Reg. No. 333-
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811-4533
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
(formerly, Fortress Municipal Income Fund, Inc.)
(Exact Name of Registrant as Specified in Charter)
(412) 288-1900
(Area Code and Telephone Number)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
JOHN W. MCGONIGLE, ESQUIRE
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
Copies to:
Byron F. Bowman, Esquire Matthew G. Maloney, Esquire
Senior Corporate Counsel Dickstein Shapiro Morin & Oshinsky LLP
Federated Investors 2101 L Street, N.W.
Federated Investors Tower Washington, D.C. 20037
Pittsburgh, PA 15222
Registrant has filed with the Securities and Exchange Commission a declaration
pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended,
that it elects to register an indefinite amount of securities under the
Securities Act of 1933, as amended, and filed the Notice required by that Rule
for Registrant's fiscal year ended August 31, 1995 on October 16, 1995.
Accordingly, no filing fee is submitted herewith.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 1(A) OF FORM N-14 SHOWING LOCATION IN
PROSPECTUS OF INFORMATION REQUIRED BY FORM N-14
Item of Part A of Form N-14 and Caption or Location in
Caption Prospectus
1. Beginning of Registration
Statement and Outside Front Cross Reference Sheet;
Cover Page of Prospectus Cover Page
2. Beginning and Outside Back
Cover Page of Prospectus Table of Contents
3. Fee Table, Synopsis Information Summary of Expenses; Summary;
and Risk Factors Risk Factors
4. Information About the Information About the
Transaction Reorganization
5. Information About the Information About the Federated
Registrant Fund and the State Bond Fund
6. Information About the Information About the Federated
Fund
Company Being Acquired and the State Bond Fund
7. Voting Information Voting Information
8. Interest of Certain Persons
and Experts Not Applicable
9. Additional Information
Required for Reoffering by
Persons Deemed to be
Underwriters Not Applicable
STATE BOND TAX EXEMPT FUND
100 NORTH MINNESOTA STREET
P.O. BOX 69
NEW ULM, MINNESOTA 56073-0069
Dear Shareholder:
The Board of Directors and management of State Bond Tax Exempt Fund (the ``State
Bond Fund') are pleased to submit for your vote a proposal to transfer all of
the assets of the State Bond Fund to Federated Municipal Opportunities Fund,
Inc. (the "Federated Fund"), a mutual fund advised by Federated Advisers. The
Federated Fund has an investment objective similar to that of the State Bond
Fund in that it seeks a high level of current income exempt from the federal
regular income tax by investing primarily in a professionally managed,
diversified portfolio of municipal bonds. As part of the transaction, holders
of shares in the State Bond Fund would receive Class A Shares of the Federated
Fund equal in value to their shares in the State Bond Fund and the State Bond
Fund would be liquidated. Shareholders receiving Class A Shares of the
Federated Fund as a result of the proposed reorganization would not have to pay
a sales load upon receiving such Shares, nor would they be subject to any
contingent deferred sales charges in connection with the exercise of exchange
rights or redemptions of such Shares.
The Board of Directors of the State Bond Fund, as well as ARM Capital Advisors,
Inc., the State Bond Fund's manager, and ARM Financial Services, Inc., the State
Bond Fund's distributor, believe the proposed agreement and plan of
reorganization is in the best interests of State Bond Fund shareholders for the
following reasons:
- -- The reorganization of the State Bond Fund into the Federated Fund may
ultimately provide operating efficiencies as a result of the size of the
Federated Fund which were not available to State Bond Fund shareholders due
to the smaller size of the State Bond Fund.
- -- The Federated Fund has an investment objective similar to that of the State
Bond Fund and offers an investment portfolio which invests in municipal bonds to
achieve a high level of current income exempt from the federal regular income
tax.
The Federated Fund is managed by Federated Advisers, a subsidiary of Federated
Investors. Federated Investors was founded in 1955 and is located in
Pittsburgh, Pennsylvania. Federated Advisers and other subsidiaries of
Federated Investors serve as investment advisers to a number of investment
companies and private accounts. With over $90 billion invested across more than
250 funds under management and/or administration by its subsidiaries, Federated
Investors is one of the largest mutual fund investment managers in the United
States. With more than 2,000 employees, Federated continues to be led by the
management who founded the company in 1955. Federated funds are presently at
work in and through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Federated Investors also has an excellent reputation for customer servicing,
having received a #1 rating for five years in a row by Dalbar, Inc. The
shareholder services for the Federated funds include advanced technological
systems that result in quick shareholder access to a broad spectrum of
information.
We believe the transfer of the State Bond Fund's assets in this transaction
presents an exciting investment opportunity for our shareholders. Your vote on
the transaction is critical to its success. The transfer will be effected only
if approved by a majority of all of the State Bond Fund's outstanding shares on
the record date voted in person or represented by proxy. We hope you share our
enthusiasm and will participate by casting your vote in person, or by proxy if
you are unable to attend the meeting. Please read the enclosed prospectus/proxy
statement carefully before you vote.
THE BOARD OF DIRECTORS BELIEVES THAT THE TRANSACTION IS IN THE BEST INTEREST OF
THE STATE BOND FUND AND ITS SHAREHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT YOU
VOTE FOR ITS APPROVAL.
Thank you for your prompt attention and participation.
Sincerely,
Dale C. Bauman
President
STATE BOND TAX EXEMPT FUND
100 NORTH MINNESOTA STREET
P.O. BOX 69
NEW ULM, MINNESOTA 56073-0069
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO SHAREHOLDERS OF STATE BOND TAX EXEMPT FUND:
A Special Meeting of Shareholders of State Bond Tax Exempt Fund, a portfolio of
State Bond Municipal Funds, Inc. (the `State Bond Fund'') will be held at
3:40 p.m. on December , 1996 at: 100 North Minnesota Street, New Ulm,
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Minnesota 56073-0069, for the following purposes:
1. To approve or disapprove a proposed Agreement and Plan of Reorganization
between State Bond Fund and Federated Municipal Opportunities Fund, Inc. (the
"Federated Fund"), whereby the Federated Fund would acquire all of the net
assets of the State Bond Fund in exchange for the Federated Fund's Class A
Shares to be distributed pro rata by the State Bond Fund to the holders of its
shares in complete liquidation of the State Bond Fund; and
2. To transact such other business as may properly come before the meeting or
any adjournment thereof.
By Order of the Board of Directors,
Dated: November , 1996 Kevin L. Howard
--
Secretary
Shareholders of record at the close of business on October 11, 1996, are
entitled to vote at the meeting. Whether or not you plan to attend the meeting,
please sign and return the enclosed proxy card. Your vote is important.
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AND TO SAVE THE EXPENSE OF FURTHER
MAILINGS, PLEASE MARK YOUR PROXY CARD, SIGN IT, AND RETURN IT IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. YOU MAY
REVOKE YOUR PROXY AT ANY TIME AT OR BEFORE THE MEETING OR VOTE IN PERSON IF YOU
ATTEND THE MEETING.
PROSPECTUS/PROXY STATEMENT
NOVEMBER , 1996
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Acquisition of the Assets of
STATE BOND TAX EXEMPT FUND,
a portfolio of
STATE BOND MUNICIPAL FUNDS, INC.
100 North Minnesota Street
P.O. Box 69
New Ulm, Minnesota 56073-0069
Telephone Number: 1-800-328-4735
By and in exchange for Class A Shares of
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-341-7400
This Prospectus/Proxy Statement describes the proposed Agreement and Plan of
Reorganization (the "Plan") whereby Federated Municipal Opportunities Fund,
Inc., a Maryland corporation (the "Federated Fund"), would acquire all of the
net assets of State Bond Tax Exempt Fund, a portfolio of State Bond Municipal
Funds, Inc., a Maryland corporation (the ``State Bond Fund''), in exchange for
the Federated Fund's Class A Shares to be distributed pro rata by the State Bond
Fund to the holders of its shares, in complete liquidation of the State Bond
Fund. As a result of the Plan, each shareholder of the State Bond Fund will
become the owner of the Federated Fund's Class A Shares having a total net asset
value equal to the total net asset value of his or her holdings in the State
Bond Fund.
THE BOARD OF DIRECTORS OF THE STATE BOND FUND UNANIMOUSLY RECOMMENDS APPROVAL OF
THE PLAN.
The Shares of each of the Federated Fund and the State Bond Fund represent
interests of separate open-end, diversified management investment companies.
The Federated Fund's investment objective is to provide a high level of current
income which is generally exempt from the federal regular income tax, which it
pursues by investing primarily in a diversified portfolio of municipal bonds.
The State Bond Fund's investment objective is to maximize current income exempt
from federal income taxes to the extent consistent with preservation of capital,
with consideration given to the opportunity for capital gain, by investing
primarily in tax exempt securities. For a comparison of the investment policies
of the Federated Fund and the State Bond Fund, see "Summary-Investment
Objectives, Policies and Limitations."
This Prospectus/Proxy Statement should be retained for future reference.
It sets forth concisely the information about the Federated Fund that a
prospective investor should know before investing. This Prospectus/Proxy
Statement is accompanied by the Prospectus of the Federated Fund dated September
1, 1996, which is incorporated herein by reference. Statements of Additional
Information for the Federated Fund dated September 1, 1996 (relating to the
Federated Fund's prospectus of the same date) and November , 1996 (relating
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to this Prospectus/Proxy Statement), the Annual Report to Shareholders dated
August 31, 1995 and the Semi-Annual Report to Shareholders dated February 29,
1996, all containing additional information, have been filed with the Securities
and Exchange Commission and are incorporated herein by reference. Copies of the
Statements of Additional Information, the Annual Report and the Semi-Annual
Report may be obtained without charge by writing or calling the Federated Fund
at the address and telephone number shown above.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page No.
Summary of Expenses
Summary
About the Proposed Reorganization
Investment Objectives, Policies and Limitations
Advisory and Other Fees
Distribution Arrangements
Purchase, Exchange and Redemption Procedures
Dividends
Tax Consequences
Risk Factors
Information About the Reorganization
Background and Reasons for the Proposed Reorganization
Agreement Among ARM, ARM Capital and Federated
Description of the Plan of Reorganization
Description of Federated Fund Shares
Federal Income Tax Consequences
Comparative Information on Shareholder Rights and Obligations
Capitalization
Information About the Federated Fund and the State Bond Fund
Federated Municipal Opportunities Fund, Inc.
State Bond Tax Exempt Fund
Voting Information
Outstanding Shares and Voting Requirements
Dissenter's Right of Appraisal
Other Matters and Discretion of Persons Named in the Proxy
Agreement and Plan of Reorganization -- Exhibit A
SUMMARY OF EXPENSES
Federated State Pro
Fund Bond Forma
(Class A Fund Combine
Shares) d
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases 4.50%(1) 4.50% 4.50%(1)
(as a percentage of offering
price)...........................
Maximum Sales Charge Imposed on
Reinvested Dividends (as a
percentage of None None None
offering price)................
Contingent Deferred Sales Charge
(as a percentage of original
purchase None(2) None None(2)
price or redemption proceeds, as
applicable)......................
Redemption Fee (as a percentage of
amount redeemed, if None None None
applicable)(3)...................
Exchange Fee..................... None None None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee................... 0.60% 0.50% 0.60%
12b-1 Fee........................ 0.00%(4) 0.25% 0.00%(4)
Total Other Expenses............. 0.48%(5) 0.15% 0.46%(5)
Total Operating 1.08% 0.90% 1.06%
Expenses(6)......................
(1) This sales charge would not be applicable to shares of the Federated Fund
acquired under the proposed reorganization.
(2) Class A Shares purchased with the proceeds of a redemption of shares of an
unaffiliated investment company purchased or redeemed with a sales charge and
not distributed by Federated Securities Corp. may be charged a contingent
deferred sales charge of 0.50 of 1% for redemptions made within one full year of
purchase. For a more complete description see `Summary - Distribution
Arrangements.'' This contingent deferred sales charge would not be applicable
to shares of the Federated Fund acquired under the proposed reorganization.
(3) Wire-transferred redemptions of Class A Shares of the Federated Fund of
less than $5,000 may be subject to additional fees. A $10.00 fee will be
charged for certain redemptions of State Bond Fund shares by wire transfer.
(4) The Federated Fund has no present intention of paying or accruing the 12b-1
fee. If the Federated Fund were paying or accruing the 12b-1 fee, it would be
able to pay up to 0.25% of its average daily net assets for the 12b-1 fee. For
a more complete description see `Summary-Distribution Arrangements.''
(5) Total other expenses for the Federated Fund and the Pro Forma Combined Fund
include a shareholder services fee of 0.25%.
(6) The total operating expenses for Class A Shares of the Federated Fund are
based on expenses expected during the fiscal year ending August 31, 1996. The
total operating expenses for the State Bond Fund are based upon expenses
incurred by the State Bond Fund during its fiscal year ended June 30, 1996.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of shares of each of the Federated
Fund, the State Bond Fund and the pro forma combined fund will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses see "Summary - Advisory and Other Fees" and "Summary - Distribution
Arrangements."
Long-term shareholders of the State Bond Fund may pay more than the
economic equivalent of the maximum front-end sales charges permitted under the
rules of the National Association of Securities Dealers, Inc.
EXAMPLE
The Example below is intended to assist an investor in understanding the
various costs that an investor will bear directly or indirectly. The Example
assumes payment of operating expenses at the levels set forth in the table
above. The Example does not include sales charges or contingent deferred sales
charges since such sales charges are not applicable to Federated Fund Shares
received as a result of the proposed reorganization. Shares purchased
subsequent to the reorganization may be subject to sales charges. For a
complete description of sales charges, contingent deferred sales charges and
exemptions from such charges, reference is hereby made to the Prospectus of the
Federated Fund dated September 1, 1996 and the Prospectus of the State Bond Fund
dated November 1, 1995, each of which is incorporated herein by reference
thereto.
An investor would pay the 1 year 3 years 5 years 10 years
following expenses on a $1,000
investment, assuming (1) 5%
annual return and (2)
redemption at the end of each
time period. Expenses would be
the same if there were no
redemption at the end of each
time period.
Federated Fund................ $11 $34 $60 $132
State Bond Fund............... $9 $29 $50 $111
Pro Forma Combined............ $11 $34 $58 $129
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
SUMMARY
This summary is qualified in its entirety by reference to the additional
information contained elsewhere in this Prospectus/Proxy Statement, the
Prospectus of the Federated Fund dated September 1, 1996, the Statement of
Additional Information of the Federated Fund dated September 1, 1996, the
Prospectus of the State Bond Fund dated November 1, 1995, the Statement of
Additional Information of the State Bond Fund dated November 1, 1995, and the
Plan, a copy of which is attached to this Prospectus/Proxy Statement as Exhibit
A.
About the Proposed Reorganization
The Board of Directors of the State Bond Fund has voted to recommend to
holders of the shares of the State Bond Fund the approval of the Plan whereby
the Federated Fund would acquire all of the assets of the State Bond Fund in
exchange for the Federated Fund's Class A Shares to be distributed pro rata by
the State Bond Fund to its shareholders in complete liquidation and dissolution
of the State Bond Fund (the "Reorganization"). As a result of the
Reorganization, each shareholder of the State Bond Fund will become the owner of
the Federated Fund's Class A Shares having a total net asset value equal to the
total net asset value of his or her holdings in the State Bond Fund on the date
of the Reorganization, i.e., the Closing Date (as hereinafter defined).
As a condition to the Reorganization transactions, the Federated Fund
and the State Bond Fund will receive an opinion of counsel that the
Reorganization will be considered a tax-free "reorganization" under applicable
provisions of the Internal Revenue Code of 1986, as amended (the `Code''), so
that no gain or loss will be recognized by either the Federated Fund or the
State Bond Fund or the shareholders of the State Bond Fund. The tax basis of
the Federated Fund's Class A Shares received by State Bond Fund shareholders
will be the same as the tax basis of their shares in the State Bond Fund. After
the acquisition is completed, the State Bond Fund will be dissolved.
Investment Objectives, Policies and Limitations
The investment objective of the Federated Fund is to provide a high
level of current income which is generally exempt from the federal regular
income tax by investing primarily in a diversified portfolio of municipal bonds.
This investment objective may not be changed without the affirmative vote of a
majority of the outstanding voting securities of the Federated Fund, as defined
in the Investment Company Act of 1940, as amended (the `1940 Act'').
The investment objective of the State Bond Fund is to seek to maximize
current income exempt from federal income taxes to the extent consistent with
preservation of capital, with consideration given to the opportunity for capital
gain, by investing primarily in tax exempt securities. This investment
objective may not be changed without the affirmative vote of a majority of the
outstanding voting securities of the State Bond Fund, as defined in the 1940
Act.
The Federated Fund invests its assets so that at least 80% of its annual
interest income is exempt from federal regular income tax (federal regular
income tax does not include the federal alternative minimum tax (the `federal
AMT')). The Federated Fund invests primarily in municipal bonds. Municipal
bonds are debt obligations issued by or on behalf of states, territories and
possessions of the United States, including the District of Columbia, and their
political subdivisions, agencies and instrumentalities, the interest from which
is exempt from the federal regular income tax. The Federated Fund may invest in
municipal bonds, the interest on which may be included in calculating the
federal AMT. The municipal bonds which the Federated Fund buys are rated `Ba''
or better by Moody's Investors Service, Inc. (`Moody's'') or ``BB'' or better by
Standard & Poor's Ratings Group (`S&P'') or, if not rated, are determined by
Federated Advisers (as hereinafter defined) to be of comparable quality. The
Federated Fund will limit its purchases of such municipal bonds
(commonly known as `junk bonds'') to up to but less than 35% of its net assets.
The Federated Fund may purchase securities on a when-issued or delayed delivery
basis, purchase a right to sell a security held by it back to the issuer or to
another party at an agreed upon price at any time during a stated period or on a
certain date, or hedge all or a portion of its investments by entering into
future contracts or options on them. If necessary for temporary defensive
purposes, the Federated Fund may invest in short-term tax-exempt or taxable
temporary investments. Unless otherwise designated, the investment policies of
the Federated Fund may be changed by the Board of Directors without shareholder
approval, although shareholders will be notified before any material change
becomes effective.
The State Bond Fund invests at least 80% of the value of its assets in
securities of states, territories, and possessions of the United States and the
District of Columbia, and their political subdivisions, agencies, and
instrumentalities, the interest on which is exempt from federal income taxes
(`Tax Exempt Securities''). The Tax Exempt Securities in which the State Bond
Fund invests primarily consist of a diversified portfolio of bonds rated Aaa,
Aa, A or Baa by Moody's or rated AAA, AA, A or BBB by S&P, notes rated MIG-1,
MIG-2, MIG-3 or MIG-4 by Moody's or SP-1, SP-2 or SP-3 by S&P, and commercial
paper rated Prime-1 or Prime-2 by Moody's or A-1 or A-2 by S&P. The State Bond
Fund may invest in Tax Exempt Securities which are not rated if, in the judgment
of ARM Capital (as hereinafter defined), such securities are of comparable
quality to rated securities in which the State Bond Fund may invest. The State
Bond Fund may purchase floating rate, variable rate, and inverse or reverse
floating rate Tax Exempt Securities; enter into repurchase agreements; and
purchase new issues of Tax Exempt Securities on a when-issued basis. Unless
otherwise designated, the investment policies of the State Bond Fund may be
changed by the Board of Directors without shareholder approval.
Both the Federated Fund and the State Bond Fund are subject to certain
investment limitations. For the Federated Fund, these include investment
limitations which prohibit it from (1) borrowing money directly or through
reverse repurchase agreements or pledging securities except, under certain
circumstances, the Federated Fund may borrow up to one-third of the value of its
total assets and pledge 10% of the value of those assets to secure such
borrowings; (2) investing more than 10% of its net assets in securities subject
to restrictions on resale under the Securities Act of 1933, as amended (the
`1933 Act''), except for certain restricted securities which meet the criteria
for liquidity as established by the Directors; (3) investing more than 5% of
its total assets in securities of one issuer (except cash and cash items and
U.S. government obligations); or (4) investing more than 5% of its total assets
in industrial development bonds of issuers that have a record of less than three
years of continuous operations. The first two investment limitations listed
above cannot be changed without shareholder approval; the last two limitations
may be changed by the Board of Directors without shareholder approval, although
shareholders will be notified before any material change becomes effective.
The State Bond Fund has investment limitations which prohibit it from
(1) borrowing money, except for temporary purposes in an amount not in excess of
10% of the value of the total assets of the State Bond Fund; provided that
borrowings in excess of 5% of such value are permitted from banks only; (2)
mortgaging or pledging assets, except that up to 10% of the value of the State
Bond Fund's total assets can be used to secure borrowings; or (3) purchasing
securities of any issuer if immediately thereafter more than 5% of the State
Bond Fund's total assets would be invested in the securities of any one issuer,
except that this limitation does not apply to obligations issued or guaranteed
as to principal and interest either by the U.S. government or its agencies or
instrumentalities. The above investment limitations of the State Bond Fund
cannot be changed without shareholder approval.
In addition to the policies and limitations set forth above, both the
Federated Fund and the State Bond Fund are subject to certain additional
investment policies and limitations, described in the Federated Fund's Statement
of Additional Information dated September 1, 1996 and the State Bond Fund's
Statement of Additional Information dated November 1, 1995. Reference is
hereby made to the Federated Fund's Prospectus and Statement of Additional
Information, each dated September 1, 1996, and to the State Bond Fund's
Prospectus and Statement of Additional Information, each dated November 1, 1995,
which set forth in full the investment objective, policies and investment
limitations of each of the Federated Fund and the State Bond Fund, all of which
are incorporated herein by reference thereto.
Advisory and Other Fees
The annual investment advisory fee for the Federated Fund is 0.60 of 1%
of the Federated Fund's average daily net assets. The investment adviser to the
Federated Fund, Federated Advisers ("Federated Advisers"), a subsidiary of
Federated Investors, may voluntarily choose to waive a portion of its advisory
fee or reimburse the Federated Fund for certain operating expenses. This
voluntary waiver of the advisory fee may be terminated by Federated Advisers at
any time in its sole discretion. Federated Advisers has also undertaken to
reimburse the Federated Fund for operating expenses in excess of limitations
established by certain states. The maximum annual management fee for the State
Bond Fund is 0.50 of 1% of the average daily net assets of the State Bond Fund.
The State Bond Fund's investment manager, ARM Capital Advisors, Inc.(`ARM
Capital'), a wholly-owned subsidiary of ARM Financial Group, Inc. (``ARM''),
has voluntarily agreed to reimburse the State Bond Fund for any expenses
incurred by it in excess of 1% of average daily net assets of the State Bond
Fund. This voluntary arrangement may be terminated by ARM Capital at anytime in
its sole discretion. ARM Capital has also undertaken to reimburse the State
Bond Fund for operating expenses in excess of limitations established by certain
states.
Federated Services Company, an affiliate of Federated Advisers,
provides certain administrative personnel and services necessary to operate the
Federated Fund at an annual rate based upon the average aggregate daily net
assets of all funds advised by Federated Advisers and its affiliates. The rate
charged is 0.15 of 1% on the first $250 million of all such funds' average
aggregate daily net assets, 0.125 of 1% on the next $250 million, 0.10 of 1% on
the next $250 million and 0.075 of 1% of all such funds' average aggregate daily
net assets in excess of $750 million, with a minimum annual fee per portfolio of
$125,000 plus $30,000 for each additional class of shares of any such portfolio.
Federated Services Company may choose voluntarily to waive a portion of its fee.
The administrative fee expense for the Federated Fund's fiscal year ending
August 31. 1995 was $423,163. Administrative personnel and other services
necessary to operate
the State Bond Fund are currently provided by ARM Capital and are included in
the annual management fee for the State Bond Fund, as discussed above.
The Federated Fund has entered into a Shareholder Services Agreement
under which it may make payments of up to 0.25 of 1% of the average daily net
asset value of the Class A Shares to obtain certain personal services for
shareholders and the maintenance of shareholder accounts. The Shareholder
Services Agreement provides that Federated Shareholder Services ("FSS"), an
affiliate of Federated Advisers, will either perform shareholder services
directly or will select financial institutions to perform such services.
Financial institutions will receive fees based upon shares owned by their
clients or customers. The schedule of such fees and the basis upon which such
fees will be paid is determined from time to time by the Federated Fund and FSS.
Other than in connection with payments under a Rule 12b-1 plan as described
below, the State Bond Fund does not make payments to obtain similar shareholder
services.
Distribution Arrangements
Federated Securities Corp. ("FSC"), an affiliate of Federated Advisers,
is the principal distributor for shares of the Federated Fund. The Federated
Fund has adopted a Rule 12b-1 Distribution Plan (the `Distribution Plan'')
pursuant to which the Federated Fund will pay a fee to the distributor in an
amount computed at an annual rate of 0.25 of 1% of the average daily net assets
of the Class A Shares to finance any activity which is principally intended to
result in the sale of Class A Shares subject to the Distribution Plan. The
Federated Fund is not currently making payments for Class A Shares under the
Distribution Plan, nor does it anticipate doing so in the immediate future. In
addition, FSC, from its own assets, may pay financial institutions supplemental
fees as financial assistance for providing substantial sales services,
distribution-related support services or shareholder services with respect to
the Federated Fund. Such assistance will be predicated upon the amount of Class
A Shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution.
Any payments made by FSC may be reimbursed by Federated Advisers or its
affiliates. If a financial institution elects to waive receipt of this payment,
the Federated Fund will waive any applicable contingent deferred sales charge
(such contingent deferred sales charges are discussed below).
ARM Financial Services, Inc. (`ARMFS''), an affiliate of ARM Capital,
is the principal distributor for shares of the State Bond Fund. The State Bond
Fund has also adopted a Rule 12b-1 Distribution Plan (the "Rule 12b-1 Plan")
pursuant to which the State Bond Fund pays ARMFS an amount equal to an annual
rate of 0.25 of 1% of the average daily net assets of the State Bond Fund. The
fee may be used by ARMFS to (i) provide initial and ongoing sales compensation
to its investment executives and to other broker-dealers in connection with the
sale of State Bond Fund shares and to pay for other advertising and promotional
expenses in connection with the sale of State Bond Fund shares, and (ii) to
provide compensation to entities in connection with the provision of certain
personal and account maintenance services to State Bond Fund shareholders
including, but not limited to, responding to shareholder inquiries and providing
information on their investments. The Federated Fund will not assume any
liabilities or make any voluntary reimbursements on account of the State Bond
Fund's Rule 12b-1 Plan.
Certain costs exist with respect to the purchase and sale of Federated
Fund and State Bond Fund shares. Class A Shares of the Federated Fund and
shares of the State Bond Fund are sold at their net asset value next determined
after an order is received, plus a maximum sales charge of 4.50%. No sales
charge will be imposed in connection with the issuance of Federated Fund shares
to State Bond Fund shareholders as a result of the Reorganization. Class A
Shares of the Federated Fund purchased with the proceeds of a redemption of
shares of an unaffiliated investment company purchased or redeemed with a sales
charge and not distributed by FSC may be charged a contingent deferred sales
charge of 0.50 of 1% for redemptions made within one full year of purchase. Any
such charge will be imposed on the lesser of the net asset value of the redeemed
shares at the time of purchase or redemption. The contingent deferred sales
charges are not imposed in connection with the exercise of exchange rights, nor
will they be imposed on redemptions of Federated Fund shares received by
shareholders of the State Bond Fund as a result of the consummation of the
Reorganization. For a complete description of sales charges, contingent
deferred sales charges and exemptions from such charges, reference is hereby
made to the Prospectus of the Federated Fund dated September 1, 1996, and the
Prospectus of the State Bond Fund dated November 1, 1995, each of which is
incorporated herein by reference thereto.
Purchase, Exchange and Redemption Procedures
The transfer agent and dividend disbursing agent for the Federated Fund
is Federated Shareholder Services Company (formerly called Federated Services
Company). The transfer agent and dividend disbursing agent for the State Bond
Fund is ARM Transfer Agency, Inc. Procedures for the purchase, exchange and
redemption of the Federated Fund's Class A Shares differ slightly from
procedures applicable to the purchase, exchange and redemption of the State Bond
Fund's shares. Any questions about such procedures may be directed to, and
assistance in effecting purchases, exchanges or redemptions of the Federated
Fund's Class A Shares or the State Bond Fund's shares may be obtained from FSC,
principal distributor for the Federated Fund, at 1-800-341-7400 or from ARMFS,
principal distributor for the State Bond Fund, at 1-800-328-4735.
Reference is made to the Prospectus of the Federated Fund dated
September 1, 1996, and the Prospectus of the State Bond Fund dated November 1,
1995, for a complete description of the purchase, exchange and redemption
procedures applicable to purchases, exchanges and redemptions of Federated Fund
and State Bond Fund shares, respectively, each of which is incorporated herein
by reference thereto. Set forth below is a brief listing of the significant
purchase, exchange and redemption procedures applicable to the Federated Fund's
Class A Shares and the State Bond Fund's shares.
Purchases of Class A Shares of the Federated Fund may be made through a
financial institution who has an agreement with FSC or, once an account has been
established, by wire or check. Purchases of shares of the State Bond Fund may
be made through ARMFS and through certain broker-dealers under contract with
ARMFS or directly by wire or check once an account has been established. The
minimum initial investment in the Federated Fund is $500. Subsequent
investments must be in amounts of at least $100. The minimum initial investment
in the State Bond Fund is $500. Subsequent investments must be in an amount of
at least $50. The Federated Fund and the State Bond Fund each reserve the right
to reject any purchase request. In connection with the sale of Class A Shares
of the Federated Fund, FSC may from time to time offer certain items of nominal
value to any shareholder.
The purchase price of the Federated Fund's Class A Shares and the State
Bond Fund's shares is based on net asset value plus a sales charge. The net
asset value per share for each of the Federated Fund and the State Bond Fund is
calculated as of the close of trading (normally 4:00 p.m., Eastern time) on the
New York Stock Exchange, Inc. (the `NYSE'') on each day on which the Federated
Fund and the State Bond Fund compute their net asset value. Purchase and
redemption orders for the Federated Fund received from broker/dealers before
5:00 p.m. (Eastern time) and from financial institutions before 4:00 p.m.
(Eastern time) may be entered at that day's price. Purchase orders for shares
of the State Bond Fund received from authorized broker/dealers will be executed
at the offering price next determined after the receipt of the order by the
broker/dealer, provided that the broker/dealer promptly transmits the order to
ARMFS the same day. Redemption orders for shares of the State Bond Fund
received by the State Bond Fund's transfer agent from authorized dealers or
representatives of ARMFS prior to the close of the NYSE will be entered at that
day's price; such redemption orders received after the close of the NYSE will be
entered at the net asset value determined at the close of the NYSE on the next
trading day. Federated Fund purchase orders by wire are considered received
upon receipt of payment by wire. Federated Fund purchase orders received by
check are considered received after the check is converted into federal funds,
which normally occurs the business day after receipt.
Holders of Class A Shares of the Federated Fund have exchange privileges
with respect to Class A Shares in certain of the funds for which affiliates of
Federated Investors serve as investment adviser or principal underwriter
(collectively, the "Federated Funds"), each of which has different investment
objectives and policies. Class A Shares in the Federated Fund may be exchanged
for Class A Shares of certain Federated Funds at net asset value without a
contingent deferred sales charge. To the extent a shareholder exchanges Class A
Shares of the Federated Fund for Class A Shares in other Federated Funds, the
time for which the exchanged-for shares are to be held will be added to the time
for which exchanged-from shares were held for purposes of satisfying the
applicable holding period. Class A Shares to be exchanged must have a net asset
value which meets the minimum investment requirement for the fund into which the
exchange is being made. Holders of shares of the State Bond Fund have exchange
privileges with respect to shares in certain of the other funds for which ARM
Capital serves as investment manager (collectively, the `State Bond Group''),
each of which has different investment objectives and policies. Any exchange
for shares of other funds in the State Bond Group will generally be at the
respective net asset values next determined after receipt of the request for
exchange. Exercise of the exchange privilege is treated as a sale for federal
income tax purposes and, accordingly, may have tax consequences for the
shareholder. Information on share exchanges may be obtained from the Federated
Fund or the State Bond Fund, as appropriate.
Redemptions of Federated Fund Class A Shares may be made through a
financial institution, by telephone, by mailing a written request or through the
Federated Fund's Systematic Withdrawal Program. Redemptions of State Bond Fund
shares may be made through an authorized dealer or representative of ARMFS, by
mailing a written request to the State Bond Fund's transfer agent or through the
State Bond Fund's quick redemption service or check redemption service. Class A
Shares of the Federated Fund are redeemed at their net asset value, less any
applicable contingent deferred sales charge, next determined after the
redemption request is received. Shares of the State Bond Fund are redeemed at
their net asset value, determined at the close of the NYSE on the date the
redemption request is received. Proceeds will ordinarily be distributed by
check within seven days after receipt of a redemption request.
Dividends
Each of the Federated Fund's and the State Bond Fund's current policy is
to pay dividends monthly from net investment income and to make annual
distributions of net realized capital gains, if any. With respect to both the
Federated Fund and the State Bond Fund, unless a shareholder otherwise
instructs, dividends and capital gain distributions will be reinvested
automatically in additional shares at net asset value, subject to no sales
charge.
Tax Consequences
As a condition to the Reorganization transactions, the Federated Fund
and the State Bond Fund will receive an opinion of counsel that the
Reorganization will be considered a tax-free "reorganization" under applicable
provisions of the Code so that no gain or loss will be recognized by either the
Federated Fund or the State Bond Fund or the shareholders of the State Bond
Fund. The tax basis of the Federated Fund shares received by State Bond Fund
shareholders will be the same as the tax basis of their shares in the State Bond
Fund.
RISK FACTORS
As with other mutual funds that invest in municipal bonds, the Federated
Fund is subject to market risks and credit risks. The value of the Class A
Shares will fluctuate. The amount of this fluctuation is dependent upon the
quality and maturity of the municipal bonds in the Federated Fund's portfolio as
well as on market conditions. Generally speaking, the lower quality, long-term
bonds in which the Federated Fund invests have greater fluctuation in value than
high quality, shorter-term bonds. Municipal bond prices are interest rate
sensitive, which means that their value varies inversely with market interest
rates. Prices of bonds also fluctuate with changes in the perceived quality of
the credit of their issuers. Since the State Bond Fund invests primarily in Tax
Exempt Securities, these risk factors are generally also present in an
investment in the State Bond Fund. A full discussion of the risks inherent in
investment in the Federated Fund and the State Bond Fund is set forth in the
Federated Fund's Prospectus and Statement of Additional Information, each dated
September 1, 1996 and the State Bond Fund's Prospectus and Statement of
Additional Information, each dated November 1, 1995, each of which is
incorporated herein by reference thereto.
INFORMATION ABOUT THE REORGANIZATION
Background and Reasons for the Proposed Reorganization
On June 14, 1995, SBM Company, which was then the investment adviser to
the State Bond Fund, completed the sale of substantially all of its business
operations to ARM (the `1995 Transaction''). In connection with the 1995
Transaction, ARM Capital became the investment manager of the State Bond Fund.
In addition, ARM acquired all of the outstanding stock of SBM Financial
Services, Inc., the predecessor in interest to ARMFS, the current distributor of
shares of the State Bond Fund.
Considerations of the Board of Directors of the State Bond Fund. On
June 6, 1996, ARM management advised the Board of Directors of the State Bond
Fund that ARM was considering redirecting its corporate strategy away from the
management and distribution of retail mutual funds in order to concentrate more
fully on its core businesses. Moreover, ARM management stated that due to the
relatively small net assets in the State Bond Fund and the other mutual funds in
the State Bond Group, ARM and its affiliates were not in a position to provide
the value-added shareholder services, technological advancements, comprehensive
distribution networks and diversified product choices that many larger mutual
fund complexes offer. As a result, management stated that ARM was engaged in
the identification and analysis of various potential alternatives for the State
Bond Fund and the other funds in the State Bond Group.
After conducting a screening process, ARM determined that in its
judgment, the proposed Reorganization was the most desirable alternative
involving the State Bond Fund that was reasonably available and that it should
be presented to the State Bond Fund's Board of Directors for its consideration.
A meeting of the entire Board of Directors was held on August 16, 1996,
at which Federated (as defined below) presented to the Board information
relating to the overall reputation, financial strength and stability of
Federated Investors, the parent company of Federated Advisers (together with its
affiliates, `Federated''). Federated, founded in 1955, is among the seven
largest mutual fund sponsors, with over $90 billion invested across more than
250 funds under management and/or administration by its subsidiaries, and over
2,000 employees. Federated's management also discussed the growth of assets
under management and/or administration by Federated from approximately $35
billion in 1989 to over $90 billion as of August 1996. Federated's management
explained to the Board that the majority of this growth came from within
Federated through its multiple distribution channels. The Board was also
informed of the variety of investment products available through Federated,
including international funds and an array of domestic funds broader than
currently offered in the State Bond Group, the exchange privileges that would be
available to former State Bond Fund shareholders if the Reorganization is
consummated, and the multiple sales charge (or `load'') structures available to
prospective shareholders. The Board took into account that if the
Reorganization takes place, shareholders of the State Bond Fund would exchange
their shares for Shares of the Federated Fund without the imposition of any
sales charge.
Federated's management advised the Board of its reputation for customer
servicing, noting that it has received a #1 rating for five years in a row by
Dalbar, Inc. Federated's management stated that its shareholder services
include advanced technological systems that result in quick shareholder access
to a broad spectrum of information, including: telephonic automated yield and
performance information; consolidated monthly shareholder statements; no-fee
IRAs; quarterly newsletters; year-end tax reporting information; direct deposit;
and telephonic redemption and exchange.
Federated's management also discussed comparative sales loads with the
Board. In particular, it was noted that the maximum front end sales load of the
Federated Fund is the same as that of the State Bond Fund. Federated's
management described rights of accumulation and other programs that can reduce
sales charges with respect to the Federated Fund.
Federated's management also reviewed with the Board relative asset size
and expense ratios, including relative advisory fees. The Board discussed the
fact that the Federated Fund is larger in asset size than the State Bond Fund
and considered potential economies of scale that might be experienced by former
State Bond Fund shareholders if they were to become shareholders of a larger
fund. The Board noted that the expense ratio of the Federated Fund presently is
higher than that of the State Bond Fund. Federated's management advised the
Board, however, that the expense ratio is lower than the average for municipal
bond funds distributed through brokers (as reported by Strategic Insight), and
is competitive. Federated's management discussed with the Board expense waiver
and reimbursement arrangements with respect to both the Federated Fund in
particular and to the complex generally.
The Chief Investment Officer, Fixed-Income, of Federated discussed with
the Board the investment philosophy of Federated Advisers for its funds,
including the Federated Fund. He also described the background and significant
investment experience of Federated portfolio managers and other related
personnel issues.
The Board was presented with materials comparing the investment
objectives and policies of the State Bond Fund with those of the Federated Fund,
and determined that they were similar. The Board also considered the
differences between the two funds, including the Federated Fund's policies with
respect to junk bonds and the ability of the Federated Fund to invest in
municipal bonds, the interest on which may be included in calculating the
federal AMT. The Board was also presented with and discussed materials
comparing the performance, Morningstar ratings and relative risks of the State
Bond Fund and the Federated Fund. Federated's management also presented
biographical information about each of the Directors of the Federated Fund and
reviewed with the Board the structure of its compliance and internal audit
departments and the scope of its training programs.
The Board also considered the potential benefits to ARM if the
Reorganization is consummated. The Board discussed the fact that ARM and ARM
Capital would be compensated for selling the books, records and goodwill
relating to the management of the State Bond Group, agreeing to certain non-
competition arrangements and cooperating in assisting in the transfer of the net
assets of the State Bond Group to the Federated Funds. They also took into
account the proposed payment to ARMFS of 0.25% of the average daily net assets
of the Federated Fund attributable to shareholder accounts serviced by ARMFS, as
well as the possible compensation of ARMFS for distribution of additional
Federated financial products in the future.
The Board noted that the State Bond Fund would not bear any of the costs
involved in the Reorganization, which would be borne entirely by ARM and/or
Federated. In addition, the Board discussed the anticipated tax-free nature of
the Reorganization to the State Bond Fund and its shareholders.
In connection with their consideration of the Reorganization, the Board
also reviewed their fiduciary obligations under state and federal law. They
considered the requirements of Section 15(f) of the 1940 Act, which provides
that an investment manager to an investment company, and the affiliates of such
manager (such as ARM), may receive any amount or benefit in connection with a
sale of any interest in such investment manager which results in an assignment
of an investment management contract if (1) for a period of three years after
such assignment, at least 75% of the board of directors of the investment
company are not `interested persons'' (as defined in the 1940 Act) of the new
investment manager or its predecessor; and (2) no `unfair burden'' (as defined
in the 1940 Act) is imposed on the investment company as a result of the
assignment or any express or implied terms, conditions or understandings
applicable thereto.
With respect to the first condition of Section 15(f) relating to Board
composition, the Board was advised that the Federated Fund's Board of Directors
presently consists of thirteen (13) Directors, only three (3) of whom are
`interested persons.'' With respect to the second condition of Section 15(f),
while there is no specific definition of `unfair burden,'' it includes any
arrangement, for two years after the transaction, pursuant to which the
predecessor or successor adviser is entitled to receive compensation from any
person in connection with the mutual fund's purchase or sale of securities,
other than bona fide ordinary compensation as principal underwriter. The
definition of unfair burden also includes any payments from the fund for other
than bona fide investment advisory or other services. The Board considered the
fact that representations were made by Federated and ARM that the agreement
among Federated, ARM and ARM Capital would contain representations and covenants
that the Reorganization would not impose an unfair burden on the State Bond
Group.
After reviewing and considering all of the information provided by
Federated and ARM, including the terms of the Reorganization, the Board,
including all of the Directors who are not interested persons of the State Bond
Fund or ARM Capital, voted unanimously at a special telephonic meeting held on
August 26, 1996, to approve the Reorganization and to recommend it to the
shareholders of the State Bond Fund for their approval.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
REORGANIZATION.
Considerations of the Board of Directors of the Federated Fund. The
Board of Directors of the Federated Fund, including a majority of the
independent Directors, have unanimously concluded that consummation of the
Reorganization is in the best interests of the Federated Fund and the
shareholders of the Federated Fund and that the interests of Federated Fund
shareholders would not be diluted as a result of effecting the Reorganization
and have unanimously voted to approve the Plan.
Agreement Among ARM, ARM Capital and Federated
The Reorganization is being proposed as part of an agreement by and
among Federated, ARM, and ARM Capital, pursuant to which ARM and ARM Capital
would be compensated for selling to Federated the books, records and goodwill
relating to the management of the State Bond Group and cooperating in
facilitating the transaction contemplated by the agreement. As part of that
agreement, ARM Capital and its affiliates have agreed not to compete with
Federated by providing investment advisory services to certain investment
companies. Following the Reorganization, ARM or its affiliates have agreed to
provide certain services to shareholders for which ARM or its affiliates may
receive fees paid by Federated and/or mutual funds in which the shareholders are
invested.
Description of the Plan of Reorganization
The Plan provides that the Federated Fund will acquire all of the net
assets of the State Bond Fund in exchange for the Federated Fund's Class A
Shares to be distributed pro rata by the State Bond Fund to its shareholders in
complete liquidation of the State Bond Fund on or about December , 1996 (the
---
"Closing Date"). Shareholders of the State Bond Fund will become shareholders
of the Federated Fund as of the close of business on the Closing Date, and will
be entitled to the Federated Fund's next dividend distribution.
As of or prior to the Closing Date, the State Bond Fund will declare and
pay a dividend or dividends which, together with all previous such dividends,
shall have the effect of distributing to its shareholders all taxable income for
the period ending on the Closing Date. In addition, the State Bond Fund's
dividend will include its net capital gains realized in the period ending on the
Closing Date.
Consummation of the Reorganization is subject to the conditions set
forth in the Plan, including receipt of an opinion in form and substance
satisfactory to the State Bond Fund and the Federated Fund, as described under
the caption "Federal Income Tax Consequences" below. The Plan may be terminated
and the Reorganization may be abandoned at any time before or after approval by
shareholders of the State Bond Fund prior to the Closing Date by either party if
it believes that consummation of the Reorganization would not be in the best
interests of its shareholders.
Federated Advisers is responsible for the payment of substantially all
of the expenses of the Reorganization incurred by either party, whether or not
the Reorganization is consummated. Such expenses include, but are not limited
to, registration fees, transfer taxes (if any), the fees of banks and transfer
agents and the costs of preparing, printing, copying and mailing proxy
solicitation materials to the State Bond Fund's shareholders and the costs of
holding the Special Meeting (as hereinafter defined). ARM is responsible for
the payment of the legal fees of the State Bond Fund. The accountants' fees of
the State Bond Fund will be borne equally by Federated Advisers and ARM.
The foregoing description of the Plan entered into between the Federated
Fund and the State Bond Fund, is qualified in its entirety by the terms and
provisions of the Plan, a copy of which is attached hereto as Exhibit A and
incorporated herein by reference thereto.
Description of Federated Fund Shares
Full and fractional Class A Shares of the Federated Fund will be issued
without the imposition of a sales charge or other fee to the shareholders of the
State Bond Fund in accordance with the procedures described above. Class A
Shares of the Federated Fund to be issued to shareholders of the State Bond Fund
under the Plan will be fully paid and nonassessable when issued and transferable
without restriction and will have no preemptive or conversion rights. Reference
is hereby made to the Prospectus of the Federated Fund dated September 1, 1996
provided herewith for additional information about Class A Shares of the
Federated Fund.
Federal Income Tax Consequences
As a condition to the Reorganization, the Federated Fund and the State
Bond Fund will receive an opinion from Dickstein Shapiro Morin & Oshinsky LLP,
counsel to the Federated Fund, to the effect that, on the basis of the existing
provisions of the Code, current administrative rules and court decisions, for
federal income tax purposes: (1) the Reorganization as set forth in the Plan
will constitute a tax-free reorganization under section 368(a)(1)(C) of the
Code; (2) no gain or loss will be recognized by the Federated Fund upon its
receipt of the State Bond Fund's assets solely in exchange for Federated Fund
Class A Shares; (3) no gain or loss will be recognized by the State Bond Fund
upon the transfer of its assets to the Federated Fund in exchange for Federated
Fund Class A Shares or upon the distribution (whether actual or constructive) of
the Federated Fund Class A Shares to the State Bond Fund shareholders in
exchange for their shares of the State Bond Fund; (4) no gain or loss will be
recognized by shareholders of the State Bond Fund upon the exchange of their
State Bond Fund shares for Federated Fund Class A Shares; (5) the tax basis of
the State Bond Fund's assets acquired by the Federated Fund will be the same as
the tax basis of such assets to the State Bond Fund immediately prior to the
Reorganization; (6) the tax basis of Federated Fund Class A Shares received by
each shareholder of the State Bond Fund pursuant to the Plan will be the same as
the tax basis of State Bond Fund shares held by such shareholder immediately
prior to the Reorganization; (7) the holding period of the assets of the State
Bond Fund in the hands of the Federated Fund will include the period during
which those assets were held by the State Bond Fund; and (8) the holding period
of Federated Fund Class A Shares received by each shareholder of the State Bond
Fund will include the period during which the State Bond Fund shares exchanged
therefor were held by such shareholder, provided the State Bond Fund shares were
held as capital assets on the date of the Reorganization.
Shareholders should recognize that an opinion of counsel is not binding
on the Internal Revenue Service (`IRS'') or any court. The State Bond Fund
does not expect to obtain a ruling from the IRS regarding the consequences of
the Reorganization. Accordingly, if the IRS sought to challenge the tax
treatment of the Reorganization and was successful, neither of which is
anticipated, the Reorganization would be treated as a taxable sale of assets of
the State Bond Fund, followed by the taxable liquidation of the State Bond Fund.
Comparative Information on Shareholder Rights and Obligations
General. Both the Federated Fund and the State Bond Fund are open-end,
diversified management investment companies registered under the 1940 Act, which
continuously offer to sell shares at their current net asset value. The
Federated Fund is organized as a corporation under the laws of the State of
Maryland and is governed by its Articles of Incorporation, Bylaws, and Board of
Directors, in addition to applicable state and Federal law. The State Bond Fund
is organized as a separate series of State Bond Municipal Funds, Inc. under the
laws of the State of Maryland and is governed by its Articles of Incorporation,
Bylaws, and Board of Directors, in addition to applicable state and Federal law.
Set forth below is a brief summary of the significant rights of shareholders of
the Federated Fund and the State Bond Fund.
Shares of the Federated Fund and the State Bond Fund. The Federated
Fund is authorized to issue 2,000,000,000 shares of common stock, par value
$0.001 per share. The Board of Directors has established four classes of shares
of the Federated Fund, known as Class A Shares, Class B Shares, Class C Shares
and Class F Shares. The State Bond Fund has an authorized capital of
10,000,000,000 shares of common stock with a par value of $.00001 per share.
The State Bond Fund is currently the sole investment portfolio of State Bond
Municipal Funds, Inc. and has only one class of shares. Issued and outstanding
shares of both the Federated Fund and State Bond Fund are fully paid and
nonassessable, and freely transferable.
Voting Rights. Neither the Federated Fund nor the State Bond Fund is
required to hold annual meetings of shareholders, except as required under the
1940 Act. Shareholder approval is necessary only for certain changes in
operations or the election of directors under certain circumstances. The
Federated Fund requires that a special meeting of shareholders be called for any
permissible purpose upon the written request of the holders of at least 10% of
the shares of the series of the Federated Fund entitled to vote. A special
meeting of the shareholders of the State Bond Fund is required to be called upon
the written request of shareholders representing not less than 25% of the shares
entitled to vote. Each share of the Federated Fund gives the shareholder one
vote in director elections and other matters submitted to shareholders for vote.
All shares of each series or class in the Federated Fund have equal voting
rights except that in matters affecting only a particular series or class, only
shares of that series or class are entitled to vote. All shares of the State
Bond Fund have equal voting rights.
Directors. The Bylaws of the Federated Fund provide that the term of
office of each Director shall be until his or her resignation or removal and
until the election and qualification of his or her successor. A Director of the
Federated Fund may be removed by a vote of a majority of all shares entitled to
vote at any special meeting of shareholders. A vacancy on the Board may be
filled by a majority of the Directors remaining in office. The Bylaws of the
State Bond Fund provide that each Director holds office from the time of his or
her election until the next annual meeting of shareholders or special meeting at
which Directors are elected and until his or her successor is duly elected and
qualifies. No Director of the State Bond Fund shall be qualified for election
by the shareholders if he or she has attained the age of 70. The Board of
Directors of the State Bond Fund shall call a meeting of shareholders for the
purpose of voting upon the question of removal of any Director or Directors when
requested in writing to do so by the record holders of not less than 10% of the
outstanding shares. A Director of the State Bond Fund may be removed, with or
without cause, by the affirmative vote of a majority of the votes entitled to be
cast for the election of Directors, and such shareholders may elect a qualified
person as Director to replace the Director so removed. In case of any vacancy
on the Board of Directors, a majority of the remaining Directors may elect a
successor to hold office until the next annual meeting of the shareholders or
special meeting at which Directors are elected and until his or her successor is
duly elected and qualifies. With respect to both the Federated Fund and the
State Bond Fund, a meeting of shareholders will be required for the purpose of
electing additional Directors whenever fewer than a majority of the Directors
then in office were elected by shareholders.
Liability of Directors and Officers. The Amended and Restated Articles
of Incorporation of the Federated Fund and the Articles of Amendment and
Restatement of the State Bond Fund both contain provisions eliminating liability
of their respective directors and officers to the corporation or its
shareholders to the fullest extent permitted by Maryland law. Therefore,
directors and officers will not be liable for monetary damages to the
corporation or its shareholders for breach of the duty of care. However, such
elimination of liability regarding a director's duty of care does not permit the
elimination or limitation of liability (1) to the extent that it is proved that
the person actually received an improper benefit or profit in money, property or
services; (2) to the extent that a judgment or other final adjudication adverse
to the person is entered in a proceeding based on a finding in the proceeding
that the person's action, or failure to act, was committed in bad faith or was
the result of active and deliberate dishonesty and was material to the cause of
action adjudicated in the proceeding; or (3) for any action or failure to act
occurring prior to February 18, 1988. In addition, due to the provisions of the
1940 Act, shareholders would still have the right to pursue monetary claims
against directors or officers for acts involving willful malfeasance, bad faith,
gross negligence or reckless disregard of their duties as directors or officers.
Under the agreement by and among Federated, ARM and ARM Capital, Federated has
agreed for a period of three (3) years following the Closing to provide coverage
under a directors and officers liability insurance policy for the current
Directors of the State Bond Fund.
Termination or Liquidation. In the event of the termination or
liquidation of the Federated Fund or any series or class of the Federated Fund
or of the termination or liquidation of the State Bond Fund, the shareholders of
the respective fund or class are entitled to receive, when and as declared by
its Directors the excess of the assets belonging to the respective fund or class
over the liabilities belonging to the respective fund or class. In either case,
the assets belonging to the fund or class will be distributed among the
shareholders in proportion to the number of shares of the respective fund or
class held by them.
Capitalization
The following table sets forth the unaudited capitalization of the Class
A Shares of the Federated Fund and the shares of the State Bond Fund as of
September 30, 1996 and on a pro forma combined basis as of that date:
Federated Fund State Bond Pro Forma
(Class A Shares) Fund Combined
Net Assets...............$102,936* $80,488,810 80,591,746
Net Asset Value
Per Share...........$10.42 $10.84 $10.42
Shares Outstanding.......9,876 7,427,032 7,732,223
*Class A Shares of the Federated Fund were established by the Board of
Directors, commencing August 5, 1996. The net assets of all classes of Shares
of the Federated Fund as of September 30, 1996 were $384,460,081.
INFORMATION ABOUT THE FEDERATED FUND
AND THE STATE BOND FUND
Federated Municipal Opportunities Fund, Inc.
Information about the Federated Fund is contained in the Federated
Fund's current Prospectus dated September 1, 1996, a copy of which is included
herewith and incorporated by reference herein. Additional information about the
Federated Fund is included in the Federated Fund's Annual Report to Shareholders
dated August 31, 1995, the Semi-Annual Report to Shareholders dated February 29,
1996, the Statement of Additional Information dated September 1, 1996 and the
Statement of Additional Information dated November , 1996 (relating to this
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Prospectus/Proxy Statement), each of which is incorporated herein by reference.
Copies of the Annual Report, the Semi-Annual Report and Statements of Additional
Information, which have been filed with the Securities and Exchange Commission
(the "SEC"), may be obtained upon request and without charge by contacting the
Federated Fund at 1-800-341-7400 or by writing the Federated Fund at Federated
Investors Tower, Pittsburgh, PA 15222-3779. The Federated Fund is subject to
the informational requirements of the 1933 Act, the Securities Exchange Act of
1934, as amended (the "1934 Act") and the 1940 Act and in accordance therewith
files reports and other information with the SEC. Reports, proxy and
information statements, charter documents and other information filed by the
Federated Fund can be obtained by calling or writing the Federated Fund and can
also be inspected and copied by the public at the public reference facilities
maintained by the SEC in Washington, D.C. located at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at certain of its regional offices
located at Suite 1400, Northwestern Atrium Center, 500 West Madison Street,
Chicago, IL 60661 and 13th Floor, Seven World Trade Center, New York, NY 10048.
Copies of such material can be obtained from the Public Reference Branch, Office
of Consumer Affairs and Information Services, SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates.
This Prospectus/Proxy Statement, which constitutes part of a
Registration Statement filed by the Federated Fund with the SEC under the 1933
Act, omits certain of the information contained in the Registration Statement.
Reference is hereby made to the Registration Statement and to the exhibits
thereto for further information with respect to the Federated Fund and the
shares offered hereby. Statements contained herein concerning the provisions of
documents are necessarily summaries of such documents, and each such statement
is qualified in its entirety by reference to the copy of the applicable document
filed with the SEC.
State Bond Tax Exempt Fund
Information about the State Bond Fund and State Bond Municipal Funds,
Inc. is contained in the State Bond Fund's current Prospectus dated November 1,
1995, the Annual Report to Shareholders dated June 30, 1996, its Statement of
Additional Information dated November 1, 1995 and the Statement of Additional
Information dated November , 1996 (relating to this Prospectus/Proxy
--
Statement), each of which is incorporated herein by reference. Copies of such
Prospectus, Annual Report, and Statement(s) of Additional Information, which
have been filed with the SEC, may be obtained upon request and without charge
from the State Bond Fund by calling 1-800-328-4735 or by writing to the State
Bond Fund at 100 North Minnesota Street, P.O. Box 69, New Ulm, Minnesota 56073-
0069. The State Bond Fund is subject to the informational requirements of the
1933 Act, the 1934 Act and the 1940 Act and in accordance therewith files
reports and other information with the SEC. Reports, proxy and information
statements, charter documents and other information filed by State Bond
Municipal Funds, Inc. or its portfolio, the State Bond Fund, can be obtained by
calling or writing the State Bond Fund and can also be inspected at the public
reference facilities maintained by the SEC or obtained at prescribed rates at
the addresses listed in the previous section.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of the State Bond Fund of proxies for use
at the Special Meeting of Shareholders (the "Special Meeting") to be held at
3:40 p.m. on December , 1996 at: 100 North Minnesota Street, New Ulm,
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Minnesota 56073-0069, and at any adjournments thereof. The proxy confers
discretionary authority on the persons designated therein to vote on other
business not currently contemplated which may properly come before the Special
Meeting. A proxy, if properly executed, duly returned and not revoked, will be
voted in accordance with the specifications thereon; if no instructions are
given, such proxy will be voted in favor of the Plan. A shareholder may revoke
a proxy at any time prior to use by filing with the Secretary of the State Bond
Fund an instrument revoking the proxy, by submitting a proxy bearing a later
date or by attending and voting at the Special Meeting.
The cost of the solicitation, including the printing and mailing of
proxy materials, will be borne by Federated Advisers. In addition to
solicitations through the mails, proxies may be solicited by officers, employees
and agents of the State Bond Fund, Federated Advisers and their respective
affiliates at no additional cost to the State Bond Fund. Such solicitations may
be by telephone, telegraph or personal contact. Federated Advisers will
reimburse custodians, nominees and fiduciaries for the reasonable costs incurred
by them in connection with forwarding solicitation materials to the beneficial
owners of shares held of record by such persons.
Outstanding Shares and Voting Requirements
The Board of Directors of the State Bond Fund has fixed the close of
business on October 11, 1996 as the record date for the determination of
shareholders entitled to notice of and to vote at the Special Meeting and any
adjournment thereof. As of the record date, there were shares of the
-------
State Bond Fund outstanding. Each of the State Bond Fund's shares is entitled
to one vote and fractional shares have proportionate voting rights. [On the
record date, the Directors and officers of the State Bond Fund as a group owned
less than 1% of the outstanding shares of the State Bond Fund.] To the best
knowledge of ARM Capital, as of the record date, no person, except as set forth
in the table below, owned beneficially or of record 5% or more of the State Bond
Fund's outstanding shares.
Percent of
Shares Owned Percent of Outstanding
Name and Address of Beneficially Outstanding Shares of the
Beneficial Owner Shares Federated Fund
Following
Reorganization
As of the record date, there were Class A, Class B, Class C
-------- ---- ----
and Class F Shares of the Federated Fund outstanding. On the record
---------
date, the Directors and officers of the Federated Fund as a group owned less
than 1% of the outstanding Class A, Class B, Class C and Class F Shares of the
Federated Fund outstanding. To the best knowledge of Federated Advisers, as of
the record date, no person, except as set forth in the table below, owned
beneficially or of record 5% or more of the Federated Fund's outstanding Class
A, Class B, Class C or Class F Shares.
Percent of
Outstanding
Shares Owned Percent of Shares of the
Class A Name and Address of Beneficially Outstanding Federated Fund
Shares Beneficial Owner Shares Following
Reorganization
Shares Owned Percent of
Class B Name and Address of Beneficially Outstanding
Shares Beneficial Owner Shares
Shares Owned Percent of
Class C Name and Address of Beneficially Outstanding
Shares Beneficial Owner Shares
Shares Owned Percent of
Class F Name and Address of Beneficially Outstanding
Shares Beneficial Owner Shares
Approval of the Plan requires the affirmative vote of a majority of the
outstanding shares of the State Bond Fund. The votes of shareholders of the
Federated Fund are not being solicited since their approval is not required in
order to effect the Reorganization.
One-third of the issued and outstanding shares of the State Bond Fund,
represented in person or by proxy, will be required to constitute a quorum at
the Special Meeting for the purpose of voting on the proposed Reorganization.
For purposes of determining the presence of a quorum, shares represented by
abstentions and "broker non-votes" will be counted as present, but not as votes
cast, at the Special Meeting. Because approval of the Reorganization requires
the approval of a majority of the outstanding shares of the State Bond Fund,
abstentions and "broker non-votes" will have the same effect as if they were
votes against the Reorganization.
Dissenter's Right of Appraisal
Shareholders of the State Bond Fund objecting to the Reorganization have
no appraisal rights under the State Bond Fund's Articles of Incorporation or
Maryland law. Under the Plan, if approved by State Bond Fund shareholders, each
shareholder will become the owner of Class A Shares of the Federated Fund having
a total net asset value equal to the total net asset value of his or her
holdings in the State Bond Fund at the Closing Date.
OTHER MATTERS AND DISCRETION OF PERSONS NAMED IN THE PROXY
Management of the State Bond Fund knows of no other matters that may
properly be, or which are likely to be, brought before the meeting. However, if
any other business shall properly come before the meeting, the persons named in
the proxy intend to vote thereon in accordance with their best judgment.
If at the time any session of the Special Meeting is called to order, a
quorum is not present in person or by proxy, the persons named as proxies may
vote those proxies which have been received to adjourn the Special Meeting to a
later date. In the event that a quorum is present but sufficient votes in favor
of one or more of the proposals have not been received, the persons named as
proxies may propose one or more adjournments of the Special Meeting to permit
further solicitation of proxies with respect to any such proposal. All such
adjournments will require the affirmative vote of a majority of the shares
present in person or by proxy at the session of the Special Meeting to be
adjourned. The persons named as proxies will vote those proxies which they are
entitled to vote in favor of the proposal, in favor of such an adjournment, and
will vote those proxies required to be voted against the proposal, against any
such adjournment.
Whether or not shareholders expect to attend the meeting, all
shareholders are urged to sign, fill in and return the enclosed proxy form
promptly.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated September 23, 1996 (the
"Agreement"), between FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC., a Maryland
corporation (hereinafter called the "Acquiring Fund"), and STATE BOND MUNICIPAL
FUNDS, INC., a Maryland corporation (hereinafter called the "Corporation") on
behalf of its portfolio STATE BOND TAX EXEMPT FUND (hereinafter called the
"Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of the
net assets of the Acquired Fund in exchange solely for Class A Shares of the
Acquiring Fund (the "Acquiring Fund Shares") and the distribution, after the
Closing Date (as hereinafter defined), of the Acquiring Fund Shares to the
shareholders of the Acquired Fund in liquidation of the Acquired Fund as
provided herein, all upon the terms and conditions hereinafter set forth in this
Agreement.
WHEREAS, the Corporation and the Acquiring Fund are registered open-end
management investment companies and the Acquired Fund owns securities in which
the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are authorized to
issue shares of common stock or shares of beneficial interest, as the case may
be;
WHEREAS, the Board of Directors, including a majority of the directors
who are not "interested persons" (as defined under the Investment Company Act of
1940, as amended (the "1940 Act")), of the Acquiring Fund has determined that
the exchange of all of the assets of the Acquired Fund for Acquiring Fund Shares
is in the best interests of the Acquiring Fund shareholders and that the
interests of the existing shareholders of the Acquiring Fund would not be
diluted as a result of this transaction; and
WHEREAS, the Board of Directors, including a majority of the directors
who are not "interested persons" (as defined under the 1940 Act), of the
Corporation has determined that the exchange of all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the Acquired
Fund shareholders;
NOW THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties agree as follows:
1.TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund agrees to assign, transfer and convey to the Acquiring Fund all of the net
assets of the Acquired Fund, including all securities and cash, other than cash
in an amount necessary to pay any unpaid dividends and distributions as provided
in paragraph 1.5, beneficially owned by the Acquired Fund, and the Acquiring
Fund agrees in exchange therefor to deliver to the Acquired Fund the number of
Acquiring Fund Shares, including fractional Acquiring Fund Shares, determined as
set forth in paragraph 2.3. Such transaction shall take place at the closing
(the "Closing") on the closing date (the "Closing Date") provided for in
paragraph 3.1. In lieu of delivering certificates for the Acquiring Fund
Shares, the Acquiring Fund shall credit the Acquiring Fund Shares to the
Acquired Fund's account, for the benefit of its shareholders, on the stock
record books of the Acquiring Fund and shall deliver a confirmation thereof to
the Acquired Fund.
1.2 The Acquired Fund will discharge or make provision for the discharge
of all of its liabilities and obligations prior to or on the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred shall be
made on the Closing Date and shall be delivered to State Street Bank and Trust
Company (hereinafter called "State Street"), Boston, Massachusetts, the
Acquiring Fund's custodian (the "Custodian"), for the account of the Acquiring
Fund, together with proper instructions and all necessary documents to transfer
to the account of the Acquiring Fund, free and clear of all liens, encumbrances,
rights, restrictions and claims created by the Acquired Fund. All cash
delivered shall be in the form of immediately available funds payable to the
order of the Custodian for the account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring Fund
any dividends or interest received on or after the Closing Date with respect to
assets transferred to the Acquiring Fund thereunder. The Acquired Fund will
transfer to the Acquiring Fund any distributions, rights or other assets
received by the Acquired Fund after the Closing Date as distributions on or with
respect to the securities transferred. Such assets shall be deemed included in
assets transferred to the Acquiring Fund on the Closing Date and shall not be
separately valued.
1.5 As soon after the Closing Date as is conveniently practicable, the
Acquired Fund will liquidate and distribute pro rata to the Acquired Fund's
shareholders of record, determined as of the close of business on the Closing
Date (the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by
the Acquired Fund pursuant to paragraph 1.1. In addition, each Acquired Fund
Shareholder shall have the right to receive any unpaid dividends or other
distributions which were declared before the Valuation Date (as hereinafter
defined) with respect to the shares of the Acquired Fund that are held by the
shareholder on the Valuation Date. Such liquidation and distribution will be
accomplished by the transfer of the Acquiring Fund Shares then credited to the
account of the Acquired Fund on the books of the Acquiring Fund to open accounts
on the share record books of the Acquiring Fund in the names of the Acquired
Fund Shareholders, and representing the respective pro rata number of the
Acquiring Fund Shares due such shareholders, based on their ownership of shares
of the Acquired Fund on the Closing Date. All issued and outstanding Shares of
the Acquired Fund will simultaneously be canceled on the books of the Acquired
Fund. Share certificates representing interests in the Acquired Fund will
represent a number of Acquiring Fund Shares, after the Closing Date as
determined in accordance with Section 2.3. The Acquiring Fund shall not issue
certificates representing the Acquiring Fund Shares in connection with such
exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be issued in
the manner described in the Acquiring Fund's current prospectus and statement of
additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund Shares
in a name other than the registered holder of the Acquired Fund shares on the
books of the Acquired Fund as of that time shall, as a condition of such
issuance and transfer, be paid by the person to whom such Acquiring Fund Shares
are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall remain
the responsibility of the Corporation up to and including the Closing Date and
such later dates, with respect to dissolution and deregistration of the
Corporation, on which the Corporation is dissolved and deregistered.
1.9 The Corporation shall be deregistered as an investment company under
the 1940 Act and dissolved as a Maryland corporation as promptly as practicable
following the Closing Date and the making of all distributions pursuant to
paragraph 1.5.
2.VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of the
close of the New York Stock Exchange (normally 4:00 p.m. Eastern time) on the
Closing Date (such time and date being herein called the "Valuation Date"),
using the valuation procedures set forth in the Acquiring Fund's then-current
prospectus or statement of additional information.
2.2 The net asset value of each Acquiring Fund Share shall be the net
asset value per share computed as of the close of the New York Stock Exchange
(normally 4:00 p.m. Eastern time) on the Valuation Date, using the valuation
procedures set forth in the Acquiring Fund's then-current prospectus or
statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets shall
be determined by dividing the value of the net assets of the Acquired Fund
determined using the same valuation procedures referred to in paragraph 2.1, by
the net asset value of one Acquiring Fund Share determined in accordance with
paragraph 2.2.
2.4 All computations of value shall be made in accordance with the regular
practices of the Acquiring Fund.
3.CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be December , 1996 or such later date as the
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parties may mutually agree. All acts taking place at the Closing Date shall be
deemed to take place simultaneously as of the close of business on the Closing
Date unless otherwise provided. The Closing shall be held at 4:00 p.m. (Eastern
time) at the offices of the Acquiring Fund, Federated Investors Tower,
Pittsburgh, PA 15222-3779, or such other time and/or place as the parties may
mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for portfolio
securities of the Acquiring Fund or the Acquired Fund shall be closed to trading
or trading thereon shall be restricted; or (b) trading or the reporting of
trading shall be disrupted so that accurate appraisal of the value of the net
assets of the Acquiring Fund or the Acquired Fund is impracticable, the Closing
Date shall be postponed until the first business day after the day when trading
shall have been fully resumed and reporting shall have been restored.
3.3 ARM Transfer Agency, Inc., as transfer agent for the Acquired Fund,
shall deliver at the Closing a certificate of an authorized officer stating that
its records contain the names and addresses of the Acquired Fund Shareholders
and the number and percentage ownership of outstanding shares owned by each such
shareholder immediately prior to the Closing. The Acquiring Fund shall issue
and deliver a confirmation evidencing the Acquiring Fund Shares to be credited
on the Closing Date to the Secretary of the Acquired Fund, or provide evidence
satisfactory to the Acquired Fund that such Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund. At
the Closing, each party shall deliver to the other such bills of sale, checks,
assignments, assumption agreements, share certificates, if any, receipts or
other documents as such other party or its counsel may reasonably request.
4.REPRESENTATIONS AND WARRANTIES.
4.1 The Corporation represents and warrants to the Acquiring Fund as
follows:
(a) The Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland and has
power to own all of its properties and assets and to carry out this Agreement.
(b) The Corporation is registered under the 1940 Act, as an
open-end, management investment company, and such registration has not been
revoked or rescinded and is in full force and effect.
(c) The Corporation is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of the
Corporation's Articles of Incorporation or Bylaws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquired Fund is a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or investigation
of or before any court or governmental body is currently pending or to its
knowledge threatened against the Acquired Fund or any of its properties or
assets which, if adversely determined, would materially and adversely affect its
financial condition or the conduct of its business. The Acquired Fund knows of
no facts which might form the basis for the institution of such proceedings, and
is not a party to or subject to the provisions of any order, decree or judgment
of any court or governmental body which materially and adversely affects its
business or its ability to consummate the transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "Commission") thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) The Statement of Assets and Liabilities of the Acquired Fund
at June 30, 1995 and 1996, have been audited by Ernst & Young LLP, independent
auditors, and have been prepared in accordance with generally accepted
accounting principles, consistently applied, and such statements (copies of
which have been furnished to the Acquiring Fund) fairly reflect the financial
condition of the Acquired Fund as of such dates, and there are no known
contingent liabilities of the Acquired Fund as of such dates not disclosed
therein.
(h) Since June 30, 1996, there has not been any material adverse
change in the Acquired Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Acquired Fund of indebtedness maturing more than one year from
the date such indebtedness was incurred, except as otherwise disclosed to and
accepted by the Acquiring Fund.
(i) At the Closing Date, all Federal and other tax returns and
reports of the Acquired Fund required by law to have been filed by such date
shall have been filed or an appropriate extension obtained, and all Federal and
other taxes shall have been paid so far as due, or provision shall have been
made for the payment thereof or contest in good faith, and to the best of the
Acquired Fund's knowledge no such return is currently under audit and no
assessment has been asserted with respect to such returns.
(j) For each fiscal year of its operation, subject to applicable
statute of limitation periods, the Acquired Fund has met the requirements of
Subchapter M of the Code for qualification and treatment as a regulated
investment company.
(k) All issued and outstanding shares of the Acquired Fund are,
and at the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable. All of the issued and outstanding shares of the
Acquired Fund will, at the time of the Closing, be held by the persons and in
the amounts set forth in the records of the transfer agent as provided in
paragraph 3.3. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquired Fund
shares, nor is there outstanding any security convertible into any of the
Acquired Fund shares.
(l) On the Closing Date, the Acquired Fund will have full right,
power and authority to sell, assign, transfer and deliver the assets to be
transferred by it hereunder.
(m) The execution, delivery and performance of this Agreement
will have been duly authorized prior to the Closing Date by all necessary action
on the part of the Corporation and, subject to the approval of the Acquired Fund
Shareholders, this Agreement constitutes the valid and legally binding
obligation of the Acquired Fund enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws relating to or affecting creditors'
rights generally and court decisions with respect thereto, and to general
principles of equity and the discretion of the court (regardless of whether the
enforceability is considered in a proceeding in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund (the
"Prospectus/Proxy Statement") to be included in the Registration Statement
referred to in paragraph 5.5 (only insofar as it relates to the Acquired Fund)
will, on the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which such statements were made,
not misleading.
4.2 The Acquiring Fund represents and warrants to the Corporation as
follows:
(a) The Acquiring Fund is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland and has
the power to carry on its business as it is now being conducted and to carry out
this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as an
open-end, diversified, management investment company, and such registration has
not been revoked or rescinded and is in full force and effect.
(c) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of the
Acquiring Fund's Articles of Incorporation or Bylaws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or investigation
of or before any court or governmental body is currently pending or to its
knowledge threatened against the Acquiring Fund or any of its properties or
assets which, if adversely determined, would materially and adversely affect its
financial condition or the conduct of its business. The Acquiring Fund knows of
no facts which might form the basis for the institution of such proceedings, and
is not a party to or subject to the provisions of any order, decree or judgment
of any court or governmental body which materially and adversely affects its
business or its ability to consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the Acquiring
Fund at August 31, 1994 and 1995, have been audited by Deloitte & Touche LLP,
independent auditors, and have been prepared in accordance with generally
accepted accounting principles, and such statements (copies of which have been
furnished to the Acquired Fund) fairly reflect the financial condition of the
Acquiring Fund as of such dates, and there are no known contingent liabilities
of the Acquiring Fund as of such dates not disclosed therein.
(g) The unaudited Statement of Assets and Liabilities of the
Acquiring Fund at February 29, 1996 has been prepared in accordance with
generally accepted accounting principles, consistently applied, although subject
to year-end adjustments, and on a basis consistent with the Statement of Assets
and Liabilities of the Acquiring Fund at August 31, 1995 which has been audited
by Deloitte & Touche LLP, independent auditors, and such statement (copies of
which have been furnished to the Acquired Fund) fairly reflects the financial
condition of the Acquiring Fund as of such date, and there are no known
liabilities of the Acquiring Fund, contingent or otherwise, as of such date not
disclosed therein.
(h) Since February 29, 1996, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as disclosed to and
accepted by the Acquired Fund.
(i) At the Closing Date, all Federal and other tax returns and
reports of the Acquiring Fund required by law to have been filed or an
appropriate extension obtained, by such date shall have been filed, and all
Federal and other taxes shall have been paid so far as due, or provision shall
have been made for the payment thereof or contest in good faith, and to the best
of the Acquiring Fund's knowledge no such return is currently under audit and no
assessment has been asserted with respect to such returns.
(j) For each fiscal year of its operation, subject to applicable
statute of limitation periods, the Acquiring Fund has met the requirements of
Subchapter M of the Code for qualification and treatment as a regulated
investment company.
(k) All issued and outstanding Acquiring Fund Shares are, and at
the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable. The Acquiring Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquiring Fund
Shares, nor is there outstanding any security convertible into any Acquiring
Fund Shares.
(l) The execution, delivery and performance of this Agreement
has been duly authorized by all necessary action on the part of the Acquiring
Fund, and this Agreement constitutes the valid and legally binding obligation of
the Acquiring Fund enforceable in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws relating to or affecting creditors' rights
generally and court decisions with respect thereto, and to general principles of
equity and the discretion of the court (regardless of whether the enforceability
is considered in a proceeding in equity or at law).
(m) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund) will,
on the effective date of the Registration Statement and on the Closing Date, not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not
misleading.
5.COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date, it
being understood that such ordinary course of business will include customary
dividends and distributions.
5.2 The Corporation will call a meeting of the Acquired Fund Shareholders
to consider and act upon this Agreement and to take all other action necessary
to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund and
the Acquired Fund will each take, or cause to be taken, all action, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty days after
the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in such
form as is reasonably satisfactory to the Acquiring Fund, a statement of the
earnings and profits of the Acquired Fund for Federal income tax purposes which
will be carried over to the Acquiring Fund as a result of Section 381 of the
Code and which will be certified by the Corporation's President and its
Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of the Prospectus/Proxy Statement,
referred to in paragraph 4.1(m), all to be included in a Registration Statement
on Form N-14 of the Acquiring Fund (the "Registration Statement"), in compliance
with the 1933 Act, the Securities Exchange Act of 1934, as amended, and the 1940
Act in connection with the meeting of the Acquired Fund Shareholders to consider
approval of this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such of
the state Blue Sky or securities laws as it may deem appropriate in order to
continue its operations after the Closing Date.
5.7 Prior to the Valuation Date, the Acquired Fund shall have declared a
dividend or dividends, with a record date and ex-dividend date prior to the
Valuation Date, which, together with all previous dividends, shall have the
effect of distributing to its shareholders all of its investment company taxable
income, if any, plus the excess of its interest income, if any, excludable from
gross income under Code section 103(a) over its deductions disallowed under Code
sections 265 and 171(a)(2) for the taxable periods or years ended on or before
June 30, 1996 and for the period from said date to and including the Closing
Date (computed without regard to any deduction for dividends paid), and all of
its net capital gain, if any, realized in taxable periods or years ended on or
before June 30, 1996 and in the period from said date to and including the
Closing Date.
6.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquired Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of the Corporation contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such securities by lot and
the holding periods of such securities, as of the Closing Date, certified by the
Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the Acquiring
Fund, to the effect that the representations and warranties of the Corporation
made in this Agreement are true and correct in all material respects at and as
of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as the Acquiring
Fund shall reasonably request.
7.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquiring Fund contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the Acquired
Fund, to the effect that the representations and warranties of the Acquiring
Fund made in this Agreement are true and correct in all material respects at and
as of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as the Acquired
Fund shall reasonably request.
7.3 There shall not have been any material adverse change in the Acquiring
Fund's financial condition, assets, liabilities or business since the date
hereof other than changes occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of any indebtedness, except as otherwise
disclosed to and accepted by the Acquired Fund.
8.FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, either
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Acquired Fund in accordance with the provisions of the Corporation's Articles of
Incorporation and the 1940 Act.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit consummation, in
all material respects, of the transactions contemplated hereby shall have been
obtained, except where failure to obtain any such consent, order or permit would
not involve a risk of a material adverse effect on the assets or properties of
the Acquiring Fund or the Acquired Fund, provided that either party hereto may
for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act.
8.5 The Acquiring Fund and the Corporation shall have received an opinion
of Dickstein Shapiro Morin & Oshinsky LLP substantially to the effect that for
Federal income tax purposes:
(a) The transfer of all of the Acquired Fund assets in exchange
for the Acquiring Fund Shares and the distribution of the Acquiring Fund Shares
to the Acquired Fund Shareholders in liquidation of the Acquired Fund will
constitute a "reorganization" within the meaning of Section 368(a)(1)(C) of the
Code; (b) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund solely in exchange for the Acquiring
Fund Shares; (c) No gain or loss will be recognized by the Acquired Fund upon
the transfer of the Acquired Fund assets to the Acquiring Fund in exchange for
the Acquiring Fund Shares or upon the distribution (whether actual or
constructive) of the Acquiring Fund Shares to Acquired Fund Shareholders in
exchange for their shares of the Acquired Fund; (d) No gain or loss will be
recognized by the Acquired Fund Shareholders upon the exchange of their Acquired
Fund shares for the Acquiring Fund Shares; (e) The tax basis of the Acquired
Fund assets acquired by the Acquiring Fund will be the same as the tax basis of
such assets to the Acquired Fund immediately prior to the Reorganization;
(f) The tax basis of the Acquiring Fund Shares received by each of the Acquired
Fund Shareholders pursuant to the Reorganization will be the same as the tax
basis of the Acquired Fund shares held by such shareholder immediately prior to
the Reorganization; (g) The holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which those
assets were held by the Acquired Fund; and (h) The holding period of the
Acquiring Fund Shares to be received by each Acquired Fund Shareholder will
include the period during which the Acquired Fund shares exchanged therefor were
held by such shareholder (provided the Acquired Fund shares were held as capital
assets on the date of the Reorganization).
9.TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Directors of the
Corporation or the Board of Directors of the Acquiring Fund at any time prior to
the Closing Date (and notwithstanding any vote of the Acquired Fund
Shareholders) if circumstances should develop that, in the opinion of either of
the parties' Board, make proceeding with the Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated hereby
is abandoned pursuant to the provisions of this Section 9, this Agreement shall
become void and have no effect, without any liability on the part of any party
hereto or the directors or officers of the Corporation or the Acquiring Fund or
the shareholders of the Acquiring Fund or of the Acquired Fund, in respect of
this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing conditions
may be waived by the Board of Directors of the Acquiring Fund or the Board of
Directors of the Corporation, if, in the judgment of either, such waiver will
not have a material adverse effect on the benefits intended under this Agreement
to the shareholders of the Acquiring Fund or of the Acquired Fund, as the case
may be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided for
herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding between
the parties hereto with respect to the subject matter hereof, and merges and
supersedes all prior discussions, agreements, and understandings of every kind
and nature between them relating to the subject matter hereof. Neither party
shall be bound by any condition, definition, warranty or representation, other
than as set forth or provided in this Agreement or as may be set forth in a
later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with the
internal laws of the State of New York, without giving effect to principles of
conflicts of laws.
11.4 This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
11.6 An agreement has been entered into under which Federated Advisers will
assume substantially all of the expenses of the reorganization including
registration fees, transfer taxes (if any), the fees of banks and transfer
agents and the costs of preparing, printing, copying and mailing proxy
solicitation materials to the Acquired Fund's shareholders and the costs of
holding the Special Meeting of Shareholders. ARM Financial Group, Inc. will
assume the legal fees of the Acquired Fund. The accountants' fees of the
Acquired Fund will be borne equally by Federated Advisers and ARM Financial
Group, Inc.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have each
caused this Agreement and Plan of Reorganization to be executed and attested on
its behalf by its duly authorized representatives as of the date first above
written.
Acquired Fund:
STATE BOND MUNICIPAL FUNDS, INC.,
on behalf of its portfolio,
Attest: STATE BOND TAX EXEMPT FUND
/s/ Sheri Bean By: /s/ Kevin L. Howard
Name: Sheri Bean Name: Kevin L. Howard
Title: Assistant Secretary Title: Vice President and Secretary
Acquiring Fund:
Attest: FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
/s/ S. Elliot Cohan By: /s/ J. Christopher
Donahue
Name: S. Elliot Cohan Name: J. Christopher Donahue
Title: Assistant Secretary Title: Executive Vice President
STATEMENT OF ADDITIONAL INFORMATION
November , 1996
---
ACQUISITION OF THE ASSETS OF
STATE BOND TAX EXEMPT FUND,
A PORTFOLIO OF
STATE BOND MUNICIPAL FUNDS, INC.
100 NORTH MINNESOTA STREET
P.O. BOX 69
NEW ULM, MINNESOTA 56073-0069
TELEPHONE NUMBER: 1-800-328-4735
BY AND IN EXCHANGE FOR CLASS A SHARES OF
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TELEPHONE NUMBER: 1-800-341-7400
This Statement of Additional Information dated November , 1996 is not
---
a prospectus. A Prospectus/Proxy Statement dated November , 1996 related to
---
the above-referenced matter may be obtained from Federated Municipal
Opportunities Fund, Inc., Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779. This Statement of Additional Information should be read in
conjunction with such Prospectus/Proxy Statement.
TABLE OF CONTENTS
1. Statement of Additional Information of Federated Municipal
Opportunities Fund, Inc., dated September 1, 1996.
2. Statement of Additional Information of State Bond Tax Exempt
Fund, a portfolio of State Bond Municipal Funds, Inc., dated November 1, 1995.
3. Financial Statements of Federated Municipal Opportunities Fund,
Inc., dated August 31, 1995.
4. Financial Statements (unaudited) of Federated Municipal
Opportunities Fund, Inc., dated February 29, 1996.
5. Financial Statements of State Bond Tax Exempt Fund, a portfolio
of State Bond Municipal Funds, Inc., dated June 30, 1996.
6. Pro Forma Financial Information of Federated Municipal
Opportunities Fund, Inc., dated August 31, 1996.
The Statement of Additional Information of Federated Municipal
Opportunities Fund, Inc. (the "Federated Fund"), dated September 1, 1996, is
incorporated herein by reference to Post-Effective Amendment No. 14 to the
Federated Fund's Registration Statement on Form N-1A (File Nos. 33-11410 and
811-4533) which was filed with the Securities and Exchange Commission on or
about May 23, 1996. A copy may be obtained, upon request and without charge,
from the Federated Fund at Federated Investors Tower, Pittsburgh, PA 15222-3279;
telephone number: 1-800-341-7400.
The Statement of Additional Information of State Bond Tax Exempt Fund
(the "State Bond Fund"), a portfolio of State Bond Municipal Funds, Inc. (the
"Corporation"), dated November 1, 1995, is incorporated herein by reference to
Post-Effective Amendment No. 16 to the Corporation's Registration Statement on
Form N-1A (File Nos. 33-18934 and 811-5412) which was filed with the Securities
and Exchange Commission on or about August 29, 1995. A copy may be obtained,
upon request and without charge, from the State Bond Fund at 100 North Minnesota
Street, P.O. Box 69, New Ulm, Minnesota 56073-0069; telephone number: 1-800-
328-4735.
The audited financial statements of the Federated Fund, dated August 31,
1995, are incorporated herein by reference to the Federated Fund's Annual Report
to Shareholders dated August 31, 1995 which was filed with the Securities and
Exchange Commission. A copy may be obtained, upon request and without charge,
from the Federated Fund at Federated Investors Tower, Pittsburgh, PA 15222-3279;
telephone number: 1-800-341-7400.
The audited financial statements of the State Bond Fund, dated June 30,
1996, are incorporated herein by reference to the State Bond Fund's Annual
Report to Shareholders dated June 30, 1996, which was filed with the Securities
and Exchange Commission. A copy may be obtained, upon request and without
charge, from the State Bond Fund at 100 North Minnesota Street, P.O. Box 69, New
Ulm, Minnesota 56073-0069; telephone number 1-800-328-4735.
The unaudited financial statements of the Federated Fund, dated
February 29, 1996, are incorporated herein by reference to the Federated Fund's
Semi-Annual Report to Shareholders, dated February 29, 1996, which was filed
with the Securities and Exchange Commission. A copy may be obtained, upon
request and without charge, from the Federated Fund at Federated Investors
Tower, Pittsburgh, PA 15222-3279; telephone number: 1-800-341-7400.
The pro forma financial information of the Federated Fund, dated
August 31, 1996 is included herein.
PART C - OTHER INFORMATION
Item 15. Indemnification
Indemnification is provided to directors and officers of the Registrant
pursuant to the Registrant's Articles of Incorporation, except where such
indemnification is not permitted by law. However, the Articles of Incorporation
do not protect the directors or officers from liability based on willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of their office.
Directors and officers of the Registrant are insured against certain
liabilities, including liabilities arising under the Securities Act of 1933 (the
"Act").
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers, and controlling persons of the Registrant by
the Registrant pursuant to the Articles of Incorporation or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by directors, officers, or controlling
persons of the Registrant in connection with the successful defense of any act,
suit, or proceeding) is asserted by such directors, officers, or controlling
persons in connection with the shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Insofar as indemnification for liabilities may be permitted pursuant to
Section 17 of the Investment Company Act of 1940 for directors, officers, or
controlling persons of the Registrant by the Registrant pursuant to the Articles
of Incorporation or otherwise, the Registrant is aware of the position of the
Securities and Exchange Commission as set forth in Investment Company Act
Release No. IC-11330. Therefore, the Registrant undertakes that in addition to
complying with the applicable provisions of the Articles of Incorporation or
otherwise, in the absence of a final decision on the merits by a court or other
body before which the proceeding was brought, that an indemnification payment
will not be made unless in the absence of such a decision, a reasonable
determination based upon factual review has been made (i) by a majority vote of
a quorum of non-party directors who are not interested persons of the Registrant
or (ii) by independent legal counsel in a written opinion that the indemnitee
was not liable for an act of willful misfeasance, bad faith, gross negligence,
or reckless disregard of duties. The Registrant further undertakes that
advancement of expenses incurred in the defense of a proceeding (upon
undertaking for repayment unless it is ultimately determined that
indemnification is appropriate) against an officer, director, or controlling
person of the Registrant will not be made absent the fulfillment of at least one
of the following conditions: (i) the indemnitee provides security for his
undertaking; (ii) the Registrant is insured against losses arising by reason of
any lawful advances; or (iii) a majority of a quorum of disinterested non-party
directors or independent legal counsel in a written opinion makes a factual
determination that there is reason to believe the indemnitee will be entitled to
indemnification.
Item 16. Exhibits
1.1 Conformed Copy of Articles of Incorporation of the Registrant, as restated*
2.1 Bylaws of the Registrant, as amended*
3 Not Applicable
4 Agreement and Plan of Reorganization dated September 23, 1996, between
State Bond Municipal Funds, Inc., a Maryland corporation, on behalf of its
portfolio, State Bond Tax Exempt Fund, and Federated Municipal Opportunities
Fund, Inc., a Maryland corporation*
5 Copy of Specimen Certificate for Shares of Capital Stock of the
Registrant(1)
6.1 Conformed Copy of Investment Advisory Contract of the Registrant(2)
7.1 Conformed Copy of Distributor's Contract of the Registrant(3)
7.2 Form of Exhibits A through D to the Distributor's Contract of the
Registrant(3)
7.3 The Registrant hereby incorporates the conformed copy of the specimen
Mutual Funds Sales and Service Agreement; Mutual Funds Service Agreement; and
Plan Trustee/Mutual Funds Service Agreement from Item 24(b)(6) of the Cash Trust
Series II Registration Statement on Form N-1A, filed with the Commission on July
24, 1995. (File Nos. 33-38550 and 811-6269)
8 Not Applicable
9 Conformed Copy of Custodian Agreement of the Registrant(4)
10.1 Conformed Copy of Distribution Plan of the Registrant, as amended(5)
10.2 The Registrant hereby incorporates the conformed copy of the specimen
Multiple Class Plan from Item 24(b)(18) of the World Investment Series, Inc.
Registration Statement on Form N-1A, filed with the Commission on January 26,
1996. (File Nos. 33-52149 and 811-07141)
10.3 The responses described in Item 16 (7.3) are hereby incorporated by
reference
11 Opinion of S. Elliott Cohan, Deputy General Counsel, Federated Investors
regarding legality of shares being issued*
12 Opinion of Dickstein Shapiro Morin & Oshinsky LLP regarding tax
consequences of Reorganization(6)
13.1 Conformed Copy of Agreement for Fund Accounting Services, Administrative
Services, Shareholder Recordkeeping Services and Custody Services Procurement(3)
13.2 Conformed Copy of Shareholder Services Agreement(7)
13.3 The responses described in Item 16 (7.3) and Item 16 (10.2) are hereby
incorporated by reference
14.1 Conformed Copy of Consent of Independent Auditors of Federated Municipal
Opportunities Fund, Inc., Deloitte & Touche LLP*
14.2 Conformed Copy of Consent of Independent Auditors of State Bond Tax Exempt
Fund, Ernst & Young LLP*
15 Not Applicable
16 Conformed Copy of Power of Attorney*
17.1 Declaration under Rule 24f-2*
17.2 Form of Proxy of State Bond Tax Exempt Fund*
* Filed electronically.
(1) Response is incorporated by reference to Registrant's Initial Registration
Amendment No. 1 filed on January 21, 1987. (File Nos. 33-11410 and 811-4533)
(2) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 4 on Form N-1A filed August 25, 1989. (File Nos. 33-11410 and
811-4533)
(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed on May 3, 1996. (File Nos. 33-11410 and
811-4533)
(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed October 25, 1995. (File Nos. 33-11410 and
811-4533)
(5) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed October 25, 1989. (File Nos. 33-11410 and
811-4533)
(6) To be filed by Post-Effective Amendment pursuant to `Dear Registrant''
letter dated February 15, 1996.
(7) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed October 26, 1994. (File Nos. 33-11410 and
811-4533)
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus which is
a part of this Registration Statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933,
the reoffering prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new Registration Statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Federated Municipal Opportunities Fund, Inc., has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Pittsburgh, Commonwealth of Pennsylvania on
October 3, 1996.
FEDERATED MUNICIPAL OPPORTUNITIES
FUND, INC.
(Registrant)
By: *
Richard B. Fisher
President
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on October 3, 1996:
* Chairman and Director
John F. Donahue
(Chief Executive Officer)
* President and Director
Richard B. Fisher
* Executive Vice President and Treasurer
John W. McGonigle
(Principal Financial and
Accounting Officer)
* Director
Thomas G. Bigley
* Director
John T. Conroy, Jr.
* Director
William J. Copeland
* Director
James E. Dowd
* Director
Lawrence D. Ellis, M.D.
* Director
Edward L. Flaherty, Jr.
* Director
Peter E. Madden
* Director
Gregor F. Meyer
* Director
John E. Murray, Jr., J.D., S.J.D.
* Director
Wesley W. Posvar
* Director
Marjorie P. Smuts
1* By: /s/ S. Elliott Cohan
Attorney in Fact
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC. (FORMERLY, FORTRESS
MUNICIPAL INCOME FUND, INC.)
STATE BOND MINNESOTA TAX-FREE INCOME FUND
STATE BOND TAX EXEMPT FUND
INTRODUCTION TO PROPOSED MERGER
AUGUST 31, 1996 (UNAUDITED)
The accompanying unaudited Pro Forma Combining Portfolio of Investments
and Statement of Assets and Liabilities reflect the accounts of Federated
Municipal Opportunities Fund, Inc. , State Bond Minnesota Tax-Free Income
Fund, and State
Bond Tax Exempt Fund, collectively (`the Funds''), for the year ended August
31, 1996. These statements have been derived from the books and records utilized
in calculating daily net asset values at August 31, 1996. The accompanying
unaudited Pro Forma Combining Statement of Operations reflects the accounts of
the Funds, for the years ended August 31, 1996, June 30, 1996, and June 30,
1996, respectively, the most recent fiscal year ends of the Funds. The Pro
Forma statements give effect to the proposed transfer of assets from State Bond
Minnesota Tax-Free Income Fund in exchange for Class A Shares of Federate
Municipal Income Fund, Inc. and State Bond Tax Exempt Fund in exchange for
Class A Shares of Federated Municipal Opportunities Fund, Inc. These two
separate proposed transfers will be transacted simultaneously.
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS
AUGUST 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
FEDERATED FEDERATED
MUNICIPAL MUNICIPAL
OPPORTUNITIES OPPORTUNITIES
FUND, INC. FUND, INC.
(FORMERLY, STATE BOND (FORMERLY, STATE
FORTRESS MINNESOTA STATE FORTRESS BOND STATE BOND
MUNICIPAL TAX-FREE BOND MUNICIPAL MINNESO TAX
INCOME INCOME TAX PRO FORMA INCOME TA TAX- EXEMPT PRO FORMA
FUND, INC.) FUND EXEMPT COMBINED FUND, INC.) FREE FUND COMBINED
FUND INCOME
FUND
MOODY'S/
PRINCIPAL PRINCIPAL PRINCIPAL S&P
AMOUNT AMOUNT PRINCIPAL AMOUNT RATING* VALUE VALUE VALUE VALUE
AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MUNICIPAL BONDS (97.7%)
ALABAMA- 1.2%
6,000,000 --- --- 6,000,000 Courtland, AL, IDB,
Solid Waste Disposal
Revenue Bonds (Series BBB/Baa1 5,869,680 --- --- 5,869,680
A), 6.375% (Champion
International
Corp.)/(Original
Issue Yield: 6.52%),
3/1/2029
ALASKA-- 0.4%
- --- --- 690,000 690,000 Alaska Housing
Finance Corp.,
Collateralized,
Veterans Mortgage
Program, Series 1991
B-1, 6.900%,
due 2032 Aaa/AAA --- --- 708,471 708,471
- --- --- 325,000 325,000 Alaska Housing Aaa/AAA
Finance Corp., --- --- 334,419 334,419
Collaterized Home
Mortgage Bonds, 1988
Series A-1, 7.625%,
due 2013
- --- --- 1,000,000 1,000,000 Alaska Valdez Marine
Terminal, 5.650%,
due 2028 Aa3/AA- --- --- 940,090 940,090
Total --- --- 1,982,980 1,982,980
ARIZONA-0.3%
- --- --- 1,500,000 1,500,000 Arizona Industrial A/A --- --- 1,478,205 1,478,205
Development
Authority, 5.450%,
due 2009
ARKANSAS--1.7%
2,920,000 --- --- 2,920,000 Conway, AR, Hospital
Authority, Revenue BBB/NR 2,976,560 --- --- 2,976,560
Bonds, 7.125% (Conway
Regional Hospital),
2/1/2013
3,000,000 --- --- 3,000,000 Conway, AR, Hospital
Authority, Revenue BBB/NR 3,205,800 --- --- 3,205,800
Refunding Bonds,
8.125% (Conway
Regional Hospital),
7/1/2005
1,000,000 --- --- 1,000,000 Conway, AR, Hospital
Authority, Revenue BBB/NR 1,074,850 --- --- 1,074,850
Refunding Bonds,
8.375% (Conway
Regional Hospital),
7/1/2011
1,000,000 --- --- 1,000,000 Little Rock, AR,
Health Facilities A+/NR 1,062,400 --- --- 1,062,400
Board, Revenue
Refunding Bonds,
7.00% (Baptist
Medical Center, AR),
10/1/2017
Total 8,319,610 --- --- 8,319,610
CALIFORNIA-0.5%
- --- --- 500,000 500,000 Berkeley, CA, School
District, 5.800%,
due 2020 Aaa/AAA --- --- 488,600 488,600
- --- --- 1,000,000 1,000,000 Central Coast Water
Authority Revenue
Bonds,
Series 1992, 6.350%, Aaa/AAA --- --- 1,075,550 1,075,550
due 2007
- --- --- 1,000,000 1,000,000 Walnut Valley, CA,
Water District,
Certificate of
Participation,
6.125%, due
2009 Aaa/AAA --- --- 1,032,820 1,032,820
Total --- --- 2,596,970 2,596,970
COLORADO--0.8%
695,000 --- --- 695,000 Colorado HFA, SFM
Revenue Bonds (Series AA/NR 729,250 --- --- 729,250
A-2), 7.70% (FHA
GTD), 2/1/2023
2,775,000 --- --- 2,775,000 Colorado HFA, SFM
Revenue Bonds (Series AA/NR 2,891,162 --- --- 2,891,162
C-2), 7.375% (FHA
GTD), 8/1/2023
295,000 --- --- 295,000 El Paso County, CO,
HFA, SFM Revenue AAA/NR 310,573 --- --- 310,573
Bonds, 8.00% (GNMA
COL), 9/1/2022
- --- --- 210,000 210,000 Housing Finance
Agency, Single Family Aa/NR --- --- 214,505 214,505
Housing Revenue
Bonds, 1986 Series A,
8.000%, due 2017
Total 3,930,985 --- 214,505 4,145,490
DISTRICT OF COLUMBIA-
0.3%
- --- --- 1,250,000 1,250,000 District of Columbia
University Revenue NR/AAA --- --- 1,275,012 1,275,012
Bonds, 6.300%, due
2013
IDAHO--0.9%
1,145,000 --- --- 1,145,000 Idaho Housing Agency,
SFM Revenue Bonds AA/NR 1,193,823 --- --- 1,193,823
(Series A), 7.50%
(FHA GTD), 7/1/2024
2,785,000 --- --- 2,785,000 Idaho Housing Agency,
SFM Revenue Bonds AA/Aa 2,918,290 --- --- 2,918,290
(Series F-2), 7.80%
(FHA GTD), 1/1/2023
Total 4,112,113 --- --- 4,112,113
ILLINOIS--7.0%
- --- --- 2,000,000 2,000,000 Chicago, IL, Water
Revenue Bonds,
7.200% due 2016 A1/AA- --- --- 2,194,460 2,194,460
- --- --- 1,000,000 1,000,000 Chicago, IL, Public
District Capital
Improvement Bonds, Aaa/AAA --- --- 1,024,200 1,024,200
5.450%, due 2004
- --- --- 1,480,000 1,480,000 City of Chicago, IL,
Gas Supply Revenue
Bonds, 7.500%, due Aa3/AA- --- --- 1,606,111 1,606,111
2015
- --- --- 1,100,000 1,100,000 City of Chicago, IL,
Gas Supply Revenue Aa3/AA --- --- 1,198,076 1,198,076
Bonds, 7.500%, due
2015
- -- --- 500,000 500,000 Cook County, IL, Aaa/AAA --- --- 499,945 499,945
6.000%, due 2017
- --- --- 1,000,000 1,000,000 Cook County, IL
Community Cons.
School District #6, Aaa/AAA --- --- 1,023,880 1,023,880
5.875%, due 2008
4,500,000 --- --- 4,500,000 Granite City, IL,
Hospital Facilities
Authority, Revenue BB+/Baa 4,637,520 --- --- 4,637,520
Refunding Bonds
(Series A), 8.125%
(St. Elizabeth
Medical
Center)/(Original
Issue Yield: 8.167%),
6/1/2008
3,000,000 --- --- 3,000,000 Illinois Development
Finance Authority,
Housing Revenue NR 2,667,210 --- --- 2,667,210
Bonds, 6.10%
(Catholic Charities
Housing Development
Corp), 1/1/2020
10,000,000 --- --- 10,000,000 Illinois Health
Facilities Authority,
Hospital Revenue NR 10,459,300 --- --- 10,459,300
Bonds (Series A),
9.25% (Edgewater
Hospital & Medical
Center, IL), 7/1/2024
- --- --- 1,400,000 1,400,000 Illinois Health
Facility Authorized
Revenue,
6.000%, due 2015 Aaa/AAA --- --- 1,378,468 1,378,468
- --- --- 1,000,000 1,000,000 Illinois State
Dedicated Tax,
6.000%, due
2015 Aaa/AAA --- --- 998,760 998,760
- --- --- 1,050,000 1,050,000 Illinois State
University Auxiliary
Facility
System, Board of
Regents Revenue
Bonds,
Series 1989, 7.400%, Aaa/A --- --- 1,156,680 1,156,680
due 2014
- --- --- 500,000 500,000 Illinois State
University Auxiliary
Facility
System, Board of
Regents Revenue
Bonds,
Series 1989, 7.400%, Aaa/A --- --- 550,800 550,800
due 2013
- --- --- 2.350,000 2.350,000 Metropolitan Pier
Exposition Authority,
IL, Dedicated State
Tax Rev. Bonds,
6.000%, due 2104 A/A+ --- --- 2,337,052 2,337,052
- --- --- 2,000,000 2,000,000 Rolling Meadows, IL,
Mortgage Revenue
Bonds Woodfield
Garden, 7.750%
due 2004 NR/A- --- --- 2,122,240 2,122,240
Total 17,764,030 --- 16,090,672 33,854,702
INDIANA--9.2%
- --- --- 550,000 550,000 Beech Grove, IN, IDR
8.750%, (Westvaco A1/A --- --- 556,424 556,424
Corp) due 2010
- --- --- 1,000,000 1,000,000 Highland, IN, School
Building Corp.,
6.750%, due 2012 NR/AAA --- --- 1,105,850 1,105,850
1,300,000 1,300,000 Indiana Municipal
Power Agency, Series
1992 A, 6.000%, due Aaa/AAA --- --- 1,363,245 1,363,245
2007
3,000,000 --- --- 3,000,000 Indiana Port
Commission, Port NR/Aa3 3,232,500 --- --- 3,232,500
Facility Revenue
Refunding Bonds,
6.875% (Cargill,
Inc.), 5/1/2012
855,000 --- --- 855,000 Indiana State HFA,
SFM Revenue Bonds NR/Aaa 902,410 --- --- 902,410
(Series A), 8.20%
(GNMA COL), 7/1/2020
- --- --- 1,100,000 1,100,000 Indiana State Toll
Roads, Revenue
Refunding Bond, A-/A --- --- 1,099,967 1,099,967
6.00%, due 2013
2,785,000 --- --- 2,785,000 Indiana State HFA,
SFM Revenue Home NR/Aaa 2,941,406 --- --- 2,941,406
Mortgage Program
(Series F-2), 7.75%
(GNMA COL), 7/1/2022
- --- --- 1,150,000 1,150,000 Indiana
Transportation
Finance Authority,
Series A, 6.250%, due A/NR --- --- 1,160,108 1,160,108
2016
17,100,000 --- --- 17,100,000 Indianapolis, IN,
Airport Authority,
Special Facilities BBB/Baa2 18,041,355 --- --- 18,041,355
Revenue Bonds, 7.10%
(Federal Express
Corp.)/(Original
Issue Yield: 7.178%),
1/15/2017
- --- --- 3,225,000 3,225,000 Indianapolis, IN,
Public Improvement
Bonds, Bank Series C, Aaa/NR --- --- 3,558,014 3,558,014
6.700%, due 2017
2,750,000 --- --- 2,750,000 LaPorte County, IN,
Hospital Authority,
Hospital Facilities
Revenue Refunding BBB-/Aaa 2,870,780 --- --- 2,870,780
Bond, 8.75% (LaPorte
Hospital, Inc.,
IN)/(United States
Treasury
PRF)/(Original Issue
Yield: 8.848%),
3/1/1997 (@102)
5,000,000 --- --- 5,000,000 LaPorte County, IN,
Hospital Authority,
Hospital Facility BBB/Baa1 4,587,750 --- --- 4,587,750
Revenue Refunding
Bonds, 6.00% (LaPorte
Hospital, Inc.,
IN)/(Original Issue
Yield: 6.35%),
3/1/2023
3,000,000 --- --- 3,000,000 LaPorte County, IN,
Hospital Authority,
Hospital Facility BBB/Baa 2,908,350 --- --- 2,908,350
Revenue Refunding
Bonds, 6.25% (LaPorte
Hospital, Inc.,
IN)/(Original Issue
Yield: 6.35%),
3/1/2012
Total 35,484,551 --- 8,843,608 44,328,159
IOWA--0.2%
1,000,000 --- --- 1,000,000 Davenport, IA, PCA,
PCR Refunding Bonds, NR 1,057,090 --- --- 1,057,090
Nicols-Homeshield
Project, 8.375%
(Quanex Corp.),
12/1/2005
KENTUCKY--1.0%
3,500,000 --- --- 3,500,000 Kenton County, KY,
Airport Board,
Special Facilities BB/Ba3 3,729,600 --- --- 3,729,600
Revenue Bonds (Series
A), 7.50% (Delta Air
Lines,
Inc.)/(Original Issue
Yield: 7.60%),
2/1/2020
1,200,000 --- --- 1,200,000 Kentucky Pollution
Abatement & Water NR 1,200,000 --- --- 1,200,000
Resource Finance
Authority Daily VRDNs
(Toyota Motor Credit
Corp.)
Total 4,929,600 --- --- 4,929,600
LOUISIANA-5.5%
3,000,000 --- --- 3,000,000 De Soto Parish, LA,
Environmental
Improvement A-/A3 3,381,990 --- --- 3,381,990
Authority, Revenue
Bonds, 7.70%
(International Paper
Co.), 11/1/2018
5,000,000 --- --- 5,000,000 Lake Charles, LA,
Harbor & Terminal
District, Port NR/Baa3 5,598,550 --- --- 5,598,550
Facilities Revenue
Refunding Bond,
Trunkline Lining Co
Project, 7.75%
(Panhandle Eastern
Corp.), 8/15/2022
- --- --- 750,000 750,000 Rapides Parish, LA,
Housing & Mortgage
Finance Authority,
Single Family
Mortgage, 7.250%, due Aaa/AA- --- --- 847,770 847,770
2010
5,645,000 --- --- 5,645,000 St. Charles Parish,
LA, PCR Bonds, 7.50%
(Louisiana Power & BBB+/Baa2 5,956,660 --- --- 5,956,660
Light Co.)/(Original
Issue Yield: 7.542%),
6/1/2021
1,400,000 --- --- 1,400,000 St. Charles Parish,
LA, PCR Bonds, 8.00% NR/Baa3 1,523,914 --- --- 1,523,914
(Louisiana Power &
Light Co.), 12/1/2014
2,100,000 --- --- 2,100,000 St. Charles Parish,
LA, PCR Bonds, 8.25% ---
(Louisiana Power & NR 2,289,462 --- 2,289,462
Light Co.)/(Original
Issue Yield: 8.273%),
6/1/2014
3,650,000 --- --- 3,650,000 St. Charles Parish,
LA, Solid Waste ---
Disposal Revenue BBB+/Baa2 3,758,770 --- 3,758,770
Bonds (Series A),
7.00% (Louisiana
Power & Light
Co.)/(Original Issue
Yield: 7.04%),
12/1/2022
3,000,000 --- --- 3,000,000 St. James Parish, LA,
Solid Waste Disposal
Revenue Bonds, 7.70% NR 3,049,200 --- --- 3,049,200
(Freeport McMoRan,
Inc.)/(Original Issue
Yield: 7.75%),
10/1/2022
Total 25,558,546 --- 847,770 26,406,316
MAINE--1.0%
- --- --- 400,000 400,000 Maine State Housing
Authority, Mortgage
Purchase Bonds, 1988
Series B, 8.000%,
due 2015 A1/AA- --- --- 420,596 420,596
4,200,000 --- --- 4,200,000 Maine State Housing
Authority, Revenue A+/A1 4,418,778 --- --- 4,418,778
Bonds (Series D-3),
8.20%, 11/15/2019
Total 4,418,778 --- 420,596 4,839,374
MARYLAND-0.2%
- --- --- 740,000 740,000 Maryland City Housing
Multi-Family
Housing, FNMA, Series
A, 7.250%
due 2023 NR/AAA --- --- 767,927 767,927
MASSACHUSETTS--2.8%
21,000,000 --- --- 21,000,000 Massachusetts IFA,
Solid Waste Disposal
Sr. Lien Revenue NR 11,350,500 --- --- 11,350,500
Bonds (Series A),
9.00% (Massachusetts
Recycling
Association),
8/1/2016
- --- --- 1,000,000 1,000,000 Massachusetts State
Housing Project
Financial Agency, A1/A+ --- --- 1,008,500 1,008,500
6.300%, due 2013
- --- --- 1,000,000 1,000,000 Massachusetts State
Housing Project
Financial Agency, Aaa/AAA --- --- 1,005,550 1,005,550
6.100%, due 2016
Total 11,350,500 --- 2,014,050 13,364,550
MICHIGAN--0.7%
- --- --- 500,000 500,000 Clintondale, MI,
Community Schools,
5.750%, due 2016 Aa/AA --- --- 488,450 488,450
- --- --- 145,000 145,000 Michigan State
Housing Development
Authority, Single
Family, Series A,
7.550%, due 2014 NR/AA+ --- --- 145,042 145,042
- --- --- 1,000,000 1,000,000 Michigan State
Housing Development,
Series B, 6.950%, due NR/AA+ --- --- 1,051,960 1,051,960
2020
1,500,000 --- --- 1,500,000 Western Townships,
MI, Utilities BBB+/NR 1,639,890 --- --- 1,639,890
Authority, LT GO
Sewer Disposal System
Bonds, 8.20%,
1/1/2018
Total 1,639,890 --- 1,685,452 3,325,342
MINNESOTA--10.0%
- --- 235,000 --- 235,000 Albany, MN,
Independent School Aa1/NR --- 242,645 --- 242,645
District #745, GO
Bonds, 6.000%, due
2009
- --- --- Bloomington Port
200,000 200,000 Authority, Series Aaa/AAA --- 202,052 --- 202,052
1994 A, 5.250%, due
2003
- --- 100,000 800,000 900,000 Burnsville, MN,
Multi-Family Housing
Revenue Refunded NR/AAA --- 104,559 836,472 941,031
Bonds, Coventry Court
Apartments Project,
Series 1989, 7.500%,
due 2027
- --- 250,000 --- 250,000 Centennial Minnesota --- ---
Independent School Aaa/AAA 270,255 270,255
District #12, GO
Bonds, Series 1991 A,
7.150%, due 2011
- --- --- 800,000 800,000 City of Minnetonka,
MN, Multi-Family
Rental Housing Rev.
Bonds, 7.250%,
due 2002 NR/AAA --- --- 830,192 830,192
- --- 150,000 --- 150,000 Coon Rapids, MN, GO
Tax Increment Bonds, A/NR --- 151,877 --- 151,877
Series 1986 B2,
7.750%, due 2006
- --- 300,000 --- 300,000 Dakota County, MN, GO Aaa/AAA --- 312,642 --- 312,642
Refunded Bonds,
6.450%, due 2010
- --- 170,000 --- 170,000 Dakota County, MN
Housing and Revenue NR/AAA --- 175,850 --- 175,850
Authority, SFM Rev.
Bonds, 7.200%, due
2009
- --- --- Duluth, MN, GO Water
285,000 285,000 Rev., Series 1992 A, A/NR --- 295,870 --- 295,870
6.250%, due 2007
- --- --- Duluth, MN, Economic ---
60,000 60,000 Development Aaa/AAA --- 64,926 64,926
Authority, 6.200%,
due 2012
- --- --- Duluth, MN, Economic
140,000 140,000 Development Aaa/AAA --- 145,062 --- 145,062
Authority, 6.200%,
due 2012
- --- --- Eden Prairie, MN,
100,000 100,000 Multi-Family Housing NR/AAA --- 104,199 --- 104,199
Preserve Place
Apartments, 7.875%,
due 2017
- --- --- Eden Prairie, MN,
300,000 300,000 Housing & A/NR --- 312,033 --- 312,033
Redevelopment
Authority, 6.200%,
due 2008
- --- --- Edina, MN,
300,000 300,000 Independent School A1/NR --- 299,037 --- 299,037
District #273,
5.750%, due 2013
- --- --- Foley, MN,
100,000 100,000 Independent School Aaa/AAA --- 104,567 --- 104,567
District #51 MBIA,
7.500%, due 2008
- --- --- Hennepin County, MN,
165,000 165,000 Lease Revenue Aa/AA --- 176,971 --- 176,971
Certificate of
Participation, Series
1991, 6.800%, due
2017
- --- 225,000 --- 225,000 Kandiyohi County, MN,
GO Refunded Bonds, A/NR --- 224,330 --- 224,330
Series 1993, 5.650%,
due 2011
- --- 150,000 --- 150,000 Metropolitan Council, Aaa/AAA --- 162,480 --- 162,480
MN, 7.250%, due 2007
- --- 275,000 --- 275,000 Minneapolis, MN, Aaa/AAA --- 278,196 --- 278,196
5.750%, due 2010
- --- 250,000 --- 250,000 Minneapolis, MN, Aaa/AAA --- 261,645 --- 261,645
6.250%, due 2012
- --- 200,000 --- 200,000 Minneapolis, MN,
Multi-Family Housing NR/AAA --- 211,190 --- 211,190
Revenue, 7.125%, due
2010
- --- 300,000 --- 300,000 Minneapolis, MN,
Multi-Family Housing NR/AAA --- 311,466 --- 311,466
Revenue, 7.050%, due
2022
- --- 400,000 2,000,000 2,400,000 Minneapolis, MN,
Special School Aaa/AAA --- 407,148 2,035,740 2,442,888
District #001,
5.900%, due 2011
Minnesota Housing
Finance Agency,
Single
- --- --- 1,300,000 1,300,000 Family Mortgage, Aa/AA+ --- --- 1,319,240 1,319,240
6.250%, due 2015
- --- --- 1,460,000 1,460,000 Minnesota Housing
Finance Authority,
Series 1993E, 6.000%, NR/AA+ --- --- 1,459,913 1,459,913
due 2014
- --- --- 500,000 500,000 Minnesota Housing Aa/AA+ --- --- 527,775 527,775
Finance Authority
Agency, Single Family
Mortgage Revenue
Bonds 1989 D Series,
7.350%, due 2016
- --- 300,000 --- 300,000 Minnesota State
University Board A/NR --- 303,645 --- 303,645
Revenue, 6.000%, due
2013
- --- 300,000 --- 300,000 Minnesota Public --- ---
Access Authority, Aa1/AAA 329,412 329,412
Water Pollution
Control, Revenue
Bonds, Series 1990 A,
7.100%, due 2012
- --- 250,000 --- 250,000 Minnesota Public
Facilities Authority, Aa1/AAA --- 276,925 --- 276,925
Water Pollution
Control, Revenue
Bonds, Series 1991 A,
6.950%, due 2013
- --- 250,000 --- 250,000 Minnesota Public
Facilities Authority, Aa1/AAA --- 266,548 --- 266,548
Water Pollution
Control, Revenue
Bonds, Series 1992 A,
6.500%, due 2014
- --- 150,000 --- 150,000 Minnesota State, Aaa/AAA --- 162,714 --- 162,714
7.000%, due 2007
1,640,000 --- --- 1,640,000 Minnesota State HFA,
SFM Revenue Bonds AA/Aa 1,730,167 --- --- 1,730,167
(Series A), 7.95%
(FHA GTD), 7/1/2022
585,000 --- --- 585,000 Minnesota State HFA,
SFM Revenue Bonds AA+/Aa 601,930 --- --- 601,930
(Series D), 8.05%
(FHA GTD), 8/1/2018
3,000,000 --- --- 3,000,000 Minnesota State HFA,
SFM Revenue Bonds AA/Aa 3,094,860 --- --- 3,094,860
(Series E), 6.85%,
1/1/2024
- --- 240,000 --- 240,000 Minnesota State ---
Housing Finance Aa/AA+ --- 253,087 253,087
Agency, 7.300%, due
2017
- --- 175,000 --- 175,000 Minnesota State
Housing Finance NR/AA+ --- 175,844 --- 175,844
Agency, Rental
Housing, Series C
Refunded Bonds,
6.150%, due 2014
- --- 90,000 --- 90,000 Minnesota State
Housing Insurance Aa/AA+ --- 94,802 --- 94,802
Agency, 7.650%, due
2008
- --- 160,000 --- 160,000 Minnesota State
Housing Finance NR/AA+ --- 159,990 --- 159,990
Agency, 6.000%, due
2014
- --- 195,000 --- 195,000 Minnesota State
Housing Finance Aa/AA+ --- 204,994 --- 204,994
Agency, 7.100%, due
2011
- --- 335,000 --- 335,000 Minnesota State
Housing Finance Aa/AA+ --- 334,310 --- 334,310
Agency, Single Family
Mortgage, 5.850%, due
2011
- --- 300,000 --- 300,000 Minnesota State
Higher Education Aa/AA- --- 311,982 --- 311,982
Facilities, 6.300%,
due 2014
- --- 200,000 --- 200,000 Minnesota State
Higher Education A1/NR --- 198,710 --- 198,710
Facilities, 5.450%,
due 2007
- --- 315,000 --- 315,000 Minnesota State
Higher Education A1/NR --- 303,591 --- 303,591
Facilities, 5.600%,
due 2014
- --- 40,000 --- 40,000 Minnesota State
Housing Development Aa/AA+ --- 40,895 --- 40,895
Single Family
Mortgage, Series B,
7.250%, due 2016
- --- 100,000 --- 100,000 Minnetonka, MN,
Multi-Family Housing NR/AA --- 102,595 --- 102,595
Revenue Bonds (Cedar
Hills East Project),
7.500%, due 2017
- --- 300,000 --- 300,000 Moorhead, MN, Public
Utility Revenue Aaa/AAA --- 315,060 --- 315,060
Bonds, Series 1992,
6.050%, due 2006
- --- 285,000 --- 285,000 Northern Mu;nicipal
Power Agency, MN, Aaa/AAA --- 308,302 --- 308,302
Electric Revenue
Refunded Bonds,
Series A, 7.250%, due
2017
- --- 530,000 --- 530,000 Northern Municipal
Power Agency, MN, A/A --- 524,048 --- 524,048
Electric Revenue
Refunded Bonds,
6.000%, due 2020
- --- 300,000 --- 300,000 Owatonna, MN, Public
Utility Refunded A1/NR --- 326,346 --- 326,346
Bonds, Series 1990,
7.400%, due 2007
- --- 100,000 --- 100,000 Ramsey & Washington
Counties Resource A1/AA- --- 104,928 --- 104,928
Recovery Revenue
Bonds, NSP Project,
6.750%, due 2006
- --- 150,000 --- 150,000 Red Wing Independent
School District #256, A1/NR --- 155,328 --- 155,328
GO School Building,
Series 1998 A,
7.300%, due 2004
- --- 100,000 --- 100,000 Robbinsdale Hospital
Refunded Revenue Aaa/AAA --- 107,973 --- 107,973
NMMCP, 1989, 7.200%,
due 2005
- --- 300,000 --- 300,000 Robbinsdale Hospital
Refunded Revenue Aaa/AAA --- 289,641 --- 289,641
NMMCP, Series A,
5.450%, due 2013
- --- 370,000 --- 370,000 Robbinsdale Hospital Aaa/AAA --- 357,224 --- 357,224
Revenue, 5.450%, due
2013
- --- 500,000 --- 500,000 Rochester, MN, Health
Care Facility Revenue NR/AA+ --- 512,180 --- 512,180
Bonds, Mayo Medical
Center, 6.250%, due
2021
- --- 500,000 --- 500,000 Rosemount, MN,
Independent School Aa1/AA --- 502,880 --- 502,880
District, 5.875%, due
2014
- --- 300,000 --- 300,000 Roseville, MN,
Independent School Aaa/AAA --- 286,944 --- 286,944
District, 5.250%, due
2013
- --- 300,000 --- 300,000 St. Anthony-New
Brighton Independent Aa1/NR --- 301,377 --- 301,377
School District #282,
GO Bonds, 5.700%, due
2012
- --- 250,000 --- 250,000 St. Cloud, MN, Hydro
Electric Generator NR/A- --- 256,580 --- 256,580
Facility Gross
Revenue Bonds,
7.375%, due 2018
- --- 480,000 --- 480,000 St. Louis Park, MN, Aaa/AAA --- 444,149 --- 444,149
Health Care Facility,
5.200%, due 2016
- --- 100,000 --- 100,000 St. Paul, MN, GO
Street Improvement, Aa/AA+ --- 100,009 --- 100,009
Special Assessment
Bonds, Series 1988 D,
7.200%, due 2008
- --- 300,000 --- 300,000 St. Paul, MN, Housing
& Redevelopment NR/A- --- 323,805 --- 323,805
Authority, Package R,
6.450%, due 2007
- --- 300,000 --- 300,000 St. Paul, MN, Housing
and Redevelpment Aaa/AAA --- 298,794 --- 298,794
Authority Revenue
Bonds, 5.400%, due
2008
- --- 300,0000 --- 300,0000 St. Paul, MN,
Independent School Aa/AA --- 297,531 --- 297,531
District #625, Series
C, 5.550%, due 2012
- --- 400,000 --- 400,000 St. Paul, MN,
Independent School Aa/AA --- 409,564 --- 409,564
District #625, Series
1994 C, 6.050%, due
2012
- --- 150,000 --- 150,000 St. Paul, MN,
Independent School Aa/AA --- 159,455 --- 159,455
District #625, School
Building Bonds,
Series 1990 D,
7.250%, due 2009
- --- 300,000 --- 300,000 St. Paul, MN,
Independent School Aa/AA --- 282,756 --- 282,756
District #625,
5.250%, due 2015
- --- 300,000 --- 300,000 St. Paul, MN,
Independent School Aa1/AA --- 289,140 --- 289,140
District, 5.200%, due
2011
9,000,000 --- --- 9,000,000 St. Paul, MN, Housing
& Redevelopment
Authority , Hospital
Revenue Refunding BBB-/Baa 8,952,300 --- --- 8,952,300
Bonds ( Series A),
6.625% (Healtheast,
MN)/(Original Issue
Yield: 6.687%),
11/1/2017
- --- 300,000 --- 300,000 Southern, MN,
Municipal Power Aaa/AAA --- 321,102 --- 321,102
Agency, Power Supply,
8.125%, due 2018
10,000,000 --- --- 10,000,000 Southern Minnesota
Municipal Power ---
Agency, Supply System AAA/Aaa 8,751,300 --- 8,751,300
Revenue Bonds (Series
A), 4.75% (MBIA
Insurance Corporation
INS)/(Original Issue
Yield: 5.52%),
1/1/2016
- --- 325,000 --- 325,000 Stearns County, MN,
GO Refunded Bonds, A/NR --- 337,028 --- 337,028
Series B, 6.000%, due
2007
- --- 300,000 --- 300,000 Stearns County, MN,
Independent #2753, Aa1/NR --- 279,954 --- 279,954
5.000%, due 2012
- --- 200,000 --- 200,000 Wayzata, MN, Tax Aa/NR --- 216,496 --- 216,496
Increment Bonds,
7.000%, due 2010
- --- 250,000 --- 250,000 Wayzata, MN,
Independent School Aa1/NR --- 254,750 --- 254,750
District #284, GO
Bonds, Series 1994 B,
5.800%, due 2009
- --- 300,000 --- 300,000 Western Minnesota
Municipal Power A1/A --- 308,934 --- 308,934
Agency, Power Supply
Revenue Refunded
Bonds, 6.875%, due
2007
- --- 250,000 --- 250,000 Western Minnesota --- ---
Municipal Power, A1/A 249,990 249,990
Series A, 6.125%, due
2016
- --- 200,000 --- 200,000 Western Minnesota --- ---
Municipal Power
Agency, Transmission Aaa/AAA 215,808 215,808
Project Revenue
Refunded Bonds,
Series 1991, 6.750%,
due 2016
- --- 250,000 --- 250,000 Whitewater Bear Lake Aa1/NR --- 254,928 --- 254,928
School, 6.000%, due
2012
- --- 100,000 --- 100,000 Worthington, MN, GO
Water Revenue Bonds, A/NR --- 106,597 --- 106,597
Series 1990 A,
7.000%, due 2010
- --- 350,000 --- 350,000 Wright County, MN, GO
Jail Refunded Bonds, A/NR --- 363,132 --- 363,132
Series 1992 B,
6.000%, due 2007
Total 23,130,557 18,201, 7,009,332 48,341,666
777
MONTANA--0.2%
1,130,000 --- --- 1,130,000 Montana State Board
of Housing, SFM NR/Aa 1,174,918 --- --- 1,174,918
Revenue Bonds (Series
B-2), 7.50% (FHA
GTD), 4/1/2023
NEVADA-0.8%
- --- --- 350,000 350,000 Clark County, NV,
Improvement
District, 5.850% due Aaa/AAA --- --- 347,277 347,277
2015
- --- --- 1,000,000 1,000,000 Clark County, NV,
School District,
General Obligation
Bonds, 5.300%,
due 2004 Aaa/AAA --- --- 1,012,490 1,012,490
- --- --- 1,000,000 1,000,000 Humbolt County,
NV,Pollution Control
Revenue Bonds, Idaho
Power Company,
8.300%, due 2014 NR/A+ --- --- 1,159,620 1,159,620
- --- --- 800,000 800,000 Lyon County, NV,
School District,
6.750%. due 2011 Aaa/AAA --- --- 891,328 891,328
- --- --- 585,000 585,000 Washoe County, NV,
General
Obligation Bonds, Aaa/AAA --- --- 606,446 606,446
6.000%, due 2009
Total --- --- 4,017,161 4,017,161
NEW HAMPSHIRE--4.8%
9,000,000 --- --- --- New Hampshire Higher
Educational & Health
Facilities Authority,
Hospital Revenue A-/NR 8,456,670 --- --- 8,456,670
Bonds, 6.00% (Nashua
Memorial Hospital,
NH)/(Original Issue
Yield: 6.40%),
10/1/2023
- --- --- 1,080,000 1,080,000 New Hampshire
Municipal Bond Bank,
Series 91 J. Non-
State Guaranteed,
6.900%, due 2012 NR/A+ --- --- 1,187,460 1,187,460
1,265,000 --- --- 1,265,000 New Hampshire State
HFA, SFM Revenue A+/Aa 1,328,958 --- --- 1,328,958
Bonds (Series B),
7.75%, 7/1/2023
6,520,000 --- --- 6,520,000 New Hampshire State
HFA, SFM Revenue A+/Aa 6,759,871 --- --- 6,759,871
Bonds (Series D),
7.25%, 7/1/2015
2,865,000 --- --- 2,865,000 New Hampshire State
IDA, PCR Bonds ( BBB-/Baa3 3,040,710 --- --- 3,040,710
Series A), 8.00%
(United Illuminating
Co.), 12/1/2014
1,500,000 --- --- 1,500,000 New Hampshire State
IDA, PCR Bonds BBB-/Baa3 1,617,465 --- --- 1,617,465
(Series B), 10.75%
(United Illuminating
Co.), 10/1/2012
- --- --- 900,000 900,000 State of New
Hampshire Turnpike
System
Revenue Bonds, 8.375% Aaa/A --- --- 961,497 961,497
due 2017
Total 21,203,674 --- 2,148,957 23,352,631
NEW YORK--2.6%
- --- --- 1,000,000 1,000,000 New York Metro
Transit Authority,
5.100%,
due 2004 Aaa/AAA --- --- 1,008,280 1,008,280
2,500,000 --- --- 2,500,000 New York State Energy
Research &
Development
Authority, Electric AA-/Aa2 2,688,875 --- --- 2,688,875
Facilities Revenue
Bonds (Series A),
7.50% (Consolidated
Edison Co.)/(Original
Issue Yield: 7.65%),
1/1/2026
5,000,000 --- --- 5,000,000 New York State
Environmental
Facilities Corp.,
Solid Waste Disposal BBB/Baa3 4,763,750 --- --- 4,763,750
Revenue Bonds, 6.10%
(Occidental Petroleum
Corp.)/(Original
Issue Yield: 6.214%),
11/1/2030
- --- --- 2,900,000 2,900,000 New York State
Environment Pollution
Control Revenue Aa/A --- --- 3,221,755 3,221,755
Bonds, 7.250%, due
2010
- --- --- 1,000,000 1,000,000 New York State Local
Government
Assistance Corp., A/A --- --- 994,240 994,240
6.000%, due 2016
Total 7,452,625 --- 5,224,275 12,676,900
NORTH CAROLINA--1.7%
1,500,000 --- --- 1,500,000 Haywood County, NC,
Industrial Facilties
& Pollution Control
Financing Authority, BBB/Baa1 1,372,530 --- --- 1,372,530
(Series A) Revenue
Bonds, 5.75%
(Champion
International
Corp.)/(Original
Issue Yield: 5.975%),
12/1/2025
6,000,000 --- --- 6,000,000 Martin County, NC,
IFA, (Series 1995) A/A2 5,886,000 --- --- 5,886,000
Solid Waste Disposal
Revenue Bonds, 6.00%
(Weyerhaeuser Co.),
11/1/2025
- --- --- 1,000,000 1,000,000 Wake County, NC, Ind.
Facilities Pollution
Control, Carolina
Power and Light,
6.900%, due 2009 A2/A1 --- --- 1,070,020 1,070,020
Total 7,258,530 --- 1,070,020 8,328,550
NORTH DAKOTA--0.9%
- --- --- 1,560,000 1,560,000 North Dakota Housing,
Single Family
Mortgage, 1992 Series
A, 6.750%,
due 2012 Aa/A+ --- --- 1,620,949 1,620,949
2,635,000 --- --- 2,635,000 North Dakota State
HFA, SFM Revenue A+/Aa 2,726,171 --- --- 2,726,171
Bonds (Series C),
7.30%, 7/1/2024
Total 2,726,171 --- 1,620,949 4,347,120
OHIO--0.4%
500,000 --- --- --- Ohio State Water
Development
Authority, PCR Bonds BBB-/Baa3 530,100 --- --- 530,100
(Series A), 8.10%
(Ohio Edison
Co.)/(Original Issue
Yield: 8.142%),
10/1/2023
1,250,000 --- --- 1,250,000 Ohio State Water
Development
Authority, PCR Bonds BB/Ba2 --- ---
(Series A-1), 9.75% 1,293,500 1,293,500
(Cleveland Electric
Illuminating Co.),
11/1/2022
Total 1,823,600 --- --- 1,823,600
OKLAHOMA--2.6%
4,585,000 --- --- 4,585,000 Jackson County, OK,
Hospital Authority,
Hospital Revenue BBB-/NR 4,415,768 --- --- 4,415,768
Refunding Bonds,
7.30% (Jackson County
Memorial Hospital,
OK)/(Original Issue
Yield: 7.40%),
8/1/2015
1,250,000 --- --- 1,250,000 Tulsa, OK, Municipal
Airport, Revenue BB+/Baa2 1,316,875 --- --- 1,316,875
Bonds, 7.375%
(American Airlines),
12/1/2020
6,200,000 --- --- 6,200,000 Tulsa, OK, Municipal
Airport, Revenue
Bonds, 7.60% BB+/Baa2 6,611,990 --- --- 6,611,990
(American
Airlines)/(Original
Issue Yield: 7.931%),
12/1/2030
Total 12,344,633 --- --- 12,344,633
OREGON-0.1%
- --- --- 500,000 500,000 Portland Oregon Sewer
System, 6.050%,
due 2009 A1/A+ --- --- 522,655 522,655
PENNSYLVANIA--11.3%
3,000,000 --- --- 3,000,000 Allegheny County, PA,
HDA, Health &
Education Revenue BBB/NR 3,061,110 --- --- 3,061,110
Bonds, 7.00%
(Rehabilitation
Institute of
Pittsburgh)/(Original
Issue Yield: 7.049%),
6/1/2010
2,500,000 --- --- 2,500,000 Allegheny County, PA,
HDA, Health &
Education Revenue BBB/NR 2,533,875 --- --- 2,533,875
Bonds, 7.00%
(Rehabilitation
Institute of
Pittsburgh)/(Original
Issue Yield: 7.132%),
6/1/2022
5,370,000 --- --- 5,370,000 Allegheny County, PA,
Higher Education, NR 5,516,655 --- --- 5,516,655
Building Authority
Revenue Bonds, 7.375%
(La Roche College),
7/15/2012
1,690,000 --- --- 1,690,000 Allegheny County, PA,
IDA, Revenue Bonds, NR 1,780,162 --- --- 1,780,162
8.75% (United Parcel
Service), 2/15/2009
665,000 --- --- 665,000 Allegheny County, PA,
Residential Finance
Agency, Mortgage NR/Aaa 697,332 --- --- 697,332
Revenue Bonds (Series
G), 9.50% (GNMA COL),
12/1/2018
3,000,000 --- --- 3,000,000 Delaware County
Authority, PA,
College Revenue NR 3,377,070 --- --- 3,377,070
Bonds, 7.25% (Eastern
College)/(United
States Treasury
PRF)/(Original Issue
Yield: 7.875%),
3/1/2012
2,055,000 --- --- 2,055,000 Erie County, PA,
Hospital Authority, NR 2,112,951 --- --- 2,112,951
Revenue Bonds, 7.50%
(Erie Infants & Youth
Home , Inc.),
10/1/2011
- --- --- 400,000 400,000 Erie County, PA,
Industrial
Development
Auth., Pollution
Control Revenue
Refunded Bonds,
Series 1991, 7.150%, A3/A- --- --- 423,124 423,124
due 2013
1,730,000 --- --- 1,730,000 Northeastern, PA,
Hospital & Education
Authority, College BBB/NR 1,598,364 --- --- 1,598,364
Revenue Refunding
Bonds (Series B),
6.00% (Kings College,
PA)/(Original Issue
Yield: 6.174%),
7/15/2018
10,000,000 --- --- 10,000,000 Pennsylvania EDFA,
Wastewater Treatment
Revenue Bonds (Series BBB-/Baa1 11,009,800 --- --- 11,009,800
A), 7.60% (Sun Co.,
Inc.)/(Original Issue
Yield: 7.653%),
12/1/2024
6,000,000 --- --- 6,000,000 Pennsylvania Housing
Finance Authority, AA/AA 6,242,460 --- --- 6,242,460
SFM Revenue Bonds
(Series 34-B), 7.00%
(FHA and FHA GTDs),
4/1/2024
2,660,000 --- --- 2,660,000 Pennsylvania Housing
Finance Authority, AA/Aa 2,797,495 --- --- 2,797,495
SFM Revenue Bonds
(Series28), 7.65%
(FHA GTD), 10/1/2023
1,740,000 --- --- 1,740,000 Pennsylvania State
Higher Education
Facilities Authority, NR 1,801,022 --- --- 1,801,022
College & University
Revenue Bonds, 6.75%
(Thiel College ),
9/1/2017
3,250,000 --- --- 3,250,000 Pennsylvania State
Higher Education
Facilities Authority,
College & University BBB+/NR 3,202,030 --- --- 3,202,030
Revenue Refunding
Bonds (Series A),
6.10% (Allegheny
College, Meadville,
PA)/(Original Issue
Yield: 6.23%),
11/1/2008
1,200,000 --- --- 1,200,000 Pennsylvania State
Higher Education
Facilities Authority, NR 1,205,952 --- --- 1,205,952
Revenue Bonds (Series
1996), 7.15% (Thiel
College ), 5/15/2015
3,875,000 --- --- 3,875,000 Pennsylvania State
Higher Education
Facilities Authority,
Revenue Bonds (Series AAA/NR 4,335,854 --- --- 4,335,854
A), 7.375% (Medical
College of
Pennsylvania)/(United
States Treasury
PRF)/(Original Issue
Yield: 7.45%),
3/1/2021
1,750,000 --- --- 1,750,000 Pennsylvania State
Higher Education
Facilities Authority,
Revenue Bonds (Series BBB/Baa1 1,940,803 --- --- 1,940,803
A), 8.375% (Medical
College of
Pennsylvania)/(United
States Treasury
PRF)/(Original Issue
Yield: 8.448%),
3/1/2011
Total 53,212,935 --- 423,124 54,636,059
RHODE ISLAND-0.4%
- --- --- 1,675,000 1,675,000 Rhode Island
Depositors, Economic
Protection Corp. Aaa/AAA --- --- 1,851,076 1,851,076
Bonds, 6.625%, due
2019
SOUTH CAROLINA--0.2%
810,000 --- --- 810,000 South Carolina State
Housing Finance &
Development AA/Aa 840,586 --- --- 840,586
Authority,
Homeownership
Mortgage Revenue
Bonds (Series A),
7.40% (FHA GTD),
7/1/2023
SOUTH DAKOTA-0.5%
- --- --- 1,400,000 1,400,000 South Dakota Housing
Development, Multi-
Famkily Housing
Revenue Bonds,
6.700%,
due 2020 A1/A+ --- --- 1,424,430 1,424,430
- --- --- 950,000 950,000 South Dakota State
Building Authority
Co-op, Series A, A1/A+ --- --- 977,332 977,332
7.500%, due 2016
Total --- --- 2,401,762 2,401,762
TENNESSEE--3.5%
2,475,000 --- --- 2,475,000 Memphis-Shelby
County, TN, Airport BBB/Baa2 2,572,020 --- --- 2,572,020
Refunding Revenue
Bonds, 6.75% (Federal
Express Corp.),
9/1/2012
3,100,000 --- --- 3,100,000 Springfield, TN,
Health & Educational
Facilities Board,
Hospital Revenue NR 3,266,036 --- --- 3,266,036
Bonds, 8.25% (Jesse
Holman Jones Hospital
Corp, TN)/(Original
Issue Yield: 8.50%),
4/1/2012
7,800,000 --- --- 7,800,000 Springfield, TN,
Health & Educational
Facilities Board,
Hospital Revenue NR 8,212,464 --- --- 8,212,464
Bonds, 8.50% (Jesse
Holman Jones Hospital
Corp, TN)/(Original
Issue Yield: 8.875%),
4/1/2024
2,825,000 --- --- 2,825,000 Tennessee Housing
Development Agency,
Homeownership NR/Aa 2,936,362 --- --- 2,936,362
Program, Issue V
Revenue Bonds, 7.65%,
7/1/2022
Total 16,986,882 --- --- 16,986,882
TEXAS--12.6%
2,500,000 --- --- 2,500,000 Brazos River
Authority, TX, PCR BBB/Baa2 2,743,225 --- --- 2,743,225
Revenue Bonds (Series
A), 7.875% (Texas
Utilities Electric
Co.), 3/1/2021
1,800,000 --- --- 1,800,000 Brazos River
Authority, TX, PCR BBB/Baa2 1,966,104 --- --- 1,966,104
Revenue Bonds (Series
A), 8.125% (Texas
Utilities Electric
Co.), 2/1/2020
- --- --- 1,000,000 1,000,000 Brownsville, TX,
Utility System
Revenue,
6.875%, due 2020 Aaa/AAA 1,098,600 1,098,600
7,320,000 --- --- 7,320,000 Dallas-Fort Worth,
TX, International
Airport Facilities, BB/Ba3 7,564,781 --- --- 7,564,781
Revenue Bonds, 7.125%
(Delta Air Lines,
Inc.)/(Original Issue
Yield: 7.55%),
11/1/2026
3,000,000 --- --- 3,000,000 Dallas-Fort Worth,
TX, International
Airport Facilities, BB+/Baa2 3,165,180 --- --- 3,165,180
Revenue Bonds, 7.25%
(American
Airlines)/(Original
Issue Yield: 7.428%),
11/1/2030
2,370,000 --- --- 2,370,000 Dallas-Fort Worth,
TX, International
Airport Facilities, BB+/Baa2 2,507,105 --- --- 2,507,105
Revenue Bonds, 7.50%
(American
Airlines)/(Original
Issue Yield: 8.20%),
11/1/2025
2,500,000 --- --- 2,500,000 Dallas-Fort Worth,
TX, International
Airport Facilities, BB/Ba3 2,673,000 --- --- 2,673,000
Revenue Bonds, 7.625%
(Delta Air Lines,
Inc.)/(Original Issue
Yield: 7.65%),
11/1/2021
1,000,000 --- --- 1,000,000 Guadalupe-Blanco
River Authority TX,
Industrial NR 1,051,630 --- --- 1,051,630
Development Corp PCR
Bonds, 8.60% (A.P.
Green Industries),
4/1/2009
2,500,000 --- --- 2,500,000 Guadalupe-Blanco
River Authority TX,
Industrial NR 2,683,200 --- --- 2,683,200
Development Corp.,
PCR Bonds, 8.60%
(A.P. Green
Industries), 4/1/2009
5,000,000 --- --- 5,000,000 Gulf Coast, TX, Waste
Disposal Authority,
Revenue Bonds (Series BBB/Baa1 5,132,350 --- --- 5,132,350
A), 6.875% (Champion
International
Corp.)/(Original
Issue Yield: 7.15%),
12/1/2028
20,000,000 --- --- 20,000,000 Houston, TX, Water &
Sewer System, Junior
Lien Refunding AAA/Aaa 18,365,800 --- --- 18,365,800
Revenue Bonds (Series
A), 5.25% (FGIC
INS)/(Original Issue
Yield: 5.60%),
12/1/2025
- --- --- 1,545,000 1,545,000 Houston, TX, Water &
Sewer Revenue
Refunded
Bonds, 6.400%, due A/A --- --- 1,625,618 1,625,618
2009
7,630,000 --- --- 7,630,000 Richardson, TX,
Hospital Authority,
Hospital Refunding & BBB-/Baa 7,613,824 --- --- 7,613,824
Improvement Bonds,
6.75% (Richardson
Medical Center,
TX)/(Original Issue
Yield: 6.82%),
12/1/2023
- --- --- 1,000,000 1,000,000 Texas Water
Development Board
Revenue, State
Revolving Fund Bonds, Aa1/AAA --- --- 1,071,120 1,071,120
6.400%, due 2007
1,700,000 --- --- 1,700,000 Tyler, TX, Health
Facilities
Development Corp., NR/Baa 1,696,124 --- --- 1,696,124
Revenue Bonds, 6.75%
(East Texas Medical
Center)/(Original
Issue Yield: 7.00%),
11/1/2025
Total 57,162,323 --- 3,795,338 60,957,661
UTAH--5.0%
- --- --- 1,000,000 1,000,000 Intermountain Power
Agency Utah Power Aa/AA- --- --- 985,100 985,100
Supply, 6.000%, due
2016
20,000,000 --- --- 20,000,000 Intermountain Power
Agency, UT, Refunding
Revenue Bonds (Series AA-/Aa 17,240,200 --- --- 17,240,200
A), 5.00% (Original
Issue Yield: 5.687%),
7/1/2023
980,000 --- --- 980,000 Utah State HFA, SFM
Revenue Bonds (Series AA/NR 1,013,722 --- --- 1,013,722
B-3), 7.10%, 7/1/2024
1,445,000 --- --- 1,445,000 Utah State HFA, SFM
Revenue Bonds (Series AA/NR 1,498,942 --- --- 1,498,942
E-2), 7.15% (FHA
GTD)/(Original Issue
Yield: 7.169%),
7/1/2024
1,860,000 --- --- 1,860,000 Utah State HFA,
Single Family AA/NR 1,950,619 --- --- 1,950,619
Mortgage Revenue
Bonds, 7.55% (FHA
GTD), 7/1/2023
455,000 --- --- 455,000 Utah State HFA,
Single Family AA/NR 477,532 --- --- 477,532
Mortgage Revenue
Bonds, 7.75% (FHA
GTD), 1/1/2023
- --- --- 1,000,000 1,000,000 Utah State Municipal
Finance Co-op,
Government Revenue
Bonds, 6.400%,
due 2009 A/A --- --- 1,018,130 1,018,130
Total 22,181,015 --- 2,003,230 24,184,245
VIRGINIA-0.1%
- --- --- 135,000 135,000 Virginia Housing
Authority,
Residential
Mortgage Revenue
Bonds, Series B,
7.550%,
due 2012 Aa/AAA --- --- 136,096 136,096
- --- --- 500,000 500,000 Virginia Housing
Development
Authority,
Series C 1992, Aa1/AA+ --- --- 522,140 522,140
6.500%, due 2007
Total --- --- 658,236 658,236
WASHINGTON--4.9%
4,250,000 --- --- 4,250,000 Pierce County, WA,
Economic Development
Corp., Solid Waste BBB/Baa2 3,803,070 --- --- 3,803,070
Revenue Bond, 5.80%
(Occidental Petroleum
Corp.)/(Original
Issue Yield: 5.90%),
9/1/2029
4,075,000 --- --- 4,075,000 Pilchuck Development
Public Corp., WA,
Special Facilities BBB+/Baa1 3,837,957 --- --- 3,837,957
Airport Revenue Bonds
( Series 1993) ,
Tramco, Inc. Project,
6.00% (Goodrich
(B.F.) Co.), 8/1/2023
4,300,000 --- --- 4,300,000 Port of Camas-
Washougal, WA, PCR
Refunding Bonds BBB+/NR 4,323,306 --- --- 4,323,306
(Series 1993), 6.70%
(James River Project,
WA)/(Original Issue
Yield: 6.75%),
4/1/2023
- --- --- 1,000,000 1,000,000 Skagit County, WA,
Cons. School
District, 6.700%, due Aaa/AAA --- --- 1,118,290 1,118,290
2007
- --- --- 1,500,000 1,500,000 Washington State
Municipal Finance Co-
op,
Government Revenue Aa/AA --- --- 1,465,380 1,465,380
Bonds, 5.600%,
due 2007
10,000,000 --- --- 10,000,000 Washington State, UT,
GO (Series A), 5.375% AAA/Aa 9,313,100 --- --- 9,313,100
(Original Issue
Yield: 6.00%),
7/1/2021
Total 21,277,433 --- 2,583,670 23,861,103
WEST VIRGINIA--0.5%
5,000,000 --- --- 5,000,000 Marion County, WV,
County Commission,
Solid Waste Facility NR 2,429,200 --- --- 2,429,200
Revenue Bonds (Series
1993), 7.75%
(American Power Paper
Recycling), 12/1/2011
WISCONSIN--0.4%
- --- --- 985,000 985,000 Wisconsin Housing and
Economic
Development
Authority, Series A,
7.100%, due 2023 Aa/AA --- --- 1,030,526 1,030,526
- --- --- 550,000 550,000 Wisconsin Housing and
Economic
Development
Authority, 6.000%,
due 2015 Aa/AA --- --- 542,647 542,647
565,000 --- --- 565,000 Wisconsin Housing &
Economic Development
Authority, A+/Aa 579,681 --- 579,681
Homeownership Revenue
Bonds (Series E),
8.00% (FHA
GTD)/(Original Issue
Yield: 8.044%),
3/1/2021
Total 579,681 --- 1,573,173 2,152,854
WYOMING-0.5%
- --- --- 2,150,000 2,150,000 Sweetwater County,
WY, PCR for Idaho
Power, 7.625%, due A3/A --- --- 2,222,218 2,222,218
2013
TOTAL MUNICIPAL $376,220,136 18,201,777 77,342,923 471,764,836
BONDS (IDENTIFIED
COST $471,438,409)
SHORT-TERM SECURITIES ( 0.6%)
- --- --- 1,150,000 1,150,000 American Express
Credit Corp., 5.280%,
due 09/03/1996 --- --- 1,150,000 1,150,000
- --- --- 950,000 950,000 Ford Motor Credit
Corp., 5.230%,
due 09/04/1996 --- --- 949,862 949,862
- --- 820,000 --- 820,000 Ford Motor Credit --- 820,000 --- 820,000
Corp., 5.160%, due
09/03/1996
TOTAL SHORT-TERM --- 820,000 2,099,862 2,919,862
SECURITIES, AT
AMORTIZED COST
TOTAL INVESTMENTS $376,220,136 $19,021 $79,442,785 $474,684,698
(IDENTIFIED COST ,777
$474,358,271)(A)
</TABLE>
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings.
(a) The cost of investments for federal tax purposes amounts to $474,358,271.
The net unrealized appreciation of investments on a federal tax basis amounts to
$326,427 which is comprised of $16,464,732 appreciation and $16,138,305
depreciation at August 31, 1996.
Note: The categories of investments are shown as a percentage of net assets ($
482,861,043) at August 31, 1996.
The following acronym(s) are used throughout this portfolio:
COL --Collateralized
EDFA --Economic Development Financing Authority
FGIC --Financial Guaranty Insurance Company
FHA --Federal Housing Administration
GNMA --Government National Mortgage Association
GO --General Obligation
GTD --Guaranteed
HDA --Hospital Development Authority
HFA --Housing Finance Authority
IDA --Industrial Development Authority
IDB --Industrial Development Bond
IFA --Industrial Finance Authority
INS --Insured
LT --Limited Tax
MBIA --Municipal Bond Investors Assurance
PCA --Pollution Control Authority
PCR --Pollution Control Revenue
PRF --Prerefunded
SFM --Single Family Mortgage
UT --Unlimited Tax
VRDNs --Variable Rate Demand Notes
(See Notes to Pro Forma Financial Statements)
<TABLE>
<CAPTION>
Federated Municipal Opportunities Fund, Inc. (formerly, Fortress Municipal Income Fund, Inc.)
State Bond Minnesota Tax-Free Income Fund
State Bond Tax Exempt Fund
Pro Forma Combining Statement of Assets and Liabilities
August 31, 1996 (unaudited)
Federated State Bond State
Municipal Minnesota Bond
Opportunities Tax-Free Tax Exempt Pro Forma Pro Forma
Fund, Inc. Income Fund Adjustment Combined
Fund
Assets:
<S> <C> <C> <C> <C> <C>
Investments in $376,220,136 $ 19,021,777 $ 79,442,785 $ --- $ 474,684,698
securities, at value
Cash 32,391 24,959 15,433 --- 72,783
Income receivable 6,897,754 261,034 1,299,429 --- 8,458,217
Receivable due from --- 6,206 1,827 8,033
affiliates
Receivable for shares 273,742 --- --- --- 273,742
sold
Total assets 383,424,023 19,313,976 80,759,474 --- 483,497,473
Liabilities:
Income distributions 942 87,407 69,481 --- 157,830
payable
Payable for shares 270,076 --- --- --- 270,076
redeemed
Accrued expenses 123,827 17,663 67,036 --- 208,526
Total liabilities 394,845 105,070 136,517 --- 636,432
Total Net Assets $383,029,178 $ 19,208,906 $ 80,622,957 $ --- $ 482,861,041
Net Assets Consists of:
Paid in capital $396,775,582 $ 18,694,128 $ 77,104,625 $ --- $ 492,574,335
Net unrealized (3,518,145) 468,398 3,360,390 --- 310,643
appreciation
(depreciation) of
investments
Accumulated net realized (11,001,821) 46,380 157,942 --- (10,797,499)
gain (loss) on
investments
Undistributed net 773,562 --- --- --- 773,562
investment income
Total Net Assets $383,029,178 $ 19,208,906 $ 80,622,957 $ --- $ 482,861,041
Class A Shares $296 $ 19,208,906 $ 80,622,957 $ --- $ 99,832,159
Class B Shares $296 $ --- $ --- $ --- $ 296
Class C Shares $296 $ --- $ --- $ --- $ 296
Class F Shares $383,028,290 $ --- $ --- $ --- $ 383,028,290
Shares Outstanding:
Class A Shares 28.662000 1,820,401 7,474,279 371,820.649 (a) 9,666,529.311
Class B Shares 28.662000 --- --- --- 28.662
Class C Shares 28.662000 --- --- --- 28.662
Class F Shares 37,075,241 --- --- --- 37,075,241
Total Shares Outstanding 37,075,326.986 1,820,401 7,474,279 371,820.649 46,741,827.635
Net Asset Value, Offering
Price, and Redemption
Proceeds Per Share:
Class A Shares:
Net Asset Value Per Share $10.33 $ 10.55 $ 10.79 $ --- $ 10.33
Offering Price Per Share $10.82* 11.05** $ 11.30** $ --- $ 10.82*
$
Redemption Proceeds Per $10.33 $ 10.55 $ 10.79 $ --- $ 10.33
Share
Class B Shares:
Net Asset Value Per Share $10.33 $ --- $ --- $ --- $ 10.33
Offering Price Per Share $10.33 $ --- $ --- $ --- $ 10.33
Redemption Proceeds Per $9.76 $ --- $ --- $ --- $ 9.76
Share ***
Class C Shares:
Net Asset Value Per Share $10.33 $ --- $ --- $ --- $ 10.33
Offering Price Per Share $10.33 $ --- $ --- $ --- $ 10.33
Redemption Proceeds Per $10.23 $ --- $ --- $ --- $ 10.23
Share ***
Class F Shares:
Net Asset Value Per Share $10.33 $ --- $ --- $ --- $ 10.33
Offering Price Per Share $10.43 $ --- $ --- $ --- $ 10.43
*
Redemption Proceeds Per $10.23 $ --- $ --- $ --- $ 10.23
Share ***
Investments, at $379,738,281 $ 18,548,504 $ 76,071,486 $ --- $ 474,358,271
identified cost
</TABLE>
(a) Adjustment to reflect share balance as a result of the
combination, based on the exchange ratios of 1.02172889271 for State Bond
Minnesota Tax-Free Income Fund and 1.04445450212 for State Bond Tax Exempt
Fund.
* See ``What Shares Cost'' in the prospectus.
** See ``How Are The Fund's Sales Charges Determined''
*** See ``Contingent Deferred Sales Charge'' in the prospectus.
(See Notes to Pro Forma Financial Statements)
Federated Municipal
Opportunities Fund, Inc. (formerly,
Fortress Municipal Income Fund, Inc.)
State Bond Minnesota Tax-Free Income
Fund
State Bond Tax Exempt Fund
Pro Forma Combining Statement of
Operations
Year Ended August 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Federated State State
Bond
Municipal Minnesota Bond
Opportunities Tax-Free Tax Exempt Pro Forma Pro Forma
Fund, Inc. Income Fund(a) Adjustment Combined
Fund(a)
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C>
Interest 28,818,178 $1,135,500 $ 5,041,950 $--- $ 34,995,628
EXPENSES:
Investment advisory fee 2,475,132 113,090 407,880 81,718 (a) 3,077,820
Administrative personnel 311,976 --- --- 75,829 (b) 387,805
and services fee
Transfer agent and 235,048 7,625 31,461 (3,616) (c) 270,518
dividend disbursing agent
fees and expenses
Accounting and custodian 175,732 18,684 30,415 (20,978) (d) 203,853
fees
Professional Fees 21,106 16,868 20,498 (37,366) (e) 21,106
Distribution services --- 47,121 204,057 (251,178) (f) ---
fee- Class A Shares
Shareholder services fee- 1,031,305 --- --- 251,178 (f) 1,282,483
Class F Shares
Printing and postage 75,552 8,069 18,150 (16,771) (g) 85,000
Other expenses 155,218 9,666 23,952 (24,815) (h) 164,021
Total expenses 4,481,069 221,123 736,413 54,001 5,492,606
Waivers-
Waiver of investment --- (32,639) --- 32,639 (i) ---
advisory fee
Waiver of shareholder (41,252) --- --- --- (41,252)
services fee- Class F
Shares
Total waivers (41,252) (32,639) --- 32,639 (41,252)
Net expenses 4,439,817 188,484 736,413 86,640 5,451,354
Net investment 24,378,361 947,016 4,305,537 (86,640) 29,544,274
income
REALIZED AND UNREALIZED
GAIN/(LOSS) ON
INVESTMENTS:
Net realized gain on (116,813) 53,432 40,206 --- (23,175)
investments
Net change in unrealized (13,721,871) (128,527) 64,146 --- (13,786,252)
appreciation
(depreciation) of
investments
Net realized and (13,838,684) (75,095) 104,352 --- (13,809,427)
unrealized gain (loss) on
investments
Change in net assets 10,539,677 $871,921 $ 4,409,889 $(86,640) $ 15,734,847
resulting from operations
</TABLE>
(a) Represents the period for the year ended June 30, 1996.
(See legend to the statement of operations)
(See notes to pro forma financial statements)
Federated Municipal Opportunities Fund, Inc. (formerly, Fortress
Municipal Income Fund, Inc.)
State Bond Minnesota Tax-Free Income Fund
State Bond Tax Exempt Fund
Notes to Pro Forma Financial Statements (unaudited)
1. Basis of Combination
The accompanying unaudited Pro Forma Combining Portfolio of Investments,
Statement of Assets and Liabilities reflect the accounts of Federated Municipal
Opportunities Fund, Inc. , State Bond Minnesota Tax-Free Income Fund, and State
Bond Tax Exempt Fund, collectively (`the Funds''), for the year ended August
31, 1996. These statements have been derived from the books and records utilized
in calculating daily net asset values at August 31, 1996. The accompanying
unaudited Pro Forma Combining Statement of Operations reflects the accounts of
the Funds, for the years ended August 31, 1996, June 30, 1996, and June 30,
1996, respectively, the most recent fiscal year ends of the Funds.
The Pro Forma Combining Portfolio of Investments, Statement of Assets
and Liabilities, and Statement of Operations (`Pro Forma Financial
Statements') should be read in conjunction with the historical financial
statements of the Funds which have been incorporated by reference in the
Statement of Additional Information. The Funds follow generally accepted
accounting principles applicable to management investment companies which are
disclosed in the historical financial statements of each fund.
The Pro Forma Financial Statements give effect to the proposed transfer
of the assets of State Bond Minnesota Tax-Free Income Fund, and State Bond Tax
Exempt Fund in exchange for Class A Shares of Federated Municipal Opportunities
Fund, Inc. Under generally accepted accounting principles, Federated Municipal
Opportunities Fund, Inc. will be the surviving entity for accounting purposes
with its historical cost of investment securities and results of operations
being carried forward.
The Pro Forma Financial Statements have been adjusted to reflect the
anticipated advisory and administration fee arrangements for the surviving
entity. Certain other operating costs have also been adjusted to reflect
anticipated expenses of the combined entity. Other costs which may change as a
result of the reorganization are currently undeterminable.
For the fiscal years ended August 31, 1996, June 30, 1996, and June 30,
1996, respectively, the Funds paid investment advisory fees computed at the
annual rate of each fund's average net assets as follows:
FUND PERCENT OF EACH FUND'S
AVERAGE NET ASSETS
Federated Municipal Opportunities Fund, Inc 0.60%
State Bond Minnesota Tax-Free Income Fund 0.60%
State Bond Tax Exempt Fund 0.50%
The advisor may voluntarily choose to waive a portion of their fees and
reimburse certain operating expenses of the Funds.
2. Shares of Beneficial Interest
The Pro Forma net asset value per share assumes the issuance of
9,666,500.649 shares of the Federated Municipal Opportunities Fund, Inc.'s
Class A Shares in exchange for 1,820,401 and 7,474,279 shares from State Bond
Minnesota Tax-Free Income Fund, and State Bond Tax Exempt Fund, respectively,
which would have been issued at August 31, 1996, in connection with the proposed
reorganization.
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
(FORMERLY, FORTRESS MUNICIPAL INCOME FUND, INC.)
d
STATE BOND MINNESOTA TAX-FREE INCOME FUND
STATE BOND TAX EXEMPT FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS NOTES
YEAR ENDED AUGUST 31, 1996 (UNAUDITED)
(a) Federated Advisers (the ``Adviser'') receives for its services an annual
investment advisory fee equal to 0.60% of the Federated Municipal Opportunities
Fund Inc.'s (the ``Fund'') average daily net assets. The adviser may
voluntarily choose to waive a portion of its fee. ARM Capital Advisors, Inc.
charged 0.60% and 0.50%, respectively, of State Bond Minnesota Tax-Free Income
Fund's and State Bond Tax-Exempt Fund's average daily net assets for its
advisory fee.
(b) Federated Administrative Services (``FAS'') provides the Fund with certain
administrative personnel and services. The FAS fee is based on the level of
average aggregate net assets of the fund for the period.
(c) Federated Services Company serves as transfer and dividend disbursing agent
for the Fund. The fee is based on the size, type, and number of accounts and
transactions made by shareholders.
(d) Fees reflect custodian costs for the Fund paid to State Street Bank and
Trust Company. The custodian fee is based on a percentage of assets, plus out-
of-pocket expenses. Federated Services Company maintains the Fund's accounting
records. The fee is based on the level of the Fund's average net assets for the
period, plus out-of-pocket expenses.
(e) Adjustment to reflect the audit fee and legal fee reductions due to the
combining of two portfolios into one.
(f) Under the terms of a Shareholder Services Agreement with Federated
Shareholder Services (``FSS'') the Fund will pay FSS up to 0.25% of average
daily net assets of the Fund for the period. The fee paid to FSS is used to
finance certain services for shareholders and to maintain shareholder accounts.
FSS may voluntarily choose to waive a portion of its fee. FSS can modify or
terminate this voluntary waiver at any time at its sole discretion. SBM
Financial Services, Inc. received 0.25% of the average daily net assets of
State Bond Minnesota Tax-Free Income Fund and State Bond Tax-Exempt Fund,
respectively, under the terms of a distribution plan pursuant to Rule 12b-1 of
the Investment Company Act of 1940, as amended, to finance activities intended
to result in the sale of State Bond Minnesota Tax-Free Income Fund's and State
Bond Tax-Exempt Fund's shares and to provide certain services for shareholders
and to maintain shareholder accounts. Class A Shares of Federated Municipal
Opportunities Fund Inc. does not have a distribution plan.
(g) Adjustment to reflect printing and postage expenses are adjusted to reflect
estimated savings to be realized by combining three portfolios into a single
portfolio.
(h) Adjustment reflects the elimination of the Directors/Trustees fees for
State Bond Minnesota Tax-Free Income Fund and State Bond Tax-Exempt Fund, the
state registration costs for the Fund only, and the decrease in insurance fees
due to the reduction in coverage requirement of one portfolio only.
(i) The expenses accrued on the Fund are sufficient to cover all expenses.
Therefore, no reimbursement is necessary.
EXHIBIT 11
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
October 3, 1996
The Directors of Federated Municipal
Opportunities Fund , Inc.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
Federated Municipal Opportunities Fund, Inc. (the `Fund''), a Maryland
Corporation, proposes to issue shares of capital stock (such shares of
capital stock being herein referred to as `Shares'') in connection with
the acquisition of the assets of State Bond Tax Exempt Fund, a portfolio of
State Bond Municipal Funds, Inc., a Maryland corporation, pursuant to the
Agreement and Plan of Reorganization dated as of September 23, 1996
(`Agreement''), filed as an exhibit to the registration statement of the
Fund filed on Form N-14 (Securities Act of 1933 No. to be assigned) under
the Securities Act of 1933 as amended (`N-14 Registration'').
As counsel I have participated in the organization of the Fund, its
registration under the Investment Company Act of 1940, the registration of
its securities on Form N-1A under the Securities Act of 1933 and its N-14
Registration. I have examined and am familiar with the written Articles of
Incorporation dated December 2, 1986 (`Articles of Incorporation''), the
Bylaws of the Fund, the Agreement and such other documents and records
deemed relevant. I have also reviewed questions of law and consulted with
The Directors of Federated Municipal
Opportunities Fund, Inc.
October 3, 1996
Page 2
counsel thereon as deemed necessary or appropriate for the purposes of this
opinion.
Based upon the foregoing, it is my opinion that:
1. The Fund is duly organized and validly existing pursuant to the
Articles of Incorporation.
2. The Shares which are currently being registered by the N-14
Registration may be legally and validly issued in accordance with the
provisions of the Agreement and the Articles of Incorporation upon receipt
of consideration sufficient to comply with the provisions of Article Fifth,
Section (a), of the Articles of Incorporation and subject to compliance
with the Investment Company Act of 1940, as amended, and applicable state
laws regulating the sale of securities. Such Shares, when so issued, will
be fully paid and non-assessable.
I consent to your filing this opinion as an exhibit to the N-14
Registration referred to above and to any application or registration
statement filed under the securities laws of any of the states of the
United States.
Very truly yours,
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
By:/s/ S. Elliott Cohan
S. Elliott Cohan
Title: Assistant Secretary
Exhibit 14.1
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Shareholders
of FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.:
We consent to the incorporation by reference in this Registration Statement
on Form N-14 of Federated Municipal Opportunities Fund, Inc.(formerly,
Fortress Municipal Income Fund, Inc.) of our report dated October 13, 1995,
appearing in the Annual Report of Fortress Municipal Income Fund, Inc. for
the year ended August 31, 1995, and incorporated by reference in the
Prospectus and Statement of Additional Information dated September 1, 1996,
and to the reference to us within this registration statement.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
October 3, 1996
Exhibit 14.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions `Financial
Highlights''and ``Independent Auditors'' and the use of our report dated
August 9, 1996 except for Note 5, as to which the date is August 26, 1996,
on the financial statements of State Bond Tax Exempt Fund (the Fund) in the
Registration Statement (Form N-1A) of the Fund which is incorporated by
reference in, and reference to our firm in Exhibit A of, the Registration
Statement (Form N-14) of Federated Municipal Opportunities Fund, Inc. filed
with the Securities and Exchange Commission.
/s/ERNST & YOUNG LLP
ERNST & YOUNG LLP
Kansas City, Missouri
October 4, 1996
EXHIBIT 16
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of FEDERATED MUNICIPAL
OPPORTUNITIES FUND, INC. and the Deputy General Counsel of Federated
Investors, and each of them, their true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for them and in
their names, place and stead, in any and all capacities, to sign any and
all documents to be filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, the Securities Exchange Act of 1934
and the Investment Company Act of 1940, by means of the Securities and
Exchange Commission's electronic disclosure system known as EDGAR; and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
sign and perform each and every act and thing requisite and necessary to be
done in connection therewith, as fully to all intents and purposes as each
of them might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
SIGNATURES TITLE DATE
/s/John F. Donahue Chairman and Director September 30, 1996
John F. Donahue (Chief Executive Officer)
/s/Richard B. Fisher President September 30, 1996
Richard B. Fisher and Director
/s/John W. McGonigle Treasurer and September 30, 1996
John W. McGonigle Executive Vice
President
(Principal Financial and
Accounting Officer)
/s/Thomas G. Bigley Director September 30, 1996
Thomas G. Bigley
/s/John T. Conroy, Jr. Director September 30, 1996
John T. Conroy, Jr.
/s/William J. Copeland Director September 30, 1996
William J. Copeland
/s/James E. Dowd Director September 30, 1996
James E. Dowd
SIGNATURES TITLE DATE
/s/Lawrence D. Ellis, M.D. Director September 30, 1996
Lawrence D. Ellis, M.D.
/s/Edward L. Flaherty, Jr. Director September 30, 1996
Edward L. Flaherty, Jr.
/s/Peter E. Madden Director September 30, 1996
Peter E. Madden
/s/Gregor F. Meyer Director September 30, 1996
Gregor F. Meyer
/s/John E. Murray, Jr. Director September 30, 1996
John E. Murray, Jr.
/s/Wesley W. Posvar Director September 30, 1996
Wesley W. Posvar
/s/Marjorie P. Smuts Director September 30, 1996
Marjorie P. Smuts
Sworn to and subscribed before me this 30th day of September, 1996
/s/Jody L.Petras
Notarial Seal
Jody L. Petras, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Sept. 27, 1999
Member Pennsylvania Association of Notaries
EXHIBIT 17.1
Rule 24f-2 Notice
FORTRESS MUNICIPAL INCOME FUND, INC.
(Fund Name)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
1933 Act No. 33-11410
(i) fiscal period for which notice is filed August 31, 1995
(ii) The number or amount of securities of the
same class or series, if any, which had been
registered under the Securities Act
of 1933, other than pursuant to Rule 24f-2
but which remained unsold at September 1,
1994, the beginning of the Registrant's
fiscal period -0-
(iii) The number or amount of securities, if
any, registered during the fiscal period
of this notice other than pursuant to
Rule 24f-2 -0- -0-
(iv) The number or amount of securities
sold during the fiscal period of this
notice 3,617,186
(v) The number or amount or securities sold
during the fiscal period of this notice
in reliance upon registration pursuant
to Rule 24f-2 (see attached Computation
of Fee) 3,617,186
WITNESS the due execution hereof this 16th day of October, 1995.
By: /s/Charles H. Field
Charles H. Field
Assistant Secretary
COMPUTATION OF FEE
1. Actual aggregate sale price of Registrant's
securities sold pursuant to Rule 24f-2 during
the fiscal period for which the 24f-2 notice
is filed (see Section v) $37,440,198
2. Reduced by the difference between:
(a) actual aggregate redemption price
of such securities redeemed by the
issuer during the fiscal period for
which the 24f-2 notice is filed $99,595,322
(b) actual aggregate redemption price
of such redeemed securities
previously applied by the issuer
pursuant to Section 24(e)(2)(a) for
the fiscal period for which the
24f-2 notice is filed -0- $99,595,322
Total amount upon which the fee calculation specified
in Section 6(b) of the Securities Act of 1933 is based $(62,155,124)
FEE SUBMITTED (1/20 of 1% of Total amount) $ -0-
CONVERSION OF NET REDEMPTIONS OF
RULE 24f-2 NOTICE TO FILING
UNDER RULE 24e-2
When a negative amount appears on the line captioned `Total amount upon
which the fee calculated specified in Section 6(b) of the Securities Act of
1933 is based', the following calculation should be made to determined the
share information needed to file under Rule 24e-2:
Total redemptions (per annual report) 9,728,597
Less: Line (v) - Rule 24f-2 Notice 3,617,186
Shares available to register under
Rule 24f-2 6,111,411(a)
Fund's Current Net Asset Value $ 10.83(b)
Multiply: Shares available to register
under Rule 24e-2 by the fund's current
net asset value (a x b) to obtain Proposed
Maximum Aggregate Offering Price $66,186,581
FEDERATED ADMINISTRATIVE
SERVICES
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
412-288-1900
October 16, 1995
Fortress Municipal Income Fund, Inc.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
You have requested my opinion for use in conjunction with a Rule 24f-2
Notice for Fortress Municipal Income Fund, Inc. (`Corporation'') to be filed in
respect of shares of the Corporation (`Shares'') sold for the fiscal year ended
August 30, 1995, pursuant to the Corporation's registration statement filed
with the Securities and Exchange Commission (the `SEC'') under the Securities
Act of 1933 (File No. 33-11410) (`Registration Statement'').
In its Registration Statement, the Corporation elected to register an
indefinite number of shares pursuant to the provisions of Investment
Company Act Rule 24f-2.
As counsel, I have participated in the preparation and filing of the
Corporation's amended Registration Statement under the Securities Act of 1933.
Further, I have examined and am familiar with the provisions of the
Articles of Incorporation dated December 2, 1986, the Bylaws of the Trust
and such other documents and records deemed relevant. I have also reviewed
questions of law and consulted with counsel thereon as deemed necessary or
appropriate by me for the purposes of this opinion.
On the basis of the foregoing, it is my opinion the Shares sold for
the fiscal year ended August 30, 1995, registration of which the Rule 24f-2
Notice makes definite in number, were legally issued, fully paid and non-
assessable by the Corporation.
I hereby consent to the filing of this opinion as an exhibit to the
Rule 24f-2 Notice referred to above, the Registration Statement of the
Corporation and to any application or registration statement filed under the
securities laws of any of the States of the United States.
The foregoing opinion is limited to the Federal laws of the United
States and the laws of the State of Maryland, and I am
expressing no opinion as to the effect of the laws of any other
jurisdiction.
Very truly yours,
Charles H. Field
Fund Attorney
FORTRESS MUNICIPAL INCOME FUND, INC.
Federated Investors
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
October 16, 1995
EDGAR Operations Branch
Securities and Exchange Commission
Division of Investment Management
450 Fifth Street, Northwest
Washington, DC 20549
RE: Rule 15f-2 Notice for FORTRESS MUNICIPAL INCOME FUND, INC.
1933 Act File No. 33-11410
1940 Act File No. 811-4553
Dear Sir or Madam:
Pursuant to the provisions of Rule 24f-2 of the Investment Company Act
of 1940, I enclose the Rule 24f-2 for FORTRESS MUNICIPAL INCOME FUND, INC.
Since the aggregate redemption price of redeemed securities exceeded
the aggregate sales price of securities sold during the period for which
the Rule 24f-2 Notice is filed, an additional filing fee pursuant to
Rule 24f-2 (c) has not been filed.
As required by Rule 24f-2(b)(1)(v), a conformed opinion of counsel
has been electronically filed herewith which indicates whether the
securities, the registration of which this Notice makes definite in number,
were legally issued, fully paid and non-assessable.
Very truly yours,
/s/ Charles H. Field
Charles H. Field
Assistant Secretary
Enclosures
cc: Charles H. Morin, Esquire
Matthew G. Maloney, Esquire
Linda L. Banas
EXHIBIT 17.2
STATE BOND TAX EXEMPT FUND,
a Portfolio of
STATE BOND MUNICIPAL FUNDS, INC.,
SPECIAL MEETING OF SHAREHOLDERS
December , 1996
==
STATE BOND TAX EXEMPT FUND,
a Portfolio of
STATE BOND MUNICIPAL FUNDS, INC.
CUSIP NO. 856573100
The undersigned shareholder(s) of State Bond Tax Exempt Fund, a portfolio
of State Bond Municipal Funds, Inc. (the `State Bond Fund''), hereby
appoint(s) Kevin L. Howard, Keith O. Martens and Dale C. Bauman, or any of
them true and lawful proxies, with power of substitution of each, to vote
all shares of the State Bond Fund which the undersigned is entitled to
vote, at the Special Meeting of Shareholders to be held on December ,
--
1996, at 100 North Minnesota Street, New Ulm, Minnesota 56073-0069, at 3:40
p.m. (local time) and at any adjournment thereof.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The proxies
named will vote the shares represented by this proxy in accordance with the
choice made on this ballot. IF NO CHOICE IS INDICATED, THIS PROXY WILL BE
VOTED AFFIRMATIVELY ON THAT MATTER.
PROPOSAL
TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
THE STATE BOND FUND AND FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND
RETAIN THE TOP PORTION.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS X
KEEP THIS PORTION FOR YOUR RECORDS.
DETACH AND RETURN THIS PORTION ONLY.
STATE BOND TAX EXEMPT FUND,
a portfolio of State Bond
Municipal Funds, Inc.
RECORD DATE SHARES:
-----------------
VOTE ON THE PROPOSAL
FOR AGAINST ABSTAIN
Please sign EXACTLY as your name(s)
appear(s) above. When signing as
attorney, executor, administrator,
guardian, trustee, custodian, etc.,
please give your full title as
such. If a corporation or
partnership, please sign the full
name by an authorized officer or
partner. If stock is owned
jointly, all owners should sign.
- -----------------------------------
Signature(s) of Shareholder(s)
Date: ___________________________
EXHIBIT 1.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC., a Maryland corporation
having post office addresses in the City of Pittsburgh, Pennsylvania and
the city of Baltimore, Maryland (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of
Maryland that:
WHEREAS, the Corporation desires to restate its charter as currently
in effect. The Charter as restated is as follows:
FIRST: The name of the corporation is Federated Municipal Opportunities
Fund, Inc. ("Corporation").
SECOND: The purpose for which the Corporation is formed is to act as an
open-end investment company registered as such with the
Securities and Exchange Commission pursuant to the Investment
Company Act of 1940 as amended (the "1940 Act") and to exercise
and generally to enjoy all of the powers, rights and privileges
granted to, or conferred upon, corporations by the Maryland
General Corporation Law now or hereafter in force.
THIRD: The post office address of the principal office of the
Corporation in the State of Maryland is: c/o The Corporation
Trust Incorporated, 32 South Street, Baltimore, Maryland 21202.
The resident agent of the Corporation in the State of Maryland is
The Corporation Trust Incorporated, which is a corporation
organized and existing under the laws of the State of Maryland,
the address of which is 32 South Street, Baltimore, Maryland
21202.
FOURTH: (a) The Corporation is authorized to issue shares of common
stock, par value $0.001 per share. The aggregate par value
of all shares which the Corporation is authorized to issue
is $2,000,000. Subject to the following paragraph, the
authorized shares are classified as $500,000,000 shares of
the Class A Shares, $500,000,000 shares of the Class B
Shares, $500,000,000 shares of the Class C Shares, and
$500,000,000 shares of the Class F Shares.
(b) The Board of Directors is authorized to classify or to
reclassify (i.e., into series and classes within series),
from time to time, any unissued shares of stock of the
Corporation, whether now or hereafter authorized, by
setting, changing or eliminating the preferences, conversion
or other rights, voting powers, restrictions, limitations as
to dividends, qualifications or terms and conditions of or
rights to require redemption of the stock.
Unless otherwise provided by the Board of Directors prior to
the issuance of the stock, the shares of any and all classes
of stock shall be subject to the following:
(i) The Board of Directors may redesignate a class of stock
whether or not shares of such class are issued and
outstanding, provided that such redesignation does not
affect the preferences, conversion or other rights,
voting powers, restrictions, limitations as to
dividends, qualifications or terms or conditions of
redemption of such class of stock.
(ii) The assets attributable to each class may be invested
in a common investment portfolio. The assets and
liabilities of each series and the income and expenses
of each class of the Corporation's stock shall be
determined separately and, accordingly, the net asset
value of shares of the Corporation's stock may vary
from class to class. The income or gain and the
expense or liabilities of the Corporation shall be
allocated to each class of stock as determined by or
under the direction of the Board of Directors.
(iii) Shares of each class of stock shall be entitled to
such dividends or distributions, in stock or in cash or
both, as may be declared from time to time by the Board
of Directors with respect to such class. Dividends or
distributions shall be paid on shares of a class of
stock only out of the assets belonging to that series,
reflecting expenses attributable to such class.
(iv) In the event of the liquidation or dissolution of the
Corporation, the stockholders of each class of the
Corporation's stock shall be entitled to receive, as a
class, out of the assets of the Corporation available
for distribution to stockholders, the assets
attributable to that class less the liabilities or
expenses allocated to that class. The assets so
distributable to the stockholders of a class shall be
distributed among such stockholders in proportion to
the number of shares of that class held by them
multiplied by the net asset value of a share of such
class on the date of determination and recorded on the
books of the Corporation. In the event that there are
any assets available for distribution that are not
attributable to any particular class of stock, such
assets shall be allocated to all classes in proportion
to the net asset value of the respective classes.
(v) All holders of shares of stock shall vote as a single
class except as may be otherwise required by law
pursuant to the 1940 Act or any applicable order, rule
or interpretation issued by the Securities and Exchange
Commission, or otherwise, and except with respect to
any matter which affects only one or more series or
classes of stock, in which case only the holders of
shares of the series or classes affected shall be
entitled to vote.
(c) The Corporation may issue fractional shares. Any fractional
share shall carry proportionately all the rights of a whole
share, excepting any right to receive a certificate
evidencing such fractional share, but including, without
limitation, the right to vote and the right to receive
dividends.
FIFTH: (a) The number of Directors of the Corporation shall be
thirteen.
The number may be changed by the Bylaws of the Corporation
or by the Board of Directors pursuant to the Bylaws.
(b) The name of the Directors who shall act until their
successors are elected and qualify, are:
John F. Donahue Richard B. Fisher
Thomas G. Bigley Edward L. Flaherty, Jr.
John T. Conroy, Jr. Peter E. Madden
William J. Copeland Gregor F. Meyer
James E. Dowd John E. Murray, Jr.
Lawrence D. Ellis, M.D. Wesley W. Posvar
Majorie P. Smuts
SIXTH: (a) To the extent the Corporation has funds or property legally
available therefor, each shareholder shall have the right at
such times as may be permitted by the Corporation, but no
less frequently than as required under the 1940 Act, to
require the Corporation to redeem all or any part of its
shares at a redemption price equal to the net asset value
per share next determined after the shares are tendered for
redemption, less any applicable redemption fee or deferred
and/or contingent deferred sales charge as determined by the
Board of Directors. The Board of Directors may adopt
requirements and procedures for redemption of shares.
Notwithstanding the foregoing, the Corporation may postpone
payment or deposit of the redemption price and may suspend
the right of the shareholders to require the Corporation to
redeem shares of any series or class pursuant to the
applicable rules and regulations, or any order, of the
Securities and Exchange Commission.
(b) The Corporation shall have the right, exercisable at the
discretion of the Board of Directors, to redeem any
shareholder's shares of any series or class for their then
current net asset value per share if at such time the
shareholder owns shares having an aggregate net asset value
of less than $500 or such lesser or greater amount for such
series or class set forth in the current registration
statement of the Corporation filed with the Securities and
Exchange Commission, or regardless of the amount, if a
shareholder fails to supply a valid taxpayer identification
number.
(c) Each share is subject to redemption by the Corporation at
the redemption price computed in the manner set forth in
subparagraph (a) of Article SIXTH of these Amended and
Restated Articles of Incorporation at any time if the Board
of Directors, in its sole discretion, determines that
failure to so redeem may result in a material adverse impact
on the Corporation or its shareholders.
SEVENTH: The following provisions are hereby adopted for the purpose of
defining, limiting, and regulating the powers of the Corporation
and of the Directors and shareholders:
(a) No shareholder shall have any pre-emptive or preferential
right of subscription to any shares of any series or class
whether now or hereafter authorized.
(b) Without the vote of the shares of any class of stock of the
Corporation then outstanding (unless stockholder approval is
otherwise required by applicable law) the Corporation may, if
approved by the Board of Directors:
(i) Sell and convey the assets belonging or attributed to a
class or series of stock to another corporation or
trust that is a management investment company (as
defined in the Investment Company Act of 1940, as
amended) and is organized under the laws of any state
of the United States for consideration which may
include the assumption of all outstanding obligations,
taxes and other liabilities, accrued or contingent,
belonging or attributed to such class and which may
include securities issued by such corporation or trust.
Following such sale and conveyance, and after making
provision for the payment of any liabilities belonging
to attributed to such class that are not assumed by the
purchaser of the assets belonging or attributed to such
class, the Corporation may, at its option, redeem all
outstanding shares of such class at the net asset value
thereof as determined by the Board of Directors in
accordance with the provisions of applicable law, less
such redemption fee or other charge, if any, as may be
fixed by resolution of the Board of Directors.
Notwithstanding any other provision of the Charter of
the Corporation to the contrary, the redemption price
may be paid in any combination of cash or other assets
belonging to attributed to the class, including but not
limited to, the distribution of the securities or other
consideration received by the Corporation for the
assets belonging or attributed to such class upon such
conditions as the Board of Directors deems, in its sole
discretion, to be appropriate consistent with
applicable law and the Charter of the Corporation.
(ii) Sell and convert the assets belonging or
attributed to a class or series of stock into money
and, after making provision for the payment of all
obligations, taxes and other liabilities, accrued or
contingent, belonging or attributed to such class, the
Corporation may, at its option (a) redeem all
outstanding shares of such class at the net asset value
thereof as determined by the Board of Directors in
accordance with the provisions of applicable law, less
such redemption fee or other charge, if any, as may be
fixed by resolution of the Board of Directors that the
Board of Directors deems, in its sole discretion, to be
appropriate consistent with applicable law and the
Charter of the Corporation, or (b) combine the assets
belonging or attributed to such class following such
sale and conversion with the assets belonging or
attributed or more other classes of stock; or
(iii) Combine the assets belonging or attributed to
a class or series of stock with the assets belonging or
attributed to any one or more classes or series of
stock of the Corporation if the Board of Directors
reasonably determines that such combination will not
have a material adverse effect on the stockholders of
any class or series of stock of the Corporation
participating in such combination. In connection with
any such combination of assets, the shares of any class
or series of stock of the Corporation then outstanding
may, if so determined by the Board of Directors, be
converted into shares of any other class or classes or
series of stock of the Corporation with respect to
which conversion is permitted by applicable law, or may
be redeemed, at the option of the Corporation, at the
net asset value thereof as determined by the Board of
Directors, less such redemption fee or charge, if any,
as may be fixed by resolution of the Board of
Directors, upon such conditions as the Board of
Directors deems, in its sole discretion, to be
appropriate consistent with applicable laws and the
Charter of the Corporation. Notwithstanding any other
provision of this Charter to the contrary, any
redemption price, or part thereof, may be paid in
shares of any other existing or future class or classes
of stock of the Corporation.
(iv) Any redemption made pursuant to this section shall
be made and be effective upon terms, at the time and in
accordance with procedures specified by the Board of
Directors. At such time as the redemption is
effective, all rights of the holders of such shares
shall cease and terminate, except the right to receive
the redemption payment, and the shares so redeemed
shall no longer be outstanding for any purpose.''
(c) In addition to its other powers explicitly or implicitly
granted under these Amended and Restated Articles of
Incorporation, by law or otherwise, the Board of Directors
of the Corporation (i) is expressly authorized to make,
alter, amend or repeal the Bylaws of the Corporation, (ii)
may from time to time determine whether, to what extent, at
what times and places, and under what conditions and
regulations the accounts and books of the Corporation, or
any of them, shall be open to the inspection of the
shareholders, and no shareholder shall have any right to
inspect any account, book or document of the Corporation
except as conferred by statute or as authorized by the Board
of Directors of the Corporation, (iii) is empowered to
authorize, without shareholder approval, the issuance and
sale from time to time of shares of stock of the Corporation
whether now or hereafter authorized on such terms and for
such consideration as the Board of Directors may determine,
and (iv) is authorized to adopt procedures for determination
of and, to the extent deemed desirable by the Board of
Directors, to maintain the constant the net asset value of
shares of the Corporation's stock.
(d) Notwithstanding any provision of the laws of the State of
Maryland requiring a greater proportion than a majority of
the votes of any or all series or classes of shares entitled
to be cast to take or authorize any action, the Corporation
shall, except to the extent otherwise required by the 1940
Act, take or authorize any such action that otherwise
requires a greater proportion of votes upon the concurrence
of a majority of the aggregate number of the votes entitled
to be cast thereon.
(e) The Corporation shall take or authorize any action permitted
by the laws of the State of Maryland to be taken upon the
concurrence of a majority of shareholders present and voting
thereon.
(f) The Corporation reserves the right from time to time to make
any amendment of its Charter now or hereafter authorized by
law, including any amendment which alters the contract
rights, as expressly set forth in its Charter, of any
outstanding shares or any series or class.
(g) The Board of Directors is expressly authorized to declare
and pay dividends and distributions in cash, securities or
other property from surplus or any funds legally available
therefor, at such intervals (which may be as frequently as
daily) or on such other periodic basis, as it shall
determine, for any series or class of stock of the
Corporation; to declare such dividends or distributions for
any series or class of stock of the Corporation by means of
a formula or other method of determination, at meetings held
less frequently than the frequency of the effectiveness of
such declarations; to establish payment dates for dividends
or any other distributions for any series or class of stock
of the Corporation on any basis, including dates occurring
less frequently than the effectiveness of declarations
thereof; and to provide for the payment of declared
dividends on a date earlier or later than the specified
payment date in the case of shareholders of such series or
class of stock redeeming their entire ownership of shares.
(h) Any determination made in good faith by or pursuant to the
direction of the Board of Directors as to the amount of the
assets, debts, obligations or liabilities of the
Corporation, as to the amount of any reserves or charges set
up and the propriety thereof, as to the time of or purpose
for creating such reserves or charges, as to the use,
alteration or cancellation of any reserves or charges
(whether or not any debt, obligation or liability for which
such reserves or charges shall have been created shall have
been paid or discharged or shall be then or thereafter
required to be paid or discharged), as to the value of or
the method of valuing any investment or other asset owned or
held by the Corporation, as to the number of shares of any
class of stock outstanding, as to the income of the
Corporation or as to any other matter relating to the
determination of net asset value, the declaration of
dividends or the issue, sale, redemption or other
acquisition of shares of the Corporation, shall be final and
conclusive and shall be binding upon the Corporation and all
holders of its shares, past, present and future, and shares
of the Corporation are issued and sold on the condition and
understanding that any and all such determinations shall be
binding as aforesaid.
EIGHTH: (a) To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General
Corporation Law, no director or officer of the Corporation
shall have any liability to the Corporation or its
shareholders for damages. This limitation on liability
applies to events occurring at the time a person serves as a
director or officer of the Corporation whether or not such
person is a director or officer at the time of any
proceeding in which liability is asserted.
(b) The Corporation shall indemnify and advance expenses to its
currently acting and its former directors to the fullest
extent that indemnification of directors is permitted by the
Maryland General Corporation Law. The Corporation shall
indemnify and advance expenses to its officers to the same
extent as its directors and may do so to such further extent
as is consistent with law. The Board of Directors may by
bylaw, resolution or agreement make further provision for
indemnification of directors, officers, employees and agents
to the fullest extent permitted by the Maryland General
Corporation Law.
(c) No provision of this Article shall be effective to protect
or purport to protect any director or officer of the
Corporation against any liability to the Corporation or its
security holders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in the conduct
of his office.
(d) References to the Maryland General Corporation Law in these
Amended and Restated Articles of Incorporation are to that
law as from time to time amended. No amendment to the
Charter of the Corporation shall affect any right of any
person under this Article based on any event, omission or
proceeding prior to the amendment.
The foregoing restatement to the charter of the Corporation was
approved by a majority of the entire Board of Directors as well as a
majority of stockholders of the Corporation; and the Corporation is
registered as an open-end company under the Investment Company Act of 1940,
as amended.
The provisions set forth in these Articles of Restatement are all the
provisions of the Charter currently in effect. The current address of the
principal office of the Corporation, the name and address of the
Corporation's resident agent and the number of Directors of the Corporation
and the names of those currently in office are stated above.
IN WITNESS WHEREOF, Federated Municipal Opportunities Fund, Inc.
has caused these presents to be signed in its name and on its behalf by its
Executive Vice President and witnessed by its Assistant Secretary on July
17, 1996.
The undersigned, John W. McGonigle, Executive Vice President and
Secretary of the Corporation, hereby acknowledges in the name and on behalf
of the Corporation the foregoing Articles of Amendment to be its corporate
act and further certifies to the best of his knowledge, information and
belief, that the matters and facts set forth herein with respect to the
authorization and approval hereof are true in all material respects and
that this statement is made under the penalties of perjury.
ATTEST: FEDERATED MUNICIPAL
OPPORTUNITIES FUND, INC.
/s/ S. Elliott Cohan /s/ John W. McGonigle
S. Elliott Cohan John W. McGonigle
Assistant Secretary Executive Vice President
EXHIBIT 2.1
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
AMENDED and RESTATED BYLAWS
ARTICLE I
MEETING OF SHAREHOLDERS
Section 1. ANNUAL MEETINGS. The Corporation is not required to hold
an annual meeting of shareholders in any year in which the election of
directors is not required to be acted upon under the Investment Company Act
of 1940, as amended.
Section 2. SPECIAL MEETINGS. Special Meetings of Shareholders of the
Company or of a particular Series or Class may be called by the Chairman,
the President or by the Board of Directors; and shall be called by the
Secretary whenever ordered by the Chairman, the Board of Directors, or as
requested in writing by Shareholders entitled to cast at least 10% of the
shares entitled to be cast at the meeting. Such Shareholder request shall
state the purpose of such meeting and the matters proposed to be acted on
thereat, and no other business shall be transacted at any such special
meeting. Unless requested by Shareholders entitled to cast a majority of
all the votes entitled to be cast at the meeting, a special meeting need
not be called to consider any matter which is substantially the same as a
matter voted on at any annual or special meeting of the Shareholders held
during the preceding 12 months.
Section 3. PLACE OF MEETINGS. All meetings of the Shareholders of
the Corporation or a particular Series or Class, shall be held at the
office of the Corporation in Pittsburgh, Pennsylvania, or at such other
place within or without the State of Maryland as may be fixed by the Board
of Directors.
Section 4. NOTICE. Not less than ten nor more than ninety days
before the date of every Special Meeting of Shareholders the Secretary or
an Assistant Secretary shall give to each Shareholder of record of the
Corporation or of the relevant Series or Class written notice of such
meeting. Such notice shall be deemed to have been given when mailed to the
Shareholder at his address appearing on the books of the Corporation, which
shall be maintained separately for the shares of each Series or Class.
Notice of a Special Meeting shall state the purpose or purposes for which
it is called and no other business shall be transacted at such Special
Meeting.
Section 5. QUORUM. The presence in person or by proxy of holders of
(a) one-half of the shares of stock of the Corporation on all matters
requiring a Majority Shareholder Vote, as defined in the Investment Company
Act of 1940, or (b) one-third of shares of stock of the Corporation on all
other matters permitted by law, in each case, entitled to vote without
regard to class shall constitute a quorum at any meeting of the
shareholders, except with respect to any matter which by law requires the
separate approval of one or more series or class of stock, in which case
the presence in person or by proxy of the holders of one-half or one-third,
as set forth above, of the shares of stock of each series or class entitled
to vote separately on the matter shall constitute a quorum.
In the absence of a quorum at any meeting, a majority of those
Shareholders present in person or by proxy may adjourn the meeting from
time to time to a date not later than 120 days after the original record
date without further notice until a quorum, as above defined, shall be
present.
Section 6. ADJOURNED MEETINGS. A meeting of Shareholders convened on
the date for which it was called (including one adjourned to achieve a
quorum as above provided in Section 5 of this Article) may be adjourned
from time to time without further notice other than by announcement to be
given at the meeting to a date not more than 120 days after the record
date, and any business may be transacted at the meeting as originally
called.
Section 7. VOTING. At all meetings of Shareholders each Shareholder
shall be entitled to one vote or fraction thereof for each Share or
fraction thereof standing in his name on the books of the Corporation on
the date for the determination of Shareholders entitled to vote at such
meeting.
Section 8. PROXIES. Any Shareholder entitled to vote at any meeting
of Shareholders may vote either in person or by proxy, but no proxy which
is dated more than eleven months before the meeting named therein shall be
accepted. Every proxy shall be in writing and signed by the Shareholder or
his duly authorized attorney in fact and dated, but need not be sealed,
witnessed or acknowledged.
Section 9. ACTION BY UNANIMOUS WRITTEN CONSENT OF SHAREHOLDERS. Any
action required or permitted to be taken at any meeting of Shareholders may
be taken without a meeting, if a consent in writing, setting forth such
action, is signed by all the Shareholders entitled to vote on the subject
matter thereof, and any other Shareholders, entitled to notice of a meeting
of stockholders (but not to vote thereat), have waived in writing any
rights which they may have to dissent from such action, and such consent
and waiver are filed with the records of the Corporation.
ARTICLE II
BOARD OF DIRECTORS
Section 1. POWERS. The business and affairs of the Corporation shall
be managed under the direction of its Board of Directors. All powers of
the Corporation may be exercised by or under the authority of the Board of
Directors except as conferred on or reserved to the Shareholders by law, by
the Charter or by these Bylaws.
Section 2. NUMBER, QUALIFICATIONS, MANNER OF ELECTION AND TERM OF
OFFICE. The number of Directors of the Corporation can be changed by a
majority of the entire Board of Directors from time to time to not less
than three or the number of Shareholders, whichever is less, nor more than
twenty. Directors need not be Shareholders. The term of office of a
Director shall not be affected by any decrease in the number of Directors
made by the Board pursuant to the foregoing authorization. Each Director
shall hold office until his resignation or removal and until the election
and qualification of his successor.
Section 3. PLACE OF MEETING. The Board of Directors may hold its
meetings at such place or places within or without the State of Maryland as
the Board or as the person or persons requesting said meeting to be called
may from time to time determine.
Section 4. ANNUAL MEETINGS. The Board of Directors shall meet
annually for the election of Officers and any other business.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such intervals and on such dates as the Board
may from time to time designate, provided that any Director who is absent
when such designation is made shall be given notice of the designation.
Section 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held at such times and at such places as may be designated
at the call of such meeting. Special meetings shall be called by the
Secretary or any Assistant Secretary at the request of the Chairman, the
President, or any Director. If the Secretary or any Assistant Secretary
when so requested refuses or fails for more than twenty-four hours to call
such meeting, the Chairman, the President or such Director may in the name
of the Secretary call such meeting by giving due notice in the manner
required when notice is given by the Secretary.
Section 7. NOTICE. The Secretary or any Assistant Secretary shall
give, at least two days before the meeting, notice of each meeting of the
Board of Directors, whether Annual, Regular or Special, to each member of
the Board by mail, telegram, telephone or electronic facsimile to his last
known address. It shall not be necessary to state the purpose or business
to be transacted in the notice of any meeting unless otherwise required by
law. Personal attendance at any meeting by a Director other than to
protest the validity of said meeting shall constitute a waiver of the
foregoing requirement of notice. In addition, notice of a meeting need not
be given if a written waiver of notice executed by such Director before or
after the Meeting is filed with the records of the meeting.
Section 8. CONDUCT OF MEETINGS AND BUSINESS. The Board of Directors
may adopt such rules and regulations for the conduct of their meetings and
the management of the affairs of the Corporation as they may deem proper
and not inconsistent with applicable law, the Charter of the Corporation or
these Bylaws.
Section 9. QUORUM. One-third of the entire Board of Directors but
not less than two directors shall constitute a quorum at any meeting of the
Board of Directors unless there is only one director, in which case that
one shall constitute a quorum. The action of a majority of Directors
present at any meeting at which a quorum is present shall be the action of
the Board of Directors unless the concurrence of a greater proportion is
required for such action by applicable law or regulation, the Charter of
the Corporation, or these Bylaws. In the absence of a quorum at any
meeting a majority of Directors present may adjourn the meeting from day to
day or for such longer periods as they may designate until a quorum shall
be present. Notice of any adjourned meeting need not be given other than by
announcement at the meeting.
Section 10. RESIGNATIONS. Any Director of the Corporation may resign
at any time by written notice to the Chairman of the Board of Directors or
to the Secretary of the Corporation. The resignation of any Director shall
take effect at the time specified therein or, if no time is specified, when
received by the Corporation. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 11. REMOVAL. At any meeting of Shareholders duly called for
the purpose, any Director may be removed from office by the vote of a
majority of all of the Shares entitled to vote.
Section 12. VACANCIES. Except as otherwise provided by law, any
vacancy occurring in the Board of Directors for any cause other than by
reason of an increase in the number of Directors may be filled by a
majority of the remaining members of the Board of Directors although such
majority is less than a quorum and any vacancy occurring by reason of an
increase in the number of Directors may be filled by action of a majority
of the entire Board of Directors then in office.
Section 13. COMPENSATION OF DIRECTORS. The Directors may receive
compensation for their services as Directors as determined by the Board of
Directors and expenses of attendance at each Meeting. Nothing herein
contained shall be construed to preclude any Director from serving the
Corporation in any other capacity, as an Officer, Agent or otherwise, and
receiving compensation therefor.
Section 14. ACTION BY UNANIMOUS WRITTEN CONSENT OF DIRECTORS. Any
action required or permitted to be taken at any Annual, Regular or Special
Meeting of the Board of Directors may be taken without a meeting if a
written consent to such action is signed by all members of the Board and
such written consent is filed with the minutes of proceedings of the Board.
Section 15. TELEPHONE CONFERENCE. Members of the Board of Directors
or any committee thereof may participate in a meeting of the Board or such
committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can
hear each other at the same time and participation by such means shall
constitute presence in person at the meeting.
ARTICLE III
EXECUTIVE AND OTHER COMMITTEES
Section 1. APPOINTMENT AND TERM OF OFFICE OF EXECUTIVE COMMITTEE.
The Board of Directors may appoint an Executive Committee, which shall
consist of two (2) or more Directors.
Section 2. VACANCIES IN EXECUTIVE COMMITTEE. Vacancies occurring in
the Executive Committee from any cause may be filled by the Board of
Directors.
Section 3. EXECUTIVE COMMITTEE TO REPORT TO BOARD. All action by the
Executive Committee shall be reported to the Board of Directors at its
Meeting next succeeding such action.
Section 4. PROCEDURE OF EXECUTIVE COMMITTEE. The Executive Committee
shall fix its own rules of procedure not inconsistent with these Bylaws or
with any directions of the Board of Directors. It shall meet at such times
and places and upon such notice as shall be provided by such rules or by
resolution of the Board of Directors. The presence of a majority shall
constitute a quorum for the transaction of business, and in every case the
affirmative vote of a majority of the members of the Committee present
shall be necessary for the taking of any action.
Section 5. POWERS OF EXECUTIVE COMMITTEE. During the intervals
between the Meetings of the Board of Directors the Executive Committee,
except as limited by law or by specific directions of the Board of
Directors, shall possess and may exercise all the powers of the Board of
Directors in the management and direction of the business and conduct of
the affairs of the Corporation. Notwithstanding the foregoing, the
Executive Committee shall not have the power to elect or remove Trustees,
increase or decrease the number of Trustees, elect or remove any officer,
declare dividends, issue shares or recommend to shareholders any action
requiring shareholder approval.
Section 6. OTHER COMMITTEES. From time to time the Board of
Directors may appoint any other Committee or Committees which shall have
such powers as shall be specified in the resolution of appointment and may
be delegated by law.
Section 7. COMPENSATION. The members of any duly appointed Committee
shall receive such compensation as from time to time may be fixed by the
Board of Directors and shall be entitled to reimbursement of expenses
incurred in connection with service on any such Committee.
Section 8. ACTION BY UNANIMOUS WRITTEN CONSENT OF EXECUTIVE COMMITTEE
OR OTHER COMMITTEES. Any action required or permitted to be taken at any
meeting of the Executive Committee or any other duly appointed Committee
may be taken without a meeting if written consent to such action is signed
by all Members of such Committee and such written consent is filed with the
minutes of the proceedings of such Committee.
Section 9. ADVISORY BOARD. The Directors may appoint an Advisory
Board to consist in the first instance of not less than three (3) members.
Members of such Advisory Board shall not be Directors or Officers and need
not be Shareholders. Members of the Advisory Board shall hold office for
such period as the Directors may by resolution provide. Any Member of such
Board may resign therefrom by written instrument signed by him which shall
take effect upon delivery to the Directors. The Advisory Board shall have
no legal powers and shall not perform functions of Directors in any manner,
said Board being intended to act merely in an advisory capacity. Such
Advisory Board shall meet at such times and upon such notice as the Board
of Directors may by resolution provide. The compensation of the Members of
the Advisory Board, if any, shall be determined by the Board of Directors.
ARTICLE IV
OFFICERS
Section 1. GENERAL PROVISIONS. The Officers of the Corporation shall
be a President, one or more Vice Presidents, a Treasurer and a Secretary.
The Board of Directors may elect or appoint a Chairman and other Officers
or agents, including one or more Assistant Vice Presidents, one or more
Assistant Secretaries and one or more Assistant Treasurers. The same
person may hold any two offices except those of President and Vice
President.
Section 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The Officers
shall be elected annually by the Board of Directors at its Annual Meeting.
Each Officer shall hold office for one year and until the election and
qualification of his successor. Any vacancy in any of the offices may be
filled for the unexpired portion of the term by the Board of Directors at
any Regular or Special Meeting of the Board. The Board of Directors may
elect or appoint additional Officers or agents at any Regular or Special
Meeting of the Board.
Section 3. REMOVAL. Any Officer elected by the Board of Directors
may be removed with or without cause at any time by the Board of Directors.
Any other employee of the Corporation may be removed or dismissed at any
time by the President.
Section 4. RESIGNATIONS. Any Officer may resign at any time by
giving written notice to the Board of Directors. Any such resignation
shall take effect at the time specified therein or, if no time is
specified, at the time of receipt. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any Office because of death,
resignation, removal, disqualification or any other cause shall be filled
for the unexpired portion of the term in the manner prescribed in these
Bylaws for regular election or appointment to such Office.
Section 6. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors, if there be a Chairman, shall preside at the meetings
of Shareholders and of the Board of Directors. He shall receive such
information and reports as he may request from the Officers of the
Corporation. He shall counsel and advise the President.
Section 7. PRESIDENT. The President of the Corporation shall be the
chief executive officer of the Corporation. Unless other provisions are
made therefor by the Board or Executive Committee, the President, without
limitation, shall employ and define the duties of all employees of the
Corporation, shall have the power to discharge any such employees, shall
exercise general supervision over the affairs of the Corporation and shall
have the power to sign, in the name of and on behalf of the Corporation,
powers of attorney, proxies, waivers of notice of meeting, consents and
other instruments relating to securities or other property owned by the
Corporation, and may, in the name of and on behalf of the Corporation, take
all such action as the President may deem advisable in entering into
agreements to purchase securities or other property in the ordinary course
of business, and to sign representation letters in the course of buying
securities or other property and shall perform such other duties as may be
assigned to him from time to time by the Board of Directors. In the
absence of the Chairman of the Board of Directors, the President or an
officer or Director appointed by the President, shall preside at all
meetings of Shareholders.
Section 8. VICE PRESIDENT. The Vice President (or if more than one,
the senior Vice President) in the absence of the President shall perform
all duties and may exercise any of the powers of the President subject to
the control of the Board. Each Vice President shall have the power,
without limitation, to sign, in the name of and on behalf of the
Corporation, powers of attorney, proxies, waivers of notice of meeting,
consents and other instruments relating to securities or other property
owned by the Corporation, and may, in the name of and on behalf of the
Corporation, take all such action as the Vice President may deem advisable
in entering into agreements to purchase securities or other property in the
ordinary course of business, and to sign representation letters in the
course of buying securities or other property shall perform such other
duties as may be assigned to him from time to time by the Board of
Directors, the Executive Committee, or the President.
Section 9. SECRETARY. The Secretary shall keep or cause to be kept
in books provided for the purpose the Minutes of the Meetings of the
Shareholders, and of the Board of Directors; shall see that all Notices are
duly given in accordance with the provisions of these Bylaws and as
required by Law; shall be custodian of the records of the Corporation;
shall keep directly or through a transfer agent a register of the post
office address of each Shareholder, and make all proper changes in such
register, retaining and filing his authority for such entries; shall see
that the books, reports, statements, certificates and all other documents
and records required by law are properly kept and filed; and in general
shall perform all duties incident to the Office of Secretary and such other
duties as may, from time to time, be assigned to him by the Board of
Directors, the Executive Committee, or the President.
Section 10. TREASURER. The Treasurer shall have supervision of the
custody of all funds and securities of the Corporation, subject to
applicable law and the determination from time to time of the Board of
Directors. He shall perform such other duties as may be from time to time
assigned to him by the Board of Directors, the Executive Committee, or the
President.
Section 11. ASSISTANT VICE PRESIDENT. The Assistant Vice President
or Vice Presidents of the Corporation shall have such authority and perform
such duties as may be assigned to them by the Board of Directors, the
Executive Committee, or the President of the Corporation.
Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
Assistant Secretary or Secretaries and the Assistant Treasurer or
Treasurers shall perform the duties of the Secretary and of the Treasurer
respectively, in the absence of those Officers and shall have such further
powers and perform such other duties as may be assigned to them
respectively by the Board of Directors or the Executive Committee or by the
President.
Section 13. SALARIES. The salaries of the Officers shall be fixed
from time to time by the Board of Directors. No Officer shall be prevented
from receiving such salary by reason of the fact that he is also a Director
of the Corporation.
ARTICLE V
SHARES AND THEIR TRANSFER
Section 1. CERTIFICATES. If issued, share certificates shall be
signed by the Chairman, the President, or any Vice President and
countersigned by the Treasurer or Secretary or any Assistant Treasurer or
Assistant Secretary. The signatures may be either manual or facsimile
signatures and the seal may be either facsimile or any other form of Seal.
Certificates for shares for which the Corporation has appointed a Transfer
Agent and Registrar shall not be valid unless countersigned by such
Transfer Agent and registered by such Registrar. In case any Officer who
has signed any certificate ceases to be an Officer of the Corporation
before the certificate is issued, the certificate may nevertheless be
issued by the Corporation with the same effect as if the Officer had not
ceased to be such Officer as of the date of its issuance. Share
certificates shall be in such form not inconsistent with law and these
Bylaws as may be determined by the Board of Directors.
Section 2. TRANSFER OF SHARES. Shares shall be transferable on the
books of the Corporation by the holder thereof in person or by duly
authorized attorney upon surrender of the certificate representing the
shares to be transferred properly endorsed.
Section 3. CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE. The
Board of Directors may fix in advance a date as the record date for the
purpose of determining Shareholders entitled to notice of or to vote at any
Meeting of Shareholders or Shareholders to receive payment of any dividend.
Such date shall in any case not be more than 90 days and in case of a
Meeting of Shareholders not less than l0 days prior to the date on which
the particular action requiring such determination of Shareholders is to be
taken. Only Shareholders of record on the record date shall be entitled to
notice of and to vote at such meeting or to receive such dividends or
rights, as the case may be.
Section 4. LOST, DESTROYED OR MUTILATED CERTIFICATES. In case any
Share certificate is lost, mutilated or destroyed the Board of Directors
may issue a new certificate in place thereof upon indemnity to the relevant
Series or Class against loss and upon such other terms and conditions as
the Board may deem advisable.
Section 5. TRANSFER AGENT AND REGISTRAR: REGULATIONS. The Board of
Directors shall have power and authority to make all such rules and
regulations as they may deem expedient concerning the issuance, transfer
and registration of Share certificates and may appoint a Transfer Agent
and/or Registrar of Share certificates of each Series or Class.
ARTICLE VI
AGREEMENTS, CHECKS, DRAFTS, ENDORSEMENTS, ETC.
Section 1. AGREEMENTS, ETC. The Board of Directors or the Executive
Committee may authorize any Officer or Officers, or Agent or Agents of the
Corporation to enter into any Agreement or execute and deliver any
instrument in the name of the Corporation and such authority may be general
or confined to specific instances; and, unless so authorized by the Board
of Directors or by the Executive Committee or by these Bylaws, no Officer,
Agent or Employee shall have any power or authority to bind the Corporation
by any Agreement or engagement or to pledge its credit or to render it
liable for any purpose or for any amount.
Section 2. CHECKS, DRAFTS, ETC. All checks, drafts, or orders for
the payment of money, notes and other evidences of indebtedness shall be
signed by such Officer or Officers, Employee or Employees, or Agent or
Agents as shall be from time to time designated by the Board of Directors
or the Executive Committee, or as may be specified in or pursuant to the
agreement between the Corporation on behalf of any Series or Class and the
Bank or Trust Company appointed as custodian.
Section 3. ENDORSEMENTS, ASSIGNMENTS AND TRANSFER OF SECURITIES. All
endorsements, assignments, stock powers or other instruments of transfer of
securities standing in the name of the Corporation or its nominee or
directions for the transfer of securities belonging to the Corporation
shall be made by such Officer or Officers, Employee or Employees, or Agent
or Agents as may be authorized by the Board of Directors or the Executive
Committee.
ARTICLE VII
BOOKS AND RECORDS
Section 1. LOCATION. The books and records of the Corporation,
including the Stock ledger or ledgers, may be kept in or outside the State
of Maryland at such office or agency of the Corporation as may be from time
to time determined by the Board of Directors.
ARTICLE VIII
FISCAL YEAR
Section 1. FISCAL YEAR. The Fiscal Year of the Corporation shall be
designated from time to time by the Board of Directors.
ARTICLE IX
INDEMNIFICATION
Section 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The
Corporation shall indemnify its directors to the fullest extent that
indemnification of directors is permitted by the Maryland General
Corporation Law. The Corporation shall indemnify its officers to the same
extent as its directors and to such further extent as is consistent with
law. The Corporation shall indemnify its directors and officers who while
serving as directors or officers also serve at the request of the
Corporation as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust, other
enterprise or employee benefit plan to the fullest extent consistent with
law. The indemnification and other rights provided by this Article shall
continue as to a person who has ceased to be a director of officer and
shall inure to the benefit of the heirs, executors and administrators of
such a person. This Article shall not protect any such person against any
liability to the Corporation or any Shareholder thereof to which such
person would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office ("disabling conduct").
Section 2. ADVANCES. Any current or former director or officer of
the Corporation seeking indemnification within the scope of this Article
shall be entitled to advances from the Corporation for payment of the
reasonable expenses incurred by him in connection with the matter as to
which he is seeking indemnification in the manner and to the fullest extent
permissible under the Maryland General Corporation Law. The person seeking
indemnification shall provide to the Corporation a written affirmation of
his good faith belief that the standard of conduct necessary for
indemnification by the Corporation has been met and a written undertaking
to repay any such advance if it should ultimately be determined that the
standard of conduct has not been met. In addition, at least one of the
following additional conditions shall be met: (a) the person seeking
indemnification shall provide security in form and amount acceptable to the
Corporation for his undertaking; (b) the Corporation is insured against
losses arising by reason of the advance, or (c) a majority of a quorum of
directors of the Corporation who are neither 'interested persons' as
defined in Section 2(a)(19) of the Investment Company Act of 1940, as
amended, nor parties to the proceeding ("disinterested non-party
directors"), or independent legal counsel, in a written opinion, shall have
determined, based on a review of facts readily available to the Corporation
at the time the advance is proposed to be made, that there is reason to
believe that the person seeking indemnification will ultimately be found to
be entitled to indemnification.
Section 3. PROCEDURE. At the request of any person claiming
indemnification under this Article, the Board of Directors shall determine,
or cause to be determined, in a manner consistent with the Maryland General
Corporation Law, whether the standards required by this Article have been
met. Indemnification shall be made only following: (a) a final decision
on the merits by a court or other body before whom the proceeding was
brought that the person to be indemnified was not liable by reason of
disabling conduct or (b) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the person to be
indemnified was not liable by reason of disabling conduct by (i) the vote
of a majority of a quorum of disinterested non-party directors or (ii) an
independent legal counsel in a written opinion.
Section 4. INDEMNIFICATION OF EMPLOYEES AND AGENTS. Employees and
agents who are not officers or directors of the Corporation may be
indemnified, and reasonable expenses may be advanced to such employees or
agents, as may be provided by action of the Board of Directors or by
contract, subject to any limitations imposed by applicable law.
Section 5. OTHER RIGHTS. The Board of Directors may make further
provisions consistent with law for indemnification and advancement of
expenses to directors, officers, employees and agents by resolution,
agreement or otherwise. The indemnification provided by this Article shall
not be deemed exclusive of any other right, with respect to indemnification
or otherwise, to which those seeking indemnification may be entitled under
any insurance or other agreement or resolution of Shareholders or
disinterested non-party directors or otherwise.
Section 6. AMENDMENTS. References in this Article are to the
Maryland General Corporation Law and to the Investment Company Act of 1940
as from time to time amended. No amendment of these Bylaws shall affect
any right of any person under this Article based on any event, omission or
proceeding prior to the amendment.
ARTICLE X
AMENDMENTS
Section 1. The Board of Directors shall have the power to alter,
amend or repeal any Bylaws of the Corporation and to make new Bylaws.
EXHIBIT 4
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated September 23, 1996 (the
"Agreement"), between FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC., a
Maryland corporation (hereinafter called the "Acquiring Fund"), and STATE
BOND MUNICIPAL FUNDS, INC., a Maryland corporation (hereinafter called the
"Corporation") on behalf of its portfolio STATE BOND TAX EXEMPT FUND
(hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C)
of the United States Internal Revenue Code of 1986, as amended (the
"Code"). The reorganization (the "Reorganization") will consist of the
transfer of all of the net assets of the Acquired Fund in exchange solely
for Class A Shares of the Acquiring Fund (the "Acquiring Fund Shares") and
the distribution, after the Closing Date (as hereinafter defined), of the
Acquiring Fund Shares to the shareholders of the Acquired Fund in
liquidation of the Acquired Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Corporation and the Acquiring Fund are registered
open-end management investment companies and the Acquired Fund owns
securities in which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are
authorized to issue shares of common stock or shares of beneficial
interest, as the case may be;
WHEREAS, the Board of Directors, including a majority of the
directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Acquiring Fund
has determined that the exchange of all of the assets of the Acquired Fund
for Acquiring Fund Shares is in the best interests of the Acquiring Fund
shareholders and that the interests of the existing shareholders of the
Acquiring Fund would not be diluted as a result of this transaction; and
WHEREAS, the Board of Directors, including a majority of the
directors who are not "interested persons" (as defined under the 1940 Act),
of the Corporation has determined that the exchange of all of the assets of
the Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquired Fund shareholders;
NOW THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties agree as
follows:
1.TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE
ACQUIRING FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the
Acquired Fund agrees to assign, transfer and convey to the Acquiring Fund
all of the net assets of the Acquired Fund, including all securities and
cash, other than cash in an amount necessary to pay any unpaid dividends
and distributions as provided in paragraph 1.5, beneficially owned by the
Acquired Fund, and the Acquiring Fund agrees in exchange therefor to
deliver to the Acquired Fund the number of Acquiring Fund Shares, including
fractional Acquiring Fund Shares, determined as set forth in paragraph 2.3.
Such transaction shall take place at the closing (the "Closing") on the
closing date (the "Closing Date") provided for in paragraph 3.1. In lieu
of delivering certificates for the Acquiring Fund Shares, the Acquiring
Fund shall credit the Acquiring Fund Shares to the Acquired Fund's account,
for the benefit of its shareholders, on the stock record books of the
Acquiring Fund and shall deliver a confirmation thereof to the Acquired
Fund.
1.2 The Acquired Fund will discharge or make provision for the
discharge of all of its liabilities and obligations prior to or on the
Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street
Bank and Trust Company (hereinafter called "State Street"), Boston,
Massachusetts, the Acquiring Fund's custodian (the "Custodian"), for the
account of the Acquiring Fund, together with proper instructions and all
necessary documents to transfer to the account of the Acquiring Fund, free
and clear of all liens, encumbrances, rights, restrictions and claims
created by the Acquired Fund. All cash delivered shall be in the form of
immediately available funds payable to the order of the Custodian for the
account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund thereunder. The
Acquired Fund will transfer to the Acquiring Fund any distributions, rights
or other assets received by the Acquired Fund after the Closing Date as
distributions on or with respect to the securities transferred. Such
assets shall be deemed included in assets transferred to the Acquiring Fund
on the Closing Date and shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable,
the Acquired Fund will liquidate and distribute pro rata to the Acquired
Fund's shareholders of record, determined as of the close of business on
the Closing Date (the "Acquired Fund Shareholders"), the Acquiring Fund
Shares received by the Acquired Fund pursuant to paragraph 1.1. In
addition, each Acquired Fund Shareholder shall have the right to receive
any unpaid dividends or other distributions which were declared before the
Valuation Date (as hereinafter defined) with respect to the shares of the
Acquired Fund that are held by the shareholder on the Valuation Date. Such
liquidation and distribution will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the Acquired Fund on
the books of the Acquiring Fund to open accounts on the share record books
of the Acquiring Fund in the names of the Acquired Fund Shareholders, and
representing the respective pro rata number of the Acquiring Fund Shares
due such shareholders, based on their ownership of shares of the Acquired
Fund on the Closing Date. All issued and outstanding Shares of the
Acquired Fund will simultaneously be canceled on the books of the Acquired
Fund. Share certificates representing interests in the Acquired Fund will
represent a number of Acquiring Fund Shares, after the Closing Date as
determined in accordance with Section 2.3. The Acquiring Fund shall not
issue certificates representing the Acquiring Fund Shares in connection
with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus
and statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund
shares on the books of the Acquired Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Corporation up to and including the
Closing Date and such later dates, with respect to dissolution and
deregistration of the Corporation, on which the Corporation is dissolved
and deregistered.
1.9 The Corporation shall be deregistered as an investment company
under the 1940 Act and dissolved as a Maryland corporation as promptly as
practicable following the Closing Date and the making of all distributions
pursuant to paragraph 1.5.
2.VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of
the close of the New York Stock Exchange (normally 4:00 p.m. Eastern time)
on the Closing Date (such time and date being herein called the "Valuation
Date"), using the valuation procedures set forth in the Acquiring Fund's
then-current prospectus or statement of additional information.
2.2 The net asset value of each Acquiring Fund Share shall be the net
asset value per share computed as of the close of the New York Stock
Exchange (normally 4:00 p.m. Eastern time) on the Valuation Date, using the
valuation procedures set forth in the Acquiring Fund's then-current
prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in
paragraph 2.1, by the net asset value of one Acquiring Fund Share
determined in accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3.CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be December , 1996 or such later date as
--
the parties may mutually agree. All acts taking place at the Closing Date
shall be deemed to take place simultaneously as of the close of business on
the Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place
as the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of
the value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 ARM Transfer Agency, Inc., as transfer agent for the Acquired
Fund, shall deliver at the Closing a certificate of an authorized officer
stating that its records contain the names and addresses of the Acquired
Fund Shareholders and the number and percentage ownership of outstanding
shares owned by each such shareholder immediately prior to the Closing.
The Acquiring Fund shall issue and deliver a confirmation evidencing the
Acquiring Fund Shares to be credited on the Closing Date to the Secretary
of the Acquired Fund, or provide evidence satisfactory to the Acquired Fund
that such Acquiring Fund Shares have been credited to the Acquired Fund's
account on the books of the Acquiring Fund. At the Closing, each party
shall deliver to the other such bills of sale, checks, assignments,
assumption agreements, share certificates, if any, receipts or other
documents as such other party or its counsel may reasonably request.
4.REPRESENTATIONS AND WARRANTIES.
4.1 The Corporation represents and warrants to the Acquiring Fund as
follows:
(a) The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Maryland and has power to own all of its properties and assets and to carry
out this Agreement.
(b) The Corporation is registered under the 1940 Act, as an
open-end, management investment company, and such registration has not been
revoked or rescinded and is in full force and effect.
(c) The Corporation is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of the
Corporation's Articles of Incorporation or Bylaws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquired Fund is a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Acquired Fund or any of
its properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquired Fund knows of no facts which might form the basis
for the institution of such proceedings, and is not a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the 1940 Act and the rules and regulations of the
Securities and Exchange Commission (the "Commission") thereunder and do not
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(g) The Statement of Assets and Liabilities of the Acquired
Fund at June 30, 1995 and 1996, have been audited by Ernst & Young LLP,
independent auditors, and have been prepared in accordance with generally
accepted accounting principles, consistently applied, and such statements
(copies of which have been furnished to the Acquiring Fund) fairly reflect
the financial condition of the Acquired Fund as of such dates, and there
are no known contingent liabilities of the Acquired Fund as of such dates
not disclosed therein.
(h) Since June 30, 1996, there has not been any material
adverse change in the Acquired Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course
of business, or any incurrence by the Acquired Fund of indebtedness
maturing more than one year from the date such indebtedness was incurred,
except as otherwise disclosed to and accepted by the Acquiring Fund.
(i) At the Closing Date, all Federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
date shall have been filed or an appropriate extension obtained, and all
Federal and other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof or contest in good faith, and
to the best of the Acquired Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such
returns.
(j) For each fiscal year of its operation, subject to
applicable statute of limitation periods, the Acquired Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. All of the issued and
outstanding shares of the Acquired Fund will, at the time of the Closing,
be held by the persons and in the amounts set forth in the records of the
transfer agent as provided in paragraph 3.3. The Acquired Fund does not
have outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquired Fund shares, nor is there outstanding any
security convertible into any of the Acquired Fund shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets
to be transferred by it hereunder.
(m) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Corporation and, subject to the
approval of the Acquired Fund Shareholders, this Agreement constitutes the
valid and legally binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions
with respect thereto, and to general principles of equity and the
discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund
(the "Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (only insofar as it relates to the
Acquired Fund) will, on the effective date of the Registration Statement
and on the Closing Date, not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
4.2 The Acquiring Fund represents and warrants to the Corporation as
follows:
(a) The Acquiring Fund is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Maryland and has the power to carry on its business as it is now being
conducted and to carry out this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as
an open-end, diversified, management investment company, and such
registration has not been revoked or rescinded and is in full force and
effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquiring Fund's Articles of Incorporation or Bylaws or of any
agreement, indenture, instrument, contract, lease or other undertaking to
which the Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Acquiring Fund or any of
its properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquiring Fund knows of no facts which might form the basis
for the institution of such proceedings, and is not a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the
Acquiring Fund at August 31, 1994 and 1995, have been audited by Deloitte &
Touche LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, and such statements (copies of
which have been furnished to the Acquired Fund) fairly reflect the
financial condition of the Acquiring Fund as of such dates, and there are
no known contingent liabilities of the Acquiring Fund as of such dates not
disclosed therein.
(g) The unaudited Statement of Assets and Liabilities of
the Acquiring Fund at February 29, 1996 has been prepared in accordance
with generally accepted accounting principles, consistently applied,
although subject to year-end adjustments, and on a basis consistent with
the Statement of Assets and Liabilities of the Acquiring Fund at August 31,
1995 which has been audited by Ernst & Young LLP, independent auditors, and
such statement (copies of which have been furnished to the Acquired Fund)
fairly reflects the financial condition of the Acquiring Fund as of such
date, and there are no known liabilities of the Acquiring Fund, contingent
or otherwise, as of such date not disclosed therein.
(h) Since February 29, 1996, there has not been any
material adverse change in the Acquiring Fund's financial condition,
assets, liabilities or business other than changes occurring in the
ordinary course of business, or any incurrence by the Acquiring Fund of
indebtedness maturing more than one year from the date such indebtedness
was incurred, except as disclosed to and accepted by the Acquired Fund.
(i) At the Closing Date, all Federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed or an
appropriate extension obtained, by such date shall have been filed, and all
Federal and other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof or contest in good faith, and
to the best of the Acquiring Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such
returns.
(j) For each fiscal year of its operation, subject to
applicable statute of limitation periods, the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company.
(k) All issued and outstanding Acquiring Fund Shares are,
and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquiring Fund Shares, nor is there outstanding any
security convertible into any Acquiring Fund Shares.
(l) The execution, delivery and performance of this
Agreement has been duly authorized by all necessary action on the part of
the Acquiring Fund, and this Agreement constitutes the valid and legally
binding obligation of the Acquiring Fund enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws relating to or
affecting creditors' rights generally and court decisions with respect
thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a
proceeding in equity or at law).
(m) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not misleading.
5.COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing
Date, it being understood that such ordinary course of business will
include customary dividends and distributions.
5.2 The Corporation will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated
herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and
do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by
this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund,
in such form as is reasonably satisfactory to the Acquiring Fund, a
statement of the earnings and profits of the Acquired Fund for Federal
income tax purposes which will be carried over to the Acquiring Fund as a
result of Section 381 of the Code and which will be certified by the
Corporation's President and its Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with
information reasonably necessary for the preparation of the
Prospectus/Proxy Statement, referred to in paragraph 4.1(m), all to be
included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
5.7 Prior to the Valuation Date, the Acquired Fund shall have
declared a dividend or dividends, with a record date and ex-dividend date
prior to the Valuation Date, which, together with all previous dividends,
shall have the effect of distributing to its shareholders all of its
investment company taxable income, if any, plus the excess of its interest
income, if any, excludable from gross income under Code section 103(a) over
its deductions disallowed under Code sections 265 and 171(a)(2) for the
taxable periods or years ended on or before June 30, 1996 and for the
period from said date to and including the Closing Date (computed without
regard to any deduction for dividends paid), and all of its net capital
gain, if any, realized in taxable periods or years ended on or before June
30, 1996 and in the period from said date to and including the Closing
Date.
6.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance
by the Acquired Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
6.1 All representations and warranties of the Corporation contained
in this Agreement shall be true and correct in all material respects as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the
Acquired Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of the
Closing Date, certified by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or
Vice President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of
the Corporation made in this Agreement are true and correct in all material
respects at and as of the Closing Date, except as they may be affected by
the transactions contemplated by this Agreement, and as to such other
matters as the Acquiring Fund shall reasonably request.
7.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by
the Acquiring Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
7.1 All representations and warranties of the Acquiring Fund
contained in this Agreement shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date with
the same force and effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or
Vice President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct in all material
respects at and as of the Closing Date, except as they may be affected by
the transactions contemplated by this Agreement, and as to such other
matters as the Acquired Fund shall reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness,
except as otherwise disclosed to and accepted by the Acquired Fund.
8.FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING
FUND AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund,
either party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding
shares of the Acquired Fund in accordance with the provisions of the
Corporation's Articles of Incorporation and the 1940 Act.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those
of the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit
consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring Fund or the Acquired
Fund, provided that either party hereto may for itself waive any of such
conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or
be pending, threatened or contemplated under the 1933 Act.
8.5 The Acquiring Fund and the Corporation shall have received an
opinion of Dickstein Shapiro Morin & Oshinsky LLP substantially to the
effect that for Federal income tax purposes:
(a) The transfer of all of the Acquired Fund assets in
exchange for the Acquiring Fund Shares and the distribution of the
Acquiring Fund Shares to the Acquired Fund Shareholders in liquidation of
the Acquired Fund will constitute a "reorganization" within the meaning of
Section 368(a)(1)(C) of the Code; (b) No gain or loss will be recognized by
the Acquiring Fund upon the receipt of the assets of the Acquired Fund
solely in exchange for the Acquiring Fund Shares; (c) No gain or loss will
be recognized by the Acquired Fund upon the transfer of the Acquired Fund
assets to the Acquiring Fund in exchange for the Acquiring Fund Shares or
upon the distribution (whether actual or constructive) of the Acquiring
Fund Shares to Acquired Fund Shareholders in exchange for their shares of
the Acquired Fund; (d) No gain or loss will be recognized by the Acquired
Fund Shareholders upon the exchange of their Acquired Fund shares for the
Acquiring Fund Shares; (e) The tax basis of the Acquired Fund assets
acquired by the Acquiring Fund will be the same as the tax basis of such
assets to the Acquired Fund immediately prior to the Reorganization;
(f) The tax basis of the Acquiring Fund Shares received by each of the
Acquired Fund Shareholders pursuant to the Reorganization will be the same
as the tax basis of the Acquired Fund shares held by such shareholder
immediately prior to the Reorganization; (g) The holding period of the
assets of the Acquired Fund in the hands of the Acquiring Fund will include
the period during which those assets were held by the Acquired Fund; and
(h) The holding period of the Acquiring Fund Shares to be received by each
Acquired Fund Shareholder will include the period during which the Acquired
Fund shares exchanged therefor were held by such shareholder (provided the
Acquired Fund shares were held as capital assets on the date of the
Reorganization).
9.TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Directors of the
Corporation or the Board of Directors of the Acquiring Fund at any time
prior to the Closing Date (and notwithstanding any vote of the Acquired
Fund Shareholders) if circumstances should develop that, in the opinion of
either of the parties' Board, make proceeding with the Agreement
inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on
the part of any party hereto or the directors or officers of the
Corporation or the Acquiring Fund or the shareholders of the Acquiring Fund
or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Directors of the Acquiring Fund or
the Board of Directors of the Corporation, if, in the judgment of either,
such waiver will not have a material adverse effect on the benefits
intended under this Agreement to the shareholders of the Acquiring Fund or
of the Acquired Fund, as the case may be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated
hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings
of every kind and nature between them relating to the subject matter
hereof. Neither party shall be bound by any condition, definition,
warranty or representation, other than as set forth or provided in this
Agreement or as may be set forth in a later writing signed by the party to
be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the State of New York, without giving effect to
principles of conflicts of laws.
11.4 This Agreement may be executed in any number of counterparts,
each of which, when executed and delivered, shall be deemed to be an
original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
11.6 An agreement has been entered into under which Federated Advisers
will assume substantially all of the expenses of the reorganization
including registration fees, transfer taxes (if any), the fees of banks and
transfer agents and the costs of preparing, printing, copying and mailing
proxy solicitation materials to the Acquired Fund's shareholders and the
costs of holding the Special Meeting of Shareholders. ARM Financial Group,
Inc. will assume the legal fees of the Acquired Fund. The accountants'
fees of the Acquired Fund will be borne equally by Federated Advisers and
ARM Financial Group, Inc.
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IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the
date first above written.
Acquired Fund:
STATE BOND MUNICIPAL FUNDS, INC.,
on behalf of its portfolio,
Attest: STATE BOND TAX EXEMPT FUND
/s/ Sheri Bean By: /s/ Kevin L. Howard
Name: Sheri Bean Name: Kevin L. Howard
Title: Assistant Secretary Title: Vice President and Secretary
Acquiring Fund:
Attest: FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
/s/ S. Elliot Cohan By: /s/ J. Christopher Donahue
Name: S. Elliot Cohan Name: J. Christopher Donahue
Title: Assistant Secretary Title: Executive Vice President
