1933 Act File No. 33-11410
1940 Act File No. 811-4533
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. ..........
Post-Effective Amendment No. 13 ........... X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 13 ........................... X
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
- --
X on May 23, 1996 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i)
75 days after filing pursuant to paragraph (a)(ii)
on pursuant to paragraph (a)(ii) of Rule 485.
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If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of 1940,
and:
X filed the Notice required by that Rule on October 16, 1995; or
intends to file the Notice required by that Rule on or about
; or
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during the most recent fiscal year did not sell any securities pursuant
to Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to
Rule 24f-2(b)(2), need not file the Notice.
Copies to: Matthew G. Maloney, Esquire
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of FEDERATED MUNICIPAL
OPPORTUNITIES FUND, INC., which is comprised of four classes of shares,
Class A Shares (1); Class B Shares (2); Class C Shares (3); and Class F
Shares (4), is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page...............(1-4) Cover Page.
Item 2. Synopsis.................(1-4) Summary of Fund Expenses.
Item 3. Condensed Financial
Information.............(4) Financial Highlights; (1-4)
Performance Information.
Item 4. General Description of
Registrant..............(1-3) Synopsis; (4) General Information;
(1-4) Investment Information; (1-4)
Investment Objective; (1-4) Investment
Policies; (1-4) Portfolio Turnover; (1-4)
Municipal Bonds; (1-4) Investment Risks;
(1-4) Investment Limitations.
Item 5. Management of the Fund...(1-4) Fund Information; (1-4) Management
of the Fund; (1-3) Distribution of Fund
Shares; (4) Distribution of Class F
Shares; (1-4) Administration of the Fund.
Item 6. Capital Stock and Other
Securities..............(1-3) Dividends and Distributions; (4)
Dividends; (1-4) Shareholder Information;
(1-4) Voting Rights; (1-4) Tax
Information; (1-4) Federal Income Tax;
(1-4) State and Local Taxes.
Item 7. Purchase of Securities Being
Offered.................(1-4) Net Asset Value; (1-3) Investing in
the Fund; (4) Investing in Class F
Shares; (4) Share Purchases; (4) Minimum
Investment Required; (4) What Shares
Cost; (1-3) Reducing or Eliminating the
Sales Charge; (4) Eliminating the Sales
Charge; (1-4) Systematic Investment
Program; (1-4) Exchange Privilege; (1-4)
Certificates and Confirmations.
Item 8. Redemption or Repurchase.(1-3) How to Redeem Shares; (4) Redeeming
Class F Shares; (1-3) Redeeming Shares
through your Financial Institution; (4)
Through a Financial Institution; (1-3)
Redeeming Shares by Mail; (4) Directly By
Mail; (1-4) Contingent Deferred Sales
Charge; (1-4) Systematic Withdrawal
Program; (1-4) Accounts With Low
Balances.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page...............(1-4) Cover Page.
Item 11. Table of Contents........(1-4) Table of Contents.
Item 12. General Information and
History.................(1-4) General Information About the Fund.
Item 13. Investment Objectives and
Policies................(1-4) Investment Objectives and Policies;
(1-4) Investment Limitations.
Item 14. Management of the Fund...(1-4) Federated Municipal Opportunities
Fund, Inc. Management.
Item 15. Control Persons and Principal
Holders of Securities...Not applicable.
Item 16. Investment Advisory and
Other Services..........(1-4) Investment Advisory Services; (1-4)
Other Services.
Item 17. Brokerage Allocation.....(1-4) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities..............Not applicable.
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered...........(1-4) Purchasing Shares; (1-4)
Determining Net Asset Value; (4) Exchange
Privilege (Class F Shares Only); (1-4)
Redeeming Shares.
Item 20. Tax Status...............(1-4) Tax Status.
Item 21. Underwriters.............Not applicable.
Item 22. Calculation of Performance
Data....................(1-4) Total Return; (1-4) Yield; (1-4)
Tax-Equivalent (1-4) Yield; (1-4)
Performance Comparisons.
Item 23. Financial Statements.....Incorporated by reference to the Annual
Report dated August 31, 1995, pursuant to
Rule 411 under the Securities Act of
1933. (File No. 811-4533).
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
(FORMERLY, FORTRESS MUNICIPAL INCOME FUND, INC.)
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
PROSPECTUS
The shares of Federated Municipal Opportunities Fund, Inc. (the "Fund")
respresent interests in an open-end, diversified management investment
company (a mutual fund) that 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.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED 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.
This prospectus contains the information you should read and know before you
invest in Class A Shares, Class B Shares, and Class C Shares of the Fund.
Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information for Class A
Shares, Class B Shares, Class C Shares and Class F Shares dated May ,
------
1996, with the Securities and Exchange Commission. The information contained
in the Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of the Statement of Additional
Information or a paper copy of this prospectus, if you have received your
prospectus electronically, free of charge by calling 1-800-245-5051. To
obtain other information or to make inquiries about the Fund, contact your
financial institution.
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. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated May , 1996
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SUMMARY OF FUND EXPENSES 1
GENERAL INFORMATION 6
INVESTMENT INFORMATION 7
INVESTMENT OBJECTIVE 7
INVESTMENT POLICIES 7
PORTFOLIO TURNOVER 9
MUNICIPAL BONDS 10
INVESTMENT RISKS 11
INVESTMENT LIMITATIONS 13
NET ASSET VALUE 14
INVESTING IN THE FUND 14
HOW TO PURCHASE SHARES 15
INVESTING IN CLASS A SHARES 16
INVESTING IN CLASS B SHARES 20
INVESTING IN CLASS C SHARES 14
SPECIAL PURCHASE FEATURES 23
EXCHANGE PRIVILEGE 23
HOW TO REDEEM SHARES 17
SPECIAL REDEMPTION FEATURES 29
CONTINGENT DEFERRED SALES
CHARGE 30
ACCOUNT AND SHARE
INFORMATION 33
FUND INFORMATION 34
MANAGEMENT OF THE FUND 34
DISTRIBUTION OF FUND SHARES 36
ADMINISTRATION OF THE FUND 38
BROKERAGE TRANSACTIONS 39
EXPENSES OF THE FUND
AND SHARES 39
SHAREHOLDER INFORMATION 24
VOTING RIGHTS 24
TAX INFORMATION 41
FEDERAL INCOME TAX 41
STATE AND LOCAL TAXES 25
PERFORMANCE INFORMATION 43
OTHER CLASSES OF SHARES 44
APPENDIX 44
ADDRESSES 46
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
SUMMARY OF FUND EXPENSES
CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)....... 4.50%
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)....... None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable) .. None
Redemption Fee (as a percentage of amount redeemed, if applicable)
..............................None
Exchange Fee ................................... None
ANNUAL OPERATING EXPENSES
(As a percentage of projected average net assets) *
Management Fee ................................ 0.60%
12b-1 Fee (1) ............................... . 0.00%
Total Other Expenses .......................... 0.48%
Shareholder Services Fee ....... 0.25%
Total Operating Expenses ...................... 1.08%
(1) The Fund has no present intention of paying or accruing the 12b-1
fee during the fiscal year ending August 31, 1996. If the Fund were
paying or accruing the 12-b1 fee, the fund would be able to pay up to
0.25% of its average daily net assets for the 12b-1 fee. See "Fund
Information."
*Total operating expenses in the table above are estimated based on
average expenses expected to be incurred during the period ending August
31, 1996. During the course of this period, expenses may be more or
less than the average amount shown.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that a shareholder of Class A Shares will
bear, either directly or indirectly. For more complete descriptions of
the various costs and expenses, see "Investing in Class A Shares" and
"Fund Information." Wire-transferred redemptions of less than $5,000
may be subject to additional fees.
EXAMPLE 1 year 3 years
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period..... $56 $78
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. THIS EXAMPLE IS BASED ON ESTIMATED DATA FOR CLASS A SHARES'
FISCAL YEAR ENDING AUGUST 31, 1996.
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
SUMMARY OF FUND EXPENSES
CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)....... None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)....... None
Contingent Deferred Sales Charge
(as a percentage of original purchase price or redemption
proceeds,
as applicable) (1)........................ 5.50%
Redemption Fee (as a percentage of amount redeemed, if applicable)
..............................None
Exchange Fee........................................ None
ANNUAL CLASS B SHARES OPERATING EXPENSES
(As a percentage of projected average net assets) *
Management Fee ..................................... 0.60%
12b-1 Fee......................................... . 0.75%
Total Other Expenses ............................... 0.48%
Shareholder Services Fee ............ 0.25%
Total Operating Expenses (2) ....................... 1.83%
(1) The contingent deferred sales charge is 5.50% in the first year
declining to 1.00% in the sixth year and 0.00% thereafter. (See "Contingent
Deferred Sales Charge").
(2) Class B Shares convert to Class A Shares (which pay lower ongoing
expenses) approximately eight years after purchase.
*Total Class B Shares operating expenses in the table above are estimated
based on average expenses expected to be incurred during the period ending
August 31, 1996. During the course of this period, expenses may be more or
less than the average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class B Shares will bear,
either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Investing in Class B Shares" and "Fund
Information." Wire-transferred redemptions of less than $5,000 may be
subject to additional fees.
Long-term shareholders 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 1 year 3 years
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period..... $75 $101
You would pay the following expenses on the same
investment, assuming no redemption..... $19 $58
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THIS EXAMPLE IS BASED ON ESTIMATED DATA FOR CLASS B SHARES' FISCAL YEAR
ENDING AUGUST 31, 1996.
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
SUMMARY OF FUND EXPENSES
CLASS C SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)....... None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)....... None
Contingent Deferred Sales Charge
(as a percentage of original purchase price or redemption
proceeds,
as applicable) (1) ..................... 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)
..............................None
Exchange Fee........................................ None
ANNUAL OPERATING EXPENSES
(As a percentage of projected average net assets)*
Management Fee ................................ 0.60%
12b-1 Fee .................................... . 0.75%
Total Other Expenses ... ...................... 0.48%
Shareholder Services Fee.............. 0.25%
Total Operating Expenses ........................... 1.83%
(1) The contingent deferred sales charge assessed is 1.00% of the lesser of
the original purchase price or the net asset value of Shares redeemed
within one year of their purchase date. For a more complete description,
see "Redeeming Class C Shares."
*Total operating expenses in the table above are estimated based on average
expenses expected to be incurred during the period ending August 31, 1996.
During the course of this period, expenses may be more or less than the
average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class C Shares will bear,
either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Investing in Class C Shares" and "Fund
Information." Wire-transferred redemptions of less than $5,000 may be
subject to additional fees.
Long-term shareholders 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 1 year 3 years
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period..... $29 $58
You would pay the following expenses on the same
investment, assuming no redemption.....$19 $58
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THIS EXAMPLE IS BASED ON ESTIMATED DATA FOR CLASS C SHARES' FISCAL YEAR
ENDING AUGUST 31, 1996.
GENERAL INFORMATION
The Corporation was established under the laws of the State of Maryland on
November 26, 1986. The Corporation's address is Liberty Center, Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779. The Articles of
Incorporation permit the Corporation to offer separate classes of shares. As
of March 31, 1996, the Corporation changed its name from Fortress Municipal
Income Fund, Inc. to Federated Municipal Opportunities Fund, Inc. With
respect to this Fund, as of the date of this prospectus, the Directors have
established four classes of shares, known as Class A Shares, Class B Shares,
Class C Shares, and Class F Shares. This prospectus relates only to the
Class A Shares, Class B Shares, and Class C Shares of the Fund (individually
and collectively as the context requires, "Shares").
Shares of the Fund are designed for individuals seeking high current income
through a professionally managed, diversified portfolio of municipal bonds.
For information on how to purchase the Shares offered by this prospectus,
please refer to "How to Purchase Shares." The minimum initial investment for
Class A Shares is $500. The minimum initial investment for Class B Shares
and Class C Shares is $1,500. Subsequent investments in any class must be in
amounts of at least $100.
Class A Shares are sold at net asset value plus an applicable sales charge
and are redeemed at net asset value. However, a contingent deferred sales
charge is imposed under certain circumstances. For a more complete
description, see "How to Redeem Shares."
Class B Shares are sold at net asset value and are redeemed at net asset
value. However, a contingent deferred sales charge is imposed on certain
Shares which are redeemed within six full years of purchase. See "How to
Redeem Shares."
Class C Shares are sold at net asset value. However, a contingent deferred
sales charge of 1.00% is imposed on certain shares which are redeemed within
the first 12 months following purchase. See "How to Redeem Shares."
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide a high level of current
income which is generally exempt from the federal regular income tax
(federal regular income tax does not include the federal alternative minimum
tax). The investment objective cannot be changed without approval of
shareholders. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by following the investment
policies described in this prospectus.
The Fund pursues its investment objective by investing primarily in a
diversified portfolio of municipal bonds. The Fund invests its assets so
that at least 80% of its annual interest income is exempt from federal
regular income tax. The Fund may invest up to but less than 35% of its net
assets in lower quality municipal bonds. These bonds will usually offer
higher yields than higher-rated bonds but involve greater investment risk at
the time of issue. (See "Investment Risks.")
INVESTMENT POLICIES
Unless otherwise designated, the investment policies described below may be
changed by the Directors without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The 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. It is
likely, however, that shareholders will be required to include interest from
a portion of the municipal bonds owned by the Fund in calculating the
federal individual alternative minimum tax or the federal alternative
minimum tax for corporations.
CHARACTERISTICS. The municipal bonds which the Fund buys are rated Ba or
higher by Moody's Investors Service, Inc. ("Moody's") or rated BB or higher
by Standard & Poor's Ratings Group ("S&P"). The 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 Fund may buy bonds
which are unrated but which the adviser judges to be similar in quality to
those rated bonds which it purchases. A description of the ratings
categories is contained in the Appendix to this prospectus.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions
are arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete these
transactions may cause the Fund to miss a price or yield considered to be
advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may
vary from the purchase prices. Accordingly, the Fund may pay more/less than
the market value of the securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits
or losses upon the sale of such commitments.
TEMPORARY INVESTMENTS. The Fund invests its assets so that at least 80% of
its annual interest income is exempt from the federal regular income tax,
except when investing for "defensive" purposes as described below. This
policy cannot be changed without approval of shareholders. From time to time
on a temporary basis, or when the investment adviser determines that market
conditions call for a temporary defensive posture, the Fund may invest in
short-term tax-exempt or taxable temporary investments. These temporary
investments include: fixed or variable rate notes issued by or on behalf of
municipal or corporate issuers; obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities; other debt securities;
commercial paper; certificates of deposit of banks; and repurchase
agreements (arrangements in which the organization selling the Fund a bond
or temporary investment agrees at the time of sale to repurchase it at a
mutually agreed upon time and price).
There are no rating requirements applicable to temporary investments.
However, the investment adviser will limit temporary investments to those it
considers to be of good quality.
OTHER INVESTMENT TECHNIQUES. The Fund may 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. These rights
may be referred to as "liquidity puts" or "standby commitments."
The Fund may also hedge all or a portion of its investments by entering into
futures contracts or options on them. Any gains realized on futures
contracts and options thereon are taxable. The Fund will notify shareholders
before it engages in these futures transactions.
PORTFOLIO TURNOVER
Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities in its portfolio will be sold whenever the
Fund's investment adviser believes it is appropriate to do so in light of
the Fund's investment objective, without regard to the length of time a
particular security may have been held.
MUNICIPAL BONDS
Municipal bonds are generally issued to finance public works such as
airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. Municipal bonds are
also issued to repay outstanding obligations, to raise funds for general
operating expenses, and to make loans to other public institutions and
facilities. Certain types of "private activity" municipal bonds are issued
to obtain funding for privately operated facilities.
There are two categories of municipal bonds: general obligation and revenue.
General obligation bonds are backed by the taxing power of the issuing
municipality. Revenue bonds are backed by the revenues of a project or
facility. Payment of principal and interest on such bonds is dependent
solely on the revenue generated by the facility financed by the bond or
other specified sources of revenue or collateral. Private activity bonds are
typically one type of "revenue" bonds.
In most cases, lower quality bonds are private activity bonds or other
revenue bonds which are not payable from general tax revenues. The Fund may
invest more than 25% of the value of its assets in private activity bonds
which may result in more than 25% of the Fund's assets being invested in one
industry. It is also possible that the Fund may from time to time invest
more than 25% of its assets in health care facilities revenue obligations,
housing agency revenue obligations or electric utility obligations.
Economic, business, political and other developments generally affecting the
revenues of issuers in such a market segment (for example, proposed
legislation or pending court decisions affecting the financing of projects
and market factors affecting the demand for their services or products) may
have a general adverse impact on all municipal bonds in the segment.
The Fund does not intend to purchase securities if, as a result of such
purchase, more than 25% of the value of its total assets would be invested
in the securities of governmental subdivisions located in any one state,
territory or possession of the United States.
INVESTMENT RISKS
The value of Shares will fluctuate. The amount of this fluctuation is
dependent upon the quality and maturity of the municipal bonds in the Fund's
portfolio as well as on market conditions. Generally speaking, the lower
quality, long-term bonds in which the 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. Thus, if market interest
rates have increased from the time a bond was purchased, the bond, if sold,
might be sold at a price less than its cost. Similarly, if market interest
rates have declined from the time a bond was purchased, the bond, if sold,
might be sold at a price greater than its cost. (In either instance, if the
bond was held to maturity, no loss or gain normally would be realized as a
result of interim market fluctuations.)
Prices of lower grade bonds also fluctuate with changes in the perceived
quality of the credit of their issuers. Consequently, shares may not be
suitable for persons who cannot assume the somewhat greater risks of capital
depreciation associated with higher tax-exempt income yields. In addition,
bonds rated "BBB" by S& P or "Baa" by Moody's have speculative
characteristics. Changes in economic conditions or other circumstances are
more likely to lead to weakened capacity to make principal and interest
payments than higher rated bonds.
A large portion of the Fund's portfolio may be invested in bonds whose
interest payments are from revenues of similar projects (such as housing or
hospitals) or where issuers share the same geographic location. As a result,
the Fund may be more susceptible to similar economic, political or
regulatory developments than would a portfolio of bonds with a greater
geographic and project variety. This susceptibility may result in greater
fluctuations in share price.
Many issuers of municipal bonds which have characteristics of rated bonds
choose to not have their obligations rated. Unrated bonds may carry a
greater risk and a higher yield than rated securities. Although unrated
bonds are not necessarily of lower quality, the market for them may not be
as broad as that for rated bonds since many investors rely solely on the
major rating agencies for credit appraisal.
Further, the lower rated or unrated municipal bonds which the Fund may
purchase are frequently traded only in markets where the number of potential
purchasers and sellers is limited. This consideration may have the effect of
limiting the availability of such bonds for the Fund to purchase and may
also have the effect of limiting the ability of the Fund to sell such bonds
at their fair value either to meet redemption requests or to respond to
changes in the economy or the financial markets. The Fund will not invest
more than 10% of its total assets in securities which are not readily
marketable.
REDUCING RISKS OF LOWER-RATED SECURITIES. The Fund's investment adviser
believes that the risks of investing in lower rated securities can be
reduced. The professional portfolio management techniques used by the Fund
to attempt to reduce these risks include:
o Credit Research. When purchasing bonds, rated or unrated, the
Fund's investment adviser performs its own credit analysis in
addition to using recognized rating agencies. This credit analysis
considers the economic feasibility of revenue bond project
financing and general purpose borrowings, the financial condition
of the issuer or guarantor with respect to liquidity, cash flow and
ability to meet anticipated debt service requirements, and
political developments that may affect credit quality.
o Diversification. The Fund invests in securities of many different
issuers to reduce portfolio risks.
o Economic Analysis. The Fund's adviser also considers trends in the
overall economy, in geographic areas, in various industries, and in
the financial markets.
INVESTMENT LIMITATIONS
The Fund will not:
o borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an arrangement to buy it back on
a set date) or pledge securities except, under certain
circumstances, the Fund may, exclusive of custodian intra-day cash
advances and the collateralization of such advances, borrow up to
one-third of the value of its total assets and pledge up to 10% of
the value of those assets to secure such borrowings; or
o invest more than 10% of its net assets in securities subject to
restrictions on resale under the Securities Act of 1933, except for
certain restricted securities which meet the criteria for liquidity
as established by the directors.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Directors without shareholder approval. Shareholders will be notified before
any material change in these limitations becomes effective.
The Fund will not:
o invest more than 5% of its total assets in securities of one issuer
(except cash and cash items and U.S. government obligations) ; or
o invest 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.
NET ASSET VALUE
The Fund's net asset value per Share fluctuates. The net asset value for
Shares is determined by adding the interest of each class of Shares in the
market value of all securities and other assets of the Fund, subtracting the
interest of each class of Shares in the liabilities of the Fund and those
attributable to each class of Shares, and dividing the remainder by the
total number of each class of Shares outstanding. The net asset value for
each class of Shares may differ due to the variance in daily net income
realized by each class. Such variance will reflect only accrued net income
to which the shareholders of a particular class are entitled.
The net asset value of each class of Shares of the Fund is determined as of
the close of trading, (normally 4:00 p.m., Eastern time), on the New York
Stock Exchange, Monday through Friday, except on: (i) days on which there
are not sufficient changes in the value of the Fund's portfolio securities
that its net asset value might be materially affected; (ii) days during
which no Shares are tendered for redemption and no orders to purchase Shares
are received; or (iii) the following holidays: New Year's Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day, and Christmas Day.
INVESTING IN THE FUND
This prospectus offers investors three classes of Shares that carry sales
charges and contingent deferred sales charges in different forms and amounts
and which bear different levels of expenses.
CLASS A SHARES
An investor who purchases Class A Shares pays a maximum sales charge of
4.50% at the time of purchase. As a result, Class A Shares are not subject
to any charges when they are redeemed (except for special programs offered
under "Purchases with Proceeds From Redemptions of Unaffiliated Investment
Companies.") Certain purchases of Class A Shares qualify for reduced sales
charges. See "Reducing the Sales Charge--Class A Shares." Class A Shares
have no conversion feature.
CLASS B SHARES
Class B Shares are sold without an initial sales charge, but are subject to
a contingent deferred sales charge of up to 5.50% if redeemed within six
full years following purchase. Class B Shares also bear a higher 12b-1 fee
than Class A Shares. Class B Shares will automatically convert into Class A
Shares, based on relative net asset value, on or around the fifteenth of the
month eight full years after the purchase date. Class B Shares provide an
investor the benefit of putting all of the investor's dollars to work from
the time the investment is made, but (until conversion) will have a higher
expense ratio and pay lower dividends than Class A Shares due to the higher
12b-1 fee.
CLASS C SHARES
Class C Shares are sold without an initial sales charge, but are subject to
a 1.00% contingent deferred sales charge on assets redeemed within the first
12 months following purchase. Class C Shares provide an investor the benefit
of putting all of the investor's dollars to work from the time the
investment is made, but will have a higher expense ratio and pay lower
dividends than Class A Shares due to the higher 12b-1 fee. Class C Shares
have no conversion feature.
HOW TO PURCHASE SHARES
Shares of the Fund are sold on days on which the New York Stock Exchange is
open. Shares of the Fund may be purchased as described below, either through
a financial institution (such as a bank or broker/dealer which has a sales
agreement with the distributor) or by wire or by check directly to the Fund,
with a minimum initial investment of $500 for Class A Shares and $1,500 for
Class B Shares and Class C Shares. Additional investments can be made for as
little as $100. (Financial institutions may impose different minimum
investment requirements on their customers.)
In connection with any sale, Federated Securities Corp. may from time to
time offer certain items of nominal value to any shareholder or investor.
The Fund reserves the right to reject any purchase request. An account must
be established at a financial institution or by completing, signing, and
returning the new account form available from the Fund before Shares can be
purchased.
INVESTING IN CLASS A SHARES
Class A Shares are sold at their net asset value next determined after an
order is received, plus a sales charge as follows:
SALES CHARGE AS SALES CHARGE AS DEALER
CONCESSION
AMOUNT OF A PERCENTAGE OF A PERCENTAGE OF AS A
PERCENTAGE OF
TRANSACTION PUBLIC OFFERING PRICE NET AMOUNT INVESTED
PUBLIC OFFERING PRICE
Less than $100,000 4.50% 4.71% 4.00%
$100,000 but less than 3.75% 3.90% 3.25%
$250,000
$250,000 but less than 2.50% 2.56% 2.25%
$500,000
$500,000 but less than 2.00% 2.04% 1.80%
$1,000,000
$1,000,000 or greater 0.00% 0.00% 0.25%*
*See sub-section entitled "Dealer Concession."
No sales charge is imposed for Class A Shares purchased through financial
intermediaries that do not receive a reallowance of the sales charge.
However, investors who purchase Shares through a trust department,
investment adviser, or other financial intermediary may be charged a service
fee or other fee by the financial intermediary. Additionally, no sales
charge is imposed for Class A Shares purchased through "wrap accounts" or
similar programs, under which clients pay a fee for services, or for
shareholders designated as Liberty Life Members.
DEALER CONCESSION
For sales of Class A Shares, a dealer will normally receive up to 90% of the
applicable sales charge. Any portion of the sales charge which is not paid
to a dealer will be retained by the distributor. However, the distributor,
may offer to pay dealers up to 100% of the sales charge retained by it. Such
payments may take the form of cash or promotional incentives, such as
reimbursement of certain expenses of qualified employees and their spouses
to attend informational meetings about the Fund or other special events at
recreational-type facilities, or items of material value. In some instances,
these incentives will be made available only to dealers whose employees have
sold or may sell a significant amount of Shares. On purchases of $1 million
or more, the investor pays no sales charge; however, the distributor will
make twelve monthly payments to the dealer totaling 0.25% of the public
offering price over the first year following the purchase. Such payments are
based on the original purchase price of Shares outstanding at each month
end.
The sales charge for Shares sold other than through registered
broker/dealers will be retained by Federated Securities Corp. Federated
Securities Corp. may pay fees to banks out of the sales charge in exchange
for sales and/or administrative services performed on behalf of the bank's
customers in connection with the initiation of customer accounts and
purchases of Shares.
REDUCING OR ELIMINATING THE SALES CHARGE
The sales charge can be reduced or eliminated on the purchase of Class A
Shares through:
o quantity discounts and accumulated purchases;
o concurrent purchases;
o signing a 13-month letter of intent;
o using the reinvestment privilege; or
o purchases with proceeds from redemptions of unaffiliated investment
company shares.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES
As shown in the table above, larger purchases reduce the sales charge paid.
The Fund will combine purchases of Class A Shares made on the same day by
the investor, the investor's spouse, and the investor's children under age
21 when it calculates the sales charge. In addition, the sales charge, if
applicable, is reduced for purchases made at one time by a trustee or
fiduciary for a single trust estate or a single fiduciary account.
If an additional purchase of Class A Shares is made, the Fund will consider
the previous purchases still invested in the Fund. For example, if a
shareholder already owns Class A Shares having a current value at the public
offering price of $90,000 and he purchases $10,000 more at the current
public offering price, the sales charge on the additional purchase according
to the schedule now in effect would be 3.75%, not 4.50%.
To receive the sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at
the time the purchase is made that Class A Shares are already owned or that
purchases are being combined. The Fund will reduce the sales charge after it
confirms the purchases.
CONCURRENT PURCHASES
For purposes of qualifying for a sales charge reduction, a shareholder has
the privilege of combining concurrent purchases of Class A Shares of two or
more of certain of the funds advised by subsidiaries of Federated Investors
(the "Federated Funds"), the purchase price of which includes a sales
charge. For example, if a shareholder concurrently invested $30,000 in Class
A Shares of certain of the other Federated Funds with a sales charge, and
$70,000 in Class A Shares of this Fund, the sales charge would be reduced.
To receive this sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at
the time the concurrent purchases are made. The Fund will reduce the sales
charge after it confirms the purchases.
LETTER OF INTENT
If a shareholder intends to purchase at least $100,000 of Class A Shares of
certain of the Federated Funds (excluding money market funds) over the next
13 months, the sales charge may be reduced by signing a letter of intent to
that effect. This letter of intent includes a provision for a sales charge
adjustment depending on the amount actually purchased within the 13-month
period and a provision for the custodian to hold up to 4.50% of the total
amount intended to be purchased in escrow (in shares) until such purchase is
completed.
The Shares held in escrow in the shareholder's account will be released upon
fulfillment of the letter of intent or the end of the 13-month period,
whichever comes first. If the amount specified in the letter of intent is
not purchased, an appropriate number of escrowed Shares may be redeemed in
order to realize the difference in the sales charge.
While this letter of intent will not obligate the shareholder to purchase
Shares, each purchase during the period will be at the sales charge
applicable to the total amount intended to be purchased. At the time a
letter of intent is established, current balances in accounts in any Class A
Shares of certain of the Federated Funds, excluding money market accounts,
will be aggregated to provide a purchase credit towards fulfillment of the
letter of intent. Prior trade prices will not be adjusted.
REINVESTMENT PRIVILEGE
If Class A Shares in the Fund have been redeemed, the shareholder has a
right, within 120 days, to reinvest the redemption proceeds at the next-
determined net asset value without any sales charge. Federated Securities
Corp. must be notified by the shareholder in writing or by his financial
institution of the reinvestment in order to eliminate a sales charge. If the
shareholder redeems his Class A Shares in the Fund, there may be tax
consequences.
PURCHASES WITH PROCEEDS FROM REDEMPTIONS OF UNAFFILIATED INVESTMENT
COMPANIES
Investors may purchase Class A Shares at net asset value, without a sales
charge, with the proceeds from the redemption of shares of an unaffiliated
investment company that were purchased or redeemed with a sales charge or
commission and were not distributed by Federated Securities Corp. The
purchase must be made within 60 days of the redemption, and Federated
Securities Corp. must be notified by the investor in writing, or by his
financial institution, at the time the purchase is made. From time to time,
the Fund may offer dealers a payment of 0.50 of 1.00% for Shares purchased
under this program. If Shares are purchased in this manner, Fund purchases
will be subject to a contingent deferred sales charge for one year from the
date of purchase.
INVESTING IN CLASS B SHARES
Class B Shares are sold at their net asset value next determined after an
order is received. While Class B Shares are sold without an initial sales
charge, under certain circumstances described under "Contingent Deferred
Sales Charge--Class B Shares," a contingent deferred sales charge may be
applied by the distributor at the time Class B Shares are redeemed.
CONVERSION OF CLASS B SHARES
Class B Shares will automatically convert into Class A Shares on or around
the fifteenth of the month eight full years after the purchase date, except
as noted below, and will no longer be subject to a distribution services fee
(see "Distribution of Shares"). Such conversion will be on the basis of the
relative net asset values per share, without the imposition of any sales
charge, fee or other charge. Class B Shares acquired by exchange from Class
B Shares of certain of the Federated Funds will convert into Class A Shares
based on the time of the initial purchase. For purposes of conversion to
Class A Shares, Shares purchased through the reinvestment of dividends and
distributions paid on Class B Shares will be considered to be held in a
separate sub-account. Each time any Class B Shares in the shareholder's
account (other than those in the sub-account) convert to Class A Shares, an
equal pro rata portion of the Class B Shares in the sub-account will also
convert to Class A Shares. The conversion of Class B Shares to Class A
Shares is subject to the continuing availability of a ruling from the
Internal Revenue Service or an opinion of counsel that such conversions will
not constitute taxable events for federal tax purposes. There can be no
assurance that such ruling or opinion will be available, and the conversion
of Class B Shares to Class A Shares will not occur if such ruling or opinion
is not available. In such event, Class B Shares would continue to be subject
to higher expenses than Class A Shares for an indefinite period.
Orders for $250,000 or more of Class B Shares will automatically be invested
in Class A Shares.
INVESTING IN CLASS C SHARES
Class C Shares are sold at net asset value next determined after an order is
received. A contingent deferred sales charge of 1.00% will be charged on
assets redeemed within the first full 12 months following purchase. For a
complete description of this charge see "Contingent Deferred Sales Charge--
Class C Shares."
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION
An investor may call his financial institution (such as a bank or an
investment dealer) to place an order to purchase Shares. Orders placed
through a financial institution are considered received when the Fund is
notified of the purchase order or when payment is converted into federal
funds. Purchase orders through a registered broker/dealer must be received
by the broker before 4:00 p.m. (Eastern time) and must be transmitted by the
broker to the Fund before 5:00 p.m. (Eastern time) in order for Shares to be
purchased at that day's price. Purchase orders through other financial
institutions must be received by the financial institution and transmitted
to the Fund before 4:00 p.m. (Eastern time) in order for Shares to be
purchased at that day's price. It is the financial institution's
responsibility to transmit orders promptly. Financial institutions may
charge additional fees for their services.
The financial institution which maintains investor accounts in Class B
Shares or Class C Shares with the Fund must do so on a fully disclosed basis
unless it accounts for share ownership periods used in calculating the
contingent deferred sales charge (see "Contingent Deferred Sales Charge").
In addition, advance payments made to financial institutions may be subject
to reclaim by the distributor for accounts transferred to financial
institutions which do not maintain investor accounts on a fully disclosed
basis and do not account for share ownership periods.
PURCHASING SHARES BY WIRE
Once an account has been established, Shares may be purchased by wire by
calling the Fund. All information needed will be taken over the telephone,
and the order is considered received when the transfer agent's bank receives
payment by wire. Federal funds should be wired as follows: Federated
Shareholder Services Company, c/o State Street Bank and Trust Company,
Boston, MA; Attn; EDGEWIRE; For Credit to: (Fund Name) (Fund Class); (Fund
Number); Account Number; Trade Date and Order Number; Group Number or Dealer
Number; Nominee or Institution Name; and ABA Number 011000028. Shares cannot
be purchased by wire on holidays when wire transfers are restricted.
Questions on wire purchases should be directed to your shareholder services
representative at the telephone number listed on your account statement.
PURCHASING SHARES BY CHECK
Shares may be purchased by sending a check to: Federated Shareholder
Services Company, P.O. Box 8600, Boston, MA 02266-8600. The check should
be made payable to the name of the Fund (designate class of Shares and
account number). Orders by mail are considered received when payment by
check is converted into federal funds (normally the business day after the
check is received), and Shares begin earning dividends the next day.
SPECIAL PURCHASE FEATURES
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their
investment on a regular basis in a minimum amount of $100. Under this
program, funds may be automatically withdrawn periodically from the
shareholder's checking account at an Automated Clearing House ("ACH") member
and invested in the Fund at the net asset value next determined after an
order is received by the Fund, plus the sales charge, if applicable.
Shareholders should contact their financial institution or the Fund to
participate in this program.
EXCHANGE PRIVILEGE
CLASS A SHARES
Class A shareholders may exchange all or some of their Shares for Class A
Shares of certain of the Federated Funds at net asset value. Neither the
Fund nor any of the Federated Funds imposes any additional fees on
qualifying exchanges.
CLASS B SHARES
Class B shareholders may exchange all or some of their Shares for Class B
Shares of certain of the Federated Funds. (Not all of the Federated Funds
currently offer Class B Shares. Contact your financial institution regarding
the availability of other Class B Shares in the Federated Funds). Exchanges
are made at net asset value without being assessed a contingent deferred
sales charge on the exchanged Shares. To the extent that a shareholder
exchanges Shares for Class B Shares in other of the 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. For more information, see "Contingent
Deferred Sales Charge."
CLASS C SHARES
Class C shareholders may exchange all or some of their Shares for Class C
Shares of certain of the Federated Funds at net asset value without a
contingent deferred sales charge. (Not all funds in the Federated Funds
currently offer Class C Shares. Contact your financial institution regarding
the availability of other Class C Shares in the Federated Funds.) To the
extent that a shareholder exchanges Shares for Class C Shares in other of
the 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. For more information,
see "Contingent Deferred Sales Charge."
The Fund has exchange privileges among like classes with the following
Federated Funds:
Federated American Leaders Fund, Inc.; Federated Asia Pacific Growth Fund;
Federated Bond Fund; Federated Capital Appreciation Fund; Federated Emerging
Markets Fund; Federated European Growth Fund; Federated Small Cap Strategies
Fund; Federated Fund for U.S. Government Securities, Inc.; Federated
Government Income Securities, Inc.; Federated Growth Strategies Fund;
Federated International Equity Fund; Federated International Income Fund;
Federated Equity Income Fund, Inc.; Federated High Income Bond Fund, Inc.;
Federated International Small Company Fund; Federated Latin America Growth
Fund; Federated Municipal Securities Fund, Inc.; Liberty U.S. Government
Money Market Trust; Federated Utility Fund, Inc.; Federated Limited Term
Fund; Federated Limited Term Municipal Fund; Federated Michigan Intermediate
Municipal Trust; Federated Pennsylvania Municipal Income Fund; Federated
Strategic Income Fund; Tax-Free Instruments Trust; and Federated World
Utility Fund.
Prospectuses for these funds are available by writing to Federated
Securities Corp.
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange Shares having a net asset
value equal to the minimum investment requirements of the fund into which
the exchange is being made. Before the exchange, the shareholder must
receive a prospectus of the fund for which the exchange is being made.
This privilege is available to shareholders resident in any state in which
the shares being acquired may be sold. Upon receipt of proper instructions
and required supporting documents, Shares submitted for exchange are
redeemed and proceeds invested in the same class of shares of the other
fund. The exchange privilege may be modified or terminated at any time.
Shareholders will be notified of the modification or termination of the
exchange privilege.
Further information on the exchange privilege and prospectuses for the
Federated Funds are available by contacting the Fund.
TAX CONSEQUENCES
An exercise of the exchange privilege is treated as a sale for federal
income tax purposes. Depending upon the circumstances, a capital gain or
loss may be realized.
MAKING AN EXCHANGE
Instructions for exchanges for the Federated Funds may be given in writing
or by telephone. Written instructions may require a signature guarantee.
Shareholders of the Fund may have difficulty in making exchanges by
telephone through brokers and other financial institutions during times of
drastic economic or market changes. If a shareholder cannot contact his
broker or financial institution by telephone, it is recommended that an
exchange request be made in writing and sent by overnight mail to Federated
Shareholder Services Company, 500 Victory Road-2nd Floor, North Quincy,
Massachusetts 02171.
TELEPHONE INSTRUCTIONS
Telephone instructions made by the investor may be carried out only if a
telephone authorization form completed by the investor is on file with the
Fund. If the instructions are given by a broker, a telephone authorization
form completed by the broker must be on file with the Fund. If reasonable
procedures are not followed by the Fund, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. Shares may be exchanged
between two funds by telephone only if the two funds have identical
shareholder registrations.
Any Shares held in certificate form cannot be exchanged by telephone but
must be forwarded to Federated Shareholder Services Company, P.O. Box 8600,
Boston, Massachusetts 02266-8600 and deposited to the shareholder's account
before being exchanged. Telephone exchange instructions are recorded and
will be binding upon the shareholder. Such instructions will be processed as
of 4:00 p.m. (Eastern time) and must be received by the Fund before that
time for Shares to be exchanged the same day. Shareholders exchanging into a
Fund will begin receiving dividends the following business day. This
privilege may be modified or terminated at any time.
HOW TO REDEEM SHARES
Shares are redeemed at their net asset value, less any applicable contingent
deferred sales charge, next determined after the Fund receives the
redemption request. Redemptions will be made on days on which the Fund
computes its net asset value. Redemption requests must be received in proper
form and can be made as described below.
REDEEMING SHARES THROUGH YOUR FINANCIAL INSTITUTION
Shares of the Fund may be redeemed by calling your financial institution to
request the redemption. Shares will be redeemed at the net asset value, less
any applicable contingent deferred sales charge next determined after the
Fund receives the redemption request from the financial institution.
Redemption requests through a registered broker/dealer must be received by
the broker before 4:00 p.m. (Eastern time) and must be transmitted by the
broker to the Fund before 5:00 p.m. (Eastern time) in order for Shares to be
redeemed at that day's net asset value. Redemption requests through other
financial institutions (such as banks) must be received by the financial
institution and transmitted to the Fund before 4:00 p.m. (Eastern time) in
order for Shares to be redeemed at that day's net asset value. The financial
institution is responsible for promptly submitting redemption requests and
providing proper written redemption instructions. Customary fees and
commissions may be charged by the financial institution for this service.
REDEEMING SHARES BY TELEPHONE
Shares may be redeemed in any amount by calling the Fund, provided the Fund
has a properly completed authorization form. These forms can be obtained
from Federated Securities Corp. Proceeds will be mailed in the form of a
check, to the shareholder's address of record or by wire transfer to the
shareholder's account at a domestic commercial bank that is a member of the
Federal Reserve System. The minimum amount for a wire transfer is $1,000.
Proceeds from redeemed Shares purchased by check or through ACH will not be
wired until that method of payment has cleared. Proceeds from redemption
requests received on holidays when wire transfers are restricted should be
directed to your shareholder services representative at the telephone number
listed on your account statement. Proceeds from redemption requests received
on holidays when wire transfers are restricted will be wired the following
business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement.
Telephone instructions will be recorded. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. In the event of drastic economic or
market changes, a shareholder may experience difficulty in redeeming by
telephone. If this occurs, "Redeeming Shares By Mail" should be considered.
If at any time the Fund shall determine it necessary to terminate or modify
the telephone redemption privilege, shareholders would be promptly notified.
REDEEMING SHARES BY MAIL
Shares may be redeemed in any amount by mailing a written request to:
Federated Shareholder Services Company, Fund Name, Fund Class, P.O. Box
8600, Boston, MA 02266-8600. If share certificates have been issued, they
should be sent unendorsed with the written request by registered or
certified mail to the address noted above.
The written request should state: the Fund name and the Class designation;
the account name as registered with the Fund; the account number; and the
number of shares to be redeemed or the dollar amount requested. All owners
of the account must sign the request exactly as the shares are registered.
Normally, a check for the proceeds is mailed within one business day, but in
no event more than seven days, after the receipt of a proper written
redemption request. Dividends are paid up to and including the day that a
redemption request is processed.
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund or a redemption payable other than
to the shareholder of record must have their signatures guaranteed by a
commercial or savings bank, trust company or savings association whose
deposits are insured by an organization which is administered by the Federal
Deposit Insurance Corporation; a member firm of a domestic stock exchange;
or any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934. The Fund does not accept signatures guaranteed by a
notary public.
SPECIAL REDEMPTION FEATURES
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount not
less than $100 may take advantage of the Systematic Withdrawal Program.
Under this program, Shares are redeemed to provide for periodic withdrawal
payments in an amount directed by the shareholder.
Depending upon the amount of the withdrawal payments, the amount of
dividends paid and capital gains distributions with respect to Shares, and
the fluctuation of the net asset value of Shares redeemed under this
program, redemptions may reduce, and eventually deplete, the shareholder's
investment in the Fund. For this reason, payments under this program should
not be considered as yield or income on the shareholder's investment in the
Fund. To be eligible to participate in this program, a shareholder must have
an account value of at least $10,000. A shareholder may apply for
participation in this program through his financial institution. Due to the
fact that Class A Shares are sold with a sales charge, it is not advisable
for shareholders to continue to purchase Class A Shares while participating
in this program. A contingent deferred sales charge may be imposed on Class
B and C Shares.
CONTINGENT DEFERRED SALES CHARGE
Shareholders may be subject to a contingent deferred sales charge upon
redemption of their Shares under the following circumstances:
CLASS A SHARES
Class A Shares purchased under a periodic special offering 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 1.00% for
redemptions made within one full year of purchase. Any applicable contingent
deferred sales charge will be imposed on the lesser of the net asset value
of the redeemed Shares at the time of purchase or the net asset value of the
redeemed Shares at the time of redemption.
CLASS B SHARES
Shareholders redeeming Class B Shares from their Fund accounts within six
full years of the purchase date of those Shares will be charged a contingent
deferred sales charge by the Fund's distributor. Any applicable contingent
deferred sales charge will be imposed on the lesser of the net asset value
of the redeemed Shares at the time of purchase or the net asset value of the
redeemed Shares at the time of redemption in accordance with the following
schedule:
YEAR OF REDEMPTION CONTINGENT DEFERRED
AFTER PURCHASE SALES CHARGE
First 5.50%
Second 4.75%
Third 4.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter 0.00%
CLASS C SHARES
Shareholders redeeming Class C Shares from their Fund accounts within one
full year of the purchase date of those Shares will be charged a contingent
deferred sales charge by the Fund's distributor of 1.00%. Any applicable
contingent deferred sales charge will be imposed on the lesser of the net
asset value of the redeemed Shares at the time of purchase or the net asset
value of the redeemed Shares at the time of redemption.
CLASS A SHARES, CLASS B SHARES, AND CLASS C SHARES
The contingent deferred sales charge will be deducted from the redemption
proceeds otherwise payable to the shareholder and will be retained by the
distributor. The contingent deferred sales charge will not be imposed with
respect to: (1) Shares acquired through the reinvestment of dividends or
distributions of long-term capital gains; and (2) Shares held for more than
six full years from the date of purchase with respect to Class B Shares and
one full year from the date of purchase with respect to Class C Shares and
applicable Class A Shares. Redemptions will be processed in a manner
intended to maximize the amount of redemption which will not be subject to a
contingent deferred sales charge. In computing the amount of the applicable
contingent deferred sales charge, redemptions are deemed to have occurred in
the following order: (1) Shares acquired through the reinvestment of
dividends and long-term capital gains; (2) Shares held for more than six
full years from the date of purchase with respect to Class B Shares and one
full year from the date of purchase with respect to Class C Shares and
applicable Class A Shares; (3) Shares held for fewer than six years with
respect to Class B Shares and one full year from the date of purchase with
respect to Class C Shares and applicable Class A Shares on a first-in,
first-out basis. A contingent deferred sales charge is not assessed in
connection with an exchange of Fund Shares for Shares of certain of the
Federated Funds in the same class (see "Exchange Privilege"). Any contingent
deferred sales charge imposed at the time the exchanged for Shares are
redeemed is calculated as if the shareholder had held the Shares from the
date on which he became a shareholder of the exchanged-from Shares.
Moreover, the contingent deferred sales charge will be eliminated with
respect to certain redemptions (see "Elimination of Contingent Deferred
Sales Charge").
ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
The contingent deferred sales charge will be eliminated with respect to the
following redemptions: (1) redemptions following the death or disability, as
defined in Section 72(m)(7) of the Internal Revenue Code of 1986, of a
shareholder; (2) redemptions representing minimum required distributions
from an Individual Retirement Account or other retirement plan to a
shareholder who has attained the age of 70 1/2; and (3) involuntary
redemptions by the Fund of Shares in shareholder accounts that do not comply
with the minimum balance requirements. No contingent deferred sales charge
will be imposed on redemptions of Shares held by Directors, employees and
sales representatives of the Fund, the distributor, or affiliates of the
Fund or distributor; employees of any financial institution that sells
Shares of the Fund pursuant to a sales agreement with the distributor; and
spouses and children under the age of 21 of the aforementioned persons.
Finally, no contingent deferred sales charge will be imposed on the
redemption of Shares originally purchased through a bank trust department,
an investment adviser registered under the Investment Advisers Act of 1940,
or any other financial institution, to the extent that no payments were
advanced for purchases made through such entities. The Directors reserve the
right to discontinue elimination of the contingent deferred sales charge.
Shareholders will be notified of such elimination. Any Shares purchased
prior to the termination of such waiver would have the contingent deferred
sales charge eliminated as provided in the Fund's prospectus at the time of
the purchase of the Shares. If a shareholder making a redemption qualifies
for an elimination of the contingent deferred sales charge, the shareholder
must notify Federated Securities Corp. or the transfer agent in writing that
he is entitled to such elimination.
ACCOUNT AND SHARE INFORMATION
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Shareholder Services Company
maintains a share account for each shareholder. Share certificates are not
issued unless requested in writing to Federated Shareholder Services
Company.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during
that month.
DIVIDENDS
Dividends are declared and paid monthly to all shareholders invested in the
Fund on the record date. Dividends and distributions are automatically
reinvested in additional Shares of the Fund on payment dates at the ex-
dividend date net asset value without a sales charge, unless shareholders
request cash payments on the new account form or by contacting the transfer
agent. All shareholders on the record date are entitled to the dividend. If
Shares are redeemed or exchanged prior to the record date or purchased after
the record date, those Shares are not entitled to that month's dividend.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, and pay the proceeds to the shareholder if the
account balance falls below the Class A Share required minimum value of $500
or the required minimum value of $1,500 for Class B Shares and Class C
Shares. This requirement does not apply, however, if the balance falls below
the required minimum value because of changes in the net asset value of the
respective Share Class. Before Shares are redeemed to close an account, the
shareholder is notified in writing and allowed 30 days to purchase
additional Shares to meet the minimum requirement.
FUND INFORMATION
MANAGEMENT OF THE FUND
DIRECTORS. The Fund is managed by the Directors. The Directors are
responsible for managing the Fund's business affairs and for exercising all
the Fund's powers except those reserved for the shareholders. An Executive
Committee of the Directors handles the Director's responsibilities between
meetings of the Directors.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Advisers, the Fund's investment adviser (the "Adviser"), subject to
direction by the Directors. The Adviser continually conducts investment
research and supervision for the Fund and is responsible for the purchase or
sale of portfolio instruments, for which it receives an annual fee from the
Fund.
Both the Corporation and the Adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Fund and its portfolio
securities. These codes recognize that such persons owe a fiduciary duty to
the Fund's shareholders and must place the interests of shareholders ahead
of the employees' own interest. Among other things, the codes: require
preclearance and periodic reporting of personal securities transactions;
prohibit personal transactions in securities being purchased or sold, or
being considered for purchase or sale, by the Fund; prohibit purchasing
securities in initial public offerings; and prohibit taking profits on
securities held for less than sixty days. Violations of the codes are
subject to review by the Directors, and could result in severe penalties.
ADVISORY FEES. The Adviser receives an annual investment advisory fee equal
to .60 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee or reimburse the fund for
certain operating expenses. The Adviser can terminate this voluntary waiver
of its advisory fee at any time at its sole discretion. The Adviser has also
undertaken to reimburse the Fund for operating expenses in excess of
limitations established by certain states.
ADVISER'S BACKGROUND. Federated Advisers, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the Trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to
a number of investment companies. With over $80 billion invested across more
than 250 funds under management and/or administration by its subsidiaries,
as of December 31, 1995, Federated Investors is one of the largest mutual
fund investment managers in the United States. With more than 1,800
employees, Federated continues to be led by the management who founded the
company in 1955. The Federated Funds are presently at work in and through
4,000 financial institutions nationwide. More than 100,000 investment
professionals have selected the Federated Funds for their clients.
Mary Jo Ochson has been the Fund's portfolio manager since May 1996. Ms.
Ochson joined Federated Investors in 1982 and has been a Senior Vice
President of the Fund's investment adviser since January 1996. From 1988
through 1995, Ms. Ochson served as a Vice President of the Fund's investment
adviser. Ms. Ochson is a Chartered Financial Analyst and received her M.B.A.
in Finance from the University of Pittsburgh.
J. Scott Albrecht has been the Fund's portfolio manager since May 1996 Mr.
Albrecht joined Federated Investors in 1989 and has been a Vice President of
the Fund's investment adviser since 1994. From 1992 to 1994, Mr. Albrecht
served as an Assistant Vice President of the Fund's investment adviser. In
1991, Mr. Albrecht acted as an investment analyst. Mr. Albrecht is a
Chartered Financial Analyst and received his M.S. in Public Management from
Carnegie Mellon University.
Jonathan C. Conley has been the Fund's portfolio manager since July 1987.
Mr. Conley joined Federated Investors in 1979 and has been a Senior Vice
President of the Fund's Adviser since 1995. Mr. Conley was a Vice President
of the Fund's Adviser from 1982 to 1995. Mr. Conley is a Chartered Financial
Analyst and received his M.B.A. in Finance from the University of Virginia.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for Shares of the
Fund. It is a Pennsylvania corporation organized on November 14, 1969, and
is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES. Under a distribution plan
adopted in accordance with Investment Company Act Rule 12b-1 (the
"Distribution Plan"), Class A Shares, Class B Shares and Class C Shares will
pay a fee to the distributor in an amount computed at an annual rate of
.25%, .75% and .75%, respectively, of the average daily net assets of each
class of Shares to finance any activity which is principally intended to
result in the sale of Shares subject to the Distribution Plan. For Class C
Shares, the distributor may select financial institutions such as banks,
fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide sales services or distribution-related support
services as agents for their clients or customers. With respect to Class B
Shares, because distribution fees to be paid by the Fund to the distributor
may not exceed an annual rate of .75% of each class of Shares' average daily
net assets, it will take the distributor a number of years to recoup the
expenses it has incurred for its sales services and distribution-related
support services pursuant to the Plan. The Fund is not currently making
payments for Class A Shares under the Distribution Plan, nor does it
anticipate doing so in the immediate future.
The Distribution Plan is a compensation type Plan. As such, the Fund makes
no payments to the distributor, except as described above. Therefore, the
Fund does not pay for unreimbursed expenses of the distributor, including
amounts expended by the distributor in excess of amounts received by it from
the Fund, interest, carrying or other financing charges in connection with
excess amounts expended, or the distributor's overhead expenses. However,
the distributor may be able to recover such amounts or may earn a profit
from future payments made by Shares under the Plan.
In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under
which the Fund may make payments up to 0.25 of 1% of the average daily net
asset value of Class A Shares, Class B Shares, and Class C Shares to obtain
certain personal services for shareholders and for the maintenance of
shareholder accounts. Under the Shareholder Services Agreement, Federated
Shareholder Services will either perform shareholder services directly or
will select financial institutions to perform shareholder services.
Financial institutions will receive fees based upon Shares owned by their
clients or customers. The schedules of such fees and the basis upon which
such fees will be paid will be determined from time to time by the Fund and
Federated Shareholder Services.
In addition to payments made pursuant to the Distribution Plan and
Shareholder Services Agreement, Federated Securities Corp. and Federated
Shareholder Services, from their own assets, may pay financial institutions
supplemental fees for the performance of sales services, distribution-
related support services, or shareholder services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to payments
made pursuant to the Distribution Plan and Shareholder Services Agreement,
the distributor may pay a supplemental fee from its own assets to financial
institutions as financial assistance for providing substantial sales
services, distribution-related support services, or shareholder services.
The support may include sponsoring sales, educational and training seminars
at recreational-type facilities for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance will be predicated upon the amount
of 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 the distributor may be reimbursed by the
Fund's Adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of
Federated Investors, provides administrative personnel and services
(including certain legal and financial reporting services) necessary to
operate the Fund. Federated Services Company provides these at an annual
rate which relates to the average aggregate daily net assets of all of the
Federated Funds as specified below:
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE FEDERATED FUNDS
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Services Company may choose voluntarily to waive a portion of its
fee.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the adviser will generally
utilize those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. In selecting among firms believed to meet these criteria, the
adviser may give consideration to those firms which have sold or are selling
shares of the Fund and other funds distributed by Federated Securities Corp.
The adviser makes decisions on portfolio transactions and selects brokers
and dealers subject to review by the Directors.
EXPENSES OF THE FUND AND SHARES
Holders of Class A Shares, Class B Shares, and Class C Shares pay their
allocable portion of Fund and portfolio expenses.
The Fund expenses for which holders of Class A Shares, Class B Shares, and
Class C Shares pay their allocable portion include, but are not limited to:
the cost of organizing the Fund and continuing its existence; registering
the Fund with federal and state securities authorities; Directors' fees;
auditors' fees; the cost of meetings of Directors; legal fees of the Fund;
association membership dues; and such non-recurring and extraordinary items
as may arise from time to time.
The portfolio expenses for which holders of Class A Shares, Class B Shares,
and Class C Shares pay their allocable portion include, but are not limited
to: registering the portfolio and Shares of the portfolio; investment
advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such non-recurring and extraordinary items as
may arise from time to time.
At present, the only expenses which are allocated specifically to Class A
Shares, Class B Shares, and Class C Shares as classes are expenses under the
Fund's Distribution Plan and fees for Shareholder Services. However, the
Directors reserve the right to allocate certain other expenses to holders of
Class A Shares, Class B Shares, and Class C Shares as it deems appropriate
("Class Expenses"). In any case, Class Expenses would be limited to:
distribution fees; transfer agent fees as identified by the transfer agent
as attributable to holders of Class A Shares, Class B Shares, and Class C
Shares; fees for Shareholder Services; printing and postage expenses related
to preparing and distributing materials such as shareholder reports,
prospectuses and proxies to current shareholders; registration fees paid to
the Securities and Exchange Commission and registration fees paid to state
securities commissions; expenses related to administrative personnel and
services as required to support holders of Class A Shares, Class B Shares,
and Class C Shares; legal fees relating solely to Class A Shares, Class B
Shares, and Class C Shares and Directors' fees incurred as a result of
issues relating solely to Class A Shares, Class B Shares, and Class C
Shares.
SHAREHOLDER INFORMATION
VOTING RIGHTS
Each share of the Fund is entitled to one vote at all meetings of
shareholders. As of April 8, 1996, Merrill Lynch Pierce Fenner & Smith (as
owner of record holding shares for its clients), Jacksonville, Florida,
owned 27.05% of the voting securities of Class F Shares of the Fund, and,
therefore, may, for certain purposes, be deemed to control the Fund and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such
companies. Shareholders are not required to pay the federal regular income
tax on any dividends received from the Fund that represent net interest on
tax-exempt municipal bonds. However, under the Tax Reform Act of 1986,
dividends representing net interest earned on some municipal bonds may be
included in calculating the federal individual alternative minimum tax or
the federal alternative minimum tax for corporations.
The alternative minimum tax, up to 28% of alternative minimum taxable income
for individuals and 20% for corporations, applies when it exceeds the
regular tax for the taxable year. Alternative minimum taxable income is
equal to the regular taxable income of the taxpayer increased by certain
"tax preference" items not included in regular taxable income and reduced by
only a portion of the deductions allowed in the calculation of the regular
tax.
The Tax Reform Act of 1986 treats interest on certain "private activity"
bonds issued after August 7, 1986, as a tax preference item for both
individuals and corporations. Unlike traditional governmental purpose
municipal bonds, which finance roads, schools, libraries, prisons and other
public facilities, private activity bonds provide benefits to private
parties. The Fund may purchase all types of municipal bonds, including
private activity bonds. Thus, should it purchase any such bonds, a portion
of the Fund's dividends may be treated as a tax preference item.
In addition, in the case of a corporate shareholder, dividends of the Fund
which represent interest on municipal bonds may be subject to the 20%
corporate alternative minimum tax because the dividends are included in a
corporation's "adjusted current earnings." The corporate alternate minimum
tax treats 75% of the excess of a taxpayer's pre-tax "adjusted current
earnings" over the taxpayer's alternative minimum taxable income as a tax
preference item. "Adjusted current earnings" is based upon the concept of a
corporation's "earnings and profits." Since "earnings and profits" generally
includes the full amount of any Fund dividend, and alternative minimum
taxable income does not include the portion of the Fund's dividend
attributable to municipal bonds which are not private activity bonds, the
difference will be included in the calculation of the corporation's
alternative minimum tax.
Dividends of the Fund representing net interest income earned on some
temporary investments and any realized net short-term gains are taxed as
ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and
distributions is provided annually.
STATE AND LOCAL TAXES
Because interest received by the Fund may not be exempt from all state and
local income taxes, shareholders may be required to pay state and local
taxes on dividends received from the Fund. Shareholders are urged to consult
their own tax advisers regarding the status of their accounts under state
and local tax laws.
PERFORMANCE INFORMATION
From time to time, the Fund advertises its total return, yield, and tax-
equivalent yield for each class of Shares including Class F Shares as
described under "Other Classes of Shares."
Total return represents the change, over a specific period of time, in the
value of an investment in each class of Shares after reinvesting all income
and capital gain distributions. It is calculated by dividing that change by
the initial investment and is expressed as a percentage.
The yield of each class of Shares is calculated by dividing the net
investment income per share (as defined by the Securities and Exchange
Commission) earned by each class of Shares over a thirty day period by the
maximum offering price per share of each class on the last day of the
period. This number is then annualized using semi-annual compounding. The
tax-equivalent yield of each class of Shares is calculated similarly to the
yield, but is adjusted to reflect the taxable yield that each class would
have had to earn to equal its actual yield, assuming a specific tax rate.
The yield and the tax-equivalent yield do not necessarily reflect income
actually earned by each class of Shares and, therefore, may not correlate to
the dividends or other distributions paid to shareholders.
The performance information reflects the effect of the maximum sales charge
and other similar non-recurring charges, such as the contingent deferred
sales charge, which, if excluded, would increase the total return, yield,
and tax-equivalent yield.
Total return, yield, and tax-equivalent yield will be calculated separately
for Class A Shares, Class B Shares, Class C Shares, and Class F Shares.
From time to time, advertisements for Class A Shares, Class B Shares, and
Class C Shares may refer to ratings, rankings, and other information in
certain financial publications and/or compare the performance of Class A
Shares, Class B Shares, and Class C Shares to certain indices.
OTHER CLASSES OF SHARES
The Fund also offers another class of shares called Class F Shares. Class F
Shares are sold primarily to customers of financial institutions subject to
a front-end sales charge, a contingent deferred sales charge and a minimum
initial investment of $1,500.
Shares and Class F Shares are subject to certain of the same expenses.
Expense differences, however, between Shares and Class F Shares may affect
the performance of each class.
To obtain more information and a prospectus for Class F Shares, investors
may call 1-800-245-5051 or contact their financial institution.
APPENDIX
MUNICIPAL BOND RATING DEFINITIONS
STANDARD AND POOR'S RATINGS GROUP
AAA--Debt rated "AAA" has the highest rating assigned by Standard & Poor's
Ratings Group ("S&P"). Capacity to pay interest and repay principal is
extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher rated categories.
BB--Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The "BB" rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied "BBB" rating.
MOODY'S INVESTORS SERVICE, INC.
AAA--Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA--Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in "Aaa" securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in "Aaa" securities.
A--Bonds which are rated "A" possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
BAA--Bonds which are rated "Baa" are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA--Bonds which are "Ba" are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
ADDRESSES
Federated Municipal Opportunities Fund, Inc.
Class A Shares Federated Investors Tower
Class B Shares Pittsburgh, Pennsylvania 15222-3779
Class C Shares
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, Massachusetts 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder
Services Company P.O. Box 8600
Boston, Massachusetts 02266-8600
Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
FEDERATED MUNICIPAL
OPPORTUNITIES FUND, INC.
(FORMERLY, FORTRESS MUNICIPAL INCOME FUND, INC.)
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
Prospectus
An Open-End, Diversified
Management Investment Company
May , 1996
---------
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779
Cusip 349557108
8092709A (5/96)
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
(FORMERLY, FORTRESS MUNICIPAL INCOME FUND, INC.)
CLASS F SHARES
PROSPECTUS
The Class F Shares of Federated Municipal Opportunities Fund, Inc. (the
"Fund") represent interests in an open-end, diversified management
investment company (a mutual fund) that 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.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED 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.
This prospectus contains the information you should read and know before
you invest in Class F Shares of the Fund. Keep this prospectus for future
reference.
The Fund has also filed a Statement of Additional Information for Class A
Shares, Class B Shares, Class C Shares, and Class F Shares dated May ,
------
1996, with the Securities and Exchange Commission. The information contained
in the Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of the Statement of Additional
Information or a paper copy of this prospectus, if you have received your
prospectus electronically, free of charge by calling 1-800-245-5051. To
obtain other information or to make inquiries about the Fund, contact your
financial institution.
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. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated May , 1996
-------
SUMMARY OF FUND EXPENSES 1
GENERAL INFORMATION 2
INVESTMENT INFORMATION 3
Investment Objective 3
Investment Policies 3
Portfolio Turnover 4
Municipal Bonds 4
Investment Risks 5
Investment Limitations 6
NET ASSET VALUE 6
INVESTING IN CLASS F SHARES 7
Share Purchases 7
Minimum Investment Required 8
What Shares Cost 8
Eliminating the Sales Charge 8
Systematic Investment Program 10
Exchange Privilege 10
Certificates And Confirmations 10
Dividends And Distributions 11
REDEEMING CLASS F SHARES 11
Through a Financial Institution11
Directly by Mail 11
Contingent Deferred Sales
Charge 12
Systematic Withdrawal Program 13
Accounts with Low Balances 13
FUND INFORMATION 13
Management of the Fund 13
Distribution of Class F Shares 14
Administration of the Fund 15
SHAREHOLDER INFORMATION 16
Voting Rights 16
TAX INFORMATION 16
Federal Income Tax 16
State and Local Taxes 17
PERFORMANCE INFORMATION 17
OTHER CLASSES OF SHARES 17
FINANCIAL HIGHLIGHTS 18
APPENDIX 20
ADDRESSES 21
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
SUMMARY OF FUND EXPENSES
CLASS F SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ........ 1.00%
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) ........ None
Contingent Deferred Sales Charge
(as a percentage of original purchase price or redemption proceeds,
as applicable) (1) ....................... 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)
..............................None
Exchange Fee........................................ None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee...................................... 0.60%
12b-1 Fee (2)....................................... 0.00%
Total Other Expenses ............................... 0.48%
Shareholder Services Fee ............ 0.25%
Total Operating Expenses ........................... 1.08%
(1) The contingent deferred sales charge is 1.00% of the lesser of the
original purchase price or the net asset value of shares redeemed within
four years of their purchase date. For a more complete description see
"Contingent Deferred Sales Charge."
(2) The Fund has no present intention of paying or accruing the 12b-1 fee
during the fiscal year ending August 31, 1996. If the Fund were paying or
accruing the 12b-1 fee, the Fund would be able to pay up to 0.25% of its
average daily net assets for the 12b-1 fee. See "Fund Information."
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Fund will bear, either
directly or indirectly. For more complete descriptions of the various costs
and expenses, see "Fund Information." Wire-transferred redemptions of less
than $5,000 may be subject to additional fees.
EXAMPLE 1 year 3 years 5 years 10 years
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period. $31 $55 $69 $140
You would pay the following expenses on the same
investment, assuming no redemption. $21 $44 $69 $140
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
(FORMERLY, FORTRESS MUNICIPAL INCOME FUND, INC.)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated October 12, 1995 on the Fund's
financial statements for the year ended August 31, 1995, and on the
following table for each of the periods presented, is included in the Annual
Report dated August 31, 1995, which is incorporated by reference. This
table should be read in conjunction with the Fund's financial statements and
notes thereto, which may obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991 1990 1989 1988 1987(A)
NET ASSET VALUE,
BEGINNING OF PERIOD $10.56 $11.28 $10.78 $10.39 $10.00 $10.23 $9.76 $10.07 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.63 0.61 0.62 0.66 0.70 0.72 0.74 0.78 0.26
Net realized and
unrealized gain (loss)
on investments 0.15 (0.73) 0.51 0.39 0.40 (0.23) 0.49 (0.36) 0.07
Total from investment
operations 0.78 (0.12) 1.13 1.05 1.10 0.49 1.23 0.42 0.33
LESS DISTRIBUTIONS
Distributions from net
investment income (0.63) (0.60) (0.63) (0.66) (0.71) (0.72) (0.76) (0.73) (0.26)
NET ASSET VALUE, END
OF PERIOD $10.71 $10.56 $11.28 $10.78 $10.39 $10.00 $10.23 $9.76 $10.07
TOTAL RETURN
(B) 7.73% (1.06%) 10.86% 10.45% 11.37% 4.98% 13.09% 4.43% 3.48%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.08%* 1.09% 1.09% 1.05% 1.02% 1.01% 0.90% 1.02% 0.86%(c)*
Net investment
income 6.18%* 5.56% 5.65% 6.18% 6.86% 7.07% 7.27% 8.03% 7.14%(c)*
Expense waiver/
reimbursement (d) 0.00%* 0.00% 0.00% 0.14% 0.33% 0.39% 0.83% 0.70% 0.29%(c)*
SUPPLEMENTAL DATA
Net assets,
end of period
(000 omitted)
$426,010 $472,232 $458,331 $248,768 $135,628 $89,907 $62,501 $25,151 $22,829
Portfolio turnover
13% 27% 7% 14% 18% 24% 24% 34% 0%
(a) Reflects operations for the period from April 10, 1987, (date of
initial public investment) to August 31, 1987. For the peroid from the
start of business, April 1, 1987 to April 9, 1987, net investment
aggregating $0.01 per share was distributed to the Fund's investment
adviser. Such distribution represented the net investment income of the
Fund prior to the initial public offering of the Fund shares which
commenced on April 10, 1987.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and
net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT, DATED AUGUST 31, 1995, WHICH CAN BE OBTAINED FREE
OF CHARGE.
GENERAL INFORMATION
The Fund was incorporated under the laws of the State of Maryland on
November 26, 1986.
The Articles of Incorporation permit the Fund to offer separate classes of
shares. As of March 31, 1995, the Corporation changed its name from Fortress
Municipal Income Fund, Inc. to Federated Municipal Opportunities Fund, Inc.
With respect to this Fund, as of the date of this prospectus, the Board of
Directors ("Directors") has established four classes of shares known as
Class A Shares, Class B Shares, Class C Shares, and Class F Shares. This
prospectus relates only to the Class F Shares ("Shares") of the Fund.
The Fund is designed primarily for individuals seeking high current
income through a professionally managed, diversified portfolio of municipal
bonds. A minimum initial investment of $1,500 is required. Class F Shares
are sold at net asset value plus an applicable sales charge and are redeemed
at net asset value. However, a contingent deferred sales charge is imposed
on certain Shares, other than Shares purchased through reinvestment of
dividends, which are redeemed within one to four years of their purchase
dates.
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide a high level of current
income which is generally exempt from the federal regular income tax
(federal regular income tax does not include the federal alternative minimum
tax). The investment objective cannot be changed without approval of
shareholders. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by following the investment
policies described in this prospectus.
The Fund pursues its investment objective by investing primarily in a
diversified portfolio of municipal bonds. The Fund invests its assets so
that at least 80% of its annual interest income is exempt from federal
regular income tax. The Fund may invest up to but less than 35% of its net
assets in lower quality municipal bonds. These bonds will usually offer
higher yields than higher-rated bonds but involve greater investment risk at
the time of issue. (See "Investment Risks.")
INVESTMENT POLICIES
Unless otherwise designated, the investment policies described below may
be changed by the Directors without shareholder approval. Shareholders will
be notified before any material change in these policies becomes
effective.
ACCEPTABLE INVESTMENTS. The 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. It is
likely, however, that shareholders will be required to include interest from
a portion of the municipal bonds owned by the Fund in calculating the
federal individual alternative minimum tax or the federal alternative
minimum tax for corporations.
CHARACTERISTICS. The municipal bonds which the Fund buys are rated Ba or
higher by Moody's Investors Service, Inc. ("Moody's") or rated BB or higher
by Standard & Poor's Ratings Group ("S&P"). The 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 Fund may buy bonds
which are unrated but which the adviser judges to be similar in quality to
those rated bonds which it purchases. A description of the ratings
categories is contained in the Appendix to this prospectus.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions
are arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete these
transactions may cause the Fund to miss a price or yield considered to be
advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may
vary from the purchase prices. Accordingly, the Fund may pay more/less than
the market value of the securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it appropriate to do so. In addition, the Fund may enter in
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits
or losses upon the sale of such commitments.
TEMPORARY INVESTMENTS. The Fund invests its assets so that at least 80% of
its annual interest income is exempt from the federal regular income tax,
except when investing for "defensive" purposes as described below. This
policy cannot be changed without approval of shareholders. From time to time
on a temporary basis, or when the investment adviser determines that market
conditions call for a temporary defensive posture, the Fund may invest in
short-term tax-exempt or taxable temporary investments. These temporary
investments include: fixed or variable rate notes issued by or on behalf of
municipal or corporate issuers; obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities; other debt securities;
commercial paper; certificates of deposit of banks; and repurchase
agreements (arrangements in which the organization selling the Fund a bond
or temporary investment agrees at the time of sale to repurchase it at a
mutually agreed upon time and price).
There are no rating requirements applicable to temporary investments.
However, the investment adviser will limit temporary investments to those it
considers to be of good quality.
OTHER INVESTMENT TECHNIQUES. The Fund may 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. These rights
may be referred to as "liquidity puts" or "standby commitments."
The Fund may also hedge all or a portion of its investments by entering into
futures contracts or options on them. Any gains realized on futures
contracts and options thereon are taxable. The Fund will notify shareholders
before it engages in these futures transactions.
PORTFOLIO TURNOVER
Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities in its portfolio will be sold whenever the
Fund's investment adviser believes it is appropriate to do so in light of
the Fund's investment objective, without regard to the length of time a
particular security may have been held.
MUNICIPAL BONDS
Municipal bonds are generally issued to finance public works such as
airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. Municipal bonds are
also issued to repay outstanding obligations, to raise funds for general
operating expenses, and to make loans to other public institutions and
facilities. Certain types of "private activity" municipal bonds are issued
to obtain funding for privately operated facilities.
There are two categories of municipal bonds: general obligation and revenue.
General obligation bonds are backed by the taxing power of the issuing
municipality. Revenue bonds are backed by the revenues of a project or
facility. Payment of principal and interest on such bonds is dependent
solely on the revenue generated by the facility financed by the bond or
other specified sources of revenue or collateral. Private activity bonds are
typically one type of "revenue" bonds.
In most cases, lower quality bonds are private activity bonds or other
revenue bonds which are not payable from general tax revenues. The Fund may
invest more than 25% of the value of its assets in private activity bonds
which may result in more than 25% of the Fund's assets being invested in one
industry. It is also possible that the Fund may from time to time invest
more than 25% of its assets in health care facilities revenue obligations,
housing agency revenue obligations or electric utility obligations.
Economic, business, political and other developments generally affecting the
revenues of issuers in such a market segment (for example, proposed
legislation or pending court decisions affecting the financing of projects
and market factors affecting the demand for their services or products) may
have a general adverse impact on all municipal bonds in the segment.
The Fund does not intend to purchase securities if, as a result of such
purchase, more than 25% of the value of its total assets would be invested
in the securities of governmental subdivisions located in any one state,
territory or possession of the United States.
INVESTMENT RISKS
The value of Shares will fluctuate. The amount of this fluctuation is
dependent upon the quality and maturity of the municipal bonds in the Fund's
portfolio as well as on market conditions. Generally speaking, the lower
quality, long-term bonds in which the 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. Thus, if market interest
rates have increased from the time a bond was purchased, the bond, if sold,
might be sold at a price less than its cost. Similarly, if market interest
rates have declined from the time a bond was purchased, the bond, if sold,
might be sold at a price greater than its cost. (In either instance, if the
bond was held to maturity, no loss or gain normally would be realized as a
result of interim market fluctuations.)
Prices of lower grade bonds also fluctuate with changes in the perceived
quality of the credit of their issuers. Consequently, shares may not be
suitable for persons who cannot assume the somewhat greater risks of capital
depreciation associated with higher tax-exempt income yields. In addition,
bonds rated "BBB" by S& P or "Baa" by Moody's have speculative
characteristics. Changes in economic conditions or other circumstances are
more likely to lead to weakened capacity to make principal and interest
payments than higher rated bonds.
A large portion of the Fund's portfolio may be invested in bonds whose
interest payments are from revenues of similar projects (such as housing or
hospitals) or where issuers share the same geographic location. As a result,
the Fund may be more susceptible to similar economic, political or
regulatory developments than would a portfolio of bonds with a greater
geographic and project variety. This susceptibility may result in greater
fluctuations in share price.
Many issuers of municipal bonds which have characteristics of rated bonds
choose to not have their obligations rated. Unrated bonds may carry a
greater risk and a higher yield than rated securities. Although unrated
bonds are not necessarily of lower quality, the market for them may not be
as broad as that for rated bonds since many investors rely solely on the
major rating agencies for credit appraisal.
Further, the lower rated or unrated municipal bonds which the Fund may
purchase are frequently traded only in markets where the number of potential
purchasers and sellers is limited. This consideration may have the effect of
limiting the availability of such bonds for the Fund to purchase and may
also have the effect of limiting the ability of the Fund to sell such bonds
at their fair value either to meet redemption requests or to respond to
changes in the economy or the financial markets. The Fund will not invest
more than 10% of its total assets in securities which are not readily
marketable.
REDUCING RISKS OF LOWER-RATED SECURITIES. The Fund's investment adviser
believes that the risks of investing in lower rated securities can be
reduced. The professional portfolio management techniques used by the Fund
to attempt to reduce these risks include:
o Credit Research. When purchasing bonds, rated or unrated, the
Fund's investment adviser performs its own credit analysis in
addition to using recognized rating agencies. This credit analysis
considers the economic feasibility of revenue bond project financing
and general purpose borrowings, the financial condition of the
issuer or guarantor with respect to liquidity, cash flow and ability
to meet anticipated debt service requirements, and political
developments that may affect credit quality.
o Diversification. The Fund invests in securities of many different
issuers to reduce portfolio risks.
o Economic Analysis. The Fund's adviser also considers trends in the
overall economy, in geographic areas, in various industries, and in
the financial markets.
INVESTMENT LIMITATIONS
The Fund will not:
o borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an arrangement to buy it back on a
set date) or pledge securities except, under certain circumstances,
the Fund may, exclusive of custodian intra-day cash advances and the
collateralization of such advances, borrow up to one-third of the
value of its total assets and pledge up to 10% of the value of those
assets to secure such borrowings; or
o invest more than 10% of its net assets in securities subject
to restrictions on resale under the Securities Act of 1933, except
for certain restricted securities which meet the criteria for
liquidity as established by the directors.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Directors without shareholder approval. Shareholders will be notified before
any material change in these limitations becomes effective.
The Fund will not:
o invest more than 5% of its total assets in securities of one
issuer (except cash and cash items and U.S. government obligations);
or
o invest 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.
NET ASSET VALUE
The Fund's net asset value per Share fluctuates. The net asset value for
Shares is determined by adding the interest of the Class F Shares in the
market value of all securities and other assets of the Fund, subtracting the
interest of the Class F Shares in the liabilities of the Fund and those
attributable to the Class F Shares, and dividing the remainder by the total
number of Class F Shares outstanding. The net asset value for Class F Shares
may differ from that of Class A Shares, Class B Shares, and Class C Shares
due to the variance in daily net income realized by each class. Such
variance will reflect only accrued net income to which the shareholders of a
particular class are entitled.
INVESTING IN CLASS F SHARES
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open. Shares
of the Fund may be purchased through an investment dealer who has a sales
agreement with the distributor, Federated Securities Corp., or directly from
Federated Securities Corp. either by mail or wire. The Fund reserves the
right to reject any purchase request.
THROUGH A FINANCIAL INSTITUTION. An investor may call his financial
institution (such as a bank or an investment dealer) to place an order to
purchase Shares. Purchase orders through a registered broker/dealer must be
received by the broker before 4:00 P.M. (Eastern time) and must be
transmitted by the broker to the Fund before 5:00 P.M. (Eastern time) in
order for Shares to be purchased at that day's price. Purchase orders
through other financial institutions must be received by the financial
institution and transmitted to the Fund before 4:00 P.M. (Eastern time) in
order for Shares to be purchased at that day's price. Orders through a
financial institution are considered received when the Fund is notified of
the purchase order. It is the financial institution's responsibility to
transmit orders promptly.
The financial institution which maintains investor accounts with the Fund
must do so on a fully disclosed basis unless it accounts for share ownership
periods used in calculating the contingent deferred sales charge (see
"Contingent Deferred Sales Charge"). In addition, advance payments made to
financial institutions may be subject to reclaim by the distributor for
accounts transferred to financial institutions which do not maintain
investor accounts on a fully disclosed basis and do not account for share
ownership periods (see "Supplemental Payments to Financial Institutions").
DIRECTLY BY MAIL.
To purchase Shares directly from Federated Securities Corp.:
o complete and sign the application available from the Fund;
o enclose a check made payable to Federated Municipal
Opportunities Fund, Inc.; and
o send both to the Fund's transfer agent, Federated Shareholder
Services Company, P.O. Box 8600, Boston, MA 02266-8600.
Purchases by mail are considered received after payment by check is
converted by the transfer agent's bank, State Street Bank, into federal
funds. This is generally the next business day after State Street Bank
receives the check.
DIRECTLY BY WIRE. To purchase Shares directly from Federated Securities
Corp. by Federal Reserve wire, call the Fund. All information needed will be
taken over the telephone, and the order is considered received when the
transfer agent's bank receives payment by wire. Shares cannot be purchased
by wire on holidays when wire transfers are restricted. Questions on wire
purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $1,500. Subsequent investments
must be in amounts of at least $100.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order
is received, plus a sales charge of 1% of the offering price (which is 1.01%
of the net amount invested). There is no sales charge for purchases of $1
million or more. However, those unaffiliated institutions through whom
Shares are purchased may charge fees for services provided which may be
related to the ownership of Shares. This prospectus should, therefore, be
read together with any agreement between the customer and the institution
with regard to services provided, the fees charged for these services, and
any restrictions and limitations imposed. No sales charge is imposed for
Shares purchased through bank trust departments or investment advisers
registered under the Investment Advisers Act of 1940 purchasing on behalf of
their clients.
The net asset value is determined as of the close of trading (normally
4:00 p.m., Eastern time) on the New York Stock Exchange, Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; or (iii) the
following holidays: New Year's Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Under certain circumstances described under "Redeeming Class F Shares,"
shareholders may be charged a contingent deferred sales charge by the
distributor at the time Shares are redeemed.
DEALER CONCESSION. For sales of Shares of the Fund, the distributor will
normally receive up to 100% of the sales charge retained by it. The sales
charge for Shares sold other than through registered broker/dealers will be
retained by Federated Securities Corp. Federated Securities Corp. may pay
fees to banks out of the sales charge in exchange for sales and/or
administrative services performed on behalf of the bank's customers in
connection with the initiation of customer accounts and purchases of
Shares.
ELIMINATING THE SALES CHARGE
The sales charge can be eliminated on the purchase of Shares through:
o quantity discounts and accumulated purchases;
o signing a 13-month letter of intent;
o using the reinvestment privilege; or
o concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. There is no sales charge for
purchases of $1 million or more. The Fund will combine purchases made on the
same day by the investor, his spouse, and his children under age 21 when it
calculates the sales charge. In addition, the sales charge is eliminated for
purchases of $1 million or more made at one time by a trustee or fiduciary
for a single trust estate or a single fiduciary account.
If an additional purchase of Shares is made, the Fund will consider the
previous purchases still invested in Shares. For example, if a shareholder
already owns Shares having a current value at the public offering price of
$900,000, and he purchases $100,000 or more at the current public offering
price, there will be no sales charge on the additional purchase.
The Fund will also combine purchases for the purpose of reducing the
contingent deferred sales charge imposed on some Share redemptions. For
example, if a shareholder already owns Shares having a current value at
public offering price of $1 million and purchases an additional $1 million
at the current public offering price, the applicable contingent deferred
sales charge would be reduced to 0.50% of those additional Shares. For more
information on the levels of contingent deferred sales charges and holding
periods, see the section entitled "Contingent Deferred Sales Charge."
To receive the sales charge elimination and/or the contingent deferred
sales charge reduction, Federated Securities Corp. must be notified by the
shareholder in writing or by their financial institution at the time the
purchase is made that Shares are already owned or that purchases are being
combined. The Fund will eliminate the sales charge and/or reduce the
contingent deferred sales charge after it confirms the purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $1
million of Shares over the next 13 months, the sales charge may be
eliminated by signing a letter of intent to that effect. This letter of
intent includes a provision for a sales charge elimination depending on the
amount actually purchased within the 13-month period and a provision for the
Fund's custodian to hold 1.00% of the total amount intended to be purchased
in escrow (in Shares of the Fund) until such purchase is completed.
The 1.00% held in escrow will be applied to the shareholder's account at
the end of the 13-month period unless the amount specified in the letter of
intent, which must be $1 million or more of Shares, is not purchased. In
this event, an appropriate number of escrowed Shares may be redeemed in
order to realize the 1.00% sales charge.
This letter of intent also includes a provision for reductions in the
contingent deferred sales charge and holding period depending on the amount
actually purchased within the 13-month period. For more information on the
various levels of contingent deferred sales charges and holding periods, see
the section entitled "Contingent Deferred Sales Charge."
This letter of intent will not obligate the shareholder to purchase
Shares. The letter may be dated as of a prior date to include any purchases
made within the past 90 days.
REINVESTMENT PRIVILEGE. If Shares in the Fund have been redeemed, the
shareholder has a one-time right, within 120 days, to reinvest the
redemption proceeds at the next-determined net asset value without any sales
charge. Federated Securities Corp. must be notified by the shareholder in
writing or by his financial institution of the reinvestment in order to
receive this elimination of the sales charge. If the shareholder redeems his
Shares, there may be tax consequences.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge
elimination, a shareholder has the privilege of combining concurrent
purchases of two or more funds offering Class F Shares, the purchase price
of which includes a sales charge. For example, if a shareholder concurrently
invested $400,000 in Class F Shares of certain of the funds advised by
subsidiaries of Federated Investors ("the Federated Funds") and $600,000 in
Shares, the sales charge would be eliminated.
To receive this sales charge elimination, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at
the time the concurrent purchases are made. The Fund will eliminate the
sales charge after it confirms the purchases.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their
investment on a regular basis. Under this program, funds may be
automatically withdrawn monthly from the shareholder's checking account and
invested in Shares at the net asset value next determined after an order is
received by State Street Bank, plus the 1.00% sales charge for purchases
under $1 million. A shareholder may apply for participation in this program
through Federated Securities Corp.
EXCHANGE PRIVILEGE
The Fund has exchange privileges with the Class F Shares of the following
Federated Funds:
Federated American Leaders Fund, Inc.; Federated California Municipal Income
Fund; Federated Adjustable Rate U.S. Government Fund, Inc.; Federated Bond
Fund; Federated Government Income Securities, Inc.; Federated Equity Income
Fund, Inc.; Federated Limited Term Fund; Federated Limited Term Municipal
Fund; Federated New York Municipal Income Fund; Federated Ohio Municipal
Income Fund; Federated Strategic Income Fund; Federated Utility Fund; and
Federated World Utility Fund.
Shares in Federated Municipal Opportunities Fund, Inc. or in the
Federated Funds may be exchanged at net asset value without a sales charge
(if previously paid) or a contingent deferred sales charge. The exchange
privilege is available to shareholders residing in any state in which the
Shares being acquired may be legally sold.
Shares of certain of the Federated Funds which are advised by
subsidiaries or affiliates of Federated Investors may also be exchanged for
Shares at net asset value (plus a sales charge, if applicable). With the
exception of exchanges into other Federated Funds, such exchanges may be
subject to a contingent deferred sales charge and possibly a sales
charge.
Shareholders using the exchange privilege must exchange Shares having a
net asset value which at least meets the minimum investment for the fund
into which the exchange is being made. Shareholders who desire to
automatically exchange Shares of a pre-determined amount on a monthly,
quarterly, annual or other periodic basis may take advantage of a systematic
exchange privilege. Further information on these exchange privileges is
available by calling Federated Securities Corp. or the shareholder's
financial institution.
Before a financial institution may request exchange by telephone on behalf
of a shareholder, an authorization form permitting the Fund to accept
exchange by telephone must first be completed. Exchange instructions may be
recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
Exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending on the circumstances, a short or long-term capital
gain or loss may be realized. Before making any exchange, a shareholder must
receive a prospectus of the fund for which the exchange is being made.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Shareholder Services Company
maintains a share account for each shareholder. Share certificates are not
issued unless requested on the application or by contacting the transfer
agent.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly statements are sent to report dividends paid during the
month.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and paid monthly to all shareholders invested in
the Fund on the record date. Distributions of any net realized long-term
capital gains will be made at least once every twelve months. Dividends and
distributions are automatically reinvested in additional Shares on payment
dates at the ex-dividend date net asset value without a sales charge unless
cash payments are requested by shareholders on the application or by writing
to Federated Shareholder Services Company.
REDEEMING CLASS F SHARES
The Fund redeems Shares at their net asset value next determined after
Federated Shareholder Services Company receives the redemption request.
Redemptions will be made on days on which the Fund computes its net asset
value. Redemption requests must be received in proper form and can be made
through a financial institution or directly from the Fund by written
request.
THROUGH A FINANCIAL INSTITUTION
A shareholder may redeem Shares by calling his financial institution
(such as a bank or an investment dealer) to request the redemption. Shares
will be redeemed at the net asset value next determined after the Fund
receives the redemption request from the financial institution. Redemption
requests through a registered broker/dealer must be received by the broker
before 4:00 P.M. (Eastern time) and must be transmitted by the broker to the
Fund before 5:00 P.M. (Eastern time) in order for Shares to be redeemed at
that day's net asset value. Redemption requests through other financial
institutions must be received by the financial institution and transmitted
to the Fund before 4:00 P.M. (Eastern time) in order for Shares to be
redeemed at that day's net asset value. The financial institution is
responsible for promptly submitting redemption requests and providing proper
written redemption instructions to the Fund. The financial institution may
charge customary fees and commissions for this service. If, at any time, the
Fund shall determine it necessary to terminate or modify this method of
redemption, shareholders will be promptly notified.
Before a financial institution may request redemption by telephone on behalf
of a shareholder, an authorization form permitting the Fund to accept
redemption requests by telephone must first be completed. Telephone
redemption instructions may be recorded. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. In the event of drastic economic or
market changes, a shareholder may experience difficulty in redeeming by
telephone. If such a case should occur, another method of redemption, such
as "Directly by Mail," should be considered.
DIRECTLY BY MAIL
Shares may be redeemed in any amount by mailing a written request to:
Federated Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-
8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name and the Class designation;
the account name as registered with the Fund; the account number; and the
number of shares to be redeemed or the dollar amount requested. All owners
of the account must sign the request exactly as the shares are registered.
Normally, a check for the proceeds is mailed within one business day, but in
no event more than seven days, after the receipt of a proper written
redemption request. Dividends are paid up to and including the day that a
redemption request is processed.
Shareholders requesting a redemption of any amount to be sent to an
address other than that on record with the Fund or a redemption payable
other than to the shareholder of record must have their signatures
guaranteed by a commercial or savings bank, trust company or savings
association whose deposits are insured by an organization which is
administered by the Federal Deposit Insurance Corporation; a
member firm of a domestic stock exchange; or any other "eligible guarantor
institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
RECEIVING PAYMENT. A check for the proceeds is mailed within seven
days after receipt of proper written redemption instructions from a broker
or from the shareholder.
CONTINGENT DEFERRED SALES CHARGE
Shareholders redeeming Shares from their Fund accounts within certain
time periods of the purchase date of those Shares will be charged a
contingent deferred sales charge by the Fund's distributor of the lesser of
the original price or the net asset value of the Shares redeemed as
follows:
CONTINGENT
DEFERRED
AMOUNT OF PURCHASE SHARES HELD SALES
CHARGE
Up to $1,999,999 4 years or less 1.00%
$2,000,000 to $4,999,999 2 years or less
0.50%
$5,000,000 or more 1 year or less 0.25%
In instances in which Shares have been acquired in exchange for Class F
Shares of other Federated Funds, (i) the purchase price is the price of the
Shares when originally purchased and (ii) the time period during which the
Shares are held will run from the date of the original purchase. The
contingent deferred sales charge will not be imposed on Shares acquired
through: (i) the reinvestment of dividends or distributions of long-term
capital gains; or (ii) the exchange of Shares of Federated Government Income
Securities, Inc. where those Shares were purchased during that fund's
Charter Offering Period. In computing the amount of contingent deferred
sales charge for accounts with Shares subject to a single holding period, if
any, redemptions are deemed to have occurred first of Shares acquired
through the reinvestment of dividends and long-term capital gains, second of
purchases of Shares occurring prior to the number of years necessary to
satisfy the applicable hold period, and finally of purchases of Shares
occurring within the current hold period. For accounts with Shares subject
to multiple holding periods, the redemption sequence will be determined
first, with reinvested dividends and long-term capital gains, and second, on
a first-in, first-out basis.
The contingent deferred sales charge will not be imposed when a
redemption results from a return under the following circumstances: (i) a
total or partial distribution from a qualified plan, other than an IRA,
Keogh Plan, or a custodial account, following retirement; (ii) a total or
partial distribution from an IRA, Keogh Plan, or a custodial account, after
the beneficial owner attains age 59 1/2; or (iii) from the death or
disability of the beneficial owner. The exemption from the contingent
deferred sales charge for qualified plans, an IRA, Keogh Plan or a custodial
account does not extend to account transfers, rollovers, and other
redemptions made for purposes of reinvestment. Contingent deferred sales
charges are not charged in connection with exchanges of Shares for shares of
certain of the Federated Funds or in connection with redemptions by the Fund
of accounts with low balances. Shares originally purchased through a bank
trust department or investment adviser registered under the Investment
Advisers Act of 1940, to the extent that no advanced payments are made for
purchases made through such entities. In addition, Shares held in the Fund
by a financial institution for its own account which were originally
purchased by the financial institution directly from the Fund's distributor
without a sales charge may be redeemed without a contingent deferred sales
charge. For more information, see "Supplemental Payments to Financial
Institutions."
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive monthly or quarterly payments of a
predetermined amount may take advantage of the Systematic Withdrawal
Program. Under this program, Shares are redeemed to provide for periodic
withdrawal payments in an amount directed by the shareholder. Depending upon
the amount of the withdrawal payments, the amount of dividends paid and
capital gains distributions with respect to Shares, and the fluctuation of
the net asset value of Shares redeemed under this program, redemptions may
reduce, and eventually deplete, the shareholder's investment in the Fund.
For this reason, payments under this program should not be considered as
yield or income on the shareholder's investment in the Fund. To be eligible
to participate in this program, a shareholder must have invested at least
$10,000 in the Fund (at current offering price).
A shareholder may apply for participation in this program through
Federated Securities Corp. Due to the fact that Shares are sold with a sales
charge, it is not advisable for shareholders to purchase Shares while
participating in this program.
Contingent deferred sales charges are charged for Shares redeemed through
this program within four years of their purchase dates.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund
may redeem Shares in any account, and pay the proceeds to the shareholder if
the account balance falls below a required minimum value of $1,500. This
requirement does not apply, however, if the balance falls below $1,500
because of changes in the Share's net asset value.
Before Shares are redeemed to close an account, the shareholder is
notified in writing and allowed 30 days to purchase additional Shares to
meet the minimum requirement.
FUND INFORMATION
MANAGEMENT OF THE FUND
DIRECTORS. The Fund is managed by the Directors. The Directors are
responsible for managing the Fund's business affairs and for exercising all
the Fund's powers except those reserved for the shareholders. An Executive
Committee of the Directors handles the Director's responsibilities between
meetings of the Directors.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated Advisers, the Fund's investment adviser (the "Adviser"), subject
to direction by the Directors. The Adviser continually conducts investment
research and supervision for the Fund and is responsible for the purchase or
sale of portfolio instruments, for which it receives an annual fee from the
Fund.
Both the Corporation and the Adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Fund and its portfolio
securities. These codes recognize that such persons owe a fiduciary duty to
the Fund's shareholders and must place the interests of shareholders ahead
of the employees' own interest. Among other things, the codes: require
preclearance and periodic reporting of personal securities transactions;
prohibit personal transactions in securities being purchased or sold, or
being considered for purchase or sale, by the Fund; prohibit purchasing
securities in initial public offerings; and prohibit taking profits on
securities held for less than sixty days. Violations of the codes are
subject to review by the Directors, and could result in severe
penalties.
ADVISORY FEES. The Adviser receives an annual investment advisory fee
equal to 0.60 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee or reimburse the fund for
certain operating expenses. The Adviser can terminate this voluntary waiver
of its advisory fee at any time at its sole discretion. The Adviser has also
undertaken to reimburse the Fund for operating expenses in excess of
limitations established by certain states.
ADVISER'S BACKGROUND. Federated Advisers, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the Trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to
a number of investment companies. With over $80 billion invested across more
than 250 funds under management and/or administration by its subsidiaries,
as of December 31, 1995, Federated Investors is one of the largest mutual
fund investment managers in the United States. With more than 1,800
employees, Federated continues to be led by the management who founded the
company in 1955. The Federated Funds are presently at work in and through
4,000 financial institutions nationwide. More than 100,000 investment
professionals have selected the Federated Funds for their clients.
Mary Jo Ochson has been the Fund's portfolio manager since May 1996. Ms.
Ochson joined Federated Investors in 1982 and has been a Senior Vice
President of the Fund's investment adviser since January 1996. From 1988
through 1995, Ms. Ochson served as a Vice President of the Fund's investment
adviser. Ms. Ochson is a Chartered Financial Analyst and received her M.B.A.
in Finance from the University of Pittsburgh.
J. Scott Albrecht has been the Fund's portfolio manager since May 1996 Mr.
Albrecht joined Federated Investors in 1989 and has been a Vice President of
the Fund's investment adviser since 1994. From 1992 to 1994, Mr. Albrecht
served as an Assistant Vice President of the Fund's investment adviser. In
1991, Mr. Albrecht acted as an investment analyst. Mr. Albrecht is a
Chartered Financial Analyst and received his M.S. in Public Management from
Carnegie Mellon University.
Jonathan C. Conley has been the Fund's portfolio manager since July 1987.
Mr. Conley joined Federated Investors in 1979 and has been a Senior Vice
President of the Fund's Adviser since 1995. Mr. Conley was a Vice President
of the Fund's Adviser from 1982 to 1995. Mr. Conley is a Chartered Financial
Analyst and received his M.B.A. in Finance from the University of
Virginia.
DISTRIBUTION OF CLASS F SHARES
Federated Securities Corp. is the principal distributor for shares of the
Fund. It is a Pennsylvania corporation organized on November 14, 1969, and
is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES. Under a distribution plan
adopted in accordance with Investment Company Act Rule 12b-1 (the "Plan"),
the distributor may select financial institutions such as banks,
fiduciaries, custodians for public funds, investment advisers and
brokers/dealers to provide sales services or distribution-related support
services as agents for their clients or customers. The Fund is not currently
making payments for Class F Shares under the Distribution Plan, nor does it
anticipate doing so in the immediate future.
The distributor will pay financial institutions a fee based upon Shares
subject to the Plan and owned by their clients or customers. The schedules
of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Board of Directors of the Fund provided
that for any period the total amount of these fees shall not exceed an
annual rate of 0.25 of 1% of the average net asset value of shares subject
to the Plan held during the period by clients or customers of financial
institutions. The current annual rate of such fees is 0.25 of 1%. Any fees
paid by the distributor under the Plan, will be reimbursed from the assets
of the Fund.
In addition, the Fund has entered into a Shareholder Services Agreement
with Federated Shareholder Services, a subsidiary of Federated Investors,
under which the Fund may make payments up to 0.25 of 1% of the average daily
net asset value of the Fund to obtain certain personal services for
shareholders and to provide the maintenance of shareholder accounts. Under
the Shareholder Services Agreement, Federated Shareholder Services will
either perform shareholder services directly or will select financial
institutions to perform shareholder services. Financial institutions will
receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will
be determined from time to time by the Fund and Federated Shareholder
Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor will
pay brokers and financial institutions, for distribution and/or
administrative services, an amount equal to 1% of the offering price of the
shares acquired by their clients or customers on purchases up to $1,999,999,
0.50% of the offering price on purchases of $2,000,000 to $4,999,999, and
0.25% of the offering price on purchases of $5,000,000 or more. (This fee is
in addition to the 1% sales charge on purchases of less than $1 million.)
Any fees paid by the distributor pursuant to these administrative
arrangements will be reimbursed by the Adviser. The administrator may elect
to receive amounts less than those stated, which would reduce the stated
contingent deferred sales charge and/or the holding period used to calculate
the fee.
Furthermore, in addition to payments made pursuant to the Plan and
Shareholder Services Agreement, the distributor may pay a supplemental fee
from its own assets to financial institutions as financial assistance for
providing substantial sales services, distribution-related support services,
or shareholder services. The support may include sponsoring sales,
educational and training seminars at recreational-type facilities for their
employees, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Fund. Such assistance will be
predicated upon the amount of 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 the distributor
may be reimbursed by the Fund's Adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of
Federated Investors, provides administrative personnel and services
(including certain legal and financial reporting services) necessary to
operate the Fund. Federated Services Company provides these at an annual
rate which relates to the average aggregate daily net assets of all of the
Federated Funds as specified below:
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE FEDERATED FUNDS
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Services Company may choose voluntarily to waive a portion of its
fee.
SHAREHOLDER INFORMATION
VOTING RIGHTS
Each share of the Fund is entitled to one vote at all meetings of
shareholders. As of April 8, 1996, Merrill Lynch Pierce Fenner & Smith (as
owner of record holding shares for its clients), Jacksonville, Florida,
owned 27.05% of the voting securities of Class F Shares of the Fund, and,
therefore, may, for certain purposes, be deemed to control the Fund and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such
companies. Shareholders are not required to pay the federal regular income
tax on any dividends received from the Fund that represent net interest on
tax-exempt municipal bonds. However, under the Tax Reform Act of 1986,
dividends representing net interest earned on some municipal bonds may be
included in calculating the federal individual alternative minimum tax or
the federal alternative minimum tax for corporations.
The alternative minimum tax, up to 28% of alternative minimum taxable income
for individuals and 20% for corporations, applies when it exceeds the
regular tax for the taxable year. Alternative minimum taxable income is
equal to the regular taxable income of the taxpayer increased by certain
"tax preference" items not included in regular taxable income and reduced by
only a portion of the deductions allowed in the calculation of the regular
tax.
The Tax Reform Act of 1986 treats interest on certain "private activity"
bonds issued after August 7, 1986, as a tax preference item for both
individuals and corporations. Unlike traditional governmental purpose
municipal bonds, which finance roads, schools, libraries, prisons and other
public facilities, private activity bonds provide benefits to private
parties. The Fund may purchase all types of municipal bonds, including
private activity bonds. Thus, should it purchase any such bonds, a portion
of the Fund's dividends may be treated as a tax preference item.
In addition, in the case of a corporate shareholder, dividends of the Fund
which represent interest on municipal bonds may be subject to the 20%
corporate alternative minimum tax because the dividends are included in a
corporation's "adjusted current earnings." The corporate alternate minimum
tax treats 75% of the excess of a taxpayer's pre-tax "adjusted current
earnings" over the taxpayer's alternative minimum taxable income as a tax
preference item. "Adjusted current earnings" is based upon the concept of a
corporation's "earnings and profits." Since "earnings and profits" generally
includes the full amount of any Fund dividend, and alternative minimum
taxable income does not include the portion of the Fund's dividend
attributable to municipal bonds which are not private activity bonds, the
difference will be included in the calculation of the corporation's
alternative minimum tax.
Dividends of the Fund representing net interest income earned on some
temporary investments and any realized net short-term gains are taxed as
ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and
distributions is provided annually.
STATE AND LOCAL TAXES
Because interest received by the Fund may not be exempt from all state and
local income taxes, shareholders may be required to pay state and local
taxes on dividends received from the Fund. Shareholders are urged to consult
their own tax advisers regarding the status of their accounts under state
and local tax laws.
PERFORMANCE INFORMATION
From time to time, the Fund advertises its total return, yield, and tax-
equivalent yield for Class F Shares.
Total return represents the change, over a specific period of time, in
the value of an investment in Shares after reinvesting all income and
capital gain distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage.
The yield of Shares is calculated by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by
the Fund over a thirty day period by the maximum offering price per share of
Shares on the last day of the period. This number is then annualized using
semi-annual compounding. The tax-equivalent yield of Shares is calculated
similarly to the yield, but is adjusted to reflect the taxable yield that
Shares would have had to earn to equal its actual yield, assuming a specific
tax rate. The yield and the tax-equivalent yield do not necessarily reflect
income actually earned by Shares and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.
The performance information reflects the effect of the maximum sales charge
and other similar non-recurring charges, such as the contingent deferred
sales charge, which, if excluded, would increase the total return, yield,
and tax-equivalent yield.
Total return, yield and tax-equivalent yield will be calculated
separately for Class A Shares, Class B Shares, Class C Shares and Class F
Shares.
From time to time, advertisements for the Fund may refer to ratings,
rankings, and other information in certain financial publications and/or
compare the Fund's performance to certain indices.
OTHER CLASSES OF SHARES
The Fund also offers other classes of shares called Class A Shares, Class B
Shares and Class C Shares which are all sold primarily to customers of
financial institutions subject to certain differences.
Class A Shares are sold at net asset value subject to a front-end sales
charge, and a shareholder services fee, and are distributed pursuant to a
Rule 12b-1 Plan. Investments in Class A Shares are subject to a minimum
initial investment of $500.
Class B Shares are sold at net asset value subject to a contingent deferred
sales charge, a shareholder services fee, and are distributed pursuant to a
Rule 12b-1 Plan. Investments in Class B Shares are subject to a minimum
initial investment of $1,500.
Class C Shares are sold at net asset value subject to a contingent deferred
sales charge, a shareholder services fee, and are distributed pursuant to a
Rule 12b-1 Plan. Investments in Class C Shares are subject to a minimum
investment of $1,500.
Class A Shares, Class B Shares, Class C Shares and Class F Shares are
subject to certain of the same expenses. Expense differences, however,
between Class A Shares, Class B Shares, Class C Shares and Class F Shares
may affect the performance of each class.
To obtain more information and a combined prospectus for Class A Shares ,
Class B Shares and Class C Shares, investors may call 1-800-245-5051 or
contact their financial institution.
APPENDIX
MUNICIPAL BOND RATING DEFINITIONS
STANDARD AND POOR'S RATINGS GROUP
AAA--Debt rated "AAA" has the highest rating assigned by Standard & Poor's
Ratings Group ("S&P"). Capacity to pay interest and repay principal is
extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher rated categories.
BB--Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The "BB" rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied "BBB" rating.
MOODY'S INVESTORS SERVICE, INC.
AAA--Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA--Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in "Aaa" securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in "Aaa" securities.
A--Bonds which are rated "A" possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
BAA--Bonds which are rated "Baa" are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA--Bonds which are "Ba" are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
ADDRESSES
Federated Municipal Opportunities Fund, Inc.
Class F Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, Massachusetts 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company P.O. Box
8600
Boston, Massachusetts 02266-8600
Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
FEDERATED MUNICIPAL
OPPORTUNITIES FUND, INC.
(FORMERLY, FORTRESS MUNICIPAL INCOME FUND, INC.)
CLASS F SHARES
Prospectus
An Open-End, Diversified
Management Investment Company
May , 1996
-----
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779
Cusip 349557108
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
CLASS F SHARES
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Class A Shares, Class B Shares, and Class C Shares dated May
, 1996, and the prospectus for Class F Shares dated May , 1996,
----- ----
of Federated Municipal Opportunities Fund, Inc. (the "Fund"). This
Statement is not a prospectus itself. You may request a copy of a
prospectus or a paper copy of this Statement, if you have received it
electronically, free of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated May , 1996
-----
FEDERATED SECURITIES CORP.
A subsidiary of FEDERATED INVESTORS
GENERAL INFORMATION ABOUT THE FUND 1
INVESTMENT OBJECTIVE AND POLICIES 1
ACCEPTABLE INVESTMENTS 1
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS 1
TEMPORARY INVESTMENTS 1
REPURCHASE AGREEMENTS 1
REVERSE REPURCHASE AGREEMENTS 2
PORTFOLIO TURNOVER 2
INVESTMENT LIMITATIONS 2
FEDERATED MUNICIPAL OPPORTUNITIES
FUND, INC. MANAGEMENT 5
FUND OWNERSHIP 9
DIRECTORS COMPENSATION 10
INVESTMENT ADVISORY SERVICES 10
ADVISER TO THE FUND 10
ADVISORY FEES 11
BROKERAGE TRANSACTIONS 11
OTHER SERVICES 12
PURCHASING SHARES 12
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES 12
CONVERSION TO FEDERAL FUNDS 12
PURCHASES BY SALES REPRESENTATIVES, FUND
DIRECTORS, AND EMPLOYEES 13
DETERMINING NET ASSET VALUE 13
VALUING MUNICIPAL BONDS 13
USE OF AMORTIZED COST 13
EXCHANGE PRIVILEGE (CLASS F SHARES ONLY) 13
REDUCED SALES CHARGE 14
REQUIREMENTS FOR EXCHANGE 14
TAX CONSEQUENCES 14
MAKING AN EXCHANGE 14
REDEEMING SHARES 14
REDEMPTION IN KIND 14
TAX STATUS 14
THE FUND'S TAX STATUS 14
SHAREHOLDERS' TAX STATUS 15
TOTAL RETURN 15
YIELD 15
TAX-EQUIVALENT YIELD 16
TAX-EQUIVALENCY TABLE 16
PERFORMANCE COMPARISONS 17
ABOUT FEDERATED INVESTORS 17
FINANCIAL STATEMENTS 18
GENERAL INFORMATION ABOUT THE FUND
The Fund was incorporated under the laws of the State of Maryland on
November 26, 1986. It is qualified to do business as a foreign corporation
in Pennsylvania. Effective March 31, 1996, the name of the Fund changed
from Fortress Municipal Income Fund, Inc. to Federated Municipal
Opportunities Fund, Inc.
Shares of the Fund are offered in four classes, known as Class A Shares,
Class B Shares, Class C Shares and Class F Shares (individually and
collectively referred to as "Shares" as the context may require.) This
Statement of Additional Information relates to all four of the above-
mentioned classes of Shares.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide a high level of current income
which is generally exempt from federal regular income tax. The objective
cannot be changed without approval of shareholders.
ACCEPTABLE INVESTMENTS
The Fund invests primarily in municipal bonds.
CHARACTERISTICS
The municipal bonds in which the Fund invests have the characteristics
set forth in the prospectus.
If a bond loses its rating or has its rating reduced after the Fund has
purchased it, the Fund is not required to drop the bond from the
portfolio, but may consider doing so. If ratings made by Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group
("S&P") change because of changes in those organizations or in their
rating systems, the Fund will try to use comparable ratings as
standards in accordance with the investment policies described in the
Fund's prospectus.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund's records at the trade date. These assets are marked
to market daily and are maintained until the transaction has been settled.
The Fund does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than 20%
of the total value of its assets.
TEMPORARY INVESTMENTS
The Fund may also invest in temporary investments from time to time for
defensive purposes. The Fund does not presently intend to invest in
temporary investments other than repurchase agreements.
The Fund might invest in temporary investments:
o as a reaction to market conditions;
o while waiting to invest proceeds of sales of shares or portfolio
securities, although generally proceeds from sales of shares will
be invested in municipal bonds as quickly as possible; or
o in anticipation of redemption requests.
The Fund will not purchase temporary investments (other than securities of
the U.S. government, its agencies or instrumentalities) if, as a result of
the purchase, 25% or more of the value of its total assets would be invested
in any one industry. However, the Fund may, for temporary defensive
purposes, invest 25% or more of the value of its assets in cash or cash
items, U.S. Treasury bills or securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or instruments secured by
these money market instruments, such as repurchase agreements.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks, broker/dealers and
other recognized financial institutions sell U.S. government securities or
certificates of deposit to the Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price within one year
from the date of acquisition. The Fund or its custodian will take possession
of the securities subject to repurchase agreements, and these securities
will be marked-to-market daily. To the extent that the original seller does
not repurchase the securities from the Fund, the Fund could receive less
than the repurchase price on any sale of such securities. In the event that
such a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending court
action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Fund and allow retention or disposition of such securities. The Fund may
only enter into repurchase agreements with banks and other recognized
financial institutions such as broker/dealers which are found by the Fund's
adviser to be creditworthy pursuant to guidelines established by the Board
of Directors ("Directors"). From time to time, such as when suitable
municipal bonds are not available, the Fund may retain a portion of its
assets in cash. Any portion of the Fund's assets maintained in cash will
reduce the amount of assets in municipal bonds and thereby reduce the Fund's
yield.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. This transaction
is similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in
the future the Fund will repurchase the portfolio instrument by remitting
the original consideration plus interest at an agreed upon rate. The use of
reverse repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but
the ability to enter into reverse repurchase agreements does not ensure that
the Fund will be able to avoid selling portfolio instruments at a
disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in
a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated on the Fund's records at the trade date. These
assets are marked to market daily and are maintained until the transaction
is settled.
PORTFOLIO TURNOVER
The Fund will not attempt to set or meet a portfolio turnover rate since any
turnover would be incidental to transactions undertaken in an attempt to
achieve the Fund's investment objective. For the fiscal years ended August
31, 1995 and August 31, 1994, the portfolio turnover rates were 13% and 27%,
respectively.
INVESTMENT LIMITATIONS
BUYING ON MARGIN
The Fund will not purchase any securities on margin, but may obtain
such short-term credits as are necessary for clearance of transactions.
The deposit or payment by the Fund of initial or variation margin in
connection with financial futures contracts or related options
transactions is not considered the purchase of a security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may
borrow money and engage in reverse repurchase agreements in amounts up
to one-third of the value of its total assets, including the amounts
borrowed.
The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure or to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while
borrowings are outstanding. During the period any reverse repurchase
agreements are outstanding, but only to the extent necessary to assure
completion of the reverse repurchase agreements, the Fund will restrict
the purchase of portfolio instruments to money market instruments
maturing on or before the expiration date of the reverse repurchase
agreements.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may pledge assets
having a market value not exceeding the lesser of the dollar amounts
borrowed or 10% of the value of total assets at the time of the
borrowing. Neither the deposit of underlying securities and other
assets in escrow in connection with the writing of put or call options
on municipal bonds nor margin deposits for the purchase and sale of
financial futures contracts and related options are deemed to be a
pledge.
The preceding limitations regarding buying on margin, borrowing money, and
pledging assets do not apply to intra-day cash advances made by the Fund's
custodian, or the grant of a security interest in securities by the Fund to
its custodian to collateralize such intra-day cash advances, in order to
enable the Fund to settle securities purchases or to redeem shares of the
Fund.
INVESTING IN REAL ESTATE
The Fund will not buy or sell real estate, although it may invest in
securities of companies whose business involves the purchase or sale of
real estate or in securities which are secured by real estate or
interests in real estate.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, except that the Fund
may purchase and sell financial futures contracts and related options.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may
be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of restricted securities which the Fund may
purchase pursuant to its investment objective, policies, and
limitations.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities up
to one-third of the value of its total assets. This shall not prevent
the purchase or holding of municipal bonds, repurchase agreements, or
other transactions which are permitted by the Fund's investment
objective and policies.
SELLING SHORT
The Fund will not sell securities short.
RESTRICTED SECURITIES
The Fund will not invest more than 10% of its net assets in securities
subject to restrictions on resale under the Securities Act of 1933,
except for certain restricted securities which meet the criteria for
liquidity as established by the Directors.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies
except as part of a merger, consolidation, or other acquisition.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Directors without shareholder approval. Shareholders will be notified before
any material change in these limitations becomes effective.
DIVERSIFICATION OF INVESTMENTS
The Fund will not invest more than 5% of its total assets in the
securities of any one issuer (except cash and cash instruments,
securities issued or guaranteed by the U.S. government, its agencies,
or instrumentalities or instruments secured by money market instruments
such as repurchase agreements).
Under this limitation, each governmental subdivision, including states
and the District of Columbia, territories, possessions of the United
States or their political subdivisions, agencies, authorities,
instrumentalities, or similar entities, will be considered a separate
issuer if its assets and revenues are separate from those of the
governmental body creating it and the security is backed only by its
own assets and revenues.
Private activity bonds backed only by the assets and revenues of a non-
governmental user are considered to be issued solely by that user. If,
in the case of a private activity bond or government-issued security, a
governmental or other entity guarantees the security, such guarantee
would be considered a separate security issued by the guarantor as well
as the other issuer, subject to limited exclusions allowed by the
Investment Company Act of 1940.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of its total assets in industrial
development bonds where the payment of principal and interest is the
responsibility of companies with less than three years of operating
history.
INVESTING IN MINERALS
The Fund will not purchase or sell oil, gas, or other mineral
exploration or development programs or leases.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS OF THE FUND
The Fund will not purchase or retain the securities of any issuer if
the Officers and Directors of the Fund or its investment adviser owning
individually more than 1/2 of 1% of the issuer's securities together
own more than 5% of the issuer's securities.
CRITERIA FOR LIQUIDITY OF RESTRICTED SECURITIES
The ability of the Board of Directors ("Directors") to determine the
liquidity of certain restricted securities is permitted under a
Securities and Exchange Commission ("SEC") Staff position set forth in
the adopting release for Rule 144A under the Securities Act of 1933
(the "Rule"). The Rule is a non-exclusive safe-harbor for certain
secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The secondary
market transactions involving securities subject to restrictions on
resale under federal securities laws. The Rule provides an exemption
from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further
enhance the liquidity of the secondary market for securities eligible
for resale under the Rule. The Fund believes that the Staff of the SEC
has left the question of determining the liquidity of all restricted
securities to the Directors. The Directors may consider the following
criteria in determining the liquidity of certain restricted securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and
the number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace
trades.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of the investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not result
in a violation of such restriction.
During the past fiscal year, the Fund did not (1) purchase or sell options
on securities, as permitted by the investment limitations, without first
notifying shareholders; (2) purchase "liquidity puts" or "standby
commitments" as described in the prospectus, engage in reverse repurchase
agreements, or borrow money in excess of 5% of the value of its total
assets; or (3) lend portfolio securities. The Fund does not expect to engage
in any of the above activities during the coming fiscal year.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S. branch
of a domestic bank or savings and loan having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment to be
"cash items."
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC. MANAGEMENT
Officers and Directors are listed with their addresses, birthdates, present
positions with Federated Municipal Opportunities Fund, Inc., and principal
occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Director
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Company .
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Director
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director or Trustee of the Funds; formerly, Senior
Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Director
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate ventures
in Southwest Florida; Director or Trustee of the Funds; formerly, President,
Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Director
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director or Trustee of the Funds; formerly, Vice Chairman and Director, PNC
Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Director
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Director
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian and
Montefiore Hospitals; Director or Trustee of the Funds.
Richard B. Fisher *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
President and Director
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Director
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director or Trustee of the Funds; formerly, Counsel, Horizon Financial,
F.A., Western Region.
Peter E. Madden
Seacliff
562 Bellevue Avenue
New port, RI
Birthdate: March 16, 1942
Director
Consultant; State Representative, Commonwealth of Massachusetts; Director or
Trustee of the Funds; formerly, President, State Street Bank and Trust
Company and State Street Boston Corporation.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Director
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee
of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Director
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Director
Professor, International Politics and Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online
Computer Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho
Management Center; Director or Trustee of the Funds; President Emeritus,
University of Pittsburgh; founding Chairman, National Advisory Council for
Environmental Policy and Technology and Federal Emergency Management
Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Director
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director or Trustee of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Director of the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research, Ltd.;
Executive Vice President and Director, Federated Securities Corp.; Trustee,
Federated Shareholder Services Company; Trustee or Director of some of the
Funds; President, Executive Vice President and Treasurer of some of the
Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.;
Trustee, Federated Shareholder Services Company; Director, Federated
Services Company; President and Trustee, Federated Shareholder Services;
Director, Federated Securities Corp.; Executive Vice President and Secretary
of the Funds.
David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President and Trustee, Federated Investors; Vice President,
Federated Shareholder Services; Executive Vice President, Federated
Securities Corp.; Treasurer of some of the Funds.
* This Director is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board
of Directors handles the responsibilities of the Board between meetings of
the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Annuity Management Series; Arrow
Funds; Automated Government Money Trust; Blanchard Funds; Blanchard Precious
Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc. ; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders Fund,
Inc.; Federated ARMs Fund; Federated Equity Funds; Federated Equity Income
Fund, Inc.; Federated Fund for U.S. Government Securities, Inc.; Federated
GNMA Trust; Federated Government Income Securities, Inc.; Federated
Government Trust; Federated High Income Bond Fund, Inc.; Federated High
Yield Trust; Federated Income Securities Trust; Federated Income Trust;
Federated Index Trust; Federated Institutional Trust; Federated Master
Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term
Municipal Trust; Federated Short-Term U.S. Government Trust; Federated Stock
and Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust;
Federated Total Return Series, Inc.; Federated U.S. Government Bond Fund;
Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S.
Government Securities Fund; 3-5 Years; Federated U.S. Government Securities
Fund; 5-10 Years; Federated Utility Fund, Inc.; First Priority Funds; Fixed
Income Securities, Inc.; Fortress Utility Fund, Inc.; High Yield Cash Trust;
Federated Insurance Series; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.; Investment Series Trust;
Liberty Term Trust, Inc. - 1999; Liberty U.S. Government Money Market
Trust; Liquid Cash Trust; Managed Series Trust; Money Market Management,
Inc.; Money Market Obligations Trust; Money Market Trust; Municipal
Securities Income Trust; Newpoint Funds; Peachtree Funds; RIMCO Monument
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The Planters
Funds; The Starburst Funds; The Starburst Funds II; The Virtus Funds; Trust
for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations;
and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Directors own less than 1% of the Fund's outstanding shares.
As of April 8, 1996, Merrill Lynch Pierce Fenner & Smith, Jacksonville,
Florida, as record owner holding Class F Shares for its clients, owned
approximately 10,450,200 (27.05%) Class F Shares of the Fund.
DIRECTORS COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
CORPORATION CORPORATION*# FROM FUND COMPLEX +
John F. Donahue $ -0- $-0- for the Corporation and
Chairman and Director 54 other investment companies in the Fund
Complex
Thomas G. Bigley++ $1,453 $86,331 for the Corporation and
Director 54 other investment companies in the Fund
Complex
John T. Conroy, Jr. $1,583 $115,760 for the Corporation and
Director 54 other investment companies in the Fund
Complex
William J. Copeland $1,583 $115,760 for the Corporation and
Director 54 other investment companies in the Fund
Complex
James E. Dowd $1,583 $115,760 for the Corporation and
Director 54 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D. $1,453 $104,898 for the Corporation and
Director 54 other investment companies in the Fund
Complex
Richard B. Fisher$-0- $-0- for the Corporation and
President and Director 6 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr. $1,583 $115,760 for the Corporation and
Director 54 other investment companies in the Fund
Complex
Peter E. Madden $1,231 $104,898 for the Corporation and
Director 54 other investment companies in the Fund
Complex
Gregor F. Meyer $1,453 $104,898 for the Corporation and
Director 54 other investment companies in the Fund
Complex
John E. Murray, Jr. $1,083 $104,898 for the Corporation and
Director 54 other investment companies in the Fund
Complex
Wesley W. Posvar $1,453 $104,898 for the Corporation and
Director 54 other investment companies in the Fund
Complex
Marjorie P. Smuts$1,453 $104,898 for the Corporation and
Director 54 other investment companies in the Fund
Complex
*Information is furnished for the fiscal year ended August 31, 1995.
#The aggregate compensation is provided for the Corporation which is
comprised of one portfolio.
+The information is provided for the last calendar year.
++Mr. Bigley served on 39 investment companies in the Federated Funds
Complex from January 1 through September 30, 1995. On October 1, 1995, he
was appointed a Trustee on 15 additional Federated Funds.
INVESTMENT ADVISORY SERVICES
ADVISER TO THE FUND
The Fund's investment adviser is Federated Advisers (the "Adviser"). It is a
subsidiary of Federated Investors. All of the voting securities of Federated
Investors are owned by a trust, the trustees of which are John F. Donahue,
his wife and his son, J. Christopher Donahue.
The Adviser shall not be liable to the Fund or any shareholder for any
losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Fund.
ADVISORY FEES
For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus. During the fiscal years ended
August 31, 1995, 1994, and 1993, the Fund's Adviser earned $2,576,669,
$2,908,854, and $2,017,241, respectively.
STATE EXPENSE LIMITATION
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets,
2% per year of the next $70 million of average net assets, and 1-1/2%
per year of the remaining average net assets, the Adviser will
reimburse the Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this expense
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the adviser will generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and selects
brokers and dealers subject to guidelines established by the Directors. The
adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
adviser and may include: advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry
studies; receipt of quotations for portfolio evaluations; and similar
services. Research services provided by brokers and dealers may be used by
the adviser or its affiliates in advising the Fund and other accounts. To
the extent that receipt of these services may supplant services for which
the adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses. The adviser and its affiliates exercise reasonable
business judgment in selecting brokers who offer brokerage and research
services to execute securities transactions. They determine in good faith
that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided. For the fiscal
years ended August 31, 1995, 1994 and 1993, the Fund paid no brokerage
commissions on brokerage transactions.
Although investment decisions for the Fund are made independently from those
of the other accounts managed by the adviser, investments of the type the
Fund may make may also be made by those other accounts. When the Fund and
one or more other accounts managed by the adviser are prepared to invest in,
or desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the
adviser to be equitable to each. In some cases, this procedure may adversely
affect the price paid or received by the Fund or the size of the position
obtained or disposed of by the Fund. In other cases, however, it is believed
that coordination and the ability to participate in volume transactions will
be to the benefit of the Fund.
OTHER SERVICES
FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in
the prospectus. From March 1, 1994, to March 1, 1996, Federated
Administrative Services served as the Fund's Administrator. Prior to March
1, 1994, Federated Administrative Services, Inc. served as the Fund's
Administrator. Both former Administrators are subsidiaries of Federated
Investors. For purposes of this Statement of Additional Information,
Federated Services Company, Federated Administrative Services, and Federated
Administrative Services, Inc. may hereinafter collectively be referred to as
the "Administrators." For the fiscal years ended August 31, 1995, 1994 and
1993, the Administrators earned $325,090, $458,072 and $395,122. Dr.
Henry J. Gailliot, an officer of Federated Advisers the adviser to the Fund,
holds approximately 20% of the outstanding common stock and serves as a
director of Commercial Data Services, Inc., a company which provides
computer processing services to Federated Services Company.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company , Boston, MA, is custodian for the
securities and cash of the Fund. Federated Services Company, Pittsburgh,
PA, provides certain accounting and recordkeeping services with respect to
the Fund's portfolio investments. The fee paid for this service is based
upon the level of the Fund's average net assets for the period plus out-of-
pocket expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records.
For its services, the transfer agent receives a fee based on the size, type
and number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Deloitte & Touche LLP, Pittsburgh,
Pennsylvania.
PURCHASING SHARES
Except under certain circumstances described in the respective
prospectuses, Shares are sold at their net asset value (plus a sales charge
on Class A Shares and Class F Shares only) on days the New York Stock
Exchange is open for business. The procedure for purchasing Shares is
explained in the respective prospectuses under "How to Purchase Shares" and
"Investing in Class F Shares."
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for Shares of the
Fund.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular
circumstances and goals. These activities and services may include, but are
not limited to, marketing efforts; providing office space, equipment,
telephone facilities, and various clerical, supervisory, computer, and other
personnel as necessary or beneficial to establish and maintain shareholder
accounts and records; processing purchase and redemption transactions and
automatic investments of client account cash balances; answering routine
client inquiries; and assisting clients in changing dividend options,
account designations, and addresses.
By adopting the Distribution Plan, the Directors expect that the Fund will
be able to achieve a more predictable flow of cash for investment purposes
and to meet redemptions. This will facilitate more efficient portfolio
management and assist the Fund in pursuing its investment objectives. By
identifying potential investors whose needs are served by the Fund's
objectives, and properly servicing these accounts, it may be possible to
curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include:
(1) providing personal services to shareholders; (2) investing shareholder
assets with a minimum of delay and administrative detail; (3) enhancing
shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.
For the fiscal period ending August 31, 1995, no payments were made
pursuant to the Distribution Plan. In addition, for this period, the Fund
paid shareholder services fees on behalf of Class F Shares in the amount of
$1,073,612, of which $16,649 was waived. Class A Shares, Class B Shares, and
Class C Shares did not exist prior to .
--------------
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be
in federal funds or be converted into federal funds before shareholders
begin to earn dividends. Federated Shareholder Services Company acts as the
shareholder's agent in depositing checks and converting them to federal
funds.
PURCHASES BY SALES REPRESENTATIVES, FUND DIRECTORS, AND EMPLOYEES
Directors, employees, and sales representatives of the Fund, Federated
Advisers, and Federated Securities Corp. or their affiliates, or any
investment dealer who has a sales agreement with Federated Securities Corp.,
and their spouses and children under 21, may buy Shares at net asset value
without a sales charge. Shares may also be sold without a sales charge to
trusts or pension or profit-sharing plans for these persons.
These sales are made with the purchaser's written assurance that the
purchase is for investment purposes and that the securities will not be
resold except through redemption by the Fund.
DETERMINING NET ASSET VALUE
Net asset value generally changes each day. The days on which net asset
value is calculated by the Fund are described in the prospectus.
VALUING MUNICIPAL BONDS
The Directors use an independent pricing service to value municipal bonds.
The independent pricing service takes into consideration yield, stability,
risk, quality, coupon rate, maturity, type of issuer, trading
characteristics, special circumstances of a security or trading market, and
any other factors or market data it considers relevant in determining
valuations for normal institutional size trading units of debt securities
and does not rely exclusively on quoted prices.
USE OF AMORTIZED COST
The Directors have decided that the fair value of debt securities authorized
to be purchased by the Fund with remaining maturities of 60 days or less at
the time of purchase shall be their amortized cost value, unless the
particular circumstances of the security indicate otherwise. Under this
method, portfolio instruments and assets are valued at the acquisition cost
as adjusted for amortization of premium or accumulation of discount rather
than at current market value. The Executive Committee continually assesses
this method of valuation and recommends changes where necessary to assure
that the Fund's portfolio instruments are valued at their fair value as
determined in good faith by the Directors.
EXCHANGE PRIVILEGE (CLASS F SHARES ONLY)
This section relates only to Class F Shares of the Fund. For information
regarding the Exchange Privilege for Class A Shares, Class B Shares, and
Class C Shares of the Fund, please see the prospectus for these classes of
Shares.
The Securities and Exchange Commission has issued an order exempting the
Fund from certain provisions of the Investment Company Act of 1940. As a
result, Fund shareholders are allowed to exchange all or some of their Class
F Shares for shares in other Federated Funds (which are sold with a sales
charge different from that of the Fund or with no sales charge and which are
advised by subsidiaries or affiliates of Federated Investors) without the
assessment of a contingent deferred sales charge on the exchanged Shares.
The order also allows certain other funds, including funds that are not
advised by subsidiaries or affiliates of Federated Investors, which do not
have a sales charge, to exchange their shares for Class F Shares on a basis
other than the current offering price. These exchanges may be made to
extent that such shares were acquired in a prior exchange at net asset
value, for shares of a Federated fund carrying a sales charge.
REDUCED SALES CHARGE
If a shareholder making such an exchange qualifies for a reduction or
elimination of the sales charge, the shareholder must notify Federated
Securities Corp.
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange Class F Shares having a net
asset value equal to the minimum investment requirements of the fund into
which the exchange is being made. Before the exchange, the shareholder must
receive a prospectus of the fund for which the exchange is being made.
This privilege is available to shareholders resident in any state in which
the fund shares being acquired may be sold. Upon receipt of proper
instructions and required supporting documents, Class F Shares submitted for
exchange are redeemed and the proceeds invested in Class F shares of the
other fund.
Further information on the exchange privilege and prospectuses for Class F
Shares or other Federated Funds available by calling the Fund.
TAX CONSEQUENCES
Exercise of this exchange privilege is treated as a sale for federal income
tax purposes. Depending upon the circumstances, a short-term or long-term
capital gain or loss may be realized.
MAKING AN EXCHANGE
Instructions for exchanges for certain Federated Funds may be given in
writing or by telephone. Written instructions may require a signature
guarantee.
REDEEMING SHARES
The Fund redeems Shares at the next computed net asset value after the
Fund receives the redemption request. Shareholder redemptions may be subject
to a contingent deferred sales charge. Redemption procedures are explained
in the respective prospectuses under "How to Redeem Shares" or "Redeeming
Class F Shares." Although the transfer agent does not charge for telephone
redemptions, it reserves the right to charge a fee for the cost of wire-
transferred redemptions of less than $5,000.
Class B Shares redeemed within six years of purchase, Class C Shares
redeemed within one year of purchase, and Class F Shares redeemed within
four years of purchase may be subject to a contingent deferred sales charge.
The amount of the contingent deferred sales charge is based upon the amount
of the administrative fee paid at the time of purchase by the distributor to
the financial institutions for services rendered, and the length of time the
investor remains a shareholder in the Fund. Should financial institutions
elect to receive an amount less than the administrative fee that is stated
in the prospectus for servicing a particular shareholder, the contingent
deferred sales charge and/or holding period for that particular shareholder
will be reduced accordingly.
REDEMPTION IN KIND
Although the Fund intends to redeem Shares in cash, it reserves the right
under certain circumstances to pay the redemption price in whole or in part
by a distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable SEC rules,
taking such securities at the same value employed in determining net asset
value and selecting the securities in a manner the Directors determine to be
fair and equitable.
The Corporation has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940 under which the Corporation is obligated to redeem
Shares for any shareholder in cash up to the lesser of $250,000 or 1% of the
Fund's net asset value during any 90-day period.
TAX STATUS
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund must,
among other requirements:
o derive at least 90% of its gross income from dividends, interest,
and gains from the sale of securities;
o derive less than 30% of its gross income from the sale of
securities held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income
earned during the year.
SHAREHOLDERS' TAX STATUS
No portion of any income dividend paid by the Fund is eligible for the
dividends received deduction available to corporations.
CAPITAL GAINS
Capital gains or losses may be realized on the sale of portfolio
securities and as a result of discounts from par value on securities
held to maturity. Sales would generally be made because of:
othe availability of higher relative yields;
odifferentials in market values;
onew investment opportunities;
ochanges in creditworthiness of an issuer; or
oan attempt to preserve gains or limit losses.
Distribution of long-term capital gains are taxed as such, whether they
are taken in cash or reinvested and regardless of the length of time
the shareholder has owned the shares. Any loss by a shareholder on
Shares held for less than six months and sold after a capital gains
distribution will be treated as a long-term capital loss to the extent
of the capital gains distribution.
TOTAL RETURN
The Class F Shares' average annual total returns for the one-year and
five-year periods ended August 31, 1995 and the period from April 10, 1987
(effective date of the Fund's registration statement) to August 31, 1995
were 5.53%, 7.55% and 7.58%, respectively. Class A Shares, Class B Shares
and Class C Shares did not exist prior to .
----------------
The average annual total return for each class of Shares of the Fund is
the average compounded rate of return for a given period that would equate a
$1,000 initial investment to the ending redeemable value of that investment.
The ending redeemable value is computed by multiplying the number of Shares
owned at the end of the period by the net asset value per share at the end
of the period. The number of Shares owned at the end of the period is based
on the number of Shares purchased at the beginning of the period with
$1,000, less any applicable sales charge, adjusted over the period by any
additional Shares, assuming the monthly reinvestment of all dividends and
distributions. Any applicable contingent deferred sales charge is deducted
from the ending value of the investment based on the lesser of the original
purchase price or the net asset value of Shares redeemed.
YIELD
The yield for Class F Shares for the thirty-day period ended August 31,
1995 was 5.76%. Class A Shares, Class B Shares and Class C Shares did not
exist prior to .
----------------
The yield for each class of Shares is determined by dividing the net
investment income per share (as defined by the Securities and Exchange
Commission) earned by the class of Shares over a thirty-day period by the
maximum offering price per share of the respective class on the last day of
the period. This value is annualized using semi-annual compounding. This
means that the amount of income generated during the thirty-day period is
assumed to be generated each month over a 12-month period and is reinvested
every six months. The yield does not necessarily reflect income actually
earned by the Fund because of certain adjustments required by the Securities
and Exchange Commission and, therefore, may not correlate to the dividends
or other distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in a
class of Shares, performance will be reduced for those shareholders paying
those fees.
TAX-EQUIVALENT YIELD
The tax-equivalent yield for Class F Shares for the thirty-day period
ended August 31, 1995 was 8.00%.
The tax-equivalent yield of the Fund is calculated similarly to the yield,
but is adjusted to reflect the taxable yield that the Fund would have had to
earn to equal its actual yield, assuming a 28% tax rate (the maximum
effective federal rate for individuals) and assuming that income is 100%
tax-exempt.
TAX-EQUIVALENCY TABLE
The Fund may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal bonds in the Fund's
portfolio generally remains free from federal regular income tax,* and is
often free from state and local taxes as well. As the table below indicates,
a "tax-exempt" investment is an attractive choice for investors,
particularly in times of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1996
MULTISTATE MUNICIPAL FUNDS
FEDERAL INCOME TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
JOINT $1- $40,101- $96,901- $147,701- OVER
RETURN 40,100 96,900 147,700 263,750 $263,750
SINGLE $1- $24,001- $58,151- $121,301- OVER
RETURN 24,000 58,150 121,300 263,750 $263,750
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
1.00% 1.18% 1.39% 1.45% 1.56% 1.66%
1.50% 1.76% 2.08% 2.17% 2.34% 2.48%
2.00% 2.35% 2.78% 2.90% 3.13% 3.31%
2.50% 2.94% 3.47% 3.62% 3.91% 4.14%
3.00% 3.53% 4.17% 4.35% 4.69% 4.97%
3.50% 4.12% 4.86% 5.07% 5.47% 5.79%
4.00% 4.71% 5.56% 5.80% 6.25% 6.62%
4.50% 5.29% 6.25% 6.52% 7.03% 7.45%
5.00% 5.88% 6.94% 7.25% 7.81% 8.28%
5.50% 6.47% 7.64% 7.97% 8.59% 9.11%
6.00% 7.06% 8.33% 8.70% 9.38% 9.93%
6.50% 7.65% 9.03% 9.42% 10.16% 10.76%
7.00% 8.24% 9.72% 10.14% 10.94% 11.59%
7.50% 8.82% 10.42% 10.87% 11.72% 12.42%
8.00% 9.41% 11.11% 11.59% 12.50% 13.25%
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state
and local taxes paid on comparable taxable investments were not used to
increase federal deductions.
The chart above is for illustrative purposes only. It is not an
indicator of past or future performance of Fund shares.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
PERFORMANCE COMPARISONS
The Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in Fund expenses; and
o various other factors.
The Fund's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net earnings and
offering price per share are factors in the computation of yield and total
return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any
change in net asset value over a specific period of time. From time
to time, the Fund will quote its Lipper ranking in the high yield
municipal bond funds category in advertising and sales literature.
o LEHMAN BROTHERS REVENUE BOND INDEX is a total return performance
benchmark for the long-term, investment grade, revenue bond market.
Returns and attributes for the index are calculated semi-monthly.
o MORNINGSTAR, INC., an independent rating service, is the publisher
of the bi-weekly Mutual Fund Values. Mutual Fund Values rates more
than 1,000 NASDAQ-listed mutual funds of all types, according to
their risk-adjusted returns. The maximum rating is five stars, and
ratings are effective for two weeks.
Advertisements and other sales literature for the Fund may quote total
returns which are calculated on non-standardized base periods. These total
returns represent the historic change in the value of an investment in the
Fund based on monthly reinvestment of dividends over a specified period of
time.
Advertisements may quote performance information which does not reflect the
effect of the sales charge.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is
reflected in its investment decision making-structured, straightforward, and
consistent. This has resulted in a history of competitive performance with a
range of competitive investment products that have gained the confidence of
thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts,
and traders dedicated to specific market sectors.
J. Thomas Madden, Executive Vice President, oversees Federated
Investors' equity and high yield corporate bond management while William D.
Dawson, Executive Vice President, oversees Federated Investors' domestic
fixed income management. Henry A. Frantzen, Executive Vice President,
oversees the management of Federated Investors' international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $2 trillion to the more than 5,500 funds
available.*
Federated Investors, through its subsidiaries, distributes mutual funds for
a variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for
a variety of applications, including defined benefit and defined
contribution programs, cash management, and asset/liability management.
Institutional clients include corporations, pension funds, tax-exempt
entities, foundations/endowments, insurance companies, and investment and
financial advisors. The marketing effort to these institutional clients is
headed by John B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the
top 100 bank holding companies use Federated funds in their clients'
portfolios. The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
FINANCIAL STATEMENTS
The financial statements for the Fund for the fiscal year ended August
31, 1995, relating to the predecessor for Class F Shares, are incorporated
herein by reference to the Annual Report to Shareholders of the Fund dated
August 31, 1995.
*Source: Investment Company Institute
Cusip 349557108
8092709B (5/96)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (Incorporated by reference to the Annual
Report dated August 31, 1995 pursuant to Rule 411 under the
Securities Act of 1933.) (File No. 811-4533)
(b) Exhibits:
(1) (i)Conformed copy of Articles of Incorporation of the
Registrant (1);
(ii)Conformed copy of Amendment to Articles of
Incorporation (6);
(2) Copy of By-Laws of the Registrant (6);
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of Capital Stock
of the Registrant (1);
(5) Conformed copy of the Investment Advisory Contract of
the Registrant (4);
(6) (i) Copy of Distributor's Contract of the Registrant;
+
(ii) Form of Exhibits A through D to the Distributor's
Contract; +
(iii) 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)
(7) Not applicable;
(8) Conformed copy of Custodian Agreement of the Registrant
(8);
+ All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Initial
Registration Amendment No. 1 filed January 21, 1987. (File Nos. 33-
11410 and 811-4533)
4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 4 filed August 25, 1989. (File Nos. 33-11410 and 811-
4533)
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 filed October 25, 1989. (File Nos. 33-11410 and 811-
4533)
6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 filed October 24, 1990. (File Nos. 33-11410 and 811-
4533)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 filed October 25, 1995. (File Nos. 33-11410 and 811-
4533)
(9) (i) Conformed copy of Agreement for Fund Accounting
Services, Administrative Services, Transfer Agency
Services, and Custody Services Procurement ;+
(ii) Conformed copy of Shareholder Services
Agreement;(7)
(iii) The responses described in Item 24(b)6 are
hereby incorporated by reference.
(10) Conformed copy of Opinion and Consent of Counsel as to
legality of shares being registered (8);
(11) Conformed copy of Consent of Independent Public
Accountants; +
(12) Not applicable;
(13) Conformed copy of Initial Capital Understanding (8);
(14) Not applicable;
(15) (i)Conformed copy of Distribution Plan as amended
(5);
(ii) The responses described in Item 24(b)6
are hereby incorporated by reference.
(16) Copy of Schedule for Computation of Yield Calculation
(8);
(17) Copy of Financial Data Schedule (8);
(18) 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).
(19) Conformed copy of Power of Attorney (8);
+ All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Initial
Registration Amendment No. 1 filed January 21, 1987. (File Nos. 33-
11410 and 811-4533)
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 filed April 9, 1987 (File Nos. 33-11410 and 811-4533)
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 3 filed October 25, 1988. (File Nos. 33-11410 and 811-
4533)
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 filed October 25, 1989. (File Nos. 33-11410 and 811-
4533)
7. Repsonse incorporated by reference to Registrant's Post-Effective
Amendment No. 10 filed October 26, 1994. (File Nos. 33-11410 and 811-
4533)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 filed October 25, 1995. (File Nos. 33-11410 and 811-
4533)
Item 25. Persons Controlled by or Under Common Control with Registrant:
None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of April 8, 1996
Shares of capital stock 11,089
($0.001 per Share par value)
Item 27. Indemnification: (1)
Item 28. Business and Other Connections of Investment Adviser:
For a description of the other business of the investment adviser,
see the section entitled "Fund Information - Management of the
Fund" in Part A. The affiliations with the Registrant of four of
the Directors and four of the Officers of the investment adviser
and their business addresses are included in Part B of this
Registration Statement under "Federated Municipal Opportunities
Fund, Inc. Management". The remaining Director of the investment
adviser, his position with the investment adviser, and, in
parentheses, his principal occupation is: Mark D. Olson (Partner,
Wilson, Halbrook & Bayard), 107 W. Market Street, Georgetown,
Delaware 19947.
The remaining Officers of the investment adviser are: William D.
Dawson, III, Henry A. Frantzen, J. Thomas Madden and Mark L.
Mallon, Executive Vice Presidents; Henry J. Gailliot, Senior Vice
President-Economist; Peter R. Anderson, Drew J. Collins, Jonathan
C. Conley, Mark Durbiano, J. Alan Minteer, Mary Jo Ochson, Robert
J. Ostrowski, Senior Vice Presidents; J. Scott Albrecht, Joseph M.
Balestrino, Randall S. Bauer, David F. Belton, David A. Briggs,
Kenneth J. Cody, Deborah A. Cunningham, Michael P. Donnelly, Linda
A. Duessel, Timothy E. Keefe, Kathleen M. Foody-Malus, Thomas M.
Franks, Edward C. Gonzales, Stephen A. Keen, Mark S. Kopinski,
Jeff A. Kozemchak, Marian R. Marinack, Susan M. Nason, Frederick
L. Plautz, Jr., Charles A. Ritter, James D. Roberge, Frank Semack,
William F. Stotz, Edward J. Tiedge, Sandra L. Weber and
Christopher H. Wiles, Vice Presidents; Thomas R. Donahue,
Treasurer; and Stephen A. Keen, Secretary. The business address
of each of the Officers of the investment adviser is Federated
Investors Tower, Pittsburgh, PA 15222-3779. These individuals are
also officers of a majority of the investment advisers to the
Funds listed in Part B of this Registration Statement.
1. Response is incorporated by reference to Registrant's Initial
Registration Amendment No. 1 filed January 21, 1987. (File Nos. 33-
11410 and 811-4533)
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the
following open-end investment companies: American Leaders
Fund, Inc.; Annuity Management Series; Arrow Funds; Automated
Government Money Trust; BayFunds; The Biltmore Funds; The
Biltmore Municipal Funds; Blanchard Funds; Blanchard Precious
Metals Fund, Inc.; Cash Trust Series, Inc.; Cash Trust Series
II; DG Investor Series; Edward D. Jones & Co. Daily Passport
Cash Trust; Federated ARMs Fund; Federated Equity Funds;
Federated GNMA Trust; Federated Government Trust; Federated
High Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Master Trust; Federated Municipal Trust;
Federated Short-Term Municipal Trust; Federated Short-Term
U.S. Government Trust; Federated Stock Trust; Federated Tax-
Free Trust; Federated Total Return Series, Inc.; Federated
U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S. Government
Securities Fund: 3-5 Years; Federated U.S. Government
Securities Fund: 5-10 Years;First Priority Funds; Fixed Income
Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress
Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.;
Government Income Securities, Inc.; High Yield Cash Trust;
Independence One Mutual Funds; Insurance Management Series;
Intermediate Municipal Trust; International Series Inc.;
Investment Series Funds, Inc.; Investment Series Trust;
Liberty Equity Income Fund, Inc.; Liberty High Income Bond
Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
U.S. Government Money Market Trust; Liberty Utility Fund,
Inc.; Liquid Cash Trust; Managed Series Trust; Marshall Funds,
Inc.; Money Market Management, Inc.; Money Market Obligations
Trust; Money Market Trust; The Monitor Funds; Municipal
Securities Income Trust; Newpoint Funds; 111 Corcoran Funds;
Peachtree Funds; The Planters Funds; RIMCO Monument Funds;
SouthTrust Vulcan Funds; Star Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.; Targeted
Duration Trust; Tax-Free Instruments Trust; Tower Mutual
Funds; Trust for Financial Institutions; Trust for Government
Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; The Virtus
Funds; Vision Group of Funds, Inc.; and World Investment
Series, Inc.
Federated Securities Corp. also acts as principal underwriter
for the following closed-end investment company: Liberty Term
Trust, Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief President Federated
Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary, and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive ViceExecutive Vice
Federated Investors Tower President, Federated, President
Pittsburgh, PA 15222-3779 Securities Corp.
John W. McGonigle Director, Federated Executive Vice
Federated Investors Tower Securities Corp. President and
Pittsburgh, PA 15222-3779 Secretary
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust, Federated
Pittsburgh, PA 15222-3779 Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securites Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael D. Fitzgerald Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joeseph Kenedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Steven A. La Versa Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John C. Shelar, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jamie M. Teschner Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Timothy Radcliff Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas R. Donahue Asstistant Secretary, --
Federated Investors Tower Assistant Treasurer,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Joseph M. Huber Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Assistant Secretary, Treasurer
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and Rules 31a-1
through 31a-3 promulgated thereunder are maintained at one of the
following locations:
Registrant...............Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Shareholder
Services Company.......Federated Investors Tower
Transfer Agent and Dividend Pittsburgh, PA 15222-3779
Disbursing Agent
Federated Administrative Federated Investors Tower
Services ..............Pittsburgh, PA 15222-3779
Administrator
Federated Advisers.......Federated Investors Tower
Adviser Pittsburgh, PA 15222-3779
State Street Bank and Trust P.O. Box 8600
Company................Boston, MA 02266-8600
Custodian
Item 31. Management Services: Not applicable.
Item 32. Undertakings: Registrant hereby undertakes to comply with the
provisions of Section 16(c) of the 1940 Act with respect to the
removal of Directors and the calling of special shareholder
meetings by shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered, a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED MUNICIPAL
OPPORTUNITIES FUND, INC., has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Pittsburgh and Commonwealth of Pennsylvania, on
the 3rd day of May, 1996
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
BY: /s/Charles H. Field
Charles H. Field, Assistant Secretary
Attorney in Fact for John F. Donahue
May 3, 1996
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE DATE
By:/s/Charles H. Field
Charles H. Field Attorney In Fact May 3, 1996
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Director
(Chief Executive Officer)
Richard B. Fisher* President and Director
David M. Taylor* Treasurer
(Principal Financial and
Accounting Officer)
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
Wesley W. Posvar* Director
Marjorie P. Smuts* Director
</TABLE>
Exhibit 11 under Form N-1A
Exhibit 8 under Item 601/Reg. S-K
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 13 to Registration Statement No. 33-11410 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
Federated Municipal Opportunities Fund, Inc. for the year ended August 31,
1995 which is a part of such Registration Statement.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
Exhibit 9(I) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AGREEMENT
FOR
FUND ACCOUNTING SERVICES,
ADMINISTRATIVE SERVICES,
TRANSFER AGENCY SERVICES
AND
CUSTODY SERVICES PROCUREMENT
AGREEMENT made as of March 1, 1996, by and between those investment
companies listed on Exhibit 1 as may be amended from time to time, having
their principal office and place of business at Federated Investors Tower,
Pittsburgh, PA 15222-3779 (the "Investment Company"), on behalf of the
portfolios (individually referred to herein as a "Fund" and collectively as
"Funds") of the Investment Company, and FEDERATED SERVICES COMPANY, a
Pennsylvania corporation, having its principal office and place of business
at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779 on behalf
of itself and its subsidiaries (the "Company").
WHEREAS, the Investment Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), with authorized and issued shares of capital stock or
beneficial interest ("Shares");
WHEREAS, the Investment Company may desire to retain the Company as fund
accountant to provide fund accounting services (as herein defined) including
certain pricing, accounting and recordkeeping services for each of the
Funds, including any classes of shares issued by any Fund ("Classes") if so
indicated on Exhibit 1, and the Company desires to accept such appointment;
WHEREAS, the Investment Company may desire to appoint the Company as its
administrator to provide it with administrative services (as herein
defined), if so indicated on Exhibit, and the Company desires to accept such
appointment;
WHEREAS, the Investment Company may desire to appoint the Company as its
transfer agent and dividend disbursing agent to provide it with transfer
agency services (as herein defined) if so indicated on Exhibit 1, and agent
in connection with certain other activities, and the Company desires to
accept such appointment; and
WHEREAS, the Investment Company may desire to appoint the Company as its
agent to select, negotiate and subcontract for custodian services from an
approved list of qualified banks if so indicated on Exhibit 1, and the
Company desires to accept such appointment; and
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties
hereto agree as follows:
SECTION ONE: FUND ACCOUNTING.
ARTICLE 1. APPOINTMENT.
The Investment Company hereby appoints the Company to provide certain
pricing and accounting services to the Funds, and/or the Classes, for the
period and on the terms set forth in this Agreement. The Company accepts
such appointment and agrees to furnish the services herein set forth in
return for the compensation as provided in Article 3 of this Section.
ARTICLE 2. THE COMPANY'S DUTIES.
Subject to the supervision and control of the Investment Company's Board
of Trustees or Directors ("Board"), the Company will assist the Investment
Company with regard to fund accounting for the Investment Company, and/or
the Funds, and/or the Classes, and in connection therewith undertakes to
perform the following specific services;
A. Value the assets of the Funds using: primarily, market quotations,
including the use of matrix pricing, supplied by the independent
pricing services selected by the Company in consultation with the
adviser, or sources selected by the adviser, and reviewed by the
board; secondarily, if a designated pricing service does not provide a
price for a security which the Company believes should be available by
market quotation, the Company may obtain a price by calling brokers
designated by the investment adviser of the fund holding the security,
or if the adviser does not supply the names of such brokers, the
Company will attempt on its own to find brokers to price those
securities; thirdly, for securities for which no market price is
available, the Pricing Committee of the Board will determine a fair
value in good faith. Consistent with Rule 2a-4 of the 40 Act,
estimates may be used where necessary or appropriate. The Company's
obligations with regard to the prices received from outside pricing
services and designated brokers or other outside sources, is to
exercise reasonable care in the supervision of the pricing agent. The
Company is not the guarantor of the securities prices received from
such agents and the Company is not liable to the Fund for potential
errors in valuing a Fund's assets or calculating the net asset value
per share of such Fund or Class when the calculations are based upon
such prices. All of the above sources of prices used as described are
deemed by the Company to be authorized sources of security prices. The
Company provides daily to the adviser the securities prices used in
calculating the net asset value of the fund, for its use in preparing
exception reports for those prices on which the adviser has comment.
Further, upon receipt of the exception reports generated by the
adviser, the Company diligently pursues communication regarding
exception reports with the designated pricing agents;
B. Determine the net asset value per share of each Fund and/or Class, at
the time and in the manner from time to time determined by the Board
and as set forth in the Prospectus and Statement of Additional
Information ("Prospectus") of each Fund;
C. Calculate the net income of each of the Funds, if any;
D. Calculate realized capital gains or losses of each of the Funds
resulting from sale or disposition of assets, if any;
E. Maintain the general ledger and other accounts, books and financial
records of the Investment Company, including for each Fund, and/or
Class, as required under Section 31(a) of the 1940 Act and the Rules
thereunder in connection with the services provided by the Company;
F. Preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records to be maintained by Rule 31a-1 under the 1940 Act in
connection with the services provided by the Company. The Company
further agrees that all such records it maintains for the Investment
Company are the property of the Investment Company and further agrees
to surrender promptly to the Investment Company such records upon the
Investment Company's request;
G. At the request of the Investment Company, prepare various reports or
other financial documents in accordance with generally accepted
accounting principles as required by federal, state and other
applicable laws and regulations; and
H. Such other similar services as may be reasonably requested by the
Investment Company.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section
One, shall hereafter be referred to as "Fund Accounting Services."
ARTICLE 3. COMPENSATION AND ALLOCATION OF EXPENSES.
A. The Funds will compensate the Company for Fund Accounting Services in
accordance with the fees agreed upon from time to time between the
parties hereto. Such fees do not include out-of-pocket disbursements
of the Company for which the Funds shall reimburse the Company. Out-
of-pocket disbursements shall include, but shall not be limited to,
the items agreed upon between the parties from time to time.
B. The Fund and/or the Class, and not the Company, shall bear the cost
of: custodial expenses; membership dues in the Investment Company
Institute or any similar organization; transfer agency expenses;
investment advisory expenses; costs of printing and mailing stock
certificates, Prospectuses, reports and notices; administrative
expenses; interest on borrowed money; brokerage commissions; taxes and
fees payable to federal, state and other governmental agencies; fees
of Trustees or Directors of the Investment Company; independent
auditors expenses; legal and audit department expenses billed to the
Company for work performed related to the Investment Company, the
Funds, or the Classes; law firm expenses; organizational expenses; or
other expenses not specified in this Article 3 which may be properly
payable by the Funds and/or Classes.
C. The compensation and out-of-pocket expenses attributable to the Fund
shall be accrued by the Fund and shall be paid to the Company no less
frequently than monthly, and shall be paid daily upon request of the
Company. The Company will maintain detailed information about the
compensation and out-of-pocket expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Investment Company and/or the Funds and a duly
authorized officer of the Company.
E. The fee for the period from the effective date of this Agreement with
respect to a Fund or a Class to the end of the initial month shall be
prorated according to the proportion that such period bears to the
full month period. Upon any termination of this Agreement before the
end of any month, the fee for such period shall be prorated according
to the proportion which such period bears to the full month period.
For purposes of determining fees payable to the Company, the value of
the Fund's net assets shall be computed at the time and in the manner
specified in the Fund's Prospectus.
F. The Company, in its sole discretion, may from time to time subcontract
to, employ or associate with itself such person or persons as the
Company may believe to be particularly suited to assist it in
performing Fund Accounting Services. Such person or persons may be
affiliates of the Company, third-party service providers, or they may
be officers and employees who are employed by both the Company and the
Investment Company; provided, however, that the Company shall be as
fully responsible to each Fund for the acts and omissions of any such
subcontractor as it is for its own acts and omissions. The
compensation of such person or persons shall be paid by the Company
and no obligation shall be incurred on behalf of the Investment
Company, the Funds, or the Classes in such respect.
SECTION TWO: ADMINISTRATIVE SERVICES.
ARTICLE 4. APPOINTMENT.
The Investment Company hereby appoints the Company as Administrator for
the period on the terms and conditions set forth in this Agreement. The
Company hereby accepts such appointment and agrees to furnish the services
set forth in Article 5 of this Agreement in return for the compensation set
forth in Article 9 of this Agreement.
ARTICLE 5. THE COMPANY'S DUTIES.
As Administrator, and subject to the supervision and control of the Board
and in accordance with Proper Instructions (as defined hereafter) from the
Investment Company the Company will provide facilities, equipment, and
personnel to carry out the following administrative services for operation
of the business and affairs of the Investment Company and each of its
portfolios:
A. prepare, file, and maintain the Investment Company's governing
documents and any amendments thereto, including the Charter (which
has already been prepared and filed), the By-laws and minutes of
meetings of the Board and Shareholders;
B. prepare and file with the Securities and Exchange Commission and the
appropriate state securities authorities the registration statements
for the Investment Company and the Investment Company's shares and all
amendments thereto, reports to regulatory authorities and
shareholders, prospectuses, proxy statements, and such other documents
all as may be necessary to enable the Investment Company to make a
continuous offering of its shares;
C. prepare, negotiate, and administer contracts (if any) on behalf of the
Investment Company with, among others, the Investment Company's
investment advisers and distributors, subject to any applicable
restrictions of the Board or the 1940 Act;
D. calculate performance data of the Investment Company for dissemination
to information services covering the investment company industry;
E. prepare and file the Investment Company's tax returns;
F. coordinate the layout and printing of publicly disseminated
prospectuses and reports;
G. perform internal audit examinations in accordance with a charter to be
adopted by the Company and the Investment Company;
H. assist with the design, development, and operation of the Investment
Company and the Funds;
I. provide individuals reasonably acceptable to the Board for nomination,
appointment, or election as officers of the Investment Company, who
will be responsible for the management of certain of the Investment
Company's affairs as determined by the Investment Company's Board; and
J. consult with the Investment Company and its Board on matters
concerning the Investment Company and its affairs.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section 4,
shall hereafter be referred to as "Administrative Services."
ARTICLE 6. RECORDS.
The Company shall create and maintain all necessary books and records in
accordance with all applicable laws, rules and regulations, including but
not limited to records required by Section 31(a) of the Investment Company
act of 1940 and the rules thereunder, as the same may be amended from time
to time, pertaining to the Administrative Services performed by it and not
otherwise created and maintained by another party pursuant to contract with
the Investment Company. Where applicable, such records shall be maintained
by the Company for the periods and in the places required by Rule 31a-2
under the 1940 Act. The books and records pertaining to the Investment
Company which are in the possession of the Company shall be the property of
the Investment Company. The Investment Company, or the Investment Company's
authorized representatives, shall have access to such books and records at
all times during the Company's normal business hours. Upon the reasonable
request of the Investment Company, copies of any such books and records
shall be provided promptly by the Company to the Investment Company or the
Investment Company's authorized representatives.
ARTICLE 7. DUTIES OF THE FUND.
The Fund assumes full responsibility for the preparation, contents and
distribution of its own offering document and for complying with all
applicable requirements the 1940 Act, the Internal Revenue Code, and any
other laws, rules and regulations of government authorities having
jurisdiction.
ARTICLE 8. EXPENSES.
The Company shall be responsible for expenses incurred in providing
office space, equipment, and personnel as may be necessary or convenient to
provide the Administrative Services to the Investment Company, including the
compensation of the Company employees who serve as trustees or directors or
officers of the Investment Company. The Investment Company shall be
responsible for all other expenses incurred by the Company on behalf of the
Investment Company, including without limitation postage and courier
expenses, printing expenses, travel expenses, registration fees, filing
fees, fees of outside counsel and independent auditors, or other
professional services, organizational expenses, insurance premiums, fees
payable to persons who are not the Company's employees, trade association
dues, and other expenses properly payable by the Funds and/or the Classes.
ARTICLE 9. COMPENSATION.
For the Administrative Services provided, the Investment Company hereby
agrees to pay and the Company hereby agrees to accept as full compensation
for its services rendered hereunder an administrative fee at an annual rate
per Fund, as specified below.
The compensation and out of pocket expenses attributable to the Fund
shall be accrued by the Fund and paid to the Company no less frequently than
monthly, and shall be paid daily upon request of the Company. The Company
will maintain detailed information about the compensation and out of pocket
expenses by the Fund.
MAX. ADMIN. AVERAGE DAILY NET ASSETS
FEE OF THE FUNDS
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
(Average Daily Net Asset break-points are on a complex-wide basis)
However, in no event shall the administrative fee received during any
year of the Agreement be less than, or be paid at a rate less than would
aggregate $125,000 per Fund and $30,000 per Class. The minimum fee set forth
above in this Article 9 may increase annually upon each March 1 anniversary
of this Agreement over the minimum fee during the prior 12 months, as
calculated under this agreement, in an amount equal to the increase in
Pennsylvania Consumer Price Index (not to exceed 6% annually) as last
reported by the U.S. Bureau of Labor Statistics for the twelve months
immediately preceding such anniversary.
ARTICLE 10. RESPONSIBILITY OF ADMINISTRATOR.
A. The Company shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Investment Company in
connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
The Company shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for the Investment Company) on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice. Any person, even though
also an officer, director, trustee, partner, employee or agent of the
Company, who may be or become an officer, director, trustee, partner,
employee or agent of the Investment Company, shall be deemed, when
rendering services to the Investment Company or acting on any business
of the Investment Company (other than services or business in
connection with the duties of the Company hereunder) to be rendering
such services to or acting solely for the Investment Company and not
as an officer, director, trustee, partner, employee or agent or one
under the control or direction of the Company even though paid by the
Company.
B. The Company shall be kept indemnified by the Investment Company and be
without liability for any action taken or thing done by it in
performing the Administrative Services in accordance with the above
standards. In order that the indemnification provisions contained in
this Article 10 shall apply, however, it is understood that if in any
case the Investment Company may be asked to indemnify or hold the
Company harmless, the Investment Company shall be fully and promptly
advised of all pertinent facts concerning the situation in question,
and it is further understood that the Company will use all reasonable
care to identify and notify the Investment Company promptly concerning
any situation which presents or appears likely to present the
probability of such a claim for indemnification against the Investment
Company. The Investment Company shall have the option to defend the
Company against any claim which may be the subject of this
indemnification. In the event that the Investment Company so elects,
it will so notify the Company and thereupon the Investment Company
shall take over complete defense of the claim, and the Company shall
in such situation initiate no further legal or other expenses for
which it shall seek indemnification under this Article. the Company
shall in no case confess any claim or make any compromise in any case
in which the Investment Company will be asked to indemnify the Company
except with the Investment Company's written consent.
SECTION THREE: TRANSFER AGENCY SERVICES.
ARTICLE 11. TERMS OF APPOINTMENT.
Subject to the terms and conditions set forth in this Agreement, the
Investment Company hereby appoints the Company to act as, and the Company
agrees to act as, transfer agent and dividend disbursing agent for each
Fund's Shares, and agent in connection with any accumulation, open-account
or similar plans provided to the shareholders of any Fund
("Shareholder(s)"), including without limitation any periodic investment
plan or periodic withdrawal program.
ARTICLE 12. DUTIES OF THE COMPANY.
The Company shall perform the following services in accordance with
Proper Instructions as may be provided from time to time by the Investment
Company as to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase of
shares and promptly deliver payment and appropriate documentation
therefore to the custodian of the relevant Fund, (the
"Custodian"). The Company shall notify the Fund and the Custodian
on a daily basis of the total amount of orders and payments so
delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of Shares of each Fund and/or Class and hold
such Shares in the appropriate Shareholder accounts.
(3) For certificated Funds and/or Classes, if a Shareholder or its
agent requests a certificate, the Company, as Transfer Agent,
shall countersign and mail by first class mail, a certificate to
the Shareholder at its address as set forth on the transfer books
of the Funds, and/or Classes, subject to any Proper Instructions
regarding the delivery of certificates.
(4) In the event that any check or other order for the purchase of
Shares of the Fund and/or Class is returned unpaid for any
reason, the Company shall debit the Share account of the
Shareholder by the number of Shares that had been credited to its
account upon receipt of the check or other order, promptly mail a
debit advice to the Shareholder, and notify the Fund and/or Class
of its action. In the event that the amount paid for such Shares
exceeds proceeds of the redemption of such Shares plus the amount
of any dividends paid with respect to such Shares, the Fund
and/the Class or its distributor will reimburse the Company on
the amount of such excess.
B. Distribution
(1) Upon notification by the Funds of the declaration of any
distribution to Shareholders, the Company shall act as Dividend
Disbursing Agent for the Funds in accordance with the provisions
of its governing document and the then-current Prospectus of the
Fund. The Company shall prepare and mail or credit income,
capital gain, or any other payments to Shareholders. As the
Dividend Disbursing Agent, the Company shall, on or before the
payment date of any such distribution, notify the Custodian of
the estimated amount required to pay any portion of said
distribution which is payable in cash and request the Custodian
to make available sufficient funds for the cash amount to be paid
out. The Company shall reconcile the amounts so requested and the
amounts actually received with the Custodian on a daily basis. If
a Shareholder is entitled to receive additional Shares by virtue
of any such distribution or dividend, appropriate credits shall
be made to the Shareholder's account, for certificated Funds
and/or Classes, delivered where requested; and
(2) The Company shall maintain records of account for each Fund and
Class and advise the Investment Company, each Fund and Class and
its Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or set
forth in Proper Instructions, deliver the appropriate
instructions therefor to the Custodian. The Company shall notify
the Funds on a daily basis of the total amount of redemption
requests processed and monies paid to the Company by the
Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds from
the Custodian with respect to any redemption, the Company shall
pay or cause to be paid the redemption proceeds in the manner
instructed by the redeeming Shareholders, pursuant to procedures
described in the then-current Prospectus of the Fund.
(3) If any certificate returned for redemption or other request for
redemption does not comply with the procedures for redemption
approved by the Fund, the Company shall promptly notify the
Shareholder of such fact, together with the reason therefor, and
shall effect such redemption at the price applicable to the date
and time of receipt of documents complying with said procedures.
(4) The Company shall effect transfers of Shares by the registered
owners thereof.
(5) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual basis
and report such actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each Fund,
and/or Class, and maintain pursuant to applicable rules of the
Securities and Exchange Commission ("SEC") a record of the total
number of Shares of the Fund and/or Class which are authorized,
based upon data provided to it by the Fund, and issued and
outstanding. The Company shall also provide the Fund on a regular
basis or upon reasonable request with the total number of Shares
which are authorized and issued and outstanding, but shall have
no obligation when recording the issuance of Shares, except as
otherwise set forth herein, to monitor the issuance of such
Shares or to take cognizance of any laws relating to the issue or
sale of such Shares, which functions shall be the sole
responsibility of the Funds.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed hereunder in the form and manner as agreed to by the
Investment Company or the Fund to include a record for each
Shareholder's account of the following:
(a) Name, address and tax identification number (and whether
such number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account, including
dividends paid and date and price for all transactions;
(d) Any stop or restraining order placed against the account;
(e) Information with respect to withholding in the case of a
foreign account or an account for which withholding is
required by the Internal Revenue Code;
(f) Any dividend reinvestment order, plan application, dividend
address and correspondence relating to the current
maintenance of the account;
(g) Certificate numbers and denominations for any Shareholder
holding certificates;
(h) Any information required in order for the Company to perform
the calculations contemplated or required by this Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such record
retention shall be at the expense of the Company, and such
records may be inspected by the Fund at reasonable times. The
Company may, at its option at any time, and shall forthwith upon
the Fund's demand, turn over to the Fund and cease to retain in
the Company's files, records and documents created and maintained
by the Company pursuant to this Agreement, which are no longer
needed by the Company in performance of its services or for its
protection. If not so turned over to the Fund, such records and
documents will be retained by the Company for six years from the
year of creation, during the first two of which such documents
will be in readily accessible form. At the end of the six year
period, such records and documents will either be turned over to
the Fund or destroyed in accordance with Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the following
information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in each
state for "blue sky" purposes as determined according to
Proper Instructions delivered from time to time by the Fund
to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption fees, or
other transaction- or sales-related payments;
(f) Such other information as may be agreed upon from time to
time.
(2) The Company shall prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies, and, if
required, mail to Shareholders, such notices for reporting
dividends and distributions paid as are required to be so filed
and mailed and shall withhold such sums as are required to be
withheld under applicable federal and state income tax laws,
rules and regulations.
(3) In addition to and not in lieu of the services set forth above,
the Company shall:
(a) Perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, agent in
connection with accumulation, open-account or similar plans
(including without limitation any periodic investment plan
or periodic withdrawal program), including but not limited
to: maintaining all Shareholder accounts, mailing
Shareholder reports and Prospectuses to current
Shareholders, withholding taxes on accounts subject to back-
up or other withholding (including non-resident alien
accounts), preparing and filing reports on U.S. Treasury
Department Form 1099 and other appropriate forms required
with respect to dividends and distributions by federal
authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to Shareholders
for all purchases and redemptions of Shares and other
conformable transactions in Shareholder accounts, preparing
and mailing activity statements for Shareholders, and
providing Shareholder account information; and
(b) provide a system which will enable the Fund to monitor the
total number of Shares of each Fund (and/or Class) sold in
each state ("blue sky reporting"). The Fund shall by Proper
Instructions (i) identify to the Company those transactions
and assets to be treated as exempt from the blue sky
reporting for each state and (ii) verify the classification
of transactions for each state on the system prior to
activation and thereafter monitor the daily activity for
each state. The responsibility of the Company for each
Fund's (and/or Class's) state blue sky registration status
is limited solely to the recording of the initial
classification of transactions or accounts with regard to
blue sky compliance and the reporting of such transactions
and accounts to the Fund as provided above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders
relating to their Share accounts and such other correspondence as
may from time to time be addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists, mail proxy
cards and other material supplied to it by the Fund in connection
with Shareholder meetings of each Fund; receive, examine and
tabulate returned proxies, and certify the vote of the
Shareholders;
(3) The Company shall establish and maintain facilities and
procedures for safekeeping of stock certificates, check forms and
facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such
certificates, forms and devices.
ARTICLE 13. DUTIES OF THE INVESTMENT COMPANY.
A. Compliance
The Investment Company or Fund assume full responsibility for the
preparation, contents and distribution of their own and/or their
classes' Prospectus and for complying with all applicable requirements
of the Securities Act of 1933, as amended (the "1933 Act"), the 1940
Act and any laws, rules and regulations of government authorities
having jurisdiction.
B. Share Certificates
The Investment Company shall supply the Company with a sufficient
supply of blank Share certificates and from time to time shall renew
such supply upon request of the Company. Such blank Share certificates
shall be properly signed, manually or by facsimile, if authorized by
the Investment Company and shall bear the seal of the Investment
Company or facsimile thereof; and notwithstanding the death,
resignation or removal of any officer of the Investment Company
authorized to sign certificates, the Company may continue to
countersign certificates which bear the manual or facsimile signature
of such officer until otherwise directed by the Investment Company.
C. Distributions
The Fund shall promptly inform the Company of the declaration of any
dividend or distribution on account of any Fund's shares.
ARTICLE 14. COMPENSATION AND EXPENSES.
A. Annual Fee
For performance by the Company pursuant to Section Three of this
Agreement, the Investment Company and/or the Fund agree to pay the
Company an annual maintenance fee for each Shareholder account as
agreed upon between the parties and as may be added to or amended from
time to time. Such fees may be changed from time to time subject to
written agreement between the Investment Company and the Company.
Pursuant to information in the Fund Prospectus or other information or
instructions from the Fund, the Company may sub-divide any Fund into
Classes or other sub-components for recordkeeping purposes. The
Company will charge the Fund the same fees for each such Class or sub-
component the same as if each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Investment
Company and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items agreed upon
between the parties, as may be added to or amended from time to time.
In addition, any other expenses incurred by the Company at the request
or with the consent of the Investment Company and/or the Fund, will be
reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the
Fund and shall be paid to the Company no less frequently than monthly,
and shall be paid daily upon request of the Company. The Company will
maintain detailed information about the compensation and out-of-pocket
expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Investment Company and/or the Funds and a duly
authorized officer of the Company.
SECTION FOUR: CUSTODY SERVICES PROCUREMENT.
ARTICLE 15. APPOINTMENT.
The Investment Company hereby appoints Company as its agent to evaluate
and obtain custody services from a financial institution that (i) meets the
criteria established in Section 17(f) of the 1940 Act and (ii) has been
approved by the Board as eligible for selection by the Company as a
custodian (the "Eligible Custodian"). The Company accepts such appointment.
ARTICLE 16. THE COMPANY AND ITS DUTIES.
Subject to the review, supervision and control of the Board, the Company
shall:
A. evaluate and obtain custody services from a financial institution that
meets the criteria established in Section 17(f) of the 1940 Act and
has been approved by the Board as being eligible for selection by the
Company as an Eligible Custodian;
B. negotiate and enter into agreements with Eligible Custodians for the
benefit of the Investment Company, with the Investment Company as a
party to each such agreement. The Company may, as paying agent, be a
party to any agreement with any such Eligible Custodian;
C. establish procedures to monitor the nature and the quality of the
services provided by Eligible Custodians;
D. monitor and evaluate the nature and the quality of services provided
by Eligible Custodians;
E. periodically provide to the Investment Company (i) written reports on
the activities and services of Eligible Custodians; (ii) the nature
and amount of disbursements made on account of the each Fund with
respect to each custodial agreement; and (iii) such other information
as the Board shall reasonably request to enable it to fulfill its
duties and obligations under Sections 17(f) and 36(b) of the 1940 Act
and other duties and obligations thereof;
F. periodically provide recommendations to the Board to enhance Eligible
Custodian's customer services capabilities and improve upon fees being
charged to the Fund by Eligible Custodian; and
The foregoing, along with any additional services that Company shall
agree in writing to perform for the Fund under this Section Four, shall
hereafter be referred to as "Custody Services Procurement."
ARTICLE 17. FEES AND EXPENSES.
A. Annual Fee
For the performance of Custody Services Procurement by the Company
pursuant to Section Four of this Agreement, the Investment Company
and/or the Fund agree to compensate the Company in accordance with the
fees agreed upon from time to time.
B. Reimbursements
In addition to the fee paid under Section 11A above, the Investment
Company and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items agreed upon
between the parties, as may be added to or amended from time to time.
In addition, any other expenses incurred by the Company at the request
or with the consent of the Investment Company and/or the Fund, will be
reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the
Fund and shall be paid to the Company no less frequently than monthly,
and shall be paid daily upon request of the Company. The Company will
maintain detailed information about the compensation and out-of-pocket
expenses by Fund.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Investment Company and/or the Funds and a duly
authorized officer of the Company.
ARTICLE 18. REPRESENTATIONS.
The Company represents and warrants that it has obtained all required
approvals from all government or regulatory authorities necessary to enter
into this arrangement and to provide the services contemplated in Section
Four of this Agreement.
SECTION FIVE: GENERAL PROVISIONS.
ARTICLE 19. PROPER INSTRUCTIONS.
As used throughout this Agreement, a "Proper Instruction" means a writing
signed or initialed by one or more person or persons as the Board shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved. Oral instructions will be
deemed to be Proper Instructions if (a) the Company reasonably believes them
to have been given by a person previously authorized in Proper Instructions
to give such instructions with respect to the transaction involved, and (b)
the Investment Company, or the Fund, and the Company promptly cause such
oral instructions to be confirmed in writing. Proper Instructions may
include communications effected directly between electro-mechanical or
electronic devices provided that the Investment Company, or the Fund, and
the Company are satisfied that such procedures afford adequate safeguards
for the Fund's assets. Proper Instructions may only be amended in writing.
ARTICLE 20. ASSIGNMENT.
Except as provided below, neither this Agreement nor any of the rights or
obligations under this Agreement may be assigned by either party without the
written consent of the other party.
A. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
B. With regard to Transfer Agency Services, the Company may without
further consent on the part of the Investment Company subcontract for
the performance of Transfer Agency Services with
(1) its subsidiary, Federated Shareholder Service Company, a Delaware
business trust, which is duly registered as a transfer agent
pursuant to Section 17A(c)(1) of the Securities Exchange Act of
1934, as amended, or any succeeding statute ("Section
17A(c)(1)"); or
(2) such other provider of services duly registered as a transfer
agent under Section 17A(c)(1) as Company shall select.
The Company shall be as fully responsible to the Investment Company
for the acts and omissions of any subcontractor as it is for its own
acts and omissions.
C. With regard to Fund Accounting Services, Administrative Services and
Custody Procurement Services, the Company may without further consent
on the part of the Investment Company subcontract for the performance
of such services with Federated Administrative Services, a wholly-
owned subsidiary of the Company.
D. The Company shall upon instruction from the Investment Company
subcontract for the performance of services under this Agreement with
an Agent selected by the Investment Company, other than as described
in B. and C. above; provided, however, that the Company shall in no
way be responsible to the Investment Company for the acts and
omissions of the Agent.
ARTICLE 21. DOCUMENTS.
A. In connection with the appointment of the Company under this
Agreement, the Investment Company shall file with the Company the
following documents:
(1) A copy of the Charter and By-Laws of the Investment Company and
all amendments thereto;
(2) A copy of the resolution of the Board of the Investment Company
authorizing this Agreement;
(3) Specimens of all forms of outstanding Share certificates of the
Investment Company or the Funds in the forms approved by the
Board of the Investment Company with a certificate of the
Secretary of the Investment Company as to such approval;
(4) All account application forms and other documents relating to
Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following documents:
(1) Each resolution of the Board of the Investment Company
authorizing the original issuance of each Fund's, and/or Class's
Shares;
(2) Each Registration Statement filed with the SEC and amendments
thereof and orders relating thereto in effect with respect to the
sale of Shares of any Fund, and/or Class;
(3) A certified copy of each amendment to the governing document and
the By-Laws of the Investment Company;
(4) Certified copies of each vote of the Board authorizing officers
to give Proper Instructions to the Custodian and agents for fund
accountant, custody services procurement, and shareholder
recordkeeping or transfer agency services;
(5) Specimens of all new Share certificates representing Shares of
any Fund, accompanied by Board resolutions approving such forms;
(6) Such other certificates, documents or opinions which the Company
may, in its discretion, deem necessary or appropriate in the
proper performance of its duties; and
(7) Revisions to the Prospectus of each Fund.
ARTICLE 22. REPRESENTATIONS AND WARRANTIES.
A. Representations and Warranties of the Company
The Company represents and warrants to the Fund that:
(1) it is a corporation duly organized and existing and in good
standing under the laws of the Commonwealth of Pennsylvania;
(2) It is duly qualified to carry on its business in each
jurisdiction where the nature of its business requires such
qualification, and in the Commonwealth of Pennsylvania;
(3) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this
Agreement;
(4) all requisite corporate proceedings have been taken to authorize
it to enter into and perform its obligations under this
Agreement;
(5) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement;
(6) it is in compliance with federal securities law requirements and
in good standing as an administrator and fund accountant; and
B. Representations and Warranties of the Investment Company
The Investment Company represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and in
good standing under the laws of its state of organization;
(2) It is empowered under applicable laws and by its Charter and By-
Laws to enter into and perform its obligations under this
Agreement;
(3) All corporate proceedings required by said Charter and By-Laws
have been taken to authorize it to enter into and perform its
obligations under this Agreement;
(4) The Investment Company is an open-end investment company
registered under the 1940 Act; and
(5) A registration statement under the 1933 Act will be effective,
and appropriate state securities law filings have been made and
will continue to be made, with respect to all Shares of each Fund
being offered for sale.
ARTICLE 23. STANDARD OF CARE AND INDEMNIFICATION.
A. Standard of Care
With regard to Sections One, Three and Four, the Company shall be held
to a standard of reasonable care in carrying out the provisions of
this Contract. The Company shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Investment Company)
on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice, provided that
such action is not in violation of applicable federal or state laws or
regulations, and is in good faith and without negligence.
B. Indemnification by Investment Company
The Company shall not be responsible for and the Investment Company or
Fund shall indemnify and hold the Company, including its officers,
directors, shareholders and their agents, employees and affiliates,
harmless against any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liabilities arising out of or
attributable to:
(1) The acts or omissions of any Custodian, Adviser, Sub-adviser or
other party contracted by or approved by the Investment Company
or Fund,
(2) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in proper
form which
(a) are received by the Company or its agents or subcontractors
and furnished to it by or on behalf of the Fund, its
Shareholders or investors regarding the purchase, redemption
or transfer of Shares and Shareholder account information;
(b) are received by the Company from independent pricing
services or sources for use in valuing the assets of the
Funds; or
(c) are received by the Company or its agents or subcontractors
from Advisers, Sub-advisers or other third parties
contracted by or approved by the Investment Company of Fund
for use in the performance of services under this Agreement;
(d) have been prepared and/or maintained by the Fund or its
affiliates or any other person or firm on behalf of the
Investment Company.
(3) The reliance on, or the carrying out by the Company or its agents
or subcontractors of Proper Instructions of the Investment
Company or the Fund.
(4) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws
or regulations of any state that such Shares be registered in
such state or in violation of any stop order or other
determination or ruling by any federal agency or any state with
respect to the offer or sale of such Shares in such state.
Provided, however, that the Company shall not be protected by
this Article 23.B. from liability for any act or omission
resulting from the Company's willful misfeasance, bad faith,
negligence or reckless disregard of its duties or failure to meet
the standard of care set forth in 23.A. above.
C. Reliance
At any time the Company may apply to any officer of the Investment
Company or Fund for instructions, and may consult with legal counsel
with respect to any matter arising in connection with the services to
be performed by the Company under this Agreement, and the Company and
its agents or subcontractors shall not be liable and shall be
indemnified by the Investment Company or the appropriate Fund for any
action reasonably taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel provided such action
is not in violation of applicable federal or state laws or
regulations. The Company, its agents and subcontractors shall be
protected and indemnified in recognizing stock certificates which are
reasonably believed to bear the proper manual or facsimile signatures
of the officers of the Investment Company or the Fund, and the proper
countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.
D. Notification
In order that the indemnification provisions contained in this
Article 23 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such
assertion, and shall keep the other party advised with respect to all
developments concerning such claim. The party who may be required to
indemnify shall have the option to participate with the party seeking
indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent.
ARTICLE 24. TERM AND TERMINATION OF AGREEMENT.
This Agreement shall be effective from March 1, 1996 and shall continue
until February 28, 2003 (`Term"). Thereafter, the Agreement will continue
for 18 month terms. The Agreement can be terminated by either party upon 18
months notice to be effective as of the end of such 18 month period. In the
event, however, of willful misfeasance, bad faith, negligence or reckless
disregard of its duties by the Company, the Investment Company has the right
to terminate the Agreement upon 60 days written notice, if Company has not
cured such willful misfeasance, bad faith, negligence or reckless disregard
of its duties within 60 days. The termination date for all original or
after-added Investment companies which are, or become, a party to this
Agreement. shall be coterminous. Investment Companies that merge or
dissolve during the Term, shall cease to be a party on the effective date of
such merger or dissolution.
Should the Investment Company exercise its rights to terminate, all out-
of-pocket expenses associated with the movement of records and materials
will be borne by the Investment Company or the appropriate Fund.
Additionally, the Company reserves the right to charge for any other
reasonable expenses associated with such termination. The provisions of
Articles 10 and 23 shall survive the termination of this Agreement.
ARTICLE 25. AMENDMENT.
This Agreement may be amended or modified by a written agreement executed
by both parties.
ARTICLE 26. INTERPRETIVE AND ADDITIONAL PROVISIONS.
In connection with the operation of this Agreement, the Company and the
Investment Company may from time to time agree on such provisions
interpretive of or in addition to the provisions of this Agreement as may in
their joint opinion be consistent with the general tenor of this Agreement.
Any such interpretive or additional provisions shall be in a writing signed
by both parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Charter. No
interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Agreement.
ARTICLE 27. GOVERNING LAW.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts
ARTICLE 28. NOTICES.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Investment Company at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the
Company at Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779,
or to such other address as the Investment Company or the Company may
hereafter specify, shall be deemed to have been properly delivered or given
hereunder to the respective address.
ARTICLE 29. COUNTERPARTS.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
ARTICLE 30. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF THE
COMPANY.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Company and signed by an authorized officer of the Company,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by
any of them individually or to impose any liability on any of them
personally, and the obligations of this Agreement are not binding upon any
of the Trustees or Shareholders of the Company, but bind only the
appropriate property of the Fund, or Class, as provided in the Declaration
of Trust.
ARTICLE 31. MERGER OF AGREEMENT.
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject hereof
whether oral or written.
ARTICLE 32. SUCCESSOR AGENT.
If a successor agent for the Investment Company shall be appointed by the
Investment Company, the Company shall upon termination of this Agreement
deliver to such successor agent at the office of the Company all properties
of the Investment Company held by it hereunder. If no such successor agent
shall be appointed, the Company shall at its office upon receipt of Proper
Instructions deliver such properties in accordance with such instructions.
In the event that no written order designating a successor agent or
Proper Instructions shall have been delivered to the Company on or before
the date when such termination shall become effective, then the Company
shall have the right to deliver to a bank or trust company, which is a
"bank" as defined in the 1940 Act, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published
report, of not less than $2,000,000, all properties held by the Company
under this Agreement. Thereafter, such bank or trust company shall be the
successor of the Company under this Agreement.
ARTICLE 33. FORCE MAJEURE.
The Company shall have no liability for cessation of services hereunder
or any damages resulting therefrom to the Fund as a result of work stoppage,
power or other mechanical failure, natural disaster, governmental action,
communication disruption or other impossibility of performance.
ARTICLE 34. ASSIGNMENT; SUCCESSORS.
This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party may assign all
of or a substantial portion of its business to a successor, or to a party
controlling, controlled by, or under common control with such party. Nothing
in this Article 34 shall prevent the Company from delegating its
responsibilities to another entity to the extent provided herein.
ARTICLE 35. SEVERABILITY.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
ARTICLE 36. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF
THE INVESTMENT COMPANY.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Investment Company and signed by an authorized officer of
the Investment Company, acting as such, and neither such authorization by
such Trustees nor such execution and delivery by such officer shall be
deemed to have been made by any of them individually or to impose any
liability on any of them personally, and the obligations of this Agreement
are not binding upon any of the Trustees or Shareholders of the Investment
Company, but bind only the property of the Fund, or Class, as provided in
the Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
INVESTMENT COMPANIES
(LISTED ON EXHIBIT 1)
By: /s/ S. Elliott Cohan
S. Elliott Cohan
Assistant Secretary
FEDERATED SERVICES COMPANY
By: /s/ Thomas J. Ward
Thomas J. Ward
Secretary
EXHIBIT 1
CONTRACT
DATE INVESTMENT COMPANY
Portfolios
Classes
March 1, 1996 FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
CLASS A
CLASS B
CLASS C
CLASS F
FEDERATED SERVICES COMPANY provides the following services:
Administrative Services
Fund Accounting Services
Shareholder Recordkeeping Services
EXHIBIT 6(I) UNDER FORM N-1A
EXHIBIT 1 UNDER ITEM 601/ REG. S-K
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
DISTRIBUTOR'S CONTRACT
AGREEMENT made this , 1996 by and between Federated Municipal
Opportunities Fund, Inc. (the "Corporation"), a Maryland Corporation,
and FEDERATED SECURITIES CORP. ("FSC"), a Pennsylvania Corporation.
In consideration of the mutual covenants hereinafter contained, it
is hereby agreed by and between the parties hereto as follows:
1. The Corporation hereby appoints FSC as its agent to sell and
distribute shares of the Corporation which may be offered in one or
more series (the "Funds") consisting of one or more classes (the
"Classes") of shares (the "Shares"), as described and set forth on one
or more exhibits to this Agreement, at the current offering price
thereof as described and set forth in the current Prospectuses of the
Corporation. FSC hereby accepts such appointment and agrees to provide
such other services for the Corporation, if any, and accept such
compensation from the Corporation, if any, as set forth in the
applicable exhibits to this Agreement.
2. The sale of any Shares may be suspended without prior notice whenever
in the judgment of the Corporation it is in its best interest to do
so.
3. Neither FSC nor any other person is authorized by the Corporation to
give any information or to make any representation relative to any
Shares other than those contained in the Registration Statement,
Prospectuses, or Statements of Additional Information ("SAIs") filed
with the Securities and Exchange Commission, as the same may be
amended from time to time, or in any supplemental information to said
Prospectuses or SAIs approved by the Corporation. FSC agrees that any
other information or representations other than those specified above
which it or any dealer or other person who purchases Shares through
FSC may make in connection with the offer or sale of Shares, shall be
made entirely without liability on the part of the Corporation. No
person or dealer, other than FSC, is authorized to act as agent for
the Corporation for any purpose. FSC agrees that in offering or
selling Shares as agent of the Corporation, it will, in all respects,
duly conform to all applicable state and federal laws and the rules
and regulations of the National Association of Securities Dealers,
Inc., including its Rules of Fair Practice. FSC will submit to the
Corporation copies of all sales literature before using the same and
will not use such sales literature if disapproved by the Corporation.
4. This Agreement is effective with respect to each Class as of the date
of execution of the applicable exhibit and shall continue in effect
with respect to each Class presently set forth on an exhibit and any
subsequent Classes added pursuant to an exhibit during the initial
term of this Agreement for one year from the date set forth above, and
thereafter for successive periods of one year if such continuance is
approved at least annually by the Directors of the Corporation
including a majority of the members of the Board of Directors of the
Corporation who are not interested persons of the Corporation and have
no direct or indirect financial interest in the operation of any
Distribution Plan relating to the Corporation or in any related
documents to such Plan ("Disinterested Directors") cast in person at a
meeting called for that purpose. If a Class is added after the first
annual approval by the Directors as described above, this Agreement
will be effective as to that Class upon execution of the applicable
exhibit and will continue in effect until the next annual approval of
this Agreement by the Directors and thereafter for successive periods
of one year, subject to approval as described above.
5. This Agreement may be terminated with regard to a particular Fund or
Class at any time, without the payment of any penalty, by the vote of
a majority of the Disinterested Directors or by a majority of the
outstanding voting securities of the particular Fund or Class on not
more than sixty (60) days' written notice to any other party to this
Agreement. This Agreement may be terminated with regard to a
particular Fund or Class by FSC on sixty (60) days' written notice to
the Corporation.
6. This Agreement may not be assigned by FSC and shall automatically
terminate in the event of an assignment by FSC as defined in the
Investment Company Act of 1940, as amended, provided, however, that
FSC may employ such other person, persons, corporation or corporations
as it shall determine in order to assist it in carrying out its duties
under this Agreement.
7. FSC shall not be liable to the Corporation for anything done or
omitted by it, except acts or omissions involving willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties
imposed by this Agreement.
8. This Agreement may be amended at any time by mutual agreement in
writing of all the parties hereto, provided that such amendment is
approved by the Directors of the Corporation including a majority of
the Disinterested Directors of the Corporation cast in person at a
meeting called for that purpose.
9. This Agreement shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
10. (a) Subject to the conditions set forth below, the Corporation agrees
to indemnify and hold harmless FSC and each person, if any, who
controls FSC within the meaning of Section 15 of the Securities
Act of 1933 and Section 20 of the Securities Act of 1934, as
amended, against any and all loss, liability, claim, damage and
expense whatsoever (including but not limited to any and all
expenses whatsoever reasonably incurred in investigating,
preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever) arising out of or based upon
any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, any Prospectuses or
SAIs (as from time to time amended and supplemented) or the
omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements
therein not misleading, unless such statement or omission was
made in reliance upon and in conformity with written information
furnished to the Corporation about FSC by or on behalf of FSC
expressly for use in the Registration Statement, any Prospectuses
and SAIs or any amendment or supplement thereof.
If any action is brought against FSC or any controlling person
thereof with respect to which indemnity may be sought against the
Corporation pursuant to the foregoing paragraph, FSC shall
promptly notify the Corporation in writing of the institution of
such action and the Corporation shall assume the defense of such
action, including the employment of counsel selected by the
Corporation and payment of expenses. FSC or any such controlling
person thereof shall have the right to employ separate counsel in
any such case, but the fees and expenses of such counsel shall be
at the expense of FSC or such controlling person unless the
employment of such counsel shall have been authorized in writing
by the Corporation in connection with the defense of such action
or the Corporation shall not have employed counsel to have charge
of the defense of such action, in any of which events such fees
and expenses shall be borne by the Corporation. Anything in this
paragraph to the contrary notwithstanding, the Corporation shall
not be liable for any settlement of any such claim of action
effected without its written consent. The Corporation agrees
promptly to notify FSC of the commencement of any litigation or
proceedings against the Corporation or any of its officers or
Directors or controlling persons in connection with the issue and
sale of Shares or in connection with the Registration Statement,
Prospectuses, or SAIs.
(b) FSC agrees to indemnify and hold harmless the Corporation, each
of its Directors, each of its officers who have signed the
Registration Statement and each other person, if any, who
controls the Corporation within the meaning of Section 15 of the
Securities Act of 1933, but only with respect to statements or
omissions, if any, made in the Registration Statement or any
Prospectus, SAI, or any amendment or supplement thereof in
reliance upon, and in conformity with, information furnished to
the Corporation about FSC by or on behalf of FSC expressly for
use in the Registration Statement or any Prospectus, SAI, or any
amendment or supplement thereof. In case any action shall be
brought against the Corporation or any other person so
indemnified based on the Registration Statement or any
Prospectus, SAI, or any amendment or supplement thereof, and with
respect to which indemnity may be sought against FSC, FSC shall
have the rights and duties given to the Corporation, and the
Corporation and each other person so indemnified shall have the
rights and duties given to FSC by the provisions of subsection
(a) above.
(c) Nothing herein contained shall be deemed to protect any person
against liability to the Corporation or its shareholders to which
such person would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of
the duties of such person or by reason of the reckless disregard
by such person of the obligations and duties of such person under
this Agreement.
(d) Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940, as
amended, for Directors, officers, FSC and controlling persons of
the Corporation by the Corporation pursuant to this Agreement,
the Corporation is aware of the position of the Securities and
Exchange Commission as set forth in the Investment Company Act
Release No. IC-11330. Therefore, the Corporation undertakes that
in addition to complying with the applicable provisions of this
Agreement, 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 Disinterested Directors, 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 Corporation 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, FSC or controlling person of the
Corporation 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 Corporation is insured
against losses arising by reason of any lawful advances; or (iii)
a majority of a quorum of non-party Disinterested 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.
11. If at any time the Shares of any Fund are offered in two or more
Classes, FSC agrees to adopt compliance standards as to when a class
of shares may be sold to particular investors.
12. This Agreement will become binding on the parties hereto upon the
Exhibit 6(ii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
Exhibit A
to the
Distributor's Contract
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
CLASS A SHARES
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated , 1996, between Federated Municipal
Opportunities Fund, Inc. and Federated Securities Corp. with respect to
the Class of shares set forth above.
1. The Corporation hereby appoints FSC to engage in activities
principally intended to result in the sale of shares of the above-
listed Class ("Shares"). Pursuant to this appointment, FSC is
authorized to select a group of financial institutions ("Financial
Institutions") to sell Shares at the current offering price thereof as
described and set forth in the respective prospectuses of the
Corporation.
2. During the term of this Agreement, the Corporation will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the
annual rate of .25 of 1% of the average aggregate net asset value of
the Shares held during the month. For the month in which this
Agreement becomes effective or terminates, there shall be an
appropriate proration of any fee payable on the basis of the number of
days that the Agreement is in effect during the month.
3. FSC may from time-to-time and for such periods as it deems appropriate
reduce its compensation to the extent any Class' expenses exceed such
lower expense limitation as FSC may, by notice to the Corporation,
voluntarily declare to be effective.
4. FSC will enter into separate written agreements with various firms to
provide certain of the services set forth in Paragraph 1 herein. FSC,
in its sole discretion, may pay Financial Institutions a periodic fee
in respect of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon which such
fees will be paid shall be determined from time to time by FSC in its
sole discretion.
5. FSC will prepare reports to the Board of Directors of the Corporation
on a quarterly basis showing amounts expended hereunder including
amounts paid to Financial Institutions and the purpose for such
expenditures.
In consideration of the mutual covenants set forth in the
Distributor's Contract dated March 1, 1996, between Federated Municipal
Opportunities Fund, Inc. and Federated Securities Corp., Federated
Municipal Opportunities Fund, Inc. executes and delivers this Exhibit
on behalf of the Funds, and with respect to the Class A Shares thereof,
first set forth in this Exhibit.
Witness the due execution hereof this day of , 1996.
ATTEST: FEDERATED MUNICIPAL OPPORTUNITIES
FUND, INC.
By:
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
By:
Secretary Executive Vice President
Exhibit 6(ii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
Exhibit B
to the
Distributor's Contract
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
CLASS B SHARES
The following provisions are hereby incorporated and made part of
the Distributor's Contract dated , 1996, between Federated
Municipal Opportunities Fund, Inc. and Federated Securities Corp. with
respect to the Class of shares set forth above.
1. The Corporation hereby appoints FSC to engage in activities
principally intended to result in the sale of shares of the above-
listed Class ("Shares"). Pursuant to this appointment, FSC is
authorized to select a group of financial institutions ("Financial
Institutions") to sell Shares at the current offering price thereof as
described and set forth in the respective prospectuses of the
Corporation.
2. During the term of this Agreement, the Corporation will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the
annual rate of .75 of 1% of the average aggregate net asset value of
the Shares held during the month. For the month in which this
Agreement becomes effective or terminates, there shall be an
appropriate proration of any fee payable on the basis of the number of
days that the Agreement is in effect during the month.
3. FSC may from time-to-time and for such periods as it deems appropriate
reduce its compensation to the extent any Class' expenses exceed such
lower expense limitation as FSC may, by notice to the Corporation,
voluntarily declare to be effective.
4. FSC will enter into separate written agreements with various firms to
provide certain of the services set forth in Paragraph 1 herein. FSC,
in its sole discretion, may pay Financial Institutions a periodic fee
in respect of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon which such
fees will be paid shall be determined from time to time by FSC in its
sole discretion.
5. FSC will prepare reports to the Board of Directors of the Corporation
on a quarterly basis showing amounts expended hereunder including
amounts paid to Financial Institutions and the purpose for such
expenditures.
In consideration of the mutual covenants set forth in the
Distributor's Contract dated , 1996, between Federated Municipal
Opportunities Fund, Inc. and Federated Securities Corp., Federated
Municipal Opportunities Fund, Inc. executes and delivers this Exhibit
on behalf of the Funds, and with respect to the Class B Shares thereof,
first set forth in this Exhibit.
Witness the due execution hereof this day of , 1996.
ATTEST: FEDERATED MUNICIPAL OPPORTUNITIES
FUND, INC.
By:
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
By:
Secretary Executive Vice President
Exhibit 6(ii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
Exhibit C
to the
Distributor's Contract
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
CLASS C SHARES
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated , 1996, between Federated Municipal
Opportunities Fund, Inc. and Federated Securities Corp. with respect to
the Class of shares set forth above.
1. The Corporation hereby appoints FSC to engage in activities principally
intended to result in the sale of shares of the above-listed Class
("Shares"). Pursuant to this appointment, FSC is authorized to select a
group of financial institutions ("Financial Institutions") to sell
Shares at the current offering price thereof as described and set forth
in the respective prospectuses of the Corporation.
2. During the term of this Agreement, the Corporation will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the
annual rate of .75 of 1% of the average aggregate net asset value of
the Shares held during the month. For the month in which this Agreement
becomes effective or terminates, there shall be an appropriate
proration of any fee payable on the basis of the number of days that
the Agreement is in effect during the month.
3. FSC may from time-to-time and for such periods as it deems appropriate
reduce its compensation to the extent any Class' expenses exceed such
lower expense limitation as FSC may, by notice to the Corporation,
voluntarily declare to be effective.
4. FSC will enter into separate written agreements with various firms to
provide certain of the services set forth in Paragraph 1 herein. FSC,
in its sole discretion, may pay Financial Institutions a periodic fee
in respect of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon which such
fees will be paid shall be determined from time to time by FSC in its
sole discretion.
5. FSC will prepare reports to the Board of Directors of the Corporation
on a quarterly basis showing amounts expended hereunder including
amounts paid to Financial Institutions and the purpose for such
expenditures.
In consideration of the mutual covenants set forth in the
Distributor's Contract dated , 1996, between Federated Municipal
Opportunities Fund, Inc. and Federated Securities Corp., Federated
Municipal Opportunities Fund, Inc. executes and delivers this Exhibit on
behalf of the Funds, and with respect to the Class C Shares thereof,
first set forth in this Exhibit.
Witness the due execution hereof this day of , 1996.
ATTEST: FEDERATED MUNICIPAL OPPORTUNITIES
FUND, INC.
By:
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
By:
Secretary Executive Vice President
Exhibit 6(ii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
Exhibit D
to the
Distributor's Contract
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
CLASS F SHARES
The following provisions are hereby incorporated and made part of
the Distributor's Contract dated , 1996, between Federated
Municipal Opportunities Fund, Inc. and Federated Securities Corp. with
respect to the Class of the Fund set forth above:
1. The Trust hereby appoints FSC to select a group of financial
institutions ("Financial Institutions") to sell shares of the above-
listed series and Class ("Shares"), at the current offering price
thereof as described and set forth in the prospectuses of the Trust.
2. FSC will enter into separate written agreements with various firms to
provide the services set forth in Paragraph 1 herein. During the term
of this Agreement, the Trust will reimburse FSC for payments made by
FSC to obtain services pursuant to this Agreement, a monthly fee
computed at the annual rate of up to .25 of 1% of the average
aggregate net asset value of the Shares held during the month. For the
month in which this Agreement becomes effective or terminates, there
shall be an appropriate proration of any fee payable on the basis of
the number of days that the Agreement is in effect during the month.
The fees paid hereunder shall be in an amount equal to the aggregate
amount of periodic fees paid by FSC to Financial Institutions pursuant
to Paragraph 3 herein.
3. FSC, in its sole discretion, may pay Financial Institutions a periodic
fee in respect of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon which such
fees will be paid shall be determined from time to time by the Trust's
Board of Trustees.
4. FSC may from time-to-time and for such periods as it deems appropriate
reduce its compensation to the extent any Class' expenses exceed such
lower expense limitation as FSC may, by notice to the Corporation,
voluntarily declare to be effective.
5. FSC will prepare reports to the Board of Trustees of the Trust on a
quarterly basis showing amounts paid to the various firms and the
purpose for such payments.
6. In the event any amendment to this Agreement materially increases the
fees set forth in Paragraph 2, such amendment must be approved by a
vote of a majority of the outstanding voting securities of the
appropriate Fund or Class.
In consideration of the mutual covenants set forth in the
Distributor's Contract dated , 1996 between Federated Municipal
Opportunities Fund, Inc. and Federated Securities Corp., Federated
Municipal Opportunities Fund, Inc. executes and delivers this Exhibit
on behalf of the Funds, and with respect to the Class F Shares first
set forth in this Exhibit.
Witness the due execution hereof this day of , 1996.
ATTEST: FEDERATED MUNICIPAL
OPPORTUNITIES FUND, INC.
By:
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
By:
Secretary Executive Vice President
