SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [ X ] Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
FEDERATED MUNICIPAL SECURITIES FUND, INC.
(Name of Registrant as Specified In Its Charter)
FEDERATED INVESTORS
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary proxy materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------
3) Filing Party:
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4) Date Filed:
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<PAGE>
FEDERATED MUNICIPAL SECURITIES FUND, INC.
PROXY STATEMENT - PLEASE VOTE!
TIME IS OF THE ESSENCE ...VOTING ONLY TAKES A FEW MINUTES AND YOUR
PARTICIPATION IS IMPORTANT! ACT NOW TO HELP THE FUND AVOID ADDITIONAL EXPENSE.
Federated Municipal Securities Fund, Inc. will hold an annual meeting of
shareholders on June 30, 1999. It is important for you to vote on the issues
described in this Proxy Statement. We recommend that you read the Proxy
Statement in its entirety; the explanations will help you to decide on the
issues.
Following is an introduction to the proposals and the process.
WHY AM I BEING ASKED TO VOTE?
Mutual funds are required to obtain shareholders' votes for certain types
of changes, like those included in this Proxy Statement. You have a right to
vote on these changes.
WHAT ISSUES AM I BEING ASKED TO VOTE ON?
The proposals include the election of Directors and changes to the Fund's
fundamental investment policies.
WHY ARE INDIVIDUALS RECOMMENDED FOR ELECTION TO THE BOARD OF DIRECTORS?
The Fund is devoted to serving the needs of its shareholders, and the Board is
responsible for managing the Fund's business affairs to meet those needs. The
Board represents the shareholders and can exercise all of the Fund's powers,
except those reserved only for shareholders.
Directors are selected on the basis of their education and professional
experience. Candidates are chosen based on their distinct interest in, and
capacity for understanding the complexities of, the operation of a mutual fund.
These individuals bring considerable experience to the impartial oversight of a
fund's operation.
The Proxy Statement includes a brief description of each nominee's history and
current position with the Fund, if applicable.
WHY AM I BEING ASKED TO VOTE ON THE RATIFICATION OF INDEPENDENT AUDITORS?
The independent auditors conduct a professional examination of certain of the
Fund's accounting documents and supporting data to render an opinion on the
material fairness of the information. Because financial reporting involves
considerable discretion, the auditors' opinion is an important assurance to both
the Fund and its investors.
The Board of Directors approved the selection of Deloitte & Touche LLP,
long-time auditors of the Fund, for the current fiscal year and believes that
the continued employment of this firm is in the Fund's best interests.
WHY ARE THE FUND'S "FUNDAMENTAL POLICIES" BEING CHANGED?
Every mutual fund has certain investment policies that can be changed only with
the approval of its shareholders. These are referred to as "fundamental"
investment policies.
In some cases, these policies were adopted to reflect regulatory, business, or
industry conditions that no longer exist or no longer are necessary. In other
cases, advances in the securities markets and the economy have created different
procedures and techniques that affect the Fund's operations.
By reducing the number of "fundamental policies," the Fund may be able to
minimize the costs and delays associated with frequent shareholder meetings.
Also, the investment adviser's ability to manage the Fund's assets may be
enhanced and investment opportunities increased.
The proposed amendments will:
o reclassify as operating policies those fundamental policies that are not
required to be fundamental by the Investment Company Act of 1940, as
amended ("1940 Act");
o simplify and modernize the policies that are required to be "fundamental"
by the 1940 Act; and
o eliminate those fundamental policies that are no longer required by the
securities laws of the various states.
Federated is a conservative money manager. Our highly trained professionals are
dedicated to making investment decisions in the best interest of the Fund and
its shareholders. The Board believes that the proposed changes will be applied
responsibly by the Fund's investment adviser.
WHY ARE SOME "FUNDAMENTAL POLICIES" BEING RECLASSIFIED AS "OPERATING POLICIES?"
As noted above, some "fundamental policies" have been redefined as "operating
policies." Operating policies do not require shareholder approval to be changed.
This gives the Fund's Board additional flexibility to determine whether to
participate in new investment opportunities and to meet industry changes
promptly.
HOW DO I VOTE MY SHARES?
You may vote in person at the annual meeting of shareholders or complete and
return the enclosed Proxy Card. If you sign and return the Proxy Card without
indicating a preference, your vote will be cast "for" all the proposals.
You may also vote by telephone at 1-800-690-6903, or through the Internet at
WWW.PROXYVOTE.COM. If you choose to help save the Fund time and postage costs by
voting through the Internet or by telephone, please don't return your Proxy
Card. If you do not respond at all, we may contact you by telephone to request
that you cast your vote.
WHO DO I CALL IF I HAVE QUESTIONS ABOUT THE PROXY STATEMENT?
Call your Investment Professional or a Federated Client Service
Representative. Federated's toll-free number is 1-800-341-7400.
After careful consideration, the Board of Directors has unanimously approved
these proposals. The Board recommends that you read the enclosed materials
carefully and vote FOR all proposals.
<PAGE>
FEDERATED MUNICIPAL SECURITIES FUND, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 30, 1999
An annual meeting of the shareholders of Federated Municipal
Securities Fund, Inc. (the "Fund") will be held at 5800 Corporate Drive,
Pittsburgh, Pennsylvania 15237-7000, at 2:00 p.m. (Eastern time), on June 30,
1999 to consider proposals:
(1) To elect three Directors.
(2) To ratify the selection of the Fund's independent auditors.
(3) To make changes to the Fund's fundamental investment policies:
(a) To amend the Fund's fundamental investment policy regarding
diversification;
(b) To amend the Fund's fundamental investment policy regarding borrowing
money and issuing senior securities;
(c) To amend the Fund's fundamental investment policy regarding
investments in real estate;
(d) To amend the Fund's fundamental investment policy regarding
investments in commodities;
(e) To amend the Fund's fundamental investment policy regarding
underwriting securities;
(f) To amend the Fund's fundamental investment policy regarding lending
assets;
(g) To amend the Fund's fundamental investment policy regarding
concentration of the Fund's investments in securities of companies in
the same industry;
(h) To amend the Fund's fundamental investment policy regarding
investments in municipal securities;
(i) To amend, and to make non-fundamental, the Fund's fundamental
investment policy on margin transactions;
(j) To amend, and to make non-fundamental, the Fund's fundamental
investment policy on pledging assets;
(k) To make non-fundamental the Fund's fundamental investment policies
regarding permissible investments;
(l) To make non-fundamental the Fund's fundamental investment policy
regarding temporary investments; and
(m) To make non-fundamental the Fund's fundamental investment policy
regarding engaging in when-issued and delayed delivery transactions.
(4) To remove certain of the Fund's fundamental investment policies:
(a) To eliminate the Fund's fundamental investment policy on investing in
oil, gas and minerals;
(b) To eliminate the Fund's fundamental investment policy on selling
securities short; and
(c) To eliminate the Fund's fundamental investment policy regarding
trading portfolio securities.
(5) To approve amendments to the Fund's Articles of Incorporation to permit the
Board of Directors to liquidate assets of a series or class without seeking
shareholder approval to the extent permitted under Maryland law.
To transact such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed April 15, 1999 as the record date for
determination of shareholders entitled to vote at the meeting.
By Order of the Board of Directors,
John W. McGonigle
Secretary
April 29, 1999
YOU CAN HELP THE FUND AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP
LETTERS TO ENSURE A QUORUM BY PROMPTLY SIGNING AND RETURNING THE ENCLOSED PROXY.
IF YOU ARE UNABLE TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY SO THAT THE NECESSARY QUORUM MAY BE REPRESENTED AT THE ANNUAL
MEETING. THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
<PAGE>
TABLE OF CONTENTS
ABOUT THE PROXY SOLICITATION AND THE ANNUAL MEETING.............................
ELECTION OF THREE DIRECTORS.....................................................
ABOUT THE ELECTION OF DIRECTORS.................................................
DIRECTOR STANDING FOR ELECTION..................................................
NOMINEES NOT PRESENTLY SERVING AS DIRECTORS.....................................
RATIFICATION OF THE SELECTION OF THE INDEPENDENT AUDITORS.......................
APPROVAL OF CHANGES TO THE FUND'S FUNDAMENTAL INVESTMENT
POLICIES....................................................................
APPROVAL OF THE ELIMINATION OF CERTAIN FUNDAMENTAL
INVESTMENT POLICIES OF THE FUND.............................................
APPROVAL OF AMENDMENTS TO THE FUND'S ARTICLES OF INCORPORATION..................
INFORMATION ABOUT THE FUND......................................................
PROXIES, QUORUM AND VOTING AT THE ANNUAL MEETING................................
SHARE OWNERSHIP OF THE DIRECTORS................................................
DIRECTOR COMPENSATION...........................................................
OFFICERS OF THE FUND............................................................
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY....................
<PAGE>
PRELIMINARY
PROXY STATEMENT
FEDERATED MUNICIPAL SECURITIES FUND, INC.
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
ABOUT THE PROXY SOLICITATION AND THE ANNUAL MEETING
The enclosed proxy is solicited on behalf of the Board of Directors of
the Fund (the "Board" or "Directors"). The proxies will be voted at the annual
meeting of shareholders of the Fund to be held on June 30, 1999, at 5800
Corporate Drive, Pittsburgh, Pennsylvania 15237-7000, at 2:00 p.m. (such annual
meeting and any adjournment or postponement thereof are referred to as the
"Annual Meeting").
The cost of the solicitation, including the printing and mailing of
proxy materials, will be borne by the Fund. In addition to solicitations through
the mails, proxies may be solicited by officers, employees, and agents of the
Fund or, if necessary, a communications firm retained for this purpose. Such
solicitations may be by telephone, telegraph, through the Internet or otherwise.
Any telephonic solicitations will follow procedures designed to ensure accuracy
and prevent fraud, including requiring identifying shareholder information,
recording the shareholder's instructions, and confirming to the shareholder
after the fact. Shareholders who communicate proxies by telephone or by other
electronic means have the same power and authority to issue, revoke, or
otherwise change their voting instruction as shareholders submitting proxies in
written form. The Fund may reimburse custodians, nominees, and fiduciaries for
the reasonable costs incurred by them in connection with forwarding solicitation
materials to the beneficial owners of shares held of record by such persons.
The Board has reviewed the proposed changes recommended in the
investment policies of the Fund, and the proposed amendments to the Fund's
Articles of Incorporation, and has approved them, subject to shareholder
approval. The purposes of the Annual Meeting are set forth in the accompanying
Notice. The Directors know of no business other than that mentioned in the
Notice that will be presented for consideration at the Annual Meeting. Should
other business properly be brought before the Annual Meeting, proxies will be
voted in accordance with the best judgment of the persons named as proxies. This
proxy statement and the enclosed proxy card are expected to be mailed on or
about April 29, 1999, to shareholders of record at the close of business on
April 15, 1999 (the "Record Date"). On the Record Date, the Fund had outstanding
_________________ shares of common stock.
The Fund's annual report, which includes audited financial statements
for the fiscal year ended March 31, 1999, will be mailed to shareholders on or
about May 29, 1999. Requests for an annual report may be made in writing to the
Fund's principal executive offices, located at Federated Investors Funds, 5800
Corporate Drive, Pittsburgh, Pennsylvania 15237-7000, or by calling toll-free
1-800-341-7400.
PROPOSAL #1: ELECTION OF THREE DIRECTORS
The persons named as proxies intend to vote in favor of the election of
John F. Cunningham, Charles F. Mansfield, Jr. and John S. Walsh (collectively,
the "Nominees") as Directors of the Fund. Mr. Walsh is presently serving as a
Director. If elected by shareholders, Messrs. Cunningham and Mansfield are
expected to assume their responsibilities as Directors effective _________,
1999. Please see "ABOUT THE ELECTION OF DIRECTORS" below for current information
about the Nominees.
Mr. Walsh was appointed a Director on January 1, 1999 to fill a vacancy
resulting from the decision to expand the size of the Board. Messrs. Cunningham
and Mansfield are being proposed for election as Directors to fill vacancies
anticipated to result from the resignation of two current Directors. The
anticipated resignations will not occur if Messrs. Cunningham and Mansfield are
not elected as Directors.
All Nominees have consented to serve if elected. If elected, the
Directors will hold office without limit in time until death, resignation,
retirement, or removal or until the next meeting of shareholders to elect
Directors and the election and qualification of their successors. Election of a
Director is by a plurality of the votes cast by shareholders of the Fund at the
Annual Meeting. The three individuals receiving the greatest number of votes at
the Annual Meeting will be deemed to be elected Directors.
If any Nominee for election as a Director named above shall by reason of
death or for any other reason become unavailable as a candidate at the Annual
Meeting, votes pursuant to the enclosed proxy will be cast for a substitute
candidate by the proxies named on the proxy card, or their substitutes, present
and acting at the Annual Meeting. Any such substitute candidate for election as
a Director who is an "interested person" (as such term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act")) of the Fund shall
be nominated by the Executive Committee. The selection of any substitute
candidate for election as a Director who is not an "interested person" shall be
made by a majority of the Directors who are not "interested persons" of the
Fund. The Board has no reason to believe that any Nominee will become
unavailable for election as a Director.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE TO ELECT AS DIRECTORS THE NOMINEES FOR ELECTION
TO THE BOARD OF DIRECTORS OF THE FUND
ABOUT THE ELECTION OF DIRECTORS
When elected, the Directors will hold office during the lifetime of the
Fund except that: (a) any Director may resign; (b) any Director may be removed
by written instrument signed by at least two-thirds of the number of Directors
prior to such removal; (c) any Director who requests to be retired or who has
become mentally or physically incapacitated may be retired by written instrument
signed by a majority of the other Directors; and (d) a Director may be removed
at any special meeting of the shareholders by a vote of two-thirds of the
outstanding shares of the Fund. In case a vacancy shall exist for any reason,
the remaining Directors will fill such vacancy by appointment of another
Director. The Directors will not fill any vacancy by appointment if, immediately
after filling such vacancy, less than two-thirds of the Directors then holding
office would have been elected by the shareholders. If, at any time, less than a
majority of the Directors holding office have been elected by the shareholders,
the Directors then in office will call a shareholders' meeting for the purpose
of electing Directors to fill vacancies. Otherwise, there will normally be no
meeting of shareholders called for the purpose of electing Directors.
Set forth below is a listing of: (i) the Director standing for election,
and (ii) the Nominees standing for election who are not presently serving as
Directors, along with their addresses, birthdates, present positions with the
Fund, if applicable, and principal occupations during the past five years:
DIRECTOR STANDING FOR ELECTION
JOHN S. WALSH
2007 Sherwood Drive
Valparaiso, IN
Birthdate: November 28, 1957
President and Director, Heat Wagon, Inc.; President and Director, Manufacturers
Products, Inc.; President, Portable Heater Parts, a division of Manufacturers
Products, Inc.; Director, Walsh & Kelly, Inc.; formerly, Vice President, Walsh &
Kelly, Inc.
NOMINEES NOT PRESENTLY SERVING AS DIRECTORS
JOHN F. CUNNINGHAM
353 El Brillo Way
Palm Beach, FL
Birthdate: March 5, 1943
Director or Trustee of some of the Federated Funds; Chairman, President and
Chief Executive Officer, Cunningham & Co., Inc.; Trustee Associate, Boston
College; Director, EMC Corporation; formerly, Director, Redgate Communications.
CHARLES F. MANSFIELD, JR.
80 South Road
Westhampton Beach, NY
Birthdate: April 10, 1945
Director or Trustee of some of the Federated Funds; management consultant.
PROPOSAL #2: RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
The 1940 Act requires that the Fund's independent auditors be selected
by the Board, including a majority of those Board members who are not
"interested persons" (as defined in the 1940 Act) of the Fund, and submitted for
ratification or rejection at the next succeeding meeting of shareholders. The
Board of Directors of the Fund, including a majority of its members who are not
"interested persons" of the Fund, approved the selection of Deloitte & Touche
LLP (the "Auditors") for the current fiscal year at a Board meeting held on
________________, 199__.
The selection by the Board of the Auditors as independent auditors for
the current fiscal year is submitted to the shareholders for ratification. Apart
from their fees as independent auditors and certain consulting fees, neither the
Auditors nor any of their partners have a direct, or material indirect,
financial interest in the Fund or its investment adviser. The Auditors are a
major international independent accounting firm. The Board believes that the
continued employment of the services of the Auditors for the current fiscal year
would be in the Fund's best interests.
Representatives of the Auditors are not expected to be present at the
Annual Meeting. If a representative is present, he or she will have the
opportunity to make a statement and would be available to respond to appropriate
questions. The ratification of the selection of the Auditors will require the
affirmative vote of a majority of the shares present and voting at the Annual
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE TO RATIFY THE SELECTION OF THE INDEPENDENT AUDITORS
APPROVAL OF CHANGES TO THE FUND'S
FUNDAMENTAL INVESTMENT POLICIES
INTRODUCTION TO PROPOSALS #3(A) TO #3(M) AND #4(A) TO #4(C)
The 1940 Act (which was adopted to protect mutual fund shareholders)
requires investment companies such as the Fund to adopt certain specific
investment policies or restrictions that can be changed only by shareholder
vote. An investment company may also elect to designate other policies or
restrictions that may be changed only by shareholder vote. Both types of
policies and restrictions are often referred to as "fundamental policies." These
policies and restrictions limit the investment activities of the Fund's
investment adviser.
After the Fund was formed in 1993, legal and regulatory requirements
applicable to mutual funds changed. For example, certain restrictions imposed by
state laws and regulations were preempted by the National Securities Markets
Improvement Act of 1996 ("NSMIA") and no longer apply. As a result, the Fund is
subject to fundamental policies that are no longer required to be fundamental,
and to other policies that are no longer required at all. Accordingly, the
Directors have authorized the submission to the Fund's shareholders for their
approval, and recommend that shareholders approve, the amendment,
reclassification and/or elimination of certain of the Fund's fundamental
policies.
The proposed amendments would:
(i) simplify, modernize and standardize the fundamental policies that are
required to be stated under the 1940 Act;
(ii) reclassify as operating policies those fundamental policies that are
not required to be fundamental under the 1940 Act; and
(iii)eliminate those fundamental policies that are no longer required by
the securities laws of the various states.
By reducing the number of policies that can be changed only by
shareholder vote, the Directors believe that the Fund would be able to minimize
the costs and delays associated with holding future shareholder meetings to
revise fundamental policies that become outdated or inappropriate. The Directors
also believe that the investment adviser's ability to manage the Fund's assets
in a changing investment environment will be enhanced and that investment
management opportunities will be increased by these changes. The chart that
follows briefly describes the differences between fundamental policies and
non-fundamental policies.
<TABLE>
<CAPTION>
FUNDAMENTAL POLICIES NON-FUNDAMENTAL POLICIES
------------------------------- --------------------------------
<S> <C> <C>
Who must approve changes in Board of Directors and Board of Directors
the policies? shareholders
How quickly can a change in Fairly slowly, since a vote Fairly quickly, because the
the policies be made? of shareholders is required change can be accomplished by
action of the Board of
Directors
What is the relative cost Costly to change because a Less costly to change because
to change a policy? shareholder vote requires a change can be accomplished
holding a meeting of by action of the Board of
shareholders Directors
</TABLE>
The recommended changes are specified below. Each Proposal will be voted
on separately, and the approval of each Proposal will require the approval of a
majority of the outstanding voting shares of the Fund as defined in the 1940
Act. (See "PROXIES, QUORUM AND VOTING AT THE ANNUAL MEETING" below.)
DESCRIPTION OF PROPOSED CHANGES
The proposed standardized fundamental investment policies cover those
areas for which the 1940 Act requires the Fund to have a fundamental
restriction. They satisfy current regulatory requirements and are written to
provide flexibility to respond to future legal, regulatory, market or technical
changes. THE PROPOSED STANDARDIZED CHANGES WILL NOT AFFECT THE FUND'S INVESTMENT
OBJECTIVE. ALTHOUGH THE PROPOSED CHANGES IN FUNDAMENTAL POLICIES WILL ALLOW THE
FUND GREATER FLEXIBILITY TO RESPOND TO FUTURE INVESTMENT OPPORTUNITIES, THE
BOARD OF DIRECTORS OF THE FUND DOES NOT ANTICIPATE THAT THE CHANGES,
INDIVIDUALLY OR IN THE AGGREGATE, WILL RESULT AT THIS TIME IN A MATERIAL CHANGE
IN THE LEVEL OF INVESTMENT RISK ASSOCIATED WITH INVESTMENT IN THE FUND.
The following is the text and a summary description of the proposed
changes to the Fund's fundamental policies and restrictions. Any non-fundamental
policy may be modified or eliminated by the Directors at any future date without
any further approval of shareholders. Shareholders should note that certain of
the fundamental policies that are treated separately below currently are
combined within a single existing fundamental policy.
Presently, if the Fund adheres to a fundamental or non-fundamental
percentage restriction at the time of an investment or transaction, a later
increase or decrease in the percentage resulting from a change in the value of
the Fund's portfolio securities or the amount of its total assets does not
create a violation of the policy.
This policy will continue to apply for any of the proposed changes that are
approved.
PROPOSAL #3: APPROVAL OF AMENDMENTS TO THE FUND'S
FUNDAMENTAL INVESTMENT POLICIES
PROPOSAL #3(A): TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT
POLICY REGARDING DIVERSIFICATION
Under the 1940 Act, the Fund's policy relating to the diversification of
its investments must be fundamental. The 1940 Act prohibits a "diversified"
mutual fund from purchasing securities of any one issuer if, at the time of
purchase, more than 5% of the fund's total assets would be invested in
securities of that issuer or the fund would own or hold more than 10% of the
outstanding voting securities of that issuer, except that up to 25% of the
fund's total assets may be invested without regard to this limitation. The 5%
limitation does not apply to securities issued by or guaranteed by the U.S.
government, its agencies or instrumentalities or to securities issued by other
open-end investment companies.
The Fund's present policy regarding diversification states:
"The Fund will not purchase the securities of any one issuer (except in
cash and cash instruments and securities issued by the United States
government, its agencies and instrumentalities), if as a result more
than 5% of its total assets would be invested in the securities of such
issuer. For purposes of this limitation, each governmental subdivision,
i.e. state, territory, possession of the United States or any political
subdivision of the foregoing including agencies, authorities,
instrumentalities, or similar entities, or of the District of Columbia
shall be considered a separate issuer if its assets and revenues are
separate from those of the governmental body creating it and the
security is backed by its own assets and revenues. In the case of an
industrial development bond, if the security is backed only by the
assets and revenues of a non-governmental user, then such
non-governmental user will be deemed to be the sole issuer. If, however,
in the case of an industrial development bond or a governmental issued
security, a governmental or some other entity guarantees the security,
such guarantee would be considered a separate security issued by the
guarantor as well as the other issuer (as above defined), subject to
limited exclusions allowed by the Investment Company Act of 1940, as
amended. For purposes of this limitation, cash instruments do not
include securities issued by banks."
In order to afford the Fund's investment adviser maximum flexibility in
managing the Fund's assets, the Directors propose to amend the Fund's
diversification policy to be consistent with the definition of a diversified
investment company under the 1940 Act. The amended policy complies with the U.S.
Securities and Exchange Commission's (the "SEC" or the "Commission") general
definition of diversification and simplifies the Fund's policy. The new policy
would specifically: (i) add securities of other investment companies to the list
of issuers which are excluded from the 5% limitation, and (ii) make clear that
the diversification test is applied to 75% of the Fund's total assets, rather
than 100% of its total assets.
Upon approval of the Fund's shareholders, the fundamental investment
policy governing diversification will be amended as follows:
"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 securities of that
issuer, or the Fund would own more than 10% of the outstanding voting
securities of that issuer."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(B): TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
CONCERNING BORROWING MONEY AND ISSUING SENIOR SECURITIES
The 1940 Act requires the Fund to have a fundamental investment policy
defining its ability to borrow money or issue senior securities. In general,
limitations on borrowing are designed to protect shareholders and their
investments by restricting the Fund's ability to subject its assets to any
claims of creditors or senior security holders who would be entitled to
dividends or rights on liquidation of the Fund prior to the rights of
shareholders.
Shareholders of the Fund are being asked to approve a new standardized
fundamental policy for borrowing and the issuance of senior securities designed
to reflect all current regulatory requirements. The Fund's current policy
states:
"The Fund will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts not in
excess of 5% of the value of its total assets or in an amount up to
one-third of the value of its total assets, including the amount
borrowed, in order to meet redemption requests without immediately
selling any portfolio securities. This borrowing provision is not for
investment leverage but solely to facilitate management of the portfolio
by enabling the Fund to meet redemption requests where the liquidation
of portfolio securities is deemed to be inconvenient or disadvantageous.
While any such borrowings are outstanding, no net purchases of
investment securities will be made by the Fund."
SENIOR SECURITIES-GENERALLY. A "senior security" is an obligation of the Fund
with respect to its earnings or assets that takes precedence over the claims of
the Fund's shareholders with respect to the same earnings or assets. The 1940
Act generally prohibits the Fund from issuing senior securities, in order to
limit the use of leverage. In general, an investment company uses leverage when
it borrows money to enter into securities transactions, or acquires an asset
without being required to make payment until a later time.
SEC staff interpretations allow the Fund to engage in a number of types
of transactions which might otherwise be considered to create "senior
securities" or "leverage," so long as the Fund meets certain collateral
requirements designed to protect shareholders. For example, some transactions
that may create senior security concerns include short sales, certain options
and futures transactions, and securities transactions that obligate the Fund to
pay money at a future date (such as when-issued, forward commitment or delayed
delivery transactions). When engaging in such transactions, the Fund must set
aside money or securities to meet the SEC staff's collateralization
requirements. This procedure effectively eliminates the Fund's ability to engage
in leverage for these types of transactions.
BORROWING-GENERALLY. Under the 1940 Act, an investment company is permitted to
borrow up to 5% of its total assets for temporary purposes. A fund may borrow
only from banks. If borrowings exceed 5%, the fund must have assets totaling at
least 300% of the borrowing when the amount of the borrowing is added to the
fund's other assets. The effect of this provision is to allow the fund to borrow
from banks in amounts up to one-third (33 1/3%) of its total assets (including
the amount borrowed). Investment companies typically borrow money to meet
redemptions in order to avoid a forced, unplanned sale of portfolio securities.
This technique allows the fund greater flexibility to buy and sell portfolio
securities for investment or tax considerations, rather than for cash flow
considerations. The costs of borrowing, however, can also reduce the fund's
total return.
The investment policy of the Fund permits borrowing to the extent
allowed under the 1940 Act, or under any SEC rule, regulation or staff
interpretation thereof. The borrowing restriction of the Fund permits borrowing
only as a temporary measure for extraordinary or emergency purposes, and
prohibits the purchase of any new securities while borrowings are outstanding.
The proposed investment policy would provide greater flexibility to the Fund,
and would permit the Fund to borrow money, directly or indirectly (such as
through reverse repurchase agreements), and issue senior securities within the
limits established under the 1940 Act or under any rule or regulation of the
Commission, or any SEC staff interpretation thereof. As a matter of operating
policy, the Fund does not intend to engage in leveraging. Upon shareholder
approval, the fundamental investment policy governing borrowing money and
issuing senior securities will state:
"The Fund may borrow money, directly or indirectly, and issue senior
securities to the maximum extent permitted under the 1940 Act."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(C): TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY REGARDING
INVESTMENTS IN REAL ESTATE
Under the 1940 Act, the Fund's policy concerning investments in real
estate must be fundamental. The Fund currently has a fundamental investment
policy prohibiting the purchase or sale of real estate. The current policy
states:
"The Fund will not purchase or sell real estate, but this shall not
prevent the Fund from investing in Municipal Bonds secured by real estate or
interests therein."
The proposed fundamental investment policy will not permit the Fund to
purchase real estate directly, but will permit the purchase of securities whose
payments of interest or principal are secured by mortgages or other rights to
real estate in the event of default. The investment policy will also enable the
Fund to invest in companies within the real estate industry, provided such
investments are consistent with the Fund's investment objective and policies.
Upon shareholder approval, the fundamental investment policy governing
investments in real estate will state:
"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."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(D): TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING INVESTMENTS IN COMMODITIES
Under the 1940 Act, the Fund's policy concerning investments in
commodities must be fundamental. The Fund is currently subject to a fundamental
restriction prohibiting the purchase or sale of commodities or commodity
contracts. Historically, the most common types of commodities have been physical
commodities such as wheat, cotton, rice and corn. However, under federal law,
futures contracts are considered to be commodities and, therefore, financial
futures contracts, such as futures contracts related to currencies, stock
indices or interest rates are considered to be commodities. Financial futures
contracts enable an investment company to buy (or sell) the right to receive the
cash difference between the contract price for an underlying asset or index and
the future market price, if the market price is higher. If the future price is
lower, the investment company is obligated to pay (or, if the investment company
sold the contract, the investment company receives) the amount of the decrease.
Investment companies often desire to invest in financial futures contracts and
options related to such contracts for hedging or other investment reasons.
The proposed policy would provide appropriate flexibility for the Fund
to invest in financial futures contracts and related options. As proposed, the
new policy is broad enough to permit investment in financial futures instruments
for either investment or hedging purposes, which is broader than the Fund's
current policies. Using financial futures instruments can involve substantial
risks, and would be utilized only if the Fund's investment adviser determined
that such investments are advisable and such practices were affirmatively
authorized by the Board and disclosed in the Fund's prospectus or statement of
additional information. Upon shareholder approval, the fundamental investment
policy governing commodities will state:
"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."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(E): TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT
POLICY REGARDING UNDERWRITING SECURITIES
Under the 1940 Act, the Fund's policy relating to underwriting is
required to be fundamental. The Fund currently is subject to a fundamental
investment policy prohibiting it from acting as an underwriter of the securities
of other issuers, and states:
"The Fund will not underwrite any issue of securities except as it may
be deemed to be an underwriter under the Securities Act of 1933, in
connection with the sale of securities in accordance with its investment
objective, policies and limitations."
A person or company generally is considered an underwriter under the
federal securities laws if it participates in the public distribution of
securities of OTHER ISSUERS, usually by purchasing the securities from the
issuer and re-selling the securities to the public. From time to time, a mutual
fund may purchase a security for investment purposes which it later sells or
redistributes to institutional investors or others under circumstances where the
Fund could possibly be considered to be an underwriter under the technical
definition of underwriter contained in the securities laws.
Upon shareholder approval, the fundamental investment policy concerning
underwriting will state:
"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."
This does not constitute a substantive change in the Fund's policy.
Rather, it reflects a restatement to standardized language now to be used by all
of the Federated Funds, and is submitted to shareholders to comply with the 1940
Act's requirements.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(F): TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING LENDING BY THE FUND
Under the 1940 Act, the Fund's policy concerning lending must be
fundamental. The Fund currently is subject to a fundamental investment
restriction limiting its ability to make loans, which states:
"The Fund will not make loans except that the Fund may, in accordance
with its investment objective, policies and limitations, acquire
publicly or non-publicly issued Municipal Bonds or temporary investments
or enter into repurchase agreements."
In order to ensure that the Fund may invest in certain debt securities or
repurchase agreements, which could technically be characterized as the making of
loans, the Fund's current fundamental restriction specifically permits such
investments.
The Fund's management has proposed amending the policy to standardize
the policy. Upon approval of the Fund's shareholders, the fundamental investment
policy governing lending assets will state:
"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."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(G): TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY REGARDING
CONCENTRATION OF THE FUND'S INVESTMENTS IN THE SECURITIES OF COMPANIES IN THE
SAME INDUSTRY
Under the 1940 Act, the Fund's policy relating to the concentration of
its investments in securities of companies in a single industry must be
fundamental. The SEC staff considers a mutual fund to "concentrate" its
investments if 25% or more of its total assets are invested in a particular
industry (not counting U.S. government securities, bank instruments issued by
domestic banks and municipal securities).
The Fund currently has a fundamental investment policy that is extremely
detailed, and that operates to reserve freedom for the Fund to concentrate its
investments in industrial development bonds. The current policy states:
"The Fund will not purchase securities if, as a result of such purchase
more that 25% of the value of its assets would be invested in the
securities of governmental subdivisions located in any one state,
territory, or possession of the United States. The Fund may invest more
than 25% of the value of its assets in industrial development bonds. As
to industrial development bonds, the Fund may purchase securities of an
issuer resulting in the ownership of more than 25% of the Fund's assets
in any one industry.
The Fund will not invest 25% or more of its total assets in any one
industry. Governmental issuers of municipal securities are not
considered part of any "industry." However, municipal securities backed
only by the assets and revenues of non-governmental users may, for this
purpose be deemed to be related to the industry in which such
non-governmental users engage, and the 25% limitation would apply to
such obligations. It is nonetheless possible that the Fund may invest
more than 25% of its assets in a broader segment of the municipal
securities market, such as revenue obligations of hospitals and other
health care facilities, housing agency revenue obligations or airport
revenue obligations. This would be the case only if the Fund determines
that the yields available from obligations in a particular segment of
the market justified the additional risks associated with a large
investment in such segment. Although such obligations could be supported
by the credit of governmental users or by the credit of non-governmental
users engaged in a number of industries, economic, business, political
and other developments generally affecting the revenues of such users
(for example, proposed legislation or pending court decisions affecting
the financing of such projects and market factors affecting the demand
for their services or products) may have a general adverse effect on all
municipal securities in such a market segment. The Fund reserves the
right to invest more than 25% of its assets in industrial development
bonds or private activity bonds or in securities of issuers located in
the same state, however it has no present intention to do so."
Upon the approval by the Fund's shareholders, the fundamental investment
policy governing concentration will be simplified, and will provide:
"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, provided that the Fund may invest more
than 25% of the value of its assets in industrial development bonds.
Government securities, municipal securities and bank instruments will
not be deemed to constitute an industry. As to industrial development
bonds, the Fund may purchase securities of an issuer resulting in the
ownership of more than 25% of the Fund's assets in one industry, and the
Fund reserves the right to invest more than 25% of its assets in
industrial development bonds in the same state."
The Fund's Board also has approved a related non-fundamental policy for
the Fund, which will be adopted if the new fundamental policy is approved by
shareholders and which provides that in applying the concentration restriction:
(1) utility companies will be divided according to their services, for example,
gas, gas transmission, electric and telephone will each be considered a separate
industry; (2) financial service companies will be classified according to the
end users of their services, for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry; and (3)
asset-backed securities will be classified according to the underlying assets
securing such securities.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(H): TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY REGARDING
INVESTMENT IN MUNICIPAL SECURITIES
The Fund is presently subject to a fundamental investment policy that
provides:
"There will be a period of time before the Fund's assets will be
substantially invested in accordance with its investment policies.
During this period, the Fund may own temporary investments, the interest
of which is subject to federal regular income taxation. After this
initial period, as a fundamental investment policy, the Fund will invest
its assets so that at least 80% of its annual interest income is exempt
from federal regular income tax except in extraordinary circumstances
when, for example, management feels that market conditions dictate a
defensive posture in temporary investments."
This investment policy was adopted at the time of the Fund's creation.
The Fund's investment adviser believes that the first part of the policy,
pertaining to making temporary investments pending the Fund's attracting
sufficient assets to invest consistent with its investment objective, is no
longer necessary. Therefore, management has proposed to eliminate the first two
sentences of the policy, subject to shareholder approval. In addition, the
Fund's investment adviser has proposed to simplify the policy by eliminating
that portion of the policy that relates to temporary investments under
extraordinary circumstances. (There is no legal requirement that this be stated
in the Fund's fundamental investment policy.) If the revised policy is approved
by shareholders, the Fund will continue to be operated in the same manner as
presently.
Upon shareholder approval, the Fund's revised fundamental investment
policy will provide:
"As a fundamental investment policy, the Fund will invest its assets so
that at least 80% of its annual interest income is exempt from federal regular
income tax."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(I): TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE FUND'S
FUNDAMENTAL INVESTMENT POLICY REGARDING BUYING SECURITIES ON MARGIN
The Fund is not required to have a fundamental restriction on margin
transactions. Accordingly, it is proposed that the Fund's existing fundamental
policy be replaced with a non-fundamental restriction. The Fund's current policy
provides:
"The Fund will not purchase any securities on margin, except for such
credits as are necessary for the clearance of transactions."
The proposed non-fundamental policy makes minor changes in wording from
the existing fundamental restrictions and expands the list of margin
transactions excepted from the prohibition to include margin deposits in
connection with financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments. While the Fund is presently authorized to engage in certain types
of futures contracts (interest rate and index financial futures contracts), the
non-fundamental limitation contemplates a broader array of investment
techniques.
Upon the approval of the elimination of the existing fundamental policy
on engaging in margin transactions, the Fund would become subject to the
following non-fundamental policy:
"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."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(J): TO AMEND AND MAKE NON-FUNDAMENTAL THE FUND'S FUNDAMENTAL
INVESTMENT POLICY ON PLEDGING ASSETS
The Fund is not required to have a fundamental investment restriction
with respect to the pledging of assets. To maximize the Fund's flexibility in
this area, the Board of the Fund believes the policy on pledging assets should
be made non-fundamental. The non-fundamental policy would be similar to the
fundamental policy proposed to be eliminated, which states:
"The Fund will not pledge, mortgage, or hypothecate its assets, except
to secure permitted borrowings. In those cases, it may pledge securities
having a market value at the time of the pledge not exceeding 10% of the
value of the Fund's total assets."
The Board does not expect this change to have a material impact on the
Fund's operations. Establishing the policy as non-fundamental, however, would
enable the Board to change this policy in the future without shareholder
approval. Although the Fund is proposing to eliminate the 10% limitation on the
amount of its assets that may be pledged, the Fund does not presently intend to
exceed this limitation. Upon the approval of the elimination of the existing
fundamental policy on pledging assets, the Fund would become subject to the
following non-fundamental policy:
"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."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(K): TO MAKE NON-FUNDAMENTAL THE FUND'S FUNDAMENTAL INVESTMENT
POLICIES REGARDING PERMISSIBLE INVESTMENTS
The Fund currently is subject to fundamental investment policies that
govern its permissible investments, which state:
"All of the Fund's assets will consist of (1) municipal bonds, (2)
temporary investments, and (3) cash. Ordinarily, the Fund will invest at
least 65% of its portfolio in investment grade bonds, including bonds
rated BBB and above by a nationally recognized statistical rating
organization and those unrated securities determined to be of equivalent
quality. The remainder of the portfolio may be invested in lower quality
and lower rated bonds.
"Subsequent to its purchase by the Fund, an issue of municipal bonds may
cease to be rated or its rating may be reduced below the minimum
required for purchase by the Fund. Neither event requires the
elimination of such obligation in its portfolio, but the investment
adviser will consider such an event in its determination of whether the
Fund should continue to hold such obligation in its portfolio. To the
extent that the ratings accorded by S&P or Moody's for municipal bonds
may change as a result of changes in such organizations, or changes in
their rating systems, the Fund will attempt to use comparable ratings as
standards for its investments in municipal bonds in accordance with its
investment policies.
"If a percentage limitation is adhered to at the time of the investment,
a later increase or decrease in percentage resulting from any change in
value for net assets will not result in violation of such restriction."
These policies are not required to be fundamental under the 1940 Act.
Accordingly, it is proposed that the Fund's existing fundamental investment
policies regarding permissible investments be replaced with identical
non-fundamental policies. The Fund has no present intention to change these
policies, and will not do so unless authorized by appropriate Board action.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(L): TO MAKE NON-FUNDAMENTAL THE FUND'S FUNDAMENTAL
INVESTMENT POLICY REGARDING TEMPORARY INVESTMENTS
The Fund currently has a fundamental investment policy pertaining to
temporary investments that states:
"From time to time on a temporary basis for defensive purposes, the Fund
may invest in "temporary" investments consisting of: notes issued by or
on behalf of municipal or corporate issuers; obligations issued or
guaranteed by the United States government, its agencies or
instrumentalities; other debt securities; commercial paper; certificates
of deposit of banks; and any of the foregoing Municipal Bonds or
temporary investments subject to short-term repurchase agreements. The
Fund may invest in these temporary investments, for example, due to
market conditions or pending investment of proceeds from the sale of
portfolio securities or in anticipation of redemptions. The rating
requirements for the Fund's investments in Municipal Bonds will not be
applicable to temporary investments. However, management will limit
temporary investments to issuers which it believes of good quality.
With respect to temporary investments, the Fund will not purchase
securities (other than securities of the United States government, its
agencies or instrumentalities) if, as a result of such purchase, more
than 25% of the value of the Fund's assets would be invested in any one
industry. However, the Fund may, at times, invest more than 25% if the
value of its assets in cash or cash items (including bank time and
demand deposits such as certificates of deposit), U.S. Treasury Bills or
securities issued or guaranteed by the United States government, its
agencies or instrumentalities, or instruments secured by these money
market instruments, such as repurchase agreements, for defensive
purposes."
This policy is not required to be fundamental by the 1940 Act.
Accordingly, it is proposed that the Fund's existing fundamental policy on
temporary investments be replaced with an identical non-fundamental policy. The
Fund has no present intention to change this policy, and will not do so unless
authorized by appropriate Board action.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(M): TO MAKE NON-FUNDAMENTAL THE FUND'S FUNDAMENTAL
INVESTMENT POLICY REGARDING ENGAGING IN WHEN-ISSUED AND DELAYED DELIVERY
TRANSACTIONS
The Fund currently has a fundamental investment policy pertaining to
engaging in when-issued and delayed delivery transactions that states:
"The Fund may also purchase and sell Municipal Bonds on a when-issued or
delayed delivery basis. When-issued and delayed delivery transactions
arise when securities are bought or sold with payment and delivery
taking place in the future in order to secure what is considered to be
an advantageous price and yield to the Fund at the time of entering into
the transaction."
Because the Fund is not required to have such a fundamental policy, it
is proposed that the Fund's existing fundamental policy on these transactions be
replaced with an identical non-fundamental policy. The Fund has no present
intention to change this policy, and will not do so unless authorized by
appropriate Board action.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #4: REMOVAL OF CERTAIN OF THE FUND'S
FUNDAMENTAL INVESTMENT POLICIES
The Board has determined that certain of the current fundamental
investment policies are unnecessary and should be removed. Until NSMIA was
adopted in 1996, the securities laws of several states required every investment
company which intended to sell its shares in those states to adopt policies
governing a variety of operational issues, including investment in certain
securities. As a consequence of those restrictions, the Fund adopted the
investment policies described below and agreed that they would be changed only
upon the approval of shareholders. Since these prohibitions are no longer
required under current law, the management of the Fund has recommended, and the
Board has determined, that these policies should be removed. The removal of
these policies would provide greater flexibility in the management of the Fund
by permitting the Fund to purchase a broader range of securities that are
permitted investments and that are consistent with its investment objective and
policies.
The policies being removed are listed below. Each will be voted on
separately, and the approval of each change will require the affirmative vote of
a majority of the outstanding voting shares of the Fund as defined in the 1940
Act. (See "PROXIES, QUORUM AND VOTING AT THE ANNUAL MEETING" below).
PROPOSAL #4(A): TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT
POLICY ON INVESTMENTS IN OIL, GAS AND MINERALS
The Fund is not required to have a fundamental restriction with respect
to oil, gas or mineral investments. To maximize the Fund's flexibility in this
area, the Board of the Fund believes that the Fund's policy on oil, gas and
mineral investments should be eliminated. This restriction was imposed by state
laws and NSMIA preempts that requirement. Notwithstanding the elimination of
this fundamental policy, the Fund does not expect to invest at this time in oil,
gas and mineral leases and programs. Upon the approval of Proposal #4(a), the
existing fundamental policy that states "the Fund will not purchase or sell oil,
gas or other mineral exploration or development programs" will be eliminated.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #4(B): TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT
POLICY ON SELLING SECURITIES SHORT
The Fund is not required to have a fundamental restriction with respect
to short sales of securities. To maximize the Fund's flexibility in this area,
the Board believes that the Fund's restriction on short sales of securities
should be eliminated. This restriction was imposed by state laws and NSMIA
preempts that requirement. Notwithstanding the elimination of this fundamental
restriction, the Fund expects to continue not to engage in short sales of
securities, except to the extent that the Fund contemporaneously owns or has the
right to acquire at no additional cost securities identical to, or convertible
into or exchangeable for, those sold short.
Upon the approval of Proposal #4(b), the existing fundamental
restriction on selling securities short for the Fund will be eliminated.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #4(C): TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING TRADING PORTFOLIO SECURITIES
The Fund is presently subject to a fundamental investment policy
regarding portfolio transactions that states:
"Portfolio trading will be undertaken principally to accomplish the
Fund's objective in relation to anticipated movements in the general
level of interest rates. The Fund is free to dispose of portfolio
securities at any time when changes in the circumstances or conditions
make such a move desirable in light of the investment objective. The
Fund will not attempt to achieve or be limited to a predetermined rate
of portfolio turnover, such turnover always being incidental to
transactions undertaken with a view to achieving the Fund's investment
objective."
Because there is no legal requirement to adopt such a fundamental investment
policy, the Fund's investment adviser has recommended that it be eliminated. It
is intended that the Fund's investment adviser will continue to operate the Fund
by trading and disposing of portfolio securities as necessary to meet the Fund's
investment objective.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #5: TO APPROVE AMENDMENTS TO THE FUND'S
ARTICLES OF INCORPORATION TO PERMIT THE BOARD OF DIRECTORS
TO LIQUIDATE ASSETS OF A SERIES OR CLASS WITHOUT SEEKING SHAREHOLDER
APPROVAL TO THE EXTENT PERMITTED UNDER MARYLAND LAW
Mutual funds, such as the Fund, are required to organize under the laws
of a state and to create and be bound by organizational documents outlining how
they will operate. In the case of the Fund, these organizational documents are
the Articles of Incorporation and the By-Laws. Since the adoption of the
Articles of Restatement to the Fund's Articles of Incorporation in 1993, the
market for mutual funds has evolved, requiring mutual funds to be more flexible
in their operation so that they may respond quickly to changes in the market.
Certain items in the Fund's current Articles of Restatement prohibit the Fund
from responding quickly and favorably to changing markets without going to the
expense and delay of holding a shareholder meeting. Accordingly, the Directors
have approved, and have authorized the submission to the Fund's shareholders for
their approval, certain amendments to the Fund's Articles of Incorporation. If
these amendments are approved by shareholders, and in light of other amendments
that have been adopted to the Articles of Incorporation that do not require
shareholder approval, it is contemplated that the Amended and Restated Articles
of Incorporation will, following Board approval, be filed in Maryland following
the Annual Meeting. The approval of the proposed amendments will require the
affirmative vote of a majority of the aggregate number of shares entitled to be
cast thereon.
Shareholders are being asked to approve amendments to the Fund's
Amended and Restated Articles of Incorporation to permit the Directors, to the
extent permissible under Maryland law from time to time, to sell and convert
into money (i.e., liquidate) all of the assets of the Fund, or a class or
series of the Fund, and then redeem all outstanding shares of any series or
class of the Fund. Currently, a vote of shareholders is required to liquidate
the Fund. The Directors have determined that the current restriction presents a
cumbersome structure under which the best interest of all of the Fund's
shareholders may not be served. By requiring the Directors to solicit a
shareholder vote, by means of a proxy solicitation for a meeting of
shareholders, the Articles of Restatement as currently in effect greatly hinder
the Directors' ability to effectively act on decisions about the continued
viability of the Fund. If it is determined that it is no longer advisable to
continue the Fund, it may not be in the best interest of shareholders to incur
the substantial additional expense of a shareholder meeting when it is more
important to preserve for shareholders those assets that remain.
If approved by shareholders, the Amended and Restated Articles of
Incorporation would provide substantially to the effect that:
"To the extent permitted under Maryland law, without the vote of the
shares of any class of stock of the Fund then outstanding, the Fund may,
upon approval of a majority of the Board of Directors, sell and convert
into money all the assets of any class or series of the Fund. Upon
making provision for the payment of all outstanding obligations, taxes
and other liabilities, accrued or contingent, belonging to the Fund, or
any class or series thereof, the Directors shall distribute the
remaining assets of the Fund ratably among the holders of the
outstanding shares of the Fund, or any affected class or series
thereof."
In the event that the amendments to the Amended and Restated Articles
of Incorporation to allow the Directors to liquidate the Fund as set forth
above are not approved by the shareholders, the provisions of the Amended and
Restated Articles of Incorporation shall remain as they are presently in the
Articles of Restatement, and the Directors will consider what action, if any,
should be taken.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
INFORMATION ABOUT THE FUND
PROXIES, QUORUM AND VOTING AT THE ANNUAL MEETING
The favorable vote of: (a) the holders of 67% or more of the outstanding
voting securities present at the Annual Meeting, if the holders of 50% or more
of the outstanding voting securities of the Fund are present or represented by
proxy; or (b) the vote of the holders of more than 50% of the outstanding voting
securities, whichever is less, is required to approve all of the proposals,
except the election of Directors, the ratification of the selection of the
Auditors, and the amendments of the Articles of Incorporation.
Only shareholders of record on the Record Date will be entitled to vote at
the Annual Meeting. Each share of the Fund is entitled to one vote. Fractional
shares are entitled to proportionate shares of one vote.
Any person giving a proxy has the power to revoke it any time prior to
its exercise by executing a superseding proxy or by submitting a written notice
of revocation to the Secretary of the Fund. In addition, although mere
attendance at the Annual Meeting will not revoke a proxy, a shareholder present
at the Annual Meeting may withdraw his or her proxy and vote in person. All
properly executed and unrevoked proxies received in time for the Annual Meeting
will be voted in accordance with the instructions contained in the proxies. IF
NO INSTRUCTION IS GIVEN ON THE PROXY, THE PERSONS NAMED AS PROXIES WILL VOTE THE
SHARES REPRESENTED THEREBY IN FAVOR OF THE MATTERS SET FORTH IN THE ATTACHED
NOTICE.
In order to hold the Annual Meeting, a "quorum" of shareholders must be
present. Holders of one-third of the total number of outstanding shares of the
Fund, present in person or by proxy, shall be required to constitute a quorum
for the purpose of voting on the proposals made.
For purposes of determining a quorum for transacting business at the
Annual Meeting, abstentions and broker "non-votes" (that is, proxies from
brokers or nominees indicating that such persons have not received instructions
from the beneficial owner or other persons entitled to vote shares on a
particular matter with respect to which the brokers or nominees do not have
discretionary power) will be treated as shares that are PRESENT but which have
not been VOTED. For this reason, abstentions and broker non-votes will have the
effect of a "no" vote for purposes of obtaining the requisite approval of some
of the proposals.
If a quorum is not present, the persons named as proxies may vote those
proxies that have been received to adjourn the Annual Meeting to a later date.
In the event that a quorum is present but sufficient votes in favor of one or
more of the proposals have not been received, the persons named as proxies may
propose one or more adjournments of the Annual Meeting to permit further
solicitations of proxies with respect to such proposal(s). All such adjournments
will require the affirmative vote of a majority of the shares present in person
or by proxy at the session of the Annual Meeting to be adjourned. The persons
named as proxies will vote AGAINST an adjournment those proxies that they are
required to vote against the proposal, and will vote in FAVOR of such an
adjournment all other proxies that they are authorized to vote. A shareholder
vote may be taken on the proposals in this proxy statement prior to any such
adjournment if sufficient votes have been received for approval.
As referred to in this Proxy Statement, the "Federated Fund Complex,"
"The Funds" or "Funds" includes the following investment companies: Automated
Government Money Trust; Cash Trust Series II; Cash Trust Series, Inc.; CCB
Funds; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
Federated Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders
Fund, Inc.; Federated ARMs Fund; Federated Core Trust; Federated Equity Funds;
Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Master Trust; Federated Municipal Opportunities Fund, Inc.;
Federated Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated
Short-Term Municipal Trust; Federated Short-Term U.S. Government Trust;
Federated Stock and Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free
Trust; Federated Total Return Series, Inc.; Federated U.S. Government Bond Fund;
Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S. Government
Securities Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10
Years; Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds, Inc.;
Liberty Term Trust, Inc. - 1999; Liberty U.S. Government Money Market Trust;
Liquid Cash Trust; Managed Series Trust; Money Market Management, Inc.; Money
Market Obligations Trust; Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Regions Funds; RIGGS Funds;
Tax-Free Instruments Trust; The Planters Funds; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; WesMark Funds; WCT Funds; World Investment Series, Inc.;
Blanchard Funds; Blanchard Precious Metals Fund, Inc.; High Yield Cash Trust;
Investment Series Trust; Targeted Duration Trust; The Virtus Funds; and Trust
for Financial Institutions.
SHARE OWNERSHIP OF THE DIRECTORS
Officers and Directors of the Fund own less than 1% of the Fund's outstanding
shares.
At the close of business on the Record Date, the following persons owned,
to the knowledge of management, more than 5% of the outstanding shares of the
Fund: [TO BE INSERTED]
<PAGE>
DIRECTOR COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
FUND FUND1# FROM FUND COMPLEX+
<S> <C> <C>
John F. Donahue*@ $0 $0 for the Fund and
Chairman and Director 56 other investment companies in the Fund Complex
J. Christopher Donahue* $0 $0 for the Fund and
Executive Vice President 56 other investment companies in the Fund Complex
and Director
Thomas G. Bigley $_____ $113,860.22 for the Fund and
Director 56 other investment companies in the Fund Complex
John T. Conroy, Jr. $_____ $125,264.48 for the Fund and
Director 56 other investment companies in the Fund Complex
Nicholas P. Constantakis $_____ $47,958.02 for the Fund and
Director 56 other investment companies in the Fund Complex
William J. Copeland $_____ $125,264.48 for the Fund and
Director 56 other investment companies in the Fund Complex
James E. Dowd $_____ $125,264.48 for the Fund and
Director 56 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D.* $_____ $113,860.22 for the Fund and
Director 56 other investment companies in the Fund Complex
Edward L. Flaherty, Jr.@ $_____ $125,264.48 for the Fund and
Director 56 other investment companies in the Fund Complex
Peter E. Madden $_____ $113,860.22 for the Fund and
Director 56 other investment companies in the Fund Complex
John E. Murray, Jr. $_____ $113,860.22 for the Fund and
Director 56 other investment companies in the Fund Complex
Wesley W. Posvar $_____ $113,860.22 for the Fund and
Director 56 other investment companies in the Fund Complex
Marjorie P. Smuts $_____ $113,860.22 for the Fund and
Director 56 other investment companies in the Fund Complex
John S. Walsh $0 $0 for the Fund and
Director 2 56 other investment companies in the Fund Complex
</TABLE>
1 Information is furnished for the fiscal year ended March 31, 1999.
2 Mr. Walsh became a member of the Board of Directors on January 1, 1999. He
did not receive any fees from the Fund Complex as of the last calendar year.
# The aggregate compensation is provided for the Fund which is comprised of one
portfolio.
+ The information is provided for the last calendar year.
* This Director is deemed to be an "interested person" as defined in the
1940 Act.
@ Member of the Executive Committee.
During the fiscal year ended March 31, 1999, there were four meetings of
the Board of Directors. The interested Directors, other than Dr. Ellis, do not
receive fees from the Fund. Dr. Ellis is an interested person by reason of the
employment of his son-in-law by Federated Securities Corp. All Directors were
reimbursed for expenses for attendance at Board of Directors meetings.
The Executive Committee of the Board of Directors handles the
responsibilities of the Board between meetings of the Board. Other than its
Executive Committee, the Fund has one Board committee, the Audit Committee.
Generally, the function of the Audit Committee is to assist the Board of
Directors in fulfilling its duties relating to the Fund's accounting and
financial reporting practices and to serve as a direct line of communication
between the Board of Directors and the independent auditors. The specific
functions of the Audit Committee include recommending the engagement or
retention of the independent auditors, reviewing with the independent auditors
the plan and the results of the auditing engagement, approving professional
services provided by the independent auditors prior to the performance of such
services, considering the range of audit and non-audit fees, reviewing the
independence of the independent auditors, reviewing the scope and results of the
Fund's procedures for internal auditing, and reviewing the Fund's system of
internal accounting controls.
Messrs. Flaherty, Conroy, Copeland, and Dowd serve on the Audit
Committee. These Directors are not interested Directors of the Fund. During the
fiscal year ended March 31, 1999, there were four meetings of the Audit
Committee. All of the members of the Audit Committee were present for each
meeting. Each member of the Audit Committee receives an annual fee of $100 plus
$25 for attendance at each meeting and is reimbursed for expenses of attendance.
OFFICERS OF THE FUND
The executive officers of the Fund are elected annually by the Board of
Directors. Each officer holds the office until qualification of his successor.
The names and birthdates of the executive officers of the Fund and their
principal occupations during the last five years are as follows:
John F. Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Director
Chief Executive Officer and Director or Trustee of the Federated Fund
Complex; Chairman and Director, Federated Investors, Inc.; Chairman and Trustee,
Federated Advisers, Federated Management, and Federated Research; Chairman and
Director, Federated Research Corp. and Federated Global Research Corp.;
Chairman, Passport Research, Ltd. Mr.
Donahue is the father of J. Christopher Donahue, Executive Vice President
and Director of the Fund.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President and Director
President or Executive Vice President of the Federated Fund Complex; Director or
Trustee of some of the Funds in the Federated Fund Complex; President and
Director, Federated Investors, Inc.; President and Trustee, Federated Advisers,
Federated Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company; Director,
Federated Services Company. Mr. Donahue is the son of John F. Donahue, Chairman
and Director of the Fund.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Trustee or Director of some of the Funds in the Federated Fund Complex;
President, Executive Vice President and Treasurer of some of the Funds in the
Federated Fund Complex; Vice Chairman, Federated Investors, Inc.; Vice
President, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President and Secretary of the Federated Fund Complex; Executive
Vice President, Secretary and Director, Federated Investors, Inc.; Trustee,
Federated Advisers, Federated Management, and Federated Research; Director,
Federated Research Corp. and Federated Global Research Corp.; Director,
Federated Services Company; Director, Federated Securities Corp.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
President or Vice President of some of the Funds in the Federated Fund Complex;
Director or Trustee of some of the Funds in the Federated Fund Complex;
Executive Vice President, Federated Investors, Inc.; Chairman and Director,
Federated Securities Corp.
William D. Dawson, III
Federated Investors Tower
Pittsburgh, PA
Birthdate: March 3, 1949
Chief Investment Officer
Chief Investment Officer of the Fund and various other Funds in the Federated
Fund Complex; Executive Vice President, Federated Investment Counseling,
Federated Global Research Corp., Federated Advisers, Federated Management,
Federated Research, and Passport Research, Ltd.; Registered Representative,
Federated Securities Corp.; Portfolio Manager, Federated Administrative
Services; Vice President, Federated Investors, Inc.
Mary Jo Ochson
Federated Investors Tower
Pittsburgh, PA
Birthdate: September 12, 1953
Vice President
Senior Vice President of Federated Advisers; formally, Vice President,
Federated Advisers.
J. Scott Albrecht
Federated Investors Tower
Pittsburgh, PA
Birthdate: June 1, 1960
Vice President
Vice President, Federated Advisers; formerly, Assistant Vice President,
Federated Advisers.
Richard J. Thomas
Federated Investors Tower
Pittsburgh, PA
Birthdate: June 17, 1954
Treasurer
Treasurer of the Federated Fund Complex; Vice President - Funds Financial
Services Division, Federated Investors, Inc.
None of the Officers of the Fund received salaries from the Fund during
the fiscal year ended March 31, 1999.
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY
The Fund is not required, and does not intend, to hold regular annual
meetings of shareholders. Shareholders wishing to submit proposals for
consideration for inclusion in a proxy statement for the next meeting of
shareholders should send their written proposals to Federated Municipal
Securities Fund, Inc., Federated Investors Funds, 5800 Corporate Drive,
Pittsburgh, Pennsylvania 15237-7000, so that they are received within a
reasonable time before any such meeting.
No business other than the matters described above is expected to come
before the Annual Meeting, but should any other matter requiring a vote of
shareholders arise, including any question as to an adjournment or postponement
of the Annual Meeting, the persons named on the enclosed proxy card will vote on
such matters according to their best judgment in the interests of the Fund.
SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
CARD AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN
THE UNITED STATES. By Order of the Board of Directors,
John W. McGonigle
Secretary
April 29, 1999
<PAGE>
FEDERATED MUNICIPAL SECURITIES FUND, INC.
INVESTMENT ADVISER
FEDERATED ADVISERS
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
DISTRIBUTOR
FEDERATED SECURITIES CORP.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
ADMINISTRATOR
FEDERATED SERVICES COMPANY
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Cusip
(_____/99)
<PAGE>
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned Shareholders of
Federated Municipal Securities Fund, Inc. (the "Fund") hereby appoint Patricia
F. Conner, Gail Cagney, William Haas, Susan M. Jones, and Ann M. Scanlon, or any
one of them, true and lawful attorneys, with the power of substitution of each,
to vote all shares of the Fund which the undersigned is entitled to vote at the
Annual Meeting of Shareholders to be held on June 30, 1999, at 5800 Corporate
Drive, Pittsburgh, Pennsylvania, at 2:00 p.m., and at any adjournment thereof.
The attorneys named will vote the shares represented by this proxy in accordance
with the choices made on this ballot. If no choice is indicated as to the item,
this proxy will be voted affirmatively on the matters. Discretionary authority
is hereby conferred as to all other matters as may properly come before the
Annual Meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FEDERATED
MUNICIPAL OPPORTUNITIES FUND, INC. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE
VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED "FOR" THE PROPOSALS.
BY CHECKING THE BOX "FOR" BELOW, YOU WILL VOTE TO APPROVE EACH OF THE PROPOSED
ITEMS IN THIS PROXY, AND TO ELECT EACH OF THE NOMINEES AS DIRECTORS OF THE FUND
FOR [ ]
PROPOSAL 1 TO ELECT JOHN F. CUNNINGHAM, CHARLES F. MANSFIELD, JR. AND
JOHN S. WALSH AS DIRECTORS OF THE FUND
FOR [ ]
AGAINST [ ]
WITHHOLD AUTHORITY
TO VOTE [ ]
FOR ALL EXCEPT [ ]
If you do not wish your shares to be voted "FOR" a
particular nominee, mark the "For All Except" box and
strike a line through the name of each nominee for
whom you are NOT voting. Your shares will be voted for
the remaining nominees.
PROPOSAL 2 TO RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP AS THE FUND'S
INDEPENDENT AUDITORS
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
PROPOSAL 3 TO MAKE CHANGES TO THE FUND'S FUNDAMENTAL INVESTMENT POLICIES:
3(A) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY REGARDING
DIVERSIFICATION
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(B) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING BORROWING MONEY AND ISSUING SENIOR
SECURITIES FOR [ ] AGAINST [ ] ABSTAIN [ ]
3(C) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING INVESTMENTS IN REAL ESTATE FOR [ ]
AGAINST [ ] ABSTAIN [ ]
3(D) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING INVESTMENTS IN COMMODITIES FOR [ ]
AGAINST [ ] ABSTAIN [ ]
3(E) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING UNDERWRITING SECURITIES FOR [ ] AGAINST [
] ABSTAIN [ ]
3(F) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING LENDING ASSETS FOR [ ] AGAINST [ ]
ABSTAIN [ ]
3(G) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY REGARDING
CONCENTRATION OF THE FUND'S INVESTMENTS IN SECURITIES OF COMPANIES IN
THE SAME INDUSTRY
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(H) TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING INVESTMENTS IN MUNICIPAL SECURITIES FOR [
] AGAINST [ ] ABSTAIN [ ]
3(I) TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE FUND'S
FUNDAMENTAL INVESTMENT POLICY ON MARGIN
TRANSACTIONS FOR [ ] AGAINST [ ] ABSTAIN [ ]
3(J) TO AMEND, AND TO MAKE NON-FUNDAMENTAL, THE FUND'S
FUNDAMENTAL INVESTMENT POLICY ON PLEDGING ASSETS
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3(K) TO MAKE NON-FUNDAMENTAL THE FUND'S FUNDAMENTAL
INVESTMENT POLICIES REGARDING PERMISSIBLE
INVESTMENTS FOR [ ] AGAINST [ ] ABSTAIN [ ]
3(L) TO MAKE NON-FUNDAMENTAL THE FUND'S FUNDAMENTAL
INVESTMENT POLICY REGARDING TEMPORARY INVESTMENTS
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3(M) TO MAKE NON-FUNDAMENTAL THE FUND'S FUNDAMENTAL
INVESTMENT POLICY REGARDING ENGAGING IN WHEN-ISSUED
AND DELAYED DELIVERY TRANSACTIONS FOR [ ] AGAINST [
] ABSTAIN [ ]
PROPOSAL 4 TO REMOVE CERTAIN OF THE FUND'S FUNDAMENTAL INVESTMENT POLICIES:
4(A) TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT
POLICY ON INVESTING IN OIL, GAS AND MINERALS FOR [
] AGAINST [ ] ABSTAIN [ ]
4(B) TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT
POLICY ON SELLING SECURITIES SHORT FOR [ ] AGAINST
[ ] ABSTAIN [ ]
4(C) TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT
POLICY REGARDING TRADING PORTFOLIO SECURITIES FOR [
] AGAINST [ ] ABSTAIN [ ]
PROPOSAL 5 TO APPROVE AN AMENDMENT TO THE FUND'S ARTICLES OF INCORPORATION TO
PERMIT THE BOARD OF DIRECTORS TO LIQUIDATE ASSETS OF A SERIES OR CLASS
WITHOUT SEEKING SHAREHOLDER APPROVAL TO THE EXTENT PERMITTED UNDER MARYLAND
LAW
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
YOUR VOTE IS IMPORTANT
Please complete, sign
and return this card
as soon as possible.
Dated
Signature
Signature (Joint Owners)
Please sign this proxy exactly as your name appears on the books of the Fund.
Joint owners should each sign personally. Directors and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
YOU MAY ALSO VOTE YOUR SHARES BY TOUCHTONE PHONE BY CALLING 1-800-690-6903,
OR THROUGH THE INTERNET AT WWW.PROXYVOTE.COM.
