1933 Act File No. 33-41004
1940 Act File No. 811-6307
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 8 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 7 X
FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
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 April 30, 1995 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.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
X filed the Notice required by that Rule on April 13, 1995; or
intends to file the Notice required by that Rule on or about
____________; or
during the most recent fiscal year did not sell any securities
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and,
pursuant to Rule 24f-2(b)(2), need not file the Notice.
Copy to: Matthew G. Maloney, Esquire
Dickstein, Shapiro & Morin
2101 L Street, N.W.
Washington, D.C. 20037
CROSS REFERENCE SHEET
This Amendment to the Registration Statement of FORTRESS
ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC. is comprised of the
following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page Cover Page.
Item 2. Synopsis Summary of Fund Expenses.
Item 3. Condensed Financial
Information Financial Highlights; Performance
Information; Financial Statements.
Item 4. General Description of
Registrant General Information; Fortress
Investment Program; Investment
Information; Investment Objective;
Investment Policies; Investment
Limitations.
Item 5. Management of the Fund Fund Information; Management of the
Fund; Distribution of Fund Shares;
Administration of the Fund.
Item 6. Capital Stock and Other
Securities Dividends and Distributions;
Shareholder Information; Voting
Rights; Tax Information; Federal
Income Tax; Pennsylvania Personal
Property Taxes.
Item 7. Purchase of Securities Being
Offered Net Asset Value; Investing in the
Fund; Share Purchases; Minimum
Investment Required; What Shares
Cost; Systematic Investment Program;
Exchange Privilege; Certificates and
Confirmations; Retirement Plans;
Exchange Privilege.
Item 8. Redemption or Repurchase Redeeming Shares; Through a
Financial Institution; Directly by
Mail; Contingent Deferred Sales
Charge; Systematic Withdrawal
Program; Accounts with Low Balances.
Item 9. Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page Cover Page.
Item 11. Table of Contents Table of Contents.
Item 12. General Information and
History General Information about the Fund.
Item 13. Investment Objectives and
Policies Investment Objective and Policies;
Types of Investments; Investment
Limitations.
Item 14. Management of the Fund Fortress Adjustable Rate U.S.
Government Fund, Inc. Management.
Item 15. Control Persons and Principal
Holders of Securities Fund Ownership; Directors'
Compensation; Director Liability.
Item 16. Investment Advisory and Other
Services Investment Advisory Services;
Administrative Services.
Item 17. Brokerage Allocation Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not Applicable.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered Purchasing Shares; Determining Net
Asset Value; Redeeming Shares;
Exchange Privilege.
Item 20. Tax Status Tax Status.
Item 21. Underwriters Not applicable.
Item 22. Calculation of Performance
Data Total Return; Yield; Performance
Comparisons.
Item 23. Financial Statements Filed in Part A.
FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
PROSPECTUS
Fortress Adjustable Rate U.S. Government, Inc. (the "Fund") is an open-end,
diversified management investment company (a mutual fund) that seeks to provide
current income consistent with lower volatility of principal by investing
primarily in a professionally managed, diversified portfolio of adjustable and
floating rate mortgage securities which are issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
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 BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated April 30,
1995, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information
free of charge by calling 1-800-235-4669. To obtain other information or to make
inquiries about the Fund, contact your financial institution.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated April 30, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
FORTRESS INVESTMENT PROGRAM 3
- ------------------------------------------------------
INVESTMENT INFORMATION 4
- ------------------------------------------------------
Investment Objective 4
Investment Policies 4
Acceptable Investments 5
Adjustable Rate Mortgage Securities 5
Collateralized Mortgage Obligations 6
Real Estate Mortgage Investment
Conduits 7
Regulatory Compliance 7
Resets of Interest 8
Caps and Floors 8
Temporary Investments 8
Repurchase Agreements 8
Lending of Portfolio Securities 8
When-Issued and Delayed Delivery
Transactions 9
Portfolio Turnover 9
Investment Limitations 9
NET ASSET VALUE 10
- ------------------------------------------------------
INVESTING IN THE FUND 10
- ------------------------------------------------------
Share Purchases 10
Through a Financial Institution 10
Directly by Mail 10
Directly by Wire 10
Minimum Investment Required 11
What Shares Cost 11
Systematic Investment Program 11
Exchange Privilege 11
Certificates and Confirmations 12
Dividends and Distributions 12
Retirement Plans 12
REDEEMING SHARES 12
- ------------------------------------------------------
Through a Financial Institution 12
Directly By Mail 13
Signatures 13
Receiving Payment 13
Contingent Deferred Sales Charge 13
Systematic Withdrawal Program 15
Accounts with Low Balances 15
FUND INFORMATION 15
- ------------------------------------------------------
Management of the Fund 15
Board of Directors 15
Investment Adviser 15
Advisory Fees 15
Advisor's Background 16
Distribution of Fund Shares 16
Distribution and Shareholder
Services Plan 16
Other Payments to Financial
Institutions 17
Administration of the Fund 18
Administrative Services 18
Custodian 18
Transfer Agent and Dividend
Disbursing Agent 18
Independent Auditors 18
SHAREHOLDER INFORMATION 18
- ------------------------------------------------------
Voting Rights 18
TAX INFORMATION 19
- ------------------------------------------------------
Federal Income Tax 19
Pennsylvania Personal Property Tax 19
PERFORMANCE INFORMATION 19
- ------------------------------------------------------
FINANCIAL STATEMENTS 20
- ------------------------------------------------------
INDEPENDENT AUDITORS' REPORT 29
- ------------------------------------------------------
ADDRESSES 30
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)............................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price).................... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as
applicable)(1).......................................................................................... 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)........................................ None
Exchange Fee.............................................................................................. None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver)(2).......................................................................... 0.53%
12b-1 Fee (after waiver)(3)............................................................................... 0.02%
Total Other Expenses...................................................................................... 0.47%
Shareholder Services Fee (after waiver)(4)................................................. 0.23%
Total Fund Operating Expenses (5)................................................................ 1.02%
</TABLE>
(1) The contingent deferred sales charge assessed is 1.00% of the lesser of the
original purchase price or the net asset value of shares redeemed within
four years of their purchase date. For a more complete description, see
"Contingent Deferred Sales Charge."
(2) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.60%.
(3) The maximum 12b-1 fee is 0.25%.
(4) The maximum shareholder services fee is 0.25%.
(5) The total Fund operating expenses would have been 1.32% absent the voluntary
waivers of a portion of the management fee and a portion of the 12b-1 fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Fund will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Investing in the Fund" and "Redeeming Shares". Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales load permitted under the rules of the National
Association of Securities Dealers, Inc.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1)
5% annual return and (2) redemption at the end of each time period....... $ 21 $ 44 $ 56 $ 125
You would pay the following expenses on the same investment, assuming no
redemption............................................................... $ 10 $ 32 $ 56 $ 125
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 29.
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
<S> <C> <C> <C> <C>
1995 1994 1993 1992*
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.79 $ 9.90 $ 9.98 $ 10.00
- -----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------
Net investment income 0.47 0.43 0.53 0.47
- -----------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.32) (0.11) (0.08) (0.06)
- ----------------------------------------------------------------------- --------- --------- --------- ---------
Total from investment operations 0.15 0.32 0.45 0.41
- ----------------------------------------------------------------------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.47) (0.43) (0.53) (0.42)
- -----------------------------------------------------------------------
Distributions in excess of net investment income (0.01)(a) -- -- (0.01)(a)
- ----------------------------------------------------------------------- --------- --------- --------- ---------
Total distributions (0.48) (0.43) (0.53) (0.43)
- ----------------------------------------------------------------------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 9.46 $ 9.79 $ 9.90 $ 9.98
- ----------------------------------------------------------------------- --------- --------- --------- ---------
TOTAL RETURN** 1.58% 3.27% 4.58% 4.14%
- -----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------
Expenses 1.02% 1.02% 1.01% 0.63%(b)
- -----------------------------------------------------------------------
Net investment income 4.76% 4.38% 5.29% 6.79%(b)
- -----------------------------------------------------------------------
Expense waiver/reimbursement(c) 0.30% 0.24% 0.01% 0.37%(b)
- -----------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------
Net assets, end of period (000 omitted) $419,095 $798,213 $1,136,198 $965,289
- -----------------------------------------------------------------------
Portfolio turnover rate 170% 40% 56% 22%
- -----------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from July 25, 1991 (date of initial
public investment) to February 29, 1992.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Distributions in excess of net investment income for the year ended
February 28, 1995, and for the period ended February 29, 1992 were the
result of certain book and tax timing differences. These distributions do
not represent a return of capital for federal income tax purposes.
(b) Computed on an annualized basis.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal year ended February 28, 1995, which can be obtained
free of charge.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Fund was incorporated under the laws of the State of Maryland on March 20,
1991. The Fund is designed primarily for individuals seeking current income
consistent with lower volatility of principal through a professionally managed,
diversified portfolio of adjustable and floating rate mortgage securities which
are issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
Volatility of principal is a measure of the degree to which the Fund's net asset
value fluctuates. A fund that invests primarily in adjustable rate securities
would tend to have a lower degree of volatility in its net asset value than a
fund that invests primarily in fixed-rate securities. This is because the value
of adjustable rate securities does not fluctuate as much as the value of
fixed-rate securities when interest rates rise or fall. By investing primarily
in mortgage securities whose interest rates adjust periodically, the Fund will
attempt to maintain a net asset value that would be less volatile than that of a
fund which invested primarily in fixed-rate mortgage securities.
A minimum initial investment of $1,500 is required, except for an IRA account,
which requires a $50 minimum initial investment. The minimum subsequent
investment is $100, except for an IRA account, which requires a minimum
subsequent investment of $50.
Fund shares are sold and redeemed at net asset value. However, a contingent
deferred sales charge is imposed on shares, other than shares purchased through
reinvestment of dividends, which are redeemed within one to four years of their
purchase dates. Fund assets may be used in connection with the distribution of
Fund shares.
FORTRESS INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
This Fund is a class of Fortress Shares ("Fortress Shares"). It is a member of a
family of funds ("Fortress Funds"), collectively known as the Fortress
Investment Program. The Program also includes the Fortress Shares of the
following funds:
AMERICAN LEADERS FUND, INC., providing growth of capital and income
through high-quality stocks;
CALIFORNIA MUNICIPAL INCOME FUND, providing current income exempt from
federal regular income tax and California personal income taxes;
FORTRESS BOND FUND, providing current income primarily through
high-quality corporate debt;
FORTRESS MUNICIPAL INCOME FUND, providing a high level of current income
generally exempt from federal regular income tax by investing primarily
in a diversified portfolio of municipal bonds;
FORTRESS UTILITY FUND, providing high current income and moderate
appreciation primarily through equity and debt securities of utility
companies;
GOVERNMENT INCOME SECURITIES, INC., providing current income through
intermediate-term U.S. government securities;
LIBERTY EQUITY INCOME FUND, INC., an equity fund investing primarily in
stocks which have a history of regular dividends;
LIMITED TERM FUND, providing a high level of current income consistent
with minimum fluctuation in principal value;
LIMITED TERM MUNICIPAL FUND, providing a high level of current income
which is exempt from federal regular income tax consistent with the
preservation of capital;
MONEY MARKET MANAGEMENT, INC., providing current income consistent with
stability of principal through high-quality money market instruments;
NEW YORK MUNICIPAL INCOME FUND, providing current income exempt from
federal regular income tax, New York personal income taxes, and New York
City income taxes;
OHIO MUNICIPAL INCOME FUND, providing current income exempt from federal
regular income tax and Ohio personal taxes;
STRATEGIC INCOME FUND, providing high current income through investing in
domestic corporate debt obligations, U.S. government securities, and
foreign government and corporate debt obligations; and
WORLD UTILITY FUND, providing total return by investing primarily in
securities issued by domestic and foreign companies in the utilities
industry.
Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus. Prospectuses for these funds are available
by writing to Federated Securities Corp.
The Fortress Investment Program provides flexibility and diversification for an
investor's long-term investment planning. It enables an investor to meet the
challenges of changing market conditions by offering convenient exchange
privileges which give access to various investment vehicles, and by providing
the investment services of proven, professional investment advisers.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income with
volatility of principal which is lower than investment companies investing
primarily in fixed-rate mortgage securities. The investment objective cannot be
changed without approval of shareholders. While there is no assurance that the
Fund will achieve its investment objective, it endeavors to do so by following
the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund's assets will be managed so that the Fund is a permissible investment
for federal credit unions under the Federal Credit Union Act and rules and
regulations established by the National Credit Union Administration. To the
extent that any investment or investment practice under the Fund's investment
policies listed below are not permissible for federal credit unions, the Fund
shall refrain from purchasing such investment or engaging in such practices. The
Fund will notify shareholders 60 days before making any change to this policy.
The investment policies described below cannot be changed without shareholder
approval.
ACCEPTABLE INVESTMENTS. The Fund pursues its investment objective by investing
primarily in adjustable and floating rate mortgage securities. Under normal
circumstances, the Fund will invest at least 65% of the value of its total
assets in adjustable and floating rate mortgage securities which are issued or
guaranteed by the U.S. government, its agencies or instrumentalities. The types
of mortgage securities in which the Fund may invest include the following:
adjustable rate mortgage securities;
collateralized mortgage obligations;
real estate mortgage investment conduits; and
other securities collateralized by or representing an interest in real
estate mortgages whose interest rates reset at periodic intervals and are
issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
In addition to the securities described above, the Fund may also invest in the
following:
direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and
notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as the: Farm Credit System, including the
National Bank for Cooperatives, Farm Credit Banks, and Banks for
Cooperatives; Farmers Home Administration; Federal Home Loan Banks;
Federal Home Loan Mortgage Corporation; Federal National Mortgage
Association; Government National Mortgage Association; and Student Loan
Marketing Association.
The government securities in which the Fund may invest are backed in a variety
of ways by the U.S. government or its agencies or instrumentalities. Some of
these securities, such as Government National Mortgage Association
mortgage-backed securities, are backed by the full faith and credit of the U.S.
government. Other securities, such as obligations of the Federal National
Mortgage Association or Federal Home Loan Mortgage Corporation, are backed by
the credit of the agency or instrumentality issuing the obligations but not the
full faith and credit of the U.S. government.
The Fund will not invest in stripped mortgage securities.
ADJUSTABLE RATE MORTGAGE SECURITIES ("ARMS"). ARMS are pass-through mortgage
securities with adjustable rather than fixed interest rates. The ARMS in which
the Fund invests are issued by Government National Mortgage Association
("GNMA"), Federal National Mortgage Association ("FNMA"), and Federal Home Loan
Mortgage Corporation ("FHLMC") and are actively traded. The underlying mortgages
which collateralize ARMS issued by GNMA are fully guaranteed by the Federal
Housing Administration ("FHA") or Veterans Administration ("VA"), while those
collateralizing ARMS issued by FHLMC or FNMA are typically conventional
residential mortgages conforming to strict underwriting size and maturity
constraints.
Unlike conventional bonds, ARMS pay back principal over the life of the ARMS
rather than at maturity. Thus, a holder of the ARMS, such as the Fund, would
receive monthly scheduled payments of principal and interest, and may receive
unscheduled principal payments representing pre-payments on the underlying
mortgages. At the time that a holder of the ARMS reinvests the payments and any
unscheduled prepayments of principal that it receives, the holder may receive a
rate of interest which is actually lower than the rate of interest paid on the
existing ARMS. As a consequence, ARMS may be a less effective means of "locking
in" long-term interest rates than other types of U.S. government securities.
Not unlike other U.S. government securities, the market value of ARMS will
generally vary inversely with changes in market interest rates. Thus, the market
value of ARMS generally declines when interest rates rise and generally rises
when interest rates decline.
While ARMS generally entail less risk of a decline during periods of rapidly
rising rates, ARMS may also have less potential for capital appreciation than
other similar investments (e.g. investments with comparable maturities) because
as interest rates decline, the likelihood increases that mortgages will be
prepaid. Furthermore, if ARMS are purchased at a premium, mortgage foreclosures
and unscheduled principal payments may result in some loss of a holder's
principal investment to the extent of the premium paid. Conversely, if ARMS are
purchased at a discount, both a scheduled payment of principal and an
unscheduled prepayment of principal would increase current and total returns and
would accelerate the recognition of income, which would be taxed as ordinary
income when distributed to shareholders.
COLLATERALIZED MORTGAGE OBLIGATIONS. Collateralized mortgage obligations are
debt obligations collateralized by mortgage loans or mortgage pass-through
securities. Typically, CMOs are collateralized by Government National Mortgage
Association, Federal National Mortgage Association, or Federal Home Loan
Mortgage Corporation Certificates, but also may be collateralized by whole loans
or Private Pass-Throughs (such collateral collectively hereinafter referred to
as "Mortgage Assets"). Multiclass pass-through securities are equity interests
in a trust composed of Mortgage Assets. Unless the context indicates otherwise,
all references herein to CMOs include multiclass pass-through securities.
Payments of principal of and interest on the Mortgage Assets, and any
reinvestment income thereon, provide the funds to pay debt service on the CMOs
or make scheduled distributions on the multiclass pass-through securities. CMOs
in which the Fund invests are issued by agencies or instrumentalities of the
U.S. government. The issuer of a series of CMOs may elect to be treated as a
Real Estate Mortgage Investment Conduit , which has certain special tax
attributes.
In a CMO, a series of bonds or certificates is issued in multiple classes. Each
class of CMOs, often referred to as a "tranche," is issued at a specific fixed
or floating coupon rate and has a stated maturity or final distribution date.
Principal prepayments on the Mortgage Assets may cause the CMOs to be retired
substantially earlier than their stated maturities or final distribution dates.
Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly
or semi-annual basis. The principal of and interest on the Mortgage Assets may
be allocated among the several classes of a series of a CMO in innumerable ways.
In one structure, payments of principal, including any principal prepayments, on
the Mortgage Assets are applied to the classes of a CMO in the order of their
respective stated maturities or final distribution dates, so that no payment of
principal will be made on any class of CMOs until all other classes having an
earlier stated maturity or final distribution date have been paid in full.
Because the mortgages underlying mortgage-backed securities often may be prepaid
without penalty or premium, mortgage-backed securities are generally subject to
higher prepayment risks than
most other types of debt instruments. Prepayment risks on mortgage securities
tend to increase during periods of declining mortgage interest rates because
many borrowers refinance their mortgages to take advantage of the more favorable
rates. Depending upon market conditions, the yield that the Fund receives from
the reinvestment of such prepayments, or any scheduled principal payments, may
be lower than the yield on the original mortgage security. As a consequence,
mortgage securities may be a less effective means of "locking in" interest rates
than other types of debt securities having the same stated maturity and may also
have less potential for capital appreciation. For certain types of asset pools,
such as collateralized mortgage obligations, prepayments may be allocated to one
tranche of securities ahead of other tranches, in order to reduce the risk of
prepayment for the other tranches.
Prepayments may result in a capital loss to the Fund to the extent that the
prepaid mortgage securities were purchased at a market premium over their stated
principal amount. Conversely, the prepayment of mortgage securities purchased at
a market discount from their stated principal amount will accelerate the
recognition of interest income by the Fund, which would be taxed as ordinary
income when distributed to the shareholders.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS"). REMICs are offerings of
multiple class real estate mortgage-backed securities which qualify and elect
treatment as such under provisions of the Internal Revenue Code. Issuers of
REMICs may take several forms, such as trusts, partnerships, corporations,
associations, or a segregated pool of mortgages. Once REMIC status is elected
and obtained, the entity is not subject to federal income taxation. Instead,
income is passed through the entity and is taxed to the person or persons who
hold interests in the REMIC. A REMIC interest must consist of one or more
classes of "regular interests," some of which may offer adjustable rates (the
type in which the Fund primarily invests), and a single class of "residual
interests." To qualify as a REMIC, substantially all the assets of the entity
must be in assets directly or indirectly secured principally by real property.
REGULATORY COMPLIANCE. In accordance with the Rules and Regulations of the NCUA,
unless the purchase is made solely to reduce interest-rate risk, the Fund will
not invest in any CMO or REMIC security that meets any of the following three
tests: (1) the CMO or REMIC has an expected average life greater than 10 years;
(2) the average life of the CMO or REMIC extends by more than 4 years assuming
an immediate and sustained parallel shift in the yield curve of plus 300 basis
points, or shortens by more than 6 years assuming an immediate and sustained
parallel shift in the yield curve of minus 300 basis points; or (3) the
estimated change in the price of the CMO or REMIC is more than 17%, due to an
immediate and sustained parallel shift in the yield curve of plus or minus 300
basis points.
Neither test (1) nor (2) above apply to floating or adjustable rate CMOs or
REMICs with all of the following characteristics: (a) the interest rate of the
instrument is reset at least annually; (b) the interest rate is below the
contractual cap of the instrument; (c) the instrument is tied to a widely-used
market rate; and (d) the instrument varies directly (not inversely) and is reset
in proportion with the index's changes.
The Fund may not purchase a residual interest in a CMO or REMIC. In addition,
the Fund will not purchase zero coupon securities with maturities greater than
10 years.
RESETS OF INTEREST. The interest rates paid on the ARMS, CMOs, and REMICs in
which the Fund invests generally are readjusted or reset at intervals of one
year or less to an increment over some predetermined interest rate index. There
are two main categories of indices: those based on U.S. Treasury securities and
those derived from a calculated measure, such as a cost of funds index or a
moving average of mortgage rates. Commonly utilized indices include the one-year
and five-year constant maturity Treasury Note rates, the three-month Treasury
Bill rate, the 180-day Treasury Bill rate, rates on longer-term Treasury
securities, the National Median Cost of Funds, the one-month or three-month
London Interbank Offered Rate (LIBOR), the prime rate of a specific bank, or
commercial paper rates. Some indices, such as the one-year constant maturity
Treasury Note rate, closely mirror changes in market interest rate levels.
Others tend to lag changes in market rate levels and tend to be somewhat less
volatile.
CAPS AND FLOORS. The underlying mortgages which collateralize the ARMS, CMOs,
and REMICs in which the Fund invests will frequently have caps and floors which
limit the maximum amount by which the loan rate to the residential borrower may
change up or down: (1) per reset or adjustment interval and (2) over the life of
the loan. Some residential mortgage loans restrict periodic adjustments by
limiting changes in the borrower's monthly principal and interest payments
rather than limiting interest rate changes. These payment caps may result in
negative amortization.
The value of mortgage securities in which the Fund invests may be affected if
market interest rates rise or fall faster and farther than the allowable caps or
floors on the underlying residential mortgage loans. An example of the effect of
caps and floors on a residential mortgage loan may be found in the Statement of
Additional Information. Additionally, even though the interest rates on the
underlying residential mortgages are adjustable, amortization and prepayments
may occur, thereby causing the effective maturities of the mortgage securities
in which the Fund invests to be shorter than the maturities stated in the
underlying mortgages.
TEMPORARY INVESTMENTS. 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:
obligations of the U.S. government or its agencies or instrumentalities;
and
repurchase agreements.
To the extent that investments in temporary investments are not for defensive
purposes, the Fund intends to limit its investment in these securities to 20% of
its total assets.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which banks,
broker/ dealers, and other recognized financial institutions sell U.S.
government securities or other securities to the Fund and agree at the time of
sale to repurchase them at a mutually agreed upon time and price. To the extent
that the original seller does not repurchase the securities from the Fund, the
Fund could receive less than the repurchase price on any sale of such
securities.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or long-term basis up to
one-third of the value of its total assets to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the
investment adviser has determined are creditworthy under guidelines established
by the Fund's Board of Directors. The Fund will receive collateral in the form
of cash or U.S. government securities equal to at least 100% of the value of the
securities loaned. There is the risk that when lending portfolio securities, the
securities may not be available to the Fund on a timely basis and the Fund may,
therefore, lose the opportunity to sell the securities at a desirable price. In
addition, in the event that a borrower of securities would file for bankruptcy
or become insolvent, disposition of the securities may be delayed pending court
action.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. Delivery of the security is to be made within 30 days from the
trade date and the period from the trade date to the settlement date will not
exceed 120 days. The seller's failure to complete these transactions may cause
the Fund to miss a price or yield considered to be advantageous. Settlement
dates may be a month or more after entering into these transactions, and the
market values of the securities purchase may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
PORTFOLIO TURNOVER. The Fund may trade or dispose of portfolio securities as
considered necessary to meet its investment objective.
INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow up to one-third of the value of its total assets and pledge up
to 10% of the value of those assets to secure such borrowings;
invest more than 10% of the value of its net assets in securities subject
to restrictions on resale under the Securities Act of 1933 except for
certain restricted securities which meet the criteria for liquidity as
established by the Directors;
invest more than 10% of the value of its net assets in securities which
are not readily marketable or which are otherwise considered illiquid,
including repurchase agreements providing for settlement in more than
seven days after notice; or
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of the market value of all securities and all other assets, less
liabilities, by the number of shares outstanding.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
SHARE PURCHASES
Fund shares are sold on days on which the New York Stock Exchange is open.
Shares of the Fund may be purchased through a financial institution (such as a
bank or an investment dealer) who has a sales agreement with the distributor,
Federated Securities Corp., or directly from Federated Securities Corp. either
by mail or wire. The Fund reserves the right to reject any purchase request.
THROUGH A FINANCIAL INSTITUTION. An investor may call his financial institution
to place an order to purchase shares of the Fund. Purchase orders through a
financial institution are considered received when the Fund is notified of the
purchase order. Purchase orders through a registered broker/dealer must be
received by the broker before 4:00 p.m. (Eastern time) and must be transmitted
by the broker to the Fund before 5:00 p.m. (Eastern time) in order for shares to
be purchased at that day's price. Purchase orders through other financial
institutions must be received by the financial institution and transmitted to
the Fund before 4:00 p.m. (Eastern time) in order for shares to be purchased at
that day's price. It is the financial institution's responsibility to transmit
orders promptly.
The financial institution which maintains investor accounts with the Fund must
do so on a fully disclosed basis unless it accounts for share ownership periods
used in calculating the contingent deferred sales charge (see "Contingent
Deferred Sales Charge"). In addition, advance payments made to financial
institutions may be subject to reclaim by the distributor for accounts
transferred to financial institutions which do not maintain investor accounts on
a fully disclosed basis and do not account for share ownership periods (see
"Other Payments to Financial Institutions").
DIRECTLY BY MAIL. To purchase shares of the Fund by mail directly from Federated
Securities Corp.:
complete and sign the new account application available from the Fund;
enclose a check made payable to Fortress Adjustable Rate U.S. Government
Fund, Inc.; and
send both to the Fund's transfer agent, Federated Services Company, c/o
State Street Bank and Trust Company, P.O. Box 8604, Boston, MA
02266-8604.
Purchases by mail are considered received after payment by check is converted by
the transfer agent's bank, State Street Bank and Trust Company ("State Street
Bank"), into federal funds. This is generally the next business day after State
Street Bank receives the check.
DIRECTLY BY WIRE. To purchase shares of the Fund directly from Federated
Securities Corp. by Federal Reserve wire, call the Fund. All information needed
will be taken over the telephone, and the order is considered received when the
Fund receives payment by wire.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $1,500 unless the investment is in
an IRA account, which requires a minimum initial investment of $50. Subsequent
investments must be in amounts of at least $100, except for an IRA account,
which must be in amounts of at least $50.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an order is
received. Unaffiliated institutions through whom shares are purchased may charge
fees for services provided which may be related to the ownership of Fund shares.
This prospectus should, therefore, be read together with any agreement between
the customer and institution with regard to services provided, the fees charged
for these services, and any restrictions and limitations imposed.
The net asset value is determined at 4:00 p.m. (Eastern time), Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; and (iii) the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Under certain circumstances described under "Redeeming Shares," shareholders may
be charged a contingent deferred sales charge by the distributor at the time
shares are redeemed.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis. Under this program, funds may be automatically withdrawn
monthly from the shareholder's checking account and invested in Fund shares at
the net asset value next determined after an order is received by the Fund. A
shareholder may apply for participation in this program through Federated
Securities Corp.
EXCHANGE PRIVILEGE
Fund shareholders may use the exchange privilege to invest in other Fortress
Funds and Federated Funds which are advised by subsidiaries or affiliates of
Federated Investors at net asset value. However, such exchanges may be subject
to a contingent deferred sales charge and possibly a sales load. This privilege
is available to shareholders resident in any state in which the fund shares
being acquired may be sold.
Shareholders in existing Fortress Funds may exchange their fund shares for
shares of the Fund at net asset value without a sales load or a contingent
deferred sales charge. Shareholders using this privilege must exchange shares
having a net asset value equal to the minimum investment requirement of the fund
into which the exchange is being made.
Shares in certain Federated Funds which are advised by subsidiaries or
affiliates of Federated Investors may also be exchanged for Fund shares at net
asset value.
Further information on the exchange privilege and prospectuses for other
Fortress Funds and Federated Funds are available by calling Federated Securities
Corp.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
on the application or by contacting the Fund.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during the
month.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and paid monthly to all shareholders invested in the Fund
on the record date. Distributions of any net realized long-term capital gains
will be made at least once every twelve months. Unless shareholders request cash
payments on the application or by writing to Federated Securities Corp.,
dividends and distributions are automatically reinvested in additional shares of
the Fund on payment dates at the ex-dividend date net asset value.
RETIREMENT PLANS
Shares of the Fund can be purchased as an investment for retirement plans or for
IRA accounts. For further details contact Federated Securities Corp. and consult
a tax adviser.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made through a financial institution or directly from the
Fund by written request.
THROUGH A FINANCIAL INSTITUTION
A shareholder may redeem shares of the Fund by calling his financial institution
(such as a bank or an investment dealer) to request the redemption. Shares will
be redeemed at the net asset value next determined after the Fund receives the
redemption request from the financial institution. Redemption requests through a
registered broker/dealer must be received by the broker before 4:00 p.m.
(Eastern time) and must be transmitted by the broker to the Fund before 5:00
p.m. (Eastern time) in order for shares to be redeemed at that day's net asset
value. Redemption requests through other financial institutions must be received
by the financial institution and transmitted to the Fund before 4:00 p.m.
(Eastern time) in order for shares to be redeemed at that day's net asset value.
The financial institution is responsible for promptly submitting redemption
requests and providing proper written redemption instructions to the Fund. The
financial institution may charge customary fees and commissions for this
service.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming through his financial institution. If such a case should
occur, another method of redemption, such as "Directly by Mail," should be
considered.
DIRECTLY BY MAIL
Shareholders may also redeem shares by sending a written request to Federated
Services Company, c/o State Street Bank and Trust Company, P.O. Box 8604,
Boston, MA 02266-8604. This written request must include the shareholder's name,
the Fund name, the Fund account number, and the share or dollar amount to be
redeemed. Shares will be redeemed at their net asset value next determined after
State Street Bank receives the redemption request.
If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders may call the Fund for assistance in redeeming by mail.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. A check for the proceeds is mailed within seven days after
receipt of proper written redemption instructions from a broker or from the
shareholder.
CONTINGENT DEFERRED SALES CHARGE
Shareholders redeeming shares from their Fund accounts within certain time
periods of the purchase date of those shares will be charged a contingent
deferred sales charge by the Fund's distributor of the lesser of the original
price or the net asset value of the shares redeemed as follows:
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
AMOUNT OF PURCHASE SHARES HELD SALES CHARGE
<S> <C> <C>
Up to $1,999,999 4 years or less 1.00%
$2,000,000 to $4,999,999 2 years or less 0.50%
$5,000,000 to $24,999,999 1 year or less 0.25%
$25,000,000 or more N/A None
</TABLE>
In instances in which Fund shares have been acquired in exchange for shares in
other Fortress Funds, (i) the purchase price is the price of the shares when
originally purchased and (ii) the time period during which the shares are held
will run from the date of the original purchase. The contingent deferred sales
charge will not be imposed on shares acquired through: (i) the reinvestment of
dividends or distributions of long-term capital gains; or (ii) the exchange of
shares of Government Income Securities, Inc., where those shares were purchased
during that fund's Charter Offering Period. In computing the amount of
contingent deferred sales charge for accounts with shares subject to a single
holding period, if any, redemptions are deemed to have occurred in the following
order: (1) shares acquired through the reinvestment of dividends and long-term
capital gains; (2) purchases of shares occurring prior to the number of years
necessary to satisfy the applicable holding period; and (3) purchases of shares
occurring within the current holding period. For accounts with shares subject to
multiple share holding periods, the redemption sequence will be determined
first, with reinvested dividends and long-term capital gains, and second, on a
first-in, first-out basis.
The contingent deferred sales charge will not be imposed when a redemption
results from a return under the following circumstances: (i) a total or partial
distribution from a qualified plan, other than an IRA, Keogh Plan, or a
custodial account, following retirement; (ii) a total or partial distribution
from an IRA, Keogh Plan, or a custodial account after the beneficial owner
attains age 59-1/2; or (iii) from the death or total and permanent disability of
the beneficial owner. The exemption from the contingent deferred sales charge
for qualified plans, an IRA, Keogh Plan, or a custodial account does not extend
to account transfers, rollovers, and other redemptions made for purposes of
reinvestment. Contingent deferred sales charges are not charged in connection
with exchanges of shares for shares in other Fortress Funds or in connection
with redemptions by the Fund of accounts with low balances. Shares of the Fund
originally purchased through a bank trust department or investment adviser
registered under the Investment Advisers Act of 1940, as amended, or retirement
plans where the third party administrator has entered into certain arrangements
with Federated Securities Corp. or its affiliates, are not subject to the
contingent deferred sales charge, to the extent that no payment was advanced for
purchases made by such entities. In addition, shares held in the Fund by a
financial institution for its own account which were originally purchased by the
financial institution directly from the Fund's distributor without a sales load
may be redeemed without a contingent deferred sales charge. For more
information, see "Other Payments to Financial Institutions."
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive monthly or quarterly payments of a
predetermined amount may take advantage of the Systematic Withdrawal Program.
Under this program, Fund shares are redeemed to provide for periodic withdrawal
payments in an amount directed by the shareholder. Depending upon the amount of
the withdrawal payments, the amount of dividends paid and capital gains
distributions with respect to Fund shares, and the fluctuation of the net asset
value of Fund shares redeemed under this program, redemptions may reduce, and
eventually use up, the shareholder's investment in the Fund. For this reason,
payments under this program should not be considered as yield or income on the
shareholder's investment in the Fund. To be eligible to participate in this
program, a shareholder must have invested at least $10,000 in the Fund (at
current offering price). A shareholder may apply for participation in this
program through Federated Securities Corp.
Contingent deferred sales charges are charged for shares redeemed through this
program within one to four years of their purchase dates.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$1,000. This requirement does not apply, however, if the balance falls below
$1,000 because of changes in the Fund's net asset value.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS. The Fund is managed by a Board of Directors. The Directors
are responsible for managing the Fund's business affairs and for exercising all
the Fund's powers except those reserved for the shareholders. An Executive
Committee of the Board of Directors handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Advisers, the Fund's investment adviser, subject to direction by the Directors.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase or sale of portfolio instruments, for
which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .60 of 1% of the Fund's average daily net assets. The adviser
may voluntarily choose to waive a portion of its fee or reimburse the Fund
for certain operating expenses. The adviser can terminate this voluntary
waiver of some or all of its advisory fee at any time at its sole
discretion. The adviser has also undertaken to reimburse the Fund for
operating expenses in excess of limitations established by certain states.
ADVISER'S BACKGROUND. Federated Advisers, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the Trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk-averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
Kathleen M. Foody-Malus has been the Fund's co-portfolio manager since
July, 1991. Ms. Foody-Malus joined Federated Investors in 1983 and has been
a Vice President of the Fund's investment adviser since 1993. Ms.
Foody-Malus served as an Assistant Vice President of the investment adviser
from 1990 until 1992, and from 1986 until 1989 she acted as an investment
analyst. Ms. Foody-Malus received her M.B.A. in Accounting/Finance from the
University of Pittsburgh.
Ms. Susan M. Nason has been the Fund's co-portfolio manager since July,
1993. Ms Nason joined Federated Investors in 1987 and has been a Vice
President of the Fund's investment adviser since 1993. Ms. Nason served as
an Assistant Vice President of the investment adviser from 1990 until 1992,
and from 1987 until 1990 she acted as an investment analyst. Ms. Nason is a
Chartered Financial Analyst and received her M.B.A. in Finance from
Carnegie Mellon University.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the Fund will pay to the distributor an amount, computed at an annual rate of
0.25 of 1% of the average daily net asset value of the Fund to finance any
activity which is principally intended to result in the sale of shares subject
to the Distribution Plan. The distributor may select financial institutions such
as banks, fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide sales support services as agents for their clients or
customers.
The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amount or may earn a profit from future payments made by the Fund
under the Distribution Plan.
In addition, the Fund has adopted a Shareholder Services Plan (the "Services
Plan") under which it may make payments up to 0.25 of 1% of the average daily
net asset value of the Fund to obtain certain personal services for shareholders
and the maintenance of shareholder accounts ("shareholder services"). The Fund
has entered into a Shareholder Services Agreement with Federated
Shareholder Services, a subsidiary of Federated Investors, under which Federated
Shareholder Services will either perform shareholder services directly or will
select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Fund and Federated Shareholder
Services.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to periodic payments to
financial institutions under the Distribution and Shareholder Services Plans,
certain financial institutions may be compensated by the adviser or its
affiliates for the continuing investment of customers' assets in certain funds,
including the Fund, advised by those entities. These payments will be made
directly by the distributor or adviser from their assets, and will not be made
from the assets of the Fund or by the assessment of a sales load on shares.
Federated Securities Corp. will pay financial institutions an amount equal to
1.00% of the offering price of the shares acquired by their clients or customers
on purchases up to $1,999,999, 0.50% of the offering price on purchases of
$2,000,000 to $4,999,999, and 0.25% of the offering price on purchases of
$5,000,000 to $24,999,999. A financial institution may elect to receive amounts
less than those stated which would reduce the stated contingent deferred sales
charge and/or the holding period used to calculate the fee.
The Glass-Steagall Act limits the ability of a depository institution (such as a
commercial bank or a savings and loan association) to become an underwriter or
distributor of securities. In the event the Glass-Steagall Act is deemed to
prohibit depository institutions from acting in the capacities described in this
prospectus or should Congress relax current restrictions on depository
institutions, the distributor and adviser will consider appropriate changes in
the administrative services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors ("Federated Fund") as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET
MAXIMUM ADMINISTRATIVE FEE ASSETS OF THE FEDERATED FUNDS
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 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 Administrative Services may choose voluntarily to waive a portion of
its fee.
CUSTODIAN. State Street Bank and Trust Company ("State Street Bank"), Boston,
Massachusetts, is custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for the shares of the Fund, and
dividend disbursing agent for the Fund.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Deloitte &
Touche LLP, Boston, Massachusetts.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund is entitled to one vote at all meetings of shareholders.
As a Maryland corporation, the Fund is not required to hold annual shareholder
meetings. Shareholder approval will be sought only for certain changes in the
Fund's operation and for the election of Directors under certain circumstances.
Directors may be removed by a majority vote of the shareholders at a special
meeting. A special meeting of shareholders shall be called by the Directors upon
the request of shareholders owning at least 10% of the Fund's outstanding
shares.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held the shares. No federal income tax is due on any
distributions earned in an IRA or qualified retirement plan until distributed,
so long as such IRA or qualified retirement plan meets the applicable
requirements of the Internal Revenue Code.
PENNSYLVANIA PERSONAL PROPERTY TAXES
Fund shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund advertises its total return and yield.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the maximum offering price per share of the Fund on
the last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
the Fund and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
The performance information reflects the effect of the contingent deferred sales
charge, a non-recurring charge, which, if excluded, would increase the total
return and yield.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------- --------------------------------------------------------------------------------- --------------
GOVERNMENT OBLIGATIONS--89.4%
- -------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. PC,
ADJUSTABLE RATE MORTGAGES--51.5%
---------------------------------------------------------------------------------
$ 211,700,492 5.885%-7.72%, 1/1/1999-9/1/2024 $ 215,746,976
--------------------------------------------------------------------------------- --------------
FEDERAL HOME LOAN MORTGAGE CORP. REMIC--2.2%
---------------------------------------------------------------------------------
5,000,000 4.875%, Series 1608B, 11/15/2007 4,870,600
---------------------------------------------------------------------------------
3,865,357 6.775%, Series 1095D, 6/15/2021 3,872,662
---------------------------------------------------------------------------------
584,558 6.825%, Series 5, Class B, 5/15/2019 587,843
--------------------------------------------------------------------------------- --------------
Total 9,331,105
--------------------------------------------------------------------------------- --------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--2.1%
---------------------------------------------------------------------------------
8,107,185 11.50%-12.25%, 12/1/2010-2/1/2020 8,888,311
--------------------------------------------------------------------------------- --------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION,
ADJUSTABLE RATE MORTGAGES--25.1%
---------------------------------------------------------------------------------
102,810,522 5.502%-7.685%, 3/1/2016-10/1/2024 105,062,410
--------------------------------------------------------------------------------- --------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION, REMIC--1.3%
---------------------------------------------------------------------------------
5,304,048 6.663%, Series 16-F, 3/25/2022 5,260,767
--------------------------------------------------------------------------------- --------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--3.7%
---------------------------------------------------------------------------------
14,093,168 11.50%-12.00%, 11/15/2012-7/15/2019 15,658,298
--------------------------------------------------------------------------------- --------------
U.S. TREASURY NOTES--3.5%
---------------------------------------------------------------------------------
15,000,000 4.00%-5.875%, 1/31/1996-5/31/1996 14,746,450
--------------------------------------------------------------------------------- --------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (IDENTIFIED COST, $373,101,649) 374,694,317
--------------------------------------------------------------------------------- --------------
</TABLE>
FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------- --------------------------------------------------------------------------------- --------------
*REPURCHASE AGREEMENTS--9.7%
- -------------------------------------------------------------------------------------------------
$ 1,000,000 Harris Trust & Savings Bank, 6.07%, dated 2/28/1995, due 3/1/1995 $ 1,000,000
---------------------------------------------------------------------------------
39,640,000 J.P. Morgan Securities, Inc., 6.13%, dated 2/28/1995, due 3/1/1995 39,640,000
--------------------------------------------------------------------------------- --------------
TOTAL REPURCHASE AGREEMENTS (AT AMORTIZED COST) 40,640,000
--------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST, $413,741,649) $ 415,334,317+
--------------------------------------------------------------------------------- --------------
</TABLE>
* Repurchase agreements are fully collateralized by U.S. government and/or
agency obligations. The investments in the repurchase agreements are through
participation in joint accounts with other Federated funds.
+ The cost of investments for federal tax purposes amounts to $413,741,649. The
net unrealized appreciation on a federal tax cost basis amounts to $1,592,668,
and is comprised of $3,108,677 appreciation and $1,516,009 depreciation at
February 28, 1995.
The following abbreviations are used in this portfolio:
PC--Participation Certificates
REMIC--Real Estate Mortgage Investment Conduit
Note: The categories of investments are shown as a percentage of net assets
($419,094,822) at February 28, 1995.
(See Notes which are an integral part of the Financial Statements)
FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------------
Total investments at value (identified and tax cost $413,741,649) $415,334,317
- -------------------------------------------------------------------------------------------------
Cash 1,428
- -------------------------------------------------------------------------------------------------
Interest receivable 5,798,242
- -------------------------------------------------------------------------------------------------
Receivable for shares sold 474,613
- -------------------------------------------------------------------------------------------------
Deferred expenses 203,267
- ------------------------------------------------------------------------------------------------- --------------
Total assets 421,811,867
- -------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------------
Dividends payable $1,276,245
- -----------------------------------------------------------------------------------
Payable for shares repurchased 1,271,925
- -----------------------------------------------------------------------------------
Accrued expenses 168,875
- ----------------------------------------------------------------------------------- ------------
Total liabilities 2,717,045
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 44,298,857 shares outstanding $419,094,822
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------------------------
Paid-in capital $464,011,777
- -------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investments 1,592,668
- -------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (46,043,668)
- -------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net investment income (465,955)
- ------------------------------------------------------------------------------------------------- --------------
Total $419,094,822
- ------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE AND OFFERING PRICE Per Share
($419,094,822 / 44,298,857 shares of shares outstanding) $9.46
- ------------------------------------------------------------------------------------------------- --------------
REDEMPTION PROCEEDS Per Share (99/100 of $9.46)* $9.37
- ------------------------------------------------------------------------------------------------- --------------
</TABLE>
* See "Redeeming Shares" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------------------------
Interest (net of dollar roll interest expense of $83,230) $ 33,065,010
- --------------------------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------------------------------
Investment advisory fee $ 3,435,227
- ------------------------------------------------------------------------------------
Directors'/Trustees' fees 11,517
- ------------------------------------------------------------------------------------
Distribution services fee 1,431,342
- ------------------------------------------------------------------------------------
Shareholder service fee 1,338,801
- ------------------------------------------------------------------------------------
Administrative personnel and services fees 436,750
- ------------------------------------------------------------------------------------
Custodian and recordkeeping fees and expenses 219,705
- ------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 329,110
- ------------------------------------------------------------------------------------
Share registration costs 114,168
- ------------------------------------------------------------------------------------
Auditing fees 13,615
- ------------------------------------------------------------------------------------
Legal fees 10,054
- ------------------------------------------------------------------------------------
Printing and postage 48,306
- ------------------------------------------------------------------------------------
Taxes 105,521
- ------------------------------------------------------------------------------------
Insurance premiums 13,666
- ------------------------------------------------------------------------------------
Miscellaneous 40,756
- ------------------------------------------------------------------------------------ ------------
Total expenses 7,548,538
- ------------------------------------------------------------------------------------
Deduct--
- ------------------------------------------------------------------------------------
Waiver of investment advisory fee $ 369,853
- ----------------------------------------------------------------------
Waiver of distribution services fee 1,338,799 1,708,652
- ---------------------------------------------------------------------- ------------ ------------
Net expenses 5,839,886
- -------------------------------------------------------------------------------------------------- --------------
Net investment income 27,225,124
- -------------------------------------------------------------------------------------------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- --------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) (24,587,433)
- --------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments 1,918,498
- -------------------------------------------------------------------------------------------------- --------------
Net realized and unrealized gain (loss) on investments (22,668,935)
- -------------------------------------------------------------------------------------------------- --------------
Change in net assets resulting from operations $ 4,556,189
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
FEBRUARY 28,
<S> <C> <C>
1995 1994
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------------------
Net investment income $ 27,225,124 $ 42,111,457
- ------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions
($21,867,392 net loss and $12,916,149 net loss, respectively,
as computed for federal tax purposes) (24,587,433) (12,060,236)
- ------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) of investments 1,918,498 1,386,612
- ------------------------------------------------------------------------------ --------------- ----------------
Change in net assets resulting from operations 4,556,189 31,437,833
- ------------------------------------------------------------------------------ --------------- ----------------
NET EQUALIZATION (DEBITS) CREDITS (520,115) (584,335)
- ------------------------------------------------------------------------------ --------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment income (26,705,009) (41,092,219)
- ------------------------------------------------------------------------------
Distributions in excess of net investment income (353,704) --
- ------------------------------------------------------------------------------ --------------- ----------------
Change in net assets resulting from distributions to shareholders (27,058,713) (41,092,219)
- ------------------------------------------------------------------------------ --------------- ----------------
SHARE TRANSACTIONS
(EXCLUSIVE OF AMOUNTS ALLOCATED TO NET INVESTMENT INCOME)
- ------------------------------------------------------------------------------
Proceeds from sales of shares 44,883,593 392,365,761
- ------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends
declared 12,180,724 19,232,330
- ------------------------------------------------------------------------------
Cost of shares redeemed (413,160,135) (739,344,309)
- ------------------------------------------------------------------------------ --------------- ----------------
Change in net assets resulting from share transactions (356,095,818) (327,746,218)
- ------------------------------------------------------------------------------ --------------- ----------------
Change in net assets (379,118,457) (337,984,939)
- ------------------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------------------
Beginning of period 798,213,279 1,136,198,218
- ------------------------------------------------------------------------------ --------------- ----------------
End of period $ 419,094,822 $ 798,213,279
- ------------------------------------------------------------------------------ --------------- ----------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Fortress Adjustable Rate U.S. Government Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940, as amended (the "Act"), as a
diversified, open-end management investment company.
(2) 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--Short-term securities with remaining maturities of
sixty days or less at time of purchase may be valued at amortized cost,
which approximates fair market value. U.S. government securities are
generally valued at the mean between the over-the-counter bid and asked
prices as furnished by an independent pricing service.
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 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 Directors (the
"Directors"). 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.
Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
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
provisions for federal tax are necessary.
At February 28, 1995, the Fund for federal tax purposes, had a capital loss
carryforward of $41,020,800, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire in 2000 ($135,570), 2001 ($6,101,688), 2002
($12,916,149) and 2003 ($21,867,393). Additionally, net capital losses of
$5,022,868 attributable to security transactions incurred after October 31,
1994 are treated as arising on March 1, 1995, the first day of the Fund's
next taxable year.
EQUALIZATION--The Fund follows the accounting practice known as
equalization, in which a portion of the proceeds from sales and costs of
redemptions of Fund shares equivalent, on a per share basis, to the amount
of undistributed net investment income on the date of the transaction, is
credited or charged to undistributed net investment income. As a result,
undistributed net investment income per share is unaffected by sales or
redemptions of Fund shares.
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.
DOLLAR ROLL TRANSACTIONS--The Fund enters into dollar roll transactions,
with respect to mortgage securities issued by GNMA, FNMA, FHLMC, in which
the Fund sells mortgage securities to financial institutions and
simultaneously agrees to accept substantially similar (same type, coupon
and maturity) securities at a later date at an agreed upon price. Dollar
roll transactions are short-term financing arrangements which will not
exceed twelve months. The Fund may use the proceeds generated from the
transactions to invest in short-term investments, which may enhance the
Fund's current yield and total return.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized using the straight line method not to exceed a period of five
years from the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) CAPITAL STOCK
At February 28, 1995, there were 5,000,000,000 shares of $.001 par value capital
stock authorized. Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
FEBRUARY 28,
<S> <C> <C>
1995 1994
- ------------------------------------------------------------------------------------
Shares sold 4,668,005 39,767,211
- ------------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 1,282,617 1,954,128
- ------------------------------------------------------------------------------------
Shares redeemed (43,186,417) (74,951,362)
- ------------------------------------------------------------------------------------ ------------- -------------
Net change resulting from share transactions (37,235,795) (33,230,023)
- ------------------------------------------------------------------------------------ ------------- -------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Fund's investment adviser, (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.60 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive a portion of its fee. The Adviser can modify or terminate this
voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The FAS fee is based on the level of average aggregate
daily net assets of all funds advised by subsidiaries of Federated Investors 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.
DISTRIBUTIONS SERVICES FEE--The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 of the Act. Under the terms of the Plan, the Fund
will compensate Federated Securities Corp. ("FSC"), the principal distributor,
from the net assets of the Fund to finance activities intended to result in the
sale of shares. The Plan provides that the Fund may incur distribution expenses
up to .25 of 1% of the average daily net assets of the Fund, annually, to
compensate FSC. The distributor may voluntarily choose to waive a portion of its
fee. The distributor can modify or terminate this voluntary waiver at any time
at its sole discretion.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of average daily net assets of the Fund for the period. This fee is to obtain
certain personal services for shareholders and to maintain the shareholder
accounts.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. This fee is based on the size, type, and number of accounts and
transactions made by shareholders.
INTERFUND TRANSACTIONS--During the year ended February 28, 1995, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser (or affiliated investment advisers), common
Directors/Trustees, and/or common officers. These transactions were made at
current market value pursuant to Rule 17a-7 under the Act amounting to
$574,366,268 and $568,853,974, respectively.
GENERAL--Certain of the Officers and Directors of the Fund are Officers and
Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended February 28, 1995, were as follows:
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------
PURCHASES-- $ 931,747,396
- ------------------------------------------------------------------------------------------------ ----------------
SALES-- $ 1,180,375,824
- ------------------------------------------------------------------------------------------------ ----------------
</TABLE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Fortress Adjustable Rate U.S. Government Fund,
Inc. as of February 28, 1995, the related statement of operations for the year
then ended, the statement of changes in net assets for the years ended February
28, 1995 and 1994, and the financial highlights (see page 2 of the prospectus)
for each of the years in the four-year period ended February 28, 1995. 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 the securities owned at
February 28, 1995 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, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Fortress Adjustable
Rate U.S. Government Fund, Inc. as of February 28, 1995, the results of its
operations, the changes in its net assets, and its financial highlights for the
respective stated periods in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 11, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Fortress Adjustable Rate Federated Investors Tower
U.S. Government Fund, Inc. Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8604
Boston, Massachusetts 02266-8604
- ---------------------------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche LLP 125 Summer Street
Boston, Massachusetts 02110-1617
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
FORTRESS ADJUSTABLE
RATE U.S. GOVERNMENT
FUND, INC.
PROSPECTUS
April 30, 1995
[LOGO]
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
349554105
1071005A (4/95)
Fortress Adjustable Rate U.S. Government Fund, Inc.
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus of Fortress Adjustable Rate U.S. Government Fund, Inc.
(the "Fund"), dated April 30, 1995. This Statement
is not a prospectus itself. To receive a copy of the prospectus,
write or call the Fund.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Statement dated April 30, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of
FEDERATED INVESTORS
General Information About the
Fund 1
Investment Objective and Policies 1
Types of Investments 1
Caps and Floors 1
When-Issued and Delayed
Delivery Transactions 1
Lending of Portfolio Securities 1
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Restricted Securities 2
Portfolio Turnover 2
Investment Limitations 2
Fortress Adjustable Rate U.S.
Government Fund, Inc. Management4
Fund Ownership 8
Directors' Compensation 9
Director Liability 9
Investment Advisory Services 9
Adviser to the Fund 9
Advisory Fees 10
Administrative Services 10
Purchasing Shares 11
Distribution and Shareholder
Services Plans 11
Conversion to Federal Funds 11
Determining Net Asset Value 11
Determining Market Value of
Securities 12
Exchange Privilege 12
Requirements For Exchange 12
Tax Consequences 12
Making an Exchange 12
Redeeming Shares 12
Redemption in Kind 13
Tax Status 13
The Fund's Tax Status 13
Shareholders' Tax Status 13
Total Return 13
Yield 13
Performance Comparisons 14
General Information About the Fund
The Fund was incorporated under the laws of the State of Maryland on
March 20, 1991. It is qualified to do business as a foreign corporation
in Pennsylvania.
Investment Objective and Policies
The investment objective of the Fund is to provide current income with
volatility of principal which is lower than investment companies
investing primarily in fixed-rate mortgage securities. The investment
objective and policies of the Fund cannot be changed without approval of
shareholders.
Types of Investments
The Fund invests primarily in adjustable and floating rate mortgage
securities which are issued or guaranteed by the U.S. government, its
agencies and instrumentalities. These securities are backed by:
o the full faith and credit of the U.S. Treasury;
o the issuer's right to borrow from the U.S. Treasury;
o the discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
o the credit of the agency or instrumentality issuing the
obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
o Federal Home Loan Banks;
o Farmers Home Administration; and
o Federal National Mortgage Association.
Caps and Floors
The value of mortgage-related securities in which the Fund invests may
be affected if interest rates rise or fall faster and farther than the
allowable caps on the underlying residential mortgage loans. For
example, consider a residential mortgage loan with a rate which adjusts
annually, an initial interest rate of 10%, a 2% per annum interest rate
cap, and a 5% life of loan interest rate cap. If the index against which
the underlying interest rate on the residential mortgage loan is
compared--such as the one-year Treasury--moves up by 3%, the residential
mortgage loan rate may not increase by more than 2% to 12% the first
year. As one of the underlying residential mortgages for the securities
in which the Fund invests, the residential mortgage would depress the
value of the securities and, therefore, the net asset value of the Fund.
If the index against which the interest rate on the underlying
residential mortgage loan is compared moves up no faster or farther than
the cap on the underlying mortgage loan allows, or if the index moves
down as fast or faster than the floor on the underlying mortgage loan
allows, the mortgage would maintain or improve the value of the
securities in which the Fund invests and, therefore, the net asset value
of the Fund.
When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be
an advantageous price or yield for the Fund. No
fees or other expenses, other than normal transaction costs, are
incurred. However, liquid assets of the Fund sufficient to make payments
for the securities to be purchased are segregated on the Fund's
records at the trade date. These assets are marked to
market daily and are maintained until the transaction is settled.
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 its
assets.
Lending of Portfolio Securities
The collateral received when the Fund lends portfolio securities 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 may pay reasonable administrative and custodial fees in connection
with a loan and may pay a negotiated portion of the interest earned on
the cash or equivalent collateral to the borrower or placing broker.
Repurchase Agreements
The Fund requires its custodian to take possession of the securities
subject to repurchase agreements, and these securities are marked to
market daily. To the extent that the original seller does not repurchase
the securities from the Fund, the Fund could receive less than the
repurchase price on any sale of such securities. In the event that such
a defaulting seller files for bankruptcy or became insolvent,
disposition of securities by the Fund might be delayed pending court
action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in
favor of the Fund and allow retention or disposition of such securities.
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 guidelines
established by the Board of Directors.
Reverse Repurchase Agreements
The Fund may also enter into reverse repurchase agreements. A reverse
repurchase transaction is similar to borrowing cash. In a reverse
repurchase agreement the Fund transfers possession of a portfolio
instrument to another person, such as a financial institution, broker,
or dealer, in return for a percentage of the instrument's market value
in cash, and agrees that on a stipulated date in the future, the Fund
will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous,
but the ability to enter into reverse repurchase agreements does not
ensure that the Fund will be able to avoid selling portfolio instruments
at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund,
in a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked
to market daily and are maintained until the transaction is settled.
Restricted Securities
The ability of the Board of Directors to determine the liquidity of
certain restricted securities is permitted under an SEC Staff position
set forth in the adopting release for Rule 144A under the Securities Act
of 1933 (the "Rule"). The Rule is a non-exclusive, safe-harbor for
certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides
an exemption from registration for resales of otherwise restricted
securities to qualified institutional buyers. The Rule was expected to
further enhance the liquidity of the secondary market for securities
eligible for resale under Rule 144A. The Fund believes that the Staff of
the SEC has left the question of determining the liquidity of all
restricted securities (eligible for resale under Rule 144A) to the
Fund's Board of Directors. The Board of Directors considers the
following criteria in determining the liquidity of certain restricted
securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security
and the number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace
trades.
Portfolio Turnover
The Fund will not attempt to set or meet a portfolio turnover rate since
any turnover would be incidental to transactions undertaken in an
attempt to achieve the Fund's investment objective. For the fiscal years
ended February 28, 1995, and 1994 the portfolio
turnover rates were 170% and 40%, respectively. The
increase in the portfolio turnover rate was a result of the Fund's
acquisition of securities that were more in line with current market
conditions relating to pre-payments, coupon rates, and weighted average
months to resets. This had no significant impact on the tax liability
of the Fund and its shareholders, and Fund expenses were not a factor as
the Fund incurred no brokerage commissions.
Investment Limitations
Buying on Margin
The Fund will not purchase any securities on margin, but may
obtain such short-term credits as are necessary for 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 total 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 borrowings in excess
of 5% of its total assets 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.
Diversification of Investments
With respect to securities comprising 75% of the value of its
total assets, the Fund will not purchase securities of any one
issuer (other than cash, cash items or securities issued or
guaranteed by the government of the United States or its agencies
or instrumentalities and repurchase agreements collateralized by
U.S. government securities) if as a result more than 5% of the
value of its total assets would be invested in the securities of
that issuer.
Investing in Real Estate
The Fund will not buy or sell real estate, including limited
partnership interests in real estate, although it may invest in
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.
Investing in Restricted Securities
The Fund will not invest more than 10% of its net assets in
securities subject to restrictions on resale under the Securities
Act of 1933, including repurchase agreements providing
for settlement in more than seven days after notice.
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 restricted securities which
the Fund may purchase pursuant to its investment objective,
policies, and limitations.
Lending Cash or Securities
The Fund will not lend any of its assets, except portfolio
securities up to one-third of the value of its total assets. This
shall not prevent the Fund from purchasing or holding U.S.
government obligations, money market instruments, variable amount
demand master notes, bonds, debentures, notes, certificates of
indebtedness, or other securities, entering into repurchase
agreements, or engaging in other transactions where permitted by a
Fund's investment objective, policies and limitations.
Selling Short
The Fund will not sell securities short unless:
o 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 issue as, and equal in
amount to, the securities sold short; and
o 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 New Issuers
The Fund will not invest more than 5% of the value of its total
assets in securities of issuers which have records of less than
three years of operating history, including the operation of any
predecessor. (This limitation does not apply to issuers of CMOs or
REMICs which are collateralized by securities or mortgages issued
or guaranteed as to prompt payment of principal and interest by an
agency of the U.S. government.)
Investing in Minerals
The Fund will not purchase or sell oil, gas, or other mineral
exploration or development programs or leases, although it may
purchase the securities of issuers which invest in or sponsor such
programs.
Investing in Issuers Whose Securities are Owned by Officers and
Directors of the Fund
The Fund will not purchase or retain the securities of any issuer
if the officers and Directors 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 Securities of Other Investment Companies
The Fund may not own securities of open-end investment companies.
The Fund can acquire up to 3 per centum of the total outstanding
stock of closed-end investment companies. The Fund will not be
subject to any other limitations with regard to the acquisition of
securities of closed-end investment companies so long as the
public offering price of the Fund's shares does not include a
sales load exceeding 1 1/2 per cent. The Fund will purchase
securities of closed-end investment companies only in open-market
transactions involving only customary broker's commissions.
However, these limitations are not applicable if the securities
are acquired in a merger, consolidation, or acquisition of assets.
Investing in Stripped Mortgage Securities
The Fund will not invest its assets in stripped mortgage
securities.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not
result in a violation of such restriction.
The Fund does not expect to pledge securities or invest in stock of
closed-end investment companies during the coming year.
The Fund has not borrowed money or sold any securities short in an
amount exceeding 5% of the value of its net assets during the last
fiscal year and has no present intent to do so in the coming fiscal
year.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings and loan having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of
investment to be "cash items."
Fortress Adjustable Rate U.S. Government Fund, Inc.
Management
Officers and Directors are listed with their addresses, present
positions with Fortress Adjustable Rate U.S. Government Fund, Inc., and
principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Director
Chairman and Trustee, Federated Investors, Federated
Advisers, Federated Management, and Federated Research; Chairman and
Director, Federated Research Corp.; Chairman, Passport Research, Ltd.;
Director, AEtna Life and Casualty Company; Chief Executive Officer and
Director, Trustee, or Managing General Partner of the Funds. Mr. Donahue
is the father of J. Christopher Donahue, Vice President of the
Company.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Director
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee, or Managing General Partner
of the Funds; formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Director
President, Investment Properties Corporation; Senior Vice-President,
John R. Wood and Associates, Inc., Realtors; President, Northgate
Village Development Corporation; Partner or Trustee in private real
estate ventures in Southwest Florida; Director, Trustee, or Managing
General Partner of the Funds; formerly, President, Naples Property
Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Director
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and
Director, Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Director
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director,
Blue Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Director
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian
and Montefiore Hospitals; Director, Trustee, or Managing General Partner
of the Funds.
Richard B. Fisher *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
President and Director
Executive Vice President and Trustee, Federated Investors;
Director, Federated Research Corp.; Chairman and Director, Federated
Securities Corp.; President or Vice President of some of the Funds;
Director or Trustee of some of the Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Director
Attorney-at-law; Partner, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Peter E. Madden
225 Franklin Street
Boston, MA
Birthdate: April 16, 1942
Director
Consultant; State Representative, Commonwealth of Massachusetts;
Director, Trustee, or Managing General Partner of the Funds; formerly,
President, State Street Bank and Trust Company and State Street Boston
Corporation and Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Director
Attorney-at-law; Partner, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice
Chairman, Horizon Financial, F.A.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Director
President, Law Professor, Duquesne University; Consulting Partner,
Mollica, Murray and Hogue; Director, Trustee or Managing General Partner
of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Director
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: July 21, 1935
Director
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Vice President
President and Trustee, Federated Investors, Federated
Advisers, Federated Management, and Federated Research; President and
Director, Federated Research Corp.; President, Passport Research, Ltd.;
Trustee, Federated Administrative Services, Federated Services
Company, and Federated Shareholder Services; President or
Vice President of the Funds; Director, Trustee, or Managing General
Partner of some of the Funds. Mr. Donahue is the son of John F. Donahue,
Chairman and Director of the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President and Treasurer, Federated Advisers, Federated Management,
Federated Research, Federated Research Corp., and Passport Research,
Ltd.; Executive Vice President, Treasurer, and Director, Federated
Securities Corp.; Trustee, Federated Services Company and Federated
Shareholder Services; Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director of some of the Funds; Vice
President and Treasurer of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and
Secretary, Federated Research Corp. and Passport Research, Ltd.;
Trustee, Federated Services Company; Executive Vice President,
Secretary, and Trustee, Federated Administrative Services; Secretary and
Trustee, Federated Shareholder Services; Executive Vice President and
Director, Federated Securities Corp.; Vice President and Secretary of
the Funds.
* This Director is deemed to be an "interested person" as
defined in the Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of
the Board of Directors handles the responsibilities of the
Board of Directors between meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the
following investment companies: American Leaders Fund, Inc.; Annuity
Management Series; Arrow Funds; Automated Cash Management Trust;
Automated Government Money Trust; California Municipal Cash
Trust; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
Federated ARMs Fund; Federated Exchange Fund, Ltd.; Federated
GNMA Trust; Federated Government Trust; Federated Growth Trust;
Federated High Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Intermediate Government Trust; Federated Master Trust;
Federated Municipal Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated Stock
Trust; Federated Tax-Free Trust; Federated U.S. Government Bond Fund;
First Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable
Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund, Inc.;
Fortress Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.;
Government Income Securities, Inc.; High Yield Cash Trust; Insight
Institutional Series, Inc.; Insurance Management Series; Intermediate
Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal
Securities Fund, Inc.; Liberty U.S. Government Money Market
Trust; Liberty Term Trust, Inc. - 1999; Liberty Utility Fund,
Inc.; Liquid Cash Trust; Managed Series Trust; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market
Trust; Municipal Securities Income Trust; Newpoint Funds; New
York Municipal Cash Trust; 111 Corcoran Funds; Peachtree Funds; The
Planters Funds; RIMCO Monument Funds; The Shawmut Funds; Short-
Term Municipal Trust; Star Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for
Financial Institutions; Trust For Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust
for U.S. Treasury Obligations; The Virtus Funds; and World
Investment Series, Inc.
Fund Ownership
Officers and Directors as a group own less than 1% of the Fund's
outstanding shares.
As of April 13, 1995, Merrill Lynch Pierce Fenner & Smith,
(as record owned holding shares for its clients) owned
12,767,376 shares (29.75%) of the outstanding shares of the
Fund.
Directors' Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM THE TOTAL COMPENSATION PAID
THE FUND FUND* FROM FUND COMPLEX +
John F. Donahue, $0 $0 for the Fund and
Chairman and Director 68 other investment companies in the Fund
Complex
Thomas G. Bigley, $788 $20,688 for the Fund and
Director 49 other investment companies in the Fund
Complex
John T. Conroy, Jr., $1,836 $117,202 for the Fund and
Director 64 other investment companies in the Fund
Complex
William J. Copeland, $1,836 $117,202 for the Fund and
Director 64 other investment companies in the Fund
Complex
James E. Dowd, $1,836 $117,202 for the Fund and
Director 64 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D., $1,667 $106,460 for the Fund and
Director 64 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr. $1,836 $117,202 for the Fund and
Director 64 other investment companies in the Fund
Complex
Peter E. Madden $1,422 $90,563 for the Fund and
Director 64 other investment companies in the Fund
Complex
Gregor F. Meyer $1,667 $106,460 for the Fund and
Director 64 other investment companies in the Fund
Complex
John E. Murray, Jr. $0 $0 for the Fund and
Director 64 other investment companies in the Fund
Complex
Wesley W. Posvar $1,667 $106,460 for the Fund and
Director 64 other investment companies in the Fund
Complex
Marjorie P. Smuts $1,667 $106,460 for the Fund and
Director 64 other investment companies in the Fund
Complex
*Information is furnished for the fiscal year ended February 28, 1995.
+The information is provided for the last calendar year.
Director Liability
The Fund's Articles of Incorporation provide that the Directors will not
be liable for errors of judgment or mistakes of fact or law. However,
they are not protected against any liability to which they would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct
of their office.
Investment Advisory Services
Adviser to the Fund
The Fund's investment adviser is Federated Advisers. It is a subsidiary
of Federated Investors. All the voting securities of Federated
Investors are owned by a trust, the trustees of which are John F.
Donahue, his wife and his son, J. Christopher Donahue.
The adviser shall not be liable to the Fund or any 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.
Advisory Fees
For its advisory services, Federated Advisers receives an annual
investment advisory fee as described in the prospectus.
For the fiscal years ended February 28, 1995, 1994, and
1993, the Fund's adviser earned $3,435,227, $5,767,213,
and $6,866,490, respectively, of which
$369,853, $117,096, and $155,350, respectively,
were voluntarily waived.
State Expense Limitations
The adviser has undertaken to comply with the expense
limitations established by certain states for
investment companies whose shares are registered for sale in those
states. If the Fund's normal operating expenses (including the
investment advisory fee, but not including brokerage commissions,
interest, taxes, and extraordinary expenses) exceed 2 1/2% per
year of the first $30 million of average net assets, 2% per year
of the next $70 million of average net assets, and 1 1/2% per year
of the remaining average net assets, the adviser will reimburse
the Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
expense limitation, the investment advisory fee paid will be
reduced by the amount of the excess, subject to an annual
adjustment. If the expense limitation is exceeded, the amount to
be reimbursed by the adviser will be limited, in any single fiscal
year, by the amount of the investment advisory fee.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
Administrative Services
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated
Administrative Services, Inc., also a subsidiary of Federated Investors,
served as the Fund's administrator. (For purposes of this Statement of
Additional Information, Federated Administrative Services and Federated
Administrative Services, Inc., may hereinafter collectively be referred
to as, the "Administrators".) For the fiscal year ended February 28,
1995, the Administrators earned $436,750. For the fiscal years
ended February 28, 1994 and 1993, Federated
Administrative Services, Inc. earned $765,738
and $744,906, respectively. Dr. Henry J. Gailliot,
an officer of Federated Advisors, the adviser to the Fund,
holds approximately 20% of the outstanding
common stock and serve as a director of Commercial Data
Services, Inc., a company which provides computer processing services to
Federated Administrative Services, Inc., and Federated Administrative
Services.
Transfer Agent and Dividend Disbursing Agent
Federated Services Company serves as transfer agent and dividend
disbursing agent for the Fund. The fee paid to the transfer agent is
based upon the size, type and number of accounts and transactions made
by shareholders.
Federated Services Company also maintains the Fund's accounting records.
The fee paid for this service is based upon the level of the Fund's
average net assets for the period plus out-of-pocket expenses.
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. In working with dealers, 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. The adviser makes decisions on portfolio
transactions and selects brokers and dealers subject to review by the
Board of Directors.
The adviser may select brokers and dealers who offer brokerage and
research services. These services may be furnished directly to the Fund
or to the adviser and may include:
o advice as to the advisability of investing in securities;
o security analysis and reports;
o economic studies;
o industry studies;
o receipt of quotations for portfolio evaluations; and
o similar services.
The adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of
the brokerage and research services provided.
Research services provided by brokers may be used by the adviser or by
affiliates of Federated Investors in advising Federated Funds and other
accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have
paid, it would tend to reduce their expenses.
Purchasing Shares
Except under certain circumstances described in the prospectus, shares
are sold at their net asset value on days the New York Stock Exchange is
open for business. The procedure for purchasing shares of the Fund is
explained in the prospectus under "Investing in the Fund."
Distribution and Shareholder Services Plans
These arrangements permit the payment of fees to financial institutions,
the distributor, and Federated Shareholder Services to
stimulate distribution activities and to cause services to be provided
to shareholders by a representative who has knowledge of the
shareholder's particular circumstances and goals. These activities and
services may include, but are not limited to, marketing efforts;
providing office space, equipment, telephone facilities, and various
clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic
investments of client account cash balances; answering routine client
inquiries, and assisting clients in changing dividend options, account
designations, and addresses.
By adopting the Distribution Plan, the Board of Directors expects that
the Fund will be able to achieve a more predictable flow of cash for
investment purposes and to meet redemptions. This will facilitate more
efficient portfolio management and assist the Fund in pursuing its
investment objectives. By identifying potential investors whose needs
are served by the Fund's objectives, and properly servicing these
accounts, it may be possible to curb sharp fluctuations in rates of
redemptions and sales.
Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail;
(3) enhancing shareholder recordkeeping systems; and (4) responding
promptly to shareholders' requests and inquiries concerning their
accounts.
For the fiscal year ended February 28, 1995, the Fund paid
$1,431,342 pursuant to the Fund's Rule 12b-1 plan, $1,338,799 of which
was waived. For the same period, the Fund paid $1,338,801 in
shareholder services fees.
Conversion to Federal Funds
It is the Fund's policy to be as fully invested as possible so that
maximum interest may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal funds
before shareholders begin to earn dividends. State Street Bank acts as
the shareholder's agent in depositing checks and converting them to
federal funds.
Determining Net Asset Value
Net asset value generally changes each day. The days on which net asset
value is calculated by the Fund are described in the prospectus. Net
asset value will not be calculated on Good Friday and on the following
holidays: New Year's Day, Presidents' Day, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day.
Determining Market Value of Securities
Market values of the Fund's securities are determined as follows:
o as provided by an independent pricing service;
o for short-term obligations, according to the mean between the
bid and asked prices, as furnished by an independent pricing
service, or for short-term obligations with remaining maturities
of 60 days or less at the time of purchase, at amortized cost
unless the Board of Directors determines this is not fair value;
or
o at fair value as determined in good faith by the Fund's Board
of Directors.
Prices provided by independent pricing services may be determined
without relying exclusively on quoted prices. Pricing services may
consider:
o yield;
o quality;
o coupon rate;
o maturity;
o type of issue;
o trading characteristics; and
o other market data.
Exchange Privilege
Requirements For Exchange
Shareholders using this privilege must exchange shares having a net
asset value of at least $1,500. Before the exchange, the shareholder
must receive a prospectus of the fund for which the exchange is being
made.
This privilege is available to shareholders residing in any state in
which the fund shares being acquired may be sold. Upon receipt of proper
instructions and required supporting documents, shares submitted for
exchange are redeemed and the proceeds invested in shares of the other
fund.
Further information on the exchange privilege and prospectuses for
Fortress Funds or certain Federated Funds are available by calling the
Fund.
Tax Consequences
Exercise of this exchange privilege is treated as a sale for federal
income tax purposes. Depending upon the circumstances, a short or long-
term capital gain or loss may be realized.
Making an Exchange
Instructions for exchanges for Fortress Funds or certain Federated Funds
must be given in writing by the shareholder. Written instructions may
require a signature guarantee.
Redeeming Shares
The Fund redeems shares at the next computed net asset value after the
Fund receives the redemption request. Redemption procedures are
explained in the prospectus under "Redeeming Shares." Although the Fund
does not charge for telephone redemptions, it reserves the right to
charge a fee for the cost of wire-transferred redemptions of less than
$5,000.
Certain shares redeemed within one to four years of purchase may be
subject to a contingent deferred sales charge. The amount of the
contingent deferred sales charge is based upon the amount of the
administrative fee paid at the time of purchase by the distributor to
the financial institutions for services rendered, and the length of time
the investor remains a shareholder in the Fund. Should financial
institutions elect to receive an amount less than the administrative fee
that is stated in the prospectus for servicing a particular shareholder,
the contingent deferred sales charge and/or holding period for that
particular shareholder will be reduced accordingly.
Redemption in Kind
Although the Fund intends to redeem shares in cash, it reserves the
right under certain circumstances to pay the redemption price in whole
or in part by a distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable Securities
and Exchange Commission rules, taking such securities at the same value
employed in determining net asset value and selecting the securities in
a manner the Board of Directors determine to be fair and equitable.
The Fund has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940 under which the Fund is obligated to redeem shares
for any shareholder in cash up to the lesser of $250,000 or 1% of the
Fund's net asset value during any 90-day period.
Redemption in kind is not as liquid as a cash redemption. If redemption
is made in kind, shareholders receiving their securities and selling
them before their maturity could receive less than the redemption value
of their securities and could incur certain transaction costs.
Tax Status
The Fund's Tax Status
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund
must, among other requirements:
o derive at least 90% of its gross income from dividends,
interest, and gains from the sale of securities;
o derive less than 30% of its gross income from the sale of
securities held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income
earned during the year.
Shareholders' Tax Status
Shareholders are subject to federal income tax on dividends and capital
gains received as cash or additional shares. No portion of any income
dividend paid by the Fund is eligible for the dividends received
deduction available to corporations.
Capital Gains
Shareholders will pay federal tax at capital gains rates on long-
term capital gains distributed to them regardless of how long they
have held the Fund shares.
Total Return
The Fund's average annual total return for the one-year period ended
February 28, 1995, and for the period from
July 25, 1991 (date of initial public investment) to
February 28, 1995 were 0.61% and 3.49%, respectively.
The average annual total return for the Fund 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 offering price 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, adjusted over the period by any additional shares, assuming the
monthly reinvestment of all dividends and distributions. Any applicable
redemption fee is deducted from the ending value of the investment based
on the lesser of the original purchase price or the offering price of
shares redeemed.
Yield
The Fund's yield for the thirty-day period ended February 28,
1995, was 5.32%.
The yield for the Fund is determined by dividing the net investment
income per share (as defined by the Securities and Exchange Commission)
earned by the Fund over a thirty-day period by the maximum offering
price per share of the Fund on the last day of the period. This value is
then annualized using semi-annual compounding. This means that the
amount of income generated during the thirty-day period is assumed to be
generated each month over a twelve-month period and is reinvested every
six months. The yield does not necessarily reflect income actually
earned by the Fund because of certain adjustments required by the
Securities and Exchange Commission and, therefore, may not correlate to
the dividends or other distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees
in connection with services provided in conjunction with an investment
in the Fund, performance will be reduced for those shareholders paying
those fees.
Performance Comparisons
The Fund's performance depends upon such variables as:
oportfolio quality;
oaverage portfolio maturity;
otype of instruments in which the portfolio is
invested;
ochanges in interest rates and market value of
portfolio securities;
ochanges in Fund's expenses; and
o various other factors.
The Fund's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net earnings
and offering price per share are factors in the computation of yield and
total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition
of any 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:
o Lehman Brothers Adjustable Rate Mortgage Funds Average is
comprised of all agency guaranteed securities with coupons that
periodically adjust over a spread of a published index.
o Lehman Brothers Mutual Fund Short (1-3) U.S. Government Index
is an index comprised of mutual funds which invest in short-term
(1-3 year) government securities.
o Lipper Analytical Services, Inc., ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any
change in net asset value over a specific period of time. From
time to time, the Fund will quote its Lipper ranking in the "U.S.
Mortgage Funds" category in advertising and sales literature.
o 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.
Advertisements and other sales literature for the Fund may quote total
returns which are calculated on non-standardized base periods. These
total returns represent the historic change in the value of an
investment in the Fund based on monthly reinvestment of dividends over a
specified period of time.
From time to time, the Fund may advertise its performance, using charts,
graphs, and descriptions, compared to federally insured bank products
including certificates of deposit and time deposits and to money market
funds using the Lipper Analytical Services, Inc., money market
instruments average.
Advertising and sales literature may show the Fund's net asset value
history in relation to certain political and economic events.
349554105
1071005B (4/95)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (Filed in Part A)
(b) Exhibits:
(1) (i) Conformed Copy of Articles of
Incorporation of the Registrant;+
(ii) Conformed Copy of Amendment No. 1
to Articles of Incorporation of the
Registrant;+
(2) (i) Copy of By-Laws of the Registrant;+
(ii) Copy of Amendment No. 1 to the
Bylaws;+
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of Capital
Stock of the Registrant; 2
(5) Copy of Investment Advisory Contract of the
Registrant;+
(6) (i) Copy of Distributor's Contract of the
Registrant;+
(ii) Form of Sales Agreement;+
(7) Not applicable;
(8) Conformed Copy of Custodian Agreement of the
Registrant;+
(9) (i) Conformed Copy of Portfolio Accounting and
Shareholder Recordkeeping Agreement of the
Registrant;+
(ii) Conformed Copy of Administrative Services
Agreement;+
(iii) Conformed Copy of Shareholder Services
Agreement;+
(iv) Conformed Copy of Shareholder Services Plan;+
(v) Copy of Shareholder Services Sub-Contract;+
(10) Copy of Opinion and Consent of Counsel as to
legality of shares being registered;+
(11) Conformed copy of Consent of Independent Public
Accountants;+
(12) Not applicable;
(13) Conformed Copy of Initial Capital
Understanding;+
(14) Not applicable;
(15) (i) Conformed Copy of Rule 12b-1 Plan; 1
(ii) Conformed Copy of 12b-1 Agreement; 1
(16) Copy of Schedule for Computation of Fund
Performance Data;+
(17) Copy of Financial Data Schedule;+
(18) Not applicable;
(19) Conformed Copy of Power of Attorney;+
+ All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Post-Effective
Registration Statement on Form N-1A filed April 24, 1994. (File Nos. 33-
41004 and 811-6307).
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 filed July 18, 1991. (File Nos. 33-41004 and 811-6307)
Item 25. Persons Controlled by or Under Common Control with Registrant:
None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of April 13, 1995
Shares of common stock 7,431
($0.0001 per Share par value)
Item 27. Indemnification: (2)
Item 28. Business and Other Connections of Investment Adviser:
(a) For a description of the other business of the investment
adviser, see the section entitled "Fund Information -
Management of the Fund" in Part A. The affiliations with the
Registrant of four of the Trustees and four of the Officers
of the investment adviser are included in Part B of this
Registration Statement under "Fortress Adjustable Rate U.S.
Government Fund, Inc. Management" 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: Mark L.
Mallon, William D. Dawson, III, and J. Thomas Madden,
Executive Vice Presidents; Henry J. Gailliot, Senior Vice
President-Economist; Peter R. Anderson, and J. Alan Minteer,
Senior Vice Presidents; J. Scott Albrecht, Randall A. Bauer,
David A. Briggs, Jonathan C. Conley, Deborah A. Cunningham,
Michael P. Donnelly, Mark Durbiano, Kathleen M. Foody-Malus,
Thomas M. Franks, Jeff A. Kozemchak, Marian R. Marinack,
Gregory M. Melvin, Susan M. Nason, Mary Jo Ochson, Robert J.
Ostrowski, Frederick L. Plautz, Jr., Charles A. Ritter, James
D. Roberge, Sandra L. Weber, Christopher H. Wiles, Vice
Presidents. The business address of each of the Officers of
the investment adviser is Federated Investors Tower,
Pittsburgh, PA 15222-3779. These individuals are also
officers of a majority of the investment advisers to the
Funds listed in Part B of this Registration Statement.
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 filed July 18, 1991. (File Nos. 33-41004 and 811-6307)
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the
following open-end investment companies: Alexander Hamilton
Funds; American Leaders Fund, Inc.; Annuity Management
Series; Arrow Funds; Automated Cash Management Trust;
Automated Government Money Trust; BayFunds; The Biltmore
Funds; The Biltmore Municipal Funds; California Municipal
Cash Trust; Cash Trust Series, Inc.; Cash Trust Series II; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash
Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated
Growth Trust; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Institutional Trust; Federated Intermediate
Government Trust; Federated Master Trust; Federated Municipal
Trust; Federated Short-Intermediate Government Trust;
Federated Short-Term U.S. Government Trust; Federated Stock
Trust; Federated Tax-Free Trust; Federated U.S. Government
Bond Fund; First Priority Funds; First Union Funds; Fixed
Income Securities, Inc.; Fortress Adjustable Rate U.S.
Government Fund, Inc.; Fortress Municipal Income Fund, Inc.;
Fortress Utility Fund, Inc.; Fountain Square Funds; Fund for
U.S. Government Securities, Inc.; Government Income
Securities, Inc.; High Yield Cash Trust; Independence One
Mutual Funds; Insight Institutional Series, Inc.; Insurance
Management Series; Intermediate Municipal Trust;
International Series Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal
Securities Fund, Inc.; Liberty U.S. Government Money Market
Trust; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed
Series Trust; Marshall Funds, Inc.; Money Market Management,
Inc.; The Medalist Funds; Money Market Obligations Trust;
Money Market Trust; The Monitor Funds; Municipal Securities
Income Trust; Newpoint Funds; New York Municipal Cash Trust;
111 Corcoran Funds; Peachtree Funds; The Planters Funds;
RIMCO Monument Funds; The Shawmut Funds; Short-Term Municipal
Trust; SouthTrust Vulcan Funds; Star Funds; The Starburst
Funds; The Starburst Funds II; Stock and Bond Fund, Inc.;
Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments
Trust; Tower Mutual Funds; Trademark Funds; Trust for
Financial Institutions; Trust for Government Cash Reserves;
Trust for Short-Term U.S. Government Securities; Trust for
U.S. Treasury Obligations; Vision Fiduciary Funds, Inc.;
Vision Group of Funds, Inc.; and World Investment Series,
Inc.
Federated Securities Corp. also acts as principal underwriter
for the following closed-end investment company: Liberty
Term Trust, Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief President and
Federated Investors Tower Executive Officer, Chief Director
Pittsburgh, PA 15222-3779 Operating Officer, and
Asst. Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice Vice President and
Federated Investors Tower President, and Treasurer, Treasurer
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice Vice President and
Federated Investors Tower President, and Assistant Secretary
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph L. Epstein Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael D. Fitzgerald Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David C. Glabicki Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William J. Kerns Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Stephen A. LaVersa Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Francis J. Matten, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Jeffrey Niss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charles A. Robison Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John C. Shelar, Jr. Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jamie M. Teschner Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Assistant Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Assistant
Federated Investors Tower Federated Securities Corp. Secretary
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. 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 the
following locations:
Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Services Company Federated Investors Tower
("Transfer Agent and Pittsburgh, PA 15222-3779
Dividend Disbursing Agent")
Federated Administrative Federated Investors Tower
Services Pittsburgh, PA 15222-3779
("Administrator")
Federated Advisers Federated Investors Tower
("Adviser") Pittsburgh, PA 15222-3779
State Street Bank and Trust P.O. Box 8604
Company Boston, MA 02266-8604
("Custodian")
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Directors 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FORTRESS ADJUSTABLE RATE
U.S. GOVERNMENT FUND, INC., 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 21st day of
April, 1995.
FUND NAME-ALL CAPS
BY: /s/Charles H. Field
Charles H. Field, Assistant Secretary
Attorney in Fact for John F. Donahue
April 21, 1995
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:
NAME TITLE DATE
By: /s/Charles H. Field
Charles H. Field Attorney In Fact April 21, 1995
ASSISTANT SECRETARY For the Persons
Listed Below
John F. Donahue* Chairman and Director
(Chief Executive Officer)
Richard B. Fisher* President and Director
Edward C. Gonzales* Vice President and Treasurer
(Principal Financial and
Accounting Officer)
Thomas G. Bigley* Director
John T. Conroy, Jr.* Director
William J. Copeland* Director
James E. Dowd* Director
Lawrence D. Ellis, M.D.* Director
Edward L. Flaherty, Jr.* Director
Peter E. Madden* Director
Gregor F. Meyer* Director
John E. Murray, Jr.* Director
Wesley W. Posvar* Director
Marjorie P. Smuts* Director
* By Power of Attorney
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg. S-K
INDEPENDENT AUDITORS' CONSENT
We consent to the use in the Prospectus constituting part of Post-Effective
Amendment No. 8 of the Registration Statement on Form N-1A (No. 33-41004)
of Fortress Adjustable Rate U.S. Government Fund, Inc. of our report dated
April 11, 1995, appearing in the Prospectus, which is a part of such
Registration Statement, and to the reference to us under the heading
"Financial Highlights" in such Prospectus.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 19, 1995
Exhibit 19 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 Secretary of FORTRESS ADJUSTABLE RATE
U.S. GOVERNMENT FUND, INC. and the Assistant General Counsel of Federated
Investors, 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
thterewith, 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 thereiwth, 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 F. Donahue Chairman and Director April 13, 1995
John F. Donahue (Chief Executive Officer)
/s/ Richard B. Fisher President and Director April 13, 1995
Richard B. Fisher
/s/ Edward C. Gonzales Vice President & Treasurer April 13, 1995
Edward C. Gonzales (Principal Financial and
Accounting Officer)
/s/ Thomas G. Bigley Director April 13, 1995
Thomas G. Bigley
/s/ John T. Conroy, Jr. Director April 13, 1995
John T. Conroy, Jr.
/s/ William J. Copeland Director April 13, 1995
William J. Copeland
/s/ James E. Dowd Director April 13, 1995
James E. Dowd
/s/ Lawrence D. Ellis, M.D. Director
April 13, 1995
Lawrence D. Ellis, M.D.
/s/ Edward L. Flaherty, Jr. Director
April 13, 1995
Edward L. Flaherty, Jr.
/s/ Peter E. Madden Director April 13, 1995
Peter E. Madden
/s/ Gregor F. Meyer Director April 13, 1995
Gregor F. Meyer
/s/ John E. Murray, Jr. Director April 13, 1995
John E. Murray, Jr.
/s/ Marjorie P. Smuts Director April 13, 1995
Marjorie P. Smuts
/s/ Wesley W. Posvar Director April 13, 1995
Wesley W. Posvar
Sworn to and subscribed before me this 13th day of April, 1995.
/s/ Marie M. Hamm
Notary Public
Exhibit 1(i) under Form N-1A
Exhibit 3(a) under Item 601/Reg. S-K
ARTICLES OF INCORPORATION
OF
FORTRESS VARIABLE RATE U.S. GOVERNMENT FUND, INC.
The undersigned, John W. McGonigle, whose post office address is
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779, being at
least eighteen years of age, does under and by virtue of the General Laws
of the State of Maryland authorizing the formation of corporations, hereby
form a corporation.
FIRST: The name of the corporation is Fortress Variable Rate
U.S. Government Fund, Inc. ("Corporation")
SECOND: The purpose for which the Corporation is formed is to act
as an open-end investment company of the management type registered as such
with the Securities and Exchange Commission pursuant to the Investment
Company Act of 1940 and to exercise and generally to enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations
by the Maryland General Corporation Law now or hereinafter in force.
THIRD: The post office address of the principal office and the
office of the resident agent of the Corporation in the State of Maryland is
32 South Street, Baltimore, Maryland 21202. The resident agent of the
Corporation in the state of Maryland is THE CORPORATION TRUST INCORPORATED,
which is a corporation organized and existing under the laws of the State
of Maryland.
FOURTH: (a) The Corporation is authorized to issue five billion
(5,000,000,000) shares of common stock, par value $.0001 per share. The
aggregate par value of all shares which the Corporation is authorized to
issue is Five Hundred Thousand Dollars ($500,000). The Corporation may
issue fractional shares.
(b) The Board of Directors is authorized to classify or to
reclassify (i.e. into series and classes of series), from time to time, any
unissued shares of stock of the Corporation, whether now or hereafter
authorized, by setting, changing or eliminating the preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms and conditions of or rights to require redemption
of the stock.
Unless otherwise provided by the Board of Directors prior to the
issuance of the stock, the shares of each class of stock shall all be
subject to the following:
(i) The net asset value of each class of stock shall be
determined separately and may vary from class to class. Income, expenses
and liabilities of the Corporation shall be allocated to each class of
stock for purposes of determining the net asset value of each class as
determined by or pursuant to the direction of the Board of Directors.
(ii) Dividends may vary from class to class.
(iii) Upon liquidation or dissolution of the Corporation, each
holder of shares of a class of stock shall be entitled to receive an amount
equal to the net asset value of the shares.
(iv) Holders of each class of stock shall vote as a single
class on all matters submitted to a vote of stockholders except to the
extent that a class vote is required by law. Only shareholders of a class
affected by a matter shall be entitled to vote on that matter.
FIFTH: (a) The number of Directors of the Corporation shall
initially be ten. The number may be changed by the By-Laws of the
Corporation or by the Board of Directors pursuant to the By-Laws.
(b) The name of each Director who shall act upon filing of these
Articles of Incorporation is:
John F. Donahue Edward L. Flaherty, Jr.
J. Christoher Donahue J. Joseph Maloney, Jr.
William J. Copeland Gregor F. Meyer
James E. Dowd Wesley W. Posvar
Lawrence D. Ellis, M.D. Marjorie P. Smuts
SIXTH: (a) To the extent the Corporation has funds or property
legally available therefor, each shareholder shall have the right at such
times as may be permitted by the Corporation, but no less frequently than
as required under the 1940 Act, to require the Corporation to redeem all or
any part of its shares at a redemption price equal to the net asset value
per share next determined after the shares are tendered for redemption,
less any applicable redemption charges as determined by the Board of
Directors. The Board of Directors may adopt requirements and procedures
for redemption of shares.
Notwithstanding the foregoing, the Corporation may postpone payment
or deposit of the redemption price any may suspend the right of the
shareholder to require the Corporation to redeem shares of any series or
class pursuant to the applicable rules and regulations, or any order, of
the Securities and Exchange Commission.
(b) The Corporation shall have the right, exercisable at the
discretion of the Board of Directors, to redeem any shareholder's shares of
any series or class for their then current net asset value per share if at
such time the shareholder owns shares having an aggregate net asset value
of $5,000 or such lesser amount for such series or class as approved by the
Board of Directors.
(c) Each share is subject to redemption by the Corporation at
the redemption price computed in the manner set forth in subparagraph (a)
of Article SIXTH of this Article of Incorporation at any time if the Board
of Directors, in its sole discretion, determines that failure to so redeem
may result in the Corporation being classified as a person holding company
as defined in the Internal Revenue Code.
(d) Notwithstanding any provision of law requiring a greater
proportion than a majority of the votes of any or all series or classes of
shares entitled to be cast to take or authorize any action, the Corporation
may take or authorize any such action upon the concurrence of a majority of
the aggregate number of the votes entitled to be cast thereon.
(e) The Corporation reserves the right from time to time to
make any amendment of its Articles of Incorporation now or hereafter
authorized by law, including any amendment which alters the contract
rights, as expressly set forth in its Articles of Incorporation, of any
outstanding shares or any series or class.
(f) The Board of Directors is expressly authorized to declare
and pay dividends and distributions in case, securities or other property
from surplus or any funds legally available therefor, at such intervals
(which may be as frequently as daily) or on such other periodic basis, as
it shall determine, for any series or class of the Corporation; to declare
such dividends or distributions for any series or class of the Corporation
by means of a formula or other method of determination, at meetings held
less frequently than the frequent of the effectiveness of such
declarations; to establish payment dates for dividends or any other
distributions for any series or class of the Corporation on any basis,
including dates occurring less frequently than the effectiveness of
declarations thereof; and to provide for the payment of declared dividends
on a date earlier or later than the specified payment date in the case of
shareholders of such series or class redeeming their entire ownership of
shares.
(g) Any determined made in good faith by or pursuant to the
direction of the Board of Directors as to the amount of the assets, debts,
obligations or liabilities of the Corporation, as to the amount of any
reserves or charges set up and the propriety thereof, as to the time of or
purpose for creating such reserves of charges (whether or not any debt,
obligation or liability for which such reserves or charges shall have been
created shall have been paid or discharged), as to the value of the method
of valuing any investment or other asset owned or held by the Corporation,
as to the number of shares of the Corporation, shall be final and
conclusive and shall be binding upon the Corporation and all holders of its
shares, past, present and future, and shares of the Corporation are issued
and sold on the condition and understanding that any and all such
determinations shall be binding as aforesaid.
EIGHTH: (a) To the fullest extent that limitations on the
liability of directors and officers and permitted by the Maryland General
Corporation Law, no director or officer of the Corporation shall have any
liability to the Corporation or its shareholders for damages. This
limitation on liability applies to events occurring at the time a person
serves as a director or officer of the Corporation whether or not such
person is a director or officer at the time of any proceeding in which
liability is asserted.
(b) The Corporation shall indemnify and advance expenses to
its currently acting and its former directors to the fullest extent that
indemnification of directors is permitted by the Maryland General
Corporation Law. The Corporation shall indemnify and advance expenses to
its officers to the same extent as its directors and may do so to such
further extent as its directors any may do so to such further extent as is
consistent with law. The Board of Directors may be by-law, resolution or
agreement make further provision for indemnification of directors,
officers, employees and agents to the fullest extent permitted by the
Maryland General Corporation Law.
(c) No provision of this Article shall be effective to
protect or purport to protect any director or officer of the Corporation
against any liability to the Corporation or its security holders to which
he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office.
(d) References to the Maryland General Corporation Law in
these Articles of Incorporation are to that law as from time to time
amended. No amendment to the charter of the Corporation shall affect any
right of any person under this Article based on any event, omission or
proceeding prior to the amendment.
IN WITNESS WHEREOF, I have signed these Articles of Incorporation and
acknowledge them to be my act on the 19th day of March, 1991.
/s/ John W. McGonigle
JOHN W. McGONIGLE
Secretary
Exhibit 1(ii) under Form N-1A
Exhibit 3(a) under Item 601/Reg. S-K
Fortress Variable Rate U.S. Government Fund, Inc.
ARTICLE OF AMENDMENT
Fortress Variable Rate U.S. Government Fund, Inc., a Maryland
corporation having its principal office in the City of Pittsburgh,
Pennsylvania (hereinafter called the "Corporation"), hereby certifies:
FIRST: The Articles of Incorporation are hereby amended by
striking Articles FIRST and inserting the following in its place:
"FIRST: The name of the Corporation is FORTRESS ADJUSTABLE
RATE U.S. GOVERNMENT FUND, INC."
SECOND: The foregoing amendment to the Articles of Incorporation
was approved by the Board of Directors of the Corporation. The Corporation
had no shareholders at the time of approval.
IN WITNESS WHEREOF, Fortress Adjustable Rate U.S. Government Fund,
Inc. has caused these presents to be signed in its name and on its behalf
by its President or one of its Vice Presidents and its corporate seal to be
hereunto affixed and attested by its Secretary or one of its Assistant
Secretaries on May 31, 1991.
The Undersigned, John W. McGongile, Vice President of the
Corporation, who executed on behalf of the Corporation the foregoing
Articles of Amendment of which its certificate is made a part, hereby
acknowledges in the name and on behalf of the Corporation the foregoing
Articles of Amendment to be its corporate act and further certifies to the
best of his knowledge, information and belief, the matters and facts set
forth therein with respect to the authorization and approval thereof are
true in all material respects under the penalty of perjury.
FORTRESS ADJUSTABLE RATE U.S.
GOVERNMENT FUND, INC.
ATTEST:
/s/ Ronald M. Petnuch /s/ John W. McGonigle
Ronald M. Petnuch John W. McGonigle
Assistant Secretary Vice President
Exhibit 2(i) under Form N-1A
Exhibit 3(b) under Item 601/Reg. S-K
FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
BY-LAWS
ARTICLE I
MEETING OF SHAREHOLDERS
Section 1. ANNUAL MEETINGS. The Annual Meetings of Shareholders of
the Corporation shall be held on the 4th Tuesday in October in each year
unless such day is a legal holiday in which case the meeting shall be held
at the same time on the next succeeding business day which is not a legal
holiday. The business to be transacted at the Annual Meeting shall include
the election of Directors, consideration and action upon the reports of
Officers and Directors, and any other business within the power of the
Corporation.
Section 2. SPECIAL MEETINGS. Special Meetings of Shareholders may be
called by the Chairman, or by the Board of Directors; and shall be called
by the Chairman, Secretary or any Director at the request in writing of the
holders of not less than 25% of the outstanding voting shares of the
capital stock of the Corporation (hereinafter, the outstanding voting
shares of the capital stock of the Corporation are referred to as
"Shares"). Any such request shall state the purposes of the proposed
meeting.
Section 3. PLACE OF MEETINGS. All meetings of the Shareholders shall
be held at the office of the Corporation in Pittsburgh, Pennsylvania, or at
such other place within or without the State of Maryland as may be fixed by
the party or parties making the call as stated in the notice thereof.
Section 4. NOTICE. Not less than ten or more than ninety days before
the date of every Annual or Special Meeting of Shareholders the Secretary
or an Assistant Secretary shall give to each Shareholder of record notice
of such meeting by mail, telegraph, cable or radio. Such notice shall be
deemed to have been given when deposited in the mail or with a telegraph or
cable office or radio station for transmission to the Shareholder at his
address appearing on the books of the Corporation. It shall not be
necessary to set forth the business proposed to be transacted in the notice
of any Annual Meeting except that any proposal to amend the Charter of the
Corporation shall be set forth in such notice. Notice of a Special Meeting
shall state the purpose or purposes for which it is called.
Section 5. QUORUM. At all meetings of the Shareholders the presence
in person or by proxy of Shareholders entitled to cast a majority in number
of votes shall be necessary to constitute a quorum for the transaction of
business. In the absence of a quorum at any meeting a majority of those
Shareholders present in person or by proxy may adjourn the meeting from
time to time to be held at the same place without further notice than by
announcement to be given at the meeting until a quorum, as above defined,
shall be present, whereupon any business may be transacted which might have
been transacted at the meeting originally called had the same been held at
the time so called.
Section 6. VOTING. At all meetings of Shareholders each Shareholder
of the Corporation shall be entitled to one vote or fraction thereof for
each Share standing in his name on the books of the Corporation on the date
for the determination of Shareholders entitled to vote at such meeting.
Section 7. PROXIES. Any Shareholder entitled to vote at any meeting
of Shareholders may vote either in person or by proxy, but no proxy which
is dated more than eleven months before the meeting named therein shall be
accepted. Every proxy shall be in writing subscribed by the Shareholder or
his duly authorized attorney and dated, but need not be sealed, witnessed
or acknowledged. All proxies shall be filed with and verified by the
Secretary, or an Assistant Secretary of the Corporation or if the meeting
shall so decide, by the Secretary of the Meeting.
Section 8. INFORMAL ACTION BY SHAREHOLDERS. Any action required or
permitted to be taken at any meeting of Shareholders may be taken without a
meeting, if a consent in writing, setting forth such action, is signed by
all the Shareholders entitled to vote on the subject matter thereof, and
such consent is filed with the records of the Corporation.
ARTICLE II
BOARD OF DIRECTORS
Section 1. POWERS. The Board of Directors shall have control and
management of the affairs, business and properties of the Corporation.
They shall have and exercise in the name of the Corporation and on behalf
of the Corporation all the rights and privileges legally exercisable by the
Corporation except as otherwise provided by law, the Charter, or these By-
Laws.
Section 2. NUMBER, QUALIFICATIONS, MANNER OF ELECTION AND TERM OF
OFFICE. The number of Directors of the Corporation shall be as fixed from
time to time by a majority of the entire Board of Directors but shall be no
less than three nor more than twenty. Directors need not be Shareholders.
The Board of Directors may from time to time by a majority of the entire
Board increase or decrease the number of Directors to such number as they
deem expedient not to be less than three nor more than twenty, however, and
fill the vacancies so created. The term of office of a Director shall not
be affected by any decrease in the number of Directors made by the Board
pursuant to the foregoing authorization. Until the first Annual Meeting of
Shareholders or until successors are duly elected and qualify, the Board of
Directors shall consist of the persons named as such in the Charter. The
Members of the Board of Directors shall be elected by the Shareholders at
the Annual Meeting of Shareholders. Each Director shall hold office until
the Annual Meeting next held after his election and until the election and
qualification of his successor.
Section 3. PLACE OF MEETING. The Board of Directors may hold its
meetings at such place or places within or without the State of Maryland as
the Board may from time to time determine.
Section 4. ANNUAL MEETINGS. The Board of Directors shall meet for
the election of Officers and any other business as promptly as may
conveniently be done after the adjournment of the Annual Meeting of
Shareholders.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such intervals and on such dates as the Board
may from time to time designate.
Section 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held at such times and at such places as may be designated
at the call of such meeting. Special meetings shall be called by the
Secretary or Assistant Secretary at the request of the Chairman or any
Director.
Section 7. NOTICE. The Secretary or Assistant Secretary shall give,
at least two days before the meeting, notice of each meeting of the Board
of Directors, whether Annual, Regular or Special, to each member of the
Board by mail, telegram or telephone to his last known address. It should
not be necessary to state the purpose or business to be transacted in the
notice of any Annual or Regular meeting. The notice of a Special Meeting
shall state the purpose or purposes for which it is called. Personal
attendance at any meeting by a Director other than to protest the validity
of said meeting shall constitute a waiver of the foregoing requirement of
notice.
Section 8. CONDUCT OF MEETINGS AND BUSINESS. The Board of Directors
may adopt such rules and regulations for the conduct of their meetings and
the management of the affairs of the Corporation as they may deem proper
and not inconsistent with applicable law, the Charter of the Corporation or
these By-Laws.
Section 9. QUORUM. A majority of the total membership of the Board
of Directors shall constitute a quorum at any meeting of the Board of
Directors. The action of a majority of Directors present at any meeting at
which a quorum is present shall be the action of the Board of Directors
unless the concurrence of a greater proportion is required for such action
by statute, the Charter of the Corporation, or these By-Laws. In the
absence of a quorum at any meeting a majority of Directors present may
adjourn the meeting from day to day or for such longer periods as they may
designate without notice other than by announcement at the meeting.
Section 10. RESIGNATIONS. Any Director of the Corporation may resign
at any time by mailing or delivering, or transmitting by radio, telegraph
or cable, written notice to the Chairman of the Board of Directors or to
the Secretary of the Corporation. The resignation of any Director shall
take effect at the time specified therein, and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make
it effective.
Section 11. REMOVAL. At any meeting of Shareholders duly called for
the purpose, any Director may by the vote of a majority of all of the
Shares entitled to vote be removed from office. At the same meeting, the
vacancy in the Board of Directors may be filled by the election of a
Director to serve for the remainder of the term and until the election and
qualification of his successor.
Section 12. VACANCIES. Except as otherwise provided by law, any
vacancy occurring in the Board of Directors for any cause other than by
reason of an increase in the number of Directors may be filled by a
majority of the remaining members of the Board of Directors although such
majority is less than a quorum and any vacancy occurring by reason of an
increase in the number of Directors may be filled by action of a majority
of the entire Board of Directors; provided, however, that upon the death,
resignation or removal during any consecutive period of twelve months of
more than one-half of the Directors holding office at the beginning of such
period, a Shareholders' Meeting shall be called forthwith for the purpose
of electing an entire new Board, including the vacancies filled pursuant to
this Section of the By-Laws. A Director elected by the Board to fill a
vacancy shall be elected to hold office until the next Annual Meeting of
Shareholders or until his successor is duly elected and qualifies.
Notwithstanding the foregoing, the Shareholders may, at any time during the
term of such Director elected to fill a vacancy, elect some other person to
fill said vacancy and thereupon the election by the Board shall be
superseded and such election by the Shareholders shall be deemed a filling
of the vacancy and not a removal and may be made at any meeting called for
such purpose.
Section 13. COMPENSATION OF DIRECTORS. The Directors may receive a
stated salary for their services as Directors, and by Resolution of the
Board of Directors a fixed fee and expenses of attendance may be allowed
for attendance at each Meeting. Nothing herein contained shall be
construed to preclude any Director from serving the Corporation in any
other capacity, as an Officer, Agent or otherwise, and receiving
compensation therefor.
Section 14. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at any Annual, Regular or Special Meeting of the
Board of Directors may be taken without a meeting if a written consent to
such action is signed by all members of the Board and such written consent
is filed with the minutes of proceedings of the Board.
Section 15. POWER TO DECLARE DIVIDENDS. The Board of Directors is
expressly authorized to determine in accordance with generally accepted
accounting principles and practices what constitutes net profits, earnings,
surplus or net assets in excess of capital, and to determine what
accounting periods shall be used by the Corporation for any purpose,
whether annual or any other period, including daily; to set apart out of
any funds of the Corporation such reserves for such purposes as it shall
determine and to abolish the same; to declare and pay dividends and
distributions by means of a formula or other method of determination, at
meetings held less frequently than the frequency of the effectiveness of
such declarations; to establish payment dates for dividends or any other
distributions on any basis, including
dates occurring less frequently than the effectiveness of declarations
thereof; and to provide for the payment of declared dividends on a date
earlier or later than the specified payment date in the case of
Shareholders redeeming their entire ownership of shares.
ARTICLE III
EXECUTIVE AND OTHER COMMITTEES
Section 1. APPOINTMENT AND TERM OF OFFICE OF EXECUTIVE COMMITTEE.
The Board of Directors, by resolution passed by a vote of at least a
majority of the entire Board, may appoint an Executive Committee, which
shall consist of two (2) or more Directors.
Section 2. VACANCIES IN EXECUTIVE COMMITTEE. Vacancies occurring in
the Executive Committee from any cause shall be filled by the Board of
Directors at any Meeting thereof by a vote of the majority of the entire
Board.
Section 3. EXECUTIVE COMMITTEE TO REPORT TO BOARD. All action by the
Executive Committee shall be reported to the Board of Directors at its
Meeting next succeeding such action.
Section 4. PROCEDURE OF EXECUTIVE COMMITTEE. The Executive Committee
shall fix its own rules of procedure not inconsistent with these By-Laws or
with any directions of the Board of Directors. It shall meet at such times
and places and upon such notice as shall be provided by such rules or by
resolution of the Board of Directors. The presence of a majority shall
constitute a quorum for the transaction of business, and in every case an
affirmative vote of a majority of all the members of the Committee present
shall be necessary for the taking of any action.
Section 5. POWERS OF EXECUTIVE COMMITTEE. During the intervals
between the Meetings of the Board of Directors the Executive Committee,
except as limited by the By-Laws of the Corporation or by specific
directions of the Board of Directors, shall possess and may exercise all
the powers of the Board of Directors in the management and direction of the
business and conduct of the affairs of the Corporation in such manner as
the Executive Committee shall deem for the best interests of the
Corporation, and shall have power to authorize the Seal of the Corporation
to be affixed to all instruments and documents requiring same.
Notwithstanding the foregoing, the Executive Committee shall not have the
power to elect Directors, increase or decrease the number of Directors,
elect or remove any Officer, declare dividends, issue shares or recommend
to Shareholders any action requiring Shareholder approval.
Section 6. OTHER COMMITTEES. From time to time the Board of
Directors may appoint any other Committee or Committees for any purpose or
purposes to the extent lawful, which shall have such powers as shall be
specified in the resolution of appointment.
Section 7. COMPENSATION. The members of any duly appointed Committee
shall receive such compensation and/or fees as from time to time may be
fixed by the Board of Directors.
Section 8. INFORMAL ACTION BY EXECUTIVE COMMITTEE OR OTHER
COMMITTEES. Any action required or permitted to be taken at any meeting of
the Executive Committee or any other duly appointed Committee may be taken
without a meeting if written consent to such action is signed by all
Members of such Committee and such written consent is filed with the
minutes of the proceedings of such Committee.
Section 9. ADVISORY BOARD. The Directors may appoint an Advisory
Board to consist in the first instance of not less than three (3) members.
Members of such Advisory Board shall not be Directors or Officers and need
not be Shareholders. Members of this Board shall hold office for such
period as the Directors may by resolution provide. Any Member of such
Board may resign therefrom by written instrument signed by him which shall
take effect upon delivery to the Directors. The Advisory Board shall have
no legal powers and shall not perform functions of Directors in any manner,
said Board being intended to act merely in an advisory capacity. Such
Advisory Board shall meet at such times and upon such notice as the Board
of Directors may by resolution provide. The compensation of the Members of
the Advisory Board, if any, shall be determined by the Board of Directors.
ARTICLE IV
OFFICERS
Section 1. GENERAL PROVISIONS. The Officers of the Corporation shall
be Chairman, a President, one or more Vice Presidents, a Treasurer and a
Secretary. The Board of Directors shall elect or appoint such other
Officers or agents as the business of the Corporation may require including
one or more Assistant Vice Presidents, one or more Assistant Secretaries
and one or more Assistant Treasurers. The same person may hold any two
offices except those of President and Vice President.
Section 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The Officers
shall be elected annually by the Board of Directors at its Annual Meeting
following the Annual Meeting of Shareholders. Each Officer shall hold
office until the Annual Meeting in the next year and until the election and
qualification of his successor. Any vacancy in any of the offices may be
filled for the unexpired portion of the term by the Board of Directors at
any Regular or Special Meeting of the Board. The Board of Directors may
elect or appoint additional Officers or agents at any Regular or Special
Meeting of the Board.
Section 3. REMOVAL. Any Officer elected by the Board of Directors
may be removed with or without cause at any time upon a vote of the
majority of the entire Board of Directors. Any other employee of the
Corporation may be removed or dismissed at any time by the Chairman.
Section 4. RESIGNATIONS. Any Officer may resign at any time by
giving written notice to the Board of Directors. Any such resignation
shall take effect at the date of receipt of each notice or at any later
time specified therein, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any Office because of death,
resignation, removal, disqualification or any other cause shall be filled
for the unexpired portion of the term in the manner prescribed in these By-
Laws for regular election or appointment to such Office.
Section 6. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors shall be the chief executive officer of the Corporation.
He shall, unless other provisions are made therefor by the Board or
Executive Committee, employ and define the duties of all employees of the
Corporation, shall have the power to discharge any such employees, shall
exercise general supervision over the affairs of the Corporation and shall
perform such other duties as may be assigned to him from time to time by
the Board of Directors. He shall preside at the meetings of Shareholders
and the Board of Directors. In the absence of the Chairman of the Board of
Directors, the President or an officer or Director appointed by the
Chairman, shall preside at all meetings of Shareholders.
Section 7. PRESIDENT. The President, in the absence of the Chairman
of the Board of Directors, shall perform all duties and may exercise any of
the powers of the Chairman of the Board of Directors subject to the control
of the Board. He shall counsel and advise the Chairman of the Board on
matters of major importance and shall perform such other duties as may be
assigned to him from time to time by the Board of Directors.
Section 8. VICE PRESIDENT. The Vice President (or if more than one,
the senior Vice President) in the absence of the President shall perform
all duties and may exercise any of the powers of the President subject to
the control of the Board. Each Vice President shall perform such other
duties as may be assigned to him from time to time by the Board of
Directors, the Executive Committee, or the Chairman.
Section 9. SECRETARY. The Secretary shall keep or cause to be kept
in books provided for the purpose the Minutes of the Meetings of the
Shareholders, and of the Board of Directors; shall see that all Notices are
duly given in accordance with the provisions of these By-Laws and as
required by Law; shall be custodian of the records and of the Seal of the
Corporation and see that the Seal is affixed to all documents the execution
of which on behalf of the Corporation under its seal is duly authorized;
shall keep directly or through a transfer agent a register of the post
office address of each Shareholder, and make all proper changes in such
register, retaining and filing his authority for such entries; shall see
that the books, reports, statements, certificates and all other documents
and records required by law are properly kept and filed; and in general
shall perform all duties incident to the Office of Secretary and such other
duties as may, from time to time, be assigned to him by the Board of
Directors, the Executive Committee, or the Chairman.
Section 10. TREASURER. The Treasurer shall have supervision of the
custody of the funds and securities of the Corporation, subject to the
Charter of the Corporation and applicable law. He shall submit to the
Annual Meeting of Shareholders a statement of the financial condition of
the Corporation and whenever required by the Board of Directors shall make
and render a statement of the accounts of the Corporation and such other
statements as may be required. He shall cause to be kept in books of the
Corporation a full and accurate account of all monies received and paid out
for the account of the Corporation. He shall perform such other duties as
may be from time to time assigned to him by the Board of Directors, the
Executive Committee, or the Chairman.
Section 11. ASSISTANT VICE PRESIDENT. The Assistant Vice President
or Vice Presidents of the Corporation shall have such authority and perform
such duties as may be assigned to them by the Board of Directors, the
Executive Committee, or the Chairman of the Corporation.
Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
Assistant Secretary or Secretaries and the Assistant Treasurer or
Treasurers shall perform the duties of the Secretary and of the Treasurer
respectively, in the absence of those Officers and shall have such further
powers and perform such other duties as may be assigned to them
respectively by the Board of Directors or the Executive Committee or by the
Chairman.
Section 13. SALARIES. The salaries of the Officers shall be fixed
from time to time by the Board of Directors. No Officer shall be prevented
from receiving such salary by reason of the fact that he is also a Director
of the Corporation.
ARTICLE V
SHARES AND THEIR TRANSFER
Section 1. CERTIFICATES. All share certificates shall be signed by
the Chairman or any Vice President and by the Treasurer or Secretary or any
Assistant Treasurer or Assistant Secretary and sealed with the seal of the
Corporation. The signatures may be either manual or facsimile signatures
and the seal may be either facsimile or any other form of Seal.
Certificates for shares for which the Corporation has appointed an
independent Transfer Agent and Registrar shall not be valid unless
countersigned by such Transfer Agent and registered by such Registrar. In
case any Officer who has signed any certificate ceases to be an Officer of
the Corporation before the certificate is issued, the certificate may
nevertheless be issued by the Corporation with the same effect as if the
Officer had not ceased to be such Officer as of the date of its issuance.
Share certificates shall be in such form not inconsistent with law or the
Charter or these By-Laws as may be determined by the Board of Directors.
Section 2. TRANSFER OF SHARES. Shares shall be transferable on the
books of the Corporation by the holder thereof in person or by duly
authorized attorney upon surrender of the certificate representing the
shares to be transferred properly endorsed.
Section 3. CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE. The
Board of Directors may fix in advance a date as the record date for the
purpose of determining Shareholders entitled to notice of or to vote at any
Meeting of Shareholders or Shareholders to receive payment of any dividend.
Such date shall in any case not be more than 60 days and in case of a
Meeting of Shareholders not less than l0 days prior to the date on which
the particular action requiring such determination of Shareholders is to be
taken. In lieu of fixing a record date the Board of Directors may provide
that the share transfer books of the Corporation shall be closed for a
stated period not to exceed in any case 20 days. If the share transfer
books are closed for the purpose of determining Shareholders entitled to
notice of or to vote at a Meeting of Shareholders such books shall be
closed for at least l0 days immediately preceding such meeting.
Section 4. LOST, DESTROYED OR MUTILATED CERTIFICATES. In case any
Share certificate is lost, mutilated or destroyed the Board of Directors
may issue a new certificate in place thereof upon indemnity to the
Corporation against loss and upon such other terms and conditions as the
Board may deem advisable.
Section 5. TRANSFER AGENT AND REGISTRAR: REGULATIONS. The Board of
Directors shall have power and authority to make all such rules and
regulations as they may deem expedient concerning the issuance, transfer
and registration of Share certificates and may appoint a Transfer Agent
and/or Registrar of Share certificates, and may require all such Share
certificates to bear the signature of such Transfer Agent and/or of such
Registrar.
ARTICLE VI
AGREEMENTS, CHECKS, DRAFTS, ENDORSEMENTS, ETC.
Section 1. AGREEMENTS, ETC. The Board of Directors or the Executive
Committee may authorize any Officer or Officers, or Agent or Agents of the
Corporation to enter into any Agreement or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances; and, unless so
authorized by the Board of Directors or by the Executive Committee or by
these By-Laws, no Officer, Agent or Employee shall have any power or
authority to bind the Corporation by any Agreement or engagement or to
pledge its credit or to render it liable pecuniarily for any purpose or to
any amount.
Section 2. CHECKS, DRAFTS, ETC. All checks, drafts, or orders for
the payment of money, notes and other evidences of indebtedness shall be
signed by such Officer or Officers, Employee or Employees, or Agent or
Agents as shall be from time to time designated by the Board of Directors
or the Executive Committee, or as may be specified in or pursuant to the
agreement between the Corporation and the Bank or Trust Company appointed
as custodian, pursuant to the provisions of the Charter of the Corporation.
Section 3. ENDORSEMENTS, ASSIGNMENTS AND TRANSFER OF SECURITIES. All
endorsements, assignments, stock powers or other instruments of transfer of
securities standing in the name of the Corporation or its nominee or
directions for the transfer of securities belonging to the Corporation
shall be made by such Officer or Officers, Employee or Employees, or Agent
or Agents as may be authorized by the Board of Directors or the Executive
Committee.
Section 4. EVIDENCE OF AUTHORITY. Anyone dealing with the
Corporation shall be fully justified in relying on a copy of a resolution
of the Board of Directors or of any Committee thereof empowered to act in
the premises which is certified as true by the Secretary or an Assistant
Secretary under the seal of the Corporation.
Section 5. DESIGNATION OF A CUSTODIAN. The Corporation shall place
and at all times maintain in the custody of a Custodian all funds,
securities and similar investments owned by the Corporation, with the
exception of securities
loaned under a properly authorized Securities Loan Agreement. The
Custodian shall be a bank having not less than $2,000,000 aggregate
capital, surplus and undivided profits and shall be appointed from time to
time by the Board of Directors, which shall fix its remuneration.
Section 6. ACTION UPON TERMINATION OF A CUSTODIAN AGREEMENT. Upon
termination of a Custodian Agreement or inability of the Custodian to
continue to serve, the Board of Directors shall promptly appoint a
successor custodian, but in the event that no successor custodian can be
found who has the required qualifications and is willing to serve, the
Board of Directors shall call as promptly as possible a special meeting of
the Shareholders to determine whether the Corporation shall function
without a custodian or shall be liquidated. If so directed by vote of the
holders of a majority of the outstanding Shares, the Custodian shall
deliver and pay over all property of the Corporation held by it as
specified in such vote.
Section 7. WHEN TO DETERMINE NET ASSET VALUE. The net asset value
per Share of the outstanding Shares shall be determined at such times as
the Board of Directors shall prescribe, provided that such net asset value
shall be determined at least weekly.
ARTICLE VII
BOOKS AND RECORDS
Section 1. LOCATION. The books and records of the Corporation,
including the Stock ledger or ledgers, may be kept in or outside the State
of Maryland at such office or agency of the Corporation as may be from time
to time determined by the Board of Directors.
ARTICLE VIII
MISCELLANEOUS
Section 1. SEAL. The Seal of the Corporation shall be a disk
inscribed with the words "Fortress Adjustable Rate U.S. Government Fund,
Inc., 1986 - Incorporated Maryland ".
Section 2. FISCAL YEAR. The Fiscal Year of the Corporation shall end
on the last day of May in each year.
Section 3. WAIVER OF NOTICE. Whenever under the provisions of these
By-Laws or of any law, the Shareholders or Directors or Members of the
Executive Committee or other Committee are authorized to hold any meeting
after notice or after the lapse of any prescribed period of time, such
meeting may be held without notice or without such lapse of time by the
written waiver of notice signed by every person entitled to notice, or if
every person entitled to notice shall be present at such meeting.
ARTICLE IX
AMENDMENTS
Section 1. The Board of Directors shall have the power, at any
Regular or Special Meeting, if notice thereof be included in the notice of
such Special Meeting, to alter, amend or repeal any By-Laws of the
Corporation and to make new By-Laws.
Section 2. The Shareholders shall have the power, at any Annual
Meeting or at any Special Meeting if notice thereof be included in the
notice of such Special Meeting, to alter, amend or repeal any By-Laws of
the Corporation or to make new By-Laws.
Exhibit 2(ii) under Form N-1A
Exhibit 3(b) under Item 601/Reg. S-K
FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
Amendment No. 1
BY-LAWS
THESE By-Laws are amended as follows:
Delete Sections 1 and 2 of Article VIII and substitute in its place
the following:
Section 1. SEAL. The Seal of the Corporation shall consist of
a flatfaced die with the word "Maryland", together with the
name of the Fund and the year of its organization cut or
engraved thereon but, unless otherwise required by the
Directors, and seal shall not be necessary to be placed on, and
its absence shall not impair the validity of, any document,
instrument or other paper executed and delivered by or on
behalf of the Corporation.
Section 2. FISCAL YEAR. The fiscal year of the
Corporation shall be designated from time to time by the
Directors.
Exhibit 5 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
INVESTMENT ADVISORY CONTRACT
This Contract is made between FEDERATED ADVISERS, a Delaware business
trust having its principal place of business in Pittsburgh, Pennsylvania
(hereinafter referred to as "Adviser"), and FORTRESS ADJUSTABLE RATE U.S.
GOVERNMENT FUND, INC., a Maryland Corporation having its principal place of
business in Pittsburgh, Pennsylvania (hereinafter referred to as the
"Fund") and is based on the following premises:
(a) That the Fund is an open-end management investment company as
that term is defined in the Investment Company Act of 1940 (the
"Act") and is registered as such with the Securities and
Exchange Commission;
(b) That Adviser is engaged in the business of rendering investment
advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. The Fund hereby appoints Adviser as investment adviser and
Adviser accepts the appointment. Subject to the direction of the Directors
of the Fund, Adviser shall provide investment research and supervision of
the investment of the Fund and conduct a continuous program of investment,
evaluation and of appropriate sale or other disposition and reinvestment of
the Fund's portfolio.
2. Adviser, in its supervision of the investments of the Fund,
will be guided by the Fund's fundamental investment policies and the
provision and restrictions contained in the Charter and By-Laws of the Fund
and set forth in the Registration Statements and exhibits as may be on file
with the Securities and Exchange Commission.
3. The Fund shall pay all of its expenses, including, without
limitation, the expenses of organizing the Fund and continuing its
existence; fees and expenses of Directors and officers of the Fund; fees
for investment advisory services and administrative personnel and services;
expenses incurred in the distribution of its shares ("Shares"), including
expenses of administrative support services; fees and expenses of preparing
and printing its Registration Statements under the Securities Act of 1933
and the Investment Company Act of 1940 and any amendments thereto; expenses
of registering and qualifying the Fund and its shares under Federal and
State laws and regulation; expenses of preparting, printing and
distributing prospectuses and any amendments to shareholder; expenses of
registering, licensing or other authorization of the Fund as broker-dealer
and of its officers as agents and salesmen under Federal and State laws and
regulations; interest expense; taxes, fees and commissions of every kind;
expenses of issue (including cost of share certificates), purchase and
redemption of shares, including expenses attributable to a program of
periodic issue; charges and expenses of custodians, transfer agents,
dividend disbursing agents, shareholder servicing agents and registrars;
printing and mailing costs; auditing, accounting and legal expenses;
reports to shareholders and governmental officers and commissions; expenses
of meetings of Directors and shareholders and proxy solicitations thereforl
insurance expenses; association membership dues and such nonrecurring items
as may arise, including all lossess and liabilities incurred in
administering the Fund. The Fund will also pay extraordinary expenses as
may arise including expenses incurred in connection with litigation,
proceedings and claims and the legal obligations of the Fund to indemnify
its Directors, officers, employees, shareholders, distributors and agents
with respect thereto.
4. For all services rendered by Adviser hereunder, the Fund shall
pay to Adviser and Adviser agrees to accept as full compensation for all
services rendered hereunder, an annual gross investment advisory fee equal
to 0.60% of 1% of the average daily net assets of the Fund. Such fee shall
be accrued and paid daily at the rate of 1/365th of 0.60% of 1% of the
daily net assets of the Fund.
5. The Adviser may from time to time and for such periods as its
deems appropriate reduce its compensation (and, if appropriate, assume
expenses of the Fund) to the extent that the Fund's expenses exceed such
lower expense limitation as the Adviser may, by notice to the Fund,
voluntarily declare to be effective.
6. The term of this Contract shall begin on the date of its
execution and shall remain in effect for two years from that date and from
year to year thereafter, subject to the provisions for termination and all
of the other terms and conditions hereof if: (a) such continuation shall
be specifically approved at least annually by the vote of a majority of
Directors of the Fund, including a majority of the Directors who are not
parties to this Contract or interested persons of any such party (other
than as Director of the Fund) cast in person at a meeting called for that
purpose; and (b) Adviser shall not have notified the Fund in writing at
least sixty (60) days prior to the anniversayr date of this Contract in any
year thereafter that it does no desire such continuation.
7. Notwithstanding any provision in this Contract, it may be
terminated at any time, without the payment of any penalty, by the
Directors of the Fund or by a vote of a majority of the shareholders of the
Fund, as defined in Section 2(a)(42) of the Act, on sixty (60) days'
written notice to the Adviser.
8. This Contract may not be assigned by Adviser and shall
automatically terminate in the event of any assignment. Adviser may employ
or contract with such other person, persons, corporation or corporations at
its own cost and expense as it shall determine in order to assist it in
carrying out this Contract.
9. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of the obligations or duties under this
Contract on the part of Adviser, Adviser shall not be liable to the Fund or
any shareholder for any act or omission in the course of or connected in
any way with rendering services or for any losses that may be sustained in
the purchase, holding or sale of any security.
10. This Contract may be amended at any time by agreement of the
parties, provided that the amendment shall be approved both by the vote of
a majority of the Directors of the Fund, including a majority of the
Directors who are not parties to this Contract or interested persons of any
such party to this Contract (other than as Directors of the Fund) cast in
person at a meeting called for that purpose, and by a majority of the
shareholders of the Funds as defined in Section 2(a)(42) of the Act.
11. The Fund is hereby expressly put on notice of the limitation of
liability as set forth in the Declarion of Trust of the Adviser and agrees
that the obligation assumed by the Adviser pursuant to this Contract shall
be limited in any case to the Adviser and its assets and, except to the
extent expressly permitted by the Investment Company Act of 1940, the Fund
shall not seek satisfactin of any such obligation from the shareholders of
the Adviser, the Trustees, officers, employees or agents of the Adviser, or
any of them.
12. The parties hereto acknowledge that Federated Investors has
reserved the right to grant the non-exclusive use of the name 'Fortress' or
any derivative thereof to any other investment company, investment adviser,
distributor or other business enterprise, and to withdraw from the Fund the
use of the name "Fortress". The name "Fortress" will continue to be used
by the Fund so long as such use is mutually agreeable to Federated
Investors and the Fund.
13. This Contract shall be construed in accordance with and
governed by the laws of the Commonweath of Pennsylvania.
IN WITNESS WHEREOF, the parties have caused this Contract to be
executed on their behalf by their duly authorized officers and their seals
to be affixed hereto this 22 day of July, 1991.
Attest: FEDERATED ADVISERS
John W. McGonigle Mark L. Mallon
Secretary Executive Vice President
Attest: FORTRESS ADJUSTABLE
GOVERNMENT FUND, INC.
John W. McGonigle J. Christopher Donahue
Secretary Executive Vice President
Exhibit 6(i) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
DISTRIBUTOR'S CONTRACT
AGREEMENT made this 22nd day of July, 1991, by and between FORTRESS
ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC. (the "Fund"), a Maryland
Corporation, and FEDERATED SECURITIES CORP. ("FSC"), a Pennsylvania
Corporation.
In consideration of the mutual convenants hereinafter contained, it
is hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints FSC as its agent to sell and
distribute shares of the Fund which may be offered in one or more classes
(the "Classes") of shares (the "Shares") as described and set forth on one
or more exhibits to this Agreement at the current offering price thereof as
described and set forth in the current Prospectuses of the Fund. FSC
hereby accepts such appointment and agrees to provide such other services
for the Fund, if any, and accept such compensation from the Fund, if any,
as set forth in the applicable exhibit to this Agreement.
2. The sale of any Shares may be suspended without prior notice
whenever in the judgment of the Fund it is in its best interest to do so.
3. Neither FSC nor any other person is authorized by the Fund to
give any information or to make any representation relative to any Shares
other than those contained in the Registration Statement, Prospectuses, or
Statement of Additional Information ("SAIs") filed with the Securities and
Exchange Commission, as the same may be amended from time to time, or in
any supplemental information to said Prospectuses or SAIs approved by the
Fund. FSC agrees that any other information or representations other than
those specified above which it or any dealer or other person who purchase
Shares through FSC may make in connection with the offer of sale of Shares,
shall be made entirely without liability on the part of the Fund. No
person or dealer, other than FSC, is authorized to act as agent for the
Fund for any purpose. FSC agrees that in offering or selling Shares as
agent of the Fund, it will, in all respects, duly conform to all applicable
state and federal laws and the rules and regulations of the National
Association of Securities Dealers, Inc., including its Rules of Fair
Practice. FSC will submit to the Fund copies of all sales literature
before using the same and will not use such sales literature if disapproved
by the Fund.
4. This Agreement is effective with respect to each Class as of
the date of execution of the applicable exhibit and shall continue in
effect with respect to each Class presently set forth on an exhibit and any
subsequent Classes added pursuant to an exhibit during the initial term of
this Agreement for one year from the date set forth above, and thereafter
for successive periods of one year if such continuance is approved at least
annually by the Directors of the Fund including a majority of the members
of the Board of Directors of the Fund who are not interested persons of the
Fund and have no direct or indirect financial interest in the operation of
any Distribution Plan relating to the Fund or any related documents to such
Plan (Disinterested Directors") cast in person at a meeting called for that
purpose. If a Class is added after the first annual approval by the
Directors as described above, this Agreement will be effective as to that
Class upon execution of the applicable exhibit and will continue in effect
until the next annual approval of this Agreement by the Directors and
thereafter for successive periods of one year, subject to approval as
described above.
5. This Agreement may be terminated with regard to a particular
Class at any time, without the payment of any penalty, by the vote of a
majority of the Disinterested Directors or by a majority of the outstanding
voting securities of the Fund or a particular Class on not more than sixth
(60) days' written notice to any other party to this Agreement. This
Agreement may be terminated with regard to the Fund for a particular Class
by FSC on sixty (60) days' written notice to the Fund.
6. This Agreement may not be assigned by FSC and shall
automatically terminate in the event of an assignment by FSC as defined in
the Investment Company Act of 1940, provided, however, that FSC may employ
such other person, persons, corporation or corporations as it shall
determine in order to assist it in carrying out its duties under this
Agreement.
7. FSC shall not be liable to the Fund for anything done or
omitted by it, except acts or omission involving willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties imposed by
this Agreement.
8. This Agreement may be amended at any time by mutual agreement
in writing of all the parties hereto, provided that such amendment is
approved by the Directors of the Fund including a majority of the
Disinterested Directors of the Fund cast in person at a meeting called for
that purpose.
9. This Agreement shall be construed in accordance with the
governed by the laws of the Commonwealth of Pennsylvania.
10. (a) Subject to the conditions set forth below, the Fund
agrees to indemnify and hold harmless FSC and each person, if any, who
controls FSC within the meeting of Section 15 of the Securities Act of 1933
and Section 20 of the Securities Act of 1934, as amended, against any and
all loss, liability, claim, damage and expense whatsoever (including but
not limited to any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever) arising out of a material fact
contained in the Registration Statement, and Prospectuses or SAIs (as from
time to time amended and supplemented) or the omission or alleged omission
was made in reliance upon and in conformity with written information
furnished to the Fund about FSC by or on behalf of FSC expressly for use in
the Registration Statement, any Prospectuses and SAIs or any amendment or
supplement thereof.
If any action is brought against FSC or any controlling person
thereof with respect to which indemnity may be sought against the Fund
pursuant to the foregoing paragraph, FSC shall promptly notify the Fund in
writing of the institution of such action and the Fund shall assume the
defense of such action, including the employment of counsel selected by the
Fund and payment of expenses. FSC or any such controlling person thereof
shall have the right to employ separate counsel in any such case, but the
fees and expenses of such counsel shall be at the expense of FSC or such
controlling person unless the employment of such counsel shall have been
authorized in writing by the Fund in connection with the defense of such
action or the Fund shall not have employed counsel to have charge of the
defense of such action, in any of which events such fees and expenses shall
be borne by the Fund. Anything in this paragraph to the contrary
notwithstanding, the Fund shall not be liable for any settlement of any
such claim of action effected without its written consent. The Fund agrees
promptly to notify FSC of the commencement of any litigation or proceedings
against the Fund or any of its officers or Directors or controlling persons
in connection with the issue and sale of Shares or in connection with the
Registration Statement, Prospectuses, or SAI's.
(b) FSC agrees to indemnify and hold harmless the Fund, each of its
Directors, each of its officers who have signed the Registration Statement
and each other person, if any, who controls the Fund within the meaning of
Section 15 of the Securities Act of 1933, but only with respect to
statements or omissions, if any, made in the Registration Statement or any
Prospectus, SAI, or any amendment or supplement thereof in reliance upon,
and in conformity with, information furnished to the Fund about FSC
expressly for use in the Registration Statement or any Prospectus, SAI, or
any amendment or supplement thereof. In case any action shall be brought
against the Fund or any other person so indemnified based on the
Registration Statement or any Prospectus, SAI, or any amendment or
supplement thereof, and with respect to which indemnity may be sought
against FSC, FSC shall have the rights and duties given to the Fund, and
the Fund and each other person so indemnified shall have the rights and
duties given to FSC by the provisions of subsection (a) above.
(c) Nothing herein contained shall be deemed to protect any person
against liability to the Fund or its shareholder to which such person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of the duties of such person or by reason of
the reckless disregard by such person of the obligations and duties of such
person under this Agreement.
(d) Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940 for Directors,
officers, FSC and controlling persons of the Fund by the Fund pursuant to
this Agreement, the Fund is aware of the position of the Securities and
Exchange Commission as set forth in the Investment Company Act Release No.
IC-11330. Therefore, the Fund undertakes that in addition to complying
with the applicable provisions of this Agreement, in the absence of a final
decision on the merits by a court or other body before which the proceeding
was brought, that an indemnification payment will not be made unless in the
absence of such a decision, a reasonable determination based upon factual
review has been made (i) by a majority vote of a quorum of a non-party
Disinterested Directors, or (ii) by independent legal counsel in a written
opinion that the indemnitee was not liable for an act of willful
misfeasance, bad faith, gross negligence or reckless disregard of duties.
The Fund further undertakes that advancement of expenses incurred in the
defense of a proceeding (upon undertaking for repayment unless it is
ultimately determined that indemnification is appropriate) against an
officer, Director, FSC or controlling person of the Fund will not be made
absent the fulfillment of at least one of the following constitutions: (i)
the indemnitee provides security for his undertaking; (ii) the Fund is
insured against losses arising by reason of any lawful advances; or (iii)
a majority of a quorum of non-party Disinterested Directors or independent
legal counsel in a written opinion makes a factual determination that there
is reason to believe the indemnitee will be entitled to indemnification.
11. FSC agrees to adopt compliance standards as to when a class of
shares may be sold to particular investors.
12. This Agreement will become binding on the parties hereto upon
the execution of the attached exhibits to the Agreement.
Exhibit A
FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated the 22nd day of July, 1991, between Fortress
Adjustable Rate U.S. Government Fund, Inc. (the "Fund") and Federated
Securities Corp. with respect to the separate Classes of Shares thereof,
first set forth in this Exhibit.
1. The Fund hereby appoints FSC to engage in activities
principally intended to result in the sale of shares of the Classes.
Pursuant to this appointment FSC is authorized to select a group of brokers
("Brokers") to sell shares of the above-listed Classes ("Shares"), at the
current offering price thereof as described and set forth in the respective
prospectuses of the Fund, and to render administrative support services to
the Fund and its shareholders. In addition, FSC is authorized to select a
group of Administrators ("Administrators") to render administrative support
services to the Fund and its shareholders.
2. Administrative support services may include, but are not
limited to, the following eleven functions: (1) account openings: the
Broker or Administrator communicates account openings via computer
terminals located on the Broker or Administrator's premises; (2) account
closings: the Broker or Administrator communicates account closings via
computer terminals; (3) enter purchase transactions: purchase transactions
are entered through the Broker or Administrator's own personal computer or
through the use of a toll-free telephone number; (4) enter redemption
transactions: Broker or Administrator enters redemption transactions in
the same manner as purchases; (5) account maintenance: Broker or
Administrator provides or arranges to provide accounting support for all
transactions. Broker or Administrator also wires funds and receives funds
for Fund share purchases and redemptions, confirms and provides training
and supervision of its personnel; (6) interest posting; Broker or
Administrator posts and reinvests dividends to the Fund's accounts; (7)
prospectus and shareholder reports: Broker or Administrator maintains and
distributes current copies of prospectuses and shareholder reports; (8)
advertisements: the Broker or Administrator continuously advertises the
availability of its services and products; (9) customer lists: the Broker
or Administrator continuously provides names of potential customers; (10)
design services: the Broker or Administrator continuously designs material
to send to customers and develops methods of making such materials
accessible to customers; and (11) consultation services: the Broker or
Administrator continuously provides information about the product needs of
customers.
3. During the term of this Agreement, the Fund will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the annual
rate of .25% of the average aggregate net asset value of the Classes of
Shares of the Fund held during the month and set forth in this exhibit.
For the month in which this Agreement becomes effective or terminates,
there shall be an appropriate portion of any fee payable on the basis of
the number of days that the Agreement is in effect during the month.
4. FSC may from time-to-time and for such periods as it deems
appropriate reduce its compensation to the extent any Class expenses exceed
such lower expense limitation as FSC may, by notice to the Fund,
voluntarily declare to be effective.
5. FSC will enter into separate written agreements with various
firms to provide certain of the services set forth in Paragraph 1 herein.
FSC, in its sole discretion, may pay Brokers and Administrators a periodic
fee in respect of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon which such fees
will be paid shall be determined from time to time by FSC in its sole
discretion.
6. FSC will prepare reports to the Board of Directors or the Fund
on a quarterly basis showing amounts paid to Broker or Administrator and
the purpose for such payments.
In consideration of the mutual covenants set forth in the
Distributor's Contract dated July 22, 1991 between the Fund and Federated
Securities Corp., Fortress Adjustable Rate U.S. Government Fund, Inc.
executes and delivers this Exhibit on behalf of the Classes of Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this 22nd day of July, 1991.
ATTEST: FORTRESS ADJUSTABLE RATE
U.S. GOVERNMENT FUND, INC.
John W. McGonigle By: Richard B. Fisher
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
S. Elliott Cohan By:Richard B. Fisher
Secretary President
(SEAL)
Exhibit 6(ii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
SALES AGREEMENT WITH FEDERATED SECURITIES CORP.
This Agreement is entered into between the financial institution
executing this Agreement, ("financial institution") and Federated
Securities Corp. ("FSC") for the mutual funds (referred to individually as
the "Fund" and collectively as the "Funds") for which FSC serves as
Distributor of shares of not limited to, those offered as part of the
Liberty Family of Funds and the Fortress Investment Program.
1. Status of Financial Institution as "Bank" or Registered Broker-
Dealer.
The Financial Institution represents and warrants to FSC that:
(a) It is either a "bank" as that term is defined in Section
3(a)(6) of the Securities Exchange Act of 1934 ("Exchange Act")
or a broker-dealer registered with the Securities and Exchange
Commission.
(b) If the Financial Institution is a "bank", it is a duly
organized and validly existing bank in good standing under the
laws of the jurisdiction in which it is organized. The
Financial institution agrees to give written notice to FSC
promptly in the event that it shall cease to be a "bank" as
defined in Section 3(a)(6) of the Exchange Act. In that event,
this Agreement shall be automatically terminated upon such
written notice.
(c) If the Financial institution is a registered broker-dealer, it
is a member of the NASD and it agrees to abide by all of the
rules and of Fair Practice. The Financial Institution agrees
to notify FSC immediately in the event of (1) its expulsion or
suspension from the NASD, or (2) its being found to have
violated any applicable federal or state law, rule or
regulation arising out of its activities as a broker-dealer or
in connection with this Agreement, or which may otherwise
affect in any material way its ability to act in accordance
with the terms of this Agreement. The Financial Institution's
expulsion from the NASD will automatically terminate this
Agreement immediately without notice. Suspension of the
Financial Institution from the NASD violation of any applicable
federal or state law, immediately upon FSC's written notice of
termination to the Financial Institution.
2. Financial Institution Acts as Agents for its Customers.
The parties agree that in each transaction in the Shares of any Fund:
(a) the Financial Institution is acting as agent for the customer;
(b) each transaction is initiated solely upon the order of the
customer; (c) as between the Financial Institution and its
customer, the customer will have full beneficial ownership of all
Shares of the Funds; (d) each transaction shall be for the account
of the customer and not for the Financial Institution's account; and
(e) each transaction shall be without recourse to the Financial
Institution provided that the Financial Institution acts in
accordance with the terms of this Agreement. The Financial
Institution shall not have any authority in any transaction to act
as FSC's agent or as agent for the Funds.
3. Execution of Orders for Purchase and Redemption of Shares.
(a) All orders for the purchase of any Shares shall be executed at
the then current public offering price per share (i.e., the net
asset value per share plus the applicable sales load, if any)
and all orders for the redemption of any Shares shall be
executed at the net asset value per share plus any applicable
redemption charge, in each case as described in the prospectus
of the Fund. FSC and the Funds reserve the right to reject any
purchase request at their sole discretion. If required by law,
each transaction shall be confirmed in writing on a fully
disclosed basis and, if confirmed by FSC, a copy of each
confirmation shall be sent simultaneously to the Financial
Institution if the Financial Institution so requests.
(b) The procedures relating to all orders and the handling of them
will be subject to the terms of the prospectus of each Fund and
FSC's written instructions to the Financial Institution from
time to time.
(c) Payments for Shares shall be made as specified in the
applicable Fund prospectus. If payment for any purchase order
is not received in accordance with the terms of the applicable
Fund prospectus, FSC reserves the right, without notice, to
cancel the sale and to hold the Financial Institution
responsible for any loss sustained as a result thereof.
(d) The Financial Institution agrees to provide such security as is
necessary to prevent any unauthorized use of the Funds'
recordkeeping system, accessed via any computer hardware or
software provided to the Financial Institution by FSC.
4. Fees Payable to the Financial Institution from Sales Loads.
(a) On each order accepted by FSC, in exchange for the performance
of sales and/or administrative services, the Financial
Institution will be entitled to receive from the amount paid by
the Financial Institution's customer the applicable percentage
of the sales load, if any, as established by FSC. The sales
loads for any Fund shall be those set forth in its prospectus.
The portion of the sales load payable to the Financial
Institution may be changed at any time at FSC's sole discretion
upon thirty (30) days' written notice to the Financial
Institution .
(b) Transactions may be settled by the Financial Institution: (1)
by payment of the full purchase price to FSC less an amount
equal to the Financial Institution's applicable percentage of
the sales load, or (2) be payment of the full purchase price to
FSC, in which case FSC shall pay to the Financial Institution,
not less frequently than monthly, the aggregate fees due it on
orders received and settled.
5. Payment of Other Administrative Fees to the Financial Institution.
The Financial Institution agrees to render or cause to be rendered
such administrative support services to the Funds for the accounts of the
Financial Institution's customers who are shareholder of the Funds, as the
parties mutually agree are necessary to facilitate the opening and closing
of accounts, entering of purchase and redemption transactions, transferring
of funds, recordkeeping and accounting, distribution of prospectuses and
shareholder reports, and communicating with shareholders. During the term
of established by FSC will pay the Financial Institution fees for each Fund
established by FSC in a written schedule delivered to the Financial
Institution pursuant to this Agreement. These fees may be changed at any
time at FSC's sole discretion upon thirty (30) days' written notice to the
Financial Institution .
6. Payment of Rule 12b-1 Fees to the Financial Institution.
Subject to and in accordance with the terms of each Fund prospectus
and the Rule 12b-1 Plan, if any, adopted by resolution of the Board of
Directors or Trustees, and the shareholders of any Fund pursuant to Rule
12b-1 under the Investment Company Act of 1940, FSC may pay fees for sales
and/or administrative support services to certain financial institutions
(such as banks and securities dealers). The Financial Institution may
serve as an Administrator, in accordance with the terms of the form of Rule
12b-1 Agreement attached as Appendix A, for all of its customers who
purchase Shares of any Funds whose prospectuses provide for the use of
Administrators.
7. Delivery of Prospectuses to Customers.
The Financial Institution will deliver or cause to be delivered to
each customer, at or prior to the time of any purchase of Shares, a copy of
the prospectus of the Fund. The Financial Institution shall not make any
representations concerning any Shares other than those contained in the
prospectus of the Fund or in any promotional materials or sales literature
furnished to the Financial Institution by FSC or the Fund.
8. Indemnification.
(a) The Financial Institution shall indemnify and hold harmless
FSC, each Fund, the transfer agents of the Funds, and their
respective subsidiaries, affiliates, officers, directors,
agents and employees from all direct or indirect liabilities,
losses or costs (including attorneys fees) arising from,
related to or otherwise connected with: (1) any breach by the
Financial Institution of any provision of this Agreement; or
(2) any actions or omissions of FSC, any Fund, the transfer
agents of the Funds, and their subsidiaries, affiliates,
officers, directors, agents and employees in reliance upon any
oral, written or computer or electronically transmitted
instructions believed to be genuine and to have been given by
or on behalf of the Financial Institution.
(b) FSC shall indemnify and hold harmless the Financial Institution
and its subsidiaries, affiliates, officers, directors, agents
and employees from and against any and all direct or indirect
liabilities, loosed or costs (including attorneys fees) arising
from, related to or otherwise connected with: (1) any breach
by FSC of any provision of this Agreement; of (2) any alleged
untrue Statement or Prospectus, or as a result of or based upon
any alleged omission to state a material fact required to be
stated, or necessary to make the statements not misleading.
(c) The agreement of the parties in this Paragraph to indemnify
each other is conditioned upon the party entitled to
indemnification (Indemnified Party) giving notice to the party
required to provide indemnification (Indemnifying Party)
promptly after the summons or other first legal process for any
claim as to which indemnity may be sought is served on the
Indemnified Party. The Indemnified Party shall permit the
Indemnified Party to assume the defense of any such claim or
any litigation resulting from it, provided that counsel for the
Indemnified Party who shall conduct the defense of such claim
or litigation shall be approved by the Indemnified Party (which
approval shall not unreasonably be withheld), and that the
Indemnified Party may participate in such defense at its
expense. The failure of the Indemnified Party to give notice
as provided in this subparagraph (c) shall not relieve the
Indemnified Party from any liability other than its indemnity
obligation under this Paragraph. No Indemnified Party, in the
defense of any such claim or litigation, shall, without the
consent of the Indemnified Party, consent to entry of any
judgment or enter into any settlement that does not include as
an unconditional term the giving by the claimant or plaintiff
to the Indemnified Party of a release from all liability in
respect to such claim or litigation.
(d) The provisions of this Paragraph 8 shall service the
termination of this Agreement.
9. Customer Names Proprietary to the Financial Institution.
(a) The names of the Financial Institution's customers are and
shall remain the Financial Institution's sole property and
shall not be used by FSC or its affiliates for any purpose
except the performance of its duties and responsibilities under
this Agreement and except for servicing and informational
mailings relating to the Funds. Notwithstanding the foregoing,
this Paragraph 9 shall not prohibit FSC or any of its
affiliates from utilizing the names of those Financial
Institution's customers for any purpose if the names are
obtained in any manner other than from the Financial
Institution pursuant to this Agreement.
(b) Neither party shall use the name of the other party in any
manner without the other party's written consent, except as
required by any applicable federal or state law, rule or
regulation, and except pursuant to any mutually agreed upon
promotional programs.
(c) The provisions of the Paragraph 9 shall service the termination
of this Agreement.
10. Solicitation of Proxies.
The Financial Institution agrees not to solicit or cause to be
solicited directly, or indirectly, at any time in the future, any proxies
from the shareholders of any or all of the Funds in opposition to proxies
solicited by management of the Fund or Funds, unless a court of competent
jurisdiction shall have determine that the conduct of a majority of the
Board of Directors or Trustees of the Fund or Funds constitutes willful
misfeasance, bad faith, gross negligence or reckless disregard of their
duties. This Paragraph 10 will survive the term of this Agreement.
11. Certification of Customers' Taxpayer Identification Numbers.
The Financial Institution agrees to obtain any taxpayer
identification number of certification from its customers required under
Section 3406 of the Internal Revenue Code, and any applicable Treasury
regulations, and to provide FSC or its designee with timely written notice
of any failure to obtain such taxpayer identification number certification
in order to enable the implementation of any required backup withholding.
12. Notices.
Except as otherwise specifically provided in this Agreement, all
notices required or permitted to be given pursuant to this Agreement shall
be given in writing and delivered by personal delivery or by postage
prepaid, registered or certified United States first class mail, return
receipt requested, or by telex, telegram or similar means of same day
delivery (with a confirming copy by mail as provided herein). Unless
otherwise notified in writing, all notices to FSC shall be given or sent to
FSC at its offices located at Federated Investors Tower, Pittsburgh, PA
15222-3779, and all notices to the Financial Institution shall be given or
sent to it at its address shown below.
13. Termination and Amendment.
(a) This Agreement shall become effective in this form as of the
date set forth below and may be terminated at any time by
either party upon thirty (30) days' prior sales agreements
between the parties.
(b) This Agreement may be amended by FSC from time to time by the
following procedure. FSC will mail a copy of the amendment to
the Financial Institution's address, as shown below. If the
Financial Institution does not object to the amendment within
thirty (30) days after its receipt, the amendment will become
part of the Agreement. The Financial Institution's objection
must be in writing and be received by FSC within such thirty
(30) days.
14. Governing Law.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Pennsylvania.
Financial Institution Name
(Please Print or Type)
Address
City State Zip Code
Dated: By:
Authorized Signature
Title
Print Name or Type Name
FEDERATED SECURITIES CORP.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By: /s/ Richard B. Fisher
Richard B. Fisher, President
Exhibit 8 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
CUSTODIAN CONTRACT
Between
FEDERATED INVESTMENT COMPANIES
and
STATE STREET BANK AND TRUST COMPANY
and
FEDERATED SERVICES COMPANY
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held by It 1
2. Duties of the Custodian With Respect to Property of the Funds
Held by the Custodian 2
2.1 Holding Securities 2
2.2 Delivery of Securities 2
2.3 Registration of Securities 5
2.4 Bank Accounts 6
2.5 Payments for Shares 7
2.6 Availability of Federal Funds 7
2.7 Collection of Income 7
2.8 Payment of Fund Moneys 8
2.9 Liability for Payment in Advance of Receipt of Securities
Purchased. 9
2.10 Payments for Repurchases or Redemptions of Shares of a
Fund 9
2.11 Appointment of Agents 10
2.12 Deposit of Fund Assets in Securities System 10
2.13 Segregated Account 12
2.14 Joint Repurchase Agreements 13
2.15 Ownership Certificates for Tax Purposes 13
2.16 Proxies 13
2.17 Communications Relating to Fund Portfolio Securities 13
2.18 Proper Instructions 14
2.19 Actions Permitted Without Express Authority 14
2.20 Evidence of Authority 15
2.21 Notice to Trust by Custodian Regarding Cash Movement. 15
3. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income 15
4. Records 16
5. Opinion of Funds' Independent Public Accountants/Auditors 16
6. Reports to Trust by Independent Public Accountants/Auditors 17
7. Compensation of Custodian 17
8. Responsibility of Custodian 17
9. Effective Period, Termination and Amendment 19
10. Successor Custodian 20
11. Interpretive and Additional Provisions 21
12. Massachusetts Law to Apply 22
13. Notices 22
14. Counterparts 22
15. Limitations of Liability 22
CUSTODIAN CONTRACT
This Contract between those INVESTMENT COMPANIES listed on Exhibit 1, as it
may be amended from time to time, (the "Trust"), which may be Massachusetts
business trusts or Maryland corporations or have such other form of
organization as may be indicated, on behalf of the portfolios (hereinafter
collectively called the "Funds" and individually referred to as a "Fund")
of the Trust, having its principal place of business at Federated Investors
Tower, Pittsburgh, Pennsylvania, 15222-3779, and STATE STREET BANK AND
TRUST COMPANY, a Massachusetts trust company, having its principal place of
business at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter
called the "Custodian", and FEDERATED SERVICES COMPANY, a Delaware business
trust company, having its principal place of business at Federated
Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, hereinafter called
("Company").
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Trust hereby employs the Custodian as the custodian of the assets
of each of the Funds of the Trust. Except as otherwise expressly
provided herein, the securities and other assets of each of the Funds
shall be segregated from the assets of each of the other Funds and
from all other persons and entities. The Trust will deliver to the
Custodian all securities and cash owned by the Funds and all payments
of income, payments of principal or capital distributions received by
them with respect to all securities owned by the Funds from time to
time, and the cash consideration received by them for shares
("Shares") of beneficial interest/capital stock of the Funds as may
be issued or sold from time to time. The Custodian shall not be
responsible for any property of the Funds held or received by the
Funds and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.18), the Custodian shall from time to time employ one or more sub-
custodians upon the terms specified in the Proper Instructions,
provided that the Custodian shall have no more or less responsibility
or liability to the Trust or any of the Funds on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian.
2. Duties of the Custodian With Respect to Property of the Funds Held
by the Custodian
2.1 Holding Securities. The Custodian shall hold and physically
segregate for the account of each Fund all non-cash property,
including all securities owned by each Fund, other than
securities which are maintained pursuant to Section 2.12 in a
clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities
System", or securities which are subject to a joint repurchase
agreement with affiliated funds pursuant to Section 2.14. The
Custodian shall maintain records of all receipts, deliveries
and locations of such securities, together with a current
inventory thereof, and shall conduct periodic physical
inspections of certificates representing stocks, bonds and
other securities held by it under this Contract in such manner
as the Custodian shall determine from time to time to be
advisable in order to verify the accuracy of such inventory.
With respect to securities held by any agent appointed
pursuant to Section 2.11 hereof, and with respect to
securities held by any sub-custodian appointed pursuant to
Section 1 hereof, the Custodian may rely upon certificates
from such agent as to the holdings of such agent and from such
sub-custodian as to the holdings of such sub-custodian, it
being understood that such reliance in no way relieves the
Custodian of its responsibilities under this Contract. The
Custodian will promptly report to the Trust the results of
such inspections, indicating any shortages or discrepancies
uncovered thereby, and take appropriate action to remedy any
such shortages or discrepancies.
2.2 Delivery of Securities. The Custodian shall release and
deliver securities owned by a Fund held by the Custodian or in
a Securities System account of the Custodian only upon receipt
of Proper Instructions, which may be continuing instructions
when deemed appropriate by the parties, and only in the
following cases:
(1) Upon sale of such securities for the account of a Fund and
receipt of payment therefor;
(2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered
into by the Trust;
(3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section 2.12
hereof;
(4) To the depository agent in connection with tender or other
similar offers for portfolio securities of a Fund, in
accordance with the provisions of Section 2.17 hereof;
(5) To the issuer thereof or its agent when such securities
are called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
(6) To the issuer thereof, or its agent, for transfer into the
name of a Fund or into the name of any nominee or nominees
of the Custodian or into the name or nominee name of any
agent appointed pursuant to Section 2.11 or into the name
or nominee name of any sub-custodian appointed pursuant to
Section 1; or for exchange for a different number of
bonds, certificates or other evidence representing the
same aggregate face amount or number of units; provided
that, in any such case, the new securities are to be
delivered to the Custodian;
(7) Upon the sale of such securities for the account of a
Fund, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street
delivery custom"; provided that in any such case, the
Custodian shall have no responsibility or liability for
any loss arising from the delivery of such securities
prior to receiving payment for such securities except as
may arise from the Custodian's own failure to act in
accordance with the standard of reasonable care or any
higher standard of care imposed upon the Custodian by any
applicable law or regulation if such above-stated standard
of reasonable care were not part of this Contract;
(8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
(9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts
or temporary securities for definitive securities;
provided that, in any such case, the new securities and
cash, if any, are to be delivered to the Custodian;
(10)For delivery in connection with any loans of portfolio
securities of a Fund, but only against receipt of adequate
collateral in the form of (a) cash, in an amount specified
by the Trust, (b) certificated securities of a description
specified by the Trust, registered in the name of the Fund
or in the name of a nominee of the Custodian referred to
in Section 2.3 hereof or in proper form for transfer, or
(c) securities of a description specified by the Trust,
transferred through a Securities System in accordance with
Section 2.12 hereof;
(11)For delivery as security in connection with any borrowings
requiring a pledge of assets by a Fund, but only against
receipt of amounts borrowed, except that in cases where
additional collateral is required to secure a borrowing
already made, further securities may be released for the
purpose;
(12)For delivery in accordance with the provisions of any
agreement among the Trust or a Fund, the Custodian and a
broker-dealer registered under the Securities Exchange Act
of 1934, as amended, (the "Exchange Act") and a member of
The National Association of Securities Dealers, Inc.
("NASD"), relating to compliance with the rules of The
Options Clearing Corporation and of any registered
national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions for a Fund;
(13)For delivery in accordance with the provisions of any
agreement among the Trust or a Fund, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations,
regarding account deposits in connection with transaction
for a Fund;
(14)Upon receipt of instructions from the transfer agent
("Transfer Agent") for a Fund, for delivery to such
Transfer Agent or to the holders of shares in connection
with distributions in kind, in satisfaction of requests by
holders of Shares for repurchase or redemption; and
(15)For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Executive Committee
of the Trust on behalf of a Fund signed by an officer of
the Trust and certified by its Secretary or an Assistant
Secretary, specifying the securities to be delivered,
setting forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery
of such securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian
(other than bearer securities) shall be registered in the name
of a particular Fund or in the name of any nominee of the Fund
or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Fund, unless the Trust has
authorized in writing the appointment of a nominee to be used
in common with other registered investment companies
affiliated with the Fund, or in the name or nominee name of
any agent appointed pursuant to Section 2.11 or in the name or
nominee name of any sub-custodian appointed pursuant to
Section 1. All securities accepted by the Custodian on behalf
of a Fund under the terms of this Contract shall be in "street
name" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the name of each Fund,
subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such
account or accounts, subject to the provisions hereof, all
cash received by it from or for the account of each Fund,
other than cash maintained in a joint repurchase account with
other affiliated funds pursuant to Section 2.14 of this
Contract or by a particular Fund in a bank account established
and used in accordance with Rule 17f-3 under the Investment
Company Act of 1940, as amended, (the "1940 Act"). Funds held
by the Custodian for a Fund may be deposited by it to its
credit as Custodian in the Banking Department of the Custodian
or in such other banks or trust companies as it may in its
discretion deem necessary or desirable; provided, however,
that every such bank or trust company shall be qualified to
act as a custodian under the 1940 Act and that each such bank
or trust company and the funds to be deposited with each such
bank or trust company shall be approved by vote of a majority
of the Board of Trustees/Directors ("Board") of the Trust.
Such funds shall be deposited by the Custodian in its capacity
as Custodian for the Fund and shall be withdrawable by the
Custodian only in that capacity. If requested by the Trust,
the Custodian shall furnish the Trust, not later than twenty
(20) days after the last business day of each month, an
internal reconciliation of the closing balance as of that day
in all accounts described in this section to the balance shown
on the daily cash report for that day rendered to the Trust.
2.5 Payments for Shares. The Custodian shall make such
arrangements with the Transfer Agent of each Fund, as will
enable the Custodian to receive the cash consideration due to
each Fund and will deposit into each Fund's account such
payments as are received from the Transfer Agent. The
Custodian will provide timely notification to the Trust and
the Transfer Agent of any receipt by it of payments for Shares
of the respective Fund.
2.6 Availability of Federal Funds. Upon mutual agreement between
the Trust and the Custodian, the Custodian shall make federal
funds available to the Funds as of specified times agreed upon
from time to time by the Trust and the Custodian in the amount
of checks, clearing house funds, and other non-federal funds
received in payment for Shares of the Funds which are
deposited into the Funds' accounts.
2.7 Collection of Income.
(1) The Custodian shall collect on a timely basis all income
and other payments with respect to registered securities
held hereunder to which each Fund shall be entitled either
by law or pursuant to custom in the securities business,
and shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date
of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such
income, as collected, to each Fund's custodian account.
Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when
they become due and shall collect interest when due on
securities held hereunder. The collection of income due
the Funds on securities loaned pursuant to the provisions
of Section 2.2 (10) shall be the responsibility of the
Trust. The Custodian will have no duty or responsibility
in connection therewith, other than to provide the Trust
with such information or data as may be necessary to
assist the Trust in arranging for the timely delivery to
the Custodian of the income to which each Fund is properly
entitled.
(2) The Custodian shall promptly notify the Trust whenever
income due on securities is not collected in due course
and will provide the Trust with monthly reports of the
status of past due income unless the parties otherwise
agree.
2.8 Payment of Fund Moneys. Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate
by the parties, the Custodian shall pay out moneys of each
Fund in the following cases only:
(1) Upon the purchase of securities, futures contracts or
options on futures contracts for the account of a Fund but
only (a) against the delivery of such securities, or
evidence of title to futures contracts, to the Custodian
(or any bank, banking firm or trust company doing business
in the United States or abroad which is qualified under
the 1940 Act to act as a custodian and has been designated
by the Custodian as its agent for this purpose) registered
in the name of the Fund or in the name of a nominee of the
Custodian referred to in Section 2.3 hereof or in proper
form for transfer, (b) in the case of a purchase effected
through a Securities System, in accordance with the
conditions set forth in Section 2.12 hereof or (c) in the
case of repurchase agreements entered into between the
Trust and any other party, (i) against delivery of the
securities either in certificate form or through an entry
crediting the Custodian's account at the Federal Reserve
Bank with such securities or (ii) against delivery of the
receipt evidencing purchase for the account of the Fund of
securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase
such securities from the Fund;
(2) In connection with conversion, exchange or surrender of
securities owned by a Fund as set forth in Section 2.2
hereof;
(3) For the redemption or repurchase of Shares of a Fund
issued by the Trust as set forth in Section 2.10 hereof;
(4) For the payment of any expense or liability incurred by a
Fund, including but not limited to the following payments
for the account of the Fund: interest; taxes; management,
accounting, transfer agent and legal fees; and operating
expenses of the Fund, whether or not such expenses are to
be in whole or part capitalized or treated as deferred
expenses;
(5) For the payment of any dividends on Shares of a Fund
declared pursuant to the governing documents of the Trust;
(6) For payment of the amount of dividends received in respect
of securities sold short;
(7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of the Executive Committee of the Trust on
behalf of a Fund signed by an officer of the Trust and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring
such purpose to be a proper purpose, and naming the person
or persons to whom such payment is to be made.
2.9 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for purchase
of securities for the account of a Fund is made by the
Custodian in advance of receipt of the securities purchased,
in the absence of specific written instructions from the Trust
to so pay in advance, the Custodian shall be absolutely liable
to the Fund for such securities to the same extent as if the
securities had been received by the Custodian.
2.10Payments for Repurchases or Redemptions of Shares of a Fund.
From such funds as may be available for the purpose of
repurchasing or redeeming Shares of a Fund, but subject to the
limitations of the Declaration of Trust/Articles of
Incorporation and any applicable votes of the Board of the
Trust pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for
payment to holders of shares of such Fund who have delivered
to the Transfer Agent a request for redemption or repurchase
of their shares including without limitation through bank
drafts, automated clearinghouse facilities, or by other means.
In connection with the redemption or repurchase of Shares of
the Funds, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or
through a commercial bank designated by the redeeming
shareholders.
2.11Appointment of Agents. The Custodian may at any time or times
in its discretion appoint (and may at any time remove) any
other bank or trust company which is itself qualified under
the 1940 Act and any applicable state law or regulation, to
act as a custodian, as its agent to carry out such of the
provisions of this Section 2 as the Custodian may from time to
time direct; provided, however, that the appointment of any
agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder.
2.12Deposit of Fund Assets in Securities System. The Custodian
may deposit and/or maintain securities owned by the Funds in a
clearing agency registered with the Securities and Exchange
Commission ("SEC") under Section 17A of the Exchange Act,
which acts as a securities depository, or in the book-entry
system authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein as
"Securities System" in accordance with applicable Federal
Reserve Board and SEC rules and regulations, if any, and
subject to the following provisions:
(1) The Custodian may keep securities of each Fund in a
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in
the Securities System which shall not include any assets
of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
(2) The records of the Custodian with respect to securities of
the Funds which are maintained in a Securities System
shall identify by book-entry those securities belonging to
each Fund;
(3) The Custodian shall pay for securities purchased for the
account of each Fund upon (i) receipt of advice from the
Securities System that such securities have been
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
payment and transfer for the account of the Fund. The
Custodian shall transfer securities sold for the account
of a Fund upon (i) receipt of advice from the Securities
System that payment for such securities has been
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
transfer and payment for the account of the Fund. Copies
of all advices from the Securities System of transfers of
securities for the account of a Fund shall identify the
Fund, be maintained for the Fund by the Custodian and be
provided to the Trust at its request. Upon request, the
Custodian shall furnish the Trust confirmation of each
transfer to or from the account of a Fund in the form of a
written advice or notice and shall furnish to the Trust
copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of a
Fund.
(4) The Custodian shall provide the Trust with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and
procedures for safeguarding securities deposited in the
Securities System;
(5) The Custodian shall have received the initial certificate,
required by Section 9 hereof;
(6) Anything to the contrary in this Contract notwithstanding,
the Custodian shall be liable to the Trust for any loss or
damage to a Fund resulting from use of the Securities
System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any
of its or their employees or from failure of the Custodian
or any such agent to enforce effectively such rights as it
may have against the Securities System; at the election of
the Trust, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim against
the Securities System or any other person which the
Custodian may have as a consequence of any such loss or
damage if and to the extent that a Fund has not been made
whole for any such loss or damage.
(7) The authorization contained in this Section 2.12 shall not
relieve the Custodian from using reasonable care and
diligence in making use of any Securities System.
2.13Segregated Account. The Custodian shall upon receipt of
Proper Instructions establish and maintain a segregated
account or accounts for and on behalf of each Fund, into which
account or accounts may be transferred cash and/or securities,
including securities maintained in an account by the Custodian
pursuant to Section 2.12 hereof, (i) in accordance with the
provisions of any agreement among the Trust, the Custodian and
a broker-dealer registered under the Exchange Act and a member
of the NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to compliance with
the rules of The Options Clearing Corporation and of any
registered national securities exchange (or the Commodity
Futures Trading Commission or any registered contract market),
or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions
for a Fund, (ii) for purpose of segregating cash or government
securities in connection with options purchased, sold or
written for a Fund or commodity futures contracts or options
thereon purchased or sold for a Fund, (iii) for the purpose of
compliance by the Trust or a Fund with the procedures required
by any release or releases of the SEC relating to the
maintenance of segregated accounts by registered investment
companies and (iv) for other proper corporate purposes, but
only, in the case of clause (iv), upon receipt of, in addition
to Proper Instructions, a certified copy of a resolution of
the Board or of the Executive Committee signed by an officer
of the Trust and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such
segregated account and declaring such purposes to be proper
corporate purposes.
2.14Joint Repurchase Agreements. Upon the receipt of Proper
Instructions, the Custodian shall deposit and/or maintain any
assets of a Fund and any affiliated funds which are subject to
joint repurchase transactions in an account established solely
for such transactions for the Fund and its affiliated funds.
For purposes of this Section 2.14, "affiliated funds" shall
include all investment companies and their portfolios for
which subsidiaries or affiliates of Federated Investors serve
as investment advisers, distributors or administrators in
accordance with applicable exemptive orders from the SEC. The
requirements of segregation set forth in Section 2.1 shall be
deemed to be waived with respect to such assets.
2.15Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for
all federal and state tax purposes in connection with receipt
of income or other payments with respect to securities of a
Fund held by it and in connection with transfers of
securities.
2.16Proxies. The Custodian shall, with respect to the securities
held hereunder, cause to be promptly executed by the
registered holder of such securities, if the securities are
registered otherwise than in the name of a Fund or a nominee
of a Fund, all proxies, without indication of the manner in
which such proxies are to be voted, and shall promptly deliver
to the Trust such proxies, all proxy soliciting materials and
all notices relating to such securities.
2.17Communications Relating to Fund Portfolio Securities. The
Custodian shall transmit promptly to the Trust all written
information (including, without limitation, pendency of calls
and maturities of securities and expirations of rights in
connection therewith and notices of exercise of call and put
options written by the Fund and the maturity of futures
contracts purchased or sold by the Fund) received by the
Custodian from issuers of the securities being held for the
Fund. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Trust all written
information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the
party (or his agents) making the tender or exchange offer. If
the Trust desires to take action with respect to any tender
offer, exchange offer or any other similar transaction, the
Trust shall notify the Custodian in writing at least three
business days prior to the date on which the Custodian is to
take such action. However, the Custodian shall nevertheless
exercise its best efforts to take such action in the event
that notification is received three business days or less
prior to the date on which action is required.
2.18Proper Instructions. Proper Instructions as used throughout
this Section 2 means a writing signed or initialed by one or
more person or persons as the Board shall have from time to
time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved. Oral
instructions will be deemed to be Proper Instructions if (a)
the Custodian reasonably believes them to have been given by a
person previously authorized in Proper Instructions to give
such instructions with respect to the transaction involved,
and (b) the Trust promptly causes such oral instructions to be
confirmed in writing. Upon receipt of a certificate of the
Secretary or an Assistant Secretary as to the authorization by
the Board of the Trust accompanied by a detailed description
of procedures approved by the Board, Proper Instructions may
include communications effected directly between electro-
mechanical or electronic devices provided that the Board and
the Custodian are satisfied that such procedures afford
adequate safeguards for a Fund's assets.
2.19Actions Permitted Without Express Authority. The Custodian
may in its discretion, without express authority from the
Trust:
(1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such
payments shall be accounted for to the Trust in such form
that it may be allocated to the affected Fund;
(2) surrender securities in temporary form for securities in
definitive form;
(3) endorse for collection, in the name of a Fund, checks,
drafts and other negotiable instruments; and
(4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the securities
and property of each Fund except as otherwise directed by
the Trust.
2.20Evidence of Authority. The Custodian shall be protected in
acting upon any instructions, notice, request, consent,
certificate or other instrument or paper reasonably believed
by it to be genuine and to have been properly executed on
behalf of a Fund. The Custodian may receive and accept a
certified copy of a vote of the Board of the Trust as
conclusive evidence (a) of the authority of any person to act
in accordance with such vote or (b) of any determination of or
any action by the Board pursuant to the Declaration of
Trust/Articles of Incorporation as described in such vote, and
such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
2.21Notice to Trust by Custodian Regarding Cash Movement. The
Custodian will provide timely notification to the Trust of any
receipt of cash, income or payments to the Trust and the
release of cash or payment by the Trust.
3. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information
to the entity or entities appointed by the Board of the Trust to keep
the books of account of each Fund and/or compute the net asset value
per share of the outstanding Shares of each Fund or, if directed in
writing to do so by the Trust, shall itself keep such books of
account and/or compute such net asset value per share. If so
directed, the Custodian shall also calculate daily the net income of
a Fund as described in the Fund's currently effective prospectus and
Statement of Additional Information ("Prospectus") and shall advise
the Trust and the Transfer Agent daily of the total amounts of such
net income and, if instructed in writing by an officer of the Trust
to do so, shall advise the Transfer Agent periodically of the
division of such net income among its various components. The
calculations of the net asset value per share and the daily income of
a Fund shall be made at the time or times described from time to time
in the Fund's currently effective Prospectus.
4. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will
meet the obligations of the Trust and the Funds under the 1940 Act,
with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder, and specifically including identified cost records
used for tax purposes. All such records shall be the property of the
Trust and shall at all times during the regular business hours of the
Custodian be open for inspection by duly authorized officers,
employees or agents of the Trust and employees and agents of the SEC.
In the event of termination of this Contract, the Custodian will
deliver all such records to the Trust, to a successor Custodian, or
to such other person as the Trust may direct. The Custodian shall
supply daily to the Trust a tabulation of securities owned by a Fund
and held by the Custodian and shall, when requested to do so by the
Trust and for such compensation as shall be agreed upon between the
Trust and the Custodian, include certificate numbers in such
tabulations.
5. Opinion of Funds' Independent Public Accountants/Auditors.
The Custodian shall take all reasonable action, as the Trust may from
time to time request, to obtain from year to year favorable opinions
from each Fund's independent public accountants/auditors with respect
to its activities hereunder in connection with the preparation of the
Fund's registration statement, periodic reports, or any other reports
to the SEC and with respect to any other requirements of such
Commission.
6. Reports to Trust by Independent Public Accountants/Auditors.
The Custodian shall provide the Trust, at such times as the Trust may
reasonably require, with reports by independent public
accountants/auditors for each Fund on the accounting system, internal
accounting control and procedures for safeguarding securities,
futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System,
relating to the services provided by the Custodian for the Fund under
this Contract; such reports shall be of sufficient scope and in
sufficient detail, as may reasonably be required by the Trust, to
provide reasonable assurance that any material inadequacies would be
disclosed by such examination and, if there are no such inadequacies,
the reports shall so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time
between Company and the Custodian.
8. Responsibility of Custodian.
The Custodian shall be held to a standard of reasonable care in
carrying out the provisions of this Contract; provided, however, that
the Custodian shall be held to any higher standard of care which
would be imposed upon the Custodian by any applicable law or
regulation if such above stated standard of reasonable care was not
part of this Contract. The Custodian shall be entitled to rely on
and may act upon advice of counsel (who may be counsel for the Trust)
on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice, provided that
such action is not in violation of applicable federal or state laws
or regulations, and is in good faith and without negligence. Subject
to the limitations set forth in Section 15 hereof, the Custodian
shall be kept indemnified by the Trust but only from the assets of
the Fund involved in the issue at hand and be without liability for
any action taken or thing done by it in carrying out the terms and
provisions of this Contract in accordance with the above standards.
In order that the indemnification provisions contained in this
Section 8 shall apply, however, it is understood that if in any case
the Trust may be asked to indemnify or save the Custodian harmless,
the Trust shall be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further understood
that the Custodian will use all reasonable care to identify and
notify the Trust promptly concerning any situation which presents or
appears likely to present the probability of such a claim for
indemnification. The Trust shall have the option to defend the
Custodian against any claim which may be the subject of this
indemnification, and in the event that the Trust so elects it will so
notify the Custodian and thereupon the Trust shall take over complete
defense of the claim, and the Custodian shall in such situation
initiate no further legal or other expenses for which it shall seek
indemnification under this Section. The Custodian shall in no case
confess any claim or make any compromise in any case in which the
Trust will be asked to indemnify the Custodian except with the
Trust's prior written consent.
Notwithstanding the foregoing, the responsibility of the Custodian
with respect to redemptions effected by check shall be in accordance
with a separate Agreement entered into between the Custodian and the
Trust.
If the Trust requires the Custodian to take any action with respect
to securities, which action involves the payment of money or which
action may, in the reasonable opinion of the Custodian, result in the
Custodian or its nominee assigned to a Fund being liable for the
payment of money or incurring liability of some other form, the
Custodian may request the Trust, as a prerequisite to requiring the
Custodian to take such action, to provide indemnity to the Custodian
in an amount and form satisfactory to the Custodian.
Subject to the limitations set forth in Section 15 hereof, the Trust
agrees to indemnify and hold harmless the Custodian and its nominee
from and against all taxes, charges, expenses, assessments, claims
and liabilities (including counsel fees) (referred to herein as
authorized charges) incurred or assessed against it or its nominee in
connection with the performance of this Contract, except such as may
arise from it or its nominee's own failure to act in accordance with
the standard of reasonable care or any higher standard of care which
would be imposed upon the Custodian by any applicable law or
regulation if such above-stated standard of reasonable care were not
part of this Contract. To secure any authorized charges and any
advances of cash or securities made by the Custodian to or for the
benefit of a Fund for any purpose which results in the Fund incurring
an overdraft at the end of any business day or for extraordinary or
emergency purposes during any business day, the Trust hereby grants
to the Custodian a security interest in and pledges to the Custodian
securities held for the Fund by the Custodian, in an amount not to
exceed 10 percent of the Fund's gross assets, the specific securities
to be designated in writing from time to time by the Trust or the
Fund's investment adviser. Should the Trust fail to make such
designation, or should it instruct the Custodian to make advances
exceeding the percentage amount set forth above and should the
Custodian do so, the Trust hereby agrees that the Custodian shall
have a security interest in all securities or other property
purchased for a Fund with the advances by the Custodian, which
securities or property shall be deemed to be pledged to the
Custodian, and the written instructions of the Trust instructing
their purchase shall be considered the requisite description and
designation of the property so pledged for purposes of the
requirements of the Uniform Commercial Code. Should the Trust fail
to cause a Fund to repay promptly any authorized charges or advances
of cash or securities, subject to the provision of the second
paragraph of this Section 8 regarding indemnification, the Custodian
shall be entitled to use available cash and to dispose of pledged
securities and property as is necessary to repay any such advances.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the
parties hereto and may be terminated by either party by an instrument
in writing delivered or mailed, postage prepaid to the other party,
such termination to take effect not sooner than sixty (60) days after
the date of such delivery or mailing; provided, however that the
Custodian shall not act under Section 2.12 hereof in the absence of
receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of the Trust has approved the initial use of
a particular Securities System as required in each case by Rule 17f-4
under the 1940 Act; provided further, however, that the Trust shall
not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the
Declaration of Trust/Articles of Incorporation, and further provided,
that the Trust may at any time by action of its Board (i) substitute
another bank or trust company for the Custodian by giving notice as
described above to the Custodian, or (ii) immediately terminate this
Contract in the event of the appointment of a conservator or receiver
for the Custodian by the appropriate banking regulatory agency or
upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Trust shall pay to the
Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its costs,
expenses and disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Board of the
Trust, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed and
in the form for transfer, all securities then held by it hereunder
for each Fund and shall transfer to separate accounts of the
successor custodian all of each Fund's securities held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of
the Board of the Trust, deliver at the office of the Custodian and
transfer such securities, funds and other properties in accordance
with such vote.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board shall have been delivered to
the Custodian on or before the date when such termination shall
become effective, then the Custodian shall have the right to deliver
to a bank or trust company, which is a "bank" as defined in the 1940
Act, (delete "doing business ... Massachusetts" unless SSBT is the
Custodian) doing business in Boston, Massachusetts, of its own
selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than
$100,000,000, all securities, funds and other properties held by the
Custodian and all instruments held by the Custodian relative thereto
and all other property held by it under this Contract for each Fund
and to transfer to separate accounts of such successor custodian all
of each Fund's securities held in any Securities System. Thereafter,
such bank or trust company shall be the successor of the Custodian
under this Contract.
In the event that securities, funds and other properties remain in
the possession of the Custodian after the date of termination hereof
owing to failure of the Trust to procure the certified copy of the
vote referred to or of the Board to appoint a successor custodian,
the Custodian shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of such
securities, funds and other properties and the provisions of this
Contract relating to the duties and obligations of the Custodian
shall remain in full force and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and
the Trust may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Contract as may in their
joint opinion be consistent with the general tenor of this Contract.
Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, provided that no
such interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the
Declaration of Trust/Articles of Incorporation. No interpretive or
additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Contract.
12. Massachusetts Law to Apply.
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
13. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or
to the Custodian at address for SSBT only: 225 Franklin Street,
Boston, Massachusetts, 02110, or to such other address as the Trust
or the Custodian may hereafter specify, shall be deemed to have been
properly delivered or given hereunder to the respective address.
14. Counterparts.
This Contract may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
15. Limitations of Liability.
The Custodian is expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust of
those Trusts which are business trusts and agrees that the
obligations and liabilities assumed by the Trust and any Fund
pursuant to this Contract, including, without limitation, any
obligation or liability to indemnify the Custodian pursuant to
Section 8 hereof, shall be limited in any case to the relevant Fund
and its assets and that the Custodian shall not seek satisfaction of
any such obligation from the shareholders of the relevant Fund, from
any other Fund or its shareholders or from the Trustees, Officers,
employees or agents of the Trust, or any of them. In addition, in
connection with the discharge and satisfaction of any claim made by
the Custodian against the Trust, for whatever reasons, involving more
than one Fund, the Trust shall have the exclusive right to determine
the appropriate allocations of liability for any such claim between
or among the Funds.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed effective as of the 1st day of December,
1993.
ATTEST: INVESTMENT COMPANIES
/s/John G. McGonigle_________ By /s/John G. Donahue_____________
John G. McGonigle John F. Donahue
Secretary Chairman
ATTEST: STATE STREET BANK AND TRUST
COMPANY
/s/ Ed McKenzie______________ By /s/ F. J. Sidoti, Jr.___________
(Assistant) Secretary Typed Name: Frank J. Sidoti, Jr.
Typed Name: Ed McKenzie Title: Vice President
ATTEST: FEDERATED SERVICES COMPANY
/s/ Jeannette Fisher-Garber______ By /s/ James J. Dolan________________
Jeannette Fisher-Garber James J. Dolan
Secretary President
EXHIBIT 1
<TABLE>
<S> <C>
CONTRACT
DATE INVESTMENT COMPANY
12/01/93 Fortress Adjustable Rate U.S. Government Fund, Inc.
</TABLE>
Exhibit 9(ii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AGREEMENT
for
FUND ACCOUNTING,
SHAREHOLDER RECORDKEEPING,
and
CUSTODY SERVICES PROCUREMENT
AGREEMENT made as of December 1, 1994, by and between those investment
companies listed on Exhibit 1 as may be amended from time to time, having
their principal office and place of business at Federated Investors
Tower, Pittsburgh, PA 15222-3779 (the "Trust"), on behalf of the
portfolios (individually referred to herein as a "Fund" and collectively
as "Funds") of the Trust, and FEDERATED SERVICES COMPANY, a Delaware
business trust, having its principal office and place of business at
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779 (the
"Company").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the
"1940 Act"), with authorized and issued shares of capital stock or
beneficial interest ("Shares"); and
WHEREAS, the Trust may desire to retain the Company to provide certain
pricing, accounting and recordkeeping services for each of the Funds,
including any classes of shares issued by any Fund ("Classes") if so
indicated on Exhibit 1, and the Company is willing to furnish such
services; and
WHEREAS, the Trust may desire to appoint the Company as its transfer
agent, dividend disbursing agent if so indicated on Exhibit 1, and agent
in connection with certain other activities, and the Company desires to
accept such appointment; and
WHEREAS, the Trust may desire to appoint the Company as its agent to
select, negotiate and subcontract for custodian services from an approved
list of qualified banks if so indicated on Exhibit 1, and the Company
desires to accept such appointment; and
WHEREAS, from time to time the Trust may desire and may instruct the
Company to subcontract for the performance of certain of its duties and
responsibilities hereunder to State Street Bank and Trust Company or
another agent (the "Agent"); and
WHEREAS, the words Trust and Fund may be used interchangeably for
those investment companies consisting of only one portfolio;
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties
hereto agree as follows:
SECTION ONE: Fund Accounting.
Article 1. Appointment.
The Trust hereby appoints the Company to provide certain pricing and
accounting services to the Funds, and/or the Classes, for the period and
on the terms set forth in this Agreement. The Company accepts such
appointment and agrees to furnish the services herein set forth in return
for the compensation as provided in Article 3 of this Section.
Article 2. The Company's Duties.
Subject to the supervision and control of the Trust's Board of
Trustees or Directors ("Board"), the Company will assist the Trust with
regard to fund accounting for the Trust, and/or the Funds, and/or the
Classes, and in connection therewith undertakes to perform the following
specific services;
A. Value the assets of the Funds using: primarily, market
quotations, including the use of matrix pricing, supplied by
the independent pricing services selected by the Company in
consultation with the adviser, or sources selected by the
adviser, and reviewed by the board; secondarily, if a
designated pricing service does not provide a price for a
security which the Company believes should be available by
market quotation, the Company may obtain a price by calling
brokers designated by the investment adviser of the fund
holding the security, or if the adviser does not supply the
names of such brokers, the Company will attempt on its own to
find brokers to price those securities; thirdly, for
securities for which no market price is available, the Pricing
Committee of the Board will determine a fair value in good
faith. Consistent with Rule 2a-4 of the 40 Act, estimates may
be used where necessary or appropriate. The Company's
obligations with regard to the prices received from outside
pricing services and designated brokers or other outside
sources, is to exercise reasonable care in the supervision of
the pricing agent. The Company is not the guarantor of the
securities prices received from such agents and the Company is
not liable to the Fund for potential errors in valuing a
Fund's assets or calculating the net asset value per share of
such Fund or Class when the calculations are based upon such
prices. All of the above sources of prices used as described
are deemed by the Company to be authorized sources of security
prices. The Company provides daily to the adviser the
securities prices used in calculating the net asset value of
the fund, for its use in preparing exception reports for those
prices on which the adviser has comment. Further, upon receipt
of the exception reports generated by the adviser, the Company
diligently pursues communication regarding exception reports
with the designated pricing agents.
B. Determine the net asset value per share of each Fund and/or
Class, at the time and in the manner from time to time
determined by the Board and as set forth in the Prospectus and
Statement of Additional Information ("Prospectus") of each
Fund;
C. Calculate the net income of each of the Funds, if any;
D. Calculate capital gains or losses of each of the Funds
resulting from sale or disposition of assets, if any;
E. Maintain the general ledger and other accounts, books and
financial records of the Trust, including for each Fund,
and/or Class, as required under Section 31(a) of the 1940 Act
and the Rules thereunder in connection with the services
provided by the Company;
F. Preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records to be maintained by Rule 31a-1 under the
1940 Act in connection with the services provided by the
Company. The Company further agrees that all such records it
maintains for the Trust are the property of the Trust and
further agrees to surrender promptly to the Trust such records
upon the Trust's request;
G. At the request of the Trust, prepare various reports or other
financial documents required by federal, state and other
applicable laws and regulations; and
H. Such other similar services as may be reasonably requested by
the Trust.
Article 3. Compensation and Allocation of Expenses.
A. The Funds will compensate the Company for its services
rendered pursuant to Section One of this Agreement in
accordance with the fees agreed upon from time to time between
the parties hereto. Such fees do not include out-of-pocket
disbursements of the Company for which the Funds shall
reimburse the Company upon receipt of a separate invoice. Out-
of-pocket disbursements shall include, but shall not be
limited to, the items agreed upon between the parties from
time to time.
B. The Fund and/or the Class, and not the Company, shall bear the
cost of: custodial expenses; membership dues in the Investment
Company Institute or any similar organization; transfer agency
expenses; investment advisory expenses; costs of printing and
mailing stock certificates, Prospectuses, reports and notices;
administrative expenses; interest on borrowed money; brokerage
commissions; taxes and fees payable to federal, state and
other governmental agencies; fees of Trustees or Directors of
the Trust; independent auditors expenses; Federated
Administrative Services and/or Federated Administrative
Services, Inc. legal and audit department expenses billed to
Federated Services Company for work performed related to the
Trust, the Funds, or the Classes; law firm expenses; or other
expenses not specified in this Article 3 which may be properly
payable by the Funds and/or classes.
C. The compensation and out-of-pocket expenses shall be accrued
by the Fund and shall be paid to the Company no less
frequently than monthly, and shall be paid daily upon request
of the Company. The Company will maintain detailed information
about the compensation and out-of-pocket expenses by Fund and
Class.
D. Any schedule of compensation agreed to hereunder, as may be
adjusted from time to time, shall be dated and signed by a
duly authorized officer of the Trust and/or the Funds and a
duly authorized officer of the Company.
E. The fee for the period from the effective date of this
Agreement with respect to a Fund or a Class to the end of the
initial month shall be prorated according to the proportion
that such period bears to the full month period. Upon any
termination of this Agreement before the end of any month, the
fee for such period shall be prorated according to the
proportion which such period bears to the full month period.
For purposes of determining fees payable to the Company, the
value of the Fund's net assets shall be computed at the time
and in the manner specified in the Fund's Prospectus.
F. The Company, in its sole discretion, may from time to time
subcontract to, employ or associate with itself such person or
persons as the Company may believe to be particularly suited
to assist it in performing services under this Section One.
Such person or persons may be third-party service providers,
or they may be officers and employees who are employed by both
the Company and the Funds. The compensation of such person or
persons shall be paid by the Company and no obligation shall
be incurred on behalf of the Trust, the Funds, or the Classes
in such respect.
SECTION TWO: Shareholder Recordkeeping.
Article 4. Terms of Appointment.
Subject to the terms and conditions set forth in this Agreement, the
Trust hereby appoints the Company to act as, and the Company agrees to
act as, transfer agent and dividend disbursing agent for each Fund's
Shares, and agent in connection with any accumulation, open-account or
similar plans provided to the shareholders of any Fund
("Shareholder(s)"), including without limitation any periodic investment
plan or periodic withdrawal program.
As used throughout this Agreement, a "Proper Instruction" means a
writing signed or initialed by one or more person or persons as the Board
shall have from time to time authorized. Each such writing shall set
forth the specific transaction or type of transaction involved. Oral
instructions will be deemed to be Proper Instructions if (a) the Company
reasonably believes them to have been given by a person previously
authorized in Proper Instructions to give such instructions with respect
to the transaction involved, and (b) the Trust, or the Fund, and the
Company promptly cause such oral instructions to be confirmed in writing.
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Trust, or the
Fund, and the Company are satisfied that such procedures afford adequate
safeguards for the Fund's assets. Proper Instructions may only be amended
in writing.
Article 5. Duties of the Company.
The Company shall perform the following services in accordance with
Proper Instructions as may be provided from time to time by the Trust as
to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the
purchase of shares and promptly deliver payment and
appropriate documentation therefore to the custodian of
the relevant Fund, (the "Custodian"). The Company shall
notify the Fund and the Custodian on a daily basis of the
total amount of orders and payments so delivered.
(2) Pursuant to purchase orders and in accordance with the
Fund's current Prospectus, the Company shall compute and
issue the appropriate number of Shares of each Fund and/or
Class and hold such Shares in the appropriate Shareholder
accounts.
(3) For certificated Funds and/or Classes, if a Shareholder or
its agent requests a certificate, the Company, as Transfer
Agent, shall countersign and mail by first class mail, a
certificate to the Shareholder at its address as set forth
on the transfer books of the Funds, and/or Classes,
subject to any Proper Instructions regarding the delivery
of certificates.
(4) In the event that any check or other order for the
purchase of Shares of the Fund and/or Class is returned
unpaid for any reason, the Company shall debit the Share
account of the Shareholder by the number of Shares that
had been credited to its account upon receipt of the check
or other order, promptly mail a debit advice to the
Shareholder, and notify the Fund and/or Class of its
action. In the event that the amount paid for such Shares
exceeds proceeds of the redemption of such Shares plus the
amount of any dividends paid with respect to such Shares,
the Fund and/the Class or its distributor will reimburse
the Company on the amount of such excess.
B. Distribution
(1) Upon notification by the Funds of the declaration of any
distribution to Shareholders, the Company shall act as
Dividend Disbursing Agent for the Funds in accordance with
the provisions of its governing document and the then-
current Prospectus of the Fund. The Company shall prepare
and mail or credit income, capital gain, or any other
payments to Shareholders. As the Dividend Disbursing
Agent, the Company shall, on or before the payment date of
any such distribution, notify the Custodian of the
estimated amount required to pay any portion of said
distribution which is payable in cash and request the
Custodian to make available sufficient funds for the cash
amount to be paid out. The Company shall reconcile the
amounts so requested and the amounts actually received
with the Custodian on a daily basis. If a Shareholder is
entitled to receive additional Shares by virtue of any
such distribution or dividend, appropriate credits shall
be made to the Shareholder's account, for certificated
Funds and/or Classes, delivered where requested; and
(2) The Company shall maintain records of account for each
Fund and Class and advise the Trust, each Fund and Class
and its Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and
redemption directions and, if such redemption requests
comply with the procedures as may be described in the Fund
Prospectus or set forth in Proper Instructions, deliver
the appropriate instructions therefor to the Custodian.
The Company shall notify the Funds on a daily basis of the
total amount of redemption requests processed and monies
paid to the Company by the Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds
from the Custodian with respect to any redemption, the
Company shall pay or cause to be paid the redemption
proceeds in the manner instructed by the redeeming
Shareholders, pursuant to procedures described in the then-
current Prospectus of the Fund.
(3) If any certificate returned for redemption or other
request for redemption does not comply with the procedures
for redemption approved by the Fund, the Company shall
promptly notify the Shareholder of such fact, together
with the reason therefor, and shall effect such redemption
at the price applicable to the date and time of receipt of
documents complying with said procedures.
(4) The Company shall effect transfers of Shares by the
registered owners thereof.
(5) The Company shall identify and process abandoned accounts
and uncashed checks for state escheat requirements on an
annual basis and report such actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each
Fund, and/or Class, and maintain pursuant to applicable
rules of the Securities and Exchange Commission ("SEC") a
record of the total number of Shares of the Fund and/or
Class which are authorized, based upon data provided to it
by the Fund, and issued and outstanding. The Company shall
also provide the Fund on a regular basis or upon
reasonable request with the total number of Shares which
are authorized and issued and outstanding, but shall have
no obligation when recording the issuance of Shares,
except as otherwise set forth herein, to monitor the
issuance of such Shares or to take cognizance of any laws
relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Funds.
(2) The Company shall establish and maintain records pursuant
to applicable rules of the SEC relating to the services to
be performed hereunder in the form and manner as agreed to
by the Trust or the Fund to include a record for each
Shareholder's account of the following:
(a) Name, address and tax identification number (and
whether such number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account,
including dividends paid and date and price for all
transactions;
(d) Any stop or restraining order placed against the
account;
(e) Information with respect to withholding in the case of
a foreign account or an account for which withholding
is required by the Internal Revenue Code;
(f) Any dividend reinvestment order, plan application,
dividend address and correspondence relating to the
current maintenance of the account;
(g) Certificate numbers and denominations for any
Shareholder holding certificates;
(h) Any information required in order for the Company to
perform the calculations contemplated or required by
this Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the
periods prescribed in said rules as specifically noted
below. Such record retention shall be at the expense of
the Company, and such records may be inspected by the Fund
at reasonable times. The Company may, at its option at any
time, and shall forthwith upon the Fund's demand, turn
over to the Fund and cease to retain in the Company's
files, records and documents created and maintained by the
Company pursuant to this Agreement, which are no longer
needed by the Company in performance of its services or
for its protection. If not so turned over to the Fund,
such records and documents will be retained by the Company
for six years from the year of creation, during the first
two of which such documents will be in readily accessible
form. At the end of the six year period, such records and
documents will either be turned over to the Fund or
destroyed in accordance with Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the
following information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in
each state for "blue sky" purposes as determined
according to Proper Instructions delivered from time
to time by the Fund to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption
fees, or other transaction- or sales-related
payments;
(f) Such other information as may be agreed upon from time
to time.
(2) The Company shall prepare in the appropriate form, file
with the Internal Revenue Service and appropriate state
agencies, and, if required, mail to Shareholders, such
notices for reporting dividends and distributions paid as
are required to be so filed and mailed and shall withhold
such sums as are required to be withheld under applicable
federal and state income tax laws, rules and regulations.
(3) In addition to and not in lieu of the services set forth
above, the Company shall:
(a) Perform all of the customary services of a transfer
agent, dividend disbursing agent and, as relevant,
agent in connection with accumulation, open-account
or similar plans (including without limitation any
periodic investment plan or periodic withdrawal
program), including but not limited to: maintaining
all Shareholder accounts, mailing Shareholder reports
and Prospectuses to current Shareholders, withholding
taxes on accounts subject to back-up or other
withholding (including non-resident alien accounts),
preparing and filing reports on U.S. Treasury
Department Form 1099 and other appropriate forms
required with respect to dividends and distributions
by federal authorities for all Shareholders,
preparing and mailing confirmation forms and
statements of account to Shareholders for all
purchases and redemptions of Shares and other
conformable transactions in Shareholder accounts,
preparing and mailing activity statements for
Shareholders, and providing Shareholder account
information; and
(b) provide a system which will enable the Fund to monitor
the total number of Shares of each Fund and/or Class
sold in each state ("blue sky reporting"). The Fund
shall by Proper Instructions (i) identify to the
Company those transactions and assets to be treated
as exempt from the blue sky reporting for each state
and (ii) verify the classification of transactions
for each state on the system prior to activation and
thereafter monitor the daily activity for each state.
The responsibility of the Company for each Fund's
and/or Class's state blue sky registration status is
limited solely to the recording of the initial
classification of transactions or accounts with
regard to blue sky compliance and the reporting of
such transactions and accounts to the Fund as
provided above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders
relating to their Share accounts and such other
correspondence as may from time to time be addressed to
the Company;
(2) The Company shall prepare Shareholder meeting lists, mail
proxy cards and other material supplied to it by the Fund
in connection with Shareholder Meetings of each Fund;
receive, examine and tabulate returned proxies, and
certify the vote of the Shareholders;
(3) The Company shall establish and maintain facilities and
procedures for safekeeping of stock certificates, check
forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account
of, such certificates, forms and devices.
Article 6. Duties of the Trust.
A. Compliance
The Trust or Fund assume full responsibility for the preparation,
contents and distribution of their own and/or their classes'
Prospectus and for complying with all applicable requirements of
the Securities Act of 1933, as amended (the "1933 Act"), the 1940
Act and any laws, rules and regulations of government authorities
having jurisdiction.
B. Share Certificates
The Trust shall supply the Company with a sufficient supply of
blank Share certificates and from time to time shall renew such
supply upon request of the Company. Such blank Share certificates
shall be properly signed, manually or by facsimile, if authorized
by the Trust and shall bear the seal of the Trust or facsimile
thereof; and notwithstanding the death, resignation or removal of
any officer of the Trust authorized to sign certificates, the
Company may continue to countersign certificates which bear the
manual or facsimile signature of such officer until otherwise
directed by the Trust.
C. Distributions
The Fund shall promptly inform the Company of the declaration of
any dividend or distribution on account of any Fund's shares.
Article 7. Compensation and Expenses.
A. Annual Fee
For performance by the Company pursuant to Section Two of this
Agreement, the Trust and/or the Fund agree to pay the Company an
annual maintenance fee for each Shareholder account as agreed
upon between the parties and as may be added to or amended from
time to time. Such fees may be changed from time to time subject
to written agreement between the Trust and the Company. Pursuant
to information in the Fund Prospectus or other information or
instructions from the Fund, the Company may sub-divide any Fund
into Classes or other sub-components for recordkeeping purposes.
The Company will charge the Fund the same fees for each such
Class or sub-component the same as if each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Trust
and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items agreed
upon between the parties, as may be added to or amended from time
to time. In addition, any other expenses incurred by the Company
at the request or with the consent of the Trust and/or the Fund,
will be reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued
by the Fund and shall be paid to the Company no less
frequently than monthly, and shall be paid daily upon request
of the Company. The Company will maintain detailed information
about the compensation and out-of-pocket expenses by Fund and
Class.
D. Any schedule of compensation agreed to hereunder, as may be
adjusted from time to time, shall be dated and signed by a
duly authorized officer of the Trust and/or the Funds and a
duly authorized officer of the Company.
Article 8. Assignment of Shareholder Recordkeeping.
Except as provided below, no right or obligation under this Section
Two may be assigned by either party without the written consent of the
other party.
A. This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and
assigns.
B. The Company may without further consent on the part of the
Trust subcontract for the performance hereof with (A) State
Street Bank and its subsidiary, Boston Financial Data
Services, Inc., a Massachusetts Trust ("BFDS"), which is duly
registered as a transfer agent pursuant to Section 17A(c)(1)
of the Securities Exchange Act of 1934, as amended, or any
succeeding statute ("Section 17A(c)(1)"), or (B) a BFDS
subsidiary duly registered as a transfer agent pursuant to
Section 17A(c)(1), or (C) a BFDS affiliate, or (D) such other
provider of services duly registered as a transfer agent under
Section 17A(c)(1) as Company shall select; provided, however,
that the Company shall be as fully responsible to the Trust
for the acts and omissions of any subcontractor as it is for
its own acts and omissions; or
C. The Company shall upon instruction from the Trust subcontract
for the performance hereof with an Agent selected by the
Trust, other than BFDS or a provider of services selected by
Company, as described in (2) above; provided, however, that
the Company shall in no way be responsible to the Trust for
the acts and omissions of the Agent.
SECTION THREE: Custody Services Procurement.
Article 9. Appointment.
The Trust hereby appoints Company as its agent to evaluate and obtain
custody services from a financial institution that (i) meets the criteria
established in Section 17(f) of the 1940 Act and (ii) has been approved
by the Board as eligible for selection by the Company as a custodian (the
"Eligible Custodian"). The Company accepts such appointment.
Article 10. The Company and Its Duties.
Subject to the review, supervision and control of the Board, the
Company shall:
A. evaluate the nature and the quality of the custodial services
provided by the Eligible Custodian;
B. employ the Eligible Custodian to serve on behalf of the Trust
as Custodian of the Trust's assets substantially on the terms
set forth as the form of agreement in Exhibit 2;
C. negotiate and enter into agreements with the Custodians for
the benefit of the Trust, with the Trust as a party to each
such agreement. The Company shall not be a party to any
agreement with any such Custodian;
D. establish procedures to monitor the nature and the quality of
the services provided by the Custodians;
E. continuously monitor the nature and the quality of services
provided by the Custodians; and
F. periodically provide to the Trust (i) written reports on the
activities and services of the Custodians; (ii) the nature and
amount of disbursement made on account of the Trust with
respect to each custodial agreement; and (iii) such other
information as the Board shall reasonably request to enable it
to fulfill its duties and obligations under Sections 17(f) and
36(b) of the 1940 Act and other duties and obligations
thereof.
Article 11. Fees and Expenses.
A. Annual Fee
For the performance by the Company pursuant to Section Three
of this Agreement, the Trust and/or the Fund agree to pay the
Company an annual fee as agreed upon between the parties.
B. Reimbursements
In addition to the fee paid under Section 11A above, the Trust
and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items agreed
upon between the parties, as may be added to or amended from time
to time. In addition, any other expenses incurred by the Company
at the request or with the consent of the Trust and/or the Fund,
will be reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued
by the Fund and shall be paid to the Company no less
frequently than monthly, and shall be paid daily upon request
of the Company. The Company will maintain detailed information
about the compensation and out-of-pocket expenses by Fund.
D. Any schedule of compensation agreed to hereunder, as may be
adjusted from time to time, shall be dated and signed by a
duly authorized officer of the Trust and/or the Funds and a
duly authorized officer of the Company.
Article 12. Representations.
The Company represents and warrants that it has obtained all required
approvals from all government or regulatory authorities necessary to
enter into this arrangement and to provide the services contemplated in
Section Three of this Agreement.
SECTION FOUR: General Provisions.
Article 13. Documents.
A. In connection with the appointment of the Company under this
Agreement, the Trust shall file with the Company the following
documents:
(1) A copy of the Charter and By-Laws of the Trust and all
amendments thereto;
(2) A copy of the resolution of the Board of the Trust
authorizing this Agreement;
(3) Specimens of all forms of outstanding Share certificates
of the Trust or the Funds in the forms approved by the
Board of the Trust with a certificate of the Secretary of
the Trust as to such approval;
(4) All account application forms and other documents relating
to Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following
documents:
(1) Each resolution of the Board of the Trust authorizing the
original issuance of each Fund's, and/or Class's Shares;
(2) Each Registration Statement filed with the SEC and
amendments thereof and orders relating thereto in effect
with respect to the sale of Shares of any Fund, and/or
Class;
(3) A certified copy of each amendment to the governing
document and the By-Laws of the Trust;
(4) Certified copies of each vote of the Board authorizing
officers to give Proper Instructions to the Custodian and
agents for fund accountant, custody services procurement,
and shareholder recordkeeping or transfer agency services;
(5) Specimens of all new Share certificates representing
Shares of any Fund, accompanied by Board resolutions
approving such forms;
(6) Such other certificates, documents or opinions which the
Company may, in its discretion, deem necessary or
appropriate in the proper performance of its duties; and
(7) Revisions to the Prospectus of each Fund.
Article 14. Representations and Warranties.
A. Representations and Warranties of the Company
The Company represents and warrants to the Trust that:
(1) It is a business trust duly organized and existing and in
good standing under the laws of the State of Delaware.
(2) It is duly qualified to carry on its business in the State
of Delaware.
(3) It is empowered under applicable laws and by its charter
and by-laws to enter into and perform this Agreement.
(4) All requisite corporate proceedings have been taken to
authorize it to enter into and perform its obligations
under this Agreement.
(5) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties
and obligations under this Agreement.
(6) It is in compliance with federal securities law
requirements and in good standing as a transfer agent.
B. Representations and Warranties of the Trust
The Trust represents and warrants to the Company that:
(1) It is an investment company duly organized and existing
and in good standing under the laws of its state of
organization;
(2) It is empowered under applicable laws and by its Charter
and By-Laws to enter into and perform its obligations
under this Agreement;
(3) All corporate proceedings required by said Charter and By-
Laws have been taken to authorize it to enter into and
perform its obligations under this Agreement;
(4) The Trust is an open-end investment company registered
under the 1940 Act; and
(5) A registration statement under the 1933 Act will be
effective, and appropriate state securities law filings
have been made and will continue to be made, with respect
to all Shares of each Fund being offered for sale.
Article 15. Standard of Care and Indemnification.
A. Standard of Care
The Company shall be held to a standard of reasonable care in
carrying out the provisions of this Contract. The Company shall
be entitled to rely on and may act upon advice of counsel (who
may be counsel for the Trust) on all matters, and shall be
without liability for any action reasonably taken or omitted
pursuant to such advice, provided that such action is not in
violation of applicable federal or state laws or regulations, and
is in good faith and without negligence.
B. Indemnification by Trust
The Company shall not be responsible for and the Trust or Fund
shall indemnify and hold the Company, including its officers,
directors, shareholders and their agents employees and
affiliates, harmless against any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liabilities arising
out of or attributable to:
(1) The acts or omissions of any Custodian, Adviser, Sub-
adviser or other party contracted by or approved by the
Trust or Fund,
(2) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in
proper form which
(a) are received by the Company or its agents or
subcontractors and furnished to it by or on behalf of
the Fund, its Shareholders or investors regarding the
purchase, redemption or transfer of Shares and
Shareholder account information;
(b) are received by the Company from independent pricing
services or sources for use in valuing the assets of
the Funds; or
(c) are received by the Company or its agents or
subcontractors from Advisers, Sub-advisers or other
third parties contracted by or approved by the Trust
of Fund for use in the performance of services under
this Agreement;
(d) have been prepared and/or maintained by the Fund or
its affiliates or any other person or firm on behalf
of the Trust.
(3) The reliance on, or the carrying out by the Company or its
agents or subcontractors of Proper Instructions of the
Trust or the Fund.
(4) The offer or sale of Shares in violation of any
requirement under the federal securities laws or
regulations or the securities laws or regulations of any
state that such Shares be registered in such state or in
violation of any stop order or other determination or
ruling by any federal agency or any state with respect to
the offer or sale of such Shares in such state.
Provided, however, that the Company shall not be protected
by this Article 15.A. from liability for any act or
omission resulting from the Company's willful misfeasance,
bad faith, negligence or reckless disregard of its duties
of failure to meet the standard of care set forth in 15.A.
above.
C. Reliance
At any time the Company may apply to any officer of the Trust or
Fund for instructions, and may consult with legal counsel with
respect to any matter arising in connection with the services to
be performed by the Company under this Agreement, and the Company
and its agents or subcontractors shall not be liable and shall be
indemnified by the Trust or the appropriate Fund for any action
reasonably taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel provided such
action is not in violation of applicable federal or state laws or
regulations. The Company, its agents and subcontractors shall be
protected and indemnified in recognizing stock certificates which
are reasonably believed to bear the proper manual or facsimile
signatures of the officers of the Trust or the Fund, and the
proper countersignature of any former transfer agent or
registrar, or of a co-transfer agent or co-registrar.
D. Notification
In order that the indemnification provisions contained in this
Article 15 shall apply, upon the assertion of a claim for which
either party may be required to indemnify the other, the party
seeking indemnification shall promptly notify the other party of
such assertion, and shall keep the other party advised with
respect to all developments concerning such claim. The party who
may be required to indemnify shall have the option to participate
with the party seeking indemnification in the defense of such
claim. The party seeking indemnification shall in no case confess
any claim or make any compromise in any case in which the other
party may be required to indemnify it except with the other
party's prior written consent.
Article 16. Termination of Agreement.
This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other. Should the Trust exercise
its rights to terminate, all out-of-pocket expenses associated with the
movement of records and materials will be borne by the Trust or the
appropriate Fund. Additionally, the Company reserves the right to charge
for any other reasonable expenses associated with such termination. The
provisions of Article 15 shall survive the termination of this Agreement.
Article 17. Amendment.
This Agreement may be amended or modified by a written agreement
executed by both parties.
Article 18. Interpretive and Additional Provisions.
In connection with the operation of this Agreement, the Company and
the Trust may from time to time agree on such provisions interpretive of
or in addition to the provisions of this Agreement as may in their joint
opinion be consistent with the general tenor of this Agreement. Any such
interpretive or additional provisions shall be in a writing signed by
both parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Charter. No
interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Agreement.
Article 19. Governing Law.
This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts
Article 20. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at Federated
Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the Company
at Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to
such other address as the Trust or the Company may hereafter specify,
shall be deemed to have been properly delivered or given hereunder to the
respective address.
Article 21. Counterparts.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
Article 22. Limitations of Liability of Trustees and Shareholders of
the Trust.
The execution and delivery of this Agreement have been authorized by
the Trustees of the Trust and signed by an authorized officer of the
Trust, acting as such, and neither such authorization by such Trustees
nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on any
of them personally, and the obligations of this Agreement are not binding
upon any of the Trustees or Shareholders of the Trust, but bind only the
appropriate property of the Fund, or Class, as provided in the
Declaration of Trust.
Article 23. Limitations of Liability of Trustees and Shareholders of
the Company.
The execution and delivery of this Agreement have been authorized by
the Trustees of the Company and signed by an authorized officer of the
Company, acting as such, and neither such authorization by such Trustees
nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on any
of them personally, and the obligations of this Agreement are not binding
upon any of the Trustees or Shareholders of the Company, but bind only
the property of the Company as provided in the Declaration of Trust.
Article 24. Assignment.
This Agreement and the rights and duties hereunder shall not be
assignable with respect to the Trust or the Funds by either of the
parties hereto except by the specific written consent of the other party.
Article 25. Merger of Agreement.
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject
hereof whether oral or written.
Article 26. Successor Agent.
If a successor agent for the Trust shall be appointed by the Trust,
the Company shall upon termination of this Agreement deliver to such
successor agent at the office of the Company all properties of the Trust
held by it hereunder. If no such successor agent shall be appointed, the
Company shall at its office upon receipt of Proper Instructions deliver
such properties in accordance with such instructions.
In the event that no written order designating a successor agent or
Proper Instructions shall have been delivered to the Company on or before
the date when such termination shall become effective, then the Company
shall have the right to deliver to a bank or trust company, which is a
"bank" as defined in the 1940 Act, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $2,000,000, all properties held by the
Company under this Agreement. Thereafter, such bank or trust company
shall be the successor of the Company under this Agreement.
Article 27. Force Majeure.
The Company shall have no liability for cessation of services
hereunder or any damages resulting therefrom to the Fund as a result of
work stoppage, power or other mechanical failure, natural disaster,
governmental action, communication disruption or other impossibility of
performance.
Article 28. Assignment; Successors.
This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party may assign
to a successor all of or a substantial portion of its business, or to a
party controlling, controlled by, or under common control with such
party. Nothing in this Article 28 shall prevent the Company from
delegating its responsibilities to another entity to the extent provided
herein.
Article 29. Severability.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf under their seals by and
through their duly authorized officers, as of the day and year first
above written.
ATTEST: INVESTMENT COMPANIES
(listed on Exhibit 1)
/s/ John W. McGonigle_______ By:__/s/ John F. Donahue___
John W. McGonigle John F. Donahue
Secretary Chairman
ATTEST: FEDERATED SERVICES COMPANY
/s/ Jeannette Fisher-Garber By:_/s/ James J. Dolan_____
Jeannette Fisher-Garber James J. Dolan
Secretary President
EXHIBIT 1
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<S> <C>
CONTRACT
DATE INVESTMENT COMPANY
Portfolios
Classes
12/01/93 FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
FEDERATED SERVICES COMPANY provides the following services:
Fund Accounting
Shareholder Recordkeeping
Custody Services Procurement
</TABLE>
Exhibit 9(ii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement is made as of this first day
of March, 1994, between those investment companies listed on Exhibit 1, as
may be amended from time to time, having their principal office and place
of business at Federated Investors Tower, Pittsburgh PA 15222-3779
(individually referred to herein as "Fund" and collectively referred to as
"Funds), on behalf of the portfolios of the Funds, and Federated
Administrative Services, a Delaware business trust (herein called "FAS").
WHEREAS, the Funds desire to retain FAS as their Administrator to
provide them with Administrative Services (as herein defined), and FAS is
willing to render such services;
WHEREAS, the Funds are registered as open-end management investment
companies under the Investment Company Act of 1940, as amended (the "1940
Act"), with authorized and issued shares of capital stock or beneficial
interest ("Shares"); and
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties hereto agree as follows:
1. Appointment of Administrator. The Funds hereby appoint FAS as
Administrator of the Funds on the terms and conditions set forth in this
Agreement; and FAS hereby accepts such appointment and agrees to perform
the services and duties set forth in Section 2 of this Agreement in
consideration of the compensation provided for in Section 4 hereof.
2. Services and Duties. As Administrator, and subject to the
supervision and control of the Funds' Boards of Trustees or Directors, as
applicable (the "Boards"), FAS will provide facilities, equipment, and
personnel to carry out the following administrative services for operation
of the business and affairs of the Funds and each of their portfolios:
(a) prepare, file, and maintain the
Funds' governing documents and any amendments thereto,
including the Declaration of Trust or Articles of
Incorporation, as appropriate,(which has already been
prepared and filed), the By-laws and minutes of meetings of
their Boards, Committees, and shareholders;
(b) prepare and file with the
Securities and Exchange Commission and the appropriate state
securities authorities the registration statements for the
Funds and the Funds' shares and all amendments thereto,
reports to regulatory authorities and shareholders,
prospectuses, proxy statements, and such other documents all
as may be necessary to enable the Funds to make continuous
offerings of their shares, as applicable;
(c) prepare, negotiate, and administer
contracts on behalf of the Funds with, among others, each
Fund's investment adviser, distributor, custodian, and
transfer agent, subject to any applicable restrictions of the
Boards or the 1940 Act;
(d) supervise the Funds' custodians in
the maintenance of the Funds' general ledgers and in the
preparation of the Funds' financial statements, including
oversight of expense accruals and payments, the determination
of the net asset value of the Funds and the declaration and
payment of dividends and other distributions to shareholders;
(e) calculate performance data of the
Funds for dissemination to information services covering the
investment company industry;
(f) prepare and file the Funds' tax
returns;
(g) examine and review the operations
of the Funds' custodians and transfer agents;
(h) coordinate the layout and printing
of publicly disseminated prospectuses and reports;
(i) perform internal audit examinations
in accordance with a charter to be adopted by FAS and the
Funds;
(j) assist with the design,
development, and operation of the Funds;
(k) provide individuals reasonably
acceptable to the Funds' Boards for nomination, appointment,
or election as officers of the Funds, who will be responsible
for the management of certain of the Funds' affairs as
determined by the Funds' Boards; and
(l) consult with the Funds and their
Boards of Trustees or Directors, as appropriate, on matters
concerning the Funds and their affairs.
The foregoing, along with any additional services that FAS shall
agree in writing to perform for the Funds hereunder, shall hereafter be
referred to as "Administrative Services." Administrative Services shall
not include any duties, functions, or services to be performed for any
Fund by such Fund's investment adviser, distributor, custodian, transfer
agent, or shareholder service agent, pursuant to their respective
agreements with such Fund.
3. Expenses. FAS shall be responsible for expenses incurred in
providing office space, equipment, and personnel as may be necessary or
convenient to provide the Administrative Services to the Fund, including
the compensation of FAS employees who serve on the Funds' Boards, or as
officers of the Funds. Each Fund shall be responsible for all other
expenses incurred by FAS on behalf of such Fund, including without
limitation postage and courier expenses, printing expenses, travel
expenses, registration fees, filing fees, fees of outside counsel and
independent auditors, insurance premiums, fees payable to members of such
Fund's Board who are not FAS employees, and trade association dues.
4. Compensation. For the Administrative Services provided, each
Fund hereby agrees to pay and FAS hereby agrees to accept as full
compensation for its services rendered hereunder an administrative fee at
an annual rate, payable daily, as specified below, based upon the total
assets of all of the Funds:
Maximum Administrative Average Daily Net Assets
Fee of the Funds
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250
million
.075% on assets in excess of
$750 million
However, in no event shall the administrative fee received during
any year of this Agreement be less than, or be paid at a rate less than
would aggregate, $125,000, per individual Fund, with an additional $30,000
for each class of shares added to any such Fund after the date hereof.
5. Standard of Care.
(a) FAS shall not be liable for any
error of judgment or mistake of law or for any loss suffered
by any Fund in connection with the matters to which this
Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of
its obligations and duties under this Agreement. FAS shall
be entitled to rely on and may act upon advice of counsel
(who may be counsel for such Fund) on all matters, and shall
be without liability for any action reasonably taken or
omitted pursuant to such advice. Any person, even though
also an officer, trustee, partner, employee or agent of FAS,
who may be or become a member of such Fund's Board, officer,
employee or agent of any Fund, shall be deemed, when
rendering services to such Fund or acting on any business of
such Fund (other than services or business in connection with
the duties of FAS hereunder) to be rendering such services to
or acting solely for such Fund and not as an officer,
trustee, partner, employee or agent or one under the control
or direction of FAS even though paid by FAS.
(b) This Section 5 shall survive
termination of this Agreement.
6. Duration and Termination. The initial term of this Agreement
with respect to each Fund shall commence on the date hereof, and extend
for a period of one year, renewable annually by the approval of the Board
of Directors/Trustees of each Fund.
7. Amendment. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which an enforcement of the change,
waiver, discharge or termination is sought.
8. Limitations of Liability of Trustees or Officers, Employees,
Agents and Shareholders of the Funds. FAS is expressly put on notice of
the limitation of liability as set forth in the Declaration of Trust of
each Fund that is a Massachusetts business trust and agrees that the
obligations assumed by each such Fund pursuant to this Agreement shall be
limited in any case to such Fund and its assets and that FAS shall not
seek satisfaction of any such obligations from the shareholders of such
Fund, the Trustees, Officers, Employees or Agents of such Fund, or any of
them.
9. Limitations of Liability of Trustees and Shareholders of FAS.
The execution and delivery of this Agreement have been authorized by the
Trustees of FAS and signed by an authorized officer of FAS, acting as
such, and neither such authorization by such Trustees nor such execution
and delivery by such officer shall be deemed to have been made by any of
them individually or to impose any liability on any of them personally,
and the obligations of this Agreement are not binding upon any of the
Trustees or shareholders of FAS, but bind only the trust property of FAS
as provided in the Declaration of Trust of FAS.
10. Notices. Notices of any kind to be given hereunder shall
be in writing (including facsimile communication) and shall be duly given
if delivered to any Fund at the following address: Federated Investors
Tower, Pittsburgh, PA 15222-3779, Attention: President and if delivered
to FAS at Federated Investors Tower, Pittsburgh, PA 15222-3779,
Attention: President.
11. Miscellaneous. This Agreement constitutes the entire
agreement between the parties hereto and supersedes any prior agreement
with respect to the subject hereof whether oral or written. The captions
in this Agreement are included for convenience of reference only and in no
way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. If any provision of this Agreement shall be
held or made invalid by a court or regulatory agency decision, statute,
rule or otherwise, the remainder of this Agreement shall not be affected
thereby. Subject to the provisions of Section 5, hereof, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and shall be governed by Pennsylvania law;
provided, however, that nothing herein shall be construed in a manner
inconsistent with the Investment Company Act of 1940 or any rule or
regulation promulgated by the Securities and Exchange Commission
thereunder.
12. Counterparts. This Agreement may be executed by different
parties on separate counterparts, each of which, when so executed and
delivered, shall be an original, and all such counterparts shall together
constitute one and the same instrument.
13. Assignment; Successors. This Agreement shall not be assigned
by any party without the prior written consent of FAS, in the case of
assignment by any Fund, or of the Funds, in the case of assignment by FAS,
except that any party may assign to a successor all of or a substantial
portion of its business to a party controlling, controlled by, or under
common control with such party. Nothing in this Section 14 shall prevent
FAS from delegating its responsibilities to another entity to the extent
provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year
first above written.
Investment Companies (listed
on Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Administrative Services
By: /s/ Edward C. Gonzales
Edward C. Gonzales
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
EXHIBIT 1
FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
Exhibit 9(iii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
SHAREHOLDER SERVICES AGREEMENT
AGREEMENT made as of the first day of March, 1994, by and between
those investment companies listed on Exhibit 1, as may be amended from time
to time, having their principal office and place of business at Federated
Investors Tower, Pittsburgh, PA 15222-3779 and who have approved a
Shareholder Services Plan (the "Plan") and this form of Agreement
(individually referred to herein as a "Fund" and collectively as "Funds")
and Federated Shareholder Services, a Delaware business trust, having its
principal office and place of business at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779 ("FSS").
1. The Funds hereby appoint FSS to render or cause to be rendered
personal services to shareholders of the Funds and/or the maintenance of
accounts of shareholders of the Funds ("Services"). In addition to
providing Services directly to shareholders of the Funds, FSS is hereby
appointed the Funds' agent to select, negotiate and subcontract for the
performance of Services. FSS hereby accepts such appointments. FSS agrees
to provide or cause to be provided Services which, in its best judgment
(subject to supervision and control of the Funds' Boards of Trustees or
Directors, as applicable), are necessary or desirable for shareholders of
the Funds. FSS further agrees to provide the Funds, upon request, a
written description of the Services which FSS is providing hereunder.
2. During the term of this Agreement, each Fund will pay FSS and
FSS agrees to accept as full compensation for its services rendered
hereunder a fee at an annual rate, calculated daily and payable monthly, up
to 0.25% of 1% of average net assets of each Fund.
For the payment period in which this Agreement becomes effective or
terminates with respect to any Fund, there shall be an appropriate
proration of the monthly fee on the basis of the number of days that this
Agreement is in effect with respect to such Fund during the month. To
enable the Funds to comply with an applicable exemptive order, FSS
represents that the fees received pursuant to this Agreement will be
disclosed to and authorized by any person or entity receiving Services, and
will not result in an excessive fee to FSS.
3. This Agreement shall continue in effect for one year from the
date of its execution, and thereafter for successive periods of one year
only if the form of this Agreement is approved at least annually by the
Board of each Fund, including a majority of the members of the Board of the
Fund who are not interested persons of the Fund and have no direct or
indirect financial interest in the operation of the Funds' Plan or in any
related documents to the Plan ("Independent Board Members") cast in person
at a meeting called for that purpose.
4. Notwithstanding paragraph 3, this Agreement may be terminated
as follows:
(a) at any time, without the payment of any penalty, by the
vote of a majority of the Independent Board Members of any Fund or
by a vote of a majority of the outstanding voting securities of any
Fund as defined in the Investment Company Act of 1940 on sixty (60)
days' written notice to the parties to this Agreement;
(b) automatically in the event of the Agreement's
assignment as defined in the Investment Company Act of 1940; and
(c) by any party to the Agreement without cause by giving
the other party at least sixty (60) days' written notice of its
intention to terminate.
5. FSS agrees to obtain any taxpayer identification number
certification from each shareholder of the Funds to which it provides
Services that is required under Section 3406 of the Internal Revenue Code,
and any applicable Treasury regulations, and to provide each Fund or its
designee with timely written notice of any failure to obtain such taxpayer
identification number certification in order to enable the implementation
of any required backup withholding.
6. FSS shall not be liable for any error of judgment or mistake of
law or for any loss suffered by any Fund in connection with the matters to
which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance
of its duties or from reckless disregard by it of its obligations and
duties under this Agreement. FSS shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for such Fund) on all matters,
and shall be without liability for any action reasonably taken or omitted
pursuant to such advice. Any person, even though also an officer, trustee,
partner, employee or agent of FSS, who may be or become a member of such
Fund's Board, officer, employee or agent of any Fund, shall be deemed, when
rendering services to such Fund or acting on any business of such Fund
(other than services or business in connection with the duties of FSS
hereunder) to be rendering such services to or acting solely for such Fund
and not as an officer, trustee, partner, employee or agent or one under the
control or direction of FSS even though paid by FSS.
This Section 6 shall survive termination of this Agreement.
7. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing
signed by the party against which an enforcement of the change, waiver,
discharge or termination is sought.
8. FSS is expressly put on notice of the limitation of liability
as set forth in the Declaration of Trust of each Fund that is a
Massachusetts business trust and agrees that the obligations assumed by
each such Fund pursuant to this Agreement shall be limited in any case to
such Fund and its assets and that FSS shall not seek satisfaction of any
such obligations from the shareholders of such Fund, the Trustees,
Officers, Employees or Agents of such Fund, or any of them.
9. The execution and delivery of this Agreement have been
authorized by the Trustees of FSS and signed by an authorized officer of
FSS, acting as such, and neither such authorization by such Trustees nor
such execution and delivery by such officer shall be deemed to have been
made by any of them individually or to impose any liability on any of them
personally, and the obligations of this Agreement are not binding upon any
of the Trustees or shareholders of FSS, but bind only the trust property of
FSS as provided in the Declaration of Trust of FSS.
10. Notices of any kind to be given hereunder shall be in writing
(including facsimile communication) and shall be duly given if delivered to
any Fund and to such Fund at the following address: Federated Investors
Tower, Pittsburgh, PA 15222-3779, Attention: President and if delivered
to FSS at Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President.
11. This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the
subject hereof whether oral or written. If any provision of this Agreement
shall be held or made invalid by a court or regulatory agency decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. Subject to the provisions of Sections 3 and 4, hereof,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and shall be governed by
Pennsylvania law; provided, however, that nothing herein shall be construed
in a manner inconsistent with the Investment Company Act of 1940 or any
rule or regulation promulgated by the Securities and Exchange Commission
thereunder.
12. This Agreement may be executed by different parties on separate
counterparts, each of which, when so executed and delivered, shall be an
original, and all such counterparts shall together constitute one and the
same instrument.
13. This Agreement shall not be assigned by any party without the
prior written consent of FSS in the case of assignment by any Fund, or of
the Funds in the case of assignment by FSS, except that any party may
assign to a successor all of or a substantial portion of its business to a
party controlling, controlled by, or under common control with such party.
Nothing in this Section 14 shall prevent FSS from delegating its
responsibilities to another entity to the extent provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
Investment Companies (listed
on Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Shareholder Services
By: /s/ James J. Dolan
Title: President
Attest: /s/ John W. McGonigle
John W. McGonigle
EXHIBIT 1
FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
Exhibit 9(iv) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
SHAREHOLDER SERVICES PLAN
This Shareholder Services Plan ("Plan") is adopted as of this 1st day
of March, 1994, by the Boards of Directors or Trustees, as applicable (the
"Boards"), of those investment companies listed on Exhibit 1 hereto as may
be amended from time to time, having their principal office and place of
business at Federated Investors Tower, Pittsburgh, PA 15222-3779
(individually referred to herein as a "Fund" and collectively as "Funds").
1. This Plan is adopted to allow the Funds to make payments as
contemplated herein to obtain certain personal services for shareholders
and/or the maintenance of shareholder accounts ("Services").
2. This Plan is designed to compensate Federated Shareholder
Services ("FSS") for providing personal services and/or the maintenance of
shareholder accounts to the Funds and their shareholders. In compensation
for the services provided pursuant to this Plan, FSS may be paid a monthly
fee computed at the annual rate not to exceed .25 of 1% of the average
aggregate net asset value of the shares of each Fund held during the month.
3. Any payments made by the Funds to FSS pursuant to this Plan
will be made pursuant to a "Shareholder Services Agreement" between FSS and
each of the Funds.
4. Quarterly in each year that this Plan remains in effect, FSS
shall prepare and furnish to the Boards of the Funds, and the Boards shall
review, a written report of the amounts expended under the Plan.
5. This Plan shall become effective with regard to each Fund
(i) after approval by majority votes of: (a) such Fund's Board; and (b)
the members of the Board of such Fund who are not interested persons of
such Fund and have no direct or indirect financial interest in the
operation of such Fund's Plan or in any related documents to the Plan
("Independent Trustees or Directors"), cast in person at a meeting called
for the purpose of voting on the Plan.
6. This Plan shall remain in effect with respect to each Fund
presently set forth on an exhibit and any subsequent Fund added pursuant to
an exhibit during the initial year of this Plan for the period of one year
from the date set forth above and may be continued thereafter if this Plan
is approved with respect to each Fund at least annually by a majority of
the relevant Fund's Board and a majority of the Independent Trustees or
Directors, of such Fund as applicable, cast in person at a meeting called
for the purpose of voting on the renewal of such Plan. If this Plan is
adopted with respect to a fund after the first annual approval by the
Trustees or Directors as described above, this Plan will be effective as to
that Fund at such time as Exhibit 1 hereto is amended to add such Fund and
will continue in effect until the next annual approval of this Plan by the
Funds' Boards and thereafter for successive periods of one year subject to
approval as described above.
7. All material amendments to this Plan must be approved by a vote
of the Board of each Fund and of the Independent Directors or Trustees of
such Fund, cast in person at a meeting called for such purpose.
8. This Plan may be terminated as follows:
(a) at any time, without the payment of any penalty, by the
vote of a majority of the Independent Board Members of any Fund or
by a vote of a majority of the outstanding voting securities of any
Fund as defined in the Investment Company Act of 1940 on sixty (60)
days' written notice to the parties to this Agreement; or
(b) by any party to the Agreement without cause by giving
the other party at least sixty (60) days' written notice of its
intention to terminate.
9. While this Plan shall be in effect, the selection and
nomination of Independent Directors or Trustees of each Fund shall be
committed to the discretion of the Independent Directors or Trustees then
in office.
10. All agreements with any person relating to the implementation
of this Plan shall be in writing and any agreement related to this Plan
shall be subject to termination, without penalty, pursuant to the
provisions of Paragraph 8 herein.
11. This Plan shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
Witness the due execution hereof this as of the date set forth above.
Investment Companies (listed
on Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Shareholder Services
By: /s/ James J. Dolan
Title: President
Attest: /s/ John W. McGonigle
John W. McGonigle
EXHIBIT 1
FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
Exhibit 9(v) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
SHAREHOLDER SERVICES SUB-CONTRACT
This Agreement is made between the Financial Institution executing
this Agreement ("Provider") and Federated Shareholder Services ("FSS") on
behalf of the investment companies listed in Exhibit A hereto (the
"Funds"), for whom FSS administers the Shareholder Services Plan ("Plan")
and who have approved this form of Agreement. In consideration of the
mutual covenants hereinafter contained, it is hereby agreed by and between
the parties hereto as follows:
1. FSS hereby appoints Provider to render or cause to be rendered
personal services to shareholders of the Funds and/or the maintenance of
accounts of shareholders of the Funds ("Services"). Provider agrees to
provide Services which, in its best judgment, are necessary or desirable
for its customers who are investors in the Funds. Provider further agrees
to provide FSS, upon request, a written description of the Services which
Provider is providing hereunder.
2. During the term of this Agreement, the Funds will pay the
Provider fees as set forth in a written schedule delivered to the Provider
pursuant to this Agreement. The fee schedule for Provider may be changed
by FSS sending a new fee schedule to Provider pursuant to Paragraph 9 of
this Agreement. For the payment period in which this Agreement becomes
effective or terminates, there shall be an appropriate proration of the fee
on the basis of the number of days that this Agreement is in effect during
the quarter. To enable the Funds to comply with an applicable exemptive
order, Provider represents that the fees received pursuant to this
Agreement will be disclosed to its customers, will be authorized by its
customers, and will not result in an excessive fee to the Provider.
3. The Provider understands that the Department of Labor views
ERISA as prohibiting fiduciaries of discretionary ERISA assets from
receiving shareholder service fees or other compensation from funds in
which the fiduciary's discretionary ERISA assets are invested. To date,
the Department of Labor has not issued any exemptive order or advisory
opinion that would exempt fiduciaries from this interpretation. Without
specific authorization from the Department of Labor, fiduciaries should
carefully avoid investing discretionary assets in any fund pursuant to an
arrangement where the fiduciary is to be compensated by the fund for such
investment. Receipt of such compensation could violate ERISA provisions
against fiduciary self-dealing and conflict of interest and could subject
the fiduciary to substantial penalties.
4. The Provider agrees not to solicit or cause to be solicited
directly, or indirectly at any time in the future, any proxies from the
shareholders of a Fund in opposition to proxies solicited by management of
the Fund, unless a court of competent jurisdiction shall have determined
that the conduct of a majority of the Board of Trustees or Directors of the
Fund constitutes willful misfeasance, bad faith, gross negligence or
reckless disregard of their duties. This paragraph 4 will survive the term
of this Agreement.
5. This Agreement shall continue in effect for one year from the
date of its execution, and thereafter for successive periods of one year if
the form of this Agreement is approved at least annually by the Board of
each Fund, including a majority of the members of the Board of the Fund who
are not interested persons of the Fund and have no direct or indirect
financial interest in the operation of the Fund's Plan or in any related
documents to the Plan ("Disinterested Board Members") cast in person at a
meeting called for that purpose.
6. Notwithstanding paragraph 5, this Agreement may be terminated
as follows:
(a) at any time, without the payment of any penalty, by the
vote of a majority of the Disinterested Board Members of the Fund
or by a vote of a majority of the outstanding voting securities of
the Fund as defined in the Investment Company Act of 1940 on not
more than sixty (60) days' written notice to the parties to this
Agreement;
(b) automatically in the event of the Agreement's
assignment as defined in the Investment Company Act of 1940; and
(c) by either party to the Agreement without cause by
giving the other party at least sixty (60) days' written notice of
its intention to terminate.
7. The Provider agrees to obtain any taxpayer identification
number certification from its customers required under Section 3406 of the
Internal Revenue Code, and any applicable Treasury regulations, and to
provide the Fund or its designee with timely written notice of any failure
to obtain such taxpayer identification number certification in order to
enable the implementation of any required backup withholding.
8. The execution and delivery of this Agreement have been
authorized by the Trustees of FSS and signed by an authorized officer of
FSS, acting as such, and neither such authorization by such Trustees nor
such execution and delivery by such officer shall be deemed to have been
made by any of them individually or to impose any liability on any of them
personally, and the obligations of this Agreement are not binding upon any
of the Trustees or shareholders of FSS, but bind only the trust property of
FSS as provided in the Declaration of Trust of FSS.
9. Notices of any kind to be given hereunder shall be in writing
(including facsimile communication) and shall be duly given if delivered to
Provider at the address set forth below and if delivered to FSS at
Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President.
10. This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the
subject hereof whether oral or written. If any provision of this Agreement
shall be held or made invalid by a court or regulatory agency decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. Subject to the provisions of Sections 5 and 6, hereof,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and shall be governed by
Pennsylvania law; provided, however, that nothing herein shall be construed
in a manner inconsistent with the Investment Company Act of 1940 or any
rule or regulation promulgated by the Securities and Exchange Commission
thereunder.
11. This Agreement may be executed by different parties on separate
counterparts, each of which, when so executed and delivered, shall be an
original, and all such counterparts shall together constitute one and the
same instrument.
12. This Agreement shall not be assigned by any party without the
prior written consent of FSS in the case of assignment by Provider, or of
Provider in the case of assignment by FSS, except that any party may assign
to a successor all of or a substantial portion of its business to a party
controlling, controlled by, or under common control with such party.
13. This Agreement may be amended by FSS from time to time by the
following procedure. FSS will mail a copy of the amendment to the
Provider's address, as shown below. If the Provider does not object to the
amendment within thirty (30) days after its receipt, the amendment will
become part of the Agreement. The Provider's objection must be in writing
and be received by FSS within such thirty days.
14. This Agreement may be terminated with regard to a particular
Fund or Class at any time, without the payment of any penalty, by FSS or by
the vote of a majority of the Disinterested Trustees or Directors, as
applicable, or by a majority of the outstanding voting securities of the
particular Fund or Class on not more than sixty (60) days' written notice
to the Provider. This Agreement may be terminated by Provider on sixty
(60) days' written notice to FSS.
15. The Provider acknowledges and agrees that FSS has entered into
this Agreement solely in the capacity of agent for the Funds and
administrator of the Plan. The Provider agrees not to claim that FSS is
liable for any responsibilities or amounts due by the Funds hereunder.
[Provider]
Address
City State Zip Code
Dated: By:
Authoried Signature
Title
Print Name of Authorized Signature
FEDERATED SHAREHOLDER SERVICES
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By:
Vice President
EXHIBIT A to Shareholder Services Sub-Contract with
Funds covered by this Agreement:
Shareholder Service Fees
1. During the term of this Agreement, FSS will pay Provider a
quarterly fee. This fee will be computed at the annual rate of ______ of
the average net asset value of shares of the Funds held during the quarter
in accounts for which the Provider provides Services under this Agreement,
so long as the average net asset value of Shares in the Funds during the
quarter equals or exceeds such minimum amount as FSS shall from time to
time determine and communicate in writing to the Provider.
2. For the quarterly period in which the Agreement becomes
effective or terminates, there shall be an appropriate proration of any fee
payable on the basis of the number of days that the Agreement is in effect
during the quarter.
Exhibit 10 under Form N-1A
Exhibit 5 under Item 601/Reg. S-K
HOUSTON, HOUSTON & DONNELLY
ATTORNEYS AT LAW
2510 CENTRE CITY TOWER
WILLIAM McC. HOUSTON PITTSBURGH, PA. 15222
FRED CHALMERS HOUSTON, JR. __________
THOMAS J. DONNELLY
JOHN F. MECK (412) 471-5828 FRED CHALMERS HOUSTON
MARIO SANTILLIOR FAX (412) 471-0738 (1914 - 1971)
THEODORE M. HAMMER
July 17, 1991
The Board of Directors of
Fortress Adjustable Rate U.S. Government Fund, Inc.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
Fortress Adjustable Rate U.S. Government Fund, Inc. ("Corporation")
proposes to offer and sell shares of its common stock in the manner and on
the terms set forth in its registration statement filed with the Securities
and Exchange Commission under the Securities Act of 1933 (File No. 33-
41104).
As counsel we have participated in the organization of the
Corporation and the preparation of its amended registration statement under
the Securities Act of 1933 and the Investment Company Act of 1940.
Further, we have examined and are familiar with the Charter of the
Corporation, its Bylaws and other corporate records and documents deemed
relevant.
On the basis of the foregoing, it is our opinion that:
1. The Corporation has been duly organized and it is legally
existing under the laws of the State of Maryland.
2. The Corporation is authorized to issue 5,000,000,000 shares of
common stock of a par value of $0.0001 per share.
3. The authorized and unissued common stock of the Corporation when
issued in the manner described in the prospectus comprising a part of the
Corporation's registration statement under the Securities Act of 1933 for
consideration equal to or exceeding its par value and not less than its net
asset value as required by the Charter of the Corporation will be legally
issued and outstanding common stock of the Corporation and will be fully
paid and non-assessable.
We hereby consent to the filing of this opinion as a part of the
Corporation's registration statement filed with the Securities and Exchange
Commission under the Securities Act of 1933 and as part of any application
or registration statement filed under the securities laws of the States of
the United States.
We further consent to the reference to this opinion and the reference
to us as Legal Counsel to the Corporation in the prospectus, registration
statements and applications.
Very truly yours,
HOUSTON, HOUSTON & DONNELLY
By: Thomas J. Donnelly
TJD/heh
Exhibit 13 under Form N-1A
Exhibit 99 under Item 601/Reg. S-K
FEDERATED ADVISERS
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(412) 288-1900
July 16, 1991
Fortress Adjustable Rate U.S.
Government Fund, Inc.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
Federated Advisers agrees to purchase 10,000 shares of Fortress
Adjustable Rate U.S. Government Fund, Inc. at the cost of $10.00 each.
These shares are purchased for investment purposes and Federated Advisers
has no present intention of redeeming these shares.
Very truly yours,
/s/ John A. Staley, IV
John A. Staley, IV
President
Exhibit 16 under Form N-1A
Exhibit 99 under Item 601/Reg. S-K
FUND NAME: FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT
FUND, INC.
COMPUTATION OF SEC YIELD
AS OF: AUGUST 30, 1991
DIVIDEND AND/OR INTEREST INCOME $179,351
FOR THE 30 DAYS ENDED
NET EXPENSES FOR THE PERIOD $5,708.73
AVG DAILY SHARES OUTSTANDING AND 3,224,453
ENTITLED TO RECEIVE DIVIDENDS
MAXIMUM OFFERING PRICE PER SHARES $10.00
AS OF 08-30-91
UNDISTRIBUTED NET INCOME $0.00970
YIELD= 2[( $179,350.76 - 5708.73)+1) 6-1]= 6.56%
3224453.1* (10-0.0097)
<TABLE>
<CAPTION>
DECLARED: MONTHLY Schedule for Computation FUND: FORTRESS
ADJUSTABLE RATE U.S. GOV'T FUND INC.
PAID; MONTHLY of Fund Performance Data Returns Since
Inception ending 08/30/91
------------------------ FYE: February 29
Average Total Return
--------- ----------
Initial Investment of: $1,000.00 on 07/25/91
Offering Price/Shares = $10.11
NAV = $10.01
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING REINVESTMENT
ENDING TOTAL
REINVESTMENT PERIOD DIVIDEND
CAPITAL GAIN PRICE PERIOD PERIOD
END INVESTMENT
DATES SHARE BASE PER SHARE PER
SHARE PER SHARE SHARE BASE
PRICE VALUE
- ------------ ---------- --------- ------------ --
- ---------- ---------- ---------- ----------
07/25/91 98.912 0.000000000
0.00000$10.0198.912$10.01$990.11
07/31/91 98.912 0.000000000
0.00000$10.0098.912$10.00$989.12
08/26/91 98.912 0.068000000
0.00000$9.0099.585$9.99$994.86
08/30/91 99.585 0.000000000
0.00000$9.9399.585$9.93$998.38
$1,000 (1+T) = Ending Redeemable Value
T = -1.16%
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Feb-28-1995
<PERIOD-END> Feb-28-1995
<INVESTMENTS-AT-COST> 413,741,649
<INVESTMENTS-AT-VALUE> 415,334,317
<RECEIVABLES> 6,272,855
<ASSETS-OTHER> 204,695
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 421,811,867
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,717,045
<TOTAL-LIABILITIES> 2,717,045
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 464,011,777
<SHARES-COMMON-STOCK> 44,298,857
<SHARES-COMMON-PRIOR> 81,534,652
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (465,955)
<ACCUMULATED-NET-GAINS> (46,043,668)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,592,668
<NET-ASSETS> 419,094,822
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 33,065,010
<OTHER-INCOME> 0
<EXPENSES-NET> 5,839,886
<NET-INVESTMENT-INCOME> 27,225,124
<REALIZED-GAINS-CURRENT> (24,587,433)
<APPREC-INCREASE-CURRENT> 1,918,498
<NET-CHANGE-FROM-OPS> 4,556,189
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 26,705,009
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 353,704
<NUMBER-OF-SHARES-SOLD> 4,668,005
<NUMBER-OF-SHARES-REDEEMED> 43,186,417
<SHARES-REINVESTED> 1,282,617
<NET-CHANGE-IN-ASSETS> (379,118,457)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (21,456,235)
<OVERDISTRIB-NII-PRIOR> (112,251)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,435,227
<INTEREST-EXPENSE> 83,230
<GROSS-EXPENSE> 7,548,538
<AVERAGE-NET-ASSETS> 572,861,718
<PER-SHARE-NAV-BEGIN> 9.790
<PER-SHARE-NII> 0.470
<PER-SHARE-GAIN-APPREC> (0.320)
<PER-SHARE-DIVIDEND> 0.470
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.010
<PER-SHARE-NAV-END> 9.460
<EXPENSE-RATIO> 102
<AVG-DEBT-OUTSTANDING> 831,288
<AVG-DEBT-PER-SHARE> 0.014
</TABLE>
