1933 Act File No. 2-75670
1940 Act File No. 811-3375
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. 25 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 24 X
FEDERATED GNMA TRUST
(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:
X immediately upon filing pursuant to paragraph (b)
on _________________ pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on pursuant to paragraph (a) of Rule 485.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
X filed the Notice required by that Rule on March 15, 1994; or
intends to file the Notice required by that Rule on or about
____________; or
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:
Thomas J. Donnelly, Esquire Charles H. Morin, Esquire
Houston, Houston & Donnelly Dickstein, Shapiro & Morin
2510 Centre City Tower 2101 L Street, N.W.
650 Smithfield Street Washington, D.C. 20037
Pittsburgh, Pennsylvania 15222
CROSS REFERENCE SHEET
This Amendment to the Registration Statement of FEDERATED GNMA TRUST,
which consists of one portfolio: Federated GNMA Trust, which is offered in
two separate classes of shares, Institutional Shares and Institutional
Service Shares, is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page Cover Page.
Item 2. Synopsis Summary of Fund Expenses.
Item 3. Condensed Financial
Information. Financial Highlights; Performance
Information.
Item 4. General Description of
Registrant Performance Information; General
Information; Investment Information;
Investment Objective; Investment
Policies; Investment Limitations.
Item 5. Management of the Trust Trust Information; Management of the
Trust; Distribution of
(Institutional
or Institutional Service) Shares;
Distribution and Shareholder
Services
Plans; Administration of the Fund.
Item 6. Capital Stock and Other
Securities Dividends; Capital Gains;
Shareholder
Information; Voting Rights;
Massachusetts Partnership Law; Tax
Information; Federal Income Tax;
Pennsylvania Corporate and Personal
Property Taxes; Other Classes of
Shares.
Item 7. Purchase of Securities
Being Offered Investing in (Institutional or
Institutional Service Shares); Share
Purchases; Minimum Investment
Required; What Shares Cost;
Exchanging
Securities for Fund Shares;
Subaccounting Services; Certificates
and Confirmations; Net Asset Value.
Item 8. Redemption or Repurchase Redeeming (Institutional or
Institutional Service) Shares;
Telephone Redemption; Written
Requests; Accounts With Low Balances.
Item 9. Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page Cover Page.
Item 11. Table of Contents Table of Contents.
Item 12. General Information and
History General Information About the Trust.
Item 13. Investment Objectives and
Policies Investment Objective and Policies.
Item 14. Management of the Registrant Trust Management.
Item 15. Control Persons and Principal
Holders of Securities Trust Ownership.
Item 16. Investment Advisory and Other
Services Investment Advisory Services;
Administrative Services.
Item 17. Brokerage Allocation Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not Applicable.
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered Purchasing Shares; Distribution and
Shareholder Services Plans;
Exchanging
Securities for Shares;
Determining Net
Asset Value; Redeeming Shares.
Item 20. Tax Status Tax Status.
Item 21. Underwriters Not applicable.
Item 22. Calculation of Performance
Data Total Return; Yield; Performance
Comparisons.
Item 23. Financial Statements Filed in Part A.
FEDERATED GNMA TRUST
INSTITUTIONAL SHARES
PROSPECTUS
The Institutional Shares of Federated GNMA Trust (the "Trust") offered by this
prospectus represent interests in a diversified portfolio of securities (the
"Fund") investing primarily in instruments issued or guaranteed by the
Government National Mortgage Association, to achieve current income. The Trust
is an open-end, diversified management investment company (a mutual fund).
Institutional Shares are sold at net asset value.
THE INSTITUTIONAL 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 INSTITUTIONAL SHARES
INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in Institutional Shares of the Fund. Keep this prospectus for future
reference.
The Fund has also filed a Combined Statement of Additional Information for
Institutional Shares and Institutional Service Shares dated March 31, 1994 with
the Securities and Exchange Commission. The information contained in the
Combined Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of the Combined Statement of Additional
Information free of charge by calling 1-800-235-4669. To obtain other
information or to make inquiries about the Fund, contact the Fund at the address
listed in the back of this prospectus.
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 March 31, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Collateralized Mortgage Obligations
("CMOs") 4
Real Estate Mortgage Investment
Conduits ("REMICs") 5
Temporary Investments 5
Repurchase Agreements 5
Lending of Portfolio Securities 6
When-Issued and Delayed
Delivery Transactions 6
Investment Limitations 6
TRUST INFORMATION 6
- ------------------------------------------------------
Management of the Trust 6
Board of Trustees 6
Investment Adviser 6
Advisory Fees 6
Adviser's Background 7
Other Payments to Financial Institutions 7
Distribution of Institutional Shares 7
Administration of the Fund 7
Administrative Services 7
Shareholder Services Plan 8
Custodian 8
Transfer Agent and Dividend
Disbursing Agent 8
Legal Counsel 8
Independent Auditors 8
NET ASSET VALUE 8
- ------------------------------------------------------
INVESTING IN INSTITUTIONAL SHARES 9
- ------------------------------------------------------
Share Purchases 9
By Wire 9
By Mail 9
Minimum Investment Required 9
What Shares Cost 9
Exchanging Securities for Fund Shares 10
Subaccounting Services 10
Certificates and Confirmations 10
Dividends 10
Capital Gains 10
REDEEMING INSTITUTIONAL SHARES 11
- ------------------------------------------------------
Telephone Redemption 11
Written Requests 11
Signatures 11
Receiving Payment 12
Accounts with Low Balances 12
SHAREHOLDER INFORMATION 12
- ------------------------------------------------------
Voting Rights 12
Massachusetts Partnership Law 12
TAX INFORMATION 13
- ------------------------------------------------------
Federal Income Tax 13
Pennsylvania Corporate and
Personal Property Taxes 13
PERFORMANCE INFORMATION 13
- ------------------------------------------------------
OTHER CLASSES OF SHARES 14
- ------------------------------------------------------
Financial Highlights--
Institutional Service Shares 15
FINANCIAL STATEMENTS 16
- ------------------------------------------------------
INDEPENDENT AUDITORS' REPORT 25
- ------------------------------------------------------
ADDRESSES Inside Back Cover
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................................................. None
Maximum Sales Load 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 amounts redeemed, if applicable)................... None
Exchange Fee.......................................................................... None
ANNUAL INSTITUTIONAL SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee........................................................................ 0.40%
12b-1 Fee............................................................................. None
Total Other Expenses.................................................................. 0.17%
Shareholder Servicing Fee(1)............................................ 0.05%
Total Institutional Shares Operating Expenses(2)................................. 0.57%
</TABLE>
(1) The maximum Shareholder Servicing Fee is 0.25%.
(2) The Total Institutional Shares Operating Expenses in the table above are
based on expenses expected during the fiscal year ending January 31, 1995.
The Total Institutional Shares Operating Expenses were 0.51% for the fiscal
year ended January 31, 1994.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF INSTITUTIONAL SHARES OF THE
FUND WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF
THE VARIOUS COSTS AND EXPENSES, SEE "TRUST INFORMATION" AND "INVESTING IN
INSTITUTIONAL SHARES." Wire-transferred redemptions of less than $5,000 may be
subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 invest-
ment assuming (1) 5% annual return and (2) redemption at
the end of each time period............................. $6 $18 $32 $ 71
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The information set forth in the foregoing table and example relates only
to Institutional Shares of the Fund. The Fund offers another class of shares
called Institutional Service Shares. Institutional Shares and Institutional
Service Shares are subject to certain of the same expenses; however,
Institutional Service Shares are subject to a 12b-1 fee of 0.25%. See "Other
Classes of Shares."
FEDERATED GNMA TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 25.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
---------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---
NET
ASSET
VALUE,
BEGINNING
OF
PERIOD $11.80 $11.64 $11.29 $10.97 $10.70 $11.08 $11.46 $11.35 $10.77 $10.63
- ---
INCOME
FROM
INVESTMENT
OPERATIONS
- ---
Net
investment
income 0.85 0.93 0.98 1.00 1.00 1.01 1.04 1.11 1.22 1.26
- ---
Net
realized
and
unrealized
gain
(loss) on
investments (0.16) 0.16 0.35 0.32 0.27 (0.38) (0.38) 0.14 0.58 0.13
- --- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total
from
investment
operations 0.69 1.09 1.33 1.32 1.27 0.63 0.66 1.25 1.80 1.39
- --- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
LESS
DISTRIBUTIONS
- ---
Dividends
to
shareholders
from
net
investment
income (0.85) (0.93) (0.98) (1.00) (1.00) (1.01) (1.04) (1.11) (1.22) (1.25)
- ---
Distributions
to
shareholders
from net
realized
gain on
investment
transactions -- -- -- -- -- -- -- (0.03) -- --
- --- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total
distributions (0.85) (0.93) (0.98) (1.00) (1.00) (1.01) (1.04) (1.14) (1.22) (1.25)
- --- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
NET
ASSET
VALUE,
END OF
PERIOD $11.64 $11.80 $11.64 $11.29 $10.97 $10.70 $11.08 $11.46 $11.35 $10.77
- --- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL
RETURN* 6.02% 9.78% 12.25% 12.65% 12.33% 5.99% 6.29% 11.53% 17.75% 14.53%
- ---
RATIOS
TO
AVERAGE
NET
ASSETS
- ---
Expenses 0.51% 0.51% 0.51% 0.52% 0.52% 0.53% 0.52% 0.51% 0.61% 0.53%
- ---
Net
investment
income 7.22% 7.98% 8.54% 9.08% 9.19% 9.33% 9.51% 9.66% 11.01% 12.35%
- ---
Expense
waiver/reimbursement(a) -- -- -- -- -- -- -- -- -- 0.13%
- ---
SUPPLEMENTAL
DATA
- ---
Net
assets,
end of
period
(000
omitted) $1,910,500 $1,770,169 $1,333,930 $1,268,706 $1,312,780 $1,710,890 $2,111,559 $2,515,127 $569,404 $174,882
- ---
Portfolio
turnover
rate 117% 33% 57% 48% 27% 40% 45% 100% 141% 147%
- ---
</TABLE>
* Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) The voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated January 31, 1994, which can be obtained free of charge.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated December 10, 1981. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest 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
Trustees ("Trustees") have established two classes of shares of the Fund, known
as Institutional Shares and Institutional Service Shares. This prospectus
relates only to Institutional Shares of the Fund.
Institutional Shares ("Shares") of the Fund are sold primarily to accounts for
which financial institutions act in a fiduciary or agency capacity as a
convenient means of accumulating an interest in a professionally managed,
diversified portfolio of primarily mortgage-backed securities. A minimum initial
investment of $25,000 over a 90-day period is required.
Shares are currently sold and redeemed at net asset value without a sales charge
imposed by the Fund.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income. The investment objective
may not be changed without the approval of shareholders. The Fund pursues this
investment objective by investing primarily in instruments issued or guaranteed
by the Government National Mortgage Association ("GNMA"). 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
As a matter of investment policy which may be changed without shareholder
approval, the Fund will limit its investments to those that are permitted for
purchase by federal savings associations pursuant to applicable rules,
regulations, or interpretations of the Office of Thrift Supervision. Should
additional permitted investments be allowed as a result of future changes in
applicable regulations or federal laws, the Fund reserves the right, without
shareholder approval, to make such investments consistent with the Fund's
investment objective, policies, and limitations. Further, should existing
statutes or regulations change so as to cause any securities held by the Fund to
become ineligible for purchase by federal savings associations, the Fund will
dispose of those securities at times advantageous to the Fund.
As operated within the above limitation, the Fund may also serve as an
appropriate vehicle for a national bank as an investment for its own account.
Unless otherwise designated, the investment policies described below may not be
changed without shareholder approval.
ACCEPTABLE INVESTMENTS. The Fund will invest primarily in mortgage-backed
securities. Under normal circumstances, at least 65% of the Fund's portfolio
will be invested in instruments issued or fully guaranteed as to principal and
interest by GNMA. In addition, to the extent that the Fund will invest in
other mortgage-backed securities, as described below, these will be
collateralized by GNMA obligations.
The Fund's permissible investments are as follows:
- U.S. Treasury bills, notes, and bonds;
- collateralized mortgage obligations;
- real estate mortgage investment conduits; and
- notes, bonds and discount notes of the following U.S. government agencies
or instrumentalities: GNMA, Export-Import Bank of the United States,
General Services Administration, Small Business Administration,
Washington Metropolitan Transit Authority, Federal National Mortgage
Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"),
Bank for Cooperatives , Federal Farm Credit Banks, Tennessee Valley
Authority, Commodity Credit Corporation, Federal Financing Bank, the
Student Loan Marketing Association, or National Credit Union
Administration. These government securities in which the Fund may invest
are backed in a variety of ways by the U.S. government or its agencies or
instrumentalities. Some of these securities, such as GNMA mortgage-backed
securities, are backed by the full faith and credit of the U.S.
government. Other securities, such as obligations of the FNMA or FHLMC,
are backed by the credit of the agency or instrumentality issuing the
obligations but not the full faith and credit of the U.S. government.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). CMOs are bonds issued by
single-purpose, stand-alone finance subsidiaries or trusts of financial
institutions, government agencies, investment bankers, or companies related to
the construction industry. CMOs purchased by the Fund will be collateralized by
pools of mortgages in which each mortgage is guaranteed as to payment of
principal and interest by GNMA.
All CMOs purchased by the Fund are issued by an agency of the United States and
are rated in the highest rating category by a nationally recognized statistical
rating organization.
The following example illustrates how mortgage cash flows are prioritized in the
case of CMOs--most of the CMOs in which the Fund invests use the same basic
structure:
(1) Several classes of securities are issued against a pool of mortgage
collateral. The most common structure contains four classes of securities:
The first three (A, B, and C bonds) pay interest at their stated rates
beginning with the issue date; the final class (Z bond) typically receives
any excess income from the underlying investments after payments are made
to the other classes and receives no principal or interest payments until
the shorter maturity classes have been retired, but then receives all
remaining principal and interest payments.
(2) The cash flows from the underlying mortgages are applied first to pay
interest and then to retire securities.
(3) The classes of securities are retired sequentially. All principal payments
are directed first to the shortest-maturity class (or A bond). When those
securities are completely retired, all principal payments are then directed
to the next-shortest-maturity security (or B bond). This process continues
until all of the classes have been paid off.
Because the cash flow is distributed sequentially instead of pro-rata, as with
pass-through securities, the cash flows and average lives of CMOs are more
predictable, and there is a period of time during which the investors in the
longer-maturity classes receive no principal paydowns. One or more of the
classes are often adjustable rate. The interest portion of these payments is
distributed by the Fund as income, and the capital portion is reinvested.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS"). REMICs are offerings of
multiple class real estate mortgage-backed securities which qualify and elect
treatment as such under provisions of the Internal Revenue Code. Issuers of
REMICs may take several forms, such as trusts, partnerships, corporations,
associations or a segregated pool of mortgages. Once REMIC status is elected and
obtained, the entity is not subject to federal income taxation. Instead, income
is passed through the entity and is taxed to the person or persons who hold
interests in the REMIC. A REMIC interest must consist of one or more classes of
"regular interests," some of which may offer adjustable rates, and a single
class of "residual interests." To qualify as a REMIC, substantially all of the
assets of the entity must be in assets directly or indirectly secured
principally by real property.
* * * *
Because the mortgages underlying mortgage-backed securities often may be prepaid
without penalty or premium, mortgage-backed securities 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. For certain types of asset pools, such as collateralized mortgage
obligations, prepayments may be allocated to one tranche of securities ahead of
other tranches, in order to reduce the risk of prepayment for the other
tranches.
Prepayments may result in a capital loss to the Fund to the extent that the
prepaid mortgage securities were purchased at a market premium over their stated
principal amount. Conversely, the prepayment of mortgage securities purchased at
a market discount from their stated principal amount will accelerate the
recognition of interest income by the Fund, which would be taxed as ordinary
income when distributed to the shareholders.
TEMPORARY INVESTMENTS. For defensive purposes only, the Fund may invest
temporarily in cash and money market instruments during times of unusual market
conditions and to maintain liquidity. Money market instruments items may
include:
- obligations of the U.S. government or its agencies or instrumentalities;
and
- repurchase agreements.
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.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or long-term basis, or both
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 Trustees. The Fund 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.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase U.S.
government obligations on a when-issued or delayed delivery basis. In
when-issued and delayed delivery transactions, the Fund relies on the seller to
complete the transaction. The seller's failure to complete the transaction may
cause the Fund to miss a price or yield considered to be advantageous.
INVESTMENT LIMITATIONS
The Fund will not 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 money and
engage in reverse repurchase agreements up to one-third of the value of its
total assets and pledge up to 10% of the value of those assets to secure such
borrowings.
As a matter of investment practice, which can be changed without shareholder
approval, the Fund will not invest more than 15% of its net assets in securities
which are illiquid, including repurchase agreements providing for settlement in
more than seven days after notice, and certain restricted securities not
determined by the Trustees to be liquid.
TRUST INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. The Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase or sale of portfolio instruments, for
which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .40 of 1% of the Fund's average daily net assets. The adviser
has also undertaken to reimburse the Trust for operating expenses in excess
of limitations established by certain states. This does not include
reimbursement to the Trust of any expenses incurred by shareholders who use
the transfer agent's subaccounting facilities.
ADVISER'S BACKGROUND. Federated Management, 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 Management 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. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $ 70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk-averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
Gary J. Madich has been the Fund's portfolio manager since February, 1987.
Mr. Madich joined Federated Investors in 1984 and has been a Senior Vice
President of the Fund's investment adviser since 1993. Mr. Madich served as
a Vice President of the Fund's investment adviser from 1988 until 1993. Mr.
Madich is a Chartered Financial Analyst and received his M.B.A. in Public
Finance from the University of Pittsburgh.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to periodic payments to
financial institutions under the Shareholder Services Plan, certain financial
institutions may be compensated by the adviser or its affiliates for the
continuing investment of customers' assets in certain funds, including the Fund,
advised by those entities. These payments will be made directly by the
distributor or adviser from their assets, and will not be made from the assets
of the Fund or by the assessment of a sales charge on Shares.
DISTRIBUTION OF INSTITUTIONAL SHARES
Federated Securities Corp. is the principal distributor for Institutional
Shares. 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.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual
rate, which relates to the average aggregate daily net assets of all funds
advised by subsidiaries of Federated Investors ("Federated Funds"), as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET
MAXIMUM ADMINISTRATIVE FEE ASSETS OF THE FEDERATED FUNDS
- --------------------------------------------- ---------------------------------------------
<S> <C>
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
</TABLE>
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 Administrative Services may choose voluntarily to waive a portion of
its fee.
SHAREHOLDER SERVICES PLAN. The Trust has adopted a Shareholder Services Plan
(the "Services Plan") under which it may make payments up to 0.25 of 1% of the
average daily net asset value of the Institutional Shares to obtain certain
personal services for shareholders and the maintenance of shareholder accounts
("shareholder services"). The Trust has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which 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
Trust and Federated Shareholder Services.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for the Shares of the Fund, and
dividend disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania and Dickstein, Shapiro & Morin, Washington, D.C.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Deloitte &
Touche, Boston, Massachusetts.
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 the Shares in the market value of all
securities and other assets of the Fund, subtracting the interest of the Shares
in the liabilities of the Fund and those attributable to Shares, and dividing
the remainder by the total number of Shares outstanding. The net asset value for
Shares may exceed that of Institutional Service 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.
INVESTING IN INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange and the Federal
Reserve wire system are open. Shares may be purchased either by wire or mail.
To purchase Shares, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken over the telephone.
The Fund reserves the right to reject any purchase request.
BY WIRE. To purchase Shares by Federal Reserve wire, call the Fund before 4:00
p.m. (Boston time) to place an order. The order is considered received
immediately. Payment by federal funds must be received before 3:00 p.m. (Boston
time) on the next business day following the order. Federal funds should be
wired as follows: State Street Bank and Trust Company, Boston, Massachusetts;
Attention: EDGEWIRE; For Credit to: Federated GNMA Trust--Institutional 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 days on which the New
York Stock Exchange is closed and on federal holidays restricting wire
transfers.
BY MAIL. To purchase Shares by mail, send a check made payable to Federated
GNMA Trust-- Institutional Shares to Federated Services Company, c/o State
Street Bank and Trust Company, P.O. Box 8602, Boston, Massachusetts 02266-8602.
Orders by mail are considered received after payment by check is converted by
State Street Bank into federal funds. This is normally the next business day
after State Street Bank receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares is $25,000 plus any non-affiliated bank
or broker's fee, if applicable. However, an account may be opened with a smaller
amount as long as the $25,000 minimum is reached within 90 days. An
institutional investor's minimum investment will be calculated by combining all
accounts it maintains with the Fund.
Individual accounts established through a non-affiliated bank or broker may be
subject to a smaller minimum investment.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund. Investors who purchase
Shares through a non-affiliated bank or broker may be charged an additional
service fee by that bank or broker.
The net asset value is determined at 4:00 p.m. (Boston time), 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.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange certain U.S. government securities or a combination of
securities and cash for Shares. The securities and any cash must have a market
value of at least $25,000. The Fund reserves the right to determine the
acceptability of securities to be exchanged. Securities accepted by the Fund are
valued in the same manner as the Fund values its assets. Investors wishing to
exchange securities should first contact Federated Securities Corp.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The transfer agent charges a
fee based on the level of subaccounting services rendered. Institutions holding
Shares in a fiduciary, agency, custodial, or similar capacity may charge or pass
through subaccounting fees as part of or in addition to normal trust or agency
account fees. They may also charge fees for other 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 the institution with regard
to the services provided, the fees charged for those services, and any
restrictions and limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Fund.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during the
month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are declared just prior
to determining net asset value. If an order for Shares is placed on the
preceding business day, Shares purchased by wire begin earning dividends on the
business day wire payment is received by the transfer agent. If the order for
Shares and payment by wire are received on the same day, Shares begin earning
dividends on the next business day. Shares purchased by check begin earning
dividends on the business day after the check is converted, upon instruction of
the transfer agent, into federal funds. Dividends are automatically reinvested
on payment dates in additional Shares unless cash payments are requested by
contacting the Fund.
CAPITAL GAINS
Capital gains realized by the Fund, if any, are distributed at least once every
12 months.
REDEEMING INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value 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 by telephone request or by written request.
TELEPHONE REDEMPTION
Shareholders may redeem their Shares by telephoning the Fund before 4:00 p.m.
(Boston time). The proceeds will normally be wire transferred the following
business day, but in no event more than seven days, to the shareholder's account
at a domestic commercial bank that is a member of the Federal Reserve System. If
at any time, the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp.
Telephone redemption instructions may 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 such a case should occur, another
method of redemption, such as "Written Requests," should be considered.
WRITTEN REQUESTS
Shares may also be redeemed by sending a written request to the Fund. Call the
Fund for specific instructions before redeeming by letter. The shareholder will
be asked to provide in the request his name, the Fund name, his account number,
and the share or dollar amount requested. If share certificates have been
issued, they must be properly endorsed and should be sent by registered or
certified mail with the written request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, 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 signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
and Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions
that are members of a signature guarantee program. The Fund and its transfer
agent reserve the right to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000. This
requirement does not apply, however, if the balance falls below $25,000 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.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights except that, in matters
affecting only a particular fund or class, only shares of that fund or class are
entitled to vote.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust's or the Fund's operation and for the election of Trustees
under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders for this purpose shall be called by the
Trustees upon the written request of shareholders owning at least 10% of the
Trust's outstanding shares entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument that the Trust or its
Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required to use its property to protect or compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust itself cannot meet its obligations to indemnify shareholders
and pay judgments against them from its assets.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue 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 received. This applies whether dividends
and distributions are received in cash or as additional shares.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Trust:
- the Fund is not subject to Pennsylvania corporate or personal property
taxes; and
- Fund shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Fund would be subject to such
taxes if owned directly by residents of those jurisdictions.
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 Shares.
Total return represents the change, over a specified period of time, in the
value of an investment in Shares of the Fund 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 of the Fund 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 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.
Shares are sold without any sales load or other similar non-recurring charges.
Total return and yield will be calculated separately for Institutional Shares
and Institutional Service Shares. Because Institutional Service Shares are
subject to a 12b-1 fee, the total return and yield for Institutional Shares, for
the same period, will exceed that of Institutional Service Shares.
From time to time, the Fund may advertise the performance of Institutional
Shares using certain financial publications and/or compare the performance of
Institutional Shares to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Institutional Service Shares are sold primarily to retail and private banking
customers of financial institutions. Institutional Service Shares are sold at
net asset value. Investments in Institutional Service Shares are subject to a
minimum initial investment of $25,000.
Institutional Service Shares are distributed pursuant to a 12b-1 Plan adopted by
the Trust whereby the distributor is paid a fee of .25 of 1% of the
Institutional Service Shares' average daily net assets.
Financial institutions and brokers providing sales and/or administrative
services may receive different compensation depending upon which class of shares
of the Fund is sold.
The amount of dividends payable to Institutional Shares will exceed that of
Institutional Service Shares by the difference between Class Expenses and
distribution and shareholder service expenses borne by shares of each respective
class.
The stated advisory fee is the same for both classes of shares.
FEDERATED GNMA TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 25.
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 31,
--------------------
1994 1993*
-------- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.80 $11.71
- -----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------
Net investment income 0.82 0.61
- -----------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.16) 0.09
- ----------------------------------------------------------------------- ------- -------
Total from investment operations 0.66 0.70
- ----------------------------------------------------------------------- ------- -------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.82) (0.61)
- ----------------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.64 $11.80
- ----------------------------------------------------------------------- ------- -------
TOTAL RETURN** 5.76% 5.62%
- -----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------
Expenses 0.76% 0.76%(a)
- -----------------------------------------------------------------------
Net investment income 6.97% 7.57%(a)
- -----------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------
Net assets, end of period (000 omitted) $137,235 $50,166
- -----------------------------------------------------------------------
Portfolio turnover rate 117% 33%
- -----------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from June 18, 1992 (date of initial public
investment) to
January 31, 1993.
** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated January 31, 1994, which can be obtained free of charge.
FEDERATED GNMA TRUST
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------ --------------
<C> <S> <C>
LONG-TERM GOVERNMENT OBLIGATIONS--100.1%
- -------------------------------------------------------------------------------
*GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--93.5%
---------------------------------------------------------------
$164,851,822 6.50%, 12/15/2023 $ 165,521,121**
---------------------------------------------------------------
474,279,079 7.00%, 1/1/2099 487,615,806**
---------------------------------------------------------------
359,438,025 7.50%, 1/15/2024 376,173,460
---------------------------------------------------------------
229,290,185 8.00%, 4/15/2017-3/15/2023 242,798,049
---------------------------------------------------------------
216,272,028 9.00%, 8/15/2016-1/20/2020 231,422,442
---------------------------------------------------------------
145,230,805 9.50%, 7/15/2009-5/15/2020 157,215,796
---------------------------------------------------------------
106,286,668 10.00%, 4/15/2016-12/20/2020 117,318,128
---------------------------------------------------------------
19,204,497 10.50%, 1/15/2016-6/15/2018 21,581,053
---------------------------------------------------------------
12,804,753 11.00%, 8/15/2019 14,589,351
---------------------------------------------------------------
25,422,544 11.50%, 4/15/2016 29,347,022
---------------------------------------------------------------
36,101,241 12.00%, 9/15/2013 42,125,456
---------------------------------------------------------------
18,698,109 12.50%, 7/15/2014 22,005,244
---------------------------------------------------------------
2,526,006 13.00%, 1/15/2015 2,982,253
---------------------------------------------------------------
3,282,005 13.50%, 10/15/2012 3,888,125
--------------------------------------------------------------- --------------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(IDENTIFIED COST $1,876,274,385) 1,914,583,306
--------------------------------------------------------------- --------------
UNITED STATES TREASURY NOTES--6.6%
---------------------------------------------------------------
97,000,000 6.25%, 2/15/2003 101,243,750
---------------------------------------------------------------
31,220,000 6.375%, 1/15/2000 33,099,132
--------------------------------------------------------------- --------------
TOTAL UNITED STATES TREASURY NOTES
(IDENTIFIED COST $135,156,734) 134,342,882
--------------------------------------------------------------- --------------
TOTAL LONG-TERM GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $2,011,431,119) 2,048,926,188
--------------------------------------------------------------- --------------
</TABLE>
FEDERATED GNMA TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------ --------------
<C> <S> <C>
(A) REPURCHASE AGREEMENTS--15.8%
- -------------------------------------------------------------------------------
$ 9,275,000 J.P. Morgan Securities, Inc., 3.19%, dated 1/31/94, due
2/1/94(b) $ 9,275,000
---------------------------------------------------------------
165,000,000+ First Boston Corp., 3.16%, dated 1/19/94, due 2/16/94 165,000,000
---------------------------------------------------------------
150,000,000+ Goldman, Sachs & Co., 3.15%, dated 1/19/94, due 2/16/94(b) 150,000,000
--------------------------------------------------------------- --------------
TOTAL REPURCHASE AGREEMENTS (AT AMORTIZED COST) (NOTE 2B) 324,275,000
--------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST $2,335,706,119) $2,373,201,188++
--------------------------------------------------------------- --------------
</TABLE>
* Because of monthly principal payments, the average lives of the Government
National Mortgage Association Modified Pass-Through securities (based upon
FHA/VA historical experience) are less than the indicated periods.
** Includes securities with a market value of $320,248,800 subject to Dollar
Roll transactions.
(a) Repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(b) The investments in repurchase agreements are through participation in a
joint account with other Federated Funds.
+ Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase
agreement within seven days.
++ The cost of investments for federal tax purposes amounts to $2,335,817,213.
The net unrealized appreciation on a federal tax cost basis amounts to
$37,383,975, which is comprised of $40,911,331 appreciation and $3,527,356
depreciation at January 31, 1994.
Note: The categories of investments are shown as a percentage of net assets
($2,047,734,300) at January 31, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GNMA TRUST
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------------------
Investments, at value (Notes 2A and 2B) (identified cost $2,335,706,119; tax
cost $2,335,817,213) $2,373,201,188
- ------------------------------------------------------------------------------
Receivable for investments sold 51,124,895
- ------------------------------------------------------------------------------
Interest receivable 13,675,584
- ------------------------------------------------------------------------------
Receivable for Fund shares sold 1,892,291
- ------------------------------------------------------------------------------ --------------
Total assets 2,439,893,958
- ------------------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------------------
Payable for dollar roll transactions (Note 2F) $316,212,625
- ---------------------------------------------------------------
Payable for investments purchased 63,492,861
- ---------------------------------------------------------------
Dividends payable 8,869,673
- ---------------------------------------------------------------
Payable for Fund shares redeemed 3,406,054
- ---------------------------------------------------------------
Payable to bank 32,902
- ---------------------------------------------------------------
Accrued expenses 145,543
- --------------------------------------------------------------- ------------
Total liabilities 392,159,658
- ------------------------------------------------------------------------------ --------------
NET ASSETS for 175,924,320 shares of beneficial interest outstanding $2,047,734,300
- ------------------------------------------------------------------------------ --------------
NET ASSETS CONSISTS OF:
- ------------------------------------------------------------------------------
Paid in capital $2,104,524,265
- ------------------------------------------------------------------------------
Unrealized appreciation of investments 37,495,069
- ------------------------------------------------------------------------------
Accumulated net realized loss on investments (94,285,034)
- ------------------------------------------------------------------------------ --------------
Total $2,047,734,300
- ------------------------------------------------------------------------------ --------------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share
Institutional Shares ($1,910,499,593 / 164,134,198 shares of beneficial
interest outstanding) $11.64
- ------------------------------------------------------------------------------ --------------
Institutional Service Shares ($137,234,707 / 11,790,122 shares of beneficial
interest outstanding) $11.64
- ------------------------------------------------------------------------------ --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED GNMA TRUST
STATEMENT OF OPERATIONS
YEAR ENDED JANUARY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------
Interest income (Note 2C) (net of interest expense of $5,291,699) $157,922,760
- --------------------------------------------------------------------------------
EXPENSES--
- --------------------------------------------------------------------------------
Investment advisory fee (Note 5) $8,180,174
- -------------------------------------------------------------------
Trustees' fees 22,730
- -------------------------------------------------------------------
Administrative personnel and services (Note 5) 1,316,655
- -------------------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees and expenses 683,096
- -------------------------------------------------------------------
Auditing fees 25,791
- -------------------------------------------------------------------
Legal fees 19,472
- -------------------------------------------------------------------
Printing and postage 19,238
- -------------------------------------------------------------------
Registration costs 61,021
- -------------------------------------------------------------------
Taxes 47,000
- -------------------------------------------------------------------
Insurance premiums 39,520
- -------------------------------------------------------------------
Distribution services fees (Note 5) 287,334
- -------------------------------------------------------------------
Miscellaneous 15,025
- ------------------------------------------------------------------- ----------
Total expenses 10,717,056
- -------------------------------------------------------------------------------- ------------
Net investment income 147,205,704
- -------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- --------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis)-- 12,114,105
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments (41,032,970)
- -------------------------------------------------------------------------------- ------------
Net realized and unrealized gain (loss) on investments (28,918,865)
- -------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $118,286,839
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED GNMA TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
--------------------------------
1994 1993*
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------
Net investment income $ 147,205,704 $ 125,517,714
- --------------------------------------------------------------
Net realized gain (loss) on investment transactions
($18,860,608 net gain and $5,182,436 net loss, respectively,
as computed for federal income tax purposes) 12,114,105 (7,890,682)
- --------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of
investments (41,032,970) 28,795,454
- -------------------------------------------------------------- -------------- --------------
Change in net assets from operations 118,286,839 146,422,486
- -------------------------------------------------------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- --------------------------------------------------------------
Dividends to shareholders from net investment income:
- --------------------------------------------------------------
Institutional Shares (139,286,614) (123,799,825)
- --------------------------------------------------------------
Institutional Service Shares (7,919,090) (1,717,889)
- -------------------------------------------------------------- -------------- --------------
Change in net assets from distributions to shareholders (147,205,704) (125,517,714)
- -------------------------------------------------------------- -------------- --------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- --------------------------------------------------------------
Net proceeds from sales of shares 1,020,100,336 916,147,877
- --------------------------------------------------------------
Net asset value of shares issued to shareholders electing to
receive payment of distributions in Fund shares 34,919,870 28,623,142
- --------------------------------------------------------------
Cost of shares redeemed (798,702,252) (479,270,829)
- -------------------------------------------------------------- -------------- --------------
Change in net assets resulting from Fund share transactions 256,317,954 465,500,190
- -------------------------------------------------------------- -------------- --------------
Change in net assets 227,399,089 486,404,962
- --------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------
Beginning of period 1,820,335,211 1,333,930,249
- -------------------------------------------------------------- -------------- --------------
End of period $2,047,734,300 $1,820,335,211
- -------------------------------------------------------------- -------------- --------------
</TABLE>
* The period from June 18, 1992 (date of initial public investment) to January
31, 1993.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GNMA TRUST
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated GNMA Trust, ("the Trust"), is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end, management investment
company. The Trust provides two classes of shares ("Institutional Shares" and
"Institutional Service Shares"). Institutional Service Shares are identical in
all respects to Institutional Shares except that Institutional Service Shares
are sold pursuant to a distribution plan ("Plan") adopted in accordance with
Investment Company Act Rule 12b-1.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--U.S. government obligations are generally valued at the mean
between the over-the-counter bid and asked prices as furnished by an independent pricing
service.
B. REPURCHASE AGREEMENTS--It is the policy of the Trust to require the custodian bank to
take possession, to have legally segregated in the Federal Reserve Book Entry System or
to have segregated within the custodian bank's vault, all securities held as collateral
in support of repurchase agreement investments. Additionally, procedures have been
established by the Trust to monitor, on a daily basis, the market value of each
repurchase agreement's underlying collateral to ensure the value at least equals the
principal amount of the repurchase transaction, including accrued interest.
The Trust will only enter into repurchase agreements with banks and other recognized
financial institutions such as broker/dealers which are deemed by the Trust's adviser to
be creditworthy pursuant to guidelines established by the Board of Trustees
("Trustees"). Risks may arise from the potential inability of counterparties to honor
the terms of the repurchase agreement. Accordingly, the Trust could receive less than
the repurchase price on the sale of collateral securities.
C. INCOME--Interest income is recorded on the accrual basis and includes discount earned,
less any premium, on short-term obligations, and original issue discount on all other
debt securities.
D. FEDERAL TAXES--It is the Trust's policy to comply with the provisions of the Internal
Revenue Code, (the "Code") as amended, applicable to regulated investment companies and
to distribute to shareholders each year substantially all of its taxable income,
including any net realized gain on investments. Accordingly, no provisions for federal
tax is necessary. At January 31, 1994, the Trust, for federal tax purposes, had a
capital loss carryforward of $83,801,283 which will reduce the Trust's taxable income
arising from future net realized gain on investments, if any, to the extent
</TABLE>
FEDERATED GNMA TRUST
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
permitted by the Code, and thus will reduce the amount of the distributions to
shareholders which would otherwise be necessary to relieve the Trust of any liability
for federal tax. Pursuant to the Code, such capital loss carryforward will expire in,
1996 ($31,912,913), 1997 ($18,028,171), 1998 ($14,893,518), 1999 ($13,784,245) and 2000
($5,182,436). Additionally, net capital losses of $10,374,414 attributable to security
transactions incurred after October 31, 1993 are treated as arising on February 1, 1994,
the first day of the Trust's next taxable year.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Trust may engage in when-issued or
delayed delivery transactions. The Trust records when-issued securities and maintains
security positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed delivery
basis are marked to market daily and begin earning interest on the settlement date.
F. DOLLAR ROLL TRANSACTIONS--The Trust enters into dollar roll transactions, with respect
to mortgage securities issued by GNMA, FNMA and FHLMC, in which the Trust sells mortgage
securities to financial institutions and simultaneously agrees to repurchase
substantially similar (same type, coupon and maturity) securities at a later date at an
agreed upon price. During the period between the sale and repurchase, the Trust forgoes
principal and interest paid on the mortgage securities sold. The Trust is compensated by
the interest earned on the cash proceeds of the initial sale and any additional fee
income received on the sale.
G. OTHER--Investment transactions are accounted for on the date of the transaction.
</TABLE>
(3) DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income are declared daily and paid monthly.
Distributions of any net realized capital gains are made at least once every
twelve months. Dividends and capital gain distributions, if any, are recorded on
the ex-dividend date.
FEDERATED GNMA TRUST
- --------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in Trust shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------------------------------------------------
1994 1993
------------------------------ ------------------------------
SHARES DOLLARS SHARES DOLLARS
----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES
- ----------------------------------
Shares outstanding, beginning of
period 150,077,131 $1,798,223,784 114,604,384 $1,382,706,120
- ----------------------------------
Shares sold 75,001,659 882,750,706 72,096,540 844,106,250
- ----------------------------------
Shares issued to shareholders
electing to receive payment of
distributions in Fund shares 2,539,103 29,822,854 2,325,483 27,205,875
- ----------------------------------
Shares redeemed (63,483,695) (745,434,319) (38,949,276) (455,794,461)
- ---------------------------------- ----------- -------------- ----------- --------------
Shares outstanding, end of period 164,134,198 $1,965,363,025 150,077,131 $1,798,223,784
- ---------------------------------- ----------- -------------- ----------- --------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------------------------------------------------
1994 1993*
------------------------------ ------------------------------
SHARES DOLLARS SHARES DOLLARS
----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
INSTITUTIONAL SERVICE SHARES
- ----------------------------------
Shares outstanding, beginning of
period 4,253,153 49,982,526 -- $ --
- ----------------------------------
Shares sold 11,649,200 137,349,630 6,131,846 72,041,627
- ----------------------------------
Shares issued to shareholders
electing to receive payment of
distributions in Fund shares 434,613 5,097,016 120,649 1,417,267
- ----------------------------------
Shares redeemed (4,546,844) (53,267,933) (1,999,342) (23,476,368)
- ---------------------------------- ----------- -------------- ----------- --------------
Shares outstanding, end of period 11,790,122 $ 139,161,239 4,253,153 $ 49,982,526
- ---------------------------------- ----------- -------------- ----------- --------------
</TABLE>
* The period from June 18, 1992 (date of initial public investment) to January
31, 1993.
FEDERATED GNMA TRUST
- --------------------------------------------------------------------------------
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Federated Management, the Trust's investment adviser ("Adviser"), receives for
its services an annual investment advisory fee equal to .40 of 1% of the Trust's
average daily net assets. For the year ended January 31, 1994, the Adviser
earned a fee of $8,180,174.
Administrative personnel and services were provided at approximate cost by
Federated Administrative Services, Inc. Effective March 1, 1994, Federated
Administrative Services ("FAS") will provide administrative personnel and
services at an annual rate of 0.15 of 1% on the first $250 million of average
aggregate net assets of the total Federated Funds; 0.125 of 1% on the next $250
million; 0.10 of 1% on the next $250 million; and 0.075 of 1% on average
aggregate net 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.
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Trust will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Trust, to finance activities intended to result in the sale of the Trust's
Institutional Service Shares. The Plan provides that the Fund may incur
distribution expenses up to .25 of 1% of the average daily net assets of the
Institutional Service Shares, annually, to compensate FSC. For the year ended
January 31, 1994, FSC was compensated $287,334 in fees under the Plan.
Certain of the Officers and Trustees of the Trust are Officers and Directors of
the above corporations.
(6) INVESTMENT TRANSACTIONS
Purchases, and sales of investments excluding short-term securities, for the
fiscal year ended January 31, 1994.
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------
PURCHASES-- $2,661,935,260
- ----------------------------------------------------------------------------- --------------
SALES-- $2,343,022,606
- ----------------------------------------------------------------------------- --------------
</TABLE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of
FEDERATED GNMA TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated GNMA Trust as of January 31, 1994,
the related statement of operations for the year then ended, the statement of
changes in net assets for the years ended January 31, 1994 and 1993, and the
financial highlights (see pages 2 and 15 of the prospectus) for each of the
years in the ten-year period ended January 31, 1994. These financial statements
and financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
January 31, 1994 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated GNMA Trust
as of January 31, 1994, the results of its operations, the changes in its net
assets, and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
Boston, Massachusetts
March 15, 1994
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated GNMA Trust Federated Investors Tower
Institutional Shares Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8602
Trust Company Boston, Massachusetts 02266-8602
- ------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ------------------------------------------------------------------------------------------------
Independent Auditor
Deloitte & Touche 125 Summer Street
Boston, Massachusetts 02110-1617
- ------------------------------------------------------------------------------------------------
</TABLE>
FEDERATED GNMA TRUST
INSTITUTIONAL SHARES
PROSPECTUS
An Open-End, Diversified
Management Investment Company
March 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
8022901A-IS (3/94)
FEDERATED GNMA TRUST
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
The Institutional Service Shares of Federated GNMA Trust (the "Trust") offered
by this prospectus represent interests in a diversified portfolio of securities
(the "Fund") investing primarily in instruments issued or guaranteed by the
Government National Mortgage Association, to achieve current income. The Trust
is an open-end, diversified management investment company (a mutual fund).
Institutional Service Shares are sold at net asset value.
THE INSTITUTIONAL SERVICE 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 INSTITUTIONAL SERVICE SHARES
INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in Institutional Service Shares of the Fund. Keep this prospectus for
future reference.
The Fund has also filed a Combined Statement of Additional Information for
Institutional Service Shares and Institutional Shares dated March 31, 1994 with
the Securities and Exchange Commission. The information contained in the
Combined Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of the Combined Statement of Additional
Information free of charge by calling 1-800-235-4669. To obtain other
information or to make inquiries about the Fund, contact the Fund at the address
listed in the back of this prospectus.
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 March 31, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SERVICE SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Collateralized Mortgage Obligations
("CMOs") 4
Real Estate Mortgage
Investment Conduits ("REMICs") 5
Temporary Investments 5
Repurchase Agreements 5
Lending of Portfolio Securities 6
When-Issued and Delayed
Delivery Transactions 6
Investment Limitations 6
TRUST INFORMATION 6
- ------------------------------------------------------
Management of the Trust 6
Board of Trustees 6
Investment Adviser 6
Advisory Fees 6
Adviser's Background 7
Other Payments to
Financial Institutions 7
Distribution of Institutional
Service Shares 7
Distribution and Shareholder
Services Plans 7
Administration of the Fund 8
Administrative Services 8
Custodian 9
Transfer Agent and
Dividend Disbursing Agent 9
Legal Counsel 9
Independent Auditors 9
NET ASSET VALUE 9
- ------------------------------------------------------
INVESTING IN INSTITUTIONAL
SERVICE SHARES 9
- ------------------------------------------------------
Share Purchases 9
By Wire 9
By Mail 9
Minimum Investment Required 10
What Shares Cost 10
Exchanging Securities for Fund Shares 10
Subaccounting Services 10
Certificates and Confirmations 10
Dividends 11
Capital Gains 11
REDEEMING INSTITUTIONAL SERVICE SHARES 11
- ------------------------------------------------------
Telephone Redemption 11
Written Requests 11
Signatures 12
Receiving Payment 12
Accounts with Low Balances 12
SHAREHOLDER INFORMATION 12
- ------------------------------------------------------
Voting Rights 12
Massachusetts Partnership Law 13
TAX INFORMATION 13
- ------------------------------------------------------
Federal Income Tax 13
Pennsylvania Corporate and Personal
Property Taxes 13
PERFORMANCE INFORMATION 14
- ------------------------------------------------------
OTHER CLASSES OF SHARES 14
- ------------------------------------------------------
Financial Highlights--
Institutional Shares 15
- ------------------------------------------------------
FINANCIAL STATEMENTS 16
- ------------------------------------------------------
INDEPENDENT AUDITORS' REPORT 25
- ------------------------------------------------------
ADDRESSES Inside Back Cover
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................................................. None
Maximum Sales Load 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 INSTITUTIONAL SERVICE SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee........................................................................ 0.40%
12b-1 Fee(1).......................................................................... 0.02%
Total Other Expenses.................................................................. 0.35%
Shareholder Servicing Fee (2).............................................. 0.23%
Total Institutional Service Shares Operating Expenses(3)......................... 0.77%
</TABLE>
(1) The maximum 12b-1 Fee is 0.25%.
(2) The maximum Shareholder Servicing Fee is 0.25%.
(3) The Total Institutional Service Shares Operating Expenses in the table above
are based on expenses expected during the fiscal year ending January 31,
1995. The Total Institutional Service Shares Operating Expenses were 0.76%
for the fiscal year ended January 31, 1994.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF INSTITUTIONAL SERVICE SHARES OF
THE FUND WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE
DESCRIPTIONS OF THE VARIOUS COSTS AND EXPENSES, SEE " TRUST INFORMATION" AND
"INVESTING IN INSTITUTIONAL SERVICE SHARES." Wire-transferred redemptions of
less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- -------------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 invest-
ment assuming (1) 5% annual return and (2) redemption at
the end of each time period............................. $8 $25 $43 $ 95
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The information set forth in the foregoing table and example relates only
to Institutional Service Shares of the Fund. The Fund offers another class of
shares called Institutional Shares. Institutional Service Shares and
Institutional Shares are subject to certain of the same expenses; however,
Institutional Shares are not subject to a 12b-1 fee. See "Other Classes of
Shares."
FEDERATED GNMA TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 25.
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 31,
---------------------
1994 1993*
-------- --------
<S> <C> <C>
- ----------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $11.80 $11.71
- ----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------
Net Investment income 0.82 0.61
- ----------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.16 ) 0.09
-------- --------
- ----------------------------------------------------------------
Total from investment operations 0.66 0.70
-------- --------
- ----------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------
Dividends to shareholders from net investment income (0.82 ) (0.61 )
-------- --------
- ----------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.64 $11.80
- ---------------------------------------------------------------- ------- -------
TOTAL RETURN** 5.76 % 5.62 %
- ----------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------
Expenses 0.76 % 0.76 %(a)
- ----------------------------------------------------------------
Net investment income 6.97 % 7.57 %(a)
- ----------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------
Net assets, end of period (000 omitted) $137,235 $50,166
- ----------------------------------------------------------------
Portfolio turnover rate 117 % 33 %
- ----------------------------------------------------------------
</TABLE>
* Reflects operations for the period from June 18, 1992 (date of initial public
investment) to
January 31, 1993.
** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated January 31, 1994, which can be obtained free of charge.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated December 10, 1981. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest 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
Trustees ("Trustees") have established two classes of shares of the Fund, known
as Institutional Service Shares and Institutional Shares. This prospectus
relates to Institutional Service Shares of the Fund.
Institutional Service Shares ("Shares") are designed primarily for retail and
private banking customers of financial institutions as a convenient means of
accumulating an interest in a professionally managed, diversified portfolio of
mortgage-backed securities. A minimum initial investment of $25,000 over a 90-
day period is required.
Shares are currently sold and redeemed at net asset value without a sales charge
imposed by the Fund.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income. The investment objective
may not be changed without the approval of shareholders. The Fund pursues this
investment objective by investing primarily in instruments issued or guaranteed
by the Government National Mortgage Association ("GNMA"). 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
As a matter of investment policy which may be changed without shareholder
approval, the Fund will limit its investments to those that are permitted for
purchase by federal savings associations pursuant to applicable rules,
regulations, or interpretations of the Office of Thrift Supervisor. Should
additional permitted investments be allowed as a result of future changes in
applicable regulations or federal laws, the Fund reserves the right, without
shareholder approval, to make such investments consistent with the Fund's
investment objective, policies, and limitations. Further, should existing
statutes or regulations change so as to cause any securities held by the Fund to
become ineligible for purchase by federal savings associations, the Fund will
dispose of those securities at times advantageous to the Fund.
As operated within the above limitation, the Fund may also serve as an
appropriate vehicle for a national bank as an investment for its own account.
Unless otherwise designated, the investment policies described below may not be
changed without shareholder approval.
ACCEPTABLE INVESTMENTS. The Fund will invest primarily in mortgage-backed
securities. Under normal circumstances, at least 65% of the Fund's portfolio
will be invested in instruments issued or fully guaranteed as to principal and
interest by GNMA. In addition, to the extent that the Fund will invest in
other mortgage-backed securities, as described below, these will be
collateralized by GNMA obligations.
The Fund's permissible investments are as follows:
- collateralized mortgage obligations;
- real estate mortgage investment conduits; and
- notes, bonds and discount notes of the following U.S. government agencies
or instrumentalities: GNMA, Export-Import Bank of the United States,
General Services Administration, Small Business Administration,
Washington Metropolitan Transit Authority, Federal National Mortgage
Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"),
Bank for Cooperatives, Federal Farm Credit Banks, Tennessee Valley
Authority, Commodity Credit Corporation, Federal Financing Bank, the
Student Loan Marketing Association, or National Credit Union
Administration. These government securities in which the Fund may invest
are backed in a variety of ways by the U.S. government or its agencies or
instrumentalities. Some of these securities, such as GNMA mortgage-backed
securities, are backed by the full faith and credit of the U.S.
government. Other securities, such as obligations of the FNMA or FHLMC,
are backed by the credit of the agency or instrumentality issuing the
obligations but not the full faith and credit of the U.S. government.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). CMOs are bonds issued by
single-purpose, stand-alone finance subsidiaries or trusts of financial
institutions, government agencies, investment bankers, or companies related to
the construction industry. CMOs purchased by the Fund will be collateralized by
pools of mortgages in which each mortgage is guaranteed as to payment of
principal and interest by GNMA.
All CMOs purchased by the Fund are issued by an agency of the United States and
are rated in the highest rating category by a nationally recognized statistical
rating organization.
The following example illustrates how mortgage cash flows are prioritized in the
case of CMOs--most of the CMOs in which the Fund invests use the same basic
structure:
(1) Several classes of securities are issued against a pool of mortgage
collateral. The most common structure contains four classes of securities:
The first three (A, B, and C bonds) pay interest at their stated rates
beginning with the issue date; the final class (Z bond) typically receives
any excess income from the underlying investments after payments are made to
the other classes and receives no principal or interest payments until the
shorter maturity classes have been retired, but then receives all remaining
principal and interest payments.
(2) The cash flows from the underlying mortgages are applied first to pay
interest and then to retire securities.
(3) The classes of securities are retired sequentially. All principal payments
are directed first to the shortest-maturity class (or A bond). When those
securities are completely retired, all principal payments are then directed
to the next-shortest-maturity security (or B bond). This process continues
until all of the classes have been paid off.
Because the cash flow is distributed sequentially instead of pro-rata, as with
pass-through securities, the cash flows and average lives of CMOs are more
predictable, and there is a period of time during which the investors in the
longer-maturity classes receive no principal paydowns. One or more of the
classes are often adjustable rate. The interest portion of these payments is
distributed by the Fund as income, and the capital portion is reinvested.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS"). REMICs are offerings of
multiple class real estate mortgage-backed securities which qualify and elect
treatment as such under provisions of the Internal Revenue Code. Issuers of
REMICs may take several forms, such as trusts, partnerships, corporations,
associations or a segregated pool of mortgages. Once REMIC status is elected and
obtained, the entity is not subject to federal income taxation. Instead, income
is passed through the entity and is taxed to the person or persons who hold
interests in the REMIC. A REMIC interest must consist of one of more classes of
"regular interests," some of which may offer adjustable rates, and a single
class of "residual interests." To qualify as a REMIC, substantially all of the
assets of the entity must be in assets directly or indirectly secured
principally by real property.
* * * *
Because the mortgages underlying mortgage-backed securities often may be prepaid
without penalty or premium, mortgage-backed securities 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. For certain types of asset pools, such as collateralized mortgage
obligations, prepayments may be allocated to one tranche of securities ahead of
other tranches, in order to reduce the risk of prepayment for the other
tranches.
Prepayments may result in a capital loss to the Fund to the extent that the
prepaid mortgage securities were purchased at a market premium over their stated
principal amount. Conversely, the prepayment of mortgage securities purchased at
a market discount from their stated principal amount will accelerate the
recognition of interest income by the Fund, which would be taxed as ordinary
income when distributed to the shareholders.
TEMPORARY INVESTMENTS. For defensive purposes only, the Fund may invest
temporarily in cash and money market instruments during times of unusual market
conditions and to maintain liquidity. Money market instruments may include:
- obligations of the U.S. government or its agencies or instrumentalities;
and
- repurchase agreements.
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.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or long-term basis, or both
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 Trustees. The Fund 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.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase U.S.
government obligations on a when-issued or delayed delivery basis. In
when-issued and delayed delivery transactions, the Fund relies on the seller to
complete the transaction. The seller's failure to complete the transaction may
cause the Fund to miss a price or yield considered to be advantageous.
INVESTMENT LIMITATIONS
The Fund will not 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 money and
engage in reverse repurchase agreements up to one-third of the value of its
total assets and pledge up to 10% of the value of those assets to secure such
borrowings.
As a matter of investment practice, which can be changed without shareholder
approval, the Fund will not invest more than 15% of its net assets in securities
which are illiquid, including repurchase agreements providing for settlement in
more than seven days after notice, and certain restricted securities not
determined by the Trustees to be liquid.
TRUST INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. The Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase or sale of portfolio instruments, for
which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .40 of 1% of the Fund's average daily net assets. The adviser
has also undertaken to reimburse the Fund for operating expenses in excess
of limitations established by certain states. This does not include
reimbursement to the Trust of any expenses incurred by shareholders who use
the transfer agent's subaccounting facilities.
ADVISER'S BACKGROUND. Federated Management, 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 Management 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. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined risk-averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
Gary J. Madich has been the Fund's portfolio manager since February, 1987.
Mr. Madich joined Federated Investors in 1984 and has been a Senior Vice
President of the Fund's investment adviser since 1993. Mr. Madich served as
a Vice President of the Fund's investment adviser from 1988 until 1993. Mr.
Madich is a Chartered Financial Analyst and received his M.B.A. in Public
Finance from the University of Pittsburgh.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to periodic payments to
financial institutions under the Distribution and Shareholder Services Plans,
certain financial institutions may be compensated by the adviser or its
affiliates for the continuing investment of customers' assets in certain funds,
including the Fund, advised by those entities. These payments will be made
directly by the distributor or adviser from their assets, and will not be made
from the assets of the Fund or by the assessment of a sales charge on Shares.
DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES
Federated Securities Corp. is the principal distributor for Institutional
Service Shares. 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.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the Fund will pay to the distributor an amount, computed at an annual rate of
.25 of 1% of the average daily net asset value of the Institutional Service
Shares to finance any activity which is principally intended to result in the
sale of shares subject to the Distribution Plan. The distributor may select
financial institutions such as banks, fiduciaries, custodians for public funds,
investment advisers, and broker/dealers to provide sales support services as
agents for their clients or customers.
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 amount or may earn a profit from future payments made by the Fund
under the Distribution Plan.
In addition, the Fund has adopted a Shareholder Services Plan (the "Services
Plan") under which it may make payments up to 0.25 of 1% of the average daily
net asset value of the Institutional Service Shares to obtain certain personal
services for shareholders and the maintenance of shareholder accounts
("shareholder services"). The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which 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.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the administrative capacities described
above or should Congress relax current restrictions on depository institutions,
the Trustee will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate, which
relates to the average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors ("Federated Funds"), as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET
MAXIMUM ADMINISTRATIVE FEE ASSETS OF THE FEDERATED FUNDS
- --------------------------------------------- ---------------------------------------------
<S> <C>
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
</TABLE>
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 Administrative Services may choose voluntarily to waive a portion of
its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for the Shares of the Fund and
dividend disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, Washington, D.C.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Deloitte &
Touche, Boston, Massachusetts.
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 the Shares in the market value of all
securities and other assets of the Fund, subtracting the interest of the Shares
in the liabilities of the Fund and those attributable to Shares, and dividing
the remainder by the total number of Shares outstanding. The net asset value for
Institutional Shares may exceed that of 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.
INVESTING IN INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange and the Federal
Reserve wire system are open. Shares may be purchased either by wire or mail.
To purchase Shares, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken over the telephone.
The Fund reserves the right to reject any purchase request.
BY WIRE. To purchase Shares by Federal Reserve wire, call the Fund before 4:00
p.m. (Boston time) to place an order. The order is considered received
immediately. Payment by federal funds must be received before 3:00 p.m. (Boston
time) on the next business day following the order. Federal funds should be
wired as follows: State Street Bank and Trust Company, Boston, Massachusetts;
Attention: EDGEWIRE; For Credit to: Federated GNMA Trust--Institutional Service
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 days on which
the New York Stock Exchange is closed and on federal holidays restricting wire
transfers.
BY MAIL. To purchase Shares by mail, send a check made payable to Federated
GNMA Trust-- Institutional Service Shares to Federated Services Company, c/o
State Street Bank and Trust Company, P.O. Box 8602, Boston, Massachusetts
02266-8602. Orders by mail are considered received after
payment by check is converted by State Street Bank into federal funds. This is
normally the next business day after State Street Bank receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares is $25,000 plus any non-affiliated bank
or broker's fee, if applicable. However, an account may be opened with a smaller
amount as long as the $25,000 minimum is reached within 90 days. An
institutional investor's minimum investment will be calculated by combining all
accounts it maintains with the Trust.
Individual accounts established through a non-affiliated bank or broker may be
subject to a smaller minimum investment.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund. Investors who purchase
Shares through a non-affiliated bank or broker may be charged an additional
service fee by that bank or broker.
The net asset value is determined at 4:00 p.m. (Boston time), 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.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange certain U.S. government securities or a combination of
securities and cash for Shares. The securities and any cash must have a market
value of at least $25,000. The Fund reserves the right to determine the
acceptability of securities to be exchanged. Securities accepted by the Fund are
valued in the same manner as the Fund values its assets. Investors wishing to
exchange securities should first contact Federated Securities Corp.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The transfer agent charges a
fee based on the level of subaccounting services rendered. Institutions holding
Shares in a fiduciary, agency, custodial, or similar capacity may charge or pass
through subaccounting fees as part of or in addition to normal trust or agency
account fees. They may also charge fees for other 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 the institution with regard
to the services provided, the fees charged for those services, and any
restrictions and limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Fund.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during the
month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are declared just prior
to determining net asset value. If an order for Shares is placed on the
preceding business day, Shares purchased by wire begin earning dividends on the
business day wire payment is received by the transfer agent. If the order for
Shares and payment by wire are received on the same day, Shares begin earning
dividends on the next business day. Shares purchased by check begin earning
dividends on the business day after the check is converted, upon instruction of
the transfer agent, into federal funds. Dividends are automatically reinvested
on payment dates in additional Shares unless cash payments are requested by
contacting the Fund.
CAPITAL GAINS
Capital gains realized by the Fund, if any, are distributed at least once every
12 months.
REDEEMING INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value 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 by telephone request or by written request.
TELEPHONE REDEMPTION
Shareholders may redeem their Shares by telephoning the Fund before 4:00 p.m.
(Boston time). The proceeds will normally be wire transferred the following
business day, but in no event more than seven days, to the shareholder's account
at a domestic commercial bank that is a member of the Federal Reserve System. If
at any time, the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp.
Telephone redemption instructions may 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 such a case should occur, another
method of redemption, such as "Written Requests," should be considered.
WRITTEN REQUESTS
Shares may also be redeemed by sending a written request to the Fund. Call the
Fund for specific instructions before redeeming by letter. The shareholder will
be asked to provide in the request his name, the Fund name, his account number,
and the Share or dollar amount requested. If Share
certificates have been issued, they must be properly endorsed and should be sent
by registered or certified mail with the written request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, 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 signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
and Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000. This
requirement does not apply, however, if the balance falls below $25,000 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.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights except that, in matters
affecting only a particular fund or class, only shares of that fund or class are
entitled to vote.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust's or the Fund's operation and for the election of Trustees
under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders for this purpose shall be called by the
Trustees upon the written request of shareholders owning at least 10% of the
Trust's outstanding shares entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument that the Trust or its
Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required to use its property to protect or compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust itself cannot meet its obligations to indemnify shareholders
and pay judgments against them from its assets.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue 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 received. This applies whether dividends
and distributions are received in cash or as additional shares.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Trust:
- the Fund is not subject to Pennsylvania corporate or personal property
taxes; and
- Fund shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Fund would be subject to such
taxes if owned directly by residents of those jurisdictions.
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 Shares.
Total return represents the change, over a specified period of time, in the
value of an investment in the Shares of the Fund after reinvesting all income
and capital gain distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage.
The yield of Shares of the Fund 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 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.
Shares are sold without any sales load or other similar non-recurring charges.
Total return and yield will be calculated separately for Institutional Service
Shares and Institutional Shares. Because Institutional Service Shares are
subject to a 12b-1 fee, the total return and yield for Institutional Shares for
the same period, will exceed that of Institutional Service Shares.
From time to time, the Fund may advertise the performance of Institutional
Service Shares using certain financial publications and/or compare the
performance of Institutional Service Shares to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Institutional Shares are sold to accounts for which financial institutions act
in a fiduciary or agency capacity. Institutional Shares are sold at net asset
value. Investments in Institutional Shares are subject to a minimum initial
investment of $25,000.
Institutional Shares are distributed without a 12b-1 Plan.
Financial institutions and brokers providing sales and administrative services
may receive different compensation depending upon which class of shares of the
Fund is sold.
The amount of dividends payable to Institutional Shares will exceed that of
Institutional Service Shares by the difference between Class Expenses and
distribution and shareholder service expenses borne by shares of each respective
class.
The stated advisory fee is the same for both classes of shares.
FEDERATED GNMA TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 25.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
---------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---
NET
ASSET
VALUE,
BEGINNING
OF
PERIOD $11.80 $11.64 $11.29 $10.97 $10.70 $11.08 $11.46 $11.35 $10.77 $10.63
- ---
INCOME
FROM
INVESTMENT
OPERATIONS
- ---
Net
investment
income 0.85 0.93 0.98 1.00 1.00 1.01 1.04 1.11 1.22 1.26
- ---
Net
realized
and
unrealized
gain(loss)
on
investments (0.16) 0.16 0.35 0.32 0.27 (0.38) (0.38) 0.14 0.58 0.13
- --- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total
from
investment
operations 0.69 1.09 1.33 1.32 1.27 0.63 0.66 1.25 1.80 1.39
- --- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
LESS
DISTRIBUTIONS
Dividends
to
shareholders
from
net
investment
income (0.85) (0.93) (0.98) (1.00) (1.00) (1.01) (1.04) (1.11) (1.22) (1.25)
- ---
Distributions
to
shareholders
from net
realized
gain on
investment
transactions -- -- -- -- -- -- -- (0.03) -- --
- --- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total
distributions (0.85) (0.93) (0.98) (1.00) (1.00) (1.01) (1.04) (1.14) (1.22) (1.25)
- --- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
NET
ASSET
VALUE,
END
OF
PERIOD $11.64 $11.80 $11.64 $11.29 $10.97 $10.70 $11.08 $11.46 $11.35 $10.77
- --- ----- ----- ----- ----- ----- ----- ----- ----- ----- ------
TOTAL
RETURN* 6.02% 9.78% 12.25% 12.65% 12.33% 5.99% 6.29% 11.53% 17.75% 14.53%
- ---
RATIOS
TO
AVERAGE
NET
ASSETS
- ---
Expenses 0.51% 0.51% 0.51% 0.52% 0.52% 0.53% 0.52% 0.51% 0.61% 0.53%
- ---
Net
investment
income 7.22% 7.98% 8.54% 9.08% 9.19% 9.33% 9.51% 9.66% 11.01% 12.35%
- ---
Expense
waiver/reimbursement(a) -- -- -- -- -- -- -- -- -- 0.13%
- ---
SUPPLEMENTAL
DATA
- ---
Net
assets,
end of
period
(000
omitted) $1,910,500 $1,770,169 $1,333,930 $1,268,706 $1,312,780 $1,710,890 $2,111,559 $2,515,127 $569,404 $174,882
- ---
Portfolio
turnover
rate 117% 33% 57% 48% 27% 40% 45% 100% 141% 147%
- ---
</TABLE>
* Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated January 31, 1994, which can be obtained free of charge.
FEDERATED GNMA TRUST
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------ --------------
<C> <S> <C>
LONG-TERM GOVERNMENT OBLIGATIONS--100.1%
- -------------------------------------------------------------------------------
*GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--93.5%
---------------------------------------------------------------
$164,851,822 6.50%, 12/15/2023 $ 165,521,121**
---------------------------------------------------------------
474,279,079 7.00%, 1/1/2099 487,615,806**
---------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S> <C>
359,438,025 7.50%, 1/15/2024 376,173,460
---------------------------------------------------------------
229,290,185 8.00%, 4/15/2017-3/15/2023 242,798,049
---------------------------------------------------------------
216,272,028 9.00%, 8/15/2016-1/20/2020 231,422,442
---------------------------------------------------------------
145,230,805 9.50%, 7/15/2009-5/15/2020 157,215,796
---------------------------------------------------------------
106,286,668 10.00%, 4/15/2016-12/20/2020 117,318,128
---------------------------------------------------------------
19,204,497 10.50%, 1/15/2016-6/15/2018 21,581,053
---------------------------------------------------------------
12,804,753 11.00%, 8/15/2019 14,589,351
---------------------------------------------------------------
25,422,544 11.50%, 4/15/2016 29,347,022
---------------------------------------------------------------
36,101,241 12.00%, 9/15/2013 42,125,456
---------------------------------------------------------------
18,698,109 12.50%, 7/15/2014 22,005,244
---------------------------------------------------------------
2,526,006 13.00%, 1/15/2015 2,982,253
---------------------------------------------------------------
3,282,005 13.50%, 10/15/2012 3,888,125
--------------------------------------------------------------- --------------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(IDENTIFIED COST $1,876,274,385) 1,914,583,306
--------------------------------------------------------------- --------------
UNITED STATES TREASURY NOTES--6.6%
---------------------------------------------------------------
97,000,000 6.25%, 2/15/2003 101,243,750
---------------------------------------------------------------
31,220,000 6.375%, 1/15/2000 33,099,132
--------------------------------------------------------------- --------------
TOTAL UNITED STATES TREASURY NOTES
(IDENTIFIED COST $135,156,734) 134,342,882
--------------------------------------------------------------- --------------
TOTAL LONG-TERM GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $2,011,431,119) 2,048,926,188
--------------------------------------------------------------- --------------
</TABLE>
FEDERATED GNMA TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------ --------------
<C> <S> <C>
(A) REPURCHASE AGREEMENTS--15.8%
- -------------------------------------------------------------------------------
$ 9,275,000 J.P. Morgan Securities, Inc., 3.19%, dated 1/31/94, due 2/1/94
(b) $ 9,275,000
---------------------------------------------------------------
165,000,000+ First Boston Corp., 3.16%, dated 1/19/94, due 2/16/94 165,000,000
---------------------------------------------------------------
150,000,000+ Goldman, Sachs & Co., 3.15%, dated 1/19/94, due 2/16/94 (b) 150,000,000
--------------------------------------------------------------- --------------
TOTAL REPURCHASE AGREEMENTS (AT AMORTIZED COST) (NOTE 2B) 324,275,000
--------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST $2,335,706,119) $2,373,201,188++
--------------------------------------------------------------- --------------
</TABLE>
* Because of monthly principal payments, the average lives of the Government
National Mortgage Association Modified Pass-Through securities (based upon
FHA/VA historical experience) are less than the indicated periods.
** Includes securities with a market value of $320,248,800 subject to Dollar
Roll transactions.
(a) Repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(b) The investments in repurchase agreements are through participation in a
joint account with other Federated Funds.
+ Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase
agreement within seven days.
++ The cost of investments for federal tax purposes amounts to $2,335,817,213.
The net unrealized appreciation on a federal tax cost basis amounts to
$37,383,975, which is comprised of $40,911,331 appreciation and $3,527,356
depreciation at January 31, 1994.
Note: The categories of investments are shown as a percentage of net assets
($2,047,734,300) at January 31, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GNMA TRUST
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------------------
Investments, at value (Notes 2A and 2B) (identified cost $2,335,706,119;
tax cost $2,335,817,213) $2,373,201,188
- ------------------------------------------------------------------------------
Receivable for investments sold 51,124,895
- ------------------------------------------------------------------------------
Interest receivable 13,675,584
- ------------------------------------------------------------------------------
Receivable for Fund shares sold 1,892,291
- ------------------------------------------------------------------------------ --------------
Total assets 2,439,893,958
- ------------------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------------------
Payable for dollar roll transactions (Note 2F) $316,212,625
- ---------------------------------------------------------------
Payable for investments purchased 63,492,861
- ---------------------------------------------------------------
Dividends payable 8,869,673
- ---------------------------------------------------------------
Payable for Fund shares redeemed 3,406,054
- ---------------------------------------------------------------
Payable to bank 32,902
- ---------------------------------------------------------------
Accrued expenses 145,543
- --------------------------------------------------------------- ------------
Total liabilities 392,159,658
- ------------------------------------------------------------------------------ --------------
NET ASSETS for 175,924,320 shares of beneficial interest outstanding $2,047,734,300
- ------------------------------------------------------------------------------ --------------
NET ASSETS CONSISTS OF:
- ------------------------------------------------------------------------------
Paid in capital $2,104,524,265
- ------------------------------------------------------------------------------
Unrealized appreciation of investments 37,495,069
- ------------------------------------------------------------------------------
Accumulated net realized loss on investments (94,285,034)
- ------------------------------------------------------------------------------ --------------
Total $2,047,734,300
- ------------------------------------------------------------------------------ --------------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share
Institutional Shares ($1,910,499,593 / 164,134,198 shares of
beneficial interest outstanding) $11.64
- ------------------------------------------------------------------------------ --------------
Institutional Service Shares ($137,234,707 / 11,790,122 shares of beneficial
interest outstanding) $11.64
- ------------------------------------------------------------------------------ --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED GNMA TRUST
STATEMENT OF OPERATIONS
YEAR ENDED JANUARY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------
Interest income (Note 2C) (net of interest expense of $5,291,699) $157,922,760
- --------------------------------------------------------------------------------
EXPENSES--
- --------------------------------------------------------------------------------
Investment advisory fee (Note 5) $8,180,174
- -------------------------------------------------------------------
Trustees' fees 22,730
- -------------------------------------------------------------------
Administrative personnel and services (Note 5) 1,316,655
- -------------------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees and expenses 683,096
- -------------------------------------------------------------------
Auditing fees 25,791
- -------------------------------------------------------------------
Legal fees 19,472
- -------------------------------------------------------------------
Printing and postage 19,238
- -------------------------------------------------------------------
Registration costs 61,021
- -------------------------------------------------------------------
Taxes 47,000
- -------------------------------------------------------------------
Insurance premiums 39,520
- -------------------------------------------------------------------
Distribution services fees (Note 5) 287,334
- -------------------------------------------------------------------
Miscellaneous 15,025
- ------------------------------------------------------------------- ----------
Total expenses 10,717,056
- -------------------------------------------------------------------------------- ------------
Net investment income 147,205,704
- -------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- --------------------------------------------------------------------------------
Net Realized gain (loss) on investments (identified cost basis)-- 12,114,105
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of
investments-- (41,032,970)
- -------------------------------------------------------------------------------- ------------
Net realized and unrealized gain (loss) on investments (28,918,865)
- -------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $118,286,839
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED GNMA TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
--------------------------------
1994 1993*
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------
Net investment income $ 147,205,704 $ 125,517,714
- --------------------------------------------------------------
Net realized gain (loss) on investment transactions
($18,860,608> net gain and $5,182,436 net loss,
respectively, as computed for federal income tax purposes) 12,114,105 (7,890,682)
- --------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of
investments (41,032,970) 28,795,454
- -------------------------------------------------------------- -------------- --------------
Change in net assets from operations 118,286,839 146,422,486
- -------------------------------------------------------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- --------------------------------------------------------------
Dividends to shareholders from net investment income:
- --------------------------------------------------------------
Institutional Shares (139,286,614) (123,799,825)
- --------------------------------------------------------------
Institutional Service Shares (7,919,090) (1,717,889)
- -------------------------------------------------------------- -------------- --------------
Change in net assets from distributions to shareholders (147,205,704) (125,517,714)
- -------------------------------------------------------------- -------------- --------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- --------------------------------------------------------------
Net proceeds from sales of shares 1,020,100,336 916,147,877
- --------------------------------------------------------------
Net asset value of shares issued to shareholders electing to
receive payment of distributions in Fund shares 34,919,870 28,623,142
- --------------------------------------------------------------
Cost of shares redeemed (798,702,252) (479,270,829)
- -------------------------------------------------------------- -------------- --------------
Change in net assets resulting from Fund share transactions 256,317,954 465,500,190
- -------------------------------------------------------------- -------------- --------------
Change in net assets 227,399,089 486,404,962
- --------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------
Beginning of period 1,820,335,211 1,333,930,249
- -------------------------------------------------------------- -------------- --------------
End of period $2,047,734,300 $1,820,335,211
- -------------------------------------------------------------- -------------- --------------
</TABLE>
* The period from June 18, 1992 (date of initial public investment) to January
31, 1993.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GNMA TRUST
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated GNMA Trust, ("the Trust"), is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end, management investment
company. The Trust provides two classes of shares ("Institutional Shares" and
"Institutional Service Shares"). Institutional Service Shares are identical in
all respects to Institutional Shares except that Institutional Service Shares
are sold pursuant to a distribution plan ("Plan") adopted in accordance with
Investment Company Act Rule 12b-1.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--U.S. government obligations are generally valued at the mean
between the over-the-counter bid and asked prices as furnished by an independent pricing
service.
B. REPURCHASE AGREEMENTS--It is the policy of the Trust to require the custodian bank to
take possession, to have legally segregated in the Federal Reserve Book Entry System or
to have segregated within the custodian bank's vault, all securities held as collateral
in support of repurchase agreement investments. Additionally, procedures have been
established by the Trust to monitor, on a daily basis, the market value of each
repurchase agreement's underlying collateral to ensure the value at least equals the
principal amount of the repurchase transaction, including accrued interest.
The Trust will only enter into repurchase agreements with banks and other recognized
financial institutions such as broker/dealers which are deemed by the Trust's adviser to
be creditworthy pursuant to guidelines established by the Board of Trustees
("Trustees"). Risks may arise from the potential inability of counterparties to honor
the terms of the repurchase agreement. Accordingly, the Trust could receive less than
the repurchase price on the sale of collateral securities.
C. INCOME--Interest income is recorded on the accrual basis and includes discount earned,
less any premium, on short-term obligations, and original issue discount on all other
debt securities.
D. FEDERAL TAXES--It is the Trust's policy to comply with the provisions of the Internal
Revenue Code, (the "Code") as amended, applicable to regulated investment companies and
to distribute to shareholders each year substantially all of its taxable income,
including any net realized gain on investments. Accordingly, no provisions for federal
tax is necessary. At January 31, 1994, the Trust, for federal tax purposes, had a
capital loss carryforward of $83,801,283 which will reduce the Trust's taxable income
arising from future net realized gain on investments, if any, to the extent permitted by
the Code, and thus will reduce the amount of the distributions to shareholders which
</TABLE>
FEDERATED GNMA TRUST
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
would otherwise be necessary to relieve the Trust of any liability for federal tax.
Pursuant to the Code, such capital loss carryforward will expire in 1996 ($31,912,913),
1997 ($18,028,171), 1998 ($14,893,518), 1999 ($13,784,245) and 2000 ($5,182,436).
Additionally, net capital losses of $10,374,414 attributable to security transactions
incurred after October 31, 1993 are treated as arising on February 1, 1994, the first
day of the Trust's next taxable year.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Trust may engage in when-issued or
delayed delivery transactions. The Trust records when-issued securities and maintains
security positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed delivery
basis are marked to market daily and begin earning interest on the settlement date.
F. DOLLAR ROLL TRANSACTIONS--The Trust enters into dollar roll transactions, with respect
to mortgage securities issued by GNMA, FNMA and FHLMC, in which the Trust sells mortgage
securities to financial institutions and simultaneously agrees to repurchase
substantially similar (same type, coupon and maturity) securities at a later date at an
agreed upon price. During the period between the sale and repurchase, the Trust forgoes
principal and interest paid on the mortgage securities sold. The Trust is compensated by
the interest earned on the cash proceeds of the initial sale and any additional fee
income received on the sale.
G. OTHER--Investment transactions are accounted for on the date of the transaction.
</TABLE>
(3) DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income are declared daily and paid monthly.
Distributions of any net realized capital gains are made at least once every
twelve months. Dividends and capital gain distributions, if any, are recorded on
the ex-dividend date.
FEDERATED GNMA TRUST
- --------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in Trust shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------------------------------------------------
1994 1993
------------------------------ ------------------------------
SHARES DOLLARS SHARES DOLLARS
----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES
- ----------------------------------
Shares outstanding, beginning
of period 150,077,131 $1,798,223,784 114,604,384 $1,382,706,120
- ----------------------------------
Shares sold 75,001,659 882,750,706 72,096,540 844,106,250
- ----------------------------------
Shares issued to shareholders
electing to receive payment of
distributions in Fund shares 2,539,103 29,822,854 2,325,483 27,205,875
- ----------------------------------
Shares redeemed (63,483,695) (745,434,319) (38,949,276) (455,794,461)
- ---------------------------------- ----------- -------------- ----------- --------------
Shares outstanding, end of period 164,134,198 $1,965,363,025 150,077,131 $1,798,223,784
- ---------------------------------- ----------- -------------- ----------- --------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------------------------------------------------
1994 1993*
------------------------------ ------------------------------
SHARES DOLLARS SHARES DOLLARS
----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
INSTITUTIONAL SERVICE SHARES
- ----------------------------------
Shares outstanding, beginning
of period 4,253,153 $ 49,982,526 -- $ --
- ----------------------------------
Shares sold 11,649,200 137,349,630 6,131,846 72,041,627
- ----------------------------------
Shares issued to shareholders
electing to receive payment of
distributions in Fund shares 434,613 5,097,016 120,649 1,417,267
- ----------------------------------
Shares redeemed (4,546,844) (53,267,933) (1,999,342) (23,476,368)
- ---------------------------------- ----------- -------------- ----------- --------------
Shares outstanding, end of period 11,790,122 $ 139,161,239 4,253,153 $ 49,982,526
- ---------------------------------- ----------- -------------- ----------- --------------
</TABLE>
* The period from June 18, 1992 (date of initial public investment) to January
31, 1993.
FEDERATED GNMA TRUST
- --------------------------------------------------------------------------------
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATE
Federated Management, the Trust's investment adviser ("Adviser"), receives for
its services an annual investment advisory fee equal to .40 of 1% of the Trust's
average daily net assets. For the year ended January 31, 1994, the Adviser
earned a fee of $8,180,174.
Administrative personnel and services were provided at approximate cost by
Federated Administrative Services, Inc. Effective March 1, 1994, Federated
Administrative Services ("FAS") will provide administrative personnel and
services at an annual rate of 0.15 of 1% on the first $250 million of average
aggregate net assets of the total Federated Funds; 0.125 of 1% on the next $250
million; 0.10 of 1% on the next $250 million; and 0.075 of 1% on average
aggregate net 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.
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Trust will compensate Federated
Securities Corp., ("FSC"), the principal distributor, from the net assets of the
Trust, to finance activities intended to result in the sale of the Trust's
Institutional Service Shares. The Plan provides that the Fund may incur
distribution expenses up to .25 of 1% of the average daily net assets of the
Institutional Service Shares, annually, to compensate FSC. For the year ended
January 31, 1994, FSC was compensated $287,334 in fees under the Plan.
Certain of the Officers and Trustees of the Trust are Officers and Directors of
the above corporations.
(6) INVESTMENT TRANSACTIONS
Purchases, and sales of investments excluding short-term securities, for the
fiscal year ended January 31, 1994.
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------
PURCHASES $2,661,935,260
- ----------------------------------------------------------------------------- --------------
SALES $2,343,022,606
- ----------------------------------------------------------------------------- --------------
</TABLE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of
FEDERATED GNMA TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated GNMA Trust as of January 31, 1994,
the related statement of operations for the year then ended, the statement of
changes in net assets for the years ended January 31, 1994 and 1993, and the
financial highlights (see pages 2 and 15 of the prospectus) for each of the
years in the ten-year period ended January 31, 1994. These financial statements
and financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
January 31, 1994 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated GNMA Trust
as of January 31, 1994, the results of its operations, the changes in its net
assets, and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
Boston, Massachusetts
March 15, 1994
[THIS PAGE INTENTIONALLY LEFT BLANK]
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated GNMA Trust Federated Investors Tower
Institutional Service Shares Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8602
Trust Company Boston, Massachusetts 02266-8602
- ------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ------------------------------------------------------------------------------------------------
Independent Auditor
Deloitte & Touche 125 Summer Street
Boston, Massachusetts 02110-1617
- ------------------------------------------------------------------------------------------------
</TABLE>
FEDERATED GNMA TRUST
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
An Open-End Diversified
Management Investment Company
March 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
8022901A-ISS (3/94)
FEDERATED GNMA TRUST
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES
COMBINED STATEMENT OF ADDITIONAL INFORMATION
The Institutional Shares and Institutional Service Shares of Federated GNMA
Trust (the "Trust") represent interests in a diversified portfolio of securities
(the "Fund"). This Combined Statement of Additional Information should be read
with the respective prospectus for Institutional Shares and Institutional
Service Shares dated March 31, 1994. This Statement is not a prospectus itself.
To receive a copy of either prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated March 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE TRUST 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Types of Investments 1
When-Issued and Delayed Delivery
Transactions 1
Lending of Portfolio Securities 1
Repurchase Agreements 1
Reverse Repurchase Agreements 2
Portfolio Turnover 2
Investment Limitations 2
TRUST MANAGEMENT 4
- ---------------------------------------------------------------
Officers and Trustees 4
The Funds 5
Trust Ownership 6
Trustee Liability 6
INVESTMENT ADVISORY SERVICES 6
- ---------------------------------------------------------------
Adviser to the Fund 6
Advisory Fees 6
Other Advisory Services 7
ADMINISTRATIVE SERVICES 7
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 7
- ---------------------------------------------------------------
PURCHASING SHARES 7
- ---------------------------------------------------------------
Distribution and Shareholder Services Plans 8
Conversion to Federal Funds 8
DETERMINING NET ASSET VALUE 8
- ---------------------------------------------------------------
Determining Market Value of Securities 8
REDEEMING SHARES 8
- ---------------------------------------------------------------
EXCHANGING SECURITIES FOR SHARES 8
- ---------------------------------------------------------------
Tax Consequences 9
TAX STATUS 9
- ---------------------------------------------------------------
The Fund's Tax Status 9
Shareholders' Tax Status 9
TOTAL RETURN 9
- ---------------------------------------------------------------
YIELD 9
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 10
- ---------------------------------------------------------------
Duration 11
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE TRUST
- --------------------------------------------------------------------------------
Federated GNMA Trust was established as a Massachusetts business trust under a
Declaration of Trust dated December 10, 1981.
Shares of the Fund are offered in two classes, known as Institutional Shares and
Institutional Service Shares (individually and collectively referred to as
"Shares"). This Combined Statement of Additional Information relates to the
above-mentioned Shares of the Fund.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is current income. The investment objective
cannot be changed without approval of shareholders.
TYPES OF INVESTMENTS
The Fund will invest primarily in mortgage-backed securities. Under normal
circumstances, at least 65% of the Fund's portfolio will be invested in
instruments issued or fully guaranteed as to principal and interest by the
Government National Mortgage Association ("GNMA"). In addition, to the extent
that the Fund will invest in other mortgage-backed securities, these will be
collateralized by GNMA obligations.
Because the mortgages underlying mortgage-backed securities often may be prepaid
without penalty or premium, mortgage-backed securities 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. For certain types of asset pools, such as collateralized mortgage
obligations, prepayments may be allocated to one tranche of securities ahead of
other tranches, in order to reduce the risk of prepayment for the other
tranches.
Prepayments may result in a capital loss to the Fund to the extent that the
prepaid mortgage securities were purchased at a market premium over their stated
principal amount. Conversely, the prepayment of mortgage securities purchased at
a market discount from their stated principal amount will accelerate the
recognition of interest income by the Fund, which would be taxed as ordinary
income when distributed to the shareholders.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in
when-issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, and not for investment leverage.
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. Settlement dates will occur no more than 120 days
after entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.
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 by the Fund's custodian at the trade date. These
securities are marked to market daily and maintained until the transaction is
settled.
The Fund may engage in these transactions to an extent that would cause the
segregation of an amount up to 20% of the total value of its assets.
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 Board of Trustees ("Trustees").
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are 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.
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.
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.
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. During the fiscal years ended January 31, 1994
and 1993, the portfolio turnover rates were 117% and 33%, respectively.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of portfolio securities.
BORROWING MONEY
The Fund will not borrow money directly or through reverse repurchase
agreements in amounts in excess of one-third of the value of its 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 borrowings in excess of 5% of
the value of its total assets are outstanding.
ISSUING SENIOR SECURITIES
The Fund will not issue senior securities except as permitted by its
investment objective and policies.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge, or
hypothecate assets having a market value not exceeding the lesser of the
dollar amount borrowed or 10% of the value of total assets at the time of
the borrowing.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities up
to one-third of the value of its total assets. This shall not prevent the
Fund from purchasing or holding U.S. government obligations, money market
instruments, bonds, debentures, notes, certificates of indebtedness or
other debt securities, entering into repurchase agreements, or engaging
in other transactions where permitted by the Fund's investment objective,
policies and limitations.
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities of any one issuer (other
than cash, cash items or securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities and
repurchase agreements collateralized by U.S. government securities) if as
a result more than 5% of the value of its total assets would be invested
in the securities of that issuer.
- --------------------------------------------------------------------------------
INVESTING IN REAL ESTATE
The Fund will not buy or sell real estate, including limited partnership
interests in 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.
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 restricted securities which the Fund may
purchase pursuant to its investment objective, policies, and limitations.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers which have records of less than three years of
operating history, including the operation of any predecessor. (This
limitation does not apply to issuers of CMOs or REMICs which are
collateralized by securities or mortgages issued or guaranteed as to
prompt payment of principal and interest by an agency of the U.S.
government).
INVESTING IN MINERALS
The Fund will not purchase or sell oil, gas, or other mineral exploration
or development programs or leases, although it may purchase the
securities of issuers which invest or sponsor such programs.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust or the Fund's investment adviser
owning individually more than 1/2 of 1% of the issuer's securities
together own more than 5% of the issuer's securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may not own securities of open-end investment companies. The
Fund can acquire up to 3% of the total outstanding stock of closed-end
investment companies. The Fund will not be subject to any other
limitations with regard to the acquisition of securities of closed-end
investment companies so long as the public offering price of the Fund's
shares does not include a sales load exceeding 1 1/2%. The Fund will
purchase securities of closed-end investment companies only in
open-market transactions involving only customary broker's commissions.
However, these limitations are not applicable if the securities are
acquired in a merger, consolidation, or acquisition of assets; nor are
they applicable with respect to securities of investment companies that
have been exempted from registration under the Investment Company Act of
1940.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements providing for
settlement in more than seven days after notice, and certain restricted
securities not determined by the Trustees to be liquid.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
The Fund does not consider the issuance of separate classes of shares to
constitute an issuance of "senior securities" within the meaning of the
investment limitations set forth above.
For the purposes of the above limitations, the Fund considers instruments issued
by a U.S. branch of a domestic bank having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment to be "cash items."
TRUST MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Federated Management,
Federated Investors, Federated Securities Corp., Federated Services Company,
Federated Administrative Services, and the Funds (as defined below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
John F. Donahue*+ Chairman and Chairman and Trustee, Federated Investors; Chairman and Trustee, Federated
Federated Investors Trustee Advisers, Federated Management, and Federated Research; Director, AEtna Life
Tower and Casualty Company; Chief Executive Officer and Director, Trustee, or
Pittsburgh, PA Managing General Partner of the Funds; formerly, Director, The Standard Fire
Insurance Company. Mr. Donahue is the
father of J. Christopher Donahue, Vice President of the Trust.
</TABLE>
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior Vice-President, John R.
Wood/IPC Commercial Wood and Associates, Inc., Realtors; President, Northgate Village
Department Development Corporation; General Partner or Trustee in private real estate
John R. Wood and ventures in Southwest Florida; Director, Trustee, or Managing General
Associates, Inc., Realtors Partner of the Funds; formerly, President, Naples Property Management, Inc.
3255 Tamiami Trail North
Naples, FL
- --------------------------------------------------------------------------------------------------------------------------------
William J. Copeland Trustee Director and Member of the Executive Committee, Michael Baker, Inc.;
One PNC Plaza- Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
23rd Floor Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan
Pittsburgh, PA Homes, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
571 Hayward Mill Road Trustee, or Managing General Partner of the Funds; formerly, Director, Blue
Concord, MA Cross of Massachusetts, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
3471 Fifth Avenue Hospitals; Clinical Professor of Medicine and Trustee, University of
Suite 1111 Pittsburgh; Director, Trustee, or Managing General Partner of the Funds.
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park
5916 Penn Mall Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director, Trustee,
Pittsburgh, PA or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
- --------------------------------------------------------------------------------------------------------------------------------
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of Massachusetts; Director,
225 Franklin Street Trustee or Managing General Partner of the Funds; formerly, President, State
Boston, MA Street Bank and Trust Company and State Street Boston Corporation and
Trustee, Lahey Clinic Foundation, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
5916 Penn Mall Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
Pittsburgh, PA Chairman, Horizon Financial, F.A.
- --------------------------------------------------------------------------------------------------------------------------------
Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
1202 Cathedral of Endowment for International Peace, RAND Corporation, Online Computer Library
Learning Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak Management
University of Pittsburgh Center; Director, Trustee, or Managing General Partner of the Funds;
Pittsburgh, PA President Emeritus, University of Pittsburgh; formerly, Chairman, National
Advisory Council for Environmental Policy and Technology.
- --------------------------------------------------------------------------------------------------------------------------------
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director, Trustee, or Managing
4905 Bayard Street General Partner of the Funds.
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Glen R. Johnson President Trustee, Federated Investors; President and/or Trustee of some of the Funds;
Federated Investors staff member, Federated Securities Corp. and Federated Administrative
Tower Services.
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue Vice President President and Trustee, Federated Investors; Trustee, Federated Advisers,
Federated Investors Federated Management, and Federated Research; President and Director,
Tower Federated Administrative Services; Trustee, Federated Services Company;
Pittsburgh, PA President or Vice President of the Funds; Director, Trustee or Managing
General Partner of some of the Funds. Mr. Donahue is the son of John F.
Donahue, Chairman and Trustee of the Trust.
- --------------------------------------------------------------------------------------------------------------------------------
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors; Chairman and
Federated Investors Director, Federated Securities Corp.; President or Vice President of the
Tower Funds; Director or Trustee of some of the Funds.
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
Edward C. Gonzales Vice President Vice President, Treasurer and Trustee, Federated Investors; Vice President
Federated Investors and Treasurer and Treasurer, Federated Advisers, Federated Management, and Federated
Tower Research; Executive Vice President, Treasurer, and Director, Federated
Pittsburgh, PA Securities Corp.; Trustee, Federated Services Company; Chairman, Treasurer,
and Director, Federated Administrative Services; Trustee of some of the
Funds; Vice President and Treasurer of the Funds.
- --------------------------------------------------------------------------------------------------------------------------------
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and Trustee, Federated
Federated Investors and Secretary Investors; Vice President, Secretary and Trustee, Federated Advisers,
Tower Federated Management, and Federated Research; Trustee, Federated Services
Pittsburgh, PA Company; Executive Vice President, Secretary, and Director, Federated
Administrative Services; Director and Executive Vice President, Federated
Securities Corp.; Vice President and Secretary of the Funds.
- --------------------------------------------------------------------------------------------------------------------------------
John A. Staley, IV Vice President Vice President and Trustee, Federated Investors; Executive Vice President,
Federated Investors Federated Securities Corp.; President and Trustee, Federated Advisers,
Tower Federated Management, and Federated Research; Vice President of the Funds;
Pittsburgh, PA Director, Trustee, or Managing General Partner of some of the Funds;
formerly, Vice President, The Standard Fire Insurance Company and President
of its Federated Research Division.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* This Trustee is deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
+ Member of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies: A.T. Ohio
Municipal Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; The Boulevard
Funds; California Municipal Cash Trust; Cash Trust Series II; Cash Trust Series,
Inc.; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; FT
Series, Inc.; Federated ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA
Trust; Federated Government Trust; Federated Growth Trust; Federated High Yield
Trust; Federated Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Intermediate Government Trust; Federated Master Trust;
Federated Municipal Trust; Federated Short-Intermediate Government Trust;
Federated Short-Intermediate Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-Free Trust; First
Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S.
Government Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility
Fund, Inc.; Fund for U.S. Government Securities, Inc.; Government Income
Securities, Inc.; High Yield Cash Trust; Insight
- --------------------------------------------------------------------------------
Institutional Series, Inc.; Insurance Management Series; Intermediate Municipal
Trust; Investment Series Funds, Inc.; Investment Series Trust; Liberty Equity
Income Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty Municipal
Securities Fund, Inc.; Liberty Term Trust, Inc.-1999; Liberty U.S. Government
Money Market Trust; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed
Series Trust; Mark Twain Funds; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust; New
York Municipal Cash Trust; 111 Corcoran Funds; Peachtree Funds; Portage Funds;
RIMCO Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Signet
Select Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and
Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments
Trust; Trademark Funds; Trust for Financial Institutions; Trust for Government
Cash Reserves; Trust for Short-Term U.S. Government Securities; and Trust for
U.S. Treasury Obligations.
TRUST OWNERSHIP
Officers and Trustees own less than 1% of the Trust's outstanding shares.
As of March 4, 1994, the following shareholders of record owned 5% or more of
the outstanding Institutional Service Shares of the Trust. Charles Schwab & Co.,
Inc., San Francisco, California, owned approximately 917,805 Shares (7.53%);
Trucojo Trust Company of St. Joseph, St. Joseph, Missouri, owned approximately
1,397,640 Shares (11.47%); Ambank & Co., Baton Rouge, Louisiana, owned
approximately 2,846,283 Shares (23.35%); and The Bank of Guam, Agana, Guam,
owned approximately 861,319 Shares (7.07%).
As of March 4, 1994, there were no shareholders of record who owned 5% or more
of the outstanding Institutional Shares of the Trust.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Federated Management, 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. John F. Donahue, Chairman and Trustee of Federated
Management, is Chairman and Trustee of Federated Investors and Chairman and
Trustee of the Trust. John A. Staley, IV, President and Trustee of Federated
Management, is Vice President and Trustee of Federated Investors, Executive Vice
President of Federated Securities Corp., and Vice President of the Trust. J.
Christopher Donahue, Trustee of Federated Management, is President and Trustee
of Federated Investors, Trustee, President, and Director of Federated
Administrative Services, Trustee, Federated Services Company, and Vice President
of the Trust. John W. McGonigle, Vice President, Secretary and Trustee of
Federated Management, is Trustee, Vice President, Secretary, and General Counsel
of Federated Investors, Director, Executive Vice President, and Secretary of
Federated Administrative Services, Director and Executive Vice President of
Federated Securities Corp., Trustee, Federated Services Company, and Vice
President and Secretary of the Trust.
The adviser shall not be liable to the Trust, the Fund or any shareholder of the
Fund for any losses that may be sustained in the purchase, holding, or sale of
any security, or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectuses. During the fiscal years ended
January 31, 1994, 1993, and 1992, the Fund's adviser earned $8,180,174,
$6,298,393, and $5,128,808, respectively.
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 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.
OTHER ADVISORY SERVICES
Federated Research Corp. receives fees from certain depository institutions for
providing consulting and portfolio advisory services relating to each
institution's program of asset management. Federated Research Corp. may advise
such clients to purchase or redeem shares of investment companies, such as the
Fund, which are managed, for a fee, by Federated Research Corp. or other
affiliates of Federated Investors, such as the adviser, and may advise such
clients to purchase and sell securities in the direct markets. Further,
Federated Research Corp., and other affiliates of the adviser may, from time to
time, provide certain consulting services and equipment to depository
institutions in order to facilitate the purchase of shares of funds offered by
Federated Securities Corp.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectuses. For the fiscal years ended January 31, 1994, 1993, and 1992,
Federated Administrative Services, Inc., the Fund's former administrator, earned
$1,316,655, $1,015,784, and $886,358, respectively. John A. Staley, IV, an
officer of the Trust, and Dr. Henry J. Gailliot, an officer of Federated
Management, the adviser to the Fund, each hold approximately 15% and 20%,
respectively, of the outstanding common stock and serve as directors of
Commercial Data Services, Inc., a company which provides computer processing
services to Federated Administrative Services, Inc., and Federated
Administrative Services. For the fiscal years ended January 31, 1994, 1993, and
1992, Federated Administrative Services, Inc. paid approximately $161,054,
$181,235, and $200,212, respectively, for services provided by Commercial Data
Services, Inc.
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 Trustees.
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:
- - advice as to the advisability of investing in securities;
- - security analysis and reports;
- - economic studies;
- - industry studies;
- - receipt of quotations for portfolio evaluations; and
- - similar services.
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.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value without a sales charge on days the New
York Stock Exchange and the Federal Reserve wire system are open for business.
The procedure for purchasing Shares is explained in the respective prospectus
under "Investing in Institutional Shares" or "Investing in Institutional Service
Shares."
- --------------------------------------------------------------------------------
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS
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. With
respect to the Institutional Service Shares class of the Fund, by adopting the
Distribution Plan, the Board of Trustees expects 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 objectives. By identifying potential
investors whose needs are served by the Fund's objectives, 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
period ending January 31, 1994, payments in the amount of $287,334 were made
pursuant to the Distribution Plan (Institutional Service Shares only) all of
which was paid to financial institutions.
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. State Street Bank acts as the
shareholder's agent in depositing checks and converting them to federal funds.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
Net asset value generally changes each day. The days on which the net asset
value for each class of Shares 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:
- - according to the mean between the over-the-counter bid and asked prices
provided by an independent pricing service, if available, or at fair value as
determined in good faith by the Trustees; or
- - for short-term obligations with maturities of less than 60 days, at amortized
cost unless the Trustees determines that particular circumstances of the
security indicate otherwise.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares of either class at the next computed net asset value
after the Fund receives the redemption request. Redemption procedures are
explained in the respective prospectus under "Redeeming Institutional Shares" or
"Redeeming Institutional Service 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.
EXCHANGING SECURITIES FOR SHARES
- --------------------------------------------------------------------------------
Investors may exchange certain U.S. government securities they already own for
Shares of either class, or they may exchange a combination of U.S. government
securities and cash for Shares of either class. An investor should forward the
securities in negotiable form with an authorized letter of transmittal to
Federated Securities Corp. specifying whether the investor will receive
Institutional Shares or Institutional Service Shares in exchange. The Fund will
notify the investor of its acceptance and valuation of the securities within
five business days of their receipt by State Street Bank.
The Fund values securities in the same manner as the Fund values its assets. 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, 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.
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:
- - derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
- - derive less than 30% of its gross income from the sale of securities held less
than three months;
- - invest in securities within certain statutory limits; and
- - 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. No portion of any income dividend paid by
the Fund is eligible for the dividends received deduction available to
corporations. These dividends, and any short-term capital gains, are taxable as
ordinary income.
CAPITAL GAINS
Capital gains distributed to shareholders will be treated as long-term
capital gains regardless of how long shareholders have held Shares.
TOTAL RETURN
- --------------------------------------------------------------------------------
The Fund's average annual total returns for Institutional Shares for the
one-year and five-year periods ended January 31, 1994, and for the period from
March 23, 1982 (effective date of the Trust's registration statement) to January
31, 1994, were 6.02%, 10.58%, and 11.68%, respectively. The Fund's average
annual total return for Institutional Service Shares for the one-year period
ended January 31, 1994, and for the period from June 18, 1992 (date of initial
public investment) to January 31, 1994 were 5.76% and 7.09%, respectively.
The average annual total return for both classes 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 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, adjusted over the period
by any additional shares, assuming the monthly reinvestment of all dividends and
distributions.
YIELD
- --------------------------------------------------------------------------------
The Fund's yield for Institutional Shares for the thirty-day period ended
January 31, 1994 was 6.58%. The Fund's yield for Institutional Service Shares
was 6.33% for the same period.
The yield for both classes of shares of the Fund is determined by dividing the
net investment income per share (as defined by the Securities and Exchange
Commission) earned by the respective class of shares over a thirty-day period by
the 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 twelve-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 either
class of shares, the performance will be reduced for those shareholders paying
those fees.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The performance of both classes of Shares depends upon such variables as:
- - portfolio quality;
- - average portfolio maturity;
- - type of instruments in which the portfolio is invested;
- - changes in interest rates and market value of portfolio securities;
- - changes in the Fund's expenses or either class of Shares' expenses; and
- - various other factors.
Both classes of Shares' 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:
- - 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 specified period of time.
From time to time, the Fund will quote its Lipper ranking in the "GNMA funds"
category in advertising and sales literature.
- - 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.
- - SALOMON BROTHERS GNMA 9-11% INDEX, a widely recognized index of Government
National Mortgage Association mortgage pass-through securities in the 9-11%
current coupon range. Total return is reported for periods of 1 month, 3
months, and 12 months. The index is tracked by Salomon Brothers, Inc.
- - SALOMON BROTHERS GNMA 30 YEAR INDEX is a total, comprehensive GNMA index
comprised of 30-year GNMA pass-throughs, 15-year GNMA pass-throughs, and GNMA
GPM's.
- - SHEARSON LEHMAN GOVERNMENT/CORPORATE (TOTAL) INDEX is comprised of
approximately 5,000 issues which include non-convertible bonds publicly issued
by the U.S. government or its agencies; corporate bonds guaranteed by the U.S.
government and quasifederal corporations; and publicly issued, fixed rate,
nonconvertible domestic bonds of companies in industry, public utilities and
finance. The average maturity of these bonds approximates nine years. Tracked
by Shearson Lehman Brothers Inc., the index calculates total returns for one
month, three month, twelve month and ten year periods and year-to-date.
- - SHEARSON LEHMAN GOVERNMENT INDEX is an unmanaged index comprised of all
publicly issued, non-convertible domestic debt of the U.S. government, or any
agency thereof, or any quasi-federal corporation and of corporate debt
guaranteed by the U.S. government. Only notes and bonds with a minimum
outstanding principal of $1 million and a minimum maturity of one year are
included.
In addition, the Fund will make comparisons to certain direct market securities
in which it is permitted to invest. The type of security that will be used for
such comparisons, and the source of its performance information is listed below.
- - 10-YEAR TREASURY NOTES--Source: Salomon Brothers. Total returns are calculated
for periods of one, three, and twelve months.
Advertisements and other sales literature for both 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
either class of Shares based on monthly reinvestment of dividends over a
specified period of time.
- --------------------------------------------------------------------------------
DURATION
Duration is a commonly used measure of the potential volatility in the price of
a bond, or other fixed income security, or in a portfolio of fixed income
securities, prior to maturity. Volatility is the magnitude of the change in the
price of a bond relative to a given change in the market rate of interest. A
bond's price volatility depends on three primary variables: the bond's coupon
rate; maturity date; and the level of market yields of similar fixed-income
securities. Generally, bonds with lower coupons or longer maturities will be
more volatile than bonds with higher coupons or shorter maturities. Duration
combines these variables into a single measure.
Duration is calculated by dividing the sum of the time-weighted values of the
cash flows of a bond or bonds, including interest and principal payments, by the
sum of the present values of the cash flows.
When the Fund invests in mortgage pass-through securities, its duration will be
calculated in a manner which requires assumptions to be made regarding future
principal prepayments. A more complete description of this calculation is
available upon request from the Fund.
8022901B (3/94)
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (Filed in Part A)
(b) Exhibits:
(1) Conformed copy of the Declaration of Trust of the
Registrant as amended (14.);
(2) Copy of the By-Laws of the Registrant as amended
(1.,2.,4.,7.,8.);
(3) Not applicable;
(4) Copy of revised Specimen Certificate for Shares of
Beneficial Interest of the Registrant (5.);
(5) Conformed copy of the revised Investment Advisory
Contract of the Registrant dated September 11, 1984
(10.);
(6) Conformed copy of the revised Distributor's Contract
(10.);
(7) Not applicable;
(8) Conformed copy of the Custodian Agreement of the
Registrant;+
(9) Conformed copy of Transfer Agency Agreement;+
(10) Copy of the Opinion and Consent of Counsel
as to legality of shares being registered (3.);
(11) Conformed copy of the Consent of
Independent Public Accountants;+
+ All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed January 12, 1982. (File Nos.
2-75670 and 811-3375)
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed February 11, 1982. (File Nos.
2-75670 and 811-3375)
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 2 on Form N-1A filed March 16, 1982. (File Nos. 2-75670
and 811-3375)
4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 4 on Form N-1A filed January 30, 1984. (File Nos. 2-75670
and 811-3375)
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed March 27, 1984. (File Nos. 2-75670
and 811-3375)
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed March 23, 1987. (File Nos. 2-75670
and 811-3375)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed March 22, 1988. (File Nos. 2-75670
and 811-3375)
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 15 on Form N-1A filed January 22, 1990.
(File Nos. 2-75670 and 811-3375)
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 23 on Form N-1A filed March 24, 1993. (File Nos. 2-75670
and 811-3375)
(12) Not applicable;
(13) Initial Capital Understanding (2.);
(14) Not applicable;
(15) Not applicable.
(16) Schedule of Computation of Fund
Performance Data (9.);
(17) Power of Attorney (13.);
(18) (i) Conformed copy of Opinion and
Consent of Counsel as to availability of
Rule 485(b);+ and
(ii) Opinion and Consent of Counsel as to Transfer
of Organization Expenses (6.);
Item 25. Persons Controlled by or Under Common Control with Registrant:
None.
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of March 4, 1994
Shares of Beneficial Interest
(no par value)
Institutional Shares 11,727
Institutional Service Shares 605
Item 27. Indemnification: (12.)
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 "Trust Information -
Management of the Trust" 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 "Trust Management -
Officers and Trustees." The remaining Trustee of the
investment adviser, his position with the investment adviser,
and, in parentheses, his principal occupation is: Mark D.
Olson (Partner, Wilson, Halbrook & Bayard), 107 W. Market
Street, Georgetown, Delaware 19947.
+ All exhibits have been filed electronically.
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed February 11, 1982. (File Nos.
2-75670 and 811-3375)
6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed January 30, 1985. (File Nos. 2-75670
and 811-3375)
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed March 22, 1989. (File Nos. 2-75670
and 811-3375)
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed on March 22, 1991. (File Nos.
2-75670 and 811-3375)
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 21 on Form N-1A filed on March 31, 1992. (File Nos.
2-75670 and 811-3357)
The remaining Officers of the investment adviser are:
William D. Dawson, J. Thomas Madden, and Mark L. Mallon,
Executive Vice Presidents; Henry J. Gailliot, Senior Vice
President-Economist; Peter R. Anderson, Gary J. Madich, and
J. Alan Minteer, Senior Vice Presidents; Randall A. Bauer,
Jonathan C. Conley, Deborah A. Cunningham, Mark E. Durbiano,
Roger A. Early, Kathleen M. Foody-Malus, David C. Francis,
Thomas M. Franks, Edward C. Gonzales, Jeff A. Kozemchak,
Marian R. Marinack, John W. McGonigle, Gregory M. Melvin,
Susan M. Nason, Mary Jo Ochson, Robert J. Ostrowski, Charles
A. Ritter, and Christopher H. Wiles, Vice Presidents,
Edward C. Gonzales, Treasurer, and John W. McGonigle,
Secretary. The business address of each of the Officers of
the investment adviser is Federated Investors Tower,
Pittsburgh, PA 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: A.T. Ohio Municipal
Money Fund; Alexander Hamilton Funds; American Leaders Fund,
Inc.; Annuity Management Series; Automated Cash Management
Trust; Automated Government Money Trust; BayFunds; The
Biltmore Funds; The Biltmore Municipal Funds; The Boulevard
Funds; California Municipal Cash Trust; Cambridge Series
Trust; Cash Trust Series, Inc.; Cash Trust Series II; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash
Trust; FT Series, Inc.; Federated ARMs Fund; Federated
Exchange Fund, Ltd.; Federated Government Trust; Federated
Growth Trust; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Intermediate Government Trust; Federated
Master Trust; Federated Municipal Trust; Federated
Short-Intermediate Government Trust; Federated Short-Term
U.S. Government Trust; Federated Stock Trust; Federated
Tax-Free Trust; Federated U.S. Government Bond Fund;
Financial Reserves Fund; First Priority Funds; First Union
Funds; Fixed Income Securities, Inc.; Fortress Adjustable
Rate U.S. Government Fund, Inc.; Fortress Municipal Income
Fund, Inc.; Fortress Utility Fund, Inc.; Fountain Square
Funds; Fund for U.S. Government Securities, Inc.; Government
Income Securities, Inc.; High Yield Cash Trust; Independence
One Mutual Funds; Insight Institutional Series, Inc.;
Insurance Management Series; Intermediate Municipal Trust;
Investment Series Funds, Inc.; Investment Series Trust;
Liberty Equity Income Fund, Inc.; Liberty High Income Bond
Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
U.S. Government Money Market Trust; Liberty Utility Fund,
Inc.; Liquid Cash Trust; Managed Series Trust; Mark Twain
Funds; Marshall Funds, Inc.; Money Market Management, Inc.;
Money Market Obligations Trust; Money Market Trust; The
Monitor Funds; Municipal Securities Income Trust; New York
Municipal Cash Trust; 111 Corcoran Funds; Peachtree Funds;
The Planters Funds; Portage Funds; RIMCO Monument Funds; The
Shawmut Funds; Short-Term Municipal Trust; Signet Select
Funds; SouthTrust Vulcan Funds; Star Funds; The Starburst
Funds; The Starburst Funds II; Stock and Bond Fund, Inc.;
Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments
Trust; Tower Mutual Funds; Trademark Funds; Trust for
Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations;
Vision Fiduciary Funds, Inc.; and Vision Group of Funds, 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 Vice President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, and
Asst. Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice Vice President
Federated Investors Tower President, and Treasurer, and Treasurer
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice Vice President and
Federated Investors Tower President, and Assistant Secretary
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
John A. Staley, IV Executive Vice President Vice President
Federated Investors Tower and Assistant Secretary,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
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
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
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
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
H. Joseph Kennedy 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
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James R. Ball Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Vice President, --
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
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
Mark D. Fisher 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
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
David C. Glabicki 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
William J. Kerns 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
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Francis J. Matten, Jr. 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
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Jeffrey Niss 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
Solon A. Person, IV 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
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charles A. Robison 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
Thomas E. Territ 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
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Federated Assistant
Federated Investors Tower Securities Corp. Secretary
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. Location of Accounts and Records:
Federated GNMA Trust Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
Federated Services Company Federated Investors Tower
("Transfer Agent and Pittsburgh, Pennsylvania
Dividend Disbursing Agent) 15222-3779
Federated Administrative Services Federated Investors Tower
("Administrator") Pittsburgh, Pennsylvania
15222-3779
Federated Management Federated Investors Tower
("Adviser") Pittsburgh, Pennsylvania
15222-3779
State Street Bank and Trust P.O. Box 8602
Company Boston, Massachusetts 02266-
("Custodian") 8602
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
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.
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED GNMA TRUST,
certifies that it meets all of the requirements for effectiveness of
this Amendment to its Registration Statement pursuant to Rule 485(b)
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, thereunto duly authorized, all in the City of Pittsburgh
and Commonwealth of Pennsylvania, on the 25th day of March, 1994.
FEDERATED GNMA TRUST
BY: /s/J. Crilley Kelly
J. Crilley Kelly, Assistant Secretary
Attorney in Fact for John F. Donahue
March 25, 1994
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/J. Crilley Kelly
J. Crilley Kelly Attorney In Fact March 25,
1994
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Glen R. Johnson* President
Edward C. Gonzales* Vice President and Treasurer
(Principal Financial and
Accounting Officer)
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
Gregor F. Meyer* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
Exhibit (11) under Form N-1A
Exhibit 23 under Item 601/Reg SK
DELOITTE & TOUCHE
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 25 to
Registration Statement (No. 2-75670) of Federated GNMA Trust of our report
dated March 15, 1994, appearing in the Prospectus, which is part of such
Registration Statement, and to the reference to us under the headings
"Financial Highlights - Institutional Shares" and "Financial Highlights -
Institutional Service Shares" in such Prospectus.
By: DELOITTE & TOUCHE
Deloitte & Touche
Certified Public Accountants
Boston, Massachusetts
March 24, 1994
HOUSTON, HOUSTON & DONNELLY
ATTORNEYS AT LAW
2510 CENTRE CITY TOWER
WILLIAM McC. HOUSTON PITTSBURGH, PA. 15222
FRED CHALMERS HOUSTON, JR. __________
THOMAS J. DONNELLY
JOHN F. MECK (412) 471-5828 FRED CHALMERS HOUSTON
FAX (412) 471-0736 (1914 - 1971)
MARIO SANTILLI, JR.
THEODORE M. HAMMER
March 17, 1994
Federated GNMA Trust
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
As counsel to Federated GNMA Trust ("Trust") we have
reviewed Post-effective Amendment No. 25 to the Trust's
Registration Statement to be filed with the Securities and
Exchange Commission under the Securities Act of 1933 (File
No. 2-75670). The subject Post-effective Amendment will be filed
pursuant to Paragraph (b) of Rule 485 and become effective
pursuant to said Rule immediately upon filing.
Our review also included an examination of other relevant
portions of the amended 1933 Act Registration Statement of the
Trust and such other documents and records deemed appropriate.
On the basis of this review we are of the opinion that
Post-effective Amendment No. 25 does not contain disclosures
which would render it ineligible to become effective pursuant to
Paragraph (b) of Rule 485.
We hereby consent to the filing of this representation
letter as a part of the Trust's Registration Statement filed with
the Securities and Exchange Commission under the Securities Act
of 1933 and as part of any application or registration statement
filed under the Securities Laws of the States of the United
States.
Very truly yours,
Houston, Houston & Donnelly
By: /s/ Thomas J. Donnelly
TJD:smg
Exhibit 9 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AGREEMENT
for
FUND ACCOUNTING,
SHAREHOLDER RECORDKEEPING,
and
CUSTODY SERVICES PROCUREMENT
AGREEMENT made as of the 1st day of December, 1993, 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 "Trust"), on behalf of the portfolios
(individually referred to herein as a "Fund" and collectively as "Funds") of
the Trust, and FEDERATED SERVICES COMPANY, a Delaware business trust, having
its principal office and place of business at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779 (the "Company").
WHEREAS, the Trust 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"); and
WHEREAS, the Trust wishes to retain the Company to provide certain
pricing, accounting and recordkeeping services for each of the Funds,
including any classes of shares issued by any Fund ("Classes"), and the
Company is willing to furnish such services; and
WHEREAS, the Trust desires to appoint the Company as its transfer agent,
dividend disbursing agent, and agent in connection with certain other
activities, and the Company desires to accept such appointment; and
WHEREAS, the Trust desires to appoint the Company as its agent to select,
negotiate and subcontract for custodian services from an approved list of
qualified banks and the Company desires to accept such appointment; and
WHEREAS, from time to time the Trust may desire and may instruct the
Company to subcontract for the performance of certain of its duties and
responsibilities hereunder to State Street Bank and Trust Company or another
agent (the "Agent"); and
WHEREAS, the words Trust and Fund may be used interchangeably for those
investment companies consisting of only one portfolio;
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 Trust 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 and Duties.
Subject to the supervision and control of the Trust's Board of Trustees
or Directors ("Board"), the Company will assist the Trust with regard to fund
accounting for the Trust, 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 and 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;
B. Calculate the net income of each of the Funds, if any;
C. Calculate capital gains or losses of each of the Funds resulting from
sale or disposition of assets, if any;
D. Maintain the general ledger and other accounts, books and financial
records of the Trust, 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;
E. 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 Trust are the property of the Trust and
further agrees to surrender promptly to the Trust such records upon the
Trust's request;
F. At the request of the Trust, prepare various reports or other financial
documents required by federal, state and other applicable laws and
regulations; and
G. Such other similar services as may be reasonably requested by the Trust.
Article 3. Compensation and Allocation of Expenses.
A. The Funds will compensate the Company for its services rendered pursuant
to Section One of this Agreement in accordance with the fees set forth on Fee
Schedules A ("A1, A2, A3 etc..."), annexed hereto and incorporated herein, as
may be added or amended from time to time. Such fees do not include
out-of-pocket disbursements of the Company for which the Funds shall reimburse
the Company upon receipt of a separate invoice. Out-of-pocket disbursements
shall include, but shall not be limited to, the items specified in Schedules B
("B1, B2, B3, etc..."), annexed hereto and incorporated herein, as may be
added or amended from time to time. Schedules B may be modified by the
Company upon not less than thirty days' prior written notice to the Trust.
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 Trust; independent auditors
expenses; Federated Administrative Services and/or Federated Administrative
Services, Inc. legal and audit department expenses billed to Federated
Services Company for work performed related to the Trust, the Funds, or the
Classes; law firm expenses; or other expenses not specified in this Article 3
which may be properly payable by the Funds and/or classes.
C. The Company will send an invoice to each of the Funds as soon as
practicable after the end of each month. Each invoice will provide detailed
information about the compensation and out-of-pocket expenses in accordance
with Schedules A and Schedules B. The Funds and or the Classes will pay to
the Company the amount of such invoice within 30 days of receipt of the
invoices.
D. Any compensation agreed to hereunder may be adjusted from time to time by
attaching to Schedules A revised Schedules dated and signed by a duly
authorized officer of the Trust 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 services under
this Section One. Such person or persons may be third-party service
providers, or they may be officers and employees who are employed by both the
Company and the Funds. The compensation of such person or persons shall be
paid by the Company and no obligation shall be incurred on behalf of the
Trust, the Funds, or the Classes in such respect.
SECTION TWO: Shareholder Recordkeeping.
Article 4. Terms of Appointment.
Subject to the terms and conditions set forth in this Agreement, the
Trust 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.
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 Trust,
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
Trust, 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 5. 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 Trust 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 Trust, 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 Trust 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 confirmable 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 6. Duties of the Trust.
A. Compliance
The Trust 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 Trust 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 Trust and shall bear the seal of the Trust
or facsimile thereof; and notwithstanding the death, resignation or removal of
any officer of the Trust 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 Trust.
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 7. Compensation and Expenses.
A. Annual Fee
For performance by the Company pursuant to Section Two of this Agreement,
the Trust and/or the Fund agree to pay the Company an annual maintenance fee
for each Shareholder account as set out in Schedules C ("C1, C2, C3 etc..."),
attached hereto, as may be added or amended from time to time. Such fees may
be changed from time to time subject to written agreement between the Trust
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 fees set forth on Schedule C 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 Trust and/or Fund
agree to reimburse the Company for out-of-pocket expenses or advances incurred
by the Company for the items set out in Schedules D ("D1, D2, D3 etc..."),
attached hereto, as may be added or amended from time to time. In addition,
any other expenses incurred by the Company at the request or with the consent
of the Trust and/or the Fund, will be reimbursed by the appropriate Fund.
C. Payment
The Company shall send an invoice with respect to fees and reimbursable
expenses to the Trust or each of the Funds as soon as practicable at the end
of each month. Each invoice will provide detailed information about the
Compensation and out-of-pocket expenses in accordance with Schedules C and
Schedules D. The Trust or the Funds will pay to the Company the amount of
such invoice within 30 days following the receipt of the invoices.
Article 8. Assignment of Shareholder Recordkeeping.
Except as provided below, no right or obligation under this Section Two
may be assigned by either party without the written consent of the other
party.
(1) This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
(2) The Company may without further consent on the part of the Trust
subcontract for the performance hereof with (A) State Street Bank and its
subsidiary, Boston Financial Data Services, Inc., a Massachusetts Trust
("BFDS"), 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 (B) a BFDS subsidiary duly
registered as a transfer agent pursuant to Section 17A(c)(1), or (C) a BFDS
affiliate, or (D) such other provider of services duly registered as a
transfer agent under Section 17A(c)(1) as Company shall select; provided,
however, that the Company shall be as fully responsible to the Trust for the
acts and omissions of any subcontractor as it is for its own acts and
omissions; or
(3) The Company shall upon instruction from the Trust subcontract for the
performance hereof with an Agent selected by the Trust, other than BFDS or a
provider of services selected by Company, as described in (2) above; provided,
however, that the Company shall in no way be responsible to the Trust for the
acts and omissions of the Agent.
SECTION THREE: Custody Services Procurement
Article 9. Appointment.
The Trust 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 10. The Company and Its Duties.
Subject to the review, supervision and control of the Board, the Company
shall:
(1) evaluate the nature and the quality of the custodial services provided by
the Eligible Custodian;
(2 employ the Eligible Custodian to serve on behalf of the Trust as Custodian
of the Trust's assets substantially on the terms set forth as the form of
agreement in Exhibit 2;
(3) negotiate and enter into agreements with the Custodians for the benefit
of the Trust, with the Trust as a party to each such agreement. The Company
shall not be a party to any agreement with any such Custodian;
(4) establish procedures to monitor the nature and the quality of the
services provided by the Custodians;
(5) continuously monitor the nature and the quality of services provided by
the Custodians; and
(6) periodically provide to the Trust (i) written reports on the activities
and services of the Custodians; (ii) the nature and amount of disbursement
made on account of the Trust 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.
Article 11. Fees and Expenses.
A. Annual Fee
For the performance by the Company pursuant to Section Three of this
Agreement, the Trust and/or the Fund agree to pay the Company an annual fee as
set forth in Schedule E, attached hereto.
B. Payment
The Company shall send an invoice with respect to fees and reimbursable
expenses to each of the Trust/or Fund as soon as practicable at the end of
each month. Each invoice will provide detailed information about the
Compensation and out-of-pocket expenses in occurrence with Schedule E. The
Trust and/or Fund will pay to the Company the amount of such invoice within 30
days following the receipt of the invoice.
Article 12. 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
Three of this Agreement.
SECTION FOUR: General Provisions.
Article 13. Documents.
A. In connection with the appointment of the Company under this Agreement,
the Trust shall file with the Company the following documents:
(1) A copy of the Charter and By-Laws of the Trust and all amendments
thereto;
(2) A copy of the resolution of the Board of the Trust authorizing this
Agreement;
(3) Specimens of all forms of outstanding Share certificates of the Trust or
the Funds in the forms approved by the Board of the Trust with a certificate
of the Secretary of the Trust 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 Trust 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 Trust;
(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 14. Representations and Warranties.
A. Representations and Warranties of the Company
The Company represents and warrants to the Trust that:
(1) It is a business trust duly organized and existing and in good standing
under the laws of the State of Delaware.
(2) It is duly qualified to carry on its business in the State of Delaware.
(3) It is empowered under applicable laws and by its charter 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 a transfer agent.
B. Representations and Warranties of the Trust
The Trust 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 Trust 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 15. Indemnification.
A. Indemnification by Trust
The Company shall not be responsible for and the Trust 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,
(2) The Trust's or Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Trust's or The Fund's lack of good faith,
negligence or willful misconduct or which arise out of the breach of any
representation or warranty of the Trust or Fund hereunder or otherwise.
(3) 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; or
(b) have been prepared and/or maintained by the Fund or its affiliates or any
other person or firm on behalf of the Trust.
(4) The reliance on, or the carrying out by the Company or its agents or
subcontractors of Proper Instructions of the Trust or the Fund.
(5) 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
15.A. from liability for any act or omission resulting from the Company's
willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties.
B. Indemnification by the Company
The Company shall indemnify and hold the Trust or each Fund harmless from
and against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liabilities arising out of or attributable to any
action or failure or omission to act by the Company as a result of the
Company's willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties.
C. Reliance
At any time the Company may apply to any officer of the Trust 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 Trust 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 Trust 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 15
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 16. Termination of Agreement.
This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other. Should the Trust exercise its rights
to terminate, all out-of-pocket expenses associated with the movement of
records and materials will be borne by the Trust or the appropriate Fund.
Additionally, the Company reserves the right to charge for any other
reasonable expenses associated with such termination. The provisions of
Article 15 shall survive the termination of this Agreement.
Article 17. Amendment.
This Agreement may be amended or modified by a written agreement executed
by both parties.
Article 18. Interpretive and Additional Provisions.
In connection with the operation of this Agreement, the Company and the
Trust 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 19. 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 20. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust 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 Trust or the Company may hereafter specify, shall be
deemed to have been properly delivered or given hereunder to the respective
address.
Article 21. Counterparts.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original.
Article 22. Limitations of Liability of Trustees and Shareholders of
the Trust.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust and signed by an authorized officer of the Trust, 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 Trust, but bind only the appropriate property of the
Fund, or Class, as provided in the Declaration of Trust.
Article 23. 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 property of the Company as
provided in the Declaration of Trust.
Article 24. Assignment.
This Agreement and the rights and duties hereunder shall not be assignable
with respect to the Trust or the Funds by either of the parties hereto except
by the specific written consent of the other party.
Article 25. 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 26. Successor Agent.
If a successor agent for the Trust shall be appointed by the Trust, the
Company shall upon termination of this Agreement deliver to such successor
agent at the office of the Company all properties of the Trust 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 27. 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 28. 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 to a
successor all of or a substantial portion of its business, or to a party
controlling, controlled by, or under common control with such party. Nothing
in this Article 28 shall prevent the Company from delegating its
responsibilities to another entity to the extent provided herein.
Article 29. Severability.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
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.
ATTEST: INVESTMENT COMPANIES
(listed on Exhibit 1)
/s/ John W. McGonigle_______ By:__/s/ John F. Donahue___
John W. McGonigle John F. Donahue
Secretary Chairman
ATTEST: FEDERATED SERVICES COMPANY
/s/ Jeannette Fisher-Garber By:_/s/ James J. Dolan_____
Jeannette Fisher-Garber James J. Dolan
Secretary President
Schedule A
Fund Accounting
Fee Schedule
I. Portfolio Record Keeping/Fund Accounting Services
Maintain investment ledgers, provide selected portfolio transactions,
position and income reports. Maintain general ledger and capital stock
accounts. Prepare daily trial balance. Provide selected general ledger
reports. Calculate net asset value daily. Securities yield or market value
quotations will be provided to State Street by the fund or via State Street
Bank automated pricing services.
ANNUAL FEES
ASSET
First $250 Million 2.0 Basis Points
Next $250 Million 1.5 Basis Points
Next $250 Million 1.0 Basis Point
Excess .5 Basis Point
Minimum fee per year $39,000
Additional class of shares per year $12,000
II. Special Services
Fees for activities of a non-recurring nature such as fund consolidation
or reorganization, extraordinary security shipments and the preparation of
special reports will be subject to negotiation.
III. Term of the Contract
The parties agree that this fee schedule shall become effective June 1,
1993 and will remain in effect until it is revised as a result of negotiations
initiated by either party.
Schedule A1
Fund Accounting
Fee Schedule
Annual
First $100 Million 3.0 Basis Points
$100 Million - $300 Million .0 Basis Points
$300 Million - $500 Million 1.0 Basis Points
Over $500 Million 0.5 Basis Points
Fund Minimum $39,000
Additional Class of Shares $12,000
(Plus pricing charges and other out-of-pocket expenses)
Schedule B
Out-of-Pocket Expenses
Fund Accounting
Out-of-pocket expenses include, but are not limited to, the following:
- Postage (including overnight courier service)
- Statement Stock
- Envelopes
- Telephones
- Telecommunication Charges (including FAX)
- Travel
- Duplicating
- Forms
- Supplies
- Microfiche
- Computer Access Charges
- Client Specific System Enhancements
- Access to the Shareholder Recordkeeping System
- Security Pricing Services
- Variable Rate Change Notification Services
- Paydown Factor Notification Services
Schedule C
Fees and Expenses
Shareholder Recordkeeping
I. Transfer Agency Services
Base Fee * (Annual fee per fund, class or
other subdivision) $24,000
Account Fee* (Annual account charge)
(includes system access and funds control
and reconcilement)
- Daily dividend fund $16.00
- Monthly dividend fund $10.00
- Quarterly dividend fund $10.00
- Contingent Deferred Sales Charge
(Additionally) $5.00
(monthly and quarterly funds only)
- Closed Accounts* $1.20
(annual)
- Termination Fee (One time charge) $20,000
II. Shareholder Services
Other Account Fees* (Services or features
not covered above)
- Account Activity Processing $3.50
(includes account establishment, transaction
and maintenance processing)
- Account Servicing $4.50
(includes shareholder servicing and
correspondence)
* All fees are annualized and will be prorated on a monthly basis for billing
purposes. Out-of-pocket expenses are not covered by these fees.
Schedule C1
Federated Investors
_ Federated Funds _
I. Annual Maintenance Charge
The annual maintenance charge includes the processing of all transactions and
correspondence. The fee is billable on a monthly basis at the rate of 1/12 of
the annual fee. A charge is made for an account in the month that an account
opens or closes.
Basic Annual per Account Fee
The individual per account charges will be billed as follows:
- Money Market Fund/Daily Accrual $16.65
- Money Market Fund/Sweep Account $10.00
- Fluctuating NAV/Daily Accrual
Non FundServe $16.65
Non Networked FundServe $14.65
- CDSC/Declared Dividend
Non FundServe $13.75
Non Networked FundServe $11.75
Networking Levels 1, 2, and 4 $11.75
Networking Level 3 $9.00
- Declared Dividend
Non FundServe $8.75
Non Networked FundServe $6.75
Networked FundServe Levels 1, 2, 3, and 4 $6.75
Taxpayer Identification Processing (TIN)
The charge for TIN solicitation includes maintenance and certification and
complies to all known government regulations regarding TIN processing.
- Maintenance $.25 per item
- Certification $.10 per item
I. Annual Maintenance Charge (con't.)
Closed Account Fee $.10 per account per month
(No fee assessed for $0 balance open accounts)
Minimum Charges
- - The monthly maintenance charge for each fund will be the actual account fees
or $1000, whichever is greater.
- - All funds will be subject to the minimum monthly fee of $1,000 except that
the minimum will be waived for the initial six months or until the fund's net
assets exceed $50,000,000, whichever occurs first.
- - The "clone" funds will be subject to a monthly minimum fee of $600.
II. Out-of-Pocket Expenses
Out-of-pocket expenses include but are not limited to: postage, forms,
telephone, microfilm, microfiche, and expenses incurred at the specific
direction of the fund. Postage for mass mailings is due seven days in advance
of the mailing date.
III. Payment
Payment is due thirty days after the date of the invoice.
Schedule C2
Federated Investors
_ Bank Proprietary Funds _
I. Annual Maintenance Charge
The annual maintenance charge includes the processing of all transactions and
correspondence. The fee is billable on a monthly basis at the rate of 1/12 of
the annual fee. A charge is made for an account in the month that an account
opens or closes.
Basic Annual per Account Fee
The individual per account charges will be billed as follows:
- Money Market Fund/Daily Accrual $16.65
- Money Market Fund/Sweep Account $10.00
- Fluctuating NAV/Daily Accrual
_ Non FundServe $16.65
_ Non Networked FundServe $14.65
- CDSC/Declared Dividend
_ Non FundServe $13.75
_ Non Networked FundServe $11.75
_ Networking Levels 1, 2, and 4 $11.75
_ Networking Level 3 $9.00
- Declared Dividend
_ Non FundServe $8.75
_ Non Networked FundServe $6.75
_ Networked FundServe Levels 1, 2, 3, and 4 $6.75
Taxpayer Identification Processing (TIN)
The charge for TIN solicitation includes maintenance and certification and
complies to all known government regulations regarding TIN processing.
- Maintenance $.25 per item
- Certification $.10 per item
I. Annual Maintenance Charge (con't.)
Closed Account Fee $.10 per account per month
(No fee assessed for $0 balance open accounts)
Minimum Charges
- The monthly maintenance charge for each fund will be the actual account
fees or $2000, whichever is greater.
II. Out-of-Pocket Expenses
Out-of-pocket expenses include but are not limited to: postage, forms,
telephone, microfilm, microfiche, and expenses incurred at the specific
direction of the fund. Postage for mass mailings is due seven days in advance
of the mailing date.
III. Payment
Payment is due thirty days after the date of the invoice.
SCHEDULE D
Out-of-Pocket Expenses Schedule
- Postage (including overnight courier service)
- Statement Stock
- Envelopes
- Telecommunication Charges (including FAX)
- Travel
- Duplicating
- Forms
- Supplies
- Microfiche
- Computer Access Charges
- Client Specific Enhancements
- Disaster Recovery
SCHEDULE E
Fee Schedule
I. Custody Services
Maintain Custody of fund assets. Settle portfolio purchases and sales.
Report buy and sell fails. Determine and collect portfolio income. Make cash
disbursements and report cash transactions. Monitor corporate actions.
ANNUAL FEES
ASSET
First $500 MillioN 1.0 Basis Point
Excess .5 Basis Point
Minimum fee per year $15,000
Wire Fees .70 per wire
Settlements:
- Each DTC Commercial Paper $9.00
- Each DTC Transaction $9.00
- Each Federal Reserve Book Entry Transaction (Repo) $4.50
- Each Repo with Banks Other than State Street Bank $7.50
- Each Physical Transaction (NY/Boston, Private Placement) $21.75
- Each Option Written/Exercised/Expired $18.75
- Each Stock Load Transaction $12.00
- Each Book Entry Muni (Sub-custody) Transaction $15.00
- Index Fund/ETD Cost + 15%
II. Out-Of-Pocket Expenses
Telephone
Postage & Insurance
Armored carrier costs
Legal fees
Supplies related to fund records
Processing validation certificates
Forms, envelopes, Xerox copies, supplies, etc.
III. Special Services
Fees for activities of a non-recurring nature such as fund consolidation or
reorganization, extraordinary security shipments and the preparation of
special reports will be subject to negotiation.
IV. Coupon Clipping
Monitoring for calls and processing for each monthly issue held
Monthly Charge $5.00
V. Balance Credit
A balance credit equal to 75% of the average balance in the custodian account
for the monthly billed times the 30-day T-Bill Rate on the last Monday of the
month billed will be applied against Section I through IV above.\
VI. Term of the Contract
The parties agree that this fee schedule shall become effective June 1, 1993
and will remain in effect until it is revised as a result of negotiations
initiated by either party.
EXHIBIT 1
FA=Fund Accounting
SR=Shareholder Recordkeeping
CSP=Custody Services Procurement
CONTRACT SERVICES RELEVANT
DATE INVESTMENT COMPANY PROVIDED SCHEDULES
12/1/93 111 Corcoran Fund
12/1/93 111 Corcoran Bond Fund FA, SR A,B,C,D
12/1/93 111 Corcoran North Carolina
Municipal Securities Fund FA, SR A,B,C,D
12/1/93 American Leaders Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP A,B,C,D,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,D,E
12/1/93 Fortress Shares FA,SR,CSP A,B,C,D,E
12/1/93 Automated Cash Management
Trust FA,SR,CSP A,B,C,D,E
12/1/93 Automated Government
Money Trust FA,SR,CSP A,B,C,D,E
01/07/94 BankSouth Select Funds SR, C,D
01/07/94 BankSouth Select Georgia
Tax-Free Income Fund SR, C,D
01/07/94 BankSouth Select Government
Money Market Fund SR, C,D
01/07/94 BankSouth Select Prime
Money Market Fund SR, C,D
01/07/94 BankSouth Select Bond Fund SR, C,D
01/07/94 BankSouth Select Equity Fund SR, C,D
12/1/93 BayFunds FA A1,B
12/1/93 BayFunds Money Market Portfolio FA A1,B
12/1/93 Investment Shares FA A1,B
12/1/93 Trust Shares FA A1,B
12/1/93 BayFunds Bond Portfolio FA A1,B
12/1/93 Investment Shares FA A1,B
12/1/93 Trust Shares FA A1,B
12/1/93 BayFunds Equity Portfolio FA A1,B
12/1/93 Investment Shares FA A1,B
12/1/93 Trust Shares FA A1,B
12/1/93 BayFunds Short-Term Yield Portfolio FA A1,B
12/1/93 Investment Shares FA A1,B
12/1/93 Trust Shares FA A1,B
12/1/93 BayFunds U.S. Treasury
Money Market Portfolio FA A1,B
12/1/93 Investment Shares FA A1,B
12/1/93 Trust Shares FA A1,B
12/1/93 The Biltmore Funds FA A1,B
12/1/93 Biltmore Balanced Fund FA A1,B
12/1/93 Biltmore Equity Fund FA A1,B
12/1/93 Biltmore Fixed Income Fund FA A1,B
12/1/93 Biltmore Equity Index Fund FA A1,B
12/1/93 Biltmore Money Market Fund FA A1,B
12/1/93 Institutional Shares FA A1,B
12/1/93 Investment Shares FA A1,B
12/1/93 Biltmore Prime Cash
Management Fund FA A1,B
12/1/93 Institutional Shares FA A1,B
12/1/93 Biltmore Short-Term Fixed
Income Fund FA A1,B
12/1/93 Biltmore Special Values Fund FA A1,B
12/1/93 Biltmore Tax-Free Money
Market Fund FA A1,B
12/1/93 Institutional Shares FA A1,B
12/1/93 Investment Shares FA A1,B
12/1/93 Biltmore U.S. Treasury Money
Market Fund FA A1,B
12/1/93 Institutional Shares FA A1,B
12/1/93 Investment Shares FA A1,B
12/1/93 Biltmore Quantitative
Equity Fund FA A1,B
12/1/93 The Boulevard Funds FA,SR A1,B,C,D
12/1/93 Boulevard Blue Chip Growth Fund FA,SR A1,B,C,D
12/1/93 Boulevard Managed Income Fund FA,SR A1,B,C,D
12/1/93 Boulevard Managed Municipal Fund FA,SR A1,B,C,D
12/1/93 Boulevard Strategic Balanced Fund FA,SR A1,B,C,D
12/1/93 California Municipal
Cash Trust FA,SR,CSP A,B,C,D,E
12/1/93 Cash Trust Series, Inc.
12/1/93 Government Cash Series FA,SR,CSP A,B,C,D,E
12/1/93 Municipal Cash Series FA,SR,CSP A,B,C,D,E
12/1/93 Prime Cash Series FA,SR,CSP A,B,C,D,E
12/1/93 Treasury Cash Series FA,SR,CSP A,B,C,D,E
12/1/93 Cash Trust Series II
12/1/93 Municipal Cash Series II FA,SR,CSP A,B,C,D,E
12/1/93 Treasury Cash Series II FA,SR,CSP A,B,C,D,E
12/1/93 DG Investor Series
12/1/93 DG Equity Fund FA,SR A1,B,C,D
12/1/93 DG Government Income Fund FA,SR A1,B,C,D
12/1/93 DG Limited Term Government
Income Fund FA,SR A1,B,C,D
12/1/93 DG Municipal Income Fund FA,SR A1,B,C,D
12/1/93 DG U.S. Government Money
Market Fund FA,SR A1,B,C,D
12/1/93 Federated ARMs Fund
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Federated Bond Fund FA,SR,CSP A,B,C,D,E
12/1/93 Federated Exchange Fund, Ltd. FA,SR,CSP A,B,C,D,E
12/1/93 Federated GNMA Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Federated Government Trust
12/1/93 Automated Government Cash
Reserves FA,SR,CSP A,B,C,D,E
12/1/93 Automated Treasury Cash
Reserves FA,SR,CSP A,B,C,D,E
12/1/93 U.S. Treasury Cash Reserves FA,SR,CSP A,B,C,D,E
12/1/93 Federated Growth Trust FA,SR,CSP A,B,C,D,E
12/1/93 Federated High Yield Trust FA,SR,CSP A,B,C,D,E
12/1/93 Federated Income Securities
Trust
12/1/93 Federated Short-Term Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Intermediate Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Federated Income Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Federated Index Trust
12/1/93 Max-Cap Fund FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Mid-Cap Fund FA,SR,CSP A,B,C,D,E
12/1/93 Mini-Cap Fund FA,SR,CSP A,B,C,D,E
12/1/93 Federated Intermediate
Government Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Federated Investment Funds
12/1/93 Growth Portfolio FA,SR,CSP A,B,C,D,E
12/1/93 High Quality Bond Portfolio FA,SR,CSP A,B,C,D,E
12/1/93 Pennsylvania Intermediate
Municipal Income Portfolio FA,SR,CSP A,B,C,D,E
12/1/93 Value Equity Portfolio FA,SR,CSP A,B,C,D,E
12/1/93 Federated Master Trust
12/1/93 Federated Municipal Trust
12/1/93 Alabama Municipal Cash Trust FA,SR,CSP A,B,C,D,E
12/1/93 Connecticut Municipal Cash Trust FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Massachusetts Municipal
Cash Trust FA,SR,CSP A,B,C,D,E
12/1/93 BayFund Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Minnesota Municipal Cash Trust FA,SR,CSP A,B,C,D,E
12/1/93 Cash Series Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 New Jersey Municipal Cash Trust FA,SR,CSP A,B,C,D,E
12/1/93 Cash Series Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Ohio Municipal Cash Trust FA,SR,CSP A,B,C,D,E
12/1/93 Cash II Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Pennsylvania Municipal Cash Trust FA,SR,CSP A,B,C,D,E
12/1/93 Cash Series Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Virginia Municipal Cash Trust FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Federated Short-Intermediate
Government Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Federated Short-Intermediate
Municipal Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Federated Short-Term U.S.
Government Trust FA,SR,CSP A,B,C,D,E
12/1/93 Stock and Bond Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP A,B,C,D,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,D,E
12/1/93 Federated Stock Trust FA,SR,CSP A,B,C,D,E
12/1/93 Federated Tax-Free Trust FA,SR,CSP A,B,C,D,E
12/1/93 Financial Reserves Fund FA A1,B
12/1/93 First Priority Funds
12/1/93 First Priority Equity Fund FA,SR A1,B,C,D
12/1/93 Investment Shares FA,SR A1,B,C,D
12/1/93 Trust Shares FA,SR A1,B,C,D
12/1/93 First Priority Fixed Income Fund FA,SR A1,B,C,D
12/1/93 Investment Shares FA,SR A1,B,C,D
12/1/93 Trust Shares FA,SR A1,B,C,D
12/1/93 First Priority Treasury Money
Market Fund FA,SR A1,B,C,D
12/1/93 Investment Shares FA,SR A1,B,C,D
12/1/93 Trust Shares FA,SR A1,B,C,D
12/1/93 Limited Maturity Government Fund FA,SR A1,B,C,D
12/1/93 Fixed Income Securities, Inc.
12/1/93 Limited Term Fund FA,SR,CSP A,B,C,D,E
12/1/93 Fortress Share FA.SR,CS A,B,C,D,E
12/1/93 Investment Shares FA,SR,CSP A,B,C,D,E
12/1/93 Limited Term Municipal Fund FA,SR,CSP A,B,C,D,E
12/1/93 Fortress Shares FA,SR,CSP A,B,C,D,E
12/1/93 Investment Shares FA,SR,CSP A,B,C,D,E
12/1/93 Multi-State Municipal Income
Fund FA,SR,CSP A,B,C,D,E
12/1/93 Limited Maturity Government Fund FA,SR,CSP A,B,C,D,E
12/1/93 Fortress Adjustable Rate U.S.
Government Fund, Inc. FA,SR,CSP A,B,C,D,E
12/1/93 Fortress Municipal Income
Fund, Inc. FA,SR,CSP A,B,C,D,E
12/1/93 Fortress Utility Fund, Inc. FA,SR,CSP A,B,C,D,E
12/1/93 FT Series, Inc.
12/1/93 International Equity Fund FA,SR,CSP A,B,C,D,E
12/1/93 Class A Shares FA,SR,CSP A,B,C,D,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,D,E
12/1/93 International Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 Class A Shares FA,SR,CSP A,B,C,D,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,D,E
12/1/93 Fund for U.S. Government
Securities, Inc.
12/1/93 Class A Shares FA,SR,CSP A,B,C,D,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,D,E
12/1/93 Government Income
Securities, Inc. FA,SR,CSP A,B,C,D,E
1/11/94 Insight Institutional
Series, Inc.
1/11/94 Insight Adjustable Rate
Mortgage Fund FA,SR,CSP A,B,C1,D,E
1/11/94 Insight Limited Term
Income Fund FA,SR,CSP A,B,C1,D,E
1/11/94 Insight Limited Term
Municipal Fund FA,SR,CSP A,B,C1,D,E
1/11/94 Insight U.S. Government Fund FA,SR,CSP A,B,C1,D,E
12/1/93 Intermediate Municipal Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Ohio Intermediate Municipal
Trust FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Pennsylvania Intermediate
Municipal Trust FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Investment Series Fund, Inc.
12/1/93 Capital Growth Fund FA,SR,CSP A,B,C,D,E
12/1/93 Investment Shares FA,SR,CSP A,B,C,D,E
12/1/93 Class A Shares FA,SR,CSP A,B,C,D,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,D,E
12/1/93 Fortress Bond Fund FA,SR,CSP A,B,C,D,E
12/1/93 Investment Series Trust
12/1/93 High Quality Stock Fund FA,SR,CSP A,B,C,D,E
12/1/93 Municipal Securities
Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 U.S. Government Bond Fund FA,SR,CSP A,B,C,D,E
12/1/93 Edward D. Jones & Co. Daily
Passport Cash Trust FA,SR,CSP A,B,C,D,E
12/1/93 Liberty Equity Income
Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP A,B,C,D,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,D,E
12/1/93 Fortress Shares FA,SR,CSP A,B,C,D,E
12/1/93 Liberty High Income Bond
Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP A,B,C,D,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,D,E
12/1/93 Liberty Municipal Securities
Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP A,B,C,D,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,D,E
12/1/93 Liberty Term Trust,
Inc. - 1999 FA,SR,CSP A,B,C,D,E
12/1/93 Liberty U.S. Government
Money Market Trust FA,SR,CSP A,B,C,D,E
12/1/93 Liberty Utility Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP A,B,C,D,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,D,E
12/1/93 Liquid Cash Trust FA,SR,CSP A,B,C,D,E
12/1/93 Star Funds
12/1/93 Star Prime Obligations Fund FA,SR A,B,C,D
12/1/93 Star Relative Value Fund FA,SR A,B,C,D
12/1/93 Star Tax-Free Money Market Fund FA,SR A,B,C,D
12/1/93 Star Treasury Fund FA,SR A,B,C,D
12/1/93 Star U.S. Government Income Fund FA,SR A,B,C,D
12/1/93 The Stellar Fund FA,SR A,B,C,D
12/1/93 Magna Funds
12/1/93 Magna Intermediate
Government Fund SR C,D
12/1/93 Mark Twain Funds
12/1/93 Mark Twain Equity Portfolio FA,SR A,B,C,D
12/1/93 Mark Twain Fixed Income
Portfolio FA,SR A,B,C,D
12/1/93 Mark Twain Government Money
Market Portfolio FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 Mark Twain Municipal Income
Portfolio FA,SR A,B,C,D
12/1/93 Marshall Funds, Inc.
12/1/93 Marshall Government Income Fund FA,SR A1,B,C,D
12/1/93 Marshall Intermediate Bond Fund FA,SR A1,B,C,D
12/1/93 Marshall Money Market Fund FA,SR A1,B,C,D
12/1/93 Investment Shares FA,SR A1,B,C,D
12/1/93 Trust Shares FA,SR A1,B,C,D
12/1/93 Marshall Short-Term Income Fund FA,SR A1,B,C,D
12/1/93 Marshall Stock Fund FA,SR A1,B,C,D
12/1/93 Marshall Tax-Free Money
Market Fund FA,SR A1,B,C,D
12/1/93 Marshall Balanced Fund FA,SR A1,B,C,D
12/1/93 Marshall Equity Income Fund FA,SR A1,B,C,D
12/1/93 Marshall Mid-Cap Stock Fund FA,SR A1,B,C,D
12/1/93 Marshall Value Equity Fund FA,SR A1,B,C,D
12/1/93 Marshal Short-Intermediate
Tax-free Fund FA,SR A1,B,C,D
12/1/93 Money Market Management,
Inc. FA,SR,CSP A,B,C,D,E
12/1/93 Money Market Trust FA,SR,CSP A,B,C,D,E
12/1/93 Money Market Obligations
Trust
12/1/93 Government Obligations Fund FA,SR,CSP A1,B,C,D,E
12/1/93 Prime Obligations Fund FA,SR,CSP A1,B,C,D,E
12/1/93 Tax-Free Obligations Fund FA,SR,CSP A1,B,C,D,E
12/1/93 Treasury Obligations Fund FA,SR,CSP A1,B,C,D,E
12/1/93 Municipal Securities Income
Trust
12/1/93 California Municipal Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 Fortress Shares FA,SR,CSP A,B,C,D,E
12/1/93 Florida Municipal Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 Maryland Municipal Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 Michigan Municipal Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 New Jersey Municipal Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 New York Municipal Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 Fortress Shares FA,SR,CSP A,B,C,D,E
12/1/93 Ohio Municipal Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 Fortress Shares FA,SR,CSP A,B,C,D,E
12/1/93 Trust Shares FA,SR,CSP A,B,C,D,E
12/1/93 Pennsylvania Municipal
Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 Investment Shares FA,SR,CSP A,B,C,D,E
12/1/93 Trust Shares FA,SR,CSP A,B,C,D,E
12/1/93 Income shares FA,SR,CSP A,B,C,D,E
12/1/93 Texas Municipal Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 Virginia Municipal Income Fund FA,SR,CSP A,B,C,D,E
12/1/93 New York Municipal Cash
Trust
12/1/93 Cash II Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 The Planters Funds
12/1/93 Tennessee Tax-Free Bond Fund FA,SR A1,B,C,D
12/1/93 Portage Funds
12/1/93 Portage Government Money
Market Fund SR C,D
12/1/93 Investment Shares SR C,D
12/1/93 Trust Shares SR C,D
12/1/93 RIMCO Monument Funds
12/1/93 RIMCO Monument Bond Fund FA,SR A,B,C,D
12/1/93 RIMCO Monument Prime Money
Market Fund FA,SR A,B,C,D
12/1/93 RIMCO Monument Stock Fund FA,SR A,B,C,D
12/1/93 RIMCO Monument U.S. Treasury
Money Market Fund FA,SR A,B,C,D
12/1/93 Signet Select Funds
12/1/93 Maryland Municipal Bond Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 Money Market Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 Treasury Money Market Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 U.S. Government Income Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 Value Equity Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 Virginia Municipal Bond Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Shawmut Funds
12/1/93 The Shawmut Fixed Income Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Shawmut Growth Equity Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Shawmut Growth and Income
Equity Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Shawmut Intermediate
Government Income Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Shawmut Limited Term
Income Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Shawmut Prime Money
Market Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Shawmut Small Capitalization
Equity Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Shawmut Connecticut
Municipal Money Market Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Shawmut Connecticut
Intermediate Municipal
Income Fund FA,SR A,B,C,D
12/1/93 The Shawmut Massachusetts
Municipal Money Market Fund FA,SR A,B,C,D
12/1/93 The Shawmut Massachusetts
Intermediate Municipal ncome Fund FA,SR A,B,C,D
12/1/93 The Starburst Funds
12/1/93 The Starburst Government Income Fund FA,SR A,B,C,D
12/1/93 The Starburst Government Money
Market Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Starburst Money Market Fund FA,SR A,B,C,D
12/1/93 Investment Shares FA,SR A,B,C,D
12/1/93 Trust Shares FA,SR A,B,C,D
12/1/93 The Starburst Municipal Income Fund FA,SR A,B,C,D
12/1/93 The Starburst Funds II
12/1/93 The Starburst Quality Income Fund FA,SR A,B,C,D
12/1/93 Tax-Free Instruments Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Trademark Funds
12/1/93 Trademark Equity Fund FA,SR A,B,C,D
12/1/93 Trademark Government Income Fund FA,SR A,B,C,D
12/1/93 Trademark Kentucky Municipal
Bond Fund FA,SR A,B,C,D
12/1/93 Trademark Short-Intermediate
Government Fund FA,SR A,B,C,D
12/1/93 Trust for Financial Institutions
12/1/93 Government Qualifying
Liquidity Fund FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Short-Term Government
Qualifying Liquidity Fund FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Government Money Market Fund FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,D,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,D,E
12/1/93 Trust for Government Cash Reserves FA,SR,CSP A,B,C,D,E
12/1/93 Trust for Short-Term U.S.
Government Securities FA,SR,CSP A,B,C,D,E
12/1/93 Trust for U.S. Treasury
Obligations FA,SR,CSP A,B,C,D,E
12/1/93 Vulcan Funds
12/1/93 Vulcan Bond Fund FA,SR A1,B,C,D
12/1/93 Vulcan Stock Fund FA,SR A1,B,C,D
12/1/93 Vulcan Treasury Obligations
Money Market Fund FA,SR A1,B,C,D
Exhibit 8 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
CUSTODIAN CONTRACT
Between
FEDERATED INVESTMENT COMPANIES
and
STATE STREET BANK AND TRUST COMPANY
and
FEDERATED SERVICES COMPANY
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to
be Held by It 1
2. Duties of the Custodian With Respect to
Property of the Funds Held by the Custodian 2
2.1 Holding Securities 2
2.2 Delivery of Securities 2
2.3 Registration of Securities 5
2.4 Bank Accounts 6
2.5 Payments for Shares 7
2.6 Availability of Federal Funds 7
2.7 Collection of Income 7
2.8 Payment of Fund Moneys 8
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased. 9
2.10Payments for Repurchases or Redemptions
of Shares of a Fund 9
2.11 Appointment of Agents 10
2.12 Deposit of Fund Assets in Securities
System 10
2.13 Segregated Account 12
2.14 Joint Repurchase Agreements 13
2.15 Ownership Certificates for Tax Purposes 13
2.16 Proxies 13
2.17 Communications Relating to Fund
Portfolio Securities 13
2.18 Proper Instructions 14
2.19 Actions Permitted Without
Express Authority 14
2.20 Evidence of Authority 15
2.21 Notice to Trust by Custodian
Regarding Cash Movement. 15
3. Duties of Custodian With Respect to the
Books of Account and Calculation of Net Asset
Value and Net Income 15
4. Records 16
5. Opinion of Funds' Independent Public
Accountants/Auditors 16
6. Reports to Trust by Independent Public
Accountants/Auditors 17
7. Compensation of Custodian 17
8. Responsibility of Custodian 17
9. Effective Period, Termination and
Amendment 19
10. Successor Custodian 20
11. Interpretive and Additional
Provisions 21
12. Massachusetts Law to Apply 22
13. Notices 22
14. Counterparts 22
15. Limitations of Liability 22
CUSTODIAN CONTRACT
This Contract between those INVESTMENT COMPANIES listed on Exhibit 1, as
it may be amended from time to time, (the "Trust"), which may be
Massachusetts business trusts or Maryland corporations or have such other
form of organization as may be indicated, on behalf of the portfolios
(hereinafter collectively called the "Funds" and individually referred to
as a "Fund") of the Trust, having its principal place of business at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, and
STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company,
having its principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian", and FEDERATED
SERVICES COMPANY, a Delaware Fusiness trust company, having its principal
place of business at Federated Investors Tower, Pittsburgh, Pennsylvania,
15222-3779, hereinafter called ("Company").
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Trust hereby employs the Custodian as the custodian of the
assets of each of the Funds of the Trust. Except as otherwise
expressly provided herein, the securities and other assets of each
of the Funds shall be segregated from the assets of each of the
other Funds and from all other persons and entities. The Trust will
deliver to the Custodian all securities and cash owned by the Funds
and all payments of income, payments of principal or capital
distributions received by them with respect to all securities owned
by the Funds from time to time, and the cash consideration received
by them for shares ("Shares") of beneficial interest/capital stock
of the Funds as may be issued or sold from time to time. The
Custodian shall not be responsible for any property of the Funds
held or received by the Funds and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.18), the Custodian shall from time to time employ one or more
sub-custodians upon the terms specified in the Proper Instructions,
provided that the Custodian shall have no more or less
responsibility or liability to the Trust or any of the Funds on
account of any actions or omissions of any sub-custodian so employed
than any such sub-custodian has to the Custodian.
2.
Duties of the Custodian With Respect to Property of the Funds Held
by the Custodian
2.1 Holding Securities. The Custodian shall hold and physically
segregate for the account of each Fund all non-cash property,
including all securities owned by each Fund, other than
securities which are maintained pursuant to Section 2.12 in a
clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities
System", or securities which are subject to a joint repurchase
agreement with affiliated funds pursuant to Section 2.14. The
Custodian shall maintain records of all receipts, deliveries and
locations of such securities, together with a current inventory
thereof, and shall conduct periodic physical inspections of
certificates representing stocks, bonds and other securities
held by it under this Contract in such manner as the Custodian
shall determine from time to time to be advisable in order to
verify the accuracy of such inventory. With respect to
securities held by any agent appointed pursuant to Section 2.11
hereof, and with respect to securities held by any sub-custodian
appointed pursuant to Section 1 hereof, the Custodian may rely
upon certificates from such agent as to the holdings of such
agent and from such sub-custodian as to the holdings of such
sub-custodian, it being understood that such reliance in no way
relieves the Custodian of its responsibilities under this
Contract. The Custodian will promptly report to the Trust the
results of such inspections, indicating any shortages or
discrepancies uncovered thereby, and take appropriate action to
remedy any such shortages or discrepancies.
2.2 Delivery of Securities. The Custodian shall release and deliver
securities owned by a Fund held by the Custodian or in a
Securities System account of the Custodian only upon receipt of
Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, and only in the following
cases:
(1) Upon sale of such securities for the account of a Fund and
receipt of payment therefor;
(2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered
into by the Trust;
(3) In the case of a sale effected through a Securities System,
in accordance with the provisions of Section 2.12 hereof;
(4) To the depository agent in connection with tender or other
similar offers for portfolio securities of a Fund, in
accordance with the provisions of Section 2.17 hereof;
(5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
(6) To the issuer thereof, or its agent, for transfer into the
name of a Fund or into the name of any nominee or nominees
of the Custodian or into the name or nominee name of any
agent appointed pursuant to Section 2.11 or into the name
or nominee name of any sub-custodian appointed pursuant to
Section 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in
any such case, the new securities are to be delivered to
the Custodian;
(7) Upon the sale of such securities for the account of a Fund,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery custom";
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's
own failure to act in accordance with the standard of
reasonable care or any higher standard of care imposed upon
the Custodian by any applicable law or regulation if such
above-stated standard of reasonable care were not part of
this Contract;
(8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
(9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts
or temporary securities for definitive securities; provided
that, in any such case, the new securities and cash, if
any, are to be delivered to the Custodian;
(10) For delivery in connection with any loans of portfolio
securities of a Fund, but only against receipt of adequate
collateral in the form of (a) cash, in an amount specified
by the Trust, (b) certificated securities of a description
specified by the Trust, registered in the name of the Fund
or in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer, or (c)
securities of a description specified by the Trust,
transferred through a Securities System in accordance with
Section 2.12 hereof;
(11) For delivery as security in connection with any borrowings
requiring a pledge of assets by a Fund, but only against
receipt of amounts borrowed, except that in cases where
additional collateral is required to secure a borrowing
already made, further securities may be released for the
purpose;
(12) For delivery in accordance with the provisions of any
agreement among the Trust or a Fund, the Custodian and a
broker-dealer registered under the Securities Exchange Act
of 1934, as amended, (the "Exchange Act") and a member of
The National Association of Securities Dealers, Inc.
("NASD"), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions for a Fund;
(13) For delivery in accordance with the provisions of any
agreement among the Trust or a Fund, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations,
regarding account deposits in connection with transaction
for a Fund;
(14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for a Fund, for delivery to such
Transfer Agent or to the holders of shares in connection
with distributions in kind, in satisfaction of requests by
holders of Shares for repurchase or redemption; and
(15) For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions, a certified
copy of a resolution of the Executive Committee of the
Trust on behalf of a Fund signed by an officer of the Trust
and certified by its Secretary or an Assistant Secretary,
specifying the securities to be delivered, setting forth
the purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian
(other than bearer securities) shall be registered in the name
of a particular Fund or in the name of any nominee of the Fund
or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Fund, unless the Trust has
authorized in writing the appointment of a nominee to be used in
common with other registered investment companies affiliated
with the Fund, or in the name or nominee name of any agent
appointed pursuant to Section 2.11 or in the name or nominee
name of any sub-custodian appointed pursuant to Section 1. All
securities accepted by the Custodian on behalf of a Fund under
the terms of this Contract shall be in "street name" or other
good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts in the name of each Fund, subject only
to draft or order by the Custodian acting pursuant to the terms
of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from
or for the account of each Fund, other than cash maintained in a
joint repurchase account with other affiliated funds pursuant to
Section 2.14 of this Contract or by a particular Fund in a bank
account established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940, as amended, (the "1940
Act"). Funds held by the Custodian for a Fund may be deposited
by it to its credit as Custodian in the Banking Department of
the Custodian or in such other banks or trust companies as it
may in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be
qualified to act as a custodian under the 1940 Act and that each
such bank or trust company and the funds to be deposited with
each such bank or trust company shall be approved by vote of a
majority of the Board of Trustees/Directors ("Board") of the
Trust. Such funds shall be deposited by the Custodian in its
capacity as Custodian for the Fund and shall be withdrawable by
the Custodian only in that capacity. If requested by the Trust,
the Custodian shall furnish the Trust, not later than twenty
(20) days after the last business day of each month, an internal
reconciliation of the closing balance as of that day in all
accounts described in this section to the balance shown on the
daily cash report for that day rendered to the Trust.
2.5 Payments for Shares. The Custodian shall make such arrangements
with the Transfer Agent of each Fund, as will enable the
Custodian to receive the cash consideration due to each Fund and
will deposit into each Fund's account such payments as are
received from the Transfer Agent. The Custodian will provide
timely notification to the Trust and the Transfer Agent of any
receipt by it of payments for Shares of the respective Fund.
2.6 Availability of Federal Funds. Upon mutual agreement between
the Trust and the Custodian, the Custodian shall make federal
funds available to the Funds as of specified times agreed upon
from time to time by the Trust and the Custodian in the amount
of checks, clearing house funds, and other non-federal funds
received in payment for Shares of the Funds which are deposited
into the Funds' accounts.
2.7 Collection of Income.
(1) The Custodian shall collect on a timely basis all income
and other payments with respect to registered securities
held hereunder to which each Fund shall be entitled either
by law or pursuant to custom in the securities business,
and shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date
of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such
income, as collected, to each Fund's custodian account.
Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when
they become due and shall collect interest when due on
securities held hereunder. The collection of income due
the Funds on securities loaned pursuant to the provisions
of Section 2.2 (10) shall be the responsibility of the
Trust. The Custodian will have no duty or responsibility
in connection therewith, other than to provide the Trust
with such information or data as may be necessary to assist
the Trust in arranging for the timely delivery to the
Custodian of the income to which each Fund is properly
entitled.
(2) The Custodian shall promptly notify the Trust whenever
income due on securities is not collected in due course and
will provide the Trust with monthly reports of the status
of past due income unless the parties otherwise agree.
2.8 Payment of Fund Moneys. Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out moneys of each Fund in
the following cases only:
(1) Upon the purchase of securities, futures contracts or
options on futures contracts for the account of a Fund but
only (a) against the delivery of such securities, or
evidence of title to futures contracts, to the Custodian
(or any bank, banking firm or trust company doing business
in the United States or abroad which is qualified under the
1940 Act to act as a custodian and has been designated by
the Custodian as its agent for this purpose) registered in
the name of the Fund or in the name of a nominee of the
Custodian referred to in Section 2.3 hereof or in proper
form for transfer, (b) in the case of a purchase effected
through a Securities System, in accordance with the
conditions set forth in Section 2.12 hereof or (c) in the
case of repurchase agreements entered into between the
Trust and any other party, (i) against delivery of the
securities either in certificate form or through an entry
crediting the Custodian's account at the Federal Reserve
Bank with such securities or (ii) against delivery of the
receipt evidencing purchase for the account of the Fund of
securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase
such securities from the Fund;
(2) In connection with conversion, exchange or surrender of
securities owned by a Fund as set forth in Section 2.2
hereof;
(3) For the redemption or repurchase of Shares of a Fund issued
by the Trust as set forth in Section 2.10 hereof;
(4) For the payment of any expense or liability incurred by a
Fund, including but not limited to the following payments
for the account of the Fund: interest; taxes; management,
accounting, transfer agent and legal fees; and operating
expenses of the Fund, whether or not such expenses are to
be in whole or part capitalized or treated as deferred
expenses;
(5) For the payment of any dividends on Shares of a Fund
declared pursuant to the governing documents of the Trust;
(6) For payment of the amount of dividends received in respect
of securities sold short;
(7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of the Executive Committee of the Trust on
behalf of a Fund signed by an officer of the Trust and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring
such purpose to be a proper purpose, and naming the person
or persons to whom such payment is to be made.
2.9 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for purchase of
securities for the account of a Fund is made by the Custodian in
advance of receipt of the securities purchased, in the absence
of specific written instructions from the Trust to so pay in
advance, the Custodian shall be absolutely liable to the Fund
for such securities to the same extent as if the securities had
been received by the Custodian.
2.10 Payments for Repurchases or Redemptions of Shares of a Fund.
From such funds as may be available for the purpose of
repurchasing or redeeming Shares of a Fund, but subject to the
limitations of the Declaration of Trust/Articles of
Incorporation and any applicable votes of the Board of the Trust
pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for
payment to holders of shares of such Fund who have delivered to
the Transfer Agent a request for redemption or repurchase of
their shares including without limitation through bank drafts,
automated clearinghouse facilities, or by other means. In
connection with the redemption or repurchase of Shares of the
Funds, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders.
2.11 Appointment of Agents. The Custodian may at any time or times
in its discretion appoint (and may at any time remove) any other
bank or trust company which is itself qualified under the 1940
Act and any applicable state law or regulation, to act as a
custodian, as its agent to carry out such of the provisions of
this Section 2 as the Custodian may from time to time direct;
provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities
hereunder.
2.12 Deposit of Fund Assets in Securities System. The Custodian may
deposit and/or maintain securities owned by the Funds in a
clearing agency registered with the Securities and Exchange
Commission ("SEC") under Section 17A of the Exchange Act, which
acts as a securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and certain
federal agencies, collectively referred to herein as "Securities
System" in accordance with applicable Federal Reserve Board and
SEC rules and regulations, if any, and subject to the following
provisions:
(1) The Custodian may keep securities of each Fund in a
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in
the Securities System which shall not include any assets of
the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
(2) The records of the Custodian with respect to securities of
the Funds which are maintained in a Securities System shall
identify by book-entry those securities belonging to each
Fund;
(3) The Custodian shall pay for securities purchased for the
account of each Fund upon (i) receipt of advice from the
Securities System that such securities have been
transferred to the Account, and (ii) the making of an entry
on the records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian shall
transfer securities sold for the account of a Fund upon (i)
receipt of advice from the Securities System that payment
for such securities has been transferred to the Account,
and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the
account of the Fund. Copies of all advices from the
Securities System of transfers of securities for the
account of a Fund shall identify the Fund, be maintained
for the Fund by the Custodian and be provided to the Trust
at its request. Upon request, the Custodian shall furnish
the Trust confirmation of each transfer to or from the
account of a Fund in the form of a written advice or notice
and shall furnish to the Trust copies of daily transaction
sheets reflecting each day's transactions in the Securities
System for the account of a Fund.
(4) The Custodian shall provide the Trust with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and
procedures for safeguarding securities deposited in the
Securities System;
(5) The Custodian shall have received the initial certificate,
required by Section 9 hereof;
(6) Anything to the contrary in this Contract notwithstanding,
the Custodian shall be liable to the Trust for any loss or
damage to a Fund resulting from use of the Securities
System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any
of its or their employees or from failure of the Custodian
or any such agent to enforce effectively such rights as it
may have against the Securities System; at the election of
the Trust, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim against
the Securities System or any other person which the
Custodian may have as a consequence of any such loss or
damage if and to the extent that a Fund has not been made
whole for any such loss or damage.
(7) The authorization contained in this Section 2.12 shall not
relieve the Custodian from using reasonable care and
diligence in making use of any Securities System.
2.13 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or
accounts for and on behalf of each Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.12 hereof, (i) in accordance with the provisions of
any agreement among the Trust, the Custodian and a broker-dealer
registered under the Exchange Act and a member of the NASD (or
any futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission
or any registered contract market), or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions for a Fund, (ii)
for purpose of segregating cash or government securities in
connection with options purchased, sold or written for a Fund or
commodity futures contracts or options thereon purchased or sold
for a Fund, (iii) for the purpose of compliance by the Trust or
a Fund with the procedures required by any release or releases
of the SEC relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper
corporate purposes, but only, in the case of clause (iv), upon
receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Board or of the Executive Committee
signed by an officer of the Trust and certified by the Secretary
or an Assistant Secretary, setting forth the purpose or purposes
of such segregated account and declaring such purposes to be
proper corporate purposes.
2.14 Joint Repurchase Agreements. Upon the receipt of Proper
Instructions, the Custodian shall deposit and/or maintain any
assets of a Fund and any affiliated funds which are subject to
joint repurchase transactions in an account established solely
for such transactions for the Fund and its affiliated funds.
For purposes of this Section 2.14, "affiliated funds" shall
include all investment companies and their portfolios for which
subsidiaries or affiliates of Federated Investors serve as
investment advisers, distributors or administrators in
accordance with applicable exemptive orders from the SEC. The
requirements of segregation set forth in Section 2.1 shall be
deemed to be waived with respect to such assets.
2.15 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of a Fund
held by it and in connection with transfers of securities.
2.16 Proxies. The Custodian shall, with respect to the securities
held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered
otherwise than in the name of a Fund or a nominee of a Fund, all
proxies, without indication of the manner in which such proxies
are to be voted, and shall promptly deliver to the Trust such
proxies, all proxy soliciting materials and all notices relating
to such securities.
2.17 Communications Relating to Fund Portfolio Securities. The
Custodian shall transmit promptly to the Trust all written
information (including, without limitation, pendency of calls
and maturities of securities and expirations of rights in
connection therewith and notices of exercise of call and put
options written by the Fund and the maturity of futures
contracts purchased or sold by the Fund) received by the
Custodian from issuers of the securities being held for the
Fund. With respect to tender or exchange offers, the Custodian
shall transmit promptly to the Trust all written information
received by the Custodian from issuers of the securities whose
tender or exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Trust desires to
take action with respect to any tender offer, exchange offer or
any other similar transaction, the Trust shall notify the
Custodian in writing at least three business days prior to the
date on which the Custodian is to take such action. However,
the Custodian shall nevertheless exercise its best efforts to
take such action in the event that notification is received
three business days or less prior to the date on which action is
required.
2.18 Proper Instructions. Proper Instructions as used throughout
this Section 2 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 Custodian
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 Trust promptly causes such oral instructions to be confirmed
in writing. Upon receipt of a certificate of the Secretary or
an Assistant Secretary as to the authorization by the Board of
the Trust accompanied by a detailed description of procedures
approved by the Board, Proper Instructions may include
communications effected directly between electro-mechanical or
electronic devices provided that the Board and the Custodian are
satisfied that such procedures afford adequate safeguards for a
Fund's assets.
2.19 Actions Permitted Without Express Authority. The Custodian may
in its discretion, without express authority from the Trust:
(1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Trust in such form that it
may be allocated to the affected Fund;
(2) surrender securities in temporary form for securities in
definitive form;
(3) endorse for collection, in the name of a Fund, checks,
drafts and other negotiable instruments; and
(4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and
property of each Fund except as otherwise directed by the
Trust.
2.20 Evidence of Authority. The Custodian shall be protected in
acting upon any instructions, notice, request, consent,
certificate or other instrument or paper reasonably believed by
it to be genuine and to have been properly executed on behalf of
a Fund. The Custodian may receive and accept a certified copy
of a vote of the Board of the Trust as conclusive evidence (a)
of the authority of any person to act in accordance with such
vote or (b) of any determination of or any action by the Board
pursuant to the Declaration of Trust/Articles of Incorporation
as described in such vote, and such vote may be considered as in
full force and effect until receipt by the Custodian of written
notice to the contrary.
2.21 Notice to Trust by Custodian Regarding Cash Movement. The
Custodian will provide timely notification to the Trust of any
receipt of cash, income or payments to the Trust and the release
of cash or payment by the Trust.
3.
Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information
to the entity or entities appointed by the Board of the Trust to
keep the books of account of each Fund and/or compute the net asset
value per share of the outstanding Shares of each Fund or, if
directed in writing to do so by the Trust, shall itself keep such
books of account and/or compute such net asset value per share. If
so directed, the Custodian shall also calculate daily the net income
of a Fund as described in the Fund's currently effective prospectus
and Statement of Additional Information ("Prospectus") and shall
advise the Trust and the Transfer Agent daily of the total amounts
of such net income and, if instructed in writing by an officer of
the Trust to do so, shall advise the Transfer Agent periodically of
the division of such net income among its various components. The
calculations of the net asset value per share and the daily income
of a Fund shall be made at the time or times described from time to
time in the Fund's currently effective Prospectus.
4. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as
will meet the obligations of the Trust and the Funds under the 1940
Act, with particular attention to Section 31 thereof and Rules 31a-1
and 31a-2 thereunder, and specifically including identified cost
records used for tax purposes. All such records shall be the
property of the Trust and shall at all times during the regular
business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Trust and employees
and agents of the SEC. In the event of termination of this
Contract, the Custodian will deliver all such records to the Trust,
to a successor Custodian, or to such other person as the Trust may
direct. The Custodian shall supply daily to the Trust a tabulation
of securities owned by a Fund and held by the Custodian and shall,
when requested to do so by the Trust and for such compensation as
shall be agreed upon between the Trust and the Custodian, include
certificate numbers in such tabulations.
5. Opinion of Funds' Independent Public Accountants/Auditors.
The Custodian shall take all reasonable action, as the Trust may
from time to time request, to obtain from year to year favorable
opinions from each Fund's independent public accountants/auditors
with respect to its activities hereunder in connection with the
preparation of the Fund's registration statement, periodic reports,
or any other reports to the SEC and with respect to any other
requirements of such Commission.
6. Reports to Trust by Independent Public Accountants/Auditors.
The Custodian shall provide the Trust, at such times as the Trust
may reasonably require, with reports by independent public
accountants/auditors for each Fund on the accounting system,
internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts,
including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian for the
Fund under this Contract; such reports shall be of sufficient scope
and in sufficient detail, as may reasonably be required by the
Trust, to provide reasonable assurance that any material
inadequacies would be disclosed by such examination and, if there
are no such inadequacies, the reports shall so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time
between Company and the Custodian.
8. Responsibility of Custodian.
The Custodian shall be held to a standard of reasonable care in
carrying out the provisions of this Contract; provided, however,
that the Custodian shall be held to any higher standard of care
which would be imposed upon the Custodian by any applicable law or
regulation if such above stated standard of reasonable care was not
part of this Contract. The Custodian shall be entitled to rely on
and may act upon advice of counsel (who may be counsel for the
Trust) 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.
Subject to the limitations set forth in Section 15 hereof, the
Custodian shall be kept indemnified by the Trust but only from the
assets of the Fund involved in the issue at hand and be without
liability for any action taken or thing done by it in carrying out
the terms and provisions of this Contract in accordance with the
above standards.
In order that the indemnification provisions contained in this
Section 8 shall apply, however, it is understood that if in any case
the Trust may be asked to indemnify or save the Custodian harmless,
the Trust shall be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further understood
that the Custodian will use all reasonable care to identify and
notify the Trust promptly concerning any situation which presents or
appears likely to present the probability of such a claim for
indemnification. The Trust shall have the option to defend the
Custodian against any claim which may be the subject of this
indemnification, and in the event that the Trust so elects it will
so notify the Custodian and thereupon the Trust shall take over
complete defense of the claim, and the Custodian shall in such
situation initiate no further legal or other expenses for which it
shall seek indemnification under this Section. The Custodian shall
in no case confess any claim or make any compromise in any case in
which the Trust will be asked to indemnify the Custodian except with
the Trust's prior written consent.
Notwithstanding the foregoing, the responsibility of the Custodian
with respect to redemptions effected by check shall be in accordance
with a separate Agreement entered into between the Custodian and the
Trust.
If the Trust requires the Custodian to take any action with respect
to securities, which action involves the payment of money or which
action may, in the reasonable opinion of the Custodian, result in
the Custodian or its nominee assigned to a Fund being liable for the
payment of money or incurring liability of some other form, the
Custodian may request the Trust, as a prerequisite to requiring the
Custodian to take such action, to provide indemnity to the Custodian
in an amount and form satisfactory to the Custodian.
Subject to the limitations set forth in Section 15 hereof, the Trust
agrees to indemnify and hold harmless the Custodian and its nominee
from and against all taxes, charges, expenses, assessments, claims
and liabilities (including counsel fees) (referred to herein as
authorized charges) incurred or assessed against it or its nominee
in connection with the performance of this Contract, except such as
may arise from it or its nominee's own failure to act in accordance
with the standard of reasonable care or any higher standard of care
which would be imposed upon the Custodian by any applicable law or
regulation if such above-stated standard of reasonable care were not
part of this Contract. To secure any authorized charges and any
advances of cash or securities made by the Custodian to or for the
benefit of a Fund for any purpose which results in the Fund
incurring an overdraft at the end of any business day or for
extraordinary or emergency purposes during any business day, the
Trust hereby grants to the Custodian a security interest in and
pledges to the Custodian securities held for the Fund by the
Custodian, in an amount not to exceed 10 percent of the Fund's gross
assets, the specific securities to be designated in writing from
time to time by the Trust or the Fund's investment adviser. Should
the Trust fail to make such designation, or should it instruct the
Custodian to make advances exceeding the percentage amount set forth
above and should the Custodian do so, the Trust hereby agrees that
the Custodian shall have a security interest in all securities or
other property purchased for a Fund with the advances by the
Custodian, which securities or property shall be deemed to be
pledged to the Custodian, and the written instructions of the Trust
instructing their purchase shall be considered the requisite
description and designation of the property so pledged for purposes
of the requirements of the Uniform Commercial Code. Should the
Trust fail to cause a Fund to repay promptly any authorized charges
or advances of cash or securities, subject to the provision of the
second paragraph of this Section 8 regarding indemnification, the
Custodian shall be entitled to use available cash and to dispose of
pledged securities and property as is necessary to repay any such
advances.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the
parties hereto and may be terminated by either party by an
instrument in writing delivered or mailed, postage prepaid to the
other party, such termination to take effect not sooner than sixty
(60) days after the date of such delivery or mailing; provided,
however that the Custodian shall not act under Section 2.12 hereof
in the absence of receipt of an initial certificate of the Secretary
or an Assistant Secretary that the Board of the Trust has approved
the initial use of a particular Securities System as required in
each case by Rule 17f-4 under the 1940 Act; provided further,
however, that the Trust shall not amend or terminate this Contract
in contravention of any applicable federal or state regulations, or
any provision of the Declaration of Trust/Articles of Incorporation,
and further provided, that the Trust may at any time by action of
its Board (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or
(ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the
appropriate banking regulatory agency or upon the happening of a
like event at the direction of an appropriate regulatory agency or
court of competent jurisdiction.
Upon termination of the Contract, the Trust shall pay to the
Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Board of the
Trust, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed
and in the form for transfer, all securities then held by it
hereunder for each Fund and shall transfer to separate accounts of
the successor custodian all of each Fund's securities held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of
the Board of the Trust, deliver at the office of the Custodian and
transfer such securities, funds and other properties in accordance
with such vote.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board shall have been delivered
to the Custodian on or before the date when such termination shall
become effective, then the Custodian shall have the right to deliver
to a bank or trust company, which is a "bank" as defined in the 1940
Act, (delete "doing business ... Massachusetts" unless SSBT is the
Custodian) doing business in Boston, Massachusetts, of its own
selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than
$100,000,000, all securities, funds and other properties held by the
Custodian and all instruments held by the Custodian relative thereto
and all other property held by it under this Contract for each Fund
and to transfer to separate accounts of such successor custodian
all of each Fund's securities held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the
Custodian under this Contract.
In the event that securities, funds and other properties remain in
the possession of the Custodian after the date of termination hereof
owing to failure of the Trust to procure the certified copy of the
vote referred to or of the Board to appoint a successor custodian,
the Custodian shall be entitled to fair compensation for its
services during such period as the Custodian retains possession of
such securities, funds and other properties and the provisions of
this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and
the Trust may from time to time agree on such provisions
interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of
this Contract. 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 Declaration of Trust/Articles of Incorporation. No
interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this
Contract.
12. Massachusetts Law to Apply.
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
13. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or
to the Custodian at address for SSBT only: 225 Franklin Street,
Boston, Massachusetts, 02110, or to such other address as the Trust
or the Custodian may hereafter specify, shall be deemed to have been
properly delivered or given hereunder to the respective address.
14. Counterparts.
This Contract may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
15. Limitations of Liability.
The Custodian is expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust of
those Trusts which are business trusts and agrees that the
obligations and liabilities assumed by the Trust and any Fund
pursuant to this Contract, including, without limitation, any
obligation or liability to indemnify the Custodian pursuant to
Section 8 hereof, shall be limited in any case to the relevant Fund
and its assets and that the Custodian shall not seek satisfaction of
any such obligation from the shareholders of the relevant Fund, from
any other Fund or its shareholders or from the Trustees, Officers,
employees or agents of the Trust, or any of them. In addition, in
connection with the discharge and satisfaction of any claim made by
the Custodian against the Trust, for whatever reasons, involving
more than one Fund, the Trust shall have the exclusive right to
determine the appropriate allocations of liability for any such
claim between or among the Funds.
IN WITNESS WHEREOF, each of the parties has caused this instrument
to be executed in its name and behalf by its duly authorized
representative and its seal to be hereunder affixed effective as of the
1st day of December, 1993.
ATTEST: INVESTMENT COMPANIES (Except those
listed below)
/s/John G. McGonigle_________ By /s/John G. Donahue_____________
John G. McGonigle John F. Donahue
Secretary Chairman
ATTEST: STATE STREET BANK AND TRUST
COMPANY
/s/ Ed McKenzie______________ By /s/ F. J. Sidoti, Jr.___________
(Assistant) Secretary Typed Name: Frank J. Sidoti, Jr.
Typed Name: Ed McKenzie Title: Vice President
ATTEST: FEDERATED SERVICES COMPANIY
/s/ Jeannette Fisher-Garber______ By /s/ James J. Dolan______________
Jeannette Fisher-Garber James J. Dolan
Secretary President
Table
CONTRACT FEE
DATE INVESTMENT COMPANY SCHEDULE
12/1/93 111 Corcoran Funds 2
12/1/93 111 Corcoran Bond Fund 2
12/1/93 111 Corcoran North Carolina
Municipal Securities Fund 2
12/1/93 American Leaders Fund, Inc. 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Fortress Shares 1
12/1/93 Automated Cash Management Trust 1
12/1/93 Automated Government Money Trust 1
12/1/93 California Municipal Cash Trust 1
Has a separate
contract with
SSB - included for
fee information
purposes only Cambridge Series Trust 1
Cambridge Capital Growth
Portfolio 1
Class A 1
Class B 1
Cambridge Government
Income Portfolio 1
Class A 1
Class B 1
Cambridge Growth Portfolio 1
Class A 1
Class B 1
Cambridge Income and
Growth Portfolio 1
Class A 1
Class B 1
Cambridge Municipal
Income Portfolio 1
Class A 1
Class B 1
12/1/93 Cash Trust Series, Inc. 1
12/1/93 Government Cash Series 1
12/1/93 Municipal Cash Series 1
12/1/93 Prime Cash Series 1
12/1/93 Treasury Cash Series 1
12/1/93 Cash Trust Series II 1
12/1/93 Municipal Cash Series II 1
12/1/93 Treasury Cash Series II 1
12/1/93 DG Investor Series 2
12/1/93 DG Equity Fund 2
12/1/93 DG Government Income Fund 2
12/1/93 DG Limited Term Government
Income Fund 2
12/1/93 DG Municipal Income Fund 2
12/1/93 DG U.S. Government Money
Market Fund 2
12/1/93 Edward D. Jones & Co. Daily Passport
Cash Trust 1
12/1/93 Federated ARMs Fund 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Bond Fund 1
12/1/93 Federated Exchange Fund, Ltd. 1
12/1/93 Federated GNMA Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Government Trust 1
12/1/93 Automated Government Cash Reserves 1
12/1/93 Automated Treasury Cash Reserves 1
12/1/93 U.S. Treasury Cash Reserves 1
12/1/93 Federated Growth Trust 1
12/1/93 Federated High Yield Trust 1
12/1/93 Federated Income Securities Trust 1
12/1/93 Federated Short-Term Income Fund 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Income Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Index Trust 1
12/1/93 Max-Cap Fund 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Mid-Cap Fund 1
12/1/93 Mini-Cap Fund 1
12/1/93 Federated Intermediate Government Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Investment Funds 1
12/1/93 Growth Portfolio 1
12/1/93 High Quality Bond Portfolio 1
12/1/93 Pennsylvania Intermediate
Municipal Income Portfolio 1
12/1/93 Value Equity Portfolio 1
12/1/93 Federated Master Trust 1
12/1/93 Federated Municipal Trust 1
12/1/93 Alabama Municipal Cash Trust 1
12/1/93 Connecticut Municipal Cash Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Massachusetts Municipal Cash Trust 1
12/1/93 BayFund Shares 1
12/1/93 Institutional Service Shares 1
12/1/93 Minnesota Municipal Cash Trust 1
12/1/93 Cash Series Shares 1
12/1/93 Institutional Shares 1
12/1/93 New Jersey Municipal Cash Trust 1
12/1/93 Cash Series Shares 1
12/1/93 Institutional Shares 1
12/1/93 Institutional Service Shares 1
12/1/93 Ohio Municipal Cash Trust 1
12/1/93 Cash II Shares 1
12/1/93 Institutional Shares 1
12/1/93 Pennsylvania Municipal Cash Trust 1
12/1/93 Cash Series Shares 1
12/1/93 Institutional Service Shares 1
12/1/93 Virginia Municipal Cash Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Short-Intermediate
Government Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Short-Intermediate Municipal Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Short-Term U.S. Government Trust 1
12/1/93 Federated Stock Trust 1
12/1/93 Federated Tax-Free Trust 1
12/1/93 Financial Reserves Fund 1
Has a separate
contract with
SSB - included for
fee information
purposes only First Union Funds
*Not effective or currently not being offered 1
First Union Balanced Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union Fixed Income
Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union Florida Municipal
Bond Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares* 1
First Union Georgia Municipal
Bond Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares* 1
First Union Insured Tax-Free
Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares* 1
First Union Managed Bond
Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares* 1
First Union Maryland Municipal
Bond Portfolio* 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union Money Market
Portfolio 1
Class B Investment Shares 1
Class C Investment Shares* 1
Trust Shares 1
First Union North Carolina
Municipal
Bond Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares* 1
First Union South Carolina
Municipal Bond Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares* 1
First Union Tax-Free
Money Market Portfolio 1
Class B Investment Shares 1
Class C Investment Shares* 1
Trust Shares 1
First Union Tennessee
Municipal Bond Portfolio* 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union Treasury Money Market
Portfolio 1
Class B Investment Shares 1
Class C Investment Shares* 1
Trust Shares 1
First Union U.S. Government
Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union Utility Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares* 1
First Union Value Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union Virginia Municipal Bond
Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares* 1
12/1/93 Fixed Income Securities, Inc. 1
12/1/93 Limited Term Fund 1
12/1/93 Fortress Shares 1
12/1/93 Investment Shares 1
12/1/93 Limited Term Municipal Fund 1
12/1/93 Fortress Shares 1
12/1/93 Investment Shares 1
12/1/93 Multi-State Municipal
Income Fund 1
12/1/93 Limited Maturity
Government Fund 1
12/1/93 Fortress Adjustable Rate
U.S. Government Fund, Inc. 1
12/1/93 Fortress Municipal Income
Fund, Inc. 1
12/1/93 Fortress Utility Fund, Inc. 1
12/1/93 FT Series, Inc. 1
12/1/93 International Equity Fund 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 International Income Fund 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Fund for U.S. Government
Securities, Inc. 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Government Income Securities, Inc. 1
Has a separate
contract with
SSB - included for
fee information
purposes only Independence One Mutual Funds
*Fund not effective or currently on hold. 1
Independence One Equity Fund* 1
Investment Shares 1
Trust Shares 1
Independence One Michigan
Municipal
Cash Fund 1
Investment Shares 1
Trust Shares* 1
Independence One Prime
Money Market Fund 1
Investment Shares 1
Trust Shares* 1
Independence One U.S. Government
Securities Fund 1
Investment Shares 1
Trust Shares 1
Independence One U.S. Treasury
Money Market
Fund 1
1/11/94 Insight Institutional Series, Inc.
1/11/94 Insight Adjustable Rate
Mortgage Fund 1
1/11/94 Insight Limited Term
Income Fund 1
1/11/94 Insight Limited Term
Municipal Fund 1
1/11/94 Insight U.S. Government Fund 1
12/1/93 Intermediate Municipal Trust 1
12/1/93 Intermediate Municipal Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Ohio Intermediate Municipal Trust 1
12/1/93 Pennsylvania Intermediate
Municipal Trust 1
12/1/93 Investment Series Fund, Inc. 1
12/1/93 Capital Growth Fund 1
12/1/93 Investment Shares 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Fortress Bond Fund 1
12/1/93 Investment Series Trust 1
12/1/93 High Quality Stock Fund 1
12/1/93 Municipal Securities
Income Fund 1
12/1/93 U.S. Government Bond Fund 1
12/1/93 Liberty Equity Income Fund, Inc. 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Fortress Shares 1
12/1/93 Liberty High Income Bond Fund, Inc. 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Liberty Municipal Securities
Fund, Inc. 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Liberty Term Trust, Inc. - 1999 1
12/1/93 Liberty U.S. Government Money
Market Trust 1
12/1/93 Liberty Utility Fund, Inc. 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Liquid Cash Trust 1
12/1/93 Money Market Management, Inc. 1
12/1/93 Money Market Trust 1
12/1/93 Money Market Obligations Trust 1
12/1/93 Government Obligations Fund 1
12/1/93 Prime Obligations Fund 1
12/1/93 Tax-Free Obligations Fund 1
12/1/93 Treasury Obligations Fund 1
12/1/93 Municipal Securities Income Trust 1
12/1/93 California Municipal
Income Fund 1
12/1/93 Fortress Shares 1
12/1/93 Florida Municipal Income Fund 1
12/1/93 Maryland Municipal Income Fund 1
12/1/93 Michigan Municipal Income Fund 1
12/1/93 New Jersey Municipal Income Fund 1
12/1/93 New York Municipal Income Fund 1
12/1/93 Fortress Shares 1
12/1/93 Ohio Municipal Income Fund 1
12/1/93 Fortress Shares 1
12/1/93 Trust Shares 1
12/1/93 Pennsylvania Municipal Income Fund 1
12/1/93 Investment Shares 1
12/1/93 Trust Shares 1
12/1/93 Income shares 1
12/1/93 Texas Municipal Income Fund 1
12/1/93 Virginia Municipal Income Fund 1
12/1/93 New York Municipal Cash Trust 1
12/1/93 Cash II Shares 1
12/1/93 Institutional Service Shares 1
12/1/93 Portage Funds 2
12/1/93 Portage Government Money
Market Fund 2
12/1/93 Investment Shares 2
12/1/93 Trust Shares 2
12/1/93 SouthTrust Vulcan Funds 2
12/1/93 Bond Fund 2
12/1/93 Stock Fund 2
12/1/93 Treasury Obligations Money
Market Fund 2
12/1/93 Stock and Bond Fund, Inc. 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Tax-Free Instruments Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 The Boulevard Funds 2
12/1/93 Boulevard Blue Chip Growth Fund 2
12/1/93 Boulevard Managed Income Fund 2
12/1/93 Boulevard Managed Municipal Fund 2
12/1/93 Boulevard Strategic Balanced Fund 2
12/1/93 The Planters Funds 2
12/1/93 Tennessee Tax-Free Bond Fund 2
Has a separate
contract with
SSB - included for
fee information
purposes only Tower Mutual Funds 1
Tower U.S. Government
Income Fund 1
Tower Capital Appreciation Fund 1
Tower Cash Reserve Fund 1
Tower Louisiana Municipal
Income Fund 1
Tower Total Return Bond Fund 1
Tower U.S. Treasury Money
Market Fund 1
12/1/93 Trademark Funds 2
12/1/93 Trademark Equity Fund 2
12/1/93 Trademark Government Income Fund 2
12/1/93 Trademark Kentucky Municipal
Bond Fund 2
12/1/93 Trademark Short-Intermediate
Government Fund 2
12/1/93 Trust for Financial Institutions 1
12/1/93 Government Qualifying
Liquidity Fund 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Short-Term Government Qualifying
Liquidity Fund 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Government Money Market Fund 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Trust for Government Cash Reserves 1
12/1/93 Trust for Short-Term U.S. Government
Securities 1
12/1/93 Trust for U.S. Treasury Obligations 1
Has a separate
contract with
SSB - included for
fee information
purposes only Vision Fiduciary Funds, Inc. 1
Vision Fiduciary Money
Market Fund 1
Has a separate
contract with
SSB - included for
fee information
purposes only Vision Group of Funds, Inc. 1
Vision Growth and Income Fund 1
Vision Money Market Fund 1
Vision New York Tax-Free Fund 1
Vision New York Tax-Free Money
Market Fund 1
Vision Treasury Money
Market Fund 1
Vision U.S. Government
Securities Fund 1
Schedule 1
STATE STREET BANK
CUSTODY /
PORTFOLIO RECORD KEEPING
FEE SCHEDULE
Federated Investors
_ Federated Funds _
I. Custody Services
Maintain Custody of fund assets. Settle portfolio purchases and sales.
Report buy and sell fails. Determine and collect portfolio income.
Make cash disbursements and report cash transactions. Monitor
corporate actions.
ANNUAL FEES
ASSET
First $500 Million 1.0
Basis Point
Excess .5
Basis Point
Minimum fee per year
$15,000
Maximum fee per year
$90,000
Wire Fees $2.70
per wire
Settlements:
- Each DTC Commercial Paper $9.00
- Each DTC Transaction $9.00
- Each Federal Reserve Book Entry
Transaction (Repo) $4.50
- Each Repo with Banks Other than
State
Street Bank $7.50
- Each Physical Transaction (NY/Boston,
Private Placement) $21.75
- Each Option Written/Exercised/Expired $18.75
- Each Stock Loan Transaction $12.00
Each Book Entry Muni (Sub-custody)
Transaction $15.00
- Index Fund/ETD Cost +
15%
II. Portfolio Record keeping / Fund Accounting Services
Maintain investment ledgers, provide selected portfolio transactions,
position and income reports. Maintain general ledger and capital
stock accounts. Prepare daily trial balance. Provide selected
general ledger reports. Calculate net asset value daily.
Securities yield or market value quotations will be provided to
State Street by the fund or via State Street Bank automated pricing
services.
ANNUAL FEES
ASSET
First $250 Million 2.0 Basis Points
Next $250 Million 1.5 Basis Points
Next $250 Million 1.0 Basis Point
Excess .5 Basis Point
Minimum fee per year $39,000
Maximum fee per year $120,000
Additional class of shares per year $12,000
III. Multicurrency Horizon Remote Service
July 1, 1993 - July 1, 1995 No Charge
Post July 1, 1995 $5,000 per portfolio per year
$
500 per portfolio per year
for each additional
class
IV. Out-Of-Pocket Expenses
Pricing Fees
Telephone
Postage & Insurance
Armored carrier costs
Legal fees
Supplies related to fund records
Processing validation certificates
Forms, envelopes, Xerox copies, supplies, etc.
Travel and setup expenses related to Horizon Remote
Lease and multiplex switching lines related to Horizon Remote
V. Special Services
Fees for activities of a non-recurring nature such as fund consolidation
or reorganization, extraordinary security shipments and the
preparation of special reports will be subject to negotiation.
VI. Coupon Clipping
Monitoring for calls and processing for each monthly issue held
Monthly Charge $5.00
VII. Balance Credit
A balance credit equal to 75% of the average balance in the custodian
account for the month billed times the 30-day T-Bill Rate on the
last Monday of the month billed will be applied against Section I
through V above.
VIII. Term of the Contract
The parties agree that this fee schedule shall become effective June 1,
1993 and will remain in effect until it is revised as a result of
negotiations initiated by either party.
FEDERATED SERVICES CO. STATE STREET BANK & TRUST CO.
By James J. Dolan By: Frank J. Sidoti, Jr.
President Vice President
January 24, 1994 December 15, 1993
