Federated Intermediate Government Fund, Inc.

485BPOS 1 form.htm Federated Intermediate Government Fund, Inc. - 485BPOS

                                                      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. __24_ ............................        X

                                     and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940            X

    Amendment No. _21_ ............................................        X

                  FEDERATED INTERMEDIATE GOVERNMENT FUND, INC.

                    (Address of Principal Executive Offices)

                                 (412) 288-1900
                        (Registrant's Telephone Number)

                          John W. McGonigle, Esquire,
                           Federated Investors Tower,
                      Pittsburgh, Pennsylvania 15222-3779
                    (Name and Address of Agent for Service)

It is proposed that this filing will become effective:

 X  immediately upon filing pursuant to paragraph (b)
 _  on                _ 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.

                                   Copies to:

Matthew G. Maloney, Esquire
Dickstein Shapiro LLP
1825 Eye St. NW
Washington, D.C.  20006

Federated
World-Class Investment Manager

Federated Intermediate Government Fund, Inc.

PROSPECTUS

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April 30, 2007

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INSTITUTIONAL SHARES

A mutual fund seeking to provide total return by investing primarily in U.S. government and government agency securities, including mortgage-backed securities issued by U.S. government agencies and instrumentalities.

As with all mutual funds, the Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.

Not FDIC Insured * May Lose Value * No Bank Guarantee

CONTENTS

Risk/Return Summary 1

What are the Fund's Fees and Expenses? 5

What are the Fund's Investment Strategies? 6

What are the Principal Securities in Which the Fund Invests? 8

What are the Specific Risks of Investing in the Fund? 15

What Do Shares Cost? 17

How is the Fund Sold? 18

Payments to Financial Intermediaries 19

How to Purchase Shares 20

How to Redeem and Exchange Shares 22

Account and Share Information 25

Who Manages the Fund? 29

Legal Proceedings 30

Financial Information 31

Appendix A: Hypothetical Investment and Expense Information 33

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is to provide total return. The Fund's total return will consist of two components: (1) changes in the market value of its portfolio securities (both realized and unrealized appreciation); and (2) income received from its portfolio securities. The Fund expects that, under normal market conditions, income will comprise the largest component of its total return. 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's overall strategy is to invest in a portfolio consisting primarily of U.S. Treasury securities, U.S. government agency securities (including mortgage-backed securities issued by U.S. government agencies or instrumentalities) and related derivative contracts. The Fund buys and sells portfolio securities based primarily on its market outlook and analysis of how securities may perform under different market conditions. The Fund evaluates its investment strategy by comparing the performance and composition of the Fund's portfolio to the performance and composition of an index composed of notes and bonds issued by the U.S. government and its agencies or instrumentalities with maturities of not less than one year and not more than ten years.

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The Fund intends to invest in the securities of U.S. government-sponsored entities (GSEs), including GSE securities that are not backed by the full faith and credit of the U.S. government, such as those issued by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association and the Federal Home Loan Bank System. These entities are, however, supported through federal subsidies, loans or other benefits. The Fund may also invest in GSE securities that are supported by the full faith and credit of the U.S. government, such as those issued by the Government National Mortgage Association. Finally, the Fund may invest in a few GSE securities that have no explicit financial support, but which are regarded as having implied support because the federal government sponsors their activities. Such securities include those issued by the Farm Credit System and the Financing Corporation.

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WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money by investing 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, which may result in a decrease in the value of Fund Shares.
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.
Risks Associated with Complex Collateralized Mortgage Obligations (CMOs). CMOs with complex or highly variable prepayment terms, such as companion classes, IOs, POs, Inverse Floaters and residuals, generally entail greater market, prepayment and liquidity risks than other mortgage-backed securities.

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Risks of Investing in Derivative Contracts and Hybrid Instruments. The Fund's use of derivative contracts and hybrid instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Also, derivative contracts and hybrid instruments may involve other risks described in this prospectus or the Fund's Statement of Additional Information, such as interest rate, liquidity and leverage risks.

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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 Bar Chart and Table

The performance information shown below will help you analyze the Fund's investment risks in light of its historical returns. The bar chart shows the variability of the Fund's Institutional Shares total returns on a calendar year-by-year basis. The Average Annual Total Return table shows returns averaged over the stated periods, and includes comparative performance information. The Fund's performance will fluctuate, and past performance (before and after taxes) is no guarantee of future results.

The Fund's Institutional Shares are sold without a sales charge (load). The total returns shown in the bar chart above are based upon net asset value.

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The Fund's Institutional Shares total return for the three-month period from January 1, 2007 to March 31, 2007 was 1.58%.

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Within the period shown in the bar chart, the Fund's Institutional Shares highest quarterly return was 3.11% (quarter ended September 30, 2001). Its lowest quarterly return was (0.92)% (quarter ended June 30, 2004).

Average Annual Total Return Table

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Return Before Taxes is shown. In addition, Return After Taxes is shown for the Fund's Institutional Shares to illustrate the effect of federal taxes on Fund returns. Actual after-tax returns depend on each investor's personal tax situation, and are likely to differ from those shown. The table also shows returns for the Lehman Brothers Intermediate Government Index (LBIG), a broad-based market index tracking U.S. government securities. Index returns do not reflect taxes, sales charges, expenses or other fees that the SEC requires to be reflected in the Fund's performance. The index is unmanaged, and unlike the fund, is not affected by cashflows. It is not possible to invest directly in an index.

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(For the Periods Ended December 31, 2006)

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	1 Year	5 Years	Start of Performance¹
Fund:
Return Before Taxes	<R>4.33%</R>	2.78%	3.93%
Return After Taxes on Distributions²	<R>2.56%</R>	1.56%	2.47%
Return After Taxes on Distributions and Sale of Fund Shares²	<R>2.79%</R>	1.65%	2.48%
<R> LBIG</R>	<R>4.08%</R>	4.53%	5.76%

1 The Fund's Institutional Shares start of performance was September 11, 2000.

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2 After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. Return After Taxes on Distributions assumes a continued investment in the Fund and shows the effect of taxes on Fund distributions. Return After Taxes on Distributions and Sale of Fund Shares assumes all Shares were redeemed at the end of each measurement period, and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on Fund distributions. These after-tax returns do not reflect the effect of any applicable state and local taxes. After-tax returns are not relevant to investors holding Shares through tax-deferred programs, such as IRA or 401(k) plans.

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What are the Fund's Fees and Expenses?

FEDERATED INTERMEDIATE GOVERNMENT FUND, INC.

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold the Fund's Institutional Shares.

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)		None
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, Reimbursement and Reduction)¹
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee²		0.40%
Distribution (12b-1) Fee		None
Other Expenses³		1.33%
Total Annual Fund Operating Expenses⁴		1.73%

1 The percentages shown are based on expenses for the entire fiscal year ended February 28, 2007. However, the rate at which expenses are accrued during the fiscal year may not be constant and, at any particular point, may be greater or less than the stated average percentage. Although not obligated to do so, (except as discussed in Note 4, below), the Adviser, administrator and shareholder services provider waived, reimbursed and/or elected not to charge certain amounts. These are shown below along with the net expenses the Fund actually paid for the fiscal year ended February 28, 2007.
Total Waivers, Reimbursement and Reduction of Fund Expenses		1.43%
Total Actual Annual Fund Operating Expenses (after waivers, reimbursement and reduction)		0.30%
2 The Adviser voluntarily waived 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 0.00% for the fiscal year ended February 28, 2007.
3 Includes a shareholder services fee/account administration fee which is used to compensate intermediaries for shareholder services or account administrative services. Please see "Payments to Financial Intermediaries" herein. The shareholder services provider and administrator voluntarily waived a portion of their fees and the Adviser voluntarily reimbursed certain operating expenses of the Fund. Additionally, the shareholder services provider elected not to charge, and therefore the Fund did not accrue, a portion of the shareholder services fee for the Institutional Shares. The Adviser, administrator and shareholder services provider can terminate these voluntary waivers, reimbursement and/or reduction at any time. Total other expenses paid by the Fund's Institutional Shares (after the voluntary waivers, reimbursement and reduction) were 0.30% for the fiscal year ended February 28, 2007.
4 The Adviser and its affiliates have voluntarily agreed to waive their fees and/or reimburse expenses (including the distribution (12b-1) fee) so that the total operating expenses paid by the Fund's Institutional Shares (after the voluntary waivers and reimbursements) will not exceed 0.30% for the fiscal year ending February 29, 2008. Although these actions are voluntary, the Adviser and its affiliates have agreed not to terminate these waivers and/or reimbursements until after April 30, 2008.

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund's Institutional Shares with the cost of investing in other mutual funds.

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The Example assumes that you invest $10,000 in the Fund's Institutional 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 Institutional Shares operating expenses are before waivers, reimbursement and reduction as shown in the table and remain the same. Although your actual costs and returns may be higher or lower, based on these assumptions your costs would be:

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1 Year	$	176
3 Years	$	545
5 Years	$	939
10 Years	$	2,041

What are the Fund's Investment Strategies?

The Fund is intended to provide returns consistent with investments in U.S. government and government agency securities. The Fund's overall strategy is therefore to invest in a portfolio consisting primarily of U.S. Treasury securities, U.S. government agency securities (including mortgage-backed securities issued by U.S. government agencies or instrumentalities) and related derivative contracts. A description of the principal types of securities and derivative contracts in which the Fund invests, other investment techniques principally used by the Fund, and their risks, immediately follows this strategy section.

The Fund buys and sells portfolio securities based primarily on the Adviser's market outlook and analysis of how securities may perform under different market conditions. The Adviser's market outlook reflects multiple factors, including:

current and expected U.S. economic growth;
current and expected changes in the rate of inflation;
the level of interest rates in other countries as compared to U.S. interest rates;
the Federal Reserve Board's monetary policy; and
technical factors affecting the supply or demand for specific securities or types of securities.

The Adviser's securities analysis considers, among other factors, the historical and expected performance of securities relative to their risks. Performance includes the potential for appreciation, as well as a security's expected yield. The analysis also considers some or all of the risks described below.

The Adviser evaluates the investment strategy by comparing the performance and composition of the Fund's portfolio to the performance and composition of an index composed of notes and bonds issued by the U.S. government and its agencies or instrumentalities with maturities of not less than one year and not more than ten years (the "Index"). Although there can be no assurance that the Fund's total return will exceed the Index's during any period, the Fund's Adviser seeks to construct a portfolio that will perform favorably when compared to the Index over the long term. In pursuing this strategy, the composition of the Fund's portfolio will vary from the composition of the Index. The Fund's portfolio may also include individual securities not represented in the Index.

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The Adviser may seek to control risks by adopting policies that limit the extent to which the Fund's portfolio may vary from the Index. For example, under normal market conditions, the Adviser currently limits the effective duration of the Fund's portfolio to within 20% of the effective duration of the Index. Effective duration provides a measure of the price sensitivity of a fixed-income security or portfolio of fixed-income securities to changes in interest rates. The Adviser may change these limitations at any time without prior approval from the Fund's trustees or shareholders.

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Mortgage-backed, pass-through certificates are typically offered or traded on a "to-be-announced" or other delayed delivery basis. Other U.S. government securities may also be offered on a delayed delivery basis. The Fund will enter into trades on this basis in order to participate in these offerings or trade these securities. The Fund may also seek to increase its income by engaging in dollar roll transactions.

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The Fund may use derivative contracts to implement elements of its investment strategy. For example, the Fund may use derivative contracts to:

increase or decrease the effective duration of the Fund's portfolio;

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increase or decrease the Fund's exposure to different points on the yield curve;¹

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increase or decrease the allocation of the portfolio to securities or types of securities in which the Fund may invest directly; or
obtain premiums from the sale of derivative contracts.

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There can be no assurance that the Fund's use of derivative contracts will work as intended.

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The Fund invests in overnight repurchase agreements or money market funds in order to maintain sufficient cash to pay for daily net redemptions and portfolio transactions.

Because the Fund refers to U.S. government securities in its name, it will notify shareholders at least 60 days in advance of any change in its investment policies that would enable the Fund to invest, under normal circumstances, less than 80% of its assets in U.S. government investments.

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1 In descriptions of the Fund's investment strategy, the Adviser may refer to the relative interest rates of securities with longer and shorter durations within a sector as a "yield curve."

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PORTFOLIO TURNOVER

The Fund actively trades its portfolio securities in an attempt to achieve its investment objective. Active trading will cause the Fund to have an increased portfolio turnover rate, which is likely to generate shorter-term gains (losses) for its shareholders, which are taxed at a higher rate than longer-term gains (losses). Actively trading portfolio securities increases the Fund's trading costs and may have an adverse impact on the Fund's performance.

TEMPORARY DEFENSIVE INVESTMENTS

The Fund may temporarily depart from its principal investment strategies by investing its assets in cash and shorter-term 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 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 (GSE) acting under federal authority. Some agency securities are supported by the full faith and credit of the United States. These include the Government National Mortgage Association, Small Business Administration, Farm Credit System Financial Assistance Corporation, Farmer's Home Administration, Federal Financing Bank, General Services Administration, Department of Housing and Urban Development, Export-Import Bank, Overseas Private Investment Corporation, and Washington Metropolitan Area Transit Authority Bonds.

Other agency securities receive support through federal subsidies, loans or other benefits. For example, the U.S. Treasury is authorized to purchase specified amounts of securities issued by (or otherwise make funds available to) the Federal Home Loan Bank System, Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, and Tennessee Valley Authority in support of such obligations.

A few agency securities have no explicit financial support, but are regarded as having implied support because the federal government sponsors their activities. These include the Farm Credit System, Financing Corporation, and Resolution Funding Corporation.

Investors regard agency securities as having low credit risks, but not as low as U.S. Treasury securities. A Fund treats mortgage-backed securities guaranteed by a GSE as agency securities. Although such a guarantee protects against credit risks, it does not reduce market and prepayment risks.

Mortgage-Backed Securities

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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. Interest in pools of adjustable rate mortgages are known as ARMs.

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Mortgage-backed securities come in a variety of forms. The simplest form of mortgage-backed securities is pass-through certificates. Holders of pass-through certificates receive a pro rata share of all net interest and principal payments and prepayments from the underlying mortgages. As a result, the holders assume all the interest rate and prepayment risks of the underlying mortgages. Other mortgage-backed securities may have more complicated financial structures.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)

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.

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, TACS AND COMPANION CLASSES

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 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.

IOS AND POS

CMOs may allocate interest payments to one class (Interest Only or IOs) and principal payments to another class (Principal Only or POs). POs increase in value when prepayment rates increase. In contrast, IOs decrease in value when prepayments increase, because the underlying mortgages generate less interest payments. However, IOs tend to increase in value when interest rates rise (and prepayments decrease). In contrast, POs decrease in value when interest rates rise (and prepayments decrease).

FLOATERS AND INVERSE FLOATERS

Another variant allocates interest payments between two classes of CMOs. One class (Floaters) receives a share of interest payments based upon a market index such as LIBOR. The other class (Inverse Floaters) receives any remaining interest payments from the underlying mortgages. Floater classes receive more interest (and Inverse Floater classes receive correspondingly less interest) as interest rates rise. This shifts prepayment and interest rate risks from the Floater to the Inverse Floater class, reducing the price volatility of the Floater class and increasing the price volatility of the Inverse Floater class.

Z CLASSES

CMOs must allocate all payments received from the underlying mortgages to some class. To capture any unallocated payments, CMOs generally have an accrual (Z) class. Z classes do not receive any payments from the underlying mortgages until all other CMO classes have been paid off. Once this happens, holders of Z class CMOs receive all payments and prepayments.

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.

DERIVATIVE CONTRACTS

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Derivative contracts are financial instruments that require payments based upon changes in the values of designated securities, commodities, currencies, indices, or other assets or instruments including other derivative contracts, (each a "Reference Instrument" and collectively, "Reference Instruments"). Each party to a derivative contract is referred to as a counterparty. Some derivative contracts require payments relating to an actual, future trade involving the Reference Instrument. These types of derivatives are frequently referred to as "physically settled" derivatives. Other derivative contracts require payments relating to the income or returns from, or changes in the market value of, a Reference Instrument. These types of derivatives are known as "cash settled" derivatives, since they require cash payments in lieu of delivery of the Reference Instrument.

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Many derivative contracts are traded on securities or commodities exchanges. In this case, the exchange sets all the terms of the contract except for the price. Investors make payments due under their contracts through the exchange. Most exchanges require investors to maintain margin accounts through their brokers to cover their potential obligations to the exchange. Parties to the contract make (or collect) daily payments to the margin accounts to reflect losses (or gains) in the value of their contracts. This protects investors against potential defaults by the counterparty. Trading contracts on an exchange also allows investors to close out their contracts by entering into offsetting contracts.

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The Fund may also trade derivative contracts over-the-counter (OTC) in transactions negotiated directly between the Fund and the counterparty. OTC contracts do not necessarily have standard terms, so they cannot be directly offset with other OTC contracts. In addition, OTC contracts with more specialized terms may be more difficult to price than exchange-traded contracts.

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Depending on how the Fund uses derivative contracts and the relationships between the market value of a derivative contract and the Reference Instrument, derivative contracts may increase or decrease the Fund's exposure to the risks of the Reference Instrument, and may also expose the Fund to liquidity and leverage risks. OTC contracts also expose the Fund to credit risks in the event that a counterparty defaults on the contract.

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Futures Contracts

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Futures contracts provide for the future sale by one party and purchase by another party of a specified amount of a Reference Instrument at a specified price, date and time. Entering into a contract to buy a Reference Instrument is commonly referred to as buying a contract or holding a long position in the asset. Entering into a contract to sell a Reference Instrument is commonly referred to as selling a contract or holding a short position in the Reference Instrument. Futures contracts are considered to be commodity contracts. The Fund has claimed an exclusion from the definition of the term "commodity pool operator" under the Commodity Exchange Act and, therefore, is not subject to registration or regulation as a commodity pool operator under that Act. Futures contracts traded OTC are frequently referred to as forward contracts. The Fund can buy or sell financial futures.

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Option Contracts

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Option contracts (also called "options") are rights to buy or sell a Reference Instrument for a specified price (the exercise price) during, or at the end of, a specified period. The seller (or writer) of the option receives a payment, or premium, from the buyer, which the writer keeps regardless of whether the buyer uses (or exercises) the option. A call option gives the holder (buyer) the right to buy the Reference Instrument from the seller (writer) of the option. A put option gives the holder the right to sell the Reference Instrument to the writer of the option. Options can trade on exchanges or in the OTC market and may be bought or sold on a wide variety of Reference Instruments. Options that are written on futures contracts will be subject to margin requirements similar to those applied to futures contracts. The Fund may buy or sell options on a Reference Instrument if it is permitted to own, invest, or otherwise have economic exposure to that instrument. The Fund is not required to own a Reference Instrument, in order to buy or sell an option on that Reference Instrument.

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Swap Contracts

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A swap contract (also known as a "swap") is a type of derivative contract in which two parties agree to pay each other (swap) the returns derived from Reference Instruments. Swaps do not always involve the delivery of the Reference Instruments by either party, and the parties might not own the Reference Instruments underlying the swap. The payments are usually made on a net basis so that, on any given day, the Fund would receive (or pay) only the amount by which its payment under the contract is less than (or exceeds) the amount of the other party's payment. Swap agreements are sophisticated instruments that can take many different forms and are known by a variety of names.

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Common types of swaps in which the Fund may invest include interest rate swaps, total return swaps, credit default swaps, and caps and floors.

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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.

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 interest rate risks for the Fund. Delayed delivery transactions also involve credit risks in the event of a counterparty default.

TO BE ANNOUNCED SECURITIES (TBAS)

RISKS OF INVESTING IN DERIVATIVE CONTRACTS AND HYBRID INSTRUMENTS

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The Fund's use of derivative contracts and hybrid instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. First, changes in the value of the derivative contracts and hybrid instruments in which the Fund invests may not be correlated with changes in the value of the underlying Reference or Valuation Instruments or, if they are correlated, may move in the opposite direction than originally anticipated. Second, while some strategies involving derivatives may reduce the risk of loss, they may also reduce potential gains or, in some cases, result in losses by offsetting favorable price movements in portfolio holdings. Third, there is a risk that derivative contracts and hybrid instruments may be erroneously priced or improperly valued and, as a result, the Fund may need to make increased cash payments to the counterparty. Fourth, derivative contracts and hybrid instruments may cause the Fund to realize increased ordinary income or short-term capital gains (which are treated as ordinary income for Federal income tax purposes) and, as a result, may increase taxable distributions to shareholders. Fifth, a common provision in OTC derivative contracts permits the counterparty to terminate any such contract between it and the Fund, if the value of the Fund's total net assets declines below a specified level over a given time period. Factors that may contribute to such a decline (which usually must be substantial) include significant shareholder redemptions and/or a marked decrease in the market value of the Fund's investments. Any such termination of the Fund's OTC derivative contracts may adversely affect the Fund (for example, by increasing losses and/or costs, and/or preventing the Fund from fully implementing its investment strategies). Finally, derivative contracts and hybrid instruments may also involve other risks described in this prospectus or in the Fund's SAI, such as interest rate , liquidity and leverage risks.

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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 (as described in this prospectus), it is processed at the next calculated net asset value (NAV). The Fund does not charge a front-end sales charge. NAV is determined as of the end of regular trading on the NYSE (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."

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The Fund generally values fixed-income securities according to prices furnished by an independent pricing service, except that fixed-income securities with remaining maturities of less than 60 days at the time of purchase are valued at amortized cost. Prices furnished by an independent pricing service are generally intended to be indicative of the bid prices currently offered to institutional investors for the securities. For mortgage-backed securities, prices furnished by the independent pricing service are based on the aggregate investment value of the projected cash flows to be generated by the security .

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Futures contracts and options are generally valued at market values established by the exchanges on which they are traded at the close of trading on such exchanges.

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If prices are not available from an independent pricing service, securities and derivative contracts traded in the over-the-counter market are generally valued according to the mean between the last bid and the last asked price for the security or contract as provided by an investment dealer or other financial institution that deals in the security or contract .

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Where a last sale price or market quotation for a portfolio security is not readily available, and no independent pricing service furnishes a price, the value of the security used in computing NAV is its fair value as determined in good faith under procedures approved by the Fund's Board of Directors (Board). The Fund may use the fair value of a security to calculate its NAV when, for example: (1) a portfolio security is not traded in a public market or the principal market in which the security trades is closed; (2) trading in a portfolio security is suspended and not resumed prior to the normal market close; (3) a portfolio security is not traded in significant volume for a substantial period; or (4) the Fund's Adviser determines that the quotation or price for a portfolio security provided by a dealer or independent pricing service is inaccurate.

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Fair valuation procedures are also used where a significant event affecting the value of a portfolio security is determined to have occurred between the time as of which the price of the portfolio security is determined and the NYSE closing time as of which the Fund's NAV is computed. An event is considered significant if there is both an affirmative expectation that the security's value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Significant events include significant general securities market movements occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE. For domestic fixed-income securities, such events may occur where the cut-off time for the market information used by the independent pricing service is earlier than the end of regular trading on the NYSE. In such cases, use of fair valuation can reduce an investor's ability to seek to profit by estimating the Fund's NAV in advance of the time as of which NAV is calculated.

In some cases, events affecting the issuer of a portfolio security may be considered significant events. Announcements concerning earnings, acquisitions, new products, management changes, litigation developments, a strike or natural disaster affecting the company's operations or regulatory changes or market developments affecting the issuer's industry occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE are examples of potentially significant events.

There can be no assurance that the Fund could purchase or sell a portfolio security at the price used to calculate the Fund's NAV. In the case of fair valued portfolio securities, lack of information and uncertainty as to the significance of information may lead to a conclusion that a prior valuation is the best indication of a portfolio security's present value. Fair valuations generally remain unchanged until new information becomes available. Consequently, changes in the fair valuation of portfolio securities may be less frequent and of greater magnitude than changes in the price of portfolio securities valued by an independent pricing service, or based on market quotations.

How is the Fund Sold?

The Fund offers two Share classes: Institutional Shares and Institutional Service Shares, each representing interests in a single portfolio of securities. This prospectus relates only to Institutional Shares. All Share classes have different expenses which affect their performance. Contact your financial intermediary or call 1-800-341-7400 for more information concerning the other class.

The Fund's Distributor, Federated Securities Corp., markets the Shares described in this prospectus to institutions acting in an agency or fiduciary capacity or to individuals, directly or through financial intermediaries. Under the Distributor's Contract with the Fund, the Distributor offers Shares on a continuous, best-efforts basis. The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

Payments to Financial Intermediaries

The Fund and its affiliated service providers may pay fees as described below to financial intermediaries (such as broker-dealers, banks, investment advisers or third-party administrators) whose customers are shareholders of the Fund.

SERVICE FEES

The Fund may pay Service Fees of up to 0.25% of average net assets to financial intermediaries or to Federated Shareholder Services Company (FSSC), a subsidiary of Federated, for providing services to shareholders and maintaining shareholder accounts. Under certain agreements, rather than paying financial intermediaries directly, the Fund may pay Service Fees to FSSC and FSSC will use the fees to compensate financial intermediaries. If a financial intermediary receives Service Fees on an account, it is not eligible to also receive Account Administration Fees on that same account.

ACCOUNT ADMINISTRATION FEES

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The Fund may pay Account Administration Fees of up to 0.25% of average net assets to banks that are not registered as broker-dealers or investment advisers for providing administrative services to the Funds and shareholders. If a financial intermediary receives Account Administration Fees on an account, it is not eligible to also receive Service Fees or Recordkeeping Fees on that same account.

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RECORDKEEPING FEES

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The Fund may pay Recordkeeping Fees on an average net assets basis or on a per account per year basis to financial intermediaries for providing recordkeeping services to the Funds and shareholders. If a financial intermediary receives Recordkeeping Fees on an account, it is not eligible to also receive Account Administration Fees or Networking Fees on that same account.

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NETWORKING FEES

The Fund may reimburse Networking Fees on a per account per year basis to financial intermediaries for providing administrative services to the Funds and shareholders on certain non-omnibus accounts. If a financial intermediary receives Networking Fees on an account, it is not eligible to also receive Recordkeeping Fees on that same account.

ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES

The Distributor may pay out of its own resources amounts (including items of material value) to certain financial intermediaries that support the sale of Shares or provide services to Fund shareholders. The amounts of these payments could be significant, and may create an incentive for the financial intermediary or its employees or associated persons to recommend or sell Shares of the Fund to you. In some cases, such payments may be made by or funded from the resources of companies affiliated with the Distributor (including the Adviser). These payments are not reflected in the fees and expenses listed in the fee table section of the Fund's prospectus and described above because they are not paid by the Fund.

These payments are negotiated and may be based on such factors as the number or value of Shares that the financial intermediary sells or may sell; the value of client assets invested; or the type and nature of services or support furnished by the financial intermediary. These payments may be in addition to payments made by the Fund to the financial intermediary under a Service Fees arrangement. In connection with these payments, the financial intermediary may elevate the prominence or profile of the Fund and/or other Federated funds within the financial intermediary's organization by, for example, placement on a list of preferred or recommended funds, and/or granting the Distributor preferential or enhanced opportunities to promote the funds in various ways within the financial intermediary's organization. You can ask your financial intermediary for information about any payments it receives from the Distributor or the Fund and any services provided.

How to Purchase Shares

You may purchase Shares through a financial intermediary, 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.

The required minimum initial investment for Fund Shares is $100,000. The required minimum subsequent investment amount is $100.

An institutional investor's minimum investment is calculated by combining all accounts it maintains with the Fund. Accounts established through financial intermediaries may be subject to a smaller minimum investment amount. Keep in mind that financial intermediaries may charge you fees for their services in connection with your Share transactions.

THROUGH A FINANCIAL INTERMEDIARY

Establish an account with the financial intermediary; and

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Submit your purchase order to the financial intermediary 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 financial intermediary forwards the order to the Fund on the same day and the Fund receives payment within one business day. You will become the owner of Shares and receive dividends when the Fund receives your payment.

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Financial intermediaries 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 incurred by the Fund or State Street Bank and Trust Company, the Fund's transfer agent.

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 send it to:

The Federated Funds
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, send it to:

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The Federated Funds
30 Dan Road
Canton, MA 02021

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Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund reserves the right to reject any purchase request. For example, to protect against check fraud the Fund may reject any purchase request involving a check that is not made payable to The Federated Funds (including, but not limited to, requests to purchase Shares using third-party checks), or involving temporary checks or credit card checks.

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.

How to Redeem and Exchange Shares

You should redeem or exchange Shares:

through a financial intermediary if you purchased Shares through a financial intermediary; or
directly from the Fund if you purchased Shares directly from the Fund.

Shares of the Fund may be redeemed for cash or exchanged for shares of the same class of other Federated funds on days on which the Fund computes its NAV. Redemption requests may be made by telephone or in writing.

THROUGH A FINANCIAL INTERMEDIARY

Submit your redemption or exchange request to your financial intermediary 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 financial intermediary.

DIRECTLY FROM THE FUND

By Telephone

You may redeem or exchange Shares by simply calling the Fund at 1-800-341-7400.

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 sending 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:

The Federated Funds
P.O. Box 8600
Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

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The Federated Funds
30 Dan Road
Canton, MA 02021

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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 financial intermediary or the Fund if you need special instructions.

Signature Guarantees

Signatures must be guaranteed by a financial institution which is a participant in a Medallion signature guarantee program 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 Medallion signature guarantee is designed to protect your account from fraud. Obtain a Medallion 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 for up to seven days:

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to allow your purchase to clear (as discussed below);

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during periods of market volatility ;

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when a shareholder's trade activity or amount adversely impacts the Fund's ability to manage its assets ; or

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during any period when the Federal Reserve wire or applicable Federal Reserve banks are closed, other than customary weekend and holiday closings.

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If you request a redemption of Shares recently purchased by check (including a cashier's check or certified check), money order, bank draft or ACH, your redemption proceeds may not be made available up to seven calendar days to allow the Fund to collect payment on the instrument used to purchase such Shares. If the purchase instrument does not clear, your purchase order will be canceled and you will be responsible for any losses incurred by the Fund as a result of your canceled order.

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In addition, the right of redemption may be suspended, or the payment of proceeds may be delayed, during any period:

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when the NYSE is closed, other than customary weekend and holiday closings;

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when trading on the NYSE is restricted, as determined by the SEC; or

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in which an emergency exists, as determined by the SEC, so that disposal of the Fund's investments or determination of its NAV is not reasonably practicable.

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You will not accrue interest or dividends on uncashed redemption checks from the Fund if those checks are undeliverable and returned to the Fund.

EXCHANGE PRIVILEGE

You may exchange Shares of the Fund for shares of any Federated fund or share class that does not have a stated sales charge or contingent deferred sales charge, except Liberty U.S. Government Money Market Trust and Class K Shares. 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. In addition, the Fund may terminate your exchange privilege if your exchange activity is found to be excessive under the Fund's frequent trading policies. See "Account and Share Information - Frequent Trading Policies."

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. In addition, you will receive periodic statements reporting all account activity, including dividends and capital gains paid.

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DIVIDENDS AND CAPITAL GAINS

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The Fund declares any dividends daily and pays them monthly to shareholders. If you purchase Shares by wire, you begin earning dividends on the day your wire is received. If you purchase Shares by check, you begin earning dividends on the business day after the Fund receives your check. In either case, you earn dividends through the day your redemption request is received.

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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. Dividends may also be reinvested without sales charges in shares of any class of any other Federated fund of which you are already a shareholder.

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If you have elected to receive dividends and/or capital gain distributions in cash, and your check is returned by the postal or other delivery service as "undeliverable," or you do not respond to mailings from Federated with regard to uncashed distribution checks, your distribution option will automatically be converted to having all dividends and capital gains reinvested in additional shares. No interest will accrue on amounts represented by uncashed distribution checks.

If you purchase Shares just before the record date for a 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 record date for a capital gain. Contact your financial intermediary 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, 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

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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 at different rates depending on the source of dividend income. Capital gains are taxable at different rates depending upon the length of time the Fund holds its assets.

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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.

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FREQUENT TRADING POLICIES

Frequent or short-term trading into and out of the Fund can have adverse consequences for the Fund and shareholders who use the Fund as a long-term investment vehicle. Such trading in significant amounts can disrupt the Fund's investment strategies (e.g., by requiring it to sell investments at inopportune times or maintain excessive short-term or cash positions to support redemptions), increase brokerage and administrative costs and affect the timing and amount of taxable gains distributed by the Fund. Investors engaged in such trading may also seek to profit by anticipating changes in the Fund's NAV in advance of the time as of which NAV is calculated.

The Fund's Board has approved policies and procedures intended to discourage excessive frequent or short-term trading of the Fund's Shares. The Fund monitors trading in Fund Shares in an effort to identify disruptive trading activity. The Fund monitors trades into and out of the Fund within a period of 30 days or less. The size of Share transactions subject to monitoring varies. However, where it is determined that a shareholder has exceeded the detection amounts twice within a period of 12 months, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. The Fund may also monitor trades into and out of the Fund over periods longer than 30 days, and if potentially disruptive trading activity is detected, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. Whether or not the specific monitoring limits are exceeded, the Fund's management or the Adviser may determine from the amount, frequency or pattern of purchases and redemptions or exchanges that a shareholder is engaged in excessive trading that is or could be detrimental to the Fund and other shareholders and may preclude the shareholder from making further purchases or exchanges of Fund Shares. No matter how the Fund defines its limits on frequent trading of Fund Shares, other purchases and sales of Fund Shares may have adverse effects on the management of the Fund's portfolio and its performance.

The Fund's frequent trading restrictions do not apply to purchases and sales of Fund Shares by other Federated funds. These funds impose the same frequent trading restrictions as the Fund at their shareholder level. In addition, allocation changes of the investing Federated fund are monitored, and the managers of the recipient fund must determine that there is no disruption to their management activity. The intent of this exception is to allow investing fund managers to accommodate cash flows that result from non-abusive trading in the investing fund, without being stopped from such trading because the aggregate of such trades exceeds the monitoring limits. Nonetheless, as with any trading in Fund Shares, purchases and redemptions of Fund Shares by other Federated funds could adversely affect the management of the Fund's portfolio and its performance.

The Fund's objective is that its restrictions on short-term trading should apply to all shareholders, regardless of the number or type of accounts in which Shares are held. However, the Fund anticipates that limitations on its ability to identify trading activity to specific shareholders, including where shares are held through intermediaries in multiple or omnibus accounts, will mean that these restrictions may not be able to be applied uniformly in all cases.

PORTFOLIO HOLDINGS INFORMATION

Information concerning the Fund's portfolio holdings is available in the "Products" section of Federated's website at FederatedInvestors.com . A complete listing of the Fund's portfolio holdings as of the end of each calendar quarter is posted on the website 30 days (or the next business day) after the end of the quarter and remains posted until replaced by the information for the succeeding quarter. Summary portfolio composition information as of the close of each month is posted on the website 15 days (or the next business day) after month-end and remains until replaced by the information for the succeeding month. The summary portfolio composition information may include percentage breakdowns of the portfolio by type of security.

To access this information from the "Products" section of the website, click on "Portfolio Holdings" and select the appropriate link opposite the name of the Fund, or select the name of the Fund from the menus on the "Products" section, and from the Fund's page click on the "Portfolio Holdings" or "Composition" link. A user is required to register on the website the first time the user accesses this information.

You may also access from the "Products" section of the website portfolio information as of the end of the Fund's fiscal quarters. The Fund's annual and semi-annual reports, which contain complete listings of the Fund's portfolio holdings as of the end of the Fund's second and fourth fiscal quarters, may be accessed by selecting the name of the Fund, clicking on "Prospectuses and Regulatory Reports" and selecting the link to the appropriate PDF. Complete listings of the Fund's portfolio holdings as of the end of the Fund's first and third fiscal quarters may be accessed by selecting "Portfolio Holdings" from the "Products" section and then selecting the appropriate link opposite the name of the Fund. Fiscal quarter information is made available on the website within 70 days after the end of the fiscal quarter. This information is also available in reports filed with the SEC at the SEC's website at www.sec.gov.

Who Manages the Fund?

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The Board 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. Federated Advisory Services Company (FASC), an affiliate of the Adviser, provides certain support services to the Adviser. The fee for these services is paid by the Adviser and not by the Fund. The address of the Adviser and FASC is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

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The Adviser and other subsidiaries of Federated advise approximately 148 equity, fixed-income, and money market mutual funds as well as a variety of customized separately managed accounts, which totaled approximately $237 billion in assets as of December 31, 2006. Federated was established in 1955 and is one of the largest investment managers in the United States with approximately 1,243 employees. Federated provides investment products to nearly 5,500 investment professionals and institutions.

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PORTFOLIO MANAGEMENT INFORMATION

Liam O'Connell

Liam O'Connell has been a portfolio manager of the Fund since June 2005. Mr. O'Connell joined Federated in September 2003 as an Investment Analyst of the Fund's Adviser. He was named an Assistant Vice President of the Adviser in January 2005. From 2001 to 2003, Mr. O'Connell attended MIT's Sloan School of Management, receiving his M.B.A. Mr. O'Connell served as an engineer with the Naval Surface Warfare Center from 1998 to 2001. Mr. O'Connell also holds a B.S. in Naval Architecture and Marine Engineering from the Webb Institute of Naval Architecture, and an M.S. from the Johns Hopkins University.

The Fund's SAI provides additional information about the Portfolio Managers' compensation, management of other accounts, and ownership of securities in the Fund.

Financial Highlights

(For a Share Outstanding Throughout Each Period)

Year Ended February 28 or 29	2007		2006	¹	2005		2004		2003
Net Asset Value, Beginning of Period	$9.33		$9.54		$9.75		$9.77		$9.60
Income From Investment Operations:
Net investment income	0.45		0.37		0.23		0.20		0.32
Net realized and unrealized gain (loss) on investments and futures contracts	0.04		(0.21	)	(0.21	)	(0.01	)	0.17
TOTAL FROM INVESTMENT OPERATIONS	0.49		0.16		0.02		0.19		0.49
Less Distributions:
Distributions from net investment income	(0.46	)	(0.37	)	(0.23	)	(0.21	)	(0.32	)
Net Asset Value, End of Period	$9.36		$9.33		$9.54		$9.75		$9.77
Total Return²	5.45	%	1.73	%	0.21	%	1.92	%	5.21	%

Ratios to Average Net Assets:
Net expenses	0.30	%	0.30	%	0.30	%	0.30	%	0.30	%
Net investment income	4.84	%	3.95	%	2.34	%	2.12	%	3.35	%
Expense waiver/reimbursement³	1.23	%	1.15	%	0.89	%	0.71	%	0.76	%
Supplemental Data:
Net assets, end of period (000 omitted)	$2,476		$7,327		$10,385		$19,978		$43,513
Portfolio turnover	157	%	140	%	164	%	116	%	110	%

1 Beginning with the year ended February 28, 2006, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.

2 Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.

3 This expense decrease is reflected in both the net expense and the net investment income ratios shown above.

Further information about the Fund's performance is contained in the Fund's Annual Report, dated February 28, 2007, which can be obtained free of charge.

Appendix A: Hypothetical Investment and Expense Information

The following chart provides additional hypothetical information about the effect of the Fund's expenses, including investment advisory fees and other Fund costs, on the Fund's assumed returns over a 10-year period. The chart shows the estimated expenses that would be incurred in respect of a hypothetical investment of $10,000, assuming a 5% return each year, and no redemption of Shares. The chart also assumes that the Fund's annual expense ratio stays the same throughout the 10-year period and that all dividends and distributions are reinvested. The annual expense ratio used in the chart is the same as stated in the "Fees and Expenses" table of this prospectus (and thus may not reflect any fee waiver or expense reimbursement currently in effect). The maximum amount of any sales charge that might be imposed on the purchase of Shares (and deducted from the hypothetical initial investment of $10,000; the "Front-End Sales Charge") is reflected in the "Hypothetical Expenses" column. The hypothetical investment information does not reflect the effect of charges (if any) normally applicable to redemptions of Shares (e.g., deferred sales charges, redemption fees). Mutual fund returns, as well as fees and expenses, may fluctuate over time, and your actual investment returns and total expenses may be higher or lower than those shown below.

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FEDERATED INTERMEDIATE GOVERNMENT FUND, INC. - INSTITUTIONAL SHARES
ANNUAL EXPENSE RATIO: 1. 73%
MAXIMUM FRONT-END SALES CHARGE: NONE

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<R>Year</R>	<R>Hypothetical Beginning Investment</R>	<R>Hypothetical Performance Earnings</R>	<R>Investment After Returns</R>	<R>Hypothetical Expenses </R>	<R>Hypothetical Ending Investment</R>
<R>1</R>	<R>$10,000.00</R>	<R>$500.00</R>	<R>$10,500.00</R>	<R>$175.83</R>	<R>$10,327.00</R>
<R>2</R>	<R>$10,327.00</R>	<R>$516.35</R>	<R>$10,843.35</R>	<R>$181.58</R>	<R>$10,664.69</R>
<R>3</R>	<R>$10,664.69</R>	<R>$533.23</R>	<R>$11,197.92</R>	<R>$187.52</R>	<R>$11,013.43</R>
<R>4</R>	<R>$11,013.43</R>	<R>$550.67</R>	<R>$11,564.10</R>	<R>$193.65</R>	<R>$11,373.57</R>
<R>5</R>	<R>$11,373.57</R>	<R>$568.68</R>	<R>$11,942.25</R>	<R>$199.98</R>	<R>$11,745.49</R>
<R>6</R>	<R>$11,745.49</R>	<R>$587.27</R>	<R>$12,332.76</R>	<R>$206.52</R>	<R>$12,129.57</R>
<R>7</R>	<R>$12,129.57</R>	<R>$606.48</R>	<R>$12,736.05</R>	<R>$213.27</R>	<R>$12,526.21</R>
<R>8</R>	<R>$12,526.21</R>	<R>$626.31</R>	<R>$13,152.52</R>	<R>$220.25</R>	<R>$12,935.82</R>
<R>9</R>	<R>$12,935.82</R>	<R>$646.79</R>	<R>$13,582.61</R>	<R>$227.45</R>	<R>$13,358.82</R>
<R>10</R>	<R>$13,358.82</R>	<R>$667.94</R>	<R>$14,026.76</R>	<R>$234.89</R>	<R>$13,795.65</R>
<R>Cumulative</R>		<R>$5,803.72</R>		<R>$2,040.94</R>

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A Statement of Additional Information (SAI) dated April 30, 2007, is incorporated by reference into this prospectus. Additional information about the Fund and its investments is contained in the Fund's SAI and Annual and Semi-Annual Reports to shareholders as they become available. The Annual Report's Management's Discussion of Fund Performance discusses market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. The SAI contains a description of the Fund's policies and procedures with respect to the disclosure of its portfolio securities. To obtain the SAI, Annual Report, Semi-Annual Report and other information without charge, and to make inquiries, call your financial intermediary or the Fund at 1-800-341-7400.

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These documents, as well as additional information about the Fund (including portfolio holdings, performance and distributions), are also available on Federated's website at FederatedInvestors.com.

You can obtain information about the Fund (including the SAI) by writing to or visiting the SEC's Public Reference Room in Washington, DC. You may also access Fund information from the EDGAR Database on the SEC's website at www.sec.gov. You can purchase copies of this information by contacting the SEC by email at publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for information on the Public Reference Room's operations and copying fees.

Investment Company Act File No. 811-6307

Federated
World-Class Investment Manager

Federated Intermediate Government Fund, Inc.
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Contact us at FederatedInvestors.com
or call 1-800-341-7400.

Federated Securities Corp., Distributor

Cusip 31420H109

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25745 (4/07)

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Federated is a registered mark of Federated Investors, Inc. 2007 (c)Federated Investors, Inc.

Federated
World-Class Investment Manager

Federated Intermediate Government Fund, Inc.

PROSPECTUS

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April 30, 2007

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INSTITUTIONAL SERVICE SHARES

Not FDIC Insured * May Lose Value * No Bank Guarantee

CONTENTS

Risk/Return Summary 1

What are the Fund's Fees and Expenses? 5

What are the Fund's Investment Strategies? 6

What are the Principal Securities in Which the Fund Invests? 8

What are the Specific Risks of Investing in the Fund? 15

What Do Shares Cost? 17

How is the Fund Sold? 18

Payments to Financial Intermediaries 19

How to Purchase Shares 21

How to Redeem and Exchange Shares 23

Account and Share Information 26

Who Manages the Fund? 29

Legal Proceedings 30

Financial Information 31

Appendix A: Hypothetical Investment and Expense Information 33

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund's overall strategy is to invest in a portfolio consisting primarily of U.S. Treasury securities, U.S. government agency securities (including mortgage- backed securities issued by U.S. government agencies or instrumentalities) and related derivative contracts. The Fund buys and sells portfolio securities based primarily on its market outlook and analysis of how securities may perform under different market conditions. The Fund evaluates its investment strategy by comparing the performance and composition of the Fund's portfolio to the performance and composition of an index composed of notes and bonds issued by the U.S. government and its agencies or instrumentalities with maturities of not less than one year and not more than ten years.

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The Fund intends to invest in the securities of U.S. government-sponsored entities (GSEs), including GSE securities that are not backed by the full faith and credit of the United States government, such as those issued by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association and the Federal Home Loan Bank System. These entities are, however, supported through federal subsidies, loans or other benefits. The Fund may also invest in GSE securities that are supported by the full faith and credit of the U.S. government, such as those issued by the Government National Mortgage Association. Finally, the Fund may invest in a few GSE securities that have no explicit financial support, but which are regarded as having implied support because the federal government sponsors their activities. Such securities include those issued by the Farm Credit System and the Financing Corporation.

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WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money by investing 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, which may result in a decrease in the value of Fund Shares.
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.
Risks Associated with Complex Collateralized Mortgage Obligations (CMOs). CMOs with complex or highly variable prepayment terms, such as companion classes, IOs, POs, Inverse Floaters and residuals, generally entail greater market, prepayment and liquidity risks than other mortgage-backed securities.

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Risks of Investing in Derivative Contracts and Hybrid Instruments. The Fund's use of derivative contracts and hybrid instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Also, derivative contracts and hybrid instruments may involve other risks described in this prospectus or the Fund's Statement of Additional Information, such as interest rate, liquidity and leverage risks.

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Risk/Return Bar Chart and Table

The performance information shown below will help you analyze the Fund's investment risks in light of its historical returns. The bar chart shows the variability of the Fund's Institutional Service Shares total returns on a calendar year-by-year basis. The Average Annual Total Return table shows returns averaged over the stated periods, and includes comparative performance information. The Fund's performance will fluctuate, and past performance (before and after taxes) is no guarantee of future results.

The Fund's Institutional Service Shares are sold without a sales charge (load). The total returns shown in the bar chart above are based upon net asset value.

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The Fund's Institutional Service Shares total return for the three-month period from January 1, 2007 to March 31, 2007 was 1.53%.

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Within the period shown in the bar chart, the Fund's Institutional Service Shares highest quarterly return was 3.05% (quarter ended September 30, 2001). Its lowest quarterly return was (0.98)% (quarter ended June 30, 2004).

Average Annual Total Return Table

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Return Before Taxes is shown. In addition, Return After Taxes is shown for the Fund's Institutional Service Shares to illustrate the effect of federal taxes on Fund returns. Actual after-tax returns depend on each investor's personal tax situation, and are likely to differ from those shown. The table also shows returns for the Lehman Brothers Intermediate Government Index (LBIG), a broad-based market index tracking U.S. government securities. Index returns do not reflect taxes, sales charges, expenses or other fees that the SEC requires to be reflected in the Fund's performance. The index is unmanaged, and unlike the fund, is not affected by cashflows. It is not possible to invest directly in an index.

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(For the Periods Ended December 31, 2006)

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	1 Year	5 Years	10 Years
Fund:
Return Before Taxes	<R>4.08%</R>	<R>2.53%</R>	<R>4.03%</R>
Return After Taxes on Distributions¹	<R>2.41%</R>	<R>1.40%</R>	<R>2.37%</R>
Return After Taxes on Distributions and Sale of Fund Shares¹	<R>2.63%</R>	<R>1.49%</R>	<R>2.41%</R>
<R> LBIG</R>	<R>4.08%</R>	<R>4.53%</R>	<R>5.81%</R>

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1 After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. Return After Taxes on Distributions assumes a continued investment in the Fund and shows the effect of taxes on Fund distributions. Return After Taxes on Distributions and Sale of Fund Shares assumes all Shares were redeemed at the end of each measurement period, and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on Fund distributions. These after-tax returns do not reflect the effect of any applicable state and local taxes. After-tax returns are not relevant to investors holding Shares through tax-deferred programs, such as IRA or 401(k) plans.

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What are the Fund's Fees and Expenses?

FEDERATED INTERMEDIATE GOVERNMENT FUND, INC.

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold the Fund's Institutional Service Shares.

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)		None
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, Reimbursement and Reduction)¹
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee²		0.40%
Distribution (12b-1) Fee³		0.25%
Other Expenses⁴		1.33%
Total Annual Fund Operating Expenses⁵		1.98%

1 The percentages shown are based on expenses for the entire fiscal year ended February 28, 2007. However, the rate at which expenses are accrued during the fiscal year may not be constant and, at any particular point, may be greater or less than the stated average percentage. Although not obligated to do so, (except as discussed in Note 5, below), the Adviser, administrator, distributor and shareholder services provider waived, reimbursed and/or elected not to charge certain amounts. These are shown below along with the net expenses the Fund actually paid for the fiscal year ended February 28, 2007.
Total Waivers, Reimbursement and Reduction of Fund Expenses		1.44%
Total Actual Annual Fund Operating Expenses (after waivers, reimbursement and reduction)		0.54%
2 The Adviser has voluntarily waived 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 0.00% for the fiscal year ended February 28, 2007.
3 The distribution (12b-1) fee has been voluntarily waived. This voluntary waiver can be terminated at any time. The distribution (12b-1) fee paid by the Fund's Institutional Service Shares (after the voluntary waiver) was 0.00% for the fiscal year ended February 28, 2007.
4 Includes a shareholder services fee/account administration fee which is used to compensate intermediaries for shareholder services or account administrative services. Please see "Payments to Financial Intermediaries" herein. The administrator voluntarily waived a portion of its fee and the Adviser voluntarily reimbursed certain operating expenses of the Fund. Additionally, the shareholder services provider elected not to charge, and therefore the Fund did not accrue, a portion of the shareholder services fee for the Institutional Service Shares. The Adviser, administrator and shareholder services provider can terminate this voluntary waiver, reimbursement and/or reduction at any time. Total other expenses paid by the Fund's Institutional Service Shares (after the voluntary waiver, reimbursement and reduction) were 0.54% for the fiscal year ended February 28, 2007.
5 The Adviser and its affiliates have voluntarily agreed to waive their fees and/or reimburse expenses (including the distribution (12b-1) fee) so that the total operating expenses paid by the Fund's Institutional Service Shares (after the voluntary waivers and reimbursements) will not exceed 0.55% for the fiscal year ending February 29, 2008. Although these actions are voluntary, the Adviser and its affiliates have agreed not to terminate these waivers and/or reimbursements until after April 30, 2008.

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund's Institutional Service Shares with the cost of investing in other mutual funds.

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The Example assumes that you invest $10,000 in the Fund's Institutional Service 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 Institutional Service Shares operating expenses are before waivers, reimbursement and reduction as shown in the table and remain the same. Although your actual costs and returns may be higher or lower, based on these assumptions your costs would be:

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1 Year	$	<R>201</R>
3 Years	$	<R>621</R>
5 Years	$	<R>1,068</R>
10 Years	$	<R>2,306</R>

What are the Fund's Investment Strategies?

current and expected U.S. economic growth;
current and expected changes in the rate of inflation;
the level of interest rates in other countries as compared to U.S. interest rates;
the Federal Reserve Board's monetary policy; and
technical factors affecting the supply or demand for specific securities or types of securities.

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Mortgage- backed, pass-through certificates are typically offered or traded on a "to-be-announced" or other delayed delivery basis. Other U.S. government securities may also be offered on a delayed delivery basis. The Fund will enter into trades on this basis in order to participate in these offerings or trade these securities. The Fund may also seek to increase its income by engaging in dollar roll transactions.

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The Fund may use derivative contracts to implement elements of its investment strategy. For example, the Fund may use derivative contracts to:

increase or decrease the effective duration of the Fund's portfolio;
increase or decrease the Fund's exposure to different points on the yield curve;¹
increase or decrease the allocation of the portfolio to securities or types of securities in which the Fund may invest directly; or
obtain premiums from the sale of derivative contracts.

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There can be no assurance that the Fund's use of derivative contracts will work as intended.

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The Fund invests in overnight repurchase agreements or money market funds in order to maintain sufficient cash to pay for daily net redemptions and portfolio transactions.

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1 In descriptions of the Fund's investment strategy, the Adviser may refer to the relative interest rates of securities with longer and shorter durations within a sector as a "yield curve."

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PORTFOLIO TURNOVER

TEMPORARY DEFENSIVE INVESTMENTS

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 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.

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

Mortgage-Backed Securities

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COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)

SEQUENTIAL CMOS

PACS, TACS AND COMPANION CLASSES

IOS AND POS

FLOATERS AND INVERSE FLOATERS

Z CLASSES

DERIVATIVE CONTRACTS

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Futures Contracts

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Option Contracts

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Swap Contracts

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Common types of swaps in which the Fund may invest include interest rate swaps, total return swaps, credit default swaps, and caps and floors.

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SPECIAL TRANSACTIONS

Repurchase Agreements

Repurchase agreements are subject to credit risks.

Delayed Delivery Transactions

TO BE ANNOUNCED SECURITIES (TBAS)

DOLLAR ROLLS

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Securities Lending

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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.

Securities lending activities are subject to interest rate and credit risks.

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Asset Segregation

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Hybrid Instruments

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What are the Specific Risks of Investing in the Fund?

INTEREST RATE RISKS

PREPAYMENT RISKS

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The Fund offers two Share classes: Institutional Shares and Institutional Service Shares, each representing interests in a single portfolio of securities. This prospectus relates only to Institutional Service Shares. All Share classes have different expenses which affect their performance. Contact your financial intermediary or call 1-800-341-7400 for more information concerning the other class.

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Payments to Financial Intermediaries

RULE 12B-1 FEES

The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees of up to 0.25% of average net assets to the Distributor for the sale, distribution, administration and customer servicing of the Fund's Institutional Service Shares. When the Distributor receives Rule 12b-1 Fees, it may pay some or all of them to financial intermediaries whose customers purchase Shares. Because these Shares pay marketing fees on an ongoing basis, your investment cost may be higher over time than other shares with different marketing fees.

SERVICE FEES

ACCOUNT ADMINISTRATION FEES

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RECORDKEEPING FEES

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NETWORKING FEES

ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES

These payments are negotiated and may be based on such factors as the number or value of Shares that the financial intermediary sells or may sell; the value of client assets invested; or the type and nature of services or support furnished by the financial intermediary. These payments may be in addition to payments made by the Fund to the financial intermediary under a Rule 12b-1 Plan and/or Service Fees arrangement. In connection with these payments, the financial intermediary may elevate the prominence or profile of the Fund and/or other Federated funds within the financial intermediary's organization by, for example, placement on a list of preferred or recommended funds, and/or granting the Distributor preferential or enhanced opportunities to promote the funds in various ways within the financial intermediary's organization. You can ask your financial intermediary for information about any payments it receives from the Distributor or the Fund and any services provided.

How to Purchase Shares

The required minimum initial investment for Fund Shares is $25,000. The required minimum subsequent investment amount is $100.

THROUGH A FINANCIAL INTERMEDIARY

Establish an account with the financial intermediary; and

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Submit your purchase order to the financial intermediary 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 financial intermediary forwards the order to the Fund on the same day and the Fund receives payment within one business day. You will become the owner of Shares and receive dividends when the Fund receives your payment.

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Financial intermediaries 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.

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:

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 send it to:

The Federated Funds
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, send it to:

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The Federated Funds
30 Dan Road
Canton, MA 02021

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BY AUTOMATED CLEARING HOUSE (ACH)

How to Redeem and Exchange Shares

You should redeem or exchange Shares:

through a financial intermediary if you purchased Shares through a financial intermediary; or
directly from the Fund if you purchased Shares directly from the Fund.

THROUGH A FINANCIAL INTERMEDIARY

DIRECTLY FROM THE FUND

By Telephone

You may redeem or exchange Shares by simply calling the Fund at 1-800-341-7400.

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 sending 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:

The Federated Funds
P.O. Box 8600
Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

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The Federated Funds
30 Dan Road
Canton, MA 02021

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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 financial intermediary or the Fund if you need special instructions.

Signature Guarantees

Signatures must be guaranteed by a financial institution which is a participant in a Medallion signature guarantee program 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.

PAYMENT METHODS FOR REDEMPTIONS

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

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Redemption proceeds normally are wired or mailed within one business day after receiving a request in proper form. Payment may be delayed for up to seven days:

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to allow your purchase to clear (as discussed below);

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during periods of market volatility ;

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when a shareholder's trade activity or amount adversely impacts the Fund's ability to manage its assets ; or

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during any period when the Federal Reserve wire or applicable Federal Reserve banks are closed, other than customary weekend and holiday closings.

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In addition, the right of redemption may be suspended, or the payment of proceeds may be delayed, during any period:

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when the NYSE is closed, other than customary weekend and holiday closings;

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when trading on the NYSE is restricted, as determined by the SEC; or

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in which an emergency exists, as determined by the SEC, so that disposal of the Fund's investments or determination of its NAV is not reasonably practicable.

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You will not accrue interest or dividends on uncashed redemption checks from the Fund if those checks are undeliverable and returned to the Fund.

EXCHANGE PRIVILEGE

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.

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

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

You will receive confirmation of purchases, redemptions and exchanges. In addition, you will receive periodic statements reporting all account activity, including dividends and capital gains paid.

DIVIDENDS AND CAPITAL GAINS

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ACCOUNTS WITH LOW BALANCES

TAX INFORMATION

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The Fund's SAI provides additional information about the Portfolio Manager's compensation, management of other accounts, and ownership of securities in the Fund.

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ADVISORY FEES

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A discussion of the Board's review of the Fund's investment advisory contract is available in the Fund's Annual Report dated February 28, 2007.

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Legal Proceedings

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Financial Information

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FINANCIAL HIGHLIGHTS

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Financial Highlights

(For a Share Outstanding Throughout Each Period)

Year Ended February 28 or 29	2007		2006	¹	2005		2004		2003
Net Asset Value, Beginning of Period	$9.33		$9.54		$9.75		$9.77		$9.60
Income From Investment Operations:
Net investment income	0.44		0.35		0.21		0.18		0.30
Net realized and unrealized gain (loss) on investments and futures contracts	0.03		(0.21	)	(0.21	)	(0.02	)	0.17
TOTAL FROM INVESTMENT OPERATIONS	0.47		0.14		0.00		0.16		0.47
Less Distributions:
Distributions from net investment income	(0.44	)	(0.35	)	(0.21	)	(0.18	)	(0.30	)
Net Asset Value, End of Period	$9.36		$9.33		$9.54		$9.75		$9.77
Total Return²	5.21	%	1.49	%	(0.04	)%	1.67	%	4.95	%

Ratios to Average Net Assets:
Net expenses	0.54	%	0.55	%	0.55	%	0.55	%	0.55	%
Net investment income	4.66	%	3.57	%	2.13	%	1.87	%	3.05	%
Expense waiver/reimbursement³	1.43	%	1.15	%	0.89	%	0.71	%	0.76	%
Supplemental Data:
Net assets, end of period (000 omitted)	$34,618		$41,425		$60,422		$76,813		$84,067
Portfolio turnover	157	%	140	%	164	%	116	%	110	%

1 Beginning with the year ended February 28, 2006, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.

2 Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.

3 This expense decrease is reflected in both the net expense and the net investment income ratios shown above.

Further information about the Fund's performance is contained in the Fund's Annual Report, dated February 28, 2007, which can be obtained free of charge.

Appendix A: Hypothetical Investment and Expense Information

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FEDERATED INTERMEDIATE GOVERNMENT FUND, INC. -
INSTITUTIONAL SERVICE SHARES
ANNUAL EXPENSE RATIO: 1. 98%
MAXIMUM FRONT-END SALES CHARGE: NONE

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<R>Year</R>	<R>Hypothetical Beginning Investment</R>	<R>Hypothetical Performance Earnings</R>	<R>Investment After Returns</R>	<R>Hypothetical Expenses </R>	<R>Hypothetical Ending Investment</R>
<R>1</R>	<R>$10,000.00</R>	<R>$500.00</R>	<R>$10,500.00</R>	<R>$200.99</R>	<R>$10,302.00</R>
<R>2</R>	<R>$10,302.00</R>	<R>$515.10</R>	<R>$10,817.10</R>	<R>$207.06</R>	<R>$10,613.12</R>
<R>3</R>	<R>$10,613.12</R>	<R>$530.66</R>	<R>$11,143.78</R>	<R>$213.31</R>	<R>$10,933.64</R>
<R>4</R>	<R>$10,933.64</R>	<R>$546.68</R>	<R>$11,480.32</R>	<R>$219.76</R>	<R>$11,263.84</R>
<R>5</R>	<R>$11,263.84</R>	<R>$563.19</R>	<R>$11,827.03</R>	<R>$226.39</R>	<R>$11,604.01</R>
<R>6</R>	<R>$11,604.01</R>	<R>$580.20</R>	<R>$12,184.21</R>	<R>$233.23</R>	<R>$11,954.45</R>
<R>7</R>	<R>$11,954.45</R>	<R>$597.72</R>	<R>$12,552.17</R>	<R>$240.27</R>	<R>$12,315.47</R>
<R>8</R>	<R>$12,315.47</R>	<R>$615.77</R>	<R>$12,931.24</R>	<R>$247.53</R>	<R>$12,687.40</R>
<R>9</R>	<R>$12,687.40</R>	<R>$634.37</R>	<R>$13,321.77</R>	<R>$255.00</R>	<R>$13,070.56</R>
<R>10</R>	<R>$13,070.56</R>	<R>$653.53</R>	<R>$13,724.09</R>	<R>$262.70</R>	<R>$13,465.29</R>
<R>Cumulative</R>		<R>$5,737.22</R>		<R>$2,306.24</R>

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These documents, as well as additional information about the Fund (including portfolio holdings, performance and distributions), are also available on Federated's website at FederatedInvestors.com.

Investment Company Act File No. 811-6307

Federated
World-Class Investment Manager

Federated Intermediate Government Fund, Inc.
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Contact us at FederatedInvestors.com
or call 1-800-341-7400.

Federated Securities Corp., Distributor

Cusip 31420H208

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25746 (4/07)

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Federated is a registered mark of Federated Investors, Inc. 2007 (c)Federated Investors, Inc.

FEDERATED INTERMEDIATE GOVERNMENT FUND, INC.

STATEMENT OF ADDITIONAL INFORMATION
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APRIL 30, 2007

INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for Federated Intermediate Government
Fund, Inc. (Fund), dated April 30, 2007.

This SAI incorporates by reference the Fund's Annual Report. Obtain the
prospectuses or the Annual Report without charge by calling 1-800-341-7400.

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CONTENTS
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How is the Fund Organized?......
Description of the Fund and Its
Investments and Risks..................
Securities in Which the Fund Invests...
What Do Shares Cost?...................
How is the Fund Sold?..................
Subaccounting Services.................
Redemption in Kind.....................
Account and Share Information..........
Tax Information........................
Who Manages and Provides Services to
the Fund?..............................
How Does the Fund Measure Performance?.
Who is Federated Investors, Inc.?......
Financial Information..................
Addresses..............................
Appendix...............................
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Federated Intermediate Government Fund, Inc.
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Contact us at FEDERATEDINVESTORS.COM
or call 1-800-341-7400.
Federated Securities Corp., Distributor

1071005B (4/07)

Federated is a registered mark
of Federated Investors, Inc.
2007 {copyright}Federated Investors, Inc.

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 Federated Limited Duration Government Fund, Inc. to
Federated Intermediate Government Fund, Inc. on April 30, 2005.

The Board of Directors (the "Board") has established two classes of shares of
the Fund, known as Institutional Shares and Institutional Service Shares
(Shares). This SAI relates to both classes of Shares. The Fund's investment
adviser is Federated Investment Management Company (Adviser).

DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS

INVESTMENT OBJECTIVE
The Fund's investment objective is to provide total return. The investment
objective may not be changed by the Fund's Board of Trustees without shareholder
approval. The Fund's total return will consist of two components: (1) changes in
the market value of its portfolio securities (both realized and unrealized
appreciation), and (2) income received from its portfolio securities. The Fund
expects that, under normal market conditions, income will comprise the largest
component of its total return. 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 SAI.

INVESTMENT STRATEGIES
The Fund is intended to provide returns consistent with investments in United
States government and government agency securities. The Fund's overall strategy
is therefore to invest in a portfolio consisting primarily of United States
Treasury securities, United States government agency securities (including
mortgage-backed securities issued by United States government agencies or
instrumentalities) and related derivative contracts. A description of the
various types of securities and derivative contracts in which the Fund invests,
other investment techniques used by the Fund, and their risks, immediately
follows this strategy section.

The Adviser evaluates the Fund's investment strategy by comparing the
performance of the Fund's portfolio to an index composed of notes and bonds
issued by the United States government and its agencies or instrumentalities
with maturities of not less than one year and not more than ten years (the
"Index"). The Fund currently uses the Lehman Brothers Intermediate Government
Index as the Index. The Adviser's basic strategy seeks to construct a portfolio
that will perform favorably when compared to the Index over the long-term. The
Adviser tries to vary the portfolio's performance from the Index by, among other
things:

* Varying the portfolio's effective duration as compared to the Index;

* Creating a portfolio of securities with a different mixture of effective
durations as compared to the composition of the Index;

Investing a larger percentage of the portfolio in certain types of securities[1]
as compared to the composition of the Index, or investing in types of securities
that are not included in the Index; and

Investing a large percentage of the portfolio in a specific security as compared
to the Index, or investing the portfolio in securities that are not included in
the Index.

Under normal market conditions, the Adviser limits the extent to which it may
vary the portfolio's effective duration to within 20% of the effective duration
of the Index.

Effective duration provides a measure of the price sensitivity of a fixed-income
security or portfolio of fixed-income securities to changes in interest rates.
The Adviser calculates the effective duration of the portfolio using standard
analytical models that quantify the expected changes in the value of the
portfolio resulting from changes in the applicable yield curve.[2] The Index may
calculate its effective duration using different assumptions and models. The
Adviser will rely on its calculations for purposes of complying with any
limitations established with respect to the portfolio's effective duration.
Uncertainty as to the amount and timing of prepayments may make calculating the
effective durations of mortgaged-backed and some asset-backed securities more
difficult than some other types of fixed-income securities.

* The Adviser bases the investment strategy principally on its market outlook,
which analyzes historical and expected changes in:

* the overall level and volatility of interest rates,

* the slope and shape of yield curves, and

* the relative interest rates of different sectors.

The investment strategy will also reflect other factors (political developments
or demographic trends, for example).

Teams of investment professionals formulate the Adviser's market outlook and
otherwise attempt to anticipate changes in market conditions. They base their
analysis on a multiple factors, which may include:

* current and expected U.S. economic growth,

* current and expected changes in the rate of inflation,

* the level of interest rates in other countries as compared to U.S. interest
rates,

* the Federal Reserve Board's monetary policy, and

* technical factors affecting the supply or demand for specific securities or
types of securities.

There is no assurance that the Adviser's efforts to forecast market conditions
and interest rates, or to assess the impact of changes in interest rates and the
yield curve, will be successful.

These teams also recommend how to structure the portfolio in response to the
market outlook. In order to manage the risks taken by the Fund, these
recommendations may set additional limits on the extent to which the portfolio's
duration and composition may vary from the Index. The Fund's portfolio manager
follows these recommendations in selecting securities for the portfolio.
Decisions to purchase or sell particular securities or derivative contracts are
based on a fundamental analysis of their sensitivity to changes in interest
rates, interest rate volatility, the yield curve and inflation, among other
factors. Characteristics that the Adviser may consider in analyzing mortgage-
backed securities include the average interest rates of the underlying loans,
the prior prepayment history and any guarantee of the security or underlying
loans by a GSE or company. This analysis relies on information from a variety of
sources (such as government securities dealers, electronic data services and
financial publications), and employs quantitative models and analytic tools
provided by third parties or developed by the Adviser. The analysis also draws
on the experience of the Adviser's staff of investment analysts, portfolio
managers and traders.

The portfolio manager uses this fundamental analysis to compare the potential
returns from available securities with comparable durations, risks and other
characteristics. For mortgage-backed securities, the decision to buy or sell
also involves assessment of available securities relative to specific interest
rate and prepayment risks, such as average life variability, price sensitivity
to changes in market spread levels and price sensitivity to changes in the level
of interest rate volatility. The Adviser assesses these risks by analyzing how
the timing, amount and division of cash flows from the mortgages underlying a
security might change in response to changing economic and market conditions.
However, there is no assurance that a security or derivative contract will
perform as expected or that the fundamental analysis will incorporate all
relevant information.

In appropriate market conditions, the Fund may invest in derivative contracts to
implement its investment strategy. For example, the Fund may buy a future or
call option on United States Treasury securities in order to lengthen the
effective duration of the portfolio as compared to the Index; alternatively, the
Fund may sell a future or call option on United States Treasury securities in
order to shorten the effective duration of the portfolio as compared to the
Index. The Fund also may use futures or options on United States Treasury
securities to increase or decrease the exposure to different points on the yield
curve without affecting the effective duration of the portfolio or to obtain
premiums. As other examples, the Fund may use swaptions or Euro-dollar futures
to shorten or lengthen the effective duration of the Fund, increase or decrease
the exposure of the Fund to different points on the yield curve or to obtain
premiums. There is no assurance that the use of derivatives contracts will work
as intended.

The Fund may also seek to increase its income by engaging in dollar roll
transactions and by lending its portfolio securities.

The Fund may invest in overnight repurchase agreements or money market funds in
order to maintain sufficient cash to pay for daily net redemptions and portfolio
transactions. In the event that the Fund does not have sufficient cash for these
purposes, it could incur overdrafts, enter into reverse repurchase agreements or
otherwise borrow money in accordance with its investment limitations. The Fund
also reserves the right to redeem Shares in kind with portfolio securities. See
PAYMENT METHOD FOR REDEMPTIONS-Redemptions In Kind. The Fund may also enter into
repurchase agreements with longer terms (up to twelve months) if they offer
higher returns than those expected from U.S. Treasury or agency securities
having the same maturity.

Mortgage-backed pass-through certificates are typically offered or traded on a
"to-be-announced" or other delayed delivery basis. Other U.S. government
securities may also be offered on a delayed delivery basis. The Fund will enter
into trades on this basis in order to participate in these offerings or trade
these securities.

Because the Fund refers to United States government securities in its name, it
will notify shareholders at least 60 days in advance of any change in its
investment policies that would enable the Fund to invest, under normal
circumstances, less than 80% of its assets in United States government
investments.

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 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 (GSE) acting under federal authority. Some agency
securities are supported by the full faith and credit of the United States.
These include the Government National Mortgage Association, Small Business
Administration, Farm Credit System Financial Assistance Corporation, Farmer's
Home Administration, Federal Financing Bank, General Services Administration,
Department of Housing and Urban Development, Export-Import Bank, Overseas
Private Investment Corporation, and Washington Metropolitan Area Transit
Authority Bonds.

Other agency securities receive support through federal subsidies, loans or
other benefits. For example, the U.S. Treasury is authorized to purchase
specified amounts of securities issued by (or otherwise make funds available to)
the Federal Home Loan Bank System, Federal Home Loan Mortgage Corporation,
Federal National Mortgage Association, and Tennessee Valley Authority in support
of such obligations.

A few agency securities have no explicit financial support, but are regarded as
having implied support because the federal government sponsors their activities.
These include the Farm Credit System, Financing Corporation, and Resolution
Funding Corporation.

Investors regard agency securities as having low credit risks, but not as low as
U.S. Treasury securities. A Fund treats mortgage -backed securities guaranteed
by a GSE as agency securities. Although such a guarantee protects against credit
risks, it does not reduce market and prepayment risks.

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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.
Interests in pools of adjustable rate mortgages are known as ARMs.

Mortgage-backed securities come in a variety of forms. The simplest form of
mortgage-backed securities is pass-through certificates. Holders of pass-through
certificates receive a pro rata share of all net interest and principal payments
and prepayments from the underlying mortgages. As a result, the holders assume
all the interest rate and prepayment risks of the underlying mortgages. Other
mortgage-backed securities may have more complicated financial structures.

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ADJUSTABLE RATE MORTGAGES (ARMS)
The Fund may invest 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)
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.

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 AND COMPANION CLASSES
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.

IOS AND POS
CMOs may allocate interest payments to one class (Interest Only or IOs) and
principal payments to another class (Principal Only or POs). POs increase in
value when prepayment rates increase. In contrast, IOs decrease in value when
prepayments increase, because the underlying mortgages generate less interest
payments. However, IOs tend to increase in value when interest rates rise (and
prepayments decrease). In contrast, POs decrease in value when interest rates
rise (and prepayments decrease).

FLOATERS AND INVERSE FLOATERS
Another variant allocates interest payments between two classes of CMOs. One
class (Floaters) receives a share of interest payments based upon a market index
such as LIBOR. The other class (Inverse Floaters) receives any remaining
interest payments from the underlying mortgages. Floater classes receive more
interest (and Inverse Floater classes receive correspondingly less interest) as
interest rates rise. This shifts prepayment and interest rate risks from the
Floater to the Inverse Floater class, reducing the price volatility of the
Floater class and increasing the price volatility of the Inverse Floater class.

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.

Z CLASSES
CMOs must allocate all payments received from the underlying mortgages to some
class. To capture any unallocated payments, CMOs generally have an accrual (Z)
class. Z classes do not receive any payments from the underlying mortgages until
all other CMO classes have been paid off. Once this happens, holders of Z class
CMOs receive all payments and prepayments.

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DERIVATIVE CONTRACTS
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated securities, commodities, currencies,
indices, or other assets or instruments including other derivative contracts,
(each a "Reference Instrument" and collectively, "Reference Instruments"). Each
party to a derivative contract is referred to as a counterparty. Some
derivative contracts require payments relating to an actual, future trade
involving the Reference Instrument. These types of derivatives are frequently
referred to as "physically settled" derivatives. Other derivative contracts
require payments relating to the income or returns from, or changes in the
market value of, a Reference Instrument. These types of derivatives are known
as "cash settled" derivatives, since they require cash payments in lieu of
delivery of the Reference Instrument.

Many derivative contracts are traded on securities or commodities exchanges. In
this case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make
(or collect) daily payments to the margin accounts to reflect losses (or gains)
in the value of their contracts. This protects investors against potential
defaults by the counterparty. Trading contracts on an exchange also allows
investors to close out their contracts by entering into offsetting contracts.

For example, the Fund could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Fund realizes a gain; if it is less, the Fund realizes a loss.
Exchanges may limit the amount of open contracts permitted at any one time.
Such limits may prevent the Fund from closing out a position. If this happens,
the Fund will be required to keep the contract open (even if it is losing money
on the contract), and to make any payments required under the contract (even if
it has to sell portfolio securities at unfavorable prices to do so). Inability
to close out a contract could also harm the Fund by preventing it from disposing
of or trading any assets it has been using to secure its obligations under the
contract.

The Fund may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.

Depending on how the Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the Reference Instrument,
derivative contracts may increase or decrease the Fund's exposure to the risks
of the Reference Instrument, and may also expose the fund to liquidity and
leverage risks. OTC contracts also expose the Fund to credit risks in the event
that a counterparty defaults on the contract.

The Fund may trade in the following types of derivative contracts, including
combinations thereof:

FUTURES CONTRACTS

Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a Reference Instrument at a specified
price, date and time. Entering into a contract to buy a Reference Instrument is
commonly referred to as buying a contract or holding a long position in the
asset. Entering into a contract to sell a Reference Instrument is commonly
referred to as selling a contract or holding a short position in the Reference
Instrument. Futures contracts are considered to be commodity contracts. The
Fund has claimed an exclusion from the definition of the term "commodity pool
operator" under the Commodity Exchange Act and, therefore, is not subject to
registration or regulation as a commodity pool operator under that Act. Futures
contracts traded OTC are frequently referred to as forward contracts. The Fund
can buy or sell financial futures.

OPTION CONTRACTS

Option contracts (also called "options") are rights to buy or sell a Reference
Instrument for a specified price (the exercise price) during, or at the end of,
a specified period. The seller (or writer) of the option receives a payment, or
premium, from the buyer, which the writer keeps regardless of whether the buyer
uses (or exercises) the option. Options can trade on exchanges or in the OTC
market and may be bought or sold on a wide variety of Reference Instruments.
Options that are written on futures contracts will be subject to margin
requirements similar to those applied to futures contracts. The Fund may buy or
sell options on a Reference Instrument if it is permitted to own, invest, or
otherwise have economic exposure to that instrument. The Fund is not required
to own a Reference Instrument, in order to buy or write an option on that
Reference Instrument.

The Fund may buy and/or sell the following types of options:

CALL OPTIONS
A call option gives the holder (buyer) the right to buy the Reference Instrument
from the seller (writer) of the option. The Fund may use call options in the
following ways:

{circle}Buy call options on a Reference Instrument in anticipation of an
increase in the value of the Reference Instrument; and

{circle}Write call options on a Reference Instrument to generate income from
premiums, and in anticipation of a decrease or only limited increase in the
value of the Reference Instrument. If the Fund writes a call option on a
Reference Instrument that it owns and that call option is exercised, the Fund
foregoes any possible profit from an increase in the market price of the
Reference Instrument over the exercise price plus the premium received.

PUT OPTIONS
A put option gives the holder the right to sell the Reference Instrument to the
writer of the option. The Fund may use put options in the following ways:

{circle}Buy put options on a Reference Instrument in anticipation of a decrease
in the value of the Reference Instrument; and

{circle}Write put options on a Reference Instrument to generate income from
premiums, and in anticipation of an increase or only limited decrease in the
value of the Reference Instrument. In writing puts, there is a risk that the
Fund may be required to take delivery of the Reference Instrument when its
current market price is lower than the exercise price.

The Fund may also buy or write options, as needed, to close out existing option
positions.

Finally, the Fund may enter into combinations of options contracts in an attempt
to benefit from changes in the prices of those options contracts (without regard
to changes in the value of the Reference Instrument).

SWAP CONTRACTS

A swap contract (also known as a "swap") is a type of derivative contract in
which two parties agree to pay each other (swap) the returns derived from
Reference Instruments. Most swaps do not involve the delivery of the underlying
assets by either party, and the parties might not own the Reference Instruments.
The payments are usually made on a net basis so that, on any given day, the Fund
would receive (or pay) only the amount by which its payment under the contract
is less than (or exceeds) the amount of the other party's payment. Swap
agreements are sophisticated instruments that can take many different forms and
are known by a variety of names. Common swap agreements that the Fund may use
include:

INTEREST RATE SWAPS

Interest rate swaps are contracts in which one party agrees to make regular
payments equal to a fixed or floating interest rate times a stated principal
amount (commonly referred to as a "notional principal amount") in return for
payments equal to a different fixed or floating rate times the same principal
amount, for a specific period. For example, a $10 million London Interbank
Offered Rate (LIBOR) swap would require one party to pay the equivalent of the
London Interbank Offered Rate of interest (which fluctuates) on $10 million
principal amount in exchange for the right to receive the equivalent of a stated
fixed rate of interest on $10 million principal amount.

TOTAL RETURN SWAPS

A total return swap is an agreement between two parties whereby one party agrees
to make payments of the total return from a Reference Instrument (or a basket of
such instruments) during the specified period, in return for payments equal to a
fixed or floating rate of interest or the total return from another Reference
Instrument. Alternately, a total return swap can be structured so that one
party will make payments to the other party if the value of a Reference
Instrument increases, but receive payments from the other party if the value of
that instrument decreases.

CREDIT DEFAULT SWAPS

A credit default swap (CDS) is an agreement between two parties whereby one
party (the "Protection Buyer") agrees to make payments over the term of the CDS
to the other party (the "Protection Seller"), provided that no designated event
of default, restructuring or other credit related event (each a "Credit Event")
occurs with respect to Reference Instrument that is usually a particular bond or
the unsecured credit of an issuer, in general (the "Reference Obligation"). Many
CDS are physically settled, which means that if a Credit Event occurs, the
Protection Seller must pay the Protection Buyer the full notional value, or "par
value," of the Reference Obligation in exchange for delivery by the Protection
Buyer of the Reference Obligation or another similar obligation issued by the
issuer of the Reference Obligation (the "Deliverable Obligation"). The
Counterparties agree to the characteristics of the Deliverable Obligation at the
time that they enter into the CDS. Alternately, a CDS can be "cash settled,"
which means that upon the occurrence of a Credit Event, the Protection Buyer
will receive a payment from the Protection Seller equal to the difference
between the par amount of the Reference Obligation and its market value at the
time of the Credit Event. The Fund may be either the Protection Buyer or the
Protection Seller in a CDS. If the Fund is a Protection Buyer and no Credit
Event occurs, the Fund will lose its entire investment in the CDS (i.e., an
amount equal to the payments made to the Protection Seller over the term of the
CDS). However, if a Credit Event occurs, the Fund (as Protection Buyer) will
deliver the Deliverable Obligation and receive a payment equal to the full
notional value of the Reference Obligation, even though the Reference Obligation
may have little or no value. If the Fund is the Protection Seller and no Credit
Event occurs, the Fund will receive a fixed rate of income throughout the term
of the CDS. However, if a Credit Event occurs, the Fund (as Protection Seller)
will pay the Protection Buyer the full notional value of the Reference
Obligation and receive the Deliverable Obligation from the Protection Buyer. A
CDS may involve greater risks than if the Fund invested directly in the
Reference Obligation. For example, a CDS may increase credit risk since the Fund
has exposure to both the issuer of the Reference Obligation and the Counterparty
to the CDS.

CAPS AND FLOORS

Caps and Floors are contracts in which one party agrees to make payments only if
an interest rate or index goes above (Cap) or below (Floor) a certain level in
return for a fee from the other party.

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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 interest
rate 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 and
credit risks.

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HYBRID INSTRUMENTS

Hybrid instruments combine elements of two different kinds of securities or
financial instruments (such as a derivative contract). Frequently, the value of
a hybrid instrument is determined by reference to changes in the value of
designated securities, commodities, currencies, indices, or other assets or
instruments (each a, "Valuation Instrument"). Hybrid instruments can take on
many forms including, but not limited to, the following forms. First, a common
form of a hybrid instrument combines elements of a derivative contract with
those of another security (typically a fixed-income security). In this case all
or a portion of the interest or principal payable on a hybrid security is
determined by reference to changes in the price of a Valuation Instrument.
Second, hybrid instruments may include convertible securities with conversion
terms related to a Valuation Instrument.

Depending on the type and terms of the hybrid instrument, its risks may reflect
a combination of the risks of investing in securities, currencies and derivative
contracts. Thus, an investment in a hybrid instrument may entail significant
risks in addition to those associated with traditional securities or the
Valuation Instrument. Hybrid instruments are also potentially more volatile
than traditional securities or the Valuation Instrument. Moreover, depending on
the structure of the particular hybrid, it may expose the Fund to leverage risks
or carry liquidity risks.

CREDIT LINKED NOTE

A credit linked note (CLN) is a type of hybrid instrument in which a special
purpose entity issues a structured note (the "Note Issuer") with respect to
which the Valuation Instrument is a single bond, a portfolio of bonds, or the
unsecured credit of an issuer, in general (each a "Reference Credit"). The
purchaser of the CLN (the "Note Purchaser") invests a par amount and receives a
payment during the term of the CLN that equals a fixed or floating rate of
interest equivalent to a high rated funded asset (such as a bank certificate of
deposit) plus an additional premium that relates to taking on the credit risk of
the Reference Credit. Upon maturity of the CLN, the Note Purchaser will receive
a payment equal to (i) the original par amount paid to the Note Issuer, if there
is no occurrence of a designated event of default, restructuring or other credit
event (each, a "Credit Event") with respect to the issuer of the Reference
Credit or (ii) the market value of the Reference Credit, if a Credit Event has
occurred. Depending upon the terms of the CLN, it is also possible that the
Note Purchaser may be required to take physical delivery of the Reference Credit
in the event of Credit Event. Most credit linked notes use a corporate bond (or
a portfolio of corporate bonds) as the Reference Credit. However, almost any
type of fixed-income security (including foreign government securities), index,
or derivative contract (such as a credit default swap) can be used as the
Reference Credit.

ASSET SEGREGATION
In accordance with the Securities and Exchange Commission (SEC) and SEC staff
positions regarding the interpretation of the Investment Company Act of 1940
(1940 Act), with respect to derivatives that create a future payment obligation
of the Fund, the Fund must "set aside" (referred to sometimes as "asset
segregation") liquid assets, or engage in other SEC- or staff-approved measures,
while the derivative contracts are open. For example, with respect to forwards
and futures contracts that are not contractually required to "cash-settle," the
Fund must cover its open positions by setting aside cash or readily marketable
securities equal to the contracts' full, notional value. With respect to
forwards and futures that are contractually required to "cash-settle," however,
the Fund is permitted to set aside cash or readily marketable securities in an
amount equal to the Fund's daily marked-to-market (net) obligations, if any
(i.e., the Fund's daily net liability, if any), rather than the notional value.

The Fund will employ another approach to segregating assets to cover options
that it sells. If the Fund sells a call option, the Fund will set aside either
the Reference Instrument subject to the option, cash or readily marketable
securities with a value that equals or exceeds the current market value of the
Reference Instrument. In no event, will the value of the cash or readily
marketable securities set aside by the Fund be less than the exercise price of
the call option. If the Fund sells a put option, the Fund will set aside cash or
readily marketable securities with a value that equals or exceeds the exercise
price of the put option.

The Fund's asset segregation approach for swap agreements varies among different
types of swaps. For example, if the Fund enters into a credit default swap as
the Protection Buyer, then it will set aside cash or readily marketable
securities necessary to meet any accrued payment obligations under the swap. By
comparison, if the Fund enters into a credit default swap as the Protection
Seller, then the Fund will set aside cash or readily marketable securities equal
to the full notional amount of the swap that must be paid upon the occurrence of
a Credit Event. For some other types of swaps, such as interest rate swaps, the
Fund will calculate the obligations of the counterparties to the swap on a net
basis. Consequently, the Fund's current obligation (or rights) under this type
of swap will equal only the net amount to be paid or received based on the
relative values of the positions held by each counterparty to the swap (the "net
amount"). The net amount currently owed by or to the Fund will be accrued daily
and the Fund will set aside cash or readily marketable securities equal to any
accrued but unpaid net amount owed by the Fund under the swap.

The Fund may reduce the liquid assets segregated to cover obligations under a
derivative contract by entering into an offsetting derivative contract. For
example, if the Fund sells a put option for the same Reference Instrument as a
call option the Fund has sold, and the exercise price of the call option is the
same as or higher than the exercise price of the put option, then the Fund may
net its obligations under the options and set aside cash or readily marketable
securities (including any margin deposited for the options) with a value equal
to the greater of (a) the current market value of the Reference Instrument
deliverable under the call option or (b) the exercise price of the put option.

By setting aside cash or readily marketable securities equal to only its net
obligations under swaps and certain cash-settled derivative contracts, the Fund
will have the ability to employ leverage to a greater extent than if the Fund
were required to segregate cash or readily marketable securities equal to the
full notional value of such contracts. The use of leverage involves certain
risks. See "Risk Factors." Unless the Fund has other cash or readily marketable
securities to set aside, it cannot trade assets set aside in connection with
derivative contracts or special transactions without 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. The Fund reserves the right to modify its
asset segregation policies in the future to comply with any changes in the
positions articulated from time to time by the SEC and its staff.

Generally, special transactions do not cash-settle on a net basis. Consequently,
with respect to special transactions, the Fund will set aside cash or readily
marketable securities with a value that equals or exceeds the Fund's
obligations.

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.
However, the Fund will attempt to terminate a loan in an effort to reacquire the
securities in time to vote on matters that are deemed to be material by the
Adviser. There can be no assurance that the Fund will have sufficient notice of
such matters to be able to terminate the loan in time to vote thereon. 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 interest rate risks and credit
risks.

HEDGING
Hedging transactions are intended to reduce specific risks. For example, to
protect the Fund against circumstances that would normally cause the Fund's
portfolio securities to decline in value, the Fund may buy or sell a derivative
contract that would normally increase in value under the same circumstances. The
Fund may also attempt to hedge by using combinations of different derivative
contracts, or derivative contracts and securities. The Fund's ability to hedge
may be limited by the costs of the derivative contracts. The Fund may attempt to
lower the cost of hedging by entering into transactions that provide only
limited protection, including transactions that (1) hedge only a portion of its
portfolio, (2) use derivative contracts that cover a narrow range of
circumstances or (3) involve the sale of derivative contracts with different
terms. Consequently, hedging transactions will not eliminate risk even if they
work as intended. In addition, hedging strategies are not always successful, and
could result in increased expenses and losses to the Fund.

INTER-FUND BORROWING AND LENDING ARRANGEMENTS
The Securities and Exchange Commission (SEC) has granted an exemption that
permits the Fund and all other funds advised by subsidiaries of Federated
Investors, Inc. (Federated funds) to lend and borrow money for certain temporary
purposes directly to and from other Federated funds. Participation in this
inter-fund lending program is voluntary for both borrowing and lending Federated
funds, and an inter-fund loan is only made if it benefits each participating
Federated fund. Federated Investors, Inc. (Federated) administers the program
according to procedures approved by the Fund's Board, and the Board monitors the
operation of the program. Any inter-fund loan must comply with certain
conditions set out in the exemption, which are designed to assure fairness and
protect all participating Federated funds.

For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may
be made only when the rate of interest to be charged is more attractive to the
lending Federated fund than market-competitive rates on overnight repurchase
agreements (Repo Rate) and more attractive to the borrowing Federated fund than
the rate of interest that would be charged by an unaffiliated bank for short-
term borrowings (Bank Loan Rate), as determined by the Board. The interest rate
imposed on inter-fund loans is the average of the Repo Rate and the Bank Loan
Rate.

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INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.

CREDIT RISKS
{circle}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.

CALL RISKS
{circle}Call risk is the possibility that an issuer may redeem a fixed-income
security before maturity (a call) at a price below its current market price.
An increase in the likelihood of a call may reduce the security's price.

{circle}If a fixed-income security is called, the Fund may have to reinvest the
proceeds in other fixed-income securities with lower interest rates, higher
credit risks, or other less favorable characteristics.

LEVERAGE RISKS
{circle}Leverage risk is created when an investment exposes the Fund to a level
of risk that exceeds the amount invested. Changes in the value of such an
investment magnify the Fund's risk of loss and potential for gain.

LIQUIDITY RISKS
{circle}Trading opportunities are more limited for fixed-income securities that
have not received any credit ratings, have received ratings below investment
grade or are not widely held.

{circle}Trading opportunities are more limited for CMOs that have complex 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.

{circle}Liquidity risk also refers to the possibility that the Fund may not be
able to sell a security or close out a derivative contract when it wants to.
If this happens, the Fund will be required to continue to hold the security
or keep the position open, and the Fund could incur losses.

<R>

RISKS ASSOCIATED WITH THE INVESTMENT ACTIVITIES OF OTHER ACCOUNTS

Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser and accounts managed by affiliates of the
Adviser. Therefore, it is possible that investment-related actions taken by
such other accounts could adversely impact the Fund with respect to, for
example, the value of Fund portfolio holdings, and/or prices paid to or
received by the Fund on its portfolio transactions, and/or the Fund's ability
to obtain or dispose of portfolio securities. Related considerations are
discussed elsewhere in this SAI under "Brokerage Transactions and Investment
Allocation."

</R>

INVESTMENT LIMITATIONS

DIVERSIFICATION
With respect to securities comprising 75% of the value of its total assets, the
Fund will not purchase securities of any one issuer (other than cash; cash
items; securities issued or guaranteed by the government of the United States or
its agencies or instrumentalities and repurchase agreements collateralized by
such U.S. government securities; and securities of other investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of that issuer, or the Fund would own more than 10% of the
outstanding voting securities of that issuer.

BORROWING MONEY AND ISSUING SENIOR SECURITIES
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940 (1940
Act).

INVESTING IN REAL ESTATE
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.

INVESTING IN COMMODITIES
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities. For purposes of
this restriction, investments in transactions involving futures contracts and
options, forward currency contracts, swap transactions and other financial
contracts that settle by payment of cash are not deemed to be investments
in commodities.

UNDERWRITING
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.

LENDING
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.

CONCENTRATION
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.
THE ABOVE LIMITATIONS CANNOT BE CHANGED UNLESS AUTHORIZED BY THE BOARD AND BY
THE "VOTE OF A MAJORITY OF ITS OUTSTANDING VOTING SECURITIES," AS DEFINED BY THE
1940 ACT. THE FOLLOWING LIMITATIONS, HOWEVER, MAY BE CHANGED BY THE BOARD
WITHOUT SHAREHOLDER APPROVAL. SHAREHOLDERS WILL BE NOTIFIED BEFORE ANY MATERIAL
CHANGE IN THESE LIMITATIONS BECOMES EFFECTIVE.

SECURITIES LENDING
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 Adviser has determined are creditworthy under
guidelines established by the Fund's Board. 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 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.

ILLIQUID SECURITIES
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits that the
fund cannot dispose of within seven days, if immediately after and as a result,
the value of such securities would exceed, in the aggregate, 15% of the Fund's
net assets.

INVESTING IN OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment companies as an
efficient means of carrying out its investment policies. It should be noted that
investment companies incur certain expenses, such as management fees, and,
therefore, any investment by the Fund in shares of other investment companies
may be subject to such duplicate expenses. At the present time, the Fund expects
that its investments in other investment companies will be limited to shares of
money market funds, including funds affiliated with the Fund's Adviser.

BUYING SECURITIES ON MARGIN
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities, and further provided that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments.

PLEDGING ASSETS

The Fund will not mortgage, pledge or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.

INVESTMENT POLICY

For purposes of the above 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" and "bank
instruments." Except with respect to borrowing money, if a percentage
limitations 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 limitation.

<R>

DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:

{circle}futures contracts and options are generally valued at market values
established by the exchanges on which they are traded at the close of trading
on such exchanges. Options traded in the over-the-counter market are
generally valued according to the mean between the last bid and the last asked
price for the option as provided by an investment dealer or other financial
institution that deals in the option. The Board may determine in good faith
that another method of valuing such investments is necessary to appraise their
fair market value;

{circle}for credit default swaps, according to the prices as furnished by an
independent pricing service which are based upon a valuation model
incorporating default probabilities, recovery rates and other market data or
factors;

{circle}for total return swaps, based upon a valuation model incorporating
underlying reference indexes, interest rates, yield curves and other market
data or factors;

{circle}for mortgage-backed securities, based on the aggregate investment value
of the projected cash flows to be generated by the security, as furnished by
an independent pricing service;

{circle}for fixed-income securities, according to the prices as furnished by
an independent pricing service, except that fixed-income securities with
remaining maturities of less than 60 days at the time of purchase are
valued at amortized cost; and

{circle}for investments in other open-end regulated investment companies,
based on net asset value (NAV); and

{circle}for all other securities at fair value as determined in accordance with
procedures established by and under the general supervision of the Board.

Prices for fixed-income securities furnished by a pricing service may be based
on a valuation matrix which incorporates both dealer-supplied valuations and
electronic data processing techniques. Such prices (other than prices of
mortgage-backed securities) are generally intended to be indicative of the bid
prices currently offered to institutional investors for the securities. The
Board has approved the use of such pricing services. A number of pricing
services are available, and the Fund may use various pricing services or
discontinue the use of any pricing service.

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.

</R>

WHAT DO SHARES COST?

The Fund's NAV per Share fluctuates and is based on the market value of all
securities and other assets of the Fund.

The NAV for each class of Shares may differ due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.

HOW IS THE FUND SOLD?

Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.

RULE 12B-1 PLAN (INSTITUTIONAL SERVICE SHARES)
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor for activities principally intended to result in the sale of Shares
such as advertising and marketing of Shares (including printing and distributing
prospectuses and sales literature to prospective shareholders and financial
intermediaries) and providing incentives to financial intermediaries to sell
Shares. The Plan is also designed to cover the cost of administrative services
performed in conjunction with the sale of Shares, including, but not limited to,
shareholder services, recordkeeping services and educational services, as well
as the costs of implementing and operating the Plan. The Rule 12b-1 Plan allows
the Distributor to contract with financial intermediaries to perform activities
covered by the Plan. The Rule 12b-1 Plan is expected to benefit the Fund in a
number of ways. For example, it is anticipated that the Plan will help the Fund
attract and retain assets, thus providing cash for orderly portfolio management
and Share redemptions and possibly helping to stabilize or reduce other
operating expenses. In addition, the Plan is integral to the multiple class
structure of the Fund, which promotes the sale of Shares by providing a range of
options to investors. 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.

For some classes of Shares, 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.

ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES
The Distributor may pay out of its own resources amounts (including items of
material value) to certain financial intermediaries. In some cases, such
payments may be made by, or funded from the resources of, companies affiliated
with the Distributor (including the Adviser). While National Association of
Securities Dealers (NASD) regulations limit the sales charges that you may bear,
there are no limits with regard to the amounts that the Distributor may pay out
of its own resources. In addition to the payments which are generally described
herein and in the prospectus, the financial intermediary also may receive
payments under the Rule 12b-1 Plan and/or Service Fees. In connection with these
payments, the financial intermediary may elevate the prominence or profile of
the Fund and/or other Federated funds within the financial intermediary's
organization by, for example, placement on a list of preferred or recommended
funds, and/or granting the Distributor preferential or enhanced opportunities to
promote the funds in various ways within the financial intermediary's
organization. You can ask your financial intermediary for information about any
payments it receives from the Distributor or the Federated funds and any
services provided.

The following examples illustrate the types of instances in which the
Distributor may make additional payments to financial intermediaries.

SUPPLEMENTAL PAYMENTS
The Distributor may make supplemental payments to certain financial
intermediaries that are holders or dealers of record for accounts in one or more
of the Federated funds. These payments may be based on such factors as the
number or value of Shares the financial intermediary sells or may sell; the
value of client assets invested; or the type and nature of services or support
furnished by the financial intermediary.

PROCESSING SUPPORT PAYMENTS
The Distributor may make payments to financial intermediaries that sell
Federated fund shares to help offset their costs associated with client account
maintenance support, statement processing and transaction processing. The types
of payments that the Distributor may make under this category include payment of
ticket charges on a per transaction basis; payment of networking fees; and
payment for ancillary services such as setting up funds on the financial
intermediary's mutual fund trading system.

RETIREMENT PLAN PROGRAM SERVICING PAYMENTS
The Distributor may make payments to certain financial intermediaries who sell
Federated fund shares through retirement plan programs. A financial
intermediary may perform retirement plan program services itself or may arrange
with a third party to perform retirement plan program services. In addition to
participant recordkeeping, reporting, or transaction processing, retirement plan
program services may include services rendered to a plan in connection with
fund/investment selection and monitoring; employee enrollment and education;
plan balance rollover or separation, or other similar services.

OTHER BENEFITS TO FINANCIAL INTERMEDIARIES
From time to time, the Distributor, at its expense, may provide additional
compensation to financial intermediaries that sell or arrange for the sale of
Shares. Such compensation may include financial assistance to financial
intermediaries that enable the Distributor to participate in or present at
conferences or seminars, sales or training programs for invited employees,
client and investor events and other financial intermediary-sponsored events.

The Distributor also may hold or sponsor, at its expense, sales events,
conferences and programs for employees or associated persons of financial
intermediaries and may pay the travel and lodging expenses of attendees. The
Distributor also may provide, at its expense, meals and entertainment in
conjunction with meetings with financial intermediaries. Other compensation may
be offered to the extent not prohibited by applicable laws, regulations or the
rules of any self-regulatory agency, such as the NASD.

SUBACCOUNTING SERVICES

Certain financial intermediaries 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. Financial intermediaries 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 financial intermediary 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 1940 Act,
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

<R>

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, except that in matters
affecting only a particular class, only Shares of that class are entitled to
vote.

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 9, 2007, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Institutional Shares: Fifth Third Bank TTEE,
Cincinnati, OH, owned approximately 80,809 Shares (35.62%); Taylor & Co.,
Los Angeles, CA, owned approximately 18,766 Shares (8.27%); PISCA Trust &
Co., Portsmouth, NH, owned approximately 16,019 Shares (7.06%); and David F.
Shayeb, Swampscott, MA, owned approximately 15,447 Shares (6.81%).

As of April 9, 2007, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Institutional Service Shares: MLPF&S,
Jacksonville, FL, owned approximately 758,857 Shares (20.57%).

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.

Fifth Third Bank is organized in the state of Ohio and is a subsidiary of Fifth
Third Bancorp, organized in the state of Texas.

</R>

TAX INFORMATION

FEDERAL INCOME TAX
<R>

The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code (Code) applicable to regulated investment companies. If these requirements
are not met, it will not receive special tax treatment and will be subject to
federal corporate income tax.

The Fund is entitled to a loss carry-forward, which may reduce the taxable
income or gain that the Fund would realize, and to which the shareholder would
be subject, in the future.

</R>

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

<R>

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. The
following tables give information about each Board member and the senior
officers of the Fund. Where required, the tables separately list Board members
who are "interested persons" of the Fund (i.e., "Interested" Board members) and
those who are not (i.e., "Independent" Board members). Unless otherwise noted,
the address of each person listed is Federated Investors Tower, 1001 Liberty
Avenue, Pittsburgh, PA. As of December 31, 2006, the Federated Fund Complex
consisted of 45 investment companies (comprising 148 portfolios). Unless
otherwise noted, each Officer is elected annually. Unless otherwise noted, each
Board member oversees all portfolios in the Federated Fund Complex and serves
for an indefinite term.

As of April 9, 2007, the Fund's Board and Officers as a group owned less than 1%
of the Fund's outstanding Shares.

INTERESTED DIRECTORS BACKGROUND AND COMPENSATION

NAME TOTAL
BIRTH DATE AGGREGATE COMPENSATION
ADDRESS COMPENSATION FROM
POSITIONS PRINCIPAL OCCUPATION(S) FOR PAST FIVE YEARS, FROM FUND FUND AND
HELD WITH OTHER DIRECTORSHIPS HELD AND PREVIOUS POSITION(S) (PAST FISCAL FEDERATED
FUND YEAR) FUND COMPLEX
DATE SERVICE (PAST
BEGAN CALENDAR
YEAR)
JOHN F. PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex; $0 $0
DONAHUE* Chairman and Director, Federated Investors, Inc.; Chairman of the Federated Fund
Birth Date: Complex's Executive Committee.
July 28,
1924 PREVIOUS POSITIONS: Chairman of the Federated Fund Complex; Trustee, Federated
DIRECTOR Investment Management Company and Chairman and Director, Federated Investment
Began Counseling.
serving:
March 1991

J. PRINCIPAL OCCUPATIONS: Principal Executive Officer and President of the Federated $0 $0
CHRISTOPHER Fund Complex; Director or Trustee of some of the Funds in the Federated Fund
DONAHUE* Complex; President, Chief Executive Officer and Director, Federated Investors,
Birth Date: Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee,
April 11, Federated Investment Counseling; Chairman and Director, Federated Global
1949 Investment Management Corp.; Chairman, Federated Equity Management Company of
PRESIDENT Pennsylvania and Passport Research, Ltd. (Investment advisory subsidiary of
AND DIRECTOR Federated); Trustee, Federated Shareholder Services Company; Director, Federated
Began Services Company.
serving:
October 1999 PREVIOUS POSITIONS: President, Federated Investment Counseling; President and
Chief Executive Officer, Federated Investment Management Company, Federated
Global Investment Management Corp. and Passport Research, Ltd.

LAWRENCE D. PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex; $1,007.38 $180,000
ELLIS, M.D.* Professor of Medicine, University of Pittsburgh; Medical Director, University of
Birth Date: Pittsburgh Medical Center Downtown; Hematologist, Oncologist and Internist,
October 11, University of Pittsburgh Medical Center.
1932
3471 Fifth OTHER DIRECTORSHIPS HELD: Member, National Board of Trustees, Leukemia Society of
Avenue America.
Suite 1111
Pittsburgh, PREVIOUS POSITIONS: Trustee, University of Pittsburgh; Director, University of
PA Pittsburgh Medical Center.
DIRECTOR
Began
serving:
March 1991

* Family relationships and reasons for "interested" status: John F. Donahue is
the father of J. Christopher Donahue; both are "interested" due to the positions
they hold with Federated and its subsidiaries. Lawrence D. Ellis, M.D. is
"interested" because his son-in-law is employed by the Fund's principal
underwriter, Federated Securities Corp.

INDEPENDENT DIRECTORS BACKGROUND AND COMPENSATION

NAME
BIRTH DATE AGGREGATE TOTAL
ADDRESS COMPENSATION COMPENSATION
POSITIONS PRINCIPAL OCCUPATION(S) FOR PAST FIVE YEARS, FROM FUND FROM FUND
HELD WITH OTHER DIRECTORSHIPS HELD AND PREVIOUS POSITION(S) (PAST FISCAL AND
FUND YEAR) FEDERATED
DATE SERVICE FUND COMPLEX
BEGAN (PAST
CALENDAR
YEAR)
THOMAS G. PRINCIPAL OCCUPATION: Director or Trustee of the Federated Fund Complex. $1,108.11 $198,000
BIGLEY
Birth Date: OTHER DIRECTORSHIPS HELD: Director, Member of Executive Committee, Children's
February 3, Hospital of Pittsburgh; Director, University of Pittsburgh.
1934
15 Old PREVIOUS POSITION: Senior Partner, Ernst & Young LLP.
Timber Trail
Pittsburgh,
PA
DIRECTOR
Began
serving:
November
1994

JOHN T. PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex; $1,108.110 $198,000
CONROY, JR. Chairman of the Board, Investment Properties Corporation; Partner or Trustee in
Birth Date: private real estate ventures in Southwest Florida.
June 23,
1937 PREVIOUS POSITIONS: President, Investment Properties Corporation; Senior Vice
Investment President, John R. Wood and Associates, Inc., Realtors; President, Naples
Properties Property Management, Inc. and Northgate Village Development Corporation.
Corporation
3838 North
Tamiami
Trail
Suite 402
Naples, FL
DIRECTOR
Began
serving:
August 1991

NICHOLAS P. PRINCIPAL OCCUPATION: Director or Trustee of the Federated Fund Complex. $1,108.11 $198,000
CONSTANTAKIS
Birth Date: OTHER DIRECTORSHIPS HELD: Director and Member of the Audit Committee, Michael
September 3, Baker Corporation (engineering and energy services worldwide).
1939
175 PREVIOUS POSITION: Partner, Andersen Worldwide SC.
Woodshire
Drive
Pittsburgh,
PA
DIRECTOR
Began
serving:
February
1998

JOHN F. PRINCIPAL OCCUPATION: Director or Trustee of the Federated Fund Complex; $1,007.38 $180,000
CUNNINGHAM Director, QSGI, Inc. (technology services company).
Birth Date:
March 5, OTHER DIRECTORSHIPS HELD: Chairman, President and Chief Executive Officer,
1943 Cunningham & Co., Inc. (strategic business consulting); Trustee Associate, Boston
353 El College.
Brillo Way
Palm Beach, PREVIOUS POSITIONS: Director, Redgate Communications and EMC Corporation
FL (computer storage systems); Chairman of the Board and Chief Executive Officer,
DIRECTOR Computer Consoles, Inc.; President and Chief Operating Officer, Wang
Began Laboratories; Director, First National Bank of Boston; Director, Apollo Computer,
serving: Inc.
January 1999

PETER E. PRINCIPAL OCCUPATION: Director or Trustee of the Federated Fund Complex. $1,007.38 $180,000
MADDEN
Birth Date: OTHER DIRECTORSHIPS HELD: Board of Overseers, Babson College.
March 16,
1942 PREVIOUS POSITIONS: Representative, Commonwealth of Massachusetts General Court;
One Royal President, State Street Bank and Trust Company and State Street Corporation
Palm Way (retired); Director, VISA USA and VISA International; Chairman and Director,
100 Royal Massachusetts Bankers Association; Director, Depository Trust Corporation;
Palm Way Director, The Boston Stock Exchange.
Palm Beach,
FL
DIRECTOR
Began
serving:
August 1991

CHARLES F. PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex; $1,108.11 $198,000
MANSFIELD, Management Consultant.
JR.
Birth Date: PREVIOUS POSITIONS: Chief Executive Officer, PBTC International Bank; Partner,
April 10, Arthur Young & Company (now Ernst & Young LLP); Chief Financial Officer of Retail
1945 Banking Sector, Chase Manhattan Bank; Senior Vice President, HSBC Bank USA
80 South (formerly, Marine Midland Bank); Vice President, Citibank; Assistant Professor of
Road Banking and Finance, Frank G. Zarb School of Business, Hofstra University;
Westhampton Executive Vice President DVC Group, Inc. (marketing, communications and
Beach, NY technology).
DIRECTOR
Began
serving:
October 1999

JOHN E. PRINCIPAL OCCUPATIONS: Director or Trustee, and Chairman of the Board of $1,343.16 $234,000
MURRAY, JR., Directors or Trustees, of the Federated Fund Complex; Chancellor and Law
J.D., S.J.D. Professor, Duquesne University; Partner, Murray, Hogue & Lannis.
Birth Date:
December 20, OTHER DIRECTORSHIPS HELD: Director, Michael Baker Corp. (engineering,
1932 construction, operations and technical services).
Chancellor,
Duquesne PREVIOUS POSITIONS: President, Duquesne University; Dean and Professor of Law,
University University of Pittsburgh School of Law; Dean and Professor of Law, Villanova
Pittsburgh, University School of Law.
PA
DIRECTOR
Began
serving:
February
1995

THOMAS M. PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex; $503.15 $45,000
O'NEILL Managing Director and Partner, Navigator Management Company, L.P. (investment and
Birth Date: strategic consulting).
June 14,
1951 OTHER DIRECTORSHIPS HELD: Director, Midway Pacific (lumber); Board of Overseers,
95 Standish Children's Hospital of Boston; Visiting Committee on Athletics, Harvard College.
Street
P.O. Box PREVIOUS POSITIONS: Chief Executive Officer and President, Managing Director and
2779 Chief Investment Officer, Fleet Investment Advisors; President and Chief
Duxbury, MA Executive Officer, Aeltus Investment Management, Inc.; General Partner, Hellman,
DIRECTOR Jordan Management Co., Boston, MA; Chief Investment Officer, The Putnam
Began Companies, Boston, MA; and Credit Analyst and Lending Officer, Fleet Bank.
serving:
October 2006
MARJORIE P. PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex. $1,007.38 $180,000
SMUTS
Birth Date: PREVIOUS POSITIONS: Public Relations/Marketing Consultant/Conference Coordinator;
June 21, National Spokesperson, Aluminum Company of America; television producer;
1935 President, Marj Palmer Assoc.; Owner, Scandia Bord.
4905 Bayard
Street
Pittsburgh,
PA
DIRECTOR
Began
serving:
March 1991

JOHN S. PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex; $1,007.38 $180,000
WALSH President and Director, Heat Wagon, Inc. (manufacturer of construction temporary
Birth Date: heaters); President and Director, Manufacturers Products, Inc. (distributor of
November 28, portable construction heaters); President, Portable Heater Parts, a division of
1957 Manufacturers Products, Inc.
2604 William
Drive PREVIOUS POSITION: Vice President, Walsh & Kelly, Inc.
Valparaiso,
IN
DIRECTOR
Began
serving:
October 1999
JAMES F. PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex; Prior $1,007.38 $134,416
WILL to June 2006, Vice Chancellor and President, Saint Vincent College.
Birth Date:
October 12, OTHER DIRECTORSHIPS HELD: Trustee, Saint Vincent College; Alleghany Corporation.
1938
721 E. PREVIOUS POSITIONS: Chairman, President and Chief Executive Officer, Armco, Inc.;
McMurray President and Chief Executive Officer, Cyclops Industries; President and Chief
Road Operating Officer, Kaiser Steel Corporation.
McMurray PA
DIRECTOR
Began
serving:
April 2006

OFFICERS**

NAME
BIRTH DATE
POSITIONS
HELD WITH PRINCIPAL OCCUPATION(S) AND PREVIOUS POSITION(S)
FUND
DATE
SERVICE
BEGAN
JOHN W. PRINCIPAL OCCUPATIONS: Executive Vice President and Secretary of the Federated Fund Complex; Vice Chairman, Executive
MCGONIGLE Vice President, Secretary and Director, Federated Investors, Inc.
Birth Date:
October 26, PREVIOUS POSITIONS: Trustee, Federated Investment Management Company and Federated Investment Counseling; Director,
1938 Federated Global Investment Management Corp., Federated Services Company and Federated Securities Corp.
EXECUTIVE
VICE
PRESIDENT
AND
SECRETARY
Began
serving:
June 1995

RICHARD A. PRINCIPAL OCCUPATIONS: Principal Financial Officer and Treasurer of the Federated Fund Complex; Senior Vice President,
NOVAK Federated Administrative Services; Financial and Operations Principal for Federated Securities Corp., Edgewood Services,
Birth Date: Inc. and Southpointe Distribution Services, Inc.
December
25, 1963 PREVIOUS POSITIONS: Controller of Federated Investors, Inc.; Vice President, Finance of Federated Services Company; held
TREASURER various financial management positions within The Mercy Hospital of Pittsburgh; Auditor, Arthur Andersen & Co.
Began
serving:
January
2006

RICHARD B. PRINCIPAL OCCUPATIONS: Vice Chairman or Vice President of some of the Funds in the Federated Fund Complex; Vice
FISHER Chairman, Federated Investors, Inc.; Chairman, Federated Securities Corp.
Birth Date:
May 17, PREVIOUS POSITIONS: President and Director or Trustee of some of the Funds in the Federated Fund Complex; Executive Vice
1923 President, Federated Investors, Inc. and Director and Chief Executive Officer, Federated Securities Corp.
VICE
CHAIRMAN
Began
serving:
August 2002

BRIAN P. PRINCIPAL OCCUPATIONS: Senior Vice President and Chief Compliance Officer of the Federated Fund Complex; Vice President
BOUDA and Chief Compliance Officer of Federated Investors, Inc.; and Chief Compliance Officer of its subsidiaries. Mr. Bouda
Birth Date: joined Federated in 1999 and is a member of the American Bar Association and the State Bar Association of Wisconsin.
February
28, 1947
SR. VICE
PRESIDENT
Began
serving:
January
2006

ROBERT J. PRINCIPAL OCCUPATIONS: Robert J. Ostrowski joined Federated in 1987 as an Investment Analyst and became a Portfolio
OSTROWSKI Manager in 1990. He was named Chief Investment Officer of taxable fixed-income products in 2004 and also serves as a
Birth Date: Senior Portfolio Manager. He has been a Senior Vice President of the Fund's Adviser since 1997. Mr. Ostrowski is a
April 26, Chartered Financial Analyst. He received his M.S. in Industrial Administration from Carnegie Mellon University.
1963
CHIEF
INVESTMENT
OFFICER
Began
serving:
May 2004

TODD A. PRINCIPAL OCCUPATIONS: Todd A. Abraham is Vice President of the Fund. Mr. Abraham has been a Portfolio Manager since
ABRAHAM 1995, a Vice President of the Fund's Adviser since 1997 and a Senior Vice President of the Fund's Adviser beginning
Birth Date: 2007. Mr. Abraham joined Federated in 1993 as an Investment Analyst and served as Assistant Vice President of the Fund's
February Adviser from 1995 to 1997. Mr. Abraham served as a Portfolio Analyst at Ryland Mortgage Co. from 1992-1993. Mr. Abraham
10, 1966 is a Chartered Financial Analyst and received his M.B.A. in Finance from Loyola College.
VICE
PRESIDENT
Began
serving:
June 1995

**Officers do not receive any compensation from the Fund.

In addition, the Fund has appointed an Anti-Money Laundering Compliance Officer.

-1-

COMMITTEES OF THE BOARD

MEETINGS
BOARD COMMITTEE HELD
COMMITTEE MEMBERS COMMITTEE FUNCTIONS DURING
LAST
FISCAL
YEAR

EXECUTIVE John F. In between meetings of the full Board, the Executive Committee generally may exercise None
Donahue all the powers of the full Board in the management and direction of the business and
John E. conduct of the affairs of the Corporation in such manner as the Executive Committee
Murray, Jr., shall deem to be in the best interests of the Corporation. However, the Executive
J.D., S.J.D. Committee cannot elect or remove Board members, increase or decrease the number of
John S. Directors, elect or remove any Officer, declare dividends, issue shares or recommend
Walsh to shareholders any action requiring shareholder approval.

AUDIT Thomas G. The purposes of the Audit Committee are to oversee the accounting and financial Eight
Bigley reporting process of the Fund, the Fund's internal control over financial reporting,
John T. and the quality, integrity and independent audit of the Fund's financial statements.
Conroy, Jr. The Committee also oversees or assists the Board with the oversight of compliance with
Nicholas P. legal requirements relating to those matters, approves the engagement and reviews the
Constantakis qualifications, independence and performance of the Fund's independent registered
Charles F. public accounting firm, acts as a liaison between the independent registered public
Mansfield, accounting firm and the Board and reviews the Fund's internal audit function.
Jr.

NOMINATING Thomas G. The Nominating Committee, whose members consist of all Independent Directors, selects None
Bigley and nominates persons for election to the Fund's Board when vacancies occur. The
John T. Committee will consider candidates recommended by shareholders, Independent Directors,
Conroy, Jr. officers or employees of any of the Fund's agents or service providers and counsel to
Nicholas P. the Fund. Any shareholder who desires to have an individual considered for nomination
Constantakis by the Committee must submit a recommendation in writing to the Secretary of the Fund,
John F. at the Fund's address appearing on the back cover of this Statement of Additional
Cunningham Information. The recommendation should include the name and address of both the
Peter E. shareholder and the candidate and detailed information concerning the candidate's
Madden qualifications and experience. In identifying and evaluating candidates for
Charles F. consideration, the Committee shall consider such factors as it deems appropriate.
Mansfield, Those factors will ordinarily include: integrity, intelligence, collegiality,
Jr. judgment, diversity, skill, business and other experience, qualification as an
John E. "Independent Director," the existence of material relationships which may create the
Murray, Jr. appearance of a lack of independence, financial or accounting knowledge and
Thomas M. experience, and dedication and willingness to devote the time and attention necessary
O'Neill to fulfill Board responsibilities.
Marjorie P.
Smuts
John S.
Walsh
James F.
Will

-2-

BOARD OWNERSHIP OF SHARES IN THE FUND AND IN THE FEDERATED FAMILY OF INVESTMENT
COMPANIES AS OF DECEMBER 31, 2006

DOLLAR RANGE
OF SHARES OWNED AGGREGATE
IN FEDERATED DOLLAR RANGE OF
INTERMEDIATE SHARES OWNED IN
INTERESTED GOVERNMENT FEDERATED FAMILY OF
BOARD MEMBER NAME FUND, INC. INVESTMENT COMPANIES

John F. Donahue None Over $100,000
J. Christopher Donahue None Over $100,000
Lawrence D. Ellis, M.D. None Over $100,000

INDEPENDENT
BOARD MEMBER NAME
Thomas G. Bigley None Over $100,000
John T. Conroy, Jr. None Over $100,000
Nicholas P. Constantakis None Over $100,000
John F. Cunningham None Over $100,000
Peter E. Madden None Over $100,000
Charles F. Mansfield, Jr. None Over $100,000
John E. Murray, Jr., J.D., S.J.D. None Over $100,000
Thomas M. O'Neill None Over $100,000
Marjorie P. Smuts None Over $100,000
John S. Walsh None Over $100,000
James F. Will None None

</R>

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.

PORTFOLIO MANAGER INFORMATION

<R>

The following information about the Fund's portfolio manager is provided as of
the end of the fund's most recently completed fiscal year.

Other Accounts Managed by Total Number of Other Accounts
Liam O'Connell Managed / Total Assets*

Registered Investment Companies 1 fund / $77.426 million
Other Pooled Investment Vehicles 0
Other Accounts 0

* None of the Accounts has an advisory fee that is based on the performance of
the account.
Dollar value range of shares owned in the Fund: none

Liam O'Connell is paid a fixed base salary and a variable annual incentive.
Base salary is determined within a market competitive position-specific salary
range, based on the portfolio manager's experience and performance. The annual
incentive amount is determined based primarily on Investment Product Performance
(IPP) and, to a lesser extent, Financial Success, and may be paid entirely in
cash, or in a combination of cash and restricted stock of Federated Investors,
Inc. (Federated). .The total combined annual incentive opportunity is intended
to be competitive in the market for this portfolio manager role.

IPP is measured on a rolling 1, 3, and 5 calendar year pre-tax gross total
return basis vs. the Fund's benchmark (i.e., Lehman Brothers Intermediate
Government Index). Performance periods are adjusted if a portfolio manager has
been managing an account for less than five years; accounts with less than one-
year of performance history under a portfolio manager may be excluded. As noted
above, Mr. O'Connell is also the portfolio manager for other accounts in
addition to the Fund. Such other accounts may have different benchmarks and
performance measures. Within each performance measurement period, IPP is
calculated with an equal weighting of each account managed by the portfolio
manager. Additionally, a portion of Mr. O'Connell's IPP score is based on the
equally-weighted performance of portfolios for which he provides research and
analytical support. In addition, Mr. O'Connell serves on one or more Investment
Teams that establish guidelines on various performance drivers (e.g., currency,
duration, sector, volatility, and/or yield curve) for taxable fixed-income
funds. A portion of the IPP score is based on Federated's senior management's
assessment of team contributions. A portion of the bonus tied to the IPP score
maybe adjusted based on management's assessment of overall contributions to fund
performance and any other factors as deemed relavent.

The Financial Success category is designed to tie the portfolio manager's bonus,
in part, to Federated's overall financial results. Funding for the Financial
Success category maybe determined on a product or asset class basis, as well as
on corporate financial results. Senior Management determines individual
Financial Success bonuses on a discretionary basis, considering overall
contributions and any other factors deemed relevant.

In addition, Liam O'Connell was awarded a grant of restricted Federated stock.
Awards of restricted stock are discretionary and are made in variable amounts
based on the subjective judgment of Federated's senior management.

As a general matter, certain conflicts of interest may arise in connection with
a portfolio manager's management of a fund's investments, on the one hand, and
the investments of other accounts for which the portfolio manager is
responsible, on the other. For example, it is possible that the various
accounts managed could have different investment strategies that, at times,
might conflict with one another to the possible detriment of the Fund.
Alternatively, to the extent that the same investment opportunities might be
desirable for more than one account, possible conflicts could arise in
determining how to allocate them. Other potential conflicts might include
conflicts created by specific portfolio manager compensation arrangements, and
conflicts relating to selection of brokers or dealers to execute fund portfolio
trades and/or specific uses of commissions from Fund portfolio trades (for
example, research, or "soft dollars"). The Adviser has adopted policies and
procedures and has structured the portfolio managers' compensation in a manner
reasonably designed to safeguard the Fund from being negatively affected as a
result of any such potential conflicts.

</R>

SERVICES AGREEMENT
Federated Advisory Services Company, an affiliate of the Adviser, provides
certain support services to the Adviser. The fee for these services is paid by
the Adviser and not by 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.

CODE OF ETHICS RESTRICTIONS ON PERSONAL TRADING

As required by SEC rules, the Fund, its Adviser, and its Distributor have
adopted codes of ethics. These codes govern securities trading activities of
investment personnel, Fund Directors, and certain other employees. Although
they do permit these people to trade in securities, including those that the
Fund could buy, as well as Shares of the Fund, they also contain significant
safeguards designed to protect the Fund and its shareholders from abuses in this
area, such as requirements to obtain prior approval for, and to report,
particular transactions.

VOTING PROXIES ON FUND PORTFOLIO SECURITIES
The Board has delegated to the Adviser authority to vote proxies on the
securities held in the Fund's portfolio. The Board has also approved the
Adviser's policies and procedures for voting the proxies, which are described
below.

PROXY VOTING POLICIES
The Adviser's general policy is to cast proxy votes in favor of proposals that
the Adviser anticipates will enhance the long-term value of the securities being
voted. Generally, this will mean voting for proposals that the Adviser believes
will: improve the management of a company; increase the rights or preferences of
the voted securities; and/or increase the chance that a premium offer would be
made for the company or for the voted securities.

The following examples illustrate how these general policies may apply to
proposals submitted by a company's board of directors. However, whether the
Adviser supports or opposes a proposal will always depend on the specific
circumstances described in the proxy statement and other available information.

On matters of corporate governance, generally the Adviser will vote for
proposals to: require independent tabulation of proxies and/or confidential
voting by shareholders; reorganize in another jurisdiction (unless it would
reduce the rights or preferences of the securities being voted); and repeal a
shareholder rights plan (also known as a "poison pill"). The Adviser will
generally vote against the adoption of such a plan (unless the plan is designed
to facilitate, rather than prevent, unsolicited offers for the company).

On matters of capital structure, generally the Adviser will vote: against
proposals to authorize or issue shares that are senior in priority or voting
rights to the securities being voted; for proposals to grant preemptive rights
to the securities being voted; and against proposals to eliminate such
preemptive rights.

On matters relating to management compensation, generally the Adviser will vote:
for stock incentive plans that align the recipients' interests with the
interests of shareholders without creating undue dilution; and against proposals
that would permit the amendment or replacement of outstanding stock incentives
with new stock incentives having more favorable terms.

On matters relating to corporate transactions, the Adviser will vote proxies
relating to proposed mergers, capital reorganizations, and similar transactions
in accordance with the general policy, based upon its analysis of the proposed
transaction. The Adviser will vote proxies in contested elections of directors
in accordance with the general policy, based upon its analysis of the opposing
slates and their respective proposed business strategies. Some transactions may
also involve proposed changes to the company's corporate governance, capital
structure or management compensation. The Adviser will vote on such changes
based on its evaluation of the proposed transaction or contested election. In
these circumstances, the Adviser may vote in a manner contrary to the general
practice for similar proposals made outside the context of such a proposed
transaction or change in the board. For example, if the Adviser decides to vote
against a proposed transaction, it may vote for anti-takeover measures
reasonably designed to prevent the transaction, even though the Adviser
typically votes against such measures in other contexts.

The Adviser generally votes against proposals submitted by shareholders without
the favorable recommendation of a company's board. The Adviser believes that a
company's board should manage its business and policies, and that shareholders
who seek specific changes should strive to convince the board of their merits or
seek direct representation on the board.

In addition, the Adviser will not vote if it determines that the consequences or
costs outweigh the potential benefit of voting. For example, if a foreign
market requires shareholders casting proxies to retain the voted shares until
the meeting date (thereby rendering the shares "illiquid" for some period of
time), the Adviser will not vote proxies for such shares.

PROXY VOTING PROCEDURES
The Adviser has established a Proxy Voting Committee (Proxy Committee), to
exercise all voting discretion granted to the Adviser by the Board in accordance
with the proxy voting policies. The Adviser has hired Institutional Shareholder
Services (ISS) to obtain, vote, and record proxies in accordance with the Proxy
Committee's directions. The Proxy Committee directs ISS by means of Proxy
Voting Guidelines, and ISS may vote any proxy as directed in the Proxy Voting
Guidelines without further direction from the Proxy Committee (and may make any
determinations required to implement the Proxy Voting Guidelines). However, if
the Proxy Voting Guidelines require case-by-case direction for a proposal, ISS
will provide the Proxy Committee with all information that it has obtained
regarding the proposal and the Proxy Committee will provide specific direction
to ISS. The Adviser's proxy voting procedures generally permit the Proxy
Committee to amend the Proxy Voting Guidelines, or override the directions
provided in such Guidelines, whenever necessary to comply with the proxy voting
policies.

CONFLICTS OF INTEREST
The Adviser has adopted procedures to address situations where a matter on which
a proxy is sought may present a potential conflict between the interests of the
Fund (and its shareholders) and those of the Adviser or Distributor. This may
occur where a significant business relationship exists between the Adviser (or
its affiliates) and a company involved with a proxy vote. A company that is a
proponent, opponent, or the subject of a proxy vote, and which to the knowledge
of the Proxy Committee has this type of significant business relationship, is
referred to as an "Interested Company."

The Adviser has implemented the following procedures in order to avoid concerns
that the conflicting interests of the Adviser have influenced proxy votes. Any
employee of the Adviser who is contacted by an Interested Company regarding
proxies to be voted by the Adviser must refer the Interested Company to a member
of the Proxy Committee, and must inform the Interested Company that the Proxy
Committee has exclusive authority to determine how the Adviser will vote. Any
Proxy Committee member contacted by an Interested Company must report it to the
full Proxy Committee and provide a written summary of the communication. Under
no circumstances will the Proxy Committee or any member of the Proxy Committee
make a commitment to an Interested Company regarding the voting of proxies or
disclose to an Interested Company how the Proxy Committee has directed such
proxies to be voted. If the Proxy Voting Guidelines already provide specific
direction on the proposal in question, the Proxy Committee shall not alter or
amend such directions. If the Proxy Voting Guidelines require the Proxy
Committee to provide further direction, the Proxy Committee shall do so in
accordance with the proxy voting policies, without regard for the interests of
the Adviser with respect to the Interested Company. If the Proxy Committee
provides any direction as to the voting of proxies relating to a proposal
affecting an Interested Company, it must disclose to the Fund's Board
information regarding: the significant business relationship; any material
communication with the Interested Company; the matter(s) voted on; and how, and
why, the Adviser voted as it did.

If the Fund holds shares of another investment company for which the Adviser (or
an affiliate) acts as an investment adviser, the Proxy Committee will vote the
Fund's proxies in the same proportion as the votes cast by shareholders who are
not clients of the Adviser at any shareholders' meeting called by such
investment company, unless otherwise directed by the Board.

PROXY VOTING REPORT
A report on "Form N-PX" of how the Fund voted any proxies during the most recent
12-month period ended June 30 is available through Federated's website. Go to
FederatedInvestors.com; select "Products;" select the Fund; then use the link to
"Prospectuses and Regulatory Reports" to access the link to Form N-PX. Form N-PX
filings are also available at the SEC's website at www.sec.gov.

PORTFOLIO HOLDINGS INFORMATION
Information concerning the Fund's portfolio holdings is available in the
"Products" section of Federated's website at FederatedInvestors.com. A complete
listing of the Fund's portfolio holdings as of the end of each calendar quarter
is posted on the website 30 days (or the next business day) after the end of the
quarter and remains posted until replaced by the information for the succeeding
quarter. Summary portfolio composition information as of the close of each month
(except for recent purchase and sale transaction information, which is updated
quarterly) is posted on the website 15 days (or the next business day) after
month-end and remains until replaced by the information for the succeeding
month. The summary portfolio composition information may include percentage
breakdowns of portfolio by type of security.

To access this information from the "Products" section of the website, click on
"Portfolio Holdings" and select the appropriate link opposite the name of the
Fund, or select the name of the Fund from the menus on the "Products" section,
and from the Fund's page click on the "Portfolio Holdings" or "Composition"
link. A user is required to register on the website the first time the user
accesses this information.

You may also access from the "Products" section of the website portfolio
information as of the end of the Fund's fiscal quarters. The Fund's annual and
semiannual reports, which contain complete listings of the Fund's portfolio
holdings as of the end of the Fund's second and fourth fiscal quarters, may be
accessed by selecting the name of the Fund, clicking on "Prospectuses and
Regulatory Reports" and selecting the link to the appropriate PDF. Complete
listings of the Fund's portfolio holdings as of the end of the Fund's first and
third fiscal quarters may be accessed by selecting "Portfolio Holdings" from the
"Products" section and then selecting the appropriate link opposite the name of
the Fund. Fiscal quarter information is made available on the website within 70
days after the end of the fiscal quarter. This information is also available in
reports filed with the SEC at the SEC's website at www.sec.gov.

The disclosure policy of the Fund and the Adviser prohibits the disclosure of
portfolio holdings information to any investor or intermediary before the same
information is made available to other investors. Employees of the Adviser or
its affiliates who have access to nonpublic information concerning the Fund's
portfolio holdings are prohibited from trading securities on the basis of this
information. Such persons must report all personal securities trades and obtain
pre-clearance for all personal securities trades other than mutual fund shares.

Firms that provide administrative, custody, financial, accounting, legal or
other services to the Fund may receive nonpublic information about Fund
portfolio holdings for purposes relating to their services. The Fund may also
provide portfolio holdings information to publications that rate, rank or
otherwise categorize investment companies. Traders or portfolio managers may
provide "interest" lists to facilitate portfolio trading if the list reflects
only that subset of the portfolio for which the trader or portfolio manager is
seeking market interest. A list of service providers, publications and other
third parties who may receive nonpublic portfolio holdings information appears
in the Appendix to this SAI.

The furnishing of nonpublic portfolio holdings information to any third party
(other than authorized governmental or regulatory personnel) requires the prior
approval of the President of the Adviser and of the Chief Compliance Officer of
the Fund. The President of the Adviser and the Chief Compliance Officer will
approve the furnishing of nonpublic portfolio holdings information to a third
party only if they consider the furnishing of such information to be in the best
interests of the Fund and its shareholders. In that regard, and to address
possible conflicts between the interests of Fund shareholders and those of the
Adviser and its affiliates, the following procedures apply. No consideration
may be received by the Fund, the Adviser, any affiliate of the Adviser or any of
their employees in connection with the disclosure of portfolio holdings
information. Before information is furnished, the third party must sign a
written agreement that it will safeguard the confidentiality of the information,
will use it only for the purposes for which it is furnished and will not use it
in connection with the trading of any security. Persons approved to receive
nonpublic portfolio holdings information will receive it as often as necessary
for the purpose for which it is provided. Such information may be furnished as
frequently as daily and often with no time lag between the date of the
information and the date it is furnished. The Board receives and reviews
annually a list of the persons who receive nonpublic portfolio holdings
information and the purposes for which it is furnished.

<R>

BROKERAGE TRANSACTIONS AND INVESTMENT ALLOCATION
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. The Adviser makes decisions on portfolio
transactions and selects brokers and dealers subject to review by the Fund's
Board.

Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser and accounts managed by affiliates of 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 Administrative Services (FAS), a subsidiary of Federated, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund. FAS provides these at the
following annual rates, based on the average aggregate daily net assets of the
Fund and most of the other Federated funds:

AVERAGE AGGREGATE DAILY
MAXIMUM ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
0.150 of 1% on the first $5 billion
0.125 of 1% on the next $5 billion
0.100 of 1% on the next $10 billion
0.075 of 1% on assets over $20 billion
The administrative fee received during any fiscal year shall be at least
$150,000 per portfolio and $40,000 per each additional class of Shares. FAS may
voluntarily waive a portion of its fee and may reimburse the Fund for expenses.

FAS 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.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company, the Fund's registered transfer agent,
maintains all necessary shareholder records.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The independent registered public accounting firm for the Fund, Ernst & Young
LLP, conducts its audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States), which require it to plan and perform
its audits to provide reasonable assurance about whether the Fund's financial
statements and financial highlights are free of material misstatement.

FEES PAID BY THE FUND FOR SERVICES
FOR THE YEAR ENDED FEBRUARY 28 2007 2006 2005
Advisory Fee Earned $168,629 $233,388 $335,571
Advisory Fee Reduction $168,629 $233,388 $335,571
Advisory Fee Reimbursement -- -- --
Administrative Fee $155,422 $155,584 $155,839
12B-1 FEE:
Institutional Service Shares -0- -0- -0-
SHAREHOLDER SERVICES FEE:
Institutional Shares -0- -0- -0-
Institutional Service Shares $86,661 $125,010 $172,524
Fees are allocated among classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable class of Shares.

</R>

HOW DOES THE FUND MEASURE PERFORMANCE?

The Fund may advertise Share performance by using the SEC's standard methods for
calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.

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
and/or the value of portfolio holdings fluctuate daily. Both net earnings and
offering price per Share are factors in the computation of yield and total
return.

<R>

AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns are given for the one-year, five-year and ten-year periods ended
February 28, 2007.

Yield is given for the 30-day period ended February 28, 2007.

30-DAY 1 YEAR 5 YEARS START OF
PERIOD PERFORMANCE
INSTITUTIONAL SHARES: ON 9/11/2000
Total Return
Before Taxes N/A 5.45% 2.88% 4.05%
After Taxes on Distributions N/A 3.63% 1.66% 2.58%
After Taxes on Distributions
and Sale of Shares N/A 3.51% 1.74% 2.57%
Yield 5.06% N/A N/A N/A

30-DAY 1 YEAR 5 YEARS 10 YEARS
INSTITUTIONAL SERVICE SHARES: PERIOD
Total Return
Before Taxes N/A 5.21% 2.63% 4.06%
After Taxes on Distributions N/A 3.47% 1.50% 2.42%
After Taxes on Distributions
and Sale of Shares N/A 3.35% 1.58% 2.45%
Yield 4.83% N/A N/A N/A

</R>

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 $10,000 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 $10,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions. Total returns after taxes are calculated in a
similar manner, but reflect additional standard assumptions required by the SEC.

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 financial intermediaries charge fees in connection with services
provided in conjunction with an investment in Shares, the Share performance is
lower for shareholders paying those fees.

WHO IS FEDERATED INVESTORS, INC.?

Federated and its subsidiaries are dedicated to providing you with world-class
investment management. With offices in Pittsburgh, New York City and Frankfurt,
Federated is a firm with independent research, product breadth and industry
standing.

Federated seeks to achieve superior and sustainable investment performance for a
broad array of global clients through a disciplined investment process and an
information advantage created by proprietary fundamental research. Federated is
distinctive in our disciplined process that integrates proprietary research with
trading and portfolio management.

FEDERATED FUNDS OVERVIEW

<R>

EQUITIES
As of December 31, 2006, Federated managed 48 equity funds totaling
approximately $28.7 billion in assets across growth, value, equity income,
international, index and sector allocation styles.

TAXABLE FIXED-INCOME
As of December 31, 2006, Federated managed 35 taxable bond funds including:
high-yield, multi-sector, mortgage-backed, U.S. government, U.S. corporate and
international, with assets approximating $15.2 billion.

TAX FREE FIXED-INCOME
As of December 31, 2006, Federated managed 14 municipal bond funds with
approximately $2.9 billion in assets and 22 municipal money market funds with
approximately $27.6 billion in total assets.

MONEY MARKET FUNDS
As of December 31, 2006, Federated managed $155.2 billion in assets across 51
money market funds, including 17 government, 11 prime, 22 municipal and 1 euro-
denominated with assets approximating $63.5 billion, $64.0 billion, $27.6
billion and $82.9 million.

The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: Stephen F. Auth, CFA, for Global
Equity; Robert J. Ostrowski, CFA, for Taxable Fixed-Income; Mary Jo Ochson, CFA,
for Tax Free Fixed-Income; and Deborah A. Cunningham, CFA, for Money Market
Funds.

FINANCIAL INFORMATION

The Financial Statements for the Fund for the fiscal year ended February 28,
2007 are incorporated herein by reference to the Annual Report to Shareholders
of Federated Intermediate Government Fund, Inc. dated February 28, 2007.

</R>

ADDRESSES

FEDERATED INTERMEDIATE GOVERNMENT FUND

Institutional Shares

Institutional Service Shares

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, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company

P.O. Box 8600

Boston, MA 02266-8600

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP

200 Clarendon Street

Boston, MA 02116-5072

-5-

<R>

APPENDIX

The following is a list of persons other than the Adviser and its affiliates
that may receive nonpublic portfolio holdings information concerning the Fund:

CUSTODIAN
State Street Bank and Trust Company

SECURITIES LENDING AGENT
Citibank, N.A.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP

LEGAL COUNSEL
Dickstein Shapiro LLP
Reed Smith LLP

SERVICE PROVIDERS
Bloomberg; Factset

SECURITY PRICING SERVICES
FT Interactive Data

RATINGS AGENCIES
Standard & Poor's

PERFORMANCE REPORTING/PUBLICATIONS
Fidelity-Strategic Advisors; Lipper; Morningstar; NASDAQ; Value Line;
Wiesenberger/Thomson Financial

OTHER
Investment Company Institute
</R>

Footnotes

[1] The Adviser may refer to types of securities (such as Treasury, agency,
mortgage-backed or corporate debt securities) as "sectors" of the fixed-income
market.

[2] In shareholder reports and other descriptions of the Fund's investment
strategy and performance, the Adviser may refer to the relative interest rates
of securities with longer and shorter durations within a sector as a "yield
curve."

PART C. OTHER INFORMATION.

Item 23. EXHIBITS:
(a) (i) Conformed Copy of Articles of Incorporation of
the Registrant; (3)
(ii) Conformed Copy of Amendment No. 1 to Articles of
Incorporation of the Registrant; (3)
(iii) Conformed Copy of Amendment No. 2 to Articles of
Incorporation of the Registrant; (6)
(iv) Conformed Copy of Amendment No. 3 to Articles of
Incorporation of the Registrant; (8)
(v) Conformed Copy of Amendment No. 4 to Articles of
Incorporation of the Registrant; (9)
(vi) Conformed Copy of Amendment No. 5 to Articles of
Incorporation of the Registrant; (9)
(vii) Conformed Copy of Amendment No. 6 to Articles of
Incorporation of the Registrant; (14)
(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)
(vi) Copy of Amendment No. 5 to the By-Laws of the Registrant; (11)
(vii) Copy of Amendment No. 6 to the By-Laws of the Registrant; (12)
(viii) Copy of Amendment No. 7 to the By-Laws of the Registrant; (13)
(ix) Copy of Amendment No. 8 to the By-Laws of the Registrant; (14)
(x) Copy of Amendment No. 9 to the By-Laws of the Registrant; (14)
(c) Copy of Specimen Certificate for Shares of Beneficial
Interest of the Registrant; (5)
(d) (i) Conformed copy of Investment Advisory Contract of
the Registrant; (3)
(ii) Conformed copy of Amendment No. 1 to the Investment Advisory
Contract of the Registrant; (9)
(iii) Conformed copy of Amendment to the Investment Advisory
Contract of the Registrant; (10)
(e) (i) Conformed copy of Distributor's Contract of the
Registrant, including Exhibit A; (3)
(ii) Conformed copy of Exhibit B to the Distributor's Contract of
the Registrant; (9)
(iii) Conformed copy of Amendment to the Distributor's Contract of
the Registrant; (10)
(iv) 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 N-1A, filed with
the Commission on July 24, 1995. (File Numbers 33-38550
and 811-6269)
(v) Conformed copy of Amendment to Distributors Contract of the
Registrant, dated October 1, 2003. (12)
(f) Not applicable;
(g) (i) Conformed Copy of Custodian Agreement of the Registrant; (3)
(ii) Conformed Copy of Custodian Fee Schedule; (6)
(iii) Conformed Copy of Amendment to Custodian Agreement of the
Registrant; (11)
(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) Conformed copy of Amendment to the Amended and Restated
Agreement for Fund Accounting Services, Administrative
Services, Shareholder Transfer Agency Services and Custody
Services Procurement; (10)
(iii) The Registrant hereby incorporates the conformed copy of the
Second Amended and Restated Services Agreement, with
attached Schedule 1 revised 6/30/04, from Item 23(h)(vii) of
the Cash Trust Series, Inc. Registration Statement on Form
N-1A, filed with the Commission on July 29, 2004. (File Nos.
33-29838 and 811-5843)
(iv) The responses described in Item 23(e)(iv) are hereby
incorporated by reference;
(v) The Registrant hereby incorporates the conformed copy of the
Financial Administration and Accounting Services
Agreement, with attached Exhibit A revised 3/1/06, from
Item (h)(viii) of the Federated Total Return Government
Bond Fund Registration Statement on Form N-1A, filed with
the Commission on April 26, 2006. (File Nos. 33-60411 and
811-07309)
(vi) The Registrant hereby incorporates by reference the
conformed copy of the Agreement for Administrative
Services, with Exhibit 1 and Amendments 1 and 2 attached,
between Federated Administrative Services and the
Registrant from Item 23(h)(iv)of the Federated Total
Return Series, Inc. Registration Statement on Form N-1A,
filed with the Commission on November 29, 2004. (File
Nos. 33-50773 and 811-7115);
(vii) The Registrant hereby incorporates the Conformed copy
of the Transfer Agency and Service Agreement
between the Federated Funds listed on Schedule A
revised 3/1/06, from Item (h)(ix) of the Federated
Total Return Government Bond Fund Registration
Statement on Form N-1A, filed with the Commission
on April 26, 2006. (File Nos. 33-60411 and 811-
07309)
(viii) The Registrant hereby incorporates the Conformed
copy of the Mutual Fund Expense/ Commission
Recapture Services Agreement between State Street
Global Markets, LLC and Certain Federated Funds
with attached Exhibit 1 dated 3/1/06, from Item
(h)(x) of the Federated Total Return Government
Bond Fund Registration Statement on Form N-1A,
filed with the Commission on April 26, 2006.
(File Nos. 33-60411 and 811-07309);
(ix) Conformed copy of Financial Administration Accounting
and Services Agreement, dated January 1, 2007; (+)
(i) Conformed copy of Opinion and Consent of Counsel as to
legality of shares being registered; (3)
(j) Conformed copy of Consent of Independent Auditors;(+)
(k) Not applicable;
(l) Conformed copy of Initial Capital Understanding; (3)
(m) (i) Conformed copy of Distribution Plan of the
Registrant, including Exhibit A; (1)
(ii) The responses described in Item 23(e)(iv) are hereby
incorporated by reference.
(n) (i) The Registrant hereby incorporates the Copy of the
Multiple Class Plan and attached Exhibits from Item (n) of the
Federated Total Return Government Bond Fund Registration
Statement on Form N-1A, filed with the Commission on April 26,
2006. (File Nos. 33-60411 and 811-07309)
(o) (i) Conformed copy of Power of Attorney of the
Registrant; (9)
(ii) Conformed copy of Power of Attorney of the Chief Investment
Officer of the Registrant; (9)
(iii) Conformed copy of Power of Attorney of President and
Director, and Vice Chairman of the Registrant; (11)
(iv) Conformed copy of Power of Attorney of Treasurer of the
Registrant; (14)
(v) Conformed copy of Power of Attorney of Director, of the
Registrant; (14)
(vi) Conformed copy of Power of Attorney of Director of the
Registrant; (14)
(vii) Conformed copy of Power of Attorney of Director of the
Registrant; (+)
(p) (i) The Registrant hereby incorporates the copy of the
Code of Ethics for Access Persons from Item 23(p) of the Money
Market Obligations Trust Registration Statement on Form N-1A
filed with the Commission on February 26, 2004. (File Nos. 33-
31602 and 811-5950).
(ii) The Registrant hereby incorporates the conformed
copy of the Federated Investors, Inc. Code of Ethics for Access
Persons, effective 1/1/2005, from Item 23(p) of the Federated
Total Return Series, Inc. Registration Statement on Form N-1A,
filed with the Commission on November 29, 2004. (File Nos. 33-
50773 and 811-7115)
(iii) The Registrant hereby incorporates the conformed copy of the
Federated Investors, Inc. Code of Ethics for Access Persons,
effective 1/1/2005, from Item 23(p) of the Money Market
Obligations Trust Registration Statement on Form N-1A, filed
with the Commission on February 25, 2005. (File Nos. 33-
31602 and 811-5950);

+ All exhibits are being filed electronically.
1. Response is incorporated by reference to Registrant's Post-Effective
Registration Statement on Form N-1A filed April 24, 1994. (File Nos.
33-41004 and 811-6307).
2. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 filed July 18, 1991. (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).
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).
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 on Form N-1A filed April 25, 2000. (File Nos. 33-41004 and
811- 6307).
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 17 on Form N-1A filed April 25, 2001. (File Nos. 33-41004 and
811- 6307).
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed April 25, 2002. (File Nos. 33-41004 and
811- 6307).
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 on Form N-1A filed April 29, 2003. (File Nos. 33-41004 and
811- 6307).
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 21 on Form N-1A filed April 28, 2004. (File Nos. 33-41004 and
811- 6307).
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 22 on Form N-1A filed April 29, 2005. (File Nos. 33-41004 and
811- 6307).
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 23 on Form N-1A filed April 28, 2006. (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 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 two of the Trustees and two 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 Trustees of the investment
adviser and, in parentheses, their principal occupations are:
Thomas R. Donahue, (Chief Financial Officer, Federated Investors,
Inc.), 1001 Liberty Avenue, Pittsburgh, PA, 15222-3779 and Mark D.
Olson (a principal of the firm, Mark D. Olson &amp; Company,
L.L.C. and Partner, Wilson, Halbrook &amp; Bayard, P.A.),
Delaware Avenue, P.O. Box 2305, Wilmington, DE 19899-2305.

The remaining Officers of the investment adviser are:

President/ Chief Executive Officer
and Trustee: John B. Fisher

Vice Chairman: William D. Dawson, III

Senior Vice Presidents: Todd Abraham
J. Scott Albrecht
Joseph M. Balestrino
Randall Bauer
Jonathan C. Conley
Deborah A. Cunningham
Mark E. Durbiano
Donald T. Ellenberger
Susan R. Hill
Robert M. Kowit
Jeffrey A. Kozemchak
Mary Jo Ochson
Robert J. Ostrowski
Ihab Salib
Paige Wilhelm

Vice Presidents: Nancy J.Belz
G. Andrew Bonnewell
Hanan Callas
Jerome Conner
James R. Crea, Jr.
Karol Crummie
Lee R. Cunningham, II
B. Anthony Delserone,Jr.
William Ehling
Eamonn G. Folan
Richard J. Gallo
John T. Gentry
Kathyrn P. Glass
Patricia L. Heagy
William R. Jamison
Nathan H. Kehm
John C. Kerber
J. Andrew Kirschler
Marian R. Marinack
Kevin McCloskey
John W. McGonigle
Natalie F. Metz
Thomas J. Mitchell
Joseph M. Natoli
Bob Nolte
Mary Kay Pavuk
Jeffrey A. Petro
John Polinski
Rae Ann Rice
Brian Ruffner
Roberto Sanchez-Dahl,Sr.
John Sidawi
Michael W. Sirianni, Jr.
Christopher Smith
Kyle Stewart
Mary Ellen Tesla
Timothy G. Trebilcock
Paolo H. Valle
Stephen J. Wagner
Mark Weiss
George B. Wright

Assistant Vice Presidents: Jason DeVito
Bryan Dingle
Timothy Gannon
James Grant
Tracey L. Lusk
Ann Manley
Karl Mocharko
Joseph Mycka
Nick Navari
Gene Neavin
Liam O'Connell
Nichlas S. Tripodes

Secretary: G. Andrew Bonnewell

Treasurer: Thomas R. Donahue

Assistant Treasurer: Denis McAuley, III

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:

Cash Trust Series, Inc.; Cash Trust Series II;
Federated Adjustable Rate Securities Fund; Federated
American Leaders Fund, Inc.; Federated Core Trust;
Federated Core Trust II, L.P.; Federated Equity
Funds; Federated Equity Income Fund, Inc.; Federated
Fixed Income Securities, Inc.; Federated GNMA Trust;
Federated Government Income Securities, Inc.;
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 Intermediate Government Fund, Inc.
Federated International Series, Inc.; Federated
Investment Series Funds, Inc.; Federated Managed
Allocation Portfolios; Federated Managed Pool Series;
Federated MDT Series; Federated Municipal Securities
Fund, Inc.; Federated Municipal Securities Income
Trust; Federated Short-Term Municipal Trust;
Federated Stock and Bond Fund, Inc.; Federated Stock
Trust; Federated Total Return Government Bond Fund;
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 World
Investment Series, Inc.; Intermediate Municipal
Trust; Edward Jones Money Market Fund and Money
Market Obligations Trust.

(b)

(1) (2) (3)
Positions and Offices Positions and Offices
With Distributor Name With Registrant
_____________________ _________________ _____________________

Chairman: Richard B. Fisher Vice Chairman

Executive Vice
Vice President, Assistant
Secretary and Director: Thomas R. Donahue

President and Director: Thomas E. Territ

Vice President and Director: Peter J. Germain

Treasurer and Director: Denis McAuley III

Senior Vice Presidents: Michael Bappert
Michael Benacci
Richard W. Boyd
Charles L. Davis, Jr.
Laura M. Deger
Peter W. Eisenbrandt
Theodore Fadool, Jr.
James S. Hamilton
James M. Heaton
Harry J. Kennedy
Michael W. Koenig
Anne H. Kruczek
Amy Michaliszyn
Richard C. Mihm
Keith Nixon
Rich Paulson
Solon A. Person, IV
Chris Prado
Brian S. Ronayne
Colin B. Starks
Robert F. Tousignant
William C. Tustin
Paul Uhlman

Vice Presidents: Irving Anderson
Dan Berry
John B. Bohnet
Edward R. Bozek
Jane E. Broeren-Lambesis
Daniel Brown
Bryan Burke
Mark Carroll
Dan Casey
Scott Charlton
Steven R. Cohen
James Conely
Kevin J. Crenny
G. Michael Cullen
Beth C. Dell
Ron Dorman
Donald C. Edwards
Lee England
Timothy Franklin
Peter Germain
Jamie Getz
Scott Gundersen
Peter Gustini
Dayna C. Haferkamp
Raymond J. Hanley
Vincent L. Harper, Jr.
Bruce E. Hastings
Jeffrey S. Jones
Ed Koontz
Christopher A. Layton
Michael H. Liss
Michael R. Manning
Michael Marcin
Martin J. McCaffrey
Mary A. McCaffrey
Vincent T. Morrow
Doris T. Muller
Alec H. Neilly
Rebecca Nelson
John A. O'Neill
James E. Ostrowski
Stephen Otto
Brian Paluso
Mark Patsy
Robert F. Phillips
Josh Rasmussen
Richard A. Recker
Ronald Reich
Christopher Renwick
Diane M. Robinson
Timothy A. Rosewicz
Thomas S. Schinabeck
Edward J. Segura
Peter Siconolfi
Edward L. Smith
John A. Staley
Jack L. Streich
Mark Strubel
Michael Vahl
David Wasik
G. Walter Whalen
Stephen White
Jeff Wick
Lewis Williams
Edward J. Wojnarowski
Michael P. Wolff
Erik Zettlemayer
Paul Zuber

Assistant Vice Presidents: Robert W. Bauman
William Rose

Secretary: C. Todd Gibson

Assistant Treasurer: Lori A. Hensler
Richard A. Novak

The business address of each of the Officers of Federated Securities
Corp. is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh,
Pennsylvania 15222-3779.

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 Reed Smith LLP
Investment Management Group (IMG)
Federated Investors Tower
12th Floor
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

State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
("Custodian, Transfer Agent
and 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

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 INTERMEDIATE 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
26th day of April, 2007.

FEDERATED INTERMEDIATE GOVERNMENT FUND, INC.

BY: /s/ Travis Williams
Travis Williams, Assistant Secretary
April 26, 2007

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/ Travis Williams Attorney In Fact April 26, 2007
Travis Williams For the Persons
ASSISTANT SECRETARY Listed Below

John F. Donahue* Director

J. Christopher Donahue* President and Director
(Principal Executive Officer)

Richard B. Fisher* Vice Chairman

Richard A. Novak* Treasurer
(Principal Financial Officer)

Thomas G. Bigley* Director

John T. Conroy, Jr.* Director

Nicholas P. Constantakis* Director

John F. Cunningham* Director

Lawrence D. Ellis, M.D.* Director

Peter E. Madden* Director

John E. Murray, Jr., J.D., S.J.D.* Director

Marjorie P. Smuts* Director

John S. Walsh* Director

James F. Will* Director

Thomas O'Neill* Director

* By Power of Attorney

Federated World-Class Investment Manager

Federated Intermediate Government Fund, Inc.

PROSPECTUS

INSTITUTIONAL SHARES

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

Risk/Return Bar Chart and Table

Average Annual Total Return Table

(For the Periods Ended December 31, 2006)

What are the Fund's Fees and Expenses?

FEDERATED INTERMEDIATE GOVERNMENT FUND, INC.

FEES AND EXPENSES

EXAMPLE

What are the Fund's Investment Strategies?

PORTFOLIO TURNOVER

TEMPORARY DEFENSIVE INVESTMENTS

What are the Principal Securities in Which the Fund Invests?

FIXED-INCOME SECURITIES

Treasury Securities

Agency Securities

Mortgage-Backed Securities

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)

SEQUENTIAL CMOS

PACS, TACS AND COMPANION CLASSES

IOS AND POS

FLOATERS AND INVERSE FLOATERS

Z CLASSES

DERIVATIVE CONTRACTS

Futures Contracts

Option Contracts

Swap Contracts

SPECIAL TRANSACTIONS

Repurchase Agreements

Delayed Delivery Transactions

TO BE ANNOUNCED SECURITIES (TBAS)

DOLLAR ROLLS

Securities Lending

Asset Segregation

Hybrid Instruments

What are the Specific Risks of Investing in the Fund?

INTEREST RATE RISKS

PREPAYMENT RISKS

RISKS ASSOCIATED WITH COMPLEX CMOS

RISKS OF INVESTING IN DERIVATIVE CONTRACTS AND HYBRID INSTRUMENTS

What Do Shares Cost?

How is the Fund Sold?

Payments to Financial Intermediaries

SERVICE FEES

ACCOUNT ADMINISTRATION FEES

RECORDKEEPING FEES

NETWORKING FEES

ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES

How to Purchase Shares

THROUGH A FINANCIAL INTERMEDIARY

DIRECTLY FROM THE FUND

By Wire

By Check

BY AUTOMATED CLEARING HOUSE (ACH)

How to Redeem and Exchange Shares

THROUGH A FINANCIAL INTERMEDIARY

DIRECTLY FROM THE FUND

By Telephone

By Mail

Signature Guarantees

PAYMENT METHODS FOR REDEMPTIONS

Redemption in Kind

LIMITATIONS ON REDEMPTION PROCEEDS

EXCHANGE PRIVILEGE

ADDITIONAL CONDITIONS

Telephone Transactions

Share Certificates

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

DIVIDENDS AND CAPITAL GAINS

ACCOUNTS WITH LOW BALANCES

TAX INFORMATION

FREQUENT TRADING POLICIES

PORTFOLIO HOLDINGS INFORMATION

Federated
World-Class Investment Manager

FEDERATED INTERMEDIATE GOVERNMENT FUND, INC. - INSTITUTIONAL SHARES
ANNUAL EXPENSE RATIO: 1. 73%
MAXIMUM FRONT-END SALES CHARGE: NONE

Federated
World-Class Investment Manager

Federated
World-Class Investment Manager