Federated ARMs Fund
Institutional Shares
Institutional Service Shares
Supplement to Prospectuses and Statement of Additional Information, as
appropriate, dated October 31, 1998
I. At the June 21, 1999 shareholder meeting, shareholders approved the
following changes to become effective July 1, 1999:
1. Elected seven Trustees.
2. Ratified the selection of the Trust's independent auditors.
3. Made changes to the Funds' fundamental investment policies:
a. Amended 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 securities of that issuer, or the Trust
would own more than 10% of the outstanding voting securities of
that issuer."
b. Amended 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."
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c. Amended the Trust's fundamental investment policy regarding
investing 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. Amended the Trust's fundamental investment policy regarding
investing 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. As a non-fundamental operating policy, for purposes of
the foregoing 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."
e. Amended 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. Amended 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. Made non-fundamental, and amended, 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."
h. Made non-fundamental, and amended, 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."
i. Made non-fundamental, and amended, 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."
j. Made non-fundamental, and amended, the Trust's fundamental
investment policy regarding investing in other investment companies to read as
follows:
"The Trust may invest its assets in securities of other investment
companies, including securities of affiliated investment companies,
as an efficient means of carrying out its investment policies and
managing its uninvested cash."
k. Made non-fundamental the Trust's fundamental investment policy as
follows:
"The Trust will limit its investments to those that are permitted
for purchase by federally chartered savings and loan associations
pursuant to applicable rules, regulations, or interpretations of
the Office of Thrift Supervision and by federal credit unions under
the Federal Credit Union Act and the rules, regulations, and
interpretations of the National Credit Union Administration."
l. Made non-fundamental the Trust's fundamental investment policy
regarding investing in U.S. government securities.
m. Made non-fundamental the Trust's fundamental investment policy
regarding investing in mortgage related securities.
n. Made non-fundamental the Trust's fundamental investment policy
regarding purchasing collateralized mortgage obligations.
o. Made non-fundamental the Trust's fundamental investment policy
regarding engaging in dollar roll transactions.
p. Made non-fundamental the Trust's fundamental investment policy
regarding engaging in repurchase agreements.
q. Made non-fundamental the Trust's fundamental investment policy
regarding engaging in reverse repurchase agreements.
r. Made non-fundamental the Trust's fundamental investment policy
regarding engaging in securities lending transactions.
s. Made non-fundamental the Trust's fundamental investment policy
regarding engaging in when-issued and delayed delivery transactions.
t. Made non-fundamental the Trust's fundamental investment policy
regarding investing in stripped mortgage securities.
4. Eliminated certain of the Trust's fundamental investment policies:
a. Approved the deletion of the Trust's fundamental investment policy
with regard to investing in new issuers.
b. Approved the deletion of the Trust's fundamental investment policy
with regard to selling securities short.
c. Approved the deletion of the Trust's fundamental investment policy
with regard to portfolio trading.
d. Approved the deletion of the Trust's fundamental investment policy
with regard to temporary investments.
5.Approved an amendment and restatement to the Trust's Declaration of
Trust to permit the Board of Trustees to liquidate assets of the Trust
without seeking shareholder approval.
II. The following actions were taken by the Board of Trustees with regard to
non-fundamental investment policies:
1.Approved the deletion of the Trust's undertaking of having no present
intent to engage in reverse repurchase agreements, purchase securities
of other investment companies, borrow money or invest in illiquid
securities in excess of 5% of the value of total assets during the
coming fiscal year.
2.Approved the deletion of the Trust's non-fundamental investment
policy pertaining to when-issued and delayed delivery transactions
that provides that the Trust will not engage in such transactions to
an extent that would cause the segregation of more than 20% of the
value of its total assets.
June 21, 1999
FEDERATED
WORLD-CLASS INVESTMENT MANAGER
Federated ARMs Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Cusip 314082108
Cusip 314082207
G02639-03 (6/99)
