FEDERATED INSTITUTIONAL SHORT-TERM GOVERNMENT FUND
(A PORTFOLIO OF FEDERATED INSTITUTIONAL TRUST)
PROSPECTUS
The shares of Federated Institutional Short-Term Government Fund (the "Fund")
offered by this prospectus represent interests in a diversified portfolio of
securities which is a portfolio of Federated Institutional Trust (the "Trust"),
an open-end management investment company (a mutual fund).
The investment objective of the Fund is current income. The Fund invests only in
U.S. government securities. Shares are sold at net asset value.
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 RISK,
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 September
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, which is in paper form only, or a paper copy of this prospectus, if
you have received your prospectus electronically, free of charge by calling
1-800-235-4669. To obtain other information or make inquiries about the Fund,
contact the Fund at the address listed in the back of this prospectus.
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 September 30, 1995
TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES 1
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GENERAL INFORMATION 2
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INVESTMENT INFORMATION 2
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Investment Objective 2
Investment Policies 2
Portfolio Turnover 4
Investment Limitations 4
TRUST INFORMATION 4
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Management of the Trust 4
Distribution of Fund Shares 5
Administration of the Fund 5
NET ASSET VALUE 6
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INVESTING IN THE FUND 7
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Share Purchases 7
Minimum Investment Required 7
What Shares Cost 7
Subaccounting Services 8
Certificates and Confirmations 8
Dividends 8
Capital Gains 8
REDEEMING SHARES 8
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Telephone Redemption 8
Written Requests 9
Accounts With Low Balances 9
SHAREHOLDER INFORMATION 10
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Voting Rights 10
Massachusetts Partnership Law 10
TAX INFORMATION 10
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Federal Income Tax 10
Pennsylvania Corporate and Personal
Property Taxes 11
PERFORMANCE INFORMATION 11
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FINANCIAL STATEMENTS 12
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REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS 13
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ADDRESSES 14
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SUMMARY OF FUND EXPENSES
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<TABLE>
<S>
<C> <C>
SHAREHOLDER TRANSACTION EXPENSES
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)...................................... None
Redemption Fee (as a percentage of amount redeemed, if
applicable)........................... None
Exchange
Fee.............................................................................
.... None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(As a percentage of projected average net
assets)*
<S>
<C> <C>
Management Fee (after waiver)
(1)............................................................
0.00%
12b-1
Fee.............................................................................
....... None
Total Other Expenses (after expense
reimbursement)........................................... 0.45%
Shareholder Services Fee
(2)............................................................ 0.00%
Total Fund Operating Expenses
(3).................................................. 0.45%
</TABLE>
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(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of the management fee. The adviser can terminate the
voluntary waiver at any time at its sole discretion. The maximum management
(2) The Fund has no present intention of paying or accruing the shareholder
services fee during the fiscal year ending July 31, 1996. If the Fund were
paying or accruing the shareholder services fee, the Fund would be able to
pay up to 0.25% of its average daily net assets for shareholder services
fee. See "Trust Information."
(3) The total Fund operating expenses are estimated to be 0.89% absent the
anticipated voluntary waiver of the management fee and the anticipated
voluntary reimbursement of certain other operating expenses.
* Total Fund operating expenses are estimated based on average expenses
expected to be incurred during the period ending July 31, 1996. During the
course of this period, expenses may be more or less than the average amount
shown.
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 "Trust Information" and "Investing in the Fund". Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE
1 year 3 years
<S>
<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................................................ $5 $14
</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. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING JULY 31,
1996.
GENERAL INFORMATION
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The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated June 9, 1994. The Declaration of Trust permits the Trust to offer
separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes.
Shares of the Fund are designed to give institutions a convenient means of
accumulating an interest in a professionally managed, diversified portfolio of
U.S. government securities. A minimum initial investment of $1,000,000 is
required.
Shares are currently sold and redeemed at net asset value without a sales charge
imposed by the Fund.
INVESTMENT INFORMATION
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INVESTMENT OBJECTIVE
The investment objective of the Fund is current income. The investment objective
cannot be changed without the 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.
Unless indicated otherwise, the investment policies of the Fund may be changed
by the Board of Trustees ("Trustees") without the approval of shareholders.
Shareholders will be notified before any material change in these policies
becomes effective.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing only in U.S. government
securities with remaining maturities of 3-1/2 years or less. The prices of fixed
income securities fluctuate inversely to the direction of interest rates.
ACCEPTABLE INVESTMENTS. The U.S. government securities in which the Fund
invests are either issued or guaranteed by the U.S. government, its agencies, or
instrumentalities. These securities are limited to:
direct obligations of the U.S. Treasury such as U.S. Treasury bills,
notes, and bonds; and
obligations of U.S. government agencies or instrumentalities such as
Federal Home Loan Banks, Federal National Mortgage Association,
Government National Mortgage Association, Tennessee Valley Authority,
Export-Import Bank of the United States, Student Loan Marketing
Association, or Federal Home Loan Mortgage Corporation.
Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government, such as Government National Mortgage Association participation
certificates, are backed by the full faith and credit of the U.S. Treasury. No
assurances can be given that the U.S. government will
provide financial support to other agencies or instrumentalities, since it is
not obligated to do so. These obligations are supported by:
the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
the discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or
the credit of the agency or instrumentality.
REPURCHASE AGREEMENTS. The U.S. government securities in which the Fund invests
may be purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/ dealers, and other recognized financial
institutions sell U.S. government securities to the Fund and agree at the time
of sale to repurchase them at a mutually agreed upon time and price.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its 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 adviser
has determined are creditworthy under guidelines established by the Fund's
Trustees and will receive collateral 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. 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 purchased may vary from the purchase prices.
Accordingly, the Fund may pay more/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 in 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.
INVESTING IN OTHER INVESTMENT COMPANIES. The Fund may invest up to 10% of its
assets in securities of other investment companies. It should be noted that
investment companies incur certain expenses, such as management fees, and,
therefore, any investment by the Fund in shares of other investment companies
would be subject to such duplicate expenses.
PORTFOLIO TURNOVER
The securities in the Fund's portfolio will be sold whenever the Fund's
investment adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular security
may have been held.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a money market or other portfolio
instrument, as applicable, 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 money up to one-third of the value of its
total assets and pledge assets as necessary to secure such borrowings.
The above investment limitation cannot be changed without shareholder approval.
The following limitation, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in this limitation becomes effective.
The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements providing for settlement in
more than seven days after notice.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. The Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser (the "adviser"), subject to direction
by the Trustees.
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.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Board of Trustees,
and could result in severe penalties.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory fee
equal to .40 of 1% of the Fund's average daily net assets. The adviser has also
undertaken to reimburse the Fund for operating expenses in excess of limitations
established by certain states. This does not include reimbursement to the Fund
of any expenses incurred by shareholders who use the transfer agent's
subaccounting facilities.
ADVISER'S BACKGROUND. Federated Management, 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 Management 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. With over $72 billion invested across more than 260 funds
under management and/or administration by its subsidiaries, as of Decem-
ber 31, 1994, Federated Investors is one of the largest mutual fund investment
managers in the United States. With more than 1,750 employees, Federated
continues to be led by the management who founded the company in 1955. Federated
funds are presently at work in and through 4,000 financial institutions
nationwide. More than 100,000 investment professionals have selected Federated
funds for their clients.
Susan M. Nason has been the Fund's portfolio manager since inception. 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. Ms. Nason is a Chartered
Financial Analyst and received her M.B.A. in Finance from Carnegie Mellon
University.
Joseph M. Balestrino has been the Fund's portfolio manager since August 1995.
Mr. Balestrino joined Federated Investors in 1986 and has been a Vice President
of the Fund's investment adviser since 1995. Mr. Balestrino served as an
Investment Analyst of the investment adviser from 1989 until 1991, and from 1986
until 1989 he acted as Project Manager in the Product Development Department.
Mr. Balestrino is a Chartered Financial Analyst and received his Master's Degree
in Urban and Regional Planning from the University of Pittsburgh.
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.
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 Funds") as specified
below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY NET
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.
SHAREHOLDER SERVICES. The Trust has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Trust may make payments up to 0.25 of 1% of the
average daily net asset value of the Fund, computed at an annual rate, to obtain
certain personal services for shareholders and provide the maintenance of
shareholder accounts ("shareholder services"). From time to time and for such
periods as deemed appropriate, the amount stated above may be reduced
voluntarily. Under the Shareholder Services Agreement, 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 Trust and Federated Shareholder Services.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. _Federated Services Company,
Boston, Massachusetts, 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 Ernst & Young
LLP, Pittsburgh, Pennsylvania.
NET ASSET VALUE
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The Fund's net asset value per share fluctuates. The net asset value for shares
is determined by adding the interest of the shares in the market value of all
securities and other assets of the Fund, subtracting the interest of the shares
in the liabilities of the Fund and those attributable to shares, and dividing
the remainder by the total number of shares outstanding.
INVESTING IN THE FUND
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SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open for
business. Shares may be purchased either by wire or mail.
To purchase shares, open an account by calling Federated Securities Corp.
Information needed to establish an account will be taken over the telephone. The
Fund reserves the right to reject any purchase request.
BY WIRE. To purchase shares by Federal Reserve wire, call the Fund before 4:00
p.m. (Eastern time) to place an order. The order is considered received
immediately. Payment by federal funds must be received before 3:00 p.m. (Eastern
time) on the next business day following the order. Federal funds should be
wired as follows: Federated Services Company, c/o State Street Bank and Trust
Company, Boston, Massachusetts; Attention: EDGEWIRE; For Credit to: Federated
Institutional Short-Term Government Fund; Fund Number (this number can be found
on the account statement or by contacting the Fund); Group Number or Wire Order
Number; Nominee or Institution Name; and ABA Number 011000028.
BY MAIL. To purchase shares by mail, send a check made payable to Federated
Institutional Short-Term Government Fund to: Federated Services Company, P.O.
Box 8600, Boston, Massachusetts 02266-8600. Orders by mail are considered
received after payment by check is converted by State Street Bank into federal
funds. This is normally the next business day after State Street Bank receives
the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in shares is $1,000,000. An institutional
investor's minimum investment will be calculated by combining all accounts it
maintains with the Fund. Accounts established through a non-affiliated bank or
broker may be subject to a smaller minimum investment.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund. Investors who purchase
shares through a non-affiliated bank or broker may be charged an additional
service fee by that bank or broker.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, 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; or (iii) the following holidays: New
Year's Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The transfer agent charges a
fee based on the level of subaccounting services rendered. Institutions holding
shares in a fiduciary, agency, custodial, or similar capacity may charge or pass
through subaccounting fees as part of or in addition to normal trust or agency
account fees. They may also charge fees for other services provided which may be
related to the ownership of shares. This prospectus should, therefore, be read
together with any agreement between the customer and the institution with regard
to the services provided, the fees charged for those services, and any
restrictions and limitations imposed.
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
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
Dividends are declared daily and paid monthly. Dividends are declared just prior
to determining net asset value. If an order for shares is placed on the
preceding business day, shares purchased by wire begin earning dividends on the
business day wire payment is received by the Fund. If the order for shares and
payment by wire are received on the same day, shares begin earning dividends on
the next business day. Shares purchased by check begin earning dividends on the
business day after the check is converted by the transfer agent into federal
funds. Dividends are automatically reinvested on payment dates in additional
shares unless cash payments are requested by contacting the Fund.
CAPITAL GAINS
Capital gains realized by the Fund, if any, will be distributed at least once
every 12 months.
REDEEMING SHARES
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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 by telephone request or by written request.
TELEPHONE REDEMPTION
Shareholders may redeem their shares by telephoning the Fund before 4:00 p.m.
(Eastern time). Telephone redemption instructions may be recorded. All proceeds
will normally be wire transferred the following business day, but in no event
more than seven days, to the shareholder's account at a domestic commercial bank
that is a member of the Federal Reserve System. If at any time, the Fund
shall determine it necessary to terminate or modify this method of redemption,
shareholders would be promptly notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as written requests, should be considered. If
reasonable procedures are not followed by the Fund, it may be liable for losses
due to unauthorized or fraudulent telephone instructions.
WRITTEN REQUESTS
Shares may also be redeemed by sending a written request to the Fund. Call the
Fund for specific instructions before redeeming by letter. The shareholder will
be asked to provide in the request his name, the Fund name, his account number,
and the share or dollar amount requested. If share certificates have been
issued, they must be properly endorsed and should be sent by registered or
certified mail with the written request.
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
Exchange;
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. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $1,000,000. This
requirement does not apply, however, if the balance falls below $1,000,000
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.
SHAREHOLDER INFORMATION
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VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's or
the Fund's operation and for the election of Trustees under certain
circumstances. As of September 6, 1995, Federated Management, Pittsburgh,
Pennsylvania, owned 99.84% of the voting securities of the Fund, and, therefore,
may, for certain purposes, be deemed to control the Fund and be able to affect
the outcome of certain matters presented for a vote of shareholders.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders for this purpose shall be called by the
Trustees upon the written request of shareholders owning at least 10% of the
outstanding shares of the Trust entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect the
shareholders of the Fund, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of its shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument that the Trust or its
Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required to use its property to protect or compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust itself cannot meet its obligations to indemnify shareholders
and pay judgments against them from its assets.
TAX INFORMATION
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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 received. This applies whether dividends
and distributions are received in cash or as additional shares.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Trust:
the Fund is not subject to Pennsylvania corporate or personal property
taxes; and
Fund shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Fund would be subject to such
taxes if owned directly by residents of those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
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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 Fund is sold without any sales load or other similar non-recurring charges.
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.
FEDERATED INSTITUTIONAL SHORT-TERM GOVERNMENT FUND
(A PORTFOLIO OF FEDERATED INSTITUTIONAL TRUST)
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1995
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<S>
<C> <C>
ASSETS:
- --------------------------------------------------------------------------------
- ----------------------
Total investments in securities, at amortized cost and value
$109,982
- --------------------------------------------------------------------------------
- ----------------------
Cash
3,092
- --------------------------------------------------------------------------------
- ----------------------
Income receivable
18
- --------------------------------------------------------------------------------
- ---------------------- ----------
Total assets
113,092
- --------------------------------------------------------------------------------
- ----------------------
LIABILITIES:
- --------------------------------------------------------------------------------
- -----------
Income distribution payable
$471
- --------------------------------------------------------------------------------
- -----------
Accrued expenses
12,466
- --------------------------------------------------------------------------------
- ----------- ---------
Total liabilities
12,937
- --------------------------------------------------------------------------------
- ---------------------- ----------
Net Assets for 10,016 shares outstanding
$100,155
- --------------------------------------------------------------------------------
- ---------------------- ----------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
- ----------------------
Paid in capital
$100,155
- --------------------------------------------------------------------------------
- ---------------------- ----------
Total Net Assets
$100,155
- --------------------------------------------------------------------------------
- ---------------------- ----------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
($100,155 / 10,016 shares outstanding)
$10.00
- --------------------------------------------------------------------------------
- ---------------------- ----------
</TABLE>
Notes:
(1) Federated Institutional Trust (the "Trust") was established as a
Massachusetts business trust under a Declaration of Trust dated June 9,
1994, and has no operations since that date other than those relating to
organizational matters, including the issuance on August 25, 1994 of 15
shares of the Federated Institutional Short-Term Government Fund (the
"Fund") at $10.00 per share to Federated Administrative Services, the
Administrator to the Fund. For the period from August 15, 1994 (start of
business) to July 31, 1995 net investment income was distributed in cash or
in reinvested shares to the Fund's Administrator. Organizational expenses
and start-up administrative services expenses incurred by the Fund,
estimated at $33,100 and $31,250, respectively, were borne initially by the
Administrator. The Fund has agreed to reimburse the Administrator for the
organizational expenses and start-up administrative expenses during the
five year period following September 13, 1994 (date the Fund became
effective.)
(2) Reference is made to "Management of the Trust," "Administration of the
Fund," and "Tax Information," in this Prospectus for a description of the
investment advisory fee, administration and other services and other
federal tax aspects of the Fund.
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
Federated Institutional Trust:
We have audited the accompanying statement of assets and liabilities of
Federated Institutional Short-Term Government Fund as of July 31, 1995. This
statement of assets and liabilities is the responsibility of the Fund's
management. Our responsibility is to express an opinion on this statement of
assets and liabilities based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities presents fairly, in all
material respects, the net assets of the Federated Institutional Short-Term
Government Fund as of July 31, 1995 in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
September 7, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Institutional Short-Term
Federated Investors Tower
Government Fund
Pittsburgh, Pennsylvania 15222-3779
- --------------------------------------------------------------------------------
- -------------------------------------
Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- --------------------------------------------------------------------------------
- -------------------------------------
Investment Adviser
Federated Management
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- --------------------------------------------------------------------------------
- -------------------------------------
Custodian
State Street Bank and P.O.
Box 8600
Trust Company
Boston, Massachusetts 02266-8600
- --------------------------------------------------------------------------------
- -------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O.
Box 8600
Boston, Massachusetts 02266-8600
- --------------------------------------------------------------------------------
- -------------------------------------
Independent Auditors
Ernst & Young LLP One
Oxford Centre
Pittsburgh, Pennsylvania 15219
- --------------------------------------------------------------------------------
- -------------------------------------
</TABLE>
FEDERATED INSTITUTIONAL
SHORT-TERM
GOVERNMENT FUND
PROSPECTUS
A Diversified Portfolio of
Federated Institutional Trust
An Open-End, Diversified
Management Investment Company
Prospectus dated September 30, 1995
Cusip 31420B102
G00352-01 (9/95)
Federated Institutional Short-Term Government Fund
(A Portfolio of Federated Institutional Trust)
Statement of Additional Information
This Statement of Additional Information should be read with the prospectus
of Federated Institutional Short-Term Government Fund (the "Fund") dated
September 30, 1995. This Statement is not a prospectus itself. To receive a
copy of the prospectus, write or call the Trust.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Statement dated September 30, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
General Information About the Fund 1
Investment Objective and Policies1
Types of Investments 1
Reverse Repurchase Agreements 1
When-Issued and Delayed Delivery Transactions 1
Repurchase Agreements 1
Portfolio Turnover 1
Investment Limitations 2
Federated Institutional Trust Management 4
Fund Ownership 8
Trustees Compensation 9
Trustee Liability 9
Investment Advisory Services 9
Adviser to the Fund 9
Advisory Fees 10
Other Related Services 10
Fund Administration 10
Transfer Agent and Dividend Disbursing Agent 10
Shareholder Services Agreement 10
Brokerage Transactions 11
Purchasing Shares 11
Conversion to Federal Funds 11
Determining Net Asset Value 11
Determining Market Value of Securities 11
Redeeming Shares 12
Redemption in Kind 12
Tax Status 12
The Fund's Tax Status 12
Shareholders' Tax Status 12
Total Return 13
Yield 13
Performance Comparisons 13
Duration 14
About Federated Investors 14
General Information About the Fund
Federated Institutional Short-Term Government Fund is a portfolio of
Federated Institutional Trust (the "Trust"). The Trust was established
as a Massachusetts business trust under a Declaration of Trust dated
June 9, 1994.
Investment Objective and Policies
The Fund's investment objective is current income. The Fund's investment
objective cannot be changed without approval of shareholders. Unless
otherwise indicated, the investment policies described below may be
changed by the Board of Trustees ("Trustees") without shareholder
approval. Shareholders will be notified before any material change in
these policies becomes effective.
Types of Investments
The Fund invests only in U.S. government securities with remaining
maturities of 3-1/2 years or less.
Reverse Repurchase Agreements
The Fund may also enter into reverse repurchase agreements. These
transactions are 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 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.
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 payment 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 has been 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.
Repurchase Agreements
The Fund or its custodian will take possession of the securities subject
to repurchase agreements, and these securities will be 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 filed for bankruptcy or became insolvent,
disposition of such 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 Trustees.
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. The portfolio
turnover rate for the period from August 15, 1994, (start of business)
to July 31, 1995, was 0%.
Investment Limitations
Selling Short and Buying On Margin
The Fund will not sell any securities short or purchase any
securities on margin but may obtain such short-term credits as may
be necessary for clearance of purchases and sales of securities.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities, except that the Fund may
borrow money in amounts up to one-third of the value of its total
assets, including the amount borrowed. The Fund will not borrow
money for investment leverage, but rather as a temporary,
extraordinary, or emergency measure to facilitate management of the
portfolio by enabling the Fund to, for example, 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 the value of its
total assets are outstanding.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets
except to secure permitted borrowings. In those cases, it may
mortgage, pledge, or hypothecate assets having a market value not
exceeding 15% of the value of total assets at the time of the
borrowing.
Concentration of Investments
The Fund will not invest 25% or more of the value of its total
assets in any one industry. However, investing in U.S. government
obligations shall not be considered investments in any one
industry.
Diversification of Investments
With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities issued by 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
such securities) if as a result more than 5% of the value of its
total assets would be invested in the securities of that issuer, or
if it would own more than 10% of the outstanding voting securities
of such issuer.
Investing in Real Estate
The Fund will not purchase or sell real estate, including limited
partnership interests, although it may invest in the 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, commodity
contracts, or commodity futures contracts.
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 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. This shall not prevent the Fund from purchasing or
holding U.S. government obligations, entering into repurchase
agreements, or engaging in other transactions where permitted by
the Fund's investment objective, policies and limitations or the
Trust's Declaration of Trust.
The above limitations cannot be changed without shareholder approval.
The following limitations may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
Investing in Restricted Securities
The Fund will not invest more than 10% of its total assets in
securities subject to restrictions on resale under the Securities
Act of 1933, except for restricted securities which meet the
criteria for liquidity as established by the Board of Trustees.
Investing in Illiquid Securities
The Fund will not invest more than 15% of the value of its net
assets in illiquid securities, including repurchase agreements
providing for settlement in more than seven days after notice and
certain restricted securities not determined by the Trustees to be
liquid.
Investing in Minerals
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, except it may
purchase the securities of issuers which invest or sponsor such
programs.
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 continuous operations, including the operation of
any predecessor.
Investing in Issuers Whose Securities Are Owned By Officers and
Trustees of the Trust
The Fund will not purchase or retain the securities of any issuer
if the officers and Trustees of the Trust or the Fund's 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.
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.
Investing in Securities of Other Investment Companies
The Fund will not own more than 3% of the total outstanding stock
of any investment company; will not invest more than 5% of its
total assets in any one investment company, or invest more than 10%
of its total assets in investment companies in general. 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. While it is the Fund's policy to waive its investment
advisory fees on assets invested in securities of other open-end
investment companies, it should be noted that investment companies
incur certain expenses, such as management fees, and, therefore,
any investment by a fund in shares of another investment company
would be subject to such duplicate expenses. The Fund will invest
in other investment companies primarily for the purpose of
investing its short-term cash on a temporary basis. The adviser
will waive its investment advisory fee on assets invested in
securities of open-end investment companies.
The Fund does not expect to borrow money or invest in reverse repurchase
agreements in excess of 5% of the value of its net assets during 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."
Federated Institutional Trust Management
Officers and Trustees are listed with their addresses, present positions
with Federated Institutional Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, Executive Vice President of the Trust.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
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
Trustee
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
Trustee
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
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
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.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center -- Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, 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
70 Westcliff Road
Westin, MA
Birthdate: March 16, 1942
Trustee
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center -- Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty;
Chairman, Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.;
Director, Trustee, or Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
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
Trustee
Professor, International Politics and Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online
Computer Library Center, Inc., and U.S. Space Foundation; Chairman,
Czecho Management Center; Director, Trustee, or Managing General Partner
of the Funds; President Emeritus, University of Pittsburgh; founding
Chairman, National Advisory Council for Environmental Policy and
Technology and Federal Emergency Management Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-
profit entities; Director, Trustee, or Managing General Partner of the
Funds.
Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp. and Federated
Administrative Services.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers,
Federated Management, and Federated Research; President and Director,
Federated Research Corp. and Federated Global 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 Trustee of the Trust.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of
some of the Funds; Director or Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Vice President and Treasurer
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice
President, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., Federated Global Research Corp. and Passport
Research, Ltd.; Executive Vice President and Director, Federated
Securities Corp.; Trustee, Federated Services Company; Chairman,
Treasurer, and Trustee, Federated Administrative Services; Trustee or
Director of some of the Funds; Executive Vice President and Treasurer of
the Funds.
David M. Taylor *
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors;
Controller, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., and Passport Research, Ltd.; Vice
President, Federated Shareholder Services; Senior Vice President,
Federated Administrative Services; Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and Trustee,
Federated Investors; Trustee, Federated Advisers, Federated Management,
and Federated Research; Director, Federated Research Corp. and Federated
Global Research Corp. ; Trustee, Federated Services Company; Executive
Vice President, Secretary, and Trustee, Federated Administrative
Services; President and Trustee, Federated Shareholder Services;
Director, Federated Securities Corp.; Executive Vice President and
Secretary of the Funds.
* This Trustee 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 Trustees handles the responsibilities of the Board of
Trustees 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 Government Money 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 Master Trust;
Federated Municipal Trust; Federated Short-Term Municipal Trust;
Federated Short-Term U.S. Government Trust; Federated Stock Trust;
Federated Tax-Free Trust; Federated Total Return Series, Inc.; Federated
U.S. Government Bond Fund; Federated U.S. Government Securities Fund: 1-
3 Years; Federated U.S, Government Secuities Fund: 3-5 Years; 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;; 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; 111 Corcoran Funds; Peachtree Funds; The
Planters Funds; RIMCO Monument Funds; The Shawmut Funds; 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; World Investment
Series, Inc.
Fund Ownership
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of September 6, 1995, the following shareholder of record owned 5% or
more of the outstanding shares of the Fund: Federated Management,
Pittsburgh, Pennsylvania, owned approximately 10,000 shares (99.84%).
Trustees Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
John F. Donahue $ -0- $-0- for the Trust and
Trustee and Chairman 68 other investment companies in the Fund Complex
Thomas G. Bigley $270 $20,688 for the Trust and
Trustee 49 other investment companies in the Fund Complex
John T. Conroy, Jr. $275 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
William J. Copeland $275 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
James E. Dowd $275 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D. $270 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Edward L. Flaherty, Jr. $275 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Peter E. Madden $270 $90,563 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Gregor F. Meyer $270 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
John E. Murray, Jr. $270 $-0- for the Trust and
Trustee 64 other investment companies in the Fund Complex
Wesley W. Posvar $270 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Marjorie P. Smuts $270 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
*Information is furnished for the fiscal year ended July 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised
of 1 portfolio.
+The information is provided for the last calendar year.
Trustee Liability
The Trust's Declaration of Trust provides that the Trustees 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 Management (the "adviser").
It is a subsidiary of Federated Investors. All of 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 Trust, the Fund, or any
shareholder of the Fund 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 Trust.
Advisory Fees
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus. For the period
from August 15, 1994, (start of business) to July 31, 1995, the adviser
earned $0.
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
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.
Other Related Services
Affiliates of the adviser may, from time to time, provide certain
electronic equipment and software to institutional customers in order to
facilitate the purchase of shares of funds offered by Federated
Securities Corp.
Fund Administration
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. For the period from August 15, 1994, (start
of business) to July 31, 1995, Federated Administrative Services earned
$0. Dr. Henry J. Gailliot, an officer of the adviser to the Fund, holds
approximately 20% of the outstanding common stock and serves as a
director of Commercial Data Services, Inc., a company which provides
computer processing services to 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 is based on the size, type and
number of accounts and transactions made by shareholders.
Federated Services Company also maintains the Trust's accounting
records. The fee is based on the level of the Fund's average net assets
for the period plus out-of-pocket expenses.
Shareholder Services Agreement
This arrangement permits the payment of fees to Federated Shareholder
Services and financial institutions to cause services to be provided
which are necessary for the maintenence of shareholder accounts and to
encourage personal services 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, 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 Shareholder Services Agreement, the Board of
Trustees expects that the Fund will benefit by: (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 period from August 15, 1994, (start of business) to July 31,
1995, the Fund did not pay shareholder services fees.
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
Trustees.
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:
- advice as to the advisability of investing in securities;
- security analysis and reports;
- economic studies;
- industry studies;
- receipt of quotations for portfolio evaluations; and
- 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. During the period from
August 15, 1994, (start of business) to July 31, 1995, the Trust paid $0
in brokerage commissions.
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
Shares are sold at their net asset value without a sales charge on days
the New York Stock Exchange is open for business. The procedure for
purchasing shares is explained in the prospectus under "Investing in
Shares."
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. 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 days on which the New York Stock
Exchange is closed.
Determining Market Value of Securities
Market values of the Fund's portfolio securities are determined as
follows:
- according to the mean between the over-the-counter bid and asked
prices provided by an independent pricing service, if available, or
at fair value as determined in good faith by the Fund's Board of
Trustees; or
- for short-term obligations with remaining maturities of less than
60 days at the time of purchase, at amortized cost unless the Board
of Trustees determines that particular circumstances of the
security indicate otherwise.
Prices provided by independent pricing services may be determined
without relying exclusively on quoted prices. Pricing services may
consider:
- yield;
- quality;
- coupon rate;
- maturity;
- type of issue;
- trading characteristics; and
- other market data.
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
transfer agent does not charge for telephone redemptions, the transfer
agent's bank reserves the right to charge a fee for the cost of wire-
transferred redemptions of less than $5,000.
Redemption in Kind
Although the Trust 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. To
the extent available, such securities will be readily marketable.
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 Trustees determine to be fair and equitable.
The Trust 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 one shareholder in cash only 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:
- derive at least 90% of its gross income from dividends, interest,
and gains from the sale of securities;
- derive less than 30% of its gross income from the sale of
securities held less than three months;
- invest in securities within certain statutory limits; and
- 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. These dividends, and any short-term
capital gains, are taxable as ordinary income.
Capital Gains
Long-term capital gains distributed to shareholders will be treated
as long-term capital gains regardless of how long shareholders have
held Fund shares.
Total Return
The Fund's cumulative total return from August 15, 1994, (start of
business) to July 31, 1995, was 0%.
Cumulative total return reflects the Fund's total performance over a
specific period of time. The Fund's cumulative total return is
representative of only eleven months of fund activity.
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 maximum 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, less any applicable sales load, adjusted over the
period by any additional shares, assuming the reinvestment of all
dividends and distributions.
Yield
The Fund's yield for the thirty-day period ended July 31, 1995, was 0%.
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 performance of the Fund depends upon such variables as:
- portfolio quality;
- average portfolio maturity;
- type of instruments in which the portfolio is invested
- changes in interest rates and market value of portfolio securities;
- changes in the Fund's expenses; and
- 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 net asset value 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:
- Lipper Analytical Services, Inc. ranks funds in various 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 "short-term U.S. government
funds" category in advertising and sales literature.
- Merrill Lynch 2-Year Treasury Index is comprised of the most
recently issued 2-year Treasury notes. Index returns are calculated
as total returns for periods of one, three, six and twelve months
as well as year-to-date.
- 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 nonstandardized base periods. The total
return represents the historic change in the value of an investment in
the Fund based on reinvestment of dividends over a specified period of
time.
Duration
Duration is a commonly used measure of the potential volatility in the
price of a bond, or other fixed income security, or in a portfolio of
fixed income securities, prior to maturity. Volatility is the magnitude
of the change in the price of a bond relative to a given change in the
market rate of interest. A bond's price volatility depends on three
primary variables: the bond's coupon rate; maturity date; and the level
of market yields of similar fixed income securities. Generally, bonds
with lower coupons or longer maturities will be more volatile than bonds
with higher coupons or shorter maturities. Duration combines these
variables into a single measure.
Duration is calculated by dividing the sum of the time-weighted present
values of the cash flows of a bond or bonds, including interest and
principal payments, by the sum of the present values of the cash flows.
About Federated Investors
Federated is dedicated to meeting investor needs which is reflected in
its investment decision making--structured, straightforward, and
consistent. This has resulted in a history of competitive performance
with a range of competitive investment products that have gained the
confidence of thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted
in sound methodologies backed by fundamental and technical research.
Investment decisions are made and executed by teams of portfolio
managers, analysts, and traders dedicated to specific market sectors.
In the government sector, as of December 31, 1994, Federated managed 9
mortgage-backed, 4 government/agency and 17 government money market
mutual funds, with assets approximating $8.5 billion, $1.6 billion and
$17 billion, respectively. Federated trades approximately $300 million
in U.S. government and mortgage-backed securities daily and places
approximately $13 billion in repurchase agreements each day. Federated
introduced the first U.S. government fund to invest in U.S. government
bond securities in 1969. Federated has been a major force in the short-
and intermediate-term government markets since 1982 and currently
manages nearly $10 billion in government funds within these maturity
ranges.
J. Thomas Madden, Executive Vice President, oversees Federated's
equity and high yield corporate bond management while William D.
Dawson, Executive Vice President, oversees Federated's domestic fixed
income management. Henry A. Frantzen, Executive Vice President,
oversees the management of Federated's international portfolios.
Mutual Fund Market
Twenty-seven percent of American households are pursuing their
financial goals through mutual funds. These investors, as well as
businesses and institutions, have entrusted over $2 trillion to the
more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual
funds for a variety of investment applications. Specific markets
include:
Institutional
Federated meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual
funds for a variety of applications, including defined benefit and
defined contribution programs, cash management, and asset/liability
management. Institutional clients include corporations, pension
funds, tax-exempt entities, foundations/endowments, insurance
companies, and investment and financial advisors. The marketing effort
to these institutional clients is headed by John B. Fisher, President,
Institutional Sales Division.
Trust Organizations
Other institutional clients include close relationships with more than
1,500 banks and trust organizations. Virtually all of the trust
divisions of the top 100 bank holding companies use Federated funds in
their clients' portfolios. The marketing effort to trust clients is
headed by Mark R. Gensheimer, Executive Vice President, Bank Marketing
& Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated mutual funds are available to consumers through major
brokerage firms nationwide--including 200 New York Stock Exchange
firms--supported by more wholesalers than any other mutual fund
distributor. The marketing effort to these firms is headed by James F.
Getz, President, Broker/Dealer Division.
*source: Investment Company Institute
Cusip 31420B102
G00352-02 (9/95)
