FEDERATED MUNICIPAL SECURITIES FUND INC, 485BPOS, 1999-07-30

FEDERATED MUNICIPAL SECURITIES FUND INC
485BPOS, 1999-07-30

Previous: CONSOLIDATED CAPITAL GROWTH FUND, SC 14D1/A, 1999-07-30

Next: HARRIS CORP /DE/, 8-K, 1999-07-30

1933 Act File No. 2-57181
1940 Act File No. 811-2677

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
------

Pre-Effective Amendment No. .....................

Post-Effective Amendment No. 54 ..................... X
------- ------

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
------

Amendment No. 38 ................................... X
------- ------

FEDERATED MUNICIPAL SECURITIES FUND, INC.

(Exact Name of Registrant as Specified in Charter)

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices)

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

John W. McGonigle, Esquire
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
x on July 30, 1999, pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(i)
_ on __________________ pursuant to paragraph (a)(i)
75 days after filing pursuant to paragraph (a)(ii) on _________________
pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:

This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Copies to:

Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037

PROSPECTUS
Federated Municipal Securities Fund, Inc.

CLASS A SHARES
CLASS B SHARES
CLASS C SHARES

A mutual fund seeking to provide for its shareholders a high level of current
income which is exempt from federal regular income tax by investing in a
portfolio of long-term, tax exempt securities.

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

JULY 31,1999

CONTENTS

Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the Fund Invests? 6
What are the Specific Risks of Investing in the Fund? 9
What Do Shares Cost? 10
How is the Fund Sold? 12
How to Purchase Shares 13
How to Redeem and Exchange Shares 14
Account and Share Information 17
Who Manages the Fund? 18
Financial Information 19

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is to provide for its shareholders a high level
of current income which is exempt from federal regular income tax. While there
is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the strategies and policies described in this
prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund pursues its objective by investing in a portfolio of tax exempt
securities so that at least 80% of its annual interest income is exempt from
federal regular income tax. Interest income from the Fund's investments may be
subject to the federal alternative minimum tax for individuals and corporations
(AMT). The Fund invests primarily in long-term, investment grade, tax exempt
securities.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factors that may reduce the Fund's returns
include:

* defaults or an increase in the risk of defaults on portfolio securities;

* a change in prevailing interest rates.

Other risk factors associated with an investment in the Fund include liquidity
risk, call risk, sector risk and leverage risk.

The Shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency.

RISK/RETURN BAR CHART AND TABLE

[Graphic]

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Class A Shares of Federated Municipal Securities Fund as
of the calendar year-end for each of ten years.

The 'y' axis reflects the "% Total Return" beginning with "-5.0%" and increasing
in increments of 5.0% up to 15%. The 'x' axis represents calculation periods for
the last ten calendar years of the Fund, beginning with the earliest year. The
light gray shaded chart features ten distinct vertical bars, each shaded in
charcoal, and each visually representing by height the total return percentages
for the calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the top of
each respective bar, for the calendar years 1989 through 1998, The percentages
noted are:
10.44%, 5.78%, 12.54%, 8.36%, 10.28%, -3.80%, 12.98%, 0.85%, 9.26%, and 5.54%.

The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.

The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.

The Fund's total return from January 1, 1999 to June 30, 1999, was (3.87%).

Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 5.85% (quarter ended June 30, 1989). Its lowest quarterly
return was (4.13%) (quarter ended March 31, 1994).

AVERAGE ANNUAL TOTAL RETURN

The following table represents the Fund's Class A Shares, Class B Shares and
Class C Shares Average Annual Total Returns, reduced to reflect applicable sales
charges, for the calendar periods ending December 31, 1998. The table shows the
Fund's total returns averaged over a period of years relative to the Lehman
Brothers Municipal Bond Index (LBMBI), a broad-based market index and the Lipper
General Municipal Funds Average (LGMFA), an average of funds with similar
objectives. The LBMBI is the Fund's total return performance benchmark for the
long-term, investment grade market. The LGMFA represents the average of the
total returns reported by all mutual funds designated by Lipper Analytical
Services, Inc. as falling in the category indicated. Total returns for the
indexes shown do not reflect sales charges, expenses or other fees that the
Securities and Exchange Commission requires to be reflected in the Fund's
performance. Indexes are unmanaged, and it is not possible to invest directly in
an index.

<TABLE>
<CAPTION>
CALENDAR PERIOD CLASS A CLASS B CLASS C LBMBI LGMFA
<S> <C> <C> <C> <C> <C>
1 Year 0.84% (1.08%) 3.58% 6.48% 5.32%
5 Years 3.85% NA 3.90% 6.22% 5.44%
10 Years 6.62% NA NA 8.22% 7.69%
Start of Performance 1 6.34% 4.64% 4.26% NA NA
</TABLE>

1 The Fund's Class A, Class B and Class C Shares start of performance dates were
October 4, 1976, July 26, 1994, and April 21, 1993, respectively.

Past performance does not necessarily predict future performance. This
information provides you with historical performance so that you can analyze
whether the Fund's investment risks are balanced by its potential rewards.

What are the Fund's Fees and Expenses?

FEDERATED MUNICIPAL SECURITIES FUND, INC.

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund's Class A, Class B, or Class C Shares.

<TABLE>
<CAPTION>
SHAREHOLDER FEES CLASS A CLASS B CLASS C
<S> <C> <C>
<C> <C> <C> <C>
Fees Paid Directly
From
Your
Investment
Maximum Sales
Charge
(Load) Imposed
on
Purchases (as a
percentage
of offering price) 4.50% None None
Maximum Deferred
Sales
Charge (Load) (as
a
percentage of
original
purchase price
or
redemption proceeds,
as
applicable) 0.00% 5.50% 1.00%
Maximum Sales
Charge
(Load) Imposed
on
Reinvested Dividends
(and
other
Distributions)
(as a percentage
of
offering price) None None None
Redemption Fee (as
a
percentage of
amount
redeemed, if applicable) None None None
Exchange Fee None None None

<CAPTION>
ANNUAL FUND
OPERATING
EXPENSES (Before Waiver)
1
<S> <C> <C> <C>
Expenses That are
Deducted
From Fund Assets (as
a
percentage of average
net
assets)
Management Fee 0.55% 0.55% 0.55%
Distribution (12b-1) Fee None 0.75% 0.75%
Shareholder Services Fee 2 0.25% 0.25% 0.25%
Other Expenses 0.21% 0.21% 0.21%
Total Annual
Fund
Operating Expenses 1.01% 1.76% 3 1.76%

1 Although not contractually obligated to do so, the shareholder services
provider waived certain amounts. These are shown below along with the net
expenses the Fund actually paid for the fiscal year ended March 31, 1999.

Total Waiver of
Fund
Expenses 0.14% 0.00% 0.01% Total Actual Annual Fund Operating Expenses (after
waiver) 0.87% 1.76% 1.75% 2 The shareholder services fee for Class A Shares and
Class C Shares has been voluntarily reduced. This voluntary reduction can be
terminated at any time. The shareholder services fee paid by the Fund's Class A
Shares and Class C Shares (after voluntary reduction) was 0.11% and 0.24%,
respectively, for the year ended March 31, 1999. 3 Class B Shares convert to
Class A Shares (which pay lower ongoing expenses) approximately eight years
after purchase.
</TABLE>

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund's
Class A, Class B and Class C Shares with the cost of investing in other mutual
funds.

The Example assumes that you invest $10,000 in the Fund's Class A, Class B and
Class C Shares for the time periods indicated and then redeem all of your Shares
at the end of those periods. Expenses assuming no redemption are also shown. The
Example also assumes that your investment has a 5% return each year and that the
Fund's Class A, Class B, and Class C Shares operating expenses are BEFORE
WAIVERS as shown in the table and remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A
Expenses assuming redemption $548 $757 $983 $1,631
Expenses assuming no redemption $548 $757 $983 $1,631
CLASS B
Expenses assuming redemption $729 $954 $1,154 $1,942
Expenses assuming no redemption $179 $554 $954 $1,942
CLASS C
Expenses assuming redemption $279 $554 $954 $2,073
Expenses assuming no redemption $179 $554 $954 $2,073
</TABLE>

What are the Fund's Investment Strategies?

The Fund invests in a portfolio of tax exempt securities so that at least 80% of
its annual interest income is exempt from federal regular income tax. Interest
income from the Fund's investments may be subject to AMT. The Fund invests
primarily in long-term, investment grade, tax exempt securities. The Fund's
investment adviser (Adviser) actively manages the Fund's portfolio, seeking to
manage the interest rate risk and credit risk assumed by the Fund and provide
superior levels of after tax total return.

The Adviser manages the Fund's interest rate risk by adjusting the duration of
its portfolio. "Duration" measures the sensitivity of a security's price to
changes in interest rates. The greater a portfolio's duration, the greater the
change in the portfolio's value in response to a change in market interest
rates. The Adviser will increase or reduce the Fund's portfolio duration based
on its interest rate outlook. When the Adviser expects interest rates to fall,
it will maintain a longer portfolio duration. When the Adviser expects interest
rates to increase, it will shorten the portfolio duration. The Adviser considers
a variety of factors in formulating its interest rate outlook, including the
following:

* current and expected U.S. economic growth;

* current and expected interest rates and inflation;

* the Federal Reserve's monetary policy; and

* supply and demand factors related to the municipal market and the effect they
may have on the returns offered for various bond maturities.

The Adviser manages credit risk by performing a fundamental credit analysis on
tax exempt securities before the Fund purchases such securities. The Adviser
considers various factors, including the following:

* the economic feasibility of revenue bond financings and general purpose
financings;

* the financial condition of the issuer or guarantor; and

* political developments that may affect credit quality.

The Adviser monitors the credit risks of all portfolio securities on an ongoing
basis by reviewing periodic financial data and ratings of nationally recognized
ratings services.

The Adviser attempts to provide superior levels of after tax total return. After
tax total return consists of two components: (1) changes in the market value of
the Fund's portfolio securities and attendant increase or decrease in the market
value of Fund shares; and (2) income received from the Fund's portfolio
securities. The Adviser seeks total return on an after tax basis, so that it
will try to maximize tax exempt income distributions; make no ordinary income
distributions; and minimize or eliminate capital gains distributions.

The Adviser's ability to formulate an accurate interest rate outlook, coupled
with effective management of the Fund's duration as described above, is critical
to the Adviser's achievement of this component of its strategy. The Adviser will
seek to further enhance after tax total return by engaging in a relative value
analysis; that is, the Adviser will assess the cost of a tax exempt security
compared with other tax exempt securities and taxable securities such as U.S.
Treasury obligations. The Adviser may also allocate investments in sectors of
the tax exempt market that offer the highest return. Finally, the Adviser will
invest a portion of the portfolio in tax exempt securities subject to AMT, which
may offer higher returns.

HEDGING

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

TEMPORARY DEFENSIVE INVESTMENTS

The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal income tax. It may do this
to minimize potential losses and maintain liquidity to meet shareholder
redemptions during adverse market conditions. This may cause the Fund to receive
and distribute taxable income to investors.

What are the Principal Securities in Which the Fund Invests?

TAX EXEMPT SECURITIES

Tax exempt securities are fixed income securities that pay interest that is not
subject to regular federal income taxes. Fixed income securities pay interest,
dividends or distributions of a specified rate. The rate may be a fixed
percentage of the principal or adjusted periodically.

Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.

MUNICIPAL LEASES

Municipalities may enter into leases for equipment or facilities. In order to
comply with state public financing laws, these leases are typically subject to
annual appropriation. In other words, a municipality may end a lease, without
penalty, by not providing for the lease payments in its annual budget. After the
lease ends, the lessor can resell the equipment or facility but may lose money
on the sale.

The Fund may invest in securities supported by pools of municipal leases. The
most common type of lease backed securities are certificates of participation
(COPs). However, the Fund may also invest directly in individual leases.

INVERSE FLOATERS

An inverse floater has a floating or variable interest rate that moves in the
opposite direction of market interest rates. When market interest rates go up,
the interest rate paid on the inverse floater goes down; when market interest
rates go down, the interest rate paid on the inverse floater goes up. Inverse
floaters generally respond more rapidly to market interest rate changes than
fixed rate, tax exempt securities. Inverse floaters are subject to interest rate
risks and leverage risks.

ZERO COUPON SECURITIES

Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below the
amount payable at maturity. The difference between the purchase price and the
amount paid at maturity represents interest on the zero coupon security.
Investors must wait until maturity to receive interest and principal, which
increases the interest rate risks and credit risks of a zero coupon security.

GENERAL OBLIGATION BONDS

General obligation bonds are supported by the issuer's power to exact property
or other taxes. The issuer must impose and collect taxes sufficient to pay
principal and interest on the bonds. However, the issuer's authority to impose
additional taxes may be limited by its charter or state law.

SPECIAL REVENUE BONDS

Special revenue bonds are payable solely from specific revenues received by the
issuer such as specific taxes, assessments, tolls, or fees. Bondholders may not
collect from the municipality's general taxes or revenues. For example, a
municipality may issue bonds to build a toll road, and pledge the tolls to repay
the bonds. Therefore, a shortfall in the tolls normally would result in a
default on the bonds.

PRIVATE ACTIVITY BONDS

Private activity bonds are special revenue bonds used to finance private
entities. For example, a municipality may issue bonds to finance a new factory
to improve its local economy. The municipality would lend the proceeds from its
bonds to the company using the factory, and the company would agree to make loan
payments sufficient to repay the bonds. The bonds would be payable solely from
the company's loan payments, not from any other revenues of the municipality.
Therefore, any default on the loan normally would result in a default on the
bonds.

The interest on many types of private activity bonds is subject to AMT. The Fund
may invest in bonds subject to AMT.

TAX INCREMENT FINANCING BONDS

Tax increment financing (TIF) bonds are payable from increases in taxes or other
revenues attributable to projects financed by the bonds. For example, a
municipality may issue TIF bonds to redevelop a commercial area. The TIF bonds
would be payable solely from any increase in sales taxes collected from
merchants in the area. The bonds could default if merchants' sales, and related
tax collections, failed to increase as anticipated.

VARIABLE RATE DEMAND INSTRUMENTS

Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 13 months.

CREDIT ENHANCEMENT

Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.

FUTURES CONTRACTS

Futures contracts, which are a form of derivative contracts, provide for the
future sale by one party and purchase by another party of a specified amount of
an underlying asset at a specified price, date, and time. Entering into a
contract to buy an underlying asset is commonly referred to as buying a contract
or holding a long position in the asset. Entering into a contract to sell an
underlying asset is commonly referred to as selling a contract or holding a
short position in the asset. Futures contracts are considered to be commodity
contracts.

The Fund may buy and sell interest rate and index financial futures contracts.
Depending upon how the Fund uses futures contracts and the relationships between
the market value of a futures contract and the underlying asset, futures
contracts may increase or decrease the Fund's exposure to interest rate risks,
and may also expose the Fund to liquidity and leverage risks.

SPECIAL TRANSACTIONS

DELAYED DELIVERY TRANSACTIONS

Delayed delivery transactions, including when-issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit risks
in the event of a counterparty default. These transactions create leverage
risks.

ASSET COVERAGE

In order to secure its obligations in connection with futures contracts or
special transactions, the Fund will either own the underlying assets, enter into
an offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to secure
such obligations without entering into an offsetting futures contract or
terminating a special transaction. This may cause the Fund to miss favorable
trading opportunities or to realize losses on futures contracts or special
transactions.

INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES

The Adviser will determine whether a security is investment grade based upon the
credit ratings given by one or more nationally recognized rating services. For
example, Standard and Poor's, a rating service, assigns ratings to investment
grade securities (AAA, AA, A, and BBB) based on their assessment of the
likelihood of the issuer's inability to pay interest or principal (default) when
due on each security. Lower credit ratings correspond to higher credit risk. If
a security has not received a rating, the Fund must rely entirely upon the
Adviser's credit assessment that the security is comparable to investment grade.

What are the Specific Risks of Investing in the Fund?

INTEREST RATE RISKS

Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.

Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of a
fixed income security to changes in interest rates.

CREDIT RISKS

Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money.

Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investor Services, Inc. These services assign
ratings to securities by assessing the likelihood of issuer default. Lower
credit ratings correspond to higher credit risk. If a security has not received
a rating, the Fund must rely entirely upon the Adviser's credit assessment.

Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.

LIQUIDITY RISKS

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

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

CALL RISKS

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

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

SECTOR RISKS

A substantial part of the Fund's portfolio may be comprised of securities credit
enhanced by banks or companies with similar characteristics. As a result, the
Fund will be more susceptible to any economic, business, political, or other
developments which generally affect these entities.

LEVERAGE RISKS

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

Investments can have these same results if their returns are based on a multiple
of a specified index, security, or other benchmark.

What Do Shares Cost?

You can purchase, redeem or exchange Shares any day the New York Stock Exchange
(NYSE) is open. When the Fund receives your transaction request in proper form,
it is processed at the next calculated net asset value (NAV) plus any applicable
front-end sales charge (public offering price).

NAV is determined at the end of regular trading (normally 4:00 p.m. Eastern
time) each day the NYSE is open. The Fund's current NAV and public offering
price may be found in the mutual funds section of certain local newspapers under
"Federated" and the appropriate class designation listing.

The following table summarizes the minimum required investment amount and the
maximum sales charge, if any, that you will pay on an investment in the Fund.
Keep in mind that investment professionals may charge you fees for their
services in connection with your Share transactions.

MAXIMUM SALES CHARGE
MINIMUM
INITIAL/ CONTINGENT
SUBSEQUENT FRONT-END DEFERRED
INVESTMENT SALES SALES
SHARES OFFERED AMOUNTS 1 CHARGE 2 CHARGE 3
Class A $1,500/$100 4.50% None
Class B $1,500/$100 None 5.50%
Class C $1,500/$100 None 1.00%

1 The minimum subsequent investment amounts for Systematic Investment Programs
is $50. Investment professionals may impose higher or lower minimum investment
requirements on their customers than those imposed by the Fund.

Orders for $250,000 or more will be invested in Class A Shares instead of Class
B Shares to maximize your return and minimize the sales charges and marketing
fees. Accounts held in the name of an investment professional may be treated
differently. Class B Shares will automatically convert into Class A Shares after
eight full years from the purchase date. This conversion is a non-taxable event.

2 Front-End Sales Charge is expressed as a percentage of public offering
price. See "Sales Charge When You Purchase."

3 See "Sales Charge When You Redeem."

SALES CHARGE WHEN YOU PURCHASE

<TABLE>
<CAPTION>
<S> <C> <C>
CLASS A SHARES
Sales Charge
as a Percentage Sales Charge
of Public as a Percentage
Purchase Amount Offering Price of NAV
Less than $100,000 4.50% 4.71%
$100,000 but less than $250,000 3.75% 3.90%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $1 million 2.00% 2.04%
$1 million or greater 1 0.00% 0.00%
</TABLE>

1 A contingent deferred sales charge of 0.75% of the redemption amount applies
to Class A Shares redeemed up to 24 months after purchase under certain
investment programs where an investment professional received an advance payment
on the transaction.

THE SALES CHARGE AT PURCHASE MAY BE REDUCED OR ELIMINATED BY:

* purchasing Shares in greater quantities to reduce the applicable sales
charge;

* combining concurrent purchases of Shares:

- - by you, your spouse, and your children under age 21; or

- - of the same share class of two or more Federated Funds (other than money
market funds);

* accumulating purchases (in calculating the sales charge on an additional
purchase, include the current value of previous Share purchases still invested
in the Fund); or

* signing a letter of intent to purchase a specific dollar amount of Shares
within 13 months (call your investment professional or the Fund for more
information).

THE SALES CHARGE WILL BE ELIMINATED WHEN YOU PURCHASE SHARES:

* within 120 days of redeeming Shares of an equal or lesser amount;

* by exchanging shares from the same share class of another Federated Fund
(other than a money market fund);

* through wrap accounts or other investment programs where you pay the
investment professional directly for services;

* through investment professionals that receive no portion of the sales
charge;

* as a Federated Life Member (Class A Shares only) and their immediate
family members; or

* as a Director or employee of the Fund, the Adviser, the Distributor and their
affiliates, and the immediate family members of these individuals.

If your investment qualifies for a reduction or elimination of the sales charge,
you or your investment professional should notify the Fund's Distributor at the
time of purchase. If the Distributor is not notified, you will receive the
reduced sales charge only on additional purchases, and not retroactively on
previous purchases.

SALES CHARGE WHEN YOU REDEEM

Your redemption proceeds may be reduced by a sales charge, commonly referred to
as a contingent deferred sales charge (CDSC).

CLASS A SHARES
A contingent deferred sales charge of 0.75% of the redemption amount applies to
Class A Shares redeemed up to 24 months after purchase under certain investment
programs where an investment professional received an advance payment on the
transaction.

CLASS B SHARES
Shares Held Up To: CDSC
1 year 5.50%
2 years 4.75%
3 years 4.00%
4 years 3.00%
5 years 2.00%
6 years 1.00%
7 years or more 0.00%
CLASS C SHARES
You will pay a 1% CDSC if you redeem Shares within one year of the purchase
date.

YOU WILL NOT BE CHARGED A CDSC WHEN REDEEMING SHARES:

* purchased with reinvested dividends or capital gains;

* purchased within 120 days of redeeming Shares of an equal or lesser
amount;

* that you exchanged into the same share class of another Federated Fund where
the shares were held for the applicable CDSC holding period (other than a money
market fund);

* purchased through investment professionals who did not receive advanced
sales payments;

* if, after you purchase Shares, you become disabled as defined by the IRS;

* if the Fund redeems your Shares and closes your account for not meeting
the minimum balance requirement;

* if your redemption is a required retirement plan distribution; or

* upon the death of the last surviving shareholder of the account.

If your redemption qualifies, you or your investment professional should notify
the Distributor at the time of redemption to eliminate the CDSC. If the
Distributor is not notified, the CDSC will apply.

TO KEEP THE SALES CHARGE AS LOW AS POSSIBLE, THE FUND REDEEMS YOUR SHARES IN
THIS ORDER:

* Shares that are not subject to a CDSC; and

* Shares held the longest (to determine the number of years your Shares have
been held, include the time you held shares of other Federated Funds that have
been exchanged for Shares of this Fund).

The CDSC is then calculated using the share price at the time of purchase or
redemption, whichever is lower.

How is the Fund Sold?

The Fund offers three share classes: Class A Shares, Class B Shares and Class C
Shares, each representing interests in a single portfolio of securities.

The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to individuals and institutions, directly or through
investment professionals. The Fund may not be a suitable investment for
retirement plans.

When the Distributor receives marketing fees and sales charges, it may pay some
or all of them to investment professionals. The Distributor and its affiliates
may pay out of their assets other amounts (including items of material value) to
investment professionals for marketing and servicing Shares. The Distributor is
a subsidiary of Federated Investors, Inc.
(Federated).

RULE 12B-1 PLAN

The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Class B and Class C Shares. Because these
Shares pay marketing fees on an ongoing basis, your investment cost may be
higher over time than other shares with different sales charges and marketing
fees.

How to Purchase Shares

You may purchase Shares through an investment professional, directly from the
Fund, or through an exchange from another Federated Fund. The Fund reserves the
right to reject any request to purchase or exchange Shares.

Where the Fund offers more than one share class and you do not specify the class
choice on your New Account Form or form of payment (e.g., Federal Reserve wire
or check) you automatically will receive Class A Shares.

THROUGH AN INVESTMENT PROFESSIONAL

* Establish an account with the investment professional; and

* Submit your purchase order to the investment professional before the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will receive
the next calculated NAV if the investment professional forwards the order to the
Fund on the same day and the Fund receives payment within three business days.
You will become the owner of Shares and receive dividends when the Fund receives
your payment.

Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."

DIRECTLY FROM THE FUND

* Establish your account with the Fund by submitting a completed New
Account Form; and

* Send your payment to the Fund by Federal Reserve wire or check.

You will become the owner of Shares and your Shares will be priced at the next
calculated NAV after the Fund receives your wire or your check. If your check
does not clear, your purchase will be canceled and you could be liable for any
losses or fees the Fund or its transfer agent incurs.

An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the next calculated NAV after the Fund receives
the order.

BY WIRE

Send your wire to:

State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number, or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number

You cannot purchase Shares by wire on holidays when wire transfers are
restricted.

BY CHECK

Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:

Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:

Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).

THROUGH AN EXCHANGE

You may purchase Shares through an exchange from the same Share class of another
Federated Fund. You must meet the minimum initial investment requirement for
purchasing Shares and both accounts must have identical registrations.

BY SYSTEMATIC INVESTMENT PROGRAM

Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.

BY AUTOMATED CLEARINGHOUSE (ACH)

Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.

How to Redeem and Exchange Shares

You should redeem or exchange Shares:

* through an investment professional if you purchased Shares through an
investment professional; or

* directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

Submit your redemption or exchange request to your investment professional by
the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). The
redemption amount you will receive is based upon the next calculated NAV after
the Fund receives the order from your investment professional.

DIRECTLY FROM THE FUND

BY TELEPHONE

You may redeem or exchange Shares by calling the Fund once you have completed
the appropriate authorization form for telephone transactions. If you call
before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time)
you will receive a redemption amount based on that day's NAV.

BY MAIL

You may redeem or exchange Shares by mailing a written request to the Fund.

You will receive a redemption amount based on the next calculated NAV after the
Fund receives your written request in proper form. Send requests by mail to:

Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:

Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317

All requests must include:

* Fund Name and Share Class, account number and account registration;

* amount to be redeemed or exchanged;

* signatures of all shareholders exactly as registered; and

* IF EXCHANGING, the Fund Name and Share Class, account number and account
registration into which you are exchanging.

Call your investment professional or the Fund if you need special instructions.

SIGNATURE GUARANTEES

Signatures must be guaranteed if:

* your redemption will be sent to an address other than the address of
record;

* your redemption will be sent to an address of record that was changed
within the last 30 days;

* a redemption is payable to someone other than the shareholder(s) of
record; or

* IF EXCHANGING (TRANSFERRING) into another fund with a different shareholder
registration.

A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.

PAYMENT METHODS FOR REDEMPTIONS

Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:

* an electronic transfer to your account at a financial institution that is
an ACH member; or

* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.

REDEMPTION IN KIND

Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.

LIMITATIONS ON REDEMPTION PROCEEDS

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

* to allow your purchase to clear;

* during periods of market volatility; or

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

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

EXCHANGE PRIVILEGES

You may exchange Shares of the Fund into Shares of the same class of another
Federated Fund. To do this, you must:

* ensure that the account registrations are identical;

* meet any minimum initial investment requirements; and

* receive a prospectus for the fund into which you wish to exchange.

An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction.

The Fund may modify or terminate the exchange privilege at any time. The Fund's
management or investment adviser may determine from the amount, frequency and
pattern of exchanges that a shareholder is engaged in excessive trading that is
detrimental to the Fund and other shareholders. If this occurs, the Fund may
terminate the availability of exchanges to that shareholder and may bar that
shareholder from purchasing other Federated Funds.

SYSTEMATIC WITHDRAWAL/EXCHANGE PROGRAM

You may automatically redeem or exchange Shares in a minimum amount of $100 on a
regular basis. Complete the appropriate section of the New Account Form or an
Account Service Options Form or contact your investment professional or the
Fund. Your account value must meet the minimum initial investment amount at the
time the program is established. This program may reduce, and eventually
deplete, your account. Payments should not be considered yield or income.

Generally, it is not advisable to continue to purchase Class A Shares subject to
a sales charge while redeeming Shares using this program.

SYSTEMATIC WITHDRAWAL PROGRAM (SWP) ON CLASS B SHARES

You will not be charged a CDSC on SWP redemptions if:

* you redeem 12% or less of your account value in a single year;

* you reinvest all dividends and capital gains distributions; and

* your account has at least a $10,000 balance when you establish the SWP. (You
cannot aggregate multiple Class B Share accounts to meet this minimum balance).

You will be subject to a CDSC on redemption amounts that exceed the 12% annual
limit. In measuring the redemption percentage, your account is valued when you
establish the SWP and then annually at calendar year-end. You can redeem
monthly, quarterly or semi-annually.

For SWP accounts established prior to April 1, 1999, your account must be at
least one year old in order to be eligible for the waiver of the CDSC.

ADDITIONAL CONDITIONS

TELEPHONE TRANSACTIONS

The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

SHARE CERTIFICATES

The Fund no longer issues share certificates. If you are redeeming or exchanging
Shares represented by certificates previously issued by the Fund, you must
return the certificates with your written redemption or exchange request. For
your protection, send your certificates by registered or certified mail, but do
not endorse them.

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

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

DIVIDENDS AND CAPITAL GAINS

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

In addition, the Fund pays any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.

If you purchase Shares just before a Fund declares a capital gain distribution,
you will pay the full price for the Shares and then receive a portion of the
price back in the form of a taxable distribution, whether or not you reinvest
the distribution in Shares. Therefore, you should consider the tax implications
of purchasing Shares shortly before the Fund declares a capital gain. Contact
your investment professional or the Fund for information concerning when
dividends and capital gains will be paid.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions or exchanges cause the account balance to fall below the
minimum initial investment amount. Before an account is closed, you will be
notified and allowed 30 days to purchase additional Shares to meet the minimum.

TAX INFORMATION

The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes. Capital gains and non-exempt
dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions and exchanges are taxable sales. Please consult your tax adviser
regarding your federal, state and local tax liability.

Who Manages the Fund?

The Board of Directors governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company (formerly Federated Advisers).
The Adviser manages the Fund's assets, including buying and selling portfolio
securities. The Adviser's address is Federated Investors Tower, 1001 Liberty
Avenue, Pittsburgh, PA 15222-3779.

The Adviser and other subsidiaries of Federated advise approximately 175 mutual
funds and separate accounts, which totaled approximately $111 billion in assets
as of December 31, 1998. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.

THE FUND'S PORTFOLIO MANAGERS ARE:

J. SCOTT ALBRECHT

J. Scott Albrecht has been the Fund's portfolio manager since 1996. Mr. Albrecht
joined Federated in 1989. He has been a Senior Portfolio Manager since 1997 and
a Vice President of the Fund's Adviser since 1994. He was a Portfolio Manager
from 1994 to 1996. Mr. Albrecht is a Chartered Financial Analyst and received
his M.S. in Public Management from Carnegie Mellon University.

MARY JO OCHSON

Mary Jo Ochson has been the Fund's portfolio manager
since 1996. She is Vice President of the Fund.
Ms. Ochson joined Federated in 1982 and has been a
Senior Portfolio Manager and a Senior Vice President of the
Fund's Adviser since 1996. From 1988 through 1995, Ms. Ochson
served as a Portfolio Manager and a Vice President of the
Fund's Adviser. Ms. Ochson is a Chartered Financial Analyst and received
her M.B.A. in Finance from the University of Pittsburgh.

ADVISORY FEES

The Adviser receives an annual investment advisory fee of 0.30% of the Fund's
average daily net assets plus 4.50% of the Fund's gross income. The Adviser may
voluntarily waive a portion of its fee or reimburse the Fund for certain
operating expenses.

Gross income includes, in general, discount earned on U.S. Treasury bills and
agency discount notes, interest earned on all interest-bearing obligations, and
dividend income recorded on the ex-dividend date but does not include capital
gains or losses or reduction for expenses.

YEAR 2000 READINESS

The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999, or experience other date-related problems. The Year 2000 problem may cause
systems to process information incorrectly and could disrupt businesses, such as
the Fund, that rely on computers.

While it is impossible to determine in advance all of the risks to the Fund, the
Fund could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.

The Fund's service providers are making changes to their computer systems to fix
any Year 2000 problems. In addition, they are working to gather information from
third-party providers to determine their Year 2000 readiness.

Year 2000 problems would also increase the risks of the Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities the Fund
may purchase.

The financial impact of these issues for the Fund is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Fund.

Financial Information

FINANCIAL HIGHLIGHTS

The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years, or since inception, if the life of
the Fund is shorter. Some of the information is presented on a per share basis.
Total returns represent the rate an investor would have earned (or lost) on an
investment in the Fund, assuming reinvestment of any dividends and capital
gains.

This information has been audited by Deloitte & Touche LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.

Financial Highlights-Class A Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.91 $10.31 $10.82 $10.92 $11.20
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.53 0.46 0.55 0.66 0.67
Net realized and
unrealized gain (loss)
on investments (0.05) 0.64 (0.36) (0.09) (0.05)
TOTAL FROM INVESTMENT
OPERATIONS 0.48 1.10 0.19 0.57 0.62
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.52) (0.46) (0.55) (0.66) (0.67)
Distributions in excess of
net investment income 1 - (0.01) (0.05) - -
Total distributions from
net investment income (0.52) (0.47) (0.60) (0.66) (0.67)
Distributions from net
realized gain
on investments - (0.03) (0.10) (0.01) (0.23)
TOTAL DISTRIBUTIONS (0.52) (0.50) (0.70) (0.67) (0.90)
NET ASSET VALUE, END OF
PERIOD $10.87 $10.91 $10.31 $10.82 $10.92
TOTAL RETURN 2 4.46% 11.28% 1.84% 5.32% 5.90%

RATIOS TO AVERAGE NET
ASSETS:
Expenses 0.87% 0.86% 0.93% 0.98% 0.92%
Net investment income 4.86% 4.70% 5.37% 5.97% 6.17%
Expense
waiver/reimbursement 3 0.14% 0.14% 0.14% 0.13% -
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $562,883 $591,310 $595,515 $663,538 $708,712
Portfolio turnover 31% 64% 33% 29% 41%
</TABLE>

1 Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These distributions do
not represent a return of capital for federal income tax purposes.

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

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

See Notes which are an integral part of the Financial Statements

Financial Highlights-Class B Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31 1999 1998 1997 1996 1995 1
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.91 $10.31 $10.82 $10.92 $11.06
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.43 0.38 0.47 0.56 0.40
Net realized and
unrealized gain (loss)
on investments (0.05) 0.64 (0.37) (0.09) (0.03)
TOTAL FROM INVESTMENT
OPERATIONS 0.38 1.02 0.10 0.47 0.37
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.42) (0.38) (0.47) (0.56) (0.40)
Distributions in excess of
net investment income 2 - (0.01) (0.04) - -
Total distributions from
net investment income (0.42) (0.39) (0.51) (0.56) (0.40)
Distributions from net
realized gain on
investments - (0.03) (0.10) (0.01) (0.11)
TOTAL DISTRIBUTIONS (0.42) (0.42) (0.61) (0.57) (0.51)
NET ASSET VALUE, END OF
PERIOD $10.87 $10.91 $10.31 $10.82 $10.92
TOTAL RETURN 3 3.53% 10.30% 0.94% 4.40% 3.49%

RATIOS TO AVERAGE NET
ASSETS:
Expenses 1.76% 1.75% 1.82% 1.86% 1.84% 4
Net investment income 3.97% 3.81% 4.50% 5.23% 5.94% 4
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $88,756 $87,304 $77,536 $58,296 $18,201
Portfolio turnover 31% 64% 33% 29% 41%
</TABLE>

1 Reflects operations for the period from July 26, 1994 (date of initial public
offering) to March 31, 1995.

2 Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These distributions do
not represent a return of capital for federal income tax purposes.

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

4 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Financial Highlights-Class C Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.91 $10.31 $10.82 $10.92 $11.20
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.43 0.37 0.46 0.56 0.58
Net realized and
unrealized gain (loss)
on investments (0.05) 0.65 (0.36) (0.09) (0.05)
TOTAL FROM INVESTMENT
OPERATIONS 0.38 1.02 0.10 0.47 0.53
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.42) (0.37) (0.46) (0.56) (0.58)
Distributions in excess of
net investment income 1 - (0.02) (0.05) - -
Total distributions from
net investment income (0.42) (0.39) (0.51) (0.56) (0.58)
Distributions from net
realized gain on
investments - (0.03) (0.10) (0.01) (0.23)
TOTAL DISTRIBUTIONS (0.42) (0.42) (0.61) (0.57) (0.81)
NET ASSET VALUE, END OF
PERIOD $10.87 $10.91 $10.31 $10.82 $10.92
TOTAL RETURN 2 3.54% 10.31% 0.95% 4.42% 4.96%

RATIOS TO AVERAGE NET
ASSETS:
Expenses 1.75% 1.74% 1.81% 1.82% 1.81%
Net investment income 3.98% 3.83% 4.51% 5.16% 5.28%
Expense
waiver/reimbursement 3 0.01% 0.01% 0.01% 0.04% -
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $16,870 $17,616 $20,544 $25,914 $22,389
Portfolio turnover 31% 64% 33% 29% 41%
</TABLE>

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

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

See Notes which are an integral part of the Financial Statements

[Graphic]
Federated
World-Class Investment Manager
PROSPECTUS

Federated Municipal Securities Fund, Inc.

CLASS A SHARES
CLASS B SHARES
CLASS C SHARES

JULY 31, 1999

A Statement of Additional Information (SAI) dated July 31, 1999, is incorporated
by reference into this prospectus. Additional information about the Fund's
investments is contained in the Fund's annual and semi-annual reports to
shareholders as they become available. The annual report discusses market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year. To obtain the SAI, the annual report,
the semi-annual report and other information without charge, and make inquiries,
call your investment professional or the Fund at 1-800-341-7400.

You can obtain information about the Fund (including the SAI) by visiting or
writing the Public Reference Room of the Securities and Exchange Commission in
Washington, DC 20549-6009 or from the Commission's Internet site at
http://www.sec.gov. You can call 1-800-SEC-0330 for information on the Public
Reference Room's operations and copying charges.

[Graphic]
Federated
Federated Municipal Securities Fund, Inc.
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor

Investment Company Act File No. 811-2677

Cusip 313913105
Cusip 313913204
Cusip 313913303
G00322-01 (7/99)

[Graphic]

STATEMENT OF ADDITIONAL INFORMATION
Federated Municipal Securities Fund, Inc.

CLASS A SHARES

CLASS B SHARES

CLASS C SHARES

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Federated Municipal Securities Fund,
Inc. (Fund), dated July 31, 1999.

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

JULY 31, 1999

[Graphic]
Federated
World-Class Investment Manager
Federated Municipal Securities Fund, Inc.
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor

8051601B (7/99)

[Graphic]

CONTENTS

How is the Fund Organized? 1

Securities in Which the Fund Invests 1

What Do Shares Cost? 4

How is the Fund Sold? 5

Exchanging Securities for Shares 6

Subaccounting Services 6

Redemption in Kind 6

Account and Share Information 6

Tax Information 6

Who Manages and Provides Services to the Fund? 7

How Does the Fund Measure Performance? 10

Who is Federated Investors, Inc.? 13

Financial Information 14

Investment Ratings 14

Addresses 16

How is the Fund Organized?

The Fund is a diversified open-end, management investment company that was
established under the laws of the State of Maryland on September 10, 1976.
The Fund changed its name from Liberty Municipal Securities Fund, Inc. to
Federated Municipal Securities Fund, Inc. on February 26, 1996. The Fund's
investment adviser is Federated Investment Management Company (Adviser).
The Adviser, formerly known as Federated Advisers, changed its name
effective March 31, 1999.

The Board of Directors (the Board) has established three classes of shares of
the Fund, known as Class A Shares, Class B Shares and Class C Shares (Shares).
This SAI relates to all of the above-mentioned Shares.

Securities in Which the Fund Invests

In pursuing its investment strategy, the Fund may invest in the following
securities, in addition to those described in the prospectus, for any purpose
that is consistent with its investment objective.

SECURITIES DESCRIPTIONS AND TECHNIQUES

FIXED INCOME SECURITIES

Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.

A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.

The following describes the types of fixed income securities, in addition to
those described in the prospectus, in which the Fund invests.

TAX EXEMPT SECURITIES

Tax exempt securities are fixed income securities that pay interest that is not
subject to regular federal income taxes. Typically, states, counties, cities and
other political subdivisions and authorities issue tax exempt securities. The
market categorizes tax exempt securities by their source of repayment.

MUNICIPAL NOTES

Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.

DERIVATIVE CONTRACTS

Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty.

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

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

TEMPORARY DEFENSIVE INVESTMENTS

The Fund may make temporary defensive investments in the following taxable
securities:

CORPORATE DEBT SECURITIES

Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. The Fund may also purchase interests in bank loans to
companies. The credit risks of corporate debt securities vary widely among
issuers.

COMMERCIAL PAPER

Commercial paper is an issuer's obligation with a maturity of less than nine
months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and use the
proceeds (or bank loans) to repay maturing paper. If the issuer cannot continue
to obtain liquidity in this fashion, its commercial paper may default.

TREASURY SECURITIES

Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.

AGENCY SECURITIES

Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities. Agency securities are
generally regarded as having low credit risks, but not as low as treasury
securities.

BANK INSTRUMENTS

Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit
and banker's acceptances. Yankee instruments are denominated in
U.S. dollars and issued by U.S. branches of foreign banks. Eurodollar
instruments are denominated in U.S. dollars and issued by non-
U.S. branches of U.S. or foreign banks.

SPECIAL TRANSACTIONS

REPURCHASE AGREEMENTS

Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.

The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.

Repurchase agreements are subject to credit risks.

INVESTMENT RATINGS

INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES

INVESTMENT RISKS

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

TAX RISKS

* In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.

* Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.

RISKS ASSOCIATED WITH NONINVESTMENT GRADE SECURITIES

Securities rated below investment grade, also known as junk bonds, generally
entail greater market, credit and liquidity risks than investment grade
securities. For example, their prices are more volatile, economic downturns and
financial setbacks may affect their prices more negatively, and their trading
market may be more limited.

Ordinarily, the Fund will invest at least 65% of its portfolio in investment
grade securities and unrated securities determined to be of equivalent quality.
The remainder of the portfolio may be invested in securities rated below
investment grade.

FUNDAMENTAL INVESTMENT POLICIES

The Fund will invest its assets so that at least 80% of its annual interest
income is exempt from federal regular income tax.

INVESTMENT LIMITATIONS

DIVERSIFICATION OF INVESTMENTS

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

BORROWING MONEY

The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the 1940 Act.

INVESTING IN REAL ESTATE

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

INVESTING IN COMMODITIES

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

UNDERWRITING

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

MAKING LOANS

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

CONCENTRATION OF INVESTMENTS

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.

Except as otherwise noted, the above limitations cannot be changed unless
authorized by the "vote of a majority of its outstanding voting securities," as
defined by the Investment Company Act. The following limitations, however, may
be changed by the Board without shareholder approval. Shareholders will be
notified before any material change in this limitation becomes effective.

PLEDGING ASSETS

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

BUYING ON MARGIN

The Fund will not purchase any 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.

INVESTING IN ILLIQUID SECURITIES

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

The Fund applies its concentration of investments restriction as follows:

* utility companies will be divided according to their services, for example,
gas, gas transmission, electric and telephone will each be considered a separate
industry;

* 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

* asset-backed securities will be classified according to the underlying assets
securing such securities.

To conform to the current view of the SEC staff that only domestic bank
instruments may be excluded from industry concentration limitations, the Fund
will not exclude foreign bank instruments from industry concentration tests as
long as the policy of the SEC remains in effect.

DETERMINING MARKET VALUE OF SECURITIES

Market values of the Fund's portfolio securities are determined as follows:

* for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;

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

* for short-term obligations, according to the mean between bid and asked prices
as furnished by an independent pricing service, except that short-term
obligations with remaining maturities of less than 60 days at the time of
purchase may be valued at amortized cost or at fair market value as determined
in good faith by the Board; and

* for all other securities at fair value as determined in good faith by the
Board.

Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker-dealers or
other financial institutions that trade the securities.

What Do Shares Cost?

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

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

REDUCING OR ELIMINATING THE FRONT-END SALES CHARGE

You can reduce or eliminate the applicable front-end sales charge, as follows:

QUANTITY DISCOUNTS

Larger purchases of the same Share class reduce or eliminate the sales charge
you pay. You can combine purchases of Shares made on the same day by you, your
spouse and your children under age 21. In addition, purchases made at one time
by a trustee or fiduciary for a single trust estate or a single fiduciary
account can be combined.

ACCUMULATED PURCHASES

If you make an additional purchase of Shares, you can count previous Share
purchases still invested in the Fund in calculating the applicable sales charge
on the additional purchase.

CONCURRENT PURCHASES

You can combine concurrent purchases of the same share class of two or more
Federated Funds in calculating the applicable sales charge.

LETTER OF INTENT CLASS A SHARES

You can sign a Letter of Intent committing to purchase a certain amount of the
same class of Shares within a 13-month period to combine such purchases in
calculating the sales charge. The Fund's custodian will hold Shares in escrow
equal to the maximum applicable sales charge. If you complete the Letter of
Intent, the Custodian will release the Shares in escrow to your account. If you
do not fulfill the Letter of Intent, the Custodian will redeem the appropriate
amount from the Shares held in escrow to pay the sales charges that were not
applied to your purchases.

REINVESTMENT PRIVILEGE

You may reinvest, within 120 days, your Share redemption proceeds at the next
determined NAV without any sales charge.

PURCHASES BY AFFILIATES OF THE FUND

The following individuals and their immediate family members may buy Shares at
NAV without any sales charge because there are nominal sales efforts associated
with their purchases:

* the Directors, employees and sales representatives of the Fund, the
Adviser, the Distributor and their affiliates;

* any associated person of an investment dealer who has a sales agreement with
the Distributor; and

* trusts, pension or profit-sharing plans for these individuals.

FEDERATED LIFE MEMBERS

Shareholders of the Fund known as "Federated Life Members" are exempt from
paying any front-end sales charge. These shareholders joined the Fund
originally:

* through the "Liberty Account," an account for Liberty Family of Funds
shareholders on February 28, 1987 (the Liberty Account and Liberty Family of
Funds are no longer marketed); or

* as Liberty Account shareholders by investing through an affinity group prior
to August 1, 1987.

REDUCING OR ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE

These reductions or eliminations are offered because: no sales commissions have
been advanced to the investment professional selling Shares; the shareholder has
already paid a Contingent Deferred Sales Charge (CDSC); or nominal sales efforts
are associated with the original purchase of Shares.

Upon notification to the Distributor or the Fund's transfer agent, no CDSC will
be imposed on redemptions:

* following the death or post-purchase disability, as defined in Section
72(m)(7) of the Internal Revenue Code of 1986, of the last surviving
shareholder;

* representing minimum required distributions from an Individual Retirement
Account or other retirement plan to a shareholder who has attained the age of
70-1/2;

* of Shares that represent a reinvestment within 120 days of a
previous redemption;

* of Shares held by the Directors, employees, and sales representatives of the
Fund, the Adviser, the Distributor and their affiliates; employees of any
investment professional that sells Shares according to a sales agreement with
the Distributor; and the immediate family members of the above persons;

* of Shares originally purchased through a bank trust department, a registered
investment adviser or retirement plans where the third party administrator has
entered into certain arrangements with the Distributor or its affiliates, or any
other investment professional, to the extent that no payments were advanced for
purchases made through these entities;

* which are involuntary redemptions processed by the Fund because the
accounts do not meet the minimum balance requirements; and

* which are qualifying redemptions of Class B Shares under a Systematic
Withdrawal Program.

How is the Fund Sold?

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

FRONT-END SALES CHARGE REALLOWANCES

The Distributor receives a front-end sales charge on certain Share sales. The
Distributor generally pays up to 90% (and as much as 100%) of this charge to
investment professionals for sales and/or administrative services. Any payments
to investment professionals in excess of 90% of the front-end sales charge are
considered supplemental payments. The Distributor retains any portion not paid
to an investment professional.

RULE 12B-1 PLAN (CLASS B SHARES AND CLASS C SHARES)

As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets.

The Fund may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.

For some classes of Shares, the maximum Rule 12b-1 Plan fee that can be paid in
any one year may not be sufficient to cover the marketing-related expenses the
Distributor has incurred. Therefore, it may take the Distributor a number of
years to recoup these expenses.

Federated and its subsidiaries may benefit from arrangements where the Rule
12b-1 Plan fees related to Class B Shares may be paid to third parties who have
advanced commissions to investment professionals.

SHAREHOLDER SERVICES

The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated, for providing shareholder services and maintaining shareholder
accounts. Federated Shareholder Services Company may select others to perform
these services for their customers and may pay them fees.

SUPPLEMENTAL PAYMENTS

Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.

Investment professionals receive such fees for providing distribution- related
or shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.

When an investment professional's customer purchases shares, the investment
professional may receive:

* an amount up to 5.50% and 1.00%, respectively, of the NAV of Class B and C
Shares.

CLASS A SHARES

Investment professionals purchasing Class A Shares for their customers are
eligible to receive an advance payment from the Distributor based on the
following breakpoints:

<TABLE>

ADVANCE PAYMENTS
AS A PERCENTAGE OF
AMOUNT PUBLIC OFFERING PRICE
<S> <C>
First $1 - $5 million 0.75%
Next $5 - $20 million 0.50%
Over $20 million 0.25%

</TABLE>

For accounts with assets over $1 million, the dealer advance payments reset
annually to the first breakpoint on the anniversary of the first purchase.

Class A Share purchases under this program may be made by Letter of Intent or by
combining concurrent purchases. The above advance payments will be paid only on
those purchases that were not previously subject to a front-end sales charge and
dealer advance payments. Certain retirement accounts may not be eligible for
this program.

A contingent deferred sales charge of 0.75% of the redemption amount applies to
Class A Shares redeemed up to 24 months after purchase. The CDSC does not apply
under certain investment programs where the investment professional does not
receive an advance payment on the transaction including, but not limited to,
trust accounts and wrap programs where the investor pays an account level fee
for investment management.

Exchanging Securities for Shares

You may contact the Distributor to request a purchase of Shares in exchange for
securities you own. The Fund reserves the right to determine whether to accept
your securities and the minimum market value to accept. The Fund will value your
securities in the same manner as it values its assets. This exchange is treated
as a sale of your securities for federal tax purposes.

Subaccounting Services

Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.

Redemption in Kind

Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.

Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.

Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.

Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.

Account and Share Information

VOTING RIGHTS

Each share of the Fund gives the shareholder one vote in Director elections and
other matters submitted to shareholders for vote.

All Shares of the Fund have equal voting rights, except that in matters
affecting only a particular class, only Shares of that class are entitled to
vote.

Directors may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Fund's outstanding shares.

As of July 1, 1999, the following shareholders owned of record, beneficially, or
both, 5% or more of the Fund's outstanding Class C Shares: Merrill Lynch,
Pierce, Fenner & Smith, Inc. (for the sole benefit of its customers),
Jacksonville, Florida, owned approximately 450,389 Shares (30.18%).

Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

Tax Information

FEDERAL INCOME TAX

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

Who Manages and Provides Services to the Fund?

BOARD OF DIRECTORS

The Board is responsible for managing the Fund's business affairs and for
exercising all the Fund's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Fund,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Director from the Fund for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. The Federated Fund Complex is
comprised of 54 investment companies, whose investment advisers are affiliated
with the Fund's Adviser.

As of July 1, 1999, the Fund's Board and Officers as a group owned less than 1%
of the Fund's outstanding Class A, B, and C Shares.

An asterisk (*) denotes a Director who is deemed to be an interested person as
defined in the Investment Company Act of 1940. A pound sign (#) denotes a Member
of the Board's Executive Committee, which handles the Board's responsibilities
between its meetings.

<TABLE>

NAME TOTAL
BIRTHDATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM FUND
POSITION WITH FUND FOR PAST FIVE YEARS FROM FUND AND FUND COMPLEX
<S> <C> <C> <C>
JOHN F. DONAHUE*#+ Chief Executive Officer $0 $0 for the Fund and
Birth Date: July 28, 1924 and Director or Trustee of 54 other investment
Federated Investors Tower the Federated Fund companies in the Fund
1001 Liberty Avenue Complex; Chairman and Complex
Pittsburgh, PA Director, Federated
CHAIRMAN and DIRECTOR Investors, Inc.; Chairman
and Trustee, Federated Investment Management
Company; Chairman and Director, Federated
Investment Counseling and Federated Global
Investment Management Corp.; Chairman,
Passport Research, Ltd.
THOMAS G. BIGLEY Director or Trustee of the Federated Fund $1,447.21 $113,860.22 for the Fund
Birth Date: February 3, 1934 Complex; Director, Member of Executive and 54 other investment
15 Old Timber Trail Committee, Children's Hospital of Pittsburgh; companies in the Fund
Pittsburgh, PA Director, Robroy Industries, Inc. (coated steel Complex
DIRECTOR conduits/computer storage equipment);
formerly: Senior Partner, Ernst & Young LLP;
Director, MED 3000 Group, Inc. (physician
practice management); Director, Member of
Executive Committee, University of Pittsburgh.
JOHN T. CONROY, JR. Director or Trustee of the Federated Fund $1,592.16 $125,264.48 for the Fund
Birth Date: June 23, 1937 Complex; President, Investment Properties and 54 other investment
Wood/IPC Commercial Dept. Corporation; Senior Vice President, companies in the Fund
John R. Wood Associates, Inc. John R. Wood and Associates, Inc., Realtors; Complex
Realtors Partner or Trustee in private real estate ventures
3255 Tamiami Trial North in Southwest Florida; formerly: President,
Naples, FL Naples Property Management, Inc. and
DIRECTOR Northgate Village Development Corporation

NICHOLAS CONSTANTAKIS Director or Trustee of the Federated Fund $1,447.21 $47,958.02 for the Fund
Birth Date: September 3, 1939 Complex; formerly: Partner, Andersen and 39 other investment
175 Woodshire Drive Worldwide SC. companies in the Fund
Pittsburgh, PA Complex
DIRECTOR

JOHN F. CUNNINGHAM Director or Trustee of some of the Federated $356.83 $0 for the Fund and
Birth Date: March 5, 1943 Fund Complex; Chairman, President and Chief 40 other investment
353 El Brillo Way Executive Officer, Cunningham & Co., Inc. companies in the Fund
Palm Beach, FL (strategic business consulting); Trustee Complex
DIRECTOR Associate, Boston College; Director, EMC
Corporation (computer storage systems);
formerly: Director, Redgate Communications.

Previous Positions: Chairman of the Board and
Chief Executive Officer, Computer Consoles,
Inc.; President and Chief Operating Officer,
Wang Laboratories; Director, First National
Bank of Boston; Director, Apollo Computer, Inc.

LAWRENCE D. ELLIS, M.D.* Director or Trustee of the Federated Fund $1,447.21 $113,860.22 for the
Birth Date: October 11, 1932 Complex; Professor of Medicine, University of Fund and 54 other investment
3471 Fifth Avenue Pittsburgh; Medical Director, University of companies in the Fund
Suite 1111 Pittsburgh Medical Center - Downtown; Complex
Pittsburgh, PA Hematologist, Oncologist, and Internist,
DIRECTOR University of Pittsburgh Medical Center;
Member, National Board of Trustees, Leukemia
Society of America.

PETER E. MADDEN Director or Trustee of the Federated Fund $1,482.96 $113,860.22 for the
Birth Date: March 16, 1942 Complex; formerly: Representative, Fund and 54 other investment
One Royal Palm Way Commonwealth of Massachusetts General companies in the Fund
100 Royal Palm Way Court; President, State Street Bank and Trust Complex
Palm Beach, FL Company and State Street Corporation.
DIRECTOR
Previous Positions: Director, VISA USA and
VISA International; Chairman and Director,
Massachusetts Bankers Association; Director,
Depository Trust Corporation; Director, The
Boston Stock Exchange.

<CAPTION>
NAME TOTAL
BIRTHDATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM FUND
POSITION WITH FUND FOR PAST FIVE YEARS FROM FUND AND FUND COMPLEX
<S> <C> <C> <C>
CHARLES F. MANSFIELD, JR.++ Director or Trustee of some $0 $0 for the Fund and
Birth Date: April 10, 1945 of the Federated Fund 43 other investment
80 South Road Complex; Management companies in the Fund
Westhampton Beach, NY Consultant. Complex
DIRECTOR
Previous Positions: Chief Executive Officer,
PBTC International Bank; Partner, Arthur
Young & Company (now Ernst & Young LLP);
Chief Financial Officer of Retail Banking
Sector, Chase Manhattan Bank; Senior Vice
President, Marine Midland Bank; Vice
President, Citibank; Assistant Professor of
Banking and Finance, Frank G. Zarb School of
Business, Hofstra University.

JOHN E. MURRAY, JR., J.D., S.J.D.# Director or Trustee of the Federated Fund $1,482.96 $113,860.22 for the Fund
Birth Date: December 20, 1932 Complex; President, Law Professor, Duquesne and 54 other investment
President, Duquesne University University; Consulting Partner, Mollica & companies in the Fund
Pittsburgh, PA Murray; Director, Michael Baker Corp. Complex
DIRECTOR (engineering, construction, operations, and
technical services).

Previous Positions: Dean and Professor of Law,
University of Pittsburgh School of Law; Dean
and Professor of Law, Villanova University
School of Law.

MARJORIE P. SMUTS Director or Trustee of the Federated Fund $1,447.21 $113,860.22 for the
Birth Date: June 21, 1935 Complex; Public Relations/Marketing/ Fund and 54 other investment
4905 Bayard Street Conference Planning. companies in the Fund
Pittsburgh, PA
DIRECTOR Previous Positions: National Spokesperson, Complex
Aluminum Company of America; television
producer; business owner.

JOHN S. WALSH++ Director or Trustee of some of the Federated $0 $0 for the Fund and
Birth Date: November 28, 1957 Fund Complex; President and Director, Heat 41 other investment
2007 Sherwood Drive Wagon, Inc. (manufacturer of construction companies in the Fund
Valparaiso, IN temporary heaters); President and Director, Complex
DIRECTOR Manufacturers Products, Inc. (distributor of
portable construction heaters); President,
Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh &
Kelly, Inc. (heavy highway contractor); formerly:
Vice President, Walsh & Kelly, Inc.

J. CHRISTOPHER DONAHUE*+ President or Executive Vice President of the $0 $0 for the Fund and
Birth Date: April 11, 1949 Federated Fund Complex; Director or Trustee of 22 other investment
Federated Investors Tower some of the Funds in the Federated Fund companies in the Fund
1001 Liberty Avenue Complex; President and Director, Federated Complex
Pittsburgh, PA Investors, Inc.; President and Trustee, Federated
PRESIDENT and DIRECTOR Investment Management Company; President
and Director, Federated Investment Counseling
and Federated Global Investment Management
Corp.; President, Passport Research, Ltd.;
Trustee, Federated Shareholder Services
Company; Director, Federated Services
Company.

EDWARD C. GONZALES Trustee or Director of some of the Funds in the $0 $0 for the Fund and
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive 1 other investment
Federated Investors Tower Vice President and Treasurer of some of the company in the Fund
1001 Liberty Avenue Funds in the Federated Fund Complex; Vice Complex
Pittsburgh, PA Chairman, Federated Investors, Inc.; Vice
EXECUTIVE VICE PRESIDENT President, Federated Investment Management
Company, Federated Investment Counseling,
Federated Global Investment Management
Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated
Securities Corp.; Trustee, Federated Shareholder
Services Company.

JOHN W. MCGONIGLE Executive Vice President and Secretary of the $0 $0 for the Fund and
Birth Date: October 26, 1938 Federated Fund Complex; Executive Vice 54 other investment
Federated Investors Tower President, Secretary, and Director, Federated companies in the Fund
1001 Liberty Avenue Investors, Inc.; Trustee, Federated Investment Complex
Pittsburgh, PA Management Company; Director, Federated
EXECUTIVE VICE PRESIDENT and Investment Counseling and Federated Global
SECRETARY Investment Management Corp.; Director
Federated Services Company; Director,
Federated Securities Corp.

RICHARD J. THOMAS Treasurer of the Federated Fund Complex; Vice $0 $0 for the Fund
Birth Date: June 17, 1954 President - Funds Financial Services Division, and 54 other investment
Federated Investors Tower Federated Investors, Inc.; formerly: various companies in the Fund
1001 Liberty Avenue management positions within Funds Financial Complex
Pittsburgh, PA Services Division of Federated Investors, Inc.
TREASURER

RICHARD B. FISHER President or Vice President of some of the $0 $0 for the Fund and
Birth Date: May 17, 1923 Funds in the Federated Fund Complex; Director 6 other investment
Federated Investors Tower or Trustee of some of the Funds in the companies in the Fund
1001 Liberty Avenue Federated Fund Complex; Executive Vice Complex
Pittsburgh, PA President, Federated Investors, Inc.; Chairman
VICE PRESIDENT and Director, Federated Securities Corp.

<CAPTION>
NAME TOTAL
BIRTHDATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM FUND
POSITION WITH FUND FOR PAST FIVE YEARS FROM FUND AND FUND COMPLEX
<S> <C> <C> <C>
WILLIAM D. DAWSON, III Chief Investment Officer $0 $0 for the Fund and
Birth Date: March 3, 1949 of this Fund and various 41 other investment
Federated Investors Tower other Funds in the companies in the Fund
1001 Liberty Avenue Federated Fund Complex; Complex
Pittsburgh, PA Executive Vice President,
CHIEF INVESTMENT OFFICER Federated Investment Counseling, Federated
Global Investment Management Corp.,
Federated Investment Management Company and
Passport Research, Ltd.; Registered
Representative, Federated Securities Corp.;
Portfolio Manager, Federated Administrative
Services; Vice President, Federated
Investors, Inc.; formerly: Executive Vice
President and Senior Vice President,
Federated Investment Counseling
Institutional Portfolio Management Services
Division; Senior Vice President, Federated
Investment Management Company and Passport
Research, Ltd.
MARY JO OCHSON Mary Jo Ochson has been the Fund's portfolio $0 $0 for the Fund and
Birth Date: September 12, 1953 manager since 1996. She is Vice President of 7 other investment
Federated Investors Tower the Fund. Ms. Ochson joined Federated in 1982 companies in the Fund
1001 Liberty Avenue and has been a Senior Portfolio Manager and a Complex
Pittsburgh, PA Senior Vice President of the Fund's Adviser
VICE PRESIDENT since 1996. From 1988 through 1995,
Ms. Ochson served as a Portfolio Manager and
a Vice President of the Fund's Adviser.
Ms. Ochson is a Chartered Financial Analyst
and received her M.B.A. in Finance from the
University of Pittsburgh.

</TABLE>

+ Mr. Donahue is the father of J. Christopher Donahue, President and
Director of the Fund.

++ Mr. Walsh became a member of the Board of Directors on January 1, 1999.
Mr. Mansfield became a member of the Board of Directors on June 30, 1999.
They did not earn any fees for serving the Fund Complex since these fees
are reported as of the end of the last calendar year. They did not
receive any fees as of the fiscal year end of the Fund.

INVESTMENT ADVISER

The Adviser conducts investment research and makes investment decisions for the
Fund. The Adviser is a wholly owned subsidiary of Federated.

The Adviser shall not be liable to the Fund or any Fund shareholder for any
losses that may be sustained in the purchase, holding, or sale of any security
or for anything done or omitted by it, except acts or omissions involving
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties imposed upon it by its contract with the Fund.

OTHER RELATED SERVICES

Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. The Adviser will generally use those who are recognized dealers in
specific portfolio instruments, except when a better price and execution of the
order can be obtained elsewhere. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.

Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.

ADMINISTRATOR

Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:

<TABLE>

MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
<S> <C>
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million

</TABLE>

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.

Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.

CUSTODIAN

State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type, and
number of accounts and transactions made by
shareholders.

INDEPENDENT PUBLIC ACCOUNTANTS

The independent public accountant for the Fund, Deloitte & Touche LLP, plans and
performs its audit so that it may provide an opinion as to whether the Fund's
financial statements and financial highlights are free of material misstatement.

FEES PAID BY THE FUND FOR SERVICES

<TABLE>

FOR THE YEAR ENDED
MARCH 31, 1999 1999 1998 1997
<S> <C> <C> <C>
Advisory Fee Earned $ 3,832,697 $ 3,872,458 $ 4,379,885
Brokerage Commissions 0 0 0
Administrative Fee 517,819 530,941 547,583
12B-1 FEE
Class B Shares 653,674 - -
Class C Shares 129,084 - -
SHAREHOLDER SERVICES FEE
Class A Shares 1,455,986 - -
Class B Shares 217,892 - -
Class C Shares 43,028 - -

</TABLE>

Fees are allocated among classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable class of Shares.

How Does the Fund Measure Performance?

The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.

Share performance reflects the effect of non-recurring charges, such as maximum
sales charges, which, if excluded, would increase the total return and yield.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.

Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.

AVERAGE ANNUAL TOTAL RETURNS AND YIELD

Total returns given for the one-year, five-year and ten-year or start of
performance periods ended December 31, 1998.

Yield and Tax-Equivalent Yield given for the 30-day period ended March 31, 1999.

<TABLE>

30-DAY
PERIOD 1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES
Total Return NA 0.84% 3.85% 6.62%
Yield 4.19% NA NA NA
Tax-Equivalent Yield 6.94% NA NA NA

<CAPTION>
30-DAY START OF PERFORMANCE
PERIOD 1 YEAR 5 YEARS ON 7/26/94
<S> <C> <C> <C> <C>
CLASS B SHARES
Total Return NA (1.08%) NA 4.64%
Yield 3.50% NA NA NA
Tax-Equivalent Yield 5.79% NA NA NA

<CAPTION>
30-DAY START OF PERFORMANCE
PERIOD 1 YEAR 5 YEARS ON 4/21/93
<S> <C> <C> <C> <C>
CLASS C SHARES
Total Return NA 3.58% 3.90% 4.26%
Yield 3.51% NA NA NA
Tax-Equivalent Yield 5.81% NA NA NA

</TABLE>

TOTAL RETURN

Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.

The average annual total return for Shares is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of Shares owned at the end of the period by
the NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.

YIELD

The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a 30-day period; by (ii) the maximum offering
price per Share on the last day of the period. This number is then annualized
using semi-annual compounding. This means that the amount of income generated
during the 30-day period is assumed to be generated each month over a 12-month
period and is reinvested every six months. The tax-equivalent yield of Shares is
calculated similarly to the yield, but is adjusted to reflect the taxable yield
that Shares would have had to earn to equal the actual yield, assuming a
specific tax rate. The yield and tax-equivalent yield do not necessarily reflect
income actually earned by Shares because of certain adjustments required by the
SEC and, therefore, may not correlate to the dividends or other distributions
paid to shareholders.

To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.

TAX EQUIVALENCY TABLE

Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to the federal
alternative minimum tax and state and/or local taxes.

<TABLE>

TAXABLE YIELD EQUIVALENT
FOR 1999 MULTISTATE
MUNICIPAL FUND
FEDERAL INCOME TAX
BRACKET: 15.00% 28.00% 31.00% 36.00% 39.60%
<S> <C> <C> <C> <C> <C>
Joint Return $1-43,050 $43,051-104,050 $104,051-158,550 $158,551-283,150 Over 283,150
Single Return $1-25,750 $25,751-62,450 $62,451-130,250 $130,251-283,150 Over 283,150
TAX EXEMPT YIELD: TAXABLE YIELD EQUIVALENT:
1.00% 1.18% 1.39% 1.45% 1.56% 1.66%
1.50% 1.76% 2.08% 2.17% 2.34% 2.48%
2.00% 2.35% 2.78% 2.90% 3.13% 3.31%
2.50% 2.94% 3.47% 3.62% 3.91% 4.14%
3.00% 3.53% 4.17% 4.35% 4.69% 4.97%
3.50% 4.12% 4.86% 5.07% 5.47% 5.79%
4.00% 4.71% 5.56% 5.80% 6.25% 6.62%
4.50% 5.29% 6.25% 6.52% 7.03% 7.45%
5.00% 5.88% 6.94% 7.25% 7.81% 8.28%
5.50% 6.47% 7.64% 7.97% 8.59% 9.11%
6.00% 7.06% 8.33% 8.70% 9.38% 9.93%
6.50% 7.65% 9.03% 9.42% 10.16% 10.76%
7.00% 8.24% 9.72% 10.14% 10.94% 11.59%
7.50% 8.82% 10.42% 10.87% 11.72% 12.42%
8.00% 9.41% 11.11% 11.59% 12.50% 13.25%

</TABLE>

Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent.

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

* references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;

* charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment;

* discussions of economic, financial and political developments and their impact
on the securities market, including the portfolio manager's views on how such
developments could impact the Funds; and

* information about the mutual fund industry from sources such as the Investment
Company Institute.

The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.

The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.

You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which the Fund uses in advertising may include:

LIPPER ANALYTICAL SERVICES, INC.

Lipper Analytical Services, Inc. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specific period of time. From
time to time, the Fund will quote its Lipper ranking in the general municipal
bond funds category in advertising and sales literature.

LEHMAN BROTHERS REVENUE BOND INDEX

Lehman Brothers Revenue Bond Index is a total return performance benchmark for
the long-term, investment grade, revenue bond market. Returns and attribute for
the index are calculated semi-monthly.

LEHMAN BROTHERS MUNICIPAL BOND INDEX

Lehman Brothers Municipal Bond Index is an unmanaged broad based total return
performance benchmark for the long-term, investment grade bond market.

LEHMAN SEVEN YEAR STATE GENERAL OBLIGATIONS INDEX

Lehman Seven Year State General Obligations Index is an index of general
obligation bonds rated A or better with 6-8 years to maturity.

MORNINGSTAR, INC.

Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.

Who is Federated Investors, Inc.?

Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.

Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state- of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.

FEDERATED FUNDS OVERVIEW

MUNICIPAL FUNDS

In the municipal sector, as of December 31, 1998, Federated managed 10 bond
funds with approximately $2.2 billion in assets and 23 money market funds with
approximately $12.5 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.

EQUITY FUNDS

In the equity sector, Federated has more than 28 years' experience. As of
December 31, 1998, Federated managed 27 equity funds totaling approximately
$14.9 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value- oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.

CORPORATE BOND FUNDS

In the corporate bond sector, as of December 31, 1998, Federated managed 9 money
market funds and 15 bond funds with assets approximating $22.8 billion and $7.1
billion, respectively. Federated's corporate bond decision making-based on
intensive, diligent credit analysis-is backed by over 26 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.

GOVERNMENT FUNDS

In the government sector, as of December 31, 1998, Federated managed 9 mortgage
backed, 5 government/agency and 19 government money market mutual funds, with
assets approximating $5.3 billion, $1.8 billion and $41.6 billion, respectively.
Federated trades approximately $425 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short and intermediate-term government markets since 1982 and
currently manages approximately $43.2 billion in government funds within these
maturity ranges.

MONEY MARKET FUNDS

In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market fund.
Simultaneously, the company pioneered the use of the amortized cost method of
accounting for valuing shares of money market funds, a principal means used by
money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1998, Federated managed more than $76.7 billion in assets across 52 money market
funds, including 19 government, 9 prime and 23 municipal with assets
approximating $41.6 billion, $22.8 billion and $12.5 billion, respectively.

The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield-
J. Thomas Madden; U.S. fixed income-William D. Dawson, III; and global
equities and fixed income-Henry A. Frantzen. The Chief Investment Officers
are Executive Vice Presidents of the Federated advisory companies.

MUTUAL FUND MARKET

Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.

FEDERATED CLIENTS OVERVIEW

Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:

INSTITUTIONAL CLIENTS

Federated meets the needs of approximately 900 institutional clients nationwide
by managing and servicing separate accounts and mutual funds for a variety of
purposes, including defined benefit and defined contribution programs, cash
management, and asset/liability management. Institutional clients include
corporations, pension funds, tax exempt entities, foundations/endowments,
insurance companies, and investment and financial advisers. The marketing effort
to these institutional clients is headed by John B. Fisher, President,
Institutional Sales Division, Federated Securities Corp.

BANK MARKETING

Other institutional clients include more than 1,600 banks and trust
organizations. Virtually all of the trust divisions of the top 100 bank holding
companies use Federated Funds in their clients' portfolios. The marketing effort
to trust clients is headed by Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

Federated Funds are available to consumers through major brokerage firms
nationwide-we have over 2,200 broker/dealer and bank broker/dealer relationships
across the country-supported by more wholesalers than any other mutual fund
distributor. Federated's service to financial professionals and institutions has
earned it high ratings in several surveys performed by DALBAR, Inc. DALBAR is
recognized as the industry benchmark for service quality measurement. The
marketing effort to these firms is headed by James F. Getz, President,
Broker/Dealer Sales Division, Federated Securities Corp.

Financial Information

The Financial Statements for the Fund for the fiscal year ended March 31, 1999,
are incorporated herein by reference to the Annual Report to Shareholders of
Federated Municipal Securities Fund, Inc. dated March 31, 1999.

Investment Ratings

STANDARD AND POOR'S LONG-TERM DEBT RATING DEFINITIONS

AAA-Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA-Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher-rated issues only in small degree.

A-Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.

BBB-Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.

BB-Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.

B-Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.

CCC-Debt rated CCC has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B rating.

CC-The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.

C-The rating C typically is applied to debt subordinated to senior debt which is
assigned an actual or implied CCC debt rating. The C rating may be used to cover
a situation where a bankruptcy petition has been filed, but debt service
payments are continued.

MOODY'S INVESTORS SERVICE, INC. LONG-TERM BOND RATING DEFINITIONS

AAA-Bonds which are rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as gilt
edged. Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

AA-Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in AAA securities.

A-Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

BAA-Bonds which are rated BAA are considered as medium-grade obligations, (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

BA-Bonds which are BA are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.

B-Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

CAA-Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

CA-Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C-Bonds which are rated C are the lowest-rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

FITCH IBCA, INC. LONG-TERM DEBT RATING DEFINITIONS

AAA-Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.

AA-Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F- 1+.

A-Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB-Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.

BB-Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.

B-Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

CCC-Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

CC-Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C-Bonds are imminent default in payment of interest or principal.

MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS

PRIME-1-Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:

* Leading market positions in well-established industries;

* High rates of return on funds employed;

* Conservative capitalization structure with moderate reliance on debt and
ample asset protection;

* Broad margins in earning coverage of fixed financial charges and high
internal cash generation; and

* Well-established access to a range of financial markets and assured sources of
alternate liquidity.

PRIME-2-Issuers rated Prime-1 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

STANDARD AND POOR'S COMMERCIAL PAPER RATINGS

A-1-This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.

A-2-Capacity for timely payment on issues with this designation is satisfactory.
However, the relative degree of safety is not as high as for issues designated
A-1.

FITCH IBCA, INC. COMMERCIAL PAPER RATING DEFINITIONS

FITCH-1-(Highest Grade) Commercial paper assigned this rating is regarded as
having the strongest degree of assurance for timely payment.

FITCH-2-(Very Good Grade) Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.

Addresses

FEDERATED MUNICIPAL SECURITIES FUND, INC.

Class A Shares

Class B Shares

Class C Shares

Federated Investors Funds

5800 Corporate Drive

Pittsburgh, PA 15237-7000

DISTRIBUTOR

Federated Securities Corp.

Federated Investors Tower

1001 Liberty Avenue

Pittsburgh, PA 15222-3779

INVESTMENT ADVISER

Federated Investment Management Company

Federated Investors Tower

1001 Liberty Avenue

Pittsburgh, PA 15222-3779

CUSTODIAN

State Street Bank and Trust Company

P.O. Box 8600

Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Shareholder Services Company

P.O. Box 8600

Boston, MA 02266-8600

INDEPENDENT PUBLIC ACCOUNTANTS

Deloitte & Touche LLP

200 Berkeley Street

Boston, MA 02116

PART C. OTHER INFORMATION.

Item 23. Financial Statements and Exhibits:

a) (i) Conformed copy of Articles of Incorporation of the
Registrant; (14)
(ii) Copy of amendment to Articles of Incorporation of the
Registrant; (14)
b) (i) Copy of Amended and Restated By-Laws of the Registrant; (14)
(ii) Copy of Amendment to By-Laws effective August 26, l987; (8)
(iii) Copy of Amendment to By-Laws effective September 30, 1976; (14)
(iv) Copy of Amendment to By-Laws effective February 17, 1984; (14)
(v) Copy of Amendment to By-Laws effective February 21, 1985; (14)
(vi) Copy of Amendment to By-Laws effective August 27, 1986; (14)
(vii) Copy of Amendment to By-Laws effective February 2, 1987; (14)
(viii)Copy of Amendment to By-Laws effective February 23, 1998; (18)
(ix) Copy of Amendment to By-Laws effective February 27, 1998; (18)
(x) Copy of Amendment to By-Laws effective May 12, 1998; (18)
c) Conformed copies of Specimen Certificates for Shares of Capital Stock
of the Registrant's Class A Shares, Class B Shares, and Class C Shares;
(16)
d) Conformed copy of Investment Advisory Contract of the Registrant; (9) e)
(i) Conformed copy of Distributor's Contract of the Registrant; (12)
(ii) Conformed copy of Exhibit D to the Distributor's Contract; (13)
(iii) Conformed copy of Distributor's Contract (Class B Shares)
including Exhibit 1 and Schedule A; (17)
(iv) The Registrant hereby incorporates the conformed copy of the
specimen Mutual Funds Sales and Service Agreement; Mutual
Funds Service Agreement; and Plan Trustee/Mutual Funds Service
Agreement from Item 24(b)(6) of the Cash Trust Series II
Registration Statement on Form N-1A, filed with the Commission
on July 24, 1995 (File Numbers 33-38550 and 811-6269);
f) Not applicable;
- ---------------------

8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 35 on Form N-1A filed July 27, 1989. (File Nos. 2-57181 and
811-2677)

9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 36 on Form N-1A filed July 17, 1990. (File Nos. 2-57181 and
811-2677)

12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 42 on Form N-1A filed May 25, 1994. (File Nos. 2-57181 and
811-2677)

13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 45 on Form N-1A filed May 25, 1995. (File Nos. 2-57181 and
811-2677)

14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 46 on Form N-1A filed April 26, 1996. (File Nos. 2-57181 and
811-2677)

16. Response is incorporated by reference to Registrant's Post Effective
Amendment No. 50 on Form N-1A filed May 29, 1997. (File Nos. 2-57181 and
811-2677)

17. Response is incorporated by reference to Registrant's Post Effective
Amendment No. 51 on Form N-1A filed May 29, 1998. (File Nos. 2-57181 and
811-2677)

18. Response is incorporated by reference to Registrant's Post Effective
Amendment No. 52 on Form N-1A filed July 28, 1998. (File Nos. 2-57181 and
811-2677)

<PAGE>

g) (i) Conformed copy of Custodian Contract of the Registrant; (13) (ii)
Conformed copy of Custody Fee Schedule; (17)

h) (i) Conformed copy of Agreement for Fund Accounting Services,
Administrative Services, Transfer Agency Services and Custody
Services Procurement; (15)
(ii) The responses described in Item 24(b)(6)(iii) are hereby
incorporated by reference.
(iii) The Registrant hereby incorporates by reference the conformed
copy of the Shareholder Services Sub-Contract between Fidelity
and Federated Shareholder Services from Item 24(b)(9)(iii) of
the Federated GNMA Trust Registration Statement on Form N-1A,
filed with the Commission on March 25, 1996. (File Nos.
2-75670 and 811-3375);
(iv) Conformed copy of Principal Shareholder Servicer's Agreement
(Class B Shares) including Exhibit 1 and Schedule A; (17)
(v) Conformed copy of Shareholders Services Agreement
(Class B Shares) including Exhibit 1 and Schedule A; (17)
(vi) Conformed copy of Amended and Restated Shareholder Services
Agreement; (18)
i) Not applicable;
j) Conformed copy of Independent Auditors' Consent; (+) k) Not applicable;
l) Not applicable;
m) (i) Conformed copy of the 12b-1 Distribution Plan of the Registrant;
(12) (ii) Conformed copy of Exhibit C of the 12b-1 Distribution Plan of
the Registrant; (13) (iii) The responses described in Item
24(b)(6)(iii) are hereby incorporated by reference.
(iv) Conformed copy of Exhibit 1 and Schedule A to the 12b-1
Distribution Plan (Class B Shares) of the Registrant; (17) n) Copy of
Financial Data Schedules; (not included per footnote 60 of Release No.
33-7684) o) The Registrant hereby incorporates the conformed copy of the
specimen Multiple Class Plan from Item 24(b)(18) of the World
Investment Series, Inc. Registration Statement on Form N-1A, filed
with the Commission on January 26, 1996. (File Nos.
33-52149 and 811-07141);
p) Conformed copy of Power of Attorney. (+)

- ----------------------

+ All exhibits have been filed electronically.

12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 42 on Form N-1A filed May 25, 1994. (File Nos. 2-57181 and
811-2667)

13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 45 on Form N-1A filed May 25, 1995. (File Nos. 2-57181 and
811-2677)

15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 48 on Form N-1A filed May 28, 1996. (File Nos. 2-57181 and
811-2677)

16. Response is incorporated by reference to Registrant's Post Effective
Amendment No. 50 on Form N-1A filed May 29, 1997. (File Nos. 2-57181 and
811-2677)

17. Response is incorporated by reference to Registrant's Post Effective
Amendment No. 51 on Form N-1A filed May 29, 1998. (File Nos. 2-57181 and
811-2677)

18. Response is incorporated by reference to Registrant's Post Effective
Amendment No. 52 on Form N-1A filed July 28, 1998. (File Nos. 2-57181 and
811-2677)

<PAGE>

Item 24. Persons Controlled by or Under Common Control with Registrant:

None

Item 25. Indemnification:(11)

Item 26. Business and Other Connections of Investment Adviser:

For a description of the other business of the investment adviser,
see the section entitled "Who Manages the Fund?" in Part A. The
affiliations with the Registrant of four of the Trustees and one
of the Officers of the investment adviser are included in Part B
of this Registration Statement under "Who Manages and Provides
Services to the Fund?" The remaining Trustee of the investment
adviser, his position with the investment adviser, and, in
parentheses, his principal occupation is: Mark D. Olson (Partner,
Wilson, Halbrook & Bayard), 107 W. Market Street, Georgetown,
Delaware 19947.

The remaining Officers of the investment adviser are:

Executive Vice Presidents: William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden

Senior Vice Presidents: Joseph M. Balestrino
Drew J. Collins
Jonathan C. Conley
Deborah A. Cunningham
Mark E. Durbiano
Sandra L. McInerney
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski

Vice Presidents: Todd A. Abraham
J. Scott Albrecht
Arthur J. Barry
Randall S. Bauer
David A. Briggs
Micheal W. Casey
Kenneth J. Cody
Alexandre de Bethmann
Michael P. Donnelly
Linda A. Duessel
Donald T. Ellenberger
Kathleen M. Foody-Malus
Thomas M. Franks
Edward C. Gonzales
James E. Grefenstette
Susan R. Hill
Stephen A. Keen
Robert K. Kinsey
Robert M. Kowit
Jeff A. Kozemchak

- --------------------

11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 38 on Form N-1A filed July 22, 1992. (File Nos. 2-57181 and
811-2677)

<PAGE>

(Vice Presidents cont.) Richard J. Lazarchic
Steven Lehman
Marian R. Marinack
Keith J. Sabol
Frank Semack
Aash M. Shah
Christopher Smith
Tracy P. Stouffer
Edward J. Tiedge
Paige M. Wilhelm
Jolanta M. Wysocka
Marc Halperin

Assistant Vice Presidents: Nancy J. Belz
Robert E. Cauley
Lee R. Cunningham, II
B. Anthony Delserone, Jr.
Paul S. Drotch
Salvatore A. Esposito
Donna M. Fabiano
John T. Gentry
William R. Jamison
Constantine Kartsonsas
John C. Kerber
Grant K. McKay
Natalie F. Metz
Joseph M. Natoli
John Sheehy
Michael W. Sirianni
Leonardo A. Vila
Lori A. Wolff
Gary Farwell

Secretary: Stephen A. Keen

Treasurer: Thomas R. Donahue

Assistant Secretaries: Thomas R. Donahue
Richard B. Fisher
Christine I. Newcamp

Assistant Treasurer: Richard B. Fisher

The business address of each of the Officers of the investment
adviser is Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3779. These individuals are also
officers of a majority of the investment advisers to the
investment companies in the Federated Fund Complex described in
Part B of this Registration Statement.

Item 27. Principal Underwriters:

(a) Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the following open-end investment
companies, including the Registrant:

Automated Government Money Trust; Cash Trust Series II; Cash Trust Series, Inc.;
CCB Funds; Edward D. Jones & Co. Daily Passport Cash Trust; Federated Adjustable
Rate U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Core Trust; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fund for U.S. Government Securities, Inc.;
Federated GNMA Trust; Federated Government Income Securities, Inc.; Federated
Government Trust; Federated High Income Bond Fund, Inc.; Federated High Yield
Trust; Federated Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Institutional Trust; Federated Insurance Series;
Federated Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated
Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term
Municipal Trust; Federated Short-Term U.S. Government Trust; Federated Stock and
Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated
Total Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; ; Hibernia Funds;
Independence One Mutual Funds; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.; Liberty U.S. Government Money
Market Trust; Liquid Cash Trust; Managed Series Trust; Marshall Funds, Inc.;
Money Market Management, Inc.; Money Market Obligations Trust; Money Market
Obligations Trust II; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Regions Funds; RIGGS Funds; SouthTrust Funds; Tax-Free
Instruments Trust; The Planters Funds; The Wachovia Funds; The Wachovia
Municipal FundsTrust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; Vision Group of
Funds, Inc.; World Investment Series, Inc.; Blanchard Funds; Blanchard Precious
Metals Fund, Inc.; DG Investor Series; High Yield Cash Trust; Investment Series
Trust; Star Funds; Targeted Duration Trust; The Virtus Funds; Trust for
Financial Institutions;

Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.

(b)

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant

Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
1001 Liberty Avenue Operating Officer, Asst.
Pittsburgh, PA 15222-3779 Secretary and Asst.
Treasurer, Federated
Securities Corp.

Edward C. Gonzales Director, Executive Vice Executive Vice
Federated Investors Tower President, President
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas R. Donahue Director, Assistant Secretary --
Federated Investors Tower and Assistant Treasurer
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant

David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant

Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant

Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Raymond Hanley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant

H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant

John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant

Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert M. Rossi Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Matthew S. Hardin Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Leslie K. Ross Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
</TABLE>

<PAGE>

Item 28. Location of Accounts and Records:

All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:

Registrant Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(Notices should be sent to the Agent for Service at above address)

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

Federated Shareholder Services Company Federated Investors Tower
("Transfer Agent and Dividend 1001 Liberty Avenue
Disbursing Agent") Boston, MA 02266-8600

Federated Services Company Federated Investors Tower
("Administrator") 1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Federated Advisers Federated Investors Tower
("Adviser") 1001 Liberty Avenue
Pittsburgh, PA 15222-3779

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

Item 29. Management Services: Not applicable.

Item 30. Undertakings:

Registrant hereby undertakes to comply with the provisions of
Section 16 (c) of the 1940 Act with respect to the removal of
Directors and the calling of special shareholder meetings by
shareholders.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED MUNICIPAL SECURITIES
FUND, INC., certifies that it meets all of the requirements for effectiveness of
this Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, duly authorized, in the
City of Pittsburgh and Commonwealth of Pennsylvania, on the 30th day of July,
1999.

FEDERATED MUNICIPAL SECURITIES FUND, INC.
BY: /s/ Leslie K. Ross
Leslie K. Ross, Assistant Secretary
Attorney in Fact for John F. Donahue
July 30, 1999

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:

NAME TITLE DATE

By: /s/ Leslie K. Ross Attorney In Fact July 30, 1999
Leslie K. Ross For the Persons
ASSISTANT SECRETARY Listed Below

William D. Dawson* Chief Investment
Officer

John F. Donahue* Chairman and Director
(Chief Executive Officer)

J. Christopher Donahue* President and Director

John W. McGonigle* Executive Vice
President and Secretary

Richard J. Thomas Treasurer
(Principal Financial and
Accounting Officer)

Thomas G. Bigley* Director

John T. Conroy, Jr.* Director

Nicholas P. Constantakis* Director

John F. Cunningham* Director

Lawrence D. Ellis, M.D.* Director

Peter E. Madden* Director

Charles F. Mansfield, Jr. Director

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

Marjorie P. Smuts* Director

John S. Walsh* Director

* By Power of Attorney

Exhibit j under N-1A
Exhibit 23 under 601/Reg SK

INDEPENDENT AUDITORS' CONSENT

To the Board of Trustees and Shareholders of
Federated Municipal Securities Fund, Inc.:

We consent to the use in Post-Effective Amendment No. 54 of Federated
Municipal Securities Fund, inc. of our report dated May 14, 1999 incorporated by
reference into the Statement of Additional Information and to the reference to
us under the heading "Financial Highlights" in the Prospectus.

/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP

Boston, Massachusetts
July 30, 1999

Exhibit p under Form N-1A
Exhibit 24 under Item 601/Reg. S-K

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints the
Secretary and Assistant Secretary of FEDERATED MUNICIPAL SECURITIES FUND, INC.
and the Deputy General Counsel of Federated Services Company, and each of them,
their true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for them and in their names, place and stead, in
any and all capacities, to sign any and all documents to be filed with the
Securities and Exchange Commission pursuant to the Securities Act of1933, the
Securities Exchange Act of 1934 and the Investment Company Act of 1940, by means
of the Securities and Exchange Commission's electronic disclosure system known
as EDGAR; and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
sign and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as each of them
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.

SIGNATURES ... TITLE DATE

/s/ Nicholas P. Constantakis Director July 1, 1998
Nicholas P. Constantakis

Sworn to and subscribed before me this 1st day of July, 1998

/s/ Cheri S. Good

<PAGE>

POWER OF ATTORNEY

SIGNATURES ... TITLE DATE

/s/ Charles F. Mansfield, Jr. Director July 30, 1999
Charles F. Mansfield, Jr.

Sworn to and subscribed before me this 30th day of July, 1999

/s/ Cheri S. Good

<PAGE>

POWER OF ATTORNEY

SIGNATURES ... TITLE DATE

/s/ John F. Cunningham Director July 30, 1999
John F. Cunningham

Sworn to and subscribed before me this 30th day of July, 1999

/s/ Cheri S. Good

<PAGE>

POWER OF ATTORNEY

SIGNATURES ... TITLE DATE

/s/ Richard J. Thomas Treasurer (Principal December 11, 1998
Richard J. Thomas. Financial and Accounting
Officer

Sworn to and subscribed before me this 11th day of December, 1998

/s/ Cheri S. Good

<PAGE>

POWER OF ATTORNEY

SIGNATURES ... TITLE DATE

/s/ William D. Dawson, III Chief Investment Officer March 3, 1999
William D. Dawson, III

Sworn to and subscribed before me this 3rd day of March, 1999

/s/ Cheri S. Good

<PAGE>

POWER OF ATTORNEY

SIGNATURES ... TITLE DATE

/s/ John S. Walsh Director March 3, 1999
John S. Walsh

Sworn to and subscribed before me this 3rd day of March, 1999

/s/ Cheri S. Good