Since October 2003, Federated and related
entities (collectively, ?Federated?) and various
Federated funds (Funds) have been named as
defendants in several class action lawsuits now
pending in the United States District Court for
the District of Maryland. The lawsuits were
purportedly filed on behalf of people who
purchased, owned and/or redeemed shares of
Federated-sponsored mutual funds during
specified periods beginning November 1, 1998.
The suits are generally similar in alleging that
Federated engaged in illegal and improper
trading practices including market timing and
late trading in concert with certain institutional
traders, which allegedly caused financial injury
to the mutual fund shareholders. Federated
without admitting the validity of any claim has
reached a preliminary settlement with the
Plaintiffs in these cases. Any settlement would
have to be approved by the Court.
     Federated entities have also been named
as defendants in several additional lawsuits that
are now pending in the United States District
Court for the Western District of Pennsylvania.
These lawsuits have been consolidated into a
single action alleging excessive advisory fees
involving another Federated Fund.
     The Board of the Funds retained the law
firm of Dickstein Shapiro LLP to represent the
Funds in each of the lawsuits described in the
preceding two paragraphs. Federated and the
Funds, and their respective counsel, have been
defending this litigation, and none of the Funds
remains a defendant in any of the lawsuits
(though, the other Fund noted above could
potentially receive a recovery in the action
alleging excessive advisory fees). Additional
lawsuits based upon similar allegations may be
filed in the future. The potential impact of these
lawsuits, all of which seek monetary damages,
attorneys? fees and expenses, and future
potential similar suits is uncertain. Although we
do not believe that these lawsuits will have a
material adverse effect on the Funds, there can
be no assurance that these suits, ongoing
adverse publicity and/or other developments
resulting from the allegations in these matters
will not result in increased Fund redemptions,
reduced sales of Fund Shares or other adverse
consequences for the Funds.