1933 Act File No. 2-98494
1940 Act File No. 811-4489
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No. ...........................
Post-Effective Amendment No. 22 ........................... X
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
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Amendment No. 20 ..........................................X
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FEDERATED U.S. GOVERNMENT BOND FUND
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
X on OCTOBER 31, 1997 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i) on pursuant to
paragraph (a) (i). 75 days after filing pursuant to paragraph
(a)(ii) on _________________ pursuant to paragraph (a)(ii) of Rule
485.
If appropriate, check the following box:
This post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
<PAGE>
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of FEDERATED
U.S. GOVERNMENT BOND FUND is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
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PROSPECTUS HEADINg
(Rule 404(c) Cross Reference)
<S> <C> <C>
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.................................General Information; Investment Information;
Investment Objective; Investment Policies;
Investment Limitations.
Item 5. Management of the Fund......................Fund Information; Management of the Fund;
Distribution of Fund Shares;
Administration of the Fund.
Item 6. Capital Stock and Other
Securities.................................Dividends; Capital Gains; Shareholder Information;
Voting Rights; Tax Information; Federal Income Tax;
State and Local Taxes.
Item 7. Purchase of Securities Being
Offered....................................Net Asset Value; Investing in the Fund;
Share Purchases; Minimum Investment Required;
What Shares Cost; Exchanging Securities for Fund Shares;
Confirmations and Account Statements.
Item 8. Redemption or Repurchase....................Redeeming Shares; Telephone Redemption;
Redeeming Shares By Mail; Accounts with Low Balances.
Item 9. Legal Proceedings...........................None.
<PAGE>
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 Fund;
Massachusetts Partnership Law; About Federated
Investors; Appendix.
Item 13. Investment Objectives and
Policies...................................Investment Objective and Policies;
Investment Limitations.
Item 14. Management of the Fund Federated U.S. Government Bond Fund
Management; Trustee Compensation.
Item 15. Control Persons and Principal
Holders of Securities Fund Ownership.
Item 16. Investment Advisory and Other
Services...................................Investment Advisory Services;
Other 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; Determining Net Asset Value;
Redeeming Shares; Exchanging Securities
for Fund 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.
</TABLE>
Federated U.S. Government Bond Fund
PROSPECTUS
A no-load, open-end, diversified management investment company (a
mutual fund) investing primarily in U.S. government bonds to pursue
total return.
This prospectus contains the information you should read and know
before you invest in Federated U.S. Government Bond Fund (the "Fund").
Keep this prospectus for future reference.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS
OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL. The Fund has also filed a Statement of Additional
Information dated October 31, 1997, with the Securities and Exchange
Commission ("SEC"). The information contained in the Statement of
Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional
Information or a paper copy of this prospectus if you have received
your prospectus electronically, free of charge by calling
1-800-341-7400. To obtain other information or to make inquiries about
the Fund, contact the Fund at the address listed on the back of this
prospectus. The Statement of Additional Information, material
incorporated by reference into this document, and other information
regarding the Fund is maintained electronically with the SEC at
Internet Web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated October 31, 1997
TABLE OF CONTENTS
Summary of Fund Expenses 1
Financial Highlights 2
General Information 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Investment Limitations 6
Fund Information 6
Management of the Fund 6
Distribution of Fund Shares 7
Administration of the Fund 7
Net Asset Value 8
Investing in the Fund 8
Share Purchases 8
Minimum Investment Required 8
What Shares Cost 8
Exchanging Securities for Fund Shares 8
Confirmations and Account Statements 8
Dividends 9
Capital Gains 9
Redeeming Shares 9
Telephone Redemption 9
Redeeming Shares by Mail 9
Accounts with Low Balances 9
Shareholder Information 10
Voting Rights 10
Tax Information 10
Federal Income Tax 10
State and Local Taxes 10
Performance Information 10
Financial Statements 11
Report of Independent Public Accountants 18
SUMMARY OF FUND EXPENSES
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SHAREHOLDER TRANSACTION EXPENSES
<S> <S> Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price) None Maximum Sales Charge Imposed on Reinvested
Difidends (as a perdentage 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
<CAPTION>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver)(1) 0.44%
12b-1 Fee None
Total Other Expenses 0.41%
Shareholder Services Fee (after waiver)(2) 0.05%
Total Operating Expenses(3) 0.85%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary
waiver of a portion of the management fee. The adviser can
terminate this voluntary waiver at any time at its sole
discretion. The maximum management fee is 0.60%.
(2) The shareholder services fee has been reduced to reflect the
voluntary waiver of a portion of the shareholder services fee. The
shareholder services provider can terminate this voluntary waiver
at any time at its sole discretion. The maximum shareholder
services fee is 0.25%.
(3) The total operating expenses would have been 1.21% absent the
voluntary waivers of portions of the management fee and
shareholder services fee.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that a shareholder of the Fund will
bear, either directly or indirectly. For more complete descriptions of
the various costs and expenses, see "Fund Information."
Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.
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EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time
period.
<S> <C>
1 year $ 9
3 years $ 27
5 years $ 47
10 years $105
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THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on
page 18.
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YEAR ENDED AUGUST 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.94 $10.45 $ 9.72 $11.04 $10.03 $ 9.48 $ 8.90 $ 9.12 $ 8.78 $ 9.08
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.60 0.60 0.60 0.54 0.58 0.63 0.66 0.71 0.70 0.76
Net realized and
unrealized gain (loss)
on investments 0.48 (0.43) 0.73 (1.09) 1.01 0.55 0.58 (0.22) 0.34 (0.30)
Total from investment
operations 1.08 0.17 1.33 (0.55) 1.59 1.18 1.24 0.49 1.04 0.46
LESS DISTRIBUTIONS
Distributions from net
investment income (0.60) (0.60) (0.60) (0.54) (0.58) (0.63) (0.66) (0.71) (0.70) (0.76)
Distributions from net
realized gain on
investments (0.12) (0.08) -- (0.23) -- -- -- -- -- --
Total distributions (0.72) (0.68) (0.60) (0.77) (0.58) (0.63) (0.66) (0.71) (0.70) (0.76)
NET ASSET VALUE, END OF
PERIOD $10.30 $ 9.94 $10.45 $ 9.72 $11.04 $10.03 $ 9.48 $ 8.90 $ 9.12 $ 8.78
TOTAL RETURN(A) 11.13% 1.37% 14.34% (5.23)% 16.44% 12.89% 14.37% 5.50% 12.35% 5.23%
RATIOS TO AVERAGE NET
ASSETS
Expenses 0.85% 0.85% 0.85% 0.83% 0.81% 0.88% 0.78% 0.78% 0.80% 0.75%
Net investment income
Expense 5.85% 5.71% 6.10% 5.25% 5.58% 6.54% 7.17% 7.81% 7.87% 8.40%
waiver/reimbursement(b) 0.36% 0.31% 0.22% 0.17% 0.62% 0.88% 0.85% 0.76% 0.96% 1.17%
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $68,641 $84,806 $124,696 $138,016 $82,737 $34,125 $27,427 $43,729 $36,325 $13,125
Portfolio turnover 90% 53% 37% 22% 53% 98% 73% 42% 35% 152%
</TABLE>
(a) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
The Fund was established as a Massachusetts business trust under a
Declaration of Trust dated May 24, 1985. The Declaration of Trust
permits the Fund to offer separate series of shares representing
interests in separate portfolios of securities. The shares in any one
portfolio may be offered in separate classes. With respect to this
Fund, as of the date of this prospectus, the Board of Trustees (the
"Trustees") has not established separate portfolios of securities or
separate classes of shares.
The Fund is designed primarily for individuals and institutions
seeking total return through a professionally managed, diversified
portfolio consisting primarily of U.S. government bonds. A minimum
initial investment of $25,000 over a 90-day period is required.
Fund 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 to pursue total return. 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. The investment objective stated above
cannot be changed without approval of shareholders. Unless stated
otherwise, the investment policies and limitations stated below cannot
be changed without shareholder approval. A description of the ratings
categories is contained in the Appendix to the Statement of Additional
Information.
INVESTMENT POLICIES
ACCEPTABLE INVESTMENTS
The Fund invests primarily in debt obligations (i.e., bills, notes and
bonds) of the U.S. government, its agencies and instrumentalities,
with at least 65% of the value of its total assets being invested
under normal circumstances in U.S. government bonds. This policy may
be changed without shareholder approval. The Fund will limit its
investments to those that are permitted for purchase by federally
chartered 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 federally chartered savings associations,
the Fund will dispose of those securities at times advantageous to the
Fund. The permitted investments of the Fund are:
* direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds;
* notes, bonds, and discount notes issued or guaranteed by U.S.
government agencies and instrumentalities supported by the full faith
and credit of the United States;
* notes, bonds, and discount notes issued or guaranteed by U.S.
government agencies or instrumentalities which receive or have access
to federal funding; and
* domestic issues of corporate debt obligations (rated Aaa, Aa, or
A by Moody's Investors Service, Inc. ("Moody's"); AAA, AA, or A
by Standard & Poor's ("S&P"); or AAA, AA, or A by Fitch Investors
Service, Inc.
("Fitch")).
The prices of fixed income securities (debt obligations) fluctuate
inversely to the direction of interest rates.
The obligations of U.S. government agencies or instrumentalities which the
Fund may buy are backed in a variety of ways by the U.S. government, its
agencies or instrumentalities. Some of these obligations are backed by the
full faith and credit of the U.S. Treasury.
The Fund may also purchase put options on financial futures contracts
and on portfolio securities and write call options on its portfolio
securities. The Fund will engage in such transactions only to the
extent permitted under applicable Office of Thrift Supervision rules,
regulations, or interpretations thereof.
RESTRICTED AND ILLIQUID SECURITIES
The Fund intends to invest in restricted securities. Restricted
securities are any securities in which the Fund may otherwise invest
pursuant to its investment objective and policies but which are
subject to restriction on resale under federal securities law.
However, the Fund will limit investments in illiquid securities,
including certain restricted securities determined by the Trustees to
be illiquid, non-negotiable time deposits, and repurchase agreements
providing for settlement in more than seven days after notice, to 10%
of its net assets. The Fund may invest in commercial paper issued
in reliance on the exemption from registration afforded by Section
4(2) of the Securities Act of 1933. Section 4(2) commercial paper is
restricted as to disposition under the federal securities law and is
generally sold to institutional investors, such as the Fund, who agree
that they are purchasing the paper for investment purposes and not
with a view to public distribution. Any resale by the purchaser must
be in an exempt transaction. Section 4(2) commercial paper is normally
resold to other institutional investors like the Fund through or with
the assistance of the issuer or investment dealers who make a market
in Section 4(2) commercial paper, thus providing liquidity. The Fund
believes that Section 4(2) commercial paper and possibly certain other
restricted securities which meet the criteria for liquidity
established by the Trustees are quite liquid. The Fund intends,
therefore, to treat the restricted securities which meet the criteria
for liquidity established by the Trustees, including Section 4(2)
commercial paper, as determined by the Fund's investment adviser, as
liquid and not subject to the investment limitations applicable to
illiquid securities. TEMPORARY INVESTMENTS
The Fund may also invest temporarily in cash and money market
instruments during times of unusual market conditions for defensive
purposes and to maintain liquidity. These money market instruments
consist of:
* commercial paper which matures in 270 days or less so long as at
least two ratings are high-quality ratings by nationally
recognized rating services. Such ratings would include: A-1 or
A-2 by S&P, Prime-1 or Prime-2 by Moody's, or F-1 or F-2 by
Fitch;
* time and savings deposits (including certificates of deposit) in
commercial or savings banks whose accounts are insured by the
Bank Insurance Fund ("BIF") or in institutions whose accounts are
insured by the Savings Association Insurance Fund, including
certificates of deposit issued by and other time deposits in
foreign branches of BIF-insured banks which, if negotiable,
mature in six months or less or if not negotiable, either mature
in ninety days or less, or are withdrawable upon notice not
exceeding ninety days;
* bankers' acceptances issued by a BIF-insured bank, or issued by
the bank's Edge Act subsidiary and guaranteed by the bank, with
remaining maturities of nine months or less. The total
acceptances of any bank held by the Fund cannot exceed 0.25% of
such bank's total deposits according to the bank's last published
statement of condition preceding the date of acceptance;
* obligations of the U.S. government or its agencies or
instrumentalities; and
* repurchase agreements collateralized by eligible investments.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks, broker/dealers,
and other recognized financial institutions sell U.S. government
securities or certificates of deposit to the Fund and agree at the
time of sale to repurchase them at a mutually agreed upon time and
price. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the
repurchase price on any sale of such securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may purchase securities on a when-issued or delayed delivery
basis. These transactions are arrangements in which the Fund purchases
securities with payment and delivery scheduled for a future time. The
seller's failure to complete these transactions may cause the Fund to
miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the
market values of the securities purchased may vary from the purchase
prices. LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, the Fund may lend portfolio
securities on a short-term or a long-term basis up to one-third of the
value of its total assets to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into
loan arrangements with broker/dealers, banks, or other institutions
which the investment adviser has determined are creditworthy under
guidelines established by the Trustees and will receive collateral in
the form of cash or U.S. government securities equal to at least 100%
of the value of the securities loaned.
There is the risk that when lending portfolio securities, the
securities may not be available to the Fund on a timely basis and the
Fund may, therefore, lose the opportunity to sell the securities at a
desirable price. In addition, in the event that a borrower of
securities would file for bankruptcy or become insolvent, disposition
of the securities may be delayed pending court action.
PUT AND CALL OPTIONS
The Fund may purchase put options on financial futures contracts and
put options on portfolio securities. Financial futures may include
index futures. These options will be used as a hedge to attempt to
protect securities which the Fund holds against decreases in value.
For the immediate future, the Fund will enter into futures contracts
directly only when it desires to exercise a financial futures put
option in its portfolio rather than either closing out the option or
allowing it to expire. The Fund will only purchase puts on financial
futures contracts which are traded on a recognized exchange. The
Fund will generally purchase over-the-counter put options on portfolio
securities in negotiated transactions with the writers of the options
since options on the portfolio securities held by the Fund are
typically not traded on an exchange. The Fund purchases options only
from investment dealers and other financial associations (such as
commercial banks or savings associations) deemed creditworthy by the
Fund's investment adviser.
In general, over-the-counter put options differ from exchange traded
put options in the following respects. Over-the-counter put options
are two-party contracts with price and terms negotiated between buyer
and seller, and such options are endorsed and/or guaranteed by third
parties (such as a New York Stock Exchange member). Additionally,
over-the-counter strike prices are adjusted to reflect dividend
payments, initial strike prices are generally set at market, and
option premiums (which are all time premiums) are amortized on a
straight-line basis over the life of the option. In contrast,
exchange-traded options are third-party contracts with standardized
strike prices and expiration dates and are purchased from the Clearing
Corporation. Strike prices are not adjusted for dividends, and options
are marked to market, thereby obviating the need to amortize the time
premium. Exchange-traded options have a continuous liquid market while
over-the-counter options do not. The Fund may also write call
options on all or any portion of its portfolio to generate income for
the Fund. The Fund will write call options on securities either held
in its portfolio or which it has the right to obtain without payment
of further consideration or for which it has segregated cash in the
amount of any additional consideration. The call options which the
Fund writes and sells must be listed on a recognized options exchange.
Although the Fund reserves the right to write covered call options on
its entire portfolio, it will not write such options on more than 25%
of its total assets unless a higher limit is authorized by its
Trustees.
The Fund may attempt to hedge the portfolio by entering into financial
futures contracts and to write calls on financial futures contracts.
The Fund will notify shareholders before it begins engaging in these
transactions.
RISKS
When the Fund writes a call option, the Fund risks not participating
in any rise in the value of the underlying security. In addition, when
the Fund purchases puts on financial futures contracts to protect
against declines in prices of portfolio securities, there is a risk
that the prices of the securities subject to the futures contracts may
not correlate perfectly with the prices of the securities in the
Fund's portfolio. This may cause the futures contract and its
corresponding put to react differently than the portfolio securities
to market changes. In addition, the Fund's investment adviser could be
incorrect in its expectations about the direction or extent of market
factors such as interest rate movements. In such an event, the Fund
may lose the purchase price of the put option. Finally, it is not
certain that a secondary market for options will exist at all times.
Although the investment adviser will consider liquidity before
entering into option transactions, there is no assurance that a liquid
secondary market on an exchange will exist for any particular option
or at any particular time. The Fund's ability to establish and close
out option positions depends on this secondary market.
The Fund will engage in such transactions only to the extent permitted
under applicable rules, regulations, or interpretations thereof of the
Office of Thrift Supervision.
PORTFOLIO TURNOVER
Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities in its portfolio will be sold whenever
the Fund's investment adviser believes it is appropriate to do so in
light of the Fund's investment objective, without regard to the length
of time a particular security may have been held.
INVESTMENT LIMITATIONS
The Fund will not:
* borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for
a percentage of its cash value with an agreement to buy it back
on a set date) or pledge securities except, under certain
circumstances, the Fund may:
* borrow up to one-third of the value of its total assets and
pledge up to 10% of the value of those assets to secure such
borrowings;
* lend any of its assets except portfolio securities up to one-third of
the value of its total assets;
* sell securities short except, under strict limitations, it may
maintain open short positions so long as not more than 10% of the
value of its net assets is held as collateral for those
positions;
* invest more than 10% of the value of its total assets in
securities subject to restrictions on resale under the federal
securities laws (except for commercial paper issued under Section
4(2) of the Securities Act of 1933);
* underwrite any issue of securities, except as it may be deemed to
be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment
objective, policies, and limitations;
* invest more than 5% of its total assets in securities of one issuer
(except cash and cash items, repurchase agreements, and U.S. government
obligations). The Fund may invest up to 15% of its total assets in the
certificates of deposit of one bank; or
* invest more than 5% of its total assets in securities of issuers
that have records of less than three years of continuous
operations.
The above investment limitations cannot be changed without shareholder
approval.
FUND INFORMATION
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for
exercising all the Fund's powers, except those reserved for the
shareholders. An Executive Committee of the 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 0.60% of the Fund's average daily net assets. The investment
advisory contract allows for the voluntary reimbursement of expenses
by the adviser from time to time. The adviser can terminate any
voluntary reimbursement of expenses at any time at its sole
discretion. 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, 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. With over $110 billion
invested across more than 300 funds under management and/or
administration by its subsidiaries, as of December 31, 1996,
Federated Investors is one of the largest mutual fund investment
managers in the United States. With more than 2,000 employees,
Federated continues to be led by the management who founded the
company in 1955. Federated funds are presently at work in and
through 4,500 financial institutions nationwide.
Susan M. Nason has been the Fund's portfolio manager since 1994. Ms. Nason
joined Federated Investors in 1987 and has been a Senior Vice President of
the Fund's investment adviser since April 1997. Ms. Nason served as a Vice
President of the investment adviser from 1993 to 1997, and as an Assistant
Vice President from 1990 until 1992. Ms. Nason is a Chartered Financial
Analyst and received her M.S.I.A. concentrating in Finance from Carnegie
Mellon University.
Donald T. Ellenberger has been a portfolio manager of the Fund since October
1997. Mr. Ellenberger joined Federated in 1996 as a Vice President of a
Federated advisory subsidiary. He has been a Vice President of the Fund's
adviser since March 1997. From 1986 to 1996, he served as a Trader/Portfolio
Manager for Mellon Bank, N.A. Mr. Ellenberger received his M.B.A. in Finance
from Stanford University.
Both the Fund and the adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Fund and its
portfolio securities. These codes recognize that such persons owe a
fiduciary duty to the Fund's shareholders and must place the interests
of shareholders ahead of the employees' own interests. Among other
things, the codes: require preclearance and periodic reporting of
personal securities transactions; prohibit personal transactions in
securities being purchased or sold, or being considered for purchase
or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less
than sixty days. Violations of the codes are subject to review by the
Trustees and could result in severe penalties.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the
Fund. 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.
SHAREHOLDER SERVICES
The Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors,
under which the Fund may make payments up to 0.25% of the average
daily net asset value of the Fund to obtain certain personal services
for shareholders and to maintain shareholder accounts. Under the
Shareholder Services Agreement, Federated Shareholder Services will
either perform shareholder services directly or will select financial
institutions to perform shareholder services. Financial institutions
will receive fees based upon shares owned by their clients or
customers. The schedules of such fees and the basis upon which fees
will be paid will be determined from time to time by the Fund and
Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS
In addition to payments made pursuant to the Shareholder Services
Agreement, Federated Securities Corp. and Federated Shareholder
Services, from their own assets, may pay financial institutions
supplemental fees for the performance of substantial sales services,
distribution-related support services, or shareholder services. The
support may include sponsoring sales, educational and training
seminars at recreational-type facilities for their employees,
providing sales literature and engineering computer software programs
that emphasize the attributes of the Fund. Such assistance will be
predicated upon the amount of shares the financial institution sells
or may sell, and/or upon the type and nature of sales or marketing
support furnished by the financial institution. Any payments made by
the distributor may be reimbursed by the Fund's adviser or its
affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES
Federated Services Company, a subsidiary of Federated Investors,
provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund.
Federated Services Company provides these at an annual rate which
relates to the average aggregate daily net assets of all funds advised
by affiliates of Federated Investors as specified below:
MAXIMUM AVERAGE AGGREGATE
FEE DAILY NET ASSETS
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at
least $125,000 per portfolio and $30,000 per each additional class of
shares. Federated Services Company may choose voluntarily to waive a
portion of its fee.
NET ASSET VALUE
The Fund's net asset value per share fluctuates. It is determined by
dividing the sum of the market value of all securities and other
assets, less liabilities, by the number of shares outstanding.
INVESTING IN THE FUND
SHARE PURCHASES
Fund shares are sold on days on which the New York Stock Exchange is
open for business. Shares may be purchased either by wire or mail.
To purchase shares of the Fund, 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 of the Fund by Federal Reserve wire, call the Fund
before 4:00 p.m. (Eastern time) to place an order. The order is
considered received immediately. Payment by federal funds must be
received before 3:00 p.m. (Eastern time) on the next business day
following the order. Federal funds should be wired as follows:
Federated Shareholder Services Company, c/o State Street Bank and
Trust Company, Boston, Massachusetts; Attention: EDGEWIRE; For Credit
to: Federated U.S. Government Bond Fund; 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; ABA Number
011000028. Shares cannot be purchased by wire on holidays when wire
transfers are restricted. Questions on wire purchases should be
directed to your shareholder services representative at the telephone
number listed on your account statement.
BY MAIL
To purchase shares of the Fund by mail, send a check made payable to
Federated U.S. Government Bond Fund to Federated Shareholder Services
Company, P.O. Box 8600, Boston, Massachusetts 02266-8600. Orders by mail are
considered received after payment by check is converted by the transfer
agent's bank, State Street Bank and Trust Company ("State Street Bank"),
into federal funds. This is normally the next business day after the check
is received by State Street Bank.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $25,000 plus any
financial intermediary'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. Accounts established through a financial intermediary may be
subject to a smaller minimum investment.
WHAT SHARES COST
Fund 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 Fund shares through a financial intermediary
may be charged an additional service fee by that financial
intermediary.
The net asset value is determined as of the close of trading (normally
4:00 p.m., Eastern time), on the New York Stock Exchange, Monday
through Friday, except on: (i) days on which there are not sufficient
changes in the value of the Fund's portfolio securities that its net
asset value might be materially affected; (ii) days during which no
shares are tendered for redemption and no orders to purchase shares
are received; or (iii) the following holidays: New Year's Day, Martin
Luther King 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 securities or a combination of
securities and cash for Fund 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. CONFIRMATIONS AND
ACCOUNT STATEMENTS
Shareholders will receive detailed confirmations of transactions. In
addition, shareholders will receive periodic statements reporting all
account activity, including dividends paid. The Fund will not issue
share certificates.
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
State Street Bank. 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 of the Fund unless
cash payments are requested by contacting the Fund.
CAPITAL GAINS
Capital gains realized by the Fund, if any, will be distributed at
least once every 12 months.
REDEEMING SHARES
The Fund redeems shares at their net asset value next determined after
the Fund receives the redemption request. Investors who redeem shares
through a financial intermediary may be charged a service fee by that
financial intermediary. 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. (Eastern time). The proceeds will normally be wired 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, provided State Street Bank has received
payment for shares from the shareholder. If at any time the Fund shall
determine it necessary to terminate or modify this method of
redemption, shareholders would be promptly notified. Proceeds from
redemption requests received on holidays when wire transfers are
restricted will be wired the following business day. Questions about
telephone redemptions on days when wire transfers are restricted
should be directed to your shareholder services representative at the
telephone number listed on your account statement.
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, shareholders may experience
difficulty in redeeming by telephone. If such a case should occur,
another method of redemption, such as "Redeeming Shares by Mail,"
should be considered.
REDEEMING SHARES BY MAIL
Shares may be redeemed in any amount by mailing a written request to:
Federated Shareholder Services Company, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be
sent unendorsed with the written request by registered or certified
mail to the address noted above.
The written request should state: the Fund name; the account name as
registered with the Fund; the account number, and the number of shares
to be redeemed or the dollar amount requested. All owners of the
account must sign the request exactly as the shares are registered.
Normally, a check for the proceeds is mailed within one business day,
but in no event more than seven days, after the receipt of a proper
written redemption request. Dividends are paid up to and including the
day that a redemption request is processed.
Shareholders requesting a redemption of any amount to be sent to an
address other than that on record with the Fund or a redemption
payable other than to the shareholder of record must have their
signatures guaranteed by a commercial or savings bank, trust company,
or saving association whose deposits are insured by an organization
which is administered by the Federal Deposit Insurance Corporation; a
member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of
1934. The Fund does not accept signatures guaranteed by a notary
public.
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 due to shareholder redemptions. 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 any portfolios in the Fund have equal voting rights except
that in matters affecting only a particular portfolio or class, only
shares of that portfolio or class are entitled to vote.
As a Massachusetts business trust, the Fund is not required to hold
annual shareholder meetings. Shareholder approval will be sought only
for certain changes in the Fund's operation and for the election of
Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a
special meeting. A special meeting of shareholders shall be called by
the Trustees upon the written request of shareholders owning at least
10% of the Fund's outstanding shares.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code, as amended, applicable to
regulated investment companies and to receive the special tax
treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal
income tax on any dividends and other distributions, including capital
gains distributions, received. This applies whether dividends and
distributions are received in cash or as additional shares.
Distributions representing long-term capital gains, if any, will be
taxable to shareholders as long-term capital gains no matter how long
the shareholders have held the shares.
STATE AND LOCAL TAXES
In the opinion of Houston, Donnelly & Meck, counsel to the Fund, Fund
shares may be subject to personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania to the extent
that the Fund's portfolio securities 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.
Total return represents the change, over a specified period of time,
in the value of an investment in 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 the Fund is calculated by dividing the net investment
income per share (as defined by the SEC) earned by the Fund over a
thirty-day period by the offering price per share of the Fund 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 the Fund and, therefore, may not correlate to the
dividends or other distributions paid to shareholders. The Fund
is sold without any sales charge or other similar non-recurring
charges.
From time to time, advertisements for the Fund may refer to ratings,
rankings and other information in certain financial publications
and/or compare the Fund's performance to certain indices.
PORTFOLIO OF INVESTMENTS
FEDERATED U.S. GOVERNMENT BOND FUND
AUGUST 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS--97.2%
U.S. TREASURY NOTES AND BONDS--94.1%
$ 2,500,000 6.125%, 12/31/2001 $ 2,492,800
1,350,000 6.25%, 1/31/2002 1,351,985
2,500,000 6.25%, 6/30/2002 2,502,450
3,000,000 11.125%, 8/15/2003 3,710,880
1,750,000 12.375%, 5/15/2004 2,320,780
4,800,000 7.25%, 8/15/2004 5,046,816
4,700,000 12.00%, 5/15/2005 6,286,438
1,600,000 6.875%, 5/15/2006 1,649,584
6,500,000 7.00%, 7/15/2006 6,756,750
1,000,000 6.50%, 10/15/2006 1,006,480
2,000,000 13.25%, 5/15/2014 3,077,360
5,000,000 7.25%, 5/15/2016 5,307,450
5,000,000 8.125%, 8/15/2019 5,812,600
7,000,000 8.75%, 8/15/2020 8,667,260
4,500,000 8.00%, 11/15/2021 5,191,200
1,000,000 6.00%, 2/15/2026 915,010
1,500,000 6.75%, 8/15/2026 1,517,265
1,000,000 6.375%, 8/15/2027 969,660
TOTAL 64,582,768
FEDERAL HOME LOAN BANK NOTE--3.1%
2,000,000 7.59%, 3/10/2005 2,127,660
TOTAL U.S. GOVERNMENT OBLIGATIONS (IDENTIFIED COST $64,190,688) 66,710,428
(A)REPURCHASE AGREEMENT--1.8%
1,265,000 BT Securities Corp., 5.580%, dated 8/29/1997, due 9/2/1997
(at amortized cost) 1,265,000
TOTAL INVESTMENTS (IDENTIFIED COST $65,455,688)(B) $ 67,975,428
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
The investment in the repurchase agreement is through
participation in a joint account with other Federated funds.
(b) The cost of investments for federal tax purposes amounts to
$65,461,269. The net unrealized appreciation of investments on a
federal tax basis amounts to $2,514,159 which is comprised of
$2,601,263 appreciation and $87,104 depreciation at August 31,
1997.
Note: The categories of investments are shown as a percentage of net assets
($68,641,146) at August 31, 1997.
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED U.S. GOVERNMENT BOND FUND
AUGUST 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost $65,455,688 and $ 67,975,428
tax cost $65,461,269)
Income receivable 862,251
Receivable for shares sold 74,402
Total assets 68,912,081
LIABILITIES:
Payable for shares redeemed $ 3,240
Income distribution payable 197,043
Payable to Bank 60,505
Accrued expenses 10,147
Total liabilities 270,935
Net Assets for 6,665,757 shares outstanding $ 68,641,146
NET ASSETS CONSIST OF:
Paid in capital $ 64,136,945
Net unrealized appreciation of investments 2,519,740
Accumulated net realized gain on investments 1,984,461
Total Net Assets $ 68,641,146
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$68,641,146 / 6,665,757 shares outstanding $10.30
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED U.S. GOVERNMENT BOND FUND
YEAR ENDED AUGUST 31, 1997
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 5,119,597
EXPENSES:
Investment advisory fee $ 458,492
Administrative personnel and services fee 125,002
Custodian fees 15,262
Transfer and dividend disbursing agent fees and expenses 23,230
Directors'/Trustees' fees 10,402
Auditing fees 14,438
Legal fees 3,091
Portfolio accounting fees 45,427
Shareholder services fee 191,038
Share registration costs 20,942
Printing and postage 10,286
Insurance premiums 3,236
Miscellaneous 7,095
Total expenses 927,941
Waivers--
Waiver of investment advisory fee $ (122,217)
Waiver of shareholder services fee (152,831)
Total waivers (275,048)
Net expenses 652,893
Net investment income 4,466,704
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 2,346,459
Net change in unrealized appreciation of investments 1,724,197
Net realized and unrealized gain on investments 4,070,656
Change in net assets resulting from operations $ 8,537,360
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED U.S. GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 4,466,704 $ 5,540,398
Net realized gain (loss) on investments ($2,322,664 and 2,346,459 2,200,449
$2,200,449 net gains, respectively, as computed for federal tax
purposes)
Net change in unrealized appreciation/depreciation 1,724,197 (5,262,955)
Change in net assets resulting from operations 8,537,360 2,477,892
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (4,466,704) (5,540,398)
Distributions from net realized gains (893,676) (716,127)
Change in net assets resulting from distributions to (5,360,380) (6,256,525)
shareholders
SHARE TRANSACTIONS--
Proceeds from sale of shares 80,772,073 102,051,549
Net asset value of shares issued to shareholders in payment of 2,286,293 1,691,349
distributions declared
Cost of shares redeemed (102,400,293) (139,853,982)
Change in net assets resulting from share transactions (19,341,927) (36,111,084)
Change in net assets (16,164,947) (39,889,717)
NET ASSETS:
Beginning of period 84,806,093 124,695,810
End of period $ 68,641,146 $ 84,806,093
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
FEDERATED U.S. GOVERNMENT BOND FUND
AUGUST 31, 1997
ORGANIZATION
Federated U.S. Government Bond Fund (the "Fund") is registered under
the Investment Company Act of 1940, as amended (the "Act"), as a
diversified, open-end management investment company. The investment
objective of the fund is to pursue total return.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS
U.S. government securities are generally valued at the mean of the
latest bid and asked price as furnished by an independent pricing
service. Short-term securities are valued at the prices provided by an
independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of purchase may
be valued at amortized cost, which approximates fair market value.
REPURCHASE AGREEMENTS
It is the policy of the Fund 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 under repurchase agreement
transactions. Additionally, procedures have been established by the
Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
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 the
guidelines and/or standards reviewed or established by the Board of
Trustees (the "Trustees"). Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and
discount, if applicable, are amortized as required by the Internal
Revenue Code, as amended (the "Code"). Distributions to shareholders
are recorded on the ex-dividend date.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly,
no provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions.
The Fund records when-issued securities on the trade date 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.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual
results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
CAPITAL STOCK
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without
par value).
Transactions in shares were as follows:
YEAR ENDED AUGUST 31,
1997 1996
Shares sold 7,825,538 9,780,023
Shares issued to shareholders in payment of
distributions declared 222,638 162,691
Shares redeemed (9,913,133) (13,340,606)
Net change resulting from share transactions (1,864,957) (3,397,892)
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Management, the Fund's investment adviser (the "Adviser"),
receives for its services an annual investment advisory fee equal to
0.60% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee. The Adviser can
modify or terminate this voluntary waiver at any time at its sole
discretion.
ADMINISTRATIVE FEE
Federated Services Company ("FServ"), under the Administrative
Services Agreement, provides the Fund with administrative personnel
and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received
during the period of the Administrative Services Agreement shall be at
least $125,000 per portfolio and $30,000 per each additional class of
shares.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated
Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25% of
average daily net assets of the Fund for the period. The fee paid to
FSS is used to finance certain services for shareholders and to
maintain shareholder accounts. FSS may voluntarily choose to waive any
portion of its fee. FSS can modify or terminate this voluntary waiver
at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company
("FSSC") serves as transfer and dividend disbursing agent for the
Fund. The fee paid to FSSC is based on the size, type, and number of
accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a
fee. The fee is based on the level of the Fund's average daily net
assets for the period, plus out-of-pocket expenses.
GENERAL
Certain of the Officers and Directors of the Fund are Officers and
Directors or Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities,
for the period ended August 31, 1997, were as follows:
PURCHASES $67,196,474
SALES $88,788,993
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of FEDERATED U.S. GOVERNMENT BOND
FUND:
We have audited the accompanying statement of assets and liabilities
of Federated U.S. Government Bond Fund (a Massachusetts business
trust), including the schedule of portfolio investments, as of August
31, 1997, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two
years in the period then ended, and financial highlights for the
periods presented. These financial statements and financial highlights
are the responsibility of the Fund'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
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
securities owned as of August 31, 1997, by correspondence with the
custodian. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Federated U.S. Government Bond Fund as of August
31, 1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then
ended, and the financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
October 1, 1997
NOTES
NOTES
[Graphic]Federated Investors
Federated U.S. Government Bond Fund
PROSPECTUS
OCTOBER 31, 1997
A No-Load, Open-End, Diversified Management Investment Company
FEDERATED U.S. GOVERNMENT BOND FUND
Federated Investors Tower
Pittsburgh, PA 15222-3779
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, PA
15222-3779
INVESTMENT ADVISER
Federated Management
Federated Investors
Tower Pittsburgh, PA 15222-3779
CUSTODIAN
State Street Bank
and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT
Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
Federated Securities Corp., Distributor
Federated Investors Tower
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 314284100
8100308A (10/97)
[Graphic]
Federated U.S. Government Bond Fund
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of the Fund dated October 31, 1997. This Statement is not a
prospectus. You may request a copy of the prospectus or a copy of this
Statement, if you have received it electronically, free of charge by
calling 1-800-341-7400.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
STATEMENT DATED OCTOBER 31, 1997 [Graphic]Federated Investors
Federated Securities Corp., Distributor Federated Investors Tower
Pittsburgh, PA 15222-3779 1-800-341-7400 www.federatedinvestors.com
Cusip 314284100
8100308B (10/97)
TABLE OF CONTENTS
GENERAL INFORMATION ABOUT THE FUND 1 INVESTMENT OBJECTIVE AND
POLICIES 1 Types of Investments 1 When-Issued and Delayed Delivery
Transactions 1 Repurchase Agreements 2 Lending of Portfolio
Securities 3 Reverse Repurchase Agreements 3 Portfolio Turnover 3
INVESTMENT LIMITATIONS 4 Buying on Margin 4 Issuing Senior Securities
and Borrowing Money 4 Pledging Assets 4 Investing in Real Estate 4
Investing in Commodities 4 Restricted Securities 4 Underwriting 4
Lending Cash or Securities 4 Concentration of Investments 4 Selling
Short 5 Investing in Minerals 5 Diversification of Investments 5
Acquiring Securities 5 Investing in New Issuers 5 Investing in
Issuers whose Securities are owned by Officers and Trustees of the
Fund 5 Investing In Illiquid Securities 5 Writing Covered Call
Options and Purchasing Put Options 5 FEDERATED U.S. GOVERNMENT BOND
FUND MANAGEMENT 6 Fund Ownership 9 Trustee Compensation 10 Trustee
Liability 10 INVESTMENT ADVISORY SERVICES 10 Adviser to the Fund 10
Advisory Fees 11 Other Related Services 11 BROKERAGE TRANSACTIONS 11
OTHER SERVICES 11 Administrative Services 11 Custodian and Portfolio
Accountant 11 Transfer Agent 11 Independent Public Accountants 12
Shareholder Services 12 PURCHASING SHARES 12 Conversion to Federal
Funds 12 DETERMINING NET ASSET VALUE 12 Determining Market Value of
Securities 12 REDEEMING SHARES 13 MASSACHUSETTS PARTNERSHIP LAW 13
EXCHANGING SECURITIES FOR FUND SHARES 13 Tax Consequences 13 TAX
STATUS 13 The Fund's Tax Status 13 Shareholders' Tax Status 13 TOTAL
RETURN 14 YIELD 14 PERFORMANCE COMPARISONS 14 Economic and Market
Information 15 ABOUT FEDERATED INVESTORS 16 Mutual Fund Market 16
APPENDIX 17
GENERAL INFORMATION ABOUT THE FUND
Federated U.S. Government Bond Fund (the "Fund") was established as a
Massachusetts business trust under a Declaration of Trust dated May
24, 1985. On August 30, 1993, shareholders of the Fund approved
changing the name of the Fund from Federated Bond Fund to Federated
U.S. Government Bond Fund.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to pursue total return. The
investment objective cannot be changed without approval of
shareholders. Unless stated otherwise, the investment policies stated
below cannot be changed without shareholder approval.
TYPES OF INVESTMENTS
The Fund invests primarily in debt obligations (i.e. bills, notes, and
bonds) of the U.S. government, its agencies and instrumentalities, with at
least 65% of the value of its total assets being invested under normal
circumstances in U.S. government bonds. This policy may be changed without
shareholder approval. The permitted investments of the Fund include:
* obligations issued or guaranteed by the U.S. government, its agencies
or instrumentalities; and
* domestic issues of corporate debt obligations (rated Aaa, Aa, or
A by Moody's Investors Service, Inc.; AAA, AA, or A by Standard &
Poor's; or AAA, AA, or A by Fitch Investors Service, Inc.).
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by
U.S. government agencies or instrumentalities. These securities are backed
by:
* the full faith and credit of the U.S. Treasury; the issuer's right to
borrow from the U.S. Treasury; the discretionary authority of the U.S.
government to purchase certain obligations of agencies or
instrumentalities; or the credit of the agency or instrumentality
issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
* Farm Credit Banks;
* Banks for Cooperatives;
* Federal Home Loan Banks;
* The Student Loan Marketing Association; and
* Federal National Mortgage Association.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
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, not for investment leverage.
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. Settlement dates may be a
month or more after entering into these transactions and the market
values of the securities purchased may vary from the purchase prices.
No fees or other expenses, other than normal transaction costs, are
incurred. However, liquid assets of the Fund sufficient to make
payment for the securities to be purchased are segregated on the
Fund's records at the trade date. These assets are marked to market
daily and are maintained until the transaction has been settled. As a
matter of policy which can be changed without shareholder approval,
the Fund does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more
than 20% of the total value of its assets. REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities
subject to repurchase agreements and these securities will be 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 (the "Trustees").
OPTION TRANSACTIONS
As a means of reducing fluctuations in the net asset value of
shares of the Fund, the Fund may attempt to hedge all or a portion
of its portfolio through the purchase of put options on portfolio
securities and listed put options on financial futures contracts
for portfolio securities. The Fund may also write covered call
options on its portfolio securities to attempt to increase its
current income. The Fund will only engage in such transactions to
the extent permitted under applicable rules, regulations, or
interpretations thereof of the Office of Thrift Supervision.
The Fund will maintain its positions in securities, option rights,
and segregated cash subject to puts and calls until the options are
exercised, closed, or have expired.
An option position may be closed out only on an exchange which
provides a secondary market for an option of the same series.
PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may purchase listed put options on financial futures
contracts. These options will be used only to protect portfolio
securities against decreases in value resulting from market factors
such as an anticipated increase in interest rates.
A futures contract is a firm commitment by two parties: the seller
who agrees to make delivery of the specific type of instrument
called for in the contract ("going short") and the buyer who agrees
to take delivery of the instrument ("going long") at a certain time
in the future. Financial futures contracts call for the delivery of
particular debt instruments issued or guaranteed by the U.S.
Treasury or by specified agencies or instrumentalities of the U.S.
government. If the Fund could enter into financial futures
contracts directly to hedge its holdings of fixed income
securities, it would enter into contracts to deliver securities at
a predetermined price (i.e., "go short") to protect itself against
the possibility that the prices of its fixed income securities may
decline during the Fund's anticipated holding period.
Unlike entering directly into a futures contract, which requires
the purchaser to buy a financial instrument on a set date at a
specified price, the purchase of a put option on a futures contract
entitles (but does not obligate) its purchaser to decide on or
before a future date whether to assume a short position at the
specified price.
Generally, if the hedged portfolio securities decrease in value
during the term of an option, the related futures contracts will
also decrease in value and the option will increase in value. In
such an event, the Fund will normally close out its option by
selling an identical option. If the hedge is successful, the
proceeds received by the Fund upon the sale of the second option
will be large enough to offset both the premium paid by the Fund
for the original option plus the realized decrease in value of the
hedged securities.
Alternately, the Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures
contract of the type underlying the option (for a price less than
the strike price of the option) and exercise the option. The Fund
would then deliver the futures contract in return for payment of
the strike price.
Currently, the Fund will only enter into futures contracts in order
to exercise put options in its portfolio. If the Fund neither
closes out nor exercises an option, the option will expire on the
date provided in the option contract, and only the premium paid for
the contract will be lost.
PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES
The Fund may purchase put options on portfolio securities to
protect against price movements in particular securities in its
portfolio. A put option gives the Fund, in return for a premium,
the right to sell the underlying security to the writer (seller) at
a specified price during the term of the option.
WRITING COVERED CALL OPTIONS
The Fund may also write covered call options to generate income. As
writer of a call option, the Fund has the obligation upon exercise
of the option during the option period to deliver the underlying
security upon payment of the exercise price.
The Fund may only sell listed call options either on securities
held in its portfolio or on securities which it has the right to
obtain without payment of further consideration (or has segregated
cash in the amount of any such additional consideration).
The Fund will only engage in such transactions to the extent
permitted under applicable Office of Thrift Supervision rules,
regulations, or interpretations thereof.
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. The Fund does not have the right to vote securities
on loan, but would terminate the loan and regain the right to vote if
that were considered important with respect to the investment.
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. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous,
but the ability to enter into reverse repurchase agreements does not
ensure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the
Fund, in a dollar amount sufficient to make payment for the
obligations to be purchased, are segregated at the trade date. The
securities are marked to market daily and maintained until the
transaction is settled.
During the period any reverse repurchase agreements are outstanding,
but only to the extent necessary to assure completion of the reverse
repurchase agreements, the Fund will restrict the purchase of
portfolio instruments to money market instruments maturing on or
before the expiration date of the reverse repurchase agreements.
PORTFOLIO TURNOVER
The Fund will not attempt to set or meet a portfolio turnover rate
since any turnover would be incidental to transactions undertaken in
an attempt to achieve the Fund's investment objective. For the fiscal
years ended August 31, 1997, and 1996, the portfolio turnover rates
were 90%, and 53%, respectively. INVESTMENT LIMITATIONS
BUYING ON MARGIN
The Fund will not purchase any securities on margin but may obtain
such short-term credits as may be necessary for the clearance of
transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may
borrow money and engage in reverse repurchase agreements in amounts up
to one-third of the value of its net assets, including the amounts
borrowed.
The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure or to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while any
such borrowings are outstanding. During the period any reverse
repurchase agreements are outstanding, but only to the extent
necessary to assure completion of the reverse repurchase agreements,
the Fund will restrict the purchase of portfolio instruments to money
market instruments maturing on or before the expiration date of the
reverse repurchase agreements.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except
to secure permitted borrowings. In those cases, it may pledge assets
having a market value not exceeding the lesser of the dollar amounts
borrowed or 10% of the value of total assets at the time of the
borrowing.
INVESTING IN REAL ESTATE
The Fund will not buy or sell real estate, although it may invest in
the securities of companies whose business involves the purchase or
sale of real estate or in securities which are secured by real estate
or interests in real estate.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities. However, the Fund may
purchase put options on portfolio securities and on financial futures
contracts. In addition, the Fund reserves the right to hedge the
portfolio by entering into financial futures contracts and to sell
calls on financial futures contracts. The Fund will notify
shareholders before such a change in its operating policies is
implemented.
RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in
securities subject to restrictions on resale under the federal
securities laws (except for commercial paper issued under Section 4(2)
of the Securities Act of 1933).
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities
in accordance with that section of the prospectus entitled "Lending of
Portfolio Securities."
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets
in any one industry. However, investing in U.S. government obligations
shall not be considered investments in any one industry.
SELLING SHORT
The Fund will not sell securities short unless:
* during the time the short position is open, it owns an equal
amount of the securities sold or securities readily and freely
convertible into or exchangeable, without payment of additional
consideration, for securities of the same issuer as, and equal in
amount to, the securities sold short; and
* not more than 10% of the Fund's net assets (taken at current
value) is held as collateral for such sales at any one time.
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs, although it may purchase the
securities of issuers which invest in or sponsor such programs.
DIVERSIFICATION OF INVESTMENTS
The Fund will not invest more than 5% of the value of its total assets
in any one issuer (except cash and cash items, repurchase agreements,
and U.S. government obligations). The Fund may invest up to 15% of its
total assets in the certificates of deposit of one bank.
The Fund considers the type of bank obligations it purchases as cash
items.
ACQUIRING SECURITIES
The Fund will not purchase securities of a company for the purpose of
exercising control or management.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets
in portfolio instruments of unseasoned issuers, including their
predecessors, that have been in operation for less than three years.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE FUND
The Fund will not purchase or retain the securities of any issuer if
the officers and Trustees of the Fund or its 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 ILLIQUID SECURITIES
The Fund will not invest more than 10% of its net assets in securities
which are illiquid, including repurchase agreements providing for
settlement in more than seven days after notice.
WRITING COVERED CALL OPTIONS AND PURCHASING PUT OPTIONS
The Fund will not write call options on securities unless the
securities are held in the Fund's portfolio or unless the Fund is
entitled to them in deliverable form without further payment or after
segregating cash in the amount of any further payment. The Fund will
not purchase put options on securities unless the securities are held
in the Fund's portfolio.
The above investment limitations cannot be changed without shareholder
approval.
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 use of short sales will allow the Fund to retain certain bonds in
its portfolio longer than it would without such sales. To the extent
the Fund receives the current income produced by such bonds for a
longer period than it might otherwise, the Fund's investment objective
of total return (which includes current income) is furthered.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S. branch
of a domestic bank or savings and loan having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment to be
"cash items."
The Fund did not engage in options transactions or reverse repurchase
agreements, sell securities short, borrow money, or invest in illiquid
securities in excess of 5% of the value of its total assets during the last
fiscal year, and has no present intent to do so in the coming fiscal year.
FEDERATED U.S. GOVERNMENT BOND FUND MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated U.S. Government Bond Fund, and principal
occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds.Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Company.
Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Director, Member
of Executive Committee, University of Pittsburgh; Director or Trustee of the
Funds.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.
William J. Copeland
One PNC Plaza--23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
formerly, Vice Chairman and Director, PNC Bank, N.A., and PNC Bank
Corp.; Director, Ryan Homes, Inc.; Director or Trustee of the Funds.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine, University of Pittsburgh; Medical Director,
University of Pittsburgh Medical Center--Downtown; Member, Board of
Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Director or Trustee of the Funds.
Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Consultant; Former State Representative, Commonwealth of
Massachusetts; formerly, President, State Street Bank and Trust
Company and State Street Boston Corporation; Director or Trustee of
the Funds.
Gregor F. Meyer
203 Kensington Ct.
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Chairman, Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Retired
from the law firm of Miller, Ament, Henny & Kochuba; Director or Trustee of
the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner,
Mollica & Murray; Director or Trustee of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation;
President Emeritus, University of Pittsburgh; Founding Chairman, National
Advisory Council for Environmental Policy and Technology, Federal Emergency
Management Advisory Board and Czech Management Center, Prague; Director or
Trustee of the Funds.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public Relations/Marketing/Conference Planning; Director or Trustee of the
Funds.
Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice
President, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., Federated Global Research Corp.
and Passport Research, Ltd.; Executive Vice President and Director,
Federated Securities Corp.; Trustee, Federated Shareholder Services
Company; Trustee or Director of some of the Funds; President,
Executive Vice President and Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President, Secretary, and Treasurer
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global
Research Corp.; Trustee, Federated Shareholder Services Company;
Director, Federated Services Company; President and Trustee, Federated
Shareholder Services; Director, Federated Securities Corp.; Executive
Vice President and Secretary of the Funds; Treasurer of some of the
Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.
* This Trustee is deemed to be an "interested person" as defined in
the Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board between
meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Arrow Funds; Automated
Government Money Trust; Blanchard Funds; Blanchard Precious Metals
Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG Investor
Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders
Fund, Inc.; Federated ARMs Fund; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income
Securities, Inc.; Federated Government Trust; Federated High Income
Bond Fund, Inc.; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Insurance Series; Federated
Investment Portfolios; Federated Investment Trust; Federated Master
Trust; Federated Municipal Opportunities Fund, Inc.; Federated
Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated
Short-Term Municipal Trust; Federated Short-Term U.S. Government
Trust; Federated Stock and Bond Fund, Inc.; Federated Stock Trust;
Federated Tax-Free Trust; Federated Total Return Series, Inc.;
Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S. Government Securities Fund:
2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income
Securities, Inc.; High Yield Cash Trust; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Term Trust, Inc.--1999; Liberty U.S. Government
Money Market Trust; Liquid Cash Trust; Managed Series Trust; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market
Obligations Trust II; Money Market Trust; Municipal Securities Income
Trust; Newpoint Funds; RIMCO Monument Funds; Targeted Duration Trust;
Tax-Free Instruments Trust; The Planters Funds; The Virtus Funds;
Trust for Financial Institutions; Trust for Government Cash Reserves;
Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; Wesmark Funds; and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding
shares. As of September 30, 1997, the following shareholders of
record owned 5% or more of the shares of the Fund: Charles Schwab &
Co., Inc., San Francisco, California owned approximately 463,990.8550
shares (6.87%); Edward C. Gonzales, TTEE Federated Investors Employee
PSP, Pittsburgh, Pennsylvania owned approximately 396,976.9870 shares
(5.88%); and JATO, National City Bank, Minneapolis, Minnesota owned
approximately 369,728.4400 shares (5.47%). TRUSTEE COMPENSATION
<TABLE> <CAPTION>
AGGREGATE
NAME COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
FUND FUND*# FROM FUND COMPLEX+
<S> <C> <S>
John F. Donahue $0 $0 for the Fund and
Chairman and Trustee 56 other investment companies in the Fund Complex
Thomas G. Bigley $1070 $108,725 for the Fund and
Trustee 56 other investment companies in the Fund Complex
John T. Conroy, Jr. $1177 $119,615 for the Fund and
Trustee 56 other investment companies in the Fund Complex
William J. Copeland $1177 $119,615 for the Fund and
Trustee 56 other investment companies in the Fund Complex
James E. Dowd $1177 $119,615 for the Fund and
Trustee 56 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D. $1070 $108,725 for the Fund and
Trustee 56 other investment companies in the Fund Complex
Edward L. Flaherty, Jr. $1177 $119,615 for the Fund and
Trustee 56 other investment companies in the Fund Complex
Peter E. Madden $1070 $108,725 for the Fund and
Trustee 56 other investment companies in the Fund Complex
Gregor F. Meyer $1070 $108,725 for the Fund and
Trustee 56 other investment companies in the Fund Complex
John E. Murray, Jr. $1070 $108,725 for the Fund and
Trustee 56 other investment companies in the Fund Complex
Wesley W. Posvar $1070 $108,725 for the Fund and
Trustee 56 other investment companies in the Fund Complex
Marjorie P. Smuts $1070 $108,725 for the Fund and
Trustee 56 other investment companies in the Fund Complex
</TABLE>
* Information is furnished for the fiscal year ended August 31, 1997.
# The aggregate compensation is provided for the Fund which is comprised of
one portfolio.
+ The information is provided for the last calendar year.
TRUSTEE LIABILITY
The Fund'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. It is a subsidiary of
Federated Investors. All of the voting securities of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, his wife, and
his son, J. Christopher Donahue.
The adviser shall not be liable to the Fund or any shareholder for any
losses that may be sustained in the purchase, holding, or sale of any
security, or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties imposed upon it by its contract
with the Fund.
ADVISORY FEES
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus. During the
fiscal years ended August 31, 1997, 1996, and 1995, the Fund's adviser
earned $458,492, $582,504, and $846,894, respectively, of which
$122,217, $102,131, and $31,460, respectively, was voluntarily waived
because of undertakings to limit the Fund's expenses.
OTHER RELATED SERVICES
Affiliates of the adviser may, from time to time, provide certain
electronic equipment and software to institutional customers in order
to facilitate the purchase of shares of funds offered by Federated
Securities Corp.
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 utilize 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. Research services provided by brokers and dealers may be
used by the adviser or its affiliates in advising the Fund 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. 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. For the fiscal years ended
August 31, 1997, 1996, and 1995, the Fund paid no brokerage
commissions on brokerage transactions. Although investment
decisions for the Fund are made independently from those of the other
accounts managed by the adviser, investments of the type the Fund may
make may also be made by those other accounts. When the Fund and one
or more other accounts managed by the adviser are prepared to invest
in, or desire to dispose of, the same security, available investments
or opportunities for sales will be allocated in a manner believed by
the adviser to be equitable to each. In some cases, this procedure may
adversely affect the price paid or received by the Fund or the size of
the position obtained or disposed of by the Fund. In other cases,
however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
OTHER SERVICES
ADMINISTRATIVE SERVICES
Federated Services Company, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee
as described in the prospectus. From March 1, 1994, to March 1, 1996,
Federated Administrative Services, a subsidiary of Federated
Investors, served as the Fund's Administrator. For purposes of this
Statement of Additional Information, Federated Services Company and
Federated Administrative Services may hereinafter collectively be
referred to as the "Administrators." For the fiscal years ended August
31, 1997, 1996, and 1995, the Administrators earned $125,002,
$125,000, and $125,000, respectively. CUSTODIAN AND PORTFOLIO
ACCOUNTANT State Street Bank and Trust Company ("State Street
Bank"), Boston, Massachusetts, is custodian for the securities and
cash of the Fund. Federated Services Company, Pittsburgh,
Pennsylvania, provides certain accounting and recordkeeping services
with respect to the Fund's portfolio investments. The fee paid for
this service is based upon the level of the Fund's average net assets
for the period, plus out-of-pocket expenses. TRANSFER AGENT
Federated Services Company, through its registered transfer agent,
Federated Shareholder Services Company, maintains all necessary
shareholder records. For its services, the transfer agent receives a
fee based on the size, type, and number of accounts and transactions
made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, Pennsylvania.
SHAREHOLDER SERVICES
This arrangement permits the payment of fees to Federated Shareholder
Services and to financial institutions 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: providing office space,
equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish
and maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account
cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and
addresses. By adopting the Shareholder Services Agreement, the
Trustees expect that the Fund will benefit by (1) providing personal
services to the shareholders; (2) investing shareholder assets with a
minimum of delay and administrative detail; (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholder's
requests and inquiries concerning their accounts. For the fiscal years
ended August 31, 1997 and 1996, the Fund paid shareholder services
fees in the amounts of $191,038 and $242,710, of which $152,831 and
$194,168, respectively, was waived. PURCHASING SHARES
Shares are sold at their net asset value without a sales charge on
days on which the New York Stock Exchange is open for business. The
procedure for purchasing shares of the Fund is explained in the
prospectus under "Investing in the Fund."
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that
maximum interest may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal
funds before shareholders begin to earn dividends. Federated Services
Company 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 net
asset value is calculated by the Fund are described in the prospectus.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as
follows:
* according to the last sale price on a national securities exchange, if
available;
* in the absence of recorded sales for equity securities, according
to the mean between the current closing bid and asked prices and
for bonds and other fixed income securities as determined by an
independent pricing service;
* for short-term obligations, according to the mean between bid and
asked prices, as furnished by an independent pricing service, or
for short-term obligations with remaining maturities of 60 days
or less at the time of purchase, at amortized cost unless the
Trustees determine this is not fair value; or
* at fair value as determined in good faith by the Trustees.
Prices provided by independent pricing services may be determined
without relying exclusively on quoted prices. Pricing services may
consider:
* yield;
* quality;
* coupon rate;
* maturity;
* type of issue;
* trading characteristics; and
* other market data.
Over-the-counter put options will be valued at the mean between the
bid and the asked prices.
REDEEMING SHARES
The Fund redeems shares at the next computed net asset value after the
Fund receives the redemption request. Redemption procedures are
explained in the prospectus under "Redeeming Shares." Although State
Street Bank 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.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally
liable as partners under Massachusetts law for obligations of the
Fund. To protect its shareholders, the Fund has filed legal documents
with Massachusetts that expressly disclaim the liability of its
shareholders for acts or obligations of the Fund. These documents
require notice of this disclaimer to be given in each agreement,
obligation, or instrument the Fund or its Trustees enter into or sign
on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for the
Fund's obligations, the Fund is required to use its property to
protect or compensate the shareholder. On request, the Fund will
defend any claim made and pay any judgment against a shareholder for
any act or obligation of the Fund. Therefore, financial loss resulting
from liability as a shareholder will occur only if the Fund itself
cannot meet its obligations to indemnify shareholders and pay
judgments against them.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange securities they already own for Fund shares, or
they may exchange a combination of securities and cash for Fund
shares. An investor should forward the securities in negotiable form
with an authorized letter of transmittal to Federated Securities Corp.
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 Fund shares on the day the securities are valued. One share of the
Fund 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 Fund 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, as amended,
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;
* 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
Shareholders will pay federal tax at capital gains rates on
long-term capital gains distributed to them regardless of how long
they have held the Fund shares.
TOTAL RETURN
The Fund's average annual total returns for the one-year, five-year,
and ten-year periods ended August 31, 1997, were 11.13%, 7.28%, and
8.63%, respectively. The average annual total return for 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
net asset value 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 the thirty-day period ended August 31, 1997, was
5.49%. The yield for the Fund is determined by dividing the net
investment income per share (as defined by the Securities and Exchange
Commission) earned by the Fund over a thirty-day period by the
offering price per share of the Fund on the last day of the period.
This value is then annualized using semi-annual compounding. This
means that the amount of income generated during the thirty-day period
is assumed to be generated each month over a 12-month period and is
reinvested every six months. The yield does not necessarily reflect
income actually earned by the Fund because of certain adjustments
required by the Securities and Exchange Commission and, therefore, may
not correlate to the dividends or other distributions paid to
shareholders.
To the extent that financial institutions and broker/dealers charge
fees in connection with services provided in conjunction with an
investment in the Fund, performance will be reduced for those
shareholders paying those fees.
PERFORMANCE COMPARISONS
The Fund's performance depends upon such variables as:
* average portfolio maturity;
* type of instruments in which the portfolio is invested; * changes
in interest rates and market value of portfolio securities; *
changes in Fund expenses; and * various other factors.
The Fund's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net
earnings and offering price per share are factors in the computation
of yield and total return.
Investors may use financial publications and/or indices to obtain a
more complete view of the Fund's performance. When comparing
performance, investors should consider all relevant factors such as
the composition of any index used, prevailing market conditions,
portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may
include:
* LEHMAN BROTHERS GOVERNMENT INDEX is comprised of long term bonds
publicly issued by the U.S. government or its agencies. It is
limited to securities with maturities of 10 years or longer. The
index calculates total return for one-month, three-month,
twelve-month and ten-year periods and year-to-date.
* MERRILL LYNCH LONG TERM GOVERNMENT INDEX is an unmanaged index
comprised of publicly issued U.S. government or U.S. agency debt
obligations with final maturities of 10 years or longer.
* LEHMAN BROTHERS LONG TERM TREASURY INDEX is comprised of U.S. Treasury
securities, publicly issued by the U.S. Treasury. It is limited to
securities with final maturities of 10 years or longer. The index
calculates total returns for one-month, three-month, twelve-month and
ten-year periods and year-to-date.
* LEHMAN BROTHERS 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
quasi-federal corporations; and publicly issued, fixed rate,
non-convertible domestic bonds of companies in industry, public
utilities, and finance. The average maturity of these bonds
approximates nine years. The index calculates total returns for
one-month, three-month, twelve-month, and ten-year periods and
year-to-date.
* SALOMON BROTHERS AAA-AA CORPORATES INDEX calculates total returns
of approximately 775 issues which include long-term, high grade
domestic corporate taxable bonds, rated AAA-AA with maturities of
twelve years or more and companies in industry, public utilities,
and finance.
* LEHMAN BROTHERS LONG TERM CORPORATE INDEX is comprised of
publicly issued fixed rate, non-convertible domestic bonds of
companies in industry, public utilities and finance. All bonds
are at least 10 years in length of maturity and are rated at
least BBB by one of the major rating agencies.
* MERRILL LYNCH 10-15 YEAR U.S. TREASURY INDEX is an unmanaged index
tracking long-term U.S. Treasury securities with maturities between 10
and 15 years. The index is produced by Merrill Lynch, Pierce, Fenner
and Smith, Inc.
* MERRILL LYNCH 10-YEAR U.S. TREASURY INDEX is an unmanaged index
tracking current 10-year Treasury notes. The index is produced by
Merrill Lynch, Pierce, Fenner and Smith, Inc.
* MERRILL LYNCH LONG TERM CORPORATE INDEX is an unmanaged index
comprised of publicly issued non-convertible domestic corporate
debt obligations having both a rating of BBB or higher and a
maturity of 10 years or longer. These quality parameters are
based on composites of rating assigned by Standard and Poor's
Ratings Group and Moody's Investors Service, Inc.
* MERRILL LYNCH CORPORATE & GOVERNMENT MASTER INDEX is an unmanaged
index comprised of approximately 4,821 issues which include
corporate debt obligations rated BBB or better and publicly
issued, non-convertible domestic debt of the U.S. government or
any agency thereof. These quality parameters are based on
composites of ratings assigned by Standard and Poor's Ratings
Group and Moody's Investors Service, Inc. Only notes and bonds
with a minimum maturity of one year are included.
* MERRILL LYNCH CORPORATE MASTER INDEX is an unmanaged index
comprised of approximately 4,256 corporate debt obligations rated
BBB or better.
These quality parameters are based on composites of ratings assigned
by Standard and Poor's Ratings Group and Moody's Investors Service,
Inc. Only bonds with a minimum maturity of one year are included.
* MORNINGSTAR, INC., an independent rating service, is the
publisher of the bi-weekly Mutual Fund Values. Mutual Fund Values
rates more than 1,000 NASDAQ-listed mutual funds of all types,
according to their risk-adjusted returns. The maximum rating is
five stars, and ratings are effective for two weeks.
Advertisements and other sales literature for the Fund may quote total
returns which are calculated or non-standardized base periods. These
total returns also represent the historic change in the value of an
investment in the Fund based on monthly reinvestment of dividends over
a specified period of time.
Advertising and other promotional literature may include charts,
graphs and other illustrations using the Fund's returns, or returns in
general, that demonstrate basic investment concepts such as
tax-deferred compounding, dollar-cost averaging and systematic
investment. In addition, the Fund can compare its performance, or
performance for the types of securities in which it invests, to a
variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions
of economic, financial and political developments and their effect on
the securities market. Such discussions may take the form of
commentary on these developments by Fund portfolio managers and their
views and analysis on how such developments could affect the Funds. In
addition, advertising and sales literature may quote statistics and
give general information about the mutual fund industry, including the
growth of the industry, from sources such as the Investment Company
Institute.
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.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is
reflected in its investment decision making--structured,
straightforward, and consistent. This has resulted in a history of
competitive performance with a range of competitive investment
products that have gained the confidence of thousands of clients and
their customers.
The company's disciplined security selection process is firmly rooted
in sound methodologies backed by fundamental and technical research.
Investment decisions are made and executed by teams of portfolio
managers, analysts, and traders dedicated to specific market sectors.
These traders handle trillions of dollars in annual trading volume.
In the government sector, as of December 31, 1996, Federated
managed 9 mortgage-backed, 5 government/agency, and 17 government
money market mutual funds, with assets approximating $6.3 billion,
$1.7 billion, and $23.6 billion, respectively. Federated trades
approximately $309 million in U.S. government and mortgage-backed
securities daily and places approximately $17 billion in repurchase
agreements each day. Federated introduced the first U.S. government
fund to invest in U.S. government bond securities in 1969. Federated
has been a major force in the short-term and intermediate-term
government markets since 1982 and currently manages nearly $30 billion
in government funds within these maturity ranges.
J. Thomas Madden, Executive Vice President, oversees Federated
Investors' equity and high-yield corporate bond management while
William D. Dawson, Executive Vice President, oversees Federated
Investors' domestic fixed income management. Henry A. Frantzen,
Executive Vice President, oversees the management of Federated
Investors' international and global portfolios.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their
financial goals through mutual funds. These investors, as well as
businesses and institutions, have entrusted over $3.5 trillion to the
more than 6,000 funds available.* Federated Investors, through
its subsidiaries, distributes mutual funds for a variety of investment
applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000
institutional clients nationwide by managing and servicing separate
accounts and mutual funds for a variety of applications, including
defined benefit and defined contribution programs, cash management,
and asset/liability management.
Institutional clients include corporations, pension funds,
tax-exempt entities, foundations/endowments, insurance companies,
and investment and financial advisors. The marketing effort to
these institutional clients is headed by John B. Fisher, President,
Institutional Sales Division.
BANK MARKETING
Other institutional clients include close relationships with more
than 1,600 banks and trust organizations. Virtually all of the
trust divisions of the top 100 bank holding companies use Federated
funds in their clients' portfolios. The marketing effort to trust
clients is headed by Timothy C. Pillion, Senior Vice President,
Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage
firms nationwide--we have over 2,200 broker/dealer and bank
broker/dealer relationships across the country--supported by more
wholesalers than any other mutual fund distributor. Federated's
service to financial professionals and institutions has earned it
high ratings in several surveys performed by DALBAR, Inc. DALBAR is
recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James
F. Getz, President, Federated Securities Corp.
* Source: Investment Company Institute
APPENDIX
STANDARD AND POOR'S CORPORATE BOND RATING DEFINITIONS
AAA --Debt rated "AAA" has the highest rating assigned by Standard &
Poor's Ratings Group. Capacity to pay interest and repay principal is
extremely strong.
AA --Debt rated "AA" has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in small
degree.
A --Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATING DEFINITIONS
AAA --Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA --Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A --Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment some time in the future.
FITCH INVESTORS SERVICE, INC. LONG-TERM DEBT RATING DEFINITIONS
AAA --Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA --Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly
vulnerable to foreseeable future developments, short-term debt of
these issuers is generally rated F-1+.
A --Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes
in economic conditions and circumstances than bonds with higher
ratings. STANDARD AND POOR'S COMMERCIAL PAPER RATING DEFINITIONS
A-1 --This designation indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus (+)
sign designation.
A-2 --Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated A-1.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATING DEFINITIONS
PRIME-1 --Issuers rated PRIME-1 (or related supporting institutions)
have a superior capacity for repayment of short-term promissory
obligations.
PRIME-1 repayment capacity will normally be evidenced by the following
characteristics:
--Leading market positions in well established industries.
--High rates of return on funds employed.
--Conservative capitalization structure with moderate reliance on
debt and ample asset protection.
--Broad margins in earning coverage of fixed financial charges and
high internal cash generation.
--Well-established access to a range of financial markets and assured
sources of alternate liquidity.
PRIME-2 --Issuers rated PRIME-2 (or related supporting institutions)
have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings trends
and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is
maintained.
FITCH INVESTORS SERVICE, INC. SHORT-TERM DEBT RATING DEFINITIONS
F-1+ --Exceptionally Strong Credit Quality. Issues assigned this
rating are regarded as having the strongest degree of assurance for
timely payment.
F-1 --Very Strong Credit Quality. Issues assigned this rating reflect
an assurance of timely payment only slightly less in degree than
issues rated F-1+.
F-2 --Good Credit Quality. Issues carrying this rating have a
satisfactory degree of assurance for timely payment but the margin of
safety is not as great for issues assigned "F-1+" and "F-1" ratings.
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (Filed in Part A);
(b) Exhibits:
(1) Conformed Copy of Declaration of Trust
of the Registrant, as Amended and Restated
(15); (2) Copy of By-Laws of the
Registrant, as Restated and Amended (15);
(3) Not applicable; (4) Copy of Specimen
Certificate for Shares of Beneficial
Interest of the Registrant (14); (5)
Conformed Copy of Investment Advisory
Contract of the Registrant (15); (6)
(i)Conformed Copy of the Distributor's
Contract (15);
(ii)The Registrant hereby
incorporates the conformed copy of
the specimen Mutual Funds Sales
and Service Agreement; Mutual
Funds Service Agreement; and Plan
Trustee/Mutual Funds Service
Agreement from Item 24 (b) (6) of
the Cash Trust Series II
Registration Statement on Form
N-1A, filed with the Commission on
July 24, 1995. (File Numbers
33-38550 and 811-6269).
(7) Not applicable;
(8) (i)Conformed Copy of Custodian Agreement
of the Registrant (15);
(ii)Conformed Copy of State Street Domestic Custody
Fee Schedule; +
(iii)Conformed Copy of Transfer Agency and
Service Agreement of the Registrant (15);
(9) (i)Conformed Copy of the Agreement
for Fund Accounting,
Administrative, Transfer Agency
and Custody Services Procurement
(17); (ii)Conformed Copy of
Shareholder Services Agreement
(15); (iii)The responses described
in Item 24 (b) (6) are hereby
incorporated by reference. (iv)The
Registrant hereby incorporates by
reference the conformed copy of
the Shareholder Services
Sub-Contract between Fidelity and
Federated Shareholder Services
from Item 24(b)(9)(iii) of the
Federated GNMA Trust Registration
Statement on Form N-1A, filed with
the Commission on March 25, 1996.
(File Nos. 2-75670 and 811-3375)
+ All exhibits are being filed electronically.
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 on Form N-1A filed October 26, 1993. (File Nos.
2-98494 and 811-4489)
15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 17 on Form N-1A filed October 25, 1994.
(File Nos. 2-98494 and 811-4489)
17. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 21 on Form N-1A filed October 18, 1996.
(File Nos. 2-98494 and 811-4489)
<PAGE>
(10) Conformed Copy of Opinion and Consent of Counsel as to legality
of shares being registered (15);
(11) Conformed Copy of Consent of Independent Public Accountants;+
(12) Not applicable;
(13) Conformed Copy of Initial Capital Understanding (15);
(14) Not applicable;
(15) Not applicable;
(16) Copy of Schedule for Computation of Fund Performance Data(16);
(17) Copy of Financial Data Schedule;+
(18) Not applicable;
(19) Conformed Copy of Power of Attorney;+
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 SEPTEMBER 30, 1997
-------------- ------------------------
Shares of Beneficial Interest 1,009
(no par value)
Item 27. Indemnification: (11)
+ All exhibits are being filed electronically.
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 filed on Form N-1A October 23, 1989
(File Nos. 2-98484 and 911-8489)
15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 17 on Form N-1A filed October 25, 1994.
(File Nos. 2-98494 and 811-4489)
16. Response in incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed October 24, 1995.
(File Nos. 22-98484 and 811-4489)
<PAGE>
Item 28. Business and Other Connections of Investment Adviser:
For a description of the other business of the
investment adviser, see the section entitled "Fund
Information"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 "Federated U.S.
Government Bond Fund Management." The remaining Trustee
of the investment adviser, his position with the
investment adviser, and, in parentheses, his principal
occupation is: Mark D. Olson (Partner, Wilson, Halbrook
& Bayard), 107 W. Market Street, Georgetown, Delaware
19947.
The remaining Officers of the investment adviser are:
Executive Vice Presidents: William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden
Senior Vice Presidents: Peter R. Anderson
Drew J. Collins
Jonathan C. Conley
Deborah A. Cunningham
Mark E. Durbiano
J. Alan Minteer
Susan M. Nason
Mary Jo Ochson
Vice Presidents: J. Scott Albrecht
Joseph M. Balestrino
Randall S. Bauer
David F. Belton
David A. Briggs
Kenneth J. Cody
Alexandre de Bethmann
Michael P. Donnelly
Linda A. Duessel
Donald T. Ellenberger
Kathleen M. Foody-Malus
Thomas M. Franks
Edward C. Gonzales
James E. Grefenstette
Susan R. Hill
Stephen A. Keen
Robert K. Kinsey
Robert M. Kowit
Jeff A. Kozemchak
Marian R. Marinack
Sandra L. McInerney
Robert J. Ostrowski
Charles A. Ritter
Scott B. Schermerhorn
Frank Semack
Aash M. Shah
William F. Stotz
Tracy P. Stouffer
Edward J. Tiedge
Paige M. Wilhelm
Jolanta M. Wysocka
<PAGE>
Assistant Vice Presidents: Todd A. Abraham
Stefanie L. Bachhuber
Arthur J. Barry
Micheal W. Casey
Robert E. Cauley
Donna M. Fabiano
John T. Gentry
William R. Jamison
Constantine Kartsonsas
Robert M. Marsh
Joseph M. Natoli
Keith J. Sabol
Michael W. Sirianni
Gregg S. Tenser
Secretary: Stephen A. Keen
Treasurer: Thomas R. Donahue
Assistant Secretaries: Thomas R. Donahue
Richard B. Fisher
Christine I. McGonigle
Assistant Treasurer: Richard B. Fisher
The business address of each of the Officers of the
investment adviser is Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779. These individuals
are also officers of a majority of the investment
advisers to the Funds listed in Part B of this
Registration Statement.
ITEM 29. PRINCIPAL UNDERWRITERS:
(a) Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the following
open-end investment companies, including the Registrant:
111 Corcoran Funds; Arrow Funds; Automated Government Money Trust;
Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust
Series II; Cash Trust Series, Inc.; DG Investor Series; Edward D.
Jones & Co. Daily Passport Cash Trust; Federated Adjustable Rate U.S.
Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Equity Funds; Federated Equity Income
Fund, Inc.; Federated Fund for U.S. Government Securities, Inc.;
Federated GNMA Trust; Federated Government Income Securities, Inc.;
Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust;
Federated Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Insurance Series; Federated Investment Portfolios;
Federated Investment Trust; Federated Master Trust; Federated
Municipal Opportunities Fund, Inc.; Federated Municipal Securities
Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and
Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust;
Federated Total Return Series, Inc.; Federated U.S. Government Bond
Fund; Federated U.S. Government Securities Fund: 1-3 Years; Federated
U.S. Government Securities Fund: 2-5 Years; Federated U.S. Government
Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; First
Priority Funds; Fixed Income Securities, Inc.; High Yield Cash Trust;
Independence One Mutual Funds; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Marshall Funds, Inc.; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market
Obligations Trust II; Money Market Trust; Municipal Securities Income
Trust; Newpoint Funds; Peachtree Funds; RIMCO Monument Funds;
SouthTrust Vulcan Funds; Star Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; The Planters Funds; The Virtus Funds; The Wachovia
Funds; The Wachovia Municipal Funds; Tower Mutual Funds; Trust for
Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury
Obligations; Vision Group of Funds, Inc.; and World Investment Series,
Inc.
Federated Securities Corp. also acts as principal underwriter for the following
closed-end investment company: Liberty Term Trust, Inc.- 1999.
<PAGE>
<TABLE>
<CAPTION>
(b)
(1) (2) (3)
<S> <C> <C>
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Richard B. Fisher Director, Chairman, Chief
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice
Federated Investors Tower President, Federated,
Pittsburgh, PA 15222-3779 Securities Corp.
Thomas R. Donahue Director, Assistant Secretary
Federated Investors Tower and Assistant Treasurer
Pittsburgh, PA 15222-3779 Federated Securities Corp
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
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
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian G. Kelly Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas A. Peters III 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
Richard A. Recker 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
George D. Riedel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward L. Smith 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
John A. Staley 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
Richard Suder Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
John F. Wallin 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
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
</TABLE>
(c) Not applicable
Item 30. LOCATION OF ACCOUNTS AND RECORDS:
All accounts and records required to be maintained
by Section 31(a) of the Investment Company Act of
1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following
locations:
REGISTRANT Federated Investors Tower
Pittsburgh, PA 15222-3779
FEDERATED SHAREHOLDER
SERVICES COMPANY Federated Investors Tower
("Transfer Agent, Dividend Boston, MA 02266-8600
Disbursing Agent and Portfolio
Recordkeeper")
FEDERATED SERVICES COMPANY Federated Investors Tower
("Administrator") Pittsburgh, PA 15222-3779
FEDERATED MANAGEMENT Federated Investors Tower
("Adviser") Pittsburgh, PA 15222-3779
STATE STREET BANK AND TRUST COMPANY P.O. Box 8600
("Custodian") Boston, MA 02266-8600
Item 31. Management Services: Not applicable.
Item 32. Undertakings: Registrant hereby undertakes to comply
with the provisions of Section 16(c) of the 1940 Act with
respect to the removal of Trustees and the calling of
special shareholder meetings by shareholders.
Registrant hereby undertakes to furnish each person to whom a
Prospectus is delivered with a copy of the Registrant's latest Annual Report to
Shareholders upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant, FEDERATED U.S.
GOVERNMENT BOND FUND, 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, thereto duly authorized, in the City of
Pittsburgh and Commonwealth of Pennsylvania, on the 20th day of
October, 1997.
FEDERATED U.S. GOVERNMENT BOND FUND
BY: /s/ Karen M. Brownlee
Karen M. Brownlee, Assistant Secretary
Attorney in Fact for John F. Donahue
October 20, 1997
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/ Karen M. Brownlee
Karen M. Brownlee Attorney In Fact October 20, 1997
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Glen R. Johnson* President
John W. McGonigle* Treasurer, Executive
Vice President and Secretary
(Principal Financial and
Accounting Officer)
Thomas G. Bigley* Trustee
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
John E. Murray, Jr.* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
Exhibit 8(iii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
STATE STREET
DOMESTIC CUSTODY
FEE SCHEDULE
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
Per Fund .25 Basis Points
Wire Fees $3.00 per wire
Settlements:
oEach DTC Transaction $5.00
oEach Federal Reserve Book Entry Transaction $3.75
oEach Repo Transaction (All Repo) $3.75
oEach Physical Transaction (NY/Boston, Private Placement) $15.00
oEach Option Written/Exercised/Expired $18.75
Each Book Entry Muni (Sub-custody) Transaction $15.00
oGovernment Paydowns $5.00
oMaturity Collections $8.00
oPTC Transactions $6.00
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. Balance Credit
MUNICIPAL FUNDS
A balance credit equal to 75% of the average demand deposit account
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 the month's custodian bill.
TRANSFER AGENT
A balance credit equal to 100% of the average balance in the transfer
agent demand deposit accounts, less the reserve requirement and
applicable related expenses, times 75% of the 30 average Fed
Funds Rate.
IV. Payment
The above fees will be charged against the funds' custodian checking
account thirty (30) days after the invoice is mailed to the funds'
offices.
V. Term of Contract
The parties agree that this fee schedule shall become
effective January 1, 1997.
FEDERATED SERVICES COMPANY STATE STREET
BY: /S/ DOUGLAS L. HEIN BY: /S/ MICHAEL E. HAGERTY
TITLE: SENIOR VICE PRESIDENT TITLE: VICE PRESIDENT
DATE: APRIL 15, 1997 DATE: APRIL 8, 1997
------------------------- -------------
Exhibit (11) under Form N-1A
Exhibit 23 under Item 601/Reg S-K
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use
in Post-Effective Amendment No. 22 to Form N-1A Registration Statement
of Federated U.S. Government Bond Fund of our report dated October 1,
1997, on the financial statements as of August 31, 1997, of Federated
U.S. Government Bond Fund, included in or made a part of this
registration statement.
By: /s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
October 20, 1997
Exhibit 19 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes
and appoints the Secretary and Assistant Secretary of FEDERATED U.S.
GOVERNMENT BOND FUND and the Deputy General Counsel of Federated
Services Company, and each of them, their true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution for them and in their names, place and stead, in any
and all capacities, to sign any and all documents to be filed with the
Securities and Exchange Commission pursuant to the Securities Act of
1933, the Securities Exchange Act of 1934 and the Investment Company
Act of 1940, by means of the Securities and Exchange Commission's
electronic disclosure system known as EDGAR; and to file the same,
with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and
authority to sign and perform each and every act and thing requisite
and necessary to be done in connection therewith, as fully to all
intents and purposes as each of them might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
SIGNATURES TITLE DATE
/S/ JOHN F. DONAHUE Chairman and Trustee October 2, 1997
- -----------------------------
John F. Donahue (Chief Executive Officer)
/S/ GLEN R. JOHNSON President October 2, 1997
- -----------------------------
Glen R. Johnson
/S/ JOHN W. MCGONIGLE Treasurer, Executive Vice October 2, 1997
- -----------------------------
John W. McGonigle President and Secretary (Principal Financial and
Accounting Officer)
/S/ THOMAS G. BIGLEY Trustee October 2, 1997
- -----------------------------
Thomas G. Bigley
/S/ JOHN T. CONROY, JR. Trustee October 2, 1997
- -----------------------------
John T. Conroy, Jr.
<PAGE>
SIGNATURES TITLE DATE
/S/ WILLIAM J. COPELAND Trustee October 2, 1997
- -----------------------------
William J. Copeland
/S/ JAMES E. DOWD Trustee October 2, 1997
- -----------------------------
James E. Dowd
/S/ LAWRENCE D. ELLIS, M.D. Trustee October 2, 1997
Lawrence D. Ellis, M.D.
/S/ EDWARD L. FLAHERTY, JR. Trustee October 2, 1997
- -----------------------------
Edward L. Flaherty, Jr.
/S/ PETER E. MADDEN Trustee October 2, 1997
- -----------------------------
Peter E. Madden
/S/ GREGOR F. MEYER Trustee October 2, 1997
- -----------------------------
Gregor F. Meyer
/S/ JOHN E. MURRAY, JR. Trustee October 2, 1997
- -----------------------------
John E. Murray, Jr.
/S/ WESLEY W. POSVAR Trustee October 2, 1997
- -----------------------------
Wesley W. Posvar
/S/ MARJORIE P. SMUTS Trustee October 2, 1997
- -----------------------------
Marjorie P. Smuts
Sworn to and subscribed before me this 2nd day of October, 1997
/S/ MARIE M. HAMM
Notarial Seal
Marie M. Hamm, Notary Public
Plum Boro, Allegheny County
My Commission Expires Oct. 9, 2000
Member, Pennsylvania Association of Notaries
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> Federated U.S. Government Bond Fund
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Aug-31-1997
<PERIOD-END> Aug-31-1997
<INVESTMENTS-AT-COST> 65,455,688
<INVESTMENTS-AT-VALUE> 67,975,428
<RECEIVABLES> 936,653
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 68,912,081
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 270,935
<TOTAL-LIABILITIES> 270,935
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 64,136,945
<SHARES-COMMON-STOCK> 6,665,757
<SHARES-COMMON-PRIOR> 7,468,116
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,984,461
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,519,740
<NET-ASSETS> 68,641,146
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,119,597
<OTHER-INCOME> 0
<EXPENSES-NET> 652,893
<NET-INVESTMENT-INCOME> 4,466,704
<REALIZED-GAINS-CURRENT> 2,346,459
<APPREC-INCREASE-CURRENT> 1,724,197
<NET-CHANGE-FROM-OPS> 8,537,360
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,466,704
<DISTRIBUTIONS-OF-GAINS> 893,676
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,825,538
<NUMBER-OF-SHARES-REDEEMED> 9,913,133
<SHARES-REINVESTED> 222,638
<NET-CHANGE-IN-ASSETS> 16,164,947
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,904,891
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 458,492
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 927,941
<AVERAGE-NET-ASSETS> 75,854,276
<PER-SHARE-NAV-BEGIN> 9.940
<PER-SHARE-NII> 0.600
<PER-SHARE-GAIN-APPREC> 0.480
<PER-SHARE-DIVIDEND> 0.600
<PER-SHARE-DISTRIBUTIONS> 0.120
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.300
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
