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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. 55 .................... X
------- ------
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
------
Amendment No. 39 ................................... 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 May 25, 2000, 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
<P>
<B>PROSPECTUS</B> </P>
<H2>
Federated Municipal Securities Fund, Inc.</H2>
<H3>
<B>CLASS A SHARES</B><BR>
<B>CLASS B SHARES</B><BR>
<B>CLASS C SHARES</B></H3>
<P>
<R></P>
<P>
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 primarily in a portfolio
of long-term, investment grade, tax exempt securities.</P>
<P>
</R></P>
<P>
<R></P>
<P>
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.</P>
<P>
</R></P>
<P>
<B><R></B></P>
<P>
<H3>NOT FDIC INSURED<BR>MAY LOSE VALUE<BR>NO BANK GUARANTEE</H3>MAY 31, 2000
<P>
</R></P>
<H3>
<B>CONTENTS</B></H3>
<P>
Risk/Return Summary 1</P>
<P>
What are the Fund's Fees and Expenses? 3</P>
<P>
What are the Fund's Investment Strategies? 4</P>
<P>
What are the Principal Securities in Which the<BR>
Fund Invests? 6</P>
<P>
<R></P>
<P>
What are the Specific Risks of Investing in the Fund? 8</P>
<P>
</R></P>
<P>
What Do Shares Cost? 10</P>
<P>
How is the Fund Sold? 12</P>
<P>
How to Purchase Shares 13</P>
<P>
How to Redeem and Exchange Shares 14</P>
<P>
Account and Share Information 17</P>
<P>
Who Manages the Fund? 18</P>
<P>
Financial Information 19</P>
<H2>
Risk/Return Summary</H2>
<H3>
<B>WHAT IS THE FUND'S INVESTMENT OBJECTIVE?</B></H3>
<P>
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.</P>
<H3>
<B>WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?</B></H3>
<P>
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.</P>
<H3>
<B>WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?</B></H3>
<P>
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:</P>
<P>
<R></P>
<UL>
<LI>
defaults or an increase in the risk of defaults on portfolio securities; and
</UL>
<P>
</R></P>
<UL>
<LI>
a change in prevailing interest rates.
</UL>
<P>
Other risk factors associated with an investment in the Fund include liquidity risk,
call risk, sector risk and leverage risk.</P>
<P>
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.</P>
<H3>
<B>Risk/Return Bar Chart and Table</B></H3>
<H3>
</H3>
<H3>
[Graphic Representation Omitted - See Appendix]</H3>
<P>
The bar chart shows the variability of the Fund's Class A Shares total returns on a
calendar year-end basis.</P>
<P>
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.</P>
<P>
<R></P>
<P>
The Fund's Class A Shares total return for the three-month period from January 1,
2000 to March 31, 2000 was 2.61%.</P>
<P>
</R></P>
<P>
<R></P>
<P>
Within the period shown in the Chart, the Fund's Class A Shares highest quarterly
return was 5.53% (quarter ended March 31, 1995). Its lowest quarterly return was
(4.13%) (quarter ended March 31, 1994).</P>
<P>
</R></P>
<P>
<R></P>
<H3>
<B>Average Annual Total Return Table</B></H3>
<P>
</R></P>
<P>
<R></P>
<P>
The following table represents the Fund's Class A, Class B and Class C Shares Average
Annual Total Returns, reduced to reflect applicable sales charges, for the calendar
periods ended December 31, 1999.</P>
<P>
</R></P>
<P>
<R></P>
<P>
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
investment 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 the mutual funds designated by Lipper Analytical Services,
Inc. as falling in the category indicated. Total returns for the index shown do not
reflect sales charges, expenses or other fees that the SEC requires to be reflected
in the Fund's performance.</P>
<P>
</R></P>
<P>
<R></P>
<P>
Indexes are unmanaged, and it is not possible to invest directly in an index.</P>
<P>
</R></P>
<P>
</P>
<TABLE CELLSPACING=0 CELLPADDING=1>
<TR>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B>Calendar Period</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="2">
<P Align=LEFT><B>Class A</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="2">
<P Align=LEFT><B>Class B</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="2">
<P Align=LEFT><B>Class C</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="2">
<P Align=LEFT><B>LBMBI</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="2">
<P Align=LEFT><B>LGMFA</B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
1 Year</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
(</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
10.63%)</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
(</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
12.12%)</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
(</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
8.11%)</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
(</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
2.06%)</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
(</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
4.61%)</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
5 Years</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
3.28%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
3.00%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
3.33%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
7.34%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
5.77%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
10 Years</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
4.87%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
- --</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
- --</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
6.89%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
6.18%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Start of Performance<SUP>1</SUP></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
- --</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
2.58%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
2.45%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
- --</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
- --</P>
</TD>
</TR>
</TABLE>
<P>
<R></P>
<P>
1 The Fund's Class B and Class C Shares start of performance dates were July 26,
1994 and April 21, 1993, respectively.</P>
<P>
</R></P>
<P>
<R></P>
<P>
Past performance does not necessarily predict future performance. This information
provides you with historical performance information so that you can analyze whether
the Fund's investment risks are balanced by its potential returns.</P>
<P>
</R></P>
<H2>
What are the Fund's Fees and Expenses?</H2>
<H3>
<B>FEDERATED MUNICIPAL SECURITIES FUND, INC.</B></H3>
<H3>
<B>FEES AND EXPENSES</B></H3>
<P>
This table describes the fees and expenses that you may pay if you buy and hold Class
A, Class B, or Class C Shares of the Fund.</P>
<P>
</P>
<TABLE CELLSPACING=0 CELLPADDING=1>
<TR>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B>Shareholder Fees</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B>Class A</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B>Class B</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B>Class C</B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Fees Paid Directly From Your Investment</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
4.50%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
None</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
None</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or
redemption proceeds, as applicable) </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
0.00%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
5.50%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
1.00%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions)
<BR>
(as a percentage of offering price). </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
None </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
None</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
None</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Redemption Fee (as a percentage of amount redeemed, if applicable) </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
None</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
None</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
None</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Exchange Fee </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
None</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
None</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
None</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Annual Fund Operating Expenses (Before Waiver)<SUP>1</SUP></B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Expenses That are Deducted From Fund Assets (as percentage of average net assets)</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Management Fee </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
0.56%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
0.56%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
0.56%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Distribution (12b-1) Fee </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
None</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
0.75%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
0.75%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Shareholder Services Fee<SUP>2</SUP> </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
0.25%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
0.25%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
0.25%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Other Expenses </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
0.25%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
0.25%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
0.25%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Total Annual Fund Operating Expenses </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
1.06%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
1.81%<SUP>3</SUP></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
1.81%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="7">
<P>
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, 2000.</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Total Waiver of Fund Expenses </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
0.14%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
0.00%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
0.01% </P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Total Actual Annual Fund Operating Expenses (after waiver) </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
0.92%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
1.81%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
1.80%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="7">
<P>
2 The shareholder services provider voluntarily waived a portion of the
shareholder services fee. The shareholder services provider can terminate this
voluntary waiver at any time. The shareholder services fee paid by the Fund's Class A
Shares and Class C Shares (after the voluntary waiver) was 0.11% and 0.24%,
respectively, for the fiscal year ended March 31, 2000.</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="7">
<P>
3 Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase.</P>
</TD>
</TR>
</TABLE>
<H3>
<B>EXAMPLE</B></H3>
<P>
<R></P>
<P>
This Example is intended to help you compare the cost of investing in the Fund's
Class A, B and C Shares with the cost of investing in other mutual funds.</P>
<P>
</R></P>
<P>
<R></P>
<P>
The Example assumes that you invest $10,000 in the Fund's Class A, B and 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, B and C
Shares operating expenses are <B><B>before waivers</B></B> as shown in the table and
remain the same. Although your actual costs and returns may be higher or lower, based
on these assumptions your costs would be:</P>
<P>
</R></P>
<P>
</P>
<TABLE CELLSPACING=0 CELLPADDING=1>
<TR>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B>Share Class</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B>1 Year</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B>3 Years</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B>5 Years</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B>10 Years</B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B><R>Class A:</R></B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Expenses assuming redemption</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$553</R></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$772</R></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<P ALIGN=RIGHT><R>
$1,008</R></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$1,686</R></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="9">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Expenses assuming no redemption</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$553</R></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$772</R></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<P ALIGN=RIGHT><R>
$1,008</R></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$1,686</R></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="9">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B><R>Class B:</R></B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Expenses assuming redemption</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$734</R></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$969</R></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$1,180</R></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$1,930</R></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="9">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Expenses assuming no redemption</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$184</R></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$569</R></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$980</R></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$1,930</R></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="9">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B><R>Class C:</R></B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Expenses assuming redemption</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$284</R></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$569</R></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$980</R></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$2,127</R></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="9">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Expenses assuming no redemption</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$184</R></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$569</R></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$980</R></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><R>$2,127</R></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="9">
<P>
<HR>
</TD>
</TR>
</TABLE>
<H2>
What are the Fund's Investment Strategies?</H2>
<P>
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.</P>
<P>
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:</P>
<UL>
<LI>
current and expected U.S. economic growth;
<LI>
current and expected interest rates and inflation;
<LI>
the Federal Reserve's monetary policy; and
</UL>
<P>
<R></P>
<UL>
<LI>
supply and demand factors related to the municipal market and the affect they may
have on the returns offered for various bond maturities.
</UL>
<P>
</R></P>
<P>
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:</P>
<UL>
<LI>
the economic feasibility of revenue bond financings and general purpose financings;
<LI>
the financial condition of the issuer or guarantor; and
<LI>
political developments that may affect credit quality.
</UL>
<P>
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.</P>
<P>
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.</P>
<P>
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.</P>
<H3>
<B>HEDGING</B></H3>
<P>
<R></P>
<P>
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 futures 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.</P>
<P>
</R></P>
<H3>
<B>TEMPORARY DEFENSIVE INVESTMENTS</B></H3>
<P>
<R></P>
<P>
The Fund may temporarily depart from its principal investment strategies by investing
its assets in cash and shorter-term 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. It may also cause the Fund to give up greater
investment returns to maintain the safety of principal, that is, the original amount
invested by shareholders.</P>
<P>
</R></P>
<H2>
What are the Principal Securities in Which the Fund Invests?</H2>
<H3>
<B>TAX EXEMPT SECURITIES</B></H3>
<P>
<R></P>
<P>
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal regular income taxes. 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.</P>
<P>
</R></P>
<P>
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.</P>
<H3>
<B>Municipal Leases</B></H3>
<P>
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.</P>
<P>
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.</P>
<H3>
<B>Inverse Floaters</B></H3>
<P>
<R></P>
<P>
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 rates changes than fixed rate tax
exempt securities. Inverse floaters are subject to interest rate risks and leverage
risks.</P>
<P>
</R></P>
<H3>
<B>Zero Coupon Securities</B></H3>
<P>
<R></P>
<P>
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 and credit risks
of a zero coupon security.</P>
<P>
</R></P>
<H3>
<B>General Obligation Bonds</B></H3>
<P>
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.</P>
<H3>
<B>Special Revenue Bonds</B></H3>
<P>
<R></P>
<P>
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.</P>
<P>
</R></P>
<H3>
<B>Private Activity Bonds</B></H3>
<P>
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.</P>
<P>
The interest on many types of private activity bonds is subject to AMT. The Fund may
invest in bonds subject to AMT.</P>
<H3>
<B>Tax Increment Financing Bonds</B></H3>
<P>
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.</P>
<H3>
<B>Variable Rate Demand Instruments</B></H3>
<P>
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.</P>
<H3>
<B>CREDIT ENHANCEMENT</B></H3>
<P>
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.</P>
<H3>
<B>FUTURES CONTRACTS</B></H3>
<P>
<R></P>
<P>
Futures contracts, which are a type of derivative contract, 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.</P>
<P>
</R></P>
<P>
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.</P>
<H3>
<B>SPECIAL TRANSACTIONS</B></H3>
<H3>
<B>Delayed Delivery Transactions</B></H3>
<P>
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.</P>
<H3>
<B>Asset Coverage</B></H3>
<P>
<R></P>
<P>
In order to secure its obligations in connection with derivative 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 derivative contract or terminating a
special transaction. This may cause the Fund to miss favorable trading opportunities
or to realize losses on derivative contracts or special transactions.</P>
<P>
</R></P>
<H3>
<B>INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES</B></H3>
<P>
<R></P>
<P>
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. If a security is downgraded below the
minimum quality grade discussed above, the Adviser will reevaluate the security, but
will not be required to sell it.</P>
<P>
</R></P>
<H2>
What are the Specific Risks of Investing in the Fund?</H2>
<H3>
<B>INTEREST RATE RISKS</B></H3>
<P>
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.</P>
<P>
<R></P>
<P>
Interest rate changes have a greater affect 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.</P>
<P>
</R></P>
<H3>
<B>CREDIT RISKS</B></H3>
<P>
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.</P>
<P>
<R></P>
<P>
Many fixed income securities receive credit ratings from services such as Standard
& Poor's and Moody's Investors Service. 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.</P>
<P>
</R></P>
<P>
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.</P>
<H3>
<B>LIQUIDITY RISKS</B></H3>
<P>
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.</P>
<P>
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.</P>
<H3>
<B>CALL RISKS</B></H3>
<P>
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.</P>
<P>
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.</P>
<H3>
<B>SECTOR RISKS</B></H3>
<P>
<R></P>
<P>
A substantial part of the Fund's portfolio may be comprised of securities credit
enhanced by banks, insurance companies or other companies with other similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political, or other developments which generally affect these issuers.</P>
<P>
</R></P>
<H3>
<B>LEVERAGE RISKS</B></H3>
<P>
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.</P>
<P>
Investments can have these same results if their returns are based on a multiple of a
specified index, security, or other benchmark.</P>
<H2>
What Do Shares Cost?</H2>
<P>
<R></P>
<P>
You can purchase, redeem or exchange Shares any day the New York Stock Exchange
(NYSE) is open. When the Fund receives your transaction request in proper form (as
described in the prospectus) it is processed at the next calculated net asset value
(NAV) plus any applicable front-end sales charge (public offering price).</P>
<P>
</R></P>
<P>
<R></P>
<P>
NAV is determined at the end of regular trading (normally 4:00 p.m. Eastern time)
each day the NYSE is open. The Fund generally values fixed income securities
according to the mean between bid and asked prices as furnished by an independent
pricing service, except that fixed income securities with remaining maturities of
less than 60 days at the time of purchase may be valued at amortized cost. 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.</P>
<P>
</R></P>
<P>
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.</P>
<P>
</P>
<TABLE CELLSPACING=0 CELLPADDING=1>
<TR>
<TD VALIGN="BOTTOM">
<P>
<P ALIGN=LEFT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM" ROWSPAN="2" COLSPAN="1">
<P Align=LEFT><B>Minimum<BR>
Initial/<BR>
Subsequent<BR>
Investment<BR>
Amounts<SUP>1</SUP></B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="3">
<P Align=LEFT><B>Maximum Sales Charge</B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B>Shares Offered</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B>Front-End<BR>
Sales<BR>
Charge<SUP>2</SUP></B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B>Contingent <BR>
Deferred<BR>
Sales<BR>
Charge<SUP>3</SUP></B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Class A</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
$1,500/$100</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
4.50%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
0.00%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Class B</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
$1,500/$100</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
None</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
5.50%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Class C</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
$1,500/$100</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
None</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
1.00%</P>
</TD>
</TR>
</TABLE>
<P>
<R></P>
<P>
1 The minimum subsequent investment amounts for Systematic Investment Programs
(SIP) is $50. Investment professionals may impose higher or lower minimum investment
requirements on their customers than those imposed by the Fund.</P>
<P>
</R></P>
<P>
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.</P>
<P>
2 Front-End Sales Charge is expressed as a percentage of public offering price.
See "Sales Charge When You Purchase."</P>
<P>
3 See "Sales Charge When You Redeem."</P>
<H3>
<B>SALES CHARGE WHEN YOU PURCHASE</B></H3>
<H3>
</H3>
<TABLE CELLSPACING=0 CELLPADDING=1>
<TR>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B>Class A Shares</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Purchase Amount</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
Sales Charge<BR>
as a Percentage<BR>
of Public<BR>
Offering Price</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
Sales Charge<BR>
as a Percentage<BR>
of NAV</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Less than $100,000</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
4.50%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
4.71%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
$100,000 but less than $250,000</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
3.75%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
3.90%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
$250,000 but less than $500,000</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
2.50%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
2.56%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
$500,000 but less than $1 million</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
2.00%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
2.04%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
$1 million or greater<SUP>1</SUP></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
0.00%</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
0.00%</P>
</TD>
</TR>
</TABLE>
<P>
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.</P>
<P>
<R></P>
<P>
If your investment qualifies for a reduction or elimination of the sales charge as
described below, 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.</P>
<P>
</R></P>
<P>
<B><B>The sales charge at purchase may be reduced or eliminated by:</B></B></P>
<UL>
<LI>
purchasing Shares in greater quantities to reduce the applicable sales charge;
<LI>
combining concurrent purchases of Shares:
<UL>
<LI>
by you, your spouse, and your children under age 21; or
<LI>
of the same share class of two or more Federated Funds (other than money market
funds);
</UL>
<LI>
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
<LI>
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).
</UL>
<P>
<B><B>The sales charge will be eliminated when you purchase Shares:</B></B></P>
<UL>
<LI>
within 120 days of redeeming Shares of an equal or lesser amount;
<LI>
by exchanging shares from the same share class of another Federated Fund (other than
a money market fund);
<LI>
through wrap accounts or other investment programs where you pay the investment
professional directly for services;
<LI>
through investment professionals that receive no portion of the sales charge;
<LI>
as a Federated Life Member (Class A Shares only) and their immediate family members;
or
<LI>
as a Director or employee of the Fund, the Adviser, the Distributor and their
affiliates, and the immediate family members of these individuals.
</UL>
<P>
<B><R></B></P>
<H3>
<B>SALES CHARGE WHEN YOU REDEEM</B></H3>
<P>
</R></P>
<P>
Your redemption proceeds may be reduced by a sales charge, commonly referred to as a
contingent deferred sales charge (CDSC).</P>
<P>
</P>
<TABLE CELLSPACING=0 CELLPADDING=1>
<TR>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B>Class A Shares</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="3">
<P>
<R>A CDSC 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. </R></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B>Class B Shares</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Shares Held Up To:</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
CDSC</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
1 Year</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
5.50%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
2 Years</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
4.75%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
3 Years</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
4.00%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
4 Years</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
3.00%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
5 Years</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
2.00%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
6 Years</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
1.00%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
7 Years or More</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
0.00%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B>Class C Shares</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="3">
<P>
You will pay a 1% CDSC if you redeem Shares within one year of the purchase date.</P>
</TD>
</TR>
</TABLE>
<P>
<R></P>
<P>
If your investment qualifies for a reduction or elimination of the sales charge as
described below, 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.</P>
<P>
</R></P>
<P>
<R></P>
<P>
<B><B>You will not be charged a CDSC when redeeming Shares:</B></B></P>
<P>
</R></P>
<UL>
<LI>
purchased with reinvested dividends or capital gains;
<LI>
purchased within 120 days of redeeming Shares of an equal or lesser amount;
</UL>
<P>
<R></P>
<UL>
<LI>
that you exchanged into the same share class of another Federated Fund if the shares
were held for the applicable CDSC holding period (other than a money market fund);
</UL>
<P>
</R></P>
<UL>
<LI>
purchased through investment professionals who did not receive advanced sales
payments;
<LI>
if, after you purchase Shares, you become disabled as defined by the IRS;
<LI>
if the Fund redeems your Shares and closes your account for not meeting the minimum
balance requirement;
<LI>
if your redemption is a required retirement plan distribution; or
<LI>
upon the death of the last surviving shareholder of the account.
</UL>
<P>
<R></P>
<P>
If your investment qualifies for a reduction or elimination of the CDSC as described
below, you or your investment professional should notify the Distributor at the time
of redemption. If the distributor is not notified, the CDSC will apply.</P>
<P>
</R></P>
<P>
<B><B>To keep the sales charge as low as possible, the Fund redeems your Shares in
this order:</B></B></P>
<UL>
<LI>
Shares that are not subject to a CDSC; and
<LI>
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).
</UL>
<P>
The CDSC is then calculated using the share price at the time of purchase or
redemption, whichever is lower.</P>
<H2>
How is the Fund Sold?</H2>
<P>
<R></P>
<P>
The Fund offers three share classes: Class A, Class B and Class C Shares, each
representing interests in a single portfolio of securities.</P>
<P>
</R></P>
<P>
<R></P>
<P>
The Fund's Distributor, Federated Securities Corp., markets the Shares described in
this prospectus to institutions or individuals, directly or through investment
professionals. The Fund may not be a suitable investment for retirement plans.</P>
<P>
</R></P>
<P>
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).</P>
<H3>
<B>RULE 12B-1 PLAN</B></H3>
<P>
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.</P>
<H2>
How to Purchase Shares</H2>
<P>
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.</P>
<P>
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.</P>
<H3>
<B>THROUGH AN INVESTMENT PROFESSIONAL</B></H3>
<UL>
<LI>
Establish an account with the investment professional; and
<LI>
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.
</UL>
<P>
Investment professionals should send payments according to the instructions in the
sections "By Wire" or "By Check."</P>
<H3>
<B>DIRECTLY FROM THE FUND</B></H3>
<UL>
<LI>
Establish your account with the Fund by submitting a completed New Account Form; and
<LI>
Send your payment to the Fund by Federal Reserve wire or check.
</UL>
<P>
<R></P>
<P>
You will become the owner of Shares and your Shares will be priced at the next
calculated NAV after the Fund receives your wire or your check. If your check does
not clear, your purchase will be canceled and you could be liable for any losses or
fees incurred by the Fund or Federated Shareholder Services Company, the Fund's
transfer agent.</P>
<P>
</R></P>
<P>
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.</P>
<H3>
<B>By Wire</B></H3>
<P>
Send your wire to:</P>
<P>
State Street Bank and Trust Company</P>
<P>
Boston, MA</P>
<P>
Dollar Amount of Wire</P>
<P>
ABA Number 011000028</P>
<P>
Attention: EDGEWIRE</P>
<P>
Wire Order Number, Dealer Number or Group Number</P>
<P>
Nominee/Institution Name</P>
<P>
Fund Name and Number and Account Number</P>
<P>
You cannot purchase Shares by wire on holidays when wire transfers are restricted.</P>
<H3>
<B>By Check</B></H3>
<P>
Make your check payable to <B><B>The Federated Funds</B></B>, note your account
number on the check, and mail it to:</P>
<P>
Federated Shareholder Services Company</P>
<P>
P.O. Box 8600</P>
<P>
Boston, MA 02266-8600</P>
<P>
If you send your check by <B><B>a private courier or overnight delivery
service</B></B> that requires a street address, mail it to:</P>
<P>
Federated Shareholder Services Company</P>
<P>
1099 Hingham Street</P>
<P>
Rockland, MA 02370-3317</P>
<P>
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).</P>
<H3>
<B>THROUGH AN EXCHANGE</B></H3>
<P>
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.</P>
<H3>
<B>BY SYSTEMATIC INVESTMENT PROGRAM</B></H3>
<P>
<R></P>
<P>
Once you have opened an account, you may automatically purchase additional Shares on
a regular basis by completing the SIP section of the New Account Form or by
contacting the Fund or your investment professional. The minimum investment amount
for SIPs is $50.</P>
<P>
</R></P>
<P>
<R></P>
<H3>
<B>BY AUTOMATED CLEARING HOUSE (ACH)</B></H3>
<P>
</R></P>
<P>
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.</P>
<H2>
How to Redeem and Exchange Shares</H2>
<P>
You should redeem or exchange Shares:</P>
<UL>
<LI>
through an investment professional if you purchased Shares through an investment
professional; or
<LI>
directly from the Fund if you purchased Shares directly from the Fund.
</UL>
<H3>
<B>THROUGH AN INVESTMENT PROFESSIONAL</B></H3>
<P>
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.</P>
<H3>
<B>DIRECTLY FROM THE FUND</B></H3>
<H3>
<B>By Telephone</B></H3>
<P>
<R></P>
<P>
You may redeem or exchange Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.</P>
<P>
</R></P>
<P>
<R></P>
<P>
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.</P>
<P>
</R></P>
<H3>
<B>By Mail</B></H3>
<P>
You may redeem or exchange Shares by mailing a written request to the Fund.</P>
<P>
<R></P>
<P>
You will receive a redemption amount based on the next calculated NAV after the Fund
receives your written request in proper form.</P>
<P>
</R></P>
<P>
<R></P>
<P>
Send requests by mail to:</P>
<P>
</R></P>
<P>
Federated Shareholder Services Company</P>
<P>
P.O. Box 8600</P>
<P>
Boston, MA 02266-8600</P>
<P>
Send requests by <B><B>private courier or overnight delivery service</B></B> to:</P>
<P>
Federated Shareholder Services Company</P>
<P>
1099 Hingham Street</P>
<P>
Rockland, MA 02370-3317</P>
<P>
All requests must include:</P>
<UL>
<LI>
Fund Name and Share Class, account number and account registration;
<LI>
amount to be redeemed or exchanged;
<LI>
signatures of all shareholders exactly as registered; and
<LI>
<B><B>if exchanging,</B></B> the Fund Name and Share Class, account number and
account registration into which you are exchanging.
</UL>
<P>
Call your investment professional or the Fund if you need special instructions.</P>
<H3>
<B>Signature Guarantees</B></H3>
<P>
Signatures must be guaranteed if:</P>
<UL>
<LI>
your redemption will be sent to an address other than the address of record;
<LI>
your redemption will be sent to an address of record that was changed within the last
30 days;
<LI>
a redemption is payable to someone other than the shareholder(s) of record; or
<LI>
<B><B>if exchanging</B></B> <B><B>(transferring)</B></B> into another fund with a
different shareholder registration.
</UL>
<P>
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. <B><B>A notary public cannot
provide a signature guarantee.</B></B></P>
<H3>
<B>PAYMENT METHODS FOR REDEMPTIONS</B></H3>
<P>
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:</P>
<UL>
<LI>
an electronic transfer to your account at a financial institution that is an ACH
member; or
<LI>
wire payment to your account at a domestic commercial bank that is a Federal Reserve
System member.
</UL>
<H3>
<B>Redemption in Kind</B></H3>
<P>
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.</P>
<H3>
<B>LIMITATIONS ON REDEMPTION PROCEEDS</B></H3>
<P>
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:</P>
<UL>
<LI>
to allow your purchase to clear;
<LI>
during periods of market volatility; or
<LI>
when a shareholder's trade activity or amount adversely impacts the Fund's ability to
manage its assets.
</UL>
<P>
You will not accrue interest or dividends on uncashed checks from the Fund if those
checks are undeliverable and returned to the Fund.</P>
<P>
<R></P>
<H3>
<B>EXCHANGE PRIVILEGE</B></H3>
<P>
</R></P>
<P>
You may exchange Shares of the Fund into Shares of the same class of another
Federated Fund. To do this, you must:</P>
<UL>
<LI>
ensure that the account registrations are identical;
<LI>
meet any minimum initial investment requirements; and
<LI>
receive a prospectus for the fund into which you wish to exchange.
</UL>
<P>
An exchange is treated as a redemption and a subsequent purchase, and is a taxable
transaction.</P>
<P>
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.</P>
<H3>
<B>SYSTEMATIC WITHDRAWAL/EXCHANGE PROGRAM</B></H3>
<P>
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.</P>
<P>
Generally, it is not advisable to continue to purchase Class A Shares subject to a
sales charge while redeeming Shares using this program.</P>
<H3>
<B>Systematic Withdrawal Program (SWP) on Class B Shares</B></H3>
<P>
You will not be charged a CDSC on SWP redemptions if:</P>
<UL>
<LI>
you redeem 12% or less of your account value in a single year;
<LI>
you reinvest all dividends and capital gains distributions; and
<LI>
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.)
</UL>
<P>
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.</P>
<P>
<B><R></B></P>
<H3>
<B>ADDITIONAL CONDITIONS</B></H3>
<P>
</R></P>
<H3>
<B>Telephone Transactions</B></H3>
<P>
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.</P>
<H3>
<B>Share Certificates</B></H3>
<P>
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.</P>
<H2>
Account and Share Information</H2>
<H3>
<B>CONFIRMATIONS AND ACCOUNT STATEMENTS</B></H3>
<P>
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.</P>
<H3>
<B>DIVIDENDS AND CAPITAL GAINS</B></H3>
<P>
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.</P>
<P>
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.</P>
<P>
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.</P>
<H3>
<B>ACCOUNTS WITH LOW BALANCES</B></H3>
<P>
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.</P>
<H3>
<B>TAX INFORMATION</B></H3>
<P>
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.</P>
<H2>
Who Manages the Fund?</H2>
<P>
<R></P>
<P>
The Board of Directors governs the Fund. The Board selects and oversees the Adviser,
Federated Investment Management Company. The Adviser manages the Fund's assets,
including buying and selling portfolio securities. The Adviser's address is Federated
Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779, 175 Water Street,
New York, NY 10038-4965.</P>
<P>
</R></P>
<P>
<R></P>
<P>
The Adviser and other subsidiaries of Federated advise approximately 176 mutual funds
and separate accounts, which totaled approximately $125 billion in assets as of
December 31, 1999. 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.</P>
<P>
</R></P>
<H3>
<B>THE FUND'S PORTFOLIO MANAGERS ARE:</B></H3>
<H3>
<B>J. Scott Albrecht</B></H3>
<P>
<B><R></B></P>
<P>
Scott Albrecht has been the Fund's Portfolio Manager since 1996. He is Vice President
of the Fund. 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.</P>
<P>
</R></P>
<H3>
<B>Mary Jo Ochson</B></H3>
<P>
<R></P>
<P>
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.</P>
<P>
</R></P>
<H3>
<B>ADVISORY FEES</B></H3>
<P>
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.</P>
<P>
<R></P>
<P>
Gross income includes, in general, discounts 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.</P>
<P>
</R></P>
<P>
<B><R></B></P>
<H2>
Financial Information</H2>
<P>
</R></P>
<H3>
<B>FINANCIAL HIGHLIGHTS</B></H3>
<P>
<R></P>
<P>
The Financial Highlights will help you understand the Fund's financial performance
for its past five fiscal years. 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.</P>
<P>
</R></P>
<P>
<R></P>
<P>
This information for the year ended March 31, 2000 has been audited by Ernst &
Young LLP, whose report, along with the Fund's audited financial statements, is
included in the Annual Report.</P>
<P>
</R></P>
<H2>
Financial Highlights--Class A Shares</H2>
<P>
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)</P>
<P>
</P>
<P>
</P>
<TABLE CELLSPACING=0 CELLPADDING=1>
<TR>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B>Year Ended March 31</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>2000</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B><SUP>1</SUP> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>1999</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>1998</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>1997</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>1996</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Net Asset Value, Beginning of Period</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.87</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.91</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.31</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.82</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.92</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Income From Investment Operations:</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Net investment income</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.58</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.53</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.46</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.55</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.66</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Net realized and unrealized gain (loss) on investments </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(1.02</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.05</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.64</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.36</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.09</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
TOTAL FROM INVESTMENT OPERATIONS</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.44</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.48</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>1.10</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.19</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.57</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Less Distributions:</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Distributions from net investment income</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.50</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.52</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.46</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.55</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.66</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Distributions in excess of net investment income<SUP>2</SUP></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>--</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>--</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.01</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.05</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>--</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Total distributions from net investment income</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.50</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT>)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.52</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT>)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.47</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT>)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.60</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT>)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.66</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT>)</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Distributions from net realized gain on investments</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.03</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>--</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.03</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.10</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.01</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
TOTAL DISTRIBUTIONS</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.53</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.52</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.50</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.70</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.67</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Net Asset Value, End of Period</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$ 9.90</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.87</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.91</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.31</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.82</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Total Return<SUP>3</SUP></B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(4.01</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>4.46</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>11.28</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>1.84</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>5.32</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Ratios to Average Net Assets:</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Expenses</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.92</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.87</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.86</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.93</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.98</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Net investment income</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>5.72</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>4.86</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>4.70</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>5.37</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>5.97</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Expense waiver/reimbursement<SUP>4</SUP></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.14</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.14</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.14</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.14</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.13</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Supplemental Data:</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Net assets, end of period (000 omitted)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>$471,475</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>$562,883</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>$591,310</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>$595,515</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>$663,538</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Portfolio turnover</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>68</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>31</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>64</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>33</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>29</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
</TABLE>
<P>
1 For the year ended March 31, 2000, the Fund was audited by Ernst & Young
LLP. Each of the previous years was audited by other auditors.</P>
<P>
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.</P>
<P>
3 Based on net asset value, which does not reflect the sales charge or contingent
deferred sales charge, if applicable.</P>
<P>
4 This voluntary expense decrease is reflected in both the expense and the net
investment income ratios shown above.</P>
<P>
Further information about the Fund's performance is contained in the Fund's Annual
Report, dated March 31, 2000, which can be obtained free of charge.</P>
<H2>
Financial Highlights--Class B Shares</H2>
<P>
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)</P>
<P>
</P>
<P>
</P>
<TABLE CELLSPACING=0 CELLPADDING=1>
<TR>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B>Year Ended March 31</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>2000</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B><SUP>1</SUP> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>1999</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>1998</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>1997</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>1996</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Net Asset Value, Beginning of Period</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B>$10.87</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B>$10.91</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B>$10.31</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B>$10.82</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B>$10.92</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Income From Investment Operations:</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Net investment income</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.48</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.43</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.38</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.47</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.56</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Net realized and unrealized gain (loss) on investments </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(1.01</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.05</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.64</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.37</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.09</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
TOTAL FROM INVESTMENT OPERATIONS</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.53</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.38</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>1.02</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.10</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.47</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Less Distributions:</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Distributions from net investment income</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.41</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.42</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.38</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.47</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.56</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Distributions in excess of net investment income<SUP>2</SUP></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>--</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>--</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.01</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.04</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>--</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Total distributions from net investment income</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.41</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT>)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.42</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT>)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.39</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT>)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.51</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT>)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.56</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT>)</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Distributions from net realized gain on investments</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.03</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>--</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.03</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.10</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.01</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
TOTAL DISTRIBUTIONS</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.44</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.42</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.42</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.61</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.57</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Net Asset Value, End of Period</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$ 9.90</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.87</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.91</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.31</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
<P ALIGN=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.82</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Total Return<SUP>3</SUP></B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(4.85</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>3.53</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>10.30</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.94</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>4.40</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Ratios to Average Net Assets:</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Expenses</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>1.81</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>1.76</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>1.75</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>1.82</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>1.86</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Net investment income</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>4.68</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>3.97</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>3.81</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>4.50</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>5.23</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Supplemental Data:</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Net assets, end of period (000 omitted)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>$72,095</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>$88,756</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>$87,304</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>$77,536</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>$58,296</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Portfolio turnover</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>68</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>31</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>64</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>33</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>29</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
</TABLE>
<P>
1 For the year ended March 31, 2000, the Fund was audited by Ernst & Young
LLP. Each of the previous years was audited by other auditors.</P>
<P>
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.</P>
<P>
3 Based on net asset value, which does not reflect the sales charge or contingent
deferred sales charge, if applicable.</P>
<P>
Further information about the Fund's performance is contained in the Fund's Annual
Report, dated March 31, 2000, which can be obtained free of charge.</P>
<H2>
Financial Highlights--Class C Shares</H2>
<P>
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)</P>
<P>
</P>
<P>
</P>
<TABLE CELLSPACING=0 CELLPADDING=1>
<TR>
<TD VALIGN="BOTTOM">
<P Align=LEFT><B>Year Ended March 31 </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>2000</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B><SUP>1</SUP> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>1999</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>1998</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>1997</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>1996</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Net Asset Value, Beginning of Period</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.87</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.91</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.31</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.82</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.92</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Income From Investment Operations:</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Net investment income</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.48</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.43</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.37</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.46</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.56</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Net realized and unrealized gain (loss) on investments </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(1.01</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.05</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.65</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.36</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.09</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
TOTAL FROM INVESTMENT OPERATIONS</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.53</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.38</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>1.02</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.10</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.47</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Less Distributions</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Distributions from net investment income</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.41</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.42</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.37</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.46</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.56</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Distributions in excess of net investment income<SUP>2</SUP></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>--</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>--</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.02</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.05</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>--</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Total distributions from net investment income</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.41</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT>)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.42</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT>)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.39</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT>)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.51</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT>)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.56</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=LEFT>)</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Distributions from net realized gain on investments</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.03</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>--</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.03</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.10</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.01</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
TOTAL DISTRIBUTIONS</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.44</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.42</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.42</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.61</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(0.57</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
)</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Net Asset Value, End of Period</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$ 9.90</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.87</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.91</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.31</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B>$10.82</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT><B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Total Return<SUP>3</SUP></B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>(4.85</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>3.54</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>10.31</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.95</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>4.42</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Ratios to Average Net Assets:</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Expenses</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>1.80</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>1.75</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>1.74</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>1.81</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>1.82</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Net investment income</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>4.68</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>3.98</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>3.83</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>4.51</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>5.16</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Expense waiver/reimbursement<SUP>4</SUP></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.01</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.01</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.01</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.01</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>0.04</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
<B>Supplemental Data:</B></P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Net assets, end of period (000 omitted)</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>$10,601</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>$16,870</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>$17,616</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>$20,544</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>$25,914</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM">
<P>
Portfolio turnover</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>68</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>31</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>64</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>33</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT> </P>
</TD>
<TD VALIGN="BOTTOM">
<P Align=RIGHT>29</P>
</TD>
<TD VALIGN="BOTTOM">
<P>
%</P>
</TD>
</TR>
<TR>
<TD VALIGN="BOTTOM" ROWSPAN="1" COLSPAN="16">
<P>
<HR>
</TD>
</TR>
</TABLE>
<P>
1 For the year ended March 31, 2000, the Fund was audited by Ernst & Young
LLP. Each of the previous years was audited by other auditors.</P>
<P>
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.</P>
<P>
3 Based on net asset value, which does not reflect the sales charge or contingent
deferred sales charge, if applicable.</P>
<P>
4 This voluntary expense decrease is reflected in both the expense and the net
investment income ratios shown above.</P>
<P>
Further information about the Fund's performance is contained in the Fund's Annual
Report, dated March 31, 2000, which can be obtained free of charge.</P>
<P>
<B>Federated<BR>World-Class Investment Manager</B></P><P><B>PROSPECTUS</B> </P>
<H2>
Federated Municipal Securities Fund, Inc.</H2>
<H3>
<B>CLASS A SHARES</B><BR>
<B>CLASS B SHARES</B><BR>
<B>CLASS C SHARES</B></H3>
<P>
<B><R></B></P>
<P>
MAY 31, 2000</P>
<P>
</R></P>
<P>
<R></P>
<P>
A Statement of Additional Information (SAI) dated May 31, 2000 is incorporated by
reference into this prospectus. Additional information about the Fund and its
investments is contained in the Fund's SAI and Semi-Annual Reports to shareholders as
they become available. The Annual Report's Management Discussion and Analysis
discusses market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year. To obtain the SAI, Semi-Annual Report
and other information without charge, and make inquiries, call your investment
professional or the Fund at 1-800-341-7400.</P>
<P>
</R></P>
<P>
<B><R></B></P>
<P>
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at http://www.sec.gov.
You can purchase copies of this information by contacting the SEC by email at
publicinfo@sec.gov or by writing to the SEC's Public Reference Section,
Washington, DC 20549-0102. Call 1-202-942-8090 for information on the Public
Reference Room's operations and copying fees.</P>
<P>
</R></P>
<P>
<B>Federated</B><BR>Federated Municipal Securities Fund, Inc.<BR>Federated Investors
Funds<BR>5800 Corporate Drive<BR>Pittsburgh, PA
15237-7000<BR>1-800-341-7400<BR><B>www.federatedinvestors.com</B><BR>Federated
Securities Corp., Distributor </P>
<P>
Investment Company Act File No. 811-2677<BR>
Cusip 313913105<BR>
Cusip 313913204<BR>
Cusip 313913303</P>
<P>
<R></P>
<P>
G00322-01 (5/00)</P>
<P>
</R></P>
<P>
</P>
<P>
Federated is a registered mark of Federated Investors, Inc. 2000 ©Federated
Investors, Inc.</P>
<P>
</P>
<P>
<B>STATEMENT OF ADDITIONAL INFORMATION</B> </P>
<H2>
Federated Municipal Securities Fund, Inc.</H2>
<P>
</P>
<H3>
<B>CLASS A SHARES</B><BR>
<B>CLASS B SHARES</B><BR>
<B>CLASS C SHARES</B></H3>
<P>
<R></P>
<P>
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 May 31, 2000.</P>
<P>
</R></P>
<P>
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.</P>
<P>
<R></P>
<P>
MAY 31, 2000</P>
<P>
</R></P>
<P>
<R></P>
<P>
<B>Federated<BR>World-Class Investment Manager</B><BR>Federated Municipal Securities
Fund, Inc.<BR>Federated Investors Funds<BR>5800 Corporate Drive<BR>Pittsburgh, PA
15237-7000<BR>1-800-341-7400<BR><B>www.federatedinvestors.com</B><BR>Federated
Securities Corp., Distributor </P>
<P>
8051601B (5/00)</P>
<P>
</R></P>
<H3>
<B>CONTENTS</B></H3>
<P>
How is the Fund Organized? 1</P>
<P>
Securities in Which the Fund Invests 1</P>
<P>
<R></P>
<P>
What Do Shares Cost? 5</P>
<P>
</R></P>
<P>
<R></P>
<P>
How is the Fund Sold? 6</P>
<P>
</R></P>
<P>
<R></P>
<P>
Exchanging Securities for Shares 7</P>
<P>
</R></P>
<P>
<R></P>
<P>
Subaccounting Services 7</P>
<P>
</R></P>
<P>
<R></P>
<P>
Redemption in Kind 7</P>
<P>
</R></P>
<P>
<R></P>
<P>
Account and Share Information 8</P>
<P>
</R></P>
<P>
<R></P>
<P>
Tax Information 8</P>
<P>
</R></P>
<P>
<R></P>
<P>
Who Manages and Provides Services to the Fund? 9</P>
<P>
</R></P>
<P>
<R></P>
<P>
How Does the Fund Measure Performance? 13</P>
<P>
</R></P>
<P>
<R></P>
<P>
Who is Federated Investors, Inc.? 16</P>
<P>
</R></P>
<P>
<R></P>
<P>
Financial Information 17</P>
<P>
</R></P>
<P>
<R></P>
<P>
Investment Ratings 18</P>
<P>
</R></P>
<P>
<R></P>
<P>
Addresses 21</P>
<P>
</R></P>
<H2>
How is the Fund Organized?</H2>
<P>
<R></P>
<P>
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).</P>
<P>
</R></P>
<P>
<R></P>
<P>
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 classes of Shares.</P>
<P>
</R></P>
<H2>
Securities in Which the Fund Invests</H2>
<P>
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.</P>
<P>
<R></P>
<H3>
<B>FIXED INCOME SECURITIES</B></H3>
<P>
</R></P>
<P>
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.</P>
<P>
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.</P>
<P>
The following describes the types of fixed income securities, in addition to those
described in the prospectus, in which the Fund invests.</P>
<H3>
<B>Tax Exempt Securities</B></H3>
<P>
<R></P>
<P>
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal regular 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.</P>
<P>
</R></P>
<H3>
MUNICIPAL NOTES</H3>
<P>
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.</P>
<H3>
<B>INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES</B></H3>
<P>
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.</P>
<H3>
<B>Derivative Contracts</B></H3>
<P>
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.</P>
<P>
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.</P>
<P>
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.</P>
<H3>
<B>Temporary Defensive Investments</B></H3>
<P>
The Fund may make temporary defensive investments in the following taxable
securities:</P>
<H3>
CORPORATE DEBT SECURITIES</H3>
<P>
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.</P>
<H3>
COMMERCIAL PAPER</H3>
<P>
<R></P>
<P>
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. The short maturity of commercial
paper reduces both the market and credit risks as compared to other debt securities
of the same issuer.</P>
<P>
</R></P>
<P>
TREASURY SECURITIES</P>
<P>
Treasury securities are direct obligations of the federal government of the United
States. Treasury securities are generally regarded as having the lowest credit
risks.</P>
<P>
AGENCY SECURITIES</P>
<P>
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.</P>
<H3>
BANK INSTRUMENTS</H3>
<P>
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.</P>
<H3>
<B>SPECIAL TRANSACTIONS</B></H3>
<H3>
<B>Repurchase Agreements</B></H3>
<P>
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.</P>
<P>
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.</P>
<P>
Repurchase agreements are subject to credit risks.</P>
<H3>
<B>INVESTMENT RATINGS</B></H3>
<H3>
<B>Investment Ratings for Investment Grade Securities</B></H3>
<P>
<R></P>
<P>
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.</P>
<P>
</R></P>
<H3>
<B>INVESTMENT RISKS</B></H3>
<P>
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.</P>
<H3>
<B>Tax Risks</B></H3>
<P>
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.</P>
<P>
Changes or proposed changes in federal tax laws may cause the prices of municipal
securities to fall.</P>
<H3>
<B>Risks Associated with Noninvestment Grade Securities</B></H3>
<P>
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.</P>
<P>
<R></P>
<P>
Ordinarily, the Fund will invest in 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.</P>
<P>
</R></P>
<P>
<R></P>
<H3>
<B>FUNDAMENTAL INVESTMENT OBJECTIVE AND POLICY</B></H3>
<P>
</R></P>
<P>
<R></P>
<P>
The investment objective of the Corporation is to provide for its shareholders a high
level of current income which is exempt from federal regular income tax.</P>
<P>
</R></P>
<P>
<R></P>
<P>
The Corporation pursues its investment objective by investing 65% of its portfolio in
municipal bonds. Municipal bonds are debt obligations issued by or on behalf of
states, territories and possessions of the United States including the District of
Columbia, and their political subdivisions, agencies and instrumentalities the
interest on which is exempt from federal regular income tax.</P>
<P>
</R></P>
<P>
<R></P>
<P>
The objective and policy may not be changed by the Fund's board without shareholders
approval.</P>
<P>
</R></P>
<H3>
<B>INVESTMENT LIMITATIONS</B></H3>
<P>
<R></P>
<H3>
<B>Diversification</B></H3>
<P>
</R></P>
<P>
With respect to securities comprising 75% of the value of its total assets, the Fund
will not purchase securities of any one issuer (other than cash, cash items,
securities issued or guaranteed by the government of the United States or its
agencies or instrumentalities and repurchase agreements collateralized by such U.S.
government securities, and securities of other investment companies) if, as a result,
more than 5% of the value of its total assets would be invested in the securities of
that issuer, or the Fund would own more than 10% of the outstanding voting securities
of that issuer.</P>
<P>
<R></P>
<H3>
<B>Borrowing Money and Issuing Senior Securities</B></H3>
<P>
</R></P>
<P>
<R></P>
<P>
The Fund may borrow money, directly or indirectly, and issue senior securities to the
maximum extent permitted under the Investment Company Act of 1940 (the 1940 Act), any
rule or order thereunder, or any Securities and Exchange Committee (SEC) staff
interpretation thereof.</P>
<P>
</R></P>
<H3>
<B>Investing in Real Estate</B></H3>
<P>
<R></P>
<P>
The Fund may not purchase or sell real estate, provided that this restriction does
not prevent the Fund from investing in issuers which invest, deal, or otherwise
engage in transactions in real estate or interests therein, or investing in
securities that are secured by real estate or interests therein. The Fund may
exercise its rights under agreements relating to such securities, including the right
to enforce security interests and to hold real estate acquired by reason of such
enforcement until that real estate can be liquidated in an orderly manner.</P>
<P>
</R></P>
<H3>
<B>Investing in Commodities</B></H3>
<P>
<R></P>
<P>
The Fund may not purchase or sell physical commodities, provided that the Fund may
purchase securities of companies that deal in commodities. For purposes of this
restriction, investments in transactions involving futures contracts and options,
forward currency contracts, swap transactions and other financial contracts that
settle by payment of cash are not deemed to be investments in commodities.</P>
<P>
</R></P>
<H3>
<B>Underwriting</B></H3>
<P>
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.</P>
<P>
<R></P>
<H3>
<B>Lending</B></H3>
<P>
</R></P>
<P>
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.</P>
<P>
<R></P>
<H3>
<B>Concentration</B></H3>
<P>
</R></P>
<P>
<R></P>
<P>
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 that 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.</P>
<P>
</R></P>
<P>
<R></P>
<P>
<B><B>The above limitations cannot be changed unless authorized by the </B><B>Board
and the "vote of a majority of its outstanding voting securities," as
defined by the 1940 Act. The following limitations, however, may be changed by the
Board without shareholder approval. Shareholders will be notified before any material
change </B><B>in these limitations becomes effective.</B></B></P>
<P>
</R></P>
<H3>
<B>Pledging Assets</B></H3>
<P>
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.</P>
<P>
<R></P>
<H3>
<B>Purchases on Margin</B></H3>
<P>
</R></P>
<P>
<R></P>
<P>
The Fund will not purchase securities on margin, provided that the Fund may obtain
short-term credits necessary for the clearance of purchases and sales of securities
and further provided that the Fund may make margin deposits in connection with its
use of financial options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative instruments.</P>
<P>
</R></P>
<P>
<R></P>
<H3>
<B>Restricted Securities</B></H3>
<P>
</R></P>
<P>
<R></P>
<P>
The Fund may invest in restricted securities. Restricted securities are any
securities in which the Fund may invest pursuant to its investment objective and
policies but which are subject to restrictions on resale under federal securities
law. Under criteria established by the board, certain restricted securities are
determined to be liquid. To the extent that restored securities are not determined to
be liquid, the Fund will limit their purchase, together with other illiquid
securities, to 15% of its net assets.</P>
<P>
</R></P>
<P>
<R></P>
<P>
To conform to the current view of the SEC staff that only domestic bank instruments
may be excluded from industry concentration limitations, as a matter of
non-fundamental policy, the Fund will not exclude foreign bank instruments from
industry concentration tests as long as the policy of the SEC remains in effect.</P>
<P>
</R></P>
<P>
The Fund applies its concentration of investments restrictions as follows:</P>
<P>
<R></P>
<UL>
<LI>
utility companies will be divided according to their services, for example, gas, gas
transmissions, electric and telephone will each be considered a separate industry;
</UL>
<P>
</R></P>
<UL>
<LI>
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
<LI>
asset-backed securities will be classified according to the underlying assets
securing such securities.
</UL>
<P>
<R></P>
<H3>
<B>DETERMINING MARKET VALUE OF SECURITIES</B></H3>
<P>
</R></P>
<P>
Market values of the Fund's portfolio securities are determined as follows:</P>
<P>
<R></P>
<UL>
<LI>
<P>
Futures contacts and options are generally valued at market values established by the
exchanges on which they are traded at the close of trading on such exchanges. Options
traded in the over-the-counter market are generally valued according to the mean
between the last bid and the last asked price for the option as provided by an
investment dealer or other financial institution that deals in the option. The Board
may determine in good faith that another method of valuing such investments is
necessary to appraise their fair market value;
</UL>
<P>
</R></P>
<P>
<R></P>
<UL>
<LI>
for fixed income securities, according to the mean between bid and asked prices as
furnished by an independent pricing service, except that fixed income securities with
remaining maturities of less than 60 days at the time of purchase may be valued at
amortized cost; and
</UL>
<P>
</R></P>
<UL>
<LI>
for all other securities at fair value as determined in good faith by the Board.
</UL>
<P>
<R></P>
<P>
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.</P>
<P>
</R></P>
<H2>
What Do Shares Cost?</H2>
<P>
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.</P>
<P>
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.</P>
<H3>
<B>REDUCING OR ELIMINATING THE FRONT-END SALES CHARGE</B></H3>
<P>
You can reduce or eliminate the applicable front-end sales charge, as follows:</P>
<H3>
<B>Quantity Discounts</B></H3>
<P>
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.</P>
<H3>
<B>Accumulated Purchases</B></H3>
<P>
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.</P>
<H3>
<B>Concurrent Purchases</B></H3>
<P>
You can combine concurrent purchases of the same share class of two or more Federated
Funds in calculating the applicable sales charge.</P>
<H3>
<B>Letter of Intent Class A Shares</B></H3>
<P>
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.</P>
<H3>
<B>Reinvestment Privilege</B></H3>
<P>
You may reinvest, within 120 days, your Share redemption proceeds at the next
determined NAV without any sales charge.</P>
<H3>
<B>Purchases by Affiliates of the Fund</B></H3>
<P>
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:</P>
<UL>
<LI>
the Directors, employees and sales representatives of the Fund, the Adviser, the
Distributor and their affiliates;
<LI>
any associated person of an investment dealer who has a sales agreement with the
Distributor; and
<LI>
trusts, pension or profit-sharing plans for these individuals.
</UL>
<H3>
<B>FEDERATED LIFE MEMBERS</B></H3>
<P>
Shareholders of the Fund known as "Federated Life Members" are exempt from
paying any front-end sales charge. These shareholders joined the Fund originally:</P>
<UL>
<LI>
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
<LI>
as Liberty Account shareholders by investing through an affinity group prior to
August 1, 1987.
</UL>
<H3>
<B>REDUCING OR ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE</B></H3>
<P>
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.</P>
<P>
Upon notification to the Distributor or the Fund's transfer agent, no CDSC will be
imposed on redemptions:</P>
<UL>
<LI>
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;
<LI>
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;
<LI>
of Shares that represent a reinvestment within 120 days of a previous redemption;
</UL>
<P>
<R></P>
<UL>
<LI>
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;
</UL>
<P>
</R></P>
<P>
<R></P>
<UL>
<LI>
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;
</UL>
<P>
</R></P>
<UL>
<LI>
which are involuntary redemptions processed by the Fund because the accounts do not
meet the minimum balance requirements; and
<LI>
which are qualifying redemptions of Class B Shares under a Systematic Withdrawal
Program.
</UL>
<H2>
How is the Fund Sold?</H2>
<P>
Under the Distributor's Contract with the Fund, the Distributor (Federated Securities
Corp.) offers Shares on a continuous, best-efforts basis.</P>
<H3>
<B>FRONT-END SALES CHARGE REALLOWANCES</B></H3>
<P>
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.</P>
<H3>
<B>RULE 12B-1 PLAN (CLASS B SHARES AND CLASS C SHARES)</B></H3>
<P>
<R></P>
<P>
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.</P>
<P>
</R></P>
<P>
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.</P>
<P>
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.</P>
<P>
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.</P>
<H3>
<B>SHAREHOLDER SERVICES</B></H3>
<P>
<R></P>
<P>
The Fund may pay Federated Shareholder Services Company, a subsidiary of Federated
Investors, Inc. (Federated) for providing shareholder services and maintaining
shareholder accounts. Federated Shareholder Services Company may select others to
perform these services for their customers and may pay them fees.</P>
<P>
</R></P>
<H3>
<B>SUPPLEMENTAL PAYMENTS</B></H3>
<P>
<R></P>
<P>
Investment professionals (such as broker/dealers or banks) may be paid fees, in
significant amounts, out of the assets of the Distributor and/or Federated
Shareholder Services Company (these fees do not come out of Fund assets). The
Distributor or Federated Shareholder Services Company may be reimbursed by the
Adviser or its affiliates.</P>
<P>
</R></P>
<P>
<R></P>
<P>
Investment professionals receive such fees for providing distribution-related and/or
shareholder services, such as advertising, providing incentives to their sales
personnel, sponsoring other activities intended to promote sales, and maintaining
shareholder accounts. These payments may be based upon such factors as the number or
value of Shares the investment professional sells or may sell, the value of client
assets invested, and/or the type and nature of sales or marketing support furnished
by the investment professional.</P>
<P>
</R></P>
<P>
When an investment professional's customer purchases shares, the investment
professional may receive:</P>
<UL>
<LI>
an amount up to 5.50% and 1.00%, respectively, of the NAV of Class B and C Shares.
</UL>
<P>
<R></P>
<P>
In addition, the Distributor may pay an investment professional 0.25% of the purchase
price of $1 million or more of Class A Shares that its customer has not redeemed over
the first year.</P>
<P>
</R></P>
<H3>
<B>Class A Shares</B></H3>
<P>
<R></P>
<P>
Investment professionals purchasing Class A Shares for their customers are eligible
to receive an advance payment from the Distributor based on the following
breakpoints.</P>
<P>
</R></P>
<P>
</P>
<TABLE CELLSPACING=0 CELLPADDING=1>
<TR>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>Amount</B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>Advance Payments <BR>
as a Percentage of <BR>
Public Offering Price</B></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
First $1 - $5 million</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
0.75%</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
Next $5 - $20 million</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
0.50%</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
Over $20 million</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
0.25%</P>
</TD>
</TR>
</TABLE>
<P>
For accounts with assets over $1 million, the dealer advance payments reset annually
to the first breakpoint on the anniversary of the first purchase.</P>
<P>
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.</P>
<P>
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.</P>
<H2>
Exchanging Securities for Shares</H2>
<P>
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.</P>
<H2>
Subaccounting Services</H2>
<P>
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.</P>
<H2>
Redemption in Kind</H2>
<P>
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.</P>
<P>
<R></P>
<P>
Because the Fund has elected to be governed by Rule 18f-1 under the 1940 Act, the
Fund is obligated to pay Share redemptions to any one shareholder in cash only up to
the lesser of $250,000 or 1% of the net assets represented by such Share class during
any 90-day period.</P>
<P>
</R></P>
<P>
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.</P>
<P>
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.</P>
<H2>
Account and Share Information</H2>
<H3>
<B>VOTING RIGHTS</B></H3>
<P>
Each share of the Fund gives the shareholder one vote in Director elections and other
matters submitted to shareholders for vote.</P>
<P>
<R></P>
<P>
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</P>
<P>
</R></P>
<P>
<R></P>
<P>
As of May 5, 2000, the following shareholders owned of record, beneficially, or both,
5% or more of outstanding Class C Shares: Edward Jones & Company, Maryland Hts.,
MO owned approximately 125,713,477 shares (12.35%); TRUCOJO Trust Company of St.
Joseph, St. Joseph, MO, owned approximately 65,198,761 shares (6.40%); MLPF&S,
Jacksonville, FL, owned approximately 219,569,277 shares (21.57%); William P. Becker
& Debra Michael Becker, Bala Cynwyd, PA, owned approximately 62,730,318 shares
(6.16%).</P>
<P>
</R></P>
<P>
<R></P>
<P>
As of May 8, 2000, the following shareholders owned of record, beneficially, or both,
5% or more of outstanding Class A Shares: Edward Jones & Company Maryland Hts.,
MO, owned approximately 3,075,269,36 shares (6.58%).</P>
<P>
</R></P>
<H2>
Tax Information</H2>
<H3>
<B>FEDERAL INCOME TAX</B></H3>
<P>
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.</P>
<H2>
Who Manages and Provides Services to the Fund?</H2>
<H3>
<B>BOARD OF DIRECTORS</B></H3>
<P>
<R></P>
<P>
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 43 investment companies, whose investment
advisers are affiliated with the Fund's Adviser.</P>
<P>
</R></P>
<P>
<R></P>
<P>
As of May 5, 2000, the Fund's Board and Officers as a group owned less than 1% of the
Fund's outstanding Class B and C Shares. As of May 8, 2000, the Fund's Board and
Officers as a group owned less than 1% of the Fund's outstanding Class A Shares.</P>
<P>
</R></P>
<P>
</P>
<TABLE CELLSPACING=0 CELLPADDING=1>
<TR>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>Name<BR>
Birth Date<BR>
Address<BR>
Position With Fund</B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>Principal Occupations <BR>
for Past Five Years</B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>Aggregate <BR>
Compensation <BR>
From Fund</B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>Total <BR>
Compensation <BR>
From Fund <BR>
and Fund Complex</B></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B><B>John F. Donahue*†</B></B><BR>
Birth Date: July 28, 1924<BR>
Federated Investors Tower <BR>
1001 Liberty Avenue <BR>
Pittsburgh, PA<BR>
CHAIRMAN AND DIRECTOR</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
Chief Executive Officer and Director or Trustee of the Federated Fund Complex;
Chairman and Director, Federated Investors, Inc.; Chairman, Federated Investment
Management Company, Federated Global Investment Management Corp. and Passport
Research, Ltd. ; formerly: Trustee, Federated Investment Management Company and
Chairman and Director, Federated Investment Counseling.</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>$0</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
$0 for the Fund and<BR>
43 other investment<BR>
companies in the<BR>
Fund Complex </P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B><B>Thomas G. Bigley</B></B><BR>
Birth Date: February 3, 1934<BR>
15 Old Timber Trail<BR>
Pittsburgh, PA<BR>
DIRECTOR</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
Director or Trustee of the Federated Fund Complex; Director, Member of Executive
Committee, Children's Hospital of Pittsburgh; Director, Robroy Industries, Inc.
(coated steel 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.</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>$1,435.86</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
$116,760.63 for the Fund<BR>
and 43 other investment <BR>
companies in the <BR>
Fund Complex</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B><B>John T. Conroy, Jr</B></B>.<BR>
Birth Date: June 23, 1937<BR>
Grubb & Ellis/Investment Properties Corporation<BR>
3201 Tamiami Trail North <BR>
Naples, FL<BR>
DIRECTOR</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
Director or Trustee of the Federated Fund Complex; President, Investment Properties
Corporation; Senior Vice President, John R. Wood and Associates, Inc., Realtors;
Partner or Trustee in private real estate ventures in Southwest Florida; formerly:
President, Naples Property Management, Inc. and Northgate Village Development
Corporation.</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>$1,541.25</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
$128,455.37 for the Fund<BR>
and 43 other investment <BR>
companies in the <BR>
Fund Complex</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B><B>Nicholas P. Constantakis</B></B><BR>
Birth Date: September 3, 1939<BR>
175 Woodshire Drive<BR>
Pittsburgh, PA<BR>
DIRECTOR</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
Director or Trustee of the Federated Fund Complex; Director, Michael Baker
Corporation (engineering, construction, operations and technical services); formerly:
Partner, Andersen Worldwide SC.</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>$1,435.86</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
$73,191.21 for the Fund<BR>
and 37 other investment <BR>
companies in the <BR>
Fund Complex</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B><B>John F. Cunningham</B></B><BR>
Birth Date: March 5, 1943<BR>
353 El Brillo Way<BR>
Palm Beach, FL<BR>
DIRECTOR</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
Director or Trustee of some of the Federated Fund Complex; Chairman, President and
Chief Executive Officer, Cunningham & Co., Inc. (strategic business consulting);
Trustee Associate, Boston College; Director, Iperia Corp. (communications/software);
formerly: Director, Redgate Communications and EMC Corporation (computer storage
systems).<BR>
<BR>
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.</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>$696.79</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
$93,190.48 for the Fund<BR>
and 37 other investment <BR>
companies in the <BR>
Fund Complex</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B><B>Lawrence D. Ellis, M.D.*</B></B><BR>
Birth Date: October 11, 1932<BR>
3471 Fifth Avenue <BR>
Suite 1111<BR>
Pittsburgh, PA<BR>
DIRECTOR</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
Director or Trustee of the Federated Fund Complex; Professor of Medicine, University
of Pittsburgh; Medical Director, University of Pittsburgh Medical Center -- Downtown;
Hematologist, Oncologist and Internist, University of Pittsburgh Medical Center;
Member, National Board of Trustees, Leukemia Society of America.</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>$1,400.94</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
$116,760.63 for the Fund <BR>
and 43 other investment <BR>
companies in the <BR>
Fund Complex</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>Name<BR>
Birth Date<BR>
Address<BR>
Position With Fund</B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>Principal Occupations <BR>
for Past Five Years</B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>Aggregate <BR>
Compensation <BR>
From Fund</B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>Total <BR>
Compensation <BR>
From Fund <BR>
and Fund Complex</B></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B><B>Peter E. Madden</B></B><BR>
Birth Date: March 16, 1942<BR>
One Royal Palm Way<BR>
100 Royal Palm Way<BR>
Palm Beach, FL<BR>
DIRECTOR</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
Director or Trustee of the Federated Fund Complex; formerly: Representative,
Commonwealth of Massachusetts General Court; President, State Street Bank and Trust
Company and State Street Corporation. <BR>
<BR>
Previous Positions: Director, VISA USA and VISA International; Chairman and Director,
Massachusetts Bankers Association; Director, Depository Trust Corporation; Director,
The Boston Stock Exchange.</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>$1,277.07</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
$109,153.60 for the Fund <BR>
and 43 other investment <BR>
companies in the <BR>
Fund Complex</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B><B>Charles F. Mansfield, Jr</B></B>.<BR>
Birth Date: April 10, 1945<BR>
80 South Road<BR>
Westhampton Beach, NY<BR>
DIRECTOR</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
Director or Trustee of some of the Federated Fund Complex; Executive Vice President,
Legal and External Affairs, Dugan Valva Contess, Inc. (marketing, communications,
technology and consulting); formerly: Management Consultant.<BR>
<BR>
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.</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>$1,515.98</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
$102,573.91 for the Fund<BR>
and 40 other investment <BR>
companies in the <BR>
Fund Complex</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B><B>John E. Murray, Jr., J.D., S.J.D.</B></B><BR>
Birth Date: December 20, 1932<BR>
President, Duquesne University<BR>
Pittsburgh, PA<BR>
DIRECTOR</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
Director or Trustee of the Federated Fund Complex; President, Law Professor, Duquesne
University; Consulting Partner, Mollica & Murray; Director, Michael Baker Corp.
(engineering, construction, operations and technical services).<BR>
<BR>
Previous Positions: Dean and Professor of Law, University of Pittsburgh School of
Law; Dean and Professor of Law, Villanova University School of Law.</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>$1,506.33</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
$128,455.37 for the Fund <BR>
and 43 other investment <BR>
companies in the <BR>
Fund Complex</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B><B>Marjorie P. Smuts</B></B><BR>
Birth Date: June 21, 1935<BR>
4905 Bayard Street<BR>
Pittsburgh, PA<BR>
DIRECTOR</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
Director or Trustee of the Federated Fund Complex; Public
Relations/Marketing/Conference Planning.<BR>
<BR>
Previous Positions: National Spokesperson, Aluminum Company of America; television
producer; business owner.</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>$1,400.94</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
$116,760.63 for the Fund<BR>
and 43 other investment <BR>
companies in the <BR>
Fund Complex</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B><B>John S. Walsh</B></B><BR>
Birth Date: November 28, 1957<BR>
2007 Sherwood Drive<BR>
Valparaiso, IN<BR>
DIRECTOR</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
Director or Trustee of some of the Federated Fund Complex; President and Director,
Heat Wagon, Inc. (manufacturer of construction temporary heaters); President and
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.</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>$1,400.94</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
$94,536.85 for the Fund<BR>
and 39 other investment <BR>
companies in the <BR>
Fund Complex</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B><B>J. Christopher Donahue†</B></B><BR>
Birth Date: April 11, 1949<BR>
Federated Investors Tower<BR>
1001 Liberty Avenue<BR>
Pittsburgh, PA<BR>
PRESIDENT AND DIRECTOR</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
President or Executive Vice President of the Federated Fund Complex; Director or
Trustee of some of the Funds in the Federated Fund Complex; President, Chief
Executive Officer and Director, Federated Investors, Inc.; President, Chief Executive
Officer and Trustee, Federated Investment Management Company; Trustee, Federated
Investment Counseling; President, Chief Executive Officer and Director, Federated
Global Investment Management Corp.; President and Chief Executive Officer, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company; Director, Federated
Services Company; formerly: President, Federated Investment Counseling.</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>$0</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
$0 for the Fund and<BR>
30 other investment <BR>
companies in the <BR>
Fund Complex</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>Name<BR>
Birth Date<BR>
Address<BR>
Position With Fund</B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>Principal Occupations <BR>
for Past Five Years</B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>Aggregate <BR>
Compensation <BR>
From Fund</B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>Total <BR>
Compensation <BR>
From Fund <BR>
and Fund Complex</B></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B><B>Edward C. Gonzales</B></B><BR>
Birth Date: October 22, 1930<BR>
Federated Investors Tower<BR>
1001 Liberty Avenue<BR>
Pittsburgh, PA<BR>
EXECUTIVE VICE PRESIDENT<BR>
AND DIRECTOR</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
President, Executive Vice President and Treasurer of some of the Funds in the
Federated Fund Complex; Vice Chairman, Federated Investors, Inc.; Trustee, Federated
Administrative Services; formerly: Trustee or Director of some of the Funds in the
Federated Fund Complex; CEO and Chairman, Federated Administrative Services; Vice
President, Federated Investment Management Company, Federated Investment Counseling,
Federated Global Investment Management Corp. and Passport Research, Ltd.; Director
and Executive Vice President, Federated Securities Corp.; Director, Federated
Services Company; Trustee, Federated Shareholder Services Company. </P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>$0</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
$0 for the Fund and <BR>
42 other investment <BR>
companies in the <BR>
Fund Complex</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B><B>John W. McGonigle</B></B><BR>
Birth Date: October 26, 1938<BR>
Federated Investors Tower<BR>
1001 Liberty Avenue<BR>
Pittsburgh, PA<BR>
EXECUTIVE VICE PRESIDENT<BR>
AND SECRETARY</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
Executive Vice President and Secretary of the Federated Fund Complex; Executive Vice
President, Secretary and Director, Federated Investors, Inc.; formerly: Trustee,
Federated Investment Management Company and Federated Investment Counseling;
Director, Federated Global Investment Management Corp., Federated Services Company
and Federated Securities Corp.</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>$0</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
$0 for the Fund and <BR>
43 other investment <BR>
companies in the <BR>
Fund Complex</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B><B>Richard J. Thomas</B></B><BR>
Birth Date: June 17, 1954<BR>
Federated Investors Tower<BR>
1001 Liberty Avenue<BR>
Pittsburgh, PA<BR>
TREASURER</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
Treasurer of the Federated Fund Complex; Senior Vice President, Federated
Administrative Services; formerly: Vice President, Federated Administrative Services;
held various management positions within Funds Financial Services Division of
Federated Investors, Inc.</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>$0</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
$0 for the Fund and <BR>
43 other investment <BR>
companies in the <BR>
Fund Complex</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B><B>Richard B. Fisher</B></B><BR>
Birth Date: May 17, 1923<BR>
Federated Investors Tower<BR>
1001 Liberty Avenue<BR>
Pittsburgh, PA<BR>
VICE PRESIDENT</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
President or Vice President of some of the Funds in the Federated Fund Complex; Vice
Chairman, Federated Investors, Inc.; Chairman, Federated Securities Corp.; formerly:
Director or Trustee of some of the Funds in the Federated Fund Complex,; Executive
Vice President, Federated Investors, Inc. and Director and Chief Executive Officer,
Federated Securities Corp.</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>$0</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
$0 for the Fund and <BR>
41 other investment <BR>
companies in the <BR>
Fund Complex</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B><B>William D. Dawson, III</B></B><BR>
Birth Date: March 3, 1949<BR>
Federated Investors Tower<BR>
1001 Liberty Avenue<BR>
Pittsburgh, PA<BR>
CHIEF INVESTMENT OFFICER</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
Chief Investment Officer of this Fund and various other Funds in the Federated Fund
Complex; Executive Vice President, Federated Investment Counseling, Federated Global
Investment Management Corp., Federated Investment Management Company and Passport
Research, Ltd.; Director, Federated Global Investment Management Corp. and Federated
Investment Management Company; 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.</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>$0</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
$0 for the Fund and <BR>
27 other investment <BR>
companies in the <BR>
Fund Complex</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B><B>Mary Jo Ochson</B></B><BR>
Birth Date: September 12, 1953<BR>
Federated Investors Tower<BR>
1001 Liberty Avenue<BR>
Pittsburgh, PA<BR>
VICE PRESIDENT</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
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.</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>$0</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
$0 for the Fund and <BR>
4 other investment <BR>
companies in the <BR>
Fund Complex</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
</TR>
</TABLE>
<P>
<R></P>
<P>
* An asterisk denotes a Director who is deemed to be an interested person as
defined in the 1940 Act.</P>
<P>
</R></P>
<P>
<R></P>
<P>
# A pound sign denotes a Member of the Board's Executive Committee, which handles
the Board's responsibilities between its meetings.</P>
<P>
</R></P>
<P>
<R></P>
<P>
† Mr. Donahue is the father of J. Christopher Donahue, President of the
Fund</P>
<P>
</R></P>
<P>
<R></P>
<P>
†† 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 receive any fees as of the fiscal year end of the Fund.</P>
<P>
</R></P>
<H3>
<B>INVESTMENT ADVISER</B></H3>
<P>
<R></P>
<P>
The Adviser conducts investment research and makes investment decisions for the
Fund.</P>
<P>
</R></P>
<P>
<R></P>
<P>
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.</P>
<P>
</R></P>
<H3>
<B>Other Related Services</B></H3>
<P>
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.</P>
<P>
<R></P>
<H3>
<B>CODE OF ETHICS RESTRICTIONS ON PERSONAL TRADING</B></H3>
<P>
</R></P>
<P>
<R></P>
<P>
As required by SEC rules, the Fund, its Adviser and its Distributor have adopted
codes of ethics. These codes govern securities trading activities of investment
personnel, Fund Directors and certain other employees. Although they do permit these
people to trade in securities, including those that the Fund could buy, they also
contain significant safeguards designed to protect the Fund and its shareholders from
abuses in this area, such as requirements to obtain prior approval for, and to
report, particular transactions.</P>
<P>
</R></P>
<H3>
<B>BROKERAGE TRANSACTIONS</B></H3>
<P>
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.</P>
<P>
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.</P>
<H3>
<B>ADMINISTRATOR</B></H3>
<P>
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:</P>
<P>
</P>
<TABLE CELLSPACING=0 CELLPADDING=1>
<TR>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>Maximum Administrative Fee</B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>Average Aggregate Daily <BR>
Net Assets of the Federated Funds</B></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
0.150 of 1%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
on the first $250 million</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
0.125 of 1%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
on the next $250 million</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
0.100 of 1%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
on the next $250 million</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
0.075 of 1%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
on assets in excess of $750 million</P>
</TD>
</TR>
</TABLE>
<P>
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.</P>
<P>
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.</P>
<H3>
<B>CUSTODIAN</B></H3>
<P>
<R></P>
<P>
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.</P>
<P>
</R></P>
<H3>
<B>TRANSFER AGENT AND DIVIDEND DISBURSING AGENT</B></H3>
<P>
<R></P>
<P>
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.</P>
<P>
</R></P>
<P>
<R></P>
<H3>
<B>INDEPENDENT AUDITORS</B></H3>
<P>
</R></P>
<P>
<R></P>
<P>
The independent auditor for the Fund, Ernst & Young 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.</P>
<P>
</R></P>
<P>
<R></P>
<H3>
<B>FEES PAID BY THE FUND FOR SERVICES</B></H3>
<P>
</R></P>
<H3>
</H3>
<TABLE CELLSPACING=0 CELLPADDING=1>
<TR>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B><R>For the Year Ended March 31 </R></B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><B><R>
2000 </R></B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><B><R>
1999</R></B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><B><R>
1998</R></B></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
Advisory Fee Earned</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><R>
$3,369,773</R></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><R>
$3,832,697</R></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><R>
$3,872,458</R></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP" ROWSPAN="1" COLSPAN="7">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
Brokerage Commissions </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>0</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>0</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>0</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP" ROWSPAN="1" COLSPAN="7">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
Administrative Fee</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><R>
452,152</R></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><R>
517,819</R></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><R>
530,941</R></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP" ROWSPAN="1" COLSPAN="7">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B>12b-1 Fee</B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP" ROWSPAN="1" COLSPAN="7">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
Class B Shares</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><R>
601,120</R></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>--</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>--</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP" ROWSPAN="1" COLSPAN="7">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
Class C Shares</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><R>
104,490</R></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>--</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>--</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP" ROWSPAN="1" COLSPAN="7">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B>Shareholder Services Fee</B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP" ROWSPAN="1" COLSPAN="7">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
Class A Shares</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><R>
556,407</R></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>--</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>--</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP" ROWSPAN="1" COLSPAN="7">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
Class B Shares</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><R>
200,373</R></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>--</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>--</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP" ROWSPAN="1" COLSPAN="7">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
Class C Shares</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><R>
33,437</R></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>--</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT>--</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP" ROWSPAN="1" COLSPAN="7">
<P>
<HR>
</TD>
</TR>
</TABLE>
<P>
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.</P>
<H2>
How Does the Fund Measure Performance?</H2>
<P>
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.</P>
<P>
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.</P>
<P>
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.</P>
<H3>
<B>AVERAGE ANNUAL TOTAL RETURNS AND YIELD</B></H3>
<P>
<R></P>
<P>
Total returns are given for the one-year, five-year and ten-year or Start of
Performance periods ended March 31, 2000.</P>
<P>
</R></P>
<P>
<R></P>
<P>
Yield and Tax-Equivalent Yields are given for the 30-day period ended March 31,
2000.</P>
<P>
</R></P>
<P>
</P>
<TABLE CELLSPACING=0 CELLPADDING=1>
<TR>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B><R>Share Class</R></B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>30-Day <BR>
Period</B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>1 <BR>
Year</B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>5 <BR>
Years</B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>10 <BR>
Years</B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B><R>Class A
</R></B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
Total Return</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
NA</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>
(8.31%)</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>
2.71%</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>
5.16%</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
Yield</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>
4.59%</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
NA</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
NA</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
NA</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
Tax-Equivalent <BR>
Yield</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>
7.60%</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
NA</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
NA</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
NA</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B><R>Share Class</R></B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>30-Day <BR>
Period</B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>1 <BR>
Year</B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>5 <BR>
Years</B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B><R>10 <BR>
Years</R></B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B><R>Start of <BR>
Performance <BR>
on July 26, <BR>
1994</R></B></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B><R>Class B
</R></B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
Total Return</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
NA</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>
(9.86%)</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>
2.42%</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>NA</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>
2.89%</R></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
Yield</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>
3.93%</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
NA</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
NA</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>NA</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
NA</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
Tax-Equivalent <BR>
Yield</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>
6.51%</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
NA</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
NA</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>NA</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
NA</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B><R>Share Class</R></B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>30-Day <BR>
Period</B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>1 <BR>
Year</B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>5 <BR>
Years</B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B><R>10 <BR>
Years</R></B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B><R>Start of <BR>
Performance <BR>
on April 21, <BR>
1993</R></B></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B><R>Class C
</R></B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
Total Return</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
NA</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>
(5.76%)</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>
2.76%</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>NA</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>
2.71%</R></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
Yield</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>
3.94%</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
NA</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
NA</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>NA</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
NA</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
Tax-Equivalent <BR>
Yield</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>
6.52%</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
NA</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
NA</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>NA</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
NA</P>
</TD>
</TR>
</TABLE>
<H3>
<B>TOTAL RETURN</B></H3>
<P>
<R></P>
<P>
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.</P>
<P>
</R></P>
<P>
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.</P>
<H3>
<B>YIELD</B></H3>
<P>
<R></P>
<P>
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 the maximum combined
federal and state 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.</P>
<P>
</R></P>
<P>
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.</P>
<H3>
<B>TAX EQUIVALENCY TABLE</B></H3>
<P>
<R></P>
<P>
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.</P>
<P>
</R></P>
<P>
</P>
<TABLE CELLSPACING=0 CELLPADDING=1>
<TR>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B><R>Taxable Yield Equivalent for 2000 MultiState Municipal
Fund</R></B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B> </B></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>Federal Income Tax Bracket:</B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><B>15.00%</B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>28.00%</B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>31.00%</B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>36.00%</B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B> </B></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=LEFT><B>39.60%</B></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
Joint Return</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><R>
$43,850</R></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><R>$43,851-105,950</R></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><R>$105,951-161,450</R></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><R>$161,451-288,350</R></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><R> $288,350</R></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP" ROWSPAN="1" COLSPAN="11">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
Single Return</P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><R>$26,250</R></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><R>$26,251-63,550</R></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><R>$63,551-132,600</R></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><R>$132,601-288,350</R></P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT> </P>
</TD>
<TD VALIGN="TOP">
<P>
<P ALIGN=RIGHT><R> $288,350</R></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP" ROWSPAN="1" COLSPAN="11">
<P>
<HR>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<B>Tax-Exempt Yield:</B></P>
</TD>
<TD VALIGN="TOP">
<P>
<B> </B></P>
</TD>
<TD VALIGN="TOP" ROWSPAN="1" COLSPAN="9">
<P>
<B>Taxable Yield Equivalent:</B></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
1.00%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
1.18%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
1.39%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
1.45%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
1.56%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
1.66%</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
1.50%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
1.76%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
2.08%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
2.17%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
2.34%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
2.48%</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
2.00%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
2.35%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
2.78%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
2.90%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
3.13%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
3.31%</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
2.50%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
2.94%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
3.47%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
3.62%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
3.91%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
4.14%</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
3.00%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
3.53%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
4.17%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
4.35%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
4.69%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
4.97%</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
3.50%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
4.12%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
4.86%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
5.07%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
5.47%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
5.79%</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
4.00%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
4.71%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
5.56%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
5.80%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
6.25%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
6.62%</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
4.50%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
5.29%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
6.25%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
6.52%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
7.03%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
7.45%</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
5.00%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
5.88%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
6.94%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
7.25%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
7.81%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
8.28%</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
5.50%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
6.47%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
7.64%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
7.97%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
8.59%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
9.11%</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
6.00%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
7.06%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
8.33%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
8.70%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
9.38%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
9.93%</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
6.50%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
7.65%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
9.03%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
9.42%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
10.16%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
10.76%</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
7.00%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
8.24%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
9.72%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
10.14%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
10.94%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
11.59%</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
7.50%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
8.82%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
10.42%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
10.87%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
11.72%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
12.42%</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
8.00%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
9.41%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
11.11%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
11.59%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
12.50%</P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
13.25%</P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<R>8.50%</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>10.00%</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>11.18%</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>12.32%</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>13.28%</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>14.07%</R></P>
</TD>
</TR>
<TR>
<TD VALIGN="TOP">
<P>
<R>9.00%</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>10.59%</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R> 12.50%</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>13.04%</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>14.06%</R></P>
</TD>
<TD VALIGN="TOP">
<P>
</P>
</TD>
<TD VALIGN="TOP">
<P>
<R>14.90%</R></P>
</TD>
</TR>
</TABLE>
<P>
Note: The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent.</P>
<H3>
<B>PERFORMANCE COMPARISONS</B></H3>
<P>
Advertising and sales literature may include:</P>
<P>
<R></P>
<UL>
<LI>
references to ratings, rankings and financial publications and/or performance
comparisons of Shares to certain indices;
</UL>
<P>
</R></P>
<UL>
<LI>
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;
</UL>
<P>
<R></P>
<UL>
<LI>
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<B><B> </B></B>Fund; and
</UL>
<P>
</R></P>
<UL>
<LI>
information about the mutual fund industry from sources such as the Investment
Company Institute.
</UL>
<P>
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.</P>
<P>
The Fund may quote information from reliable sources regarding individual countries
and regions, world stock exchanges, and economic and demographic statistics.</P>
<P>
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:</P>
<H3>
<B>Lipper Analytical Services, Inc.</B></H3>
<P>
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.</P>
<H3>
<B>Lehman Brothers Revenue Bond Index</B></H3>
<P>
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.</P>
<H3>
<B>Lehman Brothers Municipal Bond Index</B></H3>
<P>
Lehman Brothers Municipal Bond Index is an unmanaged broad based total return
performance benchmark for the long-term, investment grade bond market.</P>
<H3>
<B>Lehman Seven Year State General Obligations Index</B></H3>
<P>
Lehman Seven Year State General Obligations Index is an index of general obligation
bonds rated A or better with 6-8 years to maturity.</P>
<H3>
<B>Morningstar, Inc.</B></H3>
<P>
<R></P>
<P>
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.</P>
<P>
</R></P>
<H2>
Who is Federated Investors, Inc.?</H2>
<P>
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.</P>
<P>
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.</P>
<H3>
<B>FEDERATED FUNDS OVERVIEW</B></H3>
<H3>
<B>Municipal Funds</B></H3>
<P>
<R></P>
<P>
In the municipal sector, as of December 31, 1999, Federated managed 12 bond funds
with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 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.</P>
<P>
</R></P>
<H3>
<B>Equity Funds</B></H3>
<P>
<R></P>
<P>
In the equity sector, Federated has more than 29 years' experience. As of December
31, 1999, Federated managed 53 equity funds totaling approximately $18.3 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.</P>
<P>
</R></P>
<H3>
<B>Corporate Bond Funds</B></H3>
<P>
<R></P>
<P>
In the corporate bond sector, as of December 31, 1999, Federated managed 13 money
market funds and 29 bond funds with assets approximating $35.7 billion and $7.7
billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 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.</P>
<P>
</R></P>
<H3>
<B>Government Funds</B></H3>
<P>
<R></P>
<P>
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with assets
approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively. Federated
trades approximately $450 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
$43.8 billion in government funds within these maturity ranges.</P>
<P>
</R></P>
<H3>
<B>Money Market Funds</B></H3>
<P>
<R></P>
<P>
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, 1999, Federated managed
more than $83.0 billion in assets across 54 money market funds, including 16
government, 13 prime, 24 municipal and 1 euro-denominated with assets approximating
$34.1 billion, $35.7 billion, $13.1 billion and $115 million, respectively.</P>
<P>
</R></P>
<P>
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.</P>
<H3>
<B>MUTUAL FUND MARKET</B></H3>
<P>
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.</P>
<H3>
<B>FEDERATED CLIENTS OVERVIEW</B></H3>
<P>
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:</P>
<H3>
<B>Institutional Clients</B></H3>
<P>
<R></P>
<P>
Federated meets the needs of approximately 1,160 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.</P>
<P>
</R></P>
<H3>
<B>Bank Marketing</B></H3>
<P>
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.</P>
<H3>
<B>Broker/Dealers and Bank Broker/Dealer Subsidiaries</B></H3>
<P>
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.</P>
<H2>
Financial Information</H2>
<P>
<R></P>
<P>
The Financial Statements for the Fund for the fiscal year ended March 31, 2000 are
incorporated herein by reference to the Annual Report to Shareholders of Federated
Municipal Securities Fund, Inc. dated March 31, 2000.</P>
<P>
</R></P>
<H2>
Investment Ratings</H2>
<P>
<R></P>
<H3>
<B>STANDARD AND POOR'S LONG-TERM DEBT RATINGS</B></H3>
<P>
</R></P>
<P>
<R></P>
<P>
<B><B>AAA--</B></B>Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.</P>
<P>
</R></P>
<P>
<R></P>
<P>
<B><B>AA--</B></B>Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.</P>
<P>
</R></P>
<P>
<R></P>
<P>
<B><B>A--</B></B>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.</P>
<P>
</R></P>
<P>
<R></P>
<H3>
<B>MOODY'S INVESTORS SERVICE, INC., SHORT-TERM MUNICIPAL OBLIGATION RATINGS</B></H3>
<P>
</R></P>
<P>
<R></P>
<P>
Moody's Investor Service, Inc. (Moody's) short-term ratings are designated Moody's
Investment Grade (MIG or VMIG). (See below.) The purpose of the MIG or VMIG ratings
is to provide investors with a simple system by which the relative investment
qualities of short-term obligations may be evaluated.</P>
<P>
</R></P>
<P>
<R></P>
<P>
<B><B>MIG1--</B></B>This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad based access to the market for refinancing.</P>
<P>
</R></P>
<P>
<R></P>
<P>
<B><B>MIG2--</B></B>This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.</P>
<P>
</R></P>
<P>
<R></P>
<H3>
<B>VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS</B></H3>
<P>
</R></P>
<P>
<R></P>
<P>
Short-term ratings on issues with demand features are differentiated by the use of
the VMIG symbol to reflect such characteristics as payment upon periodic demand
rather than fixed maturity dates and payment relying on external liquidity. In this
case, two ratings are usually assigned, (for example, Aaa/VMIG-1); the first
representing an evaluation of the degree of risk associated with scheduled principal
and interest payments, and the second representing an evaluation of the degree of
risk associated with the demand feature. The VMIG rating can be assigned a 1 or 2
designation using the same definitions described above for the MIG rating.</P>
<P>
</R></P>
<P>
<R></P>
<H3>
<B>COMMERCIAL PAPER (CP) RATINGS</B></H3>
<P>
</R></P>
<P>
<R></P>
<P>
<B><B>P-1--</B></B>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, well-established access to a range of
financial markets and assured sources of alternate liquidity.</P>
<P>
</R></P>
<P>
<R></P>
<P>
<B><B>P-2--</B></B>Issuers rated Prime-2 (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.</P>
<P>
</R></P>
<P>
<R></P>
<H3>
<B>LONG-TERM DEBT RATINGS</B></H3>
<P>
</R></P>
<P>
<R></P>
<P>
<B><B>Aaa--</B></B>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.</P>
<P>
</R></P>
<P>
<R></P>
<P>
<B><B>Aa--</B></B>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.</P>
<P>
</R></P>
<P>
<R></P>
<P>
<B><B>A--</B></B>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 maybe present which
suggest a susceptibility to impairment sometime in the future.</P>
<P>
</R></P>
<P>
<R></P>
<P>
<B><B>NR--</B></B>Indicates that both the bonds and the obligor or credit enhancer
are not currently rated by S&P or Moody's with respect to short-term
indebtedness. However, management considers them to be of comparable quality to
securities rated A-1 or P-1.</P>
<P>
</R></P>
<P>
<R></P>
<P>
<B><B>NR(1)--</B></B>The underlying issuer/obligor/guarantor has other outstanding
debt rated AAA by S&P or Aaa by Moody's.</P>
<P>
</R></P>
<P>
<R></P>
<P>
<B><B>NR(2)--</B></B>The underlying issuer/obligor/guarantor has other outstanding
debt rated AA by S&P or Aa by Moody's.</P>
<P>
</R></P>
<P>
<R></P>
<P>
<B><B>NR(3)--</B></B>The underlying issuer/obligor/guarantor has other outstanding
debt rated A by S&P or Moody's.</P>
<P>
</R></P>
<P>
<R></P>
<H3>
<B>FITCH IBCA, INC. SHORT-TERM DEBT RATING DEFINITIONS</B></H3>
<P>
</R></P>
<P>
<R></P>
<P>
<B><B>F-1+--</B></B>Exceptionally Strong Credit Quality. Issues assigned this rating
are regarded as having the strongest degree of assurance for timely payment.</P>
<P>
</R></P>
<P>
<R></P>
<P>
<B><B>F-1--</B></B>Very Strong Credit Quality. Issues assigned this rating reflect an
assurance for timely payment, only slightly less in degree than issues rated F-1+.</P>
<P>
</R></P>
<P>
<R></P>
<P>
<B><B>F-2--</B></B>Good Credit Quality. Issues carrying this rating have a
satisfactory degree of assurance for timely payment, but the margin of safety is not
as great as for issues assigned F-1+ and F-1 ratings.</P>
<P>
</R></P>
<H3>
<B>STANDARD AND POOR'S LONG-TERM DEBT RATING DEFINITIONS</B></H3>
<P>
<B><B>AAA--</B></B>Debt rated AAA has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.</P>
<P>
<B><B>AA--</B></B>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.</P>
<P>
<B><B>A--</B></B>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.</P>
<P>
<B><B>BBB--</B></B>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.</P>
<P>
<B><B>BB--</B></B>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.</P>
<P>
<B><B>B--</B></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.</P>
<P>
<R></P>
<P>
<B><B>CCC--</B></B>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.</P>
<P>
</R></P>
<P>
<B><B>CC--</B></B>The rating CC typically is applied to debt subordinated to senior
debt that is assigned an actual or implied CCC debt rating.</P>
<P>
<B><B>C--</B></B>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.</P>
<H3>
<B>MOODY'S INVESTORS SERVICE, INC. LONG-TERM BOND RATING DEFINITIONS</B></H3>
<P>
<B><B>AAA--</B></B>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.</P>
<P>
<B><B>AA--</B></B>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.</P>
<P>
<B><B>A--</B></B>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.</P>
<P>
<B><B>BAA--</B></B>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.</P>
<P>
<B><B>BA--</B></B>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.</P>
<P>
<B><B>B--</B></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.</P>
<P>
<B><B>CAA--</B></B>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.</P>
<P>
<B><B>CA--</B></B>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.</P>
<P>
<B><B>C--</B></B>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.</P>
<H3>
<B>FITCH IBCA, INC. LONG-TERM DEBT RATING DEFINITIONS</B></H3>
<P>
<B><B>AAA--</B></B>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.</P>
<P>
<B><B>AA--</B></B>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+.</P>
<P>
<B><B>A--</B></B>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.</P>
<P>
<B><B>BBB--</B></B>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.</P>
<P>
<B><B>BB--</B></B>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.</P>
<P>
<B><B>B--</B></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.</P>
<P>
<B><B>CCC--</B></B>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.</P>
<P>
<B><B>CC--</B></B>Bonds are minimally protected. Default in payment of interest
and/or principal seems probable over time.</P>
<P>
<B><B>C--</B></B>Bonds are imminent default in payment of interest or principal.</P>
<H3>
<B>MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS</B></H3>
<P>
<B><B>Prime-1--</B></B>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:</P>
<UL>
<LI>
Leading market positions in well-established industries;
<LI>
High rates of return on funds employed;
<LI>
Conservative capitalization structure with moderate reliance on debt and ample asset
protection;
<LI>
Broad margins in earning coverage of fixed financial charges and high internal cash
generation; and
<LI>
Well-established access to a range of financial markets and assured sources of
alternate liquidity.
</UL>
<P>
<R></P>
<P>
<B><B>Prime-2--</B></B>Issuers rated Prime-2 (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.</P>
<P>
</R></P>
<H3>
<B>STANDARD AND POOR'S COMMERCIAL PAPER RATINGS</B></H3>
<P>
<B><B>A-1--</B></B>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.</P>
<P>
<B><B>A-2--</B></B>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.</P>
<H3>
<B>FITCH IBCA, INC. COMMERCIAL PAPER RATING DEFINITIONS</B></H3>
<P>
<B><B>FITCH-1--</B></B>(Highest Grade) Commercial paper assigned this rating is
regarded as having the strongest degree of assurance for timely payment.</P>
<P>
<B><B>FITCH-2--</B></B>(Very Good Grade) Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than the strongest
issues.</P>
<H2>
Addresses</H2>
<H3>
<B>FEDERATED MUNICIPAL SECURITIES FUND, INC.</B></H3>
<P>
Class A Shares<BR>
Class B Shares<BR>
Class C Shares</P>
<P>
Federated Investors Funds<BR>
5800 Corporate Drive<BR>
Pittsburgh, PA 15237-7000</P>
<H3>
<B>Distributor</B></H3>
<P>
Federated Securities Corp.<BR>
Federated Investors Tower<BR>
1001 Liberty Avenue<BR>
Pittsburgh, PA 15222-3779</P>
<H3>
<B>Investment Adviser</B></H3>
<P>
Federated Investment Management Company<BR>
Federated Investors Tower<BR>
1001 Liberty Avenue<BR>
Pittsburgh, PA 15222-3779</P>
<H3>
<B>Custodian</B></H3>
<P>
State Street Bank and Trust Company<BR>
P.O. Box 8600<BR>
Boston, MA 02266-8600</P>
<H3>
<B>Transfer Agent and Dividend Disbursing Agent</B></H3>
<P>
Federated Shareholder Services Company<BR>
P.O. Box 8600<BR>
Boston, MA 02266-8600</P>
<P>
<R></P>
<H3>
<B>Independent Auditors</B></H3>
<P>
</R></P>
<P>
<R></P>
<P>
Ernst & Young LLP<BR>
200 Clarendon Street<BR>
Boston, MA 02116-5072</P>
<P>
</R></P>
<P>
</P>
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)
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) 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);
o) Conformed copy of Power of Attorney. (+)
p) The Registrant hereby incorporates the conformed copy of the
Code of Ethics for Access Persons from Item 23(p) of the Money Market
Obligations Trust Registration Statement on Form N-1A filed with the
Commission on February 25, 2000. (File Nos. 33-31602 and 811-5950.)
- ----------------------
+ 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)
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 Trustees of the investment adviser and, in
parentheses, their principal occupations are: Thomas R. Donahue, (Chief
Financial Officer, Federated Investors, Inc.), 1001 Liberty Avenue,
Pittsburgh, PA, 15222-3779 and Mark D. Olson (Partner, Wilson, Halbrook
& Bayard), 107 W. Market Street, Georgetown, Delaware 19947.
The remaining Officers of the investment adviser are:
Executive Vice Presidents: William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden
Senior Vice Presidents: Joseph M. Balestrino
David A. Briggs
Jonathan C. Conley
Deborah A. Cunningham
Michael P. Donnelly
Linda A. Duessel
Mark E. Durbiano
James E. Grefenstette
Jeffrey A. Kozemchak
Sandra L. McInerney
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski
Bernard A. Picchi
Peter Vutz
Vice Presidents: Todd A. Abraham
J. Scott Albrecht
Arthur J. Barry
Randall S. Bauer
G. Andrew Bonnewell
Micheal W. Casey
Robert E. Cauley
Alexandre de Bethmann
B. Anthony Delserone, Jr.
Donald T. Ellenberger
Eamonn G. Folan
Kathleen M. Foody-Malus
Thomas M. Franks
Marc Halperin
John W. Harris
-----------------
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
Patricia L. Heagy
Susan R. Hill
William R. Jamison
Constantine J. Kartsonas
Robert M. Kowit
Richard J. Lazarchic
Steven J. Lehman
Marian R. Marinack
Christopher Matyszewski
Jeffrey A. Petro
Item 26. Business and Other Connections of Investment Adviser (continued):
Vice Presidents Keith J. Sabol
Frank Semack
Aash M. Shah
Michael W. Sirianni, Jr.
Christopher Smith
Edward J. Tiedge
Leonardo A. Vila
Paige M. Wilhelm
Lori A. Wolff
George B. Wright
Assistant Vice Presidents: Catherine A. Arendas
Arminda Aviles
Nancy J. Belz
James R. Crea, Jr.
Karol M. Krummie
Lee R. Cunningham, II
Fred B. Crutchfield
James H. Davis, II
Paul S. Drotch
Salvatore A. Esposito
Donna M. Fabiano
Gary E. Falwell
John T. Gentry
Nikola A. Ivanov
Nathan H. Kehm
John C. Kerber
Ted T. Lietz, Sr.
Monica Lugani
Grant K. McKay
Natalie F. Metz
Thomas Mitchell
Joseph M. Natoli
Bob Nolte
Mary Kay Pavuk
John Quartarolo
Rae Ann Rice
Roberto Sanchez-Dahl, Sr.
Sarath Sathkumara
James W. Schaub
John Sidawi
Diane R. Startari
Diane Tolby
Timothy G. Trebilcock
Michael R. Tucker
Steven J. Wagner
Secretary: G. Andrew Bonnewell
Treasurer: Thomas R. Donahue
Assistant Secretaries: C. Grant Anderson
Karen M. Brownlee
Leslie K. Ross
Assistant Treasurer: Denis McAuley, III
The business address of each of the Officers of the investment adviser
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh,
Pennsylvania 15222-3779. These individuals are also officers of a
majority of the investment advisers to the investment companies in the
Federated Fund Complex described in Part B of this Registration
Statement.
ITEM 27. PRINCIPAL UNDERWRITERS:
- ---------------------------------
(a) Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the following open-end investment
companies, including the Registrant: Cash Trust Series 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 Fixed Income Securities, Inc.;
Federated Fund for U.S. Government Securities, Inc.; Federated GNMA Trust;
Federated Government Income Securities, Inc.; Federated High Income Bond Fund,
Inc.; Federated High Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Institutional Trust; Federated
Insurance Series; Federated Investment Series Funds, Inc.; Federated Managed
Allocation Portfolios; Federated Municipal Opportunities Fund, Inc.; Federated
Municipal Securities Fund, Inc.; Federated Municipal Securities Income Trust;
Federated Short-Term Municipal Trust; Federated Stock and Bond Fund, Inc.;
Federated Stock Trust; Federated 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.;
FirstMerit Funds; Hibernia Funds; Independence One Mutual Funds; Intermediate
Municipal Trust; International Series, Inc.; Marshall Funds, Inc.; Money Market
Obligations Trust; Regions Funds; RIGGS Funds; SouthTrust Funds; Tax-Free
Instruments Trust; The Wachovia Funds; The Wachovia Municipal Funds; Vision
Group of Funds, Inc.; and World Investment Series, Inc.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Richard B. Fisher Chairman, Vice President
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Arthur L. Cherry Director, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales --
Federated Investors Tower and Director,
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas R. Donahue Director, Executive Vice --
Federated Investors Tower Vice President and Assistant
1001 Liberty Avenue Secretary,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
James F. Getz President-Broker/Dealer and --
Federated Investors Tower Director,
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
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
Ronald M. Petnuch Senior Vice President,
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John M. Albert Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Matthew W. Brown Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark Carroll Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Steven R. Cohen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert J. Deuberry Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark A. Gessner Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Tad Gullickson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dayna C. Haferkamp Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Anthony J. Harper 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
Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President,
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Christopher A. Layton Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael H. Liss Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Amy Michalisyn 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
Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas A. Peter 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
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward J. Segura Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
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
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert W. Bauman Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Donald C. Edwards Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John T. Glickson Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ernest L. Linane 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
Kirk A. Montgomery Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Denis McAuley, III Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Timothy S. Johnson Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Victor R. Siclari Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Item 28. Location of Accounts and Records:
For a description of the other business of the investment 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.
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 26th day of May,
2000.
FEDERATED MUNICIPAL SECURITIES FUND, INC.
BY: /s/ Leslie K. Ross
Leslie K. Ross, Assistant Secretary
Attorney in Fact for John F. Donahue
May 26, 2000
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 May 26, 2000
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
</BODY>
</HTML>
Exhibit (J) under Form N-1A
Exhibit 23 under Item 601/Reg SK
CONSENT OF ERNST & YOUNG LLP,INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Financial Highlights"
in the Prospectuses and "Independent Auditors" in the Statement Of Additional
Information and to the use of our report dated May 15, 2000, in
Post-Effective Amendment Number 55 to the Registration Statement (Form N-1A No.
2-57181) of the
Federated Municipal Securities Fund, Inc. dated May 31, 2000.
/s/ Ernst & Young
By: ERNST & YOUNG LLP
Boston, Massachusetts
May 26, 2000
POWER OF ATTORNEY
Exhibit (o) under Form N-1A Exhibit 24 under Item 601/Reg S-K
Each person whose signature appears below hereby constitutes and appoints
the Secretary and Assistant Secretaries of FEDERATED MUNICIPAL SECURITIES FUND,
INC. 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 of
1933, 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/ JOHN F. DONAHUE Chairman and Director May 15, 2000
- ---------------------------------
John F. Donahue (Chief Executive Officer)
/S/ J. CHRISTOPHER DONAHUE President and Director May 15, 2000
- ---------------------------------
J. Christopher Donahue
/S/ RICHARD J. THOMAS Treasurer May 15, 2000
- ---------------------------------
Richard J. Thomas (Principal Financial and
Accounting Officer)
SIGNATURES TITLE DATE
- ---------- ----- ----
/S/ THOMAS G. BIGLEY Director May 15, 2000
- ---------------------------------
Thomas G. Bigley
/S/ JOHN T. CONROY, JR. Director May 15, 2000
- ---------------------------------
John T. Conroy, Jr.
/S/ NICHOLAS P. CONSTANTAKIS Director May 15, 2000
- ------------------------------------
Nicholas P. Constantakis
/S/ JOHN F. CUNNINGHAM Director May 15, 2000
- ---------------------------------
John F. Cunningham
/S/ LAWRENCE D. ELLIS, M.D. Director May 15, 2000
- ---------------------------------
Lawrence D. Ellis, M.D.
/S/ PETER E. MADDEN Director May 15, 2000
- ---------------------------------
Peter E. Madden
/S/ CHARLES F. MANSFIELD, JR. Director May 15, 2000
- ---------------------------------
Charles F. Mansfield, Jr.
SIGNATURES TITLE DATE
- ---------- ----- ----
May 15, 2000
/S/ JOHN E. MURRAY, JR. Director
- ---------------------------------
John E. Murray, Jr.
/S/ MARJORIE P. SMUTS Director May 15, 2000
- ---------------------------------
Marjorie P. Smuts
/S/ JOHN S. WALSH Director May 15, 2000
- ---------------------------------
John S. Walsh
Sworn to and subscribed before me this 15TH day of MAY, 2000
------ --- ----
/S/ JANICE L. VANDENBERG
Janice L. Vandenberg
