FIXED INCOME SECURITIES, INC.
FEDERATED LIMITED TERM FUND
FEDERATED LIMITED TERM MUNICIPAL FUND
FEDERATED STRATEGIC INCOME FUND
SUPPLEMENT TO PROSPECTUSES DATED JANUARY 31, 1999
At a special meeting of shareholders to be held on November 30, 1999,
shareholders of the above-named Funds will be asked to vote on the
changes described below. If approved by shareholders, these changes will
take effect on or after December 1, 1999. Shareholders will be notified
if any of these changes are not approved at the special meeting or any
adjournment thereof. Please keep this supplement for your records.
I. Shareholders will be asked to consider the following proposals:
(1) To elect seven Directors.
(2) To make changes to the fundamental investment policies of each
Fund (except as otherwise noted):
(a) To amend the Funds' fundamental investment policies regarding
diversification to read as follows:
"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; securities issued or
guaranteed by the government of the United States or its
agencies or instrumentalities and repurchase agreements
collateralized by such U.S. government securities; and
securities of other investment companies) if, as a result,
more than 5% of the value of its total assets would be
invested in the securities of that issuer, or the Fund would
own more than 10% of the outstanding voting securities of that
issuer."
(b) To amend the Funds' fundamental investment policies regarding
borrowing money and issuing senior securities to read as follows:
"The Fund may borrow money, directly or indirectly, and issue
senior securities to the maximum extent permitted under the 1940 Act."
(c) To amend the Funds' fundamental investment policies regarding
investments in real estate to read as follows:
"The Fund may not purchase or sell real estate, provided that
this restriction does not prevent the Fund from investing in
issuers which invest, deal, or otherwise engage in
transactions in real estate or interests therein, or investing
in securities that are secured by real estate or interests
therein. The Fund may exercise its rights under agreements
relating to such securities, including the right to enforce
security interests and to hold real estate acquired by reason
of such enforcement until that real estate can be liquidated
in an orderly manner."
(d) To amend the Funds' fundamental investment policies regarding
investments in commodities to read as follows:
"The Fund may not purchase or sell physical commodities,
provided that the Fund may purchase securities of companies that deal in
commodities."
(e) To amend the Funds' fundamental investment policies regarding
underwriting securities to read as follows:
"The Fund may not underwrite the securities of other issuers,
except that the Fund may engage in transactions involving the
acquisition, disposition or resale of its portfolio
securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933."
(f)To amend the Funds' fundamental investment policies regarding
lending by the Funds to read as follows (for Federated Limited
Term Fund and Federated Strategic Income Fund ONLY):
"The Fund may not make loans, provided that this restriction
does not prevent the Fund from purchasing debt obligations,
entering into repurchase agreements, lending its assets to
broker/dealers or institutional investors and investing in
loans, including assignments and participation interests."
(g)To amend the Funds' fundamental investment policies regarding
concentration of the Funds' investments in the securities of
companies in the same industry to read as follows:
"The Fund will not make investments that will result in the
concentration of its investments in the securities of issuers
primarily engaged in the same industry. Government securities,
municipal securities and bank instruments will not be deemed
to constitute an industry."
(h) To amend, and to make non-fundamental, the Funds' fundamental
investment policies regarding buying securities on margin to read as follows:
"The Fund will not purchase securities on margin, provided
that the Fund may obtain short-term credits necessary for the
clearance of purchases and sales of securities, and further
provided that the Fund may make margin deposits in connection
with its use of financial options and futures, forward and
spot currency contracts, swap transactions and other financial
contracts or derivative instruments."
(i) To amend, and to make non-fundamental, the Funds' fundamental
investment policies regarding pledging assets to read as follows:
"The Fund will not mortgage, pledge, or hypothecate any of its
assets, provided that this shall not apply to the transfer of
securities in connection with any permissible borrowing or to
collateral arrangements in connection with permissible
activities."
(3) To eliminate the Funds' fundamental investment policies
prohibiting selling securities short (for Federated Limited Term
Fund and Federated Strategic Income Fund ONLY).
(4) To approve amendments to the Articles of Incorporation of Fixed
Income Securities, Inc.:
(a) To permit the Board of Directors to liquidate assets of a
series or class without seeking shareholder approval to the
extent permitted under Maryland law; and
(b) To permit the Board of Directors to change the name of a
series or class without shareholder approval.
II. The following actions have been taken by the Board of Directors with
regard to certain non-fundamental investment policies and limitations of the
Funds:
(1) Approved the elimination of the following non-fundamental
investment limitations of the Funds:
(a) Removed the Fund's non-fundamental investment limitation
regarding purchasing puts, calls, straddles, spreads, or any
combination of them (for Federated Limited Term Fund ONLY);
(b) Removed the Fund's non-fundamental investment limitation
regarding selling securities short (for Federated Limited Term Municipal Fund
ONLY);
(c) Removed the Fund's non-fundamental investment limitation
regarding options (for Federated Strategic Income Fund ONLY);
(d)Removed the Fund's non-fundamental investment limitation
regarding investing in securities owned by officers and
Directors (for Federated Strategic Income Fund ONLY); and
(e) Removed the Fund's non-fundamental investment limitation
regarding underwriting securities (for Federated Strategic Income Fund ONLY).
(2) Approved the elimination of the following undertakings of the
Funds:
For Federated Limited Term Fund and Federated Strategic Income Fund:
"The Fund does not expect to borrow money or pledge securities in
excess of 5% of the value of its assets during the coming fiscal year."
For Federated Limited Term Municipal Fund:
"The Fund does not expect to borrow money or pledge securities during the
coming fiscal year."
(3) Approved revisions to the following non-fundamental investment
policies of the Funds:
(a)Approved revisions to the Funds' non-fundamental policies
regarding investments in illiquid securities to read as
follows (for Federated Limited Term Municipal Fund and
Federated Strategic Income Fund ONLY):
"The Fund will not purchase securities for which there is no
readily available market, or enter into repurchase agreements
or purchase time deposits maturing in more than seven days, if
immediately after and as a result, the value of such
securities would exceed, in the aggregate, 15% of the Fund's
net assets."
(b)Approved revisions to the Fund's non-fundamental investment
policy regarding lending assets to read as follows (for
Federated Limited Term Municipal Fund ONLY):
"The Fund may not make loans, provided that this restriction
does not prevent the Fund from purchasing debt obligations,
entering into repurchase agreements, lending its assets to
broker/dealers or institutional investors and investing in
loans, including assignments and participation interests."
(4) Approved the adoption of the following non-fundamental investment
policies for the Funds:
(a)Adopted a policy regarding investing in other investment
companies that states (for Federated Limited Term Fund and
Federated Limited Term Municipal Fund ONLY):
"The Fund may invest its assets in securities of other
investment companies, including securities of affiliated
investment companies, as an efficient means of carrying out
its investment policies and managing its uninvested cash."
(b)Adopted a policy providing that Federated Limited Term Fund
may purchase call options on financial futures contracts and
portfolio securities (for Federated Limited Term Fund ONLY);
(c)Adopted a policy providing that Federated Strategic Income
Fund may purchase call options on securities indices and U.S.
Treasury securities (for Federated Strategic Income Fund
ONLY); and
(d) Adopted a policy regarding temporary investments for
Federated Strategic Income Fund which states (for Federated Strategic Income
Fund ONLY):
"The Fund may temporarily depart from its principal investment
strategies by investing its assets in cash, cash items, and
shorter-term, higher quality debt securities and similar
obligations."
(5) Approved the adoption of the following non-fundamental investment
limitations pertaining to concentration by the Funds:
"(a) utility companies will be divided according to their
services (for example, gas, gas transmission, electric and
telephone will be considered a separate industry); (b) financial
service companies will be classified according to the end users
of their services (for example, automobile finance, bank finance
and diversified finance will each be considered a separate
industry); and (c) asset-backed securities will be classified
according to the underlying assets securing such securities. To
conform to the current view of the SEC staff that only domestic
bank instruments may be excluded from industry concentration
limitations, as a matter of non-fundamental policy, the Fund will
not exclude foreign bank instruments from industry concentration
limitation tests so long as the policy of the SEC remains in
effect. In addition, investments in bank instruments, and
investments in certain industrial development bonds funded by
activities in a single industry, will be deemed to constitute
investment in an industry, except when held for temporary
defensive purposes. The investment of more than 25% of the value
of the Fund's total assets in any one industry will constitute
`concentration.'"
(6) Approved the addition of the following non-fundamental investment
limitation for each Fund when applying its commodities
restriction:
"As a matter of non-fundamental operating policy, for purposes of
the commodities policy, investments in transactions involving
futures contracts and options, forward currency contracts, swap
transactions and other financial contracts that settle by payment
of cash are not deemed to be investments in commodities."
September 24, 1999
Federated Investors
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Cusip 338319106
Cusip 338319403
Cusip 338319700
Cusip 338319866
Cusip 338319809
