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. 25 .............................. X
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 23 ............................................ X
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FEDERATED U.S. GOVERNMENT BOND FUND
(Exact Name of Registrant as Specified in Charter)
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
X on October 31, 1999 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.
Copies to:
Matthew J. Maloney, Esquire
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037
PROSPECTUS
Federated U.S. Government Bond Fund
A mutual fund seeking to pursue total return by investing primarily in U.S.
government bonds.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
OCTOBER 31, 1999
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the
Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 6
What Do Shares Cost? 6
How is the Fund Sold? 6
How to Purchase Shares 7
How to Redeem Shares 8
Account and Share Information 9
Who Manages the Fund? 10
Financial Information 11
Report of Independent Public Accountants 22
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund's investment objective 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 strategies and policies described in this prospectus. The
Fund's total return will consist of two components: (1) changes in the market
value of its portfolio securities (both realized and unrealized appreciation),
and (2) income received from its portfolio securities. The Fund expects that,
under normal market conditions, income will comprise the largest component of
its total return.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests primarily in a portfolio of direct obligations of the U.S.
government, its agencies and instrumentalities. The Fund maintains a dollar
weighted average portfolio duration that is within 20 percent of the weighted
average portfolio duration of the Merrill Lynch 10+ Year Treasury Index. This
index includes U.S. Treasury securities with maturities greater than ten years.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factor that may reduce the Fund's returns
is changes in prevailing interest rates. An increase in interest rates may
result in a decrease in the value of fund shares. Interest rate changes have a
greater effect on the price of fixed income securities with longer durations.
Duration measures the price sensitivity of a fixed income security to changes in
interest rates.
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 or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency.
RISK/RETURN BAR CHART AND TABLE
[The graphic presentation displayed here consists of a bar chart representing
the annual total returns of Federated U.S. Government Bond Fund as of the
calendar year-end for each of ten years. The `y' axis reflects the "% Total
Return" beginning with "-10.00%" and increasing in increments of 10.00% up to
30.00%. The `x' axis represents calculation periods for the last ten calendar
years of the Fund, beginning with the earliest year. The light gray shaded chart
features ten distinct vertical bars, each shaded in charcoal, and each visually
representing by height the total return percentages for the calendar year stated
directly at its base. The calculated total return percentage for the Fund for
each calendar year is stated directly at the top of each respective bar, for the
calendar years 1989 through 1998, The percentages noted are: 13.71%, 8.76%,
13.61%, 8.19%, 13.36%, (6.23%), 25.82%, (0.28%), 11.74%, and 11.42%.]
The bar chart shows the variability of the Fund's total returns on a calendar
year-end basis.
The Fund's shares are not sold subject to a sales charge (load). The total
returns displayed above are based upon net asset value.
The Fund's total return for the nine-month period from January 1, 1999, to
September 30, 1999, was (6.10%).
Within the period shown in the Chart, the Fund's highest quarterly return was
9.28% (quarter ended June 30, 1995). Its lowest quarterly return was (5.14%)
(quarter ended March 31, 1996).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Fund's Average Annual Total Returns for the
calendar periods ended December 31, 1998. The table shows the Fund's total
returns averaged over a period of years relative to the Merrill Lynch 10+ Year
Treasury Index ("ML10+TI") and the Merrill Lynch 10-Year Treasury Index
("ML10TI"), broad based market indexes. The ML10+TI is an unmanaged index which
includes U.S. Treasury Securities with maturities of greater than 10 years. The
ML10TI is an unmanaged index which tracks the current 10-Year Treasury Note. The
Fund's Adviser has elected to change the benchmark index from the ML10TI to the
ML10+TI because it is more representative of the securities in which the Fund
invests. Total returns for the indexes shown do not reflect sales charges,
expenses or other fees that the SEC requires to be reflected in the Fund's
performance. Indexes are unmanaged, and it is not possible to invest directly in
an index.
<TABLE>
<CAPTION>
CALENDAR PERIOD FUND ML10+TI ML10TI
<S> <C> <C> <C>
1 Year 11.42% 13.55% 12.71%
5 Years 7.93% 9.34% 7.16%
10 Years 9.70% 11.48% 9.45%
</TABLE>
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
returns.
What are the Fund's Fees and Expenses?
FEDERATED U.S. GOVERNMENT BOND FUND
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
<S> <C>
Fees Paid Directly From
Your Investment
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) None
Maximum Deferred Sales
Charge (Load) (as a
percentage of original
purchase price or
redemption proceeds,
as applicable) None
Maximum Sales Charge
(Load) Imposed on
Reinvested Dividends (and
other Distributions) (as a
percentage of
offering price) None
Redemption Fee (as a
percentage of amount
redeemed, if applicable) None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (Before Waiver and Reduction) 1 Expenses That are
Deducted From Fund Assets (as a percentage of average net assets)
Management Fee 2 0.60%
Distribution (12b-1) Fee None
Shareholder Services Fee 3 0.25%
Other Expenses 0.27%
Total Annual Fund
Operating Expenses 1.12%
1 Although not contractually obligated to do so, the adviser and shareholder
services provider waived certain amounts. These are shown below along with the
net expenses the Fund actually paid for the fiscal year ended August 31, 1999.
Total Waiver of Fund
Expenses 0.27%
Total Actual Annual Fund
Operating Expenses (after
waiver and reduction) 0.85%
2 The Adviser voluntarily waived a portion of the management fee. The Adviser can
terminate this voluntary waiver at any time. The management fee paid by the Fund
(after the voluntary waiver) was 0.53% for the year ended August 31, 1999.
3 The shareholder services fee has been voluntarily reduced. This voluntary
reduction can be terminated at any time. The shareholder services fee paid by the
Fund (after the voluntary reduction) was 0.05% for the year ended August 31,
1999.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses are BEFORE WAIVERS as shown in the table and remain
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C>
1 Year $ 114
3 Years $ 356
5 Years $ 617
10 Years $ 1,363
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests at least 65% of the value of its total assets, under normal
market conditions, in U.S. government bonds. As a matter of operating policy,
the Fund invests 100% of its assets in a portfolio of direct obligations of the
U.S. government, its agencies and instrumentalities. The Fund's adviser actively
manages its portfolio, seeking to limit the interest rate risk taken by the Fund
while selecting investments that should offer enhanced returns based upon the
adviser's interest rate outlook. A description of the various types of
securities in which the Fund invests, and their risks, immediately follows this
strategy section.
The adviser manages the Fund's interest rate risk by limiting the
dollar-weighted average duration of its portfolio securities. "Duration"
measures the sensitivity of a security's price to changes in interest rates. The
greater a portfolio's average duration, the greater the change in the
portfolio's value in response to a change in market interest rates. As a matter
of investment policy, under normal market conditions, the adviser limits the
average duration of the portfolio to within 20% of the duration of the Merrill
Lynch 10+ Year Treasury Index (the "Index"). This Index includes all U.S.
Treasury notes and bonds with maturities of greater than ten years.
The adviser uses three principal methods to enhance the portfolio's returns as
compared to the Index. First, the adviser tries to extend the portfolio's
average duration when it expects interest rates to fall and shorten the duration
when it expects interest rates to rise. This method seeks to enhance the returns
from favorable interest rate changes and reduce the effect of unfavorable
changes.
Second, in constructing a portfolio with a targeted average duration, the
adviser tries to combine individual portfolio securities with different
durations to take advantage of relative changes in interest rates. Relative
changes in interest rates may occur whenever longer-term interest rates move
more, less or in a different direction than shorter-term interest rates. As a
general matter, the adviser typically structures the portfolio in one of the
following ways:
* A "bulleted" portfolio structure consists primarily of securities with
durations close to the portfolio's average duration. The adviser may use this
structure, for example, when it expects the difference between longer term and
shorter term interest rates to increase.
* A "barbelled" portfolio structure consists primarily of securities with
durations above and below the average duration. The adviser may use this
structure, for example, when it expects the difference between longer term and
shorter term interest rates to decrease.
* A "laddered" portfolio structure consists of securities with durations above,
below, and at the average duration. The adviser may use this structure, for
example, when it expects longer term and shorter term interest rates to change
by approximately the same amount.
Third, the adviser tries to obtain securities issued by agencies and
instrumentalities of the U.S. that it expects to provide better returns than
U.S. Treasury securities of comparable duration. Through ongoing relative value
analysis, the adviser generally compares current yield differences of securities
to their historical and expected yield differences.
The adviser's interest rate outlook is the most important factor in selecting
the methods used to manage the Fund's portfolio. The adviser formulates its
interest rate outlook by analyzing a variety of factors such as:
* current and expected U.S. economic growth;
* current and expected interest rates and inflation;
* the Federal Reserve Board's monetary policy; and
* changes in the supply of or demand for U.S. government securities.
In selecting individual securities, the adviser analyzes how the security should
perform in response to expected interest rate changes as compared to other
securities of comparable risk.
As a consequence of this strategy, most of the Fund's portfolio consists of
securities paying interest exempt from state taxation. The Fund also invests in
repurchase agreements for U.S. government securities. Although repurchase
agreements are collateralized by the same types of securities in which the Fund
invests, income from repurchase agreements is not exempt from state taxation.
The Fund uses repurchase agreements to invest cash balances and shorten
duration, so the amount of state taxable income may vary with market conditions.
See "Tax Information" for an explanation of how your investment in the Fund may
be taxed.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash and shorter-term debt securities and similar
obligations. It may do this to minimize potential losses and maintain liquidity
to meet shareholder redemptions during adverse market conditions. This may cause
the Fund to give up greater investment returns to maintain the safety of
principal, that is, the original amount invested by shareholders.
What are the Principal Securities in Which the Fund Invests?
The Fund invests in the following types of U.S. government securities:
U.S. TREASURY SECURITIES
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.
U.S. GOVERNMENT AGENCY SECURITIES
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority.
INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES
The Adviser will determine whether a security is investment grade based upon the
credit ratings given by one or more nationally recognized rating services. For
example, Standard and Poor's, a rating service, assigns ratings to investment
grade securities (AAA, AA, A, and BBB) based on their assessment of the
likelihood of the issuer's inability to pay interest or principal (default) when
due on each security. Lower credit ratings correspond to higher credit risk. If
a security has not received a rating, the Fund must rely entirely upon the
Adviser's credit assessment that the security is comparable to investment grade.
What are the Specific Risks of Investing in the Fund?
INTEREST RATE RISKS
* Prices of fixed income securities rise and fall in response to changes in
the interest rate paid by similar securities. Generally, when interest
rates rise, prices of fixed income securities fall. However, market
factors, such as the demand for particular fixed income securities, may
cause the price of certain fixed income securities to fall while the
prices of other securities rise or remain unchanged. Due to the Fund's
average duration policy, it is expected to have more interest rate risk
than Federated U.S. Government Securities Fund: 1-3 Years, Federated
U.S. Government Securities Fund: 2-5 Years or Federated U.S. Government
Securities Fund: 5-10 Years, all of which have shorter average durations
than the Fund.
* Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of a
fixed income security to changes in interest rates.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. When the Fund receives your transaction request in proper form (as
described in the prospectus) it is processed at the next calculated net asset
value (NAV). The Fund does not charge a front-end sales charge. NAV is
determined at the end of regular trading (normally 4:00 p.m. Eastern time) each
day the NYSE is open. The Fund generally values fixed income securities at the
last sale price on a national securities exchange, if available, otherwise, as
determined by an independent pricing service.
The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.
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 is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to institutions or to individuals, directly or through
investment professionals.
The Distributor and its affiliates may pay out of their assets other
amounts (including items of material value) to investment professionals
for marketing and servicing Shares. The Distributor is a subsidiary of
Federated Investors, Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
* Establish an account with the investment professional; and
* Submit your purchase order to the investment professional before the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will receive
the next calculated NAV if the investment professional forwards the order to the
Fund on the same day and the Fund receives payment within one business day. You
will become the owner of Shares and receive dividends when the Fund receives
your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
* Establish your account with the Fund by submitting a completed New
Account Form; and
* Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares and your Shares will be priced at the next
calculated NAV after the Fund receives your wire or your check. If your check
does not clear, your purchase will be canceled and you could be liable for any
losses or fees incurred by the Fund or Federated Shareholder Services Company,
the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the next calculated NAV after the Fund receives
the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
RETIREMENT INVESTMENTS
You may purchase Shares as retirement investments (such as qualified plans and
IRAs or transfer or rollover of assets). Call your investment professional or
the Fund for information on retirement investments. We suggest that you discuss
retirement investments with your tax adviser. You may be subject to an annual
IRA account fee.
How to Redeem Shares
You should redeem Shares:
* through an investment professional if you purchased Shares through an
investment professional; or
* directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). The redemption
amount you will receive is based upon the next calculated NAV after the Fund
receives the order from your investment professional.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before the end of regular trading on the NYSE (normally 4:00 p.m.
Eastern time) you will receive a redemption amount based on that day's NAV.
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
You will receive a redemption amount based on the next calculated NAV after the
Fund receives your written request in proper form.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
* Fund Name and Share Class, account number and account registration;
* amount to be redeemed; and
* signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES
Signatures must be guaranteed if:
* your redemption will be sent to an address other than the address of
record;
* your redemption will be sent to an address of record that was changed
within the last 30 days; or
* a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
* an electronic transfer to your account at a financial institution that is
an ACH member; or
* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
* to allow your purchase to clear;
* during periods of market volatility; or
* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
REDEMPTIONS FROM RETIREMENT ACCOUNTS
In the absence of your specific instructions, 10% of the value of your
redemption from a retirement account in the Fund may be withheld for taxes. This
withholding only applies to certain types of retirement accounts.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
CONFIRMATIONS AND ACCOUNT STATEMENTS
You will receive confirmation of purchases and redemptions. In addition, you
will receive periodic statements reporting all account activity, including
dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
In addition, the Fund pays any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
If you purchase Shares just before a Fund declares a capital gain distribution,
you will pay the full price for the Shares and then receive a portion of the
price back in the form of a taxable distribution, whether or not you reinvest
the distribution in Shares. Therefore, you should consider the tax implications
of purchasing Shares shortly before the Fund declares a capital gain. Contact
your investment professional or the Fund for information concerning when
dividends and capital gains will be paid.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, non- retirement
accounts may be closed if redemptions or exchanges cause the account balance to
fall below the minimum initial investment amount. Before an account is closed,
you will be notified and allowed 30 days to purchase additional Shares to meet
the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.
Fund distributions are expected to be primarily dividends. Redemptions are
taxable sales. Please consult your tax adviser regarding your federal, state and
local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 175 mutual
funds and separate accounts, which totaled approximately $111 billion in assets
as of December 31, 1998. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.
THE FUND'S PORTFOLIO MANAGERS ARE:
SUSAN M. NASON
Susan M. Nason has been the Fund's portfolio manager since 1994. She is
Vice President of the Fund. Ms. Nason joined Federated in 1987 and has been
a Senior Portfolio Manager and Senior Vice President of the Fund's Adviser
since 1997. Ms. Nason served as a Portfolio Manager and Vice President of
the Adviser from 1993 to 1997. Ms. Nason is a Chartered Financial Analyst
and received her M.S.I.A. concentrating in Finance from Carnegie Mellon
University.
DONALD T. ELLENBERGER
Donald T. Ellenberger has been the Fund's portfolio manager since 1997.
Mr. Ellenberger joined Federated in 1996 as a Portfolio Manager and a Vice
President of a Federated advisory subsidiary. He has been a Vice President
of the Fund's Adviser since 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.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.60% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
YEAR 2000 READINESS
The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999 or experience other date-related problems. The Year 2000 problem may cause
systems to process information incorrectly and could disrupt businesses, such as
the Fund, that rely on computers.
While it is impossible to determine in advance all of the risks to the Fund, the
Fund could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.
The Fund's service providers are making changes to their computer systems to fix
any Year 2000 problems. In addition, they are working to gather information from
third-party providers to determine their Year 2000 readiness.
Year 2000 problems would also increase the risks of the Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities the Fund
may purchase. The financial impact of these issues for the Fund is still being
determined. There can be no assurance that potential Year 2000 problems would
not have a material adverse effect on the Fund.
Financial Information
FINANCIAL HIGHLIGHTS
The following Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.
This information has been audited by Arthur Andersen LLP, whose report, along
with the Fund's audited financial statements, is included in this prospectus.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 22.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31 1999 1998 1997
1996 1995
<S> <C> <C> <C> <C>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.00 $10.30 $ 9.94
$10.45 $ 9.72
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.52 0.56 0.60
0.60 0.60
Net realized and unrealized gain (loss)
on investments (0.98) 1.01 0.48
(0.43) 0.73
TOTAL FROM INVESTMENT OPERATIONS (0.46) 1.57 1.08
0.17 1.33
LESS DISTRIBUTIONS:
Distributions from net investment income (0.52) (0.56) (0.60)
(0.60) (0.60)
Distributions from net realized gain on investments (0.23) (0.31) (0.12)
(0.08) -
TOTAL DISTRIBUTIONS (0.75) (0.87) (0.72)
(0.68) (0.60)
NET ASSET VALUE, END OF PERIOD $ 9.79 $11.00 $10.30 $
9.94 $10.45
TOTAL RETURN 1 (4.52% ) 15.94% 11.13%
1.37% 14.34%
RATIOS TO AVERAGE NET ASSETS:
Expenses 2 1.12% 1.18% 1.21%
1.16% 1.07%
Net investment income 2 4.70% 4.96% 5.49%
5.40% 5.88%
Expenses (after waivers) 0.85% 0.85% 0.85%
0.85% 0.85%
Net investment income (after waivers) 4.97% 5.29% 5.85%
5.71% 6.10%
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $123,189 $116,704 $68,641 $84,806
$124,696
Portfolio turnover 100% 67% 90%
53% 37%
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
See Notes which are an integral part of the Financial Statements
Portfolio of Investments
AUGUST 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
U.S. GOVERNMENT
OBLIGATIONS-98.6%
U.S. TREASURY BONDS-83.1%
$ 2,750,000 9.250%, 2/15/2016 $ 3,517,388
1,000,000 7.250%, 5/15/2016 1,078,640
4,000,000 8.750%, 5/15/2017 4,944,000
5,300,000 8.875%, 8/15/2017 6,631,943
1,500,000 9.125%, 5/15/2018 1,924,110
2,500,000 8.875%, 2/15/2019 3,153,750
5,000,000 8.125%, 8/15/2019 5,909,350
5,000,000 8.500%, 2/15/2020 6,131,300
4,500,000 8.750%, 5/15/2020 5,652,855
7,000,000 8.750%, 8/15/2020 8,804,460
3,200,000 8.125%, 5/15/2021 3,811,136
7,000,000 8.125%, 8/15/2021 8,343,090
6,700,000 8.000%, 11/15/2021 7,900,975
5,700,000 7.250%, 8/15/2022 6,244,407
6,000,000 7.625%, 11/15/2022 6,843,960
3,000,000 7.125%, 2/15/2023 3,248,550
3,350,000 6.750%, 8/15/2026 3,501,856
3,875,000 6.375%, 8/15/2027 3,878,449
3,000,000 6.125%, 11/15/2027 2,912,640
3,500,000 5.500%, 8/15/2028 3,132,325
5,500,000 5.250%, 11/15/2028 4,764,870
TOTAL 102,330,054
FEDERAL HOME LOAN BANKS-
15.5%
1,250,000 6.900%, 2/7/2007 1,269,900
2,000,000 5.905%, 3/27/2008 1,867,240
5,500,000 5.925%, 4/9/2008 5,140,740
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
U.S. GOVERNMENT
OBLIGATIONS-continued
FEDERAL HOME LOAN BANKS-
CONTINUED
$ 3,900,000 6.185%, 5/6/2008 $ 3,708,744
3,000,000 5.800%, 9/2/2008 2,783,310
1,000,000 6.730%, 6/22/2009 983,610
3,500,000 6.500%, 8/14/2009 3,384,640
TOTAL 19,138,184
TOTAL U.S. GOVERNMENT
OBLIGATIONS (IDENTIFIED
COST $125,731,299) 121,468,238
REPURCHASE AGREEMENT-0.4%
1
445,000 Societe Generale, New
York, 5.430%, dated
8/31/1999, due 9/1/1999
(at amortized cost) 445,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$126,176,299) 2 $ 121,913,238
</TABLE>
1 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.
2 The cost of investments for federal tax purposes amounts to $126,176,299. The
net unrealized depreciation of investments on a federal tax basis amounts to
$4,263,061 which is comprised of $1,770,304 appreciation and $6,033,365
depreciation at August 31, 1999.
Note: The categories of investments are shown as a percentage of net assets
($123,189,141) at August 31, 1999.
See Notes which are an integral part of the Financial Statements
Statement of Assets and Liabilities
AUGUST 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified and tax cost
$126,176,299) $ 121,913,238
Income receivable 1,381,650
Receivable for shares sold 395,505
Prepaid expenses 15,572
TOTAL ASSETS 123,705,965
LIABILITIES:
Payable for shares
redeemed $ 105,114
Income distribution
payable 230,455
Payable to Bank 181,255
TOTAL LIABILITIES 516,824
Net assets for 12,578,002
shares outstanding $ 123,189,141
NET ASSETS CONSIST OF:
Paid in capital $ 127,359,779
Net unrealized
depreciation of
investments (4,263,061)
Accumulated net realized
gain on investments 83,734
Accumulated undistributed
net investment income 8,689
TOTAL NET ASSETS $ 123,189,141
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$123,189,141 / 12,578,002
shares outstanding $9.79
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Operations
YEAR ENDED AUGUST 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 7,422,377
EXPENSES:
Investment advisory fee $ 765,007
Administrative personnel
and services fee 125,000
Custodian fees 10,211
Transfer and dividend
disbursing agent fees and
expenses 60,111
Directors'/Trustees' fees 11,476
Auditing fees 13,000
Legal fees 4,310
Portfolio accounting fees 47,822
Shareholder services fee 318,774
Share registration costs 38,837
Printing and postage 30,037
Insurance premiums 2,000
Miscellaneous 8,054
TOTAL EXPENSES 1,434,639
WAIVERS:
Waiver of investment
advisory fee $ (90,230)
Waiver of shareholder
services fee (255,019)
TOTAL WAIVERS (345,249)
Net expenses 1,089,390
Net investment income 6,332,987
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized gain on
investments 1,696,736
Net change in unrealized
appreciation of
investments (13,860,203)
Net realized and
unrealized loss on
investments (12,163,467)
Change in net assets
resulting from operations $ (5,830,480)
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31 1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 6,332,987 $ 4,646,243
Net realized gain on
investments ($1,691,155
and $1,101,995,
respectively, as computed
for federal tax purposes) 1,696,736 1,097,066
Net change in unrealized
appreciation of
investments (13,860,203) 7,077,402
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS (5,830,480) 12,820,711
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
investment income (6,330,231) (4,648,738)
Distributions from net
realized gains on
investments (2,523,976) (2,169,264)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS
TO SHAREHOLDERS (8,854,207) (6,818,002)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 129,758,394 96,031,789
Net asset value of shares
issued to shareholders in
payment of
distributions declared 5,456,602 3,599,762
Cost of shares redeemed (114,045,213) (57,571,361)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 21,169,783 42,060,190
Change in net assets 6,485,096 48,062,899
NET ASSETS:
Beginning of period 116,704,045 68,641,146
End of period (including
accumulated undistributed
net investment income of
$8,689 and $5,296,
respectively) $ 123,189,141 $ 116,704,045
</TABLE>
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
AUGUST 31, 1999
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 60 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.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
The following reclassifications have been made to the financial statements.
<TABLE>
<CAPTION>
ACCUMULATED
NET REALIZED UNDISTRIBUTED
GAIN (LOSS) ON NET INVESTMENT
PAID-IN CAPITAL INVESTMENTS INCOME
<S> <C> <C>
$5,581 $(6,218) $637
</TABLE>
Net investment income, net realized gains (losses), and net assets were not
affected by this reclassification.
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 provision for federal tax is
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:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31 1999 1998
<S> <C> <C>
Shares sold 12,143,703 9,041,298
Shares issued to
shareholders in payment of
distributions declared 511,945 339,760
Shares redeemed (10,688,181) (5,436,280)
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 1,967,467 3,944,778
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Investment Management Company, 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, Inc. 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 Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund for the period. The fee paid to FSSC is used to finance
certain services for shareholders and to maintain shareholder accounts. FSSC may
voluntarily choose to waive any portion of its fee. FSSC 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 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 Trustees 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
year ended August 31, 1999, were as follows:
<TABLE>
<CAPTION>
<S> <C>
Purchases $151,001,090
Sales $121,583,023
</TABLE>
YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
CHANGE OF INDEPENDENT AUDITORS
On May 19, 1999, the Fund's Trustees, upon the recommendation of the Audit
Committee of the Trustees, requested and subsequently accepted the resignation
of Arthur Andersen LLP ("AA") as the Fund's independent auditors. AA's reports
on the Fund's financial statements for the fiscal years ended August 31, 1998,
and August 31, 1999, contained no adverse opinion or disclaimer of opinion nor
were they qualified or modified as to uncertainty, audit scope or accounting
principles. During the Fund's fiscal years ended August 31, 1998, and August 31,
1999: (i) there were no disagreements with AA on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of AA, would
have caused it to make reference to the subject matter of the disagreements in
connection with its reports on the financial statements for such years; and (ii)
there were no reportable events of the kind described in Item 304(a)(1)(v) of
Regulation S-K under the Securities Act of 1934, as amended.
The Fund, by action of its Trustees, upon the recommendation of the Audit
Committee of the Trustees, has engaged Ernst & Young LLP ("E&Y") as the
independent auditors to audit the Fund's financial statements for the fiscal
year ending August 31, 2000. During the Fund's fiscal years ended August 31,
1998, and August 31, 1999, neither the Fund nor anyone on its behalf has
consulted E&Y on items which: (i) concerned the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Fund's financial statements; or
(ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv)
of Item 304 of Regulation S-K) of reportable events (as described in paragraph
(a)(1)(v) of said Item 304).
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, 1999 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 the 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 and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1999, 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 audits provide 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, 1999, 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 its financial highlights for the
periods presented, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
October 26, 1999
[Graphic]
Federated
World-Class Investment Manager
PROSPECTUS
Federated U.S. Government Bond Fund
OCTOBER 31, 1999
A Statement of Additional Information (SAI) dated October 31, 1999, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Annual and
Semi-Annual Reports to shareholders as they become available. The Annual
Report's Management Discussion and Analysis discusses market conditions and
investment strategies that significantly affected the Fund's performance during
its last fiscal year. To obtain the SAI, the Annual Report, Semi-Annual Report
and other information without charge, and make inquiries, call your investment
professional or the Fund at 1-800- 341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.
[Graphic]
Federated
Federated U.S. Government Bond Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Investment Company Act File No. 811-4489
Cusip 314284100
8100308A (10/99)
[Graphic]
STATEMENT OF ADDITIONAL INFORMATION
Federated U.S. Government Bond Fund
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Federated U.S. Government Bond Fund
(Fund), dated October 31, 1999. Obtain the prospectus and the Annual Report's
Management Discussion & Analysis without charge by calling 1-800-341-7400.
OCTOBER 31, 1999
[Graphic]
Federated
World-Class Investment Manager
Federated U.S. Government Bond Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
8100308B (10/99)
[Graphic]
CONTENTS
How is the Fund Organized? 1
Securities in Which the Fund Invests 1
What Do Shares Cost? 6
How is the Fund Sold? 6
Subaccounting Services 7
Redemption in Kind 7
Massachusetts Partnership Law 7
Account and Share Information 7
Tax Information 7
Who Manages and Provides Services to the Fund? 8
How Does the Fund Measure Performance? 11
Who is Federated Investors, Inc.? 13
Investment Ratings 14
Addresses 16
Federated U.S. Government Bond Fund
SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION DATED OCTOBER 31, 1999
I. At a special meeting of shareholders to be held on November 15, 1999,
shareholders of the above-named Trust will be asked to vote on the changes
described below. If approved by shareholders, these changes will take effect on
or after December 1, 1999. Shareholders will be notified if any of these changes
are not approved at the special meeting or any adjournment thereof. Please keep
this supplement for your records.
Shareholders will be asked to consider the following proposals:
1.To elect seven Trustees.
2.To make changes to the Trust's fundamental investment policies:
a. To amend the Trust's fundamental investment policy regarding diversification
to read as follows:
"With respect to securities comprising 75% of the value of its total assets, the
Trust will not purchase securities of any one issuer (other than cash; cash
items; securities issued or guaranteed by the government of the United States or
its agencies or instrumentalities and repurchase agreements collateralized by
such U.S. government securities; and securities of other investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of that issuer, or the Trust would own more than 10% of the
outstanding voting securities of that issuer."
b. To amend the Trust's fundamental investment policy regarding borrowing money
and issuing senior securities to read as follows:
"The Trust may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the 1940 Act."
c. To amend the Trust's fundamental investment policy regarding investments in
real estate to read as follows:
"The Trust may not purchase or sell real estate, provided that this restriction
does not prevent the Trust from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Trust may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner."
d. To amend the Trust's fundamental investment policy regarding investments in
commodities to read as follows:
"The Trust may not purchase or sell physical commodities, provided that the
Trust may purchase securities of companies that deal in commodities."
e. To amend the Trust's fundamental investment policy regarding underwriting
securities to read as follows:
"The Trust may not underwrite the securities of other issuers, except that the
Trust may engage in transactions involving the acquisition, disposition or
resale of its portfolio securities, under circumstances where it may be
considered to be an underwriter under the Securities Act of 1933."
f. To amend the Trust's fundamental investment policy regarding lending by the
Trust to read as follows:
"The Trust may not make loans, provided that this restriction does not prevent
the Trust from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests."
g. To amend the Trust's fundamental investment policy regarding concentration of
the Trust's investments in securities of companies in the same industry to read
as follows:
"The Trust will not make investments that will result in the concentration of
its investments in the securities of issuers primarily engaged in the same
industry. Government securities, municipal securities and bank instruments will
not be deemed to constitute an industry."
h. To amend, and to make non-fundamental, the Trust's fundamental investment
policy regarding buying securities on margin to read as follows:
"The Trust will not purchase securities on margin, provided that the Trust may
obtain short-term credits necessary for the clearance of purchases and sales of
securities, and further provided that the Trust may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments."
i. To amend, and to make non-fundamental, the Trust's fundamental investment
policy regarding pledging assets to read as follows:
"The Trust will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities."
j. To amend, and to make non-fundamental, the Trust's fundamental investment
policy regarding investing in illiquid securities to read as follows:
"The Trust will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 15% of the Trust's net assets."
k. To amend, and to make non-fundamental, the Trust's fundamental investment
policy regarding investing in restricted securities to read as follows:
"The Trust may invest in restricted securities. Restricted securities are any
securities in which the Trust may invest pursuant to its investment objective
and policies but which are subject to restrictions on resale under federal
securities law. Under criteria established by the Trustees, certain restricted
securities are determined to be liquid. To the extent that restricted securities
are not determined to be liquid, the Trust will limit their purchase, together
with other illiquid securities, to 15% of its net assets."
l. To amend, and to make non-fundamental, the Trust's fundamental investment
policy regarding temporary investments to read as follows:
"The Trust may temporarily depart from its principal investment strategies by
investing its assets in cash, cash items and short-term, higher-quality debt
securities and similar obligations."
m. To make non-fundamental the Trust's following fundamental investment policies
regarding purchasing put options:
"The Trust 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. Put options on portfolio
securities are intended to protect against price movements in particular
securities in the portfolio. Put options on financial futures contracts will be
used only to protect portfolio securities against decreases in value resulting
from market factors such as an anticipated increase in interest rates. The Trust
will not purchase put options on securities unless the securities are held in
the Trust's portfolio."
n. To make non-fundamental the Trust's following fundamental investment policies
regarding selling call options:
"The Trust may write covered call options to generate income. The Trust 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 Trust reserves the right to write covered call options on
its entire portfolio. The Trust will not write call options on securities unless
the securities are held in the Trust's portfolio or unless the Trust is entitled
to them in deliverable form without further payment or after segregating cash in
the amount of any further payment."
o. To make non-fundamental the Trust's current fundamental investment policy
regarding investing in when-issued and delayed delivery transactions that
states:
"The Trust may invest in when-issued and delayed delivery transactions to secure
what is considered to be an advantageous price and yield for the Trust."
p. To make non-fundamental the Trust's fundamental investment policy that
provides that the Trust may enter into reverse repurchase agreements.
3. To eliminate certain of the Trust's fundamental investment policies:
a. To remove the Trust's fundamental investment policy regarding selling
securities short;
b. To remove the Trust's fundamental investment policy regarding investing in
oil, gas and minerals;
c. To remove the Trust's fundamental investment policy regarding investing in
securities of new issuers;
d. To remove the Trust's fundamental investment policy regarding investing in
issuers whose securities are owned by officers and Trustees;
e. To remove the Trust's fundamental investment policy regarding investing for
the purpose of exercising control;
f. To remove the Trust's fundamental investment policy relating to short-term
trading;
g. To remove the Trust's fundamental investment policy regarding investing in
futures contracts; and
h. To remove the Trust's fundamental investment policies confining investments
to instruments that are permitted investments for federally chartered savings
and loan institutions.
4. To approve amendments to, and a restatement of, the Declaration of Trust for
the Trust:
a. To require the approval of a majority of the outstanding voting securities of
the Trust in the event of the sale and conveyance of the assets of the Trust to
another trust or corporation; and
b. To permit the Board of Trustees to liquidate assets of the Trust, or of its
series or classes, and distribute the proceeds of such assets to the holders of
such shares representing such interests, without seeking shareholder approval.
II. The following actions have been taken by the Board of Trustees with regard
to certain non-fundamental investment policies and limitations of the Trust:
1. Approved the elimination of the following non-fundamental investment
limitations of the Trust:
a. Removed the Trust's non-fundamental investment policy pertaining to writing
covered call options that provides that the Trust will not write covered call
options on more than 25% of its total assets unless a higher limit is authorized
by the Trustees.
b. Removed the Trust's non-fundamental investment policy prohibiting engaging in
when-issued and delayed delivery transactions to an extent that would cause the
segregation of more than 20% of the total value of the Trust's assets.
2. Approved the adoption of a non-fundamental investment policy for the Trust
that provides that the Trust may purchase calls.
3. Approved the elimination of the following undertakings for the Trust: "The
Trust 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."
4. Approved the adoption of the following non-fundamental investment limitations
pertaining to concentration by the Trust:
"(a) utility companies will be divided according to their services (for example,
gas, gas transmission, electric and telephone will each be considered a separate
industry); (b) financial service companies will be classified according to the
end users of their services (for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry); and (c)
asset-backed securities will be classified according to the underlying assets
securing such securities. To conform to the current view of the SEC that only
domestic bank instruments may be excluded from industry concentration
limitations, as a matter of non-fundamental policy, the Trust will not exclude
foreign banks from industry concentration limits as long as the policy of the
SEC remains in effect. In addition, investments in bank instruments, and
investments in certain industrial development bonds funded by activities in a
single industry, will be deemed to constitute investment in an industry, except
when held for temporary defensive purposes. The investment of more than 25% of
the value of the Trust's total assets in any one industry will constitute
'concentration.'"
5. Approved the adoption of the following non-fundamental investment limitation
for the Trust when applying its commodities restriction:
"As a matter of non-fundamental policy, for purposes of the commodities policy,
investments in transactions involving futures contracts and options, forward
currency contracts, swap transactions and other financial contracts that settle
by payment of cash are not deemed to be investments in commodities." October 31,
1999
How is the Fund Organized?
The Fund is a diversified open-end, management investment company that was
established under the laws of the Commonwealth of Massachusetts on May 24, 1985.
The Fund's investment adviser is Federated Investment Management Company
(Adviser). Effective March 31, 1999, Federated Management, former Adviser to the
Fund, became Federated Investment Management Company (formerly, Federated
Advisers).
Securities in Which the Fund Invests
In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
FIXED INCOME SECURITIES
U.S. government securities pay interest, dividends or distributions at a
specified rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of securities in which the Fund invests.
TREASURY SECURITIES
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.
AGENCY SECURITIES
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a "GSE"). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities. Agency securities are
generally regarded as having low credit risks, but not as low as treasury
securities.
ZERO COUPON SECURITIES
Zero coupon securities do not pay interest or principal until final maturity,
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below the
amount payable at maturity. The difference between the purchase price and the
amount paid at maturity represents interest on the zero coupon security.
Investors must wait until maturity to receive interest and principal, which
increases the interest rate and credit risks of a zero coupon security. A zero
coupon step-up security converts to a coupon security before final maturity.
There are many forms of zero coupon securities. Some are issued at a discount
and are referred to as zero coupon or capital appreciation bonds. Others are
created from interest bearing bonds by separating the right to receive the
bond's coupon payments from the right to receive the bond's principal due at
maturity, a process known as coupon stripping. Treasury STRIPs are the most
common form of stripped zero coupon securities.
DERIVATIVE CONTRACTS
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty.
Many derivative contracts are traded on securities or commodities exchanges. In
this case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make
(or collect) daily payments to the margin accounts to reflect losses (or gains)
in the value of their contracts. This protects investors against potential
defaults by the counterparty. Trading contracts on an exchange also allows
investors to close out their contracts by entering into offsetting contracts.
For example, the Fund could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Fund realizes a gain; if it is less, the Fund realizes a loss.
Exchanges may limit the amount of open contracts permitted at any one time. Such
limits may prevent the Fund from closing out a position. If this happens, the
Fund will be required to keep the contract open (even if it is losing money on
the contract), and to make any payments required under the contract (even if it
has to sell portfolio securities at unfavorable prices to do so). Inability to
close out a contract could also harm the Fund by preventing it from disposing of
or trading any assets it has been using to secure its obligations under the
contract.
Depending upon how the Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset,
derivative contracts may increase or decrease the Fund's exposure to interest
rate risks, and may also expose the Fund to liquidity risks.
The Fund may trade in the following types of derivative contracts.
FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified price,
date, and time. Entering into a contract to buy an underlying asset is commonly
referred to as buying a contract or holding a long position in the asset.
Entering into a contract to sell an underlying asset is commonly referred to as
selling a contract or holding a short position in the asset. Futures contracts
are considered to be commodity contracts.
OPTIONS
Options are rights to buy or sell an underlying asset for a specified price (the
exercise price) during, or at the end of, a specified period. A call option
gives the holder (buyer) the right to buy the underlying asset from the seller
(writer) of the option. A put option gives the holder the right to sell the
underlying asset to the writer of the option. The writer of the option receives
a payment, or premium, from the buyer, which the writer keeps regardless of
whether the buyer uses (or exercises) the option.
The Fund may:
* Buy put options on portfolio securities and financial futures (including index
futures) contracts for portfolio securities in anticipation of a decrease in the
value of the underlying asset; and
* Buy or write options to close out existing options positions.
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 may also write call options on portfolio securities to generate income
from premiums, and in anticipation of a decrease or only limited increase in the
value of the underlying asset. If a call written by the Fund is exercised, the
Fund foregoes any possible profit from an increase in the market price of the
underlying asset over the exercise price plus the premium received. The call
options which the Fund writes must be listed on a recognized options exchange.
The Fund will only engage in the above derivatives transactions to the extent
permitted under applicable rules, regulations, or interpretations thereof of the
Office of Thrift Supervision.
SPECIAL TRANSACTIONS
HEDGING
Hedging transactions are intended to reduce specific risks. For example, to
protect the Fund against circumstances that would normally cause the Fund's
portfolio securities to decline in value, the Fund may buy or sell a derivative
contract that would normally increase in value under the same circumstances. The
Fund may also attempt to hedge by using combinations of different derivatives
contracts, or derivatives contracts and securities. The Fund's ability to hedge
may be limited by the costs of the derivatives contracts. The Fund may attempt
to lower the cost of hedging by entering into transactions that provide only
limited protection, including transactions that (1) hedge only a portion of its
portfolio, (2) use derivatives contracts that cover a narrow range of
circumstances or (3) involve the sale of derivatives contracts with different
terms. Consequently, hedging transactions will not eliminate risk even if they
work as intended. In addition, hedging strategies are not always successful, and
could result in increased expenses and losses to the Fund.
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Fund buys a U.S. government
security from a dealer or bank and agrees to sell the security back at a
mutually agreed upon time and price. The repurchase price exceeds the sale
price, reflecting the Fund's return on the transaction. This return is unrelated
to the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.
DELAYED DELIVERY TRANSACTIONS
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit risks
in the event of a counterparty default.
SECURITIES LENDING
The Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from the
borrower as collateral. The borrower must furnish additional collateral if the
market value of the loaned securities increases. Also, the borrower must pay the
Fund the equivalent of any dividends or interest received on the loaned
securities.
The Fund will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund must pay interest to the
borrower for the use of cash collateral.
Loans are subject to termination at the option of the Fund or the borrower. The
Fund will not have the right to vote on securities while they are on loan, but
it will terminate a loan in anticipation of any important vote. The Fund may pay
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash collateral to a securities
lending agent or broker.
Securities lending activities are subject to interest rate risks and credit
risks.
ASSET COVERAGE
In order to secure its obligations in connection with derivatives contracts or
special transactions, the Fund will either own the underlying assets, enter into
an offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to secure
such obligations without entering into an offsetting derivative contract or
terminating a special transaction. This may cause the Fund to miss favorable
trading opportunities or to realize losses on derivative contracts or special
transactions.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
INTEREST RATE RISKS
* Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
* Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of a
fixed income security to changes in interest rates.
CALL RISKS
* Call risk is the possibility that an issuer may redeem a fixed income security
before maturity (a call) at a price below its current market price. An increase
in the likelihood of a call may reduce the security's price.
* If a fixed income security is called, the Fund may have to reinvest the
proceeds in other fixed income securities with lower interest rates, higher
credit risks, or other less favorable characteristics.
CREDIT RISKS
* Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money.
LIQUIDITY RISKS
* Liquidity risk refers to the possibility that the Fund may not be able to sell
a security or close out a derivative contract when it wants to. If this happens,
the Fund will be required to continue to hold the security or keep the position
open, and the Fund could incur losses.
FUNDAMENTAL INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to pursue total return. The investment
objective may not be changed by the Fund's Trustees without shareholder
approval.
The Fund will limit its investments to those that are permitted for purchase by
federally chartered savings and loan institutions.
The Fund may invest in when-issued and delayed delivery transactions to secure
what is considered to be an advantageous price and yield for the Fund. 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
assets.
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. Put options on portfolio
securities are intended to protect against price movements in particular
securities in the portfolio. Put options on financial futures contracts will be
used only to protect portfolio securities against decreases in value resulting
from market factors such as an anticipated increase in interest rates.
The Fund may write covered call options to generate income. 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). As a matter of policy, which can be changed without shareholder
approval, the Fund will not write covered call options on more than 25% of its
total assets unless a higher limit is authorized by its Trustees. The Fund
reserves the right to write covered call options on its entire portfolio.
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
reserves the right to attempt, in the future, to hedge the portfolio by entering
into financial futures contracts. The Fund will notify shareholders before it
begins engaging in these transactions.
The Fund will only engage in such transactions as stated in the three preceding
paragraphs, to the extent permitted under applicable Federal Home Loan Bank
Board Rules, regulations, or interpretations thereof.
The Fund may invest temporarily in cash and cash items during times of unusual
market conditions for defensive purposes and to maintain liquidity. Cash items
may include short-term obligations such as:
* commercial paper rated A-1 or A-2 by Standard & Poor's Corporation, Prime-1 or
Prime-2 by Moody's Investors Service, Inc., or F-1 or F-2 by Fitch Investors
Service. In the case where commercial paper has received different ratings from
different rating services, such commercial paper is an acceptable temporary
investment so long as at least two ratings are high quality ratings and provided
the investment adviser has determined that such investments present minimal
credit risks;
* time and savings deposits (including certificates of deposit) in commercial or
savings banks whose accounts are insured by the FDIC or in institutions whose
accounts are insured by the FSLIC, including certificates of deposit issued by
and other time deposits in foreign branches of FDIC insured banks;
* bankers' acceptances issued by an FDIC 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.
The Fund may lend portfolio securities but the collateral received 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 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.
The Fund may also enter into reverse repurchase agreements.
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
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 LIMITATIONS CANNOT BE CHANGED UNLESS AUTHORIZED BY THE BOARD OF
TRUSTEES (BOARD) AND BY THE "VOTE OF A MAJORITY OF ITS OUTSTANDING VOTING
SECURITIES," AS DEFINED BY THE INVESTMENT COMPANY ACT OF 1940. SHAREHOLDERS WILL
BE NOTIFIED BEFORE ANY MATERIAL CHANGE IN THESE LIMITATIONS BECOMES EFFECTIVE.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:
* for fixed income securities, at the last sale price on a national securities
exchange, if available, otherwise, as determined by an independent pricing
service;
* futures contracts and options are generally valued at market values
established by the exchanges on which they are traded at the close of trading on
such exchanges. Options traded in the over-the-counter market are generally
valued according to the mean between the last bid and the last asked price for
the option as provided by an investment dealer or other financial institution
that deals in the option. The Board may determine in good faith that another
method of valuing such investments is necessary to appraise their fair market
value;
* for short-term obligations, according to the mean between bid and asked prices
as furnished by an independent pricing service, except that short-term
obligations with remaining maturities of less than 60 days at the time of
purchase may be valued at amortized cost or at fair market value as determined
in good faith by the Board; and
* for all other securities at fair value as determined in good faith by the
Board.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker/dealers or
other financial institutions that trade the securities.
What Do Shares Cost?
The Fund's net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of the Fund.
How is the Fund Sold?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
Subaccounting Services
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial, or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
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.
In the unlikely event a shareholder is held personally liable for the Fund's
obligations, the Fund is required by the Declaration of Trust 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.
Account and Share 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 the Fund have equal voting rights.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Fund's outstanding shares.
As of October 5, 1999, the following shareholder owned of record, beneficially,
or both, 5% or more of outstanding Shares: Charles Schwab & Co., Inc., San
Francisco, CA owned approximately 1,636,753 shares (12.79%).
Tax Information
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
Who Manages and Provides Services to the Fund?
BOARD OF TRUSTEES
The Board is responsible for managing the Fund's business affairs and for
exercising all the Fund's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Fund,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Fund for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. The Federated Fund Complex is
comprised of 54 investment companies, whose investment advisers are affiliated
with the Fund's Adviser.
As of October 5, 1999, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.
<TABLE>
<CAPTION>
NAME TOTAL
BIRTH DATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM FUND AND
POSITION WITH FUND FOR PAST FIVE YEARS FROM FUND FUND COMPLEX
<S> <C> <C> <C>
JOHN F. DONAHUE*+# Chief Executive Officer $0 $0 for the Fund and
Birth Date: July 28, 1924 and Director or Trustee of 54 other investment
Federated Investors Tower the Federated Fund companies in the
1001 Liberty Avenue Complex; Chairman and Fund Complex
Pittsburgh, PA Director, Federated
CHAIRMAN AND TRUSTEE Investors, Inc.; Chairman
and Trustee, Federated Investment
Management Company; Chairman and
Director, Federated Investment
Counseling and Federated Global
Investment Management Corp.; Chairman,
Passport Research, Ltd.
THOMAS G. BIGLEY Director or Trustee of $1,073.63 $113,860.22 for the Fund
Birth Date: February 3, 1934 the Federated Fund and 54 other investment
15 Old Timber Trail Complex; Director, Member companies in the
Pittsburgh, PA of Executive Committee, Fund Complex
TRUSTEE Children's Hospital of
Pittsburgh; Director,
Robroy Industries, Inc.
(coated steel conduits/
computer storage
equipment); formerly:
Senior Partner, Ernst &
Young LLP; Director, MED
3000 Group, Inc.
(physician practice
management); Director,
Member of Executive
Committee, University of
Pittsburgh.
JOHN T. CONROY, JR. Director or Trustee of the $1,181.16 $125,264.48 for the Fund
Birth Date: June 23, 1937 Federated Fund Complex; and 54 other investment
Wood/Commercial Dept. President, Investment companies in the
John R. Wood Associates, Inc. Realtors Properties Corporation; Fund Complex
3255 Tamiami Trail North Senior Vice President,
Naples, FL John R. Wood and
TRUSTEE 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.
WILLIAM J. COPELAND Director or Trustee of the $1,272.91 $125,264.48 for the Fund
Birth Date: July 4, 1918 Federated Fund Complex; and 54 other investment
One PNC Plaza-23rd Floor Director and Member of the companies in the
Pittsburgh, PA Executive Committee, Fund Complex
TRUSTEE Michael Baker Corp.
(engineering,
construction, operations,
and technical services);
Chairman, Pittsburgh
Foundation; Director,
Forbes Fund
(philanthropy); formerly:
Vice Chairman and
Director, PNC Bank, N.A.
and PNC Bank Corp.;
Director, Ryan Homes, Inc.
Previous Positions:
Director, United Refinery;
Director, Forbes Fund;
Chairman, Pittsburgh
Foundation; Chairman,
Pittsburgh Civic Light
Opera; Chairman, Health
Systems Agency of
Allegheny County; Vice
President, United Way of
Allegheny County;
President, St. Clair
Hospital; Director,
Allegheny Hospital.
LAWRENCE D. ELLIS, M.D.* Director or Trustee of the $1,073.63 $113,860.22 for the Fund
Birth Date: October 11, 1932 Federated Fund Complex; and 54 other investment
3471 Fifth Avenue Professor of Medicine, companies in the
Suite 1111 University of Pittsburgh; Fund Complex
Pittsburgh, PA Medical Director,
TRUSTEE University of Pittsburgh
Medical Center - Downtown;
Hematologist, Oncologist, and
Internist, University of Pittsburgh
Medical Center; Member, National Board
of Trustees, Leukemia Society of
America.
PETER E. MADDEN Director or Trustee of the $977.79 $113,860.22 for the Fund
Birth Date: March 16, 1942 Federated Fund Complex; and 54 other investment
One Royal Palm Way formerly: Representative, companies in the
100 Royal Palm Way Commonwealth of Fund Complex
Palm Beach, FL Massachusetts General
TRUSTEE Court; President, State
Street Bank and Trust
Company and State Street
Corporation.
Previous Positions:
Director, VISA USA and
VISA International;
Chairman and Director,
Massachusetts Bankers
Association; Director,
Depository Trust
Corporation; Director, The
Boston Stock Exchange.
<CAPTION>
NAME TOTAL
BIRTH DATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM FUND AND
POSITION WITH FUND FOR PAST FIVE YEARS FROM FUND FUND COMPLEX
<S> <C> <C> <C>
CHARLES F. MANSFIELD, JR. Director or Trustee of some $835.74 $0 for the Fund
Birth Date: April 10, 1945 of the Federated Fund and 50 other investment
80 South Road Complex; Management companies in the
Westhampton Beach, NY Consultant. Fund Complex
TRUSTEE
Previous Positions: Chief Executive
Officer, PBTC International Bank;
Partner, Arthur Young & Company (now
Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase
Manhattan Bank; Senior Vice President,
Marine Midland Bank; Vice President,
Citibank; Assistant Professor of
Banking and Finance, Frank G. Zarb
School of Business, Hofstra University.
JOHN E. MURRAY, JR., J.D., S.J.D.# Director or Trustee of $1,154.62 $113,860.22 for the Fund
Birth Date: December 20, 1932 the Federated Fund and 54 other investment
President, Duquesne University Complex; President, Law companies in the
Pittsburgh, PA Professor, Duquesne Fund Complex
TRUSTEE University; Consulting
Partner, Mollica & Murray;
Director, Michael Baker
Corp. (engineering,
construction, operations,
and technical services).
Previous Positions: Dean
and Professor of Law,
University of Pittsburgh
School of Law; Dean and
Professor of Law,
Villanova University
School of Law.
MARJORIE P. SMUTS Director or Trustee of the $1,073.63 $113,860.22 for the Fund
Birth Date: June 21, 1935 Federated Fund Complex; and 54 other investment
4905 Bayard Street Public Relations/ companies in the
Pittsburgh, PA Marketing/Conference Fund Complex
TRUSTEE Planning.
Previous Positions:
National Spokesperson,
Aluminum Company of
America; television
producer; business owner.
JOHN S. WALSH Director or Trustee of some $808.54 $0 for the Fund
Birth Date: November 28, 1957 of the Federated Fund and 48 other investment
2007 Sherwood Drive Complex; President and companies in the
Valparaiso, IN Director, Heat Wagon, Inc. Fund Complex
TRUSTEE (manufacturer of
construction temporary
heaters); President and
Director, Manufacturers
Products, Inc.
(distributor of portable
construction heaters);
President, Portable Heater
Parts, a division of
Manufacturers Products,
Inc.; Director, Walsh &
Kelly, Inc. (heavy highway
contractor); formerly:
Vice President, Walsh &
Kelly, Inc.
GLEN R. JOHNSON Staff member, Federated $0 $0 for the Fund
Birth Date: May 2, 1929 Securities Corp. and 8 other investment
Federated Investors Tower companies in the
1001 Liberty Avenue Fund Complex
Pittsburgh, PA
PRESIDENT
J. CHRISTOPHER DONAHUE+ President or Executive $0 $0 for the Fund
Birth Date: April 11, 1949 Vice President of the and 16 other investment
Federated Investors Tower Federated Fund Complex; companies in the
1001 Liberty Avenue Director or Trustee of some Fund Complex
Pittsburgh, PA of the Funds in the
EXECUTIVE VICE PRESIDENT Federated Fund Complex;
President, Chief Executive Officer and
Director, Federated Investors, Inc.;
President and Trustee, Federated
Investment Management Company;
President and Trustee, Federated
Investment Counseling; President and
Director, Federated Global Investment
Management Corp.; President, Passport
Research, Ltd.; Trustee, Federated
Shareholder Services Company; Director,
Federated Services Company.
EDWARD C. GONZALES Trustee or Director of some $0 $0 for the Fund
Birth Date: October 22, 1930 of the Funds in the and 1 other investment
Federated Investors Tower Federated Fund Complex; company in the
1001 Liberty Avenue President, Executive Vice Fund Complex
Pittsburgh, PA President and Treasurer of
EXECUTIVE VICE PRESIDENT some of the Funds in the
Federated Fund Complex; Vice Chairman,
Federated Investors, Inc.; Vice
President, Federated Investment
Management Company and Federated
Investment Counseling, Federated Global
Investment Management Corp. and
Passport Research, Ltd.; Executive Vice
President and Director, Federated
Securities Corp.; Trustee, Federated
Shareholder Services Company.
JOHN W. MCGONIGLE Executive Vice President $0 $0 for the Fund
Birth Date: October 26, 1938 and Secretary of the and 54 other investment
Federated Investors Tower Federated Fund Complex; companies in the
1001 Liberty Avenue Executive Vice President, Fund Complex
Pittsburgh, PA Secretary, and Director,
EXECUTIVE VICE PRESIDENT Federated Investors, Inc.;
and SECRETARY Trustee, Federated
Investment Management Company and
Federated Investment Counseling;
Director, Federated Global Investment
Management Corp., Federated Services
Company and Federated Securities Corp.
RICHARD J. THOMAS Treasurer of the Federated $0 $0 for the Fund
Birth Date: June 17, 1954 Fund Complex; Vice and 54 other investment
Federated Investors Tower President - Funds companies in the
1001 Liberty Avenue Financial Services Fund Complex
Pittsburgh, PA Division, Federated
TREASURER Investors, Inc.; formerly:
various management
positions within Funds
Financial Services
Division of Federated
Investors, Inc.
<CAPTION>
NAME TOTAL
BIRTH DATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM FUND AND
POSITION WITH FUND FOR PAST FIVE YEARS FROM FUND FUND COMPLEX
<S> <C> <C> <C>
RICHARD B. FISHER President or Vice $0 $0 for the Fund
Birth Date: May 17, 1923 President of some of the and 6 other investment
Federated Investors Tower Funds in the Federated Fund companies in the
1001 Liberty Avenue Complex; Director or Fund Complex
Pittsburgh, PA Trustee of some of the
VICE PRESIDENT Funds in the Federated Fund
Complex; Executive Vice
President, Federated
Investors, Inc.; Chairman
and Director, Federated
Securities Corp.
WILLIAM D. DAWSON, III Chief Investment Officer $0 $0 for the Fund
Birth Date: March 3, 1949 of this Fund and various and 41 other investment
Federated Investors Tower other Funds in the companies in the
1001 Liberty Avenue Federated Fund Complex; Fund Complex
Pittsburgh, PA Executive Vice President,
CHIEF INVESTMENT OFFICER Federated Investment
Counseling, Federated Global Investment
Management Corp., Federated Investment
Management Company and Passport
Research, Ltd.; Registered
Representative, Federated Securities
Corp.; Portfolio Manager, Federated
Administrative Services; Vice
President, Federated Investors, Inc.;
formerly: Executive Vice President and
Senior Vice President, Federated
Investment Counseling Institutional
Portfolio Management Services Division;
Senior Vice President, Federated
Investment Management Company and
Passport Research, Ltd.
SUSAN M. NASON Susan M. Nason has been the $0 $0 for the Fund
Birth Date: August 29, 1961 Fund's portfolio manager and 3 other investment
Federated Investors Tower since 1994. She is Vice companies in the
1001 Liberty Avenue President of the Fund. Fund Complex
Pittsburgh, PA Ms. Nason joined Federated
VICE PRESIDENT in 1987 and has been a
Senior Portfolio Manager
and Senior Vice President
of the Fund's Adviser since
1997. Ms. Nason served as a
Portfolio Manager and Vice
President of the Adviser
from 1993 to 1997.
Ms. Nason is a Chartered
Financial Analyst and
received her M.S.I.A.
concentrating in Finance
from Carnegie Mellon
University.
</TABLE>
* An asterisk denotes a Trustee who is deemed to be an interested person as
defined in the Investment Company Act of 1940.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Fund.
++ Messrs. Mansfield and Walsh became members of the Board of Trustees on
January 1, 1999. They did not earn any fees for serving the Fund Complex since
these fees are reported as of the end of the last calendar year.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund.
The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Fund or any Fund 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.
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 Fund Shares offered by the Distributor.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. The Adviser will generally use those who are recognized dealers in
specific portfolio instruments, except when a better price and execution of the
order can be obtained elsewhere. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
<S> <C>
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by
shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountant for the Fund, Arthur Andersen LLP, plans and
performs its audit so that it may provide an opinion as to whether the Fund's
financial statements and financial highlights are free of material misstatement.
FEES PAID BY THE FUND FOR SERVICES
<TABLE>
<CAPTION>
FOR THE YEAR ENDED AUGUST 31 1999 1998 1997
<S> <C> <C> <C>
Advisory Fee Earned $765,007 $527,474 $458,492
Advisory Fee Reduction 90,230 118,126 122,217
Brokerage Commissions $0 $0 $0
Administrative Fee 125,000 125,002 125,002
12B-1 FEE - - -
SHAREHOLDER SERVICES FEE 63,755 - -
</TABLE>
How Does the Fund Measure Performance?
The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns are given for the one-year, five-year and ten-year periods ended
August 31, 1999.
Yield is given for the 30-day period ended August 31, 1999.
<TABLE>
<CAPTION>
30-DAY PERIOD 1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Total Return NA (4.52%) 7.35% 7.92%
Yield 5.73% NA NA NA
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD
The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a 30-day period; by (ii) the maximum offering
price per Share on the last day of the period. This number is then annualized
using semi-annual compounding. This means that the amount of income generated
during the 30-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 Shares because of certain adjustments required
by the SEC and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
* references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
* charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment;
* discussions of economic, financial and political developments and their impact
on the securities market, including the portfolio manager's views on how such
developments could impact the Fund; and
* information about the mutual fund industry from sources such as the Investment
Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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
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 1-month,
3-month, 12-month and 10-year periods and year-to-date.
MERRILL LYNCH LONG TERM GOVERNMENT INDEX
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
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 1-month, 3-month, 12-month and 10-year
periods and year-to-date.
LEHMAN BROTHERS GOVERNMENT/CORPORATE (TOTAL) INDEX
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 1- month, 3-month, 12-month and 10-year periods and
year-to-date.
SALOMON BROTHERS AA-AA CORPORATES INDEX
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 12 years or more and companies in
industry, public utilities, and finance.
LEHMAN BROTHERS LONG TERM CORPORATE INDEX
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+ YEAR U.S. TREASURY INDEX
Merrill Lynch 10+ Year U.S. Treasury Index is an unmanaged index which includes
U.S. Treasury securities with maturities of greater than 10 years. The index is
produced by Merrill Lynch, Pierce, Fenner and Smith, Inc.
MERRILL LYNCH 10-YEAR U.S. TREASURY INDEX
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
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
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
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.
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.
Who is Federated Investors, Inc.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state- of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
MUNICIPAL FUNDS
In the municipal sector, as of December 31, 1998, Federated managed 10 bond
funds with approximately $2.2 billion in assets and 23 money market funds with
approximately $12.5 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
EQUITY FUNDS
In the equity sector, Federated has more than 28 years' experience. As of
December 31, 1998, Federated managed 27 equity funds totaling approximately
$14.9 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value- oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
CORPORATE BOND FUNDS
In the corporate bond sector, as of December 31, 1998, Federated managed 9 money
market funds and 15 bond funds with assets approximating $22.8 billion and $7.1
billion, respectively. Federated's corporate bond decision making-based on
intensive, diligent credit analysis-is backed by over 26 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
GOVERNMENT FUNDS
In the government sector, as of December 31, 1998, Federated managed 9 mortgage
backed, 5 government/agency and 19 government money market mutual funds, with
assets approximating $5.3 billion, $1.8 billion and $41.6 billion, respectively.
Federated trades approximately $425 million in U.S. government and mortgage
backed securities daily and places approximately $25 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- and intermediate-term government markets since 1982 and
currently manages approximately $43.2 billion in government funds within these
maturity ranges.
MONEY MARKET FUNDS
In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market fund.
Simultaneously, the company pioneered the use of the amortized cost method of
accounting for valuing shares of money market funds, a principal means used by
money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1998, Federated managed more than $76.7 billion in assets across 52 money market
funds, including 19 government, 9 prime and 23 municipal with assets
approximating $41.6 billion, $22.8 billion and $12.5 billion, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield-
J. Thomas Madden; U.S. fixed income-William D. Dawson, III; and global
equities and fixed income-Henry A. Frantzen. The Chief Investment Officers
are Executive Vice Presidents of the Federated advisory companies.
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 $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
INSTITUTIONAL CLIENTS
Federated meets the needs of approximately 900 institutional clients nationwide
by managing and servicing separate accounts and mutual funds for a variety of
purposes, 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 advisers. The marketing effort
to these institutional clients is headed by John B. Fisher, President,
Institutional Sales Division, Federated Securities Corp.
BANK MARKETING
Other institutional clients include 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,
Broker/Dealer Sales Division, Federated Securities Corp.
Investment Ratings
STANDARD AND POOR'S LONG-TERM DEBT RATING DEFINITIONS
AAA-Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA-Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher-rated issues only in small degree.
A-Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB-Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
BB-Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.
B-Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC-Debt rated CCC has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC-The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.
C-The rating C typically is applied to debt subordinated to senior debt which is
assigned an actual or implied CCC debt rating. The C rating may be used to cover
a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
MOODY'S INVESTORS SERVICE, INC. LONG-TERM BOND RATING DEFINITIONS
AAA-Bonds which are rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as gilt
edged. Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA-Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in AAA securities.
A-Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
BAA-Bonds which are rated BAA are considered as medium-grade obligations, (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA-Bonds which are BA are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B-Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA-Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA-Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C-Bonds which are rated C are the lowest-rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
FITCH IBCA, INC. LONG-TERM DEBT RATING DEFINITIONS
AAA-Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA-Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F- 1+.
A-Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB-Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB-Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B-Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC-Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC-Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C-Bonds are imminent default in payment of interest or principal.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
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; and
* Well-established access to a range of financial markets and assured sources of
alternate liquidity.
PRIME-2-Issuers rated Prime-1 (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.
STANDARD AND POOR'S COMMERCIAL PAPER RATINGS
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.
FITCH IBCA, INC. COMMERCIAL PAPER RATING DEFINITIONS
FITCH-1-(Highest Grade) Commercial paper assigned this rating is regarded as
having the strongest degree of assurance for timely payment.
FITCH-2-(Very Good Grade) Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.
Addresses
FEDERATED U.S. GOVERNMENT BOND FUND
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
225 Franklin Street
Boston, MA 02110-2812
PART C. OTHER INFORMATION.
Item 23. Exhibits:
(a) Conformed Copy of Declaration of Trust of the Registrant, as
Amended and Restated (15);
(b) (i) Copy of By-Laws of the Registrant, as Restated and
Amended (15);
(ii) Copy of Amendment #3 to the By-Laws of the
Registrant dated November 18, 1997; (19)
(iii)Copy of Amendment #4 to the By-Laws of the Registrant
dated February 23, 1998; (19)
(iv) Copy of Amendment #5 to the By-Laws of the Registrant
dated February 27, 1998; (19)
(v) Copy of Amendment #6 to the By-Laws of the Registrant
dated May 12, 1998; (19)
(c) Copy of Specimen Certificate for Shares of Beneficial Interest of
the Registrant (14);
(d) Conformed Copy of Investment Advisory Contract of the Registrant
(15);
(e) (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).
(f) Not applicable;
(g) (i) Conformed Copy of Custodian Agreement of the
Registrant (15);
(ii) Conformed Copy of State Street Domestic Custody Fee Schedule (18);
(iii) Conformed Copy of Transfer Agency and Service Agreement of
the Registrant (15);
+ 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)
18. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 22 on Form N-1A filed October 20, 1997. (File Nos. 2-98494
and 811-4489)
19. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 23 on Form N-1A filed October 28, 1998. (File Nos.
2-98494 and 811-4489)
<PAGE>
(h) (i) Conformed Copy of the Amended and Restated
Agreement for Fund Accounting, Administrative,
Transfer Agency and Custody Services
Procurement; (20)
(ii) Conformed Copy of Amended and Restated Shareholder
Services Agreement; (20)
(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);
(i) Conformed Copy of Opinion and Consent of
Counsel as to legality of shares being
registered (15); (j) Conformed Copy of
Consent of Independent Public Accountants; +
(k) Not applicable; (l) Conformed Copy of
Initial Capital Understanding (15); (m) Not
applicable; (n) Not applicable;
(o) Conformed Copy of Power of Attorney; +
(i) Conformed Copy of Power of Attorney of the
Chief Investment Officer of the Registrant; +
(ii)Conformed Copy of New Trustee Charles F. Mansfield,
Jr.; +
(iii)Conformed Copy of New Trustee John S. Walsh. +
Item 24. Persons Controlled by or Under Common Control with Registrant:
None
Item 25. 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)
20. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 24 on Form N-1A filed August 26, 1999.
(File Nos. 2-98494 and 811-4489)
<PAGE>
Item 26. Business and Other Connections of Investment Adviser:
For a description of the other business of the investment adviser, see the
section entitled "Who Manages the Fund?" in Part A. The affiliations with the
Registrant of four of the Trustees and one of the Officers of the investment
adviser are included in Part B of this Registration Statement under "Who Manages
and Provides Services to the Fund?" The remaining Trustee of the investment
adviser, his position with the investment adviser, and, in parentheses, his
principal occupation is: Mark D. Olson (Partner, Wilson, Halbrook & Bayard), 107
W. Market Street, Georgetown, Delaware 19947.
The remaining Officers of the investment adviser are:
Executive Vice Presidents: William D. Dawson, III
........Henry A. Frantzen
........J. Thomas Madden
Senior Vice Presidents: Joseph M. Balestrino
........David A. Briggs
........Drew J. Collins
........Jonathan C. Conley
........Deborah A. Cunningham
........Mark E. Durbiano
........Jeffrey A. Kozemchak
........Sandra L. McInerney
........Susan M. Nason
........Mary Jo Ochson
........Robert J. Ostrowski
Vice Presidents: Todd A. Abraham
........J. Scott Albrecht
........Arthur J. Barry
........Randall S. Bauer
........G. Andrew Bonnewell
........Micheal W. Casey
........Robert E. Cauley
........Alexandre de Bethmann
Anthony Delserone, Jr.
........Michael P. Donnelly
........Linda A. Duessel
........Donald T. Ellenberger
........Kathleen M. Foody-Malus
........Thomas M. Franks
........James E. Grefenstette
........Marc Halperin
........Patricia L. Heagy
........Susan R. Hill
........William R. Jamison
........Constantine J. Kartsonas
........Robert M. Kowit
........Richard J. Lazarchic
........Steven Lehman
........Marian R. Marinack
........William M. Painter
........Jeffrey A. Petro
........Keith J. Sabol
........Frank Semack
........Aash M. Shah
........Michael W. Sirianni, Jr.
........Christopher Smith
........Edward J. Tiedge
........Leonardo A. Vila
........Paige M. Wilhelm
........George B. Wright
<PAGE>
Assistant Vice Presidents: Arminda Aviles
........Nancy J. Belz
........Lee R. Cunningham, II
........James H. Davis, II
........Jacqueline A. Drastal
........Paul S. Drotch
........Salvatore A. Esposito
........Donna M. Fabiano
........Gary E. Farwell
........Eamonn G. Folan
........John T. Gentry
........John W. Harris
........Nathan H. Kehm
........John C. Kerber
........Grant K. McKay
........Christopher Matyszewski
........Natalie F. Metz
........Thomas Mitchell
........Joseph M. Natoli
........Trent Nevills
........Ihab Salib
........Roberto Sanchez-Dahl, Sr.
........James W. Schaub
........John Sheehy
........John Sidawi
........Matthew K. Stapen
........Diane Tolby
........Timothy G. Trebilcock
........Steven J. Wagner
........Lori A. Wolff
Secretary: ........G. Andrew Bonnewell
Treasurer: ........Thomas R. Donahue
Assistant Secretaries: C. Grant Anderson
........Karen M. Brownlee
........Leslie K. Ross
Assistant Treasurer: Dennis McAuley, III
The business address of each of the Officers of the investment adviser is
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, Pennsylvania
15222-3779. These individuals are also officers of a majority of the investment
advisers to the investment companies in the Federated Fund Complex described in
Part B of this Registration Statement.
Item 27. Principal Underwriters:
(a)......Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the following
.............open-end investment companies, including the Registrant:
Cash Trust Series II; Cash Trust Series, Inc.; CCB Funds; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Core
Trust; Federated Equity Funds; Federated Equity Income Fund, Inc.; Federated
Fund for U.S. Government Securities, Inc.; Federated GNMA Trust; Federated
Government Income Securities, Inc.; Federated Government Trust; Federated High
Income Bond Fund, Inc.; Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Insurance Series; Federated Municipal Opportunities Fund, Inc.;
Federated Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated
Short-Term Municipal Trust; Federated Stock and Bond Fund, Inc.; Federated Stock
Trust; Federated Tax-Free Trust; Federated Total Return Series, Inc.; Federated
U.S. Government Bond Fund; Federated U.S. Government Securities Fund: 1-3 Years;
Federated U.S. Government Securities Fund: 2-5 Years; Federated U.S. Government
Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; Fixed Income
Securities, Inc.; ; Hibernia Funds; Independence One Mutual Funds; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds, Inc.;
Managed Series Trust; Marshall Funds, Inc.; Money Market Management, Inc.; Money
Market Obligations Trust; Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Regions Funds; RIGGS Funds;
SouthTrust Funds; Tax-Free Instruments Trust; The Planters Funds; The Wachovia
Funds; The Wachovia Municipal Funds; Vision Group of Funds, Inc.; World
Investment Series, Inc.; Blanchard Funds; Blanchard Precious Metals Fund, Inc.;
DG Investor Series; High Yield Cash Trust; Investment Series Trust; Star Funds;
Targeted Duration Trust; The Virtus Funds; Trust for Financial Institutions;
Federated Securities Corp. also acts as principal underwriter for the following
closed-end investment company: Liberty Term Trust, Inc.- 1999.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Richard B. Fisher Chairman, Chief Executive Vice President
Federated Investors Tower Officer, Chief Operating
1001 Liberty Avenue Officer
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Arthur L. Cherry Director --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales --
Federated Investors Tower and Director
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas R. Donahue Director, Assistant Secretary --
Federated Investors Tower and Treasurer
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer and --
Federated Investors Tower Director
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ronald M. Petnuch Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Matthew W. Brown Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark Carroll Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Steven R. Cohen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert J. Deuberry Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark A. Gessner Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Tad Gullickson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dayna C. Haferkamp Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President,
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Christopher A. Layton Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael H. Liss Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Amy Michalisyn Vice President,
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Larry Sebbens Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward J. Segura Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert W. Bauman Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John T. Glickson Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Timothy S. Johnson Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dennis McAuley Assistant Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
</TABLE>
<PAGE>
Item 28. Location of Accounts and Records:
All accounts and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and Rules 31a-1
through 31a-3 promulgated thereunder are maintained at one of
the following locations:
<TABLE>
<CAPTION>
<S> <C>
Registrant Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Federated Shareholder Federated Investors Tower
Services Company 1001 Liberty Avenue
Transfer Agent and Dividend Pittsburgh, PA 15222-3779
Disbursing Agent
Federated Services Federated Investors Tower
Company 1001 Liberty Avenue
Administrator Pittsburgh, PA 15222-3779
Federated Investment Federated Investors Tower
--------------------
Management Company 1001 Liberty Avenue
------------------
Investment Adviser Pittsburgh, PA 15222-3779
State Street Bank and P.O. Box 8600
---------------------
Trust Company Boston, MA 02266-8600
Custodian
</TABLE>
Item 29. Management Services: Not applicable.
Item 30. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
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
26th day of October, 1999.
FEDERATED U.S. GOVERNMENT BOND FUND
BY: /s/ C. Grant Anderson
C. Grant Anderson, Assistant Secretary
Attorney in Fact for John F. Donahue
October 26, 1999
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:
<TABLE>
<CAPTION>
<S> <C> <C>
NAME TITLE DATE
By: /s/ C. Grant Anderson
C. Grant Anderson Attorney In Fact October 26, 1999
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Glen R. Johnson* President
Richard J. Thomas* Treasurer
(Principal Financial and
Accounting Officer)
William D. Dawson, III* Chief Investment Officer
Thomas G. Bigley* Trustee
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
Lawrence D. Ellis, M.D.* Trustee
Peter E. Madden* Trustee
Charles F. Mansfield, Jr.* Trustee
John E. Murray, Jr.* Trustee
Marjorie P. Smuts* Trustee
John S. Walsh* Trustee
* By Power of Attorney
</TABLE>
Exhibit (o) 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 Secretaries of FEDERATED U.S. GOVERNMENT
BOND FUND 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.
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURES TITLE DATE
/s/John F. Donahue Chairman and Trustee October 4, 1999
- -------------------------------------------------
John F. Donahue (Chief Executive Officer)
/s/Glen R. Johnson President October 4, 1999
Glen R. Johnson
/s/J. Christopher Donahue Executive Vice President October 4, 1999
- -------------------------------------------------
J. Christopher Donahue
/s/Richard J. Thomas Treasurer October 4, 1999
- -------------------------------------------------
Richard J. Thomas (Principal Financial and
Accounting Officer)
/s/Thoms G. Bigley Trustee October 4, 1999
Thomas G. Bigley
/s/John T. Conroy, Jr. Trustee October 4, 1999
- -------------------------------------------------
John T. Conroy, Jr.
<PAGE>
SIGNATURES TITLE DATE
/s/William J. Copeland Trustee October 4, 1999
William J. Copeland
/s/Lawrence D. Ellis, M.D. Trustee October 4, 1999
- -------------------------------------------------
Lawrence D. Ellis, M.D.
/s/Peter E. Madden Trustee October 4, 1999
Peter E. Madden
/s/John E. Murray, Jr. Trustee October 4, 1999
- -------------------------------------------------
John E. Murray, Jr.
/s/Marjorie P. Smuts Trustee October 4, 1999
Marjorie P. Smuts
</TABLE>
Sworn to and subscribed before me this 13th day of October, 1999
/s/Madaline P. Kelly
Notarial Seal
Madaline P. Kelly, Notary Public
Baldwin Boro, Allegheny County
My Commission Expires Feb. 22, 2000
Member, Pennsylvania Association of Notaries
Exhibit (o)(i) 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 Secretaries of FEDERATED U.S. GOVERNMENT
BOND FUND 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/William D. Dawson, III Chief Investment Officer October 4, 1999
- -----------------------------
William D. Dawson, III
Sworn to and subscribed before me this 13th day of October, 1999
/s/Madaline P. Kelly
Notarial Seal
Madaline P. Kelly, Notary Public
Baldwin Boro, Allegheny County
My Commission Expires Feb. 22, 2000
Member, Pennsylvania Association of Notaries
Exhibit (o)(ii) 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 Secretaries of FEDERATED U.S. GOVERNMENT
BOND FUND 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/Charles F. Mansfield, Jr. Trustee October 4, 1999
- -----------------------------
Charles F. Mansfield, Jr.
Sworn to and subscribed before me this 13th day of October, 1999
/s/Madaline P. Kelly
Notarial Seal
Madaline P. Kelly, Notary Public
Baldwin Boro, Allegheny County
My Commission Expires Feb. 22, 2000
Member, Pennsylvania Association of Notaries
Exhibit (o)(iii) 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 Secretaries of FEDERATED U.S. GOVERNMENT
BOND FUND 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 S. Walsh Trustee October 4, 1999
John S. Walsh
Sworn to and subscribed before me this 13th day of October, 1999
/s/Madaline P. Kelly
Notarial Seal
Madaline P. Kelly, Notary Public
Baldwin Boro, Allegheny County
My Commission Expires Feb. 22, 2000
Member, Pennsylvania Association of Notaries
Exhibit (j) under Form N-1A
Exhibit 23 under Item 601/Reg SK
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in
Post-Effective Amendment No. 25 to Form N-1A Registration Statement of Federated
U.S. Government Bond Fund of our report dated October 26, 1999, on the financial
statements as of August 31, 1999, of Federated U.S. Government Bond Fund,
included in or made a part of this registration statement.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
October 26, 1999
