Federated Investors, Inc.
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form N-CSR
Certified Shareholder Report of
Registered Management Investment Companies
811-6307
(Investment Company Act File Number)
Federated Intermediate Government Fund,
Inc.
______________________________________________________________
(Exact Name of Registrant as Specified
in Charter)
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent
for Service)
Date of Fiscal Year End: 02/28/14
Date of Reporting Period: Six months
ended 08/31/13
Item 1. Reports to Stockholders
Semi-Annual Shareholder
Report
August 31, 2013
Share Class
| Ticker
|
Institutional
| FLDIX
|
Service
| FLDSX
|
Federated
Intermediate Government Fund, Inc.
Not FDIC Insured • May Lose
Value • No Bank Guarantee
CONTENTS
| 1
|
| 2
|
| 5
|
| 7
|
| 8
|
| 9
|
| 10
|
| 19
|
| 21
|
| 26
|
| 26
|
Portfolio of Investments
Summary Table (unaudited)
At August 31, 2013, the
Fund's portfolio composition1 was as follows:
Type of Investment
| Percentage of
Total Net Assets
|
U.S. Government Agency Securities
| 38.5%
|
U.S. Government Agency Commercial Mortgage-Backed Securities
| 27.8%
|
U.S. Government Agency Mortgage-Backed Securities
| 19.6%
|
U.S. Treasury Security
| 8.4%
|
Derivative Contracts2,3
| 0.0%
|
Cash Equivalents4
| 5.4%
|
Other Assets and Liabilities—Net5
| 0.3%
|
TOTAL
| 100.0%
|
1
| See the Fund's Prospectus and Statement of Additional Information for a description of the principal types of securities and derivative contracts in which the Fund invests.
|
2
| Based upon net unrealized appreciation (depreciation) or value of the derivative contracts as applicable. Derivative contracts may consist of futures, forwards, options and swaps. The impact of a derivative contract
on the Fund's performance may be larger than its unrealized appreciation (depreciation) or value may indicate. In many cases, the notional value or amount of a derivative contract may provide a better indication of
the contract's significance to the portfolio. More complete information regarding the Fund's direct investments in derivative contracts, including unrealized appreciation (depreciation), value and notional values or
amounts of such contracts, can be found in the table at the end of the Portfolio of Investments included in this Report.
|
3
| Represents less than 0.1%.
|
4
| Cash Equivalents include any investments in money market mutual funds and/or overnight repurchase agreements.
|
5
| Assets, other than investments in securities and derivative contracts, less liabilities. See Statement of Assets and Liabilities.
|
Semi-Annual Shareholder Report
Portfolio of
Investments
August 31, 2013 (unaudited)
Principal
Amount
|
|
| Value
|
|
| GOVERNMENT AGENCIES—38.5%
|
|
|
| Federal Home Loan Bank System—10.1%
|
|
$2,500,000
|
| 5.000%, 11/17/2017
| $2,841,190
|
|
| Federal National Mortgage Association—28.4%
|
|
6,500,000
|
| 0.500%, 5/27/2015 - 9/28/2015
| 6,505,232
|
1,500,000
|
| 1.625%, 10/26/2015
| 1,534,958
|
|
| TOTAL
| 8,040,190
|
|
| TOTAL GOVERNMENT AGENCIES
(IDENTIFIED COST $10,710,135)
| 10,881,380
|
|
| MORTGAGE-BACKED SECURITIES—3.2%
|
|
|
| Federal Home Loan Mortgage Corporation—0.0%
|
|
837
|
| 6.500%, 12/1/2015
| 878
|
|
| Government Agency—3.2%
|
|
451,352
| 1,2
| FDIC Trust 2013-R1, Class A, 1.150%, 3/25/2033
| 446,549
|
457,177
| 1,2
| FDIC Trust 2013-R2, Class A, 1.250%, 3/25/2033
| 451,503
|
|
| TOTAL
| 898,052
|
|
| TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $908,123)
| 898,930
|
|
| COLLATERALIZED MORTGAGE OBLIGATIONS—16.4%
|
|
|
| Federal Home Loan Mortgage Corporation—2.7%
|
|
131,008
|
| REMIC 2411 FJ, 0.534%, 12/15/2029
| 130,835
|
548,750
|
| REMIC 2458 FB, 1.184%, 1/15/2032
| 560,831
|
84,024
|
| REMIC 2534 FI, 1.084%, 2/15/2032
| 85,582
|
|
| TOTAL
| 777,248
|
|
| Federal National Mortgage Association—13.7%
|
|
8,171
|
| REMIC 1993-220 FA, 0.784%, 11/25/2013
| 8,177
|
1,198,472
|
| REMIC 1999-51 F, 0.684%, 9/17/2029
| 1,205,373
|
622,822
|
| REMIC 370 F21, 0.484%, 6/1/2036
| 622,927
|
881,284
|
| REMIC 2006-58 FP, 0.484%, 7/25/2036
| 881,681
|
1,139,672
|
| REMIC 2006-85 PF, 0.564%, 9/25/2036
| 1,145,758
|
|
| TOTAL
| 3,863,916
|
|
| TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(IDENTIFIED COST $4,616,474)
| 4,641,164
|
|
| Commercial Mortgage-Backed Securities—27.8%
|
|
|
| Agency Commercial Mortgage-Backed Security—27.8%
|
|
2,000,000
|
| FHLMC REMIC K003 A4, 5.053%, 1/25/2019
| 2,247,345
|
3,991,727
|
| FHLMC REMIC K029 A1, 2.839%, 10/25/2022
| 4,047,770
|
Semi-Annual Shareholder Report
Principal
Amount
|
|
| Value
|
|
| Commercial Mortgage-Backed Securities—continued
|
|
|
| Agency Commercial Mortgage-Backed Security—continued
|
|
$1,000,000
|
| FHLMC REMIC K031 A2, 3.300%, 4/25/2023
| $983,235
|
650,000
|
| FNMA REMIC 2012-M13 A2, 2.377%, 5/25/2022
| 602,558
|
|
| TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $8,067,474)
| 7,880,908
|
|
| U.S. TREASURY—8.4%
|
|
|
| U.S. Treasury Note—8.4%
|
|
2,312,955
|
| U.S. Treasury Inflation-Protected Note, 0.125%, 4/15/2017
(IDENTIFIED COST $2,449,370)
| 2,366,826
|
|
| Repurchase Agreement—5.4%
|
|
1,537,000
|
| Interest in $3,015,000,000 joint repurchase agreement 0.06%, dated 8/30/2013 under which Bank of America, N.A. will repurchase securities
provided as collateral for $3,015,020,100 on 9/3/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with
various maturities to 7/1/2042 and the market value of those underlying securities was $3,075,320,502.
(AT COST)
| 1,537,000
|
|
| TOTAL INVESTMENTS—99.7%
(IDENTIFIED COST $28,288,576)3
| 28,206,208
|
|
| OTHER ASSETS AND LIABILITIES - NET—0.3%4
| 92,579
|
|
| TOTAL NET ASSETS—100%
| $28,298,787
|
At August 31, 2013, the Fund had the
following outstanding futures contracts:
Description
| Number of
Contracts
| Notional
Value
| Expiration
Date
| Unrealized
Appreciation
|
5United States Treasury Bond 30-Year Long Futures
| 3
| $395,719
| December 2013
| $4,517
|
5United States Treasury Notes 5-Year Long Futures
| 25
| $2,991,992
| December 2013
| $9,123
|
UNREALIZED APPRECIATION ON FUTURES CONTRACTS
| $13,640
|
Unrealized Appreciation on Futures
Contracts is included in “Other Assets and
Liabilities—Net.”
1
| Denotes a restricted security that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933;
or (b) is subject to a contractual restriction on public sales. At August 31, 2013, these restricted securities amounted to $898,052, which represented 3.2% of total net assets.
|
2
| Denotes a restricted security that may be resold without restriction to “qualified institutional buyers” as defined in Rule 144A under the Securities Act of 1933 and that the Fund has determined to be
liquid under criteria established by the Fund's Board of Directors (the “Directors”). At August 31, 2013, these liquid restricted securities amounted to $898,052, which represented 3.2% of total net
assets.
|
Semi-Annual Shareholder Report
3
| The cost of investments for federal tax purposes amounts to $28,205,864.
|
4
| Assets, other than investment in securities, less liabilities. See Statement of Assets and Liabilities.
|
5
| Non-income-producing security.
|
Note: The categories of investments
are shown as a percentage of total net assets at August 31, 2013.
Various inputs are used in
determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level
1—quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable.
Level
2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.
Level
3—significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).
The inputs or methodology used for
valuing securities are not an indication of the risk associated with investing in those securities.
The following is a summary of the
inputs used, as of August 31, 2013, in valuing the Fund's assets carried at fair value:
Valuation Inputs
|
| Level 1—
Quoted
Prices and
Investments in
Investment
Companies
| Level 2—
Other
Significant
Observable
Inputs
| Level 3—
Significant
Unobservable
Inputs
| Total
|
Debt Securities:
|
|
|
|
|
Government Agencies
| $—
| $10,881,380
| $—
| $10,881,380
|
Mortgage-Backed Securities
| —
| 898,930
| —
| 898,930
|
Collateralized Mortgage Obligations
| —
| 4,641,164
| —
| 4,641,164
|
Commercial Mortgage-Backed Securities
|
| 7,880,908
|
| 7,880,908
|
U.S. Treasury
| —
| 2,366,826
| —
| 2,366,826
|
Repurchase Agreement
| —
| 1,537,000
| —
| 1,537,000
|
TOTAL SECURITIES
| $—
| $28,206,208
| $—
| $28,206,208
|
OTHER FINANCIAL
INSTRUMENTS*
| $13,640
| $—
| $—
| $13,640
|
*
| Other financial instruments include futures contracts.
|
The following acronyms are used
throughout this portfolio:
FDIC
| —Federal Deposit Insurance Corporation
|
FHLMC
| —Federal Home Loan Mortgage Corporation
|
FNMA
| —Federal National Mortgage Association
|
REMIC
| —Real Estate Mortgage Investment Conduit
|
See Notes which are an integral part
of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights–Institutional Shares
(For a Share Outstanding
Throughout Each Period)
| Six Months
Ended
(unaudited)
8/31/2013
| Year Ended February 28 or 29,
|
2013
| 2012
| 2011
| 2010
| 2009
|
Net Asset Value, Beginning of Period
| $10.27
| $10.25
| $9.94
| $9.80
| $9.58
| $9.61
|
Income From Investment Operations:
|
|
|
|
|
|
|
Net investment income
| 0.05
| 0.15
| 0.161
| 0.161
| 0.15
| 0.301
|
Net realized and unrealized gain (loss) on investments and futures contracts
| (0.21)
| 0.03
| 0.34
| 0.16
| 0.22
| 0.04
|
TOTAL FROM INVESTMENT OPERATIONS
| (0.16)
| 0.18
| 0.50
| 0.32
| 0.37
| 0.34
|
Less Distributions:
|
|
|
|
|
|
|
Distributions from net investment income
| (0.06)
| (0.16)
| (0.19)
| (0.18)
| (0.15)
| (0.37)
|
Net Asset Value, End of Period
| $10.05
| $10.27
| $10.25
| $9.94
| $9.80
| $9.58
|
Total Return2
| (1.55)%
| 1.74%
| 5.10%
| 3.26%
| 3.89%
| 3.62%
|
Ratios to Average Net Assets:
|
|
|
|
|
|
|
Net expenses
| 0.30%3
| 0.30%
| 0.30%
| 0.30%
| 0.30%
| 0.30%
|
Net investment income
| 0.95%3
| 1.38%
| 1.57%
| 1.56%
| 1.44%
| 3.14%
|
Expense waiver/reimbursement4
| 0.96%3
| 1.29%
| 1.65%
| 1.74%
| 1.69%
| 1.50%
|
Supplemental Data:
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
| $8,007
| $7,169
| $4,379
| $4,120
| $3,346
| $2,127
|
Portfolio turnover
| 203%
| 123%
| 193%
| 149%
| 108%
| 287%
|
Portfolio turnover (excluding purchases and sales from dollar-roll transactions)
| 109%
| 41%
| 68%
| 49%
| 62%
| 46%
|
1
| Per share numbers have been calculated using the average shares method.
|
2
| Based on net asset value. Total returns for periods of less than one year are not annualized.
|
3
| Computed on an annualized basis.
|
4
| This expense decrease is reflected in both the net expense and the net investment income ratios shown above.
|
See Notes which are an integral part
of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights–Service Shares
(For a Share Outstanding
Throughout Each Period)
| Six Months
Ended
(unaudited)
8/31/2013
| Year Ended February 28 or 29,
|
2013
| 2012
| 2011
| 2010
| 2009
|
Net Asset Value, Beginning of Period
| $10.27
| $10.25
| $9.94
| $9.80
| $9.58
| $9.61
|
Income From Investment Operations:
|
|
|
|
|
|
|
Net investment income
| 0.04
| 0.13
| 0.141
| 0.141
| 0.12
| 0.281
|
Net realized and unrealized gain (loss) on investments and futures contracts
| (0.21)
| 0.03
| 0.34
| 0.16
| 0.23
| 0.03
|
TOTAL FROM INVESTMENT OPERATIONS
| (0.17)
| 0.16
| 0.48
| 0.30
| 0.35
| 0.31
|
Less Distributions:
|
|
|
|
|
|
|
Distributions from net investment income
| (0.05)
| (0.14)
| (0.17)
| (0.16)
| (0.13)
| (0.34)
|
Net Asset Value, End of Period
| $10.05
| $10.27
| $10.25
| $9.94
| $9.80
| $9.58
|
Total Return2
| (1.64)%
| 1.55%
| 4.90%
| 3.05%
| 3.70%
| 3.40%
|
Ratios to Average Net Assets:
|
|
|
|
|
|
|
Net expenses
| 0.49%3
| 0.50%
| 0.49%
| 0.51%
| 0.49%
| 0.53%
|
Net investment income
| 0.76%3
| 1.24%
| 1.38%
| 1.35%
| 1.27%
| 2.91%
|
Expense waiver/reimbursement4
| 0.96%3
| 1.35%
| 1.67%
| 1.74%
| 1.73%
| 1.56%
|
Supplemental Data:
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
| $20,291
| $22,423
| $22,915
| $24,565
| $25,386
| $28,373
|
Portfolio turnover
| 203%
| 123%
| 193%
| 149%
| 108%
| 287%
|
Portfolio turnover (excluding purchases and sales from dollar-roll transactions)
| 109%
| 41%
| 68%
| 49%
| 62%
| 46%
|
1
| Per share numbers have been calculated using the average shares method.
|
2
| Based on net asset value. Total returns for periods of less than one year are not annualized.
|
3
| Computed on an annualized basis.
|
4
| This expense decrease is reflected in both the net expense and the net investment income ratios shown above.
|
See Notes which are an integral part
of the Financial Statements
Semi-Annual Shareholder Report
Statement of Assets and Liabilities
August 31, 2013 (unaudited)
Assets:
|
|
|
Total investment in securities, at value (identified cost $28,288,576)
|
| $28,206,208
|
Cash
|
| 391
|
Restricted cash (Note 2)
|
| 30,000
|
Income receivable
|
| 80,012
|
Receivable for shares sold
|
| 4,095
|
Receivable for daily variation margin
|
| 461
|
Prepaid expenses
|
| 220
|
TOTAL ASSETS
|
| 28,321,387
|
Liabilities:
|
|
|
Payable for shares redeemed
| $4,225
|
|
Income distribution payable
| 6,704
|
|
Payable to adviser (Note 5)
| 252
|
|
Payable for Directors'/Trustees' fees (Note 5)
| 327
|
|
Payable for portfolio accounting fees
| 7,792
|
|
Payable for shareholder services fee (Note 5)
| 3,300
|
|
TOTAL LIABILITIES
|
| 22,600
|
Net assets for 2,816,380 shares outstanding
|
| $28,298,787
|
Net Assets Consist of:
|
|
|
Paid-in capital
|
| $29,557,139
|
Net unrealized depreciation of investments and futures contracts
|
| (68,728)
|
Accumulated net realized loss on investments and futures contracts
|
| (1,153,004)
|
Distributions in excess of net investment income
|
| (36,620)
|
TOTAL NET ASSETS
|
| $28,298,787
|
Net Asset Value, Offering Price and Redemption Proceeds Per Share
|
|
|
Institutional Shares:
|
|
|
$8,007,442 ÷ 796,937 shares outstanding, $0.001 par value, 2,500,000,000 shares authorized
|
| $10.05
|
Service Shares:
|
|
|
$20,291,345 ÷ 2,019,443 shares outstanding, $0.001 par value, 2,500,000,000 shares authorized
|
| $10.05
|
See Notes which are an integral part
of the Financial Statements
Semi-Annual Shareholder Report
Statement of Operations
Six Months Ended August 31, 2013
(unaudited)
Investment Income:
|
|
|
|
Interest (including income on securities loaned of $2,683)
|
|
| $184,831
|
Expenses:
|
|
|
|
Investment adviser fee (Note 5)
|
| $59,164
|
|
Administrative fee (Note 5)
|
| 11,542
|
|
Custodian fees
|
| 3,070
|
|
Transfer agent fee
|
| 10,869
|
|
Directors'/Trustees' fees (Note 5)
|
| 3,000
|
|
Auditing fees
|
| 12,829
|
|
Legal fees
|
| 3,648
|
|
Portfolio accounting fees
|
| 45,544
|
|
Shareholder services fee (Note 5)
|
| 20,418
|
|
Share registration costs
|
| 16,547
|
|
Printing and postage
|
| 8,569
|
|
Insurance premiums (Note 5)
|
| 2,053
|
|
Taxes
|
| 1,265
|
|
Miscellaneous (Note 5)
|
| 9,359
|
|
TOTAL EXPENSES
|
| 207,877
|
|
Waiver and Reimbursement (Note 5):
|
|
|
|
Waiver of investment adviser fee
| $(59,164)
|
|
|
Reimbursement of other operating expenses
| (83,197)
|
|
|
TOTAL WAIVER AND REIMBURSEMENT
|
| (142,361)
|
|
Net expenses
|
|
| 65,516
|
Net investment income
|
|
| 119,315
|
Realized and Unrealized Loss on Investments and
Futures Contracts:
|
|
|
|
Net realized loss on investments
|
|
| (26,474)
|
Net realized loss on futures contracts
|
|
| (14,416)
|
Net change in unrealized appreciation of investments
|
|
| (548,965)
|
Net change in unrealized appreciation of futures contracts
|
|
| (10,957)
|
Net realized and unrealized loss on investments and futures contracts
|
|
| (600,812)
|
Change in net assets resulting from operations
|
|
| $(481,497)
|
See Notes which are an integral part
of the Financial Statements
Semi-Annual Shareholder Report
Statement of Changes in Net Assets
| Six Months
Ended
(unaudited)
8/31/2013
| Year Ended
2/28/2013
|
Increase (Decrease) in Net Assets
|
|
|
Operations:
|
|
|
Net investment income
| $119,315
| $354,738
|
Net realized gain (loss) on investments and futures contracts
| (40,890)
| 189,302
|
Net change in unrealized appreciation/depreciation of investments and futures contracts
| (559,922)
| (112,330)
|
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS
| (481,497)
| 431,710
|
Distributions to Shareholders:
|
|
|
Distributions from net investment income
|
|
|
Institutional Shares
| (46,981)
| (79,206)
|
Service Shares
| (109,266)
| (305,784)
|
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS
| (156,247)
| (384,990)
|
Share Transactions:
|
|
|
Proceeds from sale of shares
| 2,647,744
| 8,117,481
|
Net asset value of shares issued to shareholders in payment of distributions declared
| 113,055
| 262,829
|
Cost of shares redeemed
| (3,416,682)
| (6,127,778)
|
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS
| (655,883)
| 2,252,532
|
Change in net assets
| (1,293,627)
| 2,299,252
|
Net Assets:
|
|
|
Beginning of period
| 29,592,414
| 27,293,162
|
End of period (including undistributed (distributions in excess of) net investment income of $(36,620) and $312, respectively)
| $28,298,787
| $29,592,414
|
See Notes which are an integral part
of the Financial Statements
Semi-Annual Shareholder Report
Notes to Financial
Statements
August 31, 2013 (unaudited)
1. ORGANIZATION
Federated Intermediate Government
Fund, Inc. (the “Fund”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, open-end management investment company. The Fund offers two classes of
shares: Institutional Shares and Service Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is to provide total return.
2. SIGNIFICANT ACCOUNTING
POLICIES
The following is a summary of
significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In calculating its net asset value
(NAV), the Fund generally values investments as follows:
■
| Fixed-income securities acquired with remaining maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Fund's Board of Directors (the
“Directors”).
|
■
| Fixed-income securities and repurchase agreements acquired with remaining maturities of 60 days or less are valued at their amortized cost (adjusted for the accretion of any discount or amortization of any premium),
unless the issuer's creditworthiness is impaired or other factors indicate that amortized cost is not an accurate estimate of the investment's fair value, in which case it would be valued in the same manner as a
longer-term security.
|
■
| Shares of other mutual funds or non-exchange-traded investment companies are valued based upon their reported NAVs.
|
■
| Derivative contracts listed on exchanges are valued at their reported settlement or closing price.
|
■
| Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Directors.
|
■
| For securities that are fair valued in accordance with procedures established by and under the general supervision of the Directors, certain factors may be considered such as: the purchase price of the security,
information obtained by contacting the issuer, analysis of the issuer's financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the
movement of the market in which the security is normally traded and public trading in similar securities of the issuer or comparable issuers.
|
If the Fund cannot obtain a price or
price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations or fair value the investment based on price evaluations, from one
or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, or if the Fund cannot obtain price evaluations from a pricing service or from
more than one dealer for an investment within a reasonable period of time as set forth in the Fund's valuation policies and procedures, the Fund uses the fair value of the investment determined in accordance with the
procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.
Semi-Annual Shareholder Report
Fair Valuation
The Directors have appointed a
Valuation Committee comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) and certain of the Adviser's affiliated companies to determine fair value of securities and in
overseeing the calculation of the NAV. The Directors have also authorized the use of pricing services recommended by the Valuation Committee to provide fair value evaluations of the current value of certain
investments for purposes of calculating the NAV. The Valuation Committee employs various methods for reviewing third-party pricing-service evaluations including periodic reviews of third-party pricing services'
policies, procedures and valuation methods (including key inputs and assumptions), transactional back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser
based on recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee determines the fair value of the investment in accordance with
procedures adopted by the Directors. The Directors periodically review and approve the fair valuations made by the Valuation Committee and any changes made to the procedures.
Factors considered by
pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions,
indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation).
Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid
evaluations for U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts.
In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Directors.
Repurchase Agreements
The Fund may invest in repurchase
agreements for short-term liquidity purposes. It is the policy of the Fund to require the other party to a repurchase agreement to transfer to the Fund's custodian or sub-custodian eligible securities or cash with a
market value (after transaction costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred to accounts with the custodian or sub-custodian in which
the Fund holds a “securities entitlement” and exercises “control” as those terms are defined in the Uniform Commercial Code. The Fund has established procedures for monitoring the market value
of the transferred securities and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also allow the other party to require securities to be
transferred from the account to the extent that their market value exceeds the repurchase price or in exchange for other eligible securities of equivalent market value.
The insolvency of the
other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause the Fund to receive less than the full repurchase price. Under the terms of the repurchase
agreement, any amounts received by the Fund in excess of the repurchase price and related transaction costs must be remitted to the other party.
Semi-Annual Shareholder Report
The Fund may enter
into repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the custodian or sub-custodian for investment companies and other clients advised by the Fund's Adviser
and its affiliates. The Fund will participate on a pro rata basis with the other investment companies and clients in its share of the securities transferred under such repurchase agreements and in its share of
proceeds from any repurchase or other disposition of such securities.
Repurchase agreements
are subject to Master Netting Agreements which are agreements between the Fund and its counterparties that provides for the net settlement of all transactions and collateral with the Fund, through a single payment, in
the event of default or termination. Amounts presented on the Portfolio of Investments and Statement of Assets and Liabilities are not net settlement amounts but gross. As indicated above, the cash or securities to be
repurchased, as shown on the Portfolio of Investments, exceeds the repurchase price to be paid under the agreement reducing the net settlement amount to zero.
Investment Income, Gains and
Losses, Expenses and Distributions
Investment transactions are
accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions
to shareholders are recorded on the ex-dividend date. Positive or negative inflation adjustments on Treasury Inflation-Protected Securities are included in interest income. Distributions of net investment income are
declared daily and paid monthly. Non-cash dividends included in dividend income, if any, are recorded at fair value. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are
allocated to each class based on relative average daily net assets, except that Institutional Shares and Service Shares may bear distribution services fees and shareholder services fees unique to those classes.
Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.
Premium and Discount
Amortization/Paydown Gains and Losses
All premiums and discounts on
fixed-income securities, other than mortgage-backed securities, are amortized/accreted using the effective-interest-rate method. Gains and losses realized on principal payment of mortgage-backed securities (paydown
gains and losses) are classified as part of investment income.
Federal Taxes
It is the Fund's policy to comply
with the Subchapter M provision of the Internal Revenue Code (the “Code”) and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is
necessary. As of and during the six months ended August 31, 2013, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as
income tax expense in the Statement of Operations. As of August 31, 2013, tax years 2010 through 2013 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America,
the state of Maryland and the Commonwealth of Pennsylvania.
Other Taxes
As an open-end management investment
company incorporated in the state of Maryland but domiciled in the Commonwealth of Pennsylvania, the Fund is subject to the Pennsylvania Franchise Tax. This franchise tax is assessed annually on the value of the Fund,
as represented by average net assets for the tax year.
Semi-Annual Shareholder Report
When-Issued and Delayed-Delivery
Transactions
The Fund may engage in when-issued
or delayed-delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed-delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market
conditions or the failure of counterparties to perform under the contract.
The Fund may transact
in To Be Announced Securities (TBAs). As with other delayed-delivery transactions, a seller agrees to issue TBAs 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 such as issuer, interest rate and terms of underlying mortgages. The Fund records TBAs on the trade date utilizing information associated with
the specified terms of the transaction as opposed to the specific mortgages. TBAs are marked to market daily and begin earning interest on the settlement date. Losses may occur due to the fact that the actual
underlying mortgages received may be less favorable than those anticipated by the Fund.
Futures Contracts
The Fund purchases and sells
financial futures contracts to manage duration risk and yield curve risk. Upon entering into a financial futures contract with a broker, the Fund is required to deposit in a segregated account a specified amount of
cash or U.S. government securities which is shown as Restricted cash in the Statement of Assets and Liabilities. Futures contracts are valued daily and unrealized gains or losses are recorded in a “variation
margin” account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain
or loss. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with the changes in the value of the underlying securities. There is minimal counterparty
risk to the Fund since futures are exchange traded and the exchange's clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default.
Futures contracts
outstanding at period end are listed after the Fund's Portfolio of Investments.
The average notional
value of long and short futures contracts held by the Fund throughout the period was $3,870,945 and $552,955, respectively. This is based on amounts held as of each month-end throughout the six-month fiscal period.
Dollar-Roll Transactions
The Fund engages in dollar-roll
transactions in which the Fund sells mortgage-backed securities with a commitment to buy similar (same type, coupon and maturity), but not identical mortgage-backed securities on a future date. Both securities
involved are TBA mortgage-backed securities. The Fund treats dollar-roll transactions as purchases and sales. Dollar-rolls are subject to interest rate risks and credit risks.
Semi-Annual Shareholder Report
Securities Lending
The Fund participates in a
securities lending program providing for the lending of government securities to qualified brokers. The Fund normally receives cash collateral for securities loaned that is invested in an affiliated money market fund
or in short-term securities including repurchase agreements. Collateral is maintained at a minimum level of 100% of the market value of investments loaned, plus interest, if applicable. Earnings on collateral are
allocated between the borrower of the security, the securities lending agent, as a fee for its services under the program and the Fund, according to agreed-upon rates.
As of August 31,
2013, the Fund had no outstanding securities on loan.
Additional Disclosure Related to
Derivative Instruments
Fair Value of Derivative Instruments
|
| Asset
|
| Statement of
Assets and
Liabilities
Location
| Fair
Value
|
Derivatives not accounted for as hedging instruments under ASC Topic 815
|
|
|
Interest rate contracts
| Receivable for daily
variation margin
| $13,640*
|
*
| Includes cumulative appreciation of futures contracts as reported in the footnotes to the Portfolio of Investments. Only the current day's variation margin is reported within the Statement of Assets and Liabilities.
|
The Effect of Derivative
Instruments on the Statement of Operations for the Six Months Ended August 31, 2013
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income
|
| Futures
|
Interest rate contracts
| $(14,416)
|
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income
|
| Futures
|
Interest rate contracts
| $(10,957)
|
Restricted Securities
The Fund may purchase securities
which are considered restricted. Restricted securities are securities that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from
registration, under the Securities Act of 1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale without first being registered, the
issuer of the restricted security has agreed to register such securities for resale, at the issuer's expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many
such restricted securities may be resold in the secondary market in
Semi-Annual Shareholder Report
transactions exempt from registration. Restricted
securities may be determined to be liquid under criteria established by the Directors. The Fund will not incur any registration costs upon such resales. The Fund's restricted securities, like other securities, are
priced in accordance with procedures established by and under the general supervision of the Directors.
Other
The preparation of financial
statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could
differ from those estimated.
3. CAPITAL STOCK
The following tables summarize
capital stock activity:
| Six Months Ended
8/31/2013
| Year Ended
2/28/2013
|
Institutional Shares:
| Shares
| Amount
| Shares
| Amount
|
Shares sold
| 256,595
| $2,623,208
| 671,559
| $6,904,565
|
Shares issued to shareholders in payment of distributions declared
| 3,510
| 35,656
| 4,810
| 49,449
|
Shares redeemed
| (161,297)
| (1,648,816)
| (405,427)
| (4,163,943)
|
NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS
| 98,808
| $1,010,048
| 270,942
| $2,790,071
|
| Six Months Ended
8/31/2013
| Year Ended
2/28/2013
|
Service Shares:
| Shares
| Amount
| Shares
| Amount
|
Shares sold
| 2,402
| $24,536
| 118,144
| $1,212,916
|
Shares issued to shareholders in payment of distributions declared
| 7,616
| 77,399
| 20,759
| 213,380
|
Shares redeemed
| (173,913)
| (1,767,866)
| (191,138)
| (1,963,835)
|
NET CHANGE RESULTING FROM SERVICE SHARE TRANSACTIONS
| (163,895)
| $(1,665,931)
| (52,235)
| $(537,539)
|
NET CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS
| (65,087)
| $(655,883)
| 218,707
| $2,252,532
|
4. FEDERAL TAX INFORMATION
At August 31, 2013, the cost of
investments for federal tax purposes was $28,205,864. The net unrealized appreciation of investments for federal tax purposes excluding any unrealized appreciation resulting from futures contracts was $344. This
consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $202,093 and net unrealized depreciation from investments for those securities having an excess of
cost over value of $201,749.
At February 28, 2013,
the Fund had a capital loss carryforward of $1,181,243 which will reduce the Fund's taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code, thereby reducing
the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Pursuant to the Code, a net capital loss incurred in taxable years beginning
on or before December 22, 2010, is characterized as short-term and may be carried forward
Semi-Annual Shareholder Report
for a maximum of eight tax years
(“Carryforward Limit”), whereas a net capital loss incurred in taxable years beginning after December 22, 2010, retains its character as either short-term or long-term, does not expire and is required to
be utilized prior to the losses which have a Carryforward Limit.
The following
schedule summarizes the Fund's capital loss carryforwards and expiration years:
Expiration Year
| Short-Term
| Long-Term
| Total
|
2014
| $517,635
| NA
| $517,635
|
2015
| $663,608
| NA
| $663,608
|
5. INVESTMENT ADVISER FEE AND
OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The advisory agreement between the
Fund and the Adviser provides for an annual fee equal to 0.40% of the Fund's average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any
portion of its fee and/or reimburse certain operating expenses of the Fund. For the six months ended August 31, 2013, the Adviser voluntarily waived its entire fee of $59,164 and voluntarily reimbursed $83,197 of
other operating expenses.
Administrative Fee
Federated Administrative Services
(FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is
defined as all of the Federated Funds subject to a fee under the Administrative Services Agreement. The fee paid to FAS is based on the average daily net assets of the Investment Complex as specified below, plus
certain out-of-pocket expenses:
Administrative Fee
| Average Daily Net Assets
of the Investment Complex
|
0.150%
| on the first $5 billion
|
0.125%
| on the next $5 billion
|
0.100%
| on the next $10 billion
|
0.075%
| on assets in excess of $20 billion
|
Subject to the terms described in
the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended August 31, 2013, the fee paid to FAS was 0.078% of average daily net assets of the Fund.
Distribution Services Fee
The Fund has adopted a Distribution
Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the
Fund's Service Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at 0.05% of average daily net assets, annually, to compensate
FSC. Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to
Semi-Annual Shareholder Report
waive any portion of its fee. When FSC receives
fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the six months ended August 31, 2013, the Fund's Service Shares did not incur a distribution services fee; however,
it may begin to incur this fee upon approval of the Directors.
Shareholder Services Fee
The Fund may pay fees
(“Service Fees”) up to 0.25% of the average daily net assets of the Fund's Service Shares to financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to
shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for Service Fees. For the six months ended August 31, 2013,
Service Fees for the Fund were as follows:
| Service
Fees
Incurred
|
Service Shares
| $20,418
|
For the six months ended August 31,
2013, FSSC received $1,236 of fees paid by the Fund.
Expense Limitation
The Adviser and certain of its
affiliates (which may include FSC, FAS and FSSC) have voluntarily agreed to waive their respective fees and/or reimburse expenses so that the total annual fund operating expenses (as shown in the financial highlights)
paid by the Fund's Institutional Shares and Service Shares (after the voluntary waivers and reimbursements) will not exceed 0.30% and 0.55% (the “Fee Limit”), respectively, up to but not including the
later of (the “Termination Date”): (a) May 1, 2014; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its applicable affiliates currently do not anticipate terminating or
increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Directors.
General
Certain Officers and Directors of
the Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate payment, Directors'/Trustees' fees and certain expenses related to conducting meetings of the
Directors/Trustees and other miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund.
6. Investment TRANSACTIONS
Purchases and sales of investments,
excluding long-term U.S. government securities and short-term obligations, for the six months ended August 31, 2013, were as follows:
Purchases
| $13,726,890
|
Sales
| $16,589,185
|
Semi-Annual Shareholder Report
7. LINE OF CREDIT
The Fund participates in a
$100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings
are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of August 31, 2013, there were no outstanding loans. During the six months ended August 31, 2013, the Fund did not
utilize the LOC.
8. INTERFUND LENDING
Pursuant to an Exemptive Order
issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an
alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of August 31, 2013, there were no outstanding loans. During the six months ended August 31, 2013, the program was
not utilized.
Semi-Annual Shareholder Report
Shareholder Expense
Example (unaudited)
As a shareholder of the
Fund, you incur ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or shareholder services fees and other Fund expenses. This Example is intended to help you to
understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the
beginning of the period and held for the entire period from March 1, 2013 to August 31, 2013.
ACTUAL EXPENSES
The first section of the
table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.
HYPOTHETICAL EXAMPLE FOR
COMPARISON PURPOSES
The second section of the
table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided
to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the
other funds.
Semi-Annual Shareholder Report
Please
note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds.
| Beginning
Account Value
3/1/2013
| Ending
Account Value
8/31/2013
| Expenses Paid
During Period1
|
Actual:
|
|
|
|
Institutional Shares
| $1,000
| $984.50
| $1.50
|
Service Shares
| $1,000
| $983.60
| $2.452
|
Hypothetical (assuming a 5% return
before expenses):
|
|
|
|
Institutional Shares
| $1,000
| $1,023.69
| $1.53
|
Service Shares
| $1,000
| $1,022.74
| $2.502
|
1
| Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half-year period). The annualized net expense ratios
are as follows:
|
Institutional Shares
| 0.30%
|
Service Shares
| 0.49%
|
2
| Actual and Hypothetical expenses paid during the period utilizing the Fund's Service Shares current Fee Limit of 0.55% (as reflected in the Notes to Financial Statements, Note 5 under Expense Limitation), multiplied
by the average account value over the period, multiplied by 184/365 (to reflect expenses paid as if they had been in effect throughout the most recent one-half-year period) would be $2.75 and $2.80, respectively.
|
Semi-Annual Shareholder Report
Evaluation and Approval
of Advisory Contract–May 2013
Federated Intermediate Government
Fund, Inc. (the “Fund”)
Following a review and
recommendation of approval by the Fund's independent directors, the Fund's Board reviewed and approved at its May 2013 meetings the Fund's investment advisory contract for an additional one-year term. The Board's
decision regarding the contract reflects the exercise of its business judgment on whether to continue the existing arrangements.
In this
connection, the Federated Funds' Board had previously appointed a Senior Officer, whose duties include specified responsibilities relating to the process by which advisory fees are to be charged to a Federated fund.
The Senior Officer has the authority to retain consultants, experts, or staff as may be reasonably necessary to assist in the performance of his duties, reports directly to the Board, and may be terminated only with
the approval of a majority of the independent members of the Board. The Senior Officer prepared and furnished to the Board an independent, written evaluation that covered topics discussed below (the
“Evaluation”). The Board considered that Evaluation, along with other information, in deciding to approve the advisory contract.
The Board
is also familiar with and considered judicial decisions concerning allegedly excessive investment advisory fees, which have indicated that the following factors may be relevant to an Adviser's fiduciary duty with
respect to its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser to a fund and its shareholders, including the performance and expenses of the fund and of comparable
funds; the Adviser's cost of providing the services, including the profitability to the Adviser of providing advisory services to a fund; the extent to which the Adviser may realize “economies of scale” as
a fund grows larger and, if such economies exist, whether they have been shared with a fund and its shareholders or the family of funds; any “fall-out financial benefits” that accrue to the Adviser because
of its relationship with a fund (including research services received from brokers that execute fund trades and any fees paid to affiliates of the Adviser for services rendered to a fund); comparative fee structures,
including a comparison of fees paid to the Adviser with those paid by similar funds; and the extent to which the Board members are fully informed about all facts the Board deems relevant to its consideration of the
Adviser's services and fees. Consistent with these judicial decisions, the Board also considered management fees charged to institutional and other clients of the Adviser for what might be viewed as like services. The
Board was aware of these factors and was guided by them in its review of the Fund's advisory contract to the extent it considered them to be appropriate and relevant, as discussed further below.
Semi-Annual Shareholder Report
The Board
considered and weighed these circumstances in light of its substantial accumulated experience in governing the Fund and working with Federated on matters relating to the Federated funds, and was assisted in its
deliberations by independent legal counsel. Throughout the year, and in connection with its May meetings, the Board requested and received substantial and detailed information about the Fund and the Federated
organization that was in addition to the extensive materials that comprise and accompany the Senior Officer's Evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished
additional substantial information in connection with the May meeting at which the Board's formal review of the advisory contract occurred. At this May meeting, senior management of the Adviser also met with the
independent directors and their counsel to discuss the materials presented and any other matters thought relevant by the Adviser or the directors. Between regularly scheduled meetings, the Board also received
information on particular matters as the need arose. Thus, the Board's consideration of the advisory contract included review of the Senior Officer's Evaluation, accompanying data and additional information covering
such matters as: the Adviser's investment philosophy, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a
gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or other benchmarks, as appropriate), and comments on the
reasons for performance; the Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or
competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); and the nature,
quality and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations of Fund shareholders; the entrepreneurial risk
assumed by the Adviser in sponsoring the funds; the continuing state of competition in the mutual fund industry and market practices; the range of comparable fees for similar funds in the mutual fund industry; the
Fund's relationship to the Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence
of additional sales charges; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's
responses to any issues raised therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The
criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace.
Semi-Annual Shareholder Report
While
mindful that courts have cautioned against giving such comparisons too much weight, the Board has found the use of comparisons of the Fund's fees and expenses to other mutual funds with comparable investment programs
to be relevant. The Board focused on comparisons with other similar mutual funds more heavily than non-mutual fund products or services because it is believed that they are more relevant. For example, other mutual
funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle in fact chosen and maintained by the Fund's
investors. The range of their fees and expenses therefore appears to be a relevant indicator of what consumers have found to be reasonable in the precise marketplace in which the Fund competes.
It was
noted in the materials for the Board meeting that for the period covered by the Evaluation, the Fund's investment advisory fee was waived in its entirety. The Board reviewed the contractual fee rate and other expenses
of the Fund with the Adviser, noting that the overall expense structure of the Fund, after waivers and expense reimbursements, was below the median of the relevant peer group, and was satisfied that the overall
expense structure of the Fund remained competitive.
By
contrast, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts). He concluded that mutual funds
and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted investors; being subject to different laws and regulations; different legal
structures; different average account sizes; different associated costs; different portfolio management techniques made necessary by different cash flows; and the time spent by portfolio managers and their teams,
funds financial services, legal, compliance and risk management in reviewing securities pricing, addressing different administrative responsibilities, addressing different degrees of risk associated with management
and a variety of different costs. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory fees.
The Fund's
ability to deliver competitive performance when compared to its peer group was also deemed to be relevant by the Board as a useful indicator of how the Adviser is executing the Fund's investment program, which in turn
assisted the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services were such as to warrant continuation of the advisory contract.
The Senior
Officer reviewed information compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that
comparisons to fund peer groups are relevant, though not conclusive in judging the reasonableness of proposed fees.
Semi-Annual Shareholder Report
For the
one-year, three-year and five-year periods covered by the Evaluation, the Fund's performance was above the median of the relevant peer group.
The Board
also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not only
the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds'
administrator). The information also detailed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact
that, in order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waived fees and/or reimbursed expenses and have disclosed to fund investors and/or indicated to the Board their
intention to do so in the future, where appropriate. Moreover, the Board receives regular reporting as to the institution, adjustment or elimination of these voluntary waivers.
Federated
furnished information, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified
by the Senior Officer. The Senior Officer noted that, while these cost allocation reports apply consistent allocation processes, the inherent difficulties in arbitrarily allocating costs continues to cause the Senior
Officer to question the precision of the process and to conclude that such reports may be unreliable, since a single change in an allocation estimate can dramatically alter the resulting estimate of cost and/or
profitability of a fund. The allocation information was considered in the analysis by the Board but was determined to be of limited use.
The Board
and the Senior Officer also reviewed information compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the
limited availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive. The Board agreed with this assessment.
The Senior
Officer's Evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and
long-term investments in areas that support all of the Federated family of funds, such as personnel and processes for the portfolio management, shareholder services, compliance, internal audit, and risk management
functions; and systems technology; and that the benefits of these efforts (as well as any economies, should they exist) were likely to be enjoyed by the fund family as a whole. Finally, the Board also noted the
absence of any applicable regulatory or industry guidelines on this subject,
Semi-Annual Shareholder Report
which (as discussed in the Senior
Officer's Evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with “breakpoints” that serve to reduce the fee as the fund
attains a certain size.
The Senior
Officer noted that, subject to the comments and recommendations made within his Evaluation, his observations and the information accompanying the Evaluation supported a finding by the Board that the management fees
for each of the funds were reasonable. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract.
In its
decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a
result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and
reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the
shareholders who have effectively selected the Adviser by virtue of having invested in the Fund. The Board concluded that, in light of the factors discussed above, including the nature, quality and scope of the
services provided to the Fund by the Adviser and its affiliates, continuation of the advisory contract was appropriate.
The Board
based its decision to approve the advisory contract on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations
identified above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract
reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
Semi-Annual Shareholder Report
Voting Proxies on Fund
Portfolio Securities
A description of the
policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A
report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available from Federated's website at FederatedInvestors.com. To access this information
from the home page, select “All” under “Asset Class.” Select a fund name to go to the Fund Overview page, then select a share class, if applicable. On the Fund Overview page, select the
“Literature and Prospectuses” tab. At the bottom of that page, select “Proxy Voting Record Report (Form N-PX).” Form N-PX filings are also available at the SEC's website at www.sec.gov.
Quarterly Portfolio
Schedule
The Fund files with the
SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on “Form N-Q.” These filings are available on the SEC's website at www.sec.gov and may
be reviewed and copied at the SEC's Public Reference Room in Washington, DC. (Call 1-800-SEC-0330 for information on the operation of the Public Reference Room.) You may also access this information from the
“Products” section of Federated's website at FederatedInvestors.com. From the home page, select “All” under “Asset Class.” Select a fund name to go to the Fund Overview page, then
select a share class, if applicable. On the Fund Overview page, select the “Literature and Prospectuses” tab. At the bottom of that page, select “Form N-Q.”
Semi-Annual Shareholder Report
Mutual funds are not bank
deposits or obligations, are not 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.
Investment in mutual funds involves investment risk, including the possible loss of principal.
This Report is authorized
for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE
ABOUT FUND DOCUMENT DELIVERY
In an
effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called
“householding”), as permitted by applicable rules. The Fund's “householding” program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as
Semi-Annual and Annual Shareholder Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the “householding” program. The Fund is also permitted
to treat a shareholder as having given consent (“implied consent”) if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive
mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60) days before it begins “householding” and (iii) none of the shareholders in the
household have notified the Fund(s) or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or have been deemed to have granted implied
consent, can revoke that consent and opt out of “householding” at any time: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the
Fund at 1-800-341-7400.
Semi-Annual Shareholder Report
Federated Intermediate Government
Fund, Inc.
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp.,
Distributor
CUSIP 31420H109
CUSIP 31420H208
25891 (10/13)
Federated is a registered trademark
of Federated Investors, Inc.
2013 ©Federated Investors, Inc.
Item 2. Code of Ethics
Not Applicable
Item 3. Audit Committee Financial Expert
Not Applicable
Item 4. Principal Accountant Fees and Services
Not Applicable
Item 5. Audit Committee of Listed Registrants
Not Applicable
Item 6. Schedule of Investments
(a) The registrant’s Schedule of Investments is included
as part of the Report to Stockholders filed under Item 1 of this form.
(b) Not Applicable; Fund had no divestments during the
reporting period covered since the previous Form N-CSR filing.
Item 7. Disclosure of
Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Item 8. Portfolio Managers
of Closed-End Management Investment Companies
Item 9. Purchases of Equity
Securities by Closed-End Management Investment Company and Affiliated Purchasers
Item 10. Submission of Matters to a Vote of Security
Holders
No changes to report.
Item 11. Controls and Procedures
(a) The registrant’s President and Treasurer have
concluded that the
registrant’s disclosure controls and procedures (as
defined in rule 30a-3(c) under the Act) are effective in design and operation and are sufficient to form the basis of the certifications
required by Rule 30a-(2) under the Act, based on their evaluation of these disclosure controls and procedures within 90 days of
the filing date of this report on Form N-CSR.
(b) There were no changes in the registrant’s internal
control over financial reporting (as defined in rule 30a-3(d) under the Act) during the second fiscal quarter of the period covered
by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control
over financial reporting.
Item 12. Exhibits
(a)(1) Code of Ethics- Not Applicable to this Report.
(a)(2) Certifications of Principal Executive Officer and
Principal Financial Officer.
(a)(3) Not Applicable.
(b) Certifications pursuant to 18 U.S.C. Section 1350.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Registrant Federated Intermediate Government Fund,
Inc.
By /S/ Lori A. Hensler
Lori A. Hensler, Principal Financial
Officer
Date October 22, 2013
Pursuant to the requirements of the Securities Exchange Act
of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
By /S/ J. Christopher Donahue
J. Christopher Donahue, Principal
Executive Officer
Date October 22, 2013
By /S/ Lori A. Hensler
Lori A. Hensler, Principal Financial
Officer
Date October 22, 2013