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000 C000000 0000771524
000 D000000 N
000 E000000 NF
000 F000000 Y
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000 I000000 6.1
000 J000000 A
001 A000000 FEDERATED ARMS FUND
001 B000000 811-4539
001 C000000 4122886653
002 A000000 FEDERATED INVESTORS TOWER
002 B000000 PITTSBURGH
002 C000000 PA
002 D010000 15222
002 D020000 3779
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<PAGE> PAGE 2
011 C040001 3779
012 A000001 FEDERATED SHAREHOLDER SERVICES COMPANY
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012 C010001 PITTSBURGH
012 C020001 PA
012 C030001 15222
012 C040001 3779
013 A000001 ERNST & YOUNG LLP
013 B010001 BOSTON
013 B020001 MA
013 B030001 02116
013 B040001 5072
015 A000001 STATE STREET BANK AND TRUST COMPANY
015 B000001 C
015 C010001 BOSTON
015 C020001 MA
015 C030001 02266
015 C040001 8600
015 E010001 X
015 A000002 PNC BANK, NA
015 B000002 S
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015 C020002 PA
015 C030002 15265
015 E010002 X
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015 B000003 S
015 C010003 CHARLOTTE
015 C020003 NC
015 C030003 28255
015 E010003 X
015 A000004 MORGAN GUARANTY BANK & TRUST CO.
015 B000004 S
015 C010004 NEW YORK
015 C020004 NY
015 C030004 10015
015 E010004 X
015 A000005 THE CHASE MANHATTAN CORPORATION
015 B000005 S
015 C010005 NEW YORK
015 C020005 NY
015 C030005 10006
015 E010005 X
015 A000006 BANK OF NEW YORK
015 B000006 S
015 C010006 NEW YORK
015 C020006 NY
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<PAGE> PAGE 3
015 C010007 NEW YORK
015 C020007 NY
015 C030007 10015
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020 C000004 0
020 C000005 0
020 C000006 0
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022 D000001 0
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022 C000002 560267
022 D000002 7023
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022 C000003 440580
022 D000003 0
022 A000004 CS FIRST BOSTON CORPORATION
022 C000004 321856
022 D000004 77922
022 A000005 SALOMON SMITH BARNEY
022 C000005 276210
022 D000005 0
022 A000006 BT SECURITIES INC
022 C000006 247425
022 D000006 0
022 A000007 MORGAN STANLEY AND CO.
022 C000007 170537
022 D000007 24492
022 A000008 GOLDMAN SACHS & CO
022 C000008 91187
022 D000008 11545
022 A000009 DLG CAPITAL MARKETS
022 C000009 33522
022 D000009 38513
022 A000010 LEHMAN BROS INC.
022 C000010 17443
022 D000010 39335
023 C000000 3029211
023 D000000 346062
024 000000 N
<PAGE> PAGE 4
025 D000001 0
025 D000002 0
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028 A010000 752
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<PAGE> PAGE 6
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<PAGE> PAGE 7
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080 A000000 LLOYD'S OF LONDON
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080 C000000 70000
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SIGNATURE STEVE KEANE
TITLE GENERAL COUNSEL
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771524
<NAME> FEDERATED ARMS FUND
<SERIES>
<NUMBER> 001
<NAME> FEDERATED ARMS FUND INSTITUTIONAL SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-END> AUG-31-1999
<INVESTMENTS-AT-COST> 448,908,935
<INVESTMENTS-AT-VALUE> 453,032,619
<RECEIVABLES> 11,831,753
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 460,740,688
<PAYABLE-FOR-SECURITIES> 8,631,927
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 34,721,166
<TOTAL-LIABILITIES> 43,353,093
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 502,737,671
<SHARES-COMMON-STOCK> 40,365,700
<SHARES-COMMON-PRIOR> 43,547,672
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (282,689)
<ACCUMULATED-NET-GAINS> (80,953,703)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (4,123,684)
<NET-ASSETS> 384,011,263
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 25,503,605
<OTHER-INCOME> 0
<EXPENSES-NET> (2,516,658)
<NET-INVESTMENT-INCOME> 22,986,947
<REALIZED-GAINS-CURRENT> (1,188,247)
<APPREC-INCREASE-CURRENT> (5,642,395)
<NET-CHANGE-FROM-OPS> 16,156,305
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (21,452,481)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,017,476
<NUMBER-OF-SHARES-REDEEMED> (7,803,994)
<SHARES-REINVESTED> 604,546
<NET-CHANGE-IN-ASSETS> (52,285,497)
<ACCUMULATED-NII-PRIOR> 49,788
<ACCUMULATED-GAINS-PRIOR> (79,755,456)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,624,894
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,463,432
<AVERAGE-NET-ASSETS> 400,935,984
<PER-SHARE-NAV-BEGIN> 9.670
<PER-SHARE-NII> 0.510
<PER-SHARE-GAIN-APPREC> (0.160)
<PER-SHARE-DIVIDEND> (0.510)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.510
<EXPENSE-RATIO> 0.55
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0.000
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771524
<NAME> FEDERATED ARMS FUND
<SERIES>
<NUMBER> 002
<NAME> FEDERATED ARMS FUND INSTITUTIONAL SERVICE SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-END> AUG-31-1999
<INVESTMENTS-AT-COST> 448,908,935
<INVESTMENTS-AT-VALUE> 453,032,619
<RECEIVABLES> 11,831,753
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 460,740,688
<PAYABLE-FOR-SECURITIES> 8,631,927
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 34,721,166
<TOTAL-LIABILITIES> 43,353,093
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 502,737,671
<SHARES-COMMON-STOCK> 3,508,418
<SHARES-COMMON-PRIOR> 5,036,284
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (282,689)
<ACCUMULATED-NET-GAINS> (80,953,703)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (4,123,684)
<NET-ASSETS> 33,376,332
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 25,503,605
<OTHER-INCOME> 0
<EXPENSES-NET> (2,516,658)
<NET-INVESTMENT-INCOME> 22,986,947
<REALIZED-GAINS-CURRENT> (1,188,247)
<APPREC-INCREASE-CURRENT> (5,642,395)
<NET-CHANGE-FROM-OPS> 16,156,305
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,866,943)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 398,206
<NUMBER-OF-SHARES-REDEEMED> (1,996,613)
<SHARES-REINVESTED> 70,541
<NET-CHANGE-IN-ASSETS> (52,285,497)
<ACCUMULATED-NII-PRIOR> 49,788
<ACCUMULATED-GAINS-PRIOR> (79,755,456)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,624,894
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,463,432
<AVERAGE-NET-ASSETS> 36,540,117
<PER-SHARE-NAV-BEGIN> 9.670
<PER-SHARE-NII> 0.480
<PER-SHARE-GAIN-APPREC> (0.150)
<PER-SHARE-DIVIDEND> (0.490)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.510
<EXPENSE-RATIO> 0.80
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0.000
</TABLE>
Item 77 C -- Submission of Matters to a Vote of Security Holders
A Special Meeting of Shareholders of Federated ARMs Fund (the "Fund") was
held on June 21, 1999. The following items, which are required to be reported
under this Item 77C, were approved at the meeting:
1. Election of Trustees:
Names For Against Abstentions and Withheld Authority
Broker Non-Votes To Vote
Thomas G. Bigley
30,067,640 7,423,084
Nicholas P. Constantakis
30,067,640 7,423,084
John F. Cunningham
30,067,640 7,423,084
J. Christopher Donohue
30,067,640 7,423,084
Charles F. Mansfield, Jr.
30,067,640 7,423,084
John E. Murray, Jr.
30,067,640 7,423,084
John S. Walsh
30,067,640 7,423,084
1 The following Trustees of the Fund continued their terms as Trustees of
the Fund: John F. Donohue, Lawrence D. Ellis, and Marjorie P. Smuts.
2. To ratify the selection of Ernst & Young LLP as the Fund's Independent
Auditors.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
37,448,755 24,557 17,411
3. To make changes to the Fund's fundamental investment policies.
a. To amend the Fund's fundamental investment policy regarding
diversification.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,639,087 12,060,446 791,191
b. To amend the Fund's fundamental investment policy regarding
borrowing money and issuing senior securities.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,639,087 12,060,446 791,191
c. To amend the Fund's fundamental investment policy regarding
investments in real estate.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,639,087 12,060,446 791,191
d. To amend the Fund's fundamental policy regarding investing in
commodities.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,639,087 12,060,446 791,191
e. To amend the Fund's fundamental investment policy regarding
underwriting securities.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,639,087 12,060,446 791,191
f. To amend the Fund's fundamental investment policy regarding lending
by the Fund.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,639,087 12,060,446 791,191
g. To amend, and to make non-fundamental, the Fund's fundamental
investment policy regarding buying securities on margin.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,639,087 12,060,446 791,191
h. To amend, and to make non-fundamental, the Fund's fundamental
investment policy regarding pledging assets.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,639,087 12,060,446 791,191
i. To amend, and to make non-fundamental, the Fund's fundamental
investment policy regarding investing in illiquid securities.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,639,087 12,060,446 791,191
j. To amend, and to make non-fundamental, the Fund's fundamental
investment policy regarding investing in other investment companies.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,639,087 12,060,446 791,191
k. To make non-fundamental the Fund's fundamental investment policy
regarding investing in adjustable and floating rate mortgage securities.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,639,087 12,060,446 791,191
l. To make non-fundamental the Fund's fundamental investment policy
regarding investing in U.S. government securities.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,639,087 12,060,446 791,191
m. To make non-fundamental the Fund's fundamental investment policy
regarding investing in mortgage related securities.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,639,087 12,060,446 791,191
n. To make non-fundamental the Fund's fundamental investment policy
regarding purchasing collateralized mortgage obligations.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,639,087 12,060,446 791,191
o. To make non-fundamental the Fund's fundamental investment policy
regarding engaging in dollar roll transactions.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,639,087 12,060,446 791,191
p. To make non-fundamental the Fund's fundamental investment policy
regarding engaging in repurchase agreements.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,639,087 12,060,446 791,191
q. To make non-fundamental the Fund's fundamental investment policy
regarding engaging in reverse repurchase agreements.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,639,087 12,060,446 791,191
r. To make non-fundamental the Fund's fundamental investment policy
regarding engaging in securities lending transactions.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,639,087 12,060,446 791,191
s. To make non-fundamental the Fund's fundamental investment policy
regarding engaging in when-issued and delayed delivery transactions.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,639,087 12,060,446 791,191
t. To make non-fundamental the Fund's fundamental investment policy
regarding investing in stripped mortgage securities.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,639,087 12,060,446 791,191
4. To eliminate certain of the Fund's fundamental investment policies.
a. To remove the Fund's fundamental investment policy on investing in
securities of new issuers.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,499,144 12,195,063 796,517
b. To remove the Fund's fundamental investment policy on selling
securities short.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,499,144 12,195,063 796,517
c. To remove the Fund's fundamental investment policy regarding
portfolio trading.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,499,144 12,195,063 796,517
d. To remove the Fund's fundamental investment policy regarding
temporary investments.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,499,144 12,195,063 796,517
5. To approve an amendment and restatement to the Fund's Declaration of Trust
to permit the Board of Trustees to liquidate assets of the Fund without
seeking shareholder approval.
For Against Abstentions Withheld Authority
and Broker To Vote
Non-Votes
24,610,128 12,230,086 650,510
The Definitive Proxy Statement for the Special Meeting held on June 21, 1999
was filed with the Securities and Exchange Commission on May 6, 1999, and is
incorporated by reference. (File No. 811-4539)
Report of Independent Auditors
To the Shareholders and
Board of Trustees of
Federated ARMs Fund:
In planning and performing our audit of the financial statements of
Federated ARMs Fund for the year ended August 31, 1999, we considered
its internal control, including control activities for safeguarding
securities, in order to determine our auditing procedures for the
purpose of expressing our opinion on the financial statements and to
comply with the requirements of Form N-SAR, not to provide assurance on
internal control.
The management of Federated ARMs Fund is responsible for establishing
and maintaining internal control. In fulfilling this responsibility,
estimates and judgments by management are required to assess the
expected benefits and related costs of controls. Generally, controls
that are relevant to an audit pertain to the entity's objective of
preparing financial statements for external purposes that are fairly
presented in conformity with generally accepted accounting principles.
Those controls include the safeguarding of assets against unauthorized
acquisition, use or disposition.
Because of inherent limitations in internal control, error or fraud may
occur and not be detected. Also, projection of any evaluation of
internal control to future periods is subject to the risk that it may
become inadequate because of changes in conditions or that the
effectiveness of the design and operation may deteriorate.
Our consideration of internal control would not necessarily disclose all
matters in internal control that might be material weaknesses under
standards established by the American Institute of Certified Public
Accountants. A material weakness is a condition in which the design or
operation of one or more of the internal control components does not
reduce to a relatively low level the risk that misstatements caused by
error or fraud in amounts that would be material in relation to the
financial statements being audited may occur and not be detected within
a timely period by employees in the normal course of performing their
assigned functions. However, we noted no matters involving internal
control and its operation, including controls for safeguarding
securities, that we consider to be material weaknesses as defined above
at August 31, 1999.
This report is intended solely for the information and use of
management, the Board of Trustees of Federated ARMs Fund, and the
Securities and Exchange Commission and is not intended to be and should
not be used by anyone other than these specified parties.
ERNST & YOUNG
Boston, Massachusetts
October 19, 1999
