FEDERATED U.S. GOVERNMENT SECURITIES FUND: 1-3 YEARS
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES
SUPPLEMENT TO PROSPECTUSES AND STATEMENT OF ADDITIONAL INFORMATION, AS
APPROPRIATE, DATED APRIL 30, 1999
I. At the June 21, 1999 shareholder meeting, shareholders approved the
following changes to become effective July 1, 1999:
(1) Elected seven Trustees.
(2) Ratified the selection of the Trust's independent auditors.
II. The meeting was adjourned to August 5, 1999, 2:00 p.m., (Eastern time), at
2800 Corporate Drive, Pittsburgh, PA 15237-7000 with respect to the following
proposals. Unless shareholders are notified otherwise, these changes will take
effect on August 9, 1999.
(3) To make changes to the Trust's fundamental investment policies and
limitations:
(a) To amend the Trust's fundamental investment limitation regarding borrowing
money and issuing senior securities to read as follows:
"The Trust may borrow money, directly or indirectly, and issue senior
securities to the maximum extent permitted under the 1940 Act."
(b) To amend the Trust's fundamental investment limitation regarding lending by
the Trust to read as follows:
" The Trust may not make loans, provided that this restriction does not
prevent the Trust from purchasing debt obligations, entering into
repurchase agreements, lending its assets to broker/dealers or
institutional investors and investing in loans, including assignments and
participation interests."
(c) To amend, and made non-fundamental, the Trust's fundamental investment
limitation regarding buying securities on margin to read as follows:
"The Trust will not purchase securities on margin, provided that the Trust
may obtain short-term credits necessary for the clearance of purchases and
sales of securities."
(d) To amend, and made non-fundamental, the Trust's fundamental investment
limitation regarding pledging assets to read as follows:
"The Trust will not mortgage, pledge, or hypothecate any of its assets,
provided that this shall not apply to the transfer of securities in
connection with any permissible borrowing or to collateral arrangements in
connection with permissible activities."
(e) To amend, and made non-fundamental, the Trust's fundamental investment
policy regarding investing in U.S. government securities to read as
follows:
The Trust will invest primarily in U.S. government securities.
"U.S. government securities include: (1) U.S. Treasury obligations, which
differ only in their interest rates, maturities and times of issuance: (a)
U.S. Treasury bills and (b) U.S. Treasury notes; (2) obligations issued or
guaranteed by U.S. government agencies and instrumentalities which are
supported by any of the following: (a) the full faith and credit of the
U.S. Treasury (such as Government National Mortgage Association pass
through and modified participation certificates), (b) the right of the
issuer to borrow an amount limited to a specific line of credit from the
U.S. Treasury, (c) discretionary authority of the U.S. government to
purchase obligations of the U.S. government agency or instrumentality or
(d) the credit of the instrumentality."
(f) To amend, and made non-fundamental, the Trust's fundamental investment
policy regarding investing in repurchase agreements to read as follows:
"The Trust may enter into repurchase agreements."
4. To eliminate certain of the Trust's fundamental investment limitations:
(a) To remove the Trust's fundamental investment policy regarding selling
securities short; and
(b) To remove the Trust's fundamental investment policy regarding
portfolio trading.
5. To approve an amendment and restatement to the Trust's Declaration of Trust
to permit the Board of Trustees to liquidate assets of the Trust without
seeking shareholder approval.
II. The following actions were taken by the Board of Trustees with regard to
non- fundamental investment policies:
1. Amended the Trust's non-fundamental policy concerning investing in illiquid
securities to read as follows:
"The Trust will not purchase securities for which there is no readily
available market, or enter into repurchase agreements or purchase time
deposits maturing in more than seven days, if immediately after and as a
result, the value of such securities would exceed, in aggregate, 15% of the
Trust's net assets."
2. Amended the Trust's non-fundamental policy concerning the Trust's average
dollar-weighted portfolio maturity to read as follows:
"As a matter of investment practice that can be changed without shareholder
approval, the Trust will maintain an average dollar- weighted duration of 1
to 3 years."
3. Eliminated the Trust's undertaking concerning borrowing.
4. Eliminated the Trust's non-fundamental investment policy providing that the
Trust will not engage in when-issued and delayed delivery transactions to
an extent that would cause the segregation of more than 20% of the value of
its total assets.
June 21, 1999
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Federated Investors
Federated Securities, Distributors
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
www.federatedinvstors.com
Cusip 31428M100
Cusip 31428M209
G02641-03 (6/99)
