan Banks,
Farm Credit Banks, Federal Home Loan Mortgage Corporation, Federal
National Mortgage Association, Government National Mortgage
Association, and Student Loan Marketing Association.
The obligations of U.S. government agencies or instrumentalities which the
Fund may buy are backed in a variety of ways by the U.S. government or its
agencies or instrumentalities. Some of these obligations, such as Government
National Mortgage Association ("Ginnie Mae") mortgage-backed securities and
obligations of the Farmers Home Administration, are backed by the full faith
and credit of the U.S. Treasury. Obligations of the Farmers Home
Administration are also backed by the issuer's right to borrow from the U.S.
Treasury. Obligations of Federal Home Loan Banks and the Farmers Home
Administration are backed by the discretionary authority of the U.S.
government to purchase certain obligations of agencies or instrumentalities.
Obligations of Federal Home Loan Banks, Farmers Home Administration, Farm
Credit Banks, Federal National Mortgage Association ("Fannie Mae"), and
Federal Home Loan Mortgage Corporation ("Freddie Mac") are backed by the
credit of the agency or instrumentality issuing the obligations. Some of the
securities purchased by the Fund may represent an interest solely in the
principal repayments or solely in the interest payments on mortgage-backed
securities. These securities are usually structured with two classes and
receive different proportions of the interest and principal distributions on
the pool of underlying mortgage-backed securities ("IOs and POs"). In
addition, the Fund may engage in certain strategies and transactions as
described in the prospectus.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). CMOs are debt obligations
collateralized by mortgage loans or mortgage pass-through securities.
Typically, CMOs are collateralized by Ginnie Mae, Fannie Mae or Freddie Mac
certificates, but may be collateralized by whole loans or private pass-through
securities. CMOs may have fixed or floating rates of interest.
The Fund will invest only in CMOs that are rated AAA by a nationally
recognized statistical rating organization. The Fund may also invest in
certain CMOs which are issued by private entities such as investment banking
firms and companies related to the construction industry. The CMOs in which
the Fund may invest may be: (i) securities which are collateralized by pools
of mortgages in which each mortgage is guaranteed as to payment of principal
and interest by an agency or instrumentality of the U.S. government; (ii)
securities which are collateralized by pools of mortgages in which payment of
principal and interest is guaranteed by the issuer and such mortgages in which
payment of principal and interest is guaranteed by the issuer and such
guarantee is collateralized by U.S. government securities; or (iii) other
securities in which the proceeds of the issuance are invested in mortgage-
backed securities and payment of the principal and interest is supported by
the credit of an agency or instrumentality of the U.S. government.
CMOs that include a class bearing a floating rate of interest also may include
a class whose yield floats inversely against a specified index rate. These
"inverse floaters" are more volatile than conventional fixed or floating rate
classes of a CMO and the yield thereon, as well as the value thereof, will
fluctuate in inverse proportion to changes in the index on which interest rate
adjustments are based. As a result, the yield on an inverse floater class of a
CMO will generally increase when market yields (as reflected by the index)
decrease and decrease when market yields increase. The extent of the
volatility of inverse floaters depends on the extent of anticipated changes in
market rates of interest. Generally, inverse floaters provide for interest
rate adjustments based upon a multiple of the specified interest index, which
further increases their volatility. The degree of additional volatility will
be directly proportional to the size of the multiple used in determining
interest rate adjustments.
TEMPORARY INVESTMENTS. The Fund may invest temporarily in cash and cash items
during times of unusual market conditions for defensive purposes and to
maintain liquidity.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which
banks, broker/dealers, and other recognized financial institutions sell
U.S. government securities or other securities to the Fund and agree at
the time of sale to repurchase them at a mutually agreed upon time and
price. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions are
arrangements in which the Fund purchases securities with payment and delivery
scheduled for a future time. The yields generally available on comparable
securities when delivery occurs may be higher than yields on securities
obtained pursuant to such transactions. Settlement dates may be a month or
more after entering into these transactions, and the market values of the
securities purchased may vary from the purchase prices as interest rates
fluctuate. Accordingly, the Fund may pay more/less than the market value of
the securities on the settlement date. In addition, the seller's failure to
complete these transactions may cause the Fund to miss a price or yield
considered to be advantageous.
The Fund may dispose of a commitment prior to settlement if the adviser deems
it appropriate to do so. In addition, the Fund may enter in transactions to
sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at
later dates. The Fund may realize short-term profits or losses upon the sale
of such commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or a long-term basis up to
one-third of the value of its total assets to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the
investment adviser has determined are creditworthy under guidelines
established by the Fund's Directors and will receive collateral in the form of
cash or U.S. government securities equal to at least 100% of the value of the
securities loaned.
There is the risk that when lending portfolio securities, the securities may
not be available to the Fund on a timely basis and the Fund may, therefore,
lose the opportunity to sell the securities at a desirable price. In addition,
in the event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
Securities lending transactions typically require the Fund to pay interest on
any cash collateral received. The Fund will seek to earn interest and
additional returns by investing cash collateral in repurchase agreements or
liquid high grade securities. The Fund will bear the risk of any losses on
such investments and the risk that the income from such investments are less
than the interest payable to the borrower.
SPECIAL CONSIDERATIONS OF FIXED INCOME SECURITIES
There is no limit to portfolio maturity. The prices of fixed income government
securities fluctuate inversely in relation to the direction of interest rates.
A decline in market interest rates results in a rise in the market prices of
outstanding debt obligations. Conversely, an increase in market interest rates
results in a decline in market prices of outstanding debt obligations. In
either case, the amount of change in market prices of debt obligations in
response to changes in market interest rates generally depends on the maturity
of the debt obligations: the debt obligations with the longest maturities will
experience the greatest market price changes. The prices of zero coupon
securities, IOs and POs, and certain structures of CMOs are more sensitive to
fluctuations in interest rates than are conventional bonds.
The market value of debt obligations, and therefore the Fund's net asset
value, will fluctuate due to changes in economic conditions and other market
factors such as interest rates which are beyond the control of the Fund's
investment adviser. The Fund's investment adviser could be incorrect in its
expectations about the direction or extent of these market factors. Although
debt obligations with longer maturities offer potentially greater returns,
they have greater exposure to market price fluctuation. Consequently, to the
extent the Fund is significantly invested in debt obligations with longer
maturities, there is a greater possibility of fluctuation in the Fund's net
asset value.
CMOs are generally subject to higher prepayment risks than most other types of
debt instruments. Prepayment risks on mortgage securities tend to increase
during periods of declining mortgage interest rates because many borrowers
refinance their mortgages to take advantage of the more favorable rates.
Depending upon market conditions, the yield that the Fund receives from the
reinvestment of such prepayments, or any scheduled principal payments, may be
lower than the yield on the original mortgage security. As a consequence,
mortgage securities may be a less effective means of "locking in" interest
rates than other types of debt securities having the same stated maturity and
may also have less potential for capital appreciation.
With respect to securities that represent an interest solely in the interest
payments on mortgage-backed securities, because the yield to maturity is
extremely sensitive to the rate of principal payments (including prepayments)
on the related underlying mortgage-backed securities, it is possible that the
Fund might not recover its original investment on these securities if there
are substantial prepayments on the underlying mortgage.
In addition, the Fund may, but is not required to, utilize various other
investment strategies as described herein to manage the effective maturity or
duration of the Fund's fixed income securities or to enhance potential gain.
Such strategies are generally accepted by modern portfolio managers and are
regularly utilized by mutual funds and other institutional investors. These
techniques may increase the volatility of the Fund and may involve a small
investment of cash relative to the magnitude of the risk assumed.
PUT AND CALL OPTIONS. The Fund may purchase put and call options on its
portfolio securities. These options will be used as a hedge to attempt to
protect securities which the Fund holds, or will be purchasing, against
decreases or increases in value. The Fund may also write (sell) put and call
options on all or any portion of its portfolio to generate income for the
Fund. The Fund will write call options on securities either held in its
portfolio or for which it has the right to obtain without payment of further
consideration or for which it has segregated cash in the amount of any
additional consideration.
In the case of put options, the Fund will segregate cash or U.S. Treasury
obligations with a value equal to or greater than the exercise price of the
underlying securities.
The Fund may generally purchase and write over-the-counter options on
portfolio securities in negotiated transactions with the buyers or writers of
the options since options on the portfolio securities held by the Fund are not
traded on an exchange. The Fund purchases and writes options only with
investment dealers and other financial institutions (such as commercial banks
or savings and loan associations) deemed creditworthy by the Fund's adviser.
Over-the-counter options are two-party contracts with price and terms
negotiated between buyer and seller. In contrast, exchange-traded options are
third-party contracts with standardized strike prices and expiration dates and
are purchased from a clearing corporation. Exchange-traded options have a
continuous liquid market while over-the-counter options may not.
FINANCIAL FUTURES AND OPTIONS ON FUTURES. The Fund may purchase and sell
financial futures contracts to hedge all or a portion of its portfolio of
long-term debt securities against changes in interest rates. Financial futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or instrumentalities
of the U.S. government at a certain time in the future. The seller of the
contract agrees to make delivery of the type of instrument called for in the
contract and the buyer agrees to take delivery of the instrument at the
specified future time.
The Fund may write call options and purchase put options on financial futures
contracts as a hedge to attempt to protect securities in its portfolio against
decreases in value resulting from anticipated increases in market interest
rates. When the Fund writes a call option on a futures contract, it is
undertaking the obligation of selling the futures contract at a fixed price at
any time during a specified period if the option is exercised. Conversely, as
purchaser of a put option on a futures contract, the Fund is entitled (but not
obligated) to sell a futures contract at the fixed price during the life of
the option.
The Fund may also write put options and purchase call options on financial
futures contracts as a hedge against rising purchase prices of portfolio
securities resulting from anticipated decreases in market interest rates. The
Fund will use these transactions to attempt to protect its ability to purchase
portfolio securities in the future at price levels existing at the time it
enters into the transactions. When the Fund writes a put option on a futures
contract, it is undertaking to buy a particular futures contract at a fixed
price at any time during a specified period if the option is exercised. As a
purchaser of a call option on a futures contract, the Fund is entitled (but
not obligated) to purchase a futures contract at a fixed price at any time
during the life of the option.
The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed
5% of the market value of the Fund's total assets.
RISKS. When the Fund uses financial futures and options on financial
futures as hedging devices, there is a risk that the prices of the
securities subject to the futures contracts may not correlate perfectly
with the prices of the securities in the Fund's portfolio. This may
cause the futures contract and any related options to react differently
than the portfolio securities to market changes. In addition, the
Fund's investment adviser could be incorrect in its expectations about
the direction or extent of market factors such as interest rate
movements. In these events, the Fund may lose money on the futures
contract or option. It is not certain that a secondary market for
positions in futures contracts or for options will exist at all times.
Although the investment adviser will consider liquidity before entering
into options transactions, there is no assurance that a liquid
secondary market on an exchange will exist for any particular futures
contract or option at any particular time. The Fund's ability to
establish and close out futures and options positions depends on this
secondary market.
PORTFOLIO TURNOVER. Although the Fund does not intend to invest for the
purpose of seeking short-term profits, securities in its portfolio will be
sold whenever the Fund's investment adviser believes it is appropriate to do
so in light of the Fund's investment objective, without regard to the length
of time a particular security may have been held.
INVESTMENT LIMITATIONS
The Fund will not:
o borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a
set date) or pledge securities except, under certain circumstances,
the Fund may borrow up to one-third of the value of its net assets
and pledge up to 10% of the value of its total assets to secure such
borrowings; or
o invest more than 10% of its total assets in securities subject to
restrictions on resale under the Securities Act of 1933, except for
certain restricted securities which meet the criteria for liquidity
as established by the Directors.
The above investment limitations cannot be changed without shareholder
approval. The following limitation, however, may be changed by the Directors
without shareholder approval. Shareholders will be notified before any
material change in this limitation becomes effective.
The Fund will not:
o invest more than 10% of its net assets in securities which are not
readily marketable or which are otherwise considered illiquid,
including over-the-counter options and repurchase agreements
providing for settlement in more than seven days after notice.
NET ASSET VALUE
The Fund's net asset value per share fluctuates. The net asset value for
Shares is determined by adding the interest of each class of Shares in the
market value of all securities and other assets of the Fund, subtracting the
interest of each class of Shares in the liabilities of the Fund and those
attributable to each class of Shares, and dividing the remainder by the total
number of each class of Shares outstanding. The net asset value for each class
of Shares may differ due to the variance in daily income realized by each
class. Such variance will reflect only accrued net income to which the
shareholders of a particular class are entitled.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days during which no Shares are tendered for redemption and no
orders to purchase shares are received; and (iii) the following holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day.
INVESTING IN THE FUND
This prospectus offers investors three classes of Shares that carry sales
charges and contingent deferred sales charges in different forms and amounts
and which bear different levels of expenses.
CLASS A SHARES
An investor who purchases Class A Shares pays a maximum sales charge of 4.50%
at the time of purchase. As a result, Class A Shares are not subject to any
charges when they are redeemed (except for special programs offered under
"Purchases with Proceeds From Redemptions of Unaffiliated Investment
Companies.") Certain purchases of Class A Shares qualify for reduced sales
charges. See "Reducing the Sales Charge- Class A Shares." Class A Shares have
no conversion feature.
CLASS B SHARES
Class B Shares are sold without an initial sales charge, but are subject to a
contingent deferred sales charge of up to 5.50% if redeemed within six full
years following purchase. Class B Shares also bear a higher 12b-1 fee than
Class A Shares. Class B Shares will automatically convert into Class A Shares,
based on relative net asset value, on or around the fifteenth of the month
eight full years after the purchase date. Class B Shares provide an investor
the benefit of putting all of the investor's dollars to work from the time the
investment is made, but (until conversion) will have a higher expense ratio
and pay lower dividends than Class A Shares due to the higher 12b-1 fee.
CLASS C SHARES
Class C Shares are sold without an initial sales charge, but are subject to a
1.00% contingent deferred sales charge on assets redeemed within the first 12
months following purchase. Class C Shares provide an investor the benefit of
putting all of the investor's dollars to work from the time the investment is
made, but will have a higher expense ratio and pay lower dividends than Class
A Shares due to the higher 12b-1 fee. Class C Shares have no conversion
feature.
HOW TO PURCHASE SHARES
Shares of the Fund are sold on days on which the New York Stock Exchange is
open. Shares of the Fund may be purchased, as described below, either through
a financial institution (such as a bank or broker/dealer which has a sales
agreement with the distributor) or by wire or by check directly to the Fund,
with a minimum initial investment of $500 for Class A Shares and $1,500 for
Class B Shares and Class C Shares. Additional investments can be made for as
little as $100. The minimum initial and subsequent investment for retirement
plans is only $50. (Financial institutions may impose different minimum
investment requirements on their customers.)
In connection with any sale, Federated Securities Corp., may from time to
time, offer certain items of nominal value to any shareholder or investor. The
Fund reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and
returning the new account form available from the Fund before Shares can be
purchased.
INVESTING IN CLASS A SHARES
Class A Shares are sold at their net asset value next determined after an
order is received, plus a sales charge as follows:
SALES CHARGE AS SALES CHARGE AS
DEALER CONCESSION AS
A PERCENTAGE OF A PERCENTAGE OF
A PERCENTAGE OF
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE NET AMOUNT INVESTED
PUBLIC OFFERING PRICE
Less than $100,000 4.50% 4.71% 4.00%
$100,000 - $249,000 3.75% 3.90% 3.25%
$250,000 - $499,999 2.50% 2.56% 2.25%
$500,000 - $999,999 2.00% 2.04% 1.80%
$1 million or more 0.00% 0.00% 0.25%*
*See sub-section entitled
"DEALER CONCESSION."
No sales charge is imposed for Class A Shares purchased through financial
intermediaries that do not receive a reallowance of the sales charge. However,
investors who purchase Shares through a trust department, investment adviser,
or other financial intermediary may be charged a service fee or other fee by
the financial intermediary. Additionally, no sales charge is imposed for Class
A Shares purchased through "wrap accounts" or similar programs, under which
clients pay a fee for services, or for shareholders designated as Liberty Life
Members.
DEALER CONCESSION. For sales of Class A Shares, a dealer will normally receive
up to 90% of the applicable sales charge. Any portion of the sales charge
which is not paid to a dealer will be retained by the distributor. However,
the distributor, may offer to pay dealers up to 100% of the sales charge
retained by it. Such payments may take the form of cash or promotional
incentives, such as reimbursement of certain expenses of qualified employees
and their spouses to attend informational meetings about the Fund or other
special events at recreational-type facilities, or items of material value. In
some instances, these incentives will be made available only to dealers whose
employees have sold or may sell a significant amount of Shares. On purchases
of $1 million or more, the investor pays no sales charge; however, the
distributor will make twelve monthly payments to the dealer totaling 0.25% of
the public offering price over the first year following the purchase. Such
payments are based on the original purchase price of Shares outstanding at
each month end.
The sales charge for Shares sold other than through registered broker/dealers
will be retained by Federated Securities Corp. Federated Securities Corp. may
pay fees to banks out of the sales charge in exchange for sales and/or
administrative services performed on behalf of the bank's customers in
connection with the initiation of customer accounts and purchases of Shares.
REDUCING OR ELIMINATING THE SALES CHARGE
The sales charge can be reduced or eliminated on the purchase of Class A
Shares through:
o quantity discounts and accumulated purchases;
o concurrent purchases;
o signing a 13-month letter of intent;
o using the reinvestment privilege; or
o purchases with proceeds from redemptions of unaffiliated investment company
shares.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table on page 7,
larger purchases can reduce or eliminate the sales charge paid. The Fund will
combine purchases of Class A Shares made on the same day by the investor, the
investor's spouse, and the investor's children under age 21 when it calculates
the sales charge. In addition, the sales charge, if applicable, is reduced or
eliminated for purchases made at one time by a trustee or fiduciary for a
single trust estate or a single fiduciary account.
If an additional purchase of Class A Shares is made, the Fund will consider
the previous purchases still invested in the Fund. For example, if a
shareholder already owns Class A Shares having a current value at the public
offering price of $90,000 and he purchases $10,000 more at the current public
offering price, the sales charge on the additional purchase according to the
schedule now in effect would be 3.75%, not 4.50%.
To receive the sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at the
time the purchase is made that Class A Shares are already owned or that
purchases are being combined. The Fund will reduce the sales charge after it
confirms the purchases.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge reduction
or elimination, a shareholder has the privilege of combining concurrent
purchases of Class A Shares in funds advised by subsidiaries of Federated
Investors (the "Federated Funds"), the purchase price of which includes a
sales charge. For example, if a shareholder concurrently invested $80,000 in
one of the Class A Shares in the Federated Funds with a sales charge, and
$20,000 in the Class A Shares of this Fund, the sales charge would be reduced.
To receive this sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at the
time the concurrent purchases are made. The Fund will reduce the sales charge
after it confirms the purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $100,000 of
shares in certain funds in the Federated Funds (excluding money market funds)
over the next 13 months, the sales charge may be reduced or eliminated by
signing a letter of intent to that effect. This letter of intent includes a
provision for a sales charge adjustment depending on the amount actually
purchased within the 13-month period and a provision for the custodian to hold
up to 4.50% of the total amount intended to be purchased in escrow (in Shares)
until such purchase is completed.
The Shares held in escrow in the shareholder's account will be released upon
fulfillment of the letter of intent or the end of the 13-month period,
whichever comes first. If the amount specified in the letter of intent is not
purchased, an appropriate number of escrowed Shares may be redeemed in order
to realize the difference in the sales charge.
While this letter of intent will not obligate the shareholder to purchase
Shares, each purchase during the period will be at the sales charge applicable
to the total amount intended to be purchased. At the time a letter of intent
is established, current balances in accounts in any Class A Shares of certain
funds in the Federated Funds, excluding money market accounts, will be
aggregated to provide a purchase credit towards fulfillment of the letter of
intent. Prior trade prices will not be adjusted.
REINVESTMENT PRIVILEGE. If Class A Shares in the Fund have been redeemed, the
shareholder has a right, within 120 days, to reinvest the redemption proceeds
at the next-determined net asset value without any sales charge. Federated
Securities Corp. must be notified by the shareholder in writing or by his
financial institution of the reinvestment in order to eliminate a sales
charge. If the shareholder redeems his Class A Shares in the Fund, there may
be tax consequences.
PURCHASES WITH PROCEEDS FROM REDEMPTIONS OF UNAFFILIATED INVESTMENT COMPANIES.
Investors may purchase Class A Shares at net asset value, without a sales
charge, with the proceeds from the redemption of shares of an unaffiliated
investment company that were purchased or redeemed with a sales charge or
commission and were not distributed by Federated Securities Corp. The purchase
must be made within 60 days of the redemption, and Federated Securities Corp.
must be notified by the investor in writing, or by his financial institution,
at the time the purchase is made. From time to time, the Fund may offer
dealers a payment of .50 of 1.00% for Shares purchased under this program. If
Shares are purchased in this manner, Fund purchases will be subject to a
contingent deferred sales charge for one year from the date of purchase.
INVESTING IN CLASS B SHARES
Class B Shares are sold at their net asset value next determined after an
order is received. While Class B Shares are sold without an initial sales
charge, under certain circumstances described under "Contingent Deferred Sales
Charge-Class B Shares," a contingent deferred sales charge may be applied by
the distributor at the time Class B Shares are redeemed.
CONVERSION OF CLASS B SHARES. Class B Shares will automatically convert into
Class A Shares on or around the fifteenth of the month eight full years after
the purchase date, except as noted below, and will no longer be subject to a
distribution services fee (see "Distribution of Shares"). Such conversion will
be on the basis of the relative net asset values per share, without the
imposition of any sales charge, fee or other charge. Class B Shares acquired
by exchange from Class B Shares of another fund in the Federated Funds will
convert into Class A Shares based on the time of the initial purchase. For
purposes of conversion to Class A Shares, Shares purchased through the
reinvestment of dividends and distributions paid on Class B Shares will be
considered to be held in a separate sub-account. Each time any Class B Shares
in the shareholder's account (other than those in the sub-account) convert to
Class A Shares, an equal pro rata portion of the Class B Shares in the sub-
account will also convert to Class A Shares. The conversion of Class B Shares
to Class A Shares is subject to the continuing availability of a ruling from
the Internal Revenue Service or an opinion of counsel that such conversions
will not constitute taxable events for federal tax purposes. There can be no
assurance that such ruling or opinion will be available, and the conversion of
Class B Shares to Class A Shares will not occur if such ruling or opinion is
not available. In such event, Class B Shares would continue to be subject to
higher expenses than Class A Shares for an indefinite period.
Orders for $250,000 or more of Class B Shares will automatically be invested
in Class A Shares.
INVESTING IN CLASS C SHARES
Class C Shares are sold at net asset value next determined after an order is
received. A contingent deferred sales charge of 1.00% will be charged on
assets redeemed within the first full 12 months following purchase. For a
complete description of this charge see "Contingent Deferred Sales Charge-
Class C Shares."
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION
An investor may call his financial institution (such as a bank or an
investment dealer) to place an order to purchase Shares. Orders placed through
a financial institution are considered received when the Fund is notified of
the purchase order or when payment is converted into federal funds. Purchase
orders through a registered broker/dealer must be received by the broker
before 4:00 p.m. (Eastern time) and must be transmitted by the broker to the
Fund before 5:00 p.m. (Eastern time) in order for Shares to be purchased at
that day's price. Purchase orders through other financial institutions must be
received by the financial institution and transmitted to the Fund before 4:00
p.m. (Eastern time) in order for Shares to be purchased at that day's price.
It is the financial institution's responsibility to transmit orders promptly.
Financial institutions may charge additional fees for their services.
The financial institution which maintains investor accounts in Class B Shares
or Class C Shares with the Fund must do so on a fully disclosed basis unless
it accounts for share ownership periods used in calculating the contingent
deferred sales charge (see "Contingent Deferred Sales Charge"). In addition,
advance payments made to financial institutions may be subject to reclaim by
the distributor for accounts transferred to financial institutions which do
not maintain investor accounts on a fully disclosed basis and do not account
for share ownership periods.
PURCHASING SHARES BY WIRE
Once an account has been established, Shares may be purchased by wire by
calling the Fund. All information needed will be taken over the telephone, and
the order is considered received when the transfer agent's bank receives
payment by wire. Federal funds should be wired as follows: Federated
Shareholder Services Company, c/o State Street Bank and Trust Company, Boston,
MA; Atten: EDGEWIRE; For Credit to: (Fund Name) (Fund Class); (Fund Number);
Fund Number (this number can be found on the account statement or by
contacting the Fund); Group Number or Order Number; Nominee or Institution
Name; and ABA Number 011000028. Shares cannot be purchased by wire on holidays
when wire transfers are restricted. Questions on wire purchases should be
directed to your shareholder services representative at the telephone number
listed on your account statement.
PURCHASING SHARES BY CHECK
Once an account has been established, Shares may be purchased by sending a
check to: Federated Shareholder Services Company, P.O. Box 8600, Boston, MA
02266-8600. The check should be made payable to the name of the Fund
(designate class of Shares and account number). Orders by mail are considered
received when payment by check is converted into federal funds (normally the
business day after the check is received).
SPECIAL PURCHASE FEATURES
SYSTEMATIC INVESTMENT PROGRAM. Once a Fund account has been opened,
shareholders may add to their investment on a regular basis in a minimum
amount of $100. Under this program, funds may be automatically withdrawn
periodically from the shareholder's checking account at an Automated Clearing
House ("ACH") member and invested in the Fund at the net asset value next
determined after an order is received by the Fund, plus the sales charge, if
applicable. Shareholders should contact their financial institution or the
Fund to participate in this program.
RETIREMENT PLANS. Fund Shares can be purchased as an investment for
retirement plans or IRA accounts. For further details, contact the Fund and
consult a tax adviser.
EXCHANGE PRIVILEGE
CLASS A SHARES. Class A shareholders may exchange all or some of their Shares
for Class A Shares of certain other funds in the Federated Funds at net asset
value. Neither the Fund nor any of the funds in the Federated Funds imposes
any additional fees on exchanges.
CLASS B SHARES. Class B shareholders may exchange all or some of their Shares
for Class B Shares of other funds in the Federated Funds. (Not all of the
Federated Funds currently offer Class B Shares. Contact your financial
institution regarding the availability of other Class B Shares in the
Federated Funds). Exchanges are made at net asset value without being assessed
a contingent deferred sales charge on the exchanged Shares. To the extent that
a shareholder exchanges Shares for Class B Shares in other Federated Funds,
the time for which the exchanged-for Shares are to be held will be added to
the time for which exchanged-from Shares were held for purposes of satisfying
the applicable holding period.
CLASS C SHARES. Class C shareholders may exchange all or some of their Shares
for Class C Shares in other funds in the Federated Funds at net asset value
without a contingent deferred sales charge. (Not all funds in the Federated
Funds currently offer Class C Shares. Contact your financial institution
regarding the availability of other Class C Shares in the Federated Funds). To
the extent that a shareholder exchanges Shares for Class C Shares in other
funds in the Federated Funds, the time for which the exchanged-for Shares are
to be held will be added to the time for which exchanged-from Shares were held
for purposes of satisfying the applicable holding period. For more
information, see "Contingent Deferred Sales Charge."
The Fund has exchange privileges among like classes with other funds in the
following of the Federated Funds:
Federated American Leaders Fund, Inc.; Capital Growth Fund; Federated Bond
Fund; Federated Small Cap Strategies Fund; Federated Fund for U.S. Government
Securities, Inc.; Federated International Equity Fund; Federated International
Income Fund; Federated Equity Income Fund, Inc.; Federated High Income Bond
Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated U.S.
Government Money Market Trust; Federated Utility Fund, Inc.; Federated Limited
Term Fund; Federated Limited Term Municipal Fund; Federated Michigan
Intermediate Municipal Trust; Federated Pennsylvania Municipal Income Fund;
Federated Strategic Income Fund; Federated Tax-Free Instruments Trust; and
Federated World Utility Fund.
Prospectuses for these funds are available by writing to Federated Securities
Corp.
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange Shares having a net asset
value equal to the minimum investment requirements of the fund into which the
exchange is being made. Before the exchange, the shareholder must receive a
prospectus of the fund for which the exchange is being made.
This privilege is available to shareholders resident in any state in which the
Shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
proceeds invested in the same class of Shares of the other fund. The exchange
privilege may be modified or terminated at any time. Shareholders will be
notified of the modification or termination of the exchange privilege.
Further information on the exchange privilege and prospectuses for the
Federated Funds are available by contacting the Fund.
TAX CONSEQUENCES. An exercise of the exchange privilege is treated as a sale
for federal income tax purposes. Depending upon the circumstances, a capital
gain or loss may be realized.
MAKING AN EXCHANGE. Instructions for exchanges for the Federated Funds may be
given in writing or by telephone. Written instructions may require a signature
guarantee. Shareholders of the Fund may have difficulty in making exchanges by
telephone through brokers and other financial institutions during times of
drastic economic or market changes. If a shareholder cannot contact his broker
or financial institution by telephone, it is recommended that an exchange
request be made in writing and sent by overnight mail to Federated Shareholder
Services Company, 500 Victory Road - 2nd Floor, Quincy, Massachusetts 02171.
TELEPHONE INSTRUCTIONS. Telephone instructions made by the investor may be
carried out only if a telephone authorization form completed by the investor
is on file with the Fund. If the instructions are given by a broker, a
telephone authorization form completed by the broker must be on file with the
Fund. If reasonable procedures are not followed by the Fund, it may be liable
for losses due to unauthorized or fraudulent telephone instructions. Shares
may be exchanged between two funds by telephone only if the two funds have
identical shareholder registrations.
Any Shares held in certificate form cannot be exchanged by telephone but must
be forwarded to Federated Shareholder Services Company, P.O. Box 8600, Boston,
Massachusetts 02266-8600 and deposited to the shareholder's account before
being exchanged. Telephone exchange instructions are recorded and will be
binding upon the shareholder. Such instructions will be processed as of 4:00
p.m. (Eastern time) and must be received by the Fund before that time for
Shares to be exchanged the same day. Shareholders exchanging into a Fund will
begin receiving dividends the following business day. This privilege may be
modified or terminated at any time.
HOW TO REDEEM SHARES
Shares are redeemed at their net asset value, less any applicable contingent
deferred sales charge, next determined after the Fund receives the redemption
request. Redemptions will be made on days on which the Fund computes its net
asset value. Redemption requests must be received in proper form and can be
made as described below. Redemptions of Shares held through retirement plans
will be governed by the requirements of the respective plans.
REDEEMING SHARES THROUGH YOUR FINANCIAL INSTITUTION. Shares of the Fund may
be redeemed by calling your financial institution to request the redemption.
Shares will be redeemed at the net asset value, less any applicable contingent
deferred sales charge, next determined after the Fund receives the redemption
request from the financial institution. Redemption requests through a
registered broker/dealer must be received by the broker before 4:00 p.m.
(Eastern time) and must be transmitted by the broker to the Fund before 5:00
p.m. (Eastern time) in order for Shares to be redeemed at that day's net asset
value. Redemption requests through other financial institutions (such as
banks) must be received by the financial institution and transmitted to the
Fund before 4:00 p.m. (Eastern time) in order for Shares to be redeemed at
that day's net asset value. The financial institution is responsible for
promptly submitting redemption requests and providing proper written
redemption instructions. Customary fees and commissions may be charged by the
financial institution for this service.
REDEEMING SHARES BY TELEPHONE. Shares may be redeemed in any amount by
calling the Fund provided the Fund has a properly completed authorization
form. These forms can be obtained from Federated Securities Corp. Proceeds
will be mailed in the form of a check, to the shareholder's address of record
or by wire transfer to the shareholder's account at a domestic commercial bank
that is a member of the Federal Reserve System. The minimum amount for a wire
transfer is $1,000. Proceeds from redeemed Shares purchased by check or
through ACH will not be wired until that method of payment has cleared.
Telephone instructions will be recorded. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. In the event of drastic economic or market
changes, a shareholder may experience difficulty in redeeming by telephone. If
this occurs, "Redeeming Shares By Mail" should be considered. If at any time
the Fund shall determine it necessary to terminate or modify the telephone
redemption privilege, shareholders would be promptly notified.
REDEEMING SHARES BY MAIL. Shares may be redeemed in any amount by mailing a
written request to: Federated Shareholder Services Company, P.O. Box 8600,
Boston, MA 02266-8600. If share certificates have been issued, they should be
sent unendorsed with the written request by registered or certified mail to
the address noted above.
The written request should state: Fund name and Class designation; the account
name as registered with the Fund; the account number; and the number of Shares
to be redeemed or the dollar amount requested. All owners of the account must
sign the request exactly as the Shares are registered. Normally, a check for
the proceeds is mailed within one business day, but in no event more than
seven days, after the receipt of a proper written redemption request.
Dividends are paid up to and including the day that a redemption request is
processed.
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by a
commercial or savings bank, trust company, or savings association whose
deposits are insured by an organization which is administered by the Federal
Deposit Insurance Corporation; a member firm of a domestic stock exchange; or
any other "eligible guarantor institution," as defined in the Securities Act
of 1934. The Fund does not accept signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
SYSTEMATIC WITHDRAWAL PROGRAM. Shareholders who desire to receive payments of
a predetermined amount not less than $100 may take advantage of the Systematic
Withdrawal Program. Under this program, Shares are redeemed to provide for
periodic withdrawal payments in an amount directed by the shareholder.
Depending upon the amount of the withdrawal payments, the amount of dividends
paid and capital gains distributions with respect to Shares, and the
fluctuation of the net asset value of Shares redeemed under this program,
redemptions may reduce, and eventually deplete, the shareholder's investment
in the Fund. For this reason, payments under this program should not be
considered as yield or income on the shareholder's investment in the Fund. To
be eligible to participate in this program, a shareholder must have an account
value of at least $10,000. A shareholder may apply for participation in this
program through his financial institution. Due to the fact that Class A Shares
are sold with a sales charge, it is not advisable for shareholders to continue
to purchase Class A Shares while participating in this program. A contingent
deferred sales charge may be imposed on Class B Shares and C Shares.
CONTINGENT DEFERRED SALES CHARGE
Shareholders may be subject to a contingent deferred sales charge upon
redemption of their Shares under the following circumstances:
o CLASS A SHARES
Class A Shares purchased under a periodic special offering with the proceeds
of a redemption of Shares of an unaffiliated investment company purchased or
redeemed with a sales charge and not distributed by Federated Securities Corp.
may be charged a contingent deferred sales charge of .50 of 1.00% for
redemptions made within one full year of purchase. Any applicable contingent
deferred sales charge will be imposed on the lesser of the net asset value of
the redeemed Shares at the time of purchase or the net asset value of the
redeemed Shares at the time of redemption.
o CLASS B SHARES
Shareholders redeeming Class B Shares from their Fund accounts within six full
years of the purchase date of those Shares will be charged a contingent
deferred sales charge by the Fund's distributor. Any applicable contingent
deferred sales charge will be imposed on the lesser of the net asset value of
the redeemed Shares at the time of redemption in accordance with the
following schedule:
YEAR OF REDEMPTION CONTINGENT DEFERRED
AFTER PURCHASE SALES CHARGE
First........................................................... 5.50%
Second......................................................... 4.75%
Third.......................................................... 4.00%
Fourth.......................................................... 3.00%
Fifth........................................................... 2.00%
Sixth........................................................... 1.00%
Seventh and thereafter...................................... 0.00%
oCLASS C SHARES
Shareholders redeeming Class C Shares from their Fund accounts within one full
year of the purchase date of those Shares will be charged a contingent
deferred sales charge by the Fund's distributor of 1.00%. Any applicable
contingent deferred sales charge will be imposed on the lesser of the net
asset value of the redeemed Shares at the time of purchase or the net asset
value of the redeemed Shares at the time of redemption.
o CLASS A SHARES, CLASS B SHARES , AND CLASS C SHARES
The contingent deferred sales charge will be deducted from the redemption
proceeds otherwise payable to the shareholder and will be retained by the
distributor. The contingent deferred sales charge will not be imposed with
respect to: (1) Shares acquired through the reinvestment of dividends or
distributions of long-term capital gains; and (2) Shares held for more than
six full years from the date of purchase with respect to Class B Shares and
one full year from the date of purchase with respect to Class C Shares and
applicable Class A Shares. Redemptions will be processed in a manner intended
to maximize the amount of redemption which will not be subject to a contingent
deferred sales charge. In computing the amount of the applicable contingent
deferred sales charge, redemptions are deemed to have occurred in the
following order: (1) Shares acquired through the reinvestment of dividends and
long-term capital gains; (2) Shares held for more than six full years from the
date of purchase with respect to Class B Shares and one full year from the
date of purchase with respect to Class C Shares and applicable Class A Shares;
(3) Shares held for fewer than six years with respect to Class B Shares and
one full year from the date of purchase with respect to Class C Shares and
applicable Class A Shares on a first-in, first-out basis. A contingent
deferred sales charge is not assessed in connection with an exchange of Fund
Shares for Shares of certain other funds in the Federated Funds in the same
class (see "Exchange Privilege"). Any contingent deferred sales charge imposed
at the time the exchanged for Shares are redeemed is calculated as if the
shareholder had held the Shares from the date on which he became a shareholder
of the exchanged-from Shares. Moreover, the contingent deferred sales charge
will be eliminated with respect to certain redemptions (see "Elimination of
Contingent Deferred Sales Charge").
ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge will not be charged in connection with
exchanges of the like Shares in certain other Federated Funds.
The contingent deferred sales charge will be eliminated with respect to the
following redemptions: (1) redemptions following the death or disability, as
defined in Section 72(m)(7) of the Internal Revenue Code of 1986, of a
shareholder; (2) redemptions representing minimum required distributions from
an Individual Retirement Account or other retirement plan to a shareholder who
has attained the age of 70-1/2; and (3) involuntary redemptions by the Fund of
Shares in shareholder accounts that do not comply with the minimum balance
requirements. No contingent deferred sales charge will be imposed on
redemptions of Shares held by Directors, employees and sales representatives
of the Fund, the distributor, or affiliates of the Fund or distributor;
employees of any financial institution that sells Shares of the Fund pursuant
to a sales agreement with the distributor; and spouses and children under the
age of 21 of the aforementioned persons. Finally, no contingent deferred sales
charge will be imposed on the redemption of Shares originally purchased
through a bank trust department, an investment adviser registered under the
Investment Advisers Act of 1940, or any other financial institution, to the
extent that no payments were advanced for purchases made through such
entities. The Directors reserve the right to discontinue elimination of the
contingent deferred sales charge. Shareholders will be notified of such
elimination. Any Shares purchased prior to the termination of such waiver
would have the contingent deferred sales charge eliminated as provided in the
Fund's prospectus at the time of the purchase of the Shares. If a shareholder
making a redemption qualifies for an elimination of the contingent deferred
sales charge, the shareholder must notify Federated Securities Corp. or the
transfer agent in writing that he is entitled to such elimination.
ACCOUNT AND SHARE INFORMATION
O CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Shareholder Services Company
maintains a share account for each shareholder. Share certificates are not
issued unless requested in writing to Federated Shareholder Services Company.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during
that month.
O DIVIDENDS
Dividends are declared and paid monthly to all shareholders invested in the
Fund on the record date. Distributions of any net realized long-term capital
gains will be made at least once every twelve months.
O ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the Class A Share required
minimum value of $500 or the required minimum value of $1,500 for Class B
Shares and Class C Shares. This requirement does not apply, however, if the
balance falls below the required minimum value because of changes in the net
asset value of the respective Share Class. Before Shares are redeemed to close
an account, the shareholder is notified in writing and allowed 30 days to
purchase additional Shares to meet the minimum requirement.
RETIREMENT PLANS
Shares of the Fund can be purchased as an investment for retirement plans or
for IRA accounts. For further details contact Federated Securities Corp. and
consult a tax adviser.
FUND INFORMATION
MANAGEMENT OF THE FUND
DIRECTORS. The Fund is managed by a Board of Directors. The Directors are
responsible for managing the Fund's business affairs and for exercising all
the Fund's powers except those reserved for the shareholders. An Executive
Committee of the Directors handles the Directors' responsibilities between
meetings of the Directors.
INVESTMENT ADVISER. Under the terms of an Advisory Agreement between the Fund
and Federated Advisers, Federated Advisers will furnish to the Fund such
investment advice, statistical and other factual information as may, from time
to time, be reasonably requested by the Fund.
Both the Fund and the Adviser have adopted strict codes of ethics governing
the conduct of all employees who manage the Fund and its portfolio securities.
These codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance
and periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Directors and could
result in severe penalties.
ADVISORY FEES. The Adviser receives an annual investment advisory fee
equal to .75 of 1% of the Fund's average daily net assets. Under the
investment advisory contract which provides for the voluntary waiver
and reimbursement of expenses by the Adviser, the Adviser may
voluntarily choose to waive a portion of its fee or reimburse the Funds
for certain operating expenses. The Adviser can terminate this
voluntary reimbursement of expenses at any time at its sole discretion.
The Adviser has also undertaken to reimburse the Fund for operating
expenses in excess of limitations established by certain states.
ADVISER'S BACKGROUND. Federated Advisers, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under
the Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors. All of the Class A (voting) shares of Federated Investors
are owned by a trust, the trustees of which are John F. Donahue,
Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee
of Federated Investors.
Federated Advisers and other subsidiaries of Federated Investors serve
as investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services to a number of investment companies. With over $80 billion
invested across more than 250 funds under management and/or
administration by its subsidiaries, as of December 31, 1995, Federated
Investors is one of the largest mutual fund investment managers in the
United States. With more than 1,800 employees, Federated continues to
be led by the management who founded the company in 1955. Federated
funds are presently at work in and through 4,000 financial
institututions nationwide. More than 100,000 professionals have elected
Federated funds for their clients.
PORTFOLIO MANAGERS' BACKGROUND. James D. Roberge has been the Fund's
portfolio manager since March 1995. Mr. Roberge joined Federated
Investors in 1990 and has been a Vice President of the Fund's
investment adviser since 1994. Mr. Roberge served as an Assistant Vice
President of the Fund's investment adviser from 1992 to 1994 and as an
investment analyst from 1990 to 1992. Mr. Roberge is a Chartered
Financial Analyst and received his M.B.A. in Finance from The Wharton
School of the University of Pennsylvania.
Kathleen Foody-Malus has been the Fund's portfolio manger since July
1993. Ms. Foody-Malus joined Federated Investors in 1983 and has been a
Vice President of the Fund's investment 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.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for Shares of the
Fund. Federated Securities Corp. is located at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779. It is a Pennsylvania corporation
organized on November 14, 1969, and is the principal distributor for a number
of investment companies. Federated Securities Corp. is a subsidiary of
Federated Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
The distributor may offer to pay financial institutions an amount up to 1% of
the net asset value of Class C Shares purchased by their clients or customers
at the time of purchase. These payments will be made directly by the
distributor from its assets, and will not be made from assets of the Fund.
Financial institutions may elect to waive the initial payment described above;
such waiver will result in the waiver by the Fund of the otherwise applicable
contingent deferred sales charge.
The distributor will pay dealers an amount equal to 5.50% of the net asset
value of Class B Shares purchased by their clients or customers. These
payments will be made directly by the distributor from its assets, and will
not be made from the assets of the Fund. Dealers may voluntarily waive receipt
of all or any portion of these payments. The distributor may pay a portion of
the distribution fee discussed below to financial institutions that waive all
or any portion of the advance payments.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution
Plan"), Class A Shares, Class B Shares and Class C Shares will pay a fee to
the distributor in an amount computed at an annual rate of 0.25%, 0.75%, and
0.75% of 1%, respectively, of the average daily net assets of each class of
Shares to finance any activity which is principally intended to result in the
sale of Shares subject to the Distribution Plan. For Class C Shares, the
distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers to
provide sales services or distribution-related support services as agents for
their clients or customers. With respect to Class B Shares, because
distribution fees to be paid by the Fund to the distributor may not exceed an
annual rate of 0.75% of 1% of each class of Shares' average daily net assets,
it will take the distributor a number of years to recoup the expenses it has
incurred for its distribution and distribution-related services pursuant to
the Plan. The Fund is not currently making payments for Class A Shares under
the Distribution Plan, nor does it anticipate doing so in the immediate
future.
The Distribution Plan is a compensation type Plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund
does not pay for unreimbursed expenses of the distributor, including amounts
expended by the distributor in excess of amounts received by it from the Fund,
interest, carrying or other financing charges in connection with excess
amounts expended, or the distributor's overhead expenses. However, the
distributor may be able to recover such amounts or may earn a profit from
future payments made by Shares under the Plan.
In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under
which the Fund may make payments up to 0.25 of 1% of the average daily net
asset value of Class A Shares, Class B Shares, and Class C Shares to obtain
certain personal services for shareholders and for the maintenance of
shareholder accounts ("Shareholder Services"). Under the Shareholder Services
Agreement, Federated Shareholder Services will either perform shareholder
services directly or will select financial institutions to perform shareholder
services. Financial institutions will receive fees based upon Shares owned by
their clients or customers. The schedules of such fees and the basis upon
which such fees will be paid will be determined from time to time by the Fund
and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. Federated Securities Corp.
and Federated Shareholder Services may offer to pay a fee, from their own
assets, to financial institutions as financial assistance for providing
substantial sales services, distribution-related support services, or
shareholder services. The support may include sponsoring sales, educational
and training seminars for their employees, providing sales literature, and
engineering computer software programs that emphasize the attributes of the
Fund. Such assistance will be predicated upon the amount of Shares the
financial institution sells or may sell, and/or upon the type and nature of
sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Adviser or its
affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of Federated
Investors, provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund.
Federated Services Company provides these at an annual rate which relates to
the average aggregate daily net assets of all Federated Funds as specified
below:
AVERAGE AGGREGATE DAILY NET ASSETS
MAXIMUM ADMINISTRATIVE FEE OF THE FEDERATED FUNDS
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may choose voluntarily to waive a portion of its
fee.
EXPENSES OF THE FUND AND SHARES
Holders of Class A Shares, Class B Shares, and Class C Shares pay their
allocable portion of Fund and portfolio expenses.
The Fund expenses for which holders of Class A Shares, Class B Shares, and
Class C Shares pay their allocable portion include, but are not limited to:
the cost of organizing the Fund and continuing its existence; registering the
Fund with federal and state securities authorities; Directors' fees; auditors'
fees; the cost of meetings of Directors; legal fees of the Fund; association
membership dues; and such non-recurring and extraordinary items as may arise
from time to time.
The portfolio expenses for which holders of Class A Shares, Class B Shares,
and Class C Shares pay their allocable portion include, but are not limited
to: registering the portfolio and Shares of the portfolio; investment
advisory services; taxes and commissions; custodian fees; insurance premiums;
auditors' fees; and such non-recurring and extraordinary items as may arise
from time to time.
At present, the only expenses which are allocated specifically to Class A
Shares, Class B Shares, and Class C Shares as classes are expenses under the
Fund's Distribution Plan and fees for Shareholder Services. However, the
Directors reserve the right to allocate certain other expenses to holders of
Class A Shares, Class B Shares, and Class C Shares as it deems appropriate
("Class Expenses"). In any case, Class Expenses would be limited to:
distribution fees; transfer agent fees as identified by the transfer agent as
attributable to holders of Class A Shares, Class B Shares, and Class C Shares;
fees for Shareholder Services; printing and postage expenses related to
preparing and distributing materials such as shareholder reports, prospectuses
and proxies to current shareholders; registration fees paid to the Securities
and Exchange Commission and registration fees paid to state securities
commissions; expenses related to administrative personnel and services as
required to support holders of Class A Shares, Class B Shares, and Class C
Shares; legal fees relating solely to Class A Shares, Class B Shares, and
Class C Shares and Directors' fees incurred as a result of issues relating
solely to Class A Shares, Class B Shares, and Class C Shares.
SHAREHOLDER INFORMATION
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Director elections
and other matters submitted to shareholders for vote. All Shares of each
portfolio in the Fund have equal voting rights, except that in matters
affecting only a particular portfolio or class, only shares of that portfolio
or class are entitled to vote.
As a Maryland corporation, the Fund is not required to hold annual shareholder
meetings. Shareholder approval will be sought only for certain changes in the
Fund's operation and for the election of Directors under certain
circumstances.
Directors may be removed by Directors or by shareholders at a special meeting.
A special meeting of shareholders shall be called by the Directors upon the
request of shareholders owning at least 10% of the Fund's outstanding Shares
of all series entitled to vote.
As of April 3, 1996, Merrill Lynch, Pierce, Fenner & Smith (as record owner
holding Class F Shares for its clients), owned 110,453,218 of Class F Shares
(43.35%) of voting securities of the Fund, and therefore, may, for certain
purposes, be deemed to control the Fund and be able to affect the outcome of
certain matters presented for a vote of shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code of 1986, as amended, (the "Code")
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal income tax
on any dividends and other distributions, including capital gains
distributions, received. This applies whether dividends and distributions are
received in cash or as additional Shares. Distributions representing long-term
capital gains, if any, will be taxable to shareholders as long-term capital
gains no matter how long the shareholders have held their Shares. No federal
income tax is due on any dividends earned in an IRA or qualified retirement
plan until distributed, so long as such IRA or qualified retirement plan meets
the applicable requirements of the Code.
STATE AND LOCAL TAXES
Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.
Shareholders are urged to consult their own tax advisers regarding the status
of their accounts under state and local tax laws.
PERFORMANCE INFORMATION
From time to time, the Fund advertises its total return and yield for each
class of Shares including Class F Shares (as described under "Other Classes of
Shares").
Total return represents the change, over a specified period of time, in the
value of an investment in each class of Shares after reinvesting all income
and capital gains distributions. It is calculated by dividing that change by
the initial investment and is expressed as a percentage.
The yield of each class of Shares is calculated by dividing the net investment
income per share (as defined by the Securities and Exchange Commission) earned
by each class of Shares over a thirty-day period by the maximum offering price
per share of each class of Shares on the last day of the period. This number
is then annualized using semi-annual compounding. The yield does not
necessarily reflect income actually earned by each class of Shares, and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.
The performance information reflects the effect of non-recurring charges such
as the maximum sales charge or contingent deferred sales charge, which, if
excluded, would increase the total return and yield.
Total return and yield will be calculated separately for Class A Shares, Class
B Shares, Class C Shares, and Class F Shares.
From time to time, advertisements for Class A Shares, Class B Shares, Class C
Shares, and Class F Shares of the Fund may refer to ratings, rankings, and
other information in certain financial publications and/or compare the
performance of Class A Shares, Class B Shares, Class C Shares, and Class F
Shares to certain indices.
OTHER CLASSES OF SHARES
The Fund also offers another class of shares called Class F Shares. Class F
Shares are sold primarily to customers of financial institutions and are
subject to a front-end sales charge, a contingent deferred sales charge, and a
minimum initial investment of $1500, unless the investment is in a retirement
account, in which case the minimum initial investment is $50.
Class A Shares, Class B Shares, Class C Shares, and Class F Shares are subject
to certain of the same expenses. Expense differences, however, between Class A
Shares, Class B Shares, Class C Shares, and Class F Shares may affect the
performance of each class.
To obtain more information and a prospectus for Class F Shares, investors may
call 800-245-5051 or contact their financial institution.
ADDRESSES
Federated Government Income Securities, Inc.
Class A Shares Federated Investors Tower
Class B Shares Pittsburgh, Pennsylvania 15222-3779
Class C Shares
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, Massachusetts 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company P.O. Box 8600
Boston, Massachusetts 02266-8600
Independent Public Accountants
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(formerly, Government Income Securities, Inc.)
F Shares
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
PROSPECTUS
An Open-End, Diversified Management
Investment Company
May , 1996
---
383733102
8040406A (5/96)
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
CLASS F SHARES
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
combined prospectus for Class A Shares, Class B Shares, and Class C
Shares, dated May , 1996, and the prospectus for Class F Shares,
dated
May , 1996, of Federated Government Income Securities, Inc. (formerly,
Government Income Securities, Inc.) (the "Fund"). This Statement is not a
prospectus itself. You may request a copy of a prospectus or a paper copy
of this Statement of Additional Information, if you have received it
electronically, free of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated May , 1996
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
GENERAL INFORMATION ABOUT THE FUND 1
INVESTMENT OBJECTIVE AND POLICIES 1
TYPES OF INVESTMENTS 1
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS 1
FUTURES AND OPTIONS TRANSACTIONS 2
LENDING OF PORTFOLIO SECURITIES 4
REPURCHASE AGREEMENTS 4
REVERSE REPURCHASE AGREEMENTS 4
PORTFOLIO TURNOVER 4
INVESTMENT LIMITATIONS 5
CRITERIA FOR LIQUIDITY OF RESTRICTED SECURITIES 6
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
MANAGEMENT 7
THE FUNDS 10
FUND OWNERSHIP 11
DIRECTORS COMPENSATION 12
INVESTMENT ADVISORY SERVICES 13
ADVISER TO THE FUND 13
ADVISORY FEES 13
BROKERAGE TRANSACTIONS 13
OTHER SERVICES 14
FUND ADMINISTRATION 14
CUSTODIAN AND PORTFOLIO ACCOUNTANT 14
TRANSFER AGENT 14
INDEPENDENT AUDITORS 14
PURCHASING SHARES 14
DISTRIBUTION PLAN (CLASS A SHARES, CLASS B SHARES, AND
CLASS C SHARES ONLY) AND SHAREHOLDER
SERVICES 14
CONVERSION TO FEDERAL FUNDS 15
PURCHASES BY SALES REPRESENTATIVES,
FUND DIRECTORS, AND EMPLOYEES 15
EXCHANGING SECURITIES FOR FUND SHARES 15
DETERMINING NET ASSET VALUE 16
DETERMINING MARKET VALUE OF SECURITIES 16
EXCHANGE PRIVILEGE (CLASS F SHARES ONLY) 16
REDUCED SALES CHARGE 16
REQUIREMENTS FOR EXCHANGE 16
TAX CONSEQUENCES 17
MAKING AN EXCHANGE 17
REDEEMING SHARES 17
REDEMPTION IN KIND 17
TAX STATUS 18
THE FUND'S TAX STATUS 18
SHAREHOLDERS' TAX STATUS 18
TOTAL RETURN 18
YIELD 18
CURRENT DISTRIBUTIONS 19
PERFORMANCE COMPARISONS 19
ABOUT FEDERATED INVESTORS 20
MUTUAL FUND MARKET 20
INSTITUTIONAL CLIENTS 20
TRUST ORGANIZATIONS 20
BROKER/DEALERS AND BANK BROKER/DEALER
SUBSIDIARIES 20
FINANCIAL STATEMENTS 20
GENERAL INFORMATION ABOUT THE FUND
The Fund was established as a Massachusetts business trust on September 23,
1981, and reorganized as a Maryland corporation on February 4, 1986. Effective
March 31, 1996, the Fund changed its name to Federated Government Income
Securities, Inc.
Shares of the Fund are offered in four classes known as Class A Shares,
Class B Shares, Class C Shares, and Class F Shares (individually and
collectively referred to as "Shares" as the context may require). This
Statement of Additional Information relates to all classes of Shares of the
Fund.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide current income. Current income
includes, in general, discount earned on U.S. Treasury bills and agency
discount notes, interest earned on all other U.S. government securities and
mortgage-related securities, and short-term capital gains. The investment
objective cannot be changed without approval of shareholders.
TYPES OF INVESTMENTS
The Fund invests primarily in securities which are guaranteed as to payment of
principal and interest by the U.S. government or its instrumentalities.
U.S. GOVERNMENT SECURITIES
The types of U.S. government securities in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by
U.S. government agencies or instrumentalities. These securities are
backed by:
othe full faith and credit of the U.S. Treasury (such as Farmers Home
Administration and Government National Mortgage Association);
othe issuer's right to borrow from the U.S. Treasury (such as Farmers
Home Administration);
othe discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities (such as Federal Home Loan
Banks and Farmers Home Administration); or
o the credit of the agency or instrumentality issuing the obligations
(such as Federal Home Loan Banks, Farmers Home Administration, Farm
Credit Banks, Federal National Mortgage Association, and Federal Home
Loan Mortgage Corporation).
STRIPPED MORTGAGE-RELATED SECURITIES
Some of the mortgage-related securities purchased by the Fund may
represent an interest solely in the principal repayments or solely in the
interest payments on mortgage-backed securities (stripped mortgage-backed
securities or "SMBSs"). Due to the possibility of prepayments on the
underlying mortgages, SMBSs may be more interest-rate sensitive than
other securities purchased by the Fund. If prevailing interest rates fall
below the level at which SMBSs were issued, there may be substantial
prepayments on the underlying mortgages, leading to the relatively early
prepayments of principal-only SMBSs and a reduction in the amount of
payments made to holders of interest-only SMBSs. It is possible that the
Fund might not recover its original investment on interest-only SMBSs if
there are substantial prepayments on the underlying mortgages. Therefore,
interest-only SMBSs generally increase in value as interest rates rise
and decrease in value as interest rates fall, counter to changes in value
experienced by most fixed income securities. The Fund's adviser intends
to use this characteristic of interest-only SMBSs to reduce the effects
of interest rate changes on the value of the Fund's portfolio, while
continuing to pursue current income.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the
Fund`s records at the trade date. These assets are marked to market daily and
are maintained until the transaction has been settled.
FUTURES AND OPTIONS TRANSACTIONS
The Fund may attempt to hedge all or a portion of its portfolio by buying and
selling financial futures contracts and options on financial futures
contracts. Additionally, the Fund may buy and sell call and put options on
U.S. government securities.
FINANCIAL FUTURES CONTRACTS
A futures contract is a firm commitment by two parties, the seller who
agrees to make delivery of the specific type of security called for in
the contract ("going short") and the buyer who agrees to take delivery of
the security ("going long") at a certain time in the future. Financial
futures contracts call for the delivery of particular debt securities
issued or guaranteed by the U.S. Treasury or by specified agencies or
instrumentalities of the U.S. government.
In the fixed income securities market, price moves inversely to interest
rates. A rise in rates means a drop in price. Conversely, a drop in rates
means a rise in price. In order to hedge its holdings of fixed income
securities against a rise in market interest rates, the Fund could enter
into contracts to deliver securities at a predetermined price (i.e., "go
short") to protect itself against the possibility that the prices of its
fixed income securities may decline during the Fund's anticipated holding
period. The Fund would "go long" (agree to purchase securities in the
future at a predetermined price) to hedge against a decline in market
interest rates.
PURCHASING PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may purchase listed put options on financial futures contracts
for U.S. government securities. Unlike entering directly into a futures
contract, which requires the purchaser to buy a financial instrument on a
set date at a specified price, the purchase of a put option on a futures
contract entitles (but does not obligate) its purchaser to decide on or
before a future date whether to assume a short position at the specified
price.
The Fund would purchase put options on futures to protect portfolio
securities against decreases in value resulting from an anticipated
increase in market interest rates. Generally, if the hedged portfolio
securities decrease in value during the term of an option, the related
futures contracts will also decrease in value and the option will
increase in value. In such an event, the Fund will normally close out its
option by selling an identical option. If the hedge is successful, the
proceeds received by the Fund upon the sale of the second option will be
large enough to offset both the premium paid by the Fund for the original
option plus the realized decrease in value of the hedged securities.
Alternatively, the Fund may exercise its put option. To do so, it would
simultaneously enter into a futures contract of the type underlying the
option (for a price less than the strike price of the option) and
exercise the option. The Fund would then deliver the futures contract in
return for payment of the strike price. If the Fund neither closes out
nor exercises an option, the option will expire on the date provided in
the option contract, and the premium paid for the contract will be lost.
WRITING CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write
listed call options on futures contracts for U.S. government securities
to hedge its portfolio against an increase in market interest rates. When
the Fund writes a call option on a futures contract, it is undertaking
the obligation of assuming a short futures position (selling a futures
contract) at the fixed strike price at any time during the life of the
option if the option is exercised. As market interest rates rise, causing
the prices of futures to go down, the Fund's obligation under a call
option on a future (to sell a futures contract) costs less to fulfill,
causing the value of the Fund's call option position to increase.
In other words, as the underlying futures price goes down below the
strike price, the buyer of the option has no reason to exercise the call,
so that the Fund keeps the premium received for the option. This premium
can offset the drop in value of the Fund's fixed income portfolio which
is occurring as interest rates rise.
Prior to the expiration of a call written by the Fund, or exercise of it
by the buyer, the Fund may close out the option by buying an identical
option. If the hedge is successful, the cost of the second option will be
less than the premium received by the Fund for the initial option. The
net premium income of the Fund will then offset the decrease in value of
the hedged securities.
WRITING PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may write listed put options on financial futures contracts for
U.S. government securities to hedge its portfolio against a decrease in
market interest rates. When the Fund writes a put option on a futures
contract, it receives a premium for undertaking the obligation to assume
a long futures position (buying a futures contract) at a fixed price at
any time during the life of the option. As market interest rates
decrease, the market price of the underlying futures contract normally
increases.
As the market value of the underlying futures contract increases, the
buyer of the put option has less reason to exercise the put because the
buyer can sell the same futures contract at a higher price in the market.
The premium received by the Fund can then be used to offset the higher
prices of portfolio securities to be purchased in the future due to the
decrease in market interest rates.
Prior to the expiration of the put option, or its exercise by the buyer,
the Fund may close out the option by buying an identical option. If the
hedge is successful, the cost of buying the second option will be less
than the premium received by the Fund for the initial option.
PURCHASING CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
An additional way in which the Fund may hedge against decreases in market
interest rates is to buy a listed call option on a financial futures
contract for U.S. government securities. When the Fund purchases a call
option on a futures contract, it is purchasing the right (not the
obligation) to assume a long futures position (buy a futures contract) at
a fixed price at any time during the life of the option. As market
interest rates fall, the value of the underlying futures contract will
normally increase, resulting in an increase in value of the Fund's option
position. When the market price of the underlying futures contract
increases above the strike price plus premium paid, the Fund could
exercise its option and buy the futures contract below market price.
Prior to the exercise or expiration of the call option, the Fund could
sell an identical call option and close out its position. If the premium
received upon selling the offsetting call is greater than the premium
originally paid, the Fund has completed a successful hedge.
LIMITATION ON OPEN FUTURES POSITIONS
The Fund will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds the
current market value of its securities portfolio plus or minus the
unrealized gain or loss on those open positions, adjusted for the
correlation of volatility between the hedged securities and the futures
contracts. If this limitation is exceeded at any time, the Fund will take
prompt action to close out a sufficient number of open contracts to bring
its open futures and options positions within this limitation.
"MARGIN" IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather,
the Fund is required to deposit an amount of "initial margin" in cash or
U.S. Treasury bills with its custodian (or the broker, if legally
permitted). The nature of initial margin in futures transactions is
different from that of margin in securities transactions in that futures
contract initial margin does not involve the borrowing of funds by the
Fund to finance the transactions. Initial margin is in the nature of a
performance bond or good-faith deposit on the contract which is returned
to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund
pays or receives cash, called "variation margin," equal to the daily
change in value of the futures contract. This process is known as
"marking to market." Variation margin does not represent a borrowing or
loan by the Fund but is instead settlement between the Fund and the
broker of the amount one would owe the other if the futures contract
expired. In computing its daily net asset value, the Fund will mark to
market its open futures positions.
The Fund is also required to deposit and maintain margin when it writes
call options on futures contracts.
PURCHASING PUT AND CALL OPTIONS ON U.S. GOVERNMENT SECURITIES
The Fund may purchase put and call options on U.S. government securities
to protect against price movements in particular securities. A put option
gives the Fund, in return for a premium, the right to sell the underlying
security to the writer (seller) at a specified price during the term of
the option. A call option gives the Fund, in return for a premium, the
right to buy the underlying security from the seller.
WRITING COVERED PUT AND CALL OPTIONS ON U.S. GOVERNMENT SECURITIES
The Fund may write covered put and call options to generate income. As
writer of a call option, the Fund has the obligation upon exercise of the
option during the option period to deliver the underlying security upon
payment of the exercise price. As a writer of a put option, the Fund has
the obligation to purchase a security from the purchaser of the option
upon the exercise of the option.
The Fund may only write call options either on securities held in its
portfolio or on securities which it has the right to obtain without
payment of further consideration (or has segregated cash in the amount of
any additional consideration). In the case of put options, the Fund will
segregate cash or U.S. Treasury obligations with a value equal to or
greater than the exercise price of the underlying securities.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities increase,
the borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the
option of the Fund or the borrower. The Fund may pay reasonable administrative
and custodial fees in connection with a loan and may pay a negotiated portion
of the interest earned on the cash or equivalent collateral to the borrower or
placing broker.
REPURCHASE AGREEMENTS
The Fund requires its custodian to take possession of the securities
subject to repurchase agreements, and these securities are marked to market
daily. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities. In the event that such a defaulting
seller filed for bankruptcy or became insolvent, disposition of such
securities by the Fund might be delayed pending court action. The Fund
believes that under the regular procedures normally in effect for custody of
the Fund's portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions, such as
broker/dealers, which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Directors.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. This transaction
is similar to borrowing cash. In a reverse repurchase agreement the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of
reverse repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but the
ability to enter into reverse repurchase agreements does not ensure that the
Fund will be able to avoid selling portfolio instruments at a disadvantageous
time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
PORTFOLIO TURNOVER
The Fund will not attempt to set or meet a portfolio turnover rate since
any turnover would be incidental to transactions undertaken in an attempt to
achieve the Fund's investment objective. For the fiscal years ended February
29, 1996 and February 28, 1995, the portfolio turnover rates were 161% and
143%, respectively. The elevated portfolio turnover rate is a result of the
Fund's acquisition of securities that were more in line with current market
conditions relating to pre-payments and coupon rates. This had no significant
impact on the tax liability of the Fund and its shareholders, and Fund
expenses were not a factor as the Fund incurred no brokerage commissions.
INVESTMENT LIMITATIONS
BUYING ON MARGIN
The Fund will not purchase any securities on margin, but may obtain such
short-term credits as are necessary for clearance of transactions. The
deposit or payment by the Fund of initial or variation margin in
connection with financial futures contracts or related options
transactions is not considered the purchase of a security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money and engage in reverse repurchase agreements in amounts up to one-
third of the value of its net assets, including the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements
for investment leverage, but rather as a temporary, extraordinary or
emergency measure or to facilitate management of the portfolio by
enabling the Fund to meet redemption requests when the liquidation of
portfolio securities is deemed to be inconvenient or disadvantageous. The
Fund will not purchase any securities while any such borrowings are
outstanding. During the period any reverse repurchase agreements are
outstanding, but only to the extent necessary to assure completion of the
reverse repurchase agreements, the Fund will restrict the purchase of
portfolio instruments to money market instruments maturing on or before
the expiration date of the reverse repurchase agreements.
PLEDGING ASSETS
The Fund will not pledge, mortgage, or hypothecate any assets except
to secure permitted borrowings. In those cases, it may pledge assets
having a market value not exceeding the lesser of the dollar amounts
borrowed or 10% of the value of total assets at the time of the
borrowing. Neither the deposit of underlying securities and other assets
in escrow in connection with the writing of put or call options on U.S.
government securities nor margin deposits for the purchase and sale of
financial futures contracts and related options are deemed to be a
pledge.
INVESTING IN REAL ESTATE
The Fund will not buy 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 which are secured by real estate or
interests in real estate.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, except that the Fund may
purchase and sell financial futures contracts and related options.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities.
(This shall not prevent the purchase or holding of U.S. government
securities, repurchase agreements covering U.S. government securities, or
other transactions which are permitted by the Fund's investment objective
and policies.)
SELLING SHORT
The Fund will not sell securities short.
RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in
securities subject to restrictions on resale under the Securities Act of
1933, except for certain restricted securities which meet the criteria
for liquidity as established by the Directors.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Board of
Directors without shareholder approval. Shareholders will be notified before
any material change in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its total assets
in securities which are not readily marketable or which are otherwise
considered illiquid, including over-the-counter options and repurchase
agreements providing for settlement in more than seven days after notice.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies.
WRITING COVERED PUT AND CALL OPTIONS AND PURCHASING PUT OPTIONS
The Fund will not write call options on securities unless the
securities are held in the Fund's portfolio or unless the Fund is
entitled to them in deliverable form without further payment or after
segregating cash in the amount of any further payment. The Fund will not
purchase put options on securities unless the securities are held in the
Fund's portfolio.
CRITERIA FOR LIQUIDITY OF RESTRICTED SECURITIES
The ability of the Board of Directors ("Directors") to determine the
liquidity of certain restricted securities is permitted under a Securities
and Exchange Commission ("SEC") Staff position set forth in the adopting
release for Rule 144A under the Securities Act of 1933 (the "Rule"). The Rule
is a non-exclusive safe-harbor for certain secondary market transactions
involving securities subject to restrictions on resale under federal
securities laws. The Rule provides an exemption from registration for resales
of otherwise restricted securities to qualified institutional buyers. The
Rule was expected to further enhance the liquidity of the secondary market
for securities eligible for resale under the Rule. The Fund believes that the
Staff of the SEC has left the question of determining the liquidity of all
restricted securities to the Directors. The Directors may consider the
following criteria in determining the liquidity of certain restricted
securities:
the frequency of trades and quotes for the security;
the number of dealers willing to purchase or sell the security and
the number of other potential buyers;
dealer undertakings to make a market in the security; and
the nature of the security and the nature of the marketplace
trades.
Except with respect to borrowing money, if a percentage limitation is adhered
to at the time of the investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a
violation of such restriction.
The Fund did not engage in reverse repurchase agreements, borrow money, or
invest in illiquid securities in excess of 5% of the value of its total assets
during the last fiscal year, and has no present intent to do so in the coming
fiscal year.
For purposes of its policies and limitations, the Fund considers certificates
of deposit and demand and time deposits issued by a U.S. branch of a domestic
bank or savings and loan having capital, surplus, and undivided profits in
excess of $100,000,000 at the time of investment to be "cash items."
Cash items may include short-term obligations such as:
o obligations of the U.S. government or its agencies or
instrumentalities; and
o repurchase agreements.
FEDERATED GOVERNMENT INCOME SECURITIES, INC. MANAGEMENT
Officers and Directors are listed with their addresses, birthdates, present
positions with Federated Government Income Securities, Inc., and principal
occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Director
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research; Chairman, Passport Research, Ltd.; Chief
Executive Officer and Director or Trustee of the Funds.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Director
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital
of Pittsburgh; Director or Trustee of the Funds; formerly, Senior Partner,
Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Director
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director or Trustee of the Funds; formerly, President, Naples
Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Director
Director and Member of the Executive Committee, Michael Baker, Inc.; Director
or Trustee of the Funds; formerly, Vice Chairman and Director, PNC Bank, N.A.,
and PNC Bank Corp. and Director, Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Director
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Director
Professor of Medicine and Member, Board of Trustees, University of Pittsburgh;
Medical Director, University of Pittsburgh Medical Center - Downtown; Member,
Board of Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Director or Trustee of the Funds.
Richard B. Fisher *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
President and Director
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Director
Attorney-at-law; Partner, Henny, Kochuba, Meyer and Flaherty; Director, Eat'N
Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director or
Trustee of the Funds; formerly, Counsel, Horizon Financial, F.A., Western
Region.
Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
Director
Consultant; State Representative, Commonwealth of Massachusetts; Director or
Trustee of the Funds; formerly, President, State Street Bank and Trust Company
and State Street Boston Corporation.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Director
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee
of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Director
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Director
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director or Trustee of the Funds; President Emeritus, University of
Pittsburgh; founding Chairman, National Advisory Council for Environmental
Policy and Technology and Federal Emergency Management Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Director
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director or Trustee of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global Research Corp.; President, Passport Research,
Ltd.; Trustee, Federated Administrative Services, Federated Shareholder
Services Company, and Federated Shareholder Services; President or Executive
Vice President of the Funds; Director, Trustee, or Managing General Partner of
the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and Director of
the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp.; and Passport Research, Ltd.;
Executive Vice President and Director, Federated Securities Corp.; Trustee,
Federated Shareholder Services Company; Chairman, Treasurer, and Trustee,
Federated Administrative Services; Trustee or Director of some of the Funds;
Executive Vice President and Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.;
Trustee, Federated Shareholder Services Company; Director, Federated Services
Company; President and Trustee, Federated Shareholder Services, Director,
Federated Securities Corp.; Executive Vice President and Secretary of the
Funds.
David M. Taylor*
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors;
Controller, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Senior Vice
President, Federated Shareholder Services; Senior Vice President,
Federated Administrative Services; Treasurer of the Funds.
* This Director is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the
Board of Directors handles the responsibilities of the Board of
Directors between meetings of the Board.
THE FUNDS
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Annuity Management Series; Arrow
Funds; Automated Government Money Trust; Blanchard Funds; Blanchard Precious
Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc. ; DG Investor
Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated Adjustable
Rate U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated 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 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.; First Priority Funds; Fixed Income Securities, Inc.;
Fortress Utility Fund, Inc.; High Yield Cash Trust; Insurance Management
Series; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Term Trust, Inc. - 1999;
Liberty U.S. Government Money Market Trust; Liquid Cash Trust; Managed Series
Trust; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; Newpoint Funds; Peachtree
Funds; RIMCO Monument Funds; Targeted Duration Trust; Tax-Free Instruments
Trust; The Planters Funds; The Starburst Funds; The Starburst Funds II; The
Virtus Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Directors own less than 1% of the Fund's outstanding shares.
Merrill Lynch, Pierce, Fenner & Smith, as record owner holding Fund Shares
for its clients, owned approximately 110,453,218 shares 43.35% of Class F
Shares of the Fund as of April 3, 1996.
DIRECTORS COMPENSATION
NAME , AGGREGATE TOTAL COMPENSATION PAID
POSITION WITH COMPENSATION FROM TO DIRECTORS FROM
CORPORATION CORPORATION*# CORPORATION AND FUND COMPLEX +
John F. Donahue, $-0- $-0 for the Fund and 54 other
Chairman and Director investment companies in the Fund
Complex
Richard B. Fisher, $-0- $-0- for the Fund and 6 other
President and Director investment companies in the
Fund Complex
Thomas G. Bigley++, $3,386 $86,331 for the Fund and 54 other
Director investment companies in the Fund
Complex
John T. Conroy, Jr., $3,590 $115,760 for the Fund and 54 other
Director investment companies in the Fund
Complex
William J. Copeland, $3,590 $115,760 for the Fund and 54 other
Director investment companies in the Fund
Complex
James E. Dowd, $3,590 $115,760 for the Fund and 54 other
Director investment companies in the Fund
Complex
Lawrence D. Ellis, M.D., $3,386 $104,898 for the Fund and 54 other
Director investment companies in the Fund
Complex
Edward L. Flaherty, Jr., $3,590 $115,760 for the Fund and 54 other
Director investment companies in the Fund
Complex
Peter E. Madden, $3,386 $104,898 for the Fund and 54 other
Director investment companies in the Fund
Complex
Gregor F. Meyer, $3,386 $104,898 for the Fund and 54 other
Director investment companies in the Fund
Complex
John E. Murray, Jr., $3,386 $104,898 for the Fund and 54 other
Director investment companies in the Fund
Complex
Wesley W. Posvar, $3,386 $104,898 for the Fund and 54 other
Director investment companies in the Fund
Complex
Marjorie P. Smuts, $3,386 $104,898 for the Fund and 54 other
Director investment companies in the Fund
Complex
*Information is furnished for the fiscal year ended February 29, 1996.
#The aggregate compensation is provided for the Fund which is comprised of one
portfolio.
+The information is provided for the last calendar year.
++Mr. Bigley served on 39 investment companies in the Federated Funds Complex
from January 1 through September 30, 1995. On October 1, 1995, he was
appointed a Trustee on 15 additional Federated Funds.
INVESTMENT ADVISORY SERVICES
ADVISER TO THE FUND
The Fund's investment adviser is Federated Advisers. It is a subsidiary of
Federated Investors. All of the voting securities of Federated Investors are
owned by a trust, the Trustees of which are John F. Donahue, his wife, and his
son, J. Christopher Donahue.
The adviser shall not be liable to the Fund or any 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 Fund.
ADVISORY FEES
For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus. During the fiscal years ended
February 29, 1996 and February 28, 1995 and 1994, the Fund's adviser earned
$18,231,613, $22,038,188, and $28,541,303, respectively, of which $6,060,604,
$6,801,420, and $7,242,625, respectively, were voluntarily waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1-1/2% per
year of the remaining average net assets, the adviser will reimburse the
Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
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. In working with dealers, 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 makes decisions on portfolio transactions and selects brokers and
dealers subject to review by the Board of Directors.
The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
adviser and may include:
o advice as to the advisability of investing in securities;
o security analysis and reports;
o economic studies;
o industry studies;
o receipt of quotations for portfolio evaluations; and
o similar services.
The adviser and its affiliates exercise reasonable business judgment in
selecting 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.
Research services provided by brokers may be used by the adviser or by
affiliates of Federated Investors in advising Federated Funds and other
accounts. To the extent that receipt of these services may supplant services
for which the adviser or its affiliates might otherwise have paid, it would
tend to reduce their expenses.
For the fiscal years ended February 29, 1996 and February 28, 1995 and
1994, the Fund paid no brokerage commissions on brokerage transactions.
OTHER SERVICES
FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services necessary to the Fund for a fee as
described in the respective prospectuses. From March 1, 1994 to March 1, 1996,
Federated Administrative Services served as the Fund's Administrator. Prior to
March 1, 1994, Federated Administrative Services, Inc. served as the Fund's
Administrator. Both former Administrators are subsidiaries of Federated
Investors. For purposes of this Statement of Additional Information, Federated
Services Company, Federated Administrative Services, and Federated
Administrative Services, Inc. may hereinafter collectively be referred to as
the "Administrators." For the fiscal years ended February 29, 1996 and
February 28, 1995 and 1994, the Administrators earned $1,839,595, $2,232,807,
and $2,638,423, respectivley. Dr. Henry J. Gailliot, an officer of Federated
Advisers, the adviser to the Fund, holds approximately 20% of the outstanding
common stock and serves as a director of Commercial Data Services, Inc., a
company which provides computer processing services to Federated Services
Company.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for securities
and cash of the Fund. Federated Services Company, Pittsburgh, PA, provides
certain accounting and recordkeeping services with respect to the Fund's
portfolio investments.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on the size, type and
number of transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Deloitte & Touche LLP, Pittsburgh,
PA.
PURCHASING SHARES
Except under certain circumstances described in the respective
prospectuses, Shares are sold at their net asset value (plus a sales charge on
Class A Shares and Class F Shares only) on days the New York Stock Exchange
is open for business. The procedure for purchasing shares of the Fund is
explained in the respective prospectuses under "How to Purchase Shares" and
"Investing in Class F Shares."
DISTRIBUTION PLAN (CLASS A SHARES, CLASS B SHARES, AND CLASS C SHARES
ONLY) AND SHAREHOLDER SERVICES
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; providing office space, equipment, telephone facilities,
and various clerical, supervisory, computer, and other personnel as necessary
or beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and
assisting clients in changing dividend options, account designations, and
addresses.
By adopting the Distribution Plan, (Class A Shares, Class B Shares, and
Class C Shares only) the Directors expect that the Fund will be able to
achieve a more predictable flow of cash for investment purposes and to meet
redemptions. This will facilitate more efficient portfolio management and
assist the Fund in pursuing its investment objective. By identifying potential
investors whose needs are served by the Fund's objective, and properly
servicing these accounts, it may be possible to curb sharp fluctuations in
rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include:
(1) providing personal services to shareholders; (2) investing shareholder
assets with a minimum of delay and administrative detail; (3) enhancing
shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.
For the fiscal year ended February 29, 1996, payments in the amount of
$6,077,204 were made pursuant to the Shareholder Services Plan for Class F
Shares. Class A Shares, Class B Shares, and Class C Shares did not exist prior
to , 1996.
------------
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds before shareholders begin to
earn dividends. Federated Shareholder Services Company acts as the
shareholder's agent in depositing checks and converting them to federal
funds.
PURCHASES BY SALES REPRESENTATIVES, FUND DIRECTORS, AND EMPLOYEES
Directors, employees, and sales representatives of the Fund, Federated
Advisers, and Federated Securities Corp. or their affiliates, or any
investment dealer who has a sales agreement with Federated Securities Corp.,
and their spouses and children under 21, may buy shares at net asset value
without a sales charge and are not subject to a redemption fee to the extent
the financial institution through which the shares are sold agrees to waive
any initial payment to which it might otherwise be entitled. Shares may also
be sold without sales charges to trusts or pension or profit-sharing plans for
these persons.
These sales are made with the purchaser's written assurance that the purchase
is for investment purposes and that the securities will not be resold except
through redemption by the Fund.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange qualifying securities they already own for Shares, or
they may exchange a combination of qualifying securities and cash for Shares.
Any qualifying securities to be exchanged must meet the investment objective
and policies of the Fund, must have readily ascertainable market value, must
be liquid, and must not be subject to restrictions on resale.
The Fund will prepare a list of securities which are eligible for acceptance
and furnish this list to brokers upon request. The Fund reserves the right to
reject any security, even though it appears on the list, and the right to
amend the list of acceptable securities at any time without notice to brokers
or investors.
An investment broker acting for an investor should forward the securities in
negotiable form with an authorized letter of transmittal to Federated
Securities Corp. Federated Securities Corp. will determine that transmittal
papers are in good order and forward to the Fund's custodian, State Street
Bank and Trust Company. The Fund will notify the broker of its acceptance and
valuation of the securities within five business days of their receipt by
State Street Bank.
The Fund values such securities in the same manner as the Fund values its
portfolio securities. The basis of the exchange will depend upon the net asset
value of Shares on the day the securities are valued. One Share will be issued
for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be considered
in valuing the securities. All interest, dividends, subscription, conversion,
or other rights attached to the securities become the property of the Fund,
along with the securities.
TAX CONSEQUENCES
Exercise of this exchange privilege is treated as a sale for federal
income tax purposes. Depending upon the cost basis of the securities
exchanged for Shares, a gain or loss may be realized by the investor.
DETERMINING NET ASSET VALUE
Net asset value generally changes each day. The days on which net asset
value is calculated by the Fund are described in the respective
prospectuses.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:
o as provided by an independent pricing service;
o for short-term obligations, according to the mean between the bid and
asked prices, as furnished by an independent pricing service, or for
short-term obligations with remaining maturities of 60 days or less
at the time of purchase, at amortized cost unless the Board of
Directors determines this is not fair value; or
o at fair value as determined in good faith by the Fund's
Directors.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices. Pricing services may consider:
o yield;
o quality;
o coupon rate;
o maturity;
o type of issue;
o trading characteristics; and
o other market data.
Over-the-counter put options will be valued at the mean between the bid and
the asked prices. Covered call options will be valued at the last sale price
on the national exchange on which such option is traded. Unlisted call options
will be valued at the latest bid price as provided by brokers.
EXCHANGE PRIVILEGE (CLASS F SHARES ONLY)
This section relates only to Class F Shares of the Fund. For information
regarding the Exchange Privilege for Class A Shares, Class B Shares, and Class
C Shares of the Fund, please see the combined prospectus for these classes of
Shares.
The Securities and Exchange Commission has issued an order exempting the Fund
from certain provisions of the Investment Company Act of 1940. As a result,
Fund shareholders are allowed to exchange all or some of their Class F Shares
for Shares in certain other Federated Funds (which are sold with a sales
charge different from that of the Fund or with no sales charge and which are
advised by subsidiaries or affiliates of Federated Investors) without the
assessment of a contingent deferred sales charge on the exchanged Shares.
The order also allows certain other funds that are not advised by subsidiaries
or affiliates of Federated Investors, which do not have a sales charge, to
exchange their shares for Class F Shares on a basis other than their current
offering price. These exchanges may be made to the extent that such shares
were acquired in a prior exchange, at net asset value, for shares of a
Federated Fund carrying a sales charge.
REDUCED SALES CHARGE
If a shareholder making such an exchange qualifies for a reduction or
elimination of the sales charge, the shareholder must notify Federated
Securities Corp.
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange Class F Shares having a net
asset value equal to the minimum investment requirements of the fund into
which the exchange is being made. Before the exchange, the shareholder must
receive a prospectus of the fund for which the exchange is being made.
This privilege is available to shareholders resident in any state in which the
fund shares being acquired may be sold. Upon receipt of proper instructions
and required supporting documents, Class F Shares submitted for exchange are
redeemed and the proceeds invested in Class F Shares of the other fund.
Further information on the exchange privilege and prospectuses for Class F
Funds or certain Federated Funds are available by calling the Fund.
TAX CONSEQUENCES
Exercise of this exchange privilege is treated as a sale for federal income
tax purposes. Depending upon the circumstances, a short-term or long-term
capital gain or loss may be realized.
MAKING AN EXCHANGE
Instructions for exchanges for certain Federated Funds may be given in writing
or by telephone. Written instructions may require a signature guarantee.
TELEPHONE INSTRUCTIONS
Telephone instructions made by the investor may be carried out only if
a telephone authorization form completed by the investor is on file with
the Fund or its agents. If the instructions are given by a broker, a
telephone authorization form completed by the broker must be on file with
the Fund or its agents. Shares may be exchanged between two funds by
telephone only if the two funds have identical shareholder
registrations.
Telephoned exchange instructions may be recorded. They must be
received by the Fund or its agent before 4:00 p.m. (Eastern time) for
shares to be exchanged that day. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
REDEEMING SHARES
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Shareholder redemptions may be subject to a
contingent deferred sales charge. Redemption procedures are explained in the
respective prospectuses under "How to Redeem Shares" or "Redeeming Class F
Shares." Although the transfer agent does not charge for telephone
redemptions, it reserves the right to charge a fee for the cost of wire-
transferred redemptions of less than $5,000.
Class B Shares redeemed within six years of purchase, Class C Shares, and
applicable Class A Shares redeemed within one year of purchase, and Class F
Shares redeemed within four years of purchase may be subject to a contingent
deferred sales charge. The amount of the contingent deferred sales charge is
based upon the amount of the administrative fee paid at the time of purchase
by the distributor to the financial institutions for services rendered, and
the length of time the investor remains a shareholder in the Fund. Should
financial institutions elect to receive an amount less than the administrative
fee that is stated in the prospectus for servicing a particular shareholder,
the contingent deferred sales charge and/or holding period for that particular
shareholder will be reduced accordingly.
REDEMPTION IN KIND
Although the Fund intends to redeem Shares in cash, it reserves the right
under certain circumstances to pay the redemption price in whole or in part by
a distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable Securities
and Exchange Commission rules, taking such securities at the same value
employed in determining net asset value and selecting the securities in a
manner the Directors determine to be fair and equitable.
The Fund has elected to be governed by Rule 18f-1 of the Investment Company
Act of 1940 under which the Fund is obligated to redeem Shares for any
shareholder in cash up to the lesser of $250,000 or 1% of the Fund's net asset
value during any 90-day period.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them before
their maturity could receive less than the redemption value of their
securities and could incur certain transaction costs.
TAX STATUS
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund must,
among other requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities
held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional shares. The Fund's dividends, and any short-
term capital gains, are taxable as ordinary income.
CAPITAL GAINS
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have held
the Fund shares.
TOTAL RETURN
The Class F Shares' average annual total returns for the one-year and five-
year periods ended February 29, 1996, and for the period from April 4, 1986
(effective date of the Fund's registration statement), to February 29, 1996,
were 7.61%, 6.49%, and 7.45%, respectively. Class A Shares, Class B Shares,
and Class C Shares did not exist prior to , 1996.
------------
The average annual total return for each class of shares of the Fund is the
average compounded rate of return for a given period that would equate a
$1,000 initial investment to the ending redeemable value of that investment.
The ending redeemable value is computed by multiplying the number of Shares
owned at the end of the period by the maximum offering price per Share at the
end of the period. The number of Shares owned at the end of the period is
based on the number of Shares purchased at the beginning of the period with
$1,000, less any applicable sales charge, adjusted over the period by any
additional Shares, assuming the monthly reinvestment of all dividends and
distributions. Any applicable contingent deferred sales charge is deducted
from the ending value of the investment based on the lesser of the original
purchase price or the offering price of shares redeemed. Occassionally, total
return, which does not reflect the effect of the sales charge, may be quoted
in advertising.
YIELD
The yield for Class F Shares for the thirty-day period ended February 29,
1996, was 5.62%. Class A Shares, Class B Shares, and Class C Shares did not
exist prior to , 1996.
------------
The yield for each class of Shares is determined by dividing the net
investment income per share (as defined by the Securities and Exchange
Commission) earned by each class of Shares over a thirty-day period by the
maximum offering price per share of the respective class on the last day of
the period. This value is then annualized using semi-annual compounding. This
means that the amount of income generated during the thirty-day period is
assumed to be generated each month over a 12-month period and is reinvested
every six months. The yield does not necessarily reflect income actually
earned by the Fund because of certain adjustments required by the Securities
and Exchange Commission and, therefore, may not correlate to the dividends or
other distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in a class
of Shares, the performance will be reduced for those shareholders paying those
fees.
CURRENT DISTRIBUTIONS
The Fund's average net annualized current distribution rate for the thirty
days ended February 29, 1996, was 7.00%.
The Fund calculates its current distributions daily based upon its past twelve
months' income dividends and short-term capital gains distributions per share
divided by its offering price per share on that day. The Fund may reduce the
time period upon which it bases its calculation of current distributions if
the investment adviser believes a shortened period would be more
representative in light of current market conditions.
PERFORMANCE COMPARISONS
The Fund's performance of each class of Shares depends upon such variables
as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
changes in the Fund's or a class of Shares' expenses; and
o various other factors.
The Fund's performance fluctuates on a daily basis largely because net
earnings and offering price per Share fluctuate daily. Both net earnings and
offering price per Share are factors in the computation of yield and total
return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index
used, prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute offering price. The
financial publications and/or indices which the Fund uses in advertising may
include:
o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any change
in net asset value over a specific period of time. From time to time,
the Fund will quote its Lipper ranking in the "U.S. government funds"
category in advertising and sales literature.
o SALOMON BROTHERS 15-YEAR MORTGAGE-BACKED SECURITIES INDEX includes
the average of all 15-year mortgage securities, which include Federal
Home Loan Mortgage Corporation (Freddie Mac), Federal National
Mortgage Association (Fannie Mae), and Government National Mortgage
Association (Ginnie Mae).
o THE MERRILL LYNCH TAXABLE BOND INDICES include U.S. Treasury and
agency issues and were designed to keep pace with structural changes
in the fixed income market. The performance indicators capture all
rating changes, new issues, and any structural changes of the entire
market.
o MORNINGSTAR, INC., an independent rating service, is the publisher of
the bi-weekly Mutual Fund Values. Mutual Fund Values rates more than
1,000 NASDAQ-listed mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings
are effective for two weeks.
Advertisements and other sales literature for all four classes of Shares
may quote total returns, which are calculated on non-standardized base
periods. These total returns also represent the historic change in the value
of an investment in each class of Shares based on monthly reinvestment of
dividends over a specified period of time.
From time to time , as it deems appropriate, the Fund may advertise the
performance of a class of Shares, using charts, graphs, and descriptions,
compared to federally insured bank products, including certificates of
deposits and time deposits, and to money market funds using the Lipper
Analytical Services money market instruments average.
Advertisements may quote performance information which does not reflect the
effect of various sales charges on Class A Shares, Class B Shares, Class C
Shares, and Class F Shares.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is reflected
in its investment decision making-structured, straightforward, and consistent.
This has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands
of clients and their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.
J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed income
management. Henry A Frantzen, Executive Vice President, oversees the
management of Federated Investors' international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mututal funds. These investors, as well as businesses and
institutions, have entrusted over $2 trillion to the more than 5,500 funds
available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional
clients include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios.
The marketing effort to trust clients is headed by Mark R. Gensheimer,
Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
*Source: Investment Company Institute
FINANCIAL STATEMENTS
The Financial Statements for the fiscal year ended February 29, 1996, are
incorporated herein by reference to the Annual Report for the Fund dated
February 29, 1996 (File Nos. 2-74191 and 811-3266). A copy of the Report may
be obtained without charge by contacting the Fund.
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements. (1-4) The Financial Statements for the
fiscal year ended February 29, 1996, are incorporated herein by
reference to the Fund's Annual Report dated February 29, 1996.
(b) Exhibits:
(1) (i)Conformed copy of Articles of Incorporation of the
Registrant; +
(ii)Conformed copy of Agreement and Plan of
Reorganization; +
(2) (i)Copy of By-Laws of the Registrant; +
(ii)Copy of By-Laws Amendment of 2/87 (6.);
(iii)Copy of By-Laws Amendment of 8/87 (6.);
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of Capital Stock
of the Registrant (12.);
(5) Conformed copy of Investment Advisory Contract of the
Registrant (8.);
383733102
8040406B (5/96)
(6) (i)Form of Distributor's Contract of the Registrant
including Exhibit A; +
(ii)Form of Exhibit B to the Distributor's Contract; +
(iii)Form of Exhibit C to the Distributor's Contract; +
(iv)Form of Exhibit D to the Distributor's Contract; +
(v)The Registrant hereby incorporates the conformed
copy of the specimen Mutual Funds Sales and Service
Agreement; Mutual Funds Service Agreement and Plan
Trustee/Mutual Funds Service Agreement from Item
24(b)6 of the Cash Trust Series II Registration
Statement on Form N-1A, filed with the Commission on
July 24, 1995. (File Nos. 33-38550 and 811-6269)
(7) Not applicable;
(8) Conformed copy of Custodian Agreement of the Registrant
(12.);
+ All exhibits have been filed electronically.
6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 on Form N-1A filed April 22, 1988. (File Nos. 2-74191
and 811-3266)
8. Response is incororated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed February 26, 1990. (File Nos. 2-
74191 and 811-3266)
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 30 on Form N-1A filed April 20, 1995. (File Nos. 2-74191
and 811-3266)
(9) (i) Conformed copy of Shareholder Services Agreement of
the Registrant (12.);
(ii) Conformed copy of Agreement for Fund Accounting
Services, Administrative Services, Transfer Agency
Services, and Custody Services Procurement; +
(iii)The responses described in Item 24(b)6 are hereby
incorporated by reference.
(10) Conformed copy of Opinion and Consent of Counsel as to
Legality of Shares Being Registered (12.);
(11) Conformed copy of Consent of Independent Public
Accountants;+
(12) Not applicable;
(13) Conformed copy of Initial Capital Understanding (12.);
(14) Not applicable;
(15) Not applicable;
(16) Copy of Schedule for Computation of Fund Performance Data
(12.);
(17) Financial Data Schedule;+
(18) The Registrant hereby incorporates by reference the
conformed copy of the specimen Multiple Class Plan from
Item 24(b)(18) of the World Investment Series, Inc.
Registration Statement on Form N-1A, filed with the
Commission on January 26, 1996. (File Nos. 33-52149 and
811-07141);
(19) Conformed copy of Power of Attorney; +
Item 25. Persons Controlled by or Under Common Control with Registrant:
None
+ All exhibits have been filed electronically.
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 30 on Form N-1A filed April 20, 1995. (File Nos. 2-74191
and 811-3266)
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of April 3, 1996
Shares of Capital Stock 65,090
($.001 per Share par value)
Item 27. Indemnification: (1.)
Item 28. Business and Other Connections of Investment Adviser:
(a)For a description of the other business of the investment
adviser, see the section entitled "Fund Information - Management
of the Fund" 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 "Fund Management - Officers and Directors." 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 West Market Street, Georgetown, Delaware 19947.
The remaining Officers of the investment adviser are: Mark L.
Mallon, William D. Dawson, III, Henry A. Frantzen, and J. Thomas
Madden, Executive Vice Presidents; Henry J. Gailliot, Senior
Vice President-Economist; Peter R. Anderson, Drew J. Collins,
Jonathan C. Conley, Mark Durbiano, J. Alan Minteer, Mary Jo
Ochson, and Robert J. Ostrowski, Senior Vice Presidents; J.
Scott Albrecht, Joseph M. Balestrino, Randall S. Bauer, David F.
Belton, David A. Briggs, Kenneth J. Cody, Deborah A. Cunningham,
Michael P. Donnelly, Linda A. Duessel, Kathleen M. Foody-Malus,
Thomas M. Franks, Edward C. Gonzales, Timothy E. Keefe, Stephen
A. Keen, Mark S. Kopinski, Jeff A. Kozemchak, Marian R.
Marinack, Susan M. Nason, Jr., Charles A. Ritter, James D.
Roberge, Frank Semack, William F. Stotz, Edward J. Tiedge,
Sandra L. Weber, and Christopher H. Wiles, Vice Presidents;
Thomas R. Donahue, Treasurer; and Stephen A. Keen, Secretary.
The business address of each of the Officers of the investment
adviser is Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779. These individuals are also officers of a majority
of the investment advisers to the Funds listed in Part B of this
Registration Statement under "The Funds."
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for shares of the Registrant,
also acts as principal underwriter for the following open-end investment
companies: 111 Corcoran Funds; Annuity Management Series; Arrow Funds;
Automated Government Money Trust; BayFunds; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders Fund,
Inc.; Federated ARMs Fund; Federated 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: 3-5 Years; Federated U.S. Government Securities
Fund: 5-10 Years; Federated Utility Fund, Inc.; First Priority Funds; Fixed
Income Securities, Inc.; Fortress Utility Fund, Inc.; High Yield Cash Trust;
Independence One Mutual Funds; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.; Investment Series Trust; 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 Trust; Municipal Securities Income Trust; Newpoint Funds;
Peachtree Funds; RIMCO Monument Funds;SouthTrust Vulcan Funds; Star Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; The Biltmore Funds; The
Biltmore Municipal Funds; The Monitor Funds; The Planters Funds; The Starburst
Funds; The Starburst Funds II; The Virtus Funds; Tower Mutual Funds; Trust for
Financial Institutions; Trust for Government Cash Reserves; Trust for Short-
Term U.S. Government Securities; Trust for U.S. Treasury Obligations; Vision
Group of Funds, Inc.; and World Investment Series, Inc.
Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary, and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive ViceExecutive Vice
Federated Investors Tower President, Federated President
Pittsburgh, PA 15222-3779 Securities Corp.
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
John W. McGonigle Director, Federated Executive Vice
Federated Investors Tower Securities Corp. President
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph L. Epstein Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael D. Fitzgerald Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kenedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Stephen A. LaVersa Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John C. Shelar, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jamie M. Teschner Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
J. Timothy Radcliff Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Invesors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas R. Donahue Assistant Secretary, Assistant --
Federated Investors Tower Treasurer, Federated Securities
Pittsburgh, PA 15222-3779 Corp.
Joseph M. Huber Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Assistant Secretary, Treasurer
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. 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:
Federated Government Income Securities, Inc. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Federated Shareholder Services Company Federated Investors Tower
("Transfer Agent, Dividend Pittsburgh, Pennsylvania Disbursing
Agent and Portfolio 15222-3779
Recordkeeper")
Federated Administrative Services Federated Investors Tower
("Administrator") Pittsburgh, Pennsylvania 15222-3779
Federated Advisers Federated Investors Tower
("Adviser") Pittsburgh, Pennsylvania 15222-3779
State Street Bank and Trust Company P.O. Box 8600
("Custodian") Boston, Massachusetts 02266-8600
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Directors and the calling of special shareholder meetings by
shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED GOVERNMENT INCOME
SECURITIES, INC., certifies that it meets all of the requirements for
effectiveness of this Amendment to its Registration Statement pursuant to Rule
485(a) under the Securities Act of 1933 and has duly caused this Amendment to
its 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 1st day of May, 1996.
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
BY: /s/Charles H. Field
Charles H. Field, Assistant Secretary
Attorney in Fact for John F. Donahue
May 1, 1996
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:
NAME TITLE DATE
By:/s/Charles H. Field
Charles H. Field Attorney In Fact May 1, 1996
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Director
(Chief Executive Officer)
Richard B. Fisher* President
David M. Taylor* Treasurer(Principal Financial
and Accounting Officer)
Thomas G. Bigley* Director
John T. Conroy, Jr.* Director
William J. Copeland* Director
James E. Dowd* Director
Lawrence D. Ellis, M.D.* Director
Edward L. Flaherty, Jr.* Director
Peter E. Madden* Director
Gregor F. Meyer* Director
John E. Murray, Jr.* Director
Wesley W. Posvar* Director
Marjorie P. Smuts* Director
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg S-K
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and
Shareholders of FEDERATED GOVERNMENT INCOME SECURITIES, INC.:
We consent to the incorporation by reference in Post-Effective Amendment
No. 32 to Registration Statement (No. 2-74191) of Federated Government Income
Securities, Inc. (formerly, Government Income Securities, Inc.) of our report
dated April 18, 1996, appearing in the Annual Report, which is incorporated
by reference in such Registration Statement, and to the reference to us under
the heading "Financial Highlights" in such Prospectuses.
By:DELOITTE & TOUCHE
Deloitte & Touche
Pittsburgh, Pennsylvania
Exhibit (1)(i) under Form N-1A
Exhibit 3(a) under Item 601/Reg. S-K
ARTICLES OF INCORPORATION
OF
GOVERNMENT INCOME SECURITIES, INC.
The undersigned, John W. McGonigle, whose post office address is 421
Seventh Avenue, Pittsburgh, Pennsylvania, 15219, being at least twenty-one
years of age, does under and by virtue of the General Laws of the state of
Maryland authorizing the formation of corporation, hereby form a corporation.
FIRST: The name of the Corporation is GOVERNMENT INCOME SECURITIES,
INC.
SECOND: The purpose for which the Corporation is formed is to act as
an open-end investment company of the management type registered as such with
the Securities and Exchange Commission pursuant to the Investment Company Act
of 1940 and to exercise and generally to enjoy all of the powers, rights and
privileges granted to, or conferred upon, corporations by the General Laws of
the State of Maryland now or hereafter in force.
THIRD: The post office address of the principal office and the office
of the resident agent of the Corporation in the State of Maryland is 32 South
Street, Baltimore, Maryland 21202. The resident agent of the Corporation in
the state of Maryland is THE CORPORATION TRUST INCORPORATED, which is a
corporation organized and existing under the laws of the State of Maryland.
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 2,000,000,000 shares of Capital Stock, all
of one class, of the par value of $0.001 per share, and of the aggregate par
value of $2,000,000 (hereinafter referred to as "Shares").
FIFTH: (a) The number of Directors of the Corporation shall be
eight, or such other number as may from time to time be fixed in the manner
provided by the By-Laws of the Corporation by shall never be less than three
(3).
(b) The names of the Directors who shall act until the first Annual
meeting or until their successors are duly chosen and qualify are:
John F. Donahue J. Joseph Maloney, Jr.
William J. Copeland Gregor F. Meyer
James E. Dowd Wesley W, Posvar
Edward L. Flaherty, Jr. Marjorie P. Smuts
SIXTH: The Board of Directors is empowered to authorize the issuance
from time to time of Shares of the Corporation, whether now or hereafter
authorized; provided, however, that the consideration per Share to be
received by the Corporation upon the issuance or sale of any Shares shall be
the net asset value per Share determined in accordance with the requirements
of the Investment Company Act of 1940 and the applicable rules and
regulations of the Securities and Exchange Commission (or any succeeding
governmental authority) and in conformity with generally accepted accounting
practices and principles.
SEVENTH: (a) To the extent the Corporation has funds or property
legally available therefor, each Shareholder of the Corporation shall have
the right at such times as may be permitted by the Corporation, but no less
-2-
frequently than once each week, to require the Corporation to redeem all or
any part of its Shares at a redemption price equal to the net asset value per
Share next determined after the Shares are tended for redemption; said
determination of the net asset value per Share to be made in accordance with
the requirements of the Investment Company Act of 1940 and the applicable
rules and regulations of the Securities and Exchange Commission (or any
succeeding governmental authority) and in conformity with generally accepted
accounting practices and principles.
Notwithstanding the foregoing, the Corporation may postpone payment or
deposit of the redemption price and may suspend the right of the Shareholders
to require the Corporation to redeem Shares pursuant to the applicable rules
and regulations, or any order, of the Securities and Exchange Commission.
(b) The Corporation shall have the right, exercisable at the
discretion of the Board of Directors, to redeem Shares of any Shareholder for
their then current net asset value per Share if at such time the Shareholder
owns Shares having an aggregate net asset value of less than $1,000.00.
(c) Each Share is subject to redemption by the Corporation at the
redemption price computed in the manner set forth in subparagraph (a) of
Article SEVENTH of this Charter at any time if the Board of Directors, in its
sole discretion, determines that failure to so redeem may result in the
Corporation being classified as a personal holding company as defined in the
Internal Revenue Code.
(d) Transfer of Shares will be record on the stock transfer
records of the Corporation at the request of the holders thereof at any time
during normal business hours of the Corporation unless the Board of Directors
of the Corporation determines, in its sole discretion, that allowing such
-3-
transfer may result in the Corporation being classified as a personal holding
company as defined in the Internal Revenue Code.
EIGHTH: The following provisions are hereby adopted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the
Directors and Shareholders:
(a) No Shareholder shall have any pre-emptive or preferential
right of subscription to any Shares of any class whether now or hereafter
authorized. The Board of Directors may issue Shares without first offering
the same either in whole or in part to the Shareholders.
(b) Shares may be purchased, held and disposed of by the Officers
and Directors of the Corporation, by partnerships of which any such officer
or director may be a member and by corporations of which any Officer or
Director of the Corporation may be an officer or director. Except as above
set forth, or authorized by the Securities and Exchange Commission, the
Officers and Directors of the Corporation and partnerships or corporations
which are affiliates of the Officers or Directors may not deal with the
Corporation as principals in the purchase or sale or any securities or other
property.
(c) The Corporation may enter into exclusive or non-exclusive
underwriting contracts or contracts for the sale of its Shares any may also
enter into contracts for investment advisory, management and administrative
services. The terms and conditions, methods of authorization, renewal,
amendment and termination of the aforesaid contracts shall be as determined
at the discretion of the Board of Directors; subject, however, to the
provisions of the Charter of the Corporation, the By-Laws of the Corporation,
applicable state law, and the Investment Company Act of 1940 and the rules
and regulations of the Securities and Exchange Commission.
-4-
(d) Subject to and in compliance with the provisions of the
Maryland General Corporation Law respecting interested director transactions,
the Corporation may enter into a written underwriting contract, management
contractor contracts for research and advisory services with The Standard
Fire Insurance Company or its parent, affiliates or subsidiaries thereof, or
their respective successors, or otherwise do business with such corporation,
notwithstanding the fat that one or more of the Directors of the Corporation
and some or all of its Officers are, have been, or may become Directors,
Officers, Employees or Stockholders of The Standard Fire Insurance Company or
its parent, affiliates or subsidiaries or successors, and in the absence of
actual fraud the Corporation may deal freely with The Standard Fire Insurance
Company or its parent, affiliates, subsidiaries or successors, and neither
such underwriting contract, management contract or contract for research and
advisory services nor any other contract or transaction between the
Corporation and The Standard Fire Insurance Company or its parent,
officiates, subsidiaries or successors shall be invalidated or in anyway
affected thereby, nor shall any director or Officer of the Corporation be
liable to the Corporation or to any Shareholder or creditor of the
Corporation or to any other person for any loss incurred under or by reason
of any such contract or transaction. Anything in the foregoing
notwithstanding, no Officer or Director or underwriter or investment adviser
of the Corporation shall be protected against any liability to the
Corporation or to its securities holders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
(e) No Officer or Director of the Corporation or of any investment
advisory company or management company, not the Corporation itself, not such
investment advisory or management company or underwriter of the Corporation
-5-
shall take long or short positions in respect of any Shares issued by the
Corporation; provided, however, that such prohibition shall not prevent:
(i) Any underwriter from purchasing from the Corporation Shares
issued by the Corporation, provided that orders to purchase
from the Corporation are entered with the Corporation by such
underwriter either for investment or upon receipt by it of
purchase orders for Shares of the Corporation, and provided
such purchases are not in excess of purchase orders received
by such underwriter;
(ii) The Corporation or any distributor or underwriter from
maintaining a market for Shares issued by the Corporation;
(iii) The purchase from the Corporation of Shares by the
Officers or Directors of the Corporation or of any investment
advisory, management company or underwriter or distributor of
the Corporation at the prices available to the public or as
authorized by the Securities and Exchange Commission at the
moment of such purchase.
(f) The Corporation shall indemnify its Officers, Directors,
employees and agents and any person who serves at the request of the
Corporation as a Director, Officer, employee, or agent of another
corporation, partnership, joint venture, trust or other enterprise as
follows:
(i) Every person who is or has been a Director, Officer, employee
or agent of the Corporation and persons who serve at the
Corporation's request as Director, Officer, employee or agent
of another corporation, partnership, joint venture, trust or
-6-
other enterprise shall be indemnified by the Corporation to
the fullest extent permitted by law against liability and
against all expenses reasonably incurred or paid by him in
connection with any debt, claim, action, demand, suit,
proceeding, judgment, decree, liability or obligation of any
kind in which he becomes involved as a party or otherwise by
virtue of his being or having been a Directors, Officer,
employee or agent of the Corporation or of another
corporation, partnership, joint venture, trust or other
enterprise at the request of the Corporation and against
amounts paid or incurred by him in the settlement thereof.
(ii) The words "claim," "action," "suit" or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil,
criminal, administrative, legislative, investigative or other,
including appeals), actual or threatened, and the words
"liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement,
fines, penalties and other liabilities.
(iii) No indemnification shall be provided hereunder to a
Director, Officer, employee or agent against any liability to
the Corporation or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
(iv) The rights of indemnification herein provided may be insured
against by policies maintained by the Corporation, shall be
severable, shall not affect any other rights to which any
Director, Officer, employee or agent may now or hereafter be
entitled, shall continue as to a person who has ceased to be
-7-
such Director, Officer, employee, or agent and shall inure to
the benefit of the heirs, executors and administrators of such
a person.
(v) In the absence of a final decision on the merits by a court or
other body before which such proceeding was brought, an
indemnification payment will not be made, except as provided
in paragraph (vi) of this paragraph (f), unless in the absence
of such a decision, a reasonable determination based upon a
factual review has been made (1) by a majority vote of a
quorum of non-party Directors who are not interested persons
of the Corporation, or (2) 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.
(vi) The Corporation 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,
Director or controlling person of the Corporation 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 Corporation is insured against losses
arising by reason of any lawful advances or (iii) a majority
of a quorum of disinterested non-party Directors or
independent legal counsel in a written opinion makes factual
determination that there is a reason to believe the indemnitee
will be entitled to indemnification.
-8-
(g) The Board of directors shall, subject to the laws of Maryland,
have the power to determine, from time to time, whether and to what extent
and at what times and places and under what conditions and regulations any
accounts and books of the Corporation, or any of them, shall be open to the
inspection of Shareholders.
(h) Notwithstanding any provision of law requiring a greater
proportion than a majority of the votes of all classes of Shares entitled to
be cast, to tae or authorize any action, the Corporation may take or
authorize any such action upon the concurrence of a majority of the aggregate
number of the votes entitled to be cast thereon.
(i) The Corporation reserves the right from time to time to make
any amendment of its Charter now or hereafter authorized by law, including
any amendment which alters the contract rights, as expressly set forth in its
Charter, of any outstanding Shares, except that no action affecting the
validity or assessibility of such Shares shall be taken without the unanimous
approval of the outstanding shares.
(j) In addition to the powers and authority conferred upon them by
the Charter of the Corporation or By-Laws, the Board of Directors may
exercise all such powers and authority and do all such acts and things as may
be exercised or done by the Corporation, subject, nevertheless, to the
provision of applicable state law and the Charter and By-Laws of the
Corporation.
(k) The Board of Directors is expressly authorized to determine in
accordance with generally accepted accounting principles and practices what
constitutes net profits, earnings, surplus or net assets in excess of
capital, and to determine what accounting periods shall be used by the
Corporation for any purpose, whether annual or any other period, including
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daily; to set apart out of any funds of the Corporation such reserves for
such purposes as it shall determine and to abolish the same; to declare and
pay dividends and distributions in cash, securities or other property from
surplus or any funds legally available therefor, at such intervals (which may
be as frequently as daily) or on such other periodic basis, as it shall
determine, to declare such dividends or distributions by means of a formula
or other method of determination, at meetings held less frequently than the
frequency of the effectiveness of such declarations; to establish payment
dates for dividends or any other distributions on any basis, including dates
occurring less frequently than the effectiveness of declarations thereof; and
to provide for the payment of declared dividends on a date earlier or later
than the specified payment date in the case of Shareholders redeeming their
entire ownership of Shares.
NINTH: The duration of the Corporation shall be perpetual.
IN WITNESS WHEREOF, I have signed these Articles of Incorporation on the
20th day of January, 1986.
/s/ John W. McGonigle
John W. McGonigle
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COMMONWEALTH OF PENNSYLVANIA )
: ss:
COUNTY OF ALLEGHENY )
I hereby certify that on January 20, 1986, before me, the subscriber, a
Notary Public of the Commonwealth of Pennsylvania, in and for the County of
Allegheny, personally appeared JOHN W. MCGONIGLE, who acknowledged the
foregoing Article of Incorporation to be his act.
WITNESS my hand and notarial seal or stamp the day and year last above
written.
/s/illegible signature
Exhibit 1(ii) under Form N-1A
Exhibit 2 under Item 601/Reg. S-K
AGREEMENT AND PLAN OF
REORGANIZATION
This Agreement and Plan of Reorganization is entered into between
Government Income Securities, Inc., a Maryland corporation (the "Fund") and
Money Market Instruments Trust, a Massachusetts business trust (the "Trust").
1. Recitals.
1.1 The Trust is an open-end, a management, investment company,
organized as a Massachusetts business trust, which is registered
with the Securities and Exchange Commission pursuant to the
Securities Acts.
1.2 The Trust desires to change its form of organization from a
Massachusetts business trust to a corporation formed under the laws
of the State of Maryland.
1.3 The Fund is a Maryland corporation which has been formed for the
purpose of continuing the business of the Trust. The parties
intend that the Fund will adopt the Registration Statement of the
Trust on Form N-1A as its own and file such post-effective
amendments to it with the Securities and Exchange Commission as are
determined by the Directors of the Fund to be necessary and
appropriate as a result of this Plan of Reorganization.
1.4 The parties intend by this agreement to set forth the terms and
conditions of "reorganization" under Section 368(a)(1)(F) of the
Internal Revenue Code of 1954, as amended. The parties agree as
follows:
2. Statement of Reorganization.
2.1 On the effective date stated in this agreement, the Trust will
convey, transfer and deliver to the Fund all of its then existing
assets.
2.2 In consideration thereof, the Fund agrees that it will, on the
effective date,
(a) assume and pay, to the extent that they exist on or after the
effective date, all of the Trust's obligations and
liabilities, whether absolute, accrued, contingent or
otherwise, and
(b) deliver to the Trust one share of common stock of the Fund,
$0.000q par value, for each ten shares of beneficial interest,
without par value, of the Trust outstanding immediately prior
to the effective date, subject to adjustment for fractional
shares as provided in this agreement.
The Fund will effect such delivery of its common stock by establishing
an open account for each shareholder and by crediting to that account
one share of the Fund for each ten shares which the shareholder held in
the Trust on the effective date. Fractional shares of the Fund will be
converted on the same basis as full shares and carried to the third
decimal place. On the effective date, the net asset value per share of
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common stock of the Fund shall be ten times the net asset value per
share of the Trust. Each certificate representing shares of the Trust
will represent one-tenth the number of shares of the Fund. Each
Shareholder of the Trust will have the right to exchange his share
certificates for share certificates of the Fund.
3. Effective Date of the Reorganization. The reorganization shall become
effective on January 30, 1986, or such later date as the parties may
mutually agree,
4. Conditions Precedent. The obligations of the Trust and the Fund under
this agreement shall be subject to the satisfaction of each of the
following conditions:
4.1 A vote approving this agreement and the reorganization contemplated
hereby shall have been adopted by the Trustees of the Trust and at
least a majority of the outstanding shares of beneficial interest
of the Trust entitled to vote;
4.2 The Directors and shareholders of the Fund shall have taken the
following action at meetings duly called for such purposes:
(a) Approval of the Fund's investment advisory agreement with The
Standard Fire Insurance Company;
(b) Approval of the Fund's Distribution Plan and related
agreements pursuant to Rule 12b-1;
(c) Selection of Meahl, McNamara & Co. as the Fund's independent
public accountants;
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(d) Authorization of the issuance by the Fund of shares of the
Fund on the effective date in exchange for the assets of the
Trust pursuant to the terms and provisions of this agreement.
4.3 Each party shall have received an opinion of the firm of Houston,
Houston & Donnelly, Pittsburgh, Pennsylvania, to the effect that
the reorganization contemplated by this Agreement qualifies as a
"reorganization" under Section 368(a)(i)(F) of the Internal Revenue
Code of 1954, as amended.
5. Termination. The Board of Trustees of the Trust may terminate this
agreement and abandon the reorganization, notwithstanding approval of
the reorganization by the shareholders of the Trust, at any time prior
to the effective date if, in the judgment of the Board, the facts and
circumstances make proceeding with the reorganization inadvisable.
6. Entire Agreement. This agreement is the entire agreement between the
parties and there are no agreements, understandings, restrictions or
warranties among the parties other than those set forth herein or herein
provided for.
7. Further Assurances. The Trust and the Fund shall take such further
action as may be necessary or desirable and proper to consummate the
transactions contemplated hereby.
8. Governing Law. This agreement and the transactions contemplated hereby
shall be governed by and construed and enforced in accordance with the
laws of the State of Maryland.
IN WITNESS WHEREOF, the Fund and the Trust have each caused this
Agreement and Plan of Reorganization to be executed on its behalf by its
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Chairman, President or a Vice President and its seal to be affixed hereto and
attested by its Secretary or an Assistant Secretary, this 24th day of
January, 1986.
Attest: GOVERNMENT INCOME SECURITIES, INC.
/s/John McGonigle By: /s/John F. Donahue
Secretary President
Attest: MONEY MARKET INSTRUMENTS TRUST
/s/ John McGonigle By: /s/ John F. Donahue
Secretary President
Exhibit (2)(i) under Form N-1A
Exhibit 3(b) under Item 601/Reg. S-K
GOVERNMENT INCOME SECURITIES, INC.
BY-LAWS
ARTICLE I
MEETING OF SHAREHOLDERS
Section 1. ANNUAL MEETINGS. The Annual Meeting of Shareholders of
the Corporation shall be held on the fourth Tuesday in October in each year
unless such day is a legal holiday in which case the meeting shall be held at
the same time on the next succeeding business day which is not a legal
holiday. The business to be transacted at the Annual Meeting shall include
the election of Officers and Directors, consideration and action upon the
reports of Officers and Directors, and any other business within the power of
the Corporation.
Section 2. SPECIAL MEETINGS. Special Meetings of Shareholder may
be called by the President, or by the Board of Directors; and shall be called
by the President, Secretary or any Director at the request in writing of the
holders of not less than 25% of the outstanding voting shares of the capital
stock of the Corporation (hereinafter, the outstanding voting shares of the
capital stock of the Corporation are referred to as "Shares"). Any such
request shall state the purposes of the proposed meeting.
Section 3. PLACE OF MEETINGS. All meetings of the Shareholders
shall be held at the office of the Corporation in Pittsburgh, Pennsylvania,
or at such other place within or without the State of Maryland as may be
fixed by the party or parties making the call as stated in the notice
thereof.
Section 4. NOTICE. Not less than ten or more than ninety days
before the date of every Annual or Special Meeting of Shareholders the
Secretary or an Assistant Secretary shall give to each Shareholder of record
notice of such meeting by mail, telegraph, cable or radio. Such notice shall
be deemed to have been given when deposited in the mail or with a telegraph
or cable office or radio station for transmission to the Shareholder at his
address appearing on the books of the Corporation. It shall not be necessary
to set forth the business proposed to be transacted in the notice of any
Annual Meeting except that any proposal to amend the Charter of the
Corporation shall be set forth in such notice. Notice of a Special Meeting
shall state the purpose or purposes for which it is called.
Section 5. QUORUM. At all meetings of the Shareholders the
presence in person or by proxy of Shareholders entitled to cast a majority in
number of votes shall be necessary to constitute a quorum for the transaction
of business. In the absence of a quorum at any meeting a majority of those
Shareholders present in person or by proxy may adjourn the meeting from time
to time to be held at the same place without further notice than by
announcement to be given at the meting until a quorum, as above defined,
shall be present, whereupon any business may be transacted which might have
been transacted at the meeting originally called had the same been held at
the time so called.
Section 6. VOTING. At all meetings of Shareholders each
Shareholder of the Corporation shall be entitled to one vote or fraction
thereof for each Share standing in his name on the books of the Corporation
on the date for the determination of Shareholders entitled to vote at such
meeting.
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Section 7. PROXIES. Any Shareholder entitled to vote at any meeting
of Shareholders may vote either in person or by proxy, but no proxy which is
dated more than eleven months before the meeting named therein shall be
accepted. Every proxy shall be in writing subscribed by the Shareholder or
his duly authorized attorney and dated, but need not be sealed, witnessed or
acknowledged. All proxies shall be filed with and verified by the Secretary,
or an Assistant Secretary of the Corporation or if the meeting shall so
decide, by the Secretary of the meeting.
Section 8. INFORMAL ACTION BY SHAREHOLDERS. Any action required or
permitted to be taken at any meeting of Shareholders may be taken without a
meeting, if a consent in writing, setting forth such action, is signed by all
the Shareholders entitled to vote on the subject matter thereof, and such
consent is filed with the records of the Corporation.
ARTICLE II
BOARD OF DIRECTORS
Section 1. POWERS. The Board of Directors shall have control and
management of the affairs, business and properties of the Corporation. The
shall have and exercise in the name of the Corporation and on behalf of the
Corporation all the rights and privileges legal exercisable by the
Corporation except as otherwise provided by law, the Charter, or these By-
Laws.
Section 2. NUMBER, QUALIFICATIONS, MANNER OF ELECTION AND TERM OF
OFFICE. The number of Directors of the Corporation shall be as fixed from
time to time by a majority of the entire Board of Directors but shall be no
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less than three nor more than twenty. Directors need not be Shareholders.
The Board of Directors from time to time by a majority of the entire Board
increase or decrease the number of Directors to such number as they deem
expedient not to be less than three nor more than twenty, however, and fill
the vacancies so created. The term of office of a Director shall not be
affected by any decrease in the number of Directors made by the Board
pursuant to the foregoing authorization. Until the first Annual Meeting of
Shareholders or until successors are duly elected and qualify, the Board of
Directors shall consist of the persons named as such in the Charter. The
Members of the Board of Directors shall be elected by the Shareholders at the
Annual Meeting Shareholders. Each Director shall hold office until the
Annual Meeting next held after his election and until the election and
qualification of his successor.
Section 3. PLACE OF MEETING. The Board of Directors may hold its
meetings at such place or places within or without the State of Maryland as
the Board may from time to time determine.
Section 4. ANNUAL MEETINGS. The Board of Directors shall meet for
the election of Officers and any other business as promptly as may
conveniently be done after the adjournment of the Annual Meeting of
Shareholders.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such intervals and on such dates as the Board may
from time to time designate.
Section 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held at such times and at such places as may be designated
at the call of such meeting. Special meetings shall be called by the
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Secretary or Assistant Secretary at the request of the President or any
Director.
Section 7. NOTICE. The Secretary or Assistant Secretary shall
give, at least tow days before the meeting, notice of each meeting of the
Board of Directors, whether Annual, Regular, or Special, to each member of
the Board by mail, telegram or telephone to his last known address. It
should not be necessary to state the purpose or business to be transacted in
the notice of any Annual or Regular meeting. The notice of a Special Meeting
shall state the purpose or purposes for which it is called. Personal
attendance at any meeting by a Director other than to protest the validity of
said meeting shall constitute a waiver of the foregoing requirement of
notice.
Section 8. CONDUCT OF MEETING AND BUSINESS. The Board of Directors
may adopt such rules and regulations for the conduct of their meetings and
the management of the affairs of the Corporation as they may deem proper and
not inconsistent with applicable law, the Charter of the Corporation or these
By-Laws.
Section 9. QUORUM. A majority of the total membership of the Board
of Directors shall constitute a quorum at any meeting of the Board of
Directors. The action of a majority of Directors present at any meeting at
which a quorum is present shall be the action of the Board of Directors
unless the concurrence of a greater proportion is required for such action by
statute, the Charter of the Corporation, or these By-Laws. In the absence of
a quorum at any meeting a majority of Directors present may adjourn the
meeting from day to day or for such longer periods as they may designate
without notice other than by announcement at the meeting.
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Section 10. RESIGNATIONS. Any Directors of the Corporation may
resign at any time by mailing or delivering, or transmitting by radio,
telegraph or cable, written notice to the Chairman of the Board of Directors
or to the Secretary of the Corporation. The resignation of any Director
shall take effect at the time specified therein, and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary
to make it effective.
Section 11. REMOVAL. At any meeting of Shareholders duly called for
the purpose, any Director may by the vote of a majority of all of the Shares
entitled to vote be removed from office. At the same meeting, the vacancy in
the Board of Directors may by filled by the election of a Director to serve
for the remainder of the term and until the election and qualification of his
successor.
Section 12. VACANCIES. Except as otherwise provided by law, any
vacancy occurring in the Board of Directors for any cause other than by
reason of an increase in the number of Directors may be filled by a majority
of the remaining members of the Board of Directors although such majority is
less than a quorum and any vacancy occurring by reason of an increase in the
number of Directors may by filled by action of a majority of the entire Board
of Directors; provided, however, that upon the death, resignation or removal
during any consecutive period of twelve months of more than one-half of the
Directors holding office at the beginning of such period, a Shareholders'
Meeting shall be called forthwith for the purpose of electing an entire new
Board, including the vacancies filled pursuant to this Section of the By-
Laws. A Director elected by the Board to fill a vacancy shall be elected to
hold office until the next Annual Meeting of Shareholders or until his
successor is duly elected and qualifies. Notwithstanding the foregoing, the
Shareholders may, at any time during the term of such Director elected to
fill a vacancy, elect some other person to fill said vacancy and thereupon
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the election by the Board shall be superseded and such election by the
Shareholders shall be deemed a filling of the vacancy and not a removal and
may be made at any meeting called for such purpose.
Section 13. COMPENSATION OF DIRECTORS. The Directors may receive a
stated salary for their services as Directors, and by Resolution of the Board
of Directors a fixed fee and expenses of attendance may be allowed for the
attendance at each Meeting. Nothing herein contained shall be construed to
preclude any Director from serving the Corporation in any other capacity, as
an Officer, Agent or otherwise, and receiving compensation therefor.
Section 14. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at any Annual, Regular or Special Meeting of the Board
of Directors may be taken without a meeting if a written consent to such
action is signed by all members of the Board and such written consent is
filed with the minutes of proceedings of the Board.
Section 15. POWER TO DECLARE DIVIDENDS. The Board of Directors is
expressly authorized to determine in accordance with generally accepted
accounting principles and practices what constitutes net profits, earnings,
surplus or net assets in excess of capital, and to determine what accounting
periods shall be used by the Corporation for any purpose, whether annual or
any other period, including daily; to set apart out of any funds of the
Corporation such reserves for such purposes as it shall determine and to
abolish the same; to declare and pay dividends and distributions by means of
a formula or other method of determination, at meetings held less frequently
than the frequency of the effectiveness of such declarations; to establish
payment dates for dividends or any other distributions on any basis,
including dates occurring less frequently than the effectiveness of
declarations thereof; and to provide for the payment of declared dividends on
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a date earlier or later than the specified payment date in the case of
Shareholders redeeming their entire ownership of shares.
ARTICLE III
EXECUTIVE AND OTHER COMMITTEES
Section 1. APPOINTMENT AND TERM OF OFFICE OF EXECUTIVE COMMITTEE.
The Board of Directors, by resolution passed by a vote of at least a
majority of the entire Board, may appoint an Executive Committee, which shall
consist of two (2) or more Directors.
Section 2. VACANCIES IN EXECUTIVE COMMITTEE. Vacancies occurring in
the Executive Committee from any cause shall be filled by the Board of
Directors at any Meeting thereof by a vote of the majority of the entire
Board.
Section 3. EXECUTIVE COMMITTEE TO REPORT TO BOARD. All action by the
Executive Committee shall be reported to the Board of Directors at its
Meeting next succeeding such action.
Section 4. PROCEDURE OF EXECUTIVE COMMITTEE. The Executive
Committee shall fix its own rules of procedure not inconsistent with these
By-Laws or with any directions of the Board of Directors. It shall meet at
such times and places and upon such notice as shall be provided by such rules
or by resolution of the Board of Directors. The presence of a majority shall
constitute a quorum for the transaction of business, and in every case an
affirmative vote of a majority of all the members of the Committee present
shall be necessary for the taking of any action.
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Section 5. POWERS OF EXECUTIVE COMMITTEE. During the intervals
between the meetings of the Board of Directors the Executive Committee,
except as limited by the By-Laws of the Corporation or by specific directions
of the Board of Directors, shall possess and may exercise all the powers of
the Board of Directors in the management and direction of the business and
conduct of the affairs of the Corporation in such manner as the Executive
Committee shall deem for the best interests of the Corporation, and shall
have power to authorize the Seal of the Corporation to be affixed to all
instruments and documents requiring same. Notwithstanding the foregoing, the
Executive Committee shall not have the power to elect Directors, increase or
decrease the number of Directors, elect or remove any Officer, declare
dividends, issue shares or recommend to Shareholders any action requiring
Shareholder approval.
Section 6. OTHER COMMITTEES. From time to time the Board of
Directors may appoint any other Committee or Committees for any purpose or
purposes to the extent lawful, which shall have such powers as shall be
specified in the resolution of appointment.
Section 7. COMPENSATION. The members of any duly appointed
Committee shall receive such compensation and/or fees as from time to time
may be fixed by the Board of Directors.
Section 8. INFORMAL ACTION BY EXECUTIVE COMMITTEE OR OTHER
COMMITTEES. Any action required or permitted to be taken at any meeting of
the Executive Committee or any other duly appointed Committee may be taken
without a meeting if written consent to such action is signed by all Members
of such Committee and such written consent is filed with the minutes of the
proceedings of such Committee.
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Section 9. ADVISORY BOARD. The Directors may appoint an Advisory
Board to consist in the first instance of not less than three (3) members.
Members of such Advisory Board shall not be Directors or Officers and need
not be Shareholders. Members of this Board shall hold office for such period
as the Directors may by resolution provide. Any Member of such Board may
resign therefrom by written instrument signed by him which shall take effect
upon delivery to the Directors. The Advisory Board shall have no legal
powers and shall not perform functions of Directors in any manner, said Board
being intended to act merely in an advisory capacity. Such Advisory Board
shall meet at such times and upon such notice as the Board of Directors may
by resolution provide. The compensation of the Members of the Advisory
Board, if any, shall be determined by the Board of Directors.
ARTICLE IV
OFFICERS
Section 1. GENERAL PROVISIONS. The Officers of the Corporation shall
be a President, one or more Vice Presidents, a Treasurer and a Secretary.
The Board of Directors shall elect or appoint such other Officers or agents
as the business of the Corporation may require including one or more
Assistant Vice Presidents, one or more Assistant Secretaries and one or more
Assistant Treasurers. The same person may hold any two officers except those
of the President and Vice President.
Section 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The Officers
shall be elected annually by the Board of Directors at its Annual Meeting
following the Annual Meeting of Shareholders. Each Officer shall hold office
until the Annual Meeting in the next year and until the election and
qualification of his successor. Any vacancy in any of the offices may be
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filled for the unexpired portion of the term by the Board of Directors at any
Regular or Special Meeting of the Board. The Board of Directors may elect or
appoint additional Officers or agents at any Regular or Special Meeting of
the Board.
Section 3. REMOVAL. Any Officer elected by the Board of Directors
may be removed with or without cause at any time upon a vote of the majority
of the entire Board of Directors. Any other employee of the Corporation may
be removed or dismissed at any time by the President.
Section 4. RESIGNATIONS. Any Officer may resign at any time by
giving written notice to the Board of Directors. Any such resignation shall
take effect at the date of receipt of each notice or at any later time
specified therein, and unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any Office because of death,
resignation, removal, disqualification or any other cause shall be filled for
the unexpired portion of the term in the manner prescribed in these By-Laws
for regular election or appointment to such Office.
Section 6. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of
the Board of Directors, if there be a Chairman, shall preside at the meetings
of Shareholders and of the Board of Directors. he shall receive such
information and reports as he may request from the Officers of the
Corporation. he shall counsel and advise the President on matters of major
importance,
Section 7. PRESIDENT. The President shall be the chief executive
officer of the Corporation. He shall, unless other provisions are made
therefor by the Board of Executive Committee, employ and define the duties of
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all employees of the Corporation, shall have the power to discharge any such
employees, shall exercise general supervision over the affairs of the
Corporation and shall perform such other duties as may be assigned to him
from time to time by the Board of Directors. In the absence of the Chairman
of the Board of Directors, the President shall preside at all meetings of
Shareholders.
Section 8. VICE PRESIDENT. The Vice President (or if more than
one, the senior Vice President) in the absence of the President shall perform
all duties and may exercise any of the powers of the President subject to the
control of the Board. Each Vice President shall perform such other duties as
may be assigned by the Board of Directors, the Executive Committee, or the
President.
Section 9. SECRETARY. The Secretary shall keep or cause to be
kept in books provided for the purpose the minutes of the Meetings of the
Shareholders, and of the Board of Directors; shall see that all Notices are
duly given in accordance with the provisions of these By-Laws and as required
by Law: shall be custodian of the records and of the Seal of the Corporation
and see that the Seal is affixed to al documents the execution of which on
behalf of the Corporation under its seal is duly authorized; shall keep
directly or through a transfer agent a register of the post office address of
each Shareholder, and make all proper changes in such register, retaining and
filing his authority for such entries; shall see that the books, reports,
statements, certificates and all other documents and records required by law
are properly kept and filed; and in general shall perform all duties incident
to the Office of Secretary and such other duties as may, from time to time,
be assigned to him by the Board of Directors, the Executive Committee, or
the President.
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Section 10. TREASURER. The Treasurer shall have supervision of
the custody of the funds and securities of the Corporation, subject to the
Charter of the Corporation and applicable law. he shall submit to the Annual
Meeting of Shareholders a statement of the financial condition of the
Corporation and whenever required y the Board of Directors shall make and
render a statement of the accounts of the Corporation and such other
statements as may be required. He shall cause to be kept in books of the
Corporation a full and accurate account of all monies receive and paid out
for the account of the Corporation. he shall perform such other duties as
may be from time to time assigned to him by the Board of Directors, the
Executive Committee, or the President.
Section 11. ASSISTANT VICE PRESIDENT. The Assistant Vice
President or Vice Presidents of the Corporation shall have such authority and
perform such duties as may be assigned to them by the Board of Directors, the
Executive Committee, or the President of the Corporation.
Section 12. ASSISTANT SECRETARIES AND TREASURERS. The Assistant
Secretary or Secretaries and the Assistant Treasurer or Treasurers shall
perform the duties of the Secretary and of the Treasurer respectively, in the
absence of those Officers and shall have such further powers and perform such
other duties as may be assigned tot hem respectively by the Board of
Directors or the Executive Committee or by the President.
Section 13. SALARIES. The salaries of the Officers shall be fixed
from time to time by the Board of Directors. No Officer shall be prevented
from receiving such salary by reason of the fact that he is also a Director
of the Corporation.
ARTICLE V
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SHARES AND THEIR TRANSFER
Section 1. CERTIFICATES. All share certificates shall be signed by
the President or any Vice President and by the Treasurer or Secretary or any
Assistant Treasurer or Assistant Secretary and sealed with the seal of the
Corporation. The signatures may be either manual or facsimile signatures and
the seal may be either facsimile or any other form of Seal. Certificates for
shares for which the Corporation has appointed an independent Transfer Agent
and Registrar shall not be valid unless countersigned by such Transfer Agent
and registered by such Registrar. In case any Officer who has signed any
certificate ceases to be an Officer of the Corporation before the certificate
is issued, the certificate may nevertheless be issued by the Corporation with
the same effect as if the Officer had not ceased top be such Officer as of
the date of its issuance. Share certificates shall be in such form not
inconsistent with law or the Charter or these By-Laws as may be determined by
the Board of Directors.
Section 2. TRANSFER OF SHARES. Shares shall be transferable on the
books of the Corporation by the holder thereof in person or by duly
authorized attorney upon surrender of the certificates representing the
shares to be transferred properly endorsed.
Section 3. CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE. The
Board of Directors may fix in advance a date as the record date for the
purpose of determining Shareholders entitled to notice of or to vote at any
Meeting of Shareholders or Shareholders to receive payment of any dividend.
Such date shall in any case not be more than 60 days and in case of a Meeting
of Shareholders not less than 10 day prior to the date on which the
particular action requiring such determination of Shareholders is to be
taken. In lieu of fixing a record date the Board of Directors may provide
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that the share transfer books of the Corporation shall be closed for a stated
period not to exceed in any case 20 days. If the share transfer books are
closed for the purpose of determining Shareholders entitled to notice of or
to vote at a Meeting of Shareholders such books shall be closed for at least
10 days immediately preceding such meeting.
Section 4. LOST, DESTROYED OR MUTILATED CERTIFICATES. In case any
Share certificate is lost, mutilated or destroyed the Board of Directors may
issue a new certificate in place thereof upon indemnity to the Corporation
against loss and upon such other terms and conditions as the Board may deem
advisable.
Section 5. TRANSFER AGENT AD REGISTRATION: REGULATIONS. The Board of
Directors shall have power and authority to make all such rules and
regulations as they may deem expediate concerning the issuance, transfer and
registration of Share certificates and may appoint a Transfer Agent and/or
Registrar of Share certificates, and may require all such Share certificates,
and may require all such Share certificates to bear the signature of such
Transfer Agent and/or of such Registrar.
ARTICLE VI
AGREEMENTS, CHECKS, DRAFTS, ENDORSEMENTS, ETC.
Section 1. AGREEMENTS, ETC. The Board of Directors or the
Executive Committee may authorize any Officer or Officers, or Agent or Agents
of the Corporation to enter into any Agreement or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances; and, unless so
authorized by the Board of Directors or by the Executive Committee or by
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these By-Laws, no Officer, Agent or Employee shall have any power to bind the
Corporation by any Agreement or engagement or to pledge its credit or to
render it liable pecuniarily for any purpose or to any amount.
Section 2. CHECKS, DRAFTS, ETC. All checks, drafts, or orders
for the payment of money, notes and other evidences of indebtedness shall be
signed by such Officer or Officers, Employee or Employees, or Agent or Agents
as shall be from time to time designated by the Board of Directors or the
Executive Committee, or as may be specified in or pursuant to the agreement
between the Corporation and the Bank or Trust Company appointed as custodian,
pursuant to the provisions of the Charter of the Corporation.
Section 3. ENDORSEMENTS, ASSIGNMENTS AND TRANSFER OF SECURITIES.
All endorsements, assignments, stock powers or other instruments of
transfer of securities standing in the name of the Corporation or its nominee
or directions for the transfer of securities belonging to the Corporation
shall be made by such Officer or Officers, Employee or Employees, or Agent or
Agents as may be authorized by the Board of Directors or the Executive
Committee.
Section 4. EVIDENCE OF AUTHORITY. Anyone dealing with the
Corporation shall be fully justified in relying on a copy of a resolution of
the Board of Directors or of any Committee thereof empowered to act in the
premises which is certified as true by the Secretary or an Assistant
Secretary under the seal of the Corporation.
Section 5. DESIGNATION OF A CUSTODIAN. The Corporation shall place
and at all time maintain in the custody of a Custodian all funds, securities
and similar investments owned by the Corporation, with the exception of
securities loaned under a properly authorized Securities Loan Agreement. The
Custodian shall be a bank having not less than $2,000,000 aggregate capital,
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surplus and undivided profits and shall be appointed from time to time by the
Board of Directors, which shall fix its remuneration.
Section 6. ACTION UPON TERMINATION OF A CUSTODIAN AGREEMENT. Upon
termination of a Custodian Agreement or inability of the Custodian to
continue to serve, the Board of Directors shall promptly appoint a successor
custodian, but in the event that no successor custodian can be found who has
the required qualifications and is willing to serve, the Board of Directors
shall call as promptly as possible a special meeting of the Shareholders to
determine whether the Corporation shall function without a custodian or shall
be liquidated. If so directed by vote of the holders of a majority of the
outstanding Shares, the Custodian shall deliver and pay over all property of
the Corporation held by it as specified in such vote.
Section 7. WHEN TO DETERMINE NET ASSET VALUE. The net asset value
per Share of the outstanding Shares shall be determined at such times as the
Board of Directors shall prescribe, provided that such net asset value shall
be determined at least weekly.
ARTICLE VII
BOOKS AND RECORDS
Section 1. LOCATION. The books and records of the Corporation,
including the Stock ledger or ledgers, may be kept in or outside the State of
Maryland at such office or agency of the Corporation as may be from time to
time determined by the Board of Directors.
ARTICLE VIII
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MISCELLANEOUS
Section 1. SEAL. The Seal of the Corporation shall be a disk
inscribed with the words "Government Income Securities, Inc. - Incorporated
Maryland 1986".
Section 2. FISCAL YEAR. The Fiscal Year of the Corporation shall
end on the last day of March in each year.
Section 3. WAIVER OF NOTICE. Whenever under the provisions of
these By-Laws or of any law, the Shareholders or Directors or Members of the
Executive Committee or other Committee are authorized to hold any meeting
after notice or after the lapse of any prescribed period of time, such
meeting may be held without notice or without such lapse of time by the
written waiver of notice signed by every person entitled to notice, or if
every person entitled to notice shall be present at such meeting.
ARTICLE IX
AMENDMENTS
Section 1. The Board of Directors shall have the power, at any
Regular or Special Meeting, if notice thereof be included in the notice of
such Special Meeting, to alter, amend or repeal any By-Laws of the
Corporation and to make new By-Laws.
Section 2. The Shareholders shall have the power, at any Annual
Meeting or at any Special Meeting if notice thereof be included in the notice
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of such Special Meeting, to alter, amend or repeal any By-Laws of the
Corporation or to make new By-Laws.
Exhibit 6(i) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
DISTRIBUTOR'S CONTRACT
AGREEMENT made this 22nd day of May, 1996 by and between Federated
Government Income Securities, Inc. (the "Corporation"), a Maryland
corporation, and FEDERATED SECURITIES CORP. ("FSC"), a Pennsylvania
Corporation.
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Corporation hereby appoints FSC as its agent to sell and distribute
shares of the Corporation which may be offered in one or more series
(the "Funds") consisting of one or more classes (the "Classes") of
shares (the "Shares"), as described and set forth on one or more
exhibits to this Agreement, at the current offering price thereof as
described and set forth in the current Prospectuses of the Corporation.
FSC hereby accepts such appointment and agrees to provide such other
services for the Corporation, if any, and accept such compensation from
the Corporation, if any, as set forth in the applicable exhibits to
this Agreement.
2. The sale of any Shares may be suspended without prior notice whenever
in the judgment of the Corporation it is in its best interest to do so.
3. Neither FSC nor any other person is authorized by the Corporation to
give any information or to make any representation relative to any
Shares other than those contained in the Registration Statement,
Prospectuses, or Statements of Additional Information ("SAIs") filed
with the Securities and Exchange Commission, as the same may be amended
from time to time, or in any supplemental information to said
Prospectuses or SAIs approved by the Corporation. FSC agrees that any
other information or representations other than those specified above
which it or any dealer or other person who purchases Shares through FSC
may make in connection with the offer or sale of Shares, shall be made
entirely without liability on the part of the Corporation. No person or
dealer, other than FSC, is authorized to act as agent for the
Corporation for any purpose. FSC agrees that in offering or selling
Shares as agent of the Corporation, it will, in all respects, duly
conform to all applicable state and federal laws and the rules and
regulations of the National Association of Securities Dealers, Inc.,
including its Rules of Fair Practice. FSC will submit to the
Corporation copies of all sales literature before using the same and
will not use such sales literature if disapproved by the Corporation.
4. This Agreement is effective with respect to each Class as of the date
of execution of the applicable exhibit and shall continue in effect
with respect to each Class presently set forth on an exhibit and any
subsequent Classes added pursuant to an exhibit during the initial term
of this Agreement for one year from the date set forth above, and
thereafter for successive periods of one year if such continuance is
approved at least annually by the Directors of the Corporation
including a majority of the members of the Board of Directors of the
Corporation who are not interested persons of the Corporation and have
no direct or indirect financial interest in the operation of any
Distribution Plan relating to the Corporation or in any related
documents to such Plan ("Disinterested Directors") cast in person at a
meeting called for that purpose. If a Class is added after the first
annual approval by the Directors as described above, this Agreement
will be effective as to that Class upon execution of the applicable
exhibit and will continue in effect until the next annual approval of
this Agreement by the Directors and thereafter for successive periods
of one year, subject to approval as described above.
5. This Agreement may be terminated with regard to a particular Fund or
Class at any time, without the payment of any penalty, by the vote of a
majority of the Disinterested Directors or by a majority of the
outstanding voting securities of the particular Fund or Class on not
more than sixty (60) days' written notice to any other party to this
Agreement. This Agreement may be terminated with regard to a particular
Fund or Class by FSC on sixty (60) days' written notice to the
Corporation.
6. This Agreement may not be assigned by FSC and shall automatically
terminate in the event of an assignment by FSC as defined in the
Investment Company Act of 1940, as amended, provided, however, that FSC
may employ such other person, persons, corporation or corporations as
it shall determine in order to assist it in carrying out its duties
under this Agreement.
7. FSC shall not be liable to the Corporation 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 by
this Agreement.
8. This Agreement may be amended at any time by mutual agreement in
writing of all the parties hereto, provided that such amendment is
approved by the Directorsof the Corporation including a majority of the
Disinterested Directors of the Corporation cast in person at a meeting
called for that purpose.
9. This Agreement shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
10. (a) Subject to the conditions set forth below, the Corporation agrees
to indemnify and hold harmless FSC and each person, if any, who
controls FSC within the meaning of Section 15 of the Securities
Act of 1933 and Section 20 of the Securities Act of 1934, as
amended, against any and all loss, liability, claim, damage and
expense whatsoever (including but not limited to any and all
expenses whatsoever reasonably incurred in investigating,
preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever) arising out of or based upon
any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, any Prospectuses or
SAIs (as from time to time amended and supplemented) or the
omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein
not misleading, unless such statement or omission was made in
reliance upon and in conformity with written information furnished
to the Corporation about FSC by or on behalf of FSC expressly for
use in the Registration Statement, any Prospectuses and SAIs or
any amendment or supplement thereof.
If any action is brought against FSC or any controlling person
thereof with respect to which indemnity may be sought against the
Corporation pursuant to the foregoing paragraph, FSC shall
promptly notify the Corporation in writing of the institution of
such action and the Corporation shall assume the defense of such
action, including the employment of counsel selected by the
Corporation and payment of expenses. FSC or any such controlling
person thereof shall have the right to employ separate counsel in
any such case, but the fees and expenses of such counsel shall be
at the expense of FSC or such controlling person unless the
employment of such counsel shall have been authorized in writing
by the Corporation in connection with the defense of such action
or the Corporation shall not have employed counsel to have charge
of the defense of such action, in any of which events such fees
and expenses shall be borne by the Corporation. Anything in this
paragraph to the contrary notwithstanding, the Corporation shall
not be liable for any settlement of any such claim of action
effected without its written consent. The Corporation agrees
promptly to notify FSC of the commencement of any litigation or
proceedings against the Corporation or any of its officers or
Directors or controlling persons in connection with the issue and
sale of Shares or in connection with the Registration Statement,
Prospectuses, or SAIs.
(b) FSC agrees to indemnify and hold harmless the Corporation, each of
its Directors, each of its officers who have signed the
Registration Statement and each other person, if any, who controls
the Corporation within the meaning of Section 15 of the Securities
Act of 1933, but only with respect to statements or omissions, if
any, made in the Registration Statement or any Prospectus, SAI, or
any amendment or supplement thereof in reliance upon, and in
conformity with, information furnished to the Corporation about
FSC by or on behalf of FSC expressly for use in the Registration
Statement or any Prospectus, SAI, or any amendment or supplement
thereof. In case any action shall be brought against the
Corporation or any other person so indemnified based on the
Registration Statement or any Prospectus, SAI, or any amendment or
supplement thereof, and with respect to which indemnity may be
sought against FSC, FSC shall have the rights and duties given to
the Corporation, and the Corporation and each other person so
indemnified shall have the rights and duties given to FSC by the
provisions of subsection (a) above.
(c) Nothing herein contained shall be deemed to protect any person
against liability to the Corporation or its shareholders to which
such person would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of
the duties of such person or by reason of the reckless disregard
by such person of the obligations and duties of such person under
this Agreement.
(d) Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940, as
amended, for Directors, officers, FSC and controlling persons of
the Corporation by the Corporation pursuant to this Agreement, the
Corporation is aware of the position of the Securities and
Exchange Commission as set forth in the Investment Company Act
Release No. IC-11330. Therefore, the Corporation undertakes that
in addition to complying with the applicable provisions of this
Agreement, 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 Disinterested Directors, 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 Corporation 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, Director, FSC or controlling person of the Corporation
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 Corporation is insured against losses
arising by reason of any lawful advances; or (iii) a majority of a
quorum of non-party Disinterested Directors 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.
12. If at any time the Shares of any Fund are offered in two or more
Classes, FSC agrees to adopt compliance standards as to when a class of
shares may be sold to particular investors.
13. This Agreement will become binding on the parties hereto upon the
execution of the attached exhibits to the Agreement.
Exhibit A
to the
Distributor's Contract
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
CLASS F SHARES
In consideration of the mutual covenants set forth in the
Distributor's Contract dated 22nd day of May, 1996 between Federated
Government Income Securities, Inc. and Federated Securities Corp.,
Federated Government Income Securities, Inc. executes and delivers this
Exhibit on behalf of , and with respect to the Class F Shares thereof,
first set forth in this Exhibit.
Witness the due execution hereof this 22nd day of May, 1996.
ATTEST: FEDERATED GOVERNMENT
INCOME SECURITIES, INC.
By:
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
By:
Secretary Executive Vice President
Exhibit 6(ii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
Exhibit B
to the
Distributor's Contract
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
CLASS A SHARES
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated May 22,1996, between Federated Government
Income Securities, Inc. and Federated Securities Corp. with respect to
the Class of shares set forth above.
1. The Corporation hereby appoints FSC to engage in activities principally
intended to result in the sale of shares of the above-listed Class
("Shares"). Pursuant to this appointment, FSC is authorized to select a
group of financial institutions ("Financial Institutions") to sell
Shares at the current offering price thereof as described and set forth
in the respective prospectuses of the Corporation.
2. During the term of this Agreement, the Corporation will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the
annual rate of 0.25% of the average aggregate net asset value of the
Shares held during the month. For the month in which this Agreement
becomes effective or terminates, there shall be an appropriate
proration of any fee payable on the basis of the number of days that
the Agreement is in effect during the month.
3. FSC may from time-to-time and for such periods as it deems appropriate
reduce its compensation to the extent any Class' expenses exceed such
lower expense limitation as FSC may, by notice to the Corporation,
voluntarily declare to be effective.
4. FSC will enter into separate written agreements with various firms to
provide certain of the services set forth in Paragraph 1 herein. FSC,
in its sole discretion, may pay Financial Institutions a periodic fee
in respect of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon which such
fees will be paid shall be determined from time to time by FSC in its
sole discretion.
5. FSC will prepare reports to the Board of Directors of the Corporation
on a quarterly basis showing amounts expended hereunder including
amounts paid to Financial Institutions and the purpose for such
expenditures.
In consideration of the mutual covenants set forth in the
Distributor's Contract dated May 22, 1996 between Federated Government
Income Securities, inc. and Federated Securities Corp., Federated
Government Income Securities, Inc. executes and delivers this Exhibit on
behalf of the Class A Shares, first set forth in this Exhibit.
Witness the due execution hereof this 22nd day of May, 1996.
ATTEST: FEDERATED GOVERNMENT
INCOME SECURITIES, INC.
By:
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
By:
Secretary Executive Vice President
(SEAL)
Exhibit 6(iii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
Exhibit C
to the
Distributor's Contract
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
CLASS B SHARES
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated May 22,1996, between Federated Government
Income Securities, Inc. and Federated Securities Corp. with respect to
the Class of shares set forth above.
1. The Corporation hereby appoints FSC to engage in activities principally
intended to result in the sale of shares of the above-listed Class
("Shares"). Pursuant to this appointment, FSC is authorized to select a
group of financial institutions ("Financial Institutions") to sell
Shares at the current offering price thereof as described and set forth
in the respective prospectuses of the Corporation.
2. During the term of this Agreement, the Corporation will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the
annual rate of 0.75% of the average aggregate net asset value of the
Shares held during the month. For the month in which this Agreement
becomes effective or terminates, there shall be an appropriate
proration of any fee payable on the basis of the number of days that
the Agreement is in effect during the month.
3. FSC may from time-to-time and for such periods as it deems appropriate
reduce its compensation to the extent any Class' expenses exceed such
lower expense limitation as FSC may, by notice to the Corporation,
voluntarily declare to be effective.
4. FSC will enter into separate written agreements with various firms to
provide certain of the services set forth in Paragraph 1 herein. FSC,
in its sole discretion, may pay Financial Institutions a periodic fee
in respect of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon which such
fees will be paid shall be determined from time to time by FSC in its
sole discretion.
5. FSC will prepare reports to the Board of Directors of the Corporation
on a quarterly basis showing amounts expended hereunder including
amounts paid to Financial Institutions and the purpose for such
expenditures.
In consideration of the mutual covenants set forth in the
Distributor's Contract dated May 22, 1996 between Federated Government
Income Securities, Inc. and Federated Securities Corp., Federated
Government Income Securities, Inc. executes and delivers this Exhibit on
behalf of the Class B Shares, first set forth in this Exhibit.
Witness the due execution hereof this 22nd day of May, 1996.
ATTEST: FEDERATED GOVERNMENT
INCOME SECURITIES, INC.
By:
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
By:
Secretary Executive Vice President
(SEAL)
Exhibit 6(iv) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
Exhibit D
to the
Distributor's Contract
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
CLASS C SHARES
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated May 22,1996, between Federated Government
Income Securities, Inc. and Federated Securities Corp. with respect to
the Class of shares set forth above.
1. The Corporation hereby appoints FSC to engage in activities principally
intended to result in the sale of shares of the above-listed Class
("Shares"). Pursuant to this appointment, FSC is authorized to select a
group of financial institutions ("Financial Institutions") to sell
Shares at the current offering price thereof as described and set forth
in the respective prospectuses of the Corporation.
2. During the term of this Agreement, the Corporation will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the
annual rate of 0.75% of the average aggregate net asset value of the
Shares held during the month. For the month in which this Agreement
becomes effective or terminates, there shall be an appropriate
proration of any fee payable on the basis of the number of days that
the Agreement is in effect during the month.
3. FSC may from time-to-time and for such periods as it deems appropriate
reduce its compensation to the extent any Class' expenses exceed such
lower expense limitation as FSC may, by notice to the Corporation,
voluntarily declare to be effective.
4. FSC will enter into separate written agreements with various firms to
provide certain of the services set forth in Paragraph 1 herein. FSC,
in its sole discretion, may pay Financial Institutions a periodic fee
in respect of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon which such
fees will be paid shall be determined from time to time by FSC in its
sole discretion.
5. FSC will prepare reports to the Board of Directors of the Corporation
on a quarterly basis showing amounts expended hereunder including
amounts paid to Financial Institutions and the purpose for such
expenditures.
In consideration of the mutual covenants set forth in the
Distributor's Contract dated May 22, 1996 between Federated Government
Income Securities,Inc. and Federated Securities Corp., Federated
Government Income Securities, Inc. executes and delivers this Exhibit on
behalf of the Class C Shares, first set forth in this Exhibit.
Witness the due execution hereof this 22nd day of May, 1996.
ATTEST: FEDERATED GOVERNMENT
INCOME SECURITIES, INC.
By:
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
By:
Secretary Executive Vice President
(SEAL)
Exhibit 9(II) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AGREEMENT
FOR
FUND ACCOUNTING SERVICES,
ADMINISTRATIVE SERVICES,
TRANSFER AGENCY SERVICES
AND
CUSTODY SERVICES PROCUREMENT
AGREEMENT made as of March 1, 1996, by and between those investment
companies listed on Exhibit 1 as may be amended from time to time, having
their principal office and place of business at Federated Investors Tower,
Pittsburgh, PA 15222-3779 (the "Investment Company"), on behalf of the
portfolios (individually referred to herein as a "Fund" and collectively as
"Funds") of the Investment Company, and FEDERATED SERVICES COMPANY, a
Pennsylvania corporation, having its principal office and place of business
at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779 on behalf
of itself and its subsidiaries (the "Company").
WHEREAS, the Investment Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), with authorized and issued shares of capital stock or beneficial
interest ("Shares");
WHEREAS, the Investment Company may desire to retain the Company as fund
accountant to provide fund accounting services (as herein defined) including
certain pricing, accounting and recordkeeping services for each of the Funds,
including any classes of shares issued by any Fund ("Classes") if so
indicated on Exhibit 1, and the Company desires to accept such appointment;
WHEREAS, the Investment Company may desire to appoint the Company as its
administrator to provide it with administrative services (as herein defined),
if so indicated on Exhibit, and the Company desires to accept such
appointment;
WHEREAS, the Investment Company may desire to appoint the Company as its
transfer agent and dividend disbursing agent to provide it with transfer
agency services (as herein defined) if so indicated on Exhibit 1, and agent
in connection with certain other activities, and the Company desires to
accept such appointment; and
WHEREAS, the Investment Company may desire to appoint the Company as its
agent to select, negotiate and subcontract for custodian services from an
approved list of qualified banks if so indicated on Exhibit 1, and the
Company desires to accept such appointment; and
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, and intending to be legally bound hereby, the parties hereto agree
as follows:
SECTION ONE: FUND ACCOUNTING.
ARTICLE 1. APPOINTMENT.
The Investment Company hereby appoints the Company to provide certain
pricing and accounting services to the Funds, and/or the Classes, for the
period and on the terms set forth in this Agreement. The Company accepts such
appointment and agrees to furnish the services herein set forth in return for
the compensation as provided in Article 3 of this Section.
ARTICLE 2. THE COMPANY'S DUTIES.
Subject to the supervision and control of the Investment Company's Board of
Trustees or Directors ("Board"), the Company will assist the Investment
Company with regard to fund accounting for the Investment Company, and/or the
Funds, and/or the Classes, and in connection therewith undertakes to perform
the following specific services;
A. Value the assets of the Funds using: primarily, market quotations,
including the use of matrix pricing, supplied by the independent
pricing services selected by the Company in consultation with the
adviser, or sources selected by the adviser, and reviewed by the board;
secondarily, if a designated pricing service does not provide a price
for a security which the Company believes should be available by market
quotation, the Company may obtain a price by calling brokers designated
by the investment adviser of the fund holding the security, or if the
adviser does not supply the names of such brokers, the Company will
attempt on its own to find brokers to price those securities; thirdly,
for securities for which no market price is available, the Pricing
Committee of the Board will determine a fair value in good faith.
Consistent with Rule 2a-4 of the 40 Act, estimates may be used where
necessary or appropriate. The Company's obligations with regard to the
prices received from outside pricing services and designated brokers or
other outside sources, is to exercise reasonable care in the
supervision of the pricing agent. The Company is not the guarantor of
the securities prices received from such agents and the Company is not
liable to the Fund for potential errors in valuing a Fund's assets or
calculating the net asset value per share of such Fund or Class when
the calculations are based upon such prices. All of the above sources
of prices used as described are deemed by the Company to be authorized
sources of security prices. The Company provides daily to the adviser
the securities prices used in calculating the net asset value of the
fund, for its use in preparing exception reports for those prices on
which the adviser has comment. Further, upon receipt of the exception
reports generated by the adviser, the Company diligently pursues
communication regarding exception reports with the designated pricing
agents;
B. Determine the net asset value per share of each Fund and/or Class, at
the time and in the manner from time to time determined by the Board
and as set forth in the Prospectus and Statement of Additional
Information ("Prospectus") of each Fund;
C. Calculate the net income of each of the Funds, if any;
D. Calculate realized capital gains or losses of each of the Funds
resulting from sale or disposition of assets, if any;
E. Maintain the general ledger and other accounts, books and financial
records of the Investment Company, including for each Fund, and/or
Class, as required under Section 31(a) of the 1940 Act and the Rules
thereunder in connection with the services provided by the Company;
F. Preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records to be maintained by Rule 31a-1 under the 1940 Act in
connection with the services provided by the Company. The Company
further agrees that all such records it maintains for the Investment
Company are the property of the Investment Company and further agrees
to surrender promptly to the Investment Company such records upon the
Investment Company's request;
G. At the request of the Investment Company, prepare various reports or
other financial documents in accordance with generally accepted
accounting principles as required by federal, state and other
applicable laws and regulations; and
H. Such other similar services as may be reasonably requested by the
Investment Company.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section
One, shall hereafter be referred to as "Fund Accounting Services."
ARTICLE 3. COMPENSATION AND ALLOCATION OF EXPENSES.
A. The Funds will compensate the Company for Fund Accounting Services in
accordance with the fees agreed upon from time to time between the
parties hereto. Such fees do not include out-of-pocket disbursements of
the Company for which the Funds shall reimburse the Company. Out-of-
pocket disbursements shall include, but shall not be limited to, the
items agreed upon between the parties from time to time.
B. The Fund and/or the Class, and not the Company, shall bear the cost of:
custodial expenses; membership dues in the Investment Company Institute
or any similar organization; transfer agency expenses; investment
advisory expenses; costs of printing and mailing stock certificates,
Prospectuses, reports and notices; administrative expenses; interest on
borrowed money; brokerage commissions; taxes and fees payable to
federal, state and other governmental agencies; fees of Trustees or
Directors of the Investment Company; independent auditors expenses;
legal and audit department expenses billed to the Company for work
performed related to the Investment Company, the Funds, or the Classes;
law firm expenses; organizational expenses; or other expenses not
specified in this Article 3 which may be properly payable by the Funds
and/or Classes.
C. The compensation and out-of-pocket expenses attributable to the Fund
shall be accrued by the Fund and shall be paid to the Company no less
frequently than monthly, and shall be paid daily upon request of the
Company. The Company will maintain detailed information about the
compensation and out-of-pocket expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Investment Company and/or the Funds and a duly
authorized officer of the Company.
E. The fee for the period from the effective date of this Agreement with
respect to a Fund or a Class to the end of the initial month shall be
prorated according to the proportion that such period bears to the full
month period. Upon any termination of this Agreement before the end of
any month, the fee for such period shall be prorated according to the
proportion which such period bears to the full month period. For
purposes of determining fees payable to the Company, the value of the
Fund's net assets shall be computed at the time and in the manner
specified in the Fund's Prospectus.
F. The Company, in its sole discretion, may from time to time subcontract
to, employ or associate with itself such person or persons as the
Company may believe to be particularly suited to assist it in
performing Fund Accounting Services. Such person or persons may be
affiliates of the Company, third-party service providers, or they may
be officers and employees who are employed by both the Company and the
Investment Company; provided, however, that the Company shall be as
fully responsible to each Fund for the acts and omissions of any such
subcontractor as it is for its own acts and omissions. The compensation
of such person or persons shall be paid by the Company and no
obligation shall be incurred on behalf of the Investment Company, the
Funds, or the Classes in such respect.
SECTION TWO: ADMINISTRATIVE SERVICES.
ARTICLE 4. APPOINTMENT.
The Investment Company hereby appoints the Company as Administrator for the
period on the terms and conditions set forth in this Agreement. The Company
hereby accepts such appointment and agrees to furnish the services set forth
in Article 5 of this Agreement in return for the compensation set forth in
Article 9 of this Agreement.
ARTICLE 5. THE COMPANY'S DUTIES.
As Administrator, and subject to the supervision and control of the Board
and in accordance with Proper Instructions (as defined hereafter) from the
Investment Company the Company will provide facilities, equipment, and
personnel to carry out the following administrative services for operation of
the business and affairs of the Investment Company and each of its
portfolios:
A. prepare, file, and maintain the Investment Company's governing
documents and any amendments thereto, including the Charter (which has
already been prepared and filed), the By-laws and minutes of meetings
of the Board and Shareholders;
B. prepare and file with the Securities and Exchange Commission and the
appropriate state securities authorities the registration statements
for the Investment Company and the Investment Company's shares and all
amendments thereto, reports to regulatory authorities and shareholders,
prospectuses, proxy statements, and such other documents all as may be
necessary to enable the Investment Company to make a continuous
offering of its shares;
C. prepare, negotiate, and administer contracts (if any) on behalf of the
Investment Company with, among others, the Investment Company's
investment advisers and distributors, subject to any applicable
restrictions of the Board or the 1940 Act;
D. calculate performance data of the Investment Company for dissemination
to information services covering the investment company industry;
E. prepare and file the Investment Company's tax returns;
F. coordinate the layout and printing of publicly disseminated
prospectuses and reports;
G. perform internal audit examinations in accordance with a charter to be
adopted by the Company and the Investment Company;
H. assist with the design, development, and operation of the Investment
Company and the Funds;
I. provide individuals reasonably acceptable to the Board for nomination,
appointment, or election as officers of the Investment Company, who
will be responsible for the management of certain of the Investment
Company's affairs as determined by the Investment Company's Board; and
J. consult with the Investment Company and its Board on matters concerning
the Investment Company and its affairs.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section 4,
shall hereafter be referred to as "Administrative Services."
ARTICLE 6. RECORDS.
The Company shall create and maintain all necessary books and records in
accordance with all applicable laws, rules and regulations, including but not
limited to records required by Section 31(a) of the Investment Company act of
1940 and the rules thereunder, as the same may be amended from time to time,
pertaining to the Administrative Services performed by it and not otherwise
created and maintained by another party pursuant to contract with the
Investment Company. Where applicable, such records shall be maintained by
the Company for the periods and in the places required by Rule 31a-2 under
the 1940 Act. The books and records pertaining to the Investment Company
which are in the possession of the Company shall be the property of the
Investment Company. The Investment Company, or the Investment Company's
authorized representatives, shall have access to such books and records at
all times during the Company's normal business hours. Upon the reasonable
request of the Investment Company, copies of any such books and records shall
be provided promptly by the Company to the Investment Company or the
Investment Company's authorized representatives.
ARTICLE 7. DUTIES OF THE FUND.
The Fund assumes full responsibility for the preparation, contents and
distribution of its own offering document and for complying with all
applicable requirements the 1940 Act, the Internal Revenue Code, and any
other laws, rules and regulations of government authorities having
jurisdiction.
ARTICLE 8. EXPENSES.
The Company shall be responsible for expenses incurred in providing office
space, equipment, and personnel as may be necessary or convenient to provide
the Administrative Services to the Investment Company, including the
compensation of the Company employees who serve as trustees or directors or
officers of the Investment Company. The Investment Company shall be
responsible for all other expenses incurred by the Company on behalf of the
Investment Company, including without limitation postage and courier
expenses, printing expenses, travel expenses, registration fees, filing fees,
fees of outside counsel and independent auditors, or other professional
services, organizational expenses, insurance premiums, fees payable to
persons who are not the Company's employees, trade association dues, and
other expenses properly payable by the Funds and/or the Classes.
ARTICLE 9. COMPENSATION.
For the Administrative Services provided, the Investment Company hereby
agrees to pay and the Company hereby agrees to accept as full compensation
for its services rendered hereunder an administrative fee at an annual rate
per Fund, as specified below.
The compensation and out of pocket expenses attributable to the Fund shall
be accrued by the Fund and paid to the Company no less frequently than
monthly, and shall be paid daily upon request of the Company. The Company
will maintain detailed information about the compensation and out of pocket
expenses by the Fund.
MAX. ADMIN. AVERAGE DAILY NET ASSETS
FEE OF THE FUNDS
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
(Average Daily Net Asset break-points are on a complex-wide basis)
However, in no event shall the administrative fee received during any year
of the Agreement be less than, or be paid at a rate less than would aggregate
$125,000 per Fund and $30,000 per Class. The minimum fee set forth above in
this Article 9 may increase annually upon each March 1 anniversary of this
Agreement over the minimum fee during the prior 12 months, as calculated
under this agreement, in an amount equal to the increase in Pennsylvania
Consumer Price Index (not to exceed 6% annually) as last reported by the U.S.
Bureau of Labor Statistics for the twelve months immediately preceding such
anniversary.
ARTICLE 10. RESPONSIBILITY OF ADMINISTRATOR.
A. The Company shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Investment Company in connection
with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless disregard by
it of its obligations and duties under this Agreement. The Company
shall be entitled to rely on and may act upon advice of counsel (who
may be counsel for the Investment Company) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant
to such advice. Any person, even though also an officer, director,
trustee, partner, employee or agent of the Company, who may be or
become an officer, director, trustee, partner, employee or agent of the
Investment Company, shall be deemed, when rendering services to the
Investment Company or acting on any business of the Investment Company
(other than services or business in connection with the duties of the
Company hereunder) to be rendering such services to or acting solely
for the Investment Company and not as an officer, director, trustee,
partner, employee or agent or one under the control or direction of the
Company even though paid by the Company.
B. The Company shall be kept indemnified by the Investment Company and be
without liability for any action taken or thing done by it in
performing the Administrative Services in accordance with the above
standards. In order that the indemnification provisions contained in
this Article 10 shall apply, however, it is understood that if in any
case the Investment Company may be asked to indemnify or hold the
Company harmless, the Investment Company shall be fully and promptly
advised of all pertinent facts concerning the situation in question,
and it is further understood that the Company will use all reasonable
care to identify and notify the Investment Company promptly concerning
any situation which presents or appears likely to present the
probability of such a claim for indemnification against the Investment
Company. The Investment Company shall have the option to defend the
Company against any claim which may be the subject of this
indemnification. In the event that the Investment Company so elects,
it will so notify the Company and thereupon the Investment Company
shall take over complete defense of the claim, and the Company shall in
such situation initiate no further legal or other expenses for which it
shall seek indemnification under this Article. the Company shall in no
case confess any claim or make any compromise in any case in which the
Investment Company will be asked to indemnify the Company except with
the Investment Company's written consent.
SECTION THREE: TRANSFER AGENCY SERVICES.
ARTICLE 11. TERMS OF APPOINTMENT.
Subject to the terms and conditions set forth in this Agreement, the
Investment Company hereby appoints the Company to act as, and the Company
agrees to act as, transfer agent and dividend disbursing agent for each
Fund's Shares, and agent in connection with any accumulation, open-account or
similar plans provided to the shareholders of any Fund ("Shareholder(s)"),
including without limitation any periodic investment plan or periodic
withdrawal program.
ARTICLE 12. DUTIES OF THE COMPANY.
The Company shall perform the following services in accordance with Proper
Instructions as may be provided from time to time by the Investment Company
as to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase of
shares and promptly deliver payment and appropriate documentation
therefore to the custodian of the relevant Fund, (the
"Custodian"). The Company shall notify the Fund and the Custodian
on a daily basis of the total amount of orders and payments so
delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of Shares of each Fund and/or Class and hold
such Shares in the appropriate Shareholder accounts.
(3) For certificated Funds and/or Classes, if a Shareholder or its
agent requests a certificate, the Company, as Transfer Agent,
shall countersign and mail by first class mail, a certificate to
the Shareholder at its address as set forth on the transfer books
of the Funds, and/or Classes, subject to any Proper Instructions
regarding the delivery of certificates.
(4) In the event that any check or other order for the purchase of
Shares of the Fund and/or Class is returned unpaid for any reason,
the Company shall debit the Share account of the Shareholder by
the number of Shares that had been credited to its account upon
receipt of the check or other order, promptly mail a debit advice
to the Shareholder, and notify the Fund and/or Class of its
action. In the event that the amount paid for such Shares exceeds
proceeds of the redemption of such Shares plus the amount of any
dividends paid with respect to such Shares, the Fund and/the Class
or its distributor will reimburse the Company on the amount of
such excess.
B. Distribution
(1) Upon notification by the Funds of the declaration of any
distribution to Shareholders, the Company shall act as Dividend
Disbursing Agent for the Funds in accordance with the provisions
of its governing document and the then-current Prospectus of the
Fund. The Company shall prepare and mail or credit income, capital
gain, or any other payments to Shareholders. As the Dividend
Disbursing Agent, the Company shall, on or before the payment date
of any such distribution, notify the Custodian of the estimated
amount required to pay any portion of said distribution which is
payable in cash and request the Custodian to make available
sufficient funds for the cash amount to be paid out. The Company
shall reconcile the amounts so requested and the amounts actually
received with the Custodian on a daily basis. If a Shareholder is
entitled to receive additional Shares by virtue of any such
distribution or dividend, appropriate credits shall be made to the
Shareholder's account, for certificated Funds and/or Classes,
delivered where requested; and
(2) The Company shall maintain records of account for each Fund and
Class and advise the Investment Company, each Fund and Class and
its Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or set forth
in Proper Instructions, deliver the appropriate instructions
therefor to the Custodian. The Company shall notify the Funds on a
daily basis of the total amount of redemption requests processed
and monies paid to the Company by the Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds from
the Custodian with respect to any redemption, the Company shall
pay or cause to be paid the redemption proceeds in the manner
instructed by the redeeming Shareholders, pursuant to procedures
described in the then-current Prospectus of the Fund.
(3) If any certificate returned for redemption or other request for
redemption does not comply with the procedures for redemption
approved by the Fund, the Company shall promptly notify the
Shareholder of such fact, together with the reason therefor, and
shall effect such redemption at the price applicable to the date
and time of receipt of documents complying with said procedures.
(4) The Company shall effect transfers of Shares by the registered
owners thereof.
(5) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual basis
and report such actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each Fund,
and/or Class, and maintain pursuant to applicable rules of the
Securities and Exchange Commission ("SEC") a record of the total
number of Shares of the Fund and/or Class which are authorized,
based upon data provided to it by the Fund, and issued and
outstanding. The Company shall also provide the Fund on a regular
basis or upon reasonable request with the total number of Shares
which are authorized and issued and outstanding, but shall have no
obligation when recording the issuance of Shares, except as
otherwise set forth herein, to monitor the issuance of such Shares
or to take cognizance of any laws relating to the issue or sale of
such Shares, which functions shall be the sole responsibility of
the Funds.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed hereunder in the form and manner as agreed to by the
Investment Company or the Fund to include a record for each
Shareholder's account of the following:
(a) Name, address and tax identification number (and whether such
number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account, including
dividends paid and date and price for all transactions;
(d) Any stop or restraining order placed against the account;
(e) Information with respect to withholding in the case of a
foreign account or an account for which withholding is
required by the Internal Revenue Code;
(f) Any dividend reinvestment order, plan application, dividend
address and correspondence relating to the current
maintenance of the account;
(g) Certificate numbers and denominations for any Shareholder
holding certificates;
(h) Any information required in order for the Company to perform
the calculations contemplated or required by this Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such record
retention shall be at the expense of the Company, and such records
may be inspected by the Fund at reasonable times. The Company may,
at its option at any time, and shall forthwith upon the Fund's
demand, turn over to the Fund and cease to retain in the Company's
files, records and documents created and maintained by the Company
pursuant to this Agreement, which are no longer needed by the
Company in performance of its services or for its protection. If
not so turned over to the Fund, such records and documents will be
retained by the Company for six years from the year of creation,
during the first two of which such documents will be in readily
accessible form. At the end of the six year period, such records
and documents will either be turned over to the Fund or destroyed
in accordance with Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the following
information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in each
state for "blue sky" purposes as determined according to
Proper Instructions delivered from time to time by the Fund
to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption fees, or
other transaction- or sales-related payments;
(f) Such other information as may be agreed upon from time to
time.
(2) The Company shall prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies, and, if
required, mail to Shareholders, such notices for reporting
dividends and distributions paid as are required to be so filed
and mailed and shall withhold such sums as are required to be
withheld under applicable federal and state income tax laws, rules
and regulations.
(3) In addition to and not in lieu of the services set forth above,
the Company shall:
(a) Perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, agent in
connection with accumulation, open-account or similar plans
(including without limitation any periodic investment plan or
periodic withdrawal program), including but not limited to:
maintaining all Shareholder accounts, mailing Shareholder
reports and Prospectuses to current Shareholders, withholding
taxes on accounts subject to back-up or other withholding
(including non-resident alien accounts), preparing and filing
reports on U.S. Treasury Department Form 1099 and other
appropriate forms required with respect to dividends and
distributions by federal authorities for all Shareholders,
preparing and mailing confirmation forms and statements of
account to Shareholders for all purchases and redemptions of
Shares and other conformable transactions in Shareholder
accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information;
and
(b) provide a system which will enable the Fund to monitor the
total number of Shares of each Fund (and/or Class) sold in
each state ("blue sky reporting"). The Fund shall by Proper
Instructions (i) identify to the Company those transactions
and assets to be treated as exempt from the blue sky
reporting for each state and (ii) verify the classification
of transactions for each state on the system prior to
activation and thereafter monitor the daily activity for each
state. The responsibility of the Company for each Fund's
(and/or Class's) state blue sky registration status is
limited solely to the recording of the initial classification
of transactions or accounts with regard to blue sky
compliance and the reporting of such transactions and
accounts to the Fund as provided above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders relating
to their Share accounts and such other correspondence as may from
time to time be addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists, mail proxy
cards and other material supplied to it by the Fund in connection
with Shareholder meetings of each Fund; receive, examine and
tabulate returned proxies, and certify the vote of the
Shareholders;
(3) The Company shall establish and maintain facilities and procedures
for safekeeping of stock certificates, check forms and facsimile
signature imprinting devices, if any; and for the preparation or
use, and for keeping account of, such certificates, forms and
devices.
ARTICLE 13. DUTIES OF THE INVESTMENT COMPANY.
A. Compliance
The Investment Company or Fund assume full responsibility for the
preparation, contents and distribution of their own and/or their
classes' Prospectus and for complying with all applicable requirements
of the Securities Act of 1933, as amended (the "1933 Act"), the 1940
Act and any laws, rules and regulations of government authorities
having jurisdiction.
B. Share Certificates
The Investment Company shall supply the Company with a sufficient
supply of blank Share certificates and from time to time shall renew
such supply upon request of the Company. Such blank Share certificates
shall be properly signed, manually or by facsimile, if authorized by
the Investment Company and shall bear the seal of the Investment
Company or facsimile thereof; and notwithstanding the death,
resignation or removal of any officer of the Investment Company
authorized to sign certificates, the Company may continue to
countersign certificates which bear the manual or facsimile signature
of such officer until otherwise directed by the Investment Company.
C. Distributions
The Fund shall promptly inform the Company of the declaration of any
dividend or distribution on account of any Fund's shares.
ARTICLE 14. COMPENSATION AND EXPENSES.
A. Annual Fee
For performance by the Company pursuant to Section Three of this
Agreement, the Investment Company and/or the Fund agree to pay the
Company an annual maintenance fee for each Shareholder account as
agreed upon between the parties and as may be added to or amended from
time to time. Such fees may be changed from time to time subject to
written agreement between the Investment Company and the Company.
Pursuant to information in the Fund Prospectus or other information or
instructions from the Fund, the Company may sub-divide any Fund into
Classes or other sub-components for recordkeeping purposes. The Company
will charge the Fund the same fees for each such Class or sub-component
the same as if each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Investment
Company and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items agreed upon
between the parties, as may be added to or amended from time to time.
In addition, any other expenses incurred by the Company at the request
or with the consent of the Investment Company and/or the Fund, will be
reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the
Fund and shall be paid to the Company no less frequently than monthly,
and shall be paid daily upon request of the Company. The Company will
maintain detailed information about the compensation and out-of-pocket
expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Investment Company and/or the Funds and a duly
authorized officer of the Company.
SECTION FOUR: CUSTODY SERVICES PROCUREMENT.
ARTICLE 15. APPOINTMENT.
The Investment Company hereby appoints Company as its agent to evaluate and
obtain custody services from a financial institution that (i) meets the
criteria established in Section 17(f) of the 1940 Act and (ii) has been
approved by the Board as eligible for selection by the Company as a custodian
(the "Eligible Custodian"). The Company accepts such appointment.
ARTICLE 16. THE COMPANY AND ITS DUTIES.
Subject to the review, supervision and control of the Board, the Company
shall:
A. evaluate and obtain custody services from a financial institution that
meets the criteria established in Section 17(f) of the 1940 Act and has
been approved by the Board as being eligible for selection by the
Company as an Eligible Custodian;
B. negotiate and enter into agreements with Eligible Custodians for the
benefit of the Investment Company, with the Investment Company as a
party to each such agreement. The Company may, as paying agent, be a
party to any agreement with any such Eligible Custodian;
C. establish procedures to monitor the nature and the quality of the
services provided by Eligible Custodians;
D. monitor and evaluate the nature and the quality of services provided by
Eligible Custodians;
E. periodically provide to the Investment Company (i) written reports on
the activities and services of Eligible Custodians; (ii) the nature
and amount of disbursements made on account of the each Fund with
respect to each custodial agreement; and (iii) such other information
as the Board shall reasonably request to enable it to fulfill its
duties and obligations under Sections 17(f) and 36(b) of the 1940 Act
and other duties and obligations thereof;
F. periodically provide recommendations to the Board to enhance Eligible
Custodian's customer services capabilities and improve upon fees being
charged to the Fund by Eligible Custodian; and
The foregoing, along with any additional services that Company shall agree
in writing to perform for the Fund under this Section Four, shall hereafter
be referred to as "Custody Services Procurement."
ARTICLE 17. FEES AND EXPENSES.
A. Annual Fee
For the performance of Custody Services Procurement by the Company
pursuant to Section Four of this Agreement, the Investment Company
and/or the Fund agree to compensate the Company in accordance with the
fees agreed upon from time to time.
B. Reimbursements
In addition to the fee paid under Section 11A above, the Investment
Company and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items agreed upon
between the parties, as may be added to or amended from time to time.
In addition, any other expenses incurred by the Company at the request
or with the consent of the Investment Company and/or the Fund, will be
reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the
Fund and shall be paid to the Company no less frequently than monthly,
and shall be paid daily upon request of the Company. The Company will
maintain detailed information about the compensation and out-of-pocket
expenses by Fund.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Investment Company and/or the Funds and a duly
authorized officer of the Company.
ARTICLE 18. REPRESENTATIONS.
The Company represents and warrants that it has obtained all required
approvals from all government or regulatory authorities necessary to enter
into this arrangement and to provide the services contemplated in Section
Four of this Agreement.
SECTION FIVE: GENERAL PROVISIONS.
ARTICLE 19. PROPER INSTRUCTIONS.
As used throughout this Agreement, a "Proper Instruction" means a writing
signed or initialed by one or more person or persons as the Board shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved. Oral instructions will be deemed
to be Proper Instructions if (a) the Company reasonably believes them to have
been given by a person previously authorized in Proper Instructions to give
such instructions with respect to the transaction involved, and (b) the
Investment Company, or the Fund, and the Company promptly cause such oral
instructions to be confirmed in writing. Proper Instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the Investment Company, or the Fund, and the Company
are satisfied that such procedures afford adequate safeguards for the Fund's
assets. Proper Instructions may only be amended in writing.
ARTICLE 20. ASSIGNMENT.
Except as provided below, neither this Agreement nor any of the rights or
obligations under this Agreement may be assigned by either party without the
written consent of the other party.
A. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
B. With regard to Transfer Agency Services, the Company may without
further consent on the part of the Investment Company subcontract for
the performance of Transfer Agency Services with
(1) its subsidiary, Federated Shareholder Service Company, a Delaware
business trust, which is duly registered as a transfer agent
pursuant to Section 17A(c)(1) of the Securities Exchange Act of
1934, as amended, or any succeeding statute ("Section 17A(c)(1)");
or
(2) such other provider of services duly registered as a transfer
agent under Section 17A(c)(1) as Company shall select.
The Company shall be as fully responsible to the Investment Company for
the acts and omissions of any subcontractor as it is for its own acts
and omissions.
C. With regard to Fund Accounting Services, Administrative Services and
Custody Procurement Services, the Company may without further consent
on the part of the Investment Company subcontract for the performance
of such services with Federated Administrative Services, a wholly-owned
subsidiary of the Company.
D. The Company shall upon instruction from the Investment Company
subcontract for the performance of services under this Agreement with
an Agent selected by the Investment Company, other than as described in
B. and C. above; provided, however, that the Company shall in no way be
responsible to the Investment Company for the acts and omissions of the
Agent.
ARTICLE 21. DOCUMENTS.
A. In connection with the appointment of the Company under this Agreement,
the Investment Company shall file with the Company the following
documents:
(1) A copy of the Charter and By-Laws of the Investment Company and
all amendments thereto;
(2) A copy of the resolution of the Board of the Investment Company
authorizing this Agreement;
(3) Specimens of all forms of outstanding Share certificates of the
Investment Company or the Funds in the forms approved by the Board
of the Investment Company with a certificate of the Secretary of
the Investment Company as to such approval;
(4) All account application forms and other documents relating to
Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following documents:
(1) Each resolution of the Board of the Investment Company authorizing
the original issuance of each Fund's, and/or Class's Shares;
(2) Each Registration Statement filed with the SEC and amendments
thereof and orders relating thereto in effect with respect to the
sale of Shares of any Fund, and/or Class;
(3) A certified copy of each amendment to the governing document and
the By-Laws of the Investment Company;
(4) Certified copies of each vote of the Board authorizing officers to
give Proper Instructions to the Custodian and agents for fund
accountant, custody services procurement, and shareholder
recordkeeping or transfer agency services;
(5) Specimens of all new Share certificates representing Shares of any
Fund, accompanied by Board resolutions approving such forms;
(6) Such other certificates, documents or opinions which the Company
may, in its discretion, deem necessary or appropriate in the
proper performance of its duties; and
(7) Revisions to the Prospectus of each Fund.
ARTICLE 22. REPRESENTATIONS AND WARRANTIES.
A. Representations and Warranties of the Company
The Company represents and warrants to the Fund that:
(1) it is a corporation duly organized and existing and in good
standing under the laws of the Commonwealth of Pennsylvania;
(2) It is duly qualified to carry on its business in each jurisdiction
where the nature of its business requires such qualification, and
in the Commonwealth of Pennsylvania;
(3) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this
Agreement;
(4) all requisite corporate proceedings have been taken to authorize
it to enter into and perform its obligations under this Agreement;
(5) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement;
(6) it is in compliance with federal securities law requirements and
in good standing as an administrator and fund accountant; and
B. Representations and Warranties of the Investment Company
The Investment Company represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and in
good standing under the laws of its state of organization;
(2) It is empowered under applicable laws and by its Charter and By-
Laws to enter into and perform its obligations under this
Agreement;
(3) All corporate proceedings required by said Charter and By-Laws
have been taken to authorize it to enter into and perform its
obligations under this Agreement;
(4) The Investment Company is an open-end investment company
registered under the 1940 Act; and
(5) A registration statement under the 1933 Act will be effective, and
appropriate state securities law filings have been made and will
continue to be made, with respect to all Shares of each Fund being
offered for sale.
ARTICLE 23. STANDARD OF CARE AND INDEMNIFICATION.
A. Standard of Care
With regard to Sections One, Three and Four, the Company shall be held
to a standard of reasonable care in carrying out the provisions of this
Contract. The Company shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Investment Company) on
all matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice, provided that such action is
not in violation of applicable federal or state laws or regulations,
and is in good faith and without negligence.
B. Indemnification by Investment Company
The Company shall not be responsible for and the Investment Company or
Fund shall indemnify and hold the Company, including its officers,
directors, shareholders and their agents, employees and affiliates,
harmless against any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liabilities arising out of or attributable
to:
(1) The acts or omissions of any Custodian, Adviser, Sub-adviser or
other party contracted by or approved by the Investment Company or
Fund,
(2) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in proper
form which
(a) are received by the Company or its agents or subcontractors
and furnished to it by or on behalf of the Fund, its
Shareholders or investors regarding the purchase, redemption
or transfer of Shares and Shareholder account information;
(b) are received by the Company from independent pricing services
or sources for use in valuing the assets of the Funds; or
(c) are received by the Company or its agents or subcontractors
from Advisers, Sub-advisers or other third parties contracted
by or approved by the Investment Company of Fund for use in
the performance of services under this Agreement;
(d) have been prepared and/or maintained by the Fund or its
affiliates or any other person or firm on behalf of the
Investment Company.
(3) The reliance on, or the carrying out by the Company or its agents
or subcontractors of Proper Instructions of the Investment Company
or the Fund.
(4) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws
or regulations of any state that such Shares be registered in such
state or in violation of any stop order or other determination or
ruling by any federal agency or any state with respect to the
offer or sale of such Shares in such state.
Provided, however, that the Company shall not be protected by this
Article 23.B. from liability for any act or omission resulting
from the Company's willful misfeasance, bad faith, negligence or
reckless disregard of its duties or failure to meet the standard
of care set forth in 23.A. above.
C. Reliance
At any time the Company may apply to any officer of the Investment
Company or Fund for instructions, and may consult with legal counsel
with respect to any matter arising in connection with the services to
be performed by the Company under this Agreement, and the Company and
its agents or subcontractors shall not be liable and shall be
indemnified by the Investment Company or the appropriate Fund for any
action reasonably taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel provided such action
is not in violation of applicable federal or state laws or regulations.
The Company, its agents and subcontractors shall be protected and
indemnified in recognizing stock certificates which are reasonably
believed to bear the proper manual or facsimile signatures of the
officers of the Investment Company or the Fund, and the proper
countersignature of any former transfer agent or registrar, or of a co-
transfer agent or co-registrar.
D. Notification
In order that the indemnification provisions contained in this
Article 23 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such
assertion, and shall keep the other party advised with respect to all
developments concerning such claim. The party who may be required to
indemnify shall have the option to participate with the party seeking
indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent.
ARTICLE 24. TERM AND TERMINATION OF AGREEMENT.
This Agreement shall be effective from March 1, 1996 and shall continue
until February 28, 2003 (`Term"). Thereafter, the Agreement will continue
for 18 month terms. The Agreement can be terminated by either party upon 18
months notice to be effective as of the end of such 18 month period. In the
event, however, of willful misfeasance, bad faith, negligence or reckless
disregard of its duties by the Company, the Investment Company has the right
to terminate the Agreement upon 60 days written notice, if Company has not
cured such willful misfeasance, bad faith, negligence or reckless disregard
of its duties within 60 days. The termination date for all original or
after-added Investment companies which are, or become, a party to this
Agreement. shall be coterminous. Investment Companies that merge or dissolve
during the Term, shall cease to be a party on the effective date of such
merger or dissolution.
Should the Investment Company exercise its rights to terminate, all out-of-
pocket expenses associated with the movement of records and materials will be
borne by the Investment Company or the appropriate Fund. Additionally, the
Company reserves the right to charge for any other reasonable expenses
associated with such termination. The provisions of Articles 10 and 23 shall
survive the termination of this Agreement.
ARTICLE 25. AMENDMENT.
This Agreement may be amended or modified by a written agreement executed
by both parties.
ARTICLE 26. INTERPRETIVE AND ADDITIONAL PROVISIONS.
In connection with the operation of this Agreement, the Company and the
Investment Company may from time to time agree on such provisions
interpretive of or in addition to the provisions of this Agreement as may in
their joint opinion be consistent with the general tenor of this Agreement.
Any such interpretive or additional provisions shall be in a writing signed
by both parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any applicable federal
or state regulations or any provision of the Charter. No interpretive or
additional provisions made as provided in the preceding sentence shall be
deemed to be an amendment of this Agreement.
ARTICLE 27. GOVERNING LAW.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts
ARTICLE 28. NOTICES.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Investment Company at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the
Company at Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779,
or to such other address as the Investment Company or the Company may
hereafter specify, shall be deemed to have been properly delivered or given
hereunder to the respective address.
ARTICLE 29. COUNTERPARTS.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
ARTICLE 30. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF THE
COMPANY.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Company and signed by an authorized officer of the Company,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by
any of them individually or to impose any liability on any of them
personally, and the obligations of this Agreement are not binding upon any of
the Trustees or Shareholders of the Company, but bind only the appropriate
property of the Fund, or Class, as provided in the Declaration of Trust.
ARTICLE 31. MERGER OF AGREEMENT.
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof whether
oral or written.
ARTICLE 32. SUCCESSOR AGENT.
If a successor agent for the Investment Company shall be appointed by the
Investment Company, the Company shall upon termination of this Agreement
deliver to such successor agent at the office of the Company all properties
of the Investment Company held by it hereunder. If no such successor agent
shall be appointed, the Company shall at its office upon receipt of Proper
Instructions deliver such properties in accordance with such instructions.
In the event that no written order designating a successor agent or Proper
Instructions shall have been delivered to the Company on or before the date
when such termination shall become effective, then the Company shall have the
right to deliver to a bank or trust company, which is a "bank" as defined in
the 1940 Act, of its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not less than
$2,000,000, all properties held by the Company under this Agreement.
Thereafter, such bank or trust company shall be the successor of the Company
under this Agreement.
ARTICLE 33. FORCE MAJEURE.
The Company shall have no liability for cessation of services hereunder or
any damages resulting therefrom to the Fund as a result of work stoppage,
power or other mechanical failure, natural disaster, governmental action,
communication disruption or other impossibility of performance.
ARTICLE 34. ASSIGNMENT; SUCCESSORS.
This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party may assign all
of or a substantial portion of its business to a successor, or to a party
controlling, controlled by, or under common control with such party. Nothing
in this Article 34 shall prevent the Company from delegating its
responsibilities to another entity to the extent provided herein.
ARTICLE 35. SEVERABILITY.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
ARTICLE 36. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF
THE INVESTMENT COMPANY.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Investment Company and signed by an authorized officer of the
Investment Company, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability on any
of them personally, and the obligations of this Agreement are not binding
upon any of the Trustees or Shareholders of the Investment Company, but bind
only the property of the Fund, or Class, as provided in the Declaration of
Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
INVESTMENT COMPANIES
(LISTED ON EXHIBIT 1)
By: /s/ S. Elliott Cohan
S. Elliott Cohan
Assistant Secretary
FEDERATED SERVICES COMPANY
By: /s/ Thomas J. Ward
Thomas J. Ward
Secretary
EXHIBIT 1
CONTRACT
DATE INVESTMENT COMPANY
Portfolios
Classes
March 1, 1996 FEDERATED GOVERNMENT INCOME SECURITIES, INC.
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
CLASS F SHARES
FEDERATED SERVICES COMPANY provides the following services:
Administrative Services
Fund Accounting Services
Shareholder Recordkeeping Services
Custody Services Procurement
Exhibit No. 19 on Form N-1A
Exhibit No. 99 under Item 601/Reg S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of FEDERATED GOVERNMENT INCOME
SECURITIES, INC. and the Deputy General Counsel of Federated Investors, and
each of them, their true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for them and in their names, place
and stead, in any and all capacities, to sign any and all documents to be
filed with the Securities and Exchange Commission pursuant to the Securities
Act of 1933, the Securities Exchange Act of 1934 and the Investment Company
Act of 1940, by means of the Securities and Exchange Commission's electronic
disclosure system known as EDGAR; and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to sign and perform each and every act
and thing requisite and necessary to be done in connection therewith, as
fully to all intents and purposes as each of them might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
SIGNATURES TITLE DATE
/s/John F. Donahue Chairman and Director May 1, 1996
John F. Donahue (Chief Executive Officer)
/s/Richard B. Fisher President May 1, 1996
Richard B. Fisher
/s/David M. Taylor Treasurer May 1, 1996
David M. Taylor (Principal Financial and
Accounting Officer)
/s/Thomas G. Bigley Director May 1, 1996
Thomas G. Bigley
/s/John T. Conroy, Jr. Director May 1, 1996
John T. Conroy, Jr.
SIGNATURES TITLE DATE
/s/William J. Copeland Director May 1, 1996
William J. Copeland
/s/James E. Dowd Director May 1, 1996
James E. Dowd
/s/Lawrence D. Ellis, M.D. Director May 1, 1996
Lawrence D. Ellis, M.D.
/s/Edward L. Flaherty, Jr. Director May 1, 1996
Edward L. Flaherty, Jr.
/s/Peter E. Madden Director May 1, 1996
Peter E. Madden
/s/Gregor F. Meyer Director May 1, 1996
Gregor F. Meyer
/s/John E. Murray, Jr. Director May 1, 1996
John E. Murray, Jr.
/s/Wesley W. Posvar Director May 1, 1996
Wesley W. Posvar
/s/Marjorie P. Smuts Director May 1, 1996
Marjorie P. Smuts
Sworn to and subscribed before me this 1st day of May, 1996.
/s/ Jody L. Petras
Notarial Seal
Jody L. Petras, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Sept. 27, 1999
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<NAME> Federated Government Income Securities, Inc.
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<FISCAL-YEAR-END> Feb-29-1996
<PERIOD-END> Feb-29-1996
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<DISTRIBUTIONS-OF-INCOME> 171,414,167
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