Reg. No.333-
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811-4533
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
(formerly, Fortress Municipal Income Fund, Inc.)
(Exact Name of Registrant as Specified in Charter)
(412) 288-1900
(Area Code and Telephone Number)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
JOHN W. MCGONIGLE, ESQUIRE
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
Copies to:
Byron F. Bowman, Esquire Matthew G. Maloney, Esquire
Senior Corporate Counsel Dickstein Shapiro Morin & Oshinsky LLP
Federated Investors 2101 L Street, N.W.
Federated Investors Tower Washington, D.C. 20037
Pittsburgh, PA 15222
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, as amended, that it elects to register an indefinite amount of
securities under the Securities Act of 1933, as amended, and filed the
Notice required by that Rule for Registrant's fiscal year ended August 31,
1995 on October 16, 1995. Accordingly, no filing fee is submitted herewith.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as the
Securities and Exchange Commission, acting pursuant to said Section 8(a),
may determine.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 1(A) OF FORM N-14 SHOWING LOCATION IN
PROSPECTUS OF INFORMATION REQUIRED BY FORM N-14
Item of Part A of Form N-14 and Caption or Location in
Caption Prospectus
1.Beginning of Registration
Statement and Outside Front Cross Reference Sheet;
Cover Page of Prospectus Cover Page
2.Beginning and Outside Back
Cover Page of Prospectus Table of Contents
3.Fee Table, Synopsis Information Summary of Expenses; Summary;
and Risk Factors Risk Factors
4.Information About the Information About the
Transaction Reorganization
5.Information About the Information About the Federated
Registrant Fund and the State Bond Fund
6.Information About the Information About the Federated Fund
Company Being Acquired and the State Bond Fund
7.Voting Information Voting Information
8.Interest of Certain Persons
and Experts Not Applicable
9.Additional Information
Required for Reoffering by
Persons Deemed to be
Underwriters Not Applicable
STATE BOND MINNESOTA TAX-FREE INCOME FUND
100 NORTH MINNESOTA STREET
P.O. BOX 69
NEW ULM, MINNESOTA 56073-0069
Dear Shareholder:
The Board of Directors and management of State Bond Minnesota Tax-
Free Income Fund (the `State Bond Fund'') are pleased to submit for your
vote a proposal to transfer all of the net assets of the State Bond Fund to
Federated Municipal Opportunities Fund, Inc. (the "Federated Fund"), a
mutual fund advised by Federated Advisers. The Federated Fund has an
investment objective similar to that of the State Bond Fund in that it
seeks a high level of current income exempt from the federal regular income
tax by investing primarily in a professionally managed, diversified
portfolio of municipal bonds (although the Federated Fund does not seek
income exempt from Minnesota personal income tax). As part of the
transaction, holders of shares in the State Bond Fund would receive Class A
Shares of the Federated Fund equal in value to their shares in the State
Bond Fund and the State Bond Fund would be liquidated. Shareholders
receiving Class A Shares of the Federated Fund as a result of the proposed
reorganization would not have to pay a sales load upon receiving such
Shares, nor would they be subject to any contingent deferred sales charges
in connection with the exercise of exchange rights or redemptions of such
Shares.
The Board of Directors of the State Bond Fund, as well as ARM
Capital Advisors, Inc., the State Bond Fund's manager, and ARM Financial
Services, Inc., the State Bond Fund's distributor, believe the proposed
agreement and plan of reorganization is in the best interests of State Bond
Fund shareholders for the following reasons:
-- The reorganization of the State Bond Fund into the Federated
Fund may ultimately provide operating efficiencies as a result of
the size of the Federated Fund which were not available to State
Bond Fund shareholders due to the smaller size of the State Bond
Fund.
-- The Federated Fund offers an investment portfolio which invests
in municipal bonds to achieve a high level of current income exempt
from the federal regular income tax. Although the Federated Fund,
unlike the State Bond Fund, invests in municipal bonds which are
generally not exempt from the Minnesota personal income tax, the
tax-equivalent yield produced by the Federated Fund historically
has exceeded the tax-equivalent yield produced by the State Bond
Fund.
The Federated Fund is managed by Federated Advisers, a subsidiary
of Federated Investors. Federated Investors was founded in 1955 and is
located in Pittsburgh, Pennsylvania. Federated Advisers and other
subsidiaries of Federated Investors serve as investment advisers to a
number of investment companies and private accounts. With over $90 billion
invested across more than 250 funds under management and/or administration
by its subsidiaries, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 2,000 employees,
Federated continues to be led by the management who founded the company in
1955. Federated funds are presently at work in and through 4,000 financial
institutions nationwide. More than 100,000 investment professionals have
selected Federated funds for their clients.
Federated Investors also has an excellent reputation for customer
servicing, having received a #1 rating for five years in a row by Dalbar,
Inc. The shareholder services for the Federated funds include advanced
technological systems that result in quick shareholder access to a broad
spectrum of information.
We believe the transfer of the State Bond Fund's assets in this
transaction presents an exciting investment opportunity for our
shareholders. Your vote on the transaction is critical to its success.
The transfer will be effected only if approved by a majority of all of the
State Bond Fund's outstanding shares on the record date voted in person or
represented by proxy. We hope you share our enthusiasm and will
participate by casting your vote in person, or by proxy if you are unable
to attend the meeting. Please read the enclosed prospectus/proxy statement
carefully before you vote.
THE BOARD OF DIRECTORS BELIEVES THAT THE TRANSACTION IS IN THE BEST
INTEREST OF THE STATE BOND FUND AND ITS SHAREHOLDERS, AND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR ITS APPROVAL.
Thank you for your prompt attention and participation.
Sincerely,
Dale C. Bauman
President
STATE BOND MINNESOTA TAX-FREE INCOME FUND
100 NORTH MINNESOTA STREET
P.O. BOX 69
NEW ULM, MINNESOTA 56073-0069
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO SHAREHOLDERS OF STATE BOND MINNESOTA TAX-FREE INCOME FUND:
A Special Meeting of Shareholders of State Bond Minnesota Tax-Free
Income Fund, a portfolio of State Bond Tax-Free Income Funds, Inc. (the
`State Bond Fund'') will be held at 4:30 p.m. on December , 1996 at:
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100 North Minnesota Street, New Ulm, Minnesota 56073-0069, for the
following purposes:
1. To approve or disapprove a proposed Agreement and Plan of
Reorganization between the State Bond Fund and Federated Municipal
Opportunities Fund, Inc. (the "Federated Fund"), whereby the Federated Fund
would acquire all of the net assets of the State Bond Fund in exchange for
the Federated Fund's Class A Shares to be distributed pro rata by the State
Bond Fund to the holders of its shares in complete liquidation of the State
Bond Fund; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
By Order of the Board of Directors,
Dated: November , 1996 Kevin L. Howard
--
Secretary
Shareholders of record at the close of business on October 11,
1996, are entitled to vote at the meeting. Whether or not you plan to
attend the meeting, please sign and return the enclosed proxy card. Your
vote is important.
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AND TO SAVE THE EXPENSE OF
FURTHER MAILINGS, PLEASE MARK YOUR PROXY CARD, SIGN IT, AND RETURN IT IN
THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. YOU MAY REVOKE YOUR PROXY AT ANY TIME AT OR BEFORE THE MEETING OR
VOTE IN PERSON IF YOU ATTEND THE MEETING.
PROSPECTUS/PROXY STATEMENT
NOVEMBER , 1996
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Acquisition of the Assets of
STATE BOND MINNESOTA TAX-FREE INCOME FUND,
a portfolio of
STATE BOND TAX-FREE INCOME FUNDS, INC.
100 North Minnesota Street
P.O. Box 69
New Ulm, Minnesota 56073-0069
Telephone Number: 1-800-328-4735
By and in exchange for Class A Shares of
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-341-7400
This Prospectus/Proxy Statement describes the proposed Agreement
and Plan of Reorganization (the "Plan") whereby Federated Municipal
Opportunities Fund, Inc., a Maryland corporation (the "Federated Fund"),
would acquire all of the net assets of State Bond Minnesota Tax-Free Income
Fund, a portfolio of State Bond Tax-Free Income Funds, Inc., a Maryland
corporation (the `State Bond Fund''), in exchange for the Federated Fund's
Class A Shares to be distributed pro rata by the State Bond Fund to the
holders of its shares, in complete liquidation of the State Bond Fund. As
a result of the Plan, each shareholder of the State Bond Fund will become
the owner of the Federated Fund's Class A Shares having a total net asset
value equal to the total net asset value of his or her holdings in the
State Bond Fund.
THE BOARD OF DIRECTORS OF THE STATE BOND FUND UNANIMOUSLY
RECOMMENDS APPROVAL OF THE PLAN.
The Shares of each of the Federated Fund and the State Bond Fund
represent interests of separate open-end management investment companies.
The Federated Fund's investment objective is to provide a high level of
current income which is generally exempt from the federal regular income
tax, which it pursues by investing primarily in a diversified portfolio of
municipal bonds. The State Bond Fund's investment objective is to maximize
current income exempt from both federal income tax and Minnesota personal
income tax to the extent consistent with preservation of capital, by
investing primarily in Minnesota tax exempt securities. For a comparison
of the investment policies of the Federated Fund and the State Bond Fund,
see "Summary-Investment Objectives, Policies and Limitations."
This Prospectus/Proxy Statement should be retained for future
reference. It sets forth concisely the information about the Federated
Fund that a prospective investor should know before investing. This
Prospectus/Proxy Statement is accompanied by the Prospectus of the
Federated Fund dated September 1, 1996, which is incorporated herein by
reference. Statements of Additional Information for the Federated Fund
dated September 1, 1996 (relating to the Federated Fund's prospectus of the
same date) and November , 1996 (relating to this Prospectus/Proxy
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Statement), the Annual Report to Shareholders dated August 31, 1995 and the
Semi-Annual Report to Shareholders dated February 29, 1996, all containing
additional information, have been filed with the Securities and Exchange
Commission and are incorporated herein by reference. Copies of the
Statements of Additional Information, the Annual Report and the Semi-Annual
Report may be obtained without charge by writing or calling the Federated
Fund at the address and telephone number shown above.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES
INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page No.
Summary of Expenses
Summary
About the Proposed Reorganization
Investment Objectives, Policies and Limitations
Advisory and Other Fees
Distribution Arrangements
Purchase, Exchange and Redemption Procedures
Dividends
Tax Consequences
Risk Factors
Information About the Reorganization
Background and Reasons for the Proposed Reorganization
Agreement Among ARM, ARM Capital and Federated
Description of the Plan of Reorganization
Description of Federated Fund Shares
Federal Income Tax Consequences
Comparative Information on Shareholder Rights and Obligations
Capitalization
Information About the Federated Fund and the State Bond Fund
Federated Municipal Opportunities Fund, Inc.
State Bond Minnesota Tax-Free Income Fund
Voting Information
Outstanding Shares and Voting Requirements
Dissenter's Right of Appraisal
Other Matters and Discretion of Persons Named in the Proxy
Agreement and Plan of Reorganization -- Exhibit A
SUMMARY OF EXPENSES
Federated State Pro Forma
Fund Bond Combined
(Class A Fund
Shares)
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases
(as a percentage of offering
price)...........................
Maximum Sales Charge Imposed on
Reinvested Dividends (as a
percentage of None None None
offering price)................
Contingent Deferred Sales Charge
(as a percentage of original
purchase None(2) None None(2)
price or redemption proceeds, as
applicable)......................
Redemption Fee (as a percentage of
amount redeemed, if None None None
applicable)(3)...................
Exchange Fee..................... None None None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee................... 0.60% 0.43%(4) 0.60%
12b-1 Fee........................ 0.00%(5) 0.25% 0.00%(5)
Total Other Expenses............. 0.48%(6) 0.32% 0.46%(6)
Total Operating 1.08% 1.00% 1.06%
Expenses(7)......................
(1) This sales charge would not be applicable to shares of the Federated
Fund acquired under the proposed reorganization.
(2) Class A Shares purchased with the proceeds of a redemption of shares
of an unaffiliated investment company purchased or redeemed with a sales
charge and not distributed by Federated Securities Corp. may be charged a
contingent deferred sales charge of 0.50 of 1% for redemptions made within
one full year of purchase. For a more complete description see `Summary -
Distribution Arrangements.'' This contingent deferred sales charge would
not be applicable to shares of the Federated Fund acquired under the
proposed reorganization.
(3) Wire-transferred redemptions of Class A Shares of the Federated Fund
of less than $5,000 may be subject to additional fees. A $10.00 fee will
be charged for certain redemptions of State Bond Fund shares by wire
transfer.
(4) The management fee of the State Bond Fund is net of expense
reimbursements. Without such reimbursements, the management fee would have
been 0.60%.
(5) The Federated Fund has no present intention of paying or accruing the
12b-1 fee. If the Federated Fund were paying or accruing the 12b-1 fee, it
would be able to pay up to 0.25% of its average daily net assets for the
12b-1 fee. For a more complete description see `Summary-Distribution
Arrangements.''
(6) Total other expenses for the Federated Fund and the Pro Forma Combined
Fund include a shareholder services fee of 0.25%.
(7) The total operating expenses for Class A Shares of the Federated Fund
are based on expenses expected during the fiscal year ending August 31,
1996. The total operating expenses for the State Bond Fund are based upon
expenses incurred by the State Bond Fund during its fiscal year ended June
30, 1996. The total operating expenses for the State Bond Fund were 1.00%
for the fiscal year ended June 30, 1996 and would have been 1.17% absent
the reimbursement of a portion of the management fee.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that a shareholder of shares of each of the
Federated Fund, the State Bond Fund and the pro forma combined fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses see "Summary - Advisory and Other Fees" and
"Summary - Distribution Arrangements."
Long-term shareholders of the State Bond Fund may pay more than the
economic equivalent of the maximum front-end sales charges permitted under
the rules of the National Association of Securities Dealers, Inc.
EXAMPLE
The Example below is intended to assist an investor in
understanding the various costs that an investor will bear directly or
indirectly. The Example assumes payment of operating expenses at the
levels set forth in the table above. The Example does not include sales
charges or contingent deferred sales charges since such sales charges are
not applicable to Federated Fund Shares received as a result of the
proposed reorganization. Shares purchased subsequent to the reorganization
may be subject to sales charges. For a complete description of sales
charges, contingent deferred sales charges and exemptions from such
charges, reference is hereby made to the Prospectus of the Federated Fund
dated September 1, 1996 and the Prospectus of the State Bond Fund dated
November 1, 1995, each of which is incorporated herein by reference
thereto.
An investor would pay the 1 year 3 years 5 years 10 years
following expenses on a $1,000
investment, assuming (1) 5%
annual return and (2)
redemption at the end of each
time period. Expenses would be
the same if there were no
redemption at the end of each
time period.
Federated Fund................ $11 $34 $60 $132
State Bond Fund............... $10 $32 $55 $122
Pro Forma Combined............ $11 $34 $58 $129
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
SUMMARY
This summary is qualified in its entirety by reference to the
additional information contained elsewhere in this Prospectus/Proxy
Statement, the Prospectus of the Federated Fund dated September 1, 1996,
the Statement of Additional Information of the Federated Fund dated
September 1, 1996, the Prospectus of the State Bond Fund dated November 1,
1995, the Statement of Additional Information of the State Bond Fund dated
November 1, 1995, and the Plan, a copy of which is attached to this
Prospectus/Proxy Statement as Exhibit A.
About the Proposed Reorganization
The Board of Directors of the State Bond Fund has voted to
recommend to holders of the shares of the State Bond Fund the approval of
the Plan whereby the Federated Fund would acquire all of the net assets of
the State Bond Fund in exchange for the Federated Fund's Class A Shares to
be distributed pro rata by the State Bond Fund to its shareholders in
complete liquidation and dissolution of the State Bond Fund (the
"Reorganization"). As a result of the Reorganization, each shareholder of
the State Bond Fund will become the owner of the Federated Fund's Class A
Shares having a total net asset value equal to the total net asset value of
his or her holdings in the State Bond Fund on the date of the
Reorganization, i.e., the Closing Date (as hereinafter defined).
As a condition to the Reorganization transactions, the Federated
Fund and the State Bond Fund will receive an opinion of counsel that the
Reorganization will be considered a tax-free "reorganization" under
applicable provisions of the Internal Revenue Code of 1986, as amended (the
`Code''), so that no gain or loss will be recognized by either the
Federated Fund or the State Bond Fund or the shareholders of the State Bond
Fund. The tax basis of the Federated Fund's Class A Shares received by
State Bond Fund shareholders will be the same as the tax basis of their
shares in the State Bond Fund. After the acquisition is completed, the
State Bond Fund will be dissolved.
Investment Objectives, Policies and Limitations
The investment objective of the Federated Fund is to provide a high
level of current income which is generally exempt from the federal regular
income tax by investing primarily in a diversified portfolio of municipal
bonds. This investment objective may not be changed without the
affirmative vote of a majority of the outstanding voting securities of the
Federated Fund, as defined in the Investment Company Act of 1940, as
amended (the `1940 Act'').
The investment objective of the State Bond Fund is to seek to
maximize current income exempt from both federal income tax and Minnesota
personal income tax to the extent consistent with preservation of capital,
by investing primarily in Minnesota tax exempt securities. This
investment objective may not be changed without the affirmative vote of a
majority of the outstanding voting securities of the State Bond Fund, as
defined in the 1940 Act.
The Federated Fund invests its assets so that at least 80% of its
annual interest income is exempt from federal regular income tax (federal
regular income tax does not include the federal alternative minimum tax
(the `AMT'')). Unlike most of the dividend income generated by the State
Bond Fund, the dividend income generated by the Federated Fund will
generally be subject to Minnesota personal income tax for shareholders who
are Minnesota residents; however, the tax-equivalent yield produced by the
Federated Fund historically has exceeded the tax-equivalent yield produced
by the State Bond Fund. The Federated Fund invests primarily 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 from which is exempt from the federal
regular income tax. The Federated Fund may invest in municipal bonds, the
interest on which may be included in calculating the federal AMT. The
municipal bonds which the Federated Fund buys are rated `Ba'' or better by
Moody's Investors Service, Inc. (`Moody's'') or ``BB'' or better by
Standard & Poor's Ratings Group (`S&P'') or, if not rated, are determined
by Federated Advisers (as hereinafter defined) to be of comparable quality.
The Federated Fund will limit its purchases of municipal bonds rated Ba and
BB (commonly known as `junk bonds'') to up to but less than 35% of its net
assets. The Federated Fund may purchase securities on a when-issued or
delayed delivery basis, purchase a right to sell a security held by it back
to the issuer or to another party at an agreed upon price at any time
during a stated period or on a certain date, or hedge all or a portion of
its investments by entering into future contracts or options on them. If
necessary for temporary defensive purposes, the Federated Fund may invest
in short-term tax-exempt or taxable temporary investments. Unless
otherwise designated, the investment policies of the Federated Fund may be
changed by the Board of Directors without shareholder approval, although
shareholders will be notified before any material change becomes effective.
The State Bond Fund invests at least 80% of the value of its assets
in debt obligations issued by or on behalf of the State of Minnesota and
its political subdivisions, the income on which is exempt from federal
income tax and Minnesota personal income tax (`Minnesota Tax Exempt
Securities'). Up to 20% of the assets of the State Bond Fund may generate
interest which may be included in calculating the federal AMT and the
Minnesota AMT. The State Bond Fund intends to invest its assets such that
at least 95% of its tax-exempt interest income is derived from Minnesota
Tax Exempt Securities. The Minnesota Tax Exempt Securities in which the
State Bond Fund invests primarily consist of bonds rated Aaa, Aa, A, Baa,
Ba and B by Moody's or rated AAA, AA, A, BBB, BB and B by S&P, notes rated
MIG-1, MIG-2 and MIG-3 by Moody's or SP-1 and SP-2 by S&P, and commercial
paper rated Prime-1 and Prime-2 by Moody's or A-1 and A-2 by S&P. The
State Bond Fund may invest in Minnesota Tax Exempt Securities which are not
rated if, in the judgment of ARM Capital (as hereinafter defined), the
financial condition of the issuer of such securities at the time of
purchase is comparable to, and the securities are otherwise similar in
quality to, those rated securities in which the State Bond Fund may invest.
As a matter of fundamental policy, the State Bond Fund may not invest more
than 25% of its assets in unrated Minnesota Tax Exempt Securities.
Additionally, as a matter of fundamental policy, the State Bond Fund may
not purchase Minnesota Tax Exempt Securities that are not rated within the
three highest grades by either Moody's or S&P, or that are unrated, unless
such securities are insured as to the payment of all installments of
principal and interest. The State Bond Fund does not currently invest in,
and has no current intention to invest in, bonds rated below A or unrated
bonds that are comparable to and otherwise similar in quality to securities
rated below A. The State Bond Fund may purchase floating rate, variable
rate, and inverse or reverse floating rate Minnesota Tax Exempt Securities;
enter into repurchase agreements; and purchase new issues of Minnesota Tax
Exempt Securities on a when-issued basis. If necessary for temporary
defensive purposes, the State Bond Fund may invest its assets in taxable
obligations or may hold its assets in cash. Unless otherwise designated,
the investment policies of the State Bond Fund may be changed by the Board
of Directors without shareholder approval.
The State Bond Fund is a `non-diversified'' management investment
company and as such is not required to meet any diversification
requirements under the 1940 Act. The State Bond Fund is required to meet
certain standards to qualify as a regulated investment company (`RIC'')
under the Code. At the end of each fiscal quarter with respect to at least
50% of its total assets: (1) the State Bond Fund may not invest more than
5% of its total assets in the securities of any one issuer (except U.S.
Government obligations) and (2) the State Bond Fund may not own more than
10% of the outstanding voting securities of any one issuer. By comparison,
the Federated Fund, as a `diversified'' investment company, must at all
times satisfy those two conditions with respect to 75% of the value of its
total assets. As for the other 50% of the State Bond Fund's total assets
not subject to the limitations described above, the sole limitation on
concentration of these assets is that at the end of each fiscal quarter not
more than 25% of such assets may be invested in the securities of any one
issuer.
Both the Federated Fund and the State Bond Fund are subject to
certain investment limitations. For the Federated Fund, these include
investment limitations which prohibit it from (1) borrowing money directly
or through reverse repurchase agreements or pledging securities except,
under certain circumstances, the Federated Fund may borrow up to one-third
of the value of its total assets and pledge 10% of the value of those
assets to secure such borrowings; (2) investing more than 10% of its net
assets in securities subject to restrictions on resale under the Securities
Act of 1933, as amended (the `1933 Act''), except for certain restricted
securities which meet the criteria for liquidity as established by the
Directors; (3) investing more than 5% of its total assets in securities of
one issuer (except cash and cash items and U.S. government obligations); or
(4) investing more than 5% of its total assets in industrial development
bonds of issuers that have a record of less than three years of continuous
operations. The first two investment limitations listed above cannot be
changed without shareholder approval; the last two limitations may be
changed by the Board of Directors without shareholder approval, although
shareholders will be notified before any material change becomes effective.
The State Bond Fund has investment limitations which prohibit it
from (1) borrowing money, except for temporary purposes in emergency
situations and in an aggregate amount not in excess of 20% of the value of
the total assets of the State Bond Fund; provided that borrowings in excess
of 5% of such value are permitted from banks only; (2) mortgaging or
pledging assets, except that up to 10% of the value of the State Bond
Fund's assets can be used to secure borrowings; (3) purchasing securities
of any issuer if immediately thereafter, with respect to 50% of the State
Bond Fund's total assets, more than 5% of such assets would be invested in
the securities of any one issuer, except that this limitation does not
apply to obligations issued or guaranteed as to principal and interest
either by the U.S. government or its agencies or instrumentalities; or (4)
purchasing private activity bonds if immediately thereafter more than 25%
of the State Bond Fund's assets would be invested in private activity bonds
which are based, directly or indirectly, on the credit of private entities
in any one industry or in securities of private issuers in any one
industry. The above investment limitations of the State Bond Fund cannot
be changed without shareholder approval.
In addition to the policies and limitations set forth above, both
the Federated Fund and the State Bond Fund are subject to certain
additional investment policies and limitations, described in the Federated
Fund's Statement of Additional Information dated September 1, 1996 and the
State Bond Fund's Statement of Additional Information dated November 1,
1995. Reference is hereby made to the Federated Fund's Prospectus and
Statement of Additional Information, each dated September 1, 1996, and to
the State Bond Fund's Prospectus and Statement of Additional Information,
each dated November 1, 1995, which set forth in full the investment
objective, policies and investment limitations of each of the Federated
Fund and the State Bond Fund, all of which are incorporated herein by
reference thereto.
Advisory and Other Fees
The annual investment advisory fee for the Federated Fund is 0.60
of 1% of the Federated Fund's average daily net assets. The investment
adviser to the Federated Fund, Federated Advisers ("Federated Advisers"), a
subsidiary of Federated Investors, may voluntarily choose to waive a
portion of its advisory fee or reimburse the Federated Fund for certain
operating expenses. This voluntary waiver of the advisory fee may be
terminated by Federated Advisers at any time in its sole discretion.
Federated Advisers has also undertaken to reimburse the Federated Fund for
operating expenses in excess of limitations established by certain states.
The maximum annual management fee for the State Bond Fund is 0.60 of 1% of
the first $100 million of the average daily net assets of the State Bond
Fund and 0.55 of 1% of the average daily net assets of the State Bond Fund
in excess of $100 million. The State Bond Fund's investment manager, ARM
Capital Advisors, Inc.(`ARM Capital''), a wholly-owned subsidiary of ARM
Financial Group, Inc. (`ARM''), has voluntarily agreed to reimburse the
State Bond Fund for any expenses incurred by it in excess of 1% of average
daily net assets of the State Bond Fund. This voluntary arrangement may be
terminated by ARM Capital at any time in its sole discretion. ARM Capital
has also undertaken to reimburse the State Bond Fund for operating expenses
in excess of limitations established by certain states.
Federated Services Company, an affiliate of Federated Advisers,
provides certain administrative personnel and services necessary to operate
the Federated Fund at an annual rate based upon the average aggregate daily
net assets of all funds advised by Federated Advisers and its affiliates.
The rate charged is 0.15 of 1% on the first $250 million of all such funds'
average aggregate daily net assets, 0.125 of 1% on the next $250 million,
0.10 of 1% on the next $250 million and 0.075 of 1% of all such funds'
average aggregate daily net assets in excess of $750 million, with a
minimum annual fee per portfolio of $125,000 plus $30,000 for each
additional class of shares of any such portfolio. Federated Services
Company may choose voluntarily to waive a portion of its fee. The
administrative fee expense for the Federated Fund's fiscal year ending
August 31, 1995 was $423,163. Administrative personnel and other services
necessary to operate the State Bond Fund are currently provided by ARM
Capital and are included in the annual management fee for the State Bond
Fund, as discussed above.
The Federated Fund has entered into a Shareholder Services
Agreement under which it may make payments of up to 0.25 of 1% of the
average daily net asset value of the Class A Shares to obtain certain
personal services for shareholders and the maintenance of shareholder
accounts. The Shareholder Services Agreement provides that Federated
Shareholder Services ("FSS"), an affiliate of Federated Advisers, will
either perform shareholder services directly or will select financial
institutions to perform such services. Financial institutions will receive
fees based upon shares owned by their clients or customers. The schedule
of such fees and the basis upon which such fees will be paid is determined
from time to time by the Federated Fund and FSS. Other than in connection
with payments under a Rule 12b-1 plan as described below, the State Bond
Fund does not make payments to obtain similar shareholder services.
Distribution Arrangements
Federated Securities Corp. ("FSC"), an affiliate of Federated
Advisers, is the principal distributor for shares of the Federated Fund.
The Federated Fund has adopted a Rule 12b-1 Distribution Plan (the
`Distribution Plan'') pursuant to which the Federated Fund will pay a fee
to the distributor in an amount computed at an annual rate of 0.25 of 1% of
the average daily net assets of the Class A Shares to finance any activity
which is principally intended to result in the sale of Class A Shares
subject to the Distribution Plan. The Federated Fund is not currently
making payments for Class A Shares under the Distribution Plan, nor does it
anticipate doing so in the immediate future. In addition, FSC, from its
own assets, may pay financial institutions supplemental fees as financial
assistance for providing substantial sales services, distribution-related
support services or shareholder services with respect to the Federated
Fund. Such assistance will be predicated upon the amount of Class A Shares
the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial
institution. Any payments made by FSC may be reimbursed by Federated
Advisers or its affiliates. If a financial institution elects to waive
receipt of this payment, the Federated Fund will waive any applicable
contingent deferred sales charge (such contingent deferred sales charges
are discussed below).
ARM Financial Services, Inc. (`ARMFS''), an affiliate of ARM
Capital, is the principal distributor for shares of the State Bond Fund.
The State Bond Fund has also adopted a Rule 12b-1 Distribution Plan (the
"Rule 12b-1 Plan") pursuant to which the State Bond Fund pays ARMFS an
amount equal to an annual rate of 0.25 of 1% of the average daily net
assets of the State Bond Fund. The fee may be used by ARMFS to (i) provide
initial and ongoing sales compensation to its investment executives and to
other broker-dealers in connection with the sale of State Bond Fund shares
and to pay for other advertising and promotional expenses in connection
with the sale of State Bond Fund shares, and (ii) to provide compensation
to entities in connection with the provision of certain personal and
account maintenance services to State Bond Fund shareholders including, but
not limited to, responding to shareholder inquiries and providing
information on their investments. The Federated Fund will not assume any
liabilities or make any voluntary reimbursements on account of the State
Bond Fund's Rule 12b-1 Plan.
Certain costs exist with respect to the purchase and sale of
Federated Fund and State Bond Fund shares. Class A Shares of the Federated
Fund and shares of the State Bond Fund are sold at their net asset value
next determined after an order is received, plus a maximum sales charge of
4.50%. No sales charge will be imposed in connection with the issuance of
Federated Fund shares to State Bond Fund shareholders as a result of the
Reorganization. Class A Shares of the Federated Fund purchased with the
proceeds of a redemption of shares of an unaffiliated investment company
purchased or redeemed with a sales charge and not distributed by FSC may be
charged a contingent deferred sales charge of 0.50 of 1% for redemptions
made within one full year of purchase. Any such charge will be imposed on
the lesser of the net asset value of the redeemed shares at the time of
purchase or redemption. The contingent deferred sales charges are not
imposed in connection with the exercise of exchange rights, nor will they
be imposed on redemptions of Federated Fund shares received by shareholders
of the State Bond Fund as a result of the consummation of the
Reorganization. For a complete description of sales charges, contingent
deferred sales charges and exemptions from such charges, reference is
hereby made to the Prospectus of the Federated Fund dated September 1,
1996, and the Prospectus of the State Bond Fund dated November 1, 1995,
each of which is incorporated herein by reference thereto.
Purchase, Exchange and Redemption Procedures
The transfer agent and dividend disbursing agent for the Federated
Fund is Federated Shareholder Services Company (formerly called Federated
Services Company). The transfer agent and dividend disbursing agent for
the State Bond Fund is ARM Transfer Agency, Inc. Procedures for the
purchase, exchange and redemption of the Federated Fund's Class A Shares
differ slightly from procedures applicable to the purchase, exchange and
redemption of the State Bond Fund's shares. Any questions about such
procedures may be directed to, and assistance in effecting purchases,
exchanges or redemptions of the Federated Fund's Class A Shares or the
State Bond Fund's shares may be obtained from FSC, principal distributor
for the Federated Fund, at 1-800-341-7400 or from ARMFS, principal
distributor for the State Bond Fund, at 1-800-328-4735.
Reference is made to the Prospectus of the Federated Fund dated
September 1, 1996, and the Prospectus of the State Bond Fund dated November
1, 1995, for a complete description of the purchase, exchange and
redemption procedures applicable to purchases, exchanges and redemptions of
Federated Fund and State Bond Fund shares, respectively, each of which is
incorporated herein by reference thereto. Set forth below is a brief
listing of the significant purchase, exchange and redemption procedures
applicable to the Federated Fund's Class A Shares and the State Bond Fund's
shares.
Purchases of Class A Shares of the Federated Fund may be made
through a financial institution who has an agreement with FSC or, once an
account has been established, by wire or check. Purchases of shares of the
State Bond Fund may be made through ARMFS and through certain broker-
dealers under contract with ARMFS or directly by check once an account has
been established. The minimum initial investment in the Federated Fund is
$500. Subsequent investments must be in amounts of at least $100. The
minimum initial investment in the State Bond Fund is $500. Subsequent
investments must be in an amount of at least $50. The Federated Fund and
the State Bond Fund each reserve the right to reject any purchase request.
In connection with the sale of Class A Shares of the Federated Fund, FSC
may from time to time offer certain items of nominal value to any
shareholder.
The purchase price of the Federated Fund's Class A Shares and the
State Bond Fund's shares is based on net asset value plus a sales charge.
The net asset value per share for each of the Federated Fund and the State
Bond Fund is calculated as of the close of trading (normally 4:00 p.m.,
Eastern time) on the New York Stock Exchange, Inc. (the `NYSE'') on each
day on which the Federated Fund and the State Bond Fund compute their net
asset value. Purchase and redemption orders for the Federated Fund
received from broker/dealers before 5:00 p.m. (Eastern time) and from
financial institutions before 4:00 p.m. (Eastern time) may be entered at
that day's price. Purchase orders for shares of the State Bond Fund
received from authorized broker/dealers will be executed at the offering
price next determined after the receipt of the order by the broker/dealer,
provided that the broker/dealer promptly transmits the order to ARMFS the
same day. Redemption orders for shares of the State Bond Fund received by
the State Bond Fund's transfer agent from authorized dealers or
representatives of ARMFS prior to the close of the NYSE will be entered at
that day's price; such redemption orders received after the close of the
NYSE will be entered at the net asset value determined at the close of the
NYSE on the next trading day. Federated Fund purchase orders by wire are
considered received upon receipt of payment by wire. Federated Fund
purchase orders received by check are considered received after the check
is converted into federal funds, which normally occurs the business day
after receipt.
Holders of Class A Shares of the Federated Fund have exchange
privileges with respect to Class A Shares in certain of the funds for which
affiliates of Federated Investors serve as investment adviser or principal
underwriter (collectively, the "Federated Funds"), each of which has
different investment objectives and policies. Class A Shares in the
Federated Fund may be exchanged for Class A Shares of certain Federated
Funds at net asset value without a contingent deferred sales charge. To
the extent a shareholder exchanges Class A Shares of the Federated Fund for
Class A Shares in other Federated Funds, the time for which the exchanged-
for shares are to be held will be added to the time for which exchanged-
from shares were held for purposes of satisfying the applicable holding
period. Class A Shares to be exchanged must have a net asset value which
meets the minimum investment requirement for the fund into which the
exchange is being made. Holders of shares of the State Bond Fund have
exchange privileges with respect to shares in certain of the other funds
for which ARM Capital serves as investment manager (collectively, the
`State Bond Group''), each of which has different investment objectives
and policies. Any exchange for shares of other funds in the State Bond
Group will generally be at the respective net asset values next determined
after receipt of the request for exchange. Exercise of the exchange
privilege is treated as a sale for federal income tax purposes and,
accordingly, may have tax consequences for the shareholder. Information on
share exchanges may be obtained from the Federated Fund or the State Bond
Fund, as appropriate.
Redemptions of Federated Fund Class A Shares may be made through a
financial institution, by telephone, by mailing a written request or
through the Federated Fund's Systematic Withdrawal Program. Redemptions of
State Bond Fund shares may be made through an authorized dealer or
representative of ARMFS, by mailing a written request to the State Bond
Fund's transfer agent or through the State Bond Fund's quick redemption
service or check redemption service. Class A Shares of the Federated Fund
are redeemed at their net asset value, less any applicable contingent
deferred sales charge, next determined after the redemption request is
received. Shares of the State Bond Fund are redeemed at their net asset
value, determined at the close of the NYSE on the date the redemption
request is received. Proceeds will ordinarily be distributed by check
within seven days after receipt of a redemption request.
Dividends
Each of the Federated Fund's and the State Bond Fund's current
policy is to pay dividends monthly from net investment income and to make
annual distributions of net realized capital gains, if any. With respect
to both the Federated Fund and the State Bond Fund, unless a shareholder
otherwise instructs, dividends and capital gain distributions will be
reinvested automatically in additional shares at net asset value, subject
to no sales charge.
Tax Consequences
As a condition to the Reorganization transactions, the Federated
Fund and the State Bond Fund will receive an opinion of counsel that the
Reorganization will be considered a tax-free "reorganization" under
applicable provisions of the Code so that no gain or loss will be
recognized by either the Federated Fund or the State Bond Fund or the
shareholders of the State Bond Fund. The tax basis of the Federated Fund
shares received by State Bond Fund shareholders will be the same as the tax
basis of their shares in the State Bond Fund.
RISK FACTORS
As with other mutual funds that invest in municipal bonds, the
Federated Fund is subject to market risks and credit risks. The value of
the Class A Shares will fluctuate. The amount of this fluctuation is
dependent upon the quality and maturity of the municipal bonds in the
Federated Fund's portfolio as well as on market conditions. Generally
speaking, the lower quality, long-term bonds (including junk bonds) in
which the Federated Fund invests have greater fluctuation in value than
high quality, shorter-term bonds. Municipal bond prices are interest rate
sensitive, which means that their value varies inversely with market
interest rates. Prices of bonds also fluctuate with changes in the
perceived quality of the credit of their issuers. Since the State Bond
Fund invests primarily in Minnesota Tax Exempt Securities and because it
seeks to maximize income derived from Minnesota Tax Exempt Securities, it
is susceptible to factors adversely affecting the State of Minnesota and
issuers of Minnesota Tax Exempt Securities in addition to generally being
subject to the risk factors summarized above.
Investment in a non-diversified investment company such as the
State Bond Fund may entail greater risks than investment in a
`diversified'' fund. Because of the relatively small number of issuers of
investment grade Minnesota Tax Exempt Securities, the State Bond Fund's
non-diversified status permits it from time to time to concentrate its
assets in the securities of a few issuers which ARM Capital deems to be
attractive investments, rather than invest in securities of a large number
of issuers merely to satisfy the 1940 Act's diversification requirements.
Although ARM Capital believes that the ability to concentrate the
investments of the State Bond Fund in particular issuers is advantageous
when investing in Minnesota Tax Exempt Securities, such concentration
involves an increased risk of loss to the State Bond Fund should any
particular issuer be unable to make interest or principal payments or
should the market value of particular securities decline. A full
discussion of the risks inherent in investment in the Federated Fund and
the State Bond Fund is set forth in the Federated Fund's Prospectus and
Statement of Additional Information, each dated September 1, 1996 and the
State Bond Fund's Prospectus and Statement of Additional Information, each
dated November 1, 1995, each of which is incorporated herein by reference
thereto.
INFORMATION ABOUT THE REORGANIZATION
Background and Reasons for the Proposed Reorganization
On June 14, 1995, SBM Company, which was then the investment
adviser to the State Bond Fund, completed the sale of substantially all of
its business operations to ARM (the `1995 Transaction''). In connection
with the 1995 Transaction, ARM Capital became the investment manager of the
State Bond Fund. In addition, ARM acquired all of the outstanding stock of
SBM Financial Services, Inc., the predecessor in interest to ARMFS, the
current distributor of shares of the State Bond Fund.
Considerations of the Board of Directors of the State Bond Fund.
On June 6, 1996, ARM management advised the Board of Directors of the State
Bond Fund that ARM was considering redirecting its corporate strategy away
from the management and distribution of retail mutual funds in order to
concentrate more fully on its core businesses. Moreover, ARM management
stated that due to the relatively small net assets in the State Bond Fund
and the other mutual funds in the State Bond Group, ARM and its affiliates
were not in a position to provide the value-added shareholder services,
technological advancements, comprehensive distribution networks and
diversified product choices that many larger mutual fund complexes offer.
As a result, management stated that ARM was engaged in the identification
and analysis of various potential alternatives for the State Bond Fund and
the other funds in the State Bond Group.
After conducting a screening process, ARM determined that in its
judgment, the proposed Reorganization was the most desirable alternative
involving the State Bond Fund that was reasonably available and that it
should be presented to the State Bond Fund's Board of Directors for its
consideration.
A meeting of the entire Board of Directors was held on August 16,
1996, at which Federated (as defined below) presented to the Board
information relating to the overall reputation, financial strength and
stability of Federated Investors, the parent company of Federated Advisers
(together with its affiliates, `Federated''). Federated, founded in 1955,
is among the seven largest mutual fund sponsors, with over $90 billion
invested across more than 250 funds under management and/or administration
by its subsidiaries, and over 2,000 employees. Federated's management also
discussed the growth of assets under management and/or administration by
Federated from approximately $35 billion in 1989 to over $90 billion as of
August 1996. Federated's management explained to the Board that the
majority of this growth came from within Federated through its multiple
distribution channels. The Board was also informed of the variety of
investment products available through Federated, including international
funds and an array of domestic funds broader than currently offered in the
State Bond Group, the exchange privileges that would be available to former
State Bond Fund shareholders if the Reorganization is consummated, and the
multiple sales charge (or `load'') structures available to prospective
shareholders. The Board took into account that if the Reorganization takes
place, shareholders of the State Bond Fund would exchange their shares for
Shares of the Federated Fund without the imposition of any sales charge.
Federated's management advised the Board of its reputation for
customer servicing, noting that it has received a #1 rating for five years
in a row by Dalbar, Inc. Federated's management stated that its
shareholder services include advanced technological systems that result in
quick shareholder access to a broad spectrum of information, including:
telephonic automated yield and performance information; consolidated
monthly shareholder statements; no-fee IRAs; quarterly newsletters; year-
end tax reporting information; direct deposit; and telephonic redemption
and exchange.
Federated's management also discussed comparative sales loads with
the Board. In particular, it was noted that the maximum front end sales
load of the Federated Fund is the same as that of the State Bond Fund.
Federated's management described rights of accumulation and other programs
that can reduce sales charges with respect to the Federated Fund.
Federated's management also reviewed with the Board relative asset
size and expense ratios, including relative advisory fees. The Board
discussed the fact that the Federated Fund is larger in asset size than the
State Bond Fund and considered potential economies of scale that might be
experienced by former State Bond Fund shareholders if they were to become
shareholders of a larger fund. The Board noted that the expense ratio of
the Federated Fund presently is higher than that of the State Bond Fund,
but only after taking into account current expense reimbursement
arrangements by ARM Capital. The Board noted that ARM Capital could
terminate its voluntary expense reimbursement arrangements with respect to
the State Bond Fund at any time in its sole discretion. Federated's
management advised the Board that the expense ratio of the Federated Fund
is lower than the average for municipal bond funds distributed through
brokers (as reported by Strategic Insight), and is competitive.
Federated's management discussed with the Board expense waiver and
reimbursement arrangements with respect to both the Federated Fund in
particular and to the complex generally.
The Chief Investment Officer, Fixed-Income, of Federated discussed
with the Board the investment philosophy of Federated Advisers for its
funds, including the Federated Fund. He also described the background and
significant investment experience of Federated portfolio managers and other
related personnel issues.
The Board was presented with materials comparing the investment
objectives and policies of the State Bond Fund with those of the Federated
Fund, and determined that they were similar in many respects. The Board
also considered the differences between the two funds, including the
emphasis of the State Bond Fund on income exempt from Minnesota personal
income tax and the Federated Fund's policies with respect to junk bonds.
The Board noted that although the Federated Fund, unlike the State Bond
Fund, invests in municipal bonds which are generally not exempt from the
Minnesota personal income tax, the tax-equivalent yield produced by the
Federated Fund historically has exceeded the tax-equivalent yield produced
by the State Bond Fund. The Board was also presented with and discussed
materials comparing the performance, Morningstar ratings and relative risks
of the State Bond Fund and the Federated Fund. Federated's management also
presented biographical information about each of the Directors of the
Federated Fund and reviewed with the Board the structure of its compliance
and internal audit departments and the scope of its training programs.
The Board also considered the potential benefits to ARM if the
Reorganization is consummated. The Board discussed the fact that ARM and
ARM Capital would be compensated for selling the books, records and
goodwill relating to the management of the State Bond Group, agreeing to
certain non-competition arrangements and cooperating in assisting in the
transfer of the net assets of the State Bond Group to the Federated Funds.
They also took into account the proposed payment to ARMFS of 0.25% of the
average daily net assets of the Federated Fund attributable to shareholder
accounts serviced by ARMFS, as well as the possible compensation of ARMFS
for distribution of additional Federated financial products in the future.
The Board noted that the State Bond Fund would not bear any of the
costs involved in the Reorganization, which would be borne entirely by ARM
and/or Federated. In addition, the Board discussed the anticipated tax-
free nature of the Reorganization to the State Bond Fund and its
shareholders.
In connection with their consideration of the Reorganization, the
Board also reviewed their fiduciary obligations under state and federal
law. They considered the requirements of Section 15(f) of the 1940 Act,
which provides that an investment manager to an investment company, and the
affiliates of such manager (such as ARM), may receive any amount or benefit
in connection with a sale of any interest in such investment manager which
results in an assignment of an investment management contract if (1) for a
period of three years after such assignment, at least 75% of the board of
directors of the investment company are not `interested persons'' (as
defined in the 1940 Act) of the new investment manager or its predecessor;
and (2) no `unfair burden'' (as defined in the 1940 Act) is imposed on the
investment company as a result of the assignment or any express or implied
terms, conditions or understandings applicable thereto.
With respect to the first condition of Section 15(f) relating to
Board composition, the Board was advised that the Federated Fund's Board of
Directors presently consists of thirteen (13) Directors, only three (3) of
whom are `interested persons.'' With respect to the second condition of
Section 15(f), while there is no specific definition of `unfair burden,''
it includes any arrangement, for two years after the transaction, pursuant
to which the predecessor or successor adviser is entitled to receive
compensation from any person in connection with the mutual fund's purchase
or sale of securities, other than bona fide ordinary compensation as
principal underwriter. The definition of unfair burden also includes any
payments from the fund for other than bona fide investment advisory or
other services. The Board considered the fact that representations were
made by Federated and ARM that the agreement among Federated, ARM and ARM
Capital would contain representations and covenants that the Reorganization
would not impose an unfair burden on the State Bond Group.
After reviewing and considering all of the information provided by
Federated and ARM, including the terms of the Reorganization, the Board,
including all of the Directors who are not interested persons of the State
Bond Fund or ARM Capital, voted unanimously at a special telephonic meeting
held on August 26, 1996, to approve the Reorganization and to recommend it
to the shareholders of the State Bond Fund for their approval.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
REORGANIZATION.
Considerations of the Board of Directors of the Federated Fund.
The Board of Directors of the Federated Fund, including a majority of the
independent Directors, have unanimously concluded that consummation of the
Reorganization is in the best interests of the Federated Fund and the
shareholders of the Federated Fund and that the interests of Federated Fund
shareholders would not be diluted as a result of effecting the
Reorganization and have unanimously voted to approve the Plan.
Agreement Among ARM, ARM Capital and Federated
The Reorganization is being proposed as part of an agreement by and
among Federated, ARM, and ARM Capital, pursuant to which ARM and ARM
Capital would be compensated for selling to Federated the books, records
and goodwill relating to the management of the State Bond Group and
cooperating in facilitating the transaction contemplated by the agreement.
As part of that agreement, ARM Capital and its affiliates have agreed not
to compete with Federated by providing investment advisory services to
certain investment companies. Following the Reorganization, ARM or its
affiliates have agreed to provide certain services to shareholders for
which ARM or its affiliates may receive fees paid by Federated and/or
mutual funds in which the shareholders are invested.
Description of the Plan of Reorganization
The Plan provides that the Federated Fund will acquire all of the
net assets of the State Bond Fund in exchange for the Federated Fund's
Class A Shares to be distributed pro rata by the State Bond Fund to its
shareholders in complete liquidation of the State Bond Fund on or about
December , 1996 (the "Closing Date"). Shareholders of the State Bond
---
Fund will become shareholders of the Federated Fund as of the close of
business on the Closing Date, and will be entitled to the Federated Fund's
next dividend distribution.
As of or prior to the Closing Date, the State Bond Fund will
declare and pay a dividend or dividends which, together with all previous
such dividends, shall have the effect of distributing to its shareholders
all taxable income for the period ending on the Closing Date. In addition,
the State Bond Fund's dividend will include its net capital gains realized
in the period ending on the Closing Date.
Consummation of the Reorganization is subject to the conditions set
forth in the Plan, including receipt of an opinion in form and substance
satisfactory to the State Bond Fund and the Federated Fund, as described
under the caption "Federal Income Tax Consequences" below. The Plan may be
terminated and the Reorganization may be abandoned at any time before or
after approval by shareholders of the State Bond Fund prior to the Closing
Date by either party if it believes that consummation of the Reorganization
would not be in the best interests of its shareholders.
Federated Advisers is responsible for the payment of substantially
all of the expenses of the Reorganization incurred by either party, whether
or not the Reorganization is consummated. Such expenses include, but are
not limited to, registration fees, transfer taxes (if any), the fees of
banks and transfer agents and the costs of preparing, printing, copying and
mailing proxy solicitation materials to the State Bond Fund's shareholders
and the costs of holding the Special Meeting (as hereinafter defined). ARM
is responsible for the payment of the legal fees of the State Bond Fund.
The accountants' fees of the State Bond Fund will be borne equally by
Federated Advisers and ARM.
The foregoing description of the Plan entered into between the
Federated Fund and the State Bond Fund, is qualified in its entirety by the
terms and provisions of the Plan, a copy of which is attached hereto as
Exhibit A and incorporated herein by reference thereto.
Description of Federated Fund Shares
Full and fractional Class A Shares of the Federated Fund will be
issued without the imposition of a sales charge or other fee to the
shareholders of the State Bond Fund in accordance with the procedures
described above. Class A Shares of the Federated Fund to be issued to
shareholders of the State Bond Fund under the Plan will be fully paid and
nonassessable when issued and transferable without restriction and will
have no preemptive or conversion rights. Reference is hereby made to the
Prospectus of the Federated Fund dated September 1, 1996 provided herewith
for additional information about Class A Shares of the Federated Fund.
Federal Income Tax Consequences
As a condition to the Reorganization, the Federated Fund and the
State Bond Fund will receive an opinion from Dickstein Shapiro Morin &
Oshinsky LLP, counsel to the Federated Fund, to the effect that, on the
basis of the existing provisions of the Code, current administrative rules
and court decisions, for federal income tax purposes: (1) the
Reorganization as set forth in the Plan will constitute a tax-free
reorganization under section 368(a)(1)(C) of the Code; (2) no gain or loss
will be recognized by the Federated Fund upon its receipt of the State Bond
Fund's assets solely in exchange for Federated Fund Class A Shares; (3) no
gain or loss will be recognized by the State Bond Fund upon the transfer of
its assets to the Federated Fund in exchange for Federated Fund Class A
Shares or upon the distribution (whether actual or constructive) of the
Federated Fund Class A Shares to the State Bond Fund shareholders in
exchange for their shares of the State Bond Fund; (4) no gain or loss will
be recognized by shareholders of the State Bond Fund upon the exchange of
their State Bond Fund shares for Federated Fund Class A Shares; (5) the tax
basis of the State Bond Fund's assets acquired by the Federated Fund will
be the same as the tax basis of such assets to the State Bond Fund
immediately prior to the Reorganization; (6) the tax basis of Federated
Fund Class A Shares received by each shareholder of the State Bond Fund
pursuant to the Plan will be the same as the tax basis of State Bond Fund
shares held by such shareholder immediately prior to the Reorganization;
(7) the holding period of the assets of the State Bond Fund in the hands of
the Federated Fund will include the period during which those assets were
held by the State Bond Fund; and (8) the holding period of Federated Fund
Class A Shares received by each shareholder of the State Bond Fund will
include the period during which the State Bond Fund shares exchanged
therefor were held by such shareholder, provided the State Bond Fund shares
were held as capital assets on the date of the Reorganization.
Shareholders should recognize that an opinion of counsel is not
binding on the Internal Revenue Service (`IRS'') or any court. The State
Bond Fund does not expect to obtain a ruling from the IRS regarding the
consequences of the Reorganization. Accordingly, if the IRS sought to
challenge the tax treatment of the Reorganization and was successful,
neither of which is anticipated, the Reorganization would be treated as a
taxable sale of assets of the State Bond Fund, followed by the taxable
liquidation of the State Bond Fund.
Comparative Information on Shareholder Rights and Obligations
General. Both the Federated Fund and the State Bond Fund are open-
end management investment companies registered under the 1940 Act, which
continuously offer to sell shares at their current net asset value. The
Federated Fund is organized as a corporation under the laws of the State of
Maryland and is governed by its Articles of Incorporation, Bylaws, and
Board of Directors, in addition to applicable state and Federal law. The
State Bond Fund is organized as a separate series of State Bond Tax-Free
Income Funds, Inc. under the laws of the State of Maryland and is governed
by its Articles of Incorporation, Bylaws, and Board of Directors, in
addition to applicable state and Federal law. Set forth below is a brief
summary of the significant rights of shareholders of the Federated Fund and
the State Bond Fund.
Shares of the Federated Fund and the State Bond Fund. The
Federated Fund is authorized to issue 2,000,000,000 shares of common stock,
par value $0.001 per share. The Board of Directors has established four
classes of shares of the Federated Fund, known as Class A Shares, Class B
Shares, Class C Shares and Class F Shares. The State Bond Fund has an
authorized capital of 10,000,000,000 shares of common stock with a par
value of $.00001 per share. The State Bond Fund is currently the sole
investment portfolio of State Bond Tax-Free Income Funds, Inc. and has only
one class of shares. Issued and outstanding shares of both the Federated
Fund and State Bond Fund are fully paid and nonassessable, and freely
transferable.
Voting Rights. Neither the Federated Fund nor the State Bond Fund
is required to hold annual meetings of shareholders, except as required
under the 1940 Act. Shareholder approval is necessary only for certain
changes in operations or the election of directors under certain
circumstances. The Federated Fund requires that a special meeting of
shareholders be called for any permissible purpose upon the written request
of the holders of at least 10% of the shares of the series of the Federated
Fund entitled to vote. A special meeting of the shareholders of the State
Bond Fund is required to be called upon the written request of shareholders
representing not less than 25% of the shares issued and outstanding and
entitled to vote. Each share of the Federated Fund gives the shareholder
one vote in director elections and other matters submitted to shareholders
for vote. All shares of each series or class in the Federated Fund have
equal voting rights except that in matters affecting only a particular
series or class, only shares of that series or class are entitled to vote.
All shares of the State Bond Fund have equal voting rights.
Directors. The Bylaws of the Federated Fund provide that the term
of office of each Director shall be until his or her resignation or removal
and until the election and qualification of his or her successor. A
Director of the Federated Fund may be removed by a vote of a majority of
all shares entitled to vote at any special meeting of shareholders. A
vacancy on the Board may be filled by a majority of the Directors remaining
in office. The Bylaws of the State Bond Fund provide that each Director
holds office from the time of his or her election until the next annual
meeting of shareholders and until his or her successor is duly elected and
qualifies. A Director of the State Bond Fund may be removed, with or
without cause, by the affirmative vote of a majority of the votes entitled
to be cast for the election of Directors, and such shareholders may elect a
qualified person as Director to replace the Director so removed. In case
of any vacancy on the Board of Directors, a majority of the remaining
Directors may elect a successor to hold office until the next annual
meeting of the shareholders and until his or her successor is duly elected
and qualifies. With respect to both the Federated Fund and the State Bond
Fund, a meeting of shareholders will be required for the purpose of
electing additional Directors whenever fewer than a majority of the
Directors then in office were elected by shareholders.
Liability of Directors and Officers. The Amended and Restated
Articles of Incorporation of the Federated Fund and the Articles of
Amendment and Restatement of the State Bond Fund both contain provisions
eliminating liability of their respective directors and officers to the
corporation or its shareholders to the fullest extent permitted by Maryland
law. Therefore, directors and officers will not be liable for monetary
damages to the corporation or its shareholders for breach of the duty of
care. However, such elimination of liability regarding a director's duty
of care does not permit the elimination or limitation of liability (1) to
the extent that it is proved that the person actually received an improper
benefit or profit in money, property or services; (2) to the extent that a
judgment or other final adjudication adverse to the person is entered in a
proceeding based on a finding in the proceeding that the person's action,
or failure to act, was committed in bad faith or was the result of active
and deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding; or (3) for any action or failure to act
occurring prior to February 18, 1988. In addition, due to the provisions
of the 1940 Act, shareholders would still have the right to pursue monetary
claims against directors or officers for acts involving willful
malfeasance, bad faith, gross negligence or reckless disregard of their
duties as directors or officers. Under the agreement by and among
Federated, ARM and ARM Capital, Federated has agreed for a period of three
(3) years following the Closing to provide coverage under a directors and
officers liability insurance policy for the current Directors of the State
Bond Fund.
Termination or Liquidation. In the event of the termination or
liquidation of the Federated Fund or any series or class of the Federated
Fund or of the termination or liquidation of the State Bond Fund, the
shareholders of the respective fund or class are entitled to receive, when
and as declared by its Directors the excess of the assets belonging to the
respective fund or class over the liabilities belonging to the respective
fund or class. In either case, the assets belonging to the fund or class
will be distributed among the shareholders in proportion to the number of
shares of the respective fund or class held by them.
Capitalization
The following table sets forth the unaudited capitalization of the
Class A Shares of the Federated Fund and the shares of the State Bond Fund
as of September 30, 1996 and on a pro forma combined basis as of that date:
Federated Fund State Bond Pro Forma
(Class A Shares) Fund Combined
Net Assets............... $102,936* $18,798,727
$18,901,663
Net Asset Value Per Share $10.42 $10.61
$10.42
Shares Outstanding....... 9,876 1,772,336
1,813,484
*Class A Shares of the Federated Fund were established by the Board of
Directors, commencing August 5, 1996. The net assets of all classes of
Shares of the Federated Fund as of September 30, 1996 were $384,460,081.
INFORMATION ABOUT THE FEDERATED FUND
AND THE STATE BOND FUND
Federated Municipal Opportunities Fund, Inc.
Information about the Federated Fund is contained in the Federated
Fund's current Prospectus dated September 1, 1996, a copy of which is
included herewith and incorporated by reference herein. Additional
information about the Federated Fund is included in the Federated Fund's
Annual Report to Shareholders dated August 31, 1995, the Semi-Annual Report
to Shareholders dated February 29, 1996, the Statement of Additional
Information dated September 1, 1996 and the Statement of Additional
Information dated November , 1996 (relating to this Prospectus/Proxy
--
Statement), each of which is incorporated herein by reference. Copies of
the Annual Report, the Semi-Annual Report and Statements of Additional
Information, which have been filed with the Securities and Exchange
Commission (the "SEC"), may be obtained upon request and without charge by
contacting the Federated Fund at 1-800-341-7400 or by writing the Federated
Fund at Federated Investors Tower, Pittsburgh, PA 15222-3779. The
Federated Fund is subject to the informational requirements of the 1933
Act, the Securities Exchange Act of 1934, as amended (the "1934 Act") and
the 1940 Act and in accordance therewith files reports and other
information with the SEC. Reports, proxy and information statements,
charter documents and other information filed by the Federated Fund can be
obtained by calling or writing the Federated Fund and can also be inspected
and copied by the public at the public reference facilities maintained by
the SEC in Washington, D.C. located at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at certain of its regional offices located at
Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
IL 60661 and 13th Floor, Seven World Trade Center, New York, NY 10048.
Copies of such material can be obtained from the Public Reference Branch,
Office of Consumer Affairs and Information Services, SEC, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates.
This Prospectus/Proxy Statement, which constitutes part of a
Registration Statement filed by the Federated Fund with the SEC under the
1933 Act, omits certain of the information contained in the Registration
Statement. Reference is hereby made to the Registration Statement and to
the exhibits thereto for further information with respect to the Federated
Fund and the shares offered hereby. Statements contained herein concerning
the provisions of documents are necessarily summaries of such documents,
and each such statement is qualified in its entirety by reference to the
copy of the applicable document filed with the SEC.
State Bond Minnesota Tax-Free Income Fund
Information about the State Bond Fund and State Bond Tax-Free
Income Funds, Inc. is contained in the State Bond Fund's current
Prospectus dated November 1, 1995, the Annual Report to Shareholders dated
June 30, 1996, its Statement of Additional Information dated November 1,
1995 and the Statement of Additional Information dated November , 1996
--
(relating to this Prospectus/Proxy Statement), each of which is
incorporated herein by reference. Copies of such Prospectus, Annual
Report, and Statement(s) of Additional Information, which have been filed
with the SEC, may be obtained upon request and without charge from the
State Bond Fund by calling 1-800-328-4735 or by writing to the State Bond
Fund at 100 North Minnesota Street, P.O. Box 69, New Ulm, Minnesota 56073-
0069. The State Bond Fund is subject to the informational requirements of
the 1933 Act, the 1934 Act and the 1940 Act and in accordance therewith
files reports and other information with the SEC. Reports, proxy and
information statements, charter documents and other information filed by
State Bond Tax-Free Income Funds, Inc. or its portfolio, the State Bond
Fund, can be obtained by calling or writing the State Bond Fund and can
also be inspected at the public reference facilities maintained by the SEC
or obtained at prescribed rates at the addresses listed in the previous
section.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of the State Bond Fund of proxies
for use at the Special Meeting of Shareholders (the "Special Meeting") to
be held at 4:30 p.m. on December , 1996 at: 100 North Minnesota Street,
--
New Ulm, Minnesota 56073-0069, and at any adjournments thereof. The proxy
confers discretionary authority on the persons designated therein to vote
on other business not currently contemplated which may properly come before
the Special Meeting. A proxy, if properly executed, duly returned and not
revoked, will be voted in accordance with the specifications thereon; if no
instructions are given, such proxy will be voted in favor of the Plan. A
shareholder may revoke a proxy at any time prior to use by filing with the
Secretary of the State Bond Fund an instrument revoking the proxy, by
submitting a proxy bearing a later date or by attending and voting at the
Special Meeting.
The cost of the solicitation, including the printing and mailing of
proxy materials, will be borne by Federated Advisers. In addition to
solicitations through the mails, proxies may be solicited by officers,
employees and agents of the State Bond Fund, Federated Advisers and their
respective affiliates at no additional cost to the State Bond Fund. Such
solicitations may be by telephone, telegraph or personal contact.
Federated Advisers will reimburse custodians, nominees and fiduciaries for
the reasonable costs incurred by them in connection with forwarding
solicitation materials to the beneficial owners of shares held of record by
such persons.
Outstanding Shares and Voting Requirements
The Board of Directors of the State Bond Fund has fixed the close
of business on October 11, 1996 as the record date for the determination of
shareholders entitled to notice of and to vote at the Special Meeting and
any adjournment thereof. As of the record date, there were shares
-------
of the State Bond Fund outstanding. Each of the State Bond Fund's shares
is entitled to one vote and fractional shares have proportionate voting
rights. [On the record date, the Directors and officers of the State Bond
Fund as a group owned less than 1% of the outstanding shares of the State
Bond Fund.] To the best knowledge of ARM Capital, as of the record date,
no person, except as set forth in the table below, owned beneficially or of
record 5% or more of the State Bond Fund's outstanding shares.
Percent of
Shares Owned Percent of Outstanding
Name and Address of Beneficially Outstanding Shares of the
Beneficial Owner Shares Federated Fund
Following
Reorganization
As of the record date, there were Class A, Class B,
-------- ---- ----
Class C and Class F Shares of the Federated Fund outstanding. On
---------
the record date, the Directors and officers of the Federated Fund as a
group owned less than 1% of the outstanding Class A, Class B, Class C and
Class F Shares of the Federated Fund outstanding. To the best knowledge of
Federated Advisers, as of the record date, no person, except as set forth
in the table below, owned beneficially or of record 5% or more of the
Federated Fund's outstanding Class A, Class B, Class C or Class F Shares.
Percent of
Outstanding
Shares Owned Percent of Shares of the
Class A Name and Address of Beneficially Outstanding Federated Fund
Shares Beneficial Owner Shares Following
Reorganization
Shares Owned Percent of
Class B Name and Address of Beneficially Outstanding
Shares Beneficial Owner Shares
Shares Owned Percent of
Class C Name and Address of Beneficially Outstanding
Shares Beneficial Owner Shares
Shares Owned Percent of
Class F Name and Address of Beneficially Outstanding
Shares Beneficial Owner Shares
Approval of the Plan requires the affirmative vote of a majority of
the outstanding shares of the State Bond Fund. The votes of shareholders
of the Federated Fund are not being solicited since their approval is not
required in order to effect the Reorganization.
One-third of the issued and outstanding shares of the State Bond
Fund, represented in person or by proxy, will be required to constitute a
quorum at the Special Meeting for the purpose of voting on the proposed
Reorganization. For purposes of determining the presence of a quorum,
shares represented by abstentions and "broker non-votes" will be counted as
present, but not as votes cast, at the Special Meeting. Because approval of
the Reorganization requires the approval of a majority of the outstanding
shares of the State Bond Fund, abstentions and "broker non-votes" will have
the same effect as if they were votes against the Reorganization.
Dissenter's Right of Appraisal
Shareholders of the State Bond Fund objecting to the Reorganization
have no appraisal rights under the State Bond Fund's Articles of
Incorporation or Maryland law. Under the Plan, if approved by State Bond
Fund shareholders, each shareholder will become the owner of Class A Shares
of the Federated Fund having a total net asset value equal to the total net
asset value of his or her holdings in the State Bond Fund at the Closing
Date.
OTHER MATTERS AND DISCRETION OF PERSONS NAMED IN THE PROXY
Management of the State Bond Fund knows of no other matters that
may properly be, or which are likely to be, brought before the meeting.
However, if any other business shall properly come before the meeting, the
persons named in the proxy intend to vote thereon in accordance with their
best judgment.
If at the time any session of the Special Meeting is called to
order, a quorum is not present in person or by proxy, the persons named as
proxies may vote those proxies which have been received to adjourn the
Special Meeting to a later date. In the event that a quorum is present but
sufficient votes in favor of one or more of the proposals have not been
received, the persons named as proxies may propose one or more adjournments
of the Special Meeting to permit further solicitation of proxies with
respect to any such proposal. All such adjournments will require the
affirmative vote of a majority of the shares present in person or by proxy
at the session of the Special Meeting to be adjourned. The persons named
as proxies will vote those proxies which they are entitled to vote in favor
of the proposal, in favor of such an adjournment, and will vote those
proxies required to be voted against the proposal, against any such
adjournment.
Whether or not shareholders expect to attend the meeting, all
shareholders are urged to sign, fill in and return the enclosed proxy form
promptly.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated September 23, 1996 (the
"Agreement"), between FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC., a
Maryland corporation (hereinafter called the "Acquiring Fund"), and STATE
BOND TAX-FREE INCOME FUNDS, INC., a Maryland corporation (hereinafter
called the "Corporation") on behalf of its portfolio STATE BOND MINNESOTA
TAX-FREE INCOME FUND (hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C)
of the United States Internal Revenue Code of 1986, as amended (the
"Code"). The reorganization (the "Reorganization") will consist of the
transfer of all of the net assets of the Acquired Fund in exchange solely
for Class A Shares of the Acquiring Fund (the "Acquiring Fund Shares") and
the distribution, after the Closing Date (as hereinafter defined), of the
Acquiring Fund Shares to the shareholders of the Acquired Fund in
liquidation of the Acquired Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Corporation and the Acquiring Fund are registered
open-end management investment companies and the Acquired Fund owns
securities in which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are
authorized to issue shares of common stock or shares of beneficial
interest, as the case may be;
WHEREAS, the Board of Directors, including a majority of the
directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Acquiring Fund
has determined that the exchange of all of the net assets of the Acquired
Fund for Acquiring Fund Shares is in the best interests of the Acquiring
Fund shareholders and that the interests of the existing shareholders of
the Acquiring Fund would not be diluted as a result of this transaction;
and
WHEREAS, the Board of Directors, including a majority of the
directors who are not "interested persons" (as defined under the 1940 Act),
of the Corporation has determined that the exchange of all of the net
assets of the Acquired Fund for Acquiring Fund Shares is in the best
interests of the Acquired Fund shareholders;
NOW THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties agree as
follows:
1.TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE
ACQUIRING FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the
Acquired Fund agrees to assign, transfer and convey to the Acquiring Fund
all of the net assets of the Acquired Fund, including all securities and
cash, other than cash in an amount necessary to pay any unpaid dividends
and distributions as provided in paragraph 1.5, beneficially owned by the
Acquired Fund, and the Acquiring Fund agrees in exchange therefor to
deliver to the Acquired Fund the number of Acquiring Fund Shares, including
fractional Acquiring Fund Shares, determined as set forth in paragraph 2.3.
Such transaction shall take place at the closing (the "Closing") on the
closing date (the "Closing Date") provided for in paragraph 3.1. In lieu
of delivering certificates for the Acquiring Fund Shares, the Acquiring
Fund shall credit the Acquiring Fund Shares to the Acquired Fund's account,
for the benefit of its shareholders, on the stock record books of the
Acquiring Fund and shall deliver a confirmation thereof to the Acquired
Fund.
1.2 The Acquired Fund will discharge or make provision for the
discharge of all of its liabilities and obligations prior to or on the
Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street
Bank and Trust Company (hereinafter called "State Street"), Boston,
Massachusetts, the Acquiring Fund's custodian (the "Custodian"), for the
account of the Acquiring Fund, together with proper instructions and all
necessary documents to transfer to the account of the Acquiring Fund, free
and clear of all liens, encumbrances, rights, restrictions and claims
created by the Acquired Fund. All cash delivered shall be in the form of
immediately available funds payable to the order of the Custodian for the
account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund thereunder. The
Acquired Fund will transfer to the Acquiring Fund any distributions, rights
or other assets received by the Acquired Fund after the Closing Date as
distributions on or with respect to the securities transferred. Such
assets shall be deemed included in assets transferred to the Acquiring Fund
on the Closing Date and shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable,
the Acquired Fund will liquidate and distribute pro rata to the Acquired
Fund's shareholders of record, determined as of the close of business on
the Closing Date (the "Acquired Fund Shareholders"), the Acquiring Fund
Shares received by the Acquired Fund pursuant to paragraph 1.1. In
addition, each Acquired Fund Shareholder shall have the right to receive
any unpaid dividends or other distributions which were declared before the
Valuation Date (as hereinafter defined) with respect to the shares of the
Acquired Fund that are held by the shareholder on the Valuation Date. Such
liquidation and distribution will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the Acquired Fund on
the books of the Acquiring Fund to open accounts on the share record books
of the Acquiring Fund in the names of the Acquired Fund Shareholders, and
representing the respective pro rata number of the Acquiring Fund Shares
due such shareholders, based on their ownership of shares of the Acquired
Fund on the Closing Date. All issued and outstanding Shares of the
Acquired Fund will simultaneously be canceled on the books of the Acquired
Fund. Share certificates representing interests in the Acquired Fund will
represent a number of Acquiring Fund Shares, after the Closing Date as
determined in accordance with Section 2.3. The Acquiring Fund shall not
issue certificates representing the Acquiring Fund Shares in connection
with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus
and statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund
shares on the books of the Acquired Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Corporation up to and including the
Closing Date and such later dates, with respect to dissolution and
deregistration of the Corporation, on which the Corporation is dissolved
and deregistered.
1.9 The Corporation shall be deregistered as an investment company
under the 1940 Act and dissolved as a Maryland corporation as promptly as
practicable following the Closing Date and the making of all distributions
pursuant to paragraph 1.5.
2.VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of
the close of the New York Stock Exchange (normally 4:00 p.m. Eastern time)
on the Closing Date (such time and date being herein called the "Valuation
Date"), using the valuation procedures set forth in the Acquiring Fund's
then-current prospectus or statement of additional information.
2.2 The net asset value of each Acquiring Fund Share shall be the net
asset value per share computed as of the close of the New York Stock
Exchange (normally 4:00 p.m. Eastern time) on the Valuation Date, using the
valuation procedures set forth in the Acquiring Fund's then-current
prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in
paragraph 2.1, by the net asset value of one Acquiring Fund Share
determined in accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3.CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be December , 1996 or such later date as
--
the parties may mutually agree. All acts taking place at the Closing Date
shall be deemed to take place simultaneously as of the close of business on
the Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place
as the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of
the value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 ARM Transfer Agency, Inc., as transfer agent for the Acquired
Fund, shall deliver at the Closing a certificate of an authorized officer
stating that its records contain the names and addresses of the Acquired
Fund Shareholders and the number and percentage ownership of outstanding
shares owned by each such shareholder immediately prior to the Closing.
The Acquiring Fund shall issue and deliver a confirmation evidencing the
Acquiring Fund Shares to be credited on the Closing Date to the Secretary
of the Acquired Fund, or provide evidence satisfactory to the Acquired Fund
that such Acquiring Fund Shares have been credited to the Acquired Fund's
account on the books of the Acquiring Fund. At the Closing, each party
shall deliver to the other such bills of sale, checks, assignments,
assumption agreements, share certificates, if any, receipts or other
documents as such other party or its counsel may reasonably request.
4.REPRESENTATIONS AND WARRANTIES.
4.1 The Corporation represents and warrants to the Acquiring Fund as
follows:
(a) The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Maryland and has power to own all of its properties and assets and to carry
out this Agreement.
(b) The Corporation is registered under the 1940 Act, as an
open-end, management investment company, and such registration has not been
revoked or rescinded and is in full force and effect.
(c) The Corporation is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of the
Corporation's Articles of Incorporation or Bylaws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquired Fund is a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Acquired Fund or any of
its properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquired Fund knows of no facts which might form the basis
for the institution of such proceedings, and is not a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the 1940 Act and the rules and regulations of the
Securities and Exchange Commission (the "Commission") thereunder and do not
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(g) The Statement of Assets and Liabilities of the Acquired
Fund at June 30, 1995 and 1996, have been audited by Ernst & Young LLP,
independent auditors, and have been prepared in accordance with generally
accepted accounting principles, consistently applied, and such statements
(copies of which have been furnished to the Acquiring Fund) fairly reflect
the financial condition of the Acquired Fund as of such dates, and there
are no known contingent liabilities of the Acquired Fund as of such dates
not disclosed therein.
(h) Since June 30, 1996, there has not been any material
adverse change in the Acquired Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course
of business, or any incurrence by the Acquired Fund of indebtedness
maturing more than one year from the date such indebtedness was incurred,
except as otherwise disclosed to and accepted by the Acquiring Fund.
(i) At the Closing Date, all Federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
date shall have been filed or an appropriate extension obtained, and all
Federal and other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof or contest in good faith, and
to the best of the Acquired Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such
returns.
(j) For each fiscal year of its operation, subject to
applicable statute of limitation periods, the Acquired Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. All of the issued and
outstanding shares of the Acquired Fund will, at the time of the Closing,
be held by the persons and in the amounts set forth in the records of the
transfer agent as provided in paragraph 3.3. The Acquired Fund does not
have outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquired Fund shares, nor is there outstanding any
security convertible into any of the Acquired Fund shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets
to be transferred by it hereunder.
(m) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Corporation and, subject to the
approval of the Acquired Fund Shareholders, this Agreement constitutes the
valid and legally binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions
with respect thereto, and to general principles of equity and the
discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund
(the "Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (only insofar as it relates to the
Acquired Fund) will, on the effective date of the Registration Statement
and on the Closing Date, not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
4.2 The Acquiring Fund represents and warrants to the Corporation as
follows:
(a) The Acquiring Fund is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Maryland and has the power to carry on its business as it is now being
conducted and to carry out this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as
an open-end, diversified, management investment company, and such
registration has not been revoked or rescinded and is in full force and
effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquiring Fund's Articles of Incorporation or Bylaws or of any
agreement, indenture, instrument, contract, lease or other undertaking to
which the Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Acquiring Fund or any of
its properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquiring Fund knows of no facts which might form the basis
for the institution of such proceedings, and is not a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the
Acquiring Fund at August 31, 1994 and 1995, have been audited by Deloitte &
Touche LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, and such statements (copies of
which have been furnished to the Acquired Fund) fairly reflect the
financial condition of the Acquiring Fund as of such dates, and there are
no known contingent liabilities of the Acquiring Fund as of such dates not
disclosed therein.
(g) The unaudited Statement of Assets and Liabilities of
the Acquiring Fund at February 29, 1996 has been prepared in accordance
with generally accepted accounting principles, consistently applied,
although subject to year-end adjustments, and on a basis consistent with
the Statement of Assets and Liabilities of the Acquiring Fund at August 31,
1995 which has been audited by Deloitte & Touche LLP, independent auditors,
and such statement (copies of which have been furnished to the Acquired
Fund) fairly reflects the financial condition of the Acquiring Fund as of
such date, and there are no known liabilities of the Acquiring Fund,
contingent or otherwise, as of such date not disclosed therein.
(h) Since February 29, 1996, there has not been any
material adverse change in the Acquiring Fund's financial condition,
assets, liabilities or business other than changes occurring in the
ordinary course of business, or any incurrence by the Acquiring Fund of
indebtedness maturing more than one year from the date such indebtedness
was incurred, except as disclosed to and accepted by the Acquired Fund.
(i) At the Closing Date, all Federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed or an
appropriate extension obtained, by such date shall have been filed, and all
Federal and other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof or contest in good faith, and
to the best of the Acquiring Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such
returns.
(j) For each fiscal year of its operation, subject to
applicable statute of limitation periods, the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company.
(k) All issued and outstanding Acquiring Fund Shares are,
and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquiring Fund Shares, nor is there outstanding any
security convertible into any Acquiring Fund Shares.
(l) The execution, delivery and performance of this
Agreement has been duly authorized by all necessary action on the part of
the Acquiring Fund, and this Agreement constitutes the valid and legally
binding obligation of the Acquiring Fund enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws relating to or
affecting creditors' rights generally and court decisions with respect
thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a
proceeding in equity or at law).
(m) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not misleading.
5.COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing
Date, it being understood that such ordinary course of business will
include customary dividends and distributions.
5.2 The Corporation will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated
herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and
do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by
this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund,
in such form as is reasonably satisfactory to the Acquiring Fund, a
statement of the earnings and profits of the Acquired Fund for Federal
income tax purposes which will be carried over to the Acquiring Fund as a
result of Section 381 of the Code and which will be certified by the
Corporation's President and its Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with
information reasonably necessary for the preparation of the
Prospectus/Proxy Statement, referred to in paragraph 4.1(m), all to be
included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
5.7 Prior to the Valuation Date, the Acquired Fund shall have
declared a dividend or dividends, with a record date and ex-dividend date
prior to the Valuation Date, which, together with all previous dividends,
shall have the effect of distributing to its shareholders all of its
investment company taxable income, if any, plus the excess of its interest
income, if any, excludable from gross income under Code section 103(a) over
its deductions disallowed under Code sections 265 and 171(a)(2) for the
taxable periods or years ended on or before June 30, 1996 and for the
period from said date to and including the Closing Date (computed without
regard to any deduction for dividends paid), and all of its net capital
gain, if any, realized in taxable periods or years ended on or before June
30, 1996 and in the period from said date to and including the Closing
Date.
6.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance
by the Acquired Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
6.1 All representations and warranties of the Corporation contained
in this Agreement shall be true and correct in all material respects as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the
Acquired Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of the
Closing Date, certified by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or
Vice President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of
the Corporation made in this Agreement are true and correct in all material
respects at and as of the Closing Date, except as they may be affected by
the transactions contemplated by this Agreement, and as to such other
matters as the Acquiring Fund shall reasonably request.
7.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by
the Acquiring Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
7.1 All representations and warranties of the Acquiring Fund
contained in this Agreement shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date with
the same force and effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or
Vice President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct in all material
respects at and as of the Closing Date, except as they may be affected by
the transactions contemplated by this Agreement, and as to such other
matters as the Acquired Fund shall reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness,
except as otherwise disclosed to and accepted by the Acquired Fund.
8.FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING
FUND AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund,
either party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding
shares of the Acquired Fund in accordance with the provisions of the
Corporation's Articles of Incorporation and the 1940 Act.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those
of the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit
consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring Fund or the Acquired
Fund, provided that either party hereto may for itself waive any of such
conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or
be pending, threatened or contemplated under the 1933 Act.
8.5 The Acquiring Fund and the Corporation shall have received an
opinion of Dickstein Shapiro Morin & Oshinsky LLP substantially to the
effect that for Federal income tax purposes:
(a) The transfer of all of the Acquired Fund net assets in
exchange for the Acquiring Fund Shares and the distribution of the
Acquiring Fund Shares to the Acquired Fund Shareholders in liquidation of
the Acquired Fund will constitute a "reorganization" within the meaning of
Section 368(a)(1)(C) of the Code; (b) No gain or loss will be recognized by
the Acquiring Fund upon the receipt of the assets of the Acquired Fund
solely in exchange for the Acquiring Fund Shares; (c) No gain or loss will
be recognized by the Acquired Fund upon the transfer of the Acquired Fund
assets to the Acquiring Fund in exchange for the Acquiring Fund Shares or
upon the distribution (whether actual or constructive) of the Acquiring
Fund Shares to Acquired Fund Shareholders in exchange for their shares of
the Acquired Fund; (d) No gain or loss will be recognized by the Acquired
Fund Shareholders upon the exchange of their Acquired Fund shares for the
Acquiring Fund Shares; (e) The tax basis of the Acquired Fund assets
acquired by the Acquiring Fund will be the same as the tax basis of such
assets to the Acquired Fund immediately prior to the Reorganization;
(f) The tax basis of the Acquiring Fund Shares received by each of the
Acquired Fund Shareholders pursuant to the Reorganization will be the same
as the tax basis of the Acquired Fund shares held by such shareholder
immediately prior to the Reorganization; (g) The holding period of the
assets of the Acquired Fund in the hands of the Acquiring Fund will include
the period during which those assets were held by the Acquired Fund; and
(h) The holding period of the Acquiring Fund Shares to be received by each
Acquired Fund Shareholder will include the period during which the Acquired
Fund shares exchanged therefor were held by such shareholder (provided the
Acquired Fund shares were held as capital assets on the date of the
Reorganization).
9.TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Directors of the
Corporation or the Board of Directors of the Acquiring Fund at any time
prior to the Closing Date (and notwithstanding any vote of the Acquired
Fund Shareholders) if circumstances should develop that, in the opinion of
either of the parties' Board, make proceeding with the Agreement
inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on
the part of any party hereto or the directors or officers of the
Corporation or the Acquiring Fund or the shareholders of the Acquiring Fund
or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Directors of the Acquiring Fund or
the Board of Directors of the Corporation, if, in the judgment of either,
such waiver will not have a material adverse effect on the benefits
intended under this Agreement to the shareholders of the Acquiring Fund or
of the Acquired Fund, as the case may be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated
hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings
of every kind and nature between them relating to the subject matter
hereof. Neither party shall be bound by any condition, definition,
warranty or representation, other than as set forth or provided in this
Agreement or as may be set forth in a later writing signed by the party to
be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the State of New York, without giving effect to
principles of conflicts of laws.
11.4 This Agreement may be executed in any number of counterparts,
each of which, when executed and delivered, shall be deemed to be an
original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
11.6 An agreement has been entered into under which Federated Advisers
will assume substantially all of the expenses of the reorganization
including registration fees, transfer taxes (if any), the fees of banks and
transfer agents and the costs of preparing, printing, copying and mailing
proxy solicitation materials to the Acquired Fund's shareholders and the
costs of holding the Special Meeting of Shareholders. ARM Financial Group,
Inc. will assume the legal fees of the Acquired Fund. The accountants'
fees of the Acquired Fund will be borne equally by Federated Advisers and
ARM Financial Group, Inc.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the
date first above written.
Acquired Fund:
STATE BOND TAX-FREE INCOME FUNDS,
INC.,
on behalf of its portfolio,
Attest: STATE BOND MINNESOTA TAX-FREE
INCOME FUND
/s/ Sheri Bean By: /s/ Kevin L. Howard
Name: Sheri Bean Name: Kevin L. Howard
Title: Assistant Secretary Title: Vice President and Secretary
Acquiring Fund:
Attest: FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
/s/ S. Elliot Cohan By: /s/ J. Christopher Donahue
Name: S. Elliot Cohan Name: J. Christopher Donahue
Title: Assistant Secretary Title: Executive Vice President
STATEMENT OF ADDITIONAL INFORMATION
November , 1996
---
ACQUISITION OF THE ASSETS OF
STATE BOND MINNESOTA TAX-FREE INCOME FUND,
A PORTFOLIO OF
STATE BOND TAX-FREE INCOME FUNDS, INC.
100 NORTH MINNESOTA STREET
P.O. BOX 69
NEW ULM, MINNESOTA 56073-0069
TELEPHONE NUMBER: 1-800-328-4735
BY AND IN EXCHANGE FOR CLASS A SHARES OF
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TELEPHONE NUMBER: 1-800-341-7400
This Statement of Additional Information dated November , 1996
---
is not a prospectus. A Prospectus/Proxy Statement dated November , 1996
---
related to the above-referenced matter may be obtained from Federated
Municipal Opportunities Fund, Inc., Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. This Statement of Additional Information should
be read in conjunction with such Prospectus/Proxy Statement.
TABLE OF CONTENTS
1. Statement of Additional Information of Federated Municipal
Opportunities Fund, Inc., dated September 1, 1996.
2. Statement of Additional Information of State Bond Minnesota
Tax-Free Income Fund, a portfolio of State Bond Tax-Free Income Funds,
Inc., dated November 1, 1995.
3. Financial Statements of Federated Municipal Opportunities
Fund, Inc., dated August 31, 1995.
4. Financial Statements (unaudited) of Federated Municipal
Opportunities Fund, Inc., dated February 29, 1996.
5. Financial Statements of State Bond Minnesota Tax-Free Income
Fund, a portfolio of State Bond Tax-Free Income Funds, Inc., dated June 30,
1996.
6. Pro Forma Financial Information of Federated Municipal
Opportunities Fund, Inc., dated August 31, 1996.
The Statement of Additional Information of Federated Municipal
Opportunities Fund, Inc. (the "Federated Fund"), dated September 1, 1996,
is incorporated herein by reference to Post-Effective Amendment No. 14 to
the Federated Fund's Registration Statement on Form N-1A (File
Nos. 33-11410 and 811-4533) which was filed with the Securities and
Exchange Commission on or about May 23, 1996. A copy may be obtained, upon
request and without charge, from the Federated Fund at Federated Investors
Tower, Pittsburgh, PA 15222-3279; telephone number: 1800-3417400.
The Statement of Additional Information of State Bond Minnesota
Tax-Free Income Fund (the "State Bond Fund"), a portfolio of State Bond
Tax-Free Income Funds, Inc. (the "Corporation"), dated November 1, 1995, is
incorporated herein by reference to Post-Effective Amendment No. 10 to the
Corporation's Registration Statement on Form N-1A (File Nos. 33-18934 and
811-5412) which was filed with the Securities and Exchange Commission on or
about August 28, 1995. A copy may be obtained, upon request and without
charge, from the State Bond Fund at 100 North Minnesota Street, P.O. Box
69, New Ulm, Minnesota 56073-0069; telephone number: 1-800-328-4735.
The audited financial statements of the Federated Fund, dated
August 31, 1995, are incorporated herein by reference to the Federated
Fund's Annual Report to Shareholders dated August 31, 1995 which was filed
with the Securities and Exchange Commission. A copy may be obtained, upon
request and without charge, from the Federated Fund at Federated Investors
Tower, Pittsburgh, PA 15222-3279; telephone number: 1-800-341-7400.
The audited financial statements of the State Bond Fund, dated June
30, 1996, are incorporated herein by reference to the State Bond Fund's
Annual Report to Shareholders dated June 30, 1996, which was filed with the
Securities and Exchange Commission. A copy may be obtained, upon request
and without charge, from the State Bond Fund at 100 North Minnesota Street,
P.O. Box 69, New Ulm, Minnesota 56073-0069; telephone number 1-800-328-
4735.
The unaudited financial statements of the Federated Fund, dated
February 29, 1996, are incorporated herein by reference to the Federated
Fund's Semi-Annual Report to Shareholders, dated February 29, 1996, which
was filed with the Securities and Exchange Commission. A copy may be
obtained, upon request and without charge, from the Federated Fund at
Federated Investors Tower, Pittsburgh, PA 15222-3279; telephone number: 1-
800-341-7400.
The pro forma financial information of the Federated Fund, dated
August 31, 1996 is included herein.
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC. (FORMERLY, FORTRESS
MUNICIPAL INCOME FUND, INC.)
STATE BOND MINNESOTA TAX-FREE INCOME FUND
STATE BOND TAX EXEMPT FUND
INTRODUCTION TO PROPOSED MERGER
AUGUST 31, 1996 (UNAUDITED)
The accompanying unaudited Pro Forma Combining Portfolio of
Investments and Statement of Assets and Liabilities reflect the accounts of
Federated Municipal Opportunities Fund, Inc. , State Bond Minnesota Tax-
Free Income Fund, and State Bond Tax Exempt Fund, collectively (`the
Funds''), for the year ended August 31, 1996. These statements have been
derived from the books and records utilized in calculating daily net asset
values at August 31, 1996. The accompanying unaudited Pro Forma Combining
Statement of Operations reflects the accounts of the Funds, for the years
ended August 31, 1996, June 30, 1996, and June 30, 1996, respectively, the
most recent fiscal year ends of the Funds. The Pro Forma statements give
effect to the proposed transfer of assets from State Bond Minnesota Tax-
Free Income Fund in exchange for Class A Shares of Federated Municipal
Opportunities Fund, Inc. and State Bond Tax Exempt Fund in exchange for
Class A Shares of Federated Municipal Opportunities Fund, Inc. These two
separate proposed transfers will be transacted simultaneously.
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS
AUGUST 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
FEDERATED FEDERATED
MUNICIPAL MUNICIPAL
OPPORTUNITIES OPPORTUNITIES
FUND, INC. FUND, INC.
(FORMERLY, STATE BOND (FORMERLY, STATE
FORTRESS MINNESOTA STATE FORTRESS BOND STATE BOND
MUNICIPAL TAX-FREE BOND MUNICIPAL MINNESO TAX
INCOME INCOME TAX PRO FORMA INCOME TA TAX- EXEMPT PRO FORMA
FUND, INC.) FUND EXEMPT COMBINED FUND, INC.) FREE FUND COMBINED
FUND INCOME
FUND
MOODY'S/
PRINCIPAL PRINCIPAL PRINCIPAL S&P
AMOUNT AMOUNT PRINCIPAL AMOUNT RATING* VALUE VALUE VALUE VALUE
AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MUNICIPAL BONDS (97.7%)
ALABAMA- 1.2%
6,000,000 --- --- 6,000,000 Courtland, AL, IDB,
Solid Waste Disposal
Revenue Bonds (Series BBB/Baa1 5,869,680 --- --- 5,869,680
A), 6.375% (Champion
International
Corp.)/(Original
Issue Yield: 6.52%),
3/1/2029
ALASKA-- 0.4%
- --- --- 690,000 690,000 Alaska Housing
Finance Corp.,
Collateralized,
Veterans Mortgage
Program, Series 1991
B-1, 6.900%,
due 2032 Aaa/AAA --- --- 708,471 708,471
- --- --- 325,000 325,000 Alaska Housing Aaa/AAA
Finance Corp., --- --- 334,419 334,419
Collaterized Home
Mortgage Bonds, 1988
Series A-1, 7.625%,
due 2013
- --- --- 1,000,000 1,000,000 Alaska Valdez Marine
Terminal, 5.650%,
due 2028 Aa3/AA- --- --- 940,090 940,090
Total --- --- 1,982,980 1,982,980
ARIZONA-0.3%
- --- --- 1,500,000 1,500,000 Arizona Industrial A/A --- --- 1,478,205 1,478,205
Development
Authority, 5.450%,
due 2009
ARKANSAS--1.7%
2,920,000 --- --- 2,920,000 Conway, AR, Hospital
Authority, Revenue BBB/NR 2,976,560 --- --- 2,976,560
Bonds, 7.125% (Conway
Regional Hospital),
2/1/2013
3,000,000 --- --- 3,000,000 Conway, AR, Hospital
Authority, Revenue BBB/NR 3,205,800 --- --- 3,205,800
Refunding Bonds,
8.125% (Conway
Regional Hospital),
7/1/2005
1,000,000 --- --- 1,000,000 Conway, AR, Hospital
Authority, Revenue BBB/NR 1,074,850 --- --- 1,074,850
Refunding Bonds,
8.375% (Conway
Regional Hospital),
7/1/2011
1,000,000 --- --- 1,000,000 Little Rock, AR,
Health Facilities A+/NR 1,062,400 --- --- 1,062,400
Board, Revenue
Refunding Bonds,
7.00% (Baptist
Medical Center, AR),
10/1/2017
Total 8,319,610 --- --- 8,319,610
CALIFORNIA-0.5%
- --- --- 500,000 500,000 Berkeley, CA, School
District, 5.800%,
due 2020 Aaa/AAA --- --- 488,600 488,600
- --- --- 1,000,000 1,000,000 Central Coast Water
Authority Revenue
Bonds,
Series 1992, 6.350%, Aaa/AAA --- --- 1,075,550 1,075,550
due 2007
- --- --- 1,000,000 1,000,000 Walnut Valley, CA,
Water District,
Certificate of
Participation,
6.125%, due
2009 Aaa/AAA --- --- 1,032,820 1,032,820
Total --- --- 2,596,970 2,596,970
COLORADO--0.8%
695,000 --- --- 695,000 Colorado HFA, SFM
Revenue Bonds (Series AA/NR 729,250 --- --- 729,250
A-2), 7.70% (FHA
GTD), 2/1/2023
2,775,000 --- --- 2,775,000 Colorado HFA, SFM
Revenue Bonds (Series AA/NR 2,891,162 --- --- 2,891,162
C-2), 7.375% (FHA
GTD), 8/1/2023
295,000 --- --- 295,000 El Paso County, CO,
HFA, SFM Revenue AAA/NR 310,573 --- --- 310,573
Bonds, 8.00% (GNMA
COL), 9/1/2022
- --- --- 210,000 210,000 Housing Finance
Agency, Single Family Aa/NR --- --- 214,505 214,505
Housing Revenue
Bonds, 1986 Series A,
8.000%, due 2017
Total 3,930,985 --- 214,505 4,145,490
DISTRICT OF COLUMBIA-
0.3%
- --- --- 1,250,000 1,250,000 District of Columbia
University Revenue NR/AAA --- --- 1,275,012 1,275,012
Bonds, 6.300%, due
2013
IDAHO--0.9%
1,145,000 --- --- 1,145,000 Idaho Housing Agency,
SFM Revenue Bonds AA/NR 1,193,823 --- --- 1,193,823
(Series A), 7.50%
(FHA GTD), 7/1/2024
2,785,000 --- --- 2,785,000 Idaho Housing Agency,
SFM Revenue Bonds AA/Aa 2,918,290 --- --- 2,918,290
(Series F-2), 7.80%
(FHA GTD), 1/1/2023
Total 4,112,113 --- --- 4,112,113
ILLINOIS--7.0%
- --- --- 2,000,000 2,000,000 Chicago, IL, Water
Revenue Bonds,
7.200% due 2016 A1/AA- --- --- 2,194,460 2,194,460
- --- --- 1,000,000 1,000,000 Chicago, IL, Public
District Capital
Improvement Bonds, Aaa/AAA --- --- 1,024,200 1,024,200
5.450%, due 2004
- --- --- 1,480,000 1,480,000 City of Chicago, IL,
Gas Supply Revenue
Bonds, 7.500%, due Aa3/AA- --- --- 1,606,111 1,606,111
2015
- --- --- 1,100,000 1,100,000 City of Chicago, IL,
Gas Supply Revenue Aa3/AA --- --- 1,198,076 1,198,076
Bonds, 7.500%, due
2015
- -- --- 500,000 500,000 Cook County, IL, Aaa/AAA --- --- 499,945 499,945
6.000%, due 2017
- --- --- 1,000,000 1,000,000 Cook County, IL
Community Cons.
School District #6, Aaa/AAA --- --- 1,023,880 1,023,880
5.875%, due 2008
4,500,000 --- --- 4,500,000 Granite City, IL,
Hospital Facilities
Authority, Revenue BB+/Baa 4,637,520 --- --- 4,637,520
Refunding Bonds
(Series A), 8.125%
(St. Elizabeth
Medical
Center)/(Original
Issue Yield: 8.167%),
6/1/2008
3,000,000 --- --- 3,000,000 Illinois Development
Finance Authority,
Housing Revenue NR 2,667,210 --- --- 2,667,210
Bonds, 6.10%
(Catholic Charities
Housing Development
Corp), 1/1/2020
10,000,000 --- --- 10,000,000 Illinois Health
Facilities Authority,
Hospital Revenue NR 10,459,300 --- --- 10,459,300
Bonds (Series A),
9.25% (Edgewater
Hospital & Medical
Center, IL), 7/1/2024
- --- --- 1,400,000 1,400,000 Illinois Health
Facility Authorized
Revenue,
6.000%, due 2015 Aaa/AAA --- --- 1,378,468 1,378,468
- --- --- 1,000,000 1,000,000 Illinois State
Dedicated Tax,
6.000%, due
2015 Aaa/AAA --- --- 998,760 998,760
- --- --- 1,050,000 1,050,000 Illinois State
University Auxiliary
Facility
System, Board of
Regents Revenue
Bonds,
Series 1989, 7.400%, Aaa/A --- --- 1,156,680 1,156,680
due 2014
- --- --- 500,000 500,000 Illinois State
University Auxiliary
Facility
System, Board of
Regents Revenue
Bonds,
Series 1989, 7.400%, Aaa/A --- --- 550,800 550,800
due 2013
- --- --- 2.350,000 2.350,000 Metropolitan Pier
Exposition Authority,
IL, Dedicated State
Tax Rev. Bonds,
6.000%, due 2104 A/A+ --- --- 2,337,052 2,337,052
- --- --- 2,000,000 2,000,000 Rolling Meadows, IL,
Mortgage Revenue
Bonds Woodfield
Garden, 7.750%
due 2004 NR/A- --- --- 2,122,240 2,122,240
Total 17,764,030 --- 16,090,672 33,854,702
INDIANA--9.2%
- --- --- 550,000 550,000 Beech Grove, IN, IDR
8.750%, (Westvaco A1/A --- --- 556,424 556,424
Corp) due 2010
- --- --- 1,000,000 1,000,000 Highland, IN, School
Building Corp.,
6.750%, due 2012 NR/AAA --- --- 1,105,850 1,105,850
1,300,000 1,300,000 Indiana Municipal
Power Agency, Series
1992 A, 6.000%, due Aaa/AAA --- --- 1,363,245 1,363,245
2007
3,000,000 --- --- 3,000,000 Indiana Port
Commission, Port NR/Aa3 3,232,500 --- --- 3,232,500
Facility Revenue
Refunding Bonds,
6.875% (Cargill,
Inc.), 5/1/2012
855,000 --- --- 855,000 Indiana State HFA,
SFM Revenue Bonds NR/Aaa 902,410 --- --- 902,410
(Series A), 8.20%
(GNMA COL), 7/1/2020
- --- --- 1,100,000 1,100,000 Indiana State Toll
Roads, Revenue
Refunding Bond, A-/A --- --- 1,099,967 1,099,967
6.00%, due 2013
2,785,000 --- --- 2,785,000 Indiana State HFA,
SFM Revenue Home NR/Aaa 2,941,406 --- --- 2,941,406
Mortgage Program
(Series F-2), 7.75%
(GNMA COL), 7/1/2022
- --- --- 1,150,000 1,150,000 Indiana
Transportation
Finance Authority,
Series A, 6.250%, due A/NR --- --- 1,160,108 1,160,108
2016
17,100,000 --- --- 17,100,000 Indianapolis, IN,
Airport Authority,
Special Facilities BBB/Baa2 18,041,355 --- --- 18,041,355
Revenue Bonds, 7.10%
(Federal Express
Corp.)/(Original
Issue Yield: 7.178%),
1/15/2017
- --- --- 3,225,000 3,225,000 Indianapolis, IN,
Public Improvement
Bonds, Bank Series C, Aaa/NR --- --- 3,558,014 3,558,014
6.700%, due 2017
2,750,000 --- --- 2,750,000 LaPorte County, IN,
Hospital Authority,
Hospital Facilities
Revenue Refunding BBB-/Aaa 2,870,780 --- --- 2,870,780
Bond, 8.75% (LaPorte
Hospital, Inc.,
IN)/(United States
Treasury
PRF)/(Original Issue
Yield: 8.848%),
3/1/1997 (@102)
5,000,000 --- --- 5,000,000 LaPorte County, IN,
Hospital Authority,
Hospital Facility BBB/Baa1 4,587,750 --- --- 4,587,750
Revenue Refunding
Bonds, 6.00% (LaPorte
Hospital, Inc.,
IN)/(Original Issue
Yield: 6.35%),
3/1/2023
3,000,000 --- --- 3,000,000 LaPorte County, IN,
Hospital Authority,
Hospital Facility BBB/Baa 2,908,350 --- --- 2,908,350
Revenue Refunding
Bonds, 6.25% (LaPorte
Hospital, Inc.,
IN)/(Original Issue
Yield: 6.35%),
3/1/2012
Total 35,484,551 --- 8,843,608 44,328,159
IOWA--0.2%
1,000,000 --- --- 1,000,000 Davenport, IA, PCA,
PCR Refunding Bonds, NR 1,057,090 --- --- 1,057,090
Nicols-Homeshield
Project, 8.375%
(Quanex Corp.),
12/1/2005
KENTUCKY--1.0%
3,500,000 --- --- 3,500,000 Kenton County, KY,
Airport Board,
Special Facilities BB/Ba3 3,729,600 --- --- 3,729,600
Revenue Bonds (Series
A), 7.50% (Delta Air
Lines,
Inc.)/(Original Issue
Yield: 7.60%),
2/1/2020
1,200,000 --- --- 1,200,000 Kentucky Pollution
Abatement & Water NR 1,200,000 --- --- 1,200,000
Resource Finance
Authority Daily VRDNs
(Toyota Motor Credit
Corp.)
Total 4,929,600 --- --- 4,929,600
LOUISIANA-5.5%
3,000,000 --- --- 3,000,000 De Soto Parish, LA,
Environmental
Improvement A-/A3 3,381,990 --- --- 3,381,990
Authority, Revenue
Bonds, 7.70%
(International Paper
Co.), 11/1/2018
5,000,000 --- --- 5,000,000 Lake Charles, LA,
Harbor & Terminal
District, Port NR/Baa3 5,598,550 --- --- 5,598,550
Facilities Revenue
Refunding Bond,
Trunkline Lining Co
Project, 7.75%
(Panhandle Eastern
Corp.), 8/15/2022
- --- --- 750,000 750,000 Rapides Parish, LA,
Housing & Mortgage
Finance Authority,
Single Family
Mortgage, 7.250%, due Aaa/AA- --- --- 847,770 847,770
2010
5,645,000 --- --- 5,645,000 St. Charles Parish,
LA, PCR Bonds, 7.50%
(Louisiana Power & BBB+/Baa2 5,956,660 --- --- 5,956,660
Light Co.)/(Original
Issue Yield: 7.542%),
6/1/2021
1,400,000 --- --- 1,400,000 St. Charles Parish,
LA, PCR Bonds, 8.00% NR/Baa3 1,523,914 --- --- 1,523,914
(Louisiana Power &
Light Co.), 12/1/2014
2,100,000 --- --- 2,100,000 St. Charles Parish,
LA, PCR Bonds, 8.25% ---
(Louisiana Power & NR 2,289,462 --- 2,289,462
Light Co.)/(Original
Issue Yield: 8.273%),
6/1/2014
3,650,000 --- --- 3,650,000 St. Charles Parish,
LA, Solid Waste ---
Disposal Revenue BBB+/Baa2 3,758,770 --- 3,758,770
Bonds (Series A),
7.00% (Louisiana
Power & Light
Co.)/(Original Issue
Yield: 7.04%),
12/1/2022
3,000,000 --- --- 3,000,000 St. James Parish, LA,
Solid Waste Disposal
Revenue Bonds, 7.70% NR 3,049,200 --- --- 3,049,200
(Freeport McMoRan,
Inc.)/(Original Issue
Yield: 7.75%),
10/1/2022
Total 25,558,546 --- 847,770 26,406,316
MAINE--1.0%
- --- --- 400,000 400,000 Maine State Housing
Authority, Mortgage
Purchase Bonds, 1988
Series B, 8.000%,
due 2015 A1/AA- --- --- 420,596 420,596
4,200,000 --- --- 4,200,000 Maine State Housing
Authority, Revenue A+/A1 4,418,778 --- --- 4,418,778
Bonds (Series D-3),
8.20%, 11/15/2019
Total 4,418,778 --- 420,596 4,839,374
MARYLAND-0.2%
- --- --- 740,000 740,000 Maryland City Housing
Multi-Family
Housing, FNMA, Series
A, 7.250%
due 2023 NR/AAA --- --- 767,927 767,927
MASSACHUSETTS--2.8%
21,000,000 --- --- 21,000,000 Massachusetts IFA,
Solid Waste Disposal
Sr. Lien Revenue NR 11,350,500 --- --- 11,350,500
Bonds (Series A),
9.00% (Massachusetts
Recycling
Association),
8/1/2016
- --- --- 1,000,000 1,000,000 Massachusetts State
Housing Project
Financial Agency, A1/A+ --- --- 1,008,500 1,008,500
6.300%, due 2013
- --- --- 1,000,000 1,000,000 Massachusetts State
Housing Project
Financial Agency, Aaa/AAA --- --- 1,005,550 1,005,550
6.100%, due 2016
Total 11,350,500 --- 2,014,050 13,364,550
MICHIGAN--0.7%
- --- --- 500,000 500,000 Clintondale, MI,
Community Schools,
5.750%, due 2016 Aa/AA --- --- 488,450 488,450
- --- --- 145,000 145,000 Michigan State
Housing Development
Authority, Single
Family, Series A,
7.550%, due 2014 NR/AA+ --- --- 145,042 145,042
- --- --- 1,000,000 1,000,000 Michigan State
Housing Development,
Series B, 6.950%, due NR/AA+ --- --- 1,051,960 1,051,960
2020
1,500,000 --- --- 1,500,000 Western Townships,
MI, Utilities BBB+/NR 1,639,890 --- --- 1,639,890
Authority, LT GO
Sewer Disposal System
Bonds, 8.20%,
1/1/2018
Total 1,639,890 --- 1,685,452 3,325,342
MINNESOTA--10.0%
- --- 235,000 --- 235,000 Albany, MN,
Independent School Aa1/NR --- 242,645 --- 242,645
District #745, GO
Bonds, 6.000%, due
2009
- --- --- Bloomington Port
200,000 200,000 Authority, Series Aaa/AAA --- 202,052 --- 202,052
1994 A, 5.250%, due
2003
- --- 100,000 800,000 900,000 Burnsville, MN,
Multi-Family Housing
Revenue Refunded NR/AAA --- 104,559 836,472 941,031
Bonds, Coventry Court
Apartments Project,
Series 1989, 7.500%,
due 2027
- --- 250,000 --- 250,000 Centennial Minnesota --- ---
Independent School Aaa/AAA 270,255 270,255
District #12, GO
Bonds, Series 1991 A,
7.150%, due 2011
- --- --- 800,000 800,000 City of Minnetonka,
MN, Multi-Family
Rental Housing Rev.
Bonds, 7.250%,
due 2002 NR/AAA --- --- 830,192 830,192
- --- 150,000 --- 150,000 Coon Rapids, MN, GO
Tax Increment Bonds, A/NR --- 151,877 --- 151,877
Series 1986 B2,
7.750%, due 2006
- --- 300,000 --- 300,000 Dakota County, MN, GO Aaa/AAA --- 312,642 --- 312,642
Refunded Bonds,
6.450%, due 2010
- --- 170,000 --- 170,000 Dakota County, MN
Housing and Revenue NR/AAA --- 175,850 --- 175,850
Authority, SFM Rev.
Bonds, 7.200%, due
2009
- --- --- Duluth, MN, GO Water
285,000 285,000 Rev., Series 1992 A, A/NR --- 295,870 --- 295,870
6.250%, due 2007
- --- --- Duluth, MN, Economic ---
60,000 60,000 Development Aaa/AAA --- 64,926 64,926
Authority, 6.200%,
due 2012
- --- --- Duluth, MN, Economic
140,000 140,000 Development Aaa/AAA --- 145,062 --- 145,062
Authority, 6.200%,
due 2012
- --- --- Eden Prairie, MN,
100,000 100,000 Multi-Family Housing NR/AAA --- 104,199 --- 104,199
Preserve Place
Apartments, 7.875%,
due 2017
- --- --- Eden Prairie, MN,
300,000 300,000 Housing & A/NR --- 312,033 --- 312,033
Redevelopment
Authority, 6.200%,
due 2008
- --- --- Edina, MN,
300,000 300,000 Independent School A1/NR --- 299,037 --- 299,037
District #273,
5.750%, due 2013
- --- --- Foley, MN,
100,000 100,000 Independent School Aaa/AAA --- 104,567 --- 104,567
District #51 MBIA,
7.500%, due 2008
- --- --- Hennepin County, MN,
165,000 165,000 Lease Revenue Aa/AA --- 176,971 --- 176,971
Certificate of
Participation, Series
1991, 6.800%, due
2017
- --- 225,000 --- 225,000 Kandiyohi County, MN,
GO Refunded Bonds, A/NR --- 224,330 --- 224,330
Series 1993, 5.650%,
due 2011
- --- 150,000 --- 150,000 Metropolitan Council, Aaa/AAA --- 162,480 --- 162,480
MN, 7.250%, due 2007
- --- 275,000 --- 275,000 Minneapolis, MN, Aaa/AAA --- 278,196 --- 278,196
5.750%, due 2010
- --- 250,000 --- 250,000 Minneapolis, MN, Aaa/AAA --- 261,645 --- 261,645
6.250%, due 2012
- --- 200,000 --- 200,000 Minneapolis, MN,
Multi-Family Housing NR/AAA --- 211,190 --- 211,190
Revenue, 7.125%, due
2010
- --- 300,000 --- 300,000 Minneapolis, MN,
Multi-Family Housing NR/AAA --- 311,466 --- 311,466
Revenue, 7.050%, due
2022
- --- 400,000 2,000,000 2,400,000 Minneapolis, MN,
Special School Aaa/AAA --- 407,148 2,035,740 2,442,888
District #001,
5.900%, due 2011
Minnesota Housing
Finance Agency,
Single
- --- --- 1,300,000 1,300,000 Family Mortgage, Aa/AA+ --- --- 1,319,240 1,319,240
6.250%, due 2015
- --- --- 1,460,000 1,460,000 Minnesota Housing
Finance Authority,
Series 1993E, 6.000%, NR/AA+ --- --- 1,459,913 1,459,913
due 2014
- --- --- 500,000 500,000 Minnesota Housing Aa/AA+ --- --- 527,775 527,775
Finance Authority
Agency, Single Family
Mortgage Revenue
Bonds 1989 D Series,
7.350%, due 2016
- --- 300,000 --- 300,000 Minnesota State
University Board A/NR --- 303,645 --- 303,645
Revenue, 6.000%, due
2013
- --- 300,000 --- 300,000 Minnesota Public --- ---
Access Authority, Aa1/AAA 329,412 329,412
Water Pollution
Control, Revenue
Bonds, Series 1990 A,
7.100%, due 2012
- --- 250,000 --- 250,000 Minnesota Public
Facilities Authority, Aa1/AAA --- 276,925 --- 276,925
Water Pollution
Control, Revenue
Bonds, Series 1991 A,
6.950%, due 2013
- --- 250,000 --- 250,000 Minnesota Public
Facilities Authority, Aa1/AAA --- 266,548 --- 266,548
Water Pollution
Control, Revenue
Bonds, Series 1992 A,
6.500%, due 2014
- --- 150,000 --- 150,000 Minnesota State, Aaa/AAA --- 162,714 --- 162,714
7.000%, due 2007
1,640,000 --- --- 1,640,000 Minnesota State HFA,
SFM Revenue Bonds AA/Aa 1,730,167 --- --- 1,730,167
(Series A), 7.95%
(FHA GTD), 7/1/2022
585,000 --- --- 585,000 Minnesota State HFA,
SFM Revenue Bonds AA+/Aa 601,930 --- --- 601,930
(Series D), 8.05%
(FHA GTD), 8/1/2018
3,000,000 --- --- 3,000,000 Minnesota State HFA,
SFM Revenue Bonds AA/Aa 3,094,860 --- --- 3,094,860
(Series E), 6.85%,
1/1/2024
- --- 240,000 --- 240,000 Minnesota State ---
Housing Finance Aa/AA+ --- 253,087 253,087
Agency, 7.300%, due
2017
- --- 175,000 --- 175,000 Minnesota State
Housing Finance NR/AA+ --- 175,844 --- 175,844
Agency, Rental
Housing, Series C
Refunded Bonds,
6.150%, due 2014
- --- 90,000 --- 90,000 Minnesota State
Housing Insurance Aa/AA+ --- 94,802 --- 94,802
Agency, 7.650%, due
2008
- --- 160,000 --- 160,000 Minnesota State
Housing Finance NR/AA+ --- 159,990 --- 159,990
Agency, 6.000%, due
2014
- --- 195,000 --- 195,000 Minnesota State
Housing Finance Aa/AA+ --- 204,994 --- 204,994
Agency, 7.100%, due
2011
- --- 335,000 --- 335,000 Minnesota State
Housing Finance Aa/AA+ --- 334,310 --- 334,310
Agency, Single Family
Mortgage, 5.850%, due
2011
- --- 300,000 --- 300,000 Minnesota State
Higher Education Aa/AA- --- 311,982 --- 311,982
Facilities, 6.300%,
due 2014
- --- 200,000 --- 200,000 Minnesota State
Higher Education A1/NR --- 198,710 --- 198,710
Facilities, 5.450%,
due 2007
- --- 315,000 --- 315,000 Minnesota State
Higher Education A1/NR --- 303,591 --- 303,591
Facilities, 5.600%,
due 2014
- --- 40,000 --- 40,000 Minnesota State
Housing Development Aa/AA+ --- 40,895 --- 40,895
Single Family
Mortgage, Series B,
7.250%, due 2016
- --- 100,000 --- 100,000 Minnetonka, MN,
Multi-Family Housing NR/AA --- 102,595 --- 102,595
Revenue Bonds (Cedar
Hills East Project),
7.500%, due 2017
- --- 300,000 --- 300,000 Moorhead, MN, Public
Utility Revenue Aaa/AAA --- 315,060 --- 315,060
Bonds, Series 1992,
6.050%, due 2006
- --- 285,000 --- 285,000 Northern Mu;nicipal
Power Agency, MN, Aaa/AAA --- 308,302 --- 308,302
Electric Revenue
Refunded Bonds,
Series A, 7.250%, due
2017
- --- 530,000 --- 530,000 Northern Municipal
Power Agency, MN, A/A --- 524,048 --- 524,048
Electric Revenue
Refunded Bonds,
6.000%, due 2020
- --- 300,000 --- 300,000 Owatonna, MN, Public
Utility Refunded A1/NR --- 326,346 --- 326,346
Bonds, Series 1990,
7.400%, due 2007
- --- 100,000 --- 100,000 Ramsey & Washington
Counties Resource A1/AA- --- 104,928 --- 104,928
Recovery Revenue
Bonds, NSP Project,
6.750%, due 2006
- --- 150,000 --- 150,000 Red Wing Independent
School District #256, A1/NR --- 155,328 --- 155,328
GO School Building,
Series 1998 A,
7.300%, due 2004
- --- 100,000 --- 100,000 Robbinsdale Hospital
Refunded Revenue Aaa/AAA --- 107,973 --- 107,973
NMMCP, 1989, 7.200%,
due 2005
- --- 300,000 --- 300,000 Robbinsdale Hospital
Refunded Revenue Aaa/AAA --- 289,641 --- 289,641
NMMCP, Series A,
5.450%, due 2013
- --- 370,000 --- 370,000 Robbinsdale Hospital Aaa/AAA --- 357,224 --- 357,224
Revenue, 5.450%, due
2013
- --- 500,000 --- 500,000 Rochester, MN, Health
Care Facility Revenue NR/AA+ --- 512,180 --- 512,180
Bonds, Mayo Medical
Center, 6.250%, due
2021
- --- 500,000 --- 500,000 Rosemount, MN,
Independent School Aa1/AA --- 502,880 --- 502,880
District, 5.875%, due
2014
- --- 300,000 --- 300,000 Roseville, MN,
Independent School Aaa/AAA --- 286,944 --- 286,944
District, 5.250%, due
2013
- --- 300,000 --- 300,000 St. Anthony-New
Brighton Independent Aa1/NR --- 301,377 --- 301,377
School District #282,
GO Bonds, 5.700%, due
2012
- --- 250,000 --- 250,000 St. Cloud, MN, Hydro
Electric Generator NR/A- --- 256,580 --- 256,580
Facility Gross
Revenue Bonds,
7.375%, due 2018
- --- 480,000 --- 480,000 St. Louis Park, MN, Aaa/AAA --- 444,149 --- 444,149
Health Care Facility,
5.200%, due 2016
- --- 100,000 --- 100,000 St. Paul, MN, GO
Street Improvement, Aa/AA+ --- 100,009 --- 100,009
Special Assessment
Bonds, Series 1988 D,
7.200%, due 2008
- --- 300,000 --- 300,000 St. Paul, MN, Housing
& Redevelopment NR/A- --- 323,805 --- 323,805
Authority, Package R,
6.450%, due 2007
- --- 300,000 --- 300,000 St. Paul, MN, Housing
and Redevelpment Aaa/AAA --- 298,794 --- 298,794
Authority Revenue
Bonds, 5.400%, due
2008
- --- 300,0000 --- 300,0000 St. Paul, MN,
Independent School Aa/AA --- 297,531 --- 297,531
District #625, Series
C, 5.550%, due 2012
- --- 400,000 --- 400,000 St. Paul, MN,
Independent School Aa/AA --- 409,564 --- 409,564
District #625, Series
1994 C, 6.050%, due
2012
- --- 150,000 --- 150,000 St. Paul, MN,
Independent School Aa/AA --- 159,455 --- 159,455
District #625, School
Building Bonds,
Series 1990 D,
7.250%, due 2009
- --- 300,000 --- 300,000 St. Paul, MN,
Independent School Aa/AA --- 282,756 --- 282,756
District #625,
5.250%, due 2015
- --- 300,000 --- 300,000 St. Paul, MN,
Independent School Aa1/AA --- 289,140 --- 289,140
District, 5.200%, due
2011
9,000,000 --- --- 9,000,000 St. Paul, MN, Housing
& Redevelopment
Authority , Hospital
Revenue Refunding BBB-/Baa 8,952,300 --- --- 8,952,300
Bonds ( Series A),
6.625% (Healtheast,
MN)/(Original Issue
Yield: 6.687%),
11/1/2017
- --- 300,000 --- 300,000 Southern, MN,
Municipal Power Aaa/AAA --- 321,102 --- 321,102
Agency, Power Supply,
8.125%, due 2018
10,000,000 --- --- 10,000,000 Southern Minnesota
Municipal Power ---
Agency, Supply System AAA/Aaa 8,751,300 --- 8,751,300
Revenue Bonds (Series
A), 4.75% (MBIA
Insurance Corporation
INS)/(Original Issue
Yield: 5.52%),
1/1/2016
- --- 325,000 --- 325,000 Stearns County, MN,
GO Refunded Bonds, A/NR --- 337,028 --- 337,028
Series B, 6.000%, due
2007
- --- 300,000 --- 300,000 Stearns County, MN,
Independent #2753, Aa1/NR --- 279,954 --- 279,954
5.000%, due 2012
- --- 200,000 --- 200,000 Wayzata, MN, Tax Aa/NR --- 216,496 --- 216,496
Increment Bonds,
7.000%, due 2010
- --- 250,000 --- 250,000 Wayzata, MN,
Independent School Aa1/NR --- 254,750 --- 254,750
District #284, GO
Bonds, Series 1994 B,
5.800%, due 2009
- --- 300,000 --- 300,000 Western Minnesota
Municipal Power A1/A --- 308,934 --- 308,934
Agency, Power Supply
Revenue Refunded
Bonds, 6.875%, due
2007
- --- 250,000 --- 250,000 Western Minnesota --- ---
Municipal Power, A1/A 249,990 249,990
Series A, 6.125%, due
2016
- --- 200,000 --- 200,000 Western Minnesota --- ---
Municipal Power
Agency, Transmission Aaa/AAA 215,808 215,808
Project Revenue
Refunded Bonds,
Series 1991, 6.750%,
due 2016
- --- 250,000 --- 250,000 Whitewater Bear Lake Aa1/NR --- 254,928 --- 254,928
School, 6.000%, due
2012
- --- 100,000 --- 100,000 Worthington, MN, GO
Water Revenue Bonds, A/NR --- 106,597 --- 106,597
Series 1990 A,
7.000%, due 2010
- --- 350,000 --- 350,000 Wright County, MN, GO
Jail Refunded Bonds, A/NR --- 363,132 --- 363,132
Series 1992 B,
6.000%, due 2007
Total 23,130,557 18,201, 7,009,332 48,341,666
777
MONTANA--0.2%
1,130,000 --- --- 1,130,000 Montana State Board
of Housing, SFM NR/Aa 1,174,918 --- --- 1,174,918
Revenue Bonds (Series
B-2), 7.50% (FHA
GTD), 4/1/2023
NEVADA-0.8%
- --- --- 350,000 350,000 Clark County, NV,
Improvement
District, 5.850% due Aaa/AAA --- --- 347,277 347,277
2015
- --- --- 1,000,000 1,000,000 Clark County, NV,
School District,
General Obligation
Bonds, 5.300%,
due 2004 Aaa/AAA --- --- 1,012,490 1,012,490
- --- --- 1,000,000 1,000,000 Humbolt County,
NV,Pollution Control
Revenue Bonds, Idaho
Power Company,
8.300%, due 2014 NR/A+ --- --- 1,159,620 1,159,620
- --- --- 800,000 800,000 Lyon County, NV,
School District,
6.750%. due 2011 Aaa/AAA --- --- 891,328 891,328
- --- --- 585,000 585,000 Washoe County, NV,
General
Obligation Bonds, Aaa/AAA --- --- 606,446 606,446
6.000%, due 2009
Total --- --- 4,017,161 4,017,161
NEW HAMPSHIRE--4.8%
9,000,000 --- --- --- New Hampshire Higher
Educational & Health
Facilities Authority,
Hospital Revenue A-/NR 8,456,670 --- --- 8,456,670
Bonds, 6.00% (Nashua
Memorial Hospital,
NH)/(Original Issue
Yield: 6.40%),
10/1/2023
- --- --- 1,080,000 1,080,000 New Hampshire
Municipal Bond Bank,
Series 91 J. Non-
State Guaranteed,
6.900%, due 2012 NR/A+ --- --- 1,187,460 1,187,460
1,265,000 --- --- 1,265,000 New Hampshire State
HFA, SFM Revenue A+/Aa 1,328,958 --- --- 1,328,958
Bonds (Series B),
7.75%, 7/1/2023
6,520,000 --- --- 6,520,000 New Hampshire State
HFA, SFM Revenue A+/Aa 6,759,871 --- --- 6,759,871
Bonds (Series D),
7.25%, 7/1/2015
2,865,000 --- --- 2,865,000 New Hampshire State
IDA, PCR Bonds ( BBB-/Baa3 3,040,710 --- --- 3,040,710
Series A), 8.00%
(United Illuminating
Co.), 12/1/2014
1,500,000 --- --- 1,500,000 New Hampshire State
IDA, PCR Bonds BBB-/Baa3 1,617,465 --- --- 1,617,465
(Series B), 10.75%
(United Illuminating
Co.), 10/1/2012
- --- --- 900,000 900,000 State of New
Hampshire Turnpike
System
Revenue Bonds, 8.375% Aaa/A --- --- 961,497 961,497
due 2017
Total 21,203,674 --- 2,148,957 23,352,631
NEW YORK--2.6%
- --- --- 1,000,000 1,000,000 New York Metro
Transit Authority,
5.100%,
due 2004 Aaa/AAA --- --- 1,008,280 1,008,280
2,500,000 --- --- 2,500,000 New York State Energy
Research &
Development
Authority, Electric AA-/Aa2 2,688,875 --- --- 2,688,875
Facilities Revenue
Bonds (Series A),
7.50% (Consolidated
Edison Co.)/(Original
Issue Yield: 7.65%),
1/1/2026
5,000,000 --- --- 5,000,000 New York State
Environmental
Facilities Corp.,
Solid Waste Disposal BBB/Baa3 4,763,750 --- --- 4,763,750
Revenue Bonds, 6.10%
(Occidental Petroleum
Corp.)/(Original
Issue Yield: 6.214%),
11/1/2030
- --- --- 2,900,000 2,900,000 New York State
Environment Pollution
Control Revenue Aa/A --- --- 3,221,755 3,221,755
Bonds, 7.250%, due
2010
- --- --- 1,000,000 1,000,000 New York State Local
Government
Assistance Corp., A/A --- --- 994,240 994,240
6.000%, due 2016
Total 7,452,625 --- 5,224,275 12,676,900
NORTH CAROLINA--1.7%
1,500,000 --- --- 1,500,000 Haywood County, NC,
Industrial Facilties
& Pollution Control
Financing Authority, BBB/Baa1 1,372,530 --- --- 1,372,530
(Series A) Revenue
Bonds, 5.75%
(Champion
International
Corp.)/(Original
Issue Yield: 5.975%),
12/1/2025
6,000,000 --- --- 6,000,000 Martin County, NC,
IFA, (Series 1995) A/A2 5,886,000 --- --- 5,886,000
Solid Waste Disposal
Revenue Bonds, 6.00%
(Weyerhaeuser Co.),
11/1/2025
- --- --- 1,000,000 1,000,000 Wake County, NC, Ind.
Facilities Pollution
Control, Carolina
Power and Light,
6.900%, due 2009 A2/A1 --- --- 1,070,020 1,070,020
Total 7,258,530 --- 1,070,020 8,328,550
NORTH DAKOTA--0.9%
- --- --- 1,560,000 1,560,000 North Dakota Housing,
Single Family
Mortgage, 1992 Series
A, 6.750%,
due 2012 Aa/A+ --- --- 1,620,949 1,620,949
2,635,000 --- --- 2,635,000 North Dakota State
HFA, SFM Revenue A+/Aa 2,726,171 --- --- 2,726,171
Bonds (Series C),
7.30%, 7/1/2024
Total 2,726,171 --- 1,620,949 4,347,120
OHIO--0.4%
500,000 --- --- --- Ohio State Water
Development
Authority, PCR Bonds BBB-/Baa3 530,100 --- --- 530,100
(Series A), 8.10%
(Ohio Edison
Co.)/(Original Issue
Yield: 8.142%),
10/1/2023
1,250,000 --- --- 1,250,000 Ohio State Water
Development
Authority, PCR Bonds BB/Ba2 --- ---
(Series A-1), 9.75% 1,293,500 1,293,500
(Cleveland Electric
Illuminating Co.),
11/1/2022
Total 1,823,600 --- --- 1,823,600
OKLAHOMA--2.6%
4,585,000 --- --- 4,585,000 Jackson County, OK,
Hospital Authority,
Hospital Revenue BBB-/NR 4,415,768 --- --- 4,415,768
Refunding Bonds,
7.30% (Jackson County
Memorial Hospital,
OK)/(Original Issue
Yield: 7.40%),
8/1/2015
1,250,000 --- --- 1,250,000 Tulsa, OK, Municipal
Airport, Revenue BB+/Baa2 1,316,875 --- --- 1,316,875
Bonds, 7.375%
(American Airlines),
12/1/2020
6,200,000 --- --- 6,200,000 Tulsa, OK, Municipal
Airport, Revenue
Bonds, 7.60% BB+/Baa2 6,611,990 --- --- 6,611,990
(American
Airlines)/(Original
Issue Yield: 7.931%),
12/1/2030
Total 12,344,633 --- --- 12,344,633
OREGON-0.1%
- --- --- 500,000 500,000 Portland Oregon Sewer
System, 6.050%,
due 2009 A1/A+ --- --- 522,655 522,655
PENNSYLVANIA--11.3%
3,000,000 --- --- 3,000,000 Allegheny County, PA,
HDA, Health &
Education Revenue BBB/NR 3,061,110 --- --- 3,061,110
Bonds, 7.00%
(Rehabilitation
Institute of
Pittsburgh)/(Original
Issue Yield: 7.049%),
6/1/2010
2,500,000 --- --- 2,500,000 Allegheny County, PA,
HDA, Health &
Education Revenue BBB/NR 2,533,875 --- --- 2,533,875
Bonds, 7.00%
(Rehabilitation
Institute of
Pittsburgh)/(Original
Issue Yield: 7.132%),
6/1/2022
5,370,000 --- --- 5,370,000 Allegheny County, PA,
Higher Education, NR 5,516,655 --- --- 5,516,655
Building Authority
Revenue Bonds, 7.375%
(La Roche College),
7/15/2012
1,690,000 --- --- 1,690,000 Allegheny County, PA,
IDA, Revenue Bonds, NR 1,780,162 --- --- 1,780,162
8.75% (United Parcel
Service), 2/15/2009
665,000 --- --- 665,000 Allegheny County, PA,
Residential Finance
Agency, Mortgage NR/Aaa 697,332 --- --- 697,332
Revenue Bonds (Series
G), 9.50% (GNMA COL),
12/1/2018
3,000,000 --- --- 3,000,000 Delaware County
Authority, PA,
College Revenue NR 3,377,070 --- --- 3,377,070
Bonds, 7.25% (Eastern
College)/(United
States Treasury
PRF)/(Original Issue
Yield: 7.875%),
3/1/2012
2,055,000 --- --- 2,055,000 Erie County, PA,
Hospital Authority, NR 2,112,951 --- --- 2,112,951
Revenue Bonds, 7.50%
(Erie Infants & Youth
Home , Inc.),
10/1/2011
- --- --- 400,000 400,000 Erie County, PA,
Industrial
Development
Auth., Pollution
Control Revenue
Refunded Bonds,
Series 1991, 7.150%, A3/A- --- --- 423,124 423,124
due 2013
1,730,000 --- --- 1,730,000 Northeastern, PA,
Hospital & Education
Authority, College BBB/NR 1,598,364 --- --- 1,598,364
Revenue Refunding
Bonds (Series B),
6.00% (Kings College,
PA)/(Original Issue
Yield: 6.174%),
7/15/2018
10,000,000 --- --- 10,000,000 Pennsylvania EDFA,
Wastewater Treatment
Revenue Bonds (Series BBB-/Baa1 11,009,800 --- --- 11,009,800
A), 7.60% (Sun Co.,
Inc.)/(Original Issue
Yield: 7.653%),
12/1/2024
6,000,000 --- --- 6,000,000 Pennsylvania Housing
Finance Authority, AA/AA 6,242,460 --- --- 6,242,460
SFM Revenue Bonds
(Series 34-B), 7.00%
(FHA and FHA GTDs),
4/1/2024
2,660,000 --- --- 2,660,000 Pennsylvania Housing
Finance Authority, AA/Aa 2,797,495 --- --- 2,797,495
SFM Revenue Bonds
(Series28), 7.65%
(FHA GTD), 10/1/2023
1,740,000 --- --- 1,740,000 Pennsylvania State
Higher Education
Facilities Authority, NR 1,801,022 --- --- 1,801,022
College & University
Revenue Bonds, 6.75%
(Thiel College ),
9/1/2017
3,250,000 --- --- 3,250,000 Pennsylvania State
Higher Education
Facilities Authority,
College & University BBB+/NR 3,202,030 --- --- 3,202,030
Revenue Refunding
Bonds (Series A),
6.10% (Allegheny
College, Meadville,
PA)/(Original Issue
Yield: 6.23%),
11/1/2008
1,200,000 --- --- 1,200,000 Pennsylvania State
Higher Education
Facilities Authority, NR 1,205,952 --- --- 1,205,952
Revenue Bonds (Series
1996), 7.15% (Thiel
College ), 5/15/2015
3,875,000 --- --- 3,875,000 Pennsylvania State
Higher Education
Facilities Authority,
Revenue Bonds (Series AAA/NR 4,335,854 --- --- 4,335,854
A), 7.375% (Medical
College of
Pennsylvania)/(United
States Treasury
PRF)/(Original Issue
Yield: 7.45%),
3/1/2021
1,750,000 --- --- 1,750,000 Pennsylvania State
Higher Education
Facilities Authority,
Revenue Bonds (Series BBB/Baa1 1,940,803 --- --- 1,940,803
A), 8.375% (Medical
College of
Pennsylvania)/(United
States Treasury
PRF)/(Original Issue
Yield: 8.448%),
3/1/2011
Total 53,212,935 --- 423,124 54,636,059
RHODE ISLAND-0.4%
- --- --- 1,675,000 1,675,000 Rhode Island
Depositors, Economic
Protection Corp. Aaa/AAA --- --- 1,851,076 1,851,076
Bonds, 6.625%, due
2019
SOUTH CAROLINA--0.2%
810,000 --- --- 810,000 South Carolina State
Housing Finance &
Development AA/Aa 840,586 --- --- 840,586
Authority,
Homeownership
Mortgage Revenue
Bonds (Series A),
7.40% (FHA GTD),
7/1/2023
SOUTH DAKOTA-0.5%
- --- --- 1,400,000 1,400,000 South Dakota Housing
Development, Multi-
Famkily Housing
Revenue Bonds,
6.700%,
due 2020 A1/A+ --- --- 1,424,430 1,424,430
- --- --- 950,000 950,000 South Dakota State
Building Authority
Co-op, Series A, A1/A+ --- --- 977,332 977,332
7.500%, due 2016
Total --- --- 2,401,762 2,401,762
TENNESSEE--3.5%
2,475,000 --- --- 2,475,000 Memphis-Shelby
County, TN, Airport BBB/Baa2 2,572,020 --- --- 2,572,020
Refunding Revenue
Bonds, 6.75% (Federal
Express Corp.),
9/1/2012
3,100,000 --- --- 3,100,000 Springfield, TN,
Health & Educational
Facilities Board,
Hospital Revenue NR 3,266,036 --- --- 3,266,036
Bonds, 8.25% (Jesse
Holman Jones Hospital
Corp, TN)/(Original
Issue Yield: 8.50%),
4/1/2012
7,800,000 --- --- 7,800,000 Springfield, TN,
Health & Educational
Facilities Board,
Hospital Revenue NR 8,212,464 --- --- 8,212,464
Bonds, 8.50% (Jesse
Holman Jones Hospital
Corp, TN)/(Original
Issue Yield: 8.875%),
4/1/2024
2,825,000 --- --- 2,825,000 Tennessee Housing
Development Agency,
Homeownership NR/Aa 2,936,362 --- --- 2,936,362
Program, Issue V
Revenue Bonds, 7.65%,
7/1/2022
Total 16,986,882 --- --- 16,986,882
TEXAS--12.6%
2,500,000 --- --- 2,500,000 Brazos River
Authority, TX, PCR BBB/Baa2 2,743,225 --- --- 2,743,225
Revenue Bonds (Series
A), 7.875% (Texas
Utilities Electric
Co.), 3/1/2021
1,800,000 --- --- 1,800,000 Brazos River
Authority, TX, PCR BBB/Baa2 1,966,104 --- --- 1,966,104
Revenue Bonds (Series
A), 8.125% (Texas
Utilities Electric
Co.), 2/1/2020
- --- --- 1,000,000 1,000,000 Brownsville, TX,
Utility System
Revenue,
6.875%, due 2020 Aaa/AAA 1,098,600 1,098,600
7,320,000 --- --- 7,320,000 Dallas-Fort Worth,
TX, International
Airport Facilities, BB/Ba3 7,564,781 --- --- 7,564,781
Revenue Bonds, 7.125%
(Delta Air Lines,
Inc.)/(Original Issue
Yield: 7.55%),
11/1/2026
3,000,000 --- --- 3,000,000 Dallas-Fort Worth,
TX, International
Airport Facilities, BB+/Baa2 3,165,180 --- --- 3,165,180
Revenue Bonds, 7.25%
(American
Airlines)/(Original
Issue Yield: 7.428%),
11/1/2030
2,370,000 --- --- 2,370,000 Dallas-Fort Worth,
TX, International
Airport Facilities, BB+/Baa2 2,507,105 --- --- 2,507,105
Revenue Bonds, 7.50%
(American
Airlines)/(Original
Issue Yield: 8.20%),
11/1/2025
2,500,000 --- --- 2,500,000 Dallas-Fort Worth,
TX, International
Airport Facilities, BB/Ba3 2,673,000 --- --- 2,673,000
Revenue Bonds, 7.625%
(Delta Air Lines,
Inc.)/(Original Issue
Yield: 7.65%),
11/1/2021
1,000,000 --- --- 1,000,000 Guadalupe-Blanco
River Authority TX,
Industrial NR 1,051,630 --- --- 1,051,630
Development Corp PCR
Bonds, 8.60% (A.P.
Green Industries),
4/1/2009
2,500,000 --- --- 2,500,000 Guadalupe-Blanco
River Authority TX,
Industrial NR 2,683,200 --- --- 2,683,200
Development Corp.,
PCR Bonds, 8.60%
(A.P. Green
Industries), 4/1/2009
5,000,000 --- --- 5,000,000 Gulf Coast, TX, Waste
Disposal Authority,
Revenue Bonds (Series BBB/Baa1 5,132,350 --- --- 5,132,350
A), 6.875% (Champion
International
Corp.)/(Original
Issue Yield: 7.15%),
12/1/2028
20,000,000 --- --- 20,000,000 Houston, TX, Water &
Sewer System, Junior
Lien Refunding AAA/Aaa 18,365,800 --- --- 18,365,800
Revenue Bonds (Series
A), 5.25% (FGIC
INS)/(Original Issue
Yield: 5.60%),
12/1/2025
- --- --- 1,545,000 1,545,000 Houston, TX, Water &
Sewer Revenue
Refunded
Bonds, 6.400%, due A/A --- --- 1,625,618 1,625,618
2009
7,630,000 --- --- 7,630,000 Richardson, TX,
Hospital Authority,
Hospital Refunding & BBB-/Baa 7,613,824 --- --- 7,613,824
Improvement Bonds,
6.75% (Richardson
Medical Center,
TX)/(Original Issue
Yield: 6.82%),
12/1/2023
- --- --- 1,000,000 1,000,000 Texas Water
Development Board
Revenue, State
Revolving Fund Bonds, Aa1/AAA --- --- 1,071,120 1,071,120
6.400%, due 2007
1,700,000 --- --- 1,700,000 Tyler, TX, Health
Facilities
Development Corp., NR/Baa 1,696,124 --- --- 1,696,124
Revenue Bonds, 6.75%
(East Texas Medical
Center)/(Original
Issue Yield: 7.00%),
11/1/2025
Total 57,162,323 --- 3,795,338 60,957,661
UTAH--5.0%
- --- --- 1,000,000 1,000,000 Intermountain Power
Agency Utah Power Aa/AA- --- --- 985,100 985,100
Supply, 6.000%, due
2016
20,000,000 --- --- 20,000,000 Intermountain Power
Agency, UT, Refunding
Revenue Bonds (Series AA-/Aa 17,240,200 --- --- 17,240,200
A), 5.00% (Original
Issue Yield: 5.687%),
7/1/2023
980,000 --- --- 980,000 Utah State HFA, SFM
Revenue Bonds (Series AA/NR 1,013,722 --- --- 1,013,722
B-3), 7.10%, 7/1/2024
1,445,000 --- --- 1,445,000 Utah State HFA, SFM
Revenue Bonds (Series AA/NR 1,498,942 --- --- 1,498,942
E-2), 7.15% (FHA
GTD)/(Original Issue
Yield: 7.169%),
7/1/2024
1,860,000 --- --- 1,860,000 Utah State HFA,
Single Family AA/NR 1,950,619 --- --- 1,950,619
Mortgage Revenue
Bonds, 7.55% (FHA
GTD), 7/1/2023
455,000 --- --- 455,000 Utah State HFA,
Single Family AA/NR 477,532 --- --- 477,532
Mortgage Revenue
Bonds, 7.75% (FHA
GTD), 1/1/2023
- --- --- 1,000,000 1,000,000 Utah State Municipal
Finance Co-op,
Government Revenue
Bonds, 6.400%,
due 2009 A/A --- --- 1,018,130 1,018,130
Total 22,181,015 --- 2,003,230 24,184,245
VIRGINIA-0.1%
- --- --- 135,000 135,000 Virginia Housing
Authority,
Residential
Mortgage Revenue
Bonds, Series B,
7.550%,
due 2012 Aa/AAA --- --- 136,096 136,096
- --- --- 500,000 500,000 Virginia Housing
Development
Authority,
Series C 1992, Aa1/AA+ --- --- 522,140 522,140
6.500%, due 2007
Total --- --- 658,236 658,236
WASHINGTON--4.9%
4,250,000 --- --- 4,250,000 Pierce County, WA,
Economic Development
Corp., Solid Waste BBB/Baa2 3,803,070 --- --- 3,803,070
Revenue Bond, 5.80%
(Occidental Petroleum
Corp.)/(Original
Issue Yield: 5.90%),
9/1/2029
4,075,000 --- --- 4,075,000 Pilchuck Development
Public Corp., WA,
Special Facilities BBB+/Baa1 3,837,957 --- --- 3,837,957
Airport Revenue Bonds
( Series 1993) ,
Tramco, Inc. Project,
6.00% (Goodrich
(B.F.) Co.), 8/1/2023
4,300,000 --- --- 4,300,000 Port of Camas-
Washougal, WA, PCR
Refunding Bonds BBB+/NR 4,323,306 --- --- 4,323,306
(Series 1993), 6.70%
(James River Project,
WA)/(Original Issue
Yield: 6.75%),
4/1/2023
- --- --- 1,000,000 1,000,000 Skagit County, WA,
Cons. School
District, 6.700%, due Aaa/AAA --- --- 1,118,290 1,118,290
2007
- --- --- 1,500,000 1,500,000 Washington State
Municipal Finance Co-
op,
Government Revenue Aa/AA --- --- 1,465,380 1,465,380
Bonds, 5.600%,
due 2007
10,000,000 --- --- 10,000,000 Washington State, UT,
GO (Series A), 5.375% AAA/Aa 9,313,100 --- --- 9,313,100
(Original Issue
Yield: 6.00%),
7/1/2021
Total 21,277,433 --- 2,583,670 23,861,103
WEST VIRGINIA--0.5%
5,000,000 --- --- 5,000,000 Marion County, WV,
County Commission,
Solid Waste Facility NR 2,429,200 --- --- 2,429,200
Revenue Bonds (Series
1993), 7.75%
(American Power Paper
Recycling), 12/1/2011
WISCONSIN--0.4%
- --- --- 985,000 985,000 Wisconsin Housing and
Economic
Development
Authority, Series A,
7.100%, due 2023 Aa/AA --- --- 1,030,526 1,030,526
- --- --- 550,000 550,000 Wisconsin Housing and
Economic
Development
Authority, 6.000%,
due 2015 Aa/AA --- --- 542,647 542,647
565,000 --- --- 565,000 Wisconsin Housing &
Economic Development
Authority, A+/Aa 579,681 --- 579,681
Homeownership Revenue
Bonds (Series E),
8.00% (FHA
GTD)/(Original Issue
Yield: 8.044%),
3/1/2021
Total 579,681 --- 1,573,173 2,152,854
WYOMING-0.5%
- --- --- 2,150,000 2,150,000 Sweetwater County,
WY, PCR for Idaho
Power, 7.625%, due A3/A --- --- 2,222,218 2,222,218
2013
TOTAL MUNICIPAL $376,220,136 18,201,777 77,342,923 471,764,836
BONDS (IDENTIFIED
COST $471,438,409)
SHORT-TERM SECURITIES ( 0.6%)
- --- --- 1,150,000 1,150,000 American Express
Credit Corp., 5.280%,
due 09/03/1996 --- --- 1,150,000 1,150,000
- --- --- 950,000 950,000 Ford Motor Credit
Corp., 5.230%,
due 09/04/1996 --- --- 949,862 949,862
- --- 820,000 --- 820,000 Ford Motor Credit --- 820,000 --- 820,000
Corp., 5.160%, due
09/03/1996
TOTAL SHORT-TERM --- 820,000 2,099,862 2,919,862
SECURITIES, AT
AMORTIZED COST
TOTAL INVESTMENTS $376,220,136 $19,021 $79,442,785 $474,684,698
(IDENTIFIED COST ,777
$474,358,271)(A)
</TABLE>
* Please refer to the Appendix of the Federated Municipal Opportunities Fund,
Inc. Prospectus as of September 1, 1996 for an explanation of the credit
ratings.
(a) The cost of investments for federal tax purposes amounts to $474,358,271.
The net unrealized appreciation of investments on a federal tax basis amounts to
$326,427 which is comprised of $16,464,732 appreciation and $16,138,305
depreciation at August 31, 1996.
Note: The categories of investments are shown as a percentage of net assets ($
482,861,043) at August 31, 1996.
The following acronym(s) are used throughout this portfolio:
COL --Collateralized
EDFA --Economic Development Financing Authority
FGIC --Financial Guaranty Insurance Company
FHA --Federal Housing Administration
GNMA --Government National Mortgage Association
GO --General Obligation
GTD --Guaranteed
HDA --Hospital Development Authority
HFA --Housing Finance Authority
IDA --Industrial Development Authority
IDB --Industrial Development Bond
IFA --Industrial Finance Authority
INS --Insured
LT --Limited Tax
MBIA --Municipal Bond Investors Assurance
PCA --Pollution Control Authority
PCR --Pollution Control Revenue
PRF --Prerefunded
SFM --Single Family Mortgage
UT --Unlimited Tax
VRDNs --Variable Rate Demand Notes
(See Notes to Pro Forma Financial Statements)
<TABLE>
<CAPTION>
Federated Municipal Opportunities Fund, Inc. (formerly, Fortress Municipal Income Fund, Inc.)
State Bond Minnesota Tax-Free Income Fund
State Bond Tax Exempt Fund
Pro Forma Combining Statement of Assets and Liabilities
August 31, 1996 (unaudited)
Federated State Bond State
Municipal Minnesota Bond
Opportunities Tax-Free Tax Exempt Pro Forma Pro Forma
Fund, Inc. Income Fund Adjustment Combined
Fund
Assets:
<S> <C> <C> <C> <C> <C>
Investments in $376,220,136 $ 19,021,777 $ 79,442,785 $ --- $ 474,684,698
securities, at value
Cash 32,391 24,959 15,433 --- 72,783
Income receivable 6,897,754 261,034 1,299,429 --- 8,458,217
Receivable due from --- 6,206 1,827 8,033
affiliates
Receivable for shares 273,742 --- --- --- 273,742
sold
Total assets 383,424,023 19,313,976 80,759,474 --- 483,497,473
Liabilities:
Income distributions 942 87,407 69,481 --- 157,830
payable
Payable for shares 270,076 --- --- --- 270,076
redeemed
Accrued expenses 123,827 17,663 67,036 --- 208,526
Total liabilities 394,845 105,070 136,517 --- 636,432
Total Net Assets $383,029,178 $ 19,208,906 $ 80,622,957 $ --- $ 482,861,041
Net Assets Consists of:
Paid in capital $396,775,582 $ 18,694,128 $ 77,104,625 $ --- $ 492,574,335
Net unrealized (3,518,145) 468,398 3,360,390 --- 310,643
appreciation
(depreciation) of
investments
Accumulated net realized (11,001,821) 46,380 157,942 --- (10,797,499)
gain (loss) on
investments
Undistributed net 773,562 --- --- --- 773,562
investment income
Total Net Assets $383,029,178 $ 19,208,906 $ 80,622,957 $ --- $ 482,861,041
Class A Shares $296 $ 19,208,906 $ 80,622,957 $ --- $ 99,832,159
Class B Shares $296 $ --- $ --- $ --- $ 296
Class C Shares $296 $ --- $ --- $ --- $ 296
Class F Shares $383,028,290 $ --- $ --- $ --- $ 383,028,290
Shares Outstanding:
Class A Shares 28.662 1,820,401 7,474,279 371,820.649 (a) 9,666,529.311
Class B Shares 28.662 --- --- --- 28.662
Class C Shares 28.662 --- --- --- 28.662
Class F Shares 37,075,241.000 --- --- --- 37,075,241.000
Total Shares Outstanding 37,075,326.986 1,820,401 7,474,279 371,820.649 46,741,827.635
Net Asset Value, Offering
Price, and Redemption
Proceeds Per Share:
Class A Shares:
Net Asset Value Per Share $10.33 $ 10.55 $ 10.79 $ --- $ 10.33
Offering Price Per Share $10.82* 11.05** $ 11.30** $ --- $ 10.82*
$
Redemption Proceeds Per $10.33 $ 10.55 $ 10.79 $ --- $ 10.33
Share
Class B Shares:
Net Asset Value Per Share $10.33 $ --- $ --- $ --- $ 10.33
Offering Price Per Share $10.33 $ --- $ --- $ --- $ 10.33
Redemption Proceeds Per $9.76 $ --- $ --- $ --- $ 9.76
Share ***
Class C Shares:
Net Asset Value Per Share $10.33 $ --- $ --- $ --- $ 10.33
Offering Price Per Share $10.33 $ --- $ --- $ --- $ 10.33
Redemption Proceeds Per $10.23 $ --- $ --- $ --- $ 10.23
Share ***
Class F Shares:
Net Asset Value Per Share $10.33 $ --- $ --- $ --- $ 10.33
Offering Price Per Share $10.43 $ --- $ --- $ --- $ 10.43
*
Redemption Proceeds Per $10.23 $ --- $ --- $ --- $ 10.23
Share ***
Investments, at $379,738,281 $ 18,548,504 $ 76,071,486 $ --- $ 474,358,271
identified cost
</TABLE>
(a) Adjustment to reflect share balance as a result of the
combination, based on the exchange ratios of 1.02172889271 for State Bond
Minnesota Tax-Free Income Fund and 1.04445450212 for State Bond Tax Exempt
Fund.
* See ``What Shares Cost'' in the Federated Municipal
Opportunities Fund, Inc. Prospectus as of September 1, 1996.
** See ``How Are The Fund's Sales Charges Determined'' in the
State Bond Minnesota Tax-Free Income Fund and State Bond Tax-Exempt Prospectuses
each dated as of November 1, 1995.
*** See ``Contingent Deferred Sales Charge'' in the Federated Municipal
Opportunities Fund, Inc. Prospectus as of September 1, 1996.
(See Notes to Pro Forma Financial Statements)
Federated Municipal
Opportunities Fund, Inc. (formerly,
Fortress Municipal Income Fund, Inc.)
State Bond Minnesota Tax-Free Income
Fund
State Bond Tax Exempt Fund
Pro Forma Combining Statement of
Operations
Year Ended August 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Federated State State
Bond
Municipal Minnesota Bond
Opportunities Tax-Free Tax Exempt Pro Forma Pro Forma
Fund, Inc. Income Fund(a) Adjustment Combined
Fund(a)
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C>
Interest 28,818,178 $1,135,500 $ 5,041,950 $--- $ 34,995,628
EXPENSES:
Investment advisory fee 2,475,132 113,090 407,880 81,718 (a) 3,077,820
Administrative personnel 311,976 --- --- 75,829 (b) 387,805
and services fee
Transfer agent and 235,048 7,625 31,461 (3,616) (c) 270,518
dividend disbursing agent
fees and expenses
Accounting and custodian 175,732 18,684 30,415 (20,978) (d) 203,853
fees
Professional Fees 21,106 16,868 20,498 (37,366) (e) 21,106
Distribution services --- 47,121 204,057 (251,178) (f) ---
fee- Class A Shares
Shareholder services fee- 1,031,305 --- --- 251,178 (f) 1,282,483
Class F Shares
Printing and postage 75,552 8,069 18,150 (16,771) (g) 85,000
Other expenses 155,218 9,666 23,952 (24,815) (h) 164,021
Total expenses 4,481,069 221,123 736,413 54,001 5,492,606
Waivers-
Waiver of investment --- (32,639) --- 32,639 (i) ---
advisory fee
Waiver of shareholder (41,252) --- --- --- (41,252)
services fee- Class F
Shares
Total waivers (41,252) (32,639) --- 32,639 (41,252)
Net expenses 4,439,817 188,484 736,413 86,640 5,451,354
Net investment 24,378,361 947,016 4,305,537 (86,640) 29,544,274
income
REALIZED AND UNREALIZED
GAIN/(LOSS) ON
INVESTMENTS:
Net realized gain on (116,813) 53,432 40,206 --- (23,175)
investments
Net change in unrealized (13,721,871) (128,527) 64,146 --- (13,786,252)
appreciation
(depreciation) of
investments
Net realized and (13,838,684) (75,095) 104,352 --- (13,809,427)
unrealized gain (loss) on
investments
Change in net assets 10,539,677 $871,921 $ 4,409,889 $(86,640) $ 15,734,847
resulting from operations
</TABLE>
* Represents the fiscal year ended June 30, 1996.
(See Notes to the Pro Forma Combining Statement of Operations)
(See Notes to Pro Forma Financial Statements)
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
(FORMERLY, FORTRESS MUNICIPAL INCOME FUND, INC.)
d
STATE BOND MINNESOTA TAX-FREE INCOME FUND
STATE BOND TAX EXEMPT FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS NOTES
YEAR ENDED AUGUST 31, 1996 (UNAUDITED)
(a) Federated Advisers (the `Adviser'') receives for its services an
annual investment advisory fee equal to 0.60% of the Federated Municipal
Opportunities Fund Inc.'s (the ``Federated Fund'') average daily net
assets. The adviser may voluntarily choose to waive a portion of its fee.
ARM Capital Advisors, Inc. charged 0.60% and 0.50%, respectively, of State
Bond Minnesota Tax-Free Income Fund's and State Bond Tax-Exempt Fund's
average daily net assets for its advisory fee.
(b) Federated Administrative Services (`FAS'') provides the Federated Fund
with certain administrative personnel and services. The FAS fee is based on
the level of average aggregate net assets of the fund for the period.
(c) Federated Services Company serves as transfer and dividend disbursing
agent for the Federated Fund. The fee is based on the size, type, and
number of accounts and transactions made by shareholders.
(d) Fees reflect custodian costs for the Federated Fund paid to State
Street Bank and Trust Company. The custodian fee is based on a percentage
of assets, plus out-of-pocket expenses. Federated Services Company
maintains the Federated Fund's accounting records. The fee is based on the
level of the Federated Fund's average net assets for the period, plus out-
of-pocket expenses.
(e) Adjustment to reflect the audit fee and legal fee reductions due to
the combining of two portfolios into one.
(f) Under the terms of a Shareholder Services Agreement with Federated
Shareholder Services (`FSS'') the Federated Fund will pay FSS up to 0.25%
of average daily net assets of the Federated Fund for the period. The fee
paid to FSS is used to finance certain services for shareholders and to
maintain shareholder accounts. FSS may voluntarily choose to waive a
portion of its fee. FSS can modify or terminate this voluntary waiver at
any time at its sole discretion. SBM Financial Services, Inc. received
0.25% of the average daily net assets of State Bond Minnesota Tax-Free
Income Fund and State Bond Tax-Exempt Fund, respectively, under the terms
of a distribution plan pursuant to Rule 12b-1 of the Investment Company Act
of 1940, as amended, to finance activities intended to result in the sale
of State Bond Minnesota Tax-Free Income Fund's and State Bond Tax-Exempt
Fund's shares and to provide certain services for shareholders and to
maintain shareholder accounts. Class A Shares of the Federated Fund do not
have a distribution plan.
(g) Adjustment to reflect printing and postage expenses are adjusted to
reflect estimated savings to be realized by combining three portfolios into
a single portfolio.
(h) Adjustment reflects the elimination of the Directors/Trustees fees for
State Bond Minnesota Tax-Free Income Fund and State Bond Tax-Exempt Fund,
the state registration costs for the Federated Fund only, and the decrease
in insurance fees due to the reduction in coverage requirement of one
portfolio only.
(i) The expenses accrued on the Federated Fund are
sufficient to cover all expenses. Therefore, no reimbursement is necessary.
Federated Municipal Opportunities Fund, Inc. (formerly, Fortress
Municipal Income Fund, Inc.)
State Bond Minnesota Tax-Free Income Fund
State Bond Tax Exempt Fund
Notes to Pro Forma Financial Statements (unaudited)
1. Basis of Combination
The accompanying unaudited Pro Forma Combining Portfolio of Investments,
Statement of Assets and Liabilities reflect the accounts of Federated Municipal
Opportunities Fund, Inc. , State Bond Minnesota Tax-Free Income Fund, and State
Bond Tax Exempt Fund, collectively (`the Funds''), for the year ended August
31, 1996. These statements have been derived from the books and records utilized
in calculating daily net asset values at August 31, 1996. The accompanying
unaudited Pro Forma Combining Statement of Operations reflects the accounts of
the Funds, for the years ended August 31, 1996, June 30, 1996, and June 30,
1996, respectively, the most recent fiscal year ends of the Funds.
The Pro Forma Combining Portfolio of Investments, Statement of Assets
and Liabilities, and Statement of Operations (`Pro Forma Financial
Statements') should be read in conjunction with the historical financial
statements of the Funds which have been incorporated by reference in the
Statement of Additional Information. The Funds follow generally accepted
accounting principles applicable to management investment companies which are
disclosed in the historical financial statements of each fund.
The Pro Forma Financial Statements give effect to the proposed transfer
of the assets of State Bond Minnesota Tax-Free Income Fund, and State Bond Tax
Exempt Fund in exchange for Class A Shares of Federated Municipal Opportunities
Fund, Inc. Under generally accepted accounting principles, Federated Municipal
Opportunities Fund, Inc. will be the surviving entity for accounting purposes
with its historical cost of investment securities and results of operations
being carried forward.
The Pro Forma Financial Statements have been adjusted to reflect the
anticipated advisory and administration fee arrangements for the surviving
entity. Certain other operating costs have also been adjusted to reflect
anticipated expenses of the combined entity. Other costs which may change as a
result of the reorganization are currently undeterminable.
For the fiscal years ended August 31, 1996, June 30, 1996, and June 30,
1996, respectively, the Funds paid investment advisory fees computed at the
annual rate of each fund's average net assets as follows:
FUND PERCENT OF EACH FUND'S
AVERAGE NET ASSETS
Federated Municipal Opportunities Fund, Inc 0.60%
State Bond Minnesota Tax-Free Income Fund 0.43%*
State Bond Tax Exempt Fund 0.50%
The advisor may voluntarily choose to waive a portion of their fees and
reimburse certain operating expenses of the Funds.
*The advisory fee of the State Bond Fund is net of
expense reimbursements. Without such reimbursements,
the advisory fee would have been 0.60%.
2. Shares of Beneficial Interest
The Pro Forma net asset value per share assumes the issuance of
9,666,500.649 shares of the Federated Municipal Opportunities Fund, Inc.'s
Class A Shares in exchange for 1,820,401 and 7,474,279 shares from State Bond
Minnesota Tax-Free Income Fund, and State Bond Tax Exempt Fund, respectively,
which would have been issued at August 31, 1996, in connection with the proposed
reorganization.
STATE BOND MINNESOTA TAX-FREE INCOME FUND,
a Portfolio of
STATE BOND TAX-FREE INCOME FUNDS, INC.,
SPECIAL MEETING OF SHAREHOLDERS
December , 1996
==
STATE BOND MINNESOTA TAX-FREE INCOME FUND,
a Portfolio of
STATE BOND TAX-FREE INCOME FUNDS, INC.
CUSIP NO. 85657M108
The undersigned shareholder(s) of State Bond Minnesota Tax-Free Income
Fund, a portfolio of State Bond Tax-Free Income Funds, Inc. (the `State
Bond Fund'), hereby appoint(s) Kevin L. Howard, Keith O. Martens and
Dale C. Bauman, or any of them true and lawful proxies, with power of
substitution of each, to vote all shares of the State Bond Fund which the
undersigned is entitled to vote, at the Special Meeting of Shareholders to
be held on December , 1996, at 100 North Minnesota Street, New Ulm,
--
Minnesota 56073-0069, at 4:30 p.m. (local time) and at any adjournment
thereof.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The proxies
named will vote the shares represented by this proxy in accordance with the
choice made on this ballot. IF NO CHOICE IS INDICATED, THIS PROXY WILL BE
VOTED AFFIRMATIVELY ON THAT MATTER.
PROPOSAL
TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
THE STATE BOND FUND AND FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND
RETAIN THE TOP PORTION.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS X
KEEP THIS PORTION FOR YOUR RECORDS.
DETACH AND RETURN THIS PORTION ONLY.
STATE BOND MINNESOTA TAX-FREE INCOME FUND,
a portfolio of State Bond
Tax-Free Income Funds, Inc.
RECORD DATE SHARES:
-----------------
VOTE ON THE PROPOSAL
FOR AGAINST ABSTAIN
Please sign EXACTLY as your name(s)
appear(s) above. When signing as
attorney, executor, administrator,
guardian, trustee, custodian, etc.,
please give your full title as
such. If a corporation or
partnership, please sign the full
name by an authorized officer or
partner. If stock is owned
jointly, all owners should sign.
- -----------------------------------
Signature(s) of Shareholder(s)
Date:
---------------------------------
PART C - OTHER INFORMATION
Item 15. Indemnification
Indemnification is provided to directors and officers of the
Registrant pursuant to the Registrant's Articles of Incorporation, except
where such indemnification is not permitted by law. However, the Articles
of Incorporation do not protect the directors or officers from liability
based on willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of their office.
Directors and officers of the Registrant are insured against
certain liabilities, including liabilities arising under the Securities Act
of 1933 (the "Act").
Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers, and controlling persons of the
Registrant by the Registrant pursuant to the Articles of Incorporation or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by directors,
officers, or controlling persons of the Registrant in connection with the
successful defense of any act, suit, or proceeding) is asserted by such
directors, officers, or controlling persons in connection with the shares
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940 for directors,
officers, or controlling persons of the Registrant by the Registrant
pursuant to the Articles of Incorporation or otherwise, the Registrant is
aware of the position of the Securities and Exchange Commission as set
forth in Investment Company Act Release No. IC-11330. Therefore, the
Registrant undertakes that in addition to complying with the applicable
provisions of the Articles of Incorporation or otherwise, in the absence of
a final decision on the merits by a court or other body before which the
proceeding was brought, that an indemnification payment will not be made
unless in the absence of such a decision, a reasonable determination based
upon factual review has been made (i) by a majority vote of a quorum of
non-party directors who are not interested persons of the Registrant or
(ii) by independent legal counsel in a written opinion that the indemnitee
was not liable for an act of willful misfeasance, bad faith, gross
negligence, or reckless disregard of duties. The Registrant further
undertakes that advancement of expenses incurred in the defense of a
proceeding (upon undertaking for repayment unless it is ultimately
determined that indemnification is appropriate) against an officer,
director, or controlling person of the Registrant will not be made absent
the fulfillment of at least one of the following conditions: (i) the
indemnitee provides security for his undertaking; (ii) the Registrant is
insured against losses arising by reason of any lawful advances; or (iii) a
majority of a quorum of disinterested non-party directors or independent
legal counsel in a written opinion makes a factual determination that there
is reason to believe the indemnitee will be entitled to indemnification.
Item 16. Exhibits
1.1 Conformed Copy of Articles of Incorporation of the Registrant, as
restated*
2.1 Bylaws of the Registrant, as amended*
3 Not Applicable
4 Agreement and Plan of Reorganization dated September 23, 1996, between
State Bond Tax-Free Income Funds, Inc., a Maryland corporation, on behalf
of its portfolio, State Bond Minnesota Tax-Free Income Fund, and Federated
Municipal Opportunities Fund, Inc., a Maryland corporation*
5 Copy of Specimen Certificate for Shares of Capital Stock of the
Registrant(1)
6.1 Conformed Copy of Investment Advisory Contract of the Registrant(2)
7.1 Conformed Copy of Distributor's Contract of the Registrant(3)
7.2 Form of Exhibits A through D to the Distributor's Contract of the
Registrant(3)
7.3 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 Nos. 33-38550 and 811-6269)
8 Not Applicable
9 Conformed Copy of Custodian Agreement of the Registrant(4)
10.1 Conformed Copy of Distribution Plan of the Registrant, as amended(5)
10.2 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)
10.3 The responses described in Item 16 (7.3) are hereby incorporated by
reference
11 Opinion of S. Elliott Cohan, Deputy General Counsel, Federated
Investors regarding legality of shares being issued*
12 Opinion of Dickstein Shapiro Morin & Oshinsky LLP regarding tax
consequences of Reorganization(6)
13.1 Conformed Copy of Agreement for Fund Accounting Services,
Administrative Services, Shareholder Recordkeeping Services and Custody
Services Procurement(3)
13.2 Conformed Copy of Shareholder Services Agreement(7)
13.3 The responses described in Item 16 (7.3) and Item 16 (10.2) are hereby
incorporated by reference
14.1 Conformed Copy of Consent of Independent Auditors of Federated
Municipal Opportunities Fund, Inc., Deloitte & Touche LLP*
14.2 Conformed Copy of Consent of Independent Auditors of State Bond
Minnesota Tax-Free Income Fund, Ernst & Young LLP*
15 Not Applicable
16 Conformed Copy of Power of Attorney*
17.1 Declaration under Rule 24f-2*
17.2 Form of Proxy of State Bond Minnesota Tax-Free Income Fund*
* Filed electronically.
(1) Response is incorporated by reference to Registrant's Initial
Registration Amendment No. 1 filed on January 21, 1987. (File
Nos. 33-11410 and 811-4533)
(2) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 4 on Form N-1A filed August 25, 1989. (File Nos. 33-11410
and 811-4533)
(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed on May 3, 1996. (File Nos. 33-11410
and 811-4533)
(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed October 25, 1995. (File Nos. 33-11410
and 811-4533)
(5) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed October 25, 1989. (File Nos. 33-11410
and 811-4533)
(6) To be filed by Post-Effective Amendment pursuant to `Dear Registrant''
letter dated February 15, 1996.
(7) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed October 26, 1994. (File Nos. 33-11410
and 811-4533)
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus
which is a part of this Registration Statement by any person or party who
is deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act of 1933, the reoffering prospectus will contain the
information called for by the applicable registration form for reofferings
by persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that
is filed under paragraph (1) above will be filed as a part of an amendment
to the Registration Statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act
of 1933, each post-effective amendment shall be deemed to be a new
Registration Statement for the securities offered therein, and the offering
of the securities at that time shall be deemed to be the initial bona fide
offering of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Federated Municipal Opportunities Fund, Inc., has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Pittsburgh, Commonwealth of
Pennsylvania on October 10, 1996.
FEDERATED MUNICIPAL OPPORTUNITIES
FUND, INC.
(Registrant)
By: *
Richard B. Fisher
President
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities indicated on October 10, 1996:
* Chairman and Director
John F. Donahue
(Chief Executive Officer)
* President and Director
Richard B. Fisher
* Executive Vice President and Treasurer
John W. McGonigle
(Principal Financial and
Accounting Officer)
* Director
Thomas G. Bigley
* Director
John T. Conroy, Jr.
* Director
William J. Copeland
* Director
James E. Dowd
* Director
Lawrence D. Ellis, M.D.
* Director
Edward L. Flaherty, Jr.
* Director
Peter E. Madden
* Director
Gregor F. Meyer
* Director
John E. Murray, Jr., J.D., S.J.D.
* Director
Wesley W. Posvar
* Director
Marjorie P. Smuts
1* By: /s/ S. Elliott Cohan
Attorney in Fact
EXHIBIT 11
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
October 11, 1996
The Directors of Federated Municipal
Opportunities Fund , Inc.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
Federated Municipal Opportunities Fund, Inc. (the `Fund''), a Maryland
Corporation, proposes to issue shares of capital stock (such shares of
capital stock being herein referred to as `Shares'') in connection with
the acquisition of the assets of State Bond Minnesota Tax-Free Income Fund,
a portfolio of State Bond Tax-Free Income Funds, Inc., a Maryland
corporation, pursuant to the Agreement and Plan of Reorganization dated as
of September 23, 1996 (`Agreement''), filed as an exhibit to the
registration statement of the Fund filed on Form N-14 (Securities Act of
1933 No. to be assigned) under the Securities Act of 1933 as amended (`N-
14 Registration').
As counsel I have participated in the organization of the Fund, its
registration under the Investment Company Act of 1940, the registration of
its securities on Form N-1A under the Securities Act of 1933 and its N-14
Registration. I have examined and am familiar with the written Articles of
Incorporation dated December 2, 1986 (`Articles of Incorporation''), the
Bylaws of the Fund, the Agreement and such other documents and records
The Directors of Federated Municipal
Opportunities Fund, Inc.
October 11, 1996
Page 2
deemed relevant. I have also reviewed questions of law and consulted with
counsel thereon as deemed necessary or appropriate for the purposes of this
opinion.
Based upon the foregoing, it is my opinion that:
1. The Fund is duly organized and validly existing pursuant to the
Articles of Incorporation.
2. The Shares which are currently being registered by the N-14
Registration may be legally and validly issued in accordance with the
provisions of the Agreement and the Articles of Incorporation upon receipt
of consideration sufficient to comply with the provisions of Article Fifth,
Section (a), of the Articles of Incorporation and subject to compliance
with the Investment Company Act of 1940, as amended, and applicable state
laws regulating the sale of securities. Such Shares, when so issued, will
be fully paid and non-assessable.
I consent to your filing this opinion as an exhibit to the N-14
Registration referred to above and to any application or registration
statement filed under the securities laws of any of the states of the
United States.
Very truly yours,
The Directors of Federated Municipal
Opportunities Fund, Inc.
October 11, 1996
Page 2
FEDERATED MUNICIPAL OPPORTUNITIES
FUND, INC.
By:/s/ S. Elliott Cohan
S. Elliott Cohan
Title: Assistant Secretary
Exhibit 14.1
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Shareholders
of FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.:
We consent to the incorporation by reference in this Registration Statement
on Form N-14 of Federated Municipal Opportunities Fund, Inc.(formerly,
Fortress Municipal Income Fund, Inc.) of our report dated October 13, 1995,
appearing in the Annual Report of Fortress Municipal Income Fund, Inc. for
the year ended August 31, 1995, and incorporated in the Prospectus and
Statement of Additional Information dated September 1, 1996, and to the
reference to us within this registration statement.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
October 10, 1996
Exhibit 14.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions `Financial
Highlights''and ``Independent Auditors'' and the use of our report dated
August 9, 1996, on the financial statements of State Bond Minnesota Tax-
Free Income Fund (the Fund) in the Registration Statement (Form N-1A) of
the Fund which is incorporated by reference in, and reference to our firm
in Exhibit A of, the Registration Statement (Form N-14) of Federated
Municipal Opportunities Fund, Inc. filed with the Securities and Exchange
Commission.
/s/ERNST & YOUNG LLP
ERNST & YOUNG LLP
Kansas City, Missouri
October 10, 1996
EXHIBIT 16
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of FEDERATED MUNICIPAL
OPPORTUNITIES FUND, INC. and the Deputy General Counsel of Federated
Investors, 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 September 30, 1996
John F. Donahue (Chief Executive Officer)
/s/Richard B. Fisher President September 30, 1996
Richard B. Fisher and Director
/s/John W. McGonigle Treasurer and September 30, 1996
John W. McGonigle Executive Vice
President
(Principal Financial and
Accounting Officer)
/s/Thomas G. Bigley Director September 30, 1996
Thomas G. Bigley
/s/John T. Conroy, Jr. Director September 30, 1996
John T. Conroy, Jr.
/s/William J. Copeland Director September 30, 1996
/s/James E. Dowd Director September 30, 1996
James E. Dowd
SIGNATURES TITLE DATE
/s/Lawrence D. Ellis, M.D. Director September 30, 1996
Lawrence D. Ellis, M.D.
/s/Edward L. Flaherty, Jr. Director September 30, 1996
Edward L. Flaherty, Jr.
/s/Peter E. Madden Director September 30, 1996
Peter E. Madden
/s/Gregor F. Meyer Director September 30, 1996
Gregor F. Meyer
/s/John E. Murray, Jr. Director September 30, 1996
John E. Murray, Jr.
/s/Wesley W. Posvar Director September 30, 1996
Wesley W. Posvar
/s/Marjorie P. Smuts Director September 30, 1996
Marjorie P. Smuts
Sworn to and subscribed before me this 30th day of September, 1996
/s/Jody L.Petras
Notarial Seal
Jody L. Petras, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Sept. 27, 1999
Member, Pennsylvania Association of Notaries
EXHIBIT 17.1
Rule 24f-2 Notice
FORTRESS MUNICIPAL INCOME FUND, INC.
(Fund Name)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
1933 Act No. 33-11410
(i) fiscal period for which notice is filed August 31, 1995
(ii) The number or amount of securities of the
same class or series, if any, which had been
registered under the Securities Act
of 1933, other than pursuant to Rule 24f-2
but which remained unsold at September 1,
1994, the beginning of the Registrant's
fiscal period -0-
(iii) The number or amount of securities, if
any, registered during the fiscal period
of this notice other than pursuant to
Rule 24f-2 -0- -0-
(iv) The number or amount of securities
sold during the fiscal period of this
notice 3,617,186
(v) The number or amount or securities sold
during the fiscal period of this notice
in reliance upon registration pursuant
to Rule 24f-2 (see attached Computation
of Fee) 3,617,186
WITNESS the due execution hereof this 16th day of October, 1995.
By: /s/Charles H. Field
Charles H. Field
Assistant Secretary
COMPUTATION OF FEE
1. Actual aggregate sale price of Registrant's
securities sold pursuant to Rule 24f-2 during
the fiscal period for which the 24f-2 notice
is filed (see Section v) $37,440,198
2. Reduced by the difference between:
(a) actual aggregate redemption price
of such securities redeemed by the
issuer during the fiscal period for
which the 24f-2 notice is filed $99,595,322
(b) actual aggregate redemption price
of such redeemed securities
previously applied by the issuer
pursuant to Section 24(e)(2)(a) for
the fiscal period for which the
24f-2 notice is filed -0- $99,595,322
Total amount upon which the fee calculation specified
in Section 6(b) of the Securities Act of 1933 is based $(62,155,124)
FEE SUBMITTED (1/20 of 1% of Total amount) $ -0-
CONVERSION OF NET REDEMPTIONS OF
RULE 24f-2 NOTICE TO FILING
UNDER RULE 24e-2
When a negative amount appears on the line captioned `Total amount upon
which the fee calculated specified in Section 6(b) of the Securities Act of
1933 is based', the following calculation should be made to determined the
share information needed to file under Rule 24e-2:
Total redemptions (per annual report) 9,728,597
Less: Line (v) - Rule 24f-2 Notice 3,617,186
Shares available to register under
Rule 24f-2 6,111,411(a)
Fund's Current Net Asset Value $ 10.83(b)
Multiply: Shares available to register
under Rule 24e-2 by the fund's current
net asset value (a x b) to obtain Proposed
Maximum Aggregate Offering Price $66,186,581
FEDERATED ADMINISTRATIVE
SERVICES
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
412-288-1900
October 16, 1995
Fortress Municipal Income Fund, Inc.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
You have requested my opinion for use in conjunction with a Rule 24f-2
Notice for Fortress Municipal Income Fund, Inc. (`Corporation'') to be filed in
respect of shares of the Corporation (`Shares'') sold for the fiscal year ended
August 30, 1995, pursuant to the Corporation's registration statement filed
with the Securities and Exchange Commission (the `SEC'') under the Securities
Act of 1933 (File No. 33-11410) (`Registration Statement'').
In its Registration Statement, the Corporation elected to register an
indefinite number of shares pursuant to the provisions of Investment
Company Act Rule 24f-2.
As counsel, I have participated in the preparation and filing of the
Corporation's amended Registration Statement under the Securities Act of 1933.
Further, I have examined and am familiar with the provisions of the
Articles of Incorporation dated December 2, 1986, the Bylaws of the Trust
and such other documents and records deemed relevant. I have also reviewed
questions of law and consulted with counsel thereon as deemed necessary or
appropriate by me for the purposes of this opinion.
On the basis of the foregoing, it is my opinion the Shares sold for
the fiscal year ended August 30, 1995, registration of which the Rule 24f-2
Notice makes definite in number, were legally issued, fully paid and non-
assessable by the Corporation.
I hereby consent to the filing of this opinion as an exhibit to the
Rule 24f-2 Notice referred to above, the Registration Statement of the
Corporation and to any application or registration statement filed under the
securities laws of any of the States of the United States.
The foregoing opinion is limited to the Federal laws of the United
States and the laws of the State of Maryland, and I am
expressing no opinion as to the effect of the laws of any other
jurisdiction.
Very truly yours,
Charles H. Field
Fund Attorney
FORTRESS MUNICIPAL INCOME FUND, INC.
Federated Investors
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
October 16, 1995
EDGAR Operations Branch
Securities and Exchange Commission
Division of Investment Management
450 Fifth Street, Northwest
Washington, DC 20549
RE: Rule 15f-2 Notice for FORTRESS MUNICIPAL INCOME FUND, INC.
1933 Act File No. 33-11410
1940 Act File No. 811-4553
Dear Sir or Madam:
Pursuant to the provisions of Rule 24f-2 of the Investment Company Act
of 1940, I enclose the Rule 24f-2 for FORTRESS MUNICIPAL INCOME FUND, INC.
Since the aggregate redemption price of redeemed securities exceeded
the aggregate sales price of securities sold during the period for which
the Rule 24f-2 Notice is filed, an additional filing fee pursuant to
Rule 24f-2 (c) has not been filed.
As required by Rule 24f-2(b)(1)(v), a conformed opinion of counsel
has been electronically filed herewith which indicates whether the
securities, the registration of which this Notice makes definite in number,
were legally issued, fully paid and non-assessable.
Very truly yours,
/s/ Charles H. Field
Charles H. Field
Assistant Secretary
Enclosures
cc: Charles H. Morin, Esquire
Matthew G. Maloney, Esquire
Linda L. Banas
EXHIBIT 2.1
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
AMENDED and RESTATED BYLAWS
ARTICLE I
MEETING OF SHAREHOLDERS
Section 1. ANNUAL MEETINGS. The Corporation is not required to hold
an annual meeting of shareholders in any year in which the election of
directors is not required to be acted upon under the Investment Company Act
of 1940, as amended.
Section 2. SPECIAL MEETINGS. Special Meetings of Shareholders of the
Company or of a particular Series or Class may be called by the Chairman,
the President or by the Board of Directors; and shall be called by the
Secretary whenever ordered by the Chairman, the Board of Directors, or as
requested in writing by Shareholders entitled to cast at least 10% of the
shares entitled to be cast at the meeting. Such Shareholder request shall
state the purpose of such meeting and the matters proposed to be acted on
thereat, and no other business shall be transacted at any such special
meeting. Unless requested by Shareholders entitled to cast a majority of
all the votes entitled to be cast at the meeting, a special meeting need
not be called to consider any matter which is substantially the same as a
matter voted on at any annual or special meeting of the Shareholders held
during the preceding 12 months.
Section 3. PLACE OF MEETINGS. All meetings of the Shareholders of
the Corporation or a particular Series or Class, shall be held at the
office of the Corporation in Pittsburgh, Pennsylvania, or at such other
place within or without the State of Maryland as may be fixed by the Board
of Directors.
Section 4. NOTICE. Not less than ten nor more than ninety days
before the date of every Special Meeting of Shareholders the Secretary or
an Assistant Secretary shall give to each Shareholder of record of the
Corporation or of the relevant Series or Class written notice of such
meeting. Such notice shall be deemed to have been given when mailed to the
Shareholder at his address appearing on the books of the Corporation, which
shall be maintained separately for the shares of each Series or Class.
Notice of a Special Meeting shall state the purpose or purposes for which
it is called and no other business shall be transacted at such Special
Meeting.
Section 5. QUORUM. The presence in person or by proxy of holders of
(a) one-half of the shares of stock of the Corporation on all matters
requiring a Majority Shareholder Vote, as defined in the Investment Company
Act of 1940, or (b) one-third of shares of stock of the Corporation on all
other matters permitted by law, in each case, entitled to vote without
regard to class shall constitute a quorum at any meeting of the
shareholders, except with respect to any matter which by law requires the
separate approval of one or more series or class of stock, in which case
the presence in person or by proxy of the holders of one-half or one-third,
as set forth above, of the shares of stock of each series or class entitled
to vote separately on the matter shall constitute a quorum.
In the absence of a quorum at any meeting, a majority of those
Shareholders present in person or by proxy may adjourn the meeting from
time to time to a date not later than 120 days after the original record
date without further notice until a quorum, as above defined, shall be
present.
Section 6. ADJOURNED MEETINGS. A meeting of Shareholders convened on
the date for which it was called (including one adjourned to achieve a
quorum as above provided in Section 5 of this Article) may be adjourned
from time to time without further notice other than by announcement to be
given at the meeting to a date not more than 120 days after the record
date, and any business may be transacted at the meeting as originally
called.
Section 7. VOTING. At all meetings of Shareholders each Shareholder
shall be entitled to one vote or fraction thereof for each Share or
fraction thereof standing in his name on the books of the Corporation on
the date for the determination of Shareholders entitled to vote at such
meeting.
Section 8. PROXIES. Any Shareholder entitled to vote at any meeting
of Shareholders may vote either in person or by proxy, but no proxy which
is dated more than eleven months before the meeting named therein shall be
accepted. Every proxy shall be in writing and signed by the Shareholder or
his duly authorized attorney in fact and dated, but need not be sealed,
witnessed or acknowledged.
Section 9. ACTION BY UNANIMOUS WRITTEN CONSENT OF SHAREHOLDERS. Any
action required or permitted to be taken at any meeting of Shareholders may
be taken without a meeting, if a consent in writing, setting forth such
action, is signed by all the Shareholders entitled to vote on the subject
matter thereof, and any other Shareholders, entitled to notice of a meeting
of stockholders (but not to vote thereat), have waived in writing any
rights which they may have to dissent from such action, and such consent
and waiver are filed with the records of the Corporation.
ARTICLE II
BOARD OF DIRECTORS
Section 1. POWERS. The business and affairs of the Corporation shall
be managed under the direction of its Board of Directors. All powers of
the Corporation may be exercised by or under the authority of the Board of
Directors except as conferred on or reserved to the Shareholders by law, by
the Charter or by these Bylaws.
Section 2. NUMBER, QUALIFICATIONS, MANNER OF ELECTION AND TERM OF
OFFICE. The number of Directors of the Corporation can be changed by a
majority of the entire Board of Directors from time to time to not less
than three or the number of Shareholders, whichever is less, nor more than
twenty. Directors need not be Shareholders. The term of office of a
Director shall not be affected by any decrease in the number of Directors
made by the Board pursuant to the foregoing authorization. Each Director
shall hold office until his resignation or removal and until the election
and qualification of his successor.
Section 3. PLACE OF MEETING. The Board of Directors may hold its
meetings at such place or places within or without the State of Maryland as
the Board or as the person or persons requesting said meeting to be called
may from time to time determine.
Section 4. ANNUAL MEETINGS. The Board of Directors shall meet
annually for the election of Officers and any other business.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such intervals and on such dates as the Board
may from time to time designate, provided that any Director who is absent
when such designation is made shall be given notice of the designation.
Section 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held at such times and at such places as may be designated
at the call of such meeting. Special meetings shall be called by the
Secretary or any Assistant Secretary at the request of the Chairman, the
President, or any Director. If the Secretary or any Assistant Secretary
when so requested refuses or fails for more than twenty-four hours to call
such meeting, the Chairman, the President or such Director may in the name
of the Secretary call such meeting by giving due notice in the manner
required when notice is given by the Secretary.
Section 7. NOTICE. The Secretary or any Assistant Secretary shall
give, at least two days before the meeting, notice of each meeting of the
Board of Directors, whether Annual, Regular or Special, to each member of
the Board by mail, telegram, telephone or electronic facsimile to his last
known address. It shall not be necessary to state the purpose or business
to be transacted in the notice of any meeting unless otherwise required by
law. Personal attendance at any meeting by a Director other than to
protest the validity of said meeting shall constitute a waiver of the
foregoing requirement of notice. In addition, notice of a meeting need not
be given if a written waiver of notice executed by such Director before or
after the Meeting is filed with the records of the meeting.
Section 8. CONDUCT OF MEETINGS AND BUSINESS. The Board of Directors
may adopt such rules and regulations for the conduct of their meetings and
the management of the affairs of the Corporation as they may deem proper
and not inconsistent with applicable law, the Charter of the Corporation or
these Bylaws.
Section 9. QUORUM. One-third of the entire Board of Directors but
not less than two directors shall constitute a quorum at any meeting of the
Board of Directors unless there is only one director, in which case that
one shall constitute a quorum. The action of a majority of Directors
present at any meeting at which a quorum is present shall be the action of
the Board of Directors unless the concurrence of a greater proportion is
required for such action by applicable law or regulation, the Charter of
the Corporation, or these Bylaws. In the absence of a quorum at any
meeting a majority of Directors present may adjourn the meeting from day to
day or for such longer periods as they may designate until a quorum shall
be present. Notice of any adjourned meeting need not be given other than by
announcement at the meeting.
Section 10. RESIGNATIONS. Any Director of the Corporation may resign
at any time by written notice to the Chairman of the Board of Directors or
to the Secretary of the Corporation. The resignation of any Director shall
take effect at the time specified therein or, if no time is specified, when
received by the Corporation. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 11. REMOVAL. At any meeting of Shareholders duly called for
the purpose, any Director may be removed from office by the vote of a
majority of all of the Shares entitled to vote.
Section 12. VACANCIES. Except as otherwise provided by law, any
vacancy occurring in the Board of Directors for any cause other than by
reason of an increase in the number of Directors may be filled by a
majority of the remaining members of the Board of Directors although such
majority is less than a quorum and any vacancy occurring by reason of an
increase in the number of Directors may be filled by action of a majority
of the entire Board of Directors then in office.
Section 13. COMPENSATION OF DIRECTORS. The Directors may receive
compensation for their services as Directors as determined by the Board of
Directors and expenses of attendance at each Meeting. Nothing herein
contained shall be construed to preclude any Director from serving the
Corporation in any other capacity, as an Officer, Agent or otherwise, and
receiving compensation therefor.
Section 14. ACTION BY UNANIMOUS WRITTEN CONSENT OF DIRECTORS. Any
action required or permitted to be taken at any Annual, Regular or Special
Meeting of the Board of Directors may be taken without a meeting if a
written consent to such action is signed by all members of the Board and
such written consent is filed with the minutes of proceedings of the Board.
Section 15. TELEPHONE CONFERENCE. Members of the Board of Directors
or any committee thereof may participate in a meeting of the Board or such
committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can
hear each other at the same time and participation by such means shall
constitute presence in person at the meeting.
ARTICLE III
EXECUTIVE AND OTHER COMMITTEES
Section 1. APPOINTMENT AND TERM OF OFFICE OF EXECUTIVE COMMITTEE.
The Board of Directors may appoint an Executive Committee, which shall
consist of two (2) or more Directors.
Section 2. VACANCIES IN EXECUTIVE COMMITTEE. Vacancies occurring in
the Executive Committee from any cause may be filled by the Board of
Directors.
Section 3. EXECUTIVE COMMITTEE TO REPORT TO BOARD. All action by the
Executive Committee shall be reported to the Board of Directors at its
Meeting next succeeding such action.
Section 4. PROCEDURE OF EXECUTIVE COMMITTEE. The Executive Committee
shall fix its own rules of procedure not inconsistent with these Bylaws or
with any directions of the Board of Directors. It shall meet at such times
and places and upon such notice as shall be provided by such rules or by
resolution of the Board of Directors. The presence of a majority shall
constitute a quorum for the transaction of business, and in every case the
affirmative vote of a majority of the members of the Committee present
shall be necessary for the taking of any action.
Section 5. POWERS OF EXECUTIVE COMMITTEE. During the intervals
between the Meetings of the Board of Directors the Executive Committee,
except as limited by law or by specific directions of the Board of
Directors, shall possess and may exercise all the powers of the Board of
Directors in the management and direction of the business and conduct of
the affairs of the Corporation. Notwithstanding the foregoing, the
Executive Committee shall not have the power to elect or remove Trustees,
increase or decrease the number of Trustees, elect or remove any officer,
declare dividends, issue shares or recommend to shareholders any action
requiring shareholder approval.
Section 6. OTHER COMMITTEES. From time to time the Board of
Directors may appoint any other Committee or Committees which shall have
such powers as shall be specified in the resolution of appointment and may
be delegated by law.
Section 7. COMPENSATION. The members of any duly appointed Committee
shall receive such compensation as from time to time may be fixed by the
Board of Directors and shall be entitled to reimbursement of expenses
incurred in connection with service on any such Committee.
Section 8. ACTION BY UNANIMOUS WRITTEN CONSENT OF EXECUTIVE COMMITTEE
OR OTHER COMMITTEES. Any action required or permitted to be taken at any
meeting of the Executive Committee or any other duly appointed Committee
may be taken without a meeting if written consent to such action is signed
by all Members of such Committee and such written consent is filed with the
minutes of the proceedings of such Committee.
Section 9. ADVISORY BOARD. The Directors may appoint an Advisory
Board to consist in the first instance of not less than three (3) members.
Members of such Advisory Board shall not be Directors or Officers and need
not be Shareholders. Members of the Advisory Board shall hold office for
such period as the Directors may by resolution provide. Any Member of such
Board may resign therefrom by written instrument signed by him which shall
take effect upon delivery to the Directors. The Advisory Board shall have
no legal powers and shall not perform functions of Directors in any manner,
said Board being intended to act merely in an advisory capacity. Such
Advisory Board shall meet at such times and upon such notice as the Board
of Directors may by resolution provide. The compensation of the Members of
the Advisory Board, if any, shall be determined by the Board of Directors.
ARTICLE IV
OFFICERS
Section 1. GENERAL PROVISIONS. The Officers of the Corporation shall
be a President, one or more Vice Presidents, a Treasurer and a Secretary.
The Board of Directors may elect or appoint a Chairman and other Officers
or agents, including one or more Assistant Vice Presidents, one or more
Assistant Secretaries and one or more Assistant Treasurers. The same
person may hold any two offices except those of President and Vice
President.
Section 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The Officers
shall be elected annually by the Board of Directors at its Annual Meeting.
Each Officer shall hold office for one year and until the election and
qualification of his successor. Any vacancy in any of the offices may be
filled for the unexpired portion of the term by the Board of Directors at
any Regular or Special Meeting of the Board. The Board of Directors may
elect or appoint additional Officers or agents at any Regular or Special
Meeting of the Board.
Section 3. REMOVAL. Any Officer elected by the Board of Directors
may be removed with or without cause at any time by the Board of Directors.
Any other employee of the Corporation may be removed or dismissed at any
time by the President.
Section 4. RESIGNATIONS. Any Officer may resign at any time by
giving written notice to the Board of Directors. Any such resignation
shall take effect at the time specified therein or, if no time is
specified, at the time of receipt. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any Office because of death,
resignation, removal, disqualification or any other cause shall be filled
for the unexpired portion of the term in the manner prescribed in these
Bylaws for regular election or appointment to such Office.
Section 6. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors, if there be a Chairman, shall preside at the meetings
of Shareholders and of the Board of Directors. He shall receive such
information and reports as he may request from the Officers of the
Corporation. He shall counsel and advise the President.
Section 7. PRESIDENT. The President of the Corporation shall be the
chief executive officer of the Corporation. Unless other provisions are
made therefor by the Board or Executive Committee, the President, without
limitation, shall employ and define the duties of all employees of the
Corporation, shall have the power to discharge any such employees, shall
exercise general supervision over the affairs of the Corporation and shall
have the power to sign, in the name of and on behalf of the Corporation,
powers of attorney, proxies, waivers of notice of meeting, consents and
other instruments relating to securities or other property owned by the
Corporation, and may, in the name of and on behalf of the Corporation, take
all such action as the President may deem advisable in entering into
agreements to purchase securities or other property in the ordinary course
of business, and to sign representation letters in the course of buying
securities or other property and shall perform such other duties as may be
assigned to him from time to time by the Board of Directors. In the
absence of the Chairman of the Board of Directors, the President or an
officer or Director appointed by the President, shall preside at all
meetings of Shareholders.
Section 8. VICE PRESIDENT. The Vice President (or if more than one,
the senior Vice President) in the absence of the President shall perform
all duties and may exercise any of the powers of the President subject to
the control of the Board. Each Vice President shall have the power,
without limitation, to sign, in the name of and on behalf of the
Corporation, powers of attorney, proxies, waivers of notice of meeting,
consents and other instruments relating to securities or other property
owned by the Corporation, and may, in the name of and on behalf of the
Corporation, take all such action as the Vice President may deem advisable
in entering into agreements to purchase securities or other property in the
ordinary course of business, and to sign representation letters in the
course of buying securities or other property shall perform such other
duties as may be assigned to him from time to time by the Board of
Directors, the Executive Committee, or the President.
Section 9. SECRETARY. The Secretary shall keep or cause to be kept
in books provided for the purpose the Minutes of the Meetings of the
Shareholders, and of the Board of Directors; shall see that all Notices are
duly given in accordance with the provisions of these Bylaws and as
required by Law; shall be custodian of the records of the Corporation;
shall keep directly or through a transfer agent a register of the post
office address of each Shareholder, and make all proper changes in such
register, retaining and filing his authority for such entries; shall see
that the books, reports, statements, certificates and all other documents
and records required by law are properly kept and filed; and in general
shall perform all duties incident to the Office of Secretary and such other
duties as may, from time to time, be assigned to him by the Board of
Directors, the Executive Committee, or the President.
Section 10. TREASURER. The Treasurer shall have supervision of the
custody of all funds and securities of the Corporation, subject to
applicable law and the determination from time to time of the Board of
Directors. He shall perform such other duties as may be from time to time
assigned to him by the Board of Directors, the Executive Committee, or the
President.
Section 11. ASSISTANT VICE PRESIDENT. The Assistant Vice President
or Vice Presidents of the Corporation shall have such authority and perform
such duties as may be assigned to them by the Board of Directors, the
Executive Committee, or the President of the Corporation.
Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
Assistant Secretary or Secretaries and the Assistant Treasurer or
Treasurers shall perform the duties of the Secretary and of the Treasurer
respectively, in the absence of those Officers and shall have such further
powers and perform such other duties as may be assigned to them
respectively by the Board of Directors or the Executive Committee or by the
President.
Section 13. SALARIES. The salaries of the Officers shall be fixed
from time to time by the Board of Directors. No Officer shall be prevented
from receiving such salary by reason of the fact that he is also a Director
of the Corporation.
ARTICLE V
SHARES AND THEIR TRANSFER
Section 1. CERTIFICATES. If issued, share certificates shall be
signed by the Chairman, the President, or any Vice President and
countersigned by the Treasurer or Secretary or any Assistant Treasurer or
Assistant Secretary. The signatures may be either manual or facsimile
signatures and the seal may be either facsimile or any other form of Seal.
Certificates for shares for which the Corporation has appointed a Transfer
Agent and Registrar shall not be valid unless countersigned by such
Transfer Agent and registered by such Registrar. In case any Officer who
has signed any certificate ceases to be an Officer of the Corporation
before the certificate is issued, the certificate may nevertheless be
issued by the Corporation with the same effect as if the Officer had not
ceased to be such Officer as of the date of its issuance. Share
certificates shall be in such form not inconsistent with law and these
Bylaws as may be determined by the Board of Directors.
Section 2. TRANSFER OF SHARES. Shares shall be transferable on the
books of the Corporation by the holder thereof in person or by duly
authorized attorney upon surrender of the certificate representing the
shares to be transferred properly endorsed.
Section 3. CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE. The
Board of Directors may fix in advance a date as the record date for the
purpose of determining Shareholders entitled to notice of or to vote at any
Meeting of Shareholders or Shareholders to receive payment of any dividend.
Such date shall in any case not be more than 90 days and in case of a
Meeting of Shareholders not less than l0 days prior to the date on which
the particular action requiring such determination of Shareholders is to be
taken. Only Shareholders of record on the record date shall be entitled to
notice of and to vote at such meeting or to receive such dividends or
rights, as the case may be.
Section 4. LOST, DESTROYED OR MUTILATED CERTIFICATES. In case any
Share certificate is lost, mutilated or destroyed the Board of Directors
may issue a new certificate in place thereof upon indemnity to the relevant
Series or Class against loss and upon such other terms and conditions as
the Board may deem advisable.
Section 5. TRANSFER AGENT AND REGISTRAR: REGULATIONS. The Board of
Directors shall have power and authority to make all such rules and
regulations as they may deem expedient concerning the issuance, transfer
and registration of Share certificates and may appoint a Transfer Agent
and/or Registrar of Share certificates of each Series or Class.
ARTICLE VI
AGREEMENTS, CHECKS, DRAFTS, ENDORSEMENTS, ETC.
Section 1. AGREEMENTS, ETC. The Board of Directors or the Executive
Committee may authorize any Officer or Officers, or Agent or Agents of the
Corporation to enter into any Agreement or execute and deliver any
instrument in the name of the Corporation and such authority may be general
or confined to specific instances; and, unless so authorized by the Board
of Directors or by the Executive Committee or by these Bylaws, no Officer,
Agent or Employee shall have any power or authority to bind the Corporation
by any Agreement or engagement or to pledge its credit or to render it
liable for any purpose or for any amount.
Section 2. CHECKS, DRAFTS, ETC. All checks, drafts, or orders for
the payment of money, notes and other evidences of indebtedness shall be
signed by such Officer or Officers, Employee or Employees, or Agent or
Agents as shall be from time to time designated by the Board of Directors
or the Executive Committee, or as may be specified in or pursuant to the
agreement between the Corporation on behalf of any Series or Class and the
Bank or Trust Company appointed as custodian.
Section 3. ENDORSEMENTS, ASSIGNMENTS AND TRANSFER OF SECURITIES. All
endorsements, assignments, stock powers or other instruments of transfer of
securities standing in the name of the Corporation or its nominee or
directions for the transfer of securities belonging to the Corporation
shall be made by such Officer or Officers, Employee or Employees, or Agent
or Agents as may be authorized by the Board of Directors or the Executive
Committee.
ARTICLE VII
BOOKS AND RECORDS
Section 1. LOCATION. The books and records of the Corporation,
including the Stock ledger or ledgers, may be kept in or outside the State
of Maryland at such office or agency of the Corporation as may be from time
to time determined by the Board of Directors.
ARTICLE VIII
FISCAL YEAR
Section 1. FISCAL YEAR. The Fiscal Year of the Corporation shall be
designated from time to time by the Board of Directors.
ARTICLE IX
INDEMNIFICATION
Section 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The
Corporation shall indemnify its directors to the fullest extent that
indemnification of directors is permitted by the Maryland General
Corporation Law. The Corporation shall indemnify its officers to the same
extent as its directors and to such further extent as is consistent with
law. The Corporation shall indemnify its directors and officers who while
serving as directors or officers also serve at the request of the
Corporation as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust, other
enterprise or employee benefit plan to the fullest extent consistent with
law. The indemnification and other rights provided by this Article shall
continue as to a person who has ceased to be a director of officer and
shall inure to the benefit of the heirs, executors and administrators of
such a person. This Article shall not protect any such person against any
liability to the Corporation or any Shareholder thereof to which such
person would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office ("disabling conduct").
Section 2. ADVANCES. Any current or former director or officer of
the Corporation seeking indemnification within the scope of this Article
shall be entitled to advances from the Corporation for payment of the
reasonable expenses incurred by him in connection with the matter as to
which he is seeking indemnification in the manner and to the fullest extent
permissible under the Maryland General Corporation Law. The person seeking
indemnification shall provide to the Corporation a written affirmation of
his good faith belief that the standard of conduct necessary for
indemnification by the Corporation has been met and a written undertaking
to repay any such advance if it should ultimately be determined that the
standard of conduct has not been met. In addition, at least one of the
following additional conditions shall be met: (a) the person seeking
indemnification shall provide security in form and amount acceptable to the
Corporation for his undertaking; (b) the Corporation is insured against
losses arising by reason of the advance, or (c) a majority of a quorum of
directors of the Corporation who are neither 'interested persons' as
defined in Section 2(a)(19) of the Investment Company Act of 1940, as
amended, nor parties to the proceeding ("disinterested non-party
directors"), or independent legal counsel, in a written opinion, shall have
determined, based on a review of facts readily available to the Corporation
at the time the advance is proposed to be made, that there is reason to
believe that the person seeking indemnification will ultimately be found to
be entitled to indemnification.
Section 3. PROCEDURE. At the request of any person claiming
indemnification under this Article, the Board of Directors shall determine,
or cause to be determined, in a manner consistent with the Maryland General
Corporation Law, whether the standards required by this Article have been
met. Indemnification shall be made only following: (a) a final decision
on the merits by a court or other body before whom the proceeding was
brought that the person to be indemnified was not liable by reason of
disabling conduct or (b) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the person to be
indemnified was not liable by reason of disabling conduct by (i) the vote
of a majority of a quorum of disinterested non-party directors or (ii) an
independent legal counsel in a written opinion.
Section 4. INDEMNIFICATION OF EMPLOYEES AND AGENTS. Employees and
agents who are not officers or directors of the Corporation may be
indemnified, and reasonable expenses may be advanced to such employees or
agents, as may be provided by action of the Board of Directors or by
contract, subject to any limitations imposed by applicable law.
Section 5. OTHER RIGHTS. The Board of Directors may make further
provisions consistent with law for indemnification and advancement of
expenses to directors, officers, employees and agents by resolution,
agreement or otherwise. The indemnification provided by this Article shall
not be deemed exclusive of any other right, with respect to indemnification
or otherwise, to which those seeking indemnification may be entitled under
any insurance or other agreement or resolution of Shareholders or
disinterested non-party directors or otherwise.
Section 6. AMENDMENTS. References in this Article are to the
Maryland General Corporation Law and to the Investment Company Act of 1940
as from time to time amended. No amendment of these Bylaws shall affect
any right of any person under this Article based on any event, omission or
proceeding prior to the amendment.
ARTICLE X
AMENDMENTS
Section 1. The Board of Directors shall have the power to alter,
amend or repeal any Bylaws of the corporation and to make Bylaws.
EXHIBIT 1.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC., a Maryland corporation
having post office addresses in the City of Pittsburgh, Pennsylvania and
the city of Baltimore, Maryland (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of
Maryland that:
WHEREAS, the Corporation desires to restate its charter as currently
in effect. The Charter as restated is as follows:
FIRST: The name of the corporation is Federated Municipal Opportunities
Fund, Inc. ("Corporation").
SECOND: The purpose for which the Corporation is formed is to act as an
open-end investment company registered as such with the
Securities and Exchange Commission pursuant to the Investment
Company Act of 1940 as amended (the "1940 Act") and to exercise
and generally to enjoy all of the powers, rights and privileges
granted to, or conferred upon, corporations by the Maryland
General Corporation Law now or hereafter in force.
THIRD: The post office address of the principal office of the
Corporation in the State of Maryland is: c/o The Corporation
Trust Incorporated, 32 South Street, Baltimore, Maryland 21202.
The resident agent of the Corporation in the State of Maryland is
The Corporation Trust Incorporated, which is a corporation
organized and existing under the laws of the State of Maryland,
the address of which is 32 South Street, Baltimore, Maryland
21202.
FOURTH: (a) The Corporation is authorized to issue shares of common
stock, par value $0.001 per share. The aggregate par value
of all shares which the Corporation is authorized to issue
is $2,000,000. Subject to the following paragraph, the
authorized shares are classified as $500,000,000 shares of
the Class A Shares, $500,000,000 shares of the Class B
Shares, $500,000,000 shares of the Class C Shares, and
$500,000,000 shares of the Class F Shares.
(b) The Board of Directors is authorized to classify or to
reclassify (i.e., into series and classes within series),
from time to time, any unissued shares of stock of the
Corporation, whether now or hereafter authorized, by
setting, changing or eliminating the preferences, conversion
or other rights, voting powers, restrictions, limitations as
to dividends, qualifications or terms and conditions of or
rights to require redemption of the stock.
Unless otherwise provided by the Board of Directors prior to
the issuance of the stock, the shares of any and all classes
of stock shall be subject to the following:
(i) The Board of Directors may redesignate a class of stock
whether or not shares of such class are issued and
outstanding, provided that such redesignation does not
affect the preferences, conversion or other rights,
voting powers, restrictions, limitations as to
dividends, qualifications or terms or conditions of
redemption of such class of stock.
(ii) The assets attributable to each class may be invested
in a common investment portfolio. The assets and
liabilities of each series and the income and expenses
of each class of the Corporation's stock shall be
determined separately and, accordingly, the net asset
value of shares of the Corporation's stock may vary
from class to class. The income or gain and the
expense or liabilities of the Corporation shall be
allocated to each class of stock as determined by or
under the direction of the Board of Directors.
(iii) Shares of each class of stock shall be entitled to
such dividends or distributions, in stock or in cash or
both, as may be declared from time to time by the Board
of Directors with respect to such class. Dividends or
distributions shall be paid on shares of a class of
stock only out of the assets belonging to that series,
reflecting expenses attributable to such class.
(iv) In the event of the liquidation or dissolution of the
Corporation, the stockholders of each class of the
Corporation's stock shall be entitled to receive, as a
class, out of the assets of the Corporation available
for distribution to stockholders, the assets
attributable to that class less the liabilities or
expenses allocated to that class. The assets so
distributable to the stockholders of a class shall be
distributed among such stockholders in proportion to
the number of shares of that class held by them
multiplied by the net asset value of a share of such
class on the date of determination and recorded on the
books of the Corporation. In the event that there are
any assets available for distribution that are not
attributable to any particular class of stock, such
assets shall be allocated to all classes in proportion
to the net asset value of the respective classes.
(v) All holders of shares of stock shall vote as a single
class except as may be otherwise required by law
pursuant to the 1940 Act or any applicable order, rule
or interpretation issued by the Securities and Exchange
Commission, or otherwise, and except with respect to
any matter which affects only one or more series or
classes of stock, in which case only the holders of
shares of the series or classes affected shall be
entitled to vote.
(c) The Corporation may issue fractional shares. Any fractional
share shall carry proportionately all the rights of a whole
share, excepting any right to receive a certificate
evidencing such fractional share, but including, without
limitation, the right to vote and the right to receive
dividends.
FIFTH: (a) The number of Directors of the Corporation shall be
thirteen.
The number may be changed by the Bylaws of the Corporation
or by the Board of Directors pursuant to the Bylaws.
(b) The name of the Directors who shall act until their
successors are elected and qualify, are:
John F. Donahue Richard B. Fisher
Thomas G. Bigley Edward L. Flaherty, Jr.
John T. Conroy, Jr. Peter E. Madden
William J. Copeland Gregor F. Meyer
James E. Dowd John E. Murray, Jr.
Lawrence D. Ellis, M.D. Wesley W. Posvar
Majorie P. Smuts
SIXTH: (a) To the extent the Corporation has funds or property legally
available therefor, each shareholder shall have the right at
such times as may be permitted by the Corporation, but no
less frequently than as required under the 1940 Act, to
require the Corporation to redeem all or any part of its
shares at a redemption price equal to the net asset value
per share next determined after the shares are tendered for
redemption, less any applicable redemption fee or deferred
and/or contingent deferred sales charge as determined by the
Board of Directors. The Board of Directors may adopt
requirements and procedures for redemption of shares.
Notwithstanding the foregoing, the Corporation may postpone
payment or deposit of the redemption price and may suspend
the right of the shareholders to require the Corporation to
redeem shares of any series or class pursuant to the
applicable rules and regulations, or any order, of the
Securities and Exchange Commission.
(b) The Corporation shall have the right, exercisable at the
discretion of the Board of Directors, to redeem any
shareholder's shares of any series or class for their then
current net asset value per share if at such time the
shareholder owns shares having an aggregate net asset value
of less than $500 or such lesser or greater amount for such
series or class set forth in the current registration
statement of the Corporation filed with the Securities and
Exchange Commission, or regardless of the amount, if a
shareholder fails to supply a valid taxpayer identification
number.
(c) Each share is subject to redemption by the Corporation at
the redemption price computed in the manner set forth in
subparagraph (a) of Article SIXTH of these Amended and
Restated Articles of Incorporation at any time if the Board
of Directors, in its sole discretion, determines that
failure to so redeem may result in a material adverse impact
on the Corporation or its shareholders.
SEVENTH: The following provisions are hereby adopted for the purpose of
defining, limiting, and regulating the powers of the Corporation
and of the Directors and shareholders:
(a) No shareholder shall have any pre-emptive or preferential
right of subscription to any shares of any series or class
whether now or hereafter authorized.
(b) Without the vote of the shares of any class of stock of the
Corporation then outstanding (unless stockholder approval is
otherwise required by applicable law) the Corporation may, if
approved by the Board of Directors:
(i) Sell and convey the assets belonging or attributed to a
class or series of stock to another corporation or
trust that is a management investment company (as
defined in the Investment Company Act of 1940, as
amended) and is organized under the laws of any state
of the United States for consideration which may
include the assumption of all outstanding obligations,
taxes and other liabilities, accrued or contingent,
belonging or attributed to such class and which may
include securities issued by such corporation or trust.
Following such sale and conveyance, and after making
provision for the payment of any liabilities belonging
to attributed to such class that are not assumed by the
purchaser of the assets belonging or attributed to such
class, the Corporation may, at its option, redeem all
outstanding shares of such class at the net asset value
thereof as determined by the Board of Directors in
accordance with the provisions of applicable law, less
such redemption fee or other charge, if any, as may be
fixed by resolution of the Board of Directors.
Notwithstanding any other provision of the Charter of
the Corporation to the contrary, the redemption price
may be paid in any combination of cash or other assets
belonging to attributed to the class, including but not
limited to, the distribution of the securities or other
consideration received by the Corporation for the
assets belonging or attributed to such class upon such
conditions as the Board of Directors deems, in its sole
discretion, to be appropriate consistent with
applicable law and the Charter of the Corporation.
(ii) Sell and convert the assets belonging or
attributed to a class or series of stock into money
and, after making provision for the payment of all
obligations, taxes and other liabilities, accrued or
contingent, belonging or attributed to such class, the
Corporation may, at its option (a) redeem all
outstanding shares of such class at the net asset value
thereof as determined by the Board of Directors in
accordance with the provisions of applicable law, less
such redemption fee or other charge, if any, as may be
fixed by resolution of the Board of Directors that the
Board of Directors deems, in its sole discretion, to be
appropriate consistent with applicable law and the
Charter of the Corporation, or (b) combine the assets
belonging or attributed to such class following such
sale and conversion with the assets belonging or
attributed or more other classes of stock; or
(iii) Combine the assets belonging or attributed to
a class or series of stock with the assets belonging or
attributed to any one or more classes or series of
stock of the Corporation if the Board of Directors
reasonably determines that such combination will not
have a material adverse effect on the stockholders of
any class or series of stock of the Corporation
participating in such combination. In connection with
any such combination of assets, the shares of any class
or series of stock of the Corporation then outstanding
may, if so determined by the Board of Directors, be
converted into shares of any other class or classes or
series of stock of the Corporation with respect to
which conversion is permitted by applicable law, or may
be redeemed, at the option of the Corporation, at the
net asset value thereof as determined by the Board of
Directors, less such redemption fee or charge, if any,
as may be fixed by resolution of the Board of
Directors, upon such conditions as the Board of
Directors deems, in its sole discretion, to be
appropriate consistent with applicable laws and the
Charter of the Corporation. Notwithstanding any other
provision of this Charter to the contrary, any
redemption price, or part thereof, may be paid in
shares of any other existing or future class or classes
of stock of the Corporation.
(iv) Any redemption made pursuant to this section shall
be made and be effective upon terms, at the time and in
accordance with procedures specified by the Board of
Directors. At such time as the redemption is
effective, all rights of the holders of such shares
shall cease and terminate, except the right to receive
the redemption payment, and the shares so redeemed
shall no longer be outstanding for any purpose.''
(c) In addition to its other powers explicitly or implicitly
granted under these Amended and Restated Articles of
Incorporation, by law or otherwise, the Board of Directors
of the Corporation (i) is expressly authorized to make,
alter, amend or repeal the Bylaws of the Corporation, (ii)
may from time to time determine whether, to what extent, at
what times and places, and under what conditions and
regulations the accounts and books of the Corporation, or
any of them, shall be open to the inspection of the
shareholders, and no shareholder shall have any right to
inspect any account, book or document of the Corporation
except as conferred by statute or as authorized by the Board
of Directors of the Corporation, (iii) is empowered to
authorize, without shareholder approval, the issuance and
sale from time to time of shares of stock of the Corporation
whether now or hereafter authorized on such terms and for
such consideration as the Board of Directors may determine,
and (iv) is authorized to adopt procedures for determination
of and, to the extent deemed desirable by the Board of
Directors, to maintain the constant the net asset value of
shares of the Corporation's stock.
(d) Notwithstanding any provision of the laws of the State of
Maryland requiring a greater proportion than a majority of
the votes of any or all series or classes of shares entitled
to be cast to take or authorize any action, the Corporation
shall, except to the extent otherwise required by the 1940
Act, take or authorize any such action that otherwise
requires a greater proportion of votes upon the concurrence
of a majority of the aggregate number of the votes entitled
to be cast thereon.
(e) The Corporation shall take or authorize any action permitted
by the laws of the State of Maryland to be taken upon the
concurrence of a majority of shareholders present and voting
thereon.
(f) The Corporation reserves the right from time to time to make
any amendment of its Charter now or hereafter authorized by
law, including any amendment which alters the contract
rights, as expressly set forth in its Charter, of any
outstanding shares or any series or class.
(g) The Board of Directors is expressly authorized to declare
and pay dividends and distributions in cash, securities or
other property from surplus or any funds legally available
therefor, at such intervals (which may be as frequently as
daily) or on such other periodic basis, as it shall
determine, for any series or class of stock of the
Corporation; to declare such dividends or distributions for
any series or class of stock of the Corporation by means of
a formula or other method of determination, at meetings held
less frequently than the frequency of the effectiveness of
such declarations; to establish payment dates for dividends
or any other distributions for any series or class of stock
of the Corporation on any basis, including dates occurring
less frequently than the effectiveness of declarations
thereof; and to provide for the payment of declared
dividends on a date earlier or later than the specified
payment date in the case of shareholders of such series or
class of stock redeeming their entire ownership of shares.
(h) Any determination made in good faith by or pursuant to the
direction of the Board of Directors as to the amount of the
assets, debts, obligations or liabilities of the
Corporation, as to the amount of any reserves or charges set
up and the propriety thereof, as to the time of or purpose
for creating such reserves or charges, as to the use,
alteration or cancellation of any reserves or charges
(whether or not any debt, obligation or liability for which
such reserves or charges shall have been created shall have
been paid or discharged or shall be then or thereafter
required to be paid or discharged), as to the value of or
the method of valuing any investment or other asset owned or
held by the Corporation, as to the number of shares of any
class of stock outstanding, as to the income of the
Corporation or as to any other matter relating to the
determination of net asset value, the declaration of
dividends or the issue, sale, redemption or other
acquisition of shares of the Corporation, shall be final and
conclusive and shall be binding upon the Corporation and all
holders of its shares, past, present and future, and shares
of the Corporation are issued and sold on the condition and
understanding that any and all such determinations shall be
binding as aforesaid.
EIGHTH: (a) To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General
Corporation Law, no director or officer of the Corporation
shall have any liability to the Corporation or its
shareholders for damages. This limitation on liability
applies to events occurring at the time a person serves as a
director or officer of the Corporation whether or not such
person is a director or officer at the time of any
proceeding in which liability is asserted.
(b) The Corporation shall indemnify and advance expenses to its
currently acting and its former directors to the fullest
extent that indemnification of directors is permitted by the
Maryland General Corporation Law. The Corporation shall
indemnify and advance expenses to its officers to the same
extent as its directors and may do so to such further extent
as is consistent with law. The Board of Directors may by
bylaw, resolution or agreement make further provision for
indemnification of directors, officers, employees and agents
to the fullest extent permitted by the Maryland General
Corporation Law.
(c) No provision of this Article shall be effective to protect
or purport to protect any director or officer of the
Corporation against any liability to the Corporation or its
security holders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in the conduct
of his office.
(d) References to the Maryland General Corporation Law in these
Amended and Restated Articles of Incorporation are to that
law as from time to time amended. No amendment to the
Charter of the Corporation shall affect any right of any
person under this Article based on any event, omission or
proceeding prior to the amendment.
The foregoing restatement to the charter of the Corporation was
approved by a majority of the entire Board of Directors as well as a
majority of stockholders of the Corporation; and the Corporation is
registered as an open-end company under the Investment Company Act of 1940,
as amended.
The provisions set forth in these Articles of Restatement are all the
provisions of the Charter currently in effect. The current address of the
principal office of the Corporation, the name and address of the
Corporation's resident agent and the number of Directors of the Corporation
and the names of those currently in office are stated above.
IN WITNESS WHEREOF, Federated Municipal Opportunities Fund, Inc.
has caused these presents to be signed in its name and on its behalf by its
Executive Vice President and witnessed by its Assistant Secretary on July
17, 1996.
The undersigned, John W. McGonigle, Executive Vice President and
Secretary of the Corporation, hereby acknowledges in the name and on behalf
of the Corporation the foregoing Articles of Amendment to be its corporate
act and further certifies to the best of his knowledge, information and
belief, that the matters and facts set forth herein with respect to the
authorization and approval hereof are true in all material respects and
that this statement is made under the penalties of perjury.
ATTEST: FEDERATED MUNICIPAL
OPPORTUNITIES FUND, INC.
/s/ S. Elliott Cohan /s/ John W. McGonigle
S. Elliott Cohan John W. McGonigle
Assistant Secretary Executive Vice President and Secretary
EXHIBIT 17.2
STATE BOND MINNESOTA TAX-FREE INCOME FUND,
a Portfolio of
STATE BOND TAX-FREE INCOME FUNDS, INC.,
SPECIAL MEETING OF SHAREHOLDERS
December , 1996
==
STATE BOND MINNESOTA TAX-FREE INCOME FUND,
a Portfolio of
STATE BOND TAX-FREE INCOME FUNDS, INC.
CUSIP NO. 85657M108
The undersigned shareholder(s) of State Bond Minnesota Tax-Free Income
Fund, a portfolio of State Bond Tax-Free Income Funds, Inc. (the
`State Bond Fund''), hereby appoint(s) Kevin L. Howard, Keith O.
Martens and Dale C. Bauman, or any of them true and lawful proxies,
with power of substitution of each, to vote all shares of the State
Bond Fund which the undersigned is entitled to vote, at the Special
Meeting of Shareholders to be held on December , 1996, at 100 North
--
Minnesota Street, New Ulm, Minnesota 56073-0069, at 4:30 p.m. (local
time) and at any adjournment thereof.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The proxies
named will vote the shares represented by this proxy in accordance
with the choice made on this ballot. IF NO CHOICE IS INDICATED, THIS
PROXY WILL BE VOTED AFFIRMATIVELY ON THAT MATTER.
PROPOSAL
TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
THE STATE BOND FUND AND FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND
RETAIN THE TOP PORTION.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS X
KEEP THIS PORTION FOR YOUR RECORDS.
DETACH AND RETURN THIS PORTION ONLY.
STATE BOND MINNESOTA TAX-FREE INCOME FUND,
a portfolio of State Bond
Tax-Free Income Funds, Inc.
RECORD DATE SHARES:
-----------------
VOTE ON THE PROPOSAL
FOR AGAINST ABSTAIN
Please sign EXACTLY as your name(s)
appear(s) above. When signing as
attorney, executor, administrator,
guardian, trustee, custodian, etc.,
please give your full title as
such. If a corporation or
partnership, please sign the full
name by an authorized officer or
partner. If stock is owned
jointly, all owners should sign.
- -----------------------------------
Signature(s) of Shareholder(s)
Date: ___________________________
EXHIBIT 4
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated September 23, 1996 (the
"Agreement"), between FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC., a
Maryland corporation (hereinafter called the "Acquiring Fund"), and STATE
BOND TAX-FREE INCOME FUNDS, INC., a Maryland corporation (hereinafter
called the "Corporation") on behalf of its portfolio STATE BOND MINNESOTA
TAX-FREE INCOME FUND (hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C)
of the United States Internal Revenue Code of 1986, as amended (the
"Code"). The reorganization (the "Reorganization") will consist of the
transfer of all of the net assets of the Acquired Fund in exchange solely
for Class A Shares of the Acquiring Fund (the "Acquiring Fund Shares") and
the distribution, after the Closing Date (as hereinafter defined), of the
Acquiring Fund Shares to the shareholders of the Acquired Fund in
liquidation of the Acquired Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Corporation and the Acquiring Fund are registered
open-end management investment companies and the Acquired Fund owns
securities in which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are
authorized to issue shares of common stock or shares of beneficial
interest, as the case may be;
WHEREAS, the Board of Directors, including a majority of the
directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Acquiring Fund
has determined that the exchange of all of the net assets of the Acquired
Fund for Acquiring Fund Shares is in the best interests of the Acquiring
Fund shareholders and that the interests of the existing shareholders of
the Acquiring Fund would not be diluted as a result of this transaction;
and
WHEREAS, the Board of Directors, including a majority of the
directors who are not "interested persons" (as defined under the 1940 Act),
of the Corporation has determined that the exchange of all of the net
assets of the Acquired Fund for Acquiring Fund Shares is in the best
interests of the Acquired Fund shareholders;
NOW THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties agree as
follows:
1.TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE
ACQUIRING FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the
Acquired Fund agrees to assign, transfer and convey to the Acquiring Fund
all of the net assets of the Acquired Fund, including all securities and
cash, other than cash in an amount necessary to pay any unpaid dividends
and distributions as provided in paragraph 1.5, beneficially owned by the
Acquired Fund, and the Acquiring Fund agrees in exchange therefor to
deliver to the Acquired Fund the number of Acquiring Fund Shares, including
fractional Acquiring Fund Shares, determined as set forth in paragraph 2.3.
Such transaction shall take place at the closing (the "Closing") on the
closing date (the "Closing Date") provided for in paragraph 3.1. In lieu
of delivering certificates for the Acquiring Fund Shares, the Acquiring
Fund shall credit the Acquiring Fund Shares to the Acquired Fund's account,
for the benefit of its shareholders, on the stock record books of the
Acquiring Fund and shall deliver a confirmation thereof to the Acquired
Fund.
1.2 The Acquired Fund will discharge or make provision for the
discharge of all of its liabilities and obligations prior to or on the
Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street
Bank and Trust Company (hereinafter called "State Street"), Boston,
Massachusetts, the Acquiring Fund's custodian (the "Custodian"), for the
account of the Acquiring Fund, together with proper instructions and all
necessary documents to transfer to the account of the Acquiring Fund, free
and clear of all liens, encumbrances, rights, restrictions and claims
created by the Acquired Fund. All cash delivered shall be in the form of
immediately available funds payable to the order of the Custodian for the
account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund thereunder. The
Acquired Fund will transfer to the Acquiring Fund any distributions, rights
or other assets received by the Acquired Fund after the Closing Date as
distributions on or with respect to the securities transferred. Such
assets shall be deemed included in assets transferred to the Acquiring Fund
on the Closing Date and shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable,
the Acquired Fund will liquidate and distribute pro rata to the Acquired
Fund's shareholders of record, determined as of the close of business on
the Closing Date (the "Acquired Fund Shareholders"), the Acquiring Fund
Shares received by the Acquired Fund pursuant to paragraph 1.1. In
addition, each Acquired Fund Shareholder shall have the right to receive
any unpaid dividends or other distributions which were declared before the
Valuation Date (as hereinafter defined) with respect to the shares of the
Acquired Fund that are held by the shareholder on the Valuation Date. Such
liquidation and distribution will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the Acquired Fund on
the books of the Acquiring Fund to open accounts on the share record books
of the Acquiring Fund in the names of the Acquired Fund Shareholders, and
representing the respective pro rata number of the Acquiring Fund Shares
due such shareholders, based on their ownership of shares of the Acquired
Fund on the Closing Date. All issued and outstanding Shares of the
Acquired Fund will simultaneously be canceled on the books of the Acquired
Fund. Share certificates representing interests in the Acquired Fund will
represent a number of Acquiring Fund Shares, after the Closing Date as
determined in accordance with Section 2.3. The Acquiring Fund shall not
issue certificates representing the Acquiring Fund Shares in connection
with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus
and statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund
shares on the books of the Acquired Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Corporation up to and including the
Closing Date and such later dates, with respect to dissolution and
deregistration of the Corporation, on which the Corporation is dissolved
and deregistered.
1.9 The Corporation shall be deregistered as an investment company
under the 1940 Act and dissolved as a Maryland corporation as promptly as
practicable following the Closing Date and the making of all distributions
pursuant to paragraph 1.5.
2.VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of
the close of the New York Stock Exchange (normally 4:00 p.m. Eastern time)
on the Closing Date (such time and date being herein called the "Valuation
Date"), using the valuation procedures set forth in the Acquiring Fund's
then-current prospectus or statement of additional information.
2.2 The net asset value of each Acquiring Fund Share shall be the net
asset value per share computed as of the close of the New York Stock
Exchange (normally 4:00 p.m. Eastern time) on the Valuation Date, using the
valuation procedures set forth in the Acquiring Fund's then-current
prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in
paragraph 2.1, by the net asset value of one Acquiring Fund Share
determined in accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3.CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be December , 1996 or such later date as
--
the parties may mutually agree. All acts taking place at the Closing Date
shall be deemed to take place simultaneously as of the close of business on
the Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place
as the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of
the value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 ARM Transfer Agency, Inc., as transfer agent for the Acquired
Fund, shall deliver at the Closing a certificate of an authorized officer
stating that its records contain the names and addresses of the Acquired
Fund Shareholders and the number and percentage ownership of outstanding
shares owned by each such shareholder immediately prior to the Closing.
The Acquiring Fund shall issue and deliver a confirmation evidencing the
Acquiring Fund Shares to be credited on the Closing Date to the Secretary
of the Acquired Fund, or provide evidence satisfactory to the Acquired Fund
that such Acquiring Fund Shares have been credited to the Acquired Fund's
account on the books of the Acquiring Fund. At the Closing, each party
shall deliver to the other such bills of sale, checks, assignments,
assumption agreements, share certificates, if any, receipts or other
documents as such other party or its counsel may reasonably request.
4.REPRESENTATIONS AND WARRANTIES.
4.1 The Corporation represents and warrants to the Acquiring Fund as
follows:
(a) The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Maryland and has power to own all of its properties and assets and to carry
out this Agreement.
(b) The Corporation is registered under the 1940 Act, as an
open-end, management investment company, and such registration has not been
revoked or rescinded and is in full force and effect.
(c) The Corporation is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of the
Corporation's Articles of Incorporation or Bylaws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquired Fund is a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Acquired Fund or any of
its properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquired Fund knows of no facts which might form the basis
for the institution of such proceedings, and is not a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the 1940 Act and the rules and regulations of the
Securities and Exchange Commission (the "Commission") thereunder and do not
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(g) The Statement of Assets and Liabilities of the Acquired
Fund at June 30, 1995 and 1996, have been audited by Ernst & Young LLP,
independent auditors, and have been prepared in accordance with generally
accepted accounting principles, consistently applied, and such statements
(copies of which have been furnished to the Acquiring Fund) fairly reflect
the financial condition of the Acquired Fund as of such dates, and there
are no known contingent liabilities of the Acquired Fund as of such dates
not disclosed therein.
(h) Since June 30, 1996, there has not been any material
adverse change in the Acquired Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course
of business, or any incurrence by the Acquired Fund of indebtedness
maturing more than one year from the date such indebtedness was incurred,
except as otherwise disclosed to and accepted by the Acquiring Fund.
(i) At the Closing Date, all Federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
date shall have been filed or an appropriate extension obtained, and all
Federal and other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof or contest in good faith, and
to the best of the Acquired Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such
returns.
(j) For each fiscal year of its operation, subject to
applicable statute of limitation periods, the Acquired Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. All of the issued and
outstanding shares of the Acquired Fund will, at the time of the Closing,
be held by the persons and in the amounts set forth in the records of the
transfer agent as provided in paragraph 3.3. The Acquired Fund does not
have outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquired Fund shares, nor is there outstanding any
security convertible into any of the Acquired Fund shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets
to be transferred by it hereunder.
(m) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Corporation and, subject to the
approval of the Acquired Fund Shareholders, this Agreement constitutes the
valid and legally binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions
with respect thereto, and to general principles of equity and the
discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund
(the "Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (only insofar as it relates to the
Acquired Fund) will, on the effective date of the Registration Statement
and on the Closing Date, not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
4.2 The Acquiring Fund represents and warrants to the Corporation as
follows:
(a) The Acquiring Fund is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Maryland and has the power to carry on its business as it is now being
conducted and to carry out this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as
an open-end, diversified, management investment company, and such
registration has not been revoked or rescinded and is in full force and
effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquiring Fund's Articles of Incorporation or Bylaws or of any
agreement, indenture, instrument, contract, lease or other undertaking to
which the Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Acquiring Fund or any of
its properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquiring Fund knows of no facts which might form the basis
for the institution of such proceedings, and is not a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the
Acquiring Fund at August 31, 1994 and 1995, have been audited by Deloitte &
Touche LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, and such statements (copies of
which have been furnished to the Acquired Fund) fairly reflect the
financial condition of the Acquiring Fund as of such dates, and there are
no known contingent liabilities of the Acquiring Fund as of such dates not
disclosed therein.
(g) The unaudited Statement of Assets and Liabilities of
the Acquiring Fund at February 29, 1996 has been prepared in accordance
with generally accepted accounting principles, consistently applied,
although subject to year-end adjustments, and on a basis consistent with
the Statement of Assets and Liabilities of the Acquiring Fund at August 31,
1995 which has been audited by Deloitte & Touche LLP, independent auditors,
and such statement (copies of which have been furnished to the Acquired
Fund) fairly reflects the financial condition of the Acquiring Fund as of
such date, and there are no known liabilities of the Acquiring Fund,
contingent or otherwise, as of such date not disclosed therein.
(h) Since February 29, 1996, there has not been any
material adverse change in the Acquiring Fund's financial condition,
assets, liabilities or business other than changes occurring in the
ordinary course of business, or any incurrence by the Acquiring Fund of
indebtedness maturing more than one year from the date such indebtedness
was incurred, except as disclosed to and accepted by the Acquired Fund.
(i) At the Closing Date, all Federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed or an
appropriate extension obtained, by such date shall have been filed, and all
Federal and other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof or contest in good faith, and
to the best of the Acquiring Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such
returns.
(j) For each fiscal year of its operation, subject to
applicable statute of limitation periods, the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company.
(k) All issued and outstanding Acquiring Fund Shares are,
and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquiring Fund Shares, nor is there outstanding any
security convertible into any Acquiring Fund Shares.
(l) The execution, delivery and performance of this
Agreement has been duly authorized by all necessary action on the part of
the Acquiring Fund, and this Agreement constitutes the valid and legally
binding obligation of the Acquiring Fund enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws relating to or
affecting creditors' rights generally and court decisions with respect
thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a
proceeding in equity or at law).
(m) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not misleading.
5.COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing
Date, it being understood that such ordinary course of business will
include customary dividends and distributions.
5.2 The Corporation will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated
herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and
do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by
this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund,
in such form as is reasonably satisfactory to the Acquiring Fund, a
statement of the earnings and profits of the Acquired Fund for Federal
income tax purposes which will be carried over to the Acquiring Fund as a
result of Section 381 of the Code and which will be certified by the
Corporation's President and its Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with
information reasonably necessary for the preparation of the
Prospectus/Proxy Statement, referred to in paragraph 4.1(m), all to be
included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
5.7 Prior to the Valuation Date, the Acquired Fund shall have
declared a dividend or dividends, with a record date and ex-dividend date
prior to the Valuation Date, which, together with all previous dividends,
shall have the effect of distributing to its shareholders all of its
investment company taxable income, if any, plus the excess of its interest
income, if any, excludable from gross income under Code section 103(a) over
its deductions disallowed under Code sections 265 and 171(a)(2) for the
taxable periods or years ended on or before June 30, 1996 and for the
period from said date to and including the Closing Date (computed without
regard to any deduction for dividends paid), and all of its net capital
gain, if any, realized in taxable periods or years ended on or before June
30, 1996 and in the period from said date to and including the Closing
Date.
6.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance
by the Acquired Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
6.1 All representations and warranties of the Corporation contained
in this Agreement shall be true and correct in all material respects as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the
Acquired Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of the
Closing Date, certified by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or
Vice President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of
the Corporation made in this Agreement are true and correct in all material
respects at and as of the Closing Date, except as they may be affected by
the transactions contemplated by this Agreement, and as to such other
matters as the Acquiring Fund shall reasonably request.
7.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by
the Acquiring Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
7.1 All representations and warranties of the Acquiring Fund
contained in this Agreement shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date with
the same force and effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or
Vice President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct in all material
respects at and as of the Closing Date, except as they may be affected by
the transactions contemplated by this Agreement, and as to such other
matters as the Acquired Fund shall reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness,
except as otherwise disclosed to and accepted by the Acquired Fund.
8.FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING
FUND AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund,
either party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding
shares of the Acquired Fund in accordance with the provisions of the
Corporation's Articles of Incorporation and the 1940 Act.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those
of the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit
consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring Fund or the Acquired
Fund, provided that either party hereto may for itself waive any of such
conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or
be pending, threatened or contemplated under the 1933 Act.
8.5 The Acquiring Fund and the Corporation shall have received an
opinion of Dickstein Shapiro Morin & Oshinsky LLP substantially to the
effect that for Federal income tax purposes:
(a) The transfer of all of the Acquired Fund net assets in
exchange for the Acquiring Fund Shares and the distribution of the
Acquiring Fund Shares to the Acquired Fund Shareholders in liquidation of
the Acquired Fund will constitute a "reorganization" within the meaning of
Section 368(a)(1)(C) of the Code; (b) No gain or loss will be recognized by
the Acquiring Fund upon the receipt of the assets of the Acquired Fund
solely in exchange for the Acquiring Fund Shares; (c) No gain or loss will
be recognized by the Acquired Fund upon the transfer of the Acquired Fund
assets to the Acquiring Fund in exchange for the Acquiring Fund Shares or
upon the distribution (whether actual or constructive) of the Acquiring
Fund Shares to Acquired Fund Shareholders in exchange for their shares of
the Acquired Fund; (d) No gain or loss will be recognized by the Acquired
Fund Shareholders upon the exchange of their Acquired Fund shares for the
Acquiring Fund Shares; (e) The tax basis of the Acquired Fund assets
acquired by the Acquiring Fund will be the same as the tax basis of such
assets to the Acquired Fund immediately prior to the Reorganization;
(f) The tax basis of the Acquiring Fund Shares received by each of the
Acquired Fund Shareholders pursuant to the Reorganization will be the same
as the tax basis of the Acquired Fund shares held by such shareholder
immediately prior to the Reorganization; (g) The holding period of the
assets of the Acquired Fund in the hands of the Acquiring Fund will include
the period during which those assets were held by the Acquired Fund; and
(h) The holding period of the Acquiring Fund Shares to be received by each
Acquired Fund Shareholder will include the period during which the Acquired
Fund shares exchanged therefor were held by such shareholder (provided the
Acquired Fund shares were held as capital assets on the date of the
Reorganization).
9.TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Directors of the
Corporation or the Board of Directors of the Acquiring Fund at any time
prior to the Closing Date (and notwithstanding any vote of the Acquired
Fund Shareholders) if circumstances should develop that, in the opinion of
either of the parties' Board, make proceeding with the Agreement
inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on
the part of any party hereto or the directors or officers of the
Corporation or the Acquiring Fund or the shareholders of the Acquiring Fund
or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Directors of the Acquiring Fund or
the Board of Directors of the Corporation, if, in the judgment of either,
such waiver will not have a material adverse effect on the benefits
intended under this Agreement to the shareholders of the Acquiring Fund or
of the Acquired Fund, as the case may be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated
hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings
of every kind and nature between them relating to the subject matter
hereof. Neither party shall be bound by any condition, definition,
warranty or representation, other than as set forth or provided in this
Agreement or as may be set forth in a later writing signed by the party to
be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the State of New York, without giving effect to
principles of conflicts of laws.
11.4 This Agreement may be executed in any number of counterparts,
each of which, when executed and delivered, shall be deemed to be an
original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
11.6 An agreement has been entered into under which Federated Advisers
will assume substantially all of the expenses of the reorganization
including registration fees, transfer taxes (if any), the fees of banks and
transfer agents and the costs of preparing, printing, copying and mailing
proxy solicitation materials to the Acquired Fund's shareholders and the
costs of holding the Special Meeting of Shareholders. ARM Financial Group,
Inc. will assume the legal fees of the Acquired Fund. The accountants'
fees of the Acquired Fund will be borne equally by Federated Advisers and
ARM Financial Group, Inc.
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IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the
date first above written.
Acquired Fund:
STATE BOND TAX-FREE INCOME FUNDS,
INC.,
on behalf of its portfolio,
Attest: STATE BOND MINNESOTA TAX-FREE
INCOME FUND
/s/ Sheri Bean By: /s/ Kevin L. Howard
Name: Sheri Bean Name: Kevin L. Howard
Title: Assistant Secretary Title: Vice President and Secretary
Acquiring Fund:
Attest: FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
/s/ S. Elliot Cohan By: /s/ J. Christopher Donahue
Name: S. Elliot Cohan Name: J. Christopher Donahue
Title: Assistant Secretary Title: Executive Vice President and Secretary
