485BPOS
1
1933 Act File No. 2-57181
1940 Act File No. 811-2677
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 45 X___
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 31 X
LIBERTY MUNICIPAL SECURITIES FUND, INC.
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
X on May 31, 1995 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i).
75 days after filing pursuant to paragraph (a)(ii)
on _________________ pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
X filed the Notice required by that Rule on May 15, 1995; or
intends to file the Notice required by that Rule on or about
____________; or
during the most recent fiscal year did not sell any securities
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and,
pursuant to Rule 24f-2(b)(2), need not file the Notice.
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of LIBERTY MUNICIPAL
SECURITIES FUND, INC. , which is comprised of three classes of shares,
Class A Shares (1); Class B Shares (2); and Class C Shares (3), is
comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page Cover Page (1-3).
Item 2. Synopsis Synopsis (1-3); Summary of Fund
Expenses (1-3).
Item 3. Condensed Financial
Information Financial Highlights (1-3).
Item 4. General Description of
Registrant Performance Information (1-3);
General Information (1-3); Liberty
Family of Funds (1-3); Investment
Information (1-3); Investment
Objectives (1-3); Investment
Policies (1-3); Portfolio Turnover
(1-3); Investment Risks (1-3);
Investment Limitations (1-3); Other
Classes of Shares (1-3).
Item 5. Management of the Fund Fund Information (1-3); Management
of the Fund (1-3); Distribution of
Shares (1-3); Distribution Plan
(2,3); Shareholder Services Plan (1-
3); Other Payments to Financial
Institutions (1-3); Administration
of the Fund (1-3); Brokerage
Transactions (1-3).
Item 6. Capital Stock and Other
Securities Dividends and Distributions (1-3);
Shareholder Information (1-3);
Voting Rights (1-3); Tax Information
(1-3); Pennsylvania Corporate and
Personal Property Taxes (1-3).
Item 7. Purchase of Securities Being
Offered Net Asset Value (1-3); How to
Purchase Shares (1-3); Investing in
Class A Shares (l); Investing in
Class B Shares (2); Investing in
Class C Shares (3); Reducing or
Eliminating the Sales Load (l);
Special Purchase Features (1-3);
Exchange Privilege (1-3);
Requirements for Exchange (1-3); Tax
Consequences (1-3); Making an
Exchange (1-3).
Item 8. Redemption or Repurchase How to Redeem Shares (1-3); Special
Redemption Features (1-3);
Contingent Deferred Sales Charge (1-
3); Elimination of Contingent
Deferred Sales Charge (1-3); Account
and Share Information (1-3).
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page Cover page (1-3).
Item 11. Table of Contents Table of Contents (1-3).
Item 12. General Information and
History General Information About the Fund
(1-3).
Item 13. Investment Objectives and
Policies Investment Objective and Policies (1-
3).
Item 14. Management of the Fund See Part A - Management of the Fund
(1-3).
Item 15. Control Persons and Principal
Holders of Securities Fund Ownership (1-3).
Item 16. Investment Advisory and Other
Services Investment Advisory Services (1-3);
Administrative Services (1-3).
Item 17. Brokerage Allocation Brokerage Transactions (1-3).
Item 18. Capital Stock and Other
Securities Not applicable.
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered Purchasing Shares (1-3);
Distribution Plan (Class B Shares
and Class C Shares Only) and
Shareholder Services Plan (1-3);
Determining Net Asset Value (1-3);
Redeeming Shares (1-3).
Item 20. Tax Status Tax Status (1-3).
Item 21. Underwriters See Part A - Distribution of (Class
A, B or C) Shares (1-3).
Item 22. Calculation of Performance
Data Total Return (1-3); Yield (1-3); Tax-
Equivalent Yield (1-3); Performance
Comparisons (1-3).
Item 23 Financial Statements Financial Statements (incorporated
by reference into Part B, to
Registrant's Annual Report dated
March 31, 1995; File Nos. 2-57181
and 811-2677) (1-3).
LIBERTY MUNICIPAL SECURITIES FUND, INC.
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
COMBINED PROSPECTUS
The shares of Liberty Municipal Securities Fund, Inc. (the "Fund") represent
interests in an open-end, diversified management investment company (a mutual
fund) with an investment objective of providing its shareholders a high level of
current income which is exempt from federal regular income tax by investing in a
professionally managed, diversified portfolio primarily limited to municipal
bonds.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information dated May
31, 1995, with the Securities and Exchange Commission. The information contained
in the Combined Statement of Additional Information is incorporated by reference
into this prospectus. You may request a copy of the Statement of Additional
Information free of charge by calling 1-800-235-4669. To obtain other
information or to make inquiries about the Fund, contact your financial
institution.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated May 31, 1995
------------------------------------- ---------------------------------------
TABLE OF CONTENTS
Summary of Fund Expenses.......................................................1
Financial Highlights...........................................................4
Synopsis.......................................................................7
Liberty Family of Funds........................................................8
Investment Information.........................................................9
Investment Objective.........................................................9
Investment Policies..........................................................9
Investment Risks............................................................12
Investment Limitations......................................................12
Net Asset Value...............................................................13
Investing in the Fund.........................................................13
How To Purchase Shares........................................................14
Investing In Class A Shares.................................................14
Investing In Class B Shares.................................................17
Investing In Class C Shares.................................................17
Special Purchase Features...................................................18
Exchange Privilege............................................................19
Requirements For Exchange...................................................19
Tax Consequences............................................................19
Making An Exchange..........................................................19
How To Redeem Shares..........................................................20
Special Redemption Features.................................................21
Contingent Deferred Sales Charge............................................22
Elimination of Contingent Deferred
Sales Charge.............................................................23
Account and Share Information.................................................24
Fund Information..............................................................25
Management of the Fund......................................................25
Distribution of Shares......................................................25
Administration of the Fund..................................................27
Shareholder Information.......................................................28
Voting Rights...............................................................28
Tax Information...............................................................28
Federal Income Tax..........................................................28
Pennsylvania Personal Property
Taxes....................................................................28
Performance Information.......................................................29
------------------------------------- --------------------------------------
SUMMARY OF FUND EXPENSES
LIBERTY MUNICIPAL SECURITIES FUND, INC.
CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)...................................... 4.50%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)........................... None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) (1)...................................................... 0.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)............................................... None
Exchange Fee..................................................................................................... None
ANNUAL CLASS A SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee................................................................................................... 0.62%
12b-1 Fee........................................................................................................ None
Total Other Expenses............................................................................................. 0.38%
Shareholder Services Fee (after waiver) (2)....................................................... 0.12%
Total Class A Shares Operating Expenses (3)............................................................. 1.00%
(1) Class A Shares purchased with the proceeds of a redemption of Shares of an
unaffiliated investment company purchased or sold with a sales load and not
distributed by Federated Securities Corp. may be charged a Contingent
Deferred Sales Charge of .50 of 1.00% for redemptions made within one full
year of purchase. See "Contingent Deferred Sales Charge."
(2) The maximum shareholder services fee is 0.25%.
(3) The total Class A Shares operating expenses in the table above are based on
expenses expected during the fiscal year ending March 31, 1996. The total
Class A Shares operating expenses were 0.92% for the fiscal year ended March
31, 1995.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF CLASS A SHARES WILL BEAR,
EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS
COSTS AND EXPENSES, SEE "INVESTING IN THE FUND", "CLASS A SHARES" AND "FUND
INFORMATION". Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.
EXAMPLE 1 year 3 years 5 years 10 years
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end
of each time period.......................................................... $60 $75 $98 $162
You would pay the following expenses on the same investment, assuming no
redemption................................................................... $55 $75 $98 $162
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 OF FUND EXPENSES
LIBERTY MUNICIPAL SECURITIES FUND, INC.
CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)...................................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)........................... None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) (1)...................................................... 5.50%
Redemption Fee (as a percentage of amount redeemed, if applicable)............................................... None
Exchange Fee..................................................................................................... None
ANNUAL CLASS B SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee................................................................................................... 0.62%
12b-1 Fee........................................................................................................ 0.75%
Total Other Expenses............................................................................................. 0.51%
Shareholder Services Fee.......................................................................... 0.25%
Total Class B Shares Operating Expenses (2)(3).......................................................... 1.88%
(1) The contingent deferred sales charge is 5.50% in the first year, declining
to 1.00% in the sixth year and 0.00% thereafter (see "Contingent Deferred
Sales Charge").
(2) Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase.
(3) The total Class B Shares operating expenses in the table above are based on
expenses expected during the fiscal year ending March 31, 1996. The total
Class B Shares operating expenses were 1.84% for the fiscal year ended March
31, 1995.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF CLASS B SHARES WILL BEAR,
EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS
COSTS AND EXPENSES, SEE "INVESTING IN THE FUND", "CLASS B SHARES" AND "FUND
INFORMATION". Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted under the rules of the National
Association of Securities Dealers, Inc.
EXAMPLE 1 year 3 years
You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period.......................................................... $76 $103
You would pay the following expenses on the same investment, assuming no redemption................ $19 $59
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 OF FUND EXPENSES
LIBERTY MUNICIPAL SECURITIES FUND, INC.
CLASS C SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)...................................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)........................... None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) (1)...................................................... 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)............................................... None
Exchange Fee..................................................................................................... None
ANNUAL CLASS C SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee................................................................................................... 0.62%
12b-1 Fee........................................................................................................ 0.75%
Total Other Expenses............................................................................................. 0.46%
Shareholder Services Fee (after waiver) (2)....................................................... 0.20%
Total Class C Shares Operating Expenses (3)............................................................. 1.83%
(1) The contingent deferred sales charge assessed is 1.00% of the lesser of the
original purchase price or the net asset value of Shares redeemed within one
year of their purchase date. For a more complete description, see
"Contingent Deferred Sales Charge".
(2) The maximum shareholder services fee is 0.25%.
(3) The total Class C Shares operating expenses in the table above are based on
expenses expected during the fiscal year ending March 31, 1996. The total
Class C Shares operating expenses were 1.81% for the fiscal year ended March
31, 1995.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF CLASS C SHARES WILL BEAR,
EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS
COSTS AND EXPENSES, SEE "INVESTING IN THE FUND", "CLASS C SHARES" AND "FUND
INFORMATION". Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted under the rules of the National
Association of Securities Dealers, Inc.
EXAMPLE 1 year 3 years 5 years 10 years
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end
of each time period.......................................................... $29 $58 $99 $215
You would pay the following expenses on the same investment, assuming no
redemption................................................................... $19 $58 $99 $215
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
------------------------------------- --------------------------------------
FINANCIAL HIGHLIGHTS--CLASS A SHARES
LIBERTY MUNICIPAL SECURITIES FUND, INC.
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated May 15, 1995 on the Fund's financial
statements for the year ended March 31, 1995, and on the following table for
each of the periods presented, is included in the Annual Report dated March 31,
1995, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto, whch may be
obtained from the Fund.
YEAR ENDED MARCH 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987
NET ASSET VALUE, BEGINNING
OF PERIOD $ 11.20 $ 11.62 $ 10.98 $ 10.61 $ 10.47 $ 10.26 $ 10.03 $ 10.80 $ 10.51
---------------------------
INCOME FROM INVESTMENT
OPERATIONS
---------------------------
Net investment income 0.67 0.66 0.66 0.67 0.71 0.72 0.72 0.73 0.75
---------------------------
Net realized and
unrealized gain (loss) on
investments (0.05) (0.40) 0.64 0.37 0.14 0.21 0.23 (0.77) 0.29
--------------------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations 0.62 0.26 1.30 1.04 0.85 0.93 0.95 (0.04) 1.04
---------------------------
LESS DISTRIBUTIONS
---------------------------
Distributions from net
investment income (0.67) (0.66) (0.66) (0.67) (0.71) (0.72) (0.72) (0.73) (0.75)
---------------------------
Distributions from net
realized gain on
investment transactions (0.23) (0.02) 0.00 0.00 0.00 0.00 0.00 0.00 0.00
--------------------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total distributions (0.90) (0.68) (0.66) (0.67) (0.71) (0.72) (0.72) (0.73) (0.75)
--------------------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $ 10.92 $ 11.20 $ 11.62 $ 10.98 $ 10.61 $ 10.47 $ 10.26 $ 10.03 $ 10.80
--------------------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN(A) 5.90% 2.10% 12.13% 10.05% 8.42% 9.20% 9.76% (0.17%) 10.28%
---------------------------
RATIOS TO AVERAGE NET
ASSETS
---------------------------
Expenses 0.92% 0.84% 0.80% 0.84% 0.89% 0.90% 0.95% 0.95% 0.95%
---------------------------
Net investment income 6.17% 5.59% 5.81% 6.17% 6.77% 6.80% 7.07% 7.28% 7.07%
---------------------------
Expense waiver/
reimbursement(b) -- -- -- -- -- -- -- -- --
---------------------------
SUPPLEMENTAL DATA
---------------------------
Net assets, end of period
(000 omitted) $708,679 $714,384 $706,126 $590,118 $511,611 $474,797 $440,445 $388,916 $424,655
---------------------------
Portfolio turnover 41% 27% 13% 8% 45% 25% 58% 55% 13%
---------------------------
1986
NET ASSET VALUE, BEGINNING
OF PERIOD $ 8.91
---------------------------
INCOME FROM INVESTMENT
OPERATIONS
---------------------------
Net investment income 0.80
---------------------------
Net realized and
unrealized gain (loss) on
investments 1.60
--------------------------- ---------
Total from investment
operations 2.40
---------------------------
LESS DISTRIBUTIONS
---------------------------
Distributions from net
investment income (0.80)
---------------------------
Distributions from net
realized gain on
investment transactions 0.00
--------------------------- ---------
Total distributions (0.80)
--------------------------- ---------
NET ASSET VALUE, END OF
PERIOD $ 10.51
--------------------------- ---------
TOTAL RETURN(A) 28.25%
---------------------------
RATIOS TO AVERAGE NET
ASSETS
---------------------------
Expenses 0.93%
---------------------------
Net investment income 8.39%
---------------------------
Expense waiver/
reimbursement(b) 0.23%
---------------------------
SUPPLEMENTAL DATA
---------------------------
Net assets, end of period
(000 omitted) $248,710
---------------------------
Portfolio turnover 2%
---------------------------
(a) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
Further information about the Fund's performance is contained in the Fund's
Annual Report for the fiscal year ended March 31, 1995, which can be obtained
free of charge.
------------------------------------- ---------------------------------------
FINANCIAL HIGHLIGHTS--CLASS B SHARES
LIBERTY MUNICIPAL SECURITIES FUND, INC.
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated May 15, 1995 on the Fund's financial
statements for the year ended March 31, 1995, and on the following table for the
period presented, is included in the Annual Report dated March 31, 1995, which
is incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, whch may be obtained from the
Fund.
PERIOD ENDED
MARCH 31,
1995(A)
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.06
----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
----------------------------------------------------------------------------------------------------
Net investment income 0.40
----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.03)
---------------------------------------------------------------------------------------------------- -------
Total from investment operations 0.37
----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
----------------------------------------------------------------------------------------------------
Distributions from net investment income (0.40)
----------------------------------------------------------------------------------------------------
Distributions from net realized gain on investment transactions (0.11)
---------------------------------------------------------------------------------------------------- -------
Total distributions (0.51)
---------------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 10.92
---------------------------------------------------------------------------------------------------- -------
TOTAL RETURN (B) 3.49%
----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
----------------------------------------------------------------------------------------------------
Expenses 1.84%(c)
----------------------------------------------------------------------------------------------------
Net investment income 5.94%(c)
----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $18,201
----------------------------------------------------------------------------------------------------
Portfolio turnover 41%
----------------------------------------------------------------------------------------------------
(a) Reflects operations for the period from July 26, 1994 (date of initial
public investment) to March 31, 1995.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
Further information about the Fund's performance is contained in the Fund's
Annual Report for the fiscal year ended March 31, 1995, which can be obtained
free of charge.
------------------------------------- ---------------------------------------
FINANCIAL HIGHLIGHTS--CLASS C SHARES
LIBERTY MUNICIPAL SECURITIES FUND, INC.
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated May 15, 1995 on the Fund's financial
statements for the year ended March 31, 1995, and on the following table for
each of the periods presented, is included in the Annual Report dated March 31,
1995, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto, whch may be
obtained from the Fund.
YEAR ENDED
MARCH 31,
1995 1994(A)
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.20 $ 11.70
-----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------------------------------------------------------------------
Net investment income 0.58 0.52
-----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.05) (0.48)
----------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 0.53 0.04
-----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
-----------------------------------------------------------------------------------------------
Distributions from net investment income (0.58) (0.52)
-----------------------------------------------------------------------------------------------
Distributions from net realized gain on investment transactions (0.23) (0.02)
----------------------------------------------------------------------------------------------- --------- -----------
Total distributions (0.81) (0.54)
----------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 10.92 $ 11.20
----------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN (B) 4.96% 0.17%
-----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
-----------------------------------------------------------------------------------------------
Expenses 1.81% 1.80%(c)
-----------------------------------------------------------------------------------------------
Net investment income 5.28% 4.70%(c)
-----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $22,389 $22,066
-----------------------------------------------------------------------------------------------
Portfolio turnover 41% 27%
-----------------------------------------------------------------------------------------------
(a) Reflects operations for the period from April 20, 1993 (date of initial
public investment) to March 31, 1994.]
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
Further information about the Fund's performance is contained in the Fund's
Annual Report for the fiscal year ended March 31, 1995, which can be obtained
free of charge.
--------------------------------------------------------------------------------
SYNOPSIS
The Fund was incorporated under the laws of the State of Maryland on September
10, 1976. The Fund's address is Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. The Articles of Incorporation permit the Fund to offer
separate series representing interests in separate portfolios of securities. As
of the date of this prospectus, the Board of Directors ("Directors") has
established three classes of Shares for the Fund, known as Class A Shares, Class
B Shares, and Class C Shares (individually and collectively as the context
requires, "Shares").
Shares of the Fund are designed for individuals and institutions seeking a high
level of current income which is exempt from federal regular income tax by
investing in a professionally managed, diversified portfolio primarily limited
to municipal bonds.
For information on how to purchase Shares of the Fund, please refer to "How To
Purchase Shares." The minimum initial investment for Class A Shares is $500. The
minimum initial investment for Class B Shares and Class C Shares is $1500.
Subsequent investments in any class must be in amounts of at least $100.
Class A Shares are sold at net asset value plus an applicable sales load and are
redeemed at net asset value. However, a contingent deferred sales charge is
imposed under certain circumstances. For a more complete description, see "How
To Redeem Shares."
Class B Shares are sold at net asset value and are redeemed at net asset value.
However, a contingent deferred sales charge is imposed on certain Shares which
are redeemed within six full years of purchase. See "How To Redeem Shares."
Class C Shares are sold at net asset value. A contingent deferred sales charge
of 1.00% will be charged on assets redeemed within the first 12 months following
purchase. See "How To Redeem Shares."
In addition, the Fund also pays a Shareholder Services Fee at an annual rate not
to exceed 0.25% of average daily net assets.
Additionally, information regarding the exchange privilege offered with respect
to the Fund and certain other funds for which affiliates of Federated Investors
serve as principal underwriter ("Federated Funds") can be found under "Exchange
Privilege."
Federated Advisers is the investment adviser (the "Adviser") to the Fund and
receives compensation for its services. The Adviser's address is Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779.
Investors should be aware of the following general observations. The Fund may
make certain investments and employ certain investment techniques that involve
risks, including entering into repurchase agreements and investing in
when-issued securities. These risks are described under "Investment Policies."
--------------------------------------------------------------------------------
LIBERTY FAMILY OF FUNDS
This Fund is a member of a family of mutual funds, collectively known as the
Liberty Family of Funds. The other funds in the Liberty Family of Funds are:
.American Leaders Fund, Inc., providing growth of capital and income through
high-quality stocks;
.Capital Growth Fund, providing appreciation of capital primarily through equity
securities;
.Fund for U.S. Government Securities, Inc., providing current income through
long-term U.S. government securities;
.International Equity Fund, providing long-term capital growth and income
through international securities;
.International Income Fund, providing a high level of current income consistent
with prudent investment risk through high-quality debt securities denominated
primarily in foreign currencies;
.Liberty Equity Income Fund, Inc., providing above-average income and capital
appreciation through income producing equity securities;
.Liberty High Income Bond Fund, Inc., providing high current income through
high-yielding, lower-rated corporate bonds;
.Liberty U.S. Government Money Market Trust, providing current income consistent
with stability of principal through high-quality U.S. government securities;
.Liberty Utility Fund, Inc., providing current income and long-term growth of
income, primarily through electric, gas, and communications utilities;
.Limited Term Fund, providing a high level of current income consistent with
minimum fluctuation in principal value through investment grade securities;
.Limited Term Municipal Fund, providing a high level of current income exempt
from federal regular income tax consistent with the preservation of principal,
primarily limited to municipal securities;
.Michigan Intermediate Municipal Trust, providing current income exempt from
federal regular income tax and the personal income taxes imposed by the state
of Michigan and Michigan municipalities, primarily through Michigan municipal
securities;
.Pennsylvania Municipal Income Fund, providing current income exempt from
federal regular income tax and the personal income taxes imposed by the
Commonwealth of Pennsylvania, primarily through Pennsylvania municipal
securities;
.Strategic Income Fund, providing a high level of current income, primarily
through domestic and foreign corporate debt obligations;
.Tax-Free Instruments Trust, providing current income consistent with stability
of principal and exempt from federal income tax, through high-quality,
short-term municipal securities; and
.World Utility Fund, providing total return primarily through securities issued
by domestic and foreign companies in the utilities industries.
Prospectuses for these funds are available by writing to Federated Securities
Corp.
Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus.
The Liberty Family of Funds provides flexibility and diversification for an
investor's long-term investment planning. It enables an investor to
meet the challenges of changing market conditions by offering convenient
exchange privileges which give access to various investment vehicles and by
providing the investment services of proven, professional investment advisers.
Shareholders of Class A Shares who have been designated as Liberty Life Members
are exempt from sales loads on future purchases in and exchanges between the
Class A Shares of any funds in the Liberty Family of Funds, as long as they
maintain a $500 balance in one of the Liberty Funds.
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INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide for its shareholders a high
level of current income which is exempt from federal regular income tax. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the investment policies described in this
prospectus. The investment objective and the policies and limitations described
below cannot be changed without approval of shareholders.
INVESTMENT POLICIES
ACCEPTABLE INVESTMENTS
The Fund invests its assets so that at least 80% of its annual interest income
is exempt from federal regular income tax. The Fund pursues its investment
objective by investing at least 65% of its portfolio in municipal bonds.
Municipal bonds are debt obligations issued by or on behalf of states,
territories, and possessions of the United States, including the District of
Columbia, and their political subdivisions, agencies, and instrumentalities, the
interest from which is exempt from federal regular income tax.
CHARACTERISTICS
The municipal bonds which the Fund buys have the same characteristics assigned
by Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Ratings
Group ("S & P") to bonds of investment grade quality or better. However, the
Fund is not restricted to buying rated securities. Medium investment grade
quality bonds are rated A and Baa by Moody's or A and BBB by S & P. In certain
cases the Fund's adviser may choose bonds which are unrated if it judges
the bonds to have the same characteristics as medium quality bonds (i.e., an
adequate but not outstanding capacity to service their debt). Bonds rated "BBB"
by S & P or "Baa" by Moody's have speculative characteristics. Changes in
economic conditions or other circumstances are more likely to weaken capacity to
make principal and interest payments than higher rated bonds. If a high-rated
bond loses its rating or has its rating reduced after the Fund has purchased it,
the Fund is not required to drop the bond from the portfolio, but will consider
doing so. There is no limit to portfolio maturity. A description of the ratings
categories is contained in the Appendix to the Statement of Additional
Information.
WHEN-ISSUED AND DELAYED
DELIVERY TRANSACTIONS
The Fund may purchase municipal bonds on a when-issued or delayed delivery
basis. These transactions are arrangements in which the Fund purchases
securities with payment and delivery scheduled for a future time. The seller's
failure to complete these transactions may cause the Fund to miss a price or
yield considered to be advantageous. Settlement dates may be a month or more
after entering into these transactions, and the market value of the securities
purchased may vary from the purchase prices. Accordingly, the Fund may pay more
or less than the market value of the securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter in transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
TEMPORARY INVESTMENTS
From time to time on a temporary basis, or when the investment adviser
determines that market conditions call for a temporary defensive posture, the
Fund may invest in short-term tax-exempt or taxable temporary investments. These
temporary investments include: notes issued by or on behalf of municipal or
corporate issuers; obligations issued or guaranteed by the U.S. government, its
agencies, or instrumentalities; other debt securities; commercial paper;
certificates of deposit of banks; and repurchase agreements (arrangements in
which the organization selling the Fund a bond or temporary investment agrees at
the time of sale to repurchase it at a mutually agreed upon time and price).
There are no rating requirements applicable to temporary investments. However,
the investment adviser will limit temporary investments to those it considers to
be of good quality. The Fund intends to invest no more than 20% of its assets in
temporary investments.
Although the Fund is permitted to make taxable, temporary investments, there is
no current intention of generating income subject to federal regular income tax.
PORTFOLIO TURNOVER
Securities in the Fund's portfolio will be sold whenever the Fund's investment
adviser believes it is appropriate to do so in light of the Fund's investment
objective, without regard to the length of time a particular security may have
been held. The adviser to the Fund does not anticipate that portfolio turnover
will result in adverse tax consequences. Any such trading will increase the
Fund's portfolio turnover rate and transaction costs.
MUNICIPAL BONDS
Municipal bonds are generally issued to finance public works, such as airports,
bridges, highways, housing, hospitals, mass transportation projects, schools,
streets, and water and sewer works. They are also issued to repay outstanding
obligations, to raise funds for general operating expenses, and to make loans to
other public institutions and facilities.
Municipal bonds include industrial development bonds issued by or on behalf of
public authorities to provide financing aid to acquire sites or construct and
equip facilities for privately or publicly owned corporations. The availability
of this financing encourages these corporations to locate within the sponsoring
communities and thereby increases local employment.
The two principal classifications of municipal bonds are "general obligation"
and "revenue" bonds. General obligation bonds are secured by the issuer's pledge
of its full faith and credit and taxing power for the payment of principal and
interest. Interest on and principal of revenue bonds, however, are payable only
from the revenue generated by the facility financed by the bond or other
specified sources of revenue. Revenue bonds do not represent a pledge of credit
or create any debt of or charge against the general revenues of a municipality
or public authority. Industrial development bonds are typically classified as
revenue bonds.
Municipal bonds may carry fixed, floating or inverse floating rates of interest.
Fixed rate bonds bear interest at the same rate from issuance until maturity.
The interest rate on floating rate bonds is subject to adjustment based upon
changes in market interest rates or indices, such as a bank's prime rate or a
published market index. The interest rate may be adjusted at specified intervals
or immediately upon any change in the applicable index rate. The interest rate
for most floating rate bonds varies directly with changes in the index rate, so
that the market value of the bond will approximate its stated value at the time
of each adjustment. However, inverse floating rate bonds have interest rates
that vary inversely with changes in the applicable index rate, such that the
bond's interest rate rises when market interest rates fall and fall when market
rates rise. The market value of floating rate bonds is less sensitive than fixed
rate bonds to changes in market interest rates. In contrast, the market value of
inverse floating rate bonds is more sensitive to market rate changes than fixed
or floating rate bonds. The affect of market rate changes on bonds depends upon
a variety of factors, including market expectations as to future changes in
interest rates and, in the case of floating and inverse floating rate bonds, the
frequency with which the interest rate is adjusted and the multiple of the index
rate used in making the adjustment.
Most municipal bonds pay interest in arrears on a semiannual or more frequent
basis. However, certain bonds, variously known as capital appreciation bonds or
zero coupon bonds, do not provide for any interest payments prior to maturity.
Such bonds are normally sold at a discount from their stated value, or provide
for periodic increases in their stated value to reflect a compounded interest
rate. The market value of these bonds is also more sensitive to changes in
market interest rates than bonds that provide for current interest payments.
The Fund does not intend to purchase securities if, as a result of such
purchase, more than 25% of the value of its total assets would be invested in
the securities of governmental subdivisions located in any one state, territory,
or possession of the United States.
The Fund will not invest 25% or more of its total assets in any one industry.
Governmental issuers of municipal securities are not considered part of any
"industry." However, municipal securities backed only by the assets and revenues
of nongovernmental users may, for this purpose, be deemed to be related to the
industry in which such nongovernmental users engage, and the 25% limitation
would apply to such obligations. It is nonetheless possible that the Fund may
invest more than 25% of its assets in a broader segment of the municipal
securities market, such as revenue obligations of hospitals and other health
care facilities, housing agency revenue obligations or airport revenue
obligations. This would be the case only if the Fund determines that the yields
available from obligations in a particular segment of the market justified the
additional risks associated with a large investment in such segment. Although
such obligations could be supported by the credit of governmental users or by
the credit of nongovernmental users engaged in a number of industries, economic,
business, political and other developments generally affecting the revenues of
such users (for example, proposed legislation or pending court decisions
affecting the financing of such projects and market factors affecting the demand
for their services or products) may have a general adverse effect on all
municipal securities in such a market segment. The Fund reserves the right to
invest more than 25% of its assets in industrial development bonds or private
activity bonds or in securities of issuers located in the same state, however,
it has no present intention to do so.
INVESTMENT RISKS
Yields on municipal bonds depend on a variety of factors, including: the general
conditions of the money market and the taxable and municipal bond markets; the
size of the particular offering; the maturity of the obligations; and the rating
of the issue. The ability of the Fund to achieve its investment objective also
depends on the continuing ability of the issuers of municipal bonds to meet
their obligations for the payment of interest and principal when due. The prices
of municipal bonds fluctuate inversely in relation to the direction of interest
rates. The prices of longer term bonds fluctuate more widely in response to
market interest rate changes.
INVESTMENT LIMITATIONS
The Fund will not:
.borrow money or pledge securities except, under certain circumstances, the Fund
may borrow up to one-third of the value of its total assets and pledge up to
10% of the value of those assets to secure such borrowings;
.invest more than 5% of its total assets in securities of one issuer (except
cash and cash items and U.S. government obligations); or
.invest more than 10% of its total assets in municipal bonds subject to legal or
contractual restrictions on resale, including repurchase agreements maturing in
more than seven days.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, can be changed by the Directors without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
The Fund will not:
.invest more than 5% of its total assets in securities of issuers that have
records of less than three years of continuous operations; or
.invest more than 10% of its net assets in illiquid securities, including
restricted securities which the adviser believes cannot be sold within seven
days and repurchase agreements maturing in more than seven days.
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NET ASSET VALUE
The Fund's net asset value per share fluctuates. The net asset value for Shares
is determined by adding the interest of each class of Shares in the market value
of all securities and other assets of the Fund, subtracting the interest of each
class of Shares in the liabilities of the Fund and those attributable to each
class of Shares, and dividing the remainder by the total number of each class of
Shares outstanding. The net asset value for each class of Shares may differ due
to the variance in daily net income realized by each class. Such variance will
reflect only accrued net income to which the shareholders of a particular class
are entitled.
The net asset value of each class of Shares of the Fund is determined at 4:00
p.m. (Eastern time), Monday through Friday, except on: (i) days on which there
are not sufficient changes in the value of the Fund's portfolio securities that
it's net asset value might be materially affected; (ii) days during which no
Shares are tendered for redemption and no orders to purchase Shares are
received; or (iii) the following holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
--------------------------------------------------------------------------------
INVESTING IN THE FUND
The Fund offers investors three classes of Shares that carry sales loads and
contingent deferred sales charges in different forms and amounts and which bear
different levels of expenses.
CLASS A SHARES
An investor who purchases Class A Shares pays a maximum sales load of 4.50% at
the time of purchase. As a result, Class A Shares are not subject to any charges
when they are redeemed (except for special programs offered under "Purchases
with Proceeds From Redemptions of Unaffiliated Investment Companies.") Certain
purchases of Class A Shares qualify for reduced sales loads. See "Reducing or
Eliminating the Sales Load." Class A Shares have no conversion feature.
CLASS B SHARES
Class B Shares are sold without an initial sales load, but are subject to a
contingent deferred sales charge of up to 5.50% if redeemed within six full
years following purchase. Class B Shares also bear a higher 12b-1 fee than Class
A Shares. Class B Shares will automatically convert into Class A Shares, based
on relative net asset value, on or around the fifteenth of the month eight full
years after the purchase date. Class B Shares provide an investor the benefit of
putting all of the investor's dollars to work from the time the investment is
made, but (until conversion) will have a higher expense ratio and pay lower
dividends than Class A Shares due to the higher 12b-1 fee.
CLASS C SHARES
Class C Shares are sold without an initial sales load, but are subject to a
1.00% contingent deferred sales charge on assets redeemed within the first 12
months following purchase. Class C Shares provide an investor the benefit of
putting all of the investor's dollars to work from the time the investment is
made, but will have a higher expense ratio and pay lower dividends than Class A
Shares due to the higher 12b-1 fee. Class C Shares have no conversion feature.
--------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
Shares of the Fund are sold on days on which the New York Stock Exchange is
open. Shares of the Fund may be purchased as described below, either through a
financial institution (such as a bank or broker/dealer which has a sales
agreement with the distributor) or by wire or by check directly to the Fund,
with a minimum initial investment of $500 for Class A Shares and $1,500 for
Class B Shares and Class C Shares. Additional investments can be made for as
little as $100. (Financial institutions may impose different minimum investment
requirements on their customers.)
The Fund reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before Shares can be purchased.
INVESTING IN CLASS A SHARES
Class A Shares are sold at their net asset value next determined after an order
is received, plus a sales load as follows:
DEALER
SALES LOAD SALES LOAD CONCESSION
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
OF OF NET OF PUBLIC
AMOUNT OF OFFERING AMOUNT OFFERING
TRANSACTION PRICE INVESTED PRICE
Less than $100,000 4.50% 4.71% 4.00%
$100,000 but less
than $250,000 3.75% 3.90% 3.25%
$250,000 but less
than $500,000 2.50% 2.56% 2.25%
$500,000 but less
than $1 million 2.00% 2.04% 1.80%
$1 million or greater 0.00% 0.00% 0.25%*
*See sub-section entitled "DEALER CONCESSION."
No sales load is imposed for Class A Shares purchased through bank trust
departments, investment advisers registered under the Investment Advisers Act of
1940, as amended, or to shareholders designated as Liberty Life Members.
However, investors who purchase Shares through a trust department or investment
adviser may be charged an additional service fee by that institution.
Additionally, no sales load is imposed for Class A Shares purchased through
"wrap accounts" or similar programs, under which clients pay a fee or fees for
services.
DEALER CONCESSION
For sales of Class A Shares, a dealer will normally receive up to 90% of the
applicable sales load. Any portion of the sales load which is not paid to a
dealer will be retained by the distributor. However, the distributor, may offer
to pay dealers up to 100% of the sales load retained by it. Such payments may
take the form of cash or promotional incentives, such as reimbursement of
certain expenses of qualified employees and their spouses to attend
informational meetings about the Fund or other special events at
recreational-type facilities, or items of material value. In some instances,
these incentives will be made available only to dealers whose employees have
sold or may sell a significant amount of Shares. On purchases of $1 million or
more, the investor pays no sales load; however, the distributor will make twelve
monthly payments to the dealer totaling 0.25% of the public offering price over
the first year following the purchase. Such payments are based on the original
purchase price of Shares outstanding at each month end.
The sales load for Shares sold other than through registered broker/dealers will
be retained by Federated Securities Corp. Federated Securities Corp. may pay
fees to banks out of the sales load in exchange for sales and/or administrative
services performed on behalf of the bank's customers in connection with the
initiation of customer accounts and purchases of Shares.
REDUCING OR ELIMINATING
THE SALES LOAD
The sales load can be reduced or eliminated on the purchase of Class A Shares
through:
.quantity discounts and accumulated purchases;
.concurrent purchases;
.signing a 13-month letter of intent;
.using the reinvestment privilege; or
.purchases with proceeds from redemptions of unaffiliated investment company
shares.
QUANTITY DISCOUNTS AND
ACCUMULATED PURCHASES
As shown in the table above, larger purchases reduce the sales load paid. The
Fund will combine purchases of Class A Shares made on the same day by the
investor, the investor's spouse, and the investor's children under age 21 when
it calculates the sales load. In addition, the sales load, if applicable, is
reduced for purchases made at one time by a trustee or fiduciary for a single
trust estate or a single fiduciary account.
If an additional purchase of Class A Shares is made, the Fund will consider the
previous purchases still invested in the Fund. For example, if a shareholder
already owns Class A Shares having a current value at the public offering price
of $90,000 and he purchases $10,000 more at the current public offering price,
the sales load on the additional purchase according to the schedule now in
effect would be 3.75%, not 4.50%.
To receive the sales load reduction, Federated Securities Corp. must be notified
by the shareholder in writing or by his financial institution at the time the
purchase is made that Class A Shares are already owned or that purchases are
being combined. The Fund will reduce the sales load after it confirms the
purchases.
CONCURRENT PURCHASES
For purposes of qualifying for a sales load reduction, a shareholder has the
privilege of combining concurrent purchases of two or more funds in the Liberty
Family of Funds, the purchase price of which includes a sales load. For example,
if a shareholder concurrently invested $30,000 in one of the other funds in the
Liberty Family of Funds with a sales load, and $70,000 in this Fund, the sales
load would be reduced.
To receive this sales load reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at the
time the concurrent purchases are made. The Fund will reduce the sales load
after it confirms the purchases.
LETTER OF INTENT
If a shareholder intends to purchase at least $100,000 of Shares of the funds in
the Liberty Family of Funds (excluding money market funds) over the next 13
months, the sales load may be reduced by signing a letter of intent to that
effect. This letter of intent includes a provision for a sales load adjustment
depending on the amount actually purchased within the 13-month period and a
provision for the custodian to hold up to 4.50% of the total amount intended to
be purchased in escrow (in Shares) until such purchase is completed.
The Shares held in escrow in the shareholder's account will be released upon
fulfillment of the letter of intent or the end of the 13-month period, whichever
comes first. If the amount specified in the letter of intent is not purchased,
an appropriate number of escrowed Shares may be redeemed in order to realize the
difference in the sales load.
While this letter of intent will not obligate the shareholder to purchase
Shares, each purchase during the period will be at the sales load applicable to
the total amount intended to be purchased. At the time a letter of intent is
established, current balances in accounts in any Class A Shares of any fund in
the Liberty Family of Funds, excluding money market accounts, will be aggregated
to provide a purchase credit towards fulfillment of the letter of intent. Prior
trade prices will not be adjusted.
REINVESTMENT PRIVILEGE
If Class A Shares in the Fund have been redeemed, the shareholder has the
privilege, within 120 days, to reinvest the redemption proceeds at the
next-determined net asset value without any sales load. Federated Securities
Corp. must be notified by the shareholder in writing or by his financial
institution of the reinvestment in order to eliminate a sales load. If the
shareholder redeems his Class A Shares in the Fund, there may be tax
consequences.
PURCHASES WITH PROCEEDS FROM
REDEMPTIONS OF UNAFFILIATED
INVESTMENT COMPANIES
Investors may purchase Class A Shares at net asset value, without a sales load,
with the proceeds from the redemption of shares of an unaffiliated investment
company that were purchased or sold with a sales load or commission and were not
distributed by Federated Securities Corp. The purchase must be made within 60
days of the redemption, and Federated Securities Corp. must be notified by the
investor in writing, or by his financial institution, at the time the purchase
is made. From time to time, the Fund may offer dealers a payment of .50 of 1.00%
for Shares purchased under this program. If Shares are purchased in this manner,
fund purchases will be subject to a contingent deferred sales charge for one
year from the date of purchase. Shareholders will be notified prior to the
implementation of any special offering as described above.
INVESTING IN CLASS B SHARES
Class B Shares are sold at their net asset value next determined after an order
is received. While Class B Shares are sold without an initial sales load, under
certain circumstances described under "Contingent Deferred Sales Charge--Class B
Shares," a contingent deferred sales charge may be applied by the distributor at
the time Class B Shares are redeemed.
CONVERSION OF CLASS B SHARES
Class B Shares will automatically convert into Class A Shares on or around the
fifteenth of the month eight full years after the purchase date, except as noted
below, and will no longer be subject to a distribution services fee (see
"Distribution of Shares"). Such conversion will be on the basis of the relative
net asset values per share, without the imposition of any sales load, fee or
other charge. Class B Shares acquired by exchange from Class B Shares of another
fund in the Liberty Family of Funds will convert into Class A Shares based on
the time of the initial purchase. For purposes of conversion to Class A Shares,
Shares purchased through the reinvestment of dividends and distributions paid on
Class B Shares will be considered to be held in a separate sub-account. Each
time any Class B Shares in the shareholder's account (other than those in the
sub-account) convert to Class A Shares, an equal pro rata portion of the Class B
Shares in the sub-account will also convert to Class A Shares. The conversion of
Class B Shares to Class A Shares is subject to the continuing availability of a
ruling from the Internal Revenue Service or an opinion of counsel that such
conversions will not constitute taxable events for federal tax purposes. There
can be no assurance that such ruling or opinion will be available, and the
conversion of Class B Shares to Class A Shares will not occur if such ruling or
opinion is not available. In such event, Class B Shares would continue to be
subject to higher expenses than Class A Shares for an indefinite period.
Orders for $250,000 or more of Class B Shares will automatically be invested in
Class A Shares.
INVESTING IN CLASS C SHARES
Class C Shares are sold at net asset value next determined after an order is
received. A contingent deferred sales charge of 1.00% will be charged on assets
redeemed within the first full 12 months following purchase. For a complete
description of this charge see "Contingent Deferred Sales Charge--Class C
Shares."
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION
An investor may call his financial institution (such as a bank or an investment
dealer) to place an order to purchase Shares. Orders placed through a financial
institution are considered received when the Fund is notified of the purchase
order or when payment is converted into federal funds. Purchase orders through a
registered broker/dealer must be received by the broker before 4:00 p.m.
(Eastern time) and must be transmitted by the broker to the Fund before 5:00
p.m. (Eastern time) in order for Shares to be purchased at that day's price.
Purchase orders through other financial institutions must be received by the
financial institution and transmitted to the Fund before 4:00 p.m. (Eastern
time) in order for Shares to be purchased at that day's price. It is the
financial institution's responsibility to transmit orders promptly. Financial
institutions may charge additional fees for their services.
The financial institution which maintains investor accounts in Class B Shares or
Class C Shares with the Fund must do so on a fully disclosed basis unless it
accounts for share ownership periods used in calculating the contingent deferred
sales charge (see "Contingent Deferred Sales Charge"). In addition, advance
payments made to financial institutions may be subject to reclaim by the
distributor for accounts transferred to financial institutions which do not
maintain investor accounts on a fully disclosed basis and do not account for
share ownership periods.
PURCHASING SHARES BY WIRE
Once an account has been established, Shares may be purchased by wire by calling
the Fund. All information needed will be taken over the telephone, and the order
is considered received when State Street Bank receives payment by wire. Federal
funds should be wired as follows: State Street Bank and Trust Company, Boston,
MA; Atten; EDGEWIRE; For Credit to: (Fund Name) (Fund Class); (Fund Number);
Account Number; Trade Date and Order Number; Group Number or Dealer Number;
Nominee or Institution Name; and ABA Number 011000028. Shares cannot be
purchased by wire on holidays when wire transfers are restricted.
PURCHASING SHARES BY CHECK
Once an account has been established, Shares may be purchased by sending a check
made payable to the name of the Fund (designate class of Shares and account
number) to: Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600.
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received).
SPECIAL PURCHASE FEATURES
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account at
an Automated Clearing House ("ACH") member and invested in the Fund at the net
asset value next determined after an order is received by the Fund, plus the
sales load, if applicable. Shareholders should contact their financial
institution or the Fund to participate in this program.
--------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
CLASS A SHARES
Class A shareholders may exchange all or some of their Shares for Class A Shares
of other funds in the Liberty Family of Funds at net asset value. Neither the
Fund nor any of the funds in the Liberty Family of Funds imposes any additional
fees on exchanges.
CLASS B SHARES
Class B shareholders may exchange all or some of their Shares for Class B Shares
of other funds in the Liberty Family of Funds. (Not all funds in the Liberty
Family of Funds currently offer Class B Shares. Contact your financial
institution regarding the availability of other Class B Shares in the Liberty
Family of Funds). Exchanges are made at net asset value without being assessed a
contingent deferred sales charge on the exchanged Shares. To the extent that a
shareholder exchanges Shares for Class B Shares in other funds in the Liberty
Family of 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 C SHARES
Class C shareholders may exchange all or some of their Shares for Class C Shares
in other funds in the Liberty Family of Funds at net asset value without a
contingent deferred sales charge. (Not all funds in the Liberty Family of Funds
currently offer Class C Shares. Contact your financial institution regarding the
availability of other Class C Shares in the Liberty Family of Funds.) To the
extent that a shareholder exchanges Shares for Class C Shares in other funds in
the Liberty Family of Funds, the time for which the exchanged-for Shares are to
be held will be added to the time for which exchanged-from Shares were held for
purposes of satisfying the applicable holding period. For more information, see
"Contingent Deferred Sales Charge."
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange Shares having a net asset value
equal to the minimum investment requirements of the fund into which the exchange
is being made. Before the exchange, the shareholder must receive a prospectus of
the fund for which the exchange is being made.
This privilege is available to shareholders resident in any state in which the
Shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
proceeds invested in the same class of Shares of the other fund. The exchange
privilege may be modified or terminated at any time. Shareholders will be
notified of the modification or termination of the exchange privilege.
Further information on the exchange privilege and prospectuses for the Liberty
Family of Funds are available by contacting the Fund.
TAX CONSEQUENCES
An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending upon the circumstances, a capital gain or loss may be
realized.
MAKING AN EXCHANGE
Instructions for exchanges for the Liberty Family of Funds may be given in
writing or by telephone. Written instructions may require a signature guarantee.
Shareholders of the Fund may have difficulty in making exchanges by telephone
through brokers and other financial institutions during times of drastic
economic or market changes. If a shareholder cannot contact his broker or
financial institution by telephone, it is recommended that an exchange request
be made in writing and sent by overnight mail to Federated Services Company, 500
Victory Road--2nd Floor, Quincy, Massachusetts 02171.
TELEPHONE INSTRUCTIONS
Telephone instructions made by the investor may be carried out only if a
telephone authorization form completed by the investor is on file with the Fund.
If the instructions are given by a broker, a telephone authorization form
completed by the broker must be on file with the Fund. If reasonable procedures
are not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. Shares may be exchanged between two funds by
telephone only if the two funds have identical shareholder registrations.
Any Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Services Company, P.O. Box 8600, Boston, Massachusetts
02266-8600 and deposited to the shareholder's account before being exchanged.
Telephone exchange instructions are recorded and will be binding upon the
shareholder. Such instructions will be processed as of 4:00 p.m. (Eastern time)
and must be received by the Fund before that time for Shares to be exchanged the
same day. Shareholders exchanging into a Fund will begin receiving dividends the
following business day. This privilege may be modified or terminated at any
time.
--------------------------------------------------------------------------------
HOW TO REDEEM SHARES
Shares are redeemed at their net asset value, less any applicable contingent
deferred sales charge, next determined after the Fund receives the redemption
request. Redemptions will be made on days on which the Fund computes its net
asset value. Redemption requests must be received in proper form and can be made
as described below.
REDEEMING SHARES THROUGH A
FINANCIAL INSTITUTION
Shares of the Fund may be redeemed by calling your financial institution to
request the redemption. Shares will be redeemed at the net asset value, less any
applicable contingent deferred sales charge next determined after the Fund
receives the redemption request from the financial institution. Redemption
requests through a registered broker/dealer must be received by the broker
before 4:00 p.m. (Eastern time) and must be transmitted by the broker to the
Fund before 5:00 p.m. (Eastern time) in order for Shares to be redeemed at that
day's net asset value. Redemption requests through other financial institutions
(such as banks) must be received by the financial institution and transmitted to
the Fund before 4:00 p.m. (Eastern time) in order for Shares to be redeemed at
that day's net asset value. The financial institution is responsible for
promptly submitting redemption requests and providing proper written redemption
instructions. Customary fees and commissions may be charged by the financial
institution for this service.
REDEEMING SHARES BY TELEPHONE
Shares may be redeemed in any amount by calling the Fund provided the Fund has a
properly completed authorization form. These forms can be obtained from
Federated Securities Corp. Proceeds will be mailed in the form of a check, to
the shareholder's address of record or by wire transfer to the shareholder's
account at a domestic commercial bank that is a member of the Federal Reserve
System. The minimum amount for a wire transfer is $1,000. Proceeds from redeemed
Shares purchased by check or through ACH will not be wired until that method of
payment has cleared.
Telephone instructions will be recorded. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. In the event of drastic economic or market
changes, a shareholder may experience difficulty in redeeming by telephone. If
this occurs, "Redeeming Shares By Mail" should be considered. If at any time the
Fund shall determine it necessary to terminate or modify the telephone
redemption privilege, shareholders would be promptly notified.
REDEEMING SHARES BY MAIL
Shares may be redeemed in any amount by mailing a written request to: Federated
Services Company, Fund Name, Fund Class, P.O. Box 8600, Boston, MA 02266-8600.
The written request should state: Fund Name and the Class designation; the
account name as registered with the Fund; the account number; and the number of
Shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the Shares are registered. It is recommended
that any share certificates be sent by registered or certified mail with the
written request.
If you are requesting a redemption of any amount to be sent to an address other
than that on record with the Fund, or a redemption payable to a third party,
then all signatures appearing on the written request must be guaranteed by a
bank which is a member of the Federal Deposit Insurance Corporation, a trust
company, a member firm of a domestic stock exchange, or any other "eligible
guarantor institution," as defined by the Securities and Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.
SPECIAL REDEMPTION FEATURES
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount not less
than $100 may take advantage of the Systematic Withdrawal Program. Under this
program, Shares are redeemed to provide for periodic withdrawal payments in an
amount directed by the shareholder.
Depending upon the amount of the withdrawal payments, the amount of dividends
paid and capital gains distributions with respect to Shares, and the fluctuation
of the net asset value of Shares redeemed under this program, redemptions may
reduce, and eventually deplete, the shareholder's investment in the Fund. For
this reason, payments under this program should not be considered as yield or
income on the shareholder's investment in the Fund. To be eligible to
participate in this program, a shareholder must have an account value of at
least $10,000. A shareholder may apply for participation in this program through
his financial institution. Due to the fact that Class A Shares are sold with a
sales load, it is not advisable for shareholders to continue to purchase Class A
Shares while participating in this program. A contingent deferred sales charge
may be imposed on Class B Shares and Class C Shares.
CONTINGENT DEFERRED SALES CHARGE
Shareholders may be subject to a contingent deferred sales charge upon
redemption of their Shares under the following circumstances:
CLASS A SHARES
Class A Shares purchased under a periodic special offering with the proceeds of
a redemption of Shares of an unaffiliated investment company purchased or sold
with a sales load and not distributed by Federated Securities Corp. may be
charged a contingent deferred sales charge of .50 of 1.00% for redemptions made
within one full year of purchase. Any applicable contingent deferred sales
charge will be imposed on the lesser of the net asset value of the redeemed
Shares at the time of purchase or the net asset value of the redeemed Shares at
the time of redemption.
CLASS B SHARES
Shareholders redeeming Class B Shares from their Fund accounts within six full
years of the purchase date of those Shares will be charged a contingent deferred
sales charge by the Fund's distributor. Any applicable contingent deferred sales
charge will be imposed on the lesser of the net asset value of the redeemed
Shares at the time of purchase or the net asset value of the redeemed Shares at
the time of redemption in accordance with the following schedule:
CONTINGENT
YEAR OF REDEMPTION DEFERRED
AFTER PURCHASE SALES CHARGE
First 5.50%
Second 4.75%
Third 4.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter 0.00%
CLASS C SHARES
Shareholders redeeming Class C Shares from their Fund accounts within one full
year of the purchase date of those Shares will be charged a contingent deferred
sales charge by the Fund's distributor of 1.00%. Any applicable contingent
deferred sales charge will be imposed on the lesser of the net asset value of
the redeemed Shares at the time of purchase or the net asset value of the
redeemed Shares at the time of redemption.
CLASS A SHARES, CLASS B SHARES,
AND CLASS C SHARES
The contingent deferred sales charge will be deducted from the redemption
proceeds otherwise payable to the shareholder and will be retained by the
distributor. The contingent deferred sales charge will not be imposed with
respect to: (1) Shares acquired through the reinvestment of dividends or
distributions of long-term capital gains; and (2) Shares held for more than six
full years from the date of purchase with respect to Class B Shares and one full
year from the date of purchase with respect to Class C Shares and applicable
Class A Shares. Redemptions will be processed in a manner intended to maximize
the amount of redemption which will not be subject to a contingent deferred
sales charge. In computing the amount of the applicable contingent deferred
sales charge, redemptions are deemed to have occurred in the following order:
(1) Shares acquired through the reinvestment of dividends and long-term capital
gains; (2) Shares held for more than six full years from the date of purchase
with respect to Class B Shares and one full year from the date of purchase with
respect to Class C Shares and applicable Class A Shares; (3) Shares held for
fewer than six years with respect to Class B Shares and one full year from the
date of purchase with respect to Class C Shares and applicable Class A Shares on
a first-in, first-out basis. A contingent deferred sales charge is not assessed
in connection with an exchange of Fund Shares for Shares of other funds in the
Liberty Family of Funds in the same class (see "Exchange Privilege"). Any
contingent deferred sales charge imposed at the time the exchanged for Shares
are redeemed is calculated as if the shareholder had held the Shares from the
date on which he became a shareholder of the exchanged-from Shares. Moreover,
the contingent deferred sales charge will be eliminated with respect to certain
redemptions (see "Elimination of Contingent Deferred Sales Charge").
ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge will not be charged in connection with
exchanges of Shares for Class A Shares in other Liberty Family Funds.
The contingent deferred sales charge will be eliminated with respect to the
following redemptions: (1) redemptions following the death or disability, as
defined in Section 72(m)(7) of the Internal Revenue Code of 1986, of a
shareholder; (2) redemptions representing minimum required distributions from an
Individual Retirement Account or other retirement plan to a shareholder who has
attained the age of 70-1/2; and (3) involuntary redemptions by the Fund of
Shares in shareholder accounts that do not comply with the minimum balance
requirements. No contingent deferred sales charge will be imposed on redemptions
of Shares held by Directors, employees and sales representatives of the Fund,
the distributor, or affiliates of the Fund or distributor; employees of any
financial institution that sells Shares of the Fund pursuant to a sales
agreement with the distributor; and spouses and children under the age of 21 of
the aforementioned persons. Finally, no contingent deferred sales charge will be
imposed on the redemption of Shares originally purchased through a bank trust
department, an investment adviser registered under the Investment Advisers Act
of 1940, as amended, or any other financial institution, to the extent that no
payments were advanced for purchases made through such entities. The Directors
reserve the right to discontinue elimination of the contingent deferred sales
charge. Shareholders will be notified of such elimination. Any Shares purchased
prior to the termination of such waiver would have the contingent deferred sales
charge eliminated as provided in the Fund's prospectus at the time of the
purchase of the Shares. If a shareholder making a redemption qualifies for an
elimination of the contingent deferred sales charge, the shareholder must notify
Federated Securities Corp. or the transfer agent in writing that he is entitled
to such elimination.
--------------------------------------------------------------------------------
ACCOUNT AND SHARE
INFORMATION
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
in writing to Federated Services Company.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during that
month.
DIVIDENDS
Dividends are declared daily and paid monthly to all shareholders invested in
the Fund on the record date. Dividends and distributions are automatically
reinvested in additional Shares of the Fund on payment dates at the ex-dividend
date net asset value without a sales load, unless shareholders request cash
payments on the new account form or by contacting the transfer agent. All
shareholders on the record date are entitled to the dividend. If Shares are
redeemed or exchanged prior to the record date or purchased after the record
date, those Shares are not entitled to that month's dividend.
CAPITAL GAINS
Net long-term capital gains realized by the Fund, if any, will be distributed at
least once every twelve months.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below the Class A Share required minimum value of $500 or
the required minimum value of $1,500 for Class B Shares and Class C Shares. This
requirement does not apply, however, if the balance falls below the required
minimum value because of changes in the net asset value of the respective Share
Class. Before Shares are redeemed to close an account, the shareholder is
notified in writing and allowed 30 days to purchase additional Shares to meet
the minimum requirement.
--------------------------------------------------------------------------------
FUND INFORMATION
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The Fund is managed by a Board of Directors. The Directors are responsible for
managing the Fund's business affairs and for exercising all the Fund's powers
except those reserved for the shareholders. An Executive Committee of the Board
of Directors handles the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER
Investment decisions for the Fund are made by Federated Advisers, the Fund's
investment adviser, subject to direction by the Directors. The Adviser
continually conducts investment research and supervision for the Fund and is
responsible for the purchase or sale of portfolio instruments, for which it
receives an annual fee from the Fund.
ADVISORY FEES
The Adviser receives an annual investment advisory fee equal to .30 of 1% of the
Fund's average daily net assets, plus 4.5% of the Fund's gross income (excluding
any capital gains or losses).
The Adviser may voluntarily waive a portion of its fee or reimburse the Fund for
certain operating expenses. The Adviser can terminate this voluntary waiver at
any time at its sole discretion. The Adviser has also undertaken to reimburse
the Fund for operating expenses in excess of limitations established by certain
states.
ADVISER'S BACKGROUND
Federated Advisers, a Delaware business trust organized on April 11, 1989, is a
registered investment adviser under the Investment Advisers Act of 1940. It is a
subsidiary of Federated Investors. All of the Class A (voting) Shares of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors.
Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private accounts.
Certain other subsidiaries also provide administrative services to a number of
investment companies. With over $72 billion invested across more than 260 funds
under management and/or administration by its subsidiaries, as of December 31,
1994, Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 1,750 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.
Jonathan C. Conley has been the Fund's portfolio manager since October 1984. Mr.
Conley joined Federated Investors in 1979 and has been a Vice President of the
Fund's investment adviser since 1982. Mr. Conley is a Chartered Financial
Analyst and received his M.B.A. in Finance from the University of Virginia.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for Shares of the Fund.
Federated Securities Corp. is located at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. It is a Pennsylvania corporation organized on November
14, 1969, and is the principal distributor for a number of investment companies.
Federated Securities Corp. is a subsidiary of Federated Investors.
The distributor may offer to pay financial institutions an amount equal to 1% of
the net asset value of Class C Shares purchased by their clients or customers at
the time of purchase. These payments will be made directly by the distributor
from its assets, and will not be made from assets of the Fund. Financial
institutions may elect to waive the initial payment described above; such waiver
will result in the waiver by the Fund of the otherwise applicable contingent
deferred sales charge.
The distributor will pay dealers an amount equal to 5.5% of the net asset value
of Class B Shares purchased by their clients or customers. These payments will
be made directly by the distributor from its assets, and will not be made from
the assets of the Fund. Dealers may voluntarily waive receipt of all or any
portion of these payments. The distributor may pay a portion of the distribution
fee discussed below to financial institutions that waive all or any portion of
the advance payments.
DISTRIBUTION PLAN (CLASS B SHARES AND CLASS C SHARES ONLY) AND SHAREHOLDER
SERVICES PLANS
Under a distribution plan adopted in accordance with Investment Company Act Rule
12b-1 (the "Distribution Plan"), Class B Shares and Class C Shares will pay a
fee to the distributor in an amount computed at an annual rate of .75% of the
average daily net assets of each class of Shares to finance any activity which
is principally intended to result in the sale of Shares subject to the
Distribution Plan. For Class C Shares, the distributor may select financial
institutions such as banks, fiduciaries, custodians for public funds, investment
advisers, and broker/dealers to provide sales support services as agents for
their clients or customers. With respect to Class B Shares, because distribution
fees to be paid by the Fund to the distributor may not exceed an annual rate of
.75% of each class of Shares' average daily net assets, it will take the
distributor a number of years to recoup the expenses it has incurred for its
distribution and distribution-related services pursuant to the Plan.
The Distribution Plan is a compensation type Plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by Shares
under the Plan.
In addition, the Fund has adopted a Shareholder Services Plan (the "Services
Plan") under which it may make payments up to 0.25 of 1% of the average daily
net asset value of Class A Shares, Class B Shares, and Class C Shares to obtain
certain personal services for shareholders and for the maintenance of
shareholder accounts ("Shareholder Services"). The Fund has entered into a
Shareholder Services Agreement with Federated Shareholder Services, a subsidiary
of Federated Investors, under which Federated Shareholder Services will either
perform shareholder services directly or will select financial institutions to
perform shareholder services. Financial institutions will receive fees based
upon Shares owned by their clients or customers. The schedules of such fees and
the basis upon which such fees will be paid will be determined from time to time
by the Fund and Federated Shareholder Services.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the capacities described above or should
Congress relax current restrictions on depository institutions, the Directors
will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state laws.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS
With respect to Class A Shares, Class B Shares, and Class C Shares, the
distributor may offer to pay a fee from its own assets to financial institutions
as financial assistance for providing substantial marketing and sales support.
The support may include sponsoring sales, educational and training seminars for
their employees, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Fund. Such assistance will be
predicated upon the amount of Shares the financial institution sells or may
sell, and/or upon the type and nature of sales or marketing support furnished by
the financial institution. Any payments made by the distributor may be
reimbursed by the Fund's investment adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund. Federated Administrative
Services provides these at an annual rate which relates to the average aggregate
daily net assets of all Federated Funds as specified below:
MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE DAILY NET ASSETS
FEE OF THE FEDERATED FUNDS
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of
$750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8600, Boston, Massachusetts
02266-8600, is custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Federated Services Company, P.O. Box 8600, Boston, Massachusetts 02266-8600, is
transfer agent for the Shares of the Fund, and dividend disbursing agent for the
Fund.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Deloitte & Touche LLP, 2500 One PPG
Place, Pittsburgh, Pennsylvania 15222.
--------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Director elections and
other matters submitted to shareholders for vote. All Shares of each portfolio
or class in the Fund have equal voting rights, except that in matters affecting
only a particular portfolio or class, only Shares of that portfolio or class are
entitled to vote.
As a Maryland corporation, the Fund is not required to hold annual shareholder
meetings. Shareholder approval will be sought only for certain changes in the
Fund's operation and for the election of Directors under certain circumstances.
Directors may be removed by a two-thirds vote of the number of Directors prior
to such removal or by a two-thirds vote of the shareholders at a special
meeting. A special meeting of shareholders shall be called by the Directors upon
the written request of shareholders owning at least 10% of the Fund's
outstanding Shares of all series entitled to vote.
--------------------------------------------------------------------------------
TAX INFORMATION
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional Shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held the Shares. No federal income tax is due on any
dividends earned in an IRA or qualified retirement plan until distributed.
PENNSYLVANIA PERSONAL
PROPERTY TAXES
Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
--------------------------------------------------------------------------------
PERFORMANCE INFORMATION
From time to time the Fund advertises its total return and yield for each class
of Shares.
Total return represents the change, over a specific period of time, in the value
of an investment in each class of Shares after reinvesting all income and
capital gains distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage.
The yield of each class of Shares is calculated by dividing the net investment
income per share (as defined by the Securities and Exchange Commission) earned
by each class of Shares over a thirty-day period by the maximum offering price
per share of each class on the last day of the period. This number is then
annualized using semi-annual compounding. The yield does not necessarily reflect
income actually earned by each class of Shares and, therefore, may not correlate
to the dividends or other distributions paid to shareholders.
The performance information reflects the effect of non-recurring charges, such
as the maximum sales load or contingent deferred sales charges, which, if
excluded, would increase the total return and yield.
Total return and yield will be calculated separately for Class A Shares, Class B
Shares and Class C Shares. Because Class B Shares and Class C Shares are subject
to Rule 12b-1 fees, and higher Shareholder Services fees, the yield for Class A
Shares, for the same period, may exceed that of Class B Shares and Class C
Shares.
Because Class A Shares are subject to a sales load, the total return for Class B
Shares and Class C Shares for the same period will exceed that of Class A
Shares. Depending on the dollar amount invested, and the time period for which
any particular class of Shares is held, the total return for any particular
class may exceed that of another.
From time to time, advertisements for Class A Shares, Class B Shares, and Class
C Shares of the Fund may refer to ratings rankings, and other information in
certain financial publications and/or compare the performance of Class A Shares,
Class B Shares, and Class C Shares to certain indices.
LIBERTY MUNICIPAL
SECURITIES FUND, INC.
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
COMBINED PROSPECTUS
An Open-End, Diversified
Management Investment Company
May 31, 1995
[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
530900109
530900406
530900208
G00322-01 (5/95)
Liberty Municipal Securities Fund, Inc.
Class A Shares
Class B Shares
Class C Shares
Combined Statement of Additional Information
This Combined Statement of Additional Information should be read
with the combined prospectus for Liberty Municipal
Securities Fund, Inc. (the "Fund") dated May 31,
1995. This Statement is not a prospectus itself. To receive a
copy of the prospectus, write or call the Fund.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Statement dated May 31, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED
INVESTORS
General Information About the
Fund 1
Investment Objective and Policies 1
Acceptable Investments 1
When-Issued and Delayed
Delivery Transactions 1
Temporary Investments 1
Portfolio Turnover 2
Investment Limitations 2
Liberty Municipal Securities
Fund, Inc. Management 4
Fund Ownership 8
Directors Compensation 9
Investment Advisory Services 9
Adviser to the Fund 9
Advisory Fees 10
Administrative Services 10
Transfer Agent and Dividend
Disbursing Agent 10
Brokerage Transactions 10
Purchasing Shares 11
Distribution Plan (Class B
Shares and Class C Shares
Only) and Shareholder Services
Plan11
Conversion to Federal Funds 11
Purchases by Sales
Representatives, Fund
Directors, and Employees11
Valuing Municipal Bonds 12
Redeeming Shares 12
Tax Status 12
The Fund's Tax Status 12
Total Return 12
Yield 13
Tax-Equivalent Yield 13
Tax-Equivalency Table 13
Performance Comparisons 14
About Federated Investors 15
Financial Statements 16
Appendix 17
General Information About the Fund
The Fund was incorporated under the laws of the State of Maryland on
September 10, 1976. On December 23, 1992, the shareholders of the Fund
voted to permit the Fund to offer separate series and classes of shares.
On January 6, 1993, the Board of Directors ("Directors") approved
changing the name of the Fund, effective January 6, 1993, from Federated
Tax-Free Income Fund, Inc. to Liberty Municipal Securities Fund, Inc.
Shares of the Fund are offered in three classes, known as Class A
Shares, Class B Shares, and Class C Shares (individually and
collectively referred to as "Shares" as the context may require.) This
Combined Statement of Additional Information relates to all three
classes of the above-mentioned Shares.
Investment Objective and Policies
The Fund's investment objective is to provide for its shareholders a
high level of current income which is exempt from federal regular income
tax. The objective cannot be changed without approval of shareholders.
Acceptable Investments
The Fund invests primarily in municipal bonds.
Characteristics and Risks
The municipal bonds in which the Fund invests have the
characteristics and risks set forth in the prospectus.
If ratings made by Moody's or Standard & Poor's change because of
changes in those organizations or in their rating systems, the
Fund will try to use comparable ratings as standards in accordance
with the investment policies described in the Fund's prospectus.
When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price and yield for the Fund. No fees or
other expenses, other than normal transaction costs, are
incurred. However, liquid assets of the Fund sufficient to make payment
for the securities to be purchased are segregated at the trade date.
These assets are marked to market daily and are
maintained until the transaction has been settled. The
Fund does not intend to engage in when-issued
and delayed delivery transactions to an extent that would cause the
segregation of more than 20% of the total value of its
assets.
Temporary Investments
The Fund may also invest in temporary investments from time to time for
defensive purposes. During the last fiscal year, the Fund did not invest
in temporary investments and does not presently intend to do so in the
current fiscal year. The Fund might invest in temporary investments:
o as a reaction to market conditions;
o while waiting to invest proceeds of sales of shares or
portfolio securities, although generally proceeds from sales of
shares will be invested in municipal bonds as quickly as possible;
or
o in anticipation of redemption requests.
The Fund will not purchase temporary investments (other than securities
of the U.S. government, its agencies, or instrumentalities) if, as a
result of the purchase, 25% or more of the value of its total assets
would be invested in any one industry. However, the Fund may, for
temporary defensive purposes, invest more than 25% of the value of its
assets in cash or cash items, U.S. Treasury bills, or securities issued
or guaranteed by the U.S. government, its agencies, or
instrumentalities, or instruments secured by these money market
instruments, such as repurchase agreements.
Repurchase Agreements
Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell
U.S. government securities or certificates of deposit to the Fund
and agree at the time of sale to repurchase them at a mutually
agreed upon time and price. The Fund or its custodian will take
possession of the securities subject to repurchase agreements and
these securities will be marked to market daily. To the extent
that the original seller does not repurchase the securities from
the Fund, the Fund could receive less than the repurchase price on
any sale of such securities. In the event that such a defaulting
seller filed for bankruptcy or became insolvent, disposition of
such securities by the Fund might be delayed pending court action.
The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would
rule in favor of the Fund and allow retention or disposition of
such securities. The Fund may only enter into repurchase
agreements with banks and other recognized financial institutions,
such as broker/dealers, which are found by the Fund's adviser to
be creditworthy pursuant to guidelines established by the
Directors.
From time to time, such as when suitable municipal bonds are not
available, the Fund may invest a portion of its assets in cash. Any
portion of the Fund's assets maintained in cash will reduce the amount
of assets in municipal bonds and thereby reduce the Fund's yield.
Portfolio Turnover
Portfolio trading will be undertaken principally to accomplish the
Fund's objective in relation to anticipated movements in the general
level of interest rates. The Fund is free to dispose of portfolio
securities at any time when changes in circumstances or conditions make
such a move desirable in light of the investment objective. The Fund
will not attempt to achieve or be limited to a predetermined rate of
portfolio turnover, such turnover always being incidental to
transactions undertaken with a view to achieving the Fund's investment
objective. During the fiscal years ended March 31, 1995 and
1994, the portfolio turnover rates were 41% and 27% ,
respectively.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not make short sales of
securities or purchase any securities on
margin, except for such credits
as are necessary for the
clearance of transactions.
Borrowing Money
The Fund will not borrow money except as a
temporary measure for extraordinary or emergency purposes and then
only in amounts not in excess of 5% of the value of its total
assets or in an amount up to one-third of the value
of its total assets, including the amount borrowed, in order to
meet redemption requests without immediately selling any
portfolio securities. This borrowing provision is not for
investment leverage but solely to facilitate management of the
portfolio by enabling the Fund to meet redemption requests
where the liquidation of portfolio securities
is deemed to be inconvenient or disadvantageous.
While any such borrowings are
outstanding, no net purchases of investment securities will be
made by the Fund.
Pledging Assets
The Fund will not pledge, mortgage or hypothecate
its assets, except to secure permitted borrowings.
In those cases, it may pledge securities having a
market value at the time of pledge not exceeding 10% of the
value of the Fund's total assets.
Investing in Commodities or Minerals
The Fund will not purchase or sell
commodities, commodity contracts, oil, gas, or
other mineral exploration or development programs.
Investing in Real Estate
The Fund will not purchase or sell real
estate, but this shall not prevent the Fund from
investing in Municipal Bonds secured by real estate or
interest therein.
Underwriting
The Fund will not underwrite any issue of securities except as it
may be deemed to be an underwriter under the Securities Act of
1933, in connection with the sale of securities in
accordance with its investment objective, policies
and limitations.
Making Loans
The Fund will not make loans except that the Fund
may, in accordance with its investment objective,
policies and limitations, acquire publicly or non-
publicly issued Municipal Bonds or temporary
investments or enter into repurchase agreements.
Acquiring Securities Issued by Other Investment Companies
The Fund will not invest in securities issued by any other
investment company or investment trust.
Diversification of Investments
The Fund will not purchase the securities of
any one issuer, except in cash and cash instruments
and securities issued by the United
States government, its agencies, and
instrumentalities, if as a result more than 5% of its
total assets would be invested in the securities of such
issuer.
For purposes of this limitation, each governmental subdivision,
i.e. state, territory, possession of the United States or any
political subdivision of the foregoing including agencies,
authorities, instrumentalities, or similar entities, or of the
District of Columbia shall be considered a separate issuer if its
assets and revenues are separate from those of the governmental
body creating it and revenues are separate from those of the
governmental body creating it and the security is backed by its
own assets and revenues. In the case of an industrial development
bond, if the security is backed only by the assets and revenues of
a non-governmental user, then such non-governmental user will be
deemed to be the sole issuer. If, however, in the case of an
industrial development bond or governmental issued security, a
governmental or some other entity guarantees the security, such
guarantee would be considered a separate security issued by the
guarantor as well as the other issuer (as above defined), subject
to limited exclusions allowed by the Investment Company Act of
1940, as amended. For purposes of this limitation, cash
instruments do not include securities issued by banks.
Dealing in Puts and Calls
The Fund will not purchase or sell puts,
calls, straddles, spreads, or any combination
thereof.
Investing in Issuers Whose Securities are Owned by Officers of the
Fund
The Fund will not purchase or retain the securities of any
issuer other than the securities of the Fund, if,
to the Fund's knowledge, those officers and directors of the Fund,
or of the Adviser, who individually own
beneficially more than 1/2 of 1% of the
outstanding securities of such issuer, together own
benefically more than 5% of such outstanding securities.
Concentration of Investments
The Fund will not purchase securities if, as a result of such
purchase more than 25% of the
value of its assets would be invested in
the securities of governmental subdivisions located in
any one state, territory, or possession of the United States. The
Fund may invest more than 25% of the value of its assets
in industrial development bonds. As to industrial
development bonds, the Fund may purchase securities of an issuer
resulting in the ownership of more than 25% of the Fund's assets
in any one industry.
Investing in Restricted Securities
The Fund will not invest more than 10% of the value of its total
assets in Municipal Bonds which are subject
to legal or contractual restrictions on resale,
including repurchase agreements maturing in more than seven
days.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Directors without shareholder approval. Shareholders will be notified
before any material change in these limitations becomes effective.
Investing in Illiquid Securities
The Fund will not invest more than 10% of its net assets in
illiquid securities, including restricted securities which the
adviser believes cannot be sold within seven days and repurchase
agreements maturing in more than seven days.
Investing in New or Foreign Issuers or in Securities Not Readily
Marketable
In order to qualify Shares of the Fund for sale in certain states,
the Fund has agreed with certain state securities administrators
not to invest more than 5% of the value of its total assets in
securities of issuers with records of less than three years of
continuous operations, including the operation of any predecessor.
The Fund has also agreed not to purchase equity securities of any
issuer that are not readily marketable or to invest in securities
of any foreign issuer.
In addition, in order to comply with certain state restrictions, the
Fund will not invest in real estate limited partnerships, oil, gas or
other mineral leases.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not
result in a violation of such restriction.
The Fund did not borrow money, pledge securities, invest in municipal
bonds subject to legal or contractual restrictions, invest in issuers
whose securities are owned by officers of the Fund, or invest in
securities of issuers with a record of less than three years of
continuous operation in excess of 5% of the value of its net assets
during the last fiscal year and has no present intent to do so in the
coming fiscal year.
For purposes of its policies and limitations, the Fund considers
certificates of deposits and demand and time deposits issued by a U.S.
branch of a domestic bank or savings and loan having capital, surplus
and undivided profits in excess of $100,000,000 at the time of
investment to be "cash items."
Liberty Municipal Securities Fund, Inc. Management
Officers and Directors are listed with their addresses, present
positions with Liberty Municipal Securities Fund, Inc., and principal
occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Director
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life
and Casualty Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, President and Director of the Company.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Director
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee, or Managing General Partner
of the Funds; formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Director
President, Investment Properties Corporation; Senior Vice-President,
John R. Wood and Associates, Inc., Realtors; President, Northgate
Village Development Corporation; Partner or Trustee in private real
estate ventures in Southwest Florida; Director, Trustee, or Managing
General Partner of the Funds; formerly, President, Naples Property
Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Director
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and
Director, Ryan Homes, Inc.
J. Christopher Donahue *
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
President and Director
President and Trustee, Federated Investors, Federated Advisers,
Federated Management, and Federated Research; President and Director,
Federated Research Corp.; President, Passport Research, Ltd.; Trustee,
Federated Administrative Services, Federated Services Company, and
Federated Shareholder Services; President or Vice President of the
Funds; Director, Trustee, or Managing General Partner of some of the
Funds. Mr. Donahue is the son of John F. Donahue, Chairman and Director
of the Company.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Director
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director,
Blue Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Director
D
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian
and Montefiore Hospitals; Director, Trustee, or Managing General Partner
of the Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Director
Attorney-at-law; Partner, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Peter E. Madden
225 Franklin Street
Boston, MA
Birthdate: April 16, 1942
Director
Consultant; State Representative, Commonwealth of Massachusetts;
Director, Trustee, or Managing General Partner of the Funds; formerly,
President, State Street Bank and Trust Company and State Street Boston
Corporation and Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Director
Attorney-at-law; Partner, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice
Chairman, Horizon Financial, F.A.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Director
President, Law Professor, Duquesne University; Consulting Partner,
Mollica, Murray and Hogue; Director, Trustee or Managing General Partner
of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Director
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: July 21, 1935
Director
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Director,
Federated Research Corp.; Chairman and Director, Federated Securities
Corp.; President or Vice President of some of the Funds; Director or
Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President and Treasurer, Federated Advisers, Federated Management,
Federated Research, Federated Research Corp., and Passport Research,
Ltd.; Executive Vice President, Treasurer, and Director, Federated
Securities Corp.; Trustee, Federated Services Company and Federated
Shareholder Services; Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director of some of the Funds; Vice
President and Treasurer of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and
Secretary, Federated Research Corp. and Passport Research, Ltd.;
Trustee, Federated Services Company; Executive Vice President,
Secretary, and Trustee, Federated Administrative Services; Secretary and
Trustee, Federated Shareholder Services; Executive Vice President and
Director, Federated Securities Corp.; Vice President and Secretary of
the Funds.
defined
defined in the Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of
the Board of Directors handles the responsibilities of the
Board of Directors between meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the
following investment companies: American Leaders Fund, Inc.; Annuity
Management Series; Automated Cash Management Trust; Automated Government
Money Trust; California Municipal Cash Trust; Cash Trust Series II; Cash
Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily
Passport Cash Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated Growth
Trust; Federated High Yield Trust; Federated Income Securities Trust;
Federated Income Trust; Federated Index Trust; Federated Intermediate
Government Trust; Federated Master Trust; Federated Municipal Trust;
Federated Short-Intermediate Government Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-Free Trust;
Federated U.S. Government Bond Fund; First Priority Funds; Fixed Income
Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.;
Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund
for U.S. Government Securities, Inc.; Government Income Securities,
Inc.; High Yield Cash Trust; Insight Institutional Series, Inc.;
Insurance Management Series; Intermediate Municipal Trust; International
Series Inc.; Investment Series Funds, Inc.; Investment Series Trust;
Liberty Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.;
Liberty Municipal Securities Fund, Inc.; Liberty Term Trust, Inc.-1999;
Liberty U.S. Government Money Market Trust; Liberty Utility Fund, Inc.;
Liquid Cash Trust; Mark Twain Funds; Money Market Management, Inc.;
Money Market Obligations Trust; Money Market Trust; Municipal Securities
Income Trust; New York Municipal Cash Trust; 111 Corcoran Funds;
Peachtree Funds; The Planters Funds; Portage Funds; RIMCO Monument
Funds; The Shawmut Funds; Short-Term Municipal Trust; Signet Select
Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock
and Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; Trademark Funds; Trust for Financial Institutions;
Trust For Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; The Virtus Funds;
and World Investment Series, Inc.
Fund Ownership
Officers and Directors own less than 1% of the Fund's outstanding
Shares.
As of May 5, 1995, there were no shareholders of record
who owned 5% or more of the outstanding Class A Shares of the Fund.
As of May 5, 1995, there were no shareholders of record who owned 5%
or more of the outstanding Class B Shares of the Fund.
Merrill Lynch Pierce Fenner & Smith (as record owner holding Class C
Shares for its clients) Jacksonville, Florida, owned approximately
625,806 Shares (30.31%) of the Fund as of
May 5, 1995.
Directors Compensation
NAME , AGGREGATE TOTAL COMPENSATION
PAID
POSITION WITH COMPENSATION FROM TO DIRECTORS FROM
CORPORATION CORPORATION* CORPORATION AND FUND
COMPLEX +
John F. Donahue, $ -0-
$ -0- for the Corporation and
Chairman and Director 68
other investment companies in the Fund Complex
Thomas G. Bigley, $ 857.00
$ 20,688 for the Corporation and
Director 49
other investment companies in the Fund Complex
John T. Conroy, Jr., $ 1,908.00
$ 117,202 for the Corporation and
Director 64
other investment companies in the Fund Complex
William J. Copeland, $ 1,908.00
$ 117,202 for the Corporation and
Director 64
other investment companies in the Fund Complex
J. Christopher Donahue, $ -0-
$ -0- for the Corporation and
President and Director 14
other investment companies in the Fund Complex
James E. Dowd, $ 1,908.00
$ 117,202 for the Corporation and
Director 64
other investment companies in the Fund Complex
Lawrence D. Ellis, M.D., $ 1,731.00
$ 106,460 for the Corporation and
Director 64
other investment companies in the Fund Complex
Edward L. Flaherty, Jr., $ 1,908.00
$ 117,202 for the Corporation and
Director 64
other investment companies in the Fund Complex
Peter E. Madden, $ 1,472.00
$ 90,563 for the Corporation and
Director 64
other investment companies in the Fund Complex
Gregor F. Meyer, $ 1,731.00
$ 106,460 for the Corporation and
Director 64
other investment companies in the Fund Complex
John E. Murray, Jr., $ -0-
$ -0- for the Corporation and
Director 64
other investment companies in the Fund Complex
Wesley W. Posvar, $ 1,731.00
$ 106,460 for the Corporation and
Director 64
other investment companies in the Fund Complex
Marjorie P. Smuts, $ 1,731.00
$ 106,460 for the Corporation and
Director 64
other investment companies in the Fund Complex
*Information is furnished for the fiscal year ended March 31, 1995.
+The information is provided for the last calendar year.
Investment Advisory Services
Adviser to the Fund
The Fund's investment adviser is Federated Advisers. It is a subsidiary
of Federated Investors. All the Class A (voting) shares of Federated
Investors are owned by a trust, the trustees of which are John F.
Donahue, his wife, and his son, J. Christopher Donahue. John F.
Donahue is Chairman and Trustee of Federated Advisers,
Chairman and Trustee, Federated Investors, and Chairman and Director of
the Fund. J. Christopher Donahue is President and Trustee, Federated
Advisers, President and Trustee, Federated Investors, Trustee, Federated
Administrative Services, Trustee, Federated Services Company, and
President and Director of the Fund. John W. McGonigle is Vice President,
Secretary and Trustee of Federated Advisers, Trustee, Vice President,
Secretary and General Counsel, Federated Investors, Executive Vice
President, Secretary and Trustee, Federated Administrative Services,
Executive Vice President and Director, Federated Securities Corp.,
Trustee, Federated Services Company, and Vice President and Secretary of
the Fund.
The adviser shall not be liable to the Fund or any shareholder for any
losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Fund.
Advisory Fees
For its advisory services, Federated Advisers receives an annual
investment advisory fee as described in the prospectus. During the
fiscal years ended March 31, 1995, 1994, and 1993,
the Fund's adviser earned $4,498,635, $4,570,573,
and $4,015,243, respectively.
State Expense Limitations
The adviser has undertaken to comply with the expense limitation
established by certain states for investment companies whose
shares are registered for sale in those states. If the Fund's
normal operating expenses (including the investment advisory fee,
but not including brokerage commissions, interest, taxes, and
extraordinary expenses) exceed 2-1/2% per year of the first $30
million of average net assets, 2% per year of the next $70 million
of average net assets, and 1-1/2% per year of the remaining
average net assets, the adviser will reimburse the Fund for its
expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by
the amount of the excess, subject to an annual adjustment. If the
expense limitation is exceeded, the amount to be reimbursed by the
adviser will be limited, in any single fiscal year, by the amount
of the investment advisory fee.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
Administrative Services
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated
Administrative Services, Inc., also a subsidiary of Federated Investors,
served as the Fund's administrator. For the fiscal year ended March
31, 1995, Federated Administrative Services earned $550,028. For
the fiscal year ended March 31, 1994, Federated
Administrative Services and Federated Administrative Services, Inc.,
the Fund's former administrator, collectively
earned $541,113. For the fiscal year ended March 31,
1993, Federated Administrative Services,
Inc. earned $398,773.
Dr. Henry J. Gailliot, an officer of Federated Advisers, the adviser to
the Fund, holds approximately 20% of the outstanding common stock and
serves as a director of Commercial Data Services, Inc., a company which
provides computer processing services to Federated Administrative
Services.
Transfer Agent and Dividend Disbursing Agent
Federated Services Company serves as transfer agent and dividend
disbursing agent for the Fund. The fee paid to the transfer agent is
based upon the size, type and number of accounts and transactions made
by shareholders.
Federated Services Company also maintains the Corporation's accounting
records. The fee paid for this service is based upon the level of the
Fund's average net assets for the period plus out-of-pocket
expenses.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the
order at a favorable price. In working with dealers, the adviser will
generally utilize those who are recognized dealers in specific portfolio
instruments, except when a better price and execution of the order can
be obtained elsewhere. In selecting among firms believed to meet
these criteria, the adviser may give consideration to those firms which
have sold or are selling Shares of the Fund and other funds distributed
by Federated Securities Corp. The adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review
by the Directors.
The adviser may select brokers and dealers who offer brokerage and
research services. These services may be furnished directly to the Fund
or to the adviser and may include:
o advice as to the advisability of investing in securities;
o security analysis and reports;
o economic studies;
o industry studies;
o receipt of quotations for portfolio evaluations; and
o similar services.
The adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions
charged by such persons are reasonable in relation to the value of the
brokerage and research services provided.
Research services provided by brokers may be used by the adviser or by
affiliates of Federated Investors in advising Federated Funds and other
accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have
paid, it would tend to reduce their expenses.
Purchasing Shares
Except under certain circumstances described in the prospectus, Shares
are sold at their net asset value (plus a sales charge on Class A Shares
only) on days the New York Stock Exchange is open for business. The
procedure for purchasing Shares is explained in the
combined prospectus under "How To Purchase
Shares."
Distribution Plan (Class B Shares and Class C Shares Only) and
Shareholder Services Plan
These arrangements permit the payment of fees to financial institutions,
the distributor, and Federated Shareholder Services, to stimulate
distribution activities and to cause services to be provided to
shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may
include, but are not limited to, marketing efforts; providing office
space, equipment, telephone facilities, and various clerical,
supervisory, computer, and other personnel as necessary or beneficial to
establish and maintain shareholder accounts and records; processing
purchase and redemption transactions and automatic investments of client
account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and
addresses.
With respect to the Class B and C Shares of the Fund, by adopting the
Distribution Plan, the Board of Directors expects that the Fund will be
able to achieve a more predictable flow of cash for investment purposes
and to meet redemptions. This will facilitate more efficient portfolio
management and assist the Fund in pursuing its investment objectives. By
identifying potential investors whose needs are served by the Fund's
objectives, and properly servicing these accounts, it may be possible to
curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail;
and (3) enhancing shareholder recordkeeping systems; and (4) responding
promptly to shareholders' requests and inquiries concerning their
accounts.
For the fiscal period ending March 31, 1995, payments in
the amount of $206,000 were made pursuant to the
Distribution Plan, all of which was paid to the financial institutions.
In addition, for this period, payments in the amount of
$728,702 were made pursuant to the Shareholder Services
Plan.
Conversion to Federal Funds
It is the Fund's policy to be as fully invested as possible so that
maximum interest may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal funds
before shareholders begin to earn dividends. Federated Services Company
acts as the shareholder's agent in depositing checks and converting them
to federal funds.
Purchases by Sales Representatives, Fund Directors, and Employees
Directors, employees, and sales representatives of the Fund, Federated
Advisers, and Federated Securities Corp. or their affiliates, or any
investment dealer who has a sales agreement with Federated Securities
Corp. and their spouses and children under 21, may buy Class A Shares at
net asset value without a sales charge. Shares may also be sold without
a sales charge to trusts or pension or profit-sharing plans for these
people.
These sales are made with the purchaser's written assurance that the
purchase is for investment purposes and that the securities will not be
resold except through redemption by the Fund.
Determining Net Asset Value
Net asset value generally changes each day. The days on which net asset
value is calculated by the Fund are described in the prospectus.
Valuing Municipal Bonds
The Board of Directors uses an independent pricing service to value
municipal bonds. The independent pricing service takes into
consideration yield, stability, risk, quality, coupon rate, maturity,
type of issue, trading characteristics, special circumstances of a
security or trading market, and any other factors or market data it
considers relevant in determining valuations for normal institutional
size trading units of debt securities, and does not rely exclusively on
quoted prices.
Redeeming Shares
The Fund redeems Shares at the next computed net asset value, less any
applicable contingent deferred sales charge, after the Fund receives the
redemption request. Redemption procedures are explained in the
combined prospectus under "How To Redeem Shares."
Although State Street Bank does not charge for telephone redemptions, it
reserves the right to charge a fee for the cost of wire-transferred
redemptions of less than $5,000.
Tax Status
The Fund's Tax Status
The Fund will pay no federal income tax because it expects to meet
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund
must, among other requirements:
o derive at least 90% of its gross income from dividends,
interest, and gains from the sale of securities;
o derive less than 30% of its gross income from the sale of
securities held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income
earned during the year.
Total Return
The Fund's average annual total return based on offering price
for Class A Shares for the one-year, five-year, and ten-year periods
ended March 31, 1995, was 1.11%, 6.68%, and 8.86%,
respectively. The Fund's cumulative total return based
on offering price for Class B Shares for the period from July 26, 1994
(date of initial public offering for Class B Shares) to March 31, 1995,
was (2.17%). The Fund's one-year average annual total return based on
offering price for Class C Shares for the period ended March 31,
1995 and for the period from April 20, 1993 (date of initial public
offering for Class C Shares) to March 31, 1995, was 3.91% and
2.61%, respectively.
The average annual total return for each class of Shares of the Fund is
the average compounded rate of return for a given period that would
equate a $1,000 initial investment to the ending redeemable value of
that investment. The ending redeemable value is computed by multiplying
the number of shares owned at the end of the period by the net asset
value per share at the end of the period. The number of shares owned at
the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, less any applicable sales load
adjusted over the period by any additional Shares, assuming the monthly
reinvestment of all dividends and distributions. Any applicable
contingent deferred sales charge is deducted from the ending value of
the investment based on the lesser of the original purchase price or the
net asset value of Shares redeemed.
Cumulative total return reflects the Class B Shares'
total performance over a specific period of time. This total return
assumes and is reduced by the payment of the maximum sales load and
contingent deferred sales charge, if applicable. The Class
B Shares' total return is representative of only
eight months of investment activity since the start of
performance.
Yield
The Fund's yields for the thirty-day period ended March 31,
1995 for Class A Shares, Class B Shares,
and Class C Shares were 5.10%, 4.44%, and 4.45%,
respectively.
The yield for each class of Shares of the Fund is determined by dividing
the net investment income per share (as defined by the Securities and
Exchange Commission) earned by any class of Shares over a thirty-day
period by the maximum offering price per share of the respective class
on the last day of the period. This value is then annualized using semi-
annual compounding. This means that the amount of income generated
during the thirty-day period is assumed to be generated each month over
a 12-month period and is reinvested every six months. The yield does not
necessarily reflect income actually earned by the Fund because of
certain adjustments required by the Securities and Exchange Commission
and therefore, may not correlate to the dividends or other distributions
paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees
in connection with services provided in conjunction with an investment
in any class of Shares, the performance will be reduced for those
shareholders paying those fees.
Tax-Equivalent Yield
The Fund's tax-equivalent yields for the thirty-day
period ended March 31, 1995 for Class A
Shares, Class B Shares, and Class C Shares
were 7.08%, 6.17%, and 6.18%, respectively.
The tax-equivalent yield of the Fund is calculated similarly to the
yield, but is adjusted to reflect the taxable yield that the Fund would
have had to earn to equal its actual yield, assuming a 28% tax rate and
assuming that income is 100% tax-exempt.
Tax-Equivalency Table
A tax-equivalency table may be used in advertising and sales
literature. The interest earned by the municipal securities in the
Fund's portfolio generally remains free from federal regular income
tax*, and is often free from state and local taxes as well. As the table
on the next page indicates, a "tax-free" investment can be an attractive
choice for investors, particularly in times of narrow spreads between
tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
MULTISTATE MUNICIPAL FUND
FEDERAL INCOME TAX BRACKET:
15.00% 28.00% 31.00% 36.00%
39.60%
Joint $1- $39,001 - $94,251 - $143,601 - OVER
Return 39,000 94,250 143,600 256,500 256,500
Single Return $1- $23,351 - $56,551 - $117,951 - OVER
23,350 56,550 117,950 256,500 $256,500
Tax-Exempt
Yield Taxable Yield Equivalent
1.00% 1.18% 1.39% 1.45% 1.56%
1.66%
1.50% 1.76% 2.08% 2.17% 2.34%
2.48%
2.00% 2.35% 2.78% 2.90% 3.13%
3.31%
2.50% 2.94% 3.47% 3.62% 2.91%
4.14%
3.00% 3.53% 4.17% 4.35% 4.69%
4.97%
3.50% 4.12% 4.86% 5.07% 5.47%
5.79%
4.00% 4.71% 5.56% 5.80% 6.25%
6.62%
4.50% 5.29% 6.25% 6.52% 7.03%
7.45%
5.00% 5.88% 6.94% 7.25% 7.81%
8.28%
5.50% 6.47% 7.64% 7.97% 8.59%
9.11%
6.00% 7.06% 8.33% 8.70% 9.38%
9.93%
6.50% 7.65% 9.03% 9.42% 10.16%
10.76%
7.00% 8.24% 9.72% 10.14% 10.94%
11.59%
7.50% 8.82% 10.42% 10.87% 11.72%
12.42%
8.00% 9.41% 11.11% 11.59% 12.50%
13.25%
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN
CALCULATING THE
TAXABLE YIELD EQUIVALENT.
The chart above is for illustrative purposes only. It is not an
indicator of past or future performance of the Fund.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local taxes.
Performance Comparisons
The performance of each of the classes of Shares depends upon such
variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio
securities;
o changes in the Fund's or any class of Shares' expenses; and
o various other factors.
The Fund's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net earnings
and offering price per share are factors in the computation of yield and
total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition
of any index used, prevailing market conditions, portfolio compositions
of other funds, and methods used to value portfolio securities and
compute offering price. The financial publications and/or indices which
the Fund uses in advertising may include:
o Lipper Analytical Services, Inc. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any
change in net asset value over a specific period of time. From
time to time, the Fund will quote its Lipper ranking in the
general municipal bond funds category in advertising and sales
literature.
o Lehman Brothers Revenue Bond Index is a total return
performance benchmark for the long-term, investment grade, revenue
bond market. Returns and attribute for the index are calculated
semi-monthly.
o Lehman Seven Year State General Obligations Index is an index
of general obligation bonds rated A or better with 6-8 years to
maturity.
o Morningstar, Inc., an independent rating service, is the
publisher of the bi-weekly Mutual Fund Values. Mutual Fund Values
rates more than 1,000 NASDAQ-listed mutual funds of all types,
according to their risk-adjusted returns.
The maximum rating is five stars, and ratings are effective for two
weeks.
Advertisements and other sales literature for any class of Shares may
quote total returns which are calculated on non-standardized base
periods. These total returns represent the historic change in the value
of an investment in any of the classes of Shares based on monthly
reinvestment of dividends over a specified period of time.
From time to time as it deems appropriate, the Fund may advertise the
performance of any of the classes of Shares using charts, graphs, and
descriptions, compared to federally insured bank products including
certificates of deposit and time deposits and to money market funds
using the Lipper Analytical Services money market instruments average.
Advertisements may quote performance which does not reflect the effect
of the sales charge for Class A Shares.
About Federated Investors
Federated is dedicated to meeting investor needs which is reflected in
its investment decision making structured, straightforward, and
consistent. This has resulted in a history of competitive performance
with a range of competitive investment products that have gained the
confidence of thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research.
Investment decisions are made and executed by teams of portfolio
managers, analysts, and traders dedicated to specific market sectors.
In the municipal sector, as of December 31, 1994, Federated managed 18
bond funds with approximately $1.9 billion in assets and 18 money market
funds with approximately $6.6 billion in total assets. In 1976,
Federated introduced one of the first municipal bond mutual funds in the
industry and is now one of the largest institutional buyers of municipal
securities.
J. Thomas Madden, Executive Vice President, oversees Federated's equity
and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated's domestic fixed income
management. Henry A. Frantzen, Executive Vice President, oversees the
management of Federated's international portfolios.
Mutual Fund Market
Twenty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $2 trillion to the more than 5,500
funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds
for a variety of investment applications. Specific markets include:
Institutional
Federated meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds
for a variety of applications, including defined benefit and defined
contribution programs, cash management, and asset/liability management.
Institutional clients include corporations, pension funds, tax-exempt
entities, foundations/endowments, insurance companies, and investment
and financial advisors. The marketing effort to these institutional
clients is headed by John B. Fisher, President, Institutional Sales
Division.
Trust Organizations
Other institutional clients include close relationships with more than
1,500 banks and trust organizations. Virtually all of the trust
divisions of the top 100 bank holding companies use Federated funds in
their clients' portfolios. The marketing effort to trust clients is
headed by Mark R. Gensheimer, Executive Vice President, Bank Marketing &
Sales.
Broker/dealers and bank broker/dealer subsidiaries
Federated mutual funds are available to consumers through major
brokerage firms nationwide--including 200
New York Stock Exchange firms--supported by more wholesalers than any
other mutual fund distributor. The marketing effort to these firms is
headed by James F. Getz, President, Broker/Dealer Division.
*source: Investment Company Institute
Financial Statements
The Financial Statements for the fiscal year ended March 31,
1995, are incorporated herein by reference to the Annual Report of
the Fund dated March 31, 1995 (File Nos. 2-57181 and 811-
2677). A copy of this report may be obtained without charge by
contacting the Fund.
Appendix
Standard and Poor's Ratings Group Municipal Bond Rating
Definitions
AAA--Debt rated "AAA" has the highest rating assigned by
Standard & Poor's Ratings Group. Capacity to pay interest
and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay
interest and repay principal and differs from the higher rated issues
only in small degree.
A--Debt rated "A" has a strong capacity to pay interest
and repay principal although it is somewhat more susceptible to the
adverse effect of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB--Debt rated "BBB" is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to
pay interest and repay principal for debt in this category than in
higher rated categories.
BB--Debt rated "BB" has less near-term vulnerability to
default than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely
interest and principal payments. The "BB" rating category
is also used for debt subordinated to senior debt that is assigned an
actual or implied "BBB"- rating.
B--Debt rated "B" has a greater vulnerability to default
but currently has the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will
likely impair capacity or willingness to pay interest and repay
principal.
The 'B' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
"BB "or "BB"- rating.
Moody's Investors Service, Inc. Municipal Bond Rating Definitions
Aaa--Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of.protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor
poorly secured). Interest payments and principal security
appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often
the protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both
good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
530900109
530900406
530900208
8051601B (5/95)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements. (Incorporated into the Prospectus
(Part A) by reference to the Registrant's Annual Report
dated March 3l, l995 ; File Nos. 2-57181 and 811-2677);
(b) Exhibits and Consents:
(1) Copy of Articles of Incorporation of the Registrant,
as amended (l.,2.);
(2) (i) Copy of By-Laws of the Registrant, as amended
(l.,2.,3.,6.);
(ii) Copy of Amendment to By-Laws effective August 26,
l987 (8.);
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of Capital
Stock of the Registrant (1.);
(5) Conformed Copy of Investment Advisory Contract of the
Registrant (9.);
(6) (i) Conformed Copy of Administrative Support and
Distributor's Contract of the Registrant (12);
(ii) Conformed Copy of Exhibit D to the Distributor's
Contract; +
(7) Not applicable;
(8) Conformed Copy of Custodian Contract of the
Registrant; +
(9) (i) Conformed Copy of Shareholder Services Plan; +
(ii) Conformed Copy of Agreement for Fund
Accounting, Shareholder Recordkeeping and Custody
Services Procurement; +
(iii) Conformed Copy of Administrative Services
Agreement; +
(iv) Conformed Copy of Shareholder Services
Agreement; +
(v) Form of Shareholder Services Sub-Contract; +
_____________________
+All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form S-5 filed September 24, 1976. (File Nos.
2 57181 and 811-2677)
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 2 on Form S-5 filed October 1, 1976. (File Nos. 2-57181
and 811-2677)
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 21 on Form N-1A filed November 28, 1983. (File Nos. 2-
57181 and 811-2677)
6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 31 on Form N-1A filed June 8, 1988. (File Nos. 2-57181
and 811-2677)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 35 on Form N-1A filed July 27, 1989. (File Nos. 2-57181
and 811-2677)
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 36 on Form N-1A filed July 17, 1990. (File Nos. 2-57181
and 811-2677)
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 42 on Form N-1A filed May 25, 1994. (File Nos. 2-57181
and 811-2677)
(10) Not applicable.
(11) Conformed Copy of Consent of Independent Public
Auditors;+
(12) Not applicable;
(13) Not applicable;
(14) Not applicable;
(15) (i) Copy of Distribution Plan of the
Registrant (5.);
(ii) Sales Agreement of the Registrant (6.);
(iii) Conformed Copy of 12b-1 Agreement of the
Registrant (12);
(iv) Conformed Copy of Exhibit C of the 12b-1
Agreement; +
(v) Copy of Dealer Agreement of the Registrant (5.);
(16) Schedule for Computation of Fund Performance Data
(7.);
(17) Copy of Financial Data Schedules; +
(18) Not Applicable;
(19) Conformed copy of Power of Attorney; +
Item 25. Persons Controlled by or Under Common Control with Registrant:
None.
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of May 5, 1995
Shares of capital stock
($0.0l per share par value)
Class A Shares 26,225
Class B Shares 570
Class C Shares 679
Item 27. Indemnification:(ll)
______________________
+All exhibits have been filed electronically.
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 29 on Form N-1A filed July 14, 1987. (File Nos. 2-57181
and 811-2677)
6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 31 on Form N-1A filed June 8, 1988. (File Nos. 2-57181
and 811-2677)
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 32 on Form N-1A filed July 19, 1988. (File Nos. 2-57181
and 811-2677)
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 38 on Form N-1A filed July 22, 1992. (File Nos. 2-57181
and 811-2677)
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 42 on Form N-1A filed May 25, 1994. (File Nos. 2-57181
and 811-2677)
Item 28. Business and Other Connections of Investment Adviser:
(a) For a description of the other business of the investment
adviser, see the section entitled "Fund Information -
Management of the Fund" in Part A. The affiliations with the
Registrant of four of the Directors and one of the Officers
of the investment adviser are included in Part A of this
Registration Statement under "Fund Management - Officers and
Directors." The remaining Directors of the investment
adviser, his position with the investment adviser, and, in
parentheses, his principal occupation is: Mark D. Olson,
Partner, Wilson, Halbrook & Bayard, 107 W. Market Street,
Georgetown, Delaware 19947.
The remaining Officers of the investment adviser are: William
D. Dawson, III, J. Thomas Madden, and Mark L. Mallon,
Executive Vice Presidents; Henry J. Gailliot, Senior Vice
President-Economist; Peter R. Anderson and J. Alan Minteer,
Senior Vice Presidents; J. Scott Albrecht, Randall A. Bauer,
David A. Briggs, Jonathan C. Conley, Deborah A. Cunningham,
Michael P. Donnelly, Mark E. Durbiano, Kathleen M. Foody-
Malus, Thomas M. Franks, Edward C. Gonzales, Jeff A.
Kozemchek, Marian R. Marinack, John W. McGonigle, Gregory M.
Melvin, Susan M. Nason, Mary Jo Ochson, Robert J. Ostrowski,
Frederick L. Plautz, Jr., Charles A. Ritter, James D.
Roberge, Sandra L. Weber, and Christopher H. Wiles, Vice
Presidents, Edward C. Gonzales, Treasurer, and John W.
McGonigle, Secretary. The business address of each of the
Officers of the investment adviser is Federated Investors
Tower, Pittsburgh, PA 15222-3779. These individuals are also
officers of a majority of the investment advisers to the
Funds listed in Part B of this Registration Statement.
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the
following open-end investment companies: A.T. Ohio Municipal
Money Fund; Alexander Hamilton Funds; American Leaders Fund,
Inc.; Annuity Management Series; Automated Cash Management
Fund; Automated Government Money Fund; BayFunds; The
Biltmore Funds; The Biltmore Municipal Funds; The Boulevard
Funds; California Municipal Cash Fund; Cambridge Series Fund;
Cash Fund Series, Inc.; Cash Fund Series II; DG Investor
Series; Edward D. Jones & Co. Daily Passport Cash Fund; FT
Series, Inc.; Federated ARMs Fund; Federated Exchange Fund,
Ltd.; Federated GNMA Fund; Federated Government Fund;
Federated Growth Fund; Federated High Yield Fund; Federated
Income Securities Fund; Federated Income Fund; Federated
Index Fund; Federated Intermediate Government Fund; Federated
Master Fund; Federated Municipal Fund; Federated Short-
Intermediate Government Fund; Federated Short-Term U.S.
Government Fund; Federated Stock Fund; Federated Tax-Free
Fund; Federated U.S. Government Bond Fund; Financial Reserves
Fund; First Priority Funds; First Union Funds; Fixed Income
Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress
Utility Fund, Inc.; Fountain Square Funds; Fund for U.S.
Government Securities, Inc.; Government Income Securities,
Inc.; High Yield Cash Fund; Independence One Mutual Funds;
Insight Institutional Series, Inc.; Insurance Management
Series; Intermediate Municipal Fund; Investment Series Funds,
Inc.; Investment Series Fund; Liberty Equity Income Fund,
Inc.; Liberty High Income Bond Fund, Inc.; Liberty Term Fund,
Inc.-1999; Liberty U.S. Government Money Market Fund; Liberty
Utility Fund, Inc.; Liquid Cash Fund; Mark Twain Funds;
Marshall Funds, Inc.; Money Market Management, Inc.; Money
Market Obligations Fund; Money Market Fund; The Monitor
Funds; Municipal Securities Income Fund; New York Municipal
Cash Fund; 111 Corcoran Funds; Peachtree Funds; The Planters
Funds; Portage Funds; RIMCO Monument Funds; The Shawmut
Funds; Short-Term Municipal Fund; Signet Select Funds;
SouthTrust Vulcan Funds; Star Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds; Targeted Duration Fund; Tax-Free Instruments Fund;
Tower Mutual Funds; Trademark Funds; Fund for Financial
Institutions; Fund for Government Cash Reserves; Fund for
Short-Term U.S. Government Securities; Fund for U.S. Treasury
Obligations; Vision Fiduciary Funds, Inc.; Vision Group of
Funds, Inc.; The Virtus Funds; and World Investment Series,
Inc.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, and
Asst. Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice Vice President
Federated Investors Tower President, and Treasurer, and Treasurer
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice Vice President and
Federated Investors Tower President, and Assistant Secretary
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Fund
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard W. Boyd Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertosn Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph L. Epstein Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael D. Fitzgerald Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David C. Glabicki Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Craig S. Gonzales Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William J. Kerns Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Stephen A. LaVersa Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Francis J. Matten, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Jeffrey Niss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charles A. Robison Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John C. Shelar, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jamie M. Teschner Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Federated Assistant
Federated Investors Tower Securities Corp. Secretary
Pittsburgh, PA 15222-3779
Item 30. Location of Accounts and Records:
Liberty Municipal Securities Federated Investors Tower
Fund, Inc. Pittsburgh, PA 15222-3779
Federated Services Company P.O. Box 8600
("Transfer Agent and Dividend Boston, MA 02266-8600
Disbursing Agent")
Federated Administrative Services Federated Investors Tower
("Administrator") Pittsburgh, PA 15222-3779
Federated Advisers Federated Investors Tower
("Adviser") Pittsburgh, PA 15222-3779
State Street Bank and Trust Box 8600
Company Boston, Massachusetts
("Custodian") 02266-8600
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
Registrant hereby undertakes to comply with the provisions of
Section 16 (c) of the 1940 Act with respect to the removal of
Directors and the calling of special shareholder meetings by
shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, LIBERTY MUNICIPAL
SECURITIES FUND, INC., certifies that it meets the requirements for
effectiveness of this Amendment to its Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
Amendment to its Registration Statement to be signed on its behalf by
the undersigned, thereto duly authorized, in the City of Pittsburgh and
Commonwealth of Pennsylvania, on the 25th day of May, 1995.
LIBERTY MUNICIPAL SECURITIES FUND, INC.,
BY: /s/Charles H. Field
Charles H. Field, Assistant Secretary
Attorney in Fact for John F. Donahue
May 25, 1995
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE DATE
By: /s/Charles H. Field
Charles H. Field Attorney In Fact May 25, 1995
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Director
(Chief Executive Officer)
J. Christopher Donahue* President and Director
Edward C. Gonzales* Vice President and Treasurer
(Principal Financial and
Accounting Officer)
Thomas G. Bigley* Director
John T. Conroy, Jr.* Director
William J. Copeland* Director
James E. Dowd* Director
Lawrence D. Ellis, M.D.* Director
Edward L. Flaherty, Jr.* Director
Peter E. Madden* Director
Gregor F. Meyer* Director
John E. Murray, Jr.* Director
Wesley W. Posvar* Director
Marjorie P. Smuts* Director
* By Power of Attorney
EX-99.AUDITORCONSNT
2
Exhibit 11 under Form N-1A
Exhibit 23 under 601/Reg S-K
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Shareholders of
Liberty Municipal Securities Fund, Inc.:
We consent to the use in Post-Effective Amendment No. 45 to Registration
Statement (No 2-57181) of Liberty Municipal Securities Fund, Inc., of our
report dated May 15, 1995, appearing in the Annual Report for the Liberty
Municipal Securities Fund, Inc.for the year ended March 31, 1995, and to
the reference to us under the heading "Financial Highlights" in the
Combined Prospectus which is a part of such Registration Statement.
By: DELOITTE & TOUCHE
Deloitte & Touche
Pittsburgh, Pennsylvania
May 22, 1995
EX-99.POWEROFATTY
3
Exhibit 19 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of (**SEE BELOW**) and the
Assistant 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
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 attorney-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 attorney-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 April 28, 1995
John F. Donahue (Chief Executive Officer)
/s/ J. CHRISTOPHER DONAHUE President and Director April 28, 1995
J. Christopher Donahue
/s/ EDWARD C. GONZALES Vice President and TreasurerApril 28, 1995
Edward C. Gonzales (Principal Financial and
Accounting Officer)
/s/ THOMAS G. BIGLEY Director April 28, 1995
Thomas G. Bigley
/s/ JOHN T. CONROY, JR. Director April 28, 1995
John T. Conroy, Jr.
/s/ WILLIAM J. COPELAND Director April 28, 1995
William J. Copeland
**LIBERTY MUNICIPAL SECURITIES FUND, INC.
SIGNATURES TITLE DATE
/s/ JAMES E. DOWD Director April 28, 1995
James E. Dowd
/s/ LAWRENCE D. ELLIS, M.D. Director April 28, 1995
Lawrence D. Ellis, M.D.
/s/ EDWARD L. FLAHERTY, JR. Director April 28, 1995
Edward L. Flaherty, Jr.
/s/ PETER E. MADDEN Director April 28, 1995
Peter E. Madden
/s/ GREGOR F. MEYER Director April 28, 1995
Gregor F. Meyer
/s/ JOHN E. MURRAY, JR. Director April 28, 1995
John E. Murray, Jr.
/s/ WESLEY W. POSVAR Director April 28, 1995
Wesley W. Posvar
/s/ MARJORIE P. SMUTS Director April 28, 1995
Marjorie P. Smuts
Sworn to and subscribed before me this 28th day of April, 1995
/s/ MARIE M. HAMM
Marie M. Hamm
EX-99.DISTCONTRACT
4
Exhibit 6(ii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
Exhibit D
to the
Distributor's Contract
Liberty Municipal Securities Fund, Inc.
Class B Shares
The following provisions are hereby incorporated and made part of
the Distributor's Contract dated the 1st day of March, 1993, between
Liberty Municipal Securities Fund, Inc. and Federated Securities Corp.
with respect to Classes of the Funds set forth above.
1. The Corporation hereby appoints FSC to engage in activities
principally intended to result in the sale of shares of the above-listed
Classes ("Shares"). Pursuant to this appointment, FSC is authorized to
select a group of brokers ("Brokers") to sell Shares at the current
offering price thereof as described and set forth in the respective
prospectuses of the Corporation, and to render administrative support
services to the Corporation and its shareholders. In addition, FSC is
authorized to select a group of administrators ("Administrators") to
render administrative support services to the Corporation and its
shareholders.
2. Administrative support services may include, but are not
limited to, the following functions: 1) account openings: the Broker
or Administrator communicates account openings via computer terminals
located on the Broker's or Administrator's premises; 2) account
closings: the Broker or Administrator communicates account closings via
computer terminals; 3) enter purchase transactions: purchase
transactions are entered through the Broker's or Administrator's own
personal computer or through the use of a toll-free telephone number; 4)
enter redemption transactions: Broker or Administrator enters
redemption transactions in the same manner as purchases; 5) account
maintenance: Broker or Administrator provides or arranges to provide
accounting support for all transactions. Broker or Administrator also
wires funds and receives funds for Corporation share purchases and
redemptions, confirms and reconciles all transactions, reviews the
activity in the Corporation's accounts, and provides training and
supervision of its personnel; 6) interest posting: Broker or
Administrator posts and reinvests dividends to the Corporation's
accounts; 7) prospectus and shareholder reports: Broker or
Administrator maintains and distributes current copies of prospectuses
and shareholder reports; 8) advertisements: the Broker or Administrator
continuously advertises the availability of its services and products;
9) customer lists: the Broker or Administrator continuously provides
names of potential customers; 10) design services: the Broker or
Administrator continuously designs material to send to customers and
develops methods of making such materials accessible to customers; and
11) consultation services: the Broker or Administrator continuously
provides information about the product needs of customers.
3. During the term of this Agreement, the Corporation will pay
FSC for services pursuant to this Agreement, a monthly fee computed at
the annual rate of .75 of 1.00% of the average aggregate net asset value
of the Class B Shares held during the month. For the month in which
this Agreement becomes effective or terminates, there shall be an
appropriate proration of any fee payable on the basis of the number of
days that the Agreement is in effect during the month.
4. FSC may from time-to-time and for such periods as it deems
appropriate reduce its compensation to the extent any Classes' expenses
exceed such lower expense limitation as FSC may, by notice to the
Corporation, voluntarily declare to be effective.
5. FSC will enter into separate written agreements with various
firms to provide certain of the services set forth in Paragraph 1
herein. FSC, in its sole discretion, may pay Brokers and Administrators
a periodic fee in respect of Shares owned from time to time by their
clients or customers. The schedules of such fees and the basis upon
which such fees will be paid shall be determined from time to time by
FSC in its sole discretion.
6. FSC will prepare reports to the Board of Directors of the
Corporation on a quarterly basis showing amounts expended hereunder
including amounts paid to Brokers and Administrators and the purpose for
such payments.
In consideration of the mutual covenants set forth in the
Distributor's Contract dated March 1, 1993, between Liberty Municipal
Securities Fund, Inc. and Federated Securities Corp., Liberty Municipal
Securities Fund, Inc. executes and delivers this Exhibit on behalf of
the Funds, and with respect to the separate Classes of Shares thereof,
first set forth in this Exhibit.
Witness the due execution hereof this 1st day of June, 1994.
ATTEST: LIBERTY MUNICIPAL SECURITIES
FUND, INC.
/s/ John W. McGonigle By: /s/ J. Christopher Donahue
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ S. Elliott Cohan By: /s/ Edward C. Gonzales
Secretary President
(SEAL)
EX-99.CUSTODYK
5
Exhibit 8 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
CUSTODIAN CONTRACT
Between
FEDERATED INVESTMENT COMPANIES
and
STATE STREET BANK AND TRUST COMPANY
and
FEDERATED SERVICES COMPANY
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held by It 1
2. Duties of the Custodian With Respect to Property of the Funds Held
by the Custodian 2
2.1 Holding Securities 2
2.2 Delivery of Securities 2
2.3 Registration of Securities 5
2.4 Bank Accounts 6
2.5 Payments for Shares 7
2.6 Availability of Federal Funds 7
2.7 Collection of Income 7
2.8 Payment of Fund Moneys 8
2.9 Liability for Payment in Advance of Receipt of Securities
Purchased. 9
2.10 Payments for Repurchases or Redemptions of Shares of a Fund 9
2.11 Appointment of Agents 10
2.12 Deposit of Fund Assets in Securities System 10
2.13 Segregated Account 12
2.14 Joint Repurchase Agreements 13
2.15 Ownership Certificates for Tax Purposes 13
2.16 Proxies 13
2.17 Communications Relating to Fund Portfolio Securities 13
2.18 Proper Instructions 14
2.19 Actions Permitted Without Express Authority 14
2.20 Evidence of Authority 15
2.21 Notice to Trust by Custodian Regarding Cash Movement. 15
3. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income 15
4. Records 16
5. Opinion of Funds' Independent Public Accountants/Auditors 16
6. Reports to Trust by Independent Public Accountants/Auditors 17
7. Compensation of Custodian 17
8. Responsibility of Custodian 17
9. Effective Period, Termination and Amendment 19
10. Successor Custodian 20
11. Interpretive and Additional Provisions 21
12. Massachusetts Law to Apply 22
13. Notices 22
14. Counterparts 22
15. Limitations of Liability 22
CUSTODIAN CONTRACT
This Contract between those INVESTMENT COMPANIES listed on Exhibit 1, as it
may be amended from time to time, (the "Trust"), which may be Massachusetts
business trusts or Maryland corporations or have such other form of
organization as may be indicated, on behalf of the portfolios (hereinafter
collectively called the "Funds" and individually referred to as a "Fund") of
the Trust, having its principal place of business at Federated Investors
Tower, Pittsburgh, Pennsylvania, 15222-3779, and STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company, having its principal place of business
at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian", and FEDERATED SERVICES COMPANY, a Delaware business trust
company, having its principal place of business at Federated Investors Tower,
Pittsburgh, Pennsylvania, 15222-3779, hereinafter called ("Company").
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Trust hereby employs the Custodian as the custodian of the assets of
each of the Funds of the Trust. Except as otherwise expressly provided
herein, the securities and other assets of each of the Funds shall be
segregated from the assets of each of the other Funds and from all other
persons and entities. The Trust will deliver to the Custodian all
securities and cash owned by the Funds and all payments of income,
payments of principal or capital distributions received by them with
respect to all securities owned by the Funds from time to time, and the
cash consideration received by them for shares ("Shares") of beneficial
interest/capital stock of the Funds as may be issued or sold from time
to time. The Custodian shall not be responsible for any property of the
Funds held or received by the Funds and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.18), the Custodian shall from time to time employ one or more sub-
custodians upon the terms specified in the Proper Instructions, provided
that the Custodian shall have no more or less responsibility or
liability to the Trust or any of the Funds on account of any actions or
omissions of any sub-custodian so employed than any such sub-custodian
has to the Custodian.
2. Duties of the Custodian With Respect to Property of the Funds Held
by the Custodian
2.1 Holding Securities. The Custodian shall hold and physically
segregate for the account of each Fund all non-cash property,
including all securities owned by each Fund, other than securities
which are maintained pursuant to Section 2.12 in a clearing agency
which acts as a securities depository or in a book-entry system
authorized by the U.S. Department of the Treasury, collectively
referred to herein as "Securities System", or securities which are
subject to a joint repurchase agreement with affiliated funds
pursuant to Section 2.14. The Custodian shall maintain records of
all receipts, deliveries and locations of such securities, together
with a current inventory thereof, and shall conduct periodic
physical inspections of certificates representing stocks, bonds and
other securities held by it under this Contract in such manner as
the Custodian shall determine from time to time to be advisable in
order to verify the accuracy of such inventory. With respect to
securities held by any agent appointed pursuant to Section 2.11
hereof, and with respect to securities held by any sub-custodian
appointed pursuant to Section 1 hereof, the Custodian may rely upon
certificates from such agent as to the holdings of such agent and
from such sub-custodian as to the holdings of such sub-custodian,
it being understood that such reliance in no way relieves the
Custodian of its responsibilities under this Contract. The
Custodian will promptly report to the Trust the results of such
inspections, indicating any shortages or discrepancies uncovered
thereby, and take appropriate action to remedy any such shortages
or discrepancies.
2.2 Delivery of Securities. The Custodian shall release and deliver
securities owned by a Fund held by the Custodian or in a Securities
System account of the Custodian only upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
(1) Upon sale of such securities for the account of a Fund and
receipt of payment therefor;
(2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Trust;
(3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
(4) To the depository agent in connection with tender or other
similar offers for portfolio securities of a Fund, in
accordance with the provisions of Section 2.17 hereof;
(5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to
be delivered to the Custodian;
(6) To the issuer thereof, or its agent, for transfer into the name
of a Fund or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.11 or into the name or nominee
name of any sub-custodian appointed pursuant to Section 1; or
for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new
securities are to be delivered to the Custodian;
(7) Upon the sale of such securities for the account of a Fund, to
the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery custom";
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own failure
to act in accordance with the standard of reasonable care or
any higher standard of care imposed upon the Custodian by any
applicable law or regulation if such above-stated standard of
reasonable care were not part of this Contract;
(8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered
to the Custodian;
(9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
(10)For delivery in connection with any loans of portfolio
securities of a Fund, but only against receipt of adequate
collateral in the form of (a) cash, in an amount specified by
the Trust, (b) certificated securities of a description
specified by the Trust, registered in the name of the Fund or
in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer, or (c)
securities of a description specified by the Trust, transferred
through a Securities System in accordance with Section 2.12
hereof;
(11)For delivery as security in connection with any borrowings
requiring a pledge of assets by a Fund, but only against
receipt of amounts borrowed, except that in cases where
additional collateral is required to secure a borrowing already
made, further securities may be released for the purpose;
(12)For delivery in accordance with the provisions of any agreement
among the Trust or a Fund, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934, as
amended, (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation
and of any registered national securities exchange, or of any
similar organization or organizations, regarding escrow or
other arrangements in connection with transactions for a Fund;
(13)For delivery in accordance with the provisions of any agreement
among the Trust or a Fund, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract Market, or any
similar organization or organizations, regarding account
deposits in connection with transaction for a Fund;
(14)Upon receipt of instructions from the transfer agent ("Transfer
Agent") for a Fund, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind,
in satisfaction of requests by holders of Shares for repurchase
or redemption; and
(15)For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions, a certified copy of a
resolution of the Executive Committee of the Trust on behalf of
a Fund signed by an officer of the Trust and certified by its
Secretary or an Assistant Secretary, specifying the securities
to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom
delivery of such securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian
(other than bearer securities) shall be registered in the name of a
particular Fund or in the name of any nominee of the Fund or of any
nominee of the Custodian which nominee shall be assigned
exclusively to the Fund, unless the Trust has authorized in writing
the appointment of a nominee to be used in common with other
registered investment companies affiliated with the Fund, or in the
name or nominee name of any agent appointed pursuant to Section
2.11 or in the name or nominee name of any sub-custodian appointed
pursuant to Section 1. All securities accepted by the Custodian on
behalf of a Fund under the terms of this Contract shall be in
"street name" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts in the name of each Fund, subject only to
draft or order by the Custodian acting pursuant to the terms of
this Contract, and shall hold in such account or accounts, subject
to the provisions hereof, all cash received by it from or for the
account of each Fund, other than cash maintained in a joint
repurchase account with other affiliated funds pursuant to Section
2.14 of this Contract or by a particular Fund in a bank account
established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940, as amended, (the "1940 Act").
Funds held by the Custodian for a Fund may be deposited by it to
its credit as Custodian in the Banking Department of the Custodian
or in such other banks or trust companies as it may in its
discretion deem necessary or desirable; provided, however, that
every such bank or trust company shall be qualified to act as a
custodian under the 1940 Act and that each such bank or trust
company and the funds to be deposited with each such bank or trust
company shall be approved by vote of a majority of the Board of
Trustees/Directors ("Board") of the Trust. Such funds shall be
deposited by the Custodian in its capacity as Custodian for the
Fund and shall be withdrawable by the Custodian only in that
capacity. If requested by the Trust, the Custodian shall furnish
the Trust, not later than twenty (20) days after the last business
day of each month, an internal reconciliation of the closing
balance as of that day in all accounts described in this section to
the balance shown on the daily cash report for that day rendered to
the Trust.
2.5 Payments for Shares. The Custodian shall make such arrangements
with the Transfer Agent of each Fund, as will enable the Custodian
to receive the cash consideration due to each Fund and will deposit
into each Fund's account such payments as are received from the
Transfer Agent. The Custodian will provide timely notification to
the Trust and the Transfer Agent of any receipt by it of payments
for Shares of the respective Fund.
2.6 Availability of Federal Funds. Upon mutual agreement between the
Trust and the Custodian, the Custodian shall make federal funds
available to the Funds as of specified times agreed upon from time
to time by the Trust and the Custodian in the amount of checks,
clearing house funds, and other non-federal funds received in
payment for Shares of the Funds which are deposited into the Funds'
accounts.
2.7 Collection of Income.
(1) The Custodian shall collect on a timely basis all income and
other payments with respect to registered securities held
hereunder to which each Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall
collect on a timely basis all income and other payments with
respect to bearer securities if, on the date of payment by the
issuer, such securities are held by the Custodian or its agent
thereof and shall credit such income, as collected, to each
Fund's custodian account. Without limiting the generality of
the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring
presentation as and when they become due and shall collect
interest when due on securities held hereunder. The collection
of income due the Funds on securities loaned pursuant to the
provisions of Section 2.2 (10) shall be the responsibility of
the Trust. The Custodian will have no duty or responsibility
in connection therewith, other than to provide the Trust with
such information or data as may be necessary to assist the
Trust in arranging for the timely delivery to the Custodian of
the income to which each Fund is properly entitled.
(2) The Custodian shall promptly notify the Trust whenever income
due on securities is not collected in due course and will
provide the Trust with monthly reports of the status of past
due income unless the parties otherwise agree.
2.8 Payment of Fund Moneys. Upon receipt of Proper Instructions, which
may be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out moneys of each Fund in the
following cases only:
(1) Upon the purchase of securities, futures contracts or options
on futures contracts for the account of a Fund but only (a)
against the delivery of such securities, or evidence of title
to futures contracts, to the Custodian (or any bank, banking
firm or trust company doing business in the United States or
abroad which is qualified under the 1940 Act to act as a
custodian and has been designated by the Custodian as its agent
for this purpose) registered in the name of the Fund or in the
name of a nominee of the Custodian referred to in Section 2.3
hereof or in proper form for transfer, (b) in the case of a
purchase effected through a Securities System, in accordance
with the conditions set forth in Section 2.12 hereof or (c) in
the case of repurchase agreements entered into between the
Trust and any other party, (i) against delivery of the
securities either in certificate form or through an entry
crediting the Custodian's account at the Federal Reserve Bank
with such securities or (ii) against delivery of the receipt
evidencing purchase for the account of the Fund of securities
owned by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from
the Fund;
(2) In connection with conversion, exchange or surrender of
securities owned by a Fund as set forth in Section 2.2 hereof;
(3) For the redemption or repurchase of Shares of a Fund issued by
the Trust as set forth in Section 2.10 hereof;
(4) For the payment of any expense or liability incurred by a Fund,
including but not limited to the following payments for the
account of the Fund: interest; taxes; management, accounting,
transfer agent and legal fees; and operating expenses of the
Fund, whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
(5) For the payment of any dividends on Shares of a Fund declared
pursuant to the governing documents of the Trust;
(6) For payment of the amount of dividends received in respect of
securities sold short;
(7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of the Executive Committee of the Trust on behalf of
a Fund signed by an officer of the Trust and certified by its
Secretary or an Assistant Secretary, specifying the amount of
such payment, setting forth the purpose for which such payment
is to be made, declaring such purpose to be a proper purpose,
and naming the person or persons to whom such payment is to be
made.
2.9 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for purchase of
securities for the account of a Fund is made by the Custodian in
advance of receipt of the securities purchased, in the absence of
specific written instructions from the Trust to so pay in advance,
the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been
received by the Custodian.
2.10Payments for Repurchases or Redemptions of Shares of a Fund. From
such funds as may be available for the purpose of repurchasing or
redeeming Shares of a Fund, but subject to the limitations of the
Declaration of Trust/Articles of Incorporation and any applicable
votes of the Board of the Trust pursuant thereto, the Custodian
shall, upon receipt of instructions from the Transfer Agent, make
funds available for payment to holders of shares of such Fund who
have delivered to the Transfer Agent a request for redemption or
repurchase of their shares including without limitation through
bank drafts, automated clearinghouse facilities, or by other means.
In connection with the redemption or repurchase of Shares of the
Funds, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders.
2.11Appointment of Agents. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other bank
or trust company which is itself qualified under the 1940 Act and
any applicable state law or regulation, to act as a custodian, as
its agent to carry out such of the provisions of this Section 2 as
the Custodian may from time to time direct; provided, however, that
the appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.12Deposit of Fund Assets in Securities System. The Custodian may
deposit and/or maintain securities owned by the Funds in a clearing
agency registered with the Securities and Exchange Commission
("SEC") under Section 17A of the Exchange Act, which acts as a
securities depository, or in the book-entry system authorized by
the U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities System" in
accordance with applicable Federal Reserve Board and SEC rules and
regulations, if any, and subject to the following provisions:
(1) The Custodian may keep securities of each Fund in a Securities
System provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for
customers;
(2) The records of the Custodian with respect to securities of the
Funds which are maintained in a Securities System shall
identify by book-entry those securities belonging to each Fund;
(3) The Custodian shall pay for securities purchased for the
account of each Fund upon (i) receipt of advice from the
Securities System that such securities have been transferred to
the Account, and (ii) the making of an entry on the records of
the Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall transfer securities
sold for the account of a Fund upon (i) receipt of advice from
the Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such transfer and
payment for the account of the Fund. Copies of all advices
from the Securities System of transfers of securities for the
account of a Fund shall identify the Fund, be maintained for
the Fund by the Custodian and be provided to the Trust at its
request. Upon request, the Custodian shall furnish the Trust
confirmation of each transfer to or from the account of a Fund
in the form of a written advice or notice and shall furnish to
the Trust copies of daily transaction sheets reflecting each
day's transactions in the Securities System for the account of
a Fund.
(4) The Custodian shall provide the Trust with any report obtained
by the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
(5) The Custodian shall have received the initial certificate,
required by Section 9 hereof;
(6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Trust for any loss or damage
to a Fund resulting from use of the Securities System by reason
of any negligence, misfeasance or misconduct of the Custodian
or any of its agents or of any of its or their employees or
from failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the Securities
System; at the election of the Trust, it shall be entitled to
be subrogated to the rights of the Custodian with respect to
any claim against the Securities System or any other person
which the Custodian may have as a consequence of any such loss
or damage if and to the extent that a Fund has not been made
whole for any such loss or damage.
(7) The authorization contained in this Section 2.12 shall not
relieve the Custodian from using reasonable care and diligence
in making use of any Securities System.
2.13Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or
accounts for and on behalf of each Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.12 hereof, (i) in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-dealer
registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the Commodity Exchange
Act), relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or
the Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions for a
Fund, (ii) for purpose of segregating cash or government securities
in connection with options purchased, sold or written for a Fund or
commodity futures contracts or options thereon purchased or sold
for a Fund, (iii) for the purpose of compliance by the Trust or a
Fund with the procedures required by any release or releases of the
SEC relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution
of the Board or of the Executive Committee signed by an officer of
the Trust and certified by the Secretary or an Assistant Secretary,
setting forth the purpose or purposes of such segregated account
and declaring such purposes to be proper corporate purposes.
2.14Joint Repurchase Agreements. Upon the receipt of Proper
Instructions, the Custodian shall deposit and/or maintain any
assets of a Fund and any affiliated funds which are subject to
joint repurchase transactions in an account established solely for
such transactions for the Fund and its affiliated funds. For
purposes of this Section 2.14, "affiliated funds" shall include all
investment companies and their portfolios for which subsidiaries or
affiliates of Federated Investors serve as investment advisers,
distributors or administrators in accordance with applicable
exemptive orders from the SEC. The requirements of segregation set
forth in Section 2.1 shall be deemed to be waived with respect to
such assets.
2.15Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of income
or other payments with respect to securities of a Fund held by it
and in connection with transfers of securities.
2.16Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than
in the name of a Fund or a nominee of a Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Trust such proxies, all proxy
soliciting materials and all notices relating to such securities.
2.17Communications Relating to Fund Portfolio Securities. The
Custodian shall transmit promptly to the Trust all written
information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection
therewith and notices of exercise of call and put options written
by the Fund and the maturity of futures contracts purchased or sold
by the Fund) received by the Custodian from issuers of the
securities being held for the Fund. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Trust
all written information received by the Custodian from issuers of
the securities whose tender or exchange is sought and from the
party (or his agents) making the tender or exchange offer. If the
Trust desires to take action with respect to any tender offer,
exchange offer or any other similar transaction, the Trust shall
notify the Custodian in writing at least three business days prior
to the date on which the Custodian is to take such action.
However, the Custodian shall nevertheless exercise its best efforts
to take such action in the event that notification is received
three business days or less prior to the date on which action is
required.
2.18Proper Instructions. Proper Instructions as used throughout this
Section 2 means a writing signed or initialed by one or more person
or persons as the Board shall have from time to time authorized.
Each such writing shall set forth the specific transaction or type
of transaction involved. Oral instructions will be deemed to be
Proper Instructions if (a) the Custodian reasonably believes them
to have been given by a person previously authorized in Proper
Instructions to give such instructions with respect to the
transaction involved, and (b) the Trust promptly causes such oral
instructions to be confirmed in writing. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to the
authorization by the Board of the Trust accompanied by a detailed
description of procedures approved by the Board, Proper
Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board
and the Custodian are satisfied that such procedures afford
adequate safeguards for a Fund's assets.
2.19Actions Permitted Without Express Authority. The Custodian may in
its discretion, without express authority from the Trust:
(1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Trust in such form that it may be
allocated to the affected Fund;
(2) surrender securities in temporary form for securities in
definitive form;
(3) endorse for collection, in the name of a Fund, checks, drafts
and other negotiable instruments; and
(4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property of
each Fund except as otherwise directed by the Trust.
2.20Evidence of Authority. The Custodian shall be protected in acting
upon any instructions, notice, request, consent, certificate or
other instrument or paper reasonably believed by it to be genuine
and to have been properly executed on behalf of a Fund. The
Custodian may receive and accept a certified copy of a vote of the
Board of the Trust as conclusive evidence (a) of the authority of
any person to act in accordance with such vote or (b) of any
determination of or any action by the Board pursuant to the
Declaration of Trust/Articles of Incorporation as described in such
vote, and such vote may be considered as in full force and effect
until receipt by the Custodian of written notice to the contrary.
2.21Notice to Trust by Custodian Regarding Cash Movement. The
Custodian will provide timely notification to the Trust of any
receipt of cash, income or payments to the Trust and the release of
cash or payment by the Trust.
3. Duties of Custodian With Respect to the Books of Account and Calculation
of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of the Trust to keep the
books of account of each Fund and/or compute the net asset value per
share of the outstanding Shares of each Fund or, if directed in writing
to do so by the Trust, shall itself keep such books of account and/or
compute such net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of a Fund as described in the
Fund's currently effective prospectus and Statement of Additional
Information ("Prospectus") and shall advise the Trust and the Transfer
Agent daily of the total amounts of such net income and, if instructed
in writing by an officer of the Trust to do so, shall advise the
Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per share
and the daily income of a Fund shall be made at the time or times
described from time to time in the Fund's currently effective
Prospectus.
4. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will
meet the obligations of the Trust and the Funds under the 1940 Act, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder, and specifically including identified cost records used for
tax purposes. All such records shall be the property of the Trust and
shall at all times during the regular business hours of the Custodian be
open for inspection by duly authorized officers, employees or agents of
the Trust and employees and agents of the SEC. In the event of
termination of this Contract, the Custodian will deliver all such
records to the Trust, to a successor Custodian, or to such other person
as the Trust may direct. The Custodian shall supply daily to the Trust
a tabulation of securities owned by a Fund and held by the Custodian and
shall, when requested to do so by the Trust and for such compensation as
shall be agreed upon between the Trust and the Custodian, include
certificate numbers in such tabulations.
5. Opinion of Funds' Independent Public Accountants/Auditors.
The Custodian shall take all reasonable action, as the Trust may from
time to time request, to obtain from year to year favorable opinions
from each Fund's independent public accountants/auditors with respect to
its activities hereunder in connection with the preparation of the
Fund's registration statement, periodic reports, or any other reports to
the SEC and with respect to any other requirements of such Commission.
6. Reports to Trust by Independent Public Accountants/Auditors.
The Custodian shall provide the Trust, at such times as the Trust may
reasonably require, with reports by independent public
accountants/auditors for each Fund on the accounting system, internal
accounting control and procedures for safeguarding securities, futures
contracts and options on futures contracts, including securities
deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian for the Fund under this Contract;
such reports shall be of sufficient scope and in sufficient detail, as
may reasonably be required by the Trust, to provide reasonable assurance
that any material inadequacies would be disclosed by such examination
and, if there are no such inadequacies, the reports shall so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time
between Company and the Custodian.
8. Responsibility of Custodian.
The Custodian shall be held to a standard of reasonable care in carrying
out the provisions of this Contract; provided, however, that the
Custodian shall be held to any higher standard of care which would be
imposed upon the Custodian by any applicable law or regulation if such
above stated standard of reasonable care was not part of this Contract.
The Custodian shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for the Trust) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to
such advice, provided that such action is not in violation of applicable
federal or state laws or regulations, and is in good faith and without
negligence. Subject to the limitations set forth in Section 15 hereof,
the Custodian shall be kept indemnified by the Trust but only from the
assets of the Fund involved in the issue at hand and be without
liability for any action taken or thing done by it in carrying out the
terms and provisions of this Contract in accordance with the above
standards.
In order that the indemnification provisions contained in this Section 8
shall apply, however, it is understood that if in any case the Trust may
be asked to indemnify or save the Custodian harmless, the Trust shall be
fully and promptly advised of all pertinent facts concerning the
situation in question, and it is further understood that the Custodian
will use all reasonable care to identify and notify the Trust promptly
concerning any situation which presents or appears likely to present the
probability of such a claim for indemnification. The Trust shall have
the option to defend the Custodian against any claim which may be the
subject of this indemnification, and in the event that the Trust so
elects it will so notify the Custodian and thereupon the Trust shall
take over complete defense of the claim, and the Custodian shall in such
situation initiate no further legal or other expenses for which it shall
seek indemnification under this Section. The Custodian shall in no case
confess any claim or make any compromise in any case in which the Trust
will be asked to indemnify the Custodian except with the Trust's prior
written consent.
Notwithstanding the foregoing, the responsibility of the Custodian with
respect to redemptions effected by check shall be in accordance with a
separate Agreement entered into between the Custodian and the Trust.
If the Trust requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action
may, in the reasonable opinion of the Custodian, result in the Custodian
or its nominee assigned to a Fund being liable for the payment of money
or incurring liability of some other form, the Custodian may request the
Trust, as a prerequisite to requiring the Custodian to take such action,
to provide indemnity to the Custodian in an amount and form satisfactory
to the Custodian.
Subject to the limitations set forth in Section 15 hereof, the Trust
agrees to indemnify and hold harmless the Custodian and its nominee from
and against all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) (referred to herein as authorized
charges) incurred or assessed against it or its nominee in connection
with the performance of this Contract, except such as may arise from it
or its nominee's own failure to act in accordance with the standard of
reasonable care or any higher standard of care which would be imposed
upon the Custodian by any applicable law or regulation if such above-
stated standard of reasonable care were not part of this Contract. To
secure any authorized charges and any advances of cash or securities
made by the Custodian to or for the benefit of a Fund for any purpose
which results in the Fund incurring an overdraft at the end of any
business day or for extraordinary or emergency purposes during any
business day, the Trust hereby grants to the Custodian a security
interest in and pledges to the Custodian securities held for the Fund by
the Custodian, in an amount not to exceed 10 percent of the Fund's gross
assets, the specific securities to be designated in writing from time to
time by the Trust or the Fund's investment adviser. Should the Trust
fail to make such designation, or should it instruct the Custodian to
make advances exceeding the percentage amount set forth above and should
the Custodian do so, the Trust hereby agrees that the Custodian shall
have a security interest in all securities or other property purchased
for a Fund with the advances by the Custodian, which securities or
property shall be deemed to be pledged to the Custodian, and the written
instructions of the Trust instructing their purchase shall be considered
the requisite description and designation of the property so pledged for
purposes of the requirements of the Uniform Commercial Code. Should the
Trust fail to cause a Fund to repay promptly any authorized charges or
advances of cash or securities, subject to the provision of the second
paragraph of this Section 8 regarding indemnification, the Custodian
shall be entitled to use available cash and to dispose of pledged
securities and property as is necessary to repay any such advances.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may
be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take
effect not sooner than sixty (60) days after the date of such delivery
or mailing; provided, however that the Custodian shall not act under
Section 2.12 hereof in the absence of receipt of an initial certificate
of the Secretary or an Assistant Secretary that the Board of the Trust
has approved the initial use of a particular Securities System as
required in each case by Rule 17f-4 under the 1940 Act; provided
further, however, that the Trust shall not amend or terminate this
Contract in contravention of any applicable federal or state
regulations, or any provision of the Declaration of Trust/Articles of
Incorporation, and further provided, that the Trust may at any time by
action of its Board (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the appropriate banking
regulatory agency or upon the happening of a like event at the direction
of an appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Trust shall pay to the Custodian
such compensation as may be due as of the date of such termination and
shall likewise reimburse the Custodian for its costs, expenses and
disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Board of the Trust,
the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form
for transfer, all securities then held by it hereunder for each Fund and
shall transfer to separate accounts of the successor custodian all of
each Fund's securities held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board
of the Trust, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board shall have been delivered to the
Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank
or trust company, which is a "bank" as defined in the 1940 Act, (delete
"doing business ... Massachusetts" unless SSBT is the Custodian) doing
business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $100,000,000, all securities, funds
and other properties held by the Custodian and all instruments held by
the Custodian relative thereto and all other property held by it under
this Contract for each Fund and to transfer to separate accounts of
such successor custodian all of each Fund's securities held in any
Securities System. Thereafter, such bank or trust company shall be the
successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing
to failure of the Trust to procure the certified copy of the vote
referred to or of the Board to appoint a successor custodian, the
Custodian shall be entitled to fair compensation for its services during
such period as the Custodian retains possession of such securities,
funds and other properties and the provisions of this Contract relating
to the duties and obligations of the Custodian shall remain in full
force and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and the
Trust may from time to time agree on such provisions interpretive of or
in addition to the provisions of this Contract as may in their joint
opinion be consistent with the general tenor of this Contract. Any such
interpretive or additional provisions shall be in a writing signed by
both parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Declaration of
Trust/Articles of Incorporation. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to
be an amendment of this Contract.
12. Massachusetts Law to Apply.
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
13. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at Federated
Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the
Custodian at address for SSBT only: 225 Franklin Street, Boston,
Massachusetts, 02110, or to such other address as the Trust or the
Custodian may hereafter specify, shall be deemed to have been properly
delivered or given hereunder to the respective address.
14. Counterparts.
This Contract may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
15. Limitations of Liability.
The Custodian is expressly put on notice of the limitation of liability
as set forth in Article XI of the Declaration of Trust of those Trusts
which are business trusts and agrees that the obligations and
liabilities assumed by the Trust and any Fund pursuant to this Contract,
including, without limitation, any obligation or liability to indemnify
the Custodian pursuant to Section 8 hereof, shall be limited in any case
to the relevant Fund and its assets and that the Custodian shall not
seek satisfaction of any such obligation from the shareholders of the
relevant Fund, from any other Fund or its shareholders or from the
Trustees, Officers, employees or agents of the Trust, or any of them.
In addition, in connection with the discharge and satisfaction of any
claim made by the Custodian against the Trust, for whatever reasons,
involving more than one Fund, the Trust shall have the exclusive right
to determine the appropriate allocations of liability for any such claim
between or among the Funds.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed effective as of the 1st day of December, 1993.
ATTEST: INVESTMENT COMPANIES
/s/John G. McGonigle_________ By /s/John G. Donahue_____________
John G. McGonigle John F. Donahue
Secretary Chairman
ATTEST: STATE STREET BANK AND TRUST
COMPANY
/s/ Ed McKenzie______________ By /s/ F. J. Sidoti, Jr.____________
(Assistant) Secretary Typed Name: Frank J. Sidoti, Jr.
Typed Name: Ed McKenzie Title: Vice President
ATTEST: FEDERATED SERVICES COMPANY
/s/ Jeannette Fisher-Garber______ By /s/ James J. Dolan________________
Jeannette Fisher-Garber James J. Dolan
Secretary President
EXHIBIT 1
CONTRACT
DATE INVESTMENT COMPANY
12/01/94 Liberty Municipal Securities Fund, Inc.
12/01/94 Class A Shares
12/01/94 Class B Shares
12/01/94 Class C Shares
EX-99.SSPLAN
6
Exhibit 9(i) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
SHAREHOLDER SERVICES PLAN
This Shareholder Services Plan ("Plan") is adopted as of this 1st day of
March, 1994, by the Boards of Directors or Trustees, as applicable (the
"Boards"), of those investment companies listed on Exhibit 1 hereto as may be
amended from time to time, having their principal office and place of business
at Federated Investors Tower, Pittsburgh, PA 15222-3779 (individually
referred to herein as a "Fund" and collectively as "Funds").
1. This Plan is adopted to allow the Funds to make payments as
contemplated herein to obtain certain personal services for shareholders
and/or the maintenance of shareholder accounts ("Services").
2. This Plan is designed to compensate Federated Shareholder Services
("FSS") for providing personal services and/or the maintenance of shareholder
accounts to the Funds and their shareholders. In compensation for the
services provided pursuant to this Plan, FSS may be paid a monthly fee
computed at the annual rate not to exceed .25 of 1% of the average aggregate
net asset value of the shares of each Fund held during the month.
3. Any payments made by the Funds to FSS pursuant to this Plan will be
made pursuant to a "Shareholder Services Agreement" between FSS and each of
the Funds.
4. Quarterly in each year that this Plan remains in effect, FSS shall
prepare and furnish to the Boards of the Funds, and the Boards shall review, a
written report of the amounts expended under the Plan.
5. This Plan shall become effective with regard to each Fund (i) after
approval by majority votes of: (a) such Fund's Board; and (b) the members of
the Board of such Fund who are not interested persons of such Fund and have no
direct or indirect financial interest in the operation of such Fund's Plan or
in any related documents to the Plan ("Independent Trustees or Directors"),
cast in person at a meeting called for the purpose of voting on the Plan.
6. This Plan shall remain in effect with respect to each Fund presently
set forth on an exhibit and any subsequent Fund added pursuant to an exhibit
during the initial year of this Plan for the period of one year from the date
set forth above and may be continued thereafter if this Plan is approved with
respect to each Fund at least annually by a majority of the relevant Fund's
Board and a majority of the Independent Trustees or
Directors, of such Fund as applicable, cast in person at a meeting
called for the purpose of voting on the renewal of such Plan. If this Plan
is adopted with respect to a fund after the first annual approval by the
Trustees or Directors as described above, this Plan will be effective as to
that Fund at such time as Exhibit 1 hereto is amended to add such Fund and
will continue in effect until the next annual approval of this Plan by the
Funds' Boards and thereafter for successive periods of one year subject to
approval as described above.
7. All material amendments to this Plan must be approved by a vote of
the Board of each Fund and of the Independent Directors or Trustees of such
Fund, cast in person at a meeting called for such purpose.
8. This Plan may be terminated as follows:
(a) at any time, without the payment of any penalty, by the vote of
a majority of the Independent Board Members of any Fund or by a
vote of a majority of the outstanding voting securities of any
Fund as defined in the Investment Company Act of 1940 on sixty
(60) days' written notice to the parties to this Agreement; or
(b) by any party to the Agreement without cause by giving the other
party at least sixty (60) days' written notice of its intention
to terminate.
9. While this Plan shall be in effect, the selection and nomination of
Independent Directors or Trustees of each Fund shall be committed to the
discretion of the Independent Directors or Trustees then in office.
10. All agreements with any person relating to the implementation of
this Plan shall be in writing and any agreement related to this Plan shall be
subject to termination, without penalty, pursuant to the provisions of
Paragraph 8 herein.
11. This Plan shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
Witness the due execution hereof this as of the date set forth above.
Investment Companies (listed on Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Shareholder Services
By: /s/ James J. Dolan
Title: President
Attest: /s/ John W. McGonigle
John W. McGonigle
Exhibit 1
Shareholder Services Plan
Liberty Municipal Securities Fund, Inc.
Class A Shares
Class B Shares
Class C Shares
EX-99.TACONTRACT
7
Exhibit 9(ii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AGREEMENT
for
FUND ACCOUNTING,
SHAREHOLDER RECORDKEEPING,
and
CUSTODY SERVICES PROCUREMENT
AGREEMENT made as of December 1, 1994, by and between those investment
companies listed on Exhibit 1 as may be amended from time to time, having
their principal office and place of business at Federated Investors Tower,
Pittsburgh, PA 15222-3779 (the "Trust"), on behalf of the portfolios
(individually referred to herein as a "Fund" and collectively as "Funds") of
the Trust, and FEDERATED SERVICES COMPANY, a Delaware business trust, having
its principal office and place of business at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779 (the "Company").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
with authorized and issued shares of capital stock or beneficial interest
("Shares"); and
WHEREAS, the Trust may desire to retain the Company to provide certain
pricing, accounting and recordkeeping services for each of the Funds,
including any classes of shares issued by any Fund ("Classes") if so indicated
on Exhibit 1, and the Company is willing to furnish such services; and
WHEREAS, the Trust may desire to appoint the Company as its transfer agent,
dividend disbursing agent if so indicated on Exhibit 1, and agent in
connection with certain other activities, and the Company desires to accept
such appointment; and
WHEREAS, the Trust may desire to appoint the Company as its agent to
select, negotiate and subcontract for custodian services from an approved list
of qualified banks if so indicated on Exhibit 1, and the Company desires to
accept such appointment; and
WHEREAS, from time to time the Trust may desire and may instruct the
Company to subcontract for the performance of certain of its duties and
responsibilities hereunder to State Street Bank and Trust Company or another
agent (the "Agent"); and
WHEREAS, the words Trust and Fund may be used interchangeably for those
investment companies consisting of only one portfolio;
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, and intending to be legally bound hereby, the parties hereto agree
as follows:
SECTION ONE: Fund Accounting.
Article 1. Appointment.
The Trust hereby appoints the Company to provide certain pricing and
accounting services to the Funds, and/or the Classes, for the period and on
the terms set forth in this Agreement. The Company accepts such appointment
and agrees to furnish the services herein set forth in return for the
compensation as provided in Article 3 of this Section.
Article 2. The Company's Duties.
Subject to the supervision and control of the Trust's Board of Trustees or
Directors ("Board"), the Company will assist the Trust with regard to fund
accounting for the Trust, and/or the Funds, and/or the Classes, and in
connection therewith undertakes to perform the following specific services;
A. Value the assets of the Funds using: primarily, market quotations,
including the use of matrix pricing, supplied by the independent
pricing services selected by the Company in consultation with the
adviser, or sources selected by the adviser, and reviewed by the
board; secondarily, if a designated pricing service does not provide a
price for a security which the Company believes should be available by
market quotation, the Company may obtain a price by calling brokers
designated by the investment adviser of the fund holding the security,
or if the adviser does not supply the names of such brokers, the
Company will attempt on its own to find brokers to price those
securities; thirdly, for securities for which no market price is
available, the Pricing Committee of the Board will determine a fair
value in good faith. Consistent with Rule 2a-4 of the 40 Act,
estimates may be used where necessary or appropriate. The Company's
obligations with regard to the prices received from outside pricing
services and designated brokers or other outside sources, is to
exercise reasonable care in the supervision of the pricing agent. The
Company is not the guarantor of the securities prices received from
such agents and the Company is not liable to the Fund for potential
errors in valuing a Fund's assets or calculating the net asset value
per share of such Fund or Class when the calculations are based upon
such prices. All of the above sources of prices used as described are
deemed by the Company to be authorized sources of security prices. The
Company provides daily to the adviser the securities prices used in
calculating the net asset value of the fund, for its use in preparing
exception reports for those prices on which the adviser has comment.
Further, upon receipt of the exception reports generated by the
adviser, the Company diligently pursues communication regarding
exception reports with the designated pricing agents.
B. Determine the net asset value per share of each Fund and/or Class, at
the time and in the manner from time to time determined by the Board
and as set forth in the Prospectus and Statement of Additional
Information ("Prospectus") of each Fund;
C. Calculate the net income of each of the Funds, if any;
D. Calculate capital gains or losses of each of the Funds resulting from
sale or disposition of assets, if any;
E. Maintain the general ledger and other accounts, books and financial
records of the Trust, including for each Fund, and/or Class, as
required under Section 31(a) of the 1940 Act and the Rules thereunder
in connection with the services provided by the Company;
F. Preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records to be maintained by Rule 31a-1 under the 1940 Act in
connection with the services provided by the Company. The Company
further agrees that all such records it maintains for the Trust are
the property of the Trust and further agrees to surrender promptly to
the Trust such records upon the Trust's request;
G. At the request of the Trust, prepare various reports or other financial
documents required by federal, state and other applicable laws and
regulations; and
H. Such other similar services as may be reasonably requested by the
Trust.
Article 3. Compensation and Allocation of Expenses.
A. The Funds will compensate the Company for its services rendered
pursuant to Section One of this Agreement in accordance with the fees
agreed upon from time to time between the parties hereto. Such fees do
not include out-of-pocket disbursements of the Company for which the
Funds shall reimburse the Company upon receipt of a separate invoice.
Out-of-pocket disbursements shall include, but shall not be limited
to, the items agreed upon between the parties from time to time.
B. The Fund and/or the Class, and not the Company, shall bear the cost of:
custodial expenses; membership dues in the Investment Company
Institute or any similar organization; transfer agency expenses;
investment advisory expenses; costs of printing and mailing stock
certificates, Prospectuses, reports and notices; administrative
expenses; interest on borrowed money; brokerage commissions; taxes and
fees payable to federal, state and other governmental agencies; fees
of Trustees or Directors of the Trust; independent auditors expenses;
Federated Administrative Services and/or Federated Administrative
Services, Inc. legal and audit department expenses billed to Federated
Services Company for work performed related to the Trust, the Funds,
or the Classes; law firm expenses; or other expenses not specified in
this Article 3 which may be properly payable by the Funds and/or
classes.
C. The compensation and out-of-pocket expenses shall be accrued by the
Fund and shall be paid to the Company no less frequently than monthly,
and shall be paid daily upon request of the Company. The Company will
maintain detailed information about the compensation and out-of-pocket
expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Trust and/or the Funds and a duly authorized officer of
the Company.
E. The fee for the period from the effective date of this Agreement with
respect to a Fund or a Class to the end of the initial month shall be
prorated according to the proportion that such period bears to the
full month period. Upon any termination of this Agreement before the
end of any month, the fee for such period shall be prorated according
to the proportion which such period bears to the full month period.
For purposes of determining fees payable to the Company, the value of
the Fund's net assets shall be computed at the time and in the manner
specified in the Fund's Prospectus.
F. The Company, in its sole discretion, may from time to time subcontract
to, employ or associate with itself such person or persons as the
Company may believe to be particularly suited to assist it in
performing services under this Section One. Such person or persons may
be third-party service providers, or they may be officers and
employees who are employed by both the Company and the Funds. The
compensation of such person or persons shall be paid by the Company
and no obligation shall be incurred on behalf of the Trust, the Funds,
or the Classes in such respect.
SECTION TWO: Shareholder Recordkeeping.
Article 4. Terms of Appointment.
Subject to the terms and conditions set forth in this Agreement, the Trust
hereby appoints the Company to act as, and the Company agrees to act as,
transfer agent and dividend disbursing agent for each Fund's Shares, and agent
in connection with any accumulation, open-account or similar plans provided to
the shareholders of any Fund ("Shareholder(s)"), including without limitation
any periodic investment plan or periodic withdrawal program.
As used throughout this Agreement, a "Proper Instruction" means a writing
signed or initialed by one or more person or persons as the Board shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved. Oral instructions will be deemed
to be Proper Instructions if (a) the Company reasonably believes them to have
been given by a person previously authorized in Proper Instructions to give
such instructions with respect to the transaction involved, and (b) the Trust,
or the Fund, and the Company promptly cause such oral instructions to be
confirmed in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that the
Trust, or the Fund, and the Company are satisfied that such procedures afford
adequate safeguards for the Fund's assets. Proper Instructions may only be
amended in writing.
Article 5. Duties of the Company.
The Company shall perform the following services in accordance with Proper
Instructions as may be provided from time to time by the Trust as to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase of
shares and promptly deliver payment and appropriate
documentation therefore to the custodian of the relevant Fund,
(the "Custodian"). The Company shall notify the Fund and the
Custodian on a daily basis of the total amount of orders and
payments so delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of Shares of each Fund and/or Class and hold
such Shares in the appropriate Shareholder accounts.
(3) For certificated Funds and/or Classes, if a Shareholder or its
agent requests a certificate, the Company, as Transfer Agent,
shall countersign and mail by first class mail, a certificate to
the Shareholder at its address as set forth on the transfer
books of the Funds, and/or Classes, subject to any Proper
Instructions regarding the delivery of certificates.
(4) In the event that any check or other order for the purchase of
Shares of the Fund and/or Class is returned unpaid for any
reason, the Company shall debit the Share account of the
Shareholder by the number of Shares that had been credited to
its account upon receipt of the check or other order, promptly
mail a debit advice to the Shareholder, and notify the Fund
and/or Class of its action. In the event that the amount paid
for such Shares exceeds proceeds of the redemption of such
Shares plus the amount of any dividends paid with respect to
such Shares, the Fund and/the Class or its distributor will
reimburse the Company on the amount of such excess.
B. Distribution
(1) Upon notification by the Funds of the declaration of any
distribution to Shareholders, the Company shall act as Dividend
Disbursing Agent for the Funds in accordance with the provisions
of its governing document and the then-current Prospectus of the
Fund. The Company shall prepare and mail or credit income,
capital gain, or any other payments to Shareholders. As the
Dividend Disbursing Agent, the Company shall, on or before the
payment date of any such distribution, notify the Custodian of
the estimated amount required to pay any portion of said
distribution which is payable in cash and request the Custodian
to make available sufficient funds for the cash amount to be
paid out. The Company shall reconcile the amounts so requested
and the amounts actually received with the Custodian on a daily
basis. If a Shareholder is entitled to receive additional Shares
by virtue of any such distribution or dividend, appropriate
credits shall be made to the Shareholder's account, for
certificated Funds and/or Classes, delivered where requested;
and
(2) The Company shall maintain records of account for each Fund and
Class and advise the Trust, each Fund and Class and its
Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or set
forth in Proper Instructions, deliver the appropriate
instructions therefor to the Custodian. The Company shall notify
the Funds on a daily basis of the total amount of redemption
requests processed and monies paid to the Company by the
Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds from
the Custodian with respect to any redemption, the Company shall
pay or cause to be paid the redemption proceeds in the manner
instructed by the redeeming Shareholders, pursuant to procedures
described in the then-current Prospectus of the Fund.
(3) If any certificate returned for redemption or other request for
redemption does not comply with the procedures for redemption
approved by the Fund, the Company shall promptly notify the
Shareholder of such fact, together with the reason therefor, and
shall effect such redemption at the price applicable to the date
and time of receipt of documents complying with said procedures.
(4) The Company shall effect transfers of Shares by the registered
owners thereof.
(5) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual
basis and report such actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each Fund,
and/or Class, and maintain pursuant to applicable rules of the
Securities and Exchange Commission ("SEC") a record of the total
number of Shares of the Fund and/or Class which are authorized,
based upon data provided to it by the Fund, and issued and
outstanding. The Company shall also provide the Fund on a
regular basis or upon reasonable request with the total number
of Shares which are authorized and issued and outstanding, but
shall have no obligation when recording the issuance of Shares,
except as otherwise set forth herein, to monitor the issuance of
such Shares or to take cognizance of any laws relating to the
issue or sale of such Shares, which functions shall be the sole
responsibility of the Funds.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed hereunder in the form and manner as agreed to by the
Trust or the Fund to include a record for each Shareholder's
account of the following:
(a) Name, address and tax identification number (and whether
such number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account, including
dividends paid and date and price for all transactions;
(d) Any stop or restraining order placed against the account;
(e) Information with respect to withholding in the case of a
foreign account or an account for which withholding is
required by the Internal Revenue Code;
(f) Any dividend reinvestment order, plan application, dividend
address and correspondence relating to the current
maintenance of the account;
(g) Certificate numbers and denominations for any Shareholder
holding certificates;
(h) Any information required in order for the Company to
perform the calculations contemplated or required by this
Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such
record retention shall be at the expense of the Company, and
such records may be inspected by the Fund at reasonable times.
The Company may, at its option at any time, and shall forthwith
upon the Fund's demand, turn over to the Fund and cease to
retain in the Company's files, records and documents created and
maintained by the Company pursuant to this Agreement, which are
no longer needed by the Company in performance of its services
or for its protection. If not so turned over to the Fund, such
records and documents will be retained by the Company for six
years from the year of creation, during the first two of which
such documents will be in readily accessible form. At the end of
the six year period, such records and documents will either be
turned over to the Fund or destroyed in accordance with Proper
Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the following
information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in each
state for "blue sky" purposes as determined according to
Proper Instructions delivered from time to time by the
Fund to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption fees,
or other transaction- or sales-related payments;
(f) Such other information as may be agreed upon from time to
time.
(2) The Company shall prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies, and, if
required, mail to Shareholders, such notices for reporting
dividends and distributions paid as are required to be so filed
and mailed and shall withhold such sums as are required to be
withheld under applicable federal and state income tax laws,
rules and regulations.
(3) In addition to and not in lieu of the services set forth above,
the Company shall:
(a) Perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, agent in
connection with accumulation, open-account or similar
plans (including without limitation any periodic
investment plan or periodic withdrawal program), including
but not limited to: maintaining all Shareholder accounts,
mailing Shareholder reports and Prospectuses to current
Shareholders, withholding taxes on accounts subject to
back-up or other withholding (including non-resident alien
accounts), preparing and filing reports on U.S. Treasury
Department Form 1099 and other appropriate forms required
with respect to dividends and distributions by federal
authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares
and other conformable transactions in Shareholder
accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account
information; and
(b) provide a system which will enable the Fund to monitor the
total number of Shares of each Fund and/or Class sold in
each state ("blue sky reporting"). The Fund shall by
Proper Instructions (i) identify to the Company those
transactions and assets to be treated as exempt from the
blue sky reporting for each state and (ii) verify the
classification of transactions for each state on the
system prior to activation and thereafter monitor the
daily activity for each state. The responsibility of the
Company for each Fund's and/or Class's state blue sky
registration status is limited solely to the recording of
the initial classification of transactions or accounts
with regard to blue sky compliance and the reporting of
such transactions and accounts to the Fund as provided
above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders
relating to their Share accounts and such other correspondence
as may from time to time be addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists, mail proxy
cards and other material supplied to it by the Fund in
connection with Shareholder Meetings of each Fund; receive,
examine and tabulate returned proxies, and certify the vote of
the Shareholders;
(3) The Company shall establish and maintain facilities and
procedures for safekeeping of stock certificates, check forms
and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such
certificates, forms and devices.
Article 6. Duties of the Trust.
A. Compliance
The Trust or Fund assume full responsibility for the preparation,
contents and distribution of their own and/or their classes'
Prospectus and for complying with all applicable requirements of the
Securities Act of 1933, as amended (the "1933 Act"), the 1940 Act and
any laws, rules and regulations of government authorities having
jurisdiction.
B. Share Certificates
The Trust shall supply the Company with a sufficient supply of blank
Share certificates and from time to time shall renew such supply upon
request of the Company. Such blank Share certificates shall be
properly signed, manually or by facsimile, if authorized by the Trust
and shall bear the seal of the Trust or facsimile thereof; and
notwithstanding the death, resignation or removal of any officer of
the Trust authorized to sign certificates, the Company may continue to
countersign certificates which bear the manual or facsimile signature
of such officer until otherwise directed by the Trust.
C. Distributions
The Fund shall promptly inform the Company of the declaration of any
dividend or distribution on account of any Fund's shares.
Article 7. Compensation and Expenses.
A. Annual Fee
For performance by the Company pursuant to Section Two of this
Agreement, the Trust and/or the Fund agree to pay the Company an
annual maintenance fee for each Shareholder account as agreed upon
between the parties and as may be added to or amended from time to
time. Such fees may be changed from time to time subject to written
agreement between the Trust and the Company. Pursuant to information
in the Fund Prospectus or other information or instructions from the
Fund, the Company may sub-divide any Fund into Classes or other sub-
components for recordkeeping purposes. The Company will charge the
Fund the same fees for each such Class or sub-component the same as if
each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Trust and/or
Fund agree to reimburse the Company for out-of-pocket expenses or
advances incurred by the Company for the items agreed upon between the
parties, as may be added to or amended from time to time. In addition,
any other expenses incurred by the Company at the request or with the
consent of the Trust and/or the Fund, will be reimbursed by the
appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the
Fund and shall be paid to the Company no less frequently than monthly,
and shall be paid daily upon request of the Company. The Company will
maintain detailed information about the compensation and out-of-pocket
expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Trust and/or the Funds and a duly authorized officer of
the Company.
Article 8. Assignment of Shareholder Recordkeeping.
Except as provided below, no right or obligation under this Section Two may
be assigned by either party without the written consent of the other party.
A. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
B. The Company may without further consent on the part of the Trust
subcontract for the performance hereof with (A) State Street Bank and
its subsidiary, Boston Financial Data Services, Inc., a Massachusetts
Trust ("BFDS"), which is duly registered as a transfer agent pursuant
to Section 17A(c)(1) of the Securities Exchange Act of 1934, as
amended, or any succeeding statute ("Section 17A(c)(1)"), or (B) a
BFDS subsidiary duly registered as a transfer agent pursuant to
Section 17A(c)(1), or (C) a BFDS affiliate, or (D) such other provider
of services duly registered as a transfer agent under Section
17A(c)(1) as Company shall select; provided, however, that the Company
shall be as fully responsible to the Trust for the acts and omissions
of any subcontractor as it is for its own acts and omissions; or
C. The Company shall upon instruction from the Trust subcontract for the
performance hereof with an Agent selected by the Trust, other than
BFDS or a provider of services selected by Company, as described in
(2) above; provided, however, that the Company shall in no way be
responsible to the Trust for the acts and omissions of the Agent.
SECTION THREE: Custody Services Procurement.
Article 9. Appointment.
The Trust hereby appoints Company as its agent to evaluate and obtain
custody services from a financial institution that (i) meets the criteria
established in Section 17(f) of the 1940 Act and (ii) has been approved by the
Board as eligible for selection by the Company as a custodian (the "Eligible
Custodian"). The Company accepts such appointment.
Article 10. The Company and Its Duties.
Subject to the review, supervision and control of the Board, the Company
shall:
A. evaluate the nature and the quality of the custodial services provided
by the Eligible Custodian;
B. employ the Eligible Custodian to serve on behalf of the Trust as
Custodian of the Trust's assets substantially on the terms set forth
as the form of agreement in Exhibit 2;
C. negotiate and enter into agreements with the Custodians for the benefit
of the Trust, with the Trust as a party to each such agreement. The
Company shall not be a party to any agreement with any such Custodian;
D. establish procedures to monitor the nature and the quality of the
services provided by the Custodians;
E. continuously monitor the nature and the quality of services provided by
the Custodians; and
F. periodically provide to the Trust (i) written reports on the activities
and services of the Custodians; (ii) the nature and amount of
disbursement made on account of the Trust with respect to each
custodial agreement; and (iii) such other information as the Board
shall reasonably request to enable it to fulfill its duties and
obligations under Sections 17(f) and 36(b) of the 1940 Act and other
duties and obligations thereof.
Article 11. Fees and Expenses.
A. Annual Fee
For the performance by the Company pursuant to Section Three of this
Agreement, the Trust and/or the Fund agree to pay the Company an
annual fee as agreed upon between the parties.
B. Reimbursements
In addition to the fee paid under Section 11A above, the Trust and/or
Fund agree to reimburse the Company for out-of-pocket expenses or
advances incurred by the Company for the items agreed upon between the
parties, as may be added to or amended from time to time. In addition,
any other expenses incurred by the Company at the request or with the
consent of the Trust and/or the Fund, will be reimbursed by the
appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the
Fund and shall be paid to the Company no less frequently than monthly,
and shall be paid daily upon request of the Company. The Company will
maintain detailed information about the compensation and out-of-pocket
expenses by Fund.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Trust and/or the Funds and a duly authorized officer of
the Company.
Article 12. Representations.
The Company represents and warrants that it has obtained all required
approvals from all government or regulatory authorities necessary to enter
into this arrangement and to provide the services contemplated in Section
Three of this Agreement.
SECTION FOUR: General Provisions.
Article 13. Documents.
A. In connection with the appointment of the Company under this Agreement,
the Trust shall file with the Company the following documents:
(1) A copy of the Charter and By-Laws of the Trust and all amendments
thereto;
(2) A copy of the resolution of the Board of the Trust authorizing
this Agreement;
(3) Specimens of all forms of outstanding Share certificates of the
Trust or the Funds in the forms approved by the Board of the
Trust with a certificate of the Secretary of the Trust as to
such approval;
(4) All account application forms and other documents relating to
Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following documents:
(1) Each resolution of the Board of the Trust authorizing the
original issuance of each Fund's, and/or Class's Shares;
(2) Each Registration Statement filed with the SEC and amendments
thereof and orders relating thereto in effect with respect to
the sale of Shares of any Fund, and/or Class;
(3) A certified copy of each amendment to the governing document and
the By-Laws of the Trust;
(4) Certified copies of each vote of the Board authorizing officers
to give Proper Instructions to the Custodian and agents for fund
accountant, custody services procurement, and shareholder
recordkeeping or transfer agency services;
(5) Specimens of all new Share certificates representing Shares of
any Fund, accompanied by Board resolutions approving such forms;
(6) Such other certificates, documents or opinions which the Company
may, in its discretion, deem necessary or appropriate in the
proper performance of its duties; and
(7) Revisions to the Prospectus of each Fund.
Article 14. Representations and Warranties.
A. Representations and Warranties of the Company
The Company represents and warrants to the Trust that:
(1) It is a business trust duly organized and existing and in good
standing under the laws of the State of Delaware.
(2) It is duly qualified to carry on its business in the State of
Delaware.
(3) It is empowered under applicable laws and by its charter and by-
laws to enter into and perform this Agreement.
(4) All requisite corporate proceedings have been taken to authorize
it to enter into and perform its obligations under this
Agreement.
(5) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
(6) It is in compliance with federal securities law requirements and
in good standing as a transfer agent.
B. Representations and Warranties of the Trust
The Trust represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and in
good standing under the laws of its state of organization;
(2) It is empowered under applicable laws and by its Charter and By-
Laws to enter into and perform its obligations under this
Agreement;
(3) All corporate proceedings required by said Charter and By-Laws
have been taken to authorize it to enter into and perform its
obligations under this Agreement;
(4) The Trust is an open-end investment company registered under the
1940 Act; and
(5) A registration statement under the 1933 Act will be effective,
and appropriate state securities law filings have been made and
will continue to be made, with respect to all Shares of each
Fund being offered for sale.
Article 15. Standard of Care and Indemnification.
A. Standard of Care
The Company shall be held to a standard of reasonable care in carrying
out the provisions of this Contract. The Company shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for the
Trust) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice, provided that
such action is not in violation of applicable federal or state laws or
regulations, and is in good faith and without negligence.
B. Indemnification by Trust
The Company shall not be responsible for and the Trust or Fund shall
indemnify and hold the Company, including its officers, directors,
shareholders and their agents employees and affiliates, harmless
against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liabilities arising out of or attributable to:
(1) The acts or omissions of any Custodian, Adviser, Sub-adviser or
other party contracted by or approved by the Trust or Fund,
(2) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in proper
form which
(a) are received by the Company or its agents or subcontractors
and furnished to it by or on behalf of the Fund, its
Shareholders or investors regarding the purchase,
redemption or transfer of Shares and Shareholder account
information;
(b) are received by the Company from independent pricing
services or sources for use in valuing the assets of the
Funds; or
(c) are received by the Company or its agents or subcontractors
from Advisers, Sub-advisers or other third parties
contracted by or approved by the Trust of Fund for use in
the performance of services under this Agreement;
(d) have been prepared and/or maintained by the Fund or its
affiliates or any other person or firm on behalf of the
Trust.
(3) The reliance on, or the carrying out by the Company or its agents
or subcontractors of Proper Instructions of the Trust or the
Fund.
(4) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities
laws or regulations of any state that such Shares be registered
in such state or in violation of any stop order or other
determination or ruling by any federal agency or any state with
respect to the offer or sale of such Shares in such state.
Provided, however, that the Company shall not be protected by
this Article 15.A. from liability for any act or omission
resulting from the Company's willful misfeasance, bad faith,
negligence or reckless disregard of its duties of failure to
meet the standard of care set forth in 15.A. above.
C. Reliance
At any time the Company may apply to any officer of the Trust or Fund
for instructions, and may consult with legal counsel with respect to
any matter arising in connection with the services to be performed by
the Company under this Agreement, and the Company and its agents or
subcontractors shall not be liable and shall be indemnified by the
Trust or the appropriate Fund for any action reasonably taken or
omitted by it in reliance upon such instructions or upon the opinion
of such counsel provided such action is not in violation of applicable
federal or state laws or regulations. The Company, its agents and
subcontractors shall be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual
or facsimile signatures of the officers of the Trust or the Fund, and
the proper countersignature of any former transfer agent or registrar,
or of a co-transfer agent or co-registrar.
D. Notification
In order that the indemnification provisions contained in this
Article 15 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such
assertion, and shall keep the other party advised with respect to all
developments concerning such claim. The party who may be required to
indemnify shall have the option to participate with the party seeking
indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent.
Article 16. Termination of Agreement.
This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other. Should the Trust exercise its rights
to terminate, all out-of-pocket expenses associated with the movement of
records and materials will be borne by the Trust or the appropriate Fund.
Additionally, the Company reserves the right to charge for any other
reasonable expenses associated with such termination. The provisions of
Article 15 shall survive the termination of this Agreement.
Article 17. Amendment.
This Agreement may be amended or modified by a written agreement executed
by both parties.
Article 18. Interpretive and Additional Provisions.
In connection with the operation of this Agreement, the Company and the
Trust may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall
be annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision
of the Charter. No interpretive or additional provisions made as provided in
the preceding sentence shall be deemed to be an amendment of this Agreement.
Article 19. Governing Law.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts
Article 20. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at Federated
Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the Company at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to such
other address as the Trust or the Company may hereafter specify, shall be
deemed to have been properly delivered or given hereunder to the respective
address.
Article 21. Counterparts.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original.
Article 22. Limitations of Liability of Trustees and Shareholders of the Trust.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust and signed by an authorized officer of the Trust, acting
as such, and neither such authorization by such Trustees nor such execution
and delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, and the
obligations of this Agreement are not binding upon any of the Trustees or
Shareholders of the Trust, but bind only the appropriate property of the Fund,
or Class, as provided in the Declaration of Trust.
Article 23. Limitations of Liability of Trustees and Shareholders of
the Company.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Company and signed by an authorized officer of the Company,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by
any of them individually or to impose any liability on any of them personally,
and the obligations of this Agreement are not binding upon any of the Trustees
or Shareholders of the Company, but bind only the property of the Company as
provided in the Declaration of Trust.
Article 24. Assignment.
This Agreement and the rights and duties hereunder shall not be assignable
with respect to the Trust or the Funds by either of the parties hereto except
by the specific written consent of the other party.
Article 25. Merger of Agreement.
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof whether
oral or written.
Article 26. Successor Agent.
If a successor agent for the Trust shall be appointed by the Trust, the
Company shall upon termination of this Agreement deliver to such successor
agent at the office of the Company all properties of the Trust held by it
hereunder. If no such successor agent shall be appointed, the Company shall at
its office upon receipt of Proper Instructions deliver such properties in
accordance with such instructions.
In the event that no written order designating a successor agent or Proper
Instructions shall have been delivered to the Company on or before the date
when such termination shall become effective, then the Company shall have the
right to deliver to a bank or trust company, which is a "bank" as defined in
the 1940 Act, of its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not less than
$2,000,000, all properties held by the Company under this Agreement.
Thereafter, such bank or trust company shall be the successor of the Company
under this Agreement.
Article 27. Force Majeure.
The Company shall have no liability for cessation of services hereunder or
any damages resulting therefrom to the Fund as a result of work stoppage,
power or other mechanical failure, natural disaster, governmental action,
communication disruption or other impossibility of performance.
Article 28. Assignment; Successors.
This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party may assign to a
successor all of or a substantial portion of its business, or to a party
controlling, controlled by, or under common control with such party. Nothing
in this Article 28 shall prevent the Company from delegating its
responsibilities to another entity to the extent provided herein.
Article 29. Severability.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
ATTEST: INVESTMENT COMPANIES
(listed on Exhibit 1)
/s/ John W. McGonigle_______ By:__/s/ John F. Donahue___
John W. McGonigle John F. Donahue
Secretary Chairman
ATTEST: FEDERATED SERVICES COMPANY
/s/ Jeannette Fisher-Garber By:_/s/ James J. Dolan_____
Jeannette Fisher-Garber James J. Dolan
Secretary President
EXHIBIT 1
CONTRACT
DATE INVESTMENT COMPANY
Portfolios
Classes
12/01/94 LIBERTY MUNICIPAL SECURITIES FUND, INC.
12/01/94 Liberty Municipal Securities Fund, Inc.
12/01/94 Class A Shares
12/01/94 Class B Shares
12/01/94 Class C Shares
FEDERATED SERVICES COMPANY provides the following services:
Fund Accounting
Shareholder Recordkeeping
Custody Services Procurement
EX-99.ADMSERVAGRMT
8
-1-
Exhibit (9iii) under Form
N-1A
Exhibit 10 under Item
601 under Item 601/Reg. S-K
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement is made as of this first day of
March, 1994, between those investment companies listed on Exhibit 1, as may be
amended from time to time, having their principal office and place of business
at Federated Investors Tower, Pittsburgh PA 15222-3779 (individually referred
to herein as "Fund" and collectively referred to as "Funds), on behalf of the
portfolios of the Funds, and Federated Administrative Services, a Delaware
business trust (herein called "FAS").
WHEREAS, the Funds desire to retain FAS as their Administrator to provide
them with Administrative Services (as herein defined), and FAS is willing to
render such services;
WHEREAS, the Funds are registered as open-end management investment
companies under the Investment Company Act of 1940, as amended (the "1940
Act"), with authorized and issued shares of capital stock or beneficial
interest ("Shares"); and
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, the parties hereto agree as follows:
1. Appointment of Administrator. The Funds hereby appoint FAS as
Administrator of the Funds on the terms and conditions set forth in this
Agreement; and FAS hereby accepts such appointment and agrees to perform the
services and duties set forth in Section 2 of this Agreement in consideration
of the compensation provided for in Section 4 hereof.
2. Services and Duties. As Administrator, and subject to the supervision
and control of the Funds' Boards of Trustees or Directors, as applicable (the
"Boards"), FAS will provide facilities, equipment, and personnel to carry out
the following administrative services for operation of the business and affairs
of the Funds and each of their portfolios:
(a) prepare, file, and maintain the Funds' governing documents and any
amendments thereto, including the Declaration of Trust or Articles
of Incorporation, as appropriate,(which has already been prepared
and filed), the By-laws and minutes of meetings of their Boards,
Committees, and shareholders;
(b) prepare and file with the Securities and Exchange Commission and
the appropriate state securities authorities the registration
statements for the Funds and the Funds' shares and all amendments
thereto, reports to regulatory authorities and shareholders,
prospectuses, proxy statements, and such other documents all as
may be necessary to enable the Funds to make continuous offerings
of their shares, as applicable;
(c) prepare, negotiate, and administer contracts on behalf of the
Funds with, among others, each Fund's investment adviser,
distributor, custodian, and transfer agent, subject to any
applicable restrictions of the Boards or the 1940 Act;
(d) supervise the Funds' custodians in the maintenance of the Funds'
general ledgers and in the preparation of the Funds' financial
statements, including oversight of expense accruals and payments,
the determination of the net asset value of the Funds and the
declaration and payment of dividends and other distributions to
shareholders;
(e) calculate performance data of the Funds for dissemination to
information services covering the investment company industry;
(f) prepare and file the Funds' tax returns;
(g) examine and review the operations of the Funds' custodians and
transfer agents;
(h) coordinate the layout and printing of publicly disseminated
prospectuses and reports;
(i) perform internal audit examinations in accordance with a charter
to be adopted by FAS and the Funds;
(j) assist with the design, development, and operation of the Funds;
(k) provide individuals reasonably acceptable to the Funds' Boards for
nomination, appointment, or election as officers of the Funds, who
will be responsible for the management of certain of the Funds'
affairs as determined by the Funds' Boards; and
(l) consult with the Funds and their Boards of Trustees or Directors,
as appropriate, on matters concerning the Funds and their affairs.
The foregoing, along with any additional services that FAS shall agree in
writing to perform for the Funds hereunder, shall hereafter be referred to as
"Administrative Services." Administrative Services shall not include any
duties, functions, or services to be performed for any Fund by such Fund's
investment adviser, distributor, custodian, transfer agent, or shareholder
service agent, pursuant to their respective agreements with such Fund.
3. Expenses. FAS shall be responsible for expenses incurred in providing
office space, equipment, and personnel as may be necessary or convenient to
provide the Administrative Services to the Fund, including the compensation of
FAS employees who serve on the Funds' Boards, or as officers of the Funds.
Each Fund shall be responsible for all other expenses incurred by FAS on behalf
of such Fund, including without limitation postage and courier expenses,
printing expenses, travel expenses, registration fees, filing fees, fees of
outside counsel and independent auditors, insurance premiums, fees payable to
members of such Fund's Board who are not FAS employees, and trade association
dues.
4. Compensation. For the Administrative Services provided, each Fund
hereby agrees to pay and FAS hereby agrees to accept as full compensation for
its services rendered hereunder an administrative fee at an annual rate,
payable daily, as specified below, based upon the total assets of all of the
Funds:
Maximum Administrative Average Daily Net Assets
Fee of the Funds
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
However, in no event shall the administrative fee received during any
year of this Agreement be less than, or be paid at a rate less than would
aggregate, $125,000, per individual Fund, with an additional $30,000 for each
class of shares added to any such Fund after the date hereof.
5. Standard of Care.
(a) FAS shall not be liable for any error of judgment or mistake of
law or for any loss suffered by any Fund in connection with the
matters to which this Agreement relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard
by it of its obligations and duties under this Agreement. FAS
shall be entitled to rely on and may act upon advice of counsel
(who may be counsel for such Fund) on all matters, and shall be
without liability for any action reasonably taken or omitted
pursuant to such advice. Any person, even though also an officer,
trustee, partner, employee or agent of FAS, who may be or become a
member of such Fund's Board, officer, employee or agent of any
Fund, shall be deemed, when rendering services to such Fund or
acting on any business of such Fund (other than services or
business in connection with the duties of FAS hereunder) to be
rendering such services to or acting solely for such Fund and not
as an officer, trustee, partner, employee or agent or one under
the control or direction of FAS even though paid by FAS.
(b) This Section 5 shall survive termination of this Agreement.
6. Duration and Termination. The initial term of this Agreement with
respect to each Fund shall commence on the date hereof, and extend for a period
of one year, renewable annually by the approval of the Board of
Directors/Trustees of each Fund.
7. Amendment. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which an enforcement of the change, waiver, discharge or
termination is sought.
8. Limitations of Liability of Trustees or Officers, Employees, Agents
and Shareholders of the Funds. FAS is expressly put on notice of the
limitation of liability as set forth in the Declaration of Trust of each Fund
that is a Massachusetts business trust and agrees that the obligations assumed
by each such Fund pursuant to this Agreement shall be limited in any case to
such Fund and its assets and that FAS shall not seek satisfaction of any such
obligations from the shareholders of such Fund, the Trustees, Officers,
Employees or Agents of such Fund, or any of them.
9. Limitations of Liability of Trustees and Shareholders of FAS. The
execution and delivery of this Agreement have been authorized by the Trustees
of FAS and signed by an authorized officer of FAS, acting as such, and neither
such authorization by such Trustees nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, and the obligations of this
Agreement are not binding upon any of the Trustees or shareholders of FAS, but
bind only the trust property of FAS as provided in the Declaration of Trust of
FAS.
10. Notices. Notices of any kind to be given hereunder shall be in
writing (including facsimile communication) and shall be duly given if
delivered to any Fund at the following address: Federated Investors Tower,
Pittsburgh, PA 15222-3779, Attention: President and if delivered to FAS at
Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention: President.
11. Miscellaneous. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with respect to
the subject hereof whether oral or written. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect. If
any provision of this Agreement shall be held or made invalid by a court or
regulatory agency decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. Subject to the provisions of Section
5, hereof, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and shall be governed by
Pennsylvania law; provided, however, that nothing herein shall be construed in
a manner inconsistent with the Investment Company Act of 1940 or any rule or
regulation promulgated by the Securities and Exchange Commission thereunder.
12. Counterparts. This Agreement may be executed by different parties
on separate counterparts, each of which, when so executed and delivered, shall
be an original, and all such counterparts shall together constitute one and the
same instrument.
13. Assignment; Successors. This Agreement shall not be assigned by
any party without the prior written consent of FAS, in the case of assignment
by any Fund, or of the Funds, in the case of assignment by FAS, except that any
party may assign to a successor all of or a substantial portion of its business
to a party controlling, controlled by, or under common control with such party.
Nothing in this Section 14 shall prevent FAS from delegating its
responsibilities to another entity to the extent provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
Investment Companies (listed on Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Administrative Services
By: /s/ Edward C. Gonzales
Edward C. Gonzales
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Exhibit 1
Administrative Services Agreement
Liberty Municipal Securities Fund, Inc.
Class A Shares
Class B Shares
Class C Shares
EX-99.SHRSVCAMGT
9
-1-
Exhibit 9(iv) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
SHAREHOLDER SERVICES AGREEMENT
AGREEMENT made as of the first day of March, 1994, by and between those
investment companies listed on Exhibit 1, as may be amended from time to time,
having their principal office and place of business at Federated Investors
Tower, Pittsburgh, PA 15222-3779 and who have approved a Shareholder Services
Plan (the "Plan") and this form of Agreement (individually referred to herein
as a "Fund" and collectively as "Funds") and Federated Shareholder Services, a
Delaware business trust, having its principal office and place of business at
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779 ("FSS").
1. The Funds hereby appoint FSS to render or cause to be rendered
personal services to shareholders of the Funds and/or the maintenance of
accounts of shareholders of the Funds ("Services"). In addition to providing
Services directly to shareholders of the Funds, FSS is hereby appointed the
Funds' agent to select, negotiate and subcontract for the performance of
Services. FSS hereby accepts such appointments. FSS agrees to provide or
cause to be provided Services which, in its best judgment (subject to
supervision and control of the Funds' Boards of Trustees or Directors, as
applicable), are necessary or desirable for shareholders of the Funds. FSS
further agrees to provide the Funds, upon request, a written description of
the Services which FSS is providing hereunder.
2. During the term of this Agreement, each Fund will pay FSS and FSS
agrees to accept as full compensation for its services rendered hereunder a
fee at an annual rate, calculated daily and payable monthly, up to 0.25% of 1%
of average net assets of each Fund.
For the payment period in which this Agreement becomes effective or
terminates with respect to any Fund, there shall be an appropriate proration
of the monthly fee on the basis of the number of days that this Agreement is
in effect with respect to such Fund during the month. To enable the Funds to
comply with an applicable exemptive order, FSS represents that the fees
received pursuant to this Agreement will be disclosed to and authorized by any
person or entity receiving Services, and will not result in an excessive fee
to FSS.
3. This Agreement shall continue in effect for one year from the date of
its execution, and thereafter for successive periods of one year only if the
form of this Agreement is approved at least annually by the Board of each
Fund, including a majority of the members of the Board of the Fund who are not
interested persons of the Fund and have no direct or indirect financial
interest in the operation of the Funds' Plan or in any related documents to
the Plan ("Independent Board Members") cast in person at a meeting called for
that purpose.
4. Notwithstanding paragraph 3, this Agreement may be terminated as
follows:
(a) at any time, without the payment of any penalty, by the vote of
a majority of the Independent Board Members of any Fund or by a
vote of a majority of the outstanding voting securities of any
Fund as defined in the Investment Company Act of 1940 on sixty
(60) days' written notice to the parties to this Agreement;
(b) automatically in the event of the Agreement's assignment as
defined in the Investment Company Act of 1940; and
(c) by any party to the Agreement without cause by giving the other
party at least sixty (60) days' written notice of its intention
to terminate.
5. FSS agrees to obtain any taxpayer identification number certification
from each shareholder of the Funds to which it provides Services that is
required under Section 3406 of the Internal Revenue Code, and any applicable
Treasury regulations, and to provide each Fund or its designee with timely
written notice of any failure to obtain such taxpayer identification number
certification in order to enable the implementation of any required backup
withholding.
6. FSS shall not be liable for any error of judgment or mistake of law
or for any loss suffered by any Fund in connection with the matters to which
this Agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
FSS shall be entitled to rely on and may act upon advice of counsel (who may
be counsel for such Fund) on all matters, and shall be without liability for
any action reasonably taken or omitted pursuant to such advice. Any person,
even though also an officer, trustee, partner, employee or agent of FSS, who
may be or become a member of such Fund's Board, officer, employee or agent of
any Fund, shall be deemed, when rendering services to such Fund or acting on
any business of such Fund (other than services or business in connection with
the duties of FSS hereunder) to be rendering such services to or acting solely
for such Fund and not as an officer, trustee, partner, employee or agent or
one under the control or direction of FSS even though paid by FSS.
This Section 6 shall survive termination of this Agreement.
7. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which an enforcement of the change, waiver, discharge or termination
is sought.
8. FSS is expressly put on notice of the limitation of liability as set
forth in the Declaration of Trust of each Fund that is a Massachusetts
business trust and agrees that the obligations assumed by each such Fund
pursuant to this Agreement shall be limited in any case to such Fund and its
assets and that FSS shall not seek satisfaction of any such obligations from
the shareholders of such Fund, the Trustees, Officers, Employees or Agents of
such Fund, or any of them.
9. The execution and delivery of this Agreement have been authorized by
the Trustees of FSS and signed by an authorized officer of FSS, acting as
such, and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, and the
obligations of this Agreement are not binding upon any of the Trustees or
shareholders of FSS, but bind only the trust property of FSS as provided in
the Declaration of Trust of FSS.
10. Notices of any kind to be given hereunder shall be in writing
(including facsimile communication) and shall be duly given if delivered to
any Fund and to such Fund at the following address: Federated Investors
Tower, Pittsburgh, PA 15222-3779, Attention: President and if delivered to
FSS at Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President.
11. This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
hereof whether oral or written. If any provision of this Agreement shall be
held or made invalid by a court or regulatory agency decision, statute, rule
or otherwise, the remainder of this Agreement shall not be affected thereby.
Subject to the provisions of Sections 3 and 4, hereof, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and shall be governed by Pennsylvania law; provided,
however, that nothing herein shall be construed in a manner inconsistent with
the Investment Company Act of 1940 or any rule or regulation promulgated by
the Securities and Exchange Commission thereunder.
12. This Agreement may be executed by different parties on separate
counterparts, each of which, when so executed and delivered, shall be an
original, and all such counterparts shall together constitute one and the same
instrument.
13. This Agreement shall not be assigned by any party without the
prior written consent of FSS in the case of assignment by any Fund, or of the
Funds in the case of assignment by FSS, except that any party may assign to a
successor all of or a substantial portion of its business to a party
controlling, controlled by, or under common control with such party. Nothing
in this Section 14 shall prevent FSS from delegating its responsibilities to
another entity to the extent provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
Investment Companies (listedon Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Shareholder Services
By: /s/ James J. Dolan
Title: President
Attest: /s/ John W. McGonigle
John W. McGonigle
Exhibit 1
Shareholder Services Agreement
Liberty Municipal Securities Fund, Inc.
Class A Shares
Class B Shares
Class C Shares
EX-99.SHRSVCSUB-K
10
Exhibit 9(v) under Form N-1A
Exhibit 10 under Item 601/Reg S-K
SHAREHOLDER SERVICES SUB-CONTRACT
This Agreement is made between the Financial Institution executing
this Agreement ("Provider") and Federated Shareholder Services ("FSS")
on behalf of the investment companies listed in Exhibit A hereto (the
"Funds"), for whom FSS administers the Shareholder Services Plan
("Plan") and who have approved this form of Agreement. In consideration
of the mutual covenants hereinafter contained, it is hereby agreed by
and between the parties hereto as follows:
1. FSS hereby appoints Provider to render or cause to be
rendered personal services to shareholders of the Funds and/or the
maintenance of accounts of shareholders of the Funds ("Services").
Provider agrees to provide Services which, in its best judgment, are
necessary or desirable for its customers who are investors in the Funds.
Provider further agrees to provide FSS, upon request, a written
description of the Services which Provider is providing hereunder.
2. During the term of this Agreement, the Funds will pay the
Provider fees as set forth in a written schedule delivered to the
Provider pursuant to this Agreement. The fee schedule for Provider may
be changed by FSS sending a new fee schedule to Provider pursuant to
Paragraph 9 of this Agreement. For the payment period in which this
Agreement becomes effective or terminates, there shall be an appropriate
proration of the fee on the basis of the number of days that this
Agreement is in effect during the quarter. To enable the Funds to
comply with an applicable exemptive order, Provider represents that the
fees received pursuant to this Agreement will be disclosed to its
customers, will be authorized by its customers, and will not result in
an excessive fee to the Provider.
3. The Provider understands that the Department of Labor views
ERISA as prohibiting fiduciaries of discretionary ERISA assets from
receiving shareholder service fees or other compensation from funds in
which the fiduciary's discretionary ERISA assets are invested. To date,
the Department of Labor has not issued any exemptive order or advisory
opinion that would exempt fiduciaries from this interpretation. Without
specific authorization from the Department of Labor, fiduciaries should
carefully avoid investing discretionary assets in any fund pursuant to
an arrangement where the fiduciary is to be compensated by the fund for
such investment. Receipt of such compensation could violate ERISA
provisions against fiduciary self-dealing and conflict of interest and
could subject the fiduciary to substantial penalties.
4. The Provider agrees not to solicit or cause to be solicited
directly, or indirectly at any time in the future, any proxies from the
shareholders of a Fund in opposition to proxies solicited by management
of the Fund, unless a court of competent jurisdiction shall have
determined that the conduct of a majority of the Board of Trustees or
Directors of the Fund constitutes willful misfeasance, bad faith, gross
negligence or reckless disregard of their duties. This paragraph 4 will
survive the term of this Agreement.
5. This Agreement shall continue in effect for one year from
the date of its execution, and thereafter for successive periods of one
year if the form of this Agreement is approved at least annually by the
Board of each Fund, including a majority of the members of the Board of
the Fund who are not interested persons of the Fund and have no direct
or indirect financial interest in the operation of the Fund's Plan or in
any related documents to the Plan ("Disinterested Board Members") cast
in person at a meeting called for that purpose.
6. Notwithstanding paragraph 5, this Agreement may be
terminated as follows:
(a) at any time, without the payment of any penalty, by
the vote of a majority of the Disinterested Board Members of the
Fund or by a vote of a majority of the outstanding voting
securities of the Fund as defined in the Investment Company Act
of 1940 on not more than sixty (60) days' written notice to the
parties to this Agreement;
(b) automatically in the event of the Agreement's
assignment as defined in the Investment Company Act of 1940; and
(c) by either party to the Agreement without cause by
giving the other party at least sixty (60) days' written notice
of its intention to terminate.
7. The Provider agrees to obtain any taxpayer identification
number certification from its customers required under Section 3406 of
the Internal Revenue Code, and any applicable Treasury regulations, and
to provide the Fund or its designee with timely written notice of any
failure to obtain such taxpayer identification number certification in
order to enable the implementation of any required backup withholding.
8. The execution and delivery of this Agreement have been
authorized by the Trustees of FSS and signed by an authorized officer of
FSS, acting as such, and neither such authorization by such Trustees nor
such execution and delivery by such officer shall be deemed to have been
made by any of them individually or to impose any liability on any of
them personally, and the obligations of this Agreement are not binding
upon any of the Trustees or shareholders of FSS, but bind only the trust
property of FSS as provided in the Declaration of Trust of FSS.
9. Notices of any kind to be given hereunder shall be in
writing (including facsimile communication) and shall be duly given if
delivered to Provider at the address set forth below and if delivered to
FSS at Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President.
10. This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the
subject hereof whether oral or written. If any provision of this
Agreement shall be held or made invalid by a court or regulatory agency
decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. Subject to the provisions of Sections 5
and 6, hereof, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
shall be governed by Pennsylvania law; provided, however, that nothing
herein shall be construed in a manner inconsistent with the Investment
Company Act of 1940 or any rule or regulation promulgated by the
Securities and Exchange Commission thereunder.
11. This Agreement may be executed by different parties on
separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together
constitute one and the same instrument.
12. This Agreement shall not be assigned by any party without
the prior written consent of FSS in the case of assignment by Provider,
or of Provider in the case of assignment by FSS, except that any party
may assign to a successor all of or a substantial portion of its
business to a party controlling, controlled by, or under common control
with such party.
13. This Agreement may be amended by FSS from time to time by
the following procedure. FSS will mail a copy of the amendment to the
Provider's address, as shown below. If the Provider does not object to
the amendment within thirty (30) days after its receipt, the amendment
will become part of the Agreement. The Provider's objection must be in
writing and be received by FSS within such thirty days.
14. This Agreement may be terminated with regard to a
particular Fund or Class at any time, without the payment of any
penalty, by FSS or by the vote of a majority of the Disinterested
Trustees or Directors, as applicable, or by a majority of the
outstanding voting securities of the particular Fund or Class on not
more than sixty (60) days' written notice to the Provider. This
Agreement may be terminated by Provider on sixty (60) days' written
notice to FSS.
15. The Provider acknowledges and agrees that FSS has entered
into this Agreement solely in the capacity of agent for the Funds and
administrator of the Plan. The Provider agrees not to claim that FSS is
liable for any responsibilities or amounts due by the Funds hereunder.
[Provider]
Address
City State Zip Code
Dated: By:
Authoried Signature
Title
Print Name of Authorized Signature
FEDERATED SHAREHOLDER SERVICES
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By:
Vice President
EXHIBIT A to Shareholder Services Sub-Contract with
Funds covered by this Agreement:
Liberty Municipal Securities Fund, Inc.
Class A Shares
Class B Shares
Class C Shares
Shareholder Service Fees
1. During the term of this Agreement, FSS will pay Provider a
quarterly fee. This fee will be computed at the annual rate of .25 of
1% of the average net asset value of shares of the Funds held during the
quarter in accounts for which the Provider provides Services under this
Agreement, so long as the average net asset value of Shares in the Funds
during the quarter equals or exceeds such minimum amount as FSS shall
from time to time determine and communicate in writing to the Provider.
2. For the quarterly period in which the Agreement becomes
effective or terminates, there shall be an appropriate proration of any
fee payable on the basis of the number of days that the Agreement is in
effect during the quarter.
EX-99.12B-1PLAN
11
Exhibit 15(iv) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
EXHIBIT C
to the
12b-1 Plan
LIBERTY MUNICIPAL SECURITIES FUND, INC.
Class B Shares
This Plan is adopted by LIBERTY MUNICIPAL SECURITIES FUND, INC.
with respect to the Class of Shares of the Corporation set forth above.
In compensation for the services provided pursuant to this Plan,
FSC will be paid a monthly fee computed at the annual rate of .75 of 1%
of the average aggregate net asset value of the Class B Shares of the
Corporation held during the month.
Witness the due execution hereof this 1st day of June, 1994.
LIBERTY MUNICIPAL SECURITIES
FUND, INC.
By: /s/ J. Christopher Donahue
President
EX-27.FINANDATASCH
12
6
1
Liberty Municipal Securities Fund, Inc.
Class A
12-MOS
Mar-31-1995
Mar-31-1995
706,695,167
733,649,063
17,298,026
322,640
0
751,269,729
0
0
1,967,761
1,967,761
0
721,791,660
64,904,435
63,800,859
0
0
556,412
0
26,953,896
708,711,921
0
51,529,349
0
0
44,628,279
7,819,630
(10,931,022)
41,516,887
0
43,126,423
14,957,325
0
25,045,927
27,342,942
3,400,590
12,255,698
0
8,262,499
0
0
4,498,635
0
6,901,070
725,166,805
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0
0
0.000
EX-27.FINANDATASCH
13
6
2
Liberty Municipal Securities Fund, Inc.
Class B, C, and SEL Shares
12-MOS
Mar-31-1995
Mar-31-1995
706,695,167
733,649,063
17,298,026
322,640
0
751,269,729
0
0
1,967,761
1,967,761
0
721,791,660
3,717,564
2,023,897
0
0
556,412
0
26,953,896
40,590,047
0
51,529,349
0
0
44,628,279
7,819,630
(10,931,022)
41,516,887
0
1,501,856
568,392
0
2,436,826
844,048
100,889
12,255,698
0
8,262,499
0
0
4,498,635
0
6,901,070
725,166,805
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0
0
0.000