485APOS

                                          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.   51   ....................        X

                                     and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940     X

    Amendment No.   35   ...................................        X

                    FEDERATED MUNICIPAL SECURITIES FUND, INC.

               (Exact Name of Registrant as Specified in Charter)

                            Federated Investors Funds
                       Pittsburgh, Pennsylvania 15237-7000
                    (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)
    on                    pursuant to paragraph (b)
    60 days after filing pursuant to paragraph (a)(i)
 x  on July 31, 1998, pursuant to paragraph (a)(i) 75 days after filing pursuant
    to paragraph (a)(ii) on _________________ pursuant to paragraph (a)(ii) of
    Rule 485.

If appropriate, check the following box:

    This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.



                                   Copies to:

Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C.  20037



                              CROSS-REFERENCE SHEET


      This Amendment to the Registration Statement of FEDERATED MUNICIPAL
SECURITIES FUND, INC., which is comprised of three classes of shares, (1) Class
A Shares, (2) Class B Shares, and (3) Class C Shares, is comprised of the
following:

PART A.    INFORMATION REQUIRED IN A PROSPECTUS.

                                          Prospectus Heading
                                          (Rule 404(c) Cross Reference)

Item 1.     Cover Page....................(1-3) Cover Page.
Item 2.     Synopsis                      (1-3) Summary of Fund Expenses.
Item 3.     Condensed Financial
            Information...................(1-3) Financial Highlights;
                                          (1-3) Performance Information.
Item 4.     General Description of
            Registrant....................(1-3) General Information;
                                          (1-3) Investment Information; (1-3)
                                          Investment Objective; (1-3) Investment
                                          Policies; (1-3)Investment Risks;
                                          (1-3) Investment Limitations.
Item 5.     Management of the Fund........(1-3) Fund Information; (1-3)
                                          Management of the Fund; (1-3)
                                          Distribution of Shares; (1-3)
                                          Administration of the Fund.
Item 6.     Capital Stock and Other
            Securities....................(1-3) Shareholder Information;
                                          (1-3) Calling the Fund; (1-3) Account
                                          and Share Information; (1-3)
                                          Confirmations and Account Statements;
                                          (1-3)  Dividends and Distributions;
                                          (1-3) Tax Information; (1-3)
                                          Federal Income Tax; (1-3) State and
                                          Local Taxes.
Item 7.     Purchase of Securities Being
            Offered.......................(1-3) Net Asset Value; (1-3) Investing
                                          in the Fund; (1-3) Purchasing Shares;
                                          (1-3) Purchasing Shares through a
                                          Financial Intermediary; (1-3)
                                          Purchasing Shares by Wire; (1-3)
                                          Purchasing Shares by Check; (1-3)
                                          Systematic Investment Program; (1-3)
                                          Retirement Plans; (1) Class A Shares;
                                          (2) Class B Shares; (3) Class C
                                          Shares.





Item 8.                                   Redemption or Repurchase (1-3)
                                          Redeeming and Exchanging Shares; (1-3)
                                          Redeeming or Exchanging Shares through
                                          a Financial Intermediary; (1-3)
                                          Redeeming or Exchanging Shares by
                                          Telephone; (1-3) Redeeming or
                                          Exchanging Shares by Mail; (1-3)
                                          Requirements for Redemption; (1-3)
                                          Requirements for Exchange; (1-3)
                                          Systematic Withdrawal Program; (1-3)
                                          Contingent Deferred Sales Charge;
                                          (1-3) Eliminating the Contingent
                                          Deferred Sales Charge; (1-3) Account
                                          and Share Information; (1-3) Accounts
                                          with Low Balances.
Item 9.     Pending Legal Proceedings.....None.





PART B.    INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.


Item 10.    Cover Page....................(1-3) Cover page.
Item 11.    Table of Contents             (1-3) Table of Contents.
Item 12.    General Information and
            History.......................(1-3) General Information About the
                                          Fund; (1-3) About Federated Investors.
Item 13.    Investment Objectives and
            Policies......................(1-3) Investment Objective and
                                          Policies; (1-3) Investment
                                          Limitations.
Item 14.    Management of the Fund        (1-3) Federated Municipal Securities
                                          Fund, Inc. Management; (1-3) Director
                                          Compensation.
Item 15.    Control Persons and Principal
            Holders of Securities         (1-3) Fund Ownership.
Item 16.    Investment Advisory and Other
            Services......................(1-3) Investment Advisory Services;
                                          (1-3) Other Services.
Item 17.    Brokerage Allocation..........(1-3) Brokerage Transactions.
Item 18.    Capital Stock and Other
            Securities                    Not applicable.
Item 19.    Purchase, Redemption and
            Pricing of Securities
            Being Offered.................(1-3) Purchasing Shares; (1-3)
                                          Determining Net Asset Value; (1-3)
                                          Redeeming Shares.
Item 20.    Tax Status....................Tax Status.
Item 21.    Underwriters..................(1-3) See Part A - Distribution of
                                          Shares.
Item 22.    Calculation of Performance
            Data..........................(1-3) Total Return; (1-3) Yield;
                                          (1-3) Tax-Equivalent Yield;
                                          (1-3) Performance Comparisons.
Item 23     Financial Statements..........To be filed by amendment.









Federated Municipal Securities Fund, Inc.
Class A Shares, Class B Shares, Class C Shares


Prospectus





The shares of Federated 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 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 Statement of Additional Information dated July 31,
1998, with the Securities and Exchange Commission (the "SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information or to make inquiries about the Fund, contact your
financial institution. The Statement of Additional Information, material
incorporated by reference into this document, and other information regarding
the Fund is maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.



















Prospectus dated July 31, 1998
    









                                                               TABLE OF CONTENTS


   

Summary of Fund
    Expenses.....................To be filed by amendment

Financial Highlights
  Class A Shares...............To be filed by amendment
  Class B Shares................To be filed by amendment
  Class C Shares................To be filed by amendment

General Information..................  1
  Calling the Fund...................  1
  Year 2000 Statement................  .  1

Investment Information...............  1
  Investment Objective...............  1
  Investment Policies................  1
  Investment Risks...................  4
  Investment Limitations.............  5

Net Asset Value......................  5

Investing in the Fund................  5

Purchasing Shares....................  6
  Purchasing Shares through a Financial Intermediary        6
  Purchasing Shares by Wire..........  6
  Purchasing Shares by Check.........  6
  Systematic Investment Program......  6
  Class A Shares.....................  6
  Class B Shares.....................  7
  Class C Shares.....................  7

Redeeming and Exchanging Shares......  7
  Redeeming or Exchanging Shares through a
    Financial Intermediary...........
  Redeeming or Exchanging Shares by Telephone   7
  Redeeming or Exchanging Shares by Mail        8
  Requirements for Redemption........  8
  Requirements for Exchange..........  8
  Systematic Withdrawal Program......  8
  Contingent Deferred Sales Charge...  8
  Eliminating the Contingent Deferred
    Sales Charge.....................  9

Account and Share Information........  9
  Confirmations and Certificates.....  9
  Dividends and Distributions........  9
  Accounts with Low Balances.........  9

Fund Information.....................  9
  Management of the Fund.............  9
  Distribution Plan and Shareholder Services          10
  Administration of the Fund......... 11

Shareholder Information.............. 11

Tax Information...................... 12
  Federal Income Tax................. 12
  State and Local Taxes.............. 12

Performance Information.............. 13

Appendix............................. 14

    

                               GENERAL INFORMATION

The Fund was incorporated under the laws of the State of Maryland on September
10, 1976. Class A Shares, Class B Shares and Class C Shares of the Fund
("Shares") 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.

The Fund's current net asset value and offering price may be found in the mutual
funds section of local newspapers under "Federated" and the appropriate class
designation listing.

Calling the Fund Call the Fund at 1-800-341-7400.

   

Year 2000 Statement
 Like other mutual funds and business organizations worldwide, the Fund's
service providers (among them, the adviser, distributor, administrator and
transfer agent) must ensure that their computer systems are adjusted to properly
process and calculate date-related information from and after January 1, 2000.
Many software programs and, to a lesser extent, computer hardware in use today
cannot distinguish the year 2000 from the year 1900. This design flaw may have a
negative impact in the handling of securities trades, pricing and accounting
services. The Fund and its service providers are actively working on necessary
changes to computer systems to deal with the year 2000 and reasonably believe
that systems will be year 2000 compliant when required. The Fund is continuing
to analyze the financial impact of instituting a year 2000 compliant program on
its operations.     

                             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. Unless otherwise noted, the investment objective and the policies
and limitations described below cannot be changed without approval of
shareholders.

   

The Fund may invest up to but less than 35% of its net assets in lower quality
municipal bonds. These bonds will usually offer higher yields than higher-rated
bonds, but involve greater investment risk at the time of issue. (See
"Investment Risks.")

    

Investment Policies
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 ("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. The Fund will limit its purchases of municipal
bonds rated Ba and BB or below (commonly known as "junk bonds") to up to, but
less than, 35% of its net assets. 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 this prospectus.

    

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.

The Fund may dispose of a commitment prior to settlement if the Fund's
investment 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.

   

Inverse Floaters
The Fund may invest in securities known as "inverse floaters" which represent
interests in municipal securities. The Fund intends to purchase inverse floaters
to assist in duration management and to seek current income. These obligations
pay interest rates that vary inversely with changes in the interest rates of
specified short-term municipal securities or an index of short-term municipal
securities. The interest rates on inverse floaters will typically decline as
short-term market interest rates increase and increase as short-term market
rates decline. Inverse floaters will generally respond to changes in market
interest rates more rapidly than fixed-rate long-term securities (typically
twice as fast). As a result, the market values of inverse floaters will
generally be more volatile than the market values of fixed-rate municipal
securities. Typically, the portion of the portfolio invested in inverse floaters
will be subject to additional volatility.

    

Financial Futures
The Fund may purchase and sell interest rate and index financial futures
contracts. These financial futures contracts may be used to hedge all or a
portion of its portfolio against changes in the market value of portfolio
securities and interest rates, provide additional liquidity, and accomplish its
current strategies in a more expeditious fashion. Financial futures contracts
call for the delivery of particular debt instruments at a certain time in the
future. The seller of the contract agrees to make delivery of the type of
instrument called for in the contract and the buyer agrees to take delivery of
the instrument at the specified future time.

   

As a matter of investment policy, which may be changed without shareholder
approval, the Fund may not purchase or sell futures contracts if immediately
thereafter the sum of the amount of margin deposits on the Fund's existing
futures positions would exceed 5% of the market value of the Fund's total
assets. When the Fund purchases futures contracts, an amount of readily
marketable securities, equal to the underlying commodity value of the futures
contracts (less any related margin deposits), will be deposited in a segregated
account with the Fund's custodian (or the broker, if legally permitted) to
collateralize the position and thereby insure that the use of such futures
contract is unleveraged.

    

Risks
When the Fund uses financial futures, there is a risk that the prices of the
securities subject to the futures contracts may not correlate perfectly with the
prices of the securities in the Fund's portfolio. This may cause the futures
contract to react differently than the portfolio securities to market changes.
In addition, the Fund's investment adviser could be incorrect in its
expectations about the direction or extent of market factors such as interest
rate movements. In these events, the Fund may lose money on the futures
contract. It is not certain that a secondary market for positions in futures
contracts will exist at all times. Although the investment adviser will consider
liquidity before entering into futures transactions, there is no assurance that
a liquid secondary market on an exchange or otherwise will exist for any
particular futures contract at any particular time. The Fund's ability to
establish and close out futures positions depends on this secondary market.

   

Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment companies as an
efficient means of carrying out its investment policies. It should be noted that
investment companies incur certain expenses, such as management fees, and,
therefore, any investment by the Fund in shares of other investment companies
may be subject to such duplicate expenses.

    

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 Fund's adviser 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. Private activity bonds are typically one type of "revenue" bonds.
In most cases, lower quality bonds are private activity bonds or other revenue
bonds which are not payable from general tax revenues.

    

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
   

The value of Shares will fluctuate. The amount of this fluctuation is dependent
upon the quality and maturity of the municipal bonds in the Fund's portfolio as
well as on market conditions. 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. Generally
speaking, the lower quality, long-term bonds in which the Fund invests have
greater fluctuation in value than high quality, shorter-term bonds.

Municipal bond prices are interest rate sensitive, which means that their value
varies inversely with market interest rates. Thus, if market interest rates have
increased from the time a bond was purchased, the bond, if sold, might be sold
at a price less than its cost. Similarly, if market interest rates have declined
from the time a bond was purchased, the bond, if sold, might be sold at a price
greater than its cost. (In either instance, if the bond was held to maturity, no
loss or gain normally would be realized as a result of interim market
fluctuations.)

Prices of lower grade bonds also fluctuate with changes in the perceived quality
of the credit of their issuers. Consequently, Shares may not be suitable for
persons who cannot assume the somewhat greater risks of capital depreciation
associated with higher tax-exempt income yields. In addition, bonds rated "BBB"
by S&P or "Baa" by Moody's have speculative characteristics. Changes in economic
conditions or other circumstances are more likely to lead to weakened capacity
to make principal and interest payments than higher rated bonds.

A large portion of the Fund's portfolio may be invested in bonds whose interest
payments are from revenues of similar projects (such as housing or hospitals) or
where issuers share the same geographic location. As a result, the Fund may be
more susceptible to similar economic, political or regulatory developments than
would a portfolio of bonds with a greater geographic and project variety. This
susceptibility may result in greater fluctuations in share price.

Many issuers of municipal bonds which have characteristics of rated bonds choose
not to have their obligations rated. Unrated bonds may carry a greater risk and
a higher yield than rated securities. Although unrated bonds are not necessarily
of lower quality, the market for them may not be as broad as that for rated
bonds since many investors rely solely on the major rating agencies for credit
appraisal.

Further, the lower rated or unrated municipal bonds which the Fund may purchase
are frequently traded only in markets where the number of potential purchasers
and sellers is limited. This consideration may have the effect of limiting the
availability of such bonds for the Fund to purchase and may also have the effect
of limiting the ability of the Fund to sell such bonds at their fair value
either to meet redemption requests or to respond to changes in the economy or
the financial markets. The Fund will not invest more than 15% of its total
assets in securities which are not readily marketable.

Reducing Risks of Lower-Rated Securities
The Fund's investment adviser believes that the risks of investing in lower
rated securities can be reduced. The professional portfolio management
techniques used by the Fund to attempt to reduce these risks include:

Credit Research
When purchasing bonds, rated or unrated, the Fund's investment adviser performs
its own credit analysis in addition to using recognized rating agencies. This
credit analysis considers the economic feasibility of revenue bond project
financing and general purpose borrowings, the financial condition of the issuer
or guarantor with respect to liquidity, cash flow and ability to meet
anticipated debt service requirements, and political developments that may
affect credit quality.

Diversification
The Fund invests in securities of many different issuers to reduce portfolio
risks.

Economic Analysis
The Fund's adviser also considers trends in the overall economy, in geographic
areas, in various industries, and in the financial markets.

    

Investment Limitations
The Fund will not:

o borrow money 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; or

o invest more than 5% of its total assets in securities of one issuer (except
 cash and cash items and U.S. government obligations).

   
    
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:

o invest more than 5% of its total assets in securities of issuers that have
records of less than three years of continuous operations; or

o invest more than 15% 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.


                                                                NET ASSET VALUE

The Fund's net asset value ("NAV") per Share fluctuates and is based on the
market value of all securities and other assets of the Fund. The NAV for each
class of Shares may differ due to the variance in daily net income realized by
each class. Such variance will reflect only accrued net income to which the
shareholders of a particular class are entitled.

All purchases, redemptions and exchanges are processed at the NAV next
determined after the request in proper form is received by the Fund. The NAV is
determined as of the close of trading on the New York Stock Exchange (normally
4:00 p.m., Eastern time) every day the New York Stock Exchange is open.


                              INVESTING IN THE FUND

This prospectus offers three classes of Shares, each with the characteristics
described below.


   

                  Class AClass BClass C
Minimum and Subsequent$1500/$100                      $1500/$100  $1500/$100
Investment Amounts
Maximum Sales Charge    4.50%* None                                 None
Maximum Contingent      None   5.50                                 1.00%#
Deferred Sales
Charge**
Conversion Feature      No     Yes                                         No

    
* Class A Shares are sold at NAV, plus a sales charge as follows:

               Sales Charge   Dealer
            as a Percentage ofConcession as
               Public  Neta Percentage of
              OfferingAmountPublic Offering
  Amount of TransactionPrice 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 million2.00% 2.04%   1.80%
  $1 million or greater0.00%   0.00%      0.25%
** Computed on the lesser of the NAV of the redeemed Shares at the time of
purchase or the NAV of the redeemed Shares at the time of redemption.

   The following contingent deferred sales charge schedule applies to Class B
Shares:

   Year of RedemptionContingent 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 B Shares convert to Class A Shares (which pay lower ongoing expenses)
   approximately eight years after purchase. See "Conversion of Class B Shares."

# The contingent deferred sales charge is assessed on Shares redeemed within one
year of their purchase date.


                                PURCHASING 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 intermediary (such as a bank or broker/dealer) or by sending a wire or
check directly to the Fund. Financial intermediaries may impose different
minimum investment requirements on their customers. An account must be
established with a financial intermediary or by completing, signing, and
returning the new account form available from the Fund before Shares can be
purchased. Shareholders in certain other funds advised and distributed by
affiliates of Federated Investors, Inc. ("Federated Funds") may exchange their
Shares for shares of the corresponding class of the Fund. The Fund reserves the
right to reject any purchase or exchange request.

In connection with any sale, Federated Securities Corp. may, from time to time,
offer certain items of nominal value to any shareholder or investor.

Purchasing Shares through a
Financial Intermediary
Orders placed through a financial intermediary are considered received when the
Fund is notified of the purchase order or when payment is converted into federal
funds. Purchase orders through a 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 intermediaries must be
received by the financial intermediary 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 intermediary's responsibility to transmit orders promptly.
Financial intermediaries may charge fees for their services.

The financial intermediary 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 intermediaries may be subject to reclaim by the
distributor for accounts transferred to financial intermediaries which do not
maintain investor accounts on a fully disclosed basis and do not account for
share ownership periods.

Purchasing Shares by Wire
Shares may be purchased by Federal Reserve 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: Federated Shareholder Services Company, c/o State Street
Bank and Trust Company, Boston, MA 02266-8600; Attention; EDGEWIRE; For Credit
to: (Fund Name) (Fund Class); (Fund Number--this number can be found on the
account statement or by contacting the Fund); 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
Shares may be purchased by mailing a check made payable to the name of the Fund
(designate class of Shares and account number) to: Federated Shareholder
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).

Systematic Investment Program
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. Shareholders should contact their financial intermediary
or the Fund to participate in this program.

Class A Shares
Class A Shares are sold at NAV, plus a sales charge. However:

No sales charge is imposed for Class A Shares purchased:

     through financial intermediaries that do not receive sales charge dealer
     concessions;

     by Federated Life Members who maintain a $500 minimum balance in at least
one of the Federated Funds; or

          through "wrap accounts" or similar programs under which clients pay
          a fee for services.

In addition, the sales charge can be reduced or eliminated by:

     purchasing in quantity and accumulating purchases at the levels in the
          table under "Investing in the Fund";

     combining concurrent purchases of two or more funds;

     signing a letter of intent to purchase a specific quantity of shares within
          13 months; or

     using the reinvestment privilege.

Consult a financial intermediary or Federated Securities Corp. for details on
these programs. In order to eliminate the sales charge or receive sales charge
reductions, Federated Securities Corp. must be notified by the shareholder in
writing or by a financial intermediary at the time of purchase.

Dealer Concession
For sales of Class A Shares, a dealer will normally receive up to 90% of the
applicable sales charge. Any portion of the sales charge which is not paid to a
dealer will be retained by the distributor. However, the distributor may offer
to pay dealers up to 100% of the sales charge retained by it. Such payments may
take the form of cash or promotional incentives, such as reimbursement of
certain expenses of qualified employees and their spouses to attend
informational meetings about the Fund or other special events at
recreational-type facilities, or items of material value. In some instances,
these incentives will be made available only to dealers whose employees have
sold or may sell a significant amount of Shares. On purchases of $1 million or
more, the investor pays no sales charge; however, the distributor will make
twelve monthly payments to the dealer totaling 0.25% of the public offering
price over the first year following the purchase. Such payments are based on the
original purchase price of Shares outstanding at each month end. The sales
charge for Shares sold other than through registered broker/dealers will be
retained by Federated Securities Corp.

     Federated Securities Corp. may pay fees to banks out of the sales charge in
exchange for sales and/or administrative services performed on behalf of the
bank's customers in connection with the establishment of customer accounts and
purchases of Shares.

Class B Shares
Class B Shares are sold at NAV. Under certain circumstances, a contingent
deferred sales charge will be assessed at the time of a redemption. Orders for
$250,000 or more of Class B Shares will automatically be invested in Class A
Shares.

Conversion of Class B Shares
Class B Shares will automatically convert into Class A Shares after eight full
years from the purchase date. Such conversion will be on the basis of the
relative NAVs per Share, without the imposition of any charges. Class B Shares
acquired by exchange from Class B Shares of another Federated Fund will convert
into Class A Shares based on the time of the initial purchase.

Class C Shares
Class C Shares are sold at NAV. A contingent deferred sales charge of 1.00% will
be charged on assets redeemed within the first full 12 months following
purchase.


                         REDEEMING AND EXCHANGING SHARES

Shares of the Fund may be redeemed for cash or exchanged for Shares of the same
class of other Federated Funds on days on which the Fund computes its NAV.
Shares are redeemed at NAV less any applicable contingent deferred sales charge.
Exchanges are made at NAV. Shareholders who desire to automatically exchange
Shares, of a like share class, in a predetermined amount on a monthly,
quarterly, or annual basis may take advantage of a systematic exchange
privilege. Information on this privilege is available from the Fund or your
financial intermediary. Depending upon the circumstances, a capital gain or loss
may be realized when Shares are redeemed or exchanged.

Redeeming or Exchanging Shares through a Financial Intermediary
Shares of the Fund may be redeemed or exchanged by contacting your financial
intermediary before 4:00 p.m. (Eastern time). In order for these transactions to
be processed at that day's NAV, financial intermediaries (other than
broker/dealers) must transmit the request to the Fund before 4:00 p.m. (Eastern
time), while broker/dealers must transmit the request to the Fund before 5:00
p.m. (Eastern time). The financial intermediary is responsible for promptly
submitting transaction requests and providing proper written instructions.
Customary fees and commissions may be charged by the financial intermediary for
this service. Appropriate authorization forms for these transactions must be on
file with the Fund.

Redeeming or Exchanging Shares by Telephone
Shares acquired directly from the Fund may be redeemed in any amount, or
exchanged, by calling 1-800-341-7400. Appropriate authorization forms for these
transactions must be on file with the Fund. Shares held in certificate form must
first be returned to the Fund as described in the instructions under "Redeeming
or Exchanging Shares by Mail." Redemption proceeds will either be mailed in the
form of a check to the shareholder's address of record or wire-transferred 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 or Exchanging Shares by Mail" should be considered. The
telephone transaction privilege may be modified or terminated at any time.
Shareholders would be promptly notified.

Redeeming or Exchanging Shares by Mail
Shares may be redeemed in any amount, or exchanged, by mailing a written request
to: Federated Shareholder Services Company, Fund Name, Fund Class, P.O. Box
8600, Boston, MA 02266-8600. If share certificates have been issued, they must
accompany the written request. It is recommended that certificates be sent
unendorsed by registered or certified mail.

All written requests should state: Fund Name and the Share Class name; the
account name as registered with the Fund; the account number; and the number of
Shares to be redeemed or the dollar amount of the transaction. An exchange
request should also state the name of the Fund into which the exchange is to be
made. All owners of the account must sign the request exactly as the Shares are
registered. A check for redemption proceeds is normally mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request. Dividends are paid up to and including the day that
a redemption or exchange request is processed.

Requirements for Redemption
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund, or a redemption payable other than to
the shareholder of record, must have their signatures guaranteed by a commercial
or savings bank, trust company or savings association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.

Requirements for Exchange
Shareholders must exchange Shares having a NAV equal to the minimum investment
requirements of the fund into which the exchange is being made. Contact your
financial intermediary directly or the Fund for free information on and
prospectuses for the Federated Funds into which your Shares may be exchanged.
Before the exchange, the shareholder must receive a prospectus of the fund for
which the exchange is being made.

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. Signature guarantees will be required to exchange
between fund accounts not having identical shareholder registrations. The
exchange privilege may be modified or terminated at any time. Shareholders will
be notified of the modification or termination of the exchange privilege.

Systematic Withdrawal Program
Under this program, Shares are redeemed to provide for periodic withdrawal
payments in an amount directed by the shareholder. 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
intermediary or by calling the Fund.

Because participation in this program may reduce, and eventually deplete, the
shareholder's investment in the Fund, payments under this program should not be
considered as yield or income. It is not advisable for shareholders to continue
to purchase Class A Shares subject to a sales charge while participating in this
program. A contingent deferred sales charge may be imposed on Class B and C
Shares.

Contingent Deferred Sales Charge
The contingent deferred sales charge will be deducted from the redemption
proceeds otherwise payable to the shareholder and will be retained by the
distributor. 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. The contingent deferred sales charge will not be imposed with respect to
Shares acquired through the reinvestment of dividends or distributions of
long-term capital gains. In determining the applicability of the contingent
deferred sales charge, the required holding period for your new shares received
through an exchange will include the period for which your original shares were
held.

Eliminating the Contingent Deferred
Sales Charge

     Upon written notification to Federated Securities Corp. or the transfer
agent, no contingent deferred sales charge will be imposed on redemptions:

     following the death or disability, as defined in Section 72(m)(7) of the
Internal Revenue Code of 1986, of the last surviving shareholder;

     representing minimum required distributions from an Individual Retirement
Account or other retirement plan to a shareholder who has attained the age of
701/2;

     which are involuntary redemptions of shareholder accounts that do not
comply with the minimum balance requirements;

     which are qualifying redemptions of Class B Shares under a Systematic
Withdrawal Program;

     which are reinvested in the Fund under the reinvestment privilege;

  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 intermediary that sells Shares of the Fund pursuant to a sales
  agreement with the distributor, and their immediate family members to the
  extent that no payments were advanced for purchases made by these persons; and

 of Shares originally purchased through a bank trust department, an
  investment adviser registered under the Investment Advisers Act of 1940, or
  any other financial intermediary, to the extent that no payments were advanced
  for purchases made through such entities.

For more information regarding the elimination of the contingent deferred sales
charge through a Systematic Withdrawal Program, or any of the above provisions,
contact your financial intermediary or the Fund. The Fund reserves the right to
discontinue or modify these provisions.
Shareholders will be notified of such action.


                          ACCOUNT AND SHARE INFORMATION

Confirmations and Account Statements
Shareholders will receive detailed confirmations of transactions (except for
systematic program transactions). In addition, shareholders will receive
periodic statements reporting all account activity including dividends paid. The
Fund will not issue share certificates.

Dividends and Distributions
Dividends are declared daily and paid monthly to all shareholders invested in
the Fund on the record date. Net long-term capital gains realized by the Fund,
if any, will be distributed at least once every twelve months. Dividends and
distributions are automatically reinvested in additional Shares of the Fund on
payment dates at the ex-dividend date NAV without a sales charge, unless
shareholders request cash payments on the new account form or by contacting the
transfer agent.

Accounts with Low Balances
Due to the high cost of maintaining accounts with low balances, the Fund may
close an account by redeeming all Shares and paying the proceeds to the
shareholder if the account balance falls below the applicable minimum investment
amount. Retirement plan accounts and accounts where the balance falls below the
minimum due to NAV changes will not be closed in this manner. Before an account
is closed, the shareholder will be notified and allowed 30 days to purchase
additional Shares to meet the minimum.


                                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 0.30% 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.

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, Inc.. All of the Class A (voting) Shares of
Federated Investors, Inc. are owned by a trust, the trustees of which are John
F. Donahue, Chairman and Trustee of Federated Investors, Inc., Mr. Donahue's
wife, and Mr. Donahue's son, J. Christopher Donahue, who is President and
Trustee of Federated Investors, Inc.

Federated Advisers and other subsidiaries of Federated Investors, Inc. 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 $120 billion invested across more than 300 funds
under management and/or administration by its subsidiaries, as of December 31,
1997, Federated Investors, Inc. is one of the largest mutual fund investment
managers in the United States. With more than 2,000 employees, Federated
continues to be led by the management who founded the company in 1955. Federated
funds are presently at work in and through approximately 4,000 financial
institutions nationwide.

     Mary Jo Ochson has been the Fund's portfolio manager since 1996. Ms. Ochson
joined Federated Investors, Inc. in 1982 and has been a Senior Vice President of
the Fund's investment adviser since January 1996. From 1988 through 1995, Ms.
Ochson served as a Vice President of the Fund's investment adviser. Ms. Ochson
is a Chartered Financial Analyst and received her M.B.A. in Finance from the
University of Pittsburgh.

J. Scott Albrecht has been the Fund's portfolio manager since 1966. Mr. Albrecht
joined Federated Investors, Inc. in 1989 and has been a Vice President of the
Fund's investment adviser since 1994. From 1992 to 1994, Mr. Albrecht served as
an Assistant Vice President of the Fund's investment adviser. In 1991, Mr.
Albrecht acted as an investment analyst. Mr. Albrecht is a Chartered Financial
Analyst and received his M.S.
in Public Management from Carnegie Mellon University.

Both the Fund and the Adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Directors, and could
result in severe penalties.

Distribution of Shares
Federated Securities Corp. is the principal
distributor for Shares of the Fund. Federated Securities Corp. is located at
Federated Investors, Inc. 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, Inc.

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 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 0.75% 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 services or distribution-related
support services as agents for their clients or customers. With respect to Class
B Shares, because distribution fees to be paid by the Fund to the distributor
may not exceed an annual rate of 0.75% of each class of Shares' average daily
net assets, it will take the distributor a number of years to recoup the
expenses it has incurred for its sales services and distribution and
distribution-related support services pursuant to the Distribution 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 Distribution Plan.

In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, Inc., under
which the Fund may make payments up to 0.25% of the average daily net asset
value of Class A Shares, Class B Shares, and Class C Shares to obtain certain
personal services for shareholders and for the maintenance of shareholder
accounts. Under the Shareholder Services Agreement, Federated Shareholder
Services will either perform shareholder services directly or will select
financial institutions to perform shareholder services. Financial institutions
will receive fees based upon Shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.

Supplemental Payments to Financial Institutions
With respect to Class A Shares, Class B Shares, and Class C Shares, in addition
to payments made pursuant to the Distribution Plan and Shareholder Services
Agreement, Federated Securities Corp. and Federated Shareholder Services, from
their own assets, may pay financial institutions supplemental fees for the
performance of substantial sales services, distribution-related support
services, or shareholder services. 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 Services Company, a subsidiary of Federated Investors, Inc., provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund. Federated Services Company
provides these at an annual rate which relates to the average aggregate daily
net assets of all funds advised by affiliates of Federated Investors, Inc. as
specified below:

   Maximum     Average Aggregate
Administrative FeeDaily Net Assets
    0.150% on the first $250 million 0.125% on the next $250 million 0.100% on
    the next $250 million 0.075%on assets in excess of $750 million

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may choose voluntarily to waive a portion of its fee.


                             SHAREHOLDER INFORMATION

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.

Directors may be removed by the Directors or by 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.

   

As of May 15, 1998, Merrill Lynch Pierce Fenner & Smith, Jacksonville, Florida,
for the sole benefit of its customers, was the owner of record of approximately
435,725 shares (27.84%) of the Class C Shares of the Fund, and, therefore, may,
for certain purposes, be deemed to control the Fund and be able to affect the
outcome of certain matters presented for a vote of shareholders.

    


                                                                TAX INFORMATION

Federal Income Tax
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies. Shareholders are
not required to pay the federal regular income tax on any dividends received
from the Fund that represent net interest on tax-exempt municipal bonds.
However, under the Tax Reform Act of 1986, dividends representing net interest
earned on some municipal bonds may be included in calculating the federal
individual alternative minimum tax or the federal alternative minimum tax for
corporations.

The alternative minimum tax, up to 28% of alternative minimum taxable income for
individuals and 20% for corporations, applies when it exceeds the regular tax
for the taxable year. Alternative minimum taxable income is equal to the regular
taxable income of the taxpayer increased by certain "tax-preference" items not
included in regular taxable income and reduced by only a portion of the
deductions allowed in the calculation of the regular tax.

The Tax Reform Act of 1986 treats interest on certain "private activity" bonds
issued after August 7, 1986, as a tax preference item for both individuals and
corporations. Unlike traditional governmental purpose municipal bonds, which
finance roads, schools, libraries, prisons and other public facilities, private
activity bonds provide benefits to private parties. The Fund may purchase all
types of municipal bonds, including private activity bonds. Thus, should it
purchase any such bonds, a portion of the Fund's dividends may be treated as a
tax preference item.

In addition, in the case of a corporate shareholder, dividends of the Fund which
represent interest on municipal bonds may be subject to the 20% corporate
alternative minimum tax because the dividends are included in a corporation's
"adjusted current earnings." The corporate alternative minimum tax treats 75% of
the excess of a taxpayer's pre-tax "adjusted current earnings" over the
taxpayer's alternative minimum taxable income as a tax preference item.
"Adjusted current earnings" is based upon the concept of a corporation's
"earnings and profits." Since "earnings and profits" generally includes the full
amount of any Fund dividend, and alternative minimum taxable income does not
include the portion of the Fund's dividend attributable to municipal bonds which
are not private activity bonds, the difference will be included in the
calculation of the corporation's alternative minimum tax.

Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.

These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and distributions
is provided annually.

State and Local Taxes
Fund Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.

Because interest received by the Fund may not be exempt from all state and local
income taxes, shareholders may be required to pay state and local taxes on
dividends received from the Fund. Shareholders are urged to consult their own
tax advisers regarding the status of their accounts under state and local tax
laws.


                             PERFORMANCE INFORMATION

From time to time the Fund advertises its total return, yield, and
tax-equivalent yield for each class of Shares.
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 tax-equivalent yield is calculated
similarly to the yield, but is adjusted to reflect the taxable yield that a
class of Shares would have had to earn to equal its actual yield, assuming a
specific tax rate. The yield and tax-equivalent 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 charge 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. Expense differences between Class A Shares, Class B
Shares, and Class C Shares may affect the performance of each class.

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.

   


                                    APPENDIX

Standard and Poor's ("S&P") 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.

CCC--Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B-rating.

CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.

C--The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC-debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.

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.

Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca--Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C--Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

    





Federated Municipal Securities Fund, Inc.
Class A Shares
Class B Shares
Class C Shares
   
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Investment Adviser
Federated Advisers
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
    

Custodian
State Street Bank and
Trust Company
P.O. Box 8600
Boston, MA 02266-8600

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

Independent Auditors
Deloitte & Touche LLP
2500 One PPG Place Pittsburgh, PA 15222-5401

Federated Securities Corp., Distributor

Cusip 313913105
Cusip 313913204
Cusip 313913303
   
G00322-01 (7/98)
    

Federated Municipal Securities Fund, Inc.
Class A Shares, Class B Shares,
Class C Shares


Prospectus
   
July 31, 1998
    
An Open-End, Diversified
Management Investment Company









Federated Municipal Securities Fund, Inc.
Class A Shares

Class B Shares

Class C Shares

Statement of Additional Information





   

This Statement of Additional Information should be read with the prospectus of
Federated Municipal Securities Fund, Inc. (the "Fund") dated July 31, 1998. This
Statement is not a prospectus. You may request a copy of a prospectus or a paper
copy of this Statement, if you have received it electronically, free of charge
by calling 1-800-341-7400.

Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779



Statement dated July 31, 1998 Cusip 313913105 Cusip 313913204 Cusip 313913303
8051601B (7/98)     









                                                               TABLE OF CONTENTS


(To be filed by amendment.)

                       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 from
Federated Tax-Free Income Fund, Inc. to Liberty Municipal Securities Fund, Inc.
On February 26, 1996, the Directors approved an amendment to the Articles of
Incorporation to change the name of Liberty Municipal Securities Fund, Inc. to
Federated 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 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 a bond loses its rating or has its rating reduced after the Fund has
  purchased it, the Fund is not required to drop the bond from the portfolio,
  but may consider doing so. If ratings made by Moody's Investors Service, Inc.
  ("Moody's") or Standard & Poor's ("S&P") change because of changes in those
  organizations or in their rating systems, the Fund will try to use comparable
  ratings as standards in accordance with the investment policies described in
  the Fund's prospectus.

    

When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an advantageous
price 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.

Futures Transactions
A futures contract is a firm commitment by two parties: the seller who agrees to
make delivery of the specific type of security called for in the contract
("going short") and the buyer who agrees to take delivery of the security
("going long") at a certain time in the future. In the fixed income securities
market, price moves inversely to interest rates. A rise in rates means a drop in
price. Conversely, a drop in rates means a rise in price. In order to hedge its
holdings of fixed income securities against a rise in market interest rates, the
Fund could enter into contracts to deliver securities at a predetermined price
(i.e., "go short") to protect itself against the possibility that the prices of
its fixed income securities may decline during the Fund's anticipated holding
period. The Fund would agree to purchase securities in the future at a
predetermined price (i.e., "go long") to hedge against a decline in market
interest rates.

   

"Margin" in Futures Transactions
  Unlike the purchase or sale of a security, the Fund does not pay or receive
  money upon the purchase or sale of a futures contract. Rather, the Fund is
  required to deposit an amount of "initial margin" in readily marketable
  securities with its custodian (or the broker, if legally permitted). The
  nature of initial margin in futures transactions is different from that of
  margin in securities transactions in that futures contract initial margin does
  not involve the borrowing of funds by the Fund to finance the transactions.
  Initial margin is in the nature of a performance bond or good faith deposit on
  the contract which is returned to the Fund upon termination of the futures
  contract, assuming all contractual obligations have been satisfied.

    

  A futures contract held by the Fund is valued daily at the official settlement
  price of the exchange on which it is traded. Each day the Fund pays or
  receives cash, called "variation margin," equal to the daily change in value
  of the futures contract. This process is known as "marking to market."
  Variation margin does not represent a borrowing or loan by the Fund but is
  instead settlement between the Fund and the broker of the amount one would owe
  the other if the futures contract expired. In computing its daily net asset
  value, the Fund will mark-to-market its open futures positions.

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.

   

Investing in Securities of Other Investment Companies
The Fund may invest in the securities of affiliated money market funds as an
efficient means of managing the Fund's uninvested cash.

    

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, 1998, and 1997,
the portfolio turnover rates were __% and 33%, 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.

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.

   

    

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.

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 Restricted Securities
   

The Fund may invest in restricted securities. Restricted securities are any
securities in which the Fund may invest pursuant to its investment objective and
policies, but which are subject to restrictions on resale under federal
securities law. Under criteria established by the Directors, certain restricted
securities are determined to be liquid. To the extent that restricted securities
are not determined to be liquid, the Fund will limit their purchase, together
with other illiquid securities, to 15% of its net assets.

    


              FEDERATED MUNICIPAL SECURITIES FUND, INC. MANAGEMENT

Officers and Directors are listed with their addresses, birthdates, present
positions with Federated 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, Inc., Federated Advisers,
Federated Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport Research,
Ltd.; Chief Executive Officer and Director or Trustee of the Funds. Mr. Donahue
is the father of J. Christopher Donahue, President and Director of the Company.

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Director
Director, Member of Executive Committee, Children's Hospital of Pittsburgh;
formerly, Senior Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.;
Director, Member of Executive Committee, University of Pittsburgh; Director or
Trustee of the Funds.

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; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.


Nicholas P. Constantakis
175 Woodshire Drive
Pittsburgh, PA
Birthdate: September 3, 1939

Director

Formerly, Partner, Anderson Worldwide SC; Director or Trustee of the Funds.


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.; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; Director, Ryan
Homes, Inc.; Director or Trustee of the Funds.

J. Christopher Donahue*
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
President and Director
President and Trustee, Federated Investors, Inc., Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global Research Corp.; President, Passport Research, Ltd.;
Trustee, Federated Shareholder Services Company and Federated Shareholder
Services; Director, Federated Services Company; President or Executive Vice
President of the Funds; Director or Trustee of some of the Funds. Mr. Donahue is
the son of John F. Donahue, Chairman and Director of the Company.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Director
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Director
Professor of Medicine, University of Pittsburgh; Medical Director, University of
Pittsburgh Medical Center--Downtown; Member, Board of Directors, University of
Pittsburgh Medical Center; formerly, Hematologist, Oncologist, and Internist,
Presbyterian and Montefiore Hospitals; Director or Trustee of the Funds.


Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Director
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western Region;
Director or Trustee of the Funds.

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Director
Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Director
President, Law Professor, Duquesne University; Consulting Partner, Mollica &
Murray; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Director
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board and Czech Management Center, Prague; Director or Trustee of the Funds.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Director

     Public Relations/Marketing/Conference Planning; Director or Trustee of the
Funds.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

Vice Chairman, Treasurer, and Trustee, Federated Investors, Inc.; Vice
President, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company; Trustee or Director of some of
the Funds; President, Executive Vice President and Treasurer of some of the
Funds.

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 26, 1938

Executive Vice President, Secretary and Treasurer

Executive Vice President, Secretary, and Trustee, Federated Investors, Inc.;
Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.; Trustee,
Federated Shareholder Services Company; Director, Federated Services Company;
President and Trustee, Federated Shareholder Services; Director, Federated
Securities Corp.; Executive Vice President and Secretary of the Funds; Treasurer
of some of the Funds.

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA

Birthdate: May 17, 1923

Vice President

Executive Vice President and Trustee, Federated Investors, Inc.; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of the
Funds; Director or Trustee of some of the Funds.

* This Director is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.

@  Member of the Executive Committee. The Executive Committee of the Board of
   Directors handles the responsibilities of the Board between meetings of the
   Board.

The Funds
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Automated Government Money Trust;
Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust Series II;
Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily
Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Core
Trust; Federated Equity Funds; Federated Equity Income Fund, Inc.; Federated
Fund for U.S. Government Securities, Inc.; Federated GNMA Trust; Federated
Government Income Securities, Inc.; Federated Government Trust; Federated High
Income Bond Fund, Inc.; Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Insurance Series; Federated Investment Portfolios; Federated
Investment Trust; Federated Master Trust; Federated Municipal Opportunities
Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock and Bond Fund, Inc.; Federated Stock Trust;
Federated Tax-Free Trust; Federated Total Return Series, Inc.; Federated U.S.
Government Bond Fund; Federated U.S. Government Securities Fund: 1-3 Years;
Federated U.S. Government Securities Fund: 2-5 Years; Federated U.S. Government
Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; Regions Funds; Fixed
Income Securities, Inc.; High Yield Cash Trust; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment Series
Trust; Liberty Term Trust, Inc. - 1999; Liberty U.S. Government Money Market
Trust; Liquid Cash Trust; Managed Series Trust; Money Market Management, Inc.;
Money Market Obligations Trust; Money Market Obligations Trust II; Money Market
Trust; Municipal Securities Income Trust; Newpoint Funds; RIMCO Monument Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds; The
Virtus Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; WesMark Funds; WCT Funds; and World Investment Series,
Inc.      Fund Ownership Officers and Directors own less than 1% of the Fund's
outstanding Shares.     As of May 15, 1998, no shareholders of record owned 5%
or more of the Class A Shares and Class B Shares of the Fund. As of May 15,
1998, the following shareholder of record owned 5% or more of the Class C Shares
of the Fund: Merrill Lynch Pierce Fenner & Smith, (for the sole benefit of its
clients), Jacksonville, Florida, owned approximately 435,725 shares (27.84%) and
Southwest Securities, Inc. (for the sole benefit of its clients), Dallas, Texas,
owned approximately 91,609 shares (5.85%) .     

Director Compensation

                                

   
       AGGREGATE
 NAME, COMPENSATION
POSITION WITH              FROM              TOTAL COMPENSATION PAID
FUND   FUND*#       FROM FUND COMPLEX
John F. Donahue,            $0          $0 for the Fund and 56 investment companies
Chairman and Director
J. Christopher Donahue,     $0          $0 for the Fund and 18 investment companies
President and Director
Thomas G. Bigley,           $0          $0 for the Fund and 56 investment companies
Director
John T. Conroy, Jr.,        $0          $0 for the Fund and 56 investment companies
Director
Nicholas P. Constantakis,** $0          $0 for the Fund and 36 other investment companies
Director
William J. Copeland,        $0          $0 for the Fund and 56 investment companies
Director
James E. Dowd,              $0          $0 for the Fund and 56 investment companies
Director
Lawrence D. Ellis, M.D.,    $0          $0 for the Fund and 56 investment companies
Director
Edward L. Flaherty, Jr.,    $0          $0 for the Fund and 56 investment companies
Director
Peter E. Madden,            $0          $0 for the Fund and 56 investment companies
Director
John E. Murray, Jr.,        $0          $0 for the Fund and 56 investment companies
Director
Wesley W. Posvar,           $0          $0 for the Fund and 56 investment companies
Director
Marjorie P. Smuts,          $0          $0 for the Fund and 56 investment companies
Director





*  Information is furnished for the fiscal year ended March 31, 1998.

** Mr. Constantakis became a member of the Board of Directors on February 23,
   1998. He did not earn any fees for serving the Fund Complex since these fees
   are reported as of the end of the last calendar year.

    

   The information is provided for the last calendar year.

Director Liability
The Articles of Incorporation provide that the Directors will not be liable for
errors of judgment or mistakes of fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.


                          INVESTMENT ADVISORY SERVICES

Adviser to the Fund

     The Fund's investment adviser is Federated Advisers (the "Adviser"). It is
a subsidiary of Federated Investors, Inc.. All the Class A (voting) shares of
Federated Investors, Inc. are owned by a trust, the trustees of which are John
F. Donahue, his wife, and his son, J. Christopher Donahue.

The Adviser shall not be liable to the Fund or any shareholder for any losses
that may be sustained in the purchase, holding, or sale of any security or for
anything done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Fund.

Advisory Fees
   

For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus. During the fiscal years ended March
31, 1998, 1997, and 1996, the Fund's Adviser earned $_________, $_________, and
$_________, respectively.

    


                             BROKERAGE TRANSACTIONS

   

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
guidelines established by the Directors. The Adviser may select brokers and
dealers who offer brokerage and research services. These services may be
furnished directly to the Fund or to the Adviser and may include: advice as to
the advisability of investing in securities; security analysis and reports;
economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by brokers and
dealers may be used by the Adviser or its affiliates in advising the Fund and
other accounts. To the extent that receipt of these services may supplant
services for which the Adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The Adviser and its affiliates exercise
reasonable business judgment in selecting brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided. During the fiscal
years ended March 31, 1998, 1997, and 1996, no brokerage commissions were paid
by the Fund.

    

Although investment decisions for the Fund are made independently from those of
the other accounts managed by the Adviser, investments of the type the Fund may
make may also be made by those other accounts. When the Fund and one or more
other accounts managed by the Adviser are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the adviser to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received by
the Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.


                                 OTHER SERVICES

Fund Administration
   

Federated Services Company, a subsidiary of Federated Investors, Inc., provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. From March 1, 1994, to March 1, 1996, Federated Administrative
Services served as the Fund's Administrator. For purposes of this Statement of
Additional Information, Federated Services Company and Federated Administrative
Services may hereinafter collectively be referred to as the "Administrators."
For the fiscal years ended March 31, 1998, 1997, and 1996, the Administrators
earned $_________, $547,583, and $573,123, respectively.

    

Custodian And Portfolio Accountant
State Street Bank and Trust Company, Boston, MA, is custodian for the securities
and cash of the Fund. Federated Services Company, Pittsburgh, PA, provides
certain accounting and recordkeeping services with respect to the Fund's
portfolio investments. The fee paid for this service is based upon the level of
the Fund's average net assets for the period plus out-of-pocket expenses.

Transfer Agent
Federated Services Company, through its registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based upon the size, type and
number of accounts and transactions made by shareholders.

Independent Auditors
The independent auditors for the Fund are Deloitte & Touche LLP.


                                                               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 prospectus under "Investing in the Fund" and
"Purchasing Shares."

Quantity Discounts and Accumulated Purchases
As described in the prospectus, larger purchases reduce or eliminate the sales
charge paid. The Fund will combine purchases of Class A Shares made on the same
day by the investor, the investor's spouse, and the investor's children under
age 21 when it calculates the sales charge. In addition, the sales charge, if
applicable, is reduced for purchases made at one time by a trustee or fiduciary
for a single trust estate or a single fiduciary account.

If an additional purchase of Class A Shares is made, the Fund will consider the
previous purchases still invested in the Fund. For example, if a shareholder
already owns Class A Shares having a current value at the public offering price
of $90,000 and he purchases $10,000 more at the current public offering price,
the sales charge on the additional purchase according to the schedule now in
effect would be 3.75%, not 4.50%.

To receive the sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial intermediary at the
time the purchase is made that Class A Shares are already owned or that
purchases are being combined. The Fund will reduce or eliminate the sales charge
after it confirms the purchases.

Concurrent Purchases
For purposes of qualifying for a sales charge reduction, a shareholder has the
privilege of combining concurrent purchases of Class A Shares of two or more
funds for which affiliates of Federated Investors, Inc. serve as investment
adviser and principal underwriter (the "Federated Funds"), the purchase price of
which includes a sales charge. For example, if a shareholder concurrently
invested $30,000 in the Class A Shares of one of the other Federated Funds with
a sales charge, and $70,000 in this Fund, the sales charge would be reduced.

To receive this sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial intermediary at the
time the concurrent purchases are made. The Fund will reduce the sales charge
after it confirms the purchases.

Letter of Intent
If a shareholder intends to purchase at least $100,000 of Class A Shares of
Federated Funds (excluding money market funds) over the next 13 months, the
sales charge may be reduced by signing a letter of intent to that effect. This
letter of intent includes a provision for a sales charge adjustment depending on
the amount actually purchased within the 13-month period and a provision for the
custodian to hold up to 4.50% of the total amount intended to be purchased in
escrow (in Shares) until such purchase is completed.

The Shares held in escrow in the shareholder's account will be released upon
fulfillment of the letter of intent or the end of the 13-month period, whichever
comes first. If the amount specified in the letter of intent is not purchased,
an appropriate number of escrowed Shares may be redeemed in order to realize the
difference in the sales charge.

While this letter of intent will not obligate the shareholder to purchase
Shares, each purchase during the period will be at the sales charge applicable
to the total amount intended to be purchased. At the time a letter of intent is
established, current balances in accounts in any Class A Shares of any Federated
Funds, excluding money market accounts, will be aggregated to provide a purchase
credit towards fulfillment of the letter of intent. Prior trade prices will not
be adjusted.

Reinvestment Privilege
The reinvestment privilege is available for all Shares of the Fund. 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 charge. Similarly, shareholders who redeem Class B
Shares or Class C Shares may be reinvested in the same Share class within 120
days but would not be entitled to a reimbursement of the contingent deferred
sales charge if paid at the time of redemption. However, such reinvested shares
would not be subject to a contingent deferred sales charge upon later
redemption. In addition, if the Class B or Class C Shares were reinvested
through a financial intermediary, the financial intermediary would not be
entitled to an advanced payment from Federated Securities Corp. on the
reinvested Shares. Federated Securities Corp. must be notified by the
shareholder in writing or by his financial intermediary of the reinvestment in
order to eliminate a sales charge or a contingent deferred sales charge. If the
shareholder redeems Shares in the Fund, there may be tax consequences.

Conversion of Class B Shares
Class B Shares will automatically convert into Class A Shares on or around the
15th of the month eight full years from the purchase date and will no longer be
subject to a fee under the distribution plan. 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 a 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.

Purchases by Sales Representatives, Fund Directors, and Employees
The following individuals and their immediate family members may buy Class A
Shares at net asset value without a sales charge:

  o Directors, employees, and sales representatives of the Fund, Federated
    Advisers, and Federated Securities Corp. and its affiliates;

  o Federated Life Members; and

  o any associated person of an investment dealer who has a sales agreement with
    Federated Securities Corp. Shares may also be sold without a sales charge to
    trusts, pensions, or profit-sharing plans for these individuals.

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.

     Distribution Plan (Class B Shares and Class C Shares Only) and Shareholder
Services These arrangements permit the payment of fees to financial
institutions, the distributor, and Federated Shareholder Services, to stimulate
distribution activities and to cause services to be provided to shareholders by
a representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to:
marketing efforts; providing office space, equipment, telephone facilities, and
various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses.

By adopting the Distribution Plan (Class B Shares and Class C Shares only), the
Directors expect that Class B Shares and Class C Shares of 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 year ended March 31, 1998, payments in the amounts of $______
(Class B Shares) and $_______ (Class C Shares) were made pursuant to the
Distribution Plan, all of which was paid to financial institutions. In addition,
for the fiscal year ended March 31, 1998, payments in the amounts of $_________
(Class A Shares), $_______ (Class B Shares), and $______ (Class C Shares) were
made pursuant to the Shareholder Services Agreement, of which $_______ (Class A
Shares), $______ (Class B Shares), and $_____ (Class C Shares) were voluntarily
waived.

    

Conversion to Federal Funds
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds before shareholders begin to
earn dividends. Federated Shareholder Services Company acts as the shareholder's
agent in depositing checks and converting them to federal funds.


                           DETERMINING NET ASSET VALUE

The Fund's net asset value per Share fluctuates and is based on the market value
of all securities and other assets of the Fund. The net asset value for each
class of Shares may differ due to the variance in daily net income realized by
each class.

Net asset value is not determined on (i) days on which there are not sufficient
changes in the value of the Fund's portfolio securities that its net asset value
might be materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; or (iii) the following
holidays: New Year's Day, Martin Luther King Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.

Determining Market Value of Securities
Market values of the Fund's portfolio securities are determined as follows:


                             VALUING MUNICIPAL BONDS

The Directors use an independent pricing service to value municipal bonds. The
independent pricing service takes into consideration yield, stability, risk,
quality, coupon rate, maturity, type of 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.

Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider yield, quality, coupon
rate, maturity, type of issue, trading characteristics, and other market data.


                                REDEEMING SHARES

The Fund redeems Shares at the next computed net asset value after the Fund
receives the redemption request. Shareholder redemptions may be subject to a
contingent deferred sales charge. Redemption procedures are explained in the
prospectus under "Redeeming and Exchanging Shares." Although the transfer agent
does not charge for telephone redemptions, it reserves the right to charge a fee
for the cost of wire-transferred redemptions of less than $5,000.

Redemption in Kind
Although the Fund intends to redeem Shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Fund's portfolio.

Redemption in kind will be made in conformity with applicable SEC rules, taking
such securities at the same value employed in determining net asset value and
selecting the securities in a manner the Directors determine to be fair and
equitable.

The Fund has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Fund is obligated to redeem Shares for any shareholder
in cash up to the lesser of $250,000 or 1% of the Fund's net asset value during
any 90-day period.

Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.

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; (3) Shares held for fewer than six years with respect to Class B
Shares and for less than one full year from the date of purchase with respect to
Class C Shares on a first-in, first-out basis.

Elimination of the Contingent Deferred Sales Charge--Class B Shares
  To qualify for elimination of the contingent deferred sales charge through a
  Systematic Withdrawal Program, the redemptions of Class B Shares must be from
  an account that is at least 12 months old, has all Fund distributions
  reinvested in Fund Shares, and has an account value of at least $10,000 when
  the Systematic Withdrawal Program is established. Qualifying redemptions may
  not exceed 1.00% monthly of the account value as periodically determined by
  the Fund. The amounts that a shareholder may withdraw under a Systematic
  Withdrawal Program that qualify for elimination of the Contingent Deferred
  Sales Charge may not exceed 12% annually with reference initially to the value
  of the Class B Shares upon establishment of the Systematic Withdrawal Program
  and then as calculated at the annual valuation date. Redemptions on a
  qualifying Systematic Withdrawal Program can be made at a rate of 1.00%
  monthly, 3.00% quarterly, or 6.00% semi-annually with reference to the
  applicable account valuation amount. Amounts that exceed the 12.00% annual
  limit for redemption, as described, may be subject to the Contingent Deferred
  Sales Charge. To the extent that a shareholder exchanges Shares for Class B
  Shares of other Federated Funds, the time for which the exchanged-for Shares
  are to be held will be added to the time for which exchanged-from Shares were
  held for purposes of satisfying the 12-month holding requirement. However, for
  purposes of meeting the $10,000 minimum account value requirement, Class B
  Share accounts will be not be aggregated. Any Shares purchased prior to the
  termination of this program would have the contingent deferred sales charge
  eliminated as provided in the Fund's prospectus at the time of the purchase of
  the Shares.


                                   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 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 returns based on offering price for the
following periods ended March 31, 1998, were:


   

Share Class          Inception DateOne-YearFive-Years Ten-Years Since Inception
Class     10/4/76  (2.75%)               4.42%       5.89%      ____%
Class B       7/26/94    (4.62%)    N/A       N/A        ____%
Class C       4/21/93    (0.03%)    N/A       N/A        ____%



    

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.


                                                                     YIELD

The Fund's yields for the thirty-day period ended March 31, 1998 were:

   

Share Class  Yield
Class A      ____%
Class B      ____%
Class C      ____%

    

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, 1998,
for Class A Shares, Class B Shares, and Class C Shares were ____%, ____%, and
____%, 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 1998
                            MULTISTATE MUNICIPAL FUND
      FEDERAL INCOME TAX BRACKET:
                  15.00%    28.00%       31.00%        36.00%        39.60%

      JOINT           $1-  $42,351-     $102,301-     $155,951-       OVER
      RETURN      42,350    102,300      155,950       278,450      $278,450

      SINGLE          $1-  $25,351-     $61,401-      $128,101-       OVER
      RETURN      25,350    61,400       128,100       278,450      $278,450

      Tax-Exempt
      Yield                   Taxable Yield Equivalent

        1.00%      1.18%     1.39%       1.45%         1.56%         1.66%
        1.50%      1.76%     2.08%       2.17%         2.34%         2.48%
        2.00%      2.35%     2.78%       2.90%         3.13%         3.31%
        2.50%      2.94%     3.47%       3.62%         3.91%         4.14%
        3.00%      3.53%     4.17%       4.35%         4.69%         4.97%
        3.50%      4.12%     4.86%       5.07%         5.47%         5.79%
        4.00%      4.71%     5.56%       5.80%         6.25%         6.62%
        4.50%      5.29%     6.25%       6.52%         7.03%         7.45%
        5.00%      5.88%     6.94%       7.25%         7.81%         8.28%
        5.50%      6.47%     7.64%       7.97%         8.59%         9.11%
        6.00%      7.06%     8.33%       8.70%         9.38%         9.93%
        6.50%      7.65%     9.03%       9.42%        10.16%        10.76%
        7.00%      8.24%     9.72%      10.14%        10.94%        11.59%
        7.50%      8.82%    10.42%      10.87%        11.72%        12.42%
        8.00%      9.41%    11.11%      11.59%        12.50%        13.25%


     Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent.

    


The chart above is for illustrative purposes only. It is not an indicator of
past or future performance of Fund shares.

* Some portion of the Fund's income may be subject to the federal alternative
minimum tax and state and local income taxes.


                             PERFORMANCE COMPARISONS

The 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.

Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in which in
invests, to a variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.

Economic and Market Information
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect of the
securities market. Such discussions may take the form of commentary on these
developments by Fund portfolio managers and their views and analysis on how such
developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute.


                         ABOUT FEDERATED INVESTORS, INC.

Federated Investors, Inc. 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. These traders handle trillions of dollars
in annual trading volume.

   

In the municipal sector, as of December 31, 1997, Federated Investors, Inc.
managed 11 bond funds with approximately $2.1 billion in assets and 22 money
market funds with approximately $10.9 billion in total assets. In 1976,
Federated introduced one of the first municipal bond mutual funds in the
industry and is now one of the largest institutional buyers of municipal
securities. The Funds may quote statistics from organizations including The Tax
Foundation and the National Taxpayers Union regarding the tax obligations of
Americans.

J. Thomas Madden, Executive Vice President, oversees Federated Investors, Inc.'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors, Inc.' domestic fixed
income management. Henry A. Frantzen, Executive Vice President, oversees the
management of Federated Investors, Inc.' international and global portfolios.

    

Mutual Fund Market
   

Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $4.4 trillion to the more than 6,700 funds available.*

Federated Investors, Inc., through its subsidiaries, distributes mutual funds
for a variety of investment applications. Specific markets include:

    

Institutional Clients
   

Federated Investors, Inc. meets the needs of approximately 900 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.

    

Bank Marketing
Other institutional clients include close relationships with more than 1,600
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Timothy C. Pillion, Senior Vice
President, Bank Marketing & Sales.

Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated funds are available to consumers through major brokerage firms
nationwide--we now have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Federated Securities Corp.





*     Source: Investment Company Institute


                              FINANCIAL STATEMENTS

The Financial Statements for the fiscal year ended March 31, 1997, are
incorporated herein by reference to the Annual Report of the Fund dated March
31, 1997 (File Nos. 2-57181 and 811-2677). A copy of this report may be obtained
without charge by contacting the Fund.

   

    





















PART C.    OTHER INFORMATION.

Item 24.    Financial Statements and Exhibits:

            (a)   Financial Statements. (To be filed by amendment)
            (b)   Exhibits:
                   (1)  (i) Conformed copy of Articles of Incorporation of the
                        Registrant; (14) (ii) Copy of amendment to Articles of
                        Incorporation; (14)
                   (2)  (i)   Copy of By-Laws of the Registrant; (14)
                        (ii)  Copy of Amendment to By-Laws effective
                              August 26, l987; (8)
                        (iii) Copy of Amendment to By-Laws effective
                              September 30, 1976; (14)
                        (iv)  Copy of Amendment to By-Laws effective
                              February 17, 1984; (14)
                        (v)   Copy of Amendment to By-Laws effective
                              February 21, 1985; (14)
                        (vi)  Copy of Amendment to By-Laws effective
                              August 27, 1986; (14)
                        (vii) Copy of Amendment to By-Laws effective
                              February 2, 1987; (14)
                   (3)  Not applicable;
                   (4)  Conformed copies of Specimen Certificates for Shares
                        of Capital Stock of the Registrant's Class A Shares,
                        Class B Shares, and Class C Shares; (16)
                   (5) Conformed copy of Investment Advisory Contract of the
                   Registrant; (9) (6) (i) Conformed copy of Distributor's
                   Contract of the Registrant; (12)
                        (ii)  Conformed copy of Exhibit D to the Distributor's
                              Contract; (13)
                        (iii) Conformed copy of Distributor's Contract (Class B
                              Shares) including Exhibit 1 and Schedule A; +
- ---------------------

+ All exhibits have been filed electronically.

8.   Response is incorporated by reference to Registrant's Post-Effective
     Amendment No. 35 on Form N-1A filed July 27, 1989. (File Nos. 2-57181 and
     811-2677)

9.   Response is incorporated by reference to Registrant's Post-Effective
     Amendment No. 36 on Form N-1A filed July 17, 1990. (File Nos. 2-57181 and
     811-2677)

12.  Response is incorporated by reference to Registrant's Post-Effective
     Amendment No. 42 on Form N-1A filed May 25, 1994. (File Nos. 2-57181 and
     811-2677)

13.  Response is incorporated by reference to Registrant's Post-Effective
     Amendment No. 45 on Form N-1A filed May 25, 1995. (File Nos. 2-57181 and
     811-2677)

14.  Response is incorporated by reference to Registrant's Post-Effective
     Amendment No. 46 on Form N-1A filed April 26, 1996. (File Nos. 2-57181 and
     811-2677)

16.  Response is incorporated by reference to Registrant's Post Effective
     Amendment No. 50 on Form N-1A filed May 29, 1997. (File Nos. 2-57181 and
     811-2677)





                        (iv)  The Registrant hereby incorporates the conformed
                              copy of the specimen Mutual Funds Sales and
                              Service Agreement; Mutual Funds Service Agreement;
                              and Plan Trustee/Mutual Funds Service Agreement
                              from Item 24(b)(6) of the Cash Trust Series II
                              Registration Statement on Form N-1A, filed with
                              the Commission on July 24, 1995 (File Numbers
                              33-38550 and 811-6269);
                   (7)  Not applicable;
                   (8)        (i) Conformed copy of Custodian Contract of the
                              Registrant; (13)
                        (ii)  Conformed copy of Custody Fee Schedule; +
                   (9)  (i)   Conformed copy of Agreement for Fund Accounting
                              Services, Administrative Services, Transfer
                              Agency Services and Custody Services
                              Procurement; (15)
                        (ii)  The responses described in Item 24(b)(6)(iii) are
                              hereby incorporated by reference.
                        (iii) The Registrant hereby incorporates by reference
                              the conformed copy of the Shareholder Services
                              Sub-Contract between Fidelity and Federated
                              Shareholder Services from Item 24(b)(9)(iii) of
                              the Federated GNMA Trust Registration Statement on
                              Form N-1A, filed with the Commission on March 25,
                              1996. (File Nos. 2-75670 and 811-3375);
                        (iv)  Conformed copy of Principal Shareholder
                              Servicer's Agreement (Class B Shares)
                              including Exhibit 1 and Schedule A; +
                         (v)  Conformed copy of Shareholders Services
                              Agreement (Class B Shares) including Exhibit 1
                              and Schedule A; +
                  (10)  Not applicable;
                  (11)  Conformed copy of Independent Auditors' Consent; (16)
                  (12)  Not applicable;
                  (13)  Not applicable;
                  (14)  Not applicable;

- ----------------------

+ All exhibits have been filed electronically.

12.  Response is incorporated by reference to Registrant's Post-Effective
     Amendment No. 42 on Form N-1A filed May 25, 1994. (File Nos. 2-57181 and
     811-2667)

13.  Response is incorporated by reference to Registrant's Post-Effective
     Amendment No. 45 on Form N-1A filed May 25, 1995. (File Nos. 2-57181 and
     811-2677)

14.  Response is incorporated by reference to Registrant's Post-Effective
     Amendment No. 46 on Form N-1A filed April 26, 1996. (File Nos. 2-57181 and
     811-2677)

15.  Response is incorporated by reference to Registrant's Post-Effective
     Amendment No. 48 on Form N-1A filed May 28, 1996. (File Nos. 2-57181 and
     811-2677)

16.  Response is incorporated by reference to Registrant's Post Effective
     Amendment No. 50 on Form N-1A filed May 29, 1997. (File Nos. 2-57181 and
     811-2677)






                  (15)  (i) Conformed copy of the 12b-1 Distribution Plan of the
                        Registrant; (12) (ii) Conformed copy of Exhibit C of the
                        12b-1 Distribution Plan of the Registrant; (13) (iii)
                        The responses described in Item 24(b)(6)(iii) are hereby
                        incorporated by reference. (iv) .Conformed copy of
                        Exhibit 1 and Schedule A to the 12b-1 Distribution Plan
                        (Class B Shares) of the Registrant; +
                  (16)  Copy of Schedule for Computation of Fund Performance
                        Data;(14)
                  (17)  Copy of Financial Data Schedules; (16)
                  (18)  The Registrant hereby incorporates the conformed copy of
                        the specimen Multiple Class Plan from Item 24(b)(18) of
                        the World Investment Series, Inc. Registration Statement
                        on Form N-1A, filed with the Commission on January 26,
                        1996. (File Nos. 33-52149 and 811-07141);
                  (19) Conformed copy of Power of Attorney. (16) 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 15, 1998

            Shares of capital stock
            ($0.0l per share par value)

            Class A Shares                            21,238
            Class B Shares                             2,553
            Class C Shares                               505

Item 27.    Indemnification:(11)

- ----------------------

+ All exhibits have been filed electronically.

12.  Response is incorporated by reference to Registrant's Post-Effective
     Amendment No. 42 on Form N-1A filed May 25, 1994. (File Nos. 2-57181 and
     811-2667)

13.  Response is incorporated by reference to Registrant's Post-Effective
     Amendment No. 45 on Form N-1A filed May 25, 1995. (File Nos. 2-57181 and
     811-2677)

14.  Response is incorporated by reference to Registrant's Post-Effective
     Amendment No. 46 on Form N-1A filed April 26, 1996. (File Nos. 2-57181 and
     811-2677)

16.  Response is incorporated by reference to Registrant's Post Effective
     Amendment No. 50 on Form N-1A filed May 29, 1997. (File Nos. 2-57181 and
     811-2677)






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 Trustees and one
         of the Officers of the investment adviser are included in Part B of
         this Registration Statement under "Federated Municipal Securities Fund,
         Inc. Management." The remaining Trustee 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:

         Executive Vice Presidents:          William D. Dawson, III
                                             Henry A. Frantzen
                                             J. Thomas Madden

         Senior Vice Presidents:             Joseph M. Balestrino
                                             Drew J. Collins
                                             Jonathan C. Conley
                                             Deborah A. Cunningham
                                             Mark E. Durbiano
                                             Sandra L. McInerney
                                             J. Alan Minteer
                                             Susan M. Nason
                                             Mary Jo Ochson
                                             Robert J. Ostrowski

         Vice Presidents:                    Todd A. Abraham
                                             J. Scott Albrecht
                                             Randall S. Bauer
                                             David A. Briggs
                                             Micheal W. Casey
                                             Kenneth J. Cody
                                             Alexandre de Bethmann
                                             Michael P. Donnelly
                                             Linda A. Duessel
                                             Donald T. Ellenberger
                                             Kathleen M. Foody-Malus
                                             Thomas M. Franks
                                             Edward C. Gonzales
                                             James E. Grefenstette
                                             Susan R. Hill
                                             Stephen A. Keen
                                             Robert K. Kinsey
                                             Robert M. Kowit
                                             Jeff A. Kozemchak
                                             Steven Lehman
                                             Marian R. Marinack
                                             Charles A. Ritter
                                             Scott B. Schermerhorn
                                             Frank Semack
                                             Aash M. Shah
                                             Christopher Smith
                                             William F. Stotz
                                             Tracy P. Stouffer
                                             Edward J. Tiedge
                                             Paige M. Wilhelm
                                             Jolanta M. Wysocka
         Assistant Vice Presidents:
                                             Stefanie L. Bachhuber
                                             Arthur J. Barry
                                             Robert E. Cauley
                                             Lee R. Cunningham, II
                                             Paul S. Drotch
                                             Salvatore A. Esposito
                                             Donna M. Fabiano
                                             John T. Gentry
                                             William R. Jamison
                                             Constantine Kartsonsas
                                             Natalie F. Metz
                                             Joseph M. Natoli
                                             Keith J. Sabol
                                             John Sheehy
                                             Michael W. Sirianni
                                             Gregg S. Tenser
                                             Leonardo A. Vila
                                             Lori A. Wolff

         Secretary:                          Stephen A. Keen

         Treasurer:                          Thomas R. Donahue

         Assistant Secretaries:              Thomas R. Donahue
                                             Richard B. Fisher
                                             Christine I. McGonigle

         Assistant Treasurer:                Richard B. Fisher

         The business address of each of the Officers of the investment adviser
         is Federated Investors Tower, Pittsburgh, Pennsylvania 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.

- ----------------------

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)






Item 29.    Principal Underwriters:

      (a)   Federated Securities Corp. the Distributor for shares of the
            Registrant, acts as principal underwriter for the following
            open-end investment companies, including the Registrant:

111 Corcoran Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders Fund,
Inc.; Federated ARMs Fund; Federated Core Trust; Federated Equity Funds;
Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; Regions Funds; Fixed Income Securities, Inc.; High
Yield Cash Trust; Independence One Mutual Funds; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment Series
Trust; Liberty U.S. Government Money Market Trust; Liquid Cash Trust; Managed
Series Trust; Marshall Funds, Inc.; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Peachtree Funds; RIMCO
Monument Funds; SouthTrust Vulcan Funds; Star Funds; Targeted Duration Trust;
Tax-Free Instruments Trust; The Planters Funds; The Virtus Funds; The Wachovia
Funds; The Wachovia Municipal Funds; Tower Mutual Funds; Trust for Financial
Institutions; Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; Vision Group of
Funds, Inc.; and World Investment Series, Inc.

Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.






            (b)

         (1)                           (2)                        (3)
Name and Principal            Positions and Offices        Positions and Offices
 Business Address                With Distributor             With Registrant

Richard B. Fisher             Director, Chairman, Chief        Vice President
Federated Investors Tower     Executive Officer, Chief
Pittsburgh, PA 15222-3779     Operating Officer, Asst.
                              Secretary and Asst.
                              Treasurer, Federated
                              Securities Corp.

Edward C. Gonzales            Director, Executive Vice         Executive Vice
Federated Investors Tower     President, Federated,            President
Pittsburgh, PA 15222-3779     Securities Corp.

Thomas R. Donahue             Director, Assistant Secretary
Federated Investors Tower     and Assistant Treasurer
Pittsburgh, PA 15222-3779     Federated Securities Corp

James F. Getz                 President-Broker/Dealer,             --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

John B. Fisher                President-Institutional Sales,       --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

David M. Taylor               Executive Vice President             --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark W. Bloss                 Senior Vice President,               --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard W. Boyd               Senior Vice President,               --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Laura M. Deger                Senior Vice President,               --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Theodore Fadool, Jr.          Senior Vice President,               --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Bryant R. Fisher              Senior Vice President,               --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Christopher T. Fives          Senior Vice President,               --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

James S. Hamilton             Senior Vice President,               --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779





         (1)                           (2)                        (3)
Name and Principal            Positions and Offices        Positions and Offices
 Business Address                With Distributor             With Registrant

James M. Heaton               Senior Vice President,               --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Keith Nixon                   Senior Vice President,               --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Solon A. Person, IV           Senior Vice President,               --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Timothy C. Pillion            Senior Vice President,               --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas E. Territ              Senior Vice President,               --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Ernest G. Anderson            Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Teresa M. Antoszyk            Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

John B. Bohnet                Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Byron F. Bowman               Vice President, Secretary,           --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jane E. Broeren-Lambesis      Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

David J. Callahan             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

R. Leonard Corton, Jr.        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 Distributor             With Registrant

Kevin J. Crenny               Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Daniel T. Culbertson          Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

G. Michael Cullen             Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Marc C. Danile                Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

William C. Doyle              Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jill Ehrenfeld                Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark D. Fisher                Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Joseph D. Gibbons             Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

John K. Goettlicher           Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Craig S. Gonzales             Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard C. Gonzales           Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Raymond Hanley                Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Bruce E. Hastings             Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Beth A. Hetzel                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 Distributor             With Registrant

James E. Hickey               Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Charlene H. Jennings          Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Brian G. Kelly                Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

H. Joseph Kennedy             Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Michael W. Koenig             Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Michael R. Manning            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

Alec H. Neilly                Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas A. Peters III          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

Richard A. Recker             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






         (1)                           (2)                        (3)
Name and Principal            Positions and Offices        Positions and Offices
 Business Address                With Distributor             With Registrant

Paul V. Riordan               Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

John Rogers                   Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Brian S. Ronayne              Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas S. Schinabeck          Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Edward L. Smith               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

John A. Staley                Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Colin B. Starks               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

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

Miles J. Wallace              Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

John F. Wallin                Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard B. Watts              Vice President,                      --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779






         (1)                           (2)                        (3)
Name and Principal            Positions and Offices        Positions and Offices
 Business Address                With Distributor             With Registrant

Edward J. Wojnarowski         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

Edward R. Bozek               Assistant Vice President,            --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Terri E. Bush                 Assistant Vice President,            --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Beth C. Dell                  Assistant Vice President,            --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

David L. Immonen              Assistant Vice President,            --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Renee L. Martin               Assistant Vice President,            --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Robert M. Rossi               Assistant Vice President,            --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Denis McAuley                 Treasurer,                           --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

Leslie K. Platt               Assistant Secretary,                 --
Federated Investors Tower     Federated Securities Corp.
Pittsburgh, PA 15222-3779

            (c) Not applicable.






Item 30.    Location of Accounts and Records:

All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:

Registrant                             Federated Investors Tower
                                       Pittsburgh, PA  15222-3779

Federated Shareholder Services Company P.O. Box 8600
("Transfer Agent and Dividend          Boston, MA 02266-8600
Disbursing Agent")

Federated Services Company             Federated Investors Tower
("Administrator")                      Pittsburgh, PA  15222-3779

Federated Advisers                     Federated Investors Tower
("Adviser")                            Pittsburgh, PA  15222-3779

State Street Bank and Trust Company    P.O. Box 8600
("Custodian")                          Boston, MA 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, FEDERATED MUNICIPAL SECURITIES
FUND, INC., has duly caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereto duly authorized, in the City of
Pittsburgh and Commonwealth of Pennsylvania, on the 29th day of May, 1998.

                    FEDERATED MUNICIPAL SECURITIES FUND, INC.
                  BY: /s/ Nicholas J. Seitanakis
                  Nicholas J. Seitanakis, Assistant Secretary
                  Attorney in Fact for John F. Donahue
                  May 29, 1998

    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/ Nicholas J. Seitanakis    Attorney In Fact          May 29, 1998
    Nicholas J. Seitanakis        For the Persons
    ASSISTANT SECRETARY           Listed Below


John F. Donahue*                  Chairman and Director
                                  (Chief Executive Officer)

J. Christopher Donahue*           President and Director

John W. McGonigle*                Treasurer, Executive
                                  Vice President and Secretary
                                  (Principal Financial and
                                  Accounting Officer)

Thomas G. Bigley*                 Director

John T. Conroy, Jr.*              Director

Nicholas P. Constantakis*         Director

William J. Copeland*              Director

James E. Dowd*                    Director

Lawrence D. Ellis, M.D.*          Director

Edward L. Flaherty, Jr.*          Director

Peter E. Madden*                  Director

John E. Murray, Jr.*              Director

Wesley W. Posvar*                 Director

Marjorie P. Smuts*                Director

* By Power of Attorney

EX-99.DISTRIBK

                            Exhibit 6 under Form N-1A
                        Exhibit 1 under Item 601/Reg. SK


                             DISTRIBUTOR'S CONTRACT

         AGREEMENT made this 24th day of October, 1997, by and between those
      Investment Companies on behalf of the Portfolios and Classes of Shares
      listed on Schedule A to Exhibit 1, as may be amended from time to time,
      having their principal place of business at Federated Investors Tower,
      Pittsburgh, Pennsylvania 15222-3779, and who have approved this form of
      Agreement, and FEDERATED SECURITIES CORP. ("FSC"), a Pennsylvania
      Corporation. Each of the Exhibits hereto is incorporated herein in its
      entirety and made a part hereof. In the event of any inconsistency between
      the terms of this Agreement and the terms of any applicable Exhibit, the
      terms of the applicable Exhibit shall govern.

         In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:

   1.   Each of the Investment Companies hereby appoint FSC as agent to sell and
        distribute shares of the Investment Companies which may be offered in
        one or more series (the "Funds") consisting of one or more classes (the
        "Classes") of shares (the "Shares"), as described and set forth on one
        or more exhibits to this Agreement, at the current offering price
        thereof as described and set forth in the current Prospectuses of the
        Funds. FSC hereby accepts such appointment and agrees to provide such
        other services for the Investment Companies, if any, and accept such
        compensation from the Investment Companies, if any, as set forth in the
        applicable exhibits to this Agreement.

   2.   The sale of any Shares may be suspended without prior notice whenever in
        the judgment of the applicable Investment Company it is in its best
        interest to do so.

     3.   Neither FSC nor any other person is authorized by the Investment
          Companies to give any information or to make any representation
          relative to any Shares other than those contained in the Registration
          Statement, Prospectuses, or Statements of Additional Information
          ("SAIs") filed with the Securities and Exchange Commission, as the
          same may be amended from time to time, or in any supplemental
          information to said Prospectuses or SAIs approved by the Investment
          Companies. FSC agrees that any other information or representations
          other than those specified above which it or any dealer or other
          person who purchases Shares through FSC may make in connection with
          the offer or sale of Shares, shall be made entirely without liability
          on the part of the Investment Companies. No person or dealer, other
          than FSC, is authorized to act as agent for the Investment Companies
          for any purpose. FSC agrees that in offering or selling Shares as
          agent of the Investment Companies, it will, in all respects, duly
          conform to all applicable state and federal laws and the rules and
          regulations of the National Association of Securities Dealers, Inc.,
          including its Rules of Fair Practice. FSC will submit to the
          Investment Companies copies of all sales literature before using the
          same and will not use such sales literature if disapproved by the
          Investment Companies.

     4.   This Agreement is effective with respect to each Class as of the date
          of execution of the applicable exhibit and shall continue in effect
          with respect to each Class presently set forth on an exhibit and any
          subsequent Classes added pursuant to an exhibit during the initial
          term of this Agreement for one year from the date set forth above, and
          thereafter for successive periods of one year if such continuance is
          approved at least annually by the Trustees/Directors of the Investment
          Companies including a majority of the members of the Board of
          Trustees/Directors of the Investment Companies who are not interested
          persons of the Investment Companies and have no direct or indirect
          financial interest in the operation of any Distribution Plan relating
          to the Investment Companies or in any related documents to such Plan
          ("Disinterested Trustees/Directors") cast in person at a meeting
          called for that purpose. If a Class is added after the first annual
          approval by the Trustees/Directors as described above, this Agreement
          will be effective as to that Class upon execution of the applicable
          exhibit and will continue in effect until the next annual approval of
          this Agreement by the Trustees/Directors and thereafter for successive
          periods of one year, subject to approval as described above.

   5.   This Agreement may be terminated with regard to a particular Fund or
        Class at any time, without the payment of any penalty, by the vote of a
        majority of the Disinterested Trustees/Directors or by a majority of the
        outstanding voting securities of the particular Fund or Class on not
        more than sixty (60) days' written notice to any other party to this
        Agreement.

   6.   This Agreement may not be assigned by FSC and shall automatically
        terminate in the event of an assignment by FSC as defined in the
        Investment Company Act of 1940, as amended, provided, however, that FSC
        may employ such other person, persons, corporation or corporations as it
        shall determine in order to assist it in carrying out its duties under
        this Agreement.

   7.   FSC shall not be liable to the Investment Companies for anything done or
        omitted by it, except acts or omissions involving willful misfeasance,
        bad faith, gross negligence, or reckless disregard of the duties imposed
        by this Agreement.

   8.   This Agreement may be amended at any time by mutual agreement in writing
        of all the parties hereto, provided that such amendment is approved by
        the Trustees/Directors of the Investment Companies including a majority
        of the Disinterested Trustees/Directors of the Investment Companies cast
        in person at a meeting called for that purpose.

   9. This Agreement shall be construed in accordance with and governed by the
laws of the Commonwealth of Pennsylvania.

     10.  (a) Subject to the conditions set forth below, the Investment
          Companies agree to indemnify and hold harmless FSC and each person, if
          any, who controls FSC within the meaning of Section 15 of the
          Securities Act of 1933 and Section 20 of the Securities Act of 1934,
          as amended, against any and all loss, liability, claim, damage and
          expense whatsoever (including but not limited to any and all expenses
          whatsoever reasonably incurred in investigating, preparing or
          defending against any litigation, commenced or threatened, or any
          claim whatsoever) arising out of or based upon any untrue statement or
          alleged untrue statement of a material fact contained in the
          Registration Statement, any Prospectuses or SAIs (as from time to time
          amended and supplemented) or the omission or alleged omission
          therefrom of a material fact required to be stated therein or
          necessary to make the statements therein not misleading, unless such
          statement or omission was made in reliance upon and in conformity with
          written information furnished to the Investment Companies about FSC by
          or on behalf of FSC expressly for use in the Registration Statement,
          any Prospectuses and SAIs or any amendment or supplement thereof.

              If any action is brought against FSC or any controlling person
              thereof with respect to which indemnity may be sought against any
              Investment Company pursuant to the foregoing paragraph, FSC shall
              promptly notify the Investment Company in writing of the
              institution of such action and the Investment Company shall assume
              the defense of such action, including the employment of counsel
              selected by the Investment Company and payment of expenses. FSC or
              any such controlling person thereof shall have the right to employ
              separate counsel in any such case, but the fees and expenses of
              such counsel shall be at the expense of FSC or such controlling
              person unless the employment of such counsel shall have been
              authorized in writing by the Investment Company in connection with
              the defense of such action or the Investment Company shall not
              have employed counsel to have charge of the defense of such
              action, in any of which events such fees and expenses shall be
              borne by the Investment Company. Anything in this paragraph to the
              contrary notwithstanding, the Investment Companies shall not be
              liable for any settlement of any such claim of action effected
              without their written consent. The Investment Companies agree
              promptly to notify FSC of the commencement of any litigation or
              proceedings against the Investment Companies or any of their
              officers or Trustees/Directors or controlling persons in
              connection with the issue and sale of Shares or in connection with
              the Registration Statement, Prospectuses, or SAIs.

     (b)  FSC agrees to indemnify and hold harmless the Investment Companies,
          each of its Trustees/Directors, each of its officers who have signed
          the Registration Statement and each other person, if any, who controls
          the Investment Companies within the meaning of Section 15 of the
          Securities Act of 1933, but only with respect to statements or
          omissions, if any, made in the Registration Statement or any
          Prospectus, SAI, or any amendment or supplement thereof in reliance
          upon, and in conformity with, information furnished to the Investment
          Companies about FSC by or on behalf of FSC expressly for use in the
          Registration Statement or any Prospectus, SAI, or any amendment or
          supplement thereof. In case any action shall be brought against any
          Investment Company or any other person so indemnified based on the
          Registration Statement or any Prospectus, SAI, or any amendment or
          supplement thereof, and with respect to which indemnity may be sought
          against FSC, FSC shall have the rights and duties given to the
          Investment Companies, and the Investment Companies and each other
          person so indemnified shall have the rights and duties given to FSC by
          the provisions of subsection (a) above.

        (c)   Nothing herein contained shall be deemed to protect any person
              against liability to the Investment Companies or their
              shareholders to which such person would otherwise be subject by
              reason of willful misfeasance, bad faith or gross negligence in
              the performance of the duties of such person or by reason of the
              reckless disregard by such person of the obligations and duties of
              such person under this Agreement.

     (d)  Insofar as indemnification for liabilities may be permitted pursuant
          to Section 17 of the Investment Company Act of 1940, as amended, for
          Trustees/Directors, officers, FSC and controlling persons of the
          Investment Companies by the Trustees/Directors pursuant to this
          Agreement, the Investment Companies are aware of the position of the
          Securities and Exchange Commission as set forth in the Investment
          Company Act Release No. IC-11330. Therefore, the Investment Companies
          undertakes that in addition to complying with the applicable
          provisions of this Agreement, in the absence of a final decision on
          the merits by a court or other body before which the proceeding was
          brought, that an indemnification payment will not be made unless in
          the absence of such a decision, a reasonable determination based upon
          factual review has been made (i) by a majority vote of a quorum of
          non-party Disinterested Trustees/Directors, or (ii) by independent
          legal counsel in a written opinion that the indemnitee was not liable
          for an act of willful misfeasance, bad faith, gross negligence or
          reckless disregard of duties. The Investment Companies further
          undertakes that advancement of expenses incurred in the defense of a
          proceeding (upon undertaking for repayment unless it is ultimately
          determined that indemnification is appropriate) against an officer,
          Trustees/Directors, FSC or controlling person of the Investment
          Companies will not be made absent the fulfillment of at least one of
          the following conditions: (i) the indemnitee provides security for his
          undertaking; (ii) the Investment Companies is insured against losses
          arising by reason of any lawful advances; or (iii) a majority of a
          quorum of non-party Disinterested Trustees/Directors or independent
          legal counsel in a written opinion makes a factual determination that
          there is reason to believe the indemnitee will be entitled to
          indemnification.


        
   11.  If at any time the Shares of any Fund are offered in two or more
        Classes, FSC agrees to adopt compliance standards as to when a class of
        shares may be sold to particular investors.

   12. This Agreement will become binding on the parties hereto upon the
execution of the attached exhibits to the Agreement.








                                    Exhibit 1
                                     to the
                             Distributor's Contract

      The following provisions are hereby incorporated and made part of the
Distributor's Contract (the "Distributor's Contract") dated October 24, 1997,
between the Investment Companies and Federated Securities Corp. as principal
distributor (the "Principal Distributor") with respect to the Class B Shares of
the portfolios (the "Funds") set forth on the attached Schedule A. References
herein to this Distributor's Contract refer to the Distributor's Contract as
supplemented hereby and made applicable hereby to the Class B Shares of the
Funds. In the event of any inconsistency between the terms of this Exhibit and
the terms of the Distributor's Contract, the terms of this Exhibit will govern.
Once effective in respect of the Class of Shares of any Fund set forth above,
the Distributors Contract as amended by this Exhibit shall be effective in
respect of all shares of such class outstanding whether issued prior to or after
such effectiveness.

   1. The Investment Companies hereby appoints the Principal Distributor to
      engage in activities principally intended to result in the sale of Class B
      Shares ("Class B Shares") of each Fund. Pursuant to this appointment, the
      Principal Distributor is authorized to select a group of financial
      institutions ("Financial Institutions") to sell Class B Shares of a Fund
      at the current offering price thereof as described and set forth in the
      respective prospectuses of the Fund.

   2.    (a) In consideration of the Principal Distributor's services under this
         Distributor's Contract in respect of each Fund the Investment Companies
         on behalf of the Fund agree: (I) to pay the Principal Distributor or at
         its direction its "Allocable Portion" (as hereinafter defined) of a fee
         (the "Distribution Fee") equal to 0.75 of 1% per annum of the average
         daily net asset value of the Class B Shares of the Fund outstanding
         from time to time, and (II) to withhold from redemption proceeds in
         respect of Class B Shares of the Fund such Principal Distributor's
         Allocable Portion of the Contingent Deferred Sales Charges ("CDSCs")
         payable in respect of such redemption as provided in the Prospectus for
         the Fund and to pay the same over to such Principal Distributor or at
         its direction at the time the redemption proceeds in respect of such
         redemption are payable to the holder of the Class B Shares redeemed.

      (b)The Principal Distributor will be deemed to have performed all
         services required to be performed in order to be entitled to receive
         its Allocable Portion of the Distribution Fee payable in respect of the
         Class B Shares of a Fund upon the settlement of each sale of a
         "Commission Share" (as defined in the Allocation Schedule attached
         hereto as Schedule B) of the Fund taken into account in determining
         such Principal Distributor's Allocable Portion of such Distribution
         Fees.

      (c)Notwithstanding anything to the contrary set forth in this Exhibit,
         the Distributor's Contract or (to the extent waiver thereof is
         permitted thereby) applicable law, the Investment Companies' obligation
         to pay the Principal Distributor's Allocable Portion of the
         Distribution Fees payable in respect of the Class B Shares of a Fund
         shall not be terminated or modified for any reason (including a
         termination of this Distributor's Contract as it relates to Class B
         Shares of a Fund) except to the extent required by a change in the
         Investment Company Act of 1940 (the "Act") or the Conduct Rules of the
         National Association of Securities Dealers, Inc., in either case
         enacted or promulgated after May 1, 1997, or in connection with a
         "Complete Termination" (as hereinafter defined) of the Distribution
         Plan in respect of the Class B Shares of a Fund.

      (d)The Investment Companies will not take any action to waive or change
         any CDSC in respect of the Class B Shares of a Fund, except as provided
         in the Investment Companies' prospectus or statement of additional
         information as in effect as of the date hereof without the consent of
         the Principal Distributor and the permitted assigns of all or any
         portion of its right to its Allocable Portion of the CDSCs.

      (e)Notwithstanding anything to the contrary set forth in this Exhibit,
         the Distributor's Contract, or (to the extent waiver thereof is
         permitted thereby) applicable law, neither the termination of the
         Principal Distributor's role as principal distributor of the Class B
         Shares of a Fund, nor the termination of this Distributor's Contract
         nor the termination of the Distribution Plan will terminate such
         Principal Distributor's right to its Allocable Portion of the CDSCs in
         respect of the Class B Shares of a Fund.

      (f)Notwithstanding anything to the contrary in this Exhibit, the
         Distributor's Contract, or (to the extent waiver thereof is permitted
         thereby) applicable law, the Principal Distributor may assign, sell or
         pledge (collectively, a "Transfer") its rights to its Allocable Portion
         of the Distribution Fees and CDSCs earned by it (but not its
         obligations to the Investment Companies under this Distributor's
         Contract) in respect of the Class B Shares of a Fund to raise funds to
         make the expenditures related to the distribution of Class B Shares of
         the Fund and in connection therewith upon receipt of notice of such
         Transfer, the Investment Companies shall pay, or cause to be paid to
         the assignee, purchaser or pledgee (collectively with their subsequent
         transferees, "Transferees") such portion of the Principal Distributor's
         Allocable Portion of the Distribution Fees and CDSCs in respect of the
         Class B Shares of the Fund so Transferred. Except as provided in (c)
         above and notwithstanding anything to the contrary set forth elsewhere
         in this Exhibit, the Distributor's Contract, or (to the extent waiver
         thereof is permitted thereby) applicable law, to the extent the
         Principal Distributor has Transferred its rights thereto to raise funds
         as aforesaid, the Investment Companies' obligation to pay to the
         Principal Distributor's Transferees the Principal Distributor's
         Allocable Portion of the Distribution Fees payable in respect of the
         Class B Shares of each Fund shall be absolute and unconditional and
         shall not be subject to dispute, offset, counterclaim or any defense
         whatsoever, including without limitation, any of the foregoing based on
         the insolvency or bankruptcy of the Principal Distributor (it being
         understood that such provision is not a waiver of the Investment
         Companies' right to pursue such Principal Distributor and enforce such
         claims against the assets of such Principal Distributor other than the
         Distributor's right to the Distribution Fees, CDSCs and servicing fees,
         in respect of the Class B Shares of any Fund which have been so
         transferred in connection with such Transfer). The Fund agrees that
         each such Transferee is a third party beneficiary of the provisions of
         this clause (f) but only insofar as those provisions relate to
         Distribution Fees and CDSCs transferred to such Transferee.

      (g)For purposes of this Distributor's Contract, the term Allocable
         Portion of Distribution Fees payable in respect of the Class B Shares
         of any Fund shall mean the portion of such Distribution Fees allocated
         to such Principal Distributor in accordance with the Allocation
         Schedule attached hereto as Schedule B.

      (h)For purposes of this Distributor's Contract, the term "Complete
         Termination" of the Plan in respect of any Fund means a termination of
         the Plan involving the complete cessation of the payment of
         Distribution Fees in respect of all Class B Shares of such Fund, and
         the termination of the distribution plans and the complete cessation of
         the payment of distribution fees pursuant to every other Distribution
         Plan pursuant to rule 12b-1 of the Investment Companies in respect of
         such Fund and any successor Fund or any Fund acquiring a substantial
         portion of the assets of such Fund and for every future class of shares
         which has substantially similar characteristics to the Class B Shares
         of such Fund including the manner of payment and amount of sales
         charge, contingent deferred sales charge or other similar charges borne
         directly or indirectly by the holders of such shares.

   3. The Principal Distributor may enter into separate written agreements with
      various firms to provide certain of the services set forth in Paragraph 1
      herein. The Principal Distributor, in its sole discretion, may pay
      Financial Institutions a lump sum fee on the settlement date for the sale
      of each Class B Share of the Fund to their clients or customers for
      distribution of such share. The schedules of fees to be paid such firms or
      Financial Institutions and the basis upon which such fees will be paid
      shall be determined from time to time by the Principal Distributor in its
      sole discretion.

   4. The Principal Distributor will prepare reports to the Board of
      Trustees/Directors of the Investment Companies on a quarterly basis
      showing amounts expended hereunder including amounts paid to Financial
      Institutions and the purpose for such expenditures.

      In consideration of the mutual covenants set forth in the Distributor's
Contract between the Investment Companies and the Principal Distributor, the
Principal Distributor and the Investment Companies hereby execute and deliver
this Exhibit with respect to the Class B Shares of the Fund.






      Witness the due execution hereof this 24th day of October, 1997.


ATTEST:                          INVESTMENT COMPANIES (listed on Schedule A)

By: /s/ S. Elliott Cohan         By: /s/ John W. McGonigle
Title: Assistant Secretary`      Title: Executive Vice President


ATTEST:                          FEDERATED SECURITIES CORP.


By:  /s/ Leslie K. Platt         By: /s/ Byron F. Bowman
Title: Assistant Secretary       Title: Vice President





                                                                   Schedule A

Date:  10/24/97      DISTRIBUTOR'S CONTRACT



                     Federated American Leaders Fund, Inc.
                        Class B Shares

                     Federated Equity Funds
                        Federated Aggressive Growth Fund
                        Class B Shares

                        Federated Growth Strategies Fund
                        Class B Shares

                        Federated Small Cap Strategies Fund
                        Class B Shares

                        Federated Capital Appreciation Fund
                        Class B Shares

                     Federated Equity Income Fund, Inc.
                        Class B Shares

                     Federated Fund for U.S. Government Securities, Inc.
                        Class B Shares

                     Federated Government Income Securities, Inc.
                        Class B Shares

                     Federated High Income Bond Fund, Inc.
                        Class B Shares

                     Federated Municipal Opportunities Fund, Inc.
                        Class B Shares

                     Federated Municipal Securities Fund, Inc.
                        Class B Shares

                     Federated Stock and Bond Fund, Inc.
                        Class B Shares

                     Federated Utility Fund, Inc.
                        Class B Shares

                     Fixed Income Securities, Inc.
                        Federated Strategic Income Fund
                        Class B Shares

                     International Series, Inc.
                        Federated International Equity Fund
                        Class B Shares

                        Federated International Income Fund
                        Class B Shares






                     Investment Series Funds, Inc.
                        Federated Bond Fund
                        Class B Shares

                     Liberty U.S. Government Money Market Trust
                        Class B Shares

                     Municipal Securities Income Trust
                        Federated Pennsylvania Municipal Income Fund
                        Class B Shares

                     World Investment Series, Inc.
                        Federated World Utility Fund
                        Class B Shares

                        Federated Asia Pacific Growth Fund
                        Class B Shares

                        Federated Emerging Markets Fund
                        Class B Shares

                        Federated European Growth Fund
                        Class B Shares

                        Federated International Small Company Fund
                        Class B Shares

                        Federated Latin American Growth Fund
                        Class B Shares

                        Federated International High Income Fund
                        Class B Shares

                        Federated International Growth Fund
                        Class B Shares


The following Funds were added as of December 1, 1997:

                     Municipal Securities Income Trust
                        Federated California Municipal Income Fund
                        Class B Shares

                     World Investment Series, Inc.
                        Federated Global Equity Income Fund
                        Class B Shares


The following Funds were added as of March 1, 1998:

                     Federated Stock Trust
                        Class B Shares

EX-99.CUSTODFEE

                            Exhibit 8 under Form N-1A
                        Exhibit 10 under Item 601/Reg. SK


                                                                  STATE STREET
                                                                DOMESTIC CUSTODY

                                                                  FEE SCHEDULE

                                                                Federated Funds

I.    Custody Services

      Maintain custody of fund assets. Settle portfolio purchases and sales.
      Report buy and sell fails. Determine and collect portfolio income. Make
      cash disbursements and report cash transactions. Monitor corporate
      actions.

                                                              ANNUAL FEES

      ASSET

     Per Fund                                                 .25 Basis Points

     Wire Fees                                                $3.00 per wire

      Settlements:

     o   Each DTC Transaction                                         $5.00
     o   Each Federal Reserve Book Entry Transaction                  $3.75
     o   Each Repo Transaction (All Repo)                             $3.75
     o   Each Physical Transaction (NY/Boston, Private Placement)    $15.00
     o   Each Option Written/Exercised/Expired                       $18.75
         Each Book Entry Muni (Sub-custody) Transaction              $15.00
     o   Government Paydowns                                          $5.00
     o   Maturity Collections                                         $8.00
     o   PTC Transactions                                             $6.00


II.   Special Services

      Fees for activities of a non-recurring nature such as fund consolidation
      or reorganization, extraordinary security shipments and the preparation of
      special reports will be subject to negotiation.



III.  Balance Credit

      Municipal Funds
      A balance credit equal to 75% of the average demand deposit account
      balance in the custodian account for the month billed times the 30 day
      T-Bill Rate on the last Monday of the month billed, will be applied
      against the month's custodian bill.

      Transfer Agent
      A balance credit equal to 100% of the average balance in the transfer
      agent demand deposit accounts, less the reserve requirement and applicable
      related expenses, times 75% of the 30 average Fed Funds Rate.

IV.   Payment

     The above fees will be charged against the funds' custodian checking
account thirty (30) days after the invoice is mailed to the funds' offices.

V. Term of Contract

      The parties agree that this fee schedule shall become effective
January 1, 1997.

FEDERATED SERVICES COMPANY                    STATE STREET

BY:    /s/ Douglas L. Hein                    BY:     /s/ Michael E. Hagerty

TITLE: Senior Vice President                  TITLE:  Vice President

DATE:  April 15, 1997                         DATE:   April 8, 1997

EX-99.SHSERVAGREE

                            Exhibit 9 under Form N-1A
                        Exhibit 10 under Item 601/Reg. SK


                   PRINCIPAL SHAREHOLDER SERVICER'S AGREEMENT


     THIS AGREEMENT, is made as of the 24th day of October, 1997, by and between
those Investment Companies on behalf of the Portfolios (individually referred to
herein as a "Fund" and collectively as "Funds") and Classes of Shares
("Classes") listed on Schedule A to Exhibit 1, as may be amended from time to
time, having their principal office and place of business at Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779, and who have approved this form of
Agreement and Federated Securities Corp. as the principal shareholder servicer
(the "Principal Servicer"). Each of the Exhibits hereto is incorporated herein
in its entirety and made a part hereof. In the event of any inconsistency
between the terms of this Agreement and the terms of any applicable Exhibit, the
terms of the applicable Exhibit shall govern.

     In consideration of the mutual covenants hereinafter contained it is hereby
agreed by and between the parties hereto as follows.

1.   The Investment Companies hereby appoint the Principal Servicer as their
     agent to select, negotiate and contract for the performance of and arrange
     for the rendition of personal services to shareholders and/or the
     maintenance of accounts of shareholders of each Class of the Funds as to
     which this Agreement is made applicable (The Principal Servicer's duties
     hereunder are referred to as "Services"). The Principal Servicer hereby
     accepts such appointment and agrees to perform or cause to be performed the
     Services in respect of the Classes of the Funds to which this Agreement has
     been made applicable by an Exhibit. The Principal Servicer agrees to cause
     to be provided shareholder services which, in its best judgment (subject to
     supervision and control of the Investment Companies' Boards of Trustees or
     Directors, as applicable), are necessary or desirable for shareholders of
     the Funds. The Principal Servicer further agrees to provide the Investment
     Companies, upon request, a written description of the shareholder services
     for which the Principal Servicer is arranging hereunder.

2.    During the term of this Agreement, each Investment Company will pay the
      Principal Servicer and the Principal Servicer agrees to accept as full
      compensation for its services rendered hereunder a fee as set forth on the
      Exhibit applicable to the Class of each Fund subject to this Agreement.

      For the payment period in which this Agreement becomes effective or
      terminates with respect to any Class of a 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 Class of the
      Fund during the month.

3.    This Agreement is effective with respect to each Class of a Fund as of the
      date of execution of the applicable Exhibit and 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 Investment Company, including a
      majority of the members of the Board of the Investment Company who are not
      interested persons of the Investment Company ("Independent Board Members")
      cast in person at a meeting called for that purpose.






4. Notwithstanding paragraph 3, this Agreement may be terminated with regard to
a particular Class of a Fund 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 Investment Company
           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

5.    The Principal Servicer agrees to arrange 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.   The Principal Servicer shall not be liable for any error of judgment or
     mistake of law or for any loss suffered by any Investment Company in
     connection with the matters to which this Agreement relates, except a loss
     resulting from willful misfeasance, bad faith or gross negligence on its
     part in the performance of its duties or from reckless disregard by it of
     its obligations and duties under this Agreement. the Principal Servicer
     shall be entitled to rely on and may act upon advice of counsel (who may be
     counsel for such Investment Company) on all matters, and shall be without
     liability for any action reasonably taken or omitted pursuant to such
     advice. Any person, even though also an officer, trustee, partner, employee
     or agent of the Principal Servicer, who may be or become a member of such
     Investment Company'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 the Principal Servicer 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 the Principal
     Servicer even though paid by the Principal Servicer.

      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.    The Principal Servicer is expressly put on notice of the limitation of
      liability as set forth in the Declaration of Trust of each Investment
      Company that is a Massachusetts business trust and agrees that the
      obligations assumed by each such Investment Company pursuant to this
      Agreement shall be limited in any case to such Investment Company and its
      assets and that the Principal Servicer shall not seek satisfaction of any
      such obligations from the shareholders of such Investment Company, the
      Trustees, Officers, Employees or Agents of such Investment Company, or any
      of them.

9.    The execution and delivery of this Agreement have been authorized by the
      Directors of the Principal Servicer and signed by an authorized officer of
      the Principal Servicer, acting as such, and neither such authorization by
      such Directors 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 Directors or shareholders of the Principal
      Servicer, but bind only the property of the Principal Servicer as provided
      in the Articles of Incorporation of the Principal Servicer.

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
      Investment Company at the following address: Federated Investors Tower,
      Pittsburgh, PA 15222-3779, Attention: President and if delivered to the
      Principal Servicer 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 the Principal Servicer in the case of assignment by any
      Investment Company, or of the Investment Companies in the case of
      assignment by the Principal Servicer, 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 13 shall prevent the Principal Servicer 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 Schedule
A)


Attest:        /s/ S. Elliott Cohan         By:   /s/ John W. McGonigle
Title:  Assistant Secretary           Title:   Executive Vice President


                                      Federated Securities Corp.


Attest:         /s/ Leslie K. Platt         By: /s/ Byron F. Bowman
Title:          Assistant Secretary         Title:  Vice President






                                    Exhibit 1
                                     to the
                   Principal Shareholder Servicer's Agreement
                          Related to Class B Shares of
                                    the Funds

      The following provisions are hereby incorporated and made part of the
Principal Shareholder Servicer's Agreement (the "Principal Shareholder
Servicer's Agreement") as of the 24th day of October, 1997, by and between those
Investment Companies on behalf of the Portfolios (individually referred to
herein as a "Fund" and collectively as "Funds") and Classes of Shares
("Classes") listed on Schedule A to Exhibit 1, as may be amended from time to
time, having their principal office and place of business at Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779, and who have approved this form of
Agreement and Federated Securities Corp. as the principal shareholder servicer
(the "Principal Servicer"). Each of the Exhibits hereto is incorporated herein
in its entirety and made a part hereof. In the event of any inconsistency
between the terms of this Exhibit and the terms of the Principal Shareholder
Servicer's Agreement, the terms of this Exhibit shall govern.

   1. Each Investment Company hereby appoints the Principal Servicer to arrange
      for the rendition of the shareholder services in respect of Class B Shares
      ("Class B Shares") of each Fund. Pursuant to this appointment, the
      Principal Servicer is authorized to select various companies including but
      not limited to Federated Shareholder Services ("Companies or a Company ")
      to provide such services.

   2.    (a) In consideration of the Principal Servicer's Services under this
         Agreement in respect of the Class B Shares each Fund agrees to pay the
         Principal Servicer or at its direction its "Allocable Portion" (as
         hereinafter defined) of a fee (the "Servicing Fee") equal to 0.25 of 1%
         per annum of the average daily net asset value of the Class B Shares of
         the Fund outstanding from time to time, provided however, that in the
         event the Fund operates as a fund of funds (a "FOF Fund") by investing
         the proceeds of the issuance of its Class B Shares in Class A Shares of
         another fund (the "Other Fund") and the Principal Shareholder Servicer
         receives a servicing fee in respect of the Class A Shares of the Other
         Fund so acquired by the FOF Fund, the Servicing Fee payable in respect
         of such Class B Shares of the FOF Fund will be reduced by the amount of
         the servicing fee actually received by the Principal Shareholder
         Servicer or its assign from the Other Fund in respect of the Class A
         Shares of the Other Fund acquired with the proceeds of such Class B
         Shares of the FOF Fund.

      (b)(i) The Principal Servicer will be deemed to have fully earned its
         Allocable Portion (computed as of any date) of the Servicing Fee
         payable in respect of the Class B Shares of a Fund (and to have
         satisfied its obligation to arrange for shareholder services in respect
         of such Class B Shares) on the date it has arranged for shareholder
         services to be performed by Federated Shareholder Services by payment
         of the lump sum contemplated by Alternative A to Exhibit 1 to the
         Shareholder Services Agreement among the Principal Servicer, Federated
         Shareholder Services and the Fund dated as of the date hereof (the
         "Shareholder Services Agreement") to Federated Shareholder Services
         (whose obligations are fully supported by its parent company) in
         respect of each "Commission Share" (as defined in the Allocation
         Schedule attached hereto in Schedule B) of the Fund, taken into account
         in determining such Principal Servicer's Allocable Portion of such
         Servicing Fees as of such date. The Principal Servicer shall not be
         deemed to have any other duties in respect of the Shares and its
         Allocable Portion of the Servicing Fees to which the preceding sentence
         applies and such arrangements shall be deemed a separate and distinct
         contractual arrangement from that described in clause (ii).

         (ii) The Principal Servicer will be deemed to have fully earned any
         Servicing Fees not included in its Allocable Portion (i.e., those
         attributable to Shares in respect of which Alternative A under Exhibit
         1 to the Shareholder Services Agreement is not applicable) as such
         services are performed in respect of such Shares.

      (c)Notwithstanding anything to the contrary set forth in this Exhibit,
         the Principal Shareholder Agreement, or (to the extent waiver thereof
         is permitted thereby) applicable law, each Investment Company's
         obligation to pay the Principal Servicer's Allocable Portion of the
         Servicing Fees payable in respect of the Class B Shares of a Fund shall
         not be terminated or modified for any reason (including a termination
         of this Principal Shareholder Servicer's Agreement as it relates to the
         Fund) except to the extent required by a change in the Investment
         Company Act of 1940 (the "Act") or the Conduct Rules of the National
         Association of Securities Dealers, Inc., in either case enacted or
         promulgated after May 1, 1997, or in connection with a "Complete
         Termination" (as hereinafter defined) in respect of the Class B Shares
         of such Fund.

      (d)Notwithstanding anything to the contrary in this Exhibit, the
         Principal Shareholder Agreement, or (to the extent waiver thereof is
         permitted thereby) applicable law, the Principal Servicer may assign,
         sell or pledge (collectively, "Transfer") its rights to its Allocable
         Portion of the Servicing Fees (but not its obligations to the
         Investment Companies under this Principal Shareholder Servicer's
         Agreement) in respect of the Class B Shares of a Fund to raise funds to
         make the expenditures related to the Services and in connection
         therewith upon receipt of notice of such Transfer, the Investment
         Company shall pay to the assignee, purchaser or pledgee (collectively
         with their subsequent transferees, "Transferees") such portion of the
         Principal Servicer's Allocable Portion of the Servicing Fees in respect
         of the Class B Shares of the Fund so Transferred. Except as provided in
         (c) above and notwithstanding anything to the contrary set forth
         elsewhere in this Exhibit, the Principal Shareholder Agreement, or (to
         the extent waiver thereof is permitted thereby) applicable law, to the
         extent the Principal Servicer has Transferred its rights thereto to
         raise funds as aforesaid, the Investment Companies' obligation to pay
         to the Principal Servicer's Transferees the Principal Servicer's
         Allocable Portion of the Servicing Fees payable in respect of the Class
         B Shares of each Fund shall be absolute and unconditional and shall not
         be subject to dispute, offset, counterclaim or any defense whatsoever,
         including without limitation, any of the foregoing based on the
         insolvency or bankruptcy of the Principal Servicer, Federated
         Shareholder Services (or its parent) or the failure of Federated
         Shareholder Services (or its parent) to perform its Irrevocable Service
         Commitment (it being understood that such provision is not a waiver of
         the Investment Companies' right to pursue such Principal Servicer and
         enforce such claims against the assets of such Principal Servicer other
         than the Principal Servicer's right to the Distribution Fees, Servicing
         Fees and CDSCs in respect of the Class B Shares of the Fund which have
         been so transferred in connection with such Transfer). The Fund agrees
         that each such Transferee is a third party beneficiary of the
         provisions of this clause (d) but only insofar as those provisions
         relate to Servicing Fees transferred to such Transferee.

      (e)For purposes of this Principal Shareholder Servicer's Agreement, the
         term Allocable Portion of Servicing Fees payable in respect of the
         Class B Shares of any Fund shall mean the portion of such Servicing
         Fees allocated to such Principal Servicer in accordance with the
         Allocation Schedule attached hereto as Schedule B.

      (f)For purposes of this Principal Shareholder Servicer's Contract, the
         term "Complete Termination" of shareholder servicing arrangements in
         respect of Class B Shares of a Fund means a termination of shareholder
         servicing arrangements involving the complete cessation of payments of
         Servicing Fees in respect of all Class B Shares, and the complete
         cessation of payments of servicing fees for every existing and future
         class of shares of the Fund and any successor Fund or any Fund
         acquiring a substantial portion of the assets of the Fund ,which has
         substantially similar characteristics to the Class B Shares taking into
         account the manner and amount of sales charge, servicing fee,
         contingent deferred sales charge or other similar charge borne directly
         or indirectly by the holders of such shares.

   3. The Principal Servicer may enter into separate written agreements with
      Companies to provide the services set forth in Paragraph 1 herein. The
      schedules of fees to be paid such Companies and the basis upon which such
      fees will be paid shall be determined from time to time by the Principal
      Servicer in its sole discretion.

   4. The Principal Servicer will prepare reports to the Board of
      Trustees/Directors of the Investment Companies on a quarterly basis
      showing amounts expended hereunder including amounts paid to Companies and
      the purpose for such expenditures.

      In consideration of the mutual covenants set forth in the Principal
Shareholder Servicer's Contract, the Principal Servicer and the Investment
Companies hereby execute and deliver this Exhibit with respect to the Class B
Shares of each Fund.

      Witness the due execution hereof this 24th day of October, 1997.


ATTEST:                          INVESTMENT COMPANIES (listed on Schedule A)

By: /s/ S. Elliott Cohan         By:  /s/ John W. McGonigle
Title:  Assistant Secretary      Title: Executive Vice President


ATTEST:                          FEDERATED SECURITIES CORP.


By:  /s/ Leslie K. Platt         By: /s/ Byron F. Bowman
Title: Assistant Secretary       Title: Vice President





                                                                   Schedule A

Date: 10/24/97       PRINCIPAL SHAREHOLDER SERVICER'S AGREEMENT



                     Federated American Leaders Fund, Inc.
                        Class B Shares

                     Federated Equity Funds
                        Federated Aggressive Growth Fund
                        Class B Shares

                        Federated Growth Strategies Fund
                        Class B Shares

                        Federated Small Cap Strategies Fund
                        Class B Shares

                        Federated Capital Appreciation Fund
                        Class B Shares

                     Federated Equity Income Fund, Inc.
                        Class B Shares

                     Federated Fund for U.S. Government Securities, Inc.
                        Class B Shares

                     Federated Government Income Securities, Inc.
                        Class B Shares

                     Federated High Income Bond Fund, Inc.
                        Class B Shares

                     Federated Municipal Opportunities Fund, Inc.
                        Class B Shares

                     Federated Municipal Securities Fund, Inc.
                        Class B Shares

                     Federated Stock and Bond Fund, Inc.
                        Class B Shares

                     Federated Utility Fund, Inc.
                        Class B Shares

                     Fixed Income Securities, Inc.
                        Federated Strategic Income Fund
                        Class B Shares

                     International Series, Inc.
                        Federated International Equity Fund
                        Class B Shares

                        Federated International Income Fund
                        Class B Shares






                     Investment Series Funds, Inc.
                        Federated Bond Fund
                        Class B Shares

                     Liberty U.S. Government Money Market Trust
                        Class B Shares

                     Municipal Securities Income Trust
                        Federated Pennsylvania Municipal Income Fund
                        Class B Shares

                     World Investment Series, Inc.
                        Federated World Utility Fund
                        Class B Shares

                        Federated Asia Pacific Growth Fund
                        Class B Shares

                        Federated Emerging Markets Fund
                        Class B Shares

                        Federated European Growth Fund
                        Class B Shares

                        Federated International Small Company Fund
                        Class B Shares

                        Federated Latin American Growth Fund
                        Class B Shares

                        Federated International High Income Fund
                        Class B Shares

                        Federated International Growth Fund
                        Class B Shares


The following Funds were added as of December 1, 1997:

                     Municipal Securities Income Trust
                        Federated California Municipal Income Fund
                        Class B Shares

                     World Investment Series, Inc.
                        Federated Global Equity Income Fund
                        Class B Shares


The following Funds were added as of March 1, 1998:

                     Federated Stock Trust
                        Class B Shares

EX-99.SHSERVAGREE

                                                       Exhibit 9 under Form N-1A
                                               Exhibit 10 under Item 601/Reg. SK


                         SHAREHOLDER SERVICES AGREEMENT


     THIS AGREEMENT, is made as of the 24th day of October, 1997, by and between
those Investment Companies on behalf of the Portfolios (individually referred to
herein as a "Fund" and collectively as "Funds") and Classes of Shares
("Classes") listed on Schedule A to Exhibit 1, as it 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 this form of Agreement
and Federated Securities Corp.("FSC"), a Pennsylvania Corporation, having its
principal office and place of business at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779 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"). Each of the Exhibits hereto
is incorporated herein in its entirety and made a part hereof. In the event of
any inconsistency between the terms of this Agreement and the terms of any
applicable Exhibit, the terms of the applicable Exhibit shall govern.

1.   FSC as Principal Servicer (Principal Servicer") hereby contracts with FSS
     to render or cause to be rendered personal services to shareholders and/or
     the maintenance of accounts of shareholders of each Class of the Funds to
     which this Agreement is made applicable by an Exhibit hereto ("Services").
     In addition to providing Services directly to shareholders of the Funds,
     FSS is hereby appointed the Investment Companies' agent to select,
     negotiate and subcontract for the performance of Services. FSS hereby
     accepts such appointment. FSS agrees to provide or cause to be provided
     Services which, in its best judgment (subject to supervision and control of
     the Investment Companies' Boards of Trustees or Directors, as applicable),
     are necessary or desirable for shareholders of the Funds. FSS further
     agrees to provide the Investment Companies, upon request, a written
     description of the Services which FSS is providing hereunder. The
     Investment Companies, on behalf of the Funds and each Class subject hereto
     consents to the appointment of FSS to act in its capacity as described
     herein and agrees to look solely to FSS for performance of the Services.

2.    The term of the undertaking of FSS to render services hereunder in respect
      of any Class of any Fund and the manner and amount of compensation to be
      paid in respect thereof shall be specified in respect of each Class of the
      Funds to which this Agreement is made applicable by an Exhibit hereto. FSS
      agrees to look solely to the Principal Servicer for its compensation
      hereunder.

3.    This Agreement shall become effective in respect of any Class of Shares of
      a Fund upon execution of an Exhibit relating to such Class of the Fund.
      Once effective in respect of any Class of shares, 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 Investment
      Company, including a majority of the members of the Board of the
      Investment Company who are not interested persons of the Investment
      Company ("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)  By any Investment Company as to any Fund at any time, without the
           payment of any penalty, by the vote of a majority of the Independent
           Board Members of any Investment Company 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

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 Investment Company 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 Investment Company in connection with the matters
     to which this Agreement relates, except a loss resulting from willful
     misfeasance, bad faith or gross negligence on its part in the performance
     of its duties or from reckless disregard by it of its obligations and
     duties under this Agreement. FSS shall be entitled to rely on and may act
     upon advice of counsel (who may be counsel for such Investment Company) on
     all matters, and shall be without liability for any action reasonably taken
     or omitted pursuant to such advice. Any person, even though also an
     officer, trustee, partner, employee or agent of FSS, who may be or become a
     member of such Investment Company's Board, officer, employee or agent of
     any Investment Company, shall be deemed, when rendering services to such
     Investment Company or acting on any business of such Investment Company
     (other than services or business in connection with the duties of FSS
     hereunder) to be rendering such services to or acting solely for such
     Investment Company 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 Investment Company that is a
      Massachusetts business trust and agrees that the obligations assumed by
      each such Investment Company pursuant to this Agreement shall be limited
      in any case to such Investment Company and its assets and that FSS shall
      not seek satisfaction of any such obligations from the shareholders of
      such Investment Company, the Trustees, Officers, Employees or Agents of
      such Investment Company, 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
      Investment Company 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 the parties hereto. Nothing in this Section 13 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 (listed on Schedule A)


  Attest: /S/ S. ELLIOTT COHAN        By: /S/ JOHN W. MCGONIGLE
  Title:   ASSISTANT SECRETARY        Title:   EXECUTIVE VICE PRESIDENT


                                      Federated Shareholder Services


  Attest:/S/ LESLIE K. PLATT          By:   /S/ BYRON F. BOWMAN
  Title:   ASSISTANT SECRETARY        Title:             VICE PRESIDENT


                                      Federated Securities Corp.


  Attest: /S/ LESLIE K. PLATT         By:  /S/ BYRON F. BOWMAN
  Title:   ASSISTANT SECRETARY        Title:             VICE PRESIDENT





                                    EXHIBIT 1
                        TO SHAREHOLDER SERVICES AGREEMENT
                              FOR CLASS B SHARES OF
                            THE INVESTMENT COMPANIES

      1. The Shareholder Services Agreement for Shares of the Investment
Companies on behalf of the portfolios (individually referred to as a "Fund" and
collectively as "Funds") and the classes of shares ("Classes") listed on the
attached Schedule A dated October 24, 1997 among Federated Securities Corp.
("Principal Servicer"), Federated Shareholder Services ("Class Servicer") and
the Investment Companies is hereby made applicable on the terms set forth herein
to the Class B Shares of the above-referenced Funds. In the event of any
inconsistency between the terms of this Exhibit and the Shareholder Services
Agreement, the terms of this Exhibit shall govern.

      2. In connection with the Services to be rendered to holders of Class B
Shares of each Fund, the Principal Servicer and Class Servicer agree that the
Principal Servicer shall retain and compensate the Class Servicer for its
Services in respect of the Class B Shares of the Fund on one of the following
alternative basis as the Principal Servicer shall elect:

            ALTERNATIVE A3: The Principal Servicer shall pay the Class Servicer
      a dollar amount as set forth on Schedule A per Class B Commission Share
      (as defined in the Principal Shareholder Servicer's Agreement) of the
      Fund. Class Servicer agrees that upon receipt of such payment (which shall
      be deemed to be full and adequate consideration for an irrevocable service
      commitment (the "Irrevocable Service Commitment") of Class Servicer
      hereunder), Class Servicer shall be unconditionally bound and obligated to
      either: (1) provide the Services in respect of such Commission Share and
      all other Shares derived therefrom via reinvestment of dividends, free
      exchanges or otherwise for so long as the same is outstanding or (2) in
      the event the Class Servicer for the Class B Shares is terminated by the
      Investment Company, to arrange for a replacement Class Servicer
      satisfactory to the Investment Company to perform such services, at no
      additional cost to the Fund.

            ALTERNATIVE B4: If Alternative A is not elected, the Principal
      Servicer shall pay the Class Servicer twenty five basis points (0.25%) per
      annum on the average daily net asset value of each Class B Share of the
      Fund monthly in arrears. The Class Servicer agrees that such payment is
      full and adequate consideration for the Services to be rendered by it to
      the holder of such Class B Share.

      3. In the event pursuant to paragraph 2 above, Alternative A has been
elected and the Class Servicer is terminated as Class Servicer for the Class B
Shares of the Fund, the Class Servicer agrees to pay to any successor Class
Servicer for the Class B Shares of the Fund any portion of the excess, if any,
of (A) the Servicing Fees received by it hereunder in respect of Class B Shares
of the Fund plus interest thereon at the percent as set forth on Schedule A per
annum minus (B) the costs it incurred hereunder in respect of the Class B Shares
of the Fund prior to such termination.

            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.


  Attest:                             FEDERATED SECURITIES CORP.


  By: /S/ LESLIE K. PLATT             By:  /S/ BYRON F. BOWMAN
  Title:   ASSISTANT SECRETARY        Title:             VICE PRESIDENT

  Attest:                             FEDERATED SHAREHOLDER SERVICES


  By:/S/ LESLIE K. PLATT              By:   /S/ BYRON F. BOWMAN
  Title:   ASSISTANT SECRETARY        Title:             VICE PRESIDENT

  Attest:                             INVESTMENT COMPANIES
                                      (listed on Schedule A)


  By: /S/ S. ELLIOTT COHAN            By: /S/ JOHN W. MCGONIGLE
  Title:   ASSISTANT SECRETARY        Title:   EXECUTIVE VICE PRESIDENT






                                   Schedule A

Date:   10/24/97     SHAREHOLDER SERVICES AGREEMENT



                     FEDERATED AMERICAN LEADERS FUND, INC.
                        Class B Shares

                     FEDERATED EQUITY FUNDS
                        Federated Aggressive Growth Fund
                        Class B Shares

                        Federated Growth Strategies Fund
                        Class B Shares

                        Federated Small Cap Strategies Fund
                        Class B Shares

                        Federated Capital Appreciation Fund
                        Class B Shares

                     FEDERATED EQUITY INCOME FUND, INC.
                        Class B Shares

                     FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
                        Class B Shares

                     FEDERATED GOVERNMENT INCOME SECURITIES, INC.
                        Class B Shares

                     FEDERATED HIGH INCOME BOND FUND, INC.
                        Class B Shares

                     FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
                        Class B Shares

                     FEDERATED MUNICIPAL SECURITIES FUND, INC.
                        Class B Shares

                     FEDERATED STOCK AND BOND FUND, INC.
                        Class B Shares

                     FEDERATED UTILITY FUND, INC.
                        Class B Shares

                     FIXED INCOME SECURITIES, INC.
                        Federated Strategic Income Fund
                        Class B Shares

                     INTERNATIONAL SERIES, INC.
                        Federated International Equity Fund
                        Class B Shares

                        Federated International Income Fund
                        Class B Shares






                     INVESTMENT SERIES FUNDS, INC.
                        Federated Bond Fund
                        Class B Shares

                     LIBERTY U.S. GOVERNMENT MONEY MARKET TRUST
                        Class B Shares

                     MUNICIPAL SECURITIES INCOME TRUST
                        Federated Pennsylvania Municipal Income Fund
                        Class B Shares

                     WORLD INVESTMENT SERIES, INC.
                        Federated World Utility Fund
                        Class B Shares

                        Federated Asia Pacific Growth Fund
                        Class B Shares

                        Federated Emerging Markets Fund
                        Class B Shares

                        Federated European Growth Fund
                        Class B Shares

                        Federated International Small Company Fund
                        Class B Shares

                        Federated Latin American Growth Fund
                        Class B Shares

                        Federated International High Income Fund
                        Class B Shares

                        Federated International Growth Fund
                        Class B Shares


The following Funds were added as of December 1, 1997:

                     Municipal Securities Income Trust
                        Federated California Municipal Income Fund
                        Class B Shares

                     World Investment Series, Inc.
                        Federated Global Equity Income Fund
                        Class B Shares


  The following Funds were added as of MARCH 1, 1998:

                     Federated Stock Trust
                        Class B Shares


- --------
3 [for Class B Shares where Financial Institution (i.e., Broker) is being paid
an extra 1.50 per share up front and no trailer) and Distribution Fees and
Servicing Fees are being sold by Principal Servicer] 4 [for Class B Shares where
Financial Institution (i.e., Broker) is being paid a trailer) and Distribution
Fees but not the Servicing fees are being sold by the Principal Servicer]

EX-99.12B1PLAN

                           Exhibit 15 under Form N-1A
                         Exhibit 1 under Item 601/Reg SK

                                    Exhibit 1
                                Amendment to the
                              Distribution Plan for
                            the Investment Companies
                                 Class B Shares


      1. This amendment to the Distribution Plan, ("Plan") is adopted by the
Board of Trustees/Directors of the Investment Companies with respect to the
Class of Shares of the portfolios ("Funds") of the Investment Companies set
forth on the attached Schedule A as to which the Plan has been adopted. This
Exhibit is hereby incorporated into the Plan in its entirety and made a part
thereof. In the event of any inconsistency between the terms of this Exhibit and
the terms of the Plan, the terms of this Exhibit shall govern. References herein
to the Plan shall mean the Plan as amended by this Exhibit. The terms of the
Plan as amended when effective in respect of the Class of Shares set forth above
shall apply to all amounts payable to the Principal Distributor in respect of
such Class of Shares whether arising out of sales of such Class of Shares before
or after such effective date.

      2. In compensation for the services provided pursuant to this Plan, the
Investment Companies on behalf of the Fund shall pay the Principal Distributor
its "Allocable Portion" (as defined in its Distributor's Contract as it relates
to the Class B Shares of the Fund) of a fee (the "Distribution Fee") computed at
the annual rate of 0.75 of 1% per annum on the average daily aggregate net asset
value of the Class B Shares of those Funds listed on Schedule A outstanding,
which fee shall be paid monthly in arrears.

      3. The Distributor's Contract in respect of the Class B Shares of each
Fund set forth above shall provide that: (I) the Principal Distributor in
respect of such Distributor's Contract will be deemed to have performed all
services required to be performed in order to be entitled to receive its
Allocable Portion of the Distribution Fees payable in respect of the Class B
Shares of such Fund upon the settlement date of each sale of a "Commission
Share" (as defined below) of such Fund taken into account in determining such
Principal Distributor's Allocable Portion of such Distribution Fees; (II) the
Investment Companies' obligation to pay such Principal Distributor its Allocable
Portion of the Distribution Fees payable in respect of the Class B Shares of
such Fund shall not be terminated or modified for any reason (including a
termination of the Distributor's Contract between such Principal Distributor and
such Fund) except to the extent required by a change in the Act or the Conduct
Rules of the National Association of Securities Dealers, Inc., in each case
enacted or promulgated after May 1, 1997, or in connection with a "Complete
Termination" (as hereinafter defined) of this Plan in respect of the Class B
Shares of such Fund; (III) the Investment Companies will not take any action to
waive or change any CDSC in respect of the Class B Shares of such Fund, except
as provided in the Funds' prospectus or statement of additional information
without the consent of the Principal Distributor and its assigns; (IV) neither
the termination of such Principal Distributor's role as Principal Distributor of
the Class B Shares of such Fund, nor the termination of such Distributor's
Contract nor the termination of this Plan will terminate such Principal
Distributor's right to its Allocable Portion of the CDSCs; and (V) such
Principal Distributor may assign, sell or pledge (collectively, "Transfer") its
rights to its Allocable Portion of the Distribution Fees and CDSCs (but not such
Principal Distributor's obligations to the Investment Companies under the
Distributor's Contract) to raise funds to make the expenditures related to the
distribution of Class B Shares of such Fund and in connection therewith, upon
receipt of notice of such Transfer, the Investment Companies shall pay to the
assignee, purchaser or pledgee (collectively with their subsequent transferees,
"Transferees") or third party beneficiaries such portion of the Principal
Distributor's Allocable Portion of the Distribution Fees or CDSCs in respect of
the Class B Shares of such Fund so sold or pledged and except as provided in
(II) above and notwithstanding anything of the contrary set forth in this
Exhibit or the Plan or in the Distributor's Contract, to the extent the
Principal Distributor has Transferred its right thereto as aforesaid, the
Investment Companies' obligation to pay to the Principal Distributor's
Transferee such Principal Distributor's Allocable Portion of the Distribution
Fees and CDSCs payable in respect of the Class B Shares of such Fund shall be
absolute and unconditional and shall not be subject to dispute, offset,
counterclaim or any defense whatsoever, including without limitation, any of the
foregoing based on the insolvency or bankruptcy of the Principal Distributor (it
being understood that such provision is not a waiver of the Investment
Companies' right to pursue such Principal Distributor and enforce such claims
against the assets of such Principal Distributor other than its right to the
Distribution Fees, CDSCs and servicing fees, in respect of the Class B Shares of
any Fund transferred in connection with such Transfer. For purposes of this
Plan, the term Allocable Portion of Distribution Fees or CDSCs payable in
respect of the Class B Shares of any Fund as applied to any Principal
Distributor shall mean the portion of such Distribution Fees or CDSCs payable in
respect of such Fund allocated to such Principal Underwriter in accordance with
the Allocation Schedule (as defined in the Distributor's Contract as it relates
to the Class B Shares of the Fund)). For purposes of this Plan, the term
"Complete Termination" of this Plan in respect of any Fund means a termination
of this Plan involving the complete cessation of the payment of Distribution
Fees in respect of all Class B Shares of such Fund, and the termination of the
distribution plans and the complete cessation of the payment of distribution
fees pursuant to every other Distribution Plan pursuant to rule 12b-1 of the
Investment Companies in respect of such Fund and any successor Fund or any Fund
acquiring a substantial portion of the assets of such Fund and for every future
class of shares which has substantially similar characteristics to the Class B
Shares of such Fund taking into account the manner of payment and amount of
sales charge, contingent deferred sales charge or other similar charges borne
directly or indirectly by the holders of such shares.


            Witness the due execution hereof this execution date.

                                    Investment Companies (listed on Schedule A)


                                    By: /s/ John W. McGonigle
                                    Title:  Executive Vice President
                                    Date: October 24,1997






                                                                   Schedule A

Date:  10/24/97      DISTRIBUTION PLAN



                     Federated American Leaders Fund, Inc.
                        Class B Shares

                     Federated Equity Funds
                        Federated Aggressive Growth Fund
                        Class B Shares

                        Federated Growth Strategies Fund
                        Class B Shares

                        Federated Small Cap Strategies Fund
                        Class B Shares

                        Federated Capital Appreciation Fund
                        Class B Shares

                     Federated Equity Income Fund, Inc.
                        Class B Shares

                     Federated Fund for U.S. Government Securities, Inc.
                        Class B Shares

                     Federated Government Income Securities, Inc.
                        Class B Shares

                     Federated High Income Bond Fund, Inc.
                        Class B Shares

                     Federated Municipal Opportunities Fund, Inc.
                        Class B Shares

                     Federated Municipal Securities Fund, Inc.
                        Class B Shares

                     Federated Stock and Bond Fund, Inc.
                        Class B Shares

                     Federated Utility Fund, Inc.
                        Class B Shares

                     Fixed Income Securities, Inc.
                        Federated Strategic Income Fund
                        Class B Shares

                     International Series, Inc.
                        Federated International Equity Fund
                        Class B Shares

                        Federated International Income Fund
                        Class B Shares






                     Investment Series Funds, Inc.
                        Federated Bond Fund
                        Class B Shares

                     Liberty U.S. Government Money Market Trust
                        Class B Shares

                     Municipal Securities Income Trust
                        Federated Pennsylvania Municipal Income Fund
                        Class B Shares

                     World Investment Series, Inc.
                        Federated World Utility Fund
                        Class B Shares

                        Federated Asia Pacific Growth Fund
                        Class B Shares

                        Federated Emerging Markets Fund
                        Class B Shares

                        Federated European Growth Fund
                        Class B Shares

                        Federated International Small Company Fund
                        Class B Shares

                        Federated Latin American Growth Fund
                        Class B Shares

                        Federated International High Income Fund
                        Class B Shares

                        Federated International Growth Fund
                        Class B Shares


The following Funds were added as of December 1, 1997:

                     Municipal Securities Income Trust
                        Federated California Municipal Income Fund
                        Class B Shares

                     World Investment Series, Inc.
                        Federated Global Equity Income Fund
                        Class B Shares


The following Funds were added as of March 1, 1998:

                     Federated Stock Trust
                        Class B Shares