Report of Ernst & Young LLP, Independent Auditors
To the Board of Trustees and Shareholders of
FEDERATED ARMs FUND:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Federated ARMs Fund (the
"Fund"), as of August 31, 2000, and the related statement of
operations for the two years in the period then ended, the statement of
changes in net assets, and financial highlights for each of the periods
presented therein. 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 audit in accordance with auditing standards generally
accepted in the United States. 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,
2000, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Federated ARMs Fund, at August 31, 2000, the
results of its operations for the two years in the period then ended,
the changes in its net assets, and the financial highlights for the
periods presented therein, in conformity with accounting principles
generally accepted in the United States.
ERNST & YOUNG LLP
Boston, Massachusetts
October 17, 2000
