-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KvKG1Wq17rqpN7yf8d78G+1by1cxFTOUmCUiaU+7OtSBs3TlcaTmBEd5sPnW/h2v KZOHw+NZln9jlFiilUJhqA== 0000875267-99-000006.txt : 19990428 0000875267-99-000006.hdr.sgml : 19990428 ACCESSION NUMBER: 0000875267-99-000006 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19990427 EFFECTIVENESS DATE: 19990427 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FEDERATED ADJUSTABLE RATE U S GOVERNMENT FUND INC CENTRAL INDEX KEY: 0000875267 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 251659310 STATE OF INCORPORATION: MD FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 033-41004 FILM NUMBER: 99602139 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-06307 FILM NUMBER: 99602140 BUSINESS ADDRESS: STREET 1: FEDERATED INVESTORS TOWER CITY: PITTSBURGH STATE: PA ZIP: 15222 BUSINESS PHONE: 4122881581 MAIL ADDRESS: STREET 1: FEDERATED INVESTORS TOWER CITY: PITTSBURGH STATE: PA ZIP: 15222-3779 FORMER COMPANY: FORMER CONFORMED NAME: FORTRESS ADJUSTABLE RATE U S GOVERNMENT FUND INC DATE OF NAME CHANGE: 19920703 485BPOS 1 1933 Act File No. 33-41004 1940 Act File No. 811-6307 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X ------ Pre-Effective Amendment No. .......................... Post-Effective Amendment No. __15_ ......................... X ---- - ------ and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X ------ Amendment No. _12_ ........................................ X ----- ------ FEDERATED ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC. (Exact Name of Registrant as Specified in Charter) Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 (Address of Principal Executive Offices) (412) 288-1900 (Registrant's Telephone Number) John W. McGonigle, Esquire Federated Investors Tower 1001 Liberty Avenue Pittsburgh, Pennsylvania 15222-3779 (Name and Address of Agent for Service) (Notices should be sent to the Agent for Service) It is proposed that this filing will become effective: immediately upon filing pursuant to paragraph (b) X on April 30, 1999 pursuant to paragraph (b) 60 days after filing pursuant to paragraph (a) (i) on pursuant to paragraph (a) (i) 75 days after filing pursuant to paragraph (a)(ii) on _______________ pursuant to paragraph (a)(ii) of Rule 485. If appropriate, check the following box: This post-effective amendment designates a new effective date for a previously filed post-effective amendment. Copy to: Matthew G. Maloney, Esquire Dickstein Shapiro Morin & Oshinsky LLP 2101 L Street, N.W. Washington, D.C. 20037 PROSPECTUS Federated Adjustable Rate U.S. Government Fund, Inc. [Graphic] Federated World-Class Investment Manager PROSPECTUS A mutual fund seeking to provide current income with volatility of principal which is lower than investment companies investing primarily in fixed rate mortgage securities. The fund pursues its investment objective by investing in adjustable and floating rate mortgage securities issued by the U.S. government, its agencies or instrumentalities. As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus, and any representation to the contrary is a criminal offense. APRIL 30, 1999 CONTENTS Risk/Return Summary 1 What are the Fund's Fees and Expenses? 3 What are the Fund's Investment Strategies? 4 What are the Principal Securities in Which the Fund Invests? 5 What are the Specific Risks of Investing in the Fund? 8 What Do Shares Cost? 8 How is the Fund Sold? 10 How to Purchase Shares 10 How to Redeem and Exchange Shares 12 Account and Share Information 14 Who Manages the Fund? 15 Financial Information 16 Risk/Return Summary WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The investment objective of the Fund is to provide current income with volatility of principal which is lower than investment companies investing primarily in fixed rate mortgage securities. While there is no assurance that the Fund will achieve its investment objective, it endeavors to do so by following the strategies and policies described in this prospectus. WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES? The Fund pursues its investment objective by investing at least 65% of its assets in adjustable and floating rate mortgage backed securities which are issued or guaranteed by the U.S. government, its agencies or instrumentalities. The Fund limits its investments to those that would enable it to qualify as a permissible investment for federal credit unions. WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND? All mutual funds take investment risks. Therefore, it is possible to lose money in the Fund. The primary factors that may reduce the Fund's returns include: * INTEREST RATE RISK. Prices of fixed income securities generally fall when interest rates rise. * PREPAYMENT RISK. When homeowners prepay their mortgages in response to lower interest rates, the Fund will be required to reinvest the proceeds at the lower interest rates available. Also, when interest rates fall, the price of mortgage backed securities may not rise to as great an extent as that of other fixed income securities. 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 or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. RISK/RETURN CHART The graphic presentation displayed here consists of a bar chart representing the annual total returns of Federated Adjustable Rate U.S. Government Fund, Inc. as of the calendar year-end for each of seven years. The `y' axis reflects the "% Total Return" beginning with "-2.00%" and increasing in increments of 2% up to 10%. The `x' axis represents calculation periods (from the earliest calendar year end of the Fund's start of business) through the calendar year ended 1998. The light gray shaded chart features seven distinct vertical bars, each shaded in charcoal, and each visually representing by height the total return percentages for the calendar year stated directly at its base. The calculated total return percentage for the Fund for each calendar year is stated directly at the top of each respective bar, for the calendar years 1992 through 1998. The percentages noted are: 4.57%, 3.54%, -0.31%, 8.30%, 5.90%, 5.89% and 3.62%, respectively. The bar chart shows the variability of the Fund's shares total returns on a calendar year-end basis. The total returns displayed for the Fund do not reflect the payment of any sales charges or recurring shareholder account fees. If these charges or fees had been included, the returns shown would have been lower. The Fund's total return from January 1, 1999 to March 31, 1999 was 1.56%. Within the period shown in the Chart, the Fund's highest quarterly return was 3.18% (quarter ended March 31, 1995). Its lowest quarterly return was (0.53%) (quarter ended June 30, 1994). AVERAGE ANNUAL TOTAL RETURN TABLE The following table represents the Fund's Average Annual Total Returns, reduced to reflect applicable sales charges, for the calendar periods ending December 31, 1998.
CALENDAR PERIOD FUND ML1YTI ML2YTI LARMFA 1 Year 2.63% 5.89% 6.57% 3.99% 5 Years 4.64% 5.53% 5.76% 4.97% Start of Performance 1 4.66% 5.42% 6.35% 4.98%
1 The Fund's start of performance date was July 25, 1991. The table shows the Fund's total returns averaged over a period of years relative to the Merrill Lynch 1-Year Treasury Index ("ML1YTI") and the Merrill Lynch 2-Year Treasury Index ("ML2YTI"), broad-based market indexes, and the Lipper Adjustable Rate Mortgage Funds Average ("LARMFA"), an average of funds with similar investment objectives. Total returns for the indexes shown do not reflect sales charges, expenses or other fees that the SEC requires to be reflected in the Fund's performance. Indexes are unmanaged, and it is not possible to invest directly in an index. Past performance does not necessarily predict future performance. This information provides you with historical performance information so that you can analyze whether the Fund's investment risks are balanced by its potential rewards. What are the Fund's Fees and Expenses? FEDERATED ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC. FEES AND EXPENSES This table describes the fees and expenses that you may pay if you buy and hold Shares of the Fund.
SHAREHOLDER FEES Fees Paid Directly From Your Investment Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, as applicable) 1.00% Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions) (as a percentage of offering price). None Redemption Fee (as a percentage of amount redeemed, if applicable) None Exchange Fee None ANNUAL FUND OPERATING EXPENSES (Before Waivers) 1 Expenses That are Deducted From Fund Assets (as a percentage of average net assets) Management Fee 2 0.60% Distribution (12b-1) Fee 3 0.25% Shareholder Services Fee 4 0.25% Other Expenses 0.25% Total Annual Fund Operating Expenses 1.35% 1 Although not contractually obligated to do so, the adviser, distributor and shareholder services provider waived certain amounts. These are shown below along with the net expenses the Fund actually paid for the fiscal year ended February 28, 1999. Total Waivers of Fund Expenses 0.33% Total Actual Annual Fund Operating Expenses (after waivers) 1.02% 2 The adviser voluntarily waived a portion of the management fee. The adviser can terminate this voluntary waiver at any time. The management fee paid by the Fund (after the voluntary waiver) was 0.52% for the year ended February 28, 1999. 3 The distribution (12b-1) fee has been voluntarily reduced. This voluntary reduction can be terminated at any time. The distribution (12b-1) fee paid by the Fund (after the voluntary reduction) was 0.01% for the year ended February 28, 1999. 4 The shareholder services fee has been voluntarily reduced. This voluntary reduction can be terminated at any time. The shareholder services fee paid by the Fund (after the voluntary reduction) was 0.24% for the year ended February 28, 1999.
EXAMPLE The following Example is intended to help you compare the cost of investing in the Fund's Shares with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund's Investment Shares for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's Shares operating expenses are BEFORE WAIVERS as shown in the Table and remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Expenses assuming redemption $237 $528 $739 $1,624 Expenses assuming no redemption $137 $428 $739 $1,624
What are the Fund's Investment Strategies? The Fund, under normal circumstances, invests at least 65% of its total assets in adjustable rate mortgage securities issued or guaranteed by the U.S. government, its agencies or instrumentalities. It is anticipated that such a portfolio will generally provide higher current yields than money market securities or alternative investments of comparable credit quality and volatility. While the fund's net asset value will exhibit greater volatility than that of a money market portfolio, it should exhibit reduced volatility relative to a portfolio of fixed-rate mortgages. The Fund may invest up to 35% of its total assets in other U.S. government securities. A description of the various types of securities in which the Fund invests, and their risks, immediately follows this strategy discussion. Mortgage backed securities generally offer higher yields versus comparable U.S. Treasury securities. The extra yield compensates for prepayment risk. Underlying mortgages, which act as collateral for mortgage securities, may, in most cases, be prepaid by homeowners at any time without penalty. One important reason for prepayments is changes in market interest rates from the time of mortgage origination. The Adviser attempts to manage the Fund's prepayment risk by selecting mortgage backed securities with characteristics that make prepayment less likely. An important factor in the Adviser's assessment of these characteristics is the Adviser's interest rate outlook. Characteristics that the Adviser may consider in selecting securities include the interest rate formulas of the underlying mortgages, the index off which the mortgage rate is based, the length of time the underlying mortgages have been outstanding, the prior prepayment history of the mortgages and the federal agencies that securitize the mortgages. The Adviser formulates its interest rate outlook and otherwise attempts to anticipate changes in economic and market conditions by analyzing a variety of factors such as: * current and expected U.S. economic growth; * current and expected interest rates and inflation; * the Federal Reserve's monetary policy; and * changes in the supply of or demand for U.S. government securities. There is no assurance that the Adviser's efforts to forecast market interest rates and assess the impact of market interest rates on particular securities will be successful. The Adviser may attempt to take advantage of current and potential yield differentials existing from time to time between various mortgage backed securities in order to increase the Fund's return. The Adviser may invest up to 35% of the Fund's assets in fixed rate U.S. government mortgage securities, or U.S. government securities that are not mortgage backed securities such as U.S. Treasury securities and U.S. government agency debentures, when doing so, in the Adviser's judgment, will potentially enhance return or manage risk under current or anticipated economic and market conditions. The Fund may also engage in dollar roll transactions for their potential to enhance income. The Adviser may use collateralized mortgage obligations ("CMOs") with relatively predictable cash flows (such as sequential pay, planned amortization class and targeted amortization class), to reduce prepayment risk. The Fund may invest in CMOs collateralized by privately issued mortgage securities or loans that are not otherwise guaranteed by the U.S. government. However, CMOs in which the Fund invests are issued by agencies or instrumentalities of the U.S. government. TEMPORARY DEFENSIVE INVESTMENTS 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. It may do this to minimize potential losses and maintain liquidity to meet shareholder redemptions during adverse market conditions. This may cause the Fund to give up greater investment returns to maintain the safety of principal, that is, the original amount invested by shareholders. What are the Principal Securities in Which the Fund Invests? FIXED INCOME SECURITIES Fixed income securities pay interest, dividends or distributions at a specified rate. The rate may be a fixed percentage of principal or adjusted periodically. In addition, the issuer of a fixed income security must repay the principal amount of the security, normally within a specified period of time. A security's yield measures the annual income earned on a security as a percentage of its price. A security's yield will increase or decrease depending upon whether it costs less (a discount) or more (a premium) than the principal amount. If the issuer may redeem the security before its scheduled maturity, the price and yield on a discount or premium security may change based upon the probability of an early redemption. Securities with higher risks generally have higher yields. The following describes the types of fixed income securities in which the Fund principally invests: MORTGAGE BACKED SECURITIES Mortgage backed securities represent interests in "pools" (groups) of mortgages. The mortgages that comprise a pool normally have similar interest rates, maturities and other terms. Mortgages may have fixed or adjustable interest rates. Mortgage backed securities come in a variety of forms. Many have extremely complicated terms. The simplest form of mortgage backed securities are pass-through certificates. An issuer of pass-through certificates gathers monthly payments from an underlying pool of mortgages. Then, the issuer deducts its fees and expenses and passes the balance of the payments onto the certificate holders once a month. Holders of pass-through certificates receive a pro rata share of all payments and pre-payments from the underlying mortgages. As a result, the holders assume all the prepayment risks of the underlying mortgages. ADJUSTABLE RATE MORTGAGES The Fund invests in interests in pools of adjustable rate mortgages, which are known as ARMs. While fixed rate mortgage securities have a stated interest rate, ARMs have periodic adjustments in the interest rate on the underlying mortgages. The adjustable rate feature of the mortgages underlying the ARMs will help to limit sharp movements in the Fund's net asset value in response to normal fluctuations in interest rates. As interest rates on the mortgages underlying ARMs reset periodically (for example, semi-annually or annually), the yields of the ARMs held in the portfolio will gradually adjust to reflect the overall changes in interest rates. COLLATERALIZED MORTGAGE OBLIGATIONS CMOs, including interests in real estate mortgage investment conduits (REMICs), allocate payments and prepayments from an underlying pass-through certificate among holders of different classes of mortgage backed securities. This creates different prepayment and interest rate risks for each CMO class. The Fund may invest in CMOs collateralized by privately issued mortgages or loans that are not otherwise guaranteed by the U.S. government. CMOs in which the Fund invests are, however, issued by agencies or instrumentalities of the U.S. government. The degree of prepayment risk of CMOs depends upon the structure of the CMOs. However, the actual returns of any type of mortgage backed security depends upon the performance of the underlying pool of mortgages, which no one can predict and will vary among pools. TREASURY SECURITIES Treasury securities are direct obligations of the federal government of the United States. Treasury securities are generally regarded as having the lowest credit risks. AGENCY SECURITIES Agency securities are issued or guaranteed by a federal agency or other government sponsored entity acting under federal authority (a GSE). The United States supports some GSEs with its full faith and credit. Other GSEs receive support through federal subsidies, loans or other benefits. A few GSEs have no explicit financial support, but are regarded as having implied support because the federal government sponsors their activities. Agency securities are generally regarded as having low credit risks, but not as low as Treasury securities. The Fund treats mortgage backed securities guaranteed by GSEs as agency securities. Although a GSE guarantee protects against credit risk, it does not reduce the interest rate and prepayment risks of these mortgage backed securities. SPECIAL TRANSACTIONS REPURCHASE AGREEMENTS Repurchase agreements are transactions in which the Fund buys a security from a dealer or bank and agrees to sell the security back at a mutually agreed upon time and price. The repurchase price exceeds the sale price, reflecting the Fund's return on the transaction. This return is unrelated to the interest rate on the underlying security. The Fund will enter into repurchase agreements only with banks and other recognized financial institutions, such as securities dealers, deemed creditworthy by the adviser. DELAYED DELIVERY TRANSACTIONS Delayed delivery transactions, including when issued transactions, are arrangements in which the Fund buys securities for a set price, with payment and delivery of the securities scheduled for a future time. During the period between purchase and settlement, no payment is made by the Fund to the issuer and no interest accrues to the Fund. The Fund records the transaction when it agrees to buy the securities and reflects their value in determining the price of its shares. Settlement dates may be a month or more after entering into these transactions so that the market values of the securities bought may vary from the purchase prices. Therefore, delayed delivery transactions create market risks for the Fund. Delayed delivery transactions also involve credit risks in the event of a counterparty default. TO BE ANNOUNCED SECURITIES (TBAS) As with other delayed delivery transactions, a seller agrees to issue a TBA security at a future date. However, the seller does not specify the particular securities to be delivered. Instead, the Fund agrees to accept any security that meets specified terms. For example, in a TBA mortgage backed transaction, the Fund and the seller would agree upon the issuer, interest rate and terms of the underlying mortgages. The seller would not identify the specific underlying mortgages until it issues the security. TBA mortgage backed securities increase interest rate risks because the underlying mortgages may be less favorable than anticipated by the Fund. DOLLAR ROLLS Dollar rolls are transactions where the Fund sells mortgage backed securities with a commitment to buy similar, but not identical, mortgage backed securities on a future date at a lower price. Normally, one or both securities involved are TBA mortgage backed securities. Dollar rolls are subject to interest rate risks and credit risks. ASSET COVERAGE In order to secure its obligations in connection with derivatives contracts or special transactions, the Fund will either own the underlying assets, enter into an offsetting transaction or set aside readily marketable securities with a value that equals or exceeds the Fund's obligations. Unless the Fund has other readily marketable assets to set aside, it cannot trade assets used to secure such obligations entering into an offsetting derivative contract or terminating a special transaction. This may cause the Fund to miss favorable trading opportunities or to realize losses on derivative contracts or special transactions. What are the Specific Risks of Investing in the Fund? INTEREST RATE RISKS Prices of fixed income securities rise and fall in response to changes in the interest rate paid by similar securities. Generally, when interest rates rise, prices of fixed income securities fall. However, market factors, such as the demand for particular fixed income securities, may cause the price of certain fixed income securities to fall while the prices of other securities rise or remain unchanged. Interest rate changes have a greater effect on the price of fixed income securities with longer durations. Duration measures the price sensitivity of a fixed income security to changes in interest rates. PREPAYMENT RISKS Unlike traditional fixed income securities, which may pay a fixed rate of interest until maturity, when the entire principal amount is due, payments on mortgage backed securities include both interest and a partial payment of principal. This partial payment of principal may be comprised of a scheduled principal payment as well as an unscheduled payment from the voluntary prepayment, refinancing, or foreclosure of the underlying loans. These unscheduled payments of principal can adversely affect the price and yield of mortgage backed securities. For example, during periods of declining interest rates, prepayments can be expected to accelerate, and the Fund would be required to reinvest the proceeds at the lower interest rates then available. In addition, like other interest-bearing securities, the values of mortgage backed securities generally fall when interest rates rise. Since rising interest rates generally result in decreased prepayments of mortgage backed securities, this could cause mortgage securities to have greater average lives than expected and their value may decline more than other fixed income securities. Conversely, when interest rates fall, their potential for capital appreciation is limited due to the existence of the prepayment feature. Generally, mortgage backed securities compensate for greater prepayment risk by paying a higher yield. The additional interest paid for risk is measured by the difference between the yield of a mortgage backed security and the yield of a U.S. Treasury security with a comparable maturity (the spread). An increase in the spread will cause the price of the security to decline. Spreads generally increase in response to adverse economic or market conditions. What Do Shares Cost? You can purchase, redeem, or exchange Shares any day the New York Stock Exchange (NYSE) is open. When the Fund receives your transaction request in proper form, it is processed at the next calculated net asset value (NAV). The Fund does not charge a front-end sales charge. NAV is determined at the end of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open. The Fund's current NAV and public offering price may be found in the mutual funds section of certain local newspapers under "Federated." The following table summarizes the minimum required investment amount and the maximum sales charge, if any, that you will pay on an investment in the Fund. Keep in mind that investment professionals may charge you fees for their services in connection with your Share transactions. MINIMUM MAXIMUM SALES CHARGE INITIAL/ CONTINGENT SUBSEQUENT FRONT-END DEFERRED INVESTMENT SALES SALES AMOUNTS 1 CHARGE 2 CHARGE 3 $1,500/$100 None 1.00% 1 The minimum subsequent investment amounts for Systematic Investment Programs is $50. Investment professionals may impose higher or lower minimum investment requirements on their customers than those imposed by the Fund. 2 Front-End Sales Charge is expressed as a percentage of public offering price. See "Sales Charge When You Purchase." 3 See "Sales Charge When You Redeem." THE SALES CHARGE AT PURCHASE MAY BE REDUCED OR ELIMINATED BY: * purchasing Shares in greater quantities to reduce the applicable sales charge; * combining concurrent purchases of Shares: - - by you, your spouse, and your children under age 21; or - - of the same share class of two or more Federated Funds (other than money market funds); * accumulating purchases (in calculating the sales charge on an additional purchase, include the current value of previous Share purchases still invested in the Fund); or * signing a letter of intent to purchase a specific dollar amount of Shares within 13 months (call your investment professional or the Fund for more information). THE SALES CHARGE WILL BE ELIMINATED WHEN YOU PURCHASE SHARES: * within 120 days of redeeming Shares of an equal or lesser amount; * when the Fund's Distributor does not advance payment to the investment professional for your purchase; * by exchanging shares from the same share class of another Federated Fund; * for trusts or pension or profit-sharing plans where the third party administrator has an arrangement with the Fund's Distributor or its affiliates to purchase shares without a sales charge; or * through investment professionals that receive no portion of the sales charge. If your investment qualifies for a reduction or elimination of the sales charge, you or your investment professional should notify the Fund's Distributor, Federated Securities Corp., at the time of purchase. If the Distributor is not notified, you will receive the reduced sales charge only on additional purchases, and not retroactively on previous purchases. SALES CHARGE WHEN YOU REDEEM Your redemption proceeds may be reduced by a sales charge, commonly referred to as a contingent deferred sales charge (CDSC).
PURCHASE AMOUNT SHARES HELD CDSC Up to $2 million 4 years or less 1.00% $2 - $5 million 2 years or less 0.50% $5 - $25 million 1 year or less 0.25% $25 million or more N/A None
YOU WILL NOT BE CHARGED A CDSC WHEN REDEEMING SHARES: * purchased with reinvested dividends or capital gains; * purchased within 120 days of redeeming Shares of an equal or lesser amount; * that you exchanged into the same share class of another Federated Fund where the shares were held for the applicable CDSC holding period (other than a money market fund); * purchased through investment professionals who did not receive advanced sales payments; or * if, after you purchase Shares, you become disabled as defined by the IRS. IN ADDITION, YOU WILL NOT BE CHARGED A CDSC: * if the Fund redeems your Shares and closes your account for not meeting the minimum balance requirement; * if your redemption is a required retirement plan distribution; * upon the death of the last surviving shareholder of the account. If your redemption qualifies, you or your investment professional should notify the Distributor at the time of redemption to eliminate the CDSC. If the Distributor is not notified, the CDSC will apply. TO KEEP THE SALES CHARGE AS LOW AS POSSIBLE, THE FUND REDEEMS YOUR SHARES IN THIS ORDER: * Shares that are not subject to a CDSC; and * Shares held the longest (to determine the number of years your Shares have been held, include the time you held shares of other Federated Funds that have been exchanged for Shares of this Fund). * The CDSC is then calculated using the share price at the time of purchase or redemption, whichever is lower. How is the Fund Sold? The Fund's Distributor markets the Shares described in this prospectus to individuals, directly or through investment professionals. When the Distributor receives marketing fees, it may pay some or all of them to investment professionals. The Distributor and its affiliates may pay out of their assets other amounts (including items of material value) to investment professionals for marketing and servicing Shares. The Distributor is a subsidiary of Federated Investors, Inc. (Federated). RULE 12B-1 PLAN The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to the Distributor and investment professionals for the sale, distribution and customer servicing of the Fund's Shares. Because these Shares pay marketing fees on an ongoing basis, your investment cost may be higher over time than other shares with different sales charges and marketing fees. How to Purchase Shares You may purchase Shares through an investment professional, directly from the Fund, or through an exchange from another Federated Fund. The Fund reserves the right to reject any request to purchase or exchange Shares. THROUGH AN INVESTMENT PROFESSIONAL * Establish an account with the investment professional; and * Submit your purchase order to the investment professional before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will receive the next calculated NAV if the investment professional forwards the order to the Fund on the same day and the Fund receives payment within three business days. You will become the owner of Shares and receive dividends when the Fund receives your payment. Investment professionals should send payments according to the instructions in the sections "By Wire" or "By Check." DIRECTLY FROM THE FUND * Establish your account with the Fund by submitting a completed New Account Form; and * Send your payment to the Fund by Federal Reserve wire or check. You will become the owner of Shares and your Shares will be priced at the next calculated NAV after the Fund receives your wire or your check. If your check does not clear, your purchase will be canceled and you could be liable for any losses or fees the Fund or its transfer agent incurs. An institution may establish an account and place an order by calling the Fund and the Shares will be priced at the next calculated NAV after the Fund receives the order. BY WIRE Send your wire to: State Street Bank and Trust Company Boston, MA Dollar Amount of Wire ABA Number 011000028 Attention: EDGEWIRE Wire Order Number, Dealer Number, or Group Number Nominee/Institution Name Fund Name and Number and Account Number You cannot purchase Shares by wire on holidays when wire transfers are restricted. BY CHECK Make your check payable to THE FEDERATED FUNDs, note your account number on the check, and mail it to: Federated Shareholder Services Company P.O. Box 8600 Boston, MA 02266-8600 If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that requires a street address, mail it to: Federated Shareholder Services Company 1099 Hingham Street Rockland, MA 02370-3317 Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will not accept third-party checks (checks originally payable to someone other than you or The Federated Funds). THROUGH AN EXCHANGE You may purchase Shares through an exchange from the same Share class of another Federated Fund. You must meet the minimum initial investment requirement for purchasing Shares and both accounts must have identical registrations. BY SYSTEMATIC INVESTMENT PROGRAM Once you have opened an account, you may automatically purchase additional Shares on a regular basis by completing the Systematic Investment Program (SIP) section of the New Account Form or by contacting the Fund or your investment professional. The minimum investment amount for SIPs is $50. BY AUTOMATED CLEARING HOUSE (ACH) Once you have opened an account, you may purchase additional Shares through a depository institution that is an ACH member. This purchase option can be established by completing the appropriate sections of the New Account Form. RETIREMENT INVESTMENTS You may purchase Shares as retirement investments (such as qualified plans and IRAs or transfer or rollover of assets). Call your investment professional or the Fund for information on retirement investments. We suggest that you discuss retirement investments with your tax adviser. You may be subject to an annual IRA account fee. How to Redeem and Exchange Shares You should redeem or exchange Shares: * through an investment professional if you purchased Shares through an investment professional; or * directly from the Fund if you purchased Shares directly from the Fund. THROUGH AN INVESTMENT PROFESSIONAL Submit your redemption or exchange request to your investment professional by the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). The redemption amount you will receive is based upon the next calculated NAV after the Fund receives the order from your investment professional. DIRECTLY FROM THE FUND BY TELEPHONE You may redeem or exchange Shares by calling the Fund once you have completed the appropriate authorization form for telephone transactions. If you call before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time) you will receive a redemption amount based on that day's NAV. BY MAIL You may redeem or exchange Shares by mailing a written request to the Fund. You will receive a redemption amount based on the next calculated NAV after the Fund receives your written request in proper form. Send requests by mail to: Federated Shareholder Services Company P.O. Box 8600 Boston, MA 02266-8600 Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to: Federated Shareholder Services Company 1099 Hingham Street Rockland, MA 02370-3317 All requests must include: * Fund Name and Share Class, account number and account registration; * amount to be redeemed or exchanged; * signatures of all Shareholders exactly as registered; and * IF EXCHANGING, the Fund Name and Share Class, account number and account registration into which you are exchanging. Call your investment professional or the Fund if you need special instructions. SIGNATURE GUARANTEES Signatures must be guaranteed if: * your redemption will be sent to an address other than the address of record; * your redemption will be sent to an address of record that was changed within the last 30 days; * a redemption is payable to someone other than the shareholder(s) of record; or * IF EXCHANGING (TRANSFERRING) into another fund with a different shareholder registration. A signature guarantee is designed to protect your account from fraud. Obtain a signature guarantee from a bank or trust company, savings association, credit union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT PROVIDE A SIGNATURE GUARANTEE. PAYMENT METHODS FOR REDEMPTIONS Your redemption proceeds will be mailed by check to your address of record. The following payment options are available if you complete the appropriate section of the New Account Form or an Account Service Options Form. These payment options require a signature guarantee if they were not established when the account was opened: * an electronic transfer to your account at a financial institution that is an ACH member; or * wire payment to your account at a domestic commercial bank that is a Federal Reserve System member. REDEMPTION IN KIND Although the Fund intends to pay Share redemptions in cash, it reserves the right to pay the redemption price in whole or in part by a distribution of the Fund's portfolio securities. LIMITATIONS ON REDEMPTION PROCEEDS Redemption proceeds normally are wired or mailed within one business day after receiving a request in proper form. Payment may be delayed up to seven days: * to allow your purchase to clear; * during periods of market volatility; or * when a shareholder's trade activity or amount adversely impacts the Fund's ability to manage its assets. You will not accrue interest or dividends on uncashed checks from the Fund if those checks are undeliverable and returned to the Fund. REDEMPTIONS FROM RETIREMENT ACCOUNTS In the absence of your specific instructions, 10% of the value of your redemption from a retirement account in the Fund may be withheld for taxes. This withholding only applies to certain types of retirement accounts. EXCHANGE PRIVILEGES You may exchange Shares of the Fund into Shares of the same class of another Federated Fund. To do this, you must: * ensure that the account registrations are identical; * meet any minimum initial investment requirements; and * receive a prospectus for the fund into which you wish to exchange. An exchange is treated as a redemption and a subsequent purchase, and is a taxable transaction. The Fund may modify or terminate the exchange privilege at any time. The Fund's management or investment adviser may determine from the amount, frequency and pattern of exchanges that a shareholder is engaged in excessive trading that is detrimental to the Fund and other shareholders. If this occurs, the Fund may terminate the availability of exchanges to that shareholder and may bar that shareholder from purchasing other Federated Funds. SYSTEMATIC WITHDRAWAL PROGRAM You may automatically redeem Shares in a minimum amount of $100 on a regular basis. Complete the appropriate section of the New Account Form or an Account Service Options Form or contact your investment professional or the Fund. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce, and eventually deplete, your account. Payments should not be considered yield or income. ADDITIONAL CONDITIONS TELEPHONE TRANSACTIONS The Fund will record your telephone instructions. If the Fund does not follow reasonable procedures, it may be liable for losses due to unauthorized or fraudulent telephone instructions. SHARE CERTIFICATES The Fund no longer issues share certificates. If you are redeeming or exchanging Shares represented by certificates previously issued by the Fund, you must return the certificates with your written redemption or exchange request. For your protection, send your certificates by registered or certified mail, but do not endorse them. Account and Share Information CONFIRMATIONS AND ACCOUNT STATEMENTS You will receive confirmation of purchases, redemptions and exchanges (except for systematic transactions). In addition, you will receive periodic statements reporting all account activity, including systematic transactions, dividends and capital gains paid. DIVIDENDS AND CAPITAL GAINS The Fund declares and pays any dividends monthly to shareholders. Dividends are paid to all shareholders invested in the Fund on the record date. The record date is the date on which a shareholder must officially own Shares in order to earn a dividend. In addition, the Fund pays any capital gains at least annually. Your dividends and capital gains distributions will be automatically reinvested in additional Shares without a sales charge, unless you elect cash payments. If you purchase Shares just before a Fund declares a dividend or capital gain distribution, you will pay the full price for the Shares and then receive a portion of the price back in the form of a taxable distribution, whether or not you reinvest the distribution in Shares. Therefore, you should consider the tax implications of purchasing Shares shortly before the Fund declares a dividend or capital gain. Contact your investment professional or the Fund for information concerning when dividends and capital gains will be paid. ACCOUNTS WITH LOW BALANCES Due to the high cost of maintaining accounts with low balances, non- retirement accounts may be closed if redemptions or exchanges cause the account balance to fall below the minimum initial investment amount. Before an account is closed, you will be notified and allowed 30 days to purchase additional Shares to meet the minimum. TAX INFORMATION The Fund sends an annual statement of your account activity to assist you in completing your federal, state and local tax returns. Fund distributions of dividends and capital gains are taxable to you whether paid in cash or reinvested in the Fund. Dividends are taxable as ordinary income; capital gains are taxable at different rates depending upon the length of time the Fund holds its assets. Fund distributions are expected to be primarily dividends. Redemptions and exchanges are taxable sales. Please consult your tax adviser regarding your federal, state and local tax liability. Who Manages the Fund? The Board of Directors governs the Fund. The Board selects and oversees the Adviser, Federated Investment Management Company. The Adviser manages the Fund's assets, including buying and selling portfolio securities. The Adviser's address is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779. The Adviser and other subsidiaries of Federated advise approximately 175 mutual funds and separate accounts, which total approximately $111 billion in assets as of December 31, 1998. Federated was established in 1955 and is one of the largest mutual fund investment managers in the United States with approximately 1,900 employees. More than 4,000 investment professionals make Federated Funds available to their customers. THE FUND'S PORTFOLIO MANAGERS ARE: KATHLEEN M. FOODY-MALUS Kathleen M. Foody-Malus has been the Fund's portfolio manager since July 1991. Ms. Foody-Malus joined Federated Investors in 1983 and has been a Senior Portfolio Manager since 1996 and a Vice President of the Fund's Adviser since 1993. She was a Portfolio Manager and a Vice President of the Fund's investment adviser from 1993 to 1996. Ms. Foody-Malus received her M.B.A. in Accounting/Finance from the University of Pittsburgh. TODD A. ABRAHAM Todd A. Abraham has been the Fund's portfolio manager since October 1995. He is Vice President of the Fund. Mr. Abraham has been a Portfolio Manager since 1995 and a Vice President of the Fund's Adviser since July 1997. Mr. Abraham joined Federated Investors in 1993 as an Investment Analyst and served as Assistant Vice President from 1995 to 1997. Mr. Abraham served as a Portfolio Analyst at Ryland Mortgage Co. from 1992 to 1993. Mr. Abraham is a Chartered Financial Analyst and received his M.B.A. in finance from Loyola College. ADVISORY FEES The Adviser receives an annual investment advisory fee of 0.60% of the Fund's average daily net assets. The Adviser may voluntarily waive a portion of its fee or reimburse the Fund for certain operating expenses. YEAR 2000 READINESS The "Year 2000" problem is the potential for computer errors or failures because certain computer systems may be unable to interpret dates after December 31, 1999 or experience other date-related problems. The Year 2000 problem may cause systems to process information incorrectly and could disrupt businesses, such as the Fund, that rely on computers. While it is impossible to determine in advance all of the risks to the Fund, the Fund could experience interruptions in basic financial and operational functions. Fund shareholders could experience errors or disruptions in Fund Share transactions or Fund communications. The Fund's service providers are making changes to their computer systems to fix any Year 2000 problems. In addition, they are working to gather information from third-party providers to determine their Year 2000 readiness. Year 2000 problems would also increase the risks of the Fund's investments. To assess the potential effect of the Year 2000 problem, the Adviser is reviewing information regarding the Year 2000 readiness of issuers of securities the Fund may purchase. The financial impact of these issues for the Fund is still being determined. There can be no assurance that potential Year 2000 problems would not have a material adverse effect on the Fund. Financial Information FINANCIAL HIGHLIGHTS The Financial Highlights will help you understand the Fund's financial performance for its past five fiscal years, or since inception, if the life of the Fund is shorter. Some of the information is presented on a per share basis. Total returns represent the rate an investor would have earned (or lost) on an investment in the Fund, assuming reinvestment of any dividends and capital gains. This information has been audited by Deliotte & Touche LLP, whose report, along with the Fund's audited financial statements, is included in the Annual Report. Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED FEBRUARY 28 OR 29 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $ 9.52 $ 9.56 $ 9.55 $ 9.46 $ 9.79 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.48 0.53 0.52 0.54 0.47 Net realized and unrealized gain (loss) on investments (0.09) (0.04) 0.03 0.08 (0.32) TOTAL FROM INVESTMENT OPERATIONS 0.39 0.49 0.55 0.62 0.15 LESS DISTRIBUTIONS: Distributions from net investment income (0.48) (0.53) (0.52) (0.53) (0.47) Distributions in excess of net investment income 1 - - (0.02) - (0.01) TOTAL DISTRIBUTIONS (0.48) (0.53) (0.54) (0.53) (0.48) NET ASSET VALUE, END OF PERIOD $ 9.43 $ 9.52 $ 9.56 $ 9.55 $ 9.46 TOTAL RETURN 2 4.20% 5.25% 5.90% 6.77% 1.58% RATIOS TO AVERAGE NET ASSETS: Expenses 1.02% 1.10% 1.02% 1.02% 1.02% Net investment income 5.03% 5.53% 5.42% 5.67% 4.76% Expense waiver/reimbursement 3 0.33% 0.28% 0.42% 0.34% 0.30% SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $139,968 $183,604 $224,447 $304,191 $419,095 Portfolio turnover 55% 67% 108% 144% 170%
1 Distributions in excess of net investment income were the result of certain book and tax timing differences. These distributions do not represent a return of capital for federal income tax purposes. 2 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 3 This voluntary expense decrease is reflected in both the expense and net investment income ratios shown above. Further information about the Fund's performance is contained in the Fund's Annual Report dated February 28, 1999, which can be obtained free of charge. Federated Adjustable Rate U.S. Government Fund, Inc. APRIL 30, 1999 A Statement of Additional Information (SAI) dated April 30, 1999, is incorporated by reference into this prospectus. Additional information about the Fund's investments is contained in the Fund's annual and semi-annual reports to shareholders as they become available. The annual report discusses market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. To obtain the SAI, the annual report, semi-annual report and other information without charge, and make inquiries, call your investment professional or the Fund at 1-800-341-7400. You can obtain information about the Fund (including the SAI) by visiting or writing the Public Reference Room of the Securities and Exchange Commission in Washington, DC 20549-6009 or from the Commission's Internet site at http://www.sec.gov. You can call 1-800-SEC-0330 for information on the Public Reference Room's operations and copying charges. [Graphic] Federated Federated Adjustable Rate U.S. Government Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 1-800-341-7400 WWW.FEDERATEDINVESTORS.COM Federated Securities Corp., Distributor Investment Company Act File No. 811-6307 Cusip 314072109 1071005A (4/99) [Graphic] STATEMENT OF ADDITIONAL INFORMATION Federated Adjustable Rate U.S. Government Fund, Inc. This Statement of Additional Information (SAI) is not a prospectus. Read this SAI in conjunction with the prospectus for Federated Adjustable Rate U.S. Government Fund, Inc. dated April 30, 1999. This SAI incorporates by reference the Fund's Annual Report. Obtain the prospectus or the Annual Report without charge by calling 1-800-341-7400. APRIL 30, 1999 [Graphic] Federated World-Class Investment Manager Federated Adjustable Rate U.S. Government Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 1-800-341-7400 WWW.FEDERATEDINVESTORS.COM Federated Securities Corp., Distributor 3070701B (4/99) [Graphic] CONTENTS How is the Fund Organized? 1 Securities in Which the Fund Invests 1 What Do Shares Cost? 6 How is the Fund Sold? 6 Subaccounting Services 7 Redemption in Kind 7 Account and Share Information 7 Tax Information 7 Who Manages and Provides Services to the Fund? 8 How Does the Fund Measure Performance? 11 Who is Federated Investors, Inc.? 12 Financial Information 13 Addresses 14 How is the Fund Organized? The Fund is a diversified open-end, management investment company that was established under the laws of the State of Maryland on March 20, 1991. The Fund changed its name from Fortress Adjustable Rate U.S. Government Fund, Inc. to Federated Adjustable Rate U.S. Government Fund, Inc. on March 31, 1996. The Fund's investment adviser is Investment Management Company (Adviser). The Adviser, formerly known as Federated Advisers, changed its name effective March 31, 1999. Securities in Which the Fund Invests In pursuing its investment strategy, the Fund may invest in the following securities for any purpose that is consistent with its investment objective. SECURITIES DESCRIPTIONS AND TECHNIQUES FIXED INCOME SECURITIES Fixed income securities pay interest, dividends or distributions at a specified rate. The rate may be a fixed percentage of the principal or adjusted periodically. In addition, the issuer of a fixed income security must repay the principal amount of the security, normally within a specified time. Fixed income securities provide more regular income than equity securities. However, the returns on fixed income securities are limited and normally do not increase with the issuer's earnings. This limits the potential appreciation of fixed income securities as compared to equity securities. A security's yield measures the annual income earned on a security as a percentage of its price. A security's yield will increase or decrease depending upon whether it costs less (a discount) or more (a premium) than the principal amount. If the issuer may redeem the security before its scheduled maturity, the price and yield on a discount or premium security may change based upon the probability of an early redemption. Securities with higher risks generally have higher yields The following describes the types of fixed income securities in which the Fund invests: TREASURY SECURITIES Treasury securities are direct obligations of the federal government of the United States. Treasury securities are generally regarded as having the lowest credit risks. AGENCY SECURITIES Agency securities are issued or guaranteed by a federal agency or other government sponsored entity acting under federal authority (a GSE). The United States supports some GSEs with its full faith and credit. Other GSEs receive support through federal subsidies, loans or other benefits. A few GSEs have no explicit financial support, but are regarded as having implied support because the federal government sponsors their activities. Agency securities are generally regarded as having low credit risks, but not as low as Treasury securities. The Fund treats mortgage backed securities guaranteed by GSEs as agency securities. Although a GSE guarantee protects against credit risks, it does not reduce the interest rate and prepayment risks of these mortgage backed securities. MORTGAGE BACKED SECURITIES Mortgage backed securities represent interests in pools of mortgages. The mortgages that comprise a pool normally have similar interest rates, maturities and other terms. Mortgages may have fixed or adjustable interest rates. Mortgage backed securities come in a variety of forms. Many have extremely complicated terms. The simplest form of mortgage backed securities are pass-through certificates. An issuer of pass-through certificates gathers monthly payments from an underlying pool of mortgages. Then, the issuer deducts its fees and expenses and passes the balance of the payments onto the certificate holders once a month. Holders of pass-through certificates receive a pro rata share of all payments and prepayments from the underlying mortgages. As a result, the holders assume all the prepayment risks of the underlying mortgages. ADJUSTABLE RATE MORTGAGES The fund invests in interests in "pools" (groups) of adjustable rate mortgages, which are known as ARMs. While fixed rate mortgage securities have a stated interest rate, ARMs have periodic adjustments in the interest rate on the underlying mortgages. The adjustable rate feature of the mortgages underlying the ARMs will help to limit sharp movements in the Fund's net asset value in response to normal fluctuations in interest rates. As interest rates on the mortgages underlying ARMs reset periodically (for example, semi-annually or annually), the yields of the ARMs held in the portfolio will gradually adjust to reflect the overall changes in interest rates. COLLATERALIZED MORTGAGE OBLIGATIONS CMOs, including interests in real estate mortgage investment conduits (REMICs), allocate payments and prepayments from an underlying pass-through certificate among holders of different classes of mortgage backed securities. This creates different prepayment and interest rate risks for each CMO class. The Fund may invest in CMOs collateralized by privately issued mortgages or loans that are not otherwise guaranteed by the U.S. government. CMOs in which the Fund invests, are, however, issued by agencies or instrumentalities of the U.S. government. SEQUENTIAL CMOS In a sequential pay CMO, one class of CMOs receives all principal payments and prepayments. The next class of CMOs receives all principal payments after the first class is paid off. This process repeats for each sequential class of CMO. As a result, each class of sequential pay CMOs reduces the prepayment risks of subsequent classes. PACS AND TACS More sophisticated CMOs include planned amortization classes (PACs) and targeted amortization classes (TACs). PACs and TACs are issued with companion classes. PACs and TACs receive principal payments and prepayments at a specified rate. The companion classes receive principal payments and prepayments in excess of the specified rate. In addition, PACs will receive the companion classes' share of principal payments, if necessary, to cover a shortfall in the prepayment rate. This helps PACs and TACs to control prepayment risks by increasing the risks to their companion classes. The degree of increased or decreased prepayment risks depends upon the structure of the CMOs. However, the actual returns on any type of mortgage backed security depend upon the performance of the underlying pool of mortgages, which no one can predict and will vary among pools. SPECIAL TRANSACTIONS REPURCHASE AGREEMENTS Repurchase agreements are transactions in which the Fund buys a security from a dealer or bank and agrees to sell the security back at a mutually agreed upon time and price. The repurchase price exceeds the sale price, reflecting the Fund's return on the transaction. This return is unrelated to the interest rate on the underlying security. The Fund will enter into repurchase agreements only with banks and other recognized financial institutions, such as securities dealers, deemed creditworthy by the Adviser. The Fund's custodian or subcustodian will take possession of the securities subject to repurchase agreements. The Adviser or subcustodian will monitor the value of the underlying security each day to ensure that the value of the security always equals or exceeds the repurchase price. Repurchase agreements are subject to credit risks. REVERSE REPURCHASE AGREEMENTS Reverse repurchase agreements are repurchase agreements in which the Fund is the seller (rather than the buyer) of the securities, and agrees to repurchase them at an agreed upon time and price. A reverse repurchase agreement may be viewed as a type of borrowing by the Fund. Reverse repurchase agreements are subject to credit risks. In addition, reverse repurchase agreements create leverage risks because the Fund must repurchase the underlying security at a higher price, regardless of the market value of the security at the time of repurchase. DELAYED DELIVERY TRANSACTIONS Delayed delivery transactions, including when-issued transactions, are arrangements in which the Fund buys securities for a set price, with payment and delivery of the securities scheduled for a future time. During the period between purchase and settlement, no payment is made by the Fund to the issuer and no interest accrues to the Fund. The Fund records the transaction when it agrees to buy the securities and reflects their value in determining the price of its shares. Settlement dates may be a month or more after entering into these transactions so that the market values of the securities bought may vary from the purchase prices. Therefore, delayed delivery transactions create market risks for the Fund. Delayed delivery transactions also involve credit risks in the event of a counterparty default. TO BE ANNOUNCED SECURITIES (TBAS) As with other delayed delivery transactions, a seller agrees to issue a TBA security at a future date. However, the seller does not specify the particular securities to be delivered. Instead, the Fund agrees to accept any security that meets specified terms. For example, in a TBA mortgage backed transaction, the Fund and the seller would agree upon the issuer, interest rate and terms of the underlying mortgages. The seller would not identify the specific underlying mortgages until it issues the security. TBA mortgage backed securities increase market risks because the underlying mortgages may be less favorable than anticipated by the Fund. DOLLAR ROLLS Dollar rolls are transactions where the Fund sells mortgage backed securities with a commitment to buy similar, but not identical, mortgage backed securities on a future date at a lower price. Normally, one or both securities involved are TBA mortgage backed securities. Dollar rolls are subject to market risks and credit risks. ASSET COVERAGE In order to secure its obligations in connection with derivatives contracts or special transactions, the Fund will either own the underlying assets, enter into an offsetting transaction or set aside readily marketable securities with a value that equals or exceeds the Fund's obligations. Unless the Fund has other readily marketable assets to set aside, it cannot trade assets used to secure such obligations entering into an offsetting derivative contract or terminating a special transaction. This may cause the Fund to miss favorable trading opportunities or to realize losses on derivative contracts or special transactions. SECURITIES LENDING The Fund may lend portfolio securities to borrowers that the Adviser deems creditworthy. In return, the Fund receives cash or liquid securities from the borrower as collateral. The borrower must furnish additional collateral if the market value of the loaned securities increases. Also, the borrower must pay the Fund the equivalent of any dividends or interest received on the loaned securities. The Fund will reinvest cash collateral in securities that qualify as an acceptable investment for the Fund. However, the Fund must pay interest to the borrower for the use of cash collateral. Loans are subject to termination at the option of the Fund or the borrower. The Fund will not have the right to vote on securities while they are on loan, but it will terminate a loan in anticipation of any important vote. The Fund may pay administrative and custodial fees in connection with a loan and may pay a negotiated portion of the interest earned on the cash collateral to a securities lending agent or broker. Securities lending activities are subject to market risks and credit risks. INVESTMENT RISKS There are many factors which may effect an investment in the Fund. The Fund's risks are described below: INTEREST RATE RISKS * Prices of fixed income securities rise and fall in response to interest rate changes for similar securities. Generally, when interest rates rise, prices of fixed income securities fall. However, market factors, such as the demand for particular fixed income securities, may cause the price of certain fixed income securities to fall while the prices of other securities rise or remain unchanged. * Interest rate changes have a greater effect on the price of fixed income securities with longer durations. Duration measures the price sensitivity of a fixed income security to changes in interest rates. CREDIT RISKS * Credit risk is the possibility that an issuer will default on a security by failing to pay interest or principal when due. If an issuer defaults, the Fund will lose money. PREPAYMENT RISKS * Unlike traditional fixed income securities, which may pay a fixed rate of interest until maturity, when the entire principal amount is due, payments on mortgage backed securities include both interest and a partial payment of principal. This partial payment of principal may be comprised of a scheduled principal payment as well as an unscheduled payment from the voluntary prepayment, refinancing or foreclosure of the underlying loans. These unscheduled payments of principal can adversely affect the price and yield of mortgage backed securities. For example, during periods of declining interest rates, prepayments can be expected to accelerate, and the Fund would be required to reinvest the proceeds at the lower interest rates then available. In addition, like other interest bearing securities, the values of mortgage backed securities generally fall when interest rates rise. Since rising interest rates generally result in decreased prepayments of mortgage backed securities, this could cause mortgage securities to have greater average lives than expected and their value may decline more than other fixed income securities. Conversely, when interest rates fall, their potential for capital appreciation is limited due to the existence of the prepayment feature. * Generally, mortgage backed securities compensate for greater prepayment risk by paying a higher yield. The additional interest paid for risk is measured by the difference between the yield of a mortgage backed security and the yield of a U.S. Treasury security with a comparable maturity (the spread). An increase in the spread will cause the price of the security to decline. Spreads generally increase in response to adverse economic or market conditions. LIQUIDITY RISKS * Trading opportunities are more limited for CMOs that have complicated terms or that are not widely held. These features may make it more difficult to sell or buy a security at a favorable price or time. Consequently, the Fund may have to accept a lower price to sell a security, sell other securities to raise cash or give up an investment opportunity, any of which could have a negative effect on the Fund's performance. Infrequent trading of securities may also lead to an increase in their price volatility. * Liquidity risk also refers to the possibility that the Fund may not be able to sell a security when it wants to. If this happens, the Fund will be required to continue to hold the security, and the Fund could incur losses. REGULATORY COMPLIANCE In accordance with the rules and regulations established by the National Credit Union Administration (NCUA), unless the purchase is made solely to reduce interest-rate risk, the Fund will not invest in any CMO or REMIC security that meets any of the following three tests: (1) the CMO or REMIC has an expected average life greater than 10 years; (2) the average life of the CMO or REMIC extends by more than four years assuming an immediate and sustained parallel shift in the yield curve of plus 300 basis points, or shortens by more than six years assuming an immediately and sustained parallel shift in the yield curve of minus 300 basis points; or (3) the estimated change in the price of the CMO or REMIC is more than 17%, due to an immediate and sustained parallel shift in the yield curve of plus or minus 300 basis points. Neither test (1) nor (2) above apply to floating or adjustable rate CMOs or REMICs with all of the following characteristics: (a) the interest rate of the instrument is reset at least annually; (b) the interest rate is below the contractual cap of the instrument; (c) the instrument is tied to a widely used market rate; and (d) the instrument varies directly (no inversely) and is reset in proportion with the index's changes. The Fund may not purchase a residual interest in CMO or REMIC. In addition, the Fund will not purchase zero coupon securities with maturities greater than 10 years. FUNDAMENTAL INVESTMENT POLICIES Under normal circumstances, the Fund will invest at least 65% of the value of its total assets in adjustable and floating rate mortgage securities which are issued or guaranteed by the U.S. government, its agencies or instrumentalities. The Fund engages in when-issued and delayed delivery transactions only for the purpose of acquiring portfolio securities consistent with the Fund's investment objective and policies, and not for investment leverage. Liquid assets of the Fund sufficient to make payment for the securities to be purchased are segregated at the trade date. These securities are marked to market daily and are maintained until the transaction is settled. The Fund does not intend to engage in when-issued and delayed delivery transactions to an extent that would cause the segregation of more than 20% of the total value of its respective assets. The Fund may invest temporarily in cash and cash items during times of unusual market conditions for defensive purposes and to maintain liquidity. The Fund may engage in dollar roll transactions with respect to mortgage securities issued by GNMA, FNMA and FHLMC. The collateral received when the Fund lends portfolio securities must be valued daily and, should the market value of the loaned securities increase, the borrower must furnish additional collateral to the Fund. The Fund requires its custodian to take possession of the securities subject to repurchase agreements, and these securities are marked to market daily. The Fund may enter into reverse repurchase agreements. 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 Fund's Board of Directors. The Fund may trade or dispose of portfolio securities as considered necessary to meet its investment objective. The Fund may lend portfolio securities up to one-third of the value of its total assets to broker/dealers, banks or other institutional borrowers of securities. The Fund will only enter into loan arrangements with broker/ dealers, banks or other institutions which the investment adviser has determined are creditworthy under guidelines established by the Fund's Board of Directors. The Fund will receive collateral in the form of cash or U.S. government securities equal to at least 100% of the value of the securities loaned. The Fund may enter into reverse repurchase agreements. 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. INVESTMENT LIMITATIONS The following limitations cannot be changed unless authorized by the "vote of a majority of its outstanding voting securities," as defined by the Investment Company Act. BUYING ON MARGIN The Fund will not purchase any securities on margin, but may obtain such short-term credits as are necessary for clearance of transactions. ISSUING SENIOR SECURITIES AND BORROWING MONEY The Fund will not issue senior securities except that the Fund may borrow money and engage in reverse repurchase agreements in amounts up to one-third of the value of its total assets, including the amounts borrowed. The Fund will not borrow money or engage in reverse repurchase agreements for investment leverage, but rather as a temporary, extraordinary, or emergency measure or to facilitate management of the portfolio by enabling the Fund to meet redemption requests when the liquidation of portfolio securities is deemed to be inconvenient or disadvantageous. The Fund will not purchase any securities while borrowings in excess of 5% of its total assets are outstanding, but only to the extent necessary to assure completion of the reverse repurchase agreements, the Fund will restrict the purchase of portfolio instruments to money market instruments maturing on or before the expiration date of the reverse repurchase agreements. PLEDGING ASSETS The Fund will not mortgage, pledge or hypothecate any assets except to secure permitted borrowings. In those cases, it may pledge assets having a market value not exceeding the lesser of the dollar amounts borrowed or 10% of the value of total assets at the time of the borrowing. DIVERSIFICATION OF INVESTMENTS With respect to securities comprising 75% of the value of its total assets, the Fund will not purchase securities of any one issuer (other than cash, cash items or securities issued or guaranteed by the government of the United States or its agencies or instrumentalities and repurchase agreements collateralized by U.S. government securities) if as a result more than 5% of the value of its total assets would be invested in the securities of that issuer. INVESTING IN REAL ESTATE The Fund will not buy or sell real estate, including limited partnership interests in real estate, although it may invest in securities of companies whose business involves the purchase or sale of real estate or in securities which are secured by real estate or interests in real estate. INVESTING IN COMMODITIES The Fund will not purchase or sell commodities. INVESTING IN RESTRICTED SECURITIES The Fund will not invest more than 10% of its net assets in securities subject to restrictions on resale under the Securities Act of 1933, including repurchase agreements providing for settlement in more than seven days after notice. UNDERWRITING The Fund will not underwrite any issue of securities, except as it may be deemed to be an underwriter under the Securities Act of 1933 in connection with the sale of restricted securities which the Fund may purchase pursuant to its investment objective, policies and limitations. LENDING CASH OR SECURITIES The Fund will not lend any of its assets, except portfolio securities up to one-third of the value of its total assets. This shall not prevent the Fund from purchasing or holding U.S. government obligations, money market instruments, variable amount demand master notes, bonds, debentures, notes, certificates of indebtedness, or other securities, entering into repurchase agreements, or engaging in other transactions where permitted by a Fund's investment objective, policies and limitations. SELLING SHORT The Fund will not sell securities short unless: * during the time the short position is open, it owns an equal amount of the securities sold or securities readily and freely convertible into or exchangeable, without payment of additional consideration, for securities of the same issue as, and equal in amount to, the securities sold short; and * not more than 10% of the Fund's net assets (taken at current value) is held as collateral for such sales at any one time. INVESTING IN NEW ISSUERS The Fund will not invest more than 5% of the value of its total assets in securities of issuers which have records of less than three years of operating history, including the operation of any predecessor. (This limitation does not apply to issuers of collateralized mortgage obligations or real estate mortgage investment conduits which are collateralized by securities or mortgages issued or guaranteed as to prompt payment of principal and interest by an agency of the U.S. government.) INVESTING IN MINERALS The Fund will not purchase or sell oil, gas or other mineral exploration or development programs or leases, although it may purchase the securities of issuers which invest in or sponsor such programs. INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND DIRECTORS OF THE FUND The Fund will not purchase or retain the securities of any issuer if the Officers and Directors of the Fund or its investment adviser owning individually more than 1/2 of 1% of the issuer's securities together own more than 5% of the issuer's securities. INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES The Fund may not own securities of open-end investment companies. The Fund can acquire up to 3% of the total outstanding stock of closed-end investment companies. The Fund will not be subject to any other limitations with regard to the acquisition of securities of closed-end investment companies so long as the public offering price of the Fund's shares does not include a sales charge exceeding 1.5%. The Fund will purchase securities of closed-end investment companies only in open-market transactions involving only customary broker's commissions. However, these limitations are not applicable if the securities are acquired in a merger, consolidation or acquisition of assets. INVESTING IN STRIPPED MORTGAGE SECURITIES The Fund will not invest its assets in stripped mortgage securities Except with respect to borrowing money, if a percentage limitation is adhered to at the time of investment, a later increase or decrease in percentage resulting from any change in value or net assets will not result in a violation of such restriction. The Fund does not expect to pledge securities or invest in stock of closed-end investment companies during the coming year. The Fund has not borrowed money or sold any securities short in an amount exceeding 5% of the value of its net assets during the last fiscal year and has no present intent to do so in the coming fiscal year. For purposes of its policies and limitations, the Fund considers certificates of deposit and demand and time deposits issued by a U.S. branch of a domestic bank or savings association having capital, surplus, and undivided profits in excess of $100,000,000 at the time of investment to be "cash items." PORTFOLIO TURNOVER The Fund will not attempt to set or meet a portfolio turnover rate since any turnover would be incidental to transactions undertaken in an attempt to achieve the Fund's investment objective. For the fiscal years ended February 28, 1999 and 1998, the portfolio turnover rates were 55% and 67%, respectively. DETERMINING MARKET VALUE OF SECURITIES Market values of the Fund's portfolio securities are determined as follows: * for bonds and other fixed income securities, at the last sale price on a national securities exchange, if available, otherwise, as determined by an independent pricing service; * for short-term obligations, according to the mean between bid and asked prices as furnished by an independent pricing service, except that short-term obligations with remaining maturities of less than 60 days at the time of purchase may be valued at amortized cost or at fair market value as determined in good faith by the Board; and * for all other securities, at fair value as determined in good faith by the Board. Prices provided by independent pricing services may be determined without relying exclusively on quoted prices and may consider institutional trading in similar groups of securities, yield, quality, stability, risk, coupon rate, maturity, type of issue, trading characteristics and other market data or factors. From time to time, when prices cannot be obtained from an independent pricing service, securities may be valued based on quotes from broker-dealers or other financial institutions that trade the securities. TRADING IN FOREIGN SECURITIES Trading in foreign securities may be completed at times which vary from the closing of the New York Stock Exchange (NYSE). In computing its NAV, the Fund values foreign securities at the latest closing price on the exchange on which they are traded immediately prior to the closing of the NYSE. Certain foreign currency exchange rates may also be determined at the latest rate prior to the closing of the NYSE. Foreign securities quoted in foreign currencies are translated into U.S. dollars at current rates. Occasionally, events that affect these values and exchange rates may occur between the times at which they are determined and the closing of the NYSE. If such events materially affect the value of portfolio securities, these securities may be valued at their fair value as determined in good faith by the Fund's Board, although the actual calculation may be done by others. What Do Shares Cost? The Fund's net asset value (NAV) per Share fluctuates and is based on the market value of all securities and other assets of the Fund. REDUCING OR ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE These reductions or eliminations are offered because: no sales commissions have been advanced to the investment professional selling Shares; the shareholder has already paid a Contingent Deferred Sales Charge (CDSC); or nominal sales efforts are associated with the original purchase of Shares. Upon notification to the Distributor or the Fund's transfer agent, no CDSC will be imposed on redemptions: * following the death or post-purchase disability, as defined in Section 72(m)(7) of the Internal Revenue Code of 1986, of the last surviving shareholder; * representing minimum required distributions from an Individual Retirement Account or other retirement plan to a shareholder who has attained the age of 70-1/2; * representing a total or partial distribution from a qualified plan. A total or partial distribution does not include an account transfer, rollover or other redemption made for purposes of reinvestment. A qualified plan does not include an Individual Retirement Account, Keogh Plan or a custodial account, following retirement; * which are involuntary redemptions processed by the Fund because the accounts do not meet the minimum balance requirements; * of Shares that represent a reinvestment within 120 days of a previous redemption; * of Shares acquired through the exchange of shares of Federated Government Income Securities, Inc. where those shares were purchased during that fund's Charter Offering Period; * of Shares held by the Directors, employees and sales representatives of the Fund, the Adviser, the Distributor and their affiliates; employees of any investment professional that sells Shares according to a sales agreement with the Distributor; and the immediate family members of the above persons; and * of Shares originally purchased through a bank trust department, a registered investment adviser or retirement plans where the third party administrator has entered into certain arrangements with the Distributor or its affiliates, or any other investment professional, to the extent that no payments were advanced for purchases made through these entities. How is the Fund Sold? Under the Distributor's Contract with the Fund, the Distributor (Federated Securities Corp.), located at Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779, offers Shares on a continuous, best-efforts basis. RULE 12B-1 PLAN As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the Distributor (who may then pay investment professionals such as banks, broker/dealers, trust departments of banks and registered investment advisers) for marketing activities (such as advertising, printing and distributing prospectuses, and providing incentives to investment professionals) to promote sales of Shares so that overall Fund assets are maintained or increased. This helps the Fund achieve economies of scale, reduce per share expenses, and provide cash for orderly portfolio management and Share redemptions. In addition, the Fund's service providers that receive asset-based fees also benefit from stable or increasing Fund assets. The Fund may compensate the Distributor more or less than its actual marketing expenses. In no event will the Fund pay for any expenses of the Distributor that exceed the maximum Rule 12b-1 Plan fee. The maximum Rule 12b-1 Plan fee that can be paid in any one year may not be sufficient to cover the marketing related expenses the Distributor has incurred. Therefore, it may take the Distributor a number of years to recoup these expenses. SHAREHOLDER SERVICES The Fund may pay Federated Shareholder Services Company, a subsidiary of Federated Investors, Inc. (Federated), for providing shareholder services and maintaining shareholder accounts. Federated Shareholder Services Company may select others to perform these services for their customers and may pay them fees. SUPPLEMENTAL PAYMENTS Investment professionals may be paid fees out of the assets of the Distributor and/or Federated Shareholder Services Company (but not out of Fund assets). The Distributor and/or Federated Shareholder Services Company may be reimbursed by the Adviser or its affiliates. Investment professionals receive such fees for providing distribution- related or shareholder services such as sponsoring sales, providing sales literature, conducting training seminars for employees and engineering sales-related computer software programs and systems. Also, investment professionals may be paid cash or promotional incentives, such as reimbursement of certain expenses relating to attendance at informational meetings about the Fund or other special events at recreational-type facilities, or items of material value. These payments will be based upon the amount of Shares the investment professional sells or may sell and/or upon the type and nature of sales or marketing support furnished by the investment professional. The Distributor may pay investment professionals 0.25% of the purchase price of $1 million or more of Fund Shares that its customer has not redeemed over the first year. Subaccounting Services Certain investment professionals may wish to use the transfer agent's subaccounting system to minimize their internal recordkeeping requirements. The transfer agent may charge a fee based on the level of subaccounting services rendered. Investment professionals 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 that may be related to the ownership of Shares. This information should, therefore, be read together with any agreement between the customer and the investment professional about the services provided, the fees charged for those services, and any restrictions and limitations imposed. Redemption in Kind Although the Fund intends to pay Share redemptions in cash, it reserves the right, as described below, to pay the redemption price in whole or in part by a distribution of the Fund's portfolio securities. Because the Fund has elected to be governed by Rule 18f-1 under the Investment Company Act of 1940, the Fund is obligated to pay Share redemptions to any one shareholder in cash only up to the lesser of $250,000 or 1% of the net assets represented by such Share class during any 90-day period. Any Share redemption payment greater than this amount will also be in cash unless the Fund's Board determines that payment should be in kind. In such a case, the Fund will pay all or a portion of the remainder of the redemption in portfolio securities, valued in the same way as the Fund determines its NAV. The portfolio securities will be selected in a manner that the Fund's Board deems fair and equitable and, to the extent available, such securities will be readily marketable. Redemption in kind is not as liquid as a cash redemption. If redemption is made in kind, shareholders receiving the portfolio securities and selling them before their maturity could receive less than the redemption value of the securities and could incur certain transaction costs. Account and Share Information VOTING RIGHTS Each Share of the Fund gives the shareholder one vote in Director elections and other matters submitted to shareholders for vote. All Shares of the Fund have equal voting rights. Directors may be removed by the Board or by shareholders at a special meeting. A special meeting of shareholders will be called by the Board upon the written request of shareholders who own at least 10% of the Fund's outstanding shares. As of April 7, 1999, the following shareholders owned of record, beneficially, or both, 5% or more of outstanding Shares: MLPF&S for the sole benefit of its customers, Jacksonville, FL, owned approximately 4,311,990 shares (17.12%). Shareholders owning 25% or more of outstanding Shares may be in control and be able to affect the outcome of certain matters presented for a vote of shareholders. Tax Information FEDERAL INCOME TAX The Fund intends to meet requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies. If these requirements are not met, it will not receive special tax treatment and will pay federal income tax. Who Manages and Provides Services to the Fund? BOARD OF DIRECTORS The Board is responsible for managing the Fund's business affairs and for exercising all the Fund's powers except those reserved for the shareholders. Information about each Board member is provided below and includes each person's: name, address, birth date, present position(s) held with the Fund, principal occupations for the past five years and positions held prior to the past five years, total compensation received as a Director from the Fund for its most recent fiscal year, and the total compensation received from the Federated Fund Complex for the most recent calendar year. The Federated Fund Complex is comprised of 54 investment companies, whose investment advisers are affiliated with the Fund's Adviser. As of April 7, 1999, the Fund's Board and Officers as a group owned less than 1% of the Fund's outstanding Shares. An asterisk (*) denotes a Director who is deemed to be an interested person as defined in the Investment Company Act of 1940. The following symbol (#) denotes a Member of the Board's Executive Committee, which handles the Board's responsibilities between its meetings.
NAME TOTAL BIRTH DATE AGGREGATE COMPENSATION ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM FUND AND POSITION WITH FUND FOR PAST FIVE YEARS FROM FUND FUND COMPLEX JOHN F. DONAHUE*+ Chief Executive Officer $0 $0 for the Fund and Birth date: July 28, 1924 and Director or Trustee 54 other investment Federated Investors Tower of the Federated Fund companies in the 1001 Liberty Avenue Complex; Chairman and Fund Complex Pittsburgh, PA Director, Federated CHAIRMAN AND DIRECTOR Investors, Inc.; Chairman and Trustee, Federated Investment Management Company; Chairman and Director, Federated Investment Counseling, and Federated Global Investment Management Corp.; Chairman, Passport Research, Ltd. THOMAS G. BIGLEY Director or Trustee of the Federated Fund $1,110.07 $113,860.22 for the Fund Birth date: February 3, 1934 Complex; Director, Member of Executive and 54 other investment 15 Old Timber Trail Committee, Children's Hospital of companies in the Pittsburgh, PA Pittsburgh; formerly: Senior Partner, Ernst & Fund Complex DIRECTOR Young LLP; Director, MED 3000 Group, Inc.; Director, Member of Executive Committee, University of Pittsburgh. JOHN T. CONROY, JR. Director or Trustee of the Federated Fund $1,221.25 $125,264.48 for the Fund Birth date: June 23, 1937 Complex; President, Investment Properties and 54 other investment Wood/IPC Commercial Dept. Corporation; Senior Vice President, companies in the John R. Wood Associates, Inc. Realtors John R. Wood and Associates, Inc., Realtors; Fund Complex 3255 Tamiami Trial North Partner or Trustee in private real estate Naples, FL ventures in Southwest Florida; formerly: DIRECTOR President, Naples Property Management, Inc. and Northgate Village Development Corporation. NICHOLAS CONSTANTAKIS Director or Trustee of the Federated Fund $1,110.07 $47,958.02 for the Fund Birth date: September 3, 1939 Complex; formerly: Partner, Andersen and 39 other investment 175 Woodshire Drive Worldwide SC. companies in the Pittsburgh, PA Fund Complex DIRECTOR WILLIAM J. COPELAND Director or Trustee of the Federated Fund $1,259.52 $125,264.48 for the Fund Birth date: July 4, 1918 Complex; Director and Member of the and 37 other investment One PNC Plaza-23rd Floor Executive Committee, Michael Baker, Inc.; companies in the Pittsburgh, PA formerly: Vice Chairman and Director, PNC Fund Complex DIRECTOR Bank, N.A. and PNC Bank Corp.; Director, Ryan Homes, Inc. Previous Positions: Director, United Refinery; Director, Forbes Fund; Chairman, Pittsburgh Foundation; Chairman, Pittsburgh Civic Light Opera. JOHN F. CUNNINGHAM++ Director or Trustee of some of the Federated $272.94 $0 for the Fund and Birth date: March 5, 1943 Fund Complex; Chairman, President and 43 other investment 353 El Brillo Way Chief Executive Officer, Cunningham & Co., companies in the Palm Beach, FL Inc.; Trustee Associate, Boston College; Fund Complex DIRECTOR Director, EMC Corporation; formerly: Director, Redgate Communications. Previous Positions: Chairman of the Board and Chief Executive Officer, Computer Consoles, Inc.; President and Chief Operating Officer, Wang Laboratories; Director, First National Bank of Boston; Director, Apollo Computer, Inc. JAMES E. DOWD, ESQ. Director or Trustee of the Federated Fund $1,248.59 $125,264.48 for the Fund Birth date: May 18, 1922 Complex; Attorney-at-law; Director, The and 10 other investment 571 Hayward Mill Road Emerging Germany Fund, Inc. companies in the Concord, MA Previous Positions: President, Boston Stock Fund Complex DIRECTOR Exchange, Inc.; Regional Administrator, United States Securities and Exchange Commission. NAME TOTAL BIRTH DATE AGGREGATE COMPENSATION ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM FUND AND POSITION WITH FUND FOR PAST FIVE YEARS FROM FUND FUND COMPLEX LAWRENCE D. ELLIS, M.D.* Director or Trustee of $1,110.07 $113,860.22 for the Fund Birth date: October 11, 1932 the Federated Fund and 54 other investment 3471 Fifth Avenue Complex; Professor of companies in the Suite 1111 Medicine, University of Fund Complex Pittsburgh, PA Pittsburgh; Medical DIRECTOR Director, University of Pittsburgh Medical Center - Downtown; Hematologist, Oncologist and Internist, University of Pittsburgh Medical Center; Member, National Board of Trustees, Leukemia Society of America. EDWARD L. FLAHERTY, JR., ESQ.# Director or Trustee of the Federated Fund $1,248.59 $125,264.48 for the Fund Birth date: June 18, 1924 Complex; Attorney of Counsel, Miller, and 10 other investment Miller, Ament, Henny & Kochuba Ament, Henny & Kochuba; Director companies in the 205 Ross Street Emeritus, Eat'N Park Restaurants, Inc.; Fund Complex Pittsburgh, PA formerly: Counsel, Horizon Financial, F.A., DIRECTOR Western Region; Partner, Meyer and Flaherty. PETER E. MADDEN Director or Trustee of the Federated Fund $1,137.41 $113,860.22 for the Fund Birth date: March 16, 1942 Complex; formerly: Representative, and 54 other investment One Royal Palm Way Commonwealth of Massachusetts General companies in the 100 Royal Palm Way Court; President, State Street Bank and Trust Fund Complex Palm Beach, FL Company and State Street Corporation. DIRECTOR Previous Positions: Director, VISA USA and VISA International; Chairman and Director, Massachusetts Bankers Association; Director, Depository Trust Corporation. JOHN E. MURRAY, JR., J.D., S.J.D. Director or Trustee of the Federated Fund $1,137.41 $113,860.22 for the Fund Birth date: December 20, 1932 Complex; President, Law Professor, and 54 other investment President, Duquesne University Duquesne University; Consulting Partner, companies in the Pittsburgh, PA Mollica & Murray. Fund Complex DIRECTOR Previous Positions: Dean and Professor of Law, University of Pittsburgh School of Law; Dean and Professor of Law, Villanova University School of Law. WESLEY W. POSVAR Director or Trustee of the Federated Fund $1,164.75 $113,860.22 for the Fund Birth date: September 14, 1925 Complex; President, World Society of and 10 other investment 1202 Cathedral of Learning Ekistics (metropolitan planning), Athens; companies in the University of Pittsburgh Professor, International Politics; Fund Complex Pittsbugh, PA Management Consultant; Trustee, Carnegie DIRECTOR Endowment for International Peace, RAND Corporation, Online Computer Library Center, Inc., National Defense University and U.S. Space Foundation; President Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council for Environmental Policy and Technology, Federal Emergency Management Advisory Board; Trustee, Czech Management Center, Prague. Previous Positions: Professor, United States Military Academy; Professor, United States Air Force Academy. MARJORIE P. SMUTS Director or Trustee of the Federated Fund $1,110.07 $113,860.22 for the Fund Birth date: June 21, 1935 Complex; Public Relations/Marketing/ and 54 other investment 4905 Bayard Street Conference Planning. companies in the Pittsburgh, PA Previous Positions: National Spokesperson, Fund Complex DIRECTOR Aluminum Company of America; business owner. J. CHRISTOPHER DONAHUE+ President or Executive Vice President of the $0 $0 for the Fund and Birth date: April 11, 1949 Federated Fund Complex; Director or 22 other investment Federated Investors Tower Trustee of some of the Funds in the companies in the 1001 Liberty Avenue Federated Fund Complex; President and Fund Complex Pittsburgh, PA Director, Federated Investors, Inc.; President EXECUTIVE VICE PRESIDENT and Trustee, Federated Investment Management Company, President and Director, Federated Investment Counseling and Federated Global Investment Management Corp.; President, Passport Research, Ltd.; Trustee, Federated Shareholder Services Company; Director, Federated Services Company. EDWARD C. GONZALES Trustee or Director of some of the Funds in $0 $0 for the Fund and Birth date: October 22, 1930 the Federated Fund Complex; President, 1 other investment Federated Investors Tower Executive Vice President and Treasurer of company in the 1001 Liberty Avenue some of the Funds in the Federated Fund Fund Complex Pittsburgh, PA Complex; Vice Chairman, Federated EXECUTIVE VICE PRESIDENT Investors, Inc.; Vice President, Federated Investment Management Company and Federated Investment Counseling, Federated Global Investment Management Corp. and Passport Research, Ltd.; Executive Vice President and Director, Federated Securities Corp.; Trustee, Federated Shareholder Services Company. NAME TOTAL BIRTH DATE AGGREGATE COMPENSATION ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM FUND AND POSITION WITH FUND FOR PAST FIVE YEARS FROM FUND FUND COMPLEX JOHN W. MCGONIGLE Executive Vice President $0 $0 for the Fund and Birth date: October 26, 1938 and Secretary of the 54 other investment Federated Investors Tower Federated Fund Complex; companies in the 1001 Liberty Avenue Executive Vice Fund Complex Pittsburgh, PA President, Secretary, EXECUTIVE VICE PRESIDENT and Director, Federated and SECRETARY Investors, Inc.; Trustee, Federated Investment Management Company, Director, Federated Investment Counseling and Federated Global Investment Management Corp.: Director, Federated Services Company; Director, Federated Securities Corp. RICHARD J. THOMAS Treasurer of the Federated Fund Complex; $0 $0 for the Fund and Birthdate: June 17, 1954 Vice President - Funds Financial Services 54 other investment Federated Investors Tower Division, Federated Investors, Inc.; formerly: companies in the 1001 Liberty Avenue various management positions within Funds Fund Complex Pittsburgh, PA Financial Services Division of Federated TREASURER Investors, Inc. RICHARD B. FISHER President or Vice President of some of the $0 $0 for the Fund and Birth date: May 17, 1923 Funds in the Federated Fund Complex; 6 other investment Federated Investors Tower Director or Trustee of some of the Funds in companies in the 1001 Liberty Avenue the Federated Fund Complex; Executive Vice Fund Complex Pittsburgh, PA President, Federated Investors, Inc.; PRESIDENT Chairman and Director, Federated Securities Corp. WILLIAM D. DAWSON, III Chief Investment Officer of this Fund and $0 $0 for the Fund and Birth date: March 3, 1949 various other Funds in the Federated Fund 41 other investment Federated Investors Tower Complex; Executive Vice President, companies in the 1001 Liberty Avenue Federated Investment Counseling, Fund Complex Pittsburgh, PA Federated Global Research Corp., Federated CHIEF INVESTMENT OFFICER Advisers, Federated Management, Federated Research and Passport Research, Ltd.; Registered Representative, Federated Securities Corp.; Portfolio Manager, Federated Administrative Services; Vice President, Federated Investors, Inc.; formerly: Executive Vice President and Senior Vice President, Federated Investment Counseling Institutional Portfolio Management Services Division; Senior Vice President, Federated Research Corp., Federated Advisers, Federated Management, Federated Research, and Passport Research, Ltd. TODD A. ABRAHAM Todd A. Abraham has been the Fund's $0 $0 for the Fund and Birth date: February 10, 1966 portfolio manager since 1995. He is Vice 2 other investment Federated Investors Tower President of the Fund. Mr. Abraham has companies in the 1001 Liberty Avenue been a Portfolio Manager since 1995 and a Fund Complex Pittsburgh, PA Vice President of the Fund's Adviser since VICE PRESIDENT July 1997. Mr. Abraham joined Federated Investors in 1993 as an Investment Analyst and served as Assistant Vice President from 1995 to 1997. Mr. Abraham served as a Portfolio Analyst at Ryland Mortgage Co. from 1992 to 1993. Mr. Abraham is a Chartered Financial Analyst and received his M.B.A. in finance from Loyola College.
+ Mr. Donahue is the father of J. Christopher Donahue, Executive Vice President of the Corporation. ++ Mr. Cunningham became a member of the Board of Directors on January 1, 1999. He did not earn any fees for serving the Fund Complex since these fees are reported as of the end of the last calendar year. He did not receive any fees as of the fiscal year end of the Company. INVESTMENT ADVISER The Adviser conducts investment research and makes investment decisions for the Fund. The Adviser is a wholly owned subsidiary of Federated. The Adviser shall not be liable to the Fund or any Fund shareholder for any losses that may be sustained in the purchase, holding or sale of any security or for anything done or omitted by it, except acts or omissions involving willful misfeasance, bad faith, gross negligence or reckless disregard of the duties imposed upon it by its contract with the Fund. 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 Fund Shares offered by the Distributor. 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. 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. In selecting among firms believed to meet these criteria, the Adviser may give consideration to those firms which have sold or are selling Shares of the Fund and other funds distributed by the Distributor and its affiliates. The Adviser makes decisions on portfolio transactions and selects brokers and dealers subject to review by the Fund's Board. RESEARCH SERVICES Investment decisions for the Fund are made independently from those of other accounts managed by the Adviser. When the Fund and one or more of those accounts invests in, or disposes of, the same security, available investments or opportunities for sales will be allocated among the Fund and the account(s) in a manner believed by the Adviser to be equitable. While the coordination and ability to participate in volume transactions may benefit the Fund, it is possible that this procedure could adversely impact the price paid or received and/or the position obtained or disposed of by the Fund. ADMINISTRATOR Federated Services Company, a subsidiary of Federated, provides administrative personnel and services (including certain legal and financial reporting services) necessary to operate the Fund. Federated Services Company provides these at the following annual rate of the average aggregate daily net assets of all Federated Funds as specified below: MAXIMUM AVERAGE AGGREGATE DAILY ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS 0.150 of 1% on the first $250 million 0.125 of 1% on the next $250 million 0.100 of 1% on the next $250 million 0.075 of 1% on assets in excess of $750 million The administrative fee received during any fiscal year shall be at least $125,000 per portfolio. Federated Services Company may voluntarily waive a portion of its fee and may reimburse the Fund for expenses. Federated Services Company also provides certain accounting and recordkeeping services with respect to the Fund's portfolio investments for a fee based on Fund assets plus out-of-pocket expenses. CUSTODIAN State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the securities and cash of the Fund. Foreign instruments purchased by the Fund are held by foreign banks participating in a network coordinated by State Street Bank. TRANSFER AGENT AND DIVIDEND DISBURSING AGENT Federated Services Company, through its registered transfer agent subsidiary, Federated Shareholder Services Company, maintains all necessary shareholder records. The Fund pays the transfer agent a fee based on the size, type and number of accounts and transactions made by shareholders. INDEPENDENT PUBLIC ACCOUNTANTS Deloitte & Touche LLP is the independent public accountant for the Fund. FEES PAID BY THE FUND FOR SERVICES FOR THE YEAR ENDED FEBRUARY 28 1999 1998 1997 Advisory Fee Earned $955,395 $1,201,782 $1,540,544 Advisory Fee Reduction 119,907 65,849 432,964 Brokerage Commissions - - - Administrative Fee 125,000 151,178 194,044 12B-1 FEE 15,923 - - SHAREHOLDER SERVICES FEE 382,158 - - How Does the Fund Measure Performance? The Fund may advertise Share performance by using the Securities and Exchange Commission's (SEC) standard method for calculating performance applicable to all mutual funds. The SEC also permits this standard performance information to be accompanied by non-standard performance information. Share performance reflects the effect of non-recurring charges, such as maximum sales charges, which if excluded, would increase the total return and yield. The performance of Shares depends upon such variables as: portfolio quality; average portfolio maturity; type and value of portfolio securities; changes in interest rates; changes or differences in the Fund's or any class of Shares' expenses; and various other factors. Share performance fluctuates on a daily basis largely because net earnings fluctuate daily. Both net earnings and offering price per Share are factors in the computation of yield and total return. AVERAGE ANNUAL TOTAL RETURNS AND YIELD Total returns given for the one-year, five-year and start of performance periods ended February 28, 1999. Yield given for the 30-day period ended February 28, 1999. START OF PERFORMANCE ON 30-DAY PERIOD 1 YEAR 5 YEARS JULY 25, 1991 Total Return 3.20% 4.72% 4.69% Yield 5.35% TOTAL RETURN Total return represents the change (expressed as a percentage) in the value of Shares over a specific period of time, and includes the investment of income and capital gains distributions. The average annual total return for Shares 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 NAV 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 charge, adjusted over the period by any additional Shares, assuming the annual reinvestment of all dividends and distributions. YIELD The yield of Shares is calculated by dividing: (i) the net investment income per Share earned by the Shares over a 30-day period; by (ii) the maximum offering price per Share on the last day of the period. This number is then annualized using semi-annual compounding. This means that the amount of income generated during the 30-day period is assumed to be generated each month over a 12-month period and is reinvested every six months. The yield does not necessarily reflect income actually earned by Shares because of certain adjustments required by the SEC and, therefore, may not correlate to the dividends or other distributions paid to shareholders. To the extent investment professionals and broker/dealers charge fees in connection with services provided in conjunction with an investment in Shares, the Share performance is lower for shareholders paying those fees. PERFORMANCE COMPARISONS Advertising and sales literature may include: * references to ratings, rankings and financial publications and/or performance comparisons of Shares to certain indices; * charts, graphs and illustrations using the Fund's returns, or returns in general, that demonstrate investment concepts such as tax-deferred compounding, dollar-cost averaging and systematic investment; * discussions of economic, financial and political developments and their impact on the securities market, including the portfolio manager's views on how such developments could impact the Funds; and * information about the mutual fund industry from sources such as the Investment Company Institute. The Fund may compare its performance, or performance for the types of securities in which it invests, to a variety of other investments, including federally insured bank products such as bank savings accounts, certificates of deposit and Treasury bills. The Fund may quote information from reliable sources regarding individual countries and regions, world stock exchanges, and economic and demographic statistics. You may use financial publications and/or indices to obtain a more complete view of Share performance. When comparing performance, you should consider all relevant factors such as the composition of the 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: LEHMAN BROTHERS ADJUSTABLE RATE MORTGAGE FUNDS AVERAGE Lehman Brothers Adjustable Rate Mortgage Funds Average is comprised of all agency guaranteed securities with coupons that periodically adjust over a spread of a published index. LEHMAN BROTHERS MUTUAL FUND SHORT (1-3) U.S. GOVERNMENT INDEX Lehman Brothers Mutual Fund Short (1-3) U.S. Government Index is an index comprised of mutual funds which invest in short-term (1-3 year) government securities. LIPPER ANALYTICAL SERVICES, INC. Lipper Analytical Services, Inc., ranks funds in various fund categories by making comparative calculations using total return. Total return assumes the reinvestment of all capital gains distributions and income dividends and takes into account any change in offering price over a specific period of time. From time to time, the Fund will quote its Lipper ranking in the "U.S. Mortgage Funds" category in advertising and sales literature. MORNINGSTAR, INC. 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. Who is Federated Investors, Inc.? Federated is dedicated to meeting investor needs by making structured, straightforward and consistent investment decisions. Federated investment products have a history of competitive performance and have gained the confidence of thousands of financial institutions and individual investors. Federated's disciplined investment selection process is rooted in sound methodologies backed by fundamental and technical research. At Federated, success in investment management does not depend solely on the skill of a single portfolio manager. It is a fusion of individual talents and state- of-the-art industry tools and resources. Federated's investment process involves teams of portfolio managers and analysts, and investment decisions are executed by traders who are dedicated to specific market sectors and who handle trillions of dollars in annual trading volume. FEDERATED FUNDS OVERVIEW MUNICIPAL FUNDS In the municipal sector, as of December 31, 1998, Federated managed 10 bond funds with approximately $2.2 billion in assets and 23 money market funds with approximately $12.5 billion in total assets. In 1976, Federated introduced one of the first municipal bond mutual funds in the industry and is now one of the largest institutional buyers of municipal securities. The Funds may quote statistics from organizations including The Tax Foundation and the National Taxpayers Union regarding the tax obligations of Americans. EQUITY FUNDS In the equity sector, Federated has more than 28 years' experience. As of December 31, 1998, Federated managed 27 equity funds totaling approximately $14.9 billion in assets across growth, value, equity income, international, index and sector (i.e. utility) styles. Federated's value- oriented management style combines quantitative and qualitative analysis and features a structured, computer-assisted composite modeling system that was developed in the 1970s. CORPORATE BOND FUNDS In the corporate bond sector, as of December 31, 1998, Federated managed 9 money market funds and 15 bond funds with assets approximating $22.8 billion and $7.1 billion, respectively. Federated's corporate bond decision making-based on intensive, diligent credit analysis-is backed by over 26 years of experience in the corporate bond sector. In 1972, Federated introduced one of the first high-yield bond funds in the industry. In 1983, Federated was one of the first fund managers to participate in the asset- backed securities market, a market totaling more than $209 billion. GOVERNMENT FUNDS In the government sector, as of December 31, 1998, Federated manages 9 mortgage backed, 5 government/agency and 19 government money market mutual funds, with assets approximating $5.3 billion, $1.8 billion and $41.6 billion, respectively. Federated trades approximately $425 million in U.S. government and mortgage backed securities daily and places approximately $25 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 approximately $43.2 billion in government funds within these maturity ranges. MONEY MARKET FUNDS In the money market sector, Federated gained prominence in the mutual fund industry in 1974 with the creation of the first institutional money market fund. Simultaneously, the company pioneered the use of the amortized cost method of accounting for valuing shares of money market funds, a principal means used by money managers today to value money market fund shares. Other innovations include the first institutional tax-free money market fund. As of December 31, 1998, Federated managed more than $76.7 billion in assets across 52 money market funds, including 19 government, 9 prime and 23 municipal with assets approximating $41.6 billion, $22.8 billion and $12.5 billion, respectively. The Chief Investment Officers responsible for oversight of the various investment sectors within Federated are: U.S. equity and high yield- J. Thomas Madden; U.S. fixed income-William D. Dawson, III; and global equities and fixed income-Henry A. Frantzen. The Chief Investment Officers are Executive Vice Presidents of the Federated advisory companies. MUTUAL FUND MARKET Thirty-seven percent of American households are pursuing their financial goals through mutual funds. These investors, as well as businesses and institutions, have entrusted over $5 trillion to the more than 7,300 funds available, according to the Investment Company Institute. FEDERATED CLIENTS OVERVIEW Federated distributes mutual funds through its subsidiaries for a variety of investment purposes. Specific markets include: INSTITUTIONAL CLIENTS Federated meets the needs of approximately 900 institutional clients nationwide by managing and servicing separate accounts and mutual funds for a variety of purposes, 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 advisers. The marketing effort to these institutional clients is headed by John B. Fisher, President, Institutional Sales Division, Federated Securities Corp. BANK MARKETING Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank Marketing & Sales. BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES Federated Funds are available to consumers through major brokerage firms nationwide-we have over 2,200 broker/dealer and bank broker/dealer relationships across the country-supported by more wholesalers than any other mutual fund distributor. Federated's service to financial professionals and institutions has earned it high ratings in several surveys performed by DALBAR, Inc. DALBAR is recognized as the industry benchmark for service quality measurement. The marketing effort to these firms is headed by James F. Getz, President, Broker/Dealer Sales Division, Federated Securities Corp. Financial Information [The Financial Statements for the Fund for the fiscal year ended February 28, 1999 are incorporated herein by reference to the Annual Report to Shareholders of Federated Adjustable Rate U.S. Government Fund, Inc. dated February 28, 1999.] Addresses FEDERATED ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC. Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 DISTRIBUTOR Federated Securities Corp. Federated Investors Tower 1001 Liberty Avenue Pittsburgh, PA 15222-3779 INVESTMENT ADVISER Federated Investment Management Company Federated Investors Tower 1001 Liberty Avenue Pittsburgh, PA 15222-3779 CUSTODIAN State Street Bank and Trust Company P.O. Box 8600 Boston, MA 02266-8600 TRANSFER AGENT AND DIVIDEND DISBURSING AGENT Federated Shareholder Services Company P.O. Box 8600 Boston, MA 02266-8600 INDEPENDENT PUBLIC ACCOUNTANTS Deloitte & Touche LLP 125 Summer Street Boston, MA 02110-1617 PART C. OTHER INFORMATION. Item 23. EXHIBITS: (a) (i) Conformed Copy of Articles of Incorporation of the Registrant; (3) (ii) Conformed Copy of Amendment (dated 5/31/91) to Articles of Incorporation of the Registrant; (3) (iii) Conformed Copy of Amendment (dated 3/29/96) to Articles of Incorporation of the Registrant; (6) (b) (i) Copy of By-Laws of the Registrant; (3) (ii) Copy of Amendment No. 1 to the By-Laws of the Registrant; (3) (iii) Copy of Amendment No. 2 to the By-Laws of the Registrant; (7) (iv) Copy of Amendment No. 3 to the By-Laws of the Registrant; (7) (v) Copy of Amendment No. 4 to the By-Laws of the Registrant; (7) (c) Copy of Specimen Certificate for Shares of Beneficial Interest of the Registrant; (5) (d) Conformed copy of Investment Advisory Contract of the Registrant; (3) (e) (i) Conformed copy of Distributor's Contract of the Registrant; (3) (ii) The Registrant hereby incorporates the conformed copy of the specimen Mutual Funds Sales and Service Agreement; Mutual Funds Service ....Agreement; and Plan Trustee/Mutual Funds Service Agreement from Item 24(b)(6) of the Cash Trust ................Series II Registration Statement on Form N1-A, filed with the Commission on July 24, 1995. (File ............Numbers 33-38550 and 811-6269) (f) Not applicable; (g) (i) Conformed Copy of Custodian Agreement of the Registrant; (3) (ii) Conformed Copy of Custodian Fee Schedule; (6) + All exhibits have been filed electronically. 3. Response is incorporated by reference to Registrant's Post-Effective Amendment No. 8 on Form N-1A filed April 21, 1995. (File Nos. 33-41004 and 811-6307). 5. Response is incorporated by reference to Registrant's Post-Effective Amendment No. 12 on Form N-1A filed April 28, 1997. (File Nos. 33-41004 and 811-6307). 6. Response is incorporated by reference to Registrant's Post-Effective Amendment No. 13 on Form N-1A filed April 28, 1998. (File Nos. 33-41004 and 811-6307). 7. Response is incorporated by reference to Registrant's Post-Effective Amendment No. 14 on Form N-1A filed February 26, 1999. (File Nos. 33-41004 and 811-6307). (h) (i) Conformed copy of Amended and Restated Agreement for Fund Accounting Services, Administrative Services, Shareholder Transfer Agency Services and Custody Services Procurement; (4) (ii) The Registrant hereby incorporates the conformed copy of the Shareholder Services Sub-Contract between Fidelity and Federated Shareholder Services from Item 24(b)(9)(iii) of the Federated GNMA Trust Registration Statement on Form N-1A, filed with the Commission on March 26, 1996. (File Nos. 2-75670 and 811-3375) (iii) Conformed copy of Shareholder Services Agreement; (6) (iv) The responses described in Item 23(e)(ii) are hereby incorporated by reference. (i) Conformed copy of Opinion and Consent of Counsel as to legality of shares being registered; (3) (j) Conformed copy of Consent of Independent Public Accountants; + (k) Not applicable; (l) Conformed copy of Initial Capital Understanding; (3) (m) (i) Conformed copy of Distribution Plan of the Registrant; (1) (ii) The responses described in Item 23(e)(ii) are hereby incorporated by reference. (n) Copy of Financial Data Schedules; + (o) Not applicable; (p) (i) Conformed copy of Power of Attorney of the Registrant;(6) (ii) Conformed copy of Power of Attorney of Chief Investment Officer of the Registrant; (7) (iii) Conformed copy of Power of Attorney of Treasurer of the Registrant; (7) (iv) Conformed copy of Power of Attorney of Director of the Registrant; (7) + All exhibits have been filed electronically. 1. Response is incorporated by reference to Registrant's Post-Effective Registration Statement on Form N-1A filed April 24, 1994. (File Nos. 33-41004 and 811-6307). 3. Response is incorporated by reference to Registrant's Post-Effective Amendment No. 8 on Form N-1A filed April 21, 1995. (File Nos. 33-41004 and 811-6307). 4. Response is incorporated by reference to Registrant's Post-Effective Amendment No. 10 on Form N-1A filed April 25, 1996. (File Nos. 33-41004 and 811-6307). 6. Response is incorporated by reference to Registrant's Post-Effective Amendment No. 13 on Form N-1A filed April 28, 1998. (File Nos. 33-41004 and 811-6307). 7. Response is incorporated by reference to Registrant's Post-Effective Amendment No. 14 on Form N-1A filed February 26, 1999. (File Nos. 33-41004 and 811-6307). Item 24. Persons Controlled By or Under Common Control with the Fund: None Item 25. Indemnification: (2) Item 26. Business and Other Connections of the Investment Adviser: For a description of the other business of the investment adviser, see the section entitled "Who Manages the Fund" in Part A. The affiliations with the Registrant of four of the Directors and one of the Officers of the investment adviser are included in Part B of this Registration Statement under "Who Manages and Provides Services to the Fund." The remaining Director of the investment adviser, his position with the investment adviser, and, in parentheses, his principal occupation is: Mark D. Olson (Partner, Wilson, Halbrook & Bayard), 107 W. Market Street, Georgetown, Delaware 19947. The remaining Officers of the investment adviser are: Executive Vice Presidents: William D. Dawson, III Henry A. Frantzen J. Thomas Madden Senior Vice Presidents: Joseph M. Balestrino David A. Briggs Drew J. Collins Jonathan C. Conley Deborah A. Cunningham Mark E. Durbiano Jeffrey A. Kozemchak Sandra L. McInerney Susan M. Nason Mary Jo Ochson Robert J. Ostrowski Vice Presidents: Todd A. Abraham J. Scott Albrecht Arthur J. Barry Randall S. Bauer David A. Briggs Micheal W. Casey Robert E. Cauley Kenneth J. Cody Alexandre de Bethmann B. Anthony Delserone, Jr. Michael P. Donnelly Linda A. Duessel Donald T. Ellenberger Kathleen M. Foody-Malus Thomas M. Franks Edward C. Gonzales James E. Grefenstette Marc Halperin Patricia L. Heagy Susan R. Hill William R. Jamison Constantine J. Kartsonas Stephen A. Keen 2. Response is incorporated by reference to Registrant's Pre- Effective Amendment No. 1 filed July 18, 1991. (File Nos. 33-41001 and 811-6307). Robert M. Kowit Richard J. Lazarchic Steven Lehman Marian R. Marinack Keith J. Sabol Frank Semack Aash M. Shah Michael W. Sirianni, Jr. Christopher Smith Tracy P. Stouffer Edward J. Tiedge Paige M. Wilhelm George B. Wright Jolanta M. Wysocka Assistant Vice Presidents: Nancy J. Belz Lee R. Cunningham, II James H. Davis, II Jacqueline A. Drastal Paul S. Drotch Salvatore A. Esposito Donna M. Fabiano Gary E. Farwell Eamonn G. Folan John T. Gentry John W. Harris Nathan H. Kehm John C. Kerber Grant K. McKay Natalie F. Metz Joseph M. Natoli John Sheehy Matthew K. Stapen Diane Tolby Timothy G. Trebilcock Leonardo A. Vila Steven J. Wagner Lori A. Wolff Secretary: G. Andrew Bonnewell Treasurer: Thomas R. Donahue Assistant Secretaries: Thomas R. Donahue Richard B. Fisher Christine M. Newcamp Assistant Treasurer: Richard B. Fisher The business address of each of the Officers of the investment adviser is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, Pennsylvania 15222-3779. These individuals are also officers of a majority of the investment advisers to the investment companies in the Federated Fund Complex described in Part B of this Registration Statement. Item 27. Principal Underwriters: (a)......Federated Securities Corp. the Distributor for shares of the Registrant, acts as principal underwriter for the following .... open-end investment companies, including the Registrant: Automated Government Money Trust; Cash Trust Series II; Cash Trust Series, Inc.; CCB Funds; Edward D. Jones & Co. Daily Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Core Trust; Federated Equity Funds; Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities, Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.; Federated High Yield Trust; Federated Income Securities Trust; Federated Income Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance Series; Federated Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond Fund, Inc.; 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 Securities Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; ; Hibernia Funds; Independence One Mutual Funds; Intermediate Municipal Trust; International Series, Inc.; Investment Series Funds, Inc.; Liberty U.S. Government Money Market Trust; Liquid Cash Trust; Managed Series Trust; Marshall Funds, Inc.; Money Market Management, Inc.; Money Market Obligations Trust; Money Market Obligations Trust II; Money Market Trust; Municipal Securities Income Trust; Newpoint Funds; Regions Funds; RIGGS Funds; SouthTrust Funds; Tax-Free Instruments Trust; The Planters Funds; The Wachovia Funds; The Wachovia Municipal Funds; Trust for Government Cash Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations; Vision Group of Funds, Inc.; World Investment Series, Inc.; Blanchard Funds; Blanchard Precious Metals Fund, Inc.; DG Investor Series; High Yield Cash Trust; Investment Series Trust; Star Funds; Targeted Duration Trust; The Virtus Funds; Trust for Financial Institutions; Federated Securities Corp. also acts as principal underwriter for the following closed-end investment company: Liberty Term Trust, Inc.- 1999.
(b) (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address With Distributor With Registrant Richard B. Fisher Director, Chairman, Chief President and Federated Investors Tower Executive Officer, Chief Director 1001 Liberty Avenue Operating Officer, Asst. Pittsburgh, PA 15222-3779 Secretary and Asst. Treasurer, Federated Securities Corp. Edward C. Gonzales Director, Executive Vice Executive Vice Federated Investors Tower President, President 1001 Liberty Avenue Federated Securities Corp. Pittsburgh, PA 15222-3779 Thomas R. Donahue Director, Assistant Secretary Federated Investors Tower and Assistant Treasurer 1001 Liberty Avenue Federated Securities Corp. Pittsburgh, PA 15222-3779 James F. Getz President-Broker/Dealer, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 John B. Fisher President-Institutional Sales, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 David M. Taylor Executive Vice President -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Mark W. Bloss Senior Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Richard W. Boyd Senior Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Laura M. Deger Senior Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Theodore Fadool, Jr. Senior Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Bryant R. Fisher Senior Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address With Distributor With Registrant Christopher T. Fives Senior Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 James S. Hamilton Senior Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 James M. Heaton Senior Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Keith Nixon Senior Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Solon A. Person, IV Senior Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Timothy C. Pillion Senior Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Thomas E. Territ Senior Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Ernest G. Anderson Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Teresa M. Antoszyk Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 John B. Bohnet Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Jane E. Broeren-Lambesis Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Matthew W. Brown Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address With Distributor With Registrant David J. Callahan Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Mark Carroll Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Steven R. Cohen Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Mary J. Combs Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 R. Edmond Connell, Jr. Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 R. Leonard Corton, Jr. Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Kevin J. Crenny Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Daniel T. Culbertson Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 G. Michael Cullen Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Marc C. Danile Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Robert J. Deuberry Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 William C. Doyle Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address With Distributor With Registrant Jill Ehrenfeld Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Mark D. Fisher Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Mark A. Gessner Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Joseph D. Gibbons Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 John K. Goettlicher Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Craig S. Gonzales Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 G. Tad Gullickson Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Dayna C. Haferkamp Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Raymond Hanley Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Bruce E. Hastings Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Beth A. Hetzel Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 James E. Hickey Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address With Distributor With Registrant Charlene H. Jennings Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 H. Joseph Kennedy Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Michael W. Koenig Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Christopher A. Layton Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Michael H. Liss Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Michael R. Manning Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Mark J. Miehl Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Richard C. Mihm Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Thomas P. Moretti Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Alec H. Neilly Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Thomas A. Peters III Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Robert F. Phillips Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address With Distributor With Registrant Richard A. Recker Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Eugene B. Reed Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Paul V. Riordan Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 John Rogers Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Brian S. Ronayne Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Thomas S. Schinabeck Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Edward J. Segura Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Edward L. Smith Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 David W. Spears Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 John A. Staley Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Colin B. Starks Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Jeffrey A. Stewart Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address With Distributor With Registrant William C. Tustin Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Paul A. Uhlman Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Miles J. Wallace Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 John F. Wallin Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Richard B. Watts Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Edward J. Wojnarowski Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Michael P. Wolff Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Robert W. Bauman Assistant Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Edward R. Bozek Assistant Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Terri E. Bush Assistant Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Beth C. Dell Assistant Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 David L. Immonen Assistant Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address With Distributor With Registrant John T. Glickson Assistant Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Renee L. Martin Assistant Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Robert M. Rossi Assistant Vice President, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Matthew S. Hardin Secretary, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Denis McAuley Treasurer, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Leslie K. Ross Assistant Secretary, -- Federated Investors Tower Federated Securities Corp. 1001 Liberty Avenue Pittsburgh, PA 15222-3779
(c) Not applicable. Item 28. Location of Accounts and Records: All accounts and records required to be maintained by Section 31(a) of the Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated thereunder are maintained at one of the following locations:
Registrant Federated Investors Tower 1001 Liberty Avenue Pittsburgh, PA 15222-3779 (Notices should be sent to the Agent for Service at above address) Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 Federated Shareholder Services Company P.O. Box 8600 ("Transfer Agent and Boston, MA 02266-8600 Dividend Disbursing Agent") Federated Services Company Federated Investors Tower ("Administrator") 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Federated Investment Federated Investors Tower Management Company 1001 Liberty Avenue ("Adviser") Pittsburgh, PA 15222-3779 State Street Bank and P.O. Box 8600 Trust Company Boston, MA 02266-8600 ("Custodian")
Item 29. Management Services: Not applicable. Item 30. Undertakings: Registrant hereby undertakes to comply with the provisions of Section 16(c) of the 1940 Act with respect to the removal of Directors and the calling of special shareholder meetings by shareholders. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, FEDERATED ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC., certifies that it meets all of the requirements for effectiveness of this Amendment to its Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Pittsburgh and Commonwealth of Pennsylvania, on the 27th, day of April, 1999. FEDERATED ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC. BY: /s/ Nicholas J. Seitanakis Nicholas J. Seitanakis, Assistant Secretary Attorney in Fact for John F. Donahue April 27, 1999 Pursuant to the requirements of the Securities Act of 1933, this Amendment to its Registration Statement has been signed below by the following person in the capacity and on the date indicated:
NAME TITLE DATE By: /s/ Nicholas J. Seitanakis Nicholas J. Seitanakis Attorney In Fact April 27, 1999 ASSISTANT SECRETARY For the Persons Listed Below John F. Donahue* Chairman and Director (Chief Executive Officer) William D. Dawson, III* Chief Investment Officer Richard B. Fisher* President and Director Richard J. Thomas* Treasurer (Principal Financial and Accounting Officer) Thomas G. Bigley* Director John T. Conroy, Jr.* Director Nicholas P. Constantakis* Director William J. Copeland* Director John F. Cunningham* Director James E. Dowd, Esq.* Director Lawrence D. Ellis, M.D.* Director Edward L. Flaherty, Jr., Esq.* Director Peter E. Madden* Director John E. Murray, Jr., J.D., S.J.D.* Director Wesley W. Posvar* Director Marjorie P. Smuts* Director * By Power of Attorney
EX-99.AUDITORCONSENT 2 Exhibit (j) under Form N-1A Exhibit (23) under Item 601/Reg. S-K INDEPENDENT AUDITORS' CONSENT To the Board of Trustees and Shareholders of Federated Adjustable Rate U.S. Government Fund; We consent to the use in Post-Effective Amendment No. 15 to Registration Statement 33-41004 of Federated Adjustable Rate U.S. Government Fund of our report dated April 9, 1999 appearing in the Prospectus, which is a part of such Registration Statement, and to the reference to us under the heading "Financial Highlights" in such Prospectus. By: DELOITTE & TOUCHE LLP Deloitte & Touche LLP Boston, Massachusetts April 27, 1999 EX-27.FDS 3
6 01 Federated Adjustable Rate U. S. Government Fund Inc 12-MOS Feb-28-1999 Feb-28-1999 137,422,788 137,261,102 3,359,546 0 3,011 140,623,659 0 0 656,152 656,152 0 182,781,621 14,850,336 19,290,274 159,346 0 (42,811,774) 0 (161,686) 139,967,507 0 9,642,945 0 1,630,696 8,012,249 (39,240) (1,414,222) 6,558,787 0 (7,982,323) 0 0 323,500 (5,297,637) 534,199 (43,636,422) 129,391 (42,772,534) 0 0 955,395 0 2,148,684 159,232,812 9.520 0.480 (0.090) (0.480) 0.000 0.000 9.430 1.02 0 0.000
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