FEDERATED ARMS FUND
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES
SUPPLEMENT TO PROSPECTUSES DATED OCTOBER 31, 1998
At a Special Meeting of Shareholders to be held on June 21, 1999, shareholders
will be asked to vote on the changes described below. If approved by
shareholders, these changes will take effect as of July 1, 1999. Shareholders
will be notified if any of these changes are not approved. Please keep this
supplement for your records.
Shareholders will be asked to consider the following proposals:
(1) To elect seven Trustees.
(2) To ratify the selection of the Trust's independent auditors.
(3) To make changes to the Trust's fundamental investment policies:
(a) To amend the Trust's fundamental investment policy regarding
diversification;
(b) To amend the Trust's fundamental investment policy regarding
borrowing money and issuing senior securities;
(c) To amend the Trust's fundamental investment policy regarding
investing in real estate;
(d) To amend the Trust's fundamental investment policy regarding
investing in commodities;
(e) To amend the Trust's fundamental investment policy regarding
underwriting securities;
(f) To amend the Trust's fundamental investment policy regarding
lending by the Trust;
(g) To amend, and to make non-fundamental, the Trust's fundamental
investment policy regarding buying securities on margin;
(h) To amend, and to make non-fundamental, the Trust's fundamental
investment policy regarding pledging assets;
(i) To amend, and to make non-fundamental, the Trust's fundamental
investment policy on investing in illiquid securities;
(j) To amend, and to make non-fundamental, the Trust's fundamental
investment policy regarding investing in other investment
companies;
(k) To make non-fundamental the Trust's fundamental investment policy
regarding investing in adjustable and floating rate mortgage
securities;
(l) To make non-fundamental the Trust's fundamental investment policy
regarding investing in U.S. government securities;
(m) To make non-fundamental the Trust's fundamental investment policy
regarding investing in mortgage related securities;
(n) To make non-fundamental the Trust's fundamental investment policy
regarding purchasing collateralized mortgage obligations;
(o) To make non-fundamental the Trust's fundamental investment policy
regarding engaging in dollar roll transactions;
(p) To make non-fundamental the Trust's fundamental investment policy
regarding engaging in repurchase agreements;
(q) To make non-fundamental the Trust's fundamental investment policy
regarding engaging in reverse repurchase agreements;
(r) To make non-fundamental the Trust's fundamental investment policy
regarding engaging in securities lending transactions;
(s) To make non-fundamental the Trust's fundamental investment policy
regarding engaging in when-issued and delayed delivery
transactions; and
(t) To make non-fundamental the Trust's fundamental investment policy
regarding investing in stripped mortgage securities.
(4) To eliminate certain of the Trust's fundamental investment policies:
(a) To remove the Trust's fundamental investment policy on investing
in new issuers;
(b) To remove the Trust's fundamental investment policy on selling
securities short; and
(c) To remove the Trust's fundamental investment policy regarding
portfolio trading.
(d) To remove the Trust's fundamental investment policy regarding
temporary investments;
(5) To approve an amendment and restatement to the Trust's Declaration of
Trust to permit the Board of Trustees to liquidate assets of the Trust
without seeking shareholder approval.
(6) To transact such other business as may properly come before the
meeting or any adjournment thereof.
April 23, 1999
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Federated Investors
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Cusip 314082108
Cusip 314082207
G02639-02 (4/99)
