form.htm

Federated Municipal Securities Fund, Inc.

PROSPECTUS

May 31, 2010

CLASS A SHARES (TICKER LMSFX)

CLASS B SHARES (TICKER LMSBX)

CLASS C SHARES (TICKER LMSCX)

CLASS F SHARES (TICKER LMFFX)

A mutual fund seeking to provide for its shareholders a high level of current income which is exempt from federal regular income tax by investing at least a majority of its assets in a portfolio of: (1) long-term, tax-exempt securities; and (2) investment-grade, tax-exempt securities.

As with all mutual funds, the Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.

Fund Summary Information

RISK/RETURN SUMMARY: INVESTMENT OBJECTIVE

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.

RISK/RETURN SUMMARY: FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold Class A Shares, Class B Shares, Class C Shares and Class F Shares of the Fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000, or $1,000,000, in certain classes (e.g. Class A Shares and Class F Shares, respectively) of Federated funds. More information about these and other discounts is available from your financial professional and in the “What Do Shares Cost?” section of the Prospectus on page 24.

Shareholder Fees	Class A	Class B	Class C	Class F
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	4.50%	None	None	1.00%
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, as applicable)	0.00%	5.50%	1.00%	1.00%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions) (as a percentage of offering price)	None	None	None	None
Redemption Fee (as a percentage of amount redeemed, if applicable)	None	None	None	None
Exchange Fee	None	None	None	None
Annual Fund Operating Expenses
Expenses That You Pay Each Year as a Percentage of the Value of Your Investment
Management Fee	0.53%	0.53%	0.53%	0.53%
Distribution (12b-1) Fee	None	0.75%	0.75%	None
Other Expenses	0.45%	0.45%	0.45%	0.45%
Total Annual Fund Operating Expenses	0.98%	1.73%	1.73%	0.98%
Fee Waivers and/or Expense Reimbursements1	0.11%	0.00%	0.00%	0.11%
Total Annual Fund Operating Expenses After Fee Waivers and/or Expense Reimbursements	0.87%	1.73%	1.73%	0.87%

The Adviser and its affiliates have voluntarily agreed to waive their fees and/or reimburse expenses so that the total annual fund operating expenses paid by the Fund’s Class A Shares, Class B Shares, Class C Shares and Class F Shares (after the voluntary waivers and/or reimbursements) will not exceed 0.87%, 1.76%, 1.76% and 0.87% (the “Fee Limit”), respectively, through the later of (the “Termination Date”): (a) May 31, 2011; or (b) the date of the Fund’s next effective Prospectus. While the Adviser and its affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Fund’s Board of Directors.

Example

This Example is intended to help you compare the cost of investing in the Fund’s Class A Shares, Class B Shares, Class C Shares and Class F Shares with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund’s Class A Shares, Class B Shares, Class C Shares and Class F Shares for the time periods indicated and then redeem all of your Shares at the end of those periods. Expenses assuming no redemption are also shown. The Example also assumes that your investment has a 5% return each year and that the Fund’s Class A Shares, Class B Shares, Class C Shares and Class F Shares operating expenses are as shown in the table and remain the same. Although your actual costs and returns may be higher or lower, based on these assumptions your costs would be:

Share Class	1 Year	3 Years	5 Years	10 Years
Class A Shares:
Expenses assuming redemption	$545	$748	$967	$1,597
Expenses assuming no redemption	$545	$748	$967	$1,597
Class B Shares:
Expenses assuming redemption	$726	$945	$1,139	$1,842
Expenses assuming no redemption	$176	$545	$939	$1,842
Class C Shares:
Expenses assuming redemption	$276	$545	$939	$2,041
Expenses assuming no redemption	$176	$545	$939	$2,041
Class F Shares:
Expenses assuming redemption	$299	$509	$636	$1,289
Expenses assuming no redemption	$199	$409	$636	$1,289

Portfolio Turnover

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 23% of the average value of its portfolio.

RISK/RETURN SUMMARY: INVESTMENTS, RISKS, PERFORMANCE

What are the Fund’s Main Investment Strategies?

The Fund pursues its objective by investing its assets so that, normally (except as discussed herein), distributions of annual interest income are exempt from federal regular income tax. The Fund’s investment adviser (Adviser) also normally (except as discussed herein) will invest the Fund’s assets entirely in securities whose interest is not subject to (or not a specific preference item for purposes of) the federal alternative minimum tax for individuals and corporations (AMT), such that, normally, distributions of annual interest income also are exempt from the AMT. However, in certain circumstances (such as, for example, when there is a lack of supply of non-AMT securities, there are advantageous market conditions, or if there are changes in the tax laws relating to AMT), to pursue the Fund’s investment objective, the Adviser may invest the Fund’s assets in securities that may be subject to AMT. When there is a lack of supply of non-AMT securities and/or other circumstances that exist, such circumstances may result in the Fund acquiring AMT securities that are consistent with the Fund’s investment objective. These acquisitions may occur in the ordinary course or in connection with fund reorganization transactions (i.e., transactions in which the Fund acquires the portfolio securities of other mutual funds), an issuer bankruptcy or another event or circumstance. In such circumstances, interest from the Fund’s investments may be subject to the AMT.

The Fund does not limit itself to securities of a particular maturity range. Currently, the Fund invests at least a majority of its assets in long-term, tax-exempt securities (i.e., securities with stated maturities of 10 years or more).

The Fund also will invest at least a majority of its assets in securities rated investment grade (or unrated securities of comparable quality), and may purchase securities rated below investment grade (or unrated securities of comparable quality), which are also known as junk bonds, up to 49% of its assets. Investment-grade securities are securities that receive investment-grade ratings (i.e., generally ratings in the first, second, third or fourth highest rating category) by a nationally recognized statistical rating organization (NRSRO) or unrated securities of comparable quality. For example, securities rated "AAA," "AA," "A" or "BBB" by Standard & Poor's, an NRSRO, would be rated in the first, second, third or fourth ratings category, respectively. Securities rated below investment grade (or noninvestment-grade securities) are se curities that do not receive investment-grade ratings (i.e., generally ratings below one of the four highest rating categories) by an NRSRO or unrated securities of comparable quality. For example, securities rated "B" or "BB" by Standard & Poor's, an NRSRO, would be noninvestment-grade securities. The Fund does not have a specific minimum quality rating.

The tax-exempt securities in which the Fund may principally invest include general obligation bonds, special revenue bonds, private activity bonds, tax increment financing bonds, municipal leases, zero-coupon securities, inverse floaters, municipal mortgage-backed securities, planned amortization classes, variable rate demand instruments, municipal notes and municipal auction rate securities. Certain of the tax-exempt securities in which the Fund invests may be subject to credit enhancement. The Fund also may principally invest in derivative contracts (such as, for example, futures contracts, options contracts and swap contracts) and hybrid instruments to implement its investment strategies as more fully described herein.

The Fund also may invest in certain securities as described herein (such as market discount bonds, credit default swaps and other derivative transactions) that will likely cause the Fund to realize a limited amount of ordinary income or short-term capital gains (which are treated as ordinary income for federal income tax purposes).

What are the Main Risks on Investing in the Fund?

All mutual funds take investment risks. Therefore, it is possible to lose money by investing in the Fund. The primary factors that may reduce the Fund’s returns include:

·	Interest Rate Risks. Prices of fixed-income securities (including tax-exempt securities) generally fall when interest rates rise. Interest rate changes have a greater effect on prices of fixed-income securities with longer durations.

Credit Risks. There is a possibility that issuers of securities in which the Fund may invest may default in the payment of interest or principal on the securities when due, which would cause the Fund to lose money. Noninvestment-grade securities generally have a higher default risk than investment-grade securities.

Liquidity Risks. Certain securities in which the Fund invests may be less readily marketable and may be subject to greater fluctuation in price than other securities. These features may make it more difficult to sell or buy a security at a favorable price or time. Noninvestment-grade securities generally have less liquidity than investment-grade securities. Liquidity risk also refers to the possibility that the Fund may not be able to close out a derivative contract when it wants to. Over-the-counter derivative contracts generally carry greater liquidity risk than exchange-traded contracts.

Tax Risks. In order to pay interest except from federal income tax, tax-exempt securities must meet certain legal requirements. Failure to meet such requirements may cause the interest received and distributed by the Fund to shareholders to be taxable. The federal income tax treatment of payments in respect of certain derivative contracts is unclear. The Fund also may invest in market discount bonds, enter into credit default swap arrangements and other derivative transactions, and engage in other permissible activities that will likely cause the Fund to realize a limited amount of ordinary income or short-term capital gains (which are treated as ordinary income for federal income tax purposes). Consequently, for each of these reasons, the Fund may receive payment s, and make distributions, that are treated as ordinary income for federal income tax purposes.

Leverage Risks. Leverage risk is created when an investment, which includes, for example, an investment in a derivative contract, exposes the Fund to a level of risk that exceeds the amount invested. Changes in the value of such an investment magnify the Fund’s risk of loss and potential for gain. Investments can have these same results if their returns are based on a multiple of a specified index, security or other benchmark.

·	Call Risks. The Fund’s performance may be adversely affected by the possibility that an issuer of a security held by the Fund may redeem the security prior to maturity at a price below or above its current market value.

Sector Risks. A substantial part of the Fund’s portfolio may be comprised of securities issued or credit enhanced by companies in similar businesses, or with other similar characteristics. As a result, the Fund will be more susceptible to any economic, business, political or other developments which generally affect these entities.

Prepayment Risks. When homeowners prepay their mortgages in response to lower interest rates, the Fund will be required to reinvest the proceeds at the lower interest rates available. Also, when interest rates fall, the price of municipal mortgage-backed securities may not rise to as great an extent as that of other fixed-income securities.

Credit Enhancement Risk. The securities in which the Fund invests may be subject to credit enhancement (for example, guarantees, letters of credit or bond insurance). If the credit quality of the credit enhancement provider (for example, a bank or bond insurer) is downgraded, the rating on a security credit enhanced by such credit enhancement provider also may be downgraded. Having multiple securities credit enhanced by the same enhancement provider will increase the adverse effects on the Fund that are likely to result from a downgrading of, or a default by, such an enhancement provider. Adverse developments in the banking or bond insurance industries also may negatively affect the Fund.

·	Risks Associated with Noninvestment-Grade Securities. The Fund may invest a portion of its assets in securities rated below investment grade (which are also known as junk bonds), which may be subject to greater economic, credit and liquidity risks than investment-grade securities.

·	Risks Related to the Economy. Lower-grade bond returns are sensitive to changes in the economy. The value of the Fund’s portfolio may decline in tandem with a drop in the overall value of the stock market based on negative developments in the U.S. and global economies.

Risks of Investing in Derivative Contracts and Hybrid Instruments. Derivative contracts and hybrid instruments involve risks different from, or possibly greater than, risks associated with investing directly in securities and other traditional investments. Specific risk issues related to the use of such contracts and instruments include valuation and tax issues, increased potential for losses and/or costs to the Fund, and a potential reduction in gains to the Fund. Each of these issues is described in greater detail in this Prospectus. Derivative contracts and hybrid instruments may also involve other risks described in this Prospectus or the Fund’s Statement of Additional Information (SAI), such as interest rate, credit, liquidity and leverage risks.

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 or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency.

PERFORMANCE: BAR CHART AND TABLE

Risk/Return Bar Chart

The bar chart and performance table below reflect historical performance data for the Fund’s Class A Shares. The performance information shown below will help you analyze the Fund’s investment risks in light of its historical returns. The bar chart shows the variability of the Fund’s Class A Shares total returns on a calendar year-by-year basis. The Average Annual Total Return table shows returns averaged over the stated periods, and includes comparative performance information. The Fund’s performance will fluctuate, and past performance (before and after taxes) is not necessarily an indication of future results. Updated performance information for the Fund is available under the “Products” section at FederatedInvestors.com or by calling 1-800-341-7400.

The total returns shown in the bar chart do not reflect the payment of any sales charges or recurring shareholder account fees. If these charges or fees had been included, the returns shown would have been lower.

The Fund’s Class A Shares total return for the three-month period from January 1, 2010 to March 31, 2010, was 1.16%.

Within the periods shown in the bar chart, the Fund’s Class A Shares highest quarterly return was 7.91% (quarter ended September 30, 2009). Its lowest quarterly return was (4.58)% (quarter ended September 30, 2008).

Average Annual Total Return Table

In addition to Return Before Taxes, Return After Taxes is shown for the Fund’s Class A Shares to illustrate the effect of federal taxes on Fund returns. After-tax returns are shown only for Class A Shares and after-tax returns for Class B Shares, Class C Shares and Class F Shares will differ from those shown below for Class A Shares. Actual after-tax returns depend on each investor’s personal tax situation, and are likely to differ from those shown. After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. These after-tax returns do not reflect th e effect of any applicable state and local taxes. After-tax returns are not relevant to investors holding Shares through tax-deferred programs, such as IRA or 401(k) plans. Historical returns do not include the effect of a 1.00% front-end sales charge on Class C Shares purchased prior to February 1, 2007. Effective February 1, 2007, this sales charge was eliminated.

(FOR THE PERIOD ENDED DECEMBER 31, 2009)

	1 Year	5 Years	10 Years	Start of Performance
Class A Shares:
Return Before Taxes	8.41%	1.89%	4.22%
Return After Taxes on Distributions	8.41%	1.89%	4.22%
Return After Taxes on Distributions and Sale of Fund Shares	7.02%	2.23%	4.27%
Class B Shares:
Return Before Taxes	6.99%	1.59%	3.96%
Class C Shares:
Return Before Taxes	11.49%	1.94%	3.78%
Class F Shares (start of performance 5/31/2007):
Return Before Taxes	11.39%			1.42%
Barclays Capital Municipal Bond Index1 (reflects no deduction for fees, expenses or taxes)	12.91%	4.32%	5.75%
Lipper General Municipal Debt Funds Average2	16.85%	2.88%	4.60%

The Barclays Capital Municipal Bond Index is a broad market performance benchmark for the tax-exempt bond market. To be included in the Barclays Capital Municipal Bond Index, bonds must have a minimum credit rating of at least Baa3/BBB-, an outstanding par value of at least $7 million and be issued as part of a transaction of at least $75 million. The bonds must be fixed rate, have an issue date after December 31, 1990 and must be at least one year from their maturity date. Remarketed issues, taxable municipal bonds, bonds with floating rates and derivatives are excluded from the index.

2	Lipper figures represent the average of the total returns reported by all of the mutual funds designated by Lipper, Inc. as falling into the respective categories indicated.

FUND MANAGEMENT

The Fund’s Investment Adviser is Federated Investment Management Company.

J. Scott Albrecht, Senior Portfolio Manager, has been the Fund's portfolio manager since May 1996.

PURCHASE AND SALE OF FUND SHARES

The minimum investment amount for the Fund’s Class A Shares, Class B Shares, Class C Shares and Class F Shares is generally $1,500 for initial investments and $100 for subsequent investments. The minimum subsequent investment for Systematic Investment Programs is $50.

You may purchase, redeem or exchange Shares of the Fund on any day the New York Stock Exchange (NYSE) is open. Shares may be purchased through a financial intermediary or directly from the Fund, by wire or by check. Redeem or exchange through a financial intermediary or directly from the Fund by telephone at 1-800-341-7400 or by mail.

TAX INFORMATION

It is anticipated that Fund distributions will be primarily dividends that are exempt from federal regular income tax, although a portion of the Fund’s dividends may not be tax-exempt. Dividends may be subject to state and local taxes. Although the Fund does not seek to realize capital gains, the Fund may realize and distribute capital gains from time to time as a result of the Fund’s normal investment activities. Any Fund distributions of capital gains are taxable at applicable capital gains rates. The Fund is generally not a suitable investment for retirement accounts.

PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES

If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and/or its related companies may pay the intermediary for the sale of Fund Shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s Web site for more information.

What are the Fund’s Investment Strategies?

While there is no assurance that the Fund will achieve its investment objective, it endeavors to do so by following the strategies and policies described in this Prospectus. The Fund pursues its objective by investing its assets so that, normally (except as discussed herein), distributions of annual interest income are exempt from federal regular income tax. The Fund’s investment adviser (Adviser) also normally (except as discussed herein) will invest the Fund’s assets entirely in securities whose interest is not subject to (or not a specific preference item for purposes of) the federal alternative minimum tax for individuals and corporations (AMT), such that, normally, distributions of annual interest income also are exempt from the AMT. However, in certain circumstances (such as, for example, when there is a lack of supply of non-AMT securities, there are advantageous market conditions, or if there are changes in the tax laws relating to AMT), to pursue the Fund’s investment objective, the Adviser may invest the Fund’s assets in securities that may be subject to AMT. When there is a lack of supply of non-AMT securities and/or other circumstances that exist, such circumstances may result in the Fund acquiring AMT securities that are consistent with the Fund’s investment objective. These acquisitions may occur in the ordinary course or in connection with fund reorganization transactions (i.e., transactions in which the Fund acquires the portfolio securities of other mutual funds), an issuer bankruptcy or another event or circumstance. In such circumstances, interest from the Fund’s investments may be subject to the AMT.

The Fund also will invest at least a majority of its assets in securities rated investment grade (or unrated securities of comparable quality) without regard to the maturity of the securities, and may purchase securities rated below investment grade (or unrated securities of comparable quality), which are also known as junk bonds, up to 49% of its assets.

The amount of the Fund’s assets invested in long-term or investment-grade, tax-exempt securities will be determined at the time when tax-exempt securities are purchased. For example, a later increase or decrease in percentage resulting from any change in value or net assets, or from a downgrade in a security’s rating/quality, will not require the Fund to sell any tax-exempt security held in the Fund’s portfolio.

Investment-grade securities are securities that receive investment-grade ratings (i.e., generally ratings in the first, second, third or fourth highest rating category) by a nationally recognized statistical rating organization (NRSRO) or unrated securities of comparable quality. For example, securities rated “AAA,” “AA,” “A” or “BBB” by Standard & Poor’s, an NRSRO, would be rated in the first, second, third or fourth ratings category, respectively. Securities rated below investment grade (or noninvestment-grade securities) are securities that do not receive investment-grade ratings (i.e., generally ratings below one of the four highest rating categories) by an NRSRO or unrated securities of comparable quality. For example, securities rated “B” or “BB” by Standard & Poor’s, an NRSRO, would be noninvestment-grade securities.

The investment-grade, tax-exempt securities in which the Fund invests generally are subject to interest rate, credit, liquidity, tax, leverage, call, sector, prepayment, credit enhancement and economic risks, and the derivatives contracts and hybrid instruments in which the Fund invests are subject to these risks, as well as the risks of investment in derivatives contracts and hybrid instruments, all as described in this Prospectus. The noninvestment-grade securities in which the Fund invests also are subject to interest rate, credit, liquidity, tax, leverage, call, sector, prepayment, credit enhancement and economic risks, as well as the risks of investing in noninvestment-grade securities as described in this Prospectus.

The Adviser of the Fund actively manages the Fund’s portfolio, seeking to manage the interest rate risk and credit risk assumed by the Fund and provide superior levels of after-tax total return.

The Adviser manages the Fund’s interest rate risk by adjusting the duration of its portfolio. “Duration” measures the sensitivity of a security’s price to changes in interest rates. The greater a portfolio’s duration, the greater the potential change in the portfolio’s value in response to a change in market interest rates. The Adviser will increase or reduce the Fund’s portfolio duration based on its interest rate outlook. When the Adviser expects interest rates to fall, it will maintain a longer portfolio duration. When the Adviser expects interest rates to increase, it will shorten the portfolio duration. The Adviser uses hedging transactions for purposes of duration management. The Adviser considers a variety of factors in formulating its interest rate outlook, including the followi ng:

·	current and expected U.S. economic growth;

·	current and expected interest rates and inflation;

·	the Federal Reserve Board’s monetary policy; and

·	supply and demand factors related to the municipal market and the effect they may have on the returns offered for various bond maturities.

The Adviser manages credit risk by performing a fundamental credit analysis on tax-exempt securities before the Fund purchases such securities. The Adviser considers various factors, including the following:

·	the economic feasibility of revenue bond financings and general purpose financings;

·	the financial condition of the issuer or guarantor; and

·	political developments that may affect credit quality.

The Adviser monitors the credit risks of all securities on an ongoing basis by reviewing periodic financial data and ratings of NRSROs. The Fund’s investments in noninvestment-grade securities will be more dependent on the Adviser’s credit analysis than would be investment-grade securities, because noninvestment-grade securities, while generally offering higher yields, also involve greater risks. Consequently, in addition to the review process described above, the Adviser may, for example and when appropriate, visit the site that the issuer is developing with the proceeds of the offering; and generally will engage in detailed discussions with the issuer regarding the offering.

The Adviser attempts to provide superior levels of after-tax total return. Total return consists of two components: (1) income received from the Fund’s portfolio securities; and (2) changes in the market value of the Fund’s portfolio securities and attendant increase or decrease in the net asset value (NAV) of Fund Shares. The Adviser seeks total return on an after-tax basis, so that it will try to maximize tax-exempt income distributions; make limited ordinary income distributions; and minimize or eliminate capital gains distributions. In seeking to increase incremental after-tax total returns, the Fund may invest in tax-exempt securities that are trading at a price less than the original issue price (or market discount bonds), enter in credit default swap arrangements and other derivative transacti ons, and engage in other permissible activities that will likely cause the Fund to realize a limited amount of ordinary income or short-term capital gains (which are treated as ordinary income for federal income tax purposes) and, as a result, may result in taxable distributions to shareholders. The ordinary income derived from these investment strategies generally will be limited to approximately 5% or less of the Fund’s annual distributions.

The Adviser’s ability to formulate an accurate interest rate outlook, coupled with effective management of the Fund’s duration as described above, is critical to the Adviser’s achievement of this component of its strategy. The Adviser will seek to further enhance after-tax total return by engaging in a relative value analysis; that is, the Adviser will assess the cost of a tax-exempt security compared with other tax-exempt securities and taxable securities such as U.S. Treasury obligations. The Adviser may also allocate investments in sectors of the tax-exempt market that offer the highest return.

The Fund may use derivative contracts and/or hybrid instruments to implement elements of its investment strategy. For example, the Fund may use derivative contracts or hybrid instruments to increase or decrease the portfolio’s exposure to the investment(s) underlying the derivative or hybrid or to gain exposure to the municipal bond sector. Additionally, by way of example, the Fund may use derivative contracts in an attempt to:

·	increase or decrease the effective duration of the Fund portfolio;

·	obtain premiums from the sale of derivative contracts;

·	realize gains from trading a derivative contract; or

·	hedge against potential losses.

There can be no assurance that the Fund’s use of derivative contracts or hybrid instruments will work as intended.

Because the Fund refers to municipal investments in its name, it has an investment policy that it will normally invest its assets so that at least 80% of the income that it distributes will be exempt from federal regular income tax. This policy may not be changed without shareholder approval.

TEMPORARY INVESTMENTS

The Fund may temporarily depart from its principal investment strategies by investing its assets in taxable securities or holding cash. It may do this in response to unusual circumstances, such as: adverse market, economic or other conditions (for example, to help avoid potential losses, or during periods when there is a shortage of appropriate tax-exempt securities); to maintain liquidity to meet shareholder redemptions; or to accommodate cash inflows. It is possible that such temporary investments could affect the Fund’s investment returns. If the Fund invests in taxable securities, it may receive and distribute taxable income to investors and to that extent fail to meet its investment objectives.

What are the Principal Securities in Which the Fund Invests?

The following provides general information on the types of securities in which the Fund principally invests. The Fund may invest in other types of securities as a non-principal investment as described in the Fund’s Statement of Additional Information (SAI).

TAX-EXEMPT SECURITIES

Tax-exempt securities are fixed-income securities that, in the opinion of bond counsel to the issuer or on the basis of another authority believed by the Adviser to be reliable, pay interest that is not subject to federal regular income taxes. Fixed-income securities pay interest, dividends or distributions at a specified rate. The rate may be a fixed percentage of the principal or adjusted periodically. In addition, the issuer of a fixed-income security must repay the principal amount of the security, normally within a specified time.

Typically, states, counties, cities, and other political subdivisions and authorities issue tax-exempt securities. The market categorizes tax-exempt securities by their source of repayment. Certain of these tax-exempt securities may be subject to credit enhancement.

The following describes the principal types of tax-exempt securities in which the Fund may invest:

General Obligation Bonds (A Type of Tax-Exempt Security)

General obligation bonds are supported by the issuer’s power to exact property or other taxes. The issuer must impose and collect taxes sufficient to pay principal and interest on the bonds. However, the issuer’s authority to impose additional taxes may be limited by its charter or state law.

Special Revenue Bonds (A Type of Tax-Exempt Security)

Special revenue bonds are payable solely from specific revenues received by the issuer such as specific taxes, assessments, tolls or fees. Bondholders may not collect from the municipality’s general taxes or revenues. For example, a municipality may issue bonds to build a toll road, and pledge the tolls to repay the bonds. Therefore, a shortfall in the tolls normally would result in a default on the bonds, or in certain cases, may result in a reduction in payments received in respect of the bonds.

Private Activity Bonds (A Type of Special Revenue Bond)

Private activity bonds are special revenue bonds used to finance private projects. A certain percentage of the proceeds from a private activity bond is used for a private business use or a certain percentage of the debt service regarding a private activity bond is paid directly or indirectly from a private business use. A private business use is a trade or business carried on by any person or entity other than a governmental unit. Private activity bonds are secured primarily by revenues derived from loan repayments or lease payments due from the private entity, which may or may not be guaranteed by a parent company or otherwise secured. Private activity bonds generally are not secured by a pledge of the taxing power of the issuer of such bonds. For example, a municipality may issue bonds to finance a new factory to improve its local econo my. The municipality would lend the proceeds from its bonds to the company using the factory, and the company would agree to make loan payments sufficient to cover interest and principal payments on the bonds. The bonds would be payable from the company's loan payments, and generally not from any other revenues of the municipality. Therefore, any default of the loan normally would result in a default on the bonds.

Types of private activity bonds include, for example: bonds issued to obtain funds to provide water, sewage and solid waste facilities, qualified residential rental projects, certain local electric, gas and other heating and cooling facilities, qualified hazardous waste facilities, high speed intercity rail facilities, certain airports, docks, wharves and mass transportation facilities and qualified mortgages; qualified student loan bonds; qualified redevelopment bonds and bonds used for certain organizations exempt from federal income taxation (qualified 501(c)(3) bonds).

The interest on many types of private activity bonds is subject to AMT. However, issues are available in the marketplace that are not subject to AMT due to qualifying tax rules.

Tax Increment Financing Bonds (A Type of Tax-Exempt Security)

Tax increment financing (TIF) bonds are payable from increases in taxes or other revenues attributable to projects within the TIF district. For example, a municipality may issue TIF bonds to redevelop a commercial area. The TIF bonds would be payable solely from any increase in sales taxes collected from the merchants in the area. The bonds could fail to pay principal or interest if merchants' sales, and related tax collections, failed to increase as anticipated.

Municipal Leases (A Type of Tax-Exempt Security)

Municipalities may enter into leases for equipment or facilities. In order to comply with state public financing laws, these leases are typically subject to annual appropriation. In other words, a municipality may end a lease, without penalty, by not providing for the lease payments in its annual budget. After the lease ends, the lessor can resell the equipment or facility but may lose money on the sale.

The Fund may invest in securities supported by pools of municipal leases. The most common type of lease-backed securities are certificates of participation (COPs). However, the Fund may also invest directly in individual leases.

Zero-Coupon Securities (A Fixed-Income Tax-Exempt Security)

Zero-coupon securities do not pay interest or principal until final maturity unlike debt securities that provide periodic payments of interest (referred to as a coupon payment). Investors buy zero-coupon securities at a price below the amount payable at maturity. The difference between the purchase price and the amount paid at maturity represents interest on the zero-coupon security. Investors must wait until maturity to receive interest and principal, which increases the interest rate and credit risks of a zero coupon security. A zero-coupon step-up security converts to a coupon security before final maturity.

There are many forms of zero-coupon securities. Some are issued at a discount and are referred to as zero coupon or capital appreciation bonds. Others are created from interest bearing bonds by separating the right to receive the bond’s coupon payments from the right to receive the bond’s principal due at maturity, a process known as coupon stripping. In addition, some securities give the issuer the option to deliver additional securities in place of cash interest payments, thereby increasing the amount payable at maturity. These are referred to as pay-in-kind or PIK securities.

Inverse Floaters (A Fixed-Income Tax-Exempt Security)

An inverse floater has a floating or variable interest rate that moves in the opposite direction of market interest rates. Inverse floaters are used to enhance the income from a bond investment by employing leverage. When short-term market interest rates go up, the interest rate paid on the inverse floater goes down; when short-term market interest rates go down, the interest rate paid on the inverse floater goes up. Inverse floaters generally respond more rapidly to market interest rate changes than fixed-rate, tax-exempt securities. Inverse floaters are subject to interest rate risks and leverage risks.

Municipal Mortgage-Backed Securities (A Fixed-Income Tax-Exempt Security)

Municipal mortgage-backed securities are special revenue bonds, the proceeds of which may be used to provide mortgage loans for single family homes or to finance multifamily housing. Municipal mortgage-backed securities represent interest in pools of mortgages. The mortgages that comprise a pool normally have similar interest rates, maturities and other terms. Mortgages-may have fixed or adjustable rates. Interest in pools of adjustable rate mortgages are known as ARMs. Municipal mortgage-backed securities generally have fixed-interest rates.

Municipal mortgage-backed securities come in a variety of forms. The simplest forms of municipal mortgage-backed securities are pass-through certificates. Holders of pass-through certificates receive a pro rata share of all net interest and principal payments and prepayments from the underlying mortgages. As a result, the holders assume all interest rate and prepayment risks of the underlying mortgages. Other municipal mortgage-backed securities may have more complicated financial structures.

PACs (A Type of Municipal Mortgage-Backed Security)

PACs (planned amortization classes) are a sophisticated form of municipal mortgage-backed security issued with a companion class(es). PACs receive principal payments and prepayments at a specified rate. The companion classes receive principal payments and prepayments in excess of the specified rate. In addition, PACs will receive the companion classes’ share of principal payments, if necessary, to cover a shortfall in the prepayment rate. This helps PACs to control prepayment risks by increasing the risks to their companion classes.

Variable Rate Demand Instruments (A Type of Tax-Exempt Security)

Variable rate demand instruments are tax-exempt securities that require the issuer or a third party, such as a dealer or bank (the Demand Provider), to repurchase the security for its face value upon demand. The securities also pay interest at a variable rate intended to cause the securities to trade at their face value. Some variable rate demand instruments are “conditional,” so that the occurrence of certain conditions discharges the Demand Provider’s obligation to repurchase the security. Other variable rate demand instruments are “unconditional,” so that there are no conditions under which the Demand Provider’s obligation to repurchase the security can terminate. The Fund treats variable rate demand instruments as short-term securities even though their maturity may extend beyond 397 days because, w ithin 397 days, their variable interest rate adjusts in response to changes in market rates and the repayment of their principal amount can be demanded. Certain variable rate demand instruments that may be invested in by the Fund, referred to as “synthetic” variable rate demand instruments, have certain features, such as call features, that make it possible that the Fund will realize capital gains.

Municipal Notes (A Type of Tax-Exempt Security)

Municipal notes are short-term, tax-exempt securities. Many municipalities issue such notes to fund their current operations before collecting taxes or other municipal revenues. Municipalities may also issue notes to fund capital projects prior to issuing long-term bonds. The issuers typically repay the notes at the end of their fiscal year, either with taxes, other revenues or proceeds from newly issued notes or bonds.

Municipal Auction Rate Securities (A Type of Tax-Exempt Security)

Municipal auction rate securities are tax-exempt securities that are issued (without a demand feature) generally for a specified term, during which the interest rate may be reset at specified intervals (such as, for example, every 7, 28, 35 or 49 days) by means of a “Dutch Auction” or similar competitive process. These securities may be referred to as “municipal auction rate notes.” In the auction, holders of such securities, and investors who seek to acquire such securities, indicate their interest in continuing to hold, or to purchase, the securities at rates that they specify to broker-dealers that serve as auction agents for the auction. If the auction is successful, a holder of such securities will be able to sell them at par value through the auction process. A “failed auction” oc curs when, for example, the auction agent does not receive enough bids to cover the aggregate amount of securities that have been put up for sale at the auction, or the lowest interest rate at which all of the securities that have been put up for sale at the auction would be above the “maximum interest rate” set forth in the documentation for the securities, or some other reason. When a failed auction occurs, a holder of the securities may not be able to sell all or a portion of the securities it desired to sell at the auction, in which case the affected securities would pay the maximum interest rate set forth in their documentation until the next successful auction. The maximum interest rate may be a multiple of a specified index or a fixed rate and may be dependent on other factors, such as the credit rating of the securities at the time of auction. Municipal auction rate securities may be subject to interest rate, credit, credit enhancement, prepayment, liquidity and economic risks.

DERIVATIVE CONTRACTS

Derivative contracts are financial instruments that require payments based upon changes in the values of designated securities, commodities, indices or other assets or instruments including other derivative contracts (each a “Reference Instrument” and collectively, “Reference Instruments”). Each party to a derivative contract is referred to as a counterparty. Some derivative contracts require payments relating to an actual, future trade involving the Reference Instrument. These types of derivatives are frequently referred to as “physically settled” derivatives. Other derivative contracts require payments relating to the income or returns from, or changes in the market value of, a Reference Instrument. These types of derivatives are known as “cash settled” derivatives, since they require cash payments in lieu of delivery of the Reference Instrument.

Many derivative contracts are traded on securities or commodities exchanges. In this case, the exchange sets all the terms of the contract except for the price. Investors make payments due under their contracts through the exchange. Most exchanges require investors to maintain margin accounts through their brokers to cover their potential obligations to the exchange. Parties to the contract make (or collect) daily payments to the margin accounts to reflect losses (or gains) in the value of their contracts. This protects investors against potential defaults by the counterparty. Trading contracts on an exchange also allows investors to close out their contracts by entering into offsetting contracts.

The Fund may also trade derivative contracts over-the-counter (OTC) in transactions negotiated directly between the Fund and the counterparty. OTC contracts do not necessarily have standard terms, so they may be less liquid and more difficult to close out than exchange-traded contracts. In addition, OTC contracts with more specialized terms may be more difficult to value than exchange-traded contracts, especially in times of financial stress.

Depending on how the Fund uses derivative contracts and the relationships between the market value of a derivative contract and the Reference Instrument, derivative contracts may increase or decrease the Fund’s exposure to the risks of the Reference Instrument, and may also expose the fund to liquidity and leverage risks. OTC contracts also expose the Fund to credit risks in the event that a counterparty defaults on the contract.

Payment obligations arising in connection with derivative contracts are frequently required to be secured with collateral (in the case of OTC contracts) or margin (in the case of exchange-traded contracts, as previously noted). To the extent necessary to meet such requirements, the Fund may purchase U.S. Treasury and/or government agency securities.

The Fund may invest in a derivative contract if it is permitted to own, invest in or otherwise have economic exposure to the Reference Instrument. The Fund is not required to own a Reference Instrument in order to buy or sell a derivative contract relating to that Reference Instrument. The Fund may trade in the following specific types and/or combinations of derivative contracts:

Futures Contracts (A Type of Derivative)

Futures contracts provide for the future sale by one party and purchase by another party of a specified amount of a Reference Instrument at a specified price, date and time. Entering into a contract to buy a Reference Instrument is commonly referred to as buying a contract or holding a long position in the asset. Entering into a contract to sell a Reference Instrument is commonly referred to as selling a contract or holding a short position in the Reference Instrument. Futures contracts are considered to be commodity contracts. The Fund has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act and, therefore, is not subject to registration or regulation as a commodity pool operator under that Act. Futures contracts traded OTC are frequently referred to as forward contra cts. The Fund can buy or sell financial futures (such as interest rate futures, index futures and security futures).

Option Contracts (A Type of Derivative)

Option contracts (also called “options”) are rights to buy or sell a Reference Instrument for a specified price (the exercise price) during, or at the end of, a specified period. The seller (or writer) of the option receives a payment, or premium, from the buyer, which the writer keeps regardless of whether the buyer uses (or exercises) the option. A call option gives the holder (buyer) the right to buy the Reference Instrument from the seller (writer) of the option. A put option gives the holder the right to sell the Reference Instrument to the writer of the option. Options can trade on exchanges or in the OTC market and may be bought or sold on a wide variety of Reference Instruments. Options that are written on futures contracts will be subject to margin requirements similar to those applied to futures contracts.

Swap Contracts (A Type of Derivative)

A swap contract (also known as a “swap”) is a type of derivative contract in which two parties agree to pay each other (swap) the returns derived from Reference Instruments. Swaps do not always involve the delivery of the Reference Instruments by either party, and the parties might not own the Reference Instruments underlying the swap. The payments are usually made on a net basis so that, on any given day, the Fund would receive (or pay) only the amount by which its payment under the contract is less than (or exceeds) the amount of the other party’s payment. Swap agreements are sophisticated instruments that can take many different forms and are known by a variety of names.

Common types of swaps in which the Fund may invest include interest rate swaps, total return swaps, credit default swaps and caps and floors.

OTHER INVESTMENTS, TRANSACTIONS, TECHNIQUES

Credit Enhancement

The Fund may invest in securities that have credit enhancement. Credit enhancement consists of an arrangement in which a company agrees to pay amounts due on a fixed-income security (including a tax-exempt security) if the issuer defaults. In some cases the company providing credit enhancement makes all payments directly to the security holders and receives reimbursement from the issuer. Normally, the credit enhancer may have greater financial resources and liquidity than the issuer. For this reason, the Adviser may evaluate the credit risk of a fixed-income security based solely upon its credit enhancement.

Common types of credit enhancement include guarantees, letters of credit, bond insurance and surety bonds. Credit enhancement also includes arrangements where securities or other liquid assets secure payment of a fixed-income security. If a default occurs, these assets may be sold and the proceeds paid to security’s holders. Either form of credit enhancement reduces credit risks by providing another source of payment for a fixed-income security.

Hybrid Instruments

Hybrid instruments combine elements of two different kinds of securities or financial instruments (such as a derivative contract). Frequently, the value of a hybrid instrument is determined by reference to changes in the value of a Reference Instrument (that is a designated security, commodity, index or other asset or instrument including a derivative contract). The Fund may use hybrid instruments only in connection with permissible investment activities. Hybrid instruments can take on many forms including, but not limited to, the following forms. First, a common form of a hybrid instrument combines elements of a derivative contract with those of another security (typically a fixed-income security). In this case all or a portion of the interest or principal payable on a hybrid security is determined by reference to changes in the price of a Reference Instrument. Second, hybrid instruments may include convertible securities with conversion terms related to a Reference Instrument.

Depending on the type and terms of the hybrid instrument, its risks may reflect a combination of the risks of investing in the Reference Instrument with the risks of investing in other securities and derivative contracts. Thus, an investment in a hybrid instrument may entail significant risks in addition to those associated with traditional investments or the Reference Instrument. Hybrid instruments are also potentially more volatile than traditional securities or the Reference Instrument. Moreover, depending on the structure of the particular hybrid, it may expose the Fund to leverage risks or carry liquidity risks.

Delayed Delivery Transactions

Delayed delivery transactions, including when-issued transactions, are arrangements in which the Fund buys securities for a set price, with payment and delivery of the securities scheduled for a future time. During the period between purchase and settlement, no payment is made by the Fund to the issuer and no interest accrues to the Fund. The Fund records the transaction when it agrees to buy the securities and reflects their value in determining the price of its shares. Settlement dates may be a month or more after entering into these transactions so that the market values of the securities bought may vary from the purchase prices. Therefore, delayed delivery transactions create interest rate risks for the Fund. Delayed delivery transactions also involve credit risks in the event of a counterparty default. These transactions create leverage risks.

Asset Segregation

In order to secure its obligations in connection with derivative contracts or special transactions, the Fund will either own the underlying assets, enter into offsetting transactions or set aside cash or readily marketable securities. This requirement may cause the Fund to miss favorable trading opportunities, due to a lack of sufficient cash or readily marketable securities. This requirement may also cause the Fund to realize losses on offsetting or terminated derivative contracts or special transactions.

INVESTMENT RATINGS FOR INVESTMENT-GRADE SECURITIES

The Adviser will determine whether a security is investment-grade based upon the credit ratings given by one or more NRSROs. For example, Standard & Poor’s, an NRSRO, assigns ratings to investment-grade securities (“AAA,” “AA,” “A” and “BBB”) based on their assessment of the likelihood of the issuer’s inability to pay interest or principal (default) when due on each security. Lower credit ratings correspond to higher credit risk. If a security has not received a rating, the Fund must rely entirely upon the Adviser’s credit assessment that the security is comparable to investment grade.

As disclosed in this Prospectus, the Fund may invest up to 49% of its assets in securities rated below investment grade (or unrated securities of comparable quality). The Fund does not have a specific minimum quality rating.

If a security is downgraded below any minimum quality grade discussed above, the Adviser will reevaluate the security, but will not be required to sell it.

What are the Specific Risks of Investing in the Fund?

The following provides general information on risks associated with the types of securities in which the Fund principally invests. The Fund may invest in other types of securities as a non-principal investment; risks associated with investing in such other securities are described in the Fund’s SAI.

INTEREST RATE RISKS

Prices of fixed-income securities (including tax-exempt securities) rise and fall in response to changes in the interest rate paid by similar securities. Generally, when interest rates rise, prices of fixed-income securities fall. However, market factors, such as the demand for particular fixed-income securities, may cause the price of certain fixed-income securities to fall while the prices of other securities rise or remain unchanged.

Interest rate changes have a greater effect on the price of fixed-income securities with longer durations. Duration measures the price sensitivity of a fixed-income security to changes in interest rates. Certain factors, such as the presence of call features, may cause a particular fixed-income security, or the Fund as a whole, to exhibit less sensitivity to changes in interest rates.

Certain of the Fund’s investments may also be valued, in part, by reference to the relative relationship between interest rates on tax-exempt securities and taxable securities, respectively. When the market for tax-exempt securities under performs (or outperforms) the market for taxable securities, the value of these investments may be negatively affected (or positively affected).

CREDIT RISKS

Credit risk is the possibility that an issuer will default on a security by failing to pay interest or principal when due. Noninvestment-grade securities generally have a higher default risk than investment-grade securities. If an issuer defaults, the Fund will lose money.

Many fixed-income securities (including tax-exempt securities) receive credit ratings from NRSROs such as Standard & Poor’s and Moody’s Investors Service, Inc. These NRSROs assign ratings to securities by assessing the likelihood of issuer default. Lower credit ratings correspond to higher perceived credit risk and higher credit ratings correspond to lower perceived credit risk. Credit ratings do not provide assurance against default or other loss of money. If a security has not received a rating, the Fund must rely entirely upon the Adviser’s credit assessment.

Fixed-income securities generally compensate for greater credit risk by paying interest at a higher rate. The difference between the yield of a security and the yield of a U.S. Treasury security or other appropriate benchmark with a comparable maturity (the spread) measures the additional interest paid for risk. Spreads may increase generally in response to adverse economic or market conditions. A security’s spread may also increase if the security’s rating is lowered, or the security is perceived to have an increased credit risk. An increase in the spread will cause the price of the security to decline.

Credit risk includes the possibility that a party to a transaction involving the Fund will fail to meet its obligations. This could cause the Fund to lose the benefit of the transaction or prevent the Fund from selling or buying other securities to implement its investment strategy.

LIQUIDITY RISKS

Trading opportunities are more limited for fixed-income securities (including tax-exempt securities) that have not received any credit ratings, have received any credit ratings below investment-grade or are not widely held. Trading opportunities also are more limited for inverse floaters that have complex terms or that are not widely held. These features may make it more difficult to sell or buy a security at a favorable price or time. Consequently, the Fund may have to accept a lower price to sell a security, sell other securities to raise cash or give up an investment opportunity, any of which could have a negative effect on the Fund’s performance. Infrequent trading of securities may also lead to an increase in their price volatility. Noninvestment-grade securities generally have less liquidity than investm ent-grade securities.

Liquidity risk also refers to the possibility that the Fund may not be able to sell a security or close out a derivative contract when it wants to. If this happens, the Fund will be required to continue to hold the security or keep the position open, and the Fund could incur losses.

OTC derivative contracts generally carry greater liquidity risk than exchange- traded contracts. This risk may be increased in times of financial stress, if the trading market for OTC derivative contracts becomes restricted.

TAX RISKS

Changes or proposed changes in federal or state tax laws may cause the prices of tax-exempt securities to fall and/or may affect the tax-exempt status of the securities in which the Fund invests.

The federal income tax treatment of payments in respect of certain derivative contracts is unclear. Additionally, the Fund may not be able to close out certain derivative contracts when it wants to. The Fund also may invest in market discount bonds, enter into credit default swap arrangements and other derivative transactions, and engage in other permissible activities that will likely cause the Fund to realize a limited amount of ordinary income or short-term capital gains (which are treated as ordinary income for federal income tax purposes). Consequently, for each of these reasons, the Fund may receive payments, and make distributions, that are treated as ordinary income for federal income tax purposes.

LEVERAGE RISKS

Leverage risk is created when an investment, which includes, for example, an investment in a derivative contract, exposes the Fund to a level of risk that exceeds the amount invested. Changes in the value of such an investment magnify the Fund’s risk of loss and potential for gain. Investments can have these same results if their returns are based on a multiple of a specified index, security or other benchmark.

CALL RISKS

Call risk is the possibility that an issuer may redeem a fixed-income security (including a tax-exempt security) before maturity (a call) at a price below or above its current market price. An increase in the likelihood of a call may reduce the security’s price. If a fixed-income security is called, the Fund may have to reinvest the proceeds in other fixed-income securities with lower interest rates, higher credit risks or other less favorable characteristics.

SECTOR RISK

A substantial part of the Fund’s portfolio may be comprised of securities issued or credit-enhanced by companies in similar businesses with other similar characteristics. As a result, the Fund will be more susceptible to any economic, business, political or other developments which generally affect these issuers or entities. Developments affecting companies with similar characteristics might include changes in interest rates, changes in economic cycle affecting credit losses and regulatory changes.

PREPAYMENT RISKS

Unlike traditional fixed-income securities (including tax-exempt securites), which pay a fixed rate of interest until maturity (when the entire principal amount is due) payments on municipal mortgage-backed securities include both interest and a partial payment of principal. Partial payment of principal may be comprised of scheduled principal payments as well as unscheduled payments from the voluntary prepayment, refinancing, or foreclosure of the underlying loans. These unscheduled prepayments of principal create risks that can adversely affect a Fund holding municipal mortgage-backed securities.

For example, when interest rates decline, the values of municipal mortgage-backed securities generally rise. However, when interest rates decline, unscheduled prepayments can be expected to accelerate, and the Fund would be required to reinvest the proceeds of the prepayments at the lower interest rates then available. Unscheduled prepayments would also limit the potential for capital appreciation on municipal mortgage-backed securities.

Conversely, when interest rates rise, the values of municipal mortgage-backed securities generally fall. Since rising interest rates typically result in decreased prepayments, this could lengthen the average lives of municipal mortgage-backed securities, and cause their value to decline more than traditional fixed-income securities.

Generally, municipal mortgage-backed securities compensate for the increased risk associated with prepayments by paying a higher yield. The additional interest paid for risk is measured by the difference between the yield of a municipal mortgage-backed security and the yield of a U.S. Treasury security or other appropriate benchmark with a comparable maturity (the spread). An increase in the spread will cause the price of the municipal mortgage-backed security to decline. Spreads generally increase in response to adverse economic or market conditions. Spreads may also increase if the security is perceived to have an increased prepayment risk or is perceived to have less market demand.

CREDIT ENHANCEMENT RISK

The securities in which the Fund invests may be subject to credit enhancement (for example, guarantees, letters of credit or bond insurance). Credit enhancement is designed to help assure timely payment of the security; it does not protect the Fund against losses caused by declines in a security's value due to changes in market conditions. Securities subject to credit enhancement generally would be assigned a lower credit rating if the rating were based primarily on the credit quality of the issuer without regard to the credit enhancement. If the credit quality of the credit enhancement provider (for example, a bank or bond insurer) is downgraded, the rating on a security credit enhanced by such credit enhancement provider also may be downgraded.

A single enhancement provider may provide credit enhancement to more than one of the Fund’s investments. Having multiple securities credit enhanced by the same enhancement provider will increase the adverse effects on the Fund that are likely to result from a downgrading of, or a default by, such an enhancement provider. Adverse developments in the banking or bond insurance industries also may negatively affect the Fund, as the Fund may invest in securities credit enhanced by banks or by bond insurers without limit. Bond insurers that provide credit enhancement for large segments of the fixed-income markets, including the municipal bond market, may be more susceptible to being downgraded or defaulting during recessions or similar periods of economic stress.

RISKS ASSOCIATED WITH NONINVESTMENT-GRADE SECURITIES

Securities rated below investment grade (i.e., noninvestment-grade securities or unrated securities of comparable quality), also known as junk bonds, generally entail greater economic, credit and liquidity risks than investment-grade securities. For example, their prices are more volatile, economic downturns and financial setbacks may affect their prices more negatively, and their trading market may be more limited. The Fund will invest at least a majority of its assets in securities rated investment grade (or unrated securities of comparable quality), and may purchase securities rated below investment grade (or unrated securities of comparable quality) up to 49% of its assets.

RISKS RELATED TO THE ECONOMY

Lower grade bond returns are sensitive to changes in the economy. The value of the Fund’s portfolio may decline in tandem with a drop in the overall value of the stock market based on negative developments in the U.S. and global economies.

RISKS OF INVESTING IN DERIVATIVE CONTRACTS AND HYBRID INSTRUMENTS

The Fund’s exposure to derivative contracts and hybrid instruments (either directly or through its investment in another investment company) involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. First, changes in the value of the derivative contracts and hybrid instruments in which the Fund invests may not be correlated with changes in the value of the underlying Reference Instruments or, if they are correlated, may move in the opposite direction than originally anticipated. Second, while some strategies involving derivatives may reduce the risk of loss, they may also reduce potential gains or, in some cases, result in losses by offsetting favorable price movements in portfolio holdings. Third, there is a risk that derivative contracts a nd hybrid instruments may be erroneously priced or improperly valued and, as a result, the Fund may need to make increased cash payments to the counterparty. Fourth, exposure to derivative contracts and hybrid instruments may have tax consequences to the Fund and its shareholders. For example, derivative contracts and hybrid instruments may cause the Fund to realize increased ordinary income or short-term capital gains (which are treated as ordinary income for Federal income tax purposes) and, as a result, may increase taxable distributions to shareholders. In addition, under certain circumstances certain derivative contracts and hybrid instruments may cause the Fund to: a) incur an excise tax on a portion of the income related to those contracts and instruments; and/or b) reclassify, as a return of capital, some or all of the distributions previously made to shareholders during the fiscal year as dividend income. Fifth, a common provision in OTC derivative contracts permits the counterparty to terminate any such contract between it and the Fund, if the value of the Fund’s total net assets declines below a specified level over a given time period. Factors that may contribute to such a decline (which usually must be substantial) include significant shareholder redemptions and/or a marked decrease in the market value of the Fund’s investments. Any such termination of the Fund’s OTC derivative contracts may adversely affect the Fund (for example, by increasing losses and/or costs, and/or preventing the Fund from fully implementing its investment strategies). Finally, derivative contracts and hybrid instruments may also involve other risks described in this Prospectus or in the Fund’s SAI, such as interest rate, credit, liquidity and leverage risks.

What Do Shares Cost?

CALCULATION OF NET ASSET VALUE

When the Fund receives your transaction request in proper form (as described in this Prospectus), it is processed at the next calculated net asset value of a Share (NAV) plus any applicable front-end sales charge (public offering price). A Share’s NAV is determined as of the end of regular trading on the New York Stock Exchange (NYSE) (normally 4:00 p.m. Eastern time), each day the NYSE is open. The Fund calculates the NAV of each class by valuing the assets allocated to the Share’s class, subtracting the liabilities allocated to the class and dividing the balance by the number of Shares of the class outstanding. The Fund’s current NAV and public offering price may be found at FederatedInvestors.com and in the mutual funds section of certain newspapers under “Federated.”

You can purchase, redeem or exchange Shares any day the NYSE is open.

When the Fund holds fixed-income securities that trade on days the NYSE is closed, the value of the Fund’s assets may change on days you cannot purchase or redeem Shares.

In calculating its NAV, the Fund generally values investments as follows:

·	Fixed-income securities acquired with remaining maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Board of Directors (Board).

·	Fixed-income securities acquired with remaining maturities of 60 days or less are valued at their cost (adjusted for the accretion of any discount or amortization of any premium).

·	Derivative contracts listed on exchanges are valued at their reported settlement or closing price, except that options are valued at the mean of closing bid and asked quotations.

·	Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Board.

If the Fund cannot obtain a price or price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations, or fair value the investment based on price evaluations, from one or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund’s NAV.

Shares of other mutual funds are valued based upon their reported NAVs. The prospectuses for these mutual funds explain the circumstances under which they will use fair value pricing and the effects of using fair value pricing.

FAIR VALUATION AND SIGNIFICANT EVENTS PROCEDURES

The Board has ultimate responsibility for determining the fair value of investments for which market quotations are not readily available. The Board has appointed a Valuation Committee comprised of officers of the Fund and of the Adviser to assist in this responsibility and in overseeing the calculation of the NAV. The Board has also authorized the use of pricing services recommended by the Valuation Committee to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee determines the fair value of the investment in accordance with procedures adopted by the Board. The Board periodically reviews and approves the fair valuations made by the Valuation Committee and any ch anges made to the procedures. The Fund’s SAI discusses the methods used by pricing services and the Valuation Committee to value investments.

Using fair value to price investments may result in a value that is different from an investment’s most recent closing price and from the prices used by other mutual funds to calculate their NAVs. The Valuation Committee generally will not change an investment’s fair value in the absence of new information relating to the investment or its issuer such as changes in the issuer’s business or financial results, or relating to external market factors, such as trends in the market values of comparable securities. This may result in less frequent, and larger, changes in fair values as compared to prices based on market quotations or price evaluations from pricing services or dealers.

The Board also has adopted procedures requiring an investment to be priced at its fair value whenever the Adviser determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment’s value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:

·	With respect to price evaluations of fixed-income securities determined before the close of regular trading on the NYSE, actions by the Federal Reserve Open Market Committee and other significant trends in U.S. fixed-income markets;

·	Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; and

·	Announcements concerning matters such as acquisitions, recapitalizations or litigation developments or a natural disaster affecting the issuer’s operations or regulatory changes or market developments affecting the issuer’s industry.

The Valuation Committee uses a pricing service to determine the fair value of equity securities traded principally in foreign markets when the Adviser determines that there has been a significant trend in the U.S. equity markets or in index futures trading. For other significant events, the Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Valuation Committee will determine the fair value of the investment using another method approved by the Board. The Board has ultimate responsibility for any fair valuations made in response to a significant event.

The fair valuation of securities following a significant event can serve to reduce arbitrage opportunities for short-term traders to profit at the expense of long-term investors in the Fund. For example, such arbitrage opportunities may exist when the market on which portfolio securities are traded closes before the Fund calculates its NAV, which is typically the case with Asian and European markets. However, there is no assurance that these significant event procedures will prevent dilution of the NAV by short-term traders. See “Account and Share Information–Frequent Trading Policies” for other procedures the Fund employs to deter such short-term trading.

SALES CHARGE INFORMATION

The following table summarizes the minimum required investment amount and the maximum sales charge, if any, that you will pay on an investment in the Fund. Keep in mind that financial intermediaries may charge you fees for their services in connection with your Share transactions.

	Minimum Initial/Subsequent Investment Amounts1	Maximum Sales Charges
Shares Offered		Front-End Sales Charge2	Contingent Deferred Sales Charge3

Class A Shares

$1,500/$100

4.50%

0.00%

Class B Shares

$1,500/$100

None

5.50%

Class C Shares

$1,500/$100

None

1.00%

Class F Shares

$1,500/$100

1.00%

1	The minimum subsequent investment amount for Systematic Investment Programs (SIPs) is $50. Financial intermediaries may impose higher or lower minimum investment requirements on their customers than those imposed by the Fund.

To maximize your return and minimize the sales charges and marketing fees, purchases of Class B Shares are generally limited to $100,000 and purchases of Class C Shares are generally limited to $1,000,000. Purchases equal to or in excess of these limits may be made in Class A Shares. If your Shares are held on the books of the Fund in the name of a financial intermediary, you may be subject to rules of your financial intermediary that differ from those of the Fund. See “Purchase Restrictions on Class B Shares and Class C Shares” below. After Class B Shares have been held for eight years from the date of purchase, they will automatically convert to Class A Shares on or about the last day of the following month. This conversion is a non-taxable event.

2	Front-End Sales Charge is expressed as a percentage of public offering price. See “Sales Charge When You Purchase.”

3	See “Sales Charge When You Redeem.”

As shown in the table above, each class of Shares has a different sales charge structure. In addition, the ongoing annual operating expenses (expense ratios), as well as the compensation payable to financial intermediaries, also vary among the classes. Before you decide which class to purchase, you should review the different charges and expenses of each class carefully, in light of your personal circumstances, and consult with your financial intermediary.

Among the important factors to consider are the amount you plan to invest and the length of time you expect to hold your investment (for example, whether the investment is in connection with a long-term retirement program). You should also consider, for example, that it may be possible to reduce or eliminate, the front-end sales charges imposed on purchases of Class A Shares and Class F Shares. Among other ways, Class A Shares and Class F Shares have a series of “breakpoints,” which means that the front-end sales charges decrease (and can be eliminated entirely) as the amount invested increases. (The breakpoint schedule is set out below, along with detailed information on ways to reduce, or eliminate, front-end sales charges.) On the other hand, Class B Shares do not have front-end sales charges, but the deferred sales charge s imposed on redemptions of Class B Shares do not vary at all in relation to the amounts invested. Rather, these charges decrease with the passage of time (ultimately going to zero after Shares have been held for six full years). Finally, Class C Shares do not have front-end sales charges, but do impose a contingent deferred sales charge only if redeemed within one year after purchase; however, the asset-based 12b-1 fees charged to Class C Shares are greater than those charged to Class A Shares and Class F Shares and comparable to those charged to Class B Shares.

You should also consider that the expense ratio for Class A Shares will be lower than that for Class B Shares or Class C Shares. Thus, the fact that no front-end charges are ever imposed on purchases of Class B Shares and Class C Shares does not always make them preferable to Class A Shares.

SALES CHARGE WHEN YOU PURCHASE

The following tables list the sales charges which will be applied to your Share purchase, subject to the breakpoint discounts indicated in the tables and described below.

Class A Shares:
Purchase Amount	Sales Charge as a Percentage of Public Offering Price	Sales Charge as a Percentage of NAV
Less than $50,000	5.50%	5.82%
$50,000 but less than $100,000	4.50%	4.71%
$100,000 but less than $250,000	3.75%	3.90%
$250,000 but less than $500,000	2.50%	2.56%
$500,000 but less than $1 million	2.00%	2.04%
$1 million or greater1	0.00%	0.00%

1	A contingent deferred sales charge of 0.75% of the redemption amount applies to Shares redeemed up to 24 months after purchase under certain investment programs where a financial intermediary received an advance payment on the transaction.

Class F Shares:
Purchase Amount	Sales Charge as a Percentage of Public Offering Price	Sales Charge as a Percentage of NAV
Less than $1 million	1.00%	1.01%
$1 million or greater	0.00%	0.00%

REDUCING THE SALES CHARGE WITH BREAKPOINT DISCOUNTS

Your investment may qualify for a reduction or elimination of the sales charge, also known as a breakpoint discount. The breakpoint discounts offered by the Fund are indicated in the tables above.

You or your financial intermediary must notify the Fund’s Transfer Agent of eligibility for any applicable breakpoint discount at the time of purchase.

In order to receive the applicable breakpoint discount, it may be necessary at the time of purchase for you to inform your financial intermediary or the Transfer Agent of the existence of other accounts in which there are holdings eligible to be aggregated to meet a sales charge breakpoint (Qualifying Accounts). Qualifying Accounts mean those share accounts in the Federated funds held directly or through a financial intermediary or through a single-participant retirement account by you, your spouse, your parents (if you are under age 21) and/or your children under age 21, which can be linked using tax identification numbers (TINs), social security numbers (SSNs) or broker identification numbers (BINs). Accounts held through 401(k) plans and similar multi-participant retirement plans, or through “Section 529” college savings p lans or those accounts which cannot be linked using TINs, SSNs or BINs, are not Qualifying Accounts.

In order to verify your eligibility for a breakpoint discount, you will be required to provide to your financial intermediary or the Transfer Agent certain information on your New Account Form and may be required to provide account statements regarding Qualifying Accounts. If you purchase through a financial intermediary, you may be asked to provide additional information and records as required by the financial intermediary. Failure to provide proper notification or verification of eligibility for a breakpoint discount may result in your not receiving a breakpoint discount to which you are otherwise entitled. Breakpoint discounts apply only to your current purchase and do not apply retroactively to previous purchases. The sales charges applicable to the Shares offered in this Prospectus, and the breakpoint discounts offered with respect to such Shares, are described in full in this Prospectus. Because the Prospectus is available on Federated’s Web site free of charge, Federated does not disclose this information separately on the Web site.

Contingent upon notification to the Transfer Agent, the sales charge at purchase of Class A Shares and Class F Shares only, may be reduced or eliminated by:

Larger Purchases

·	purchasing Class A Shares or Class F Shares in greater quantities to reduce the applicable sales charge;

Concurrent and Accumulated Purchases

combining concurrent purchases of and/or current investments in Class A Shares, Class B Shares, Class C Shares, Class F Shares and Class K Shares of any Federated fund made or held by Qualifying Accounts; the purchase amount used in determining the sales charge on your additional Share purchase will be calculated by multiplying the respective maximum public offering price times the number of Class A Shares, Class B Shares, Class C Shares, Class F Shares and Class K Shares of any Federated fund currently held in Qualifying Accounts and adding the dollar amount of your current purchase; or

Letter of Intent

signing a letter of intent to purchase a qualifying amount of Class A Shares or Class F Shares within 13 months. (Call your financial intermediary or the Fund for more information.) The Fund’s custodian will hold Shares in escrow equal to the maximum applicable sales charge. If you complete the Letter of Intent, the Custodian will release the Shares in escrow to your account. If you do not fulfill the Letter of Intent, the Custodian will redeem the appropriate amount from the Shares held in escrow to pay the sales charges that were not applied to your purchases.

PURCHASE RESTRICTIONS ON CLASS B AND CLASS C SHARES

In order to maximize shareholder returns and minimize sales charges and marketing fees, an investor’s purchases of Class B Shares are generally limited to $100,000 and an investor’s purchases of Class C Shares are generally limited to $1,000,000. In applying the limit, the dollar amount of the current purchase is added to the product obtained by multiplying the respective maximum public offering price times the number of Class A, Class B, Class C, Class F and Class K Shares of any Federated fund currently held in linked Qualifying Accounts, as defined in the section entitled “Reducing the Sales Charge with Breakpoint Discounts.” If the sum of these two amounts would equal or exceed the limit, then the current purchase order will not be processed. Instead, the Distributor will attempt to contact the investor or the investor’s financial intermediary to offer the opportunity to convert the order to Class A Shares.

If your Shares are held on the books of the Fund in the name of a financial intermediary, you may be subject to rules of your financial intermediary that differ from those of the Fund.

ELIMINATING THE SALES CHARGE

Contingent upon notification to the Transfer Agent, the sales charge will be eliminated when you purchase Shares:

·	within 120 days of redeeming Shares of an equal or greater amount;

·	through a financial intermediary that did not receive a dealer reallowance on the purchase;

·	with reinvested dividends or capital gains;

·	as a shareholder that originally became a shareholder of a Federated fund pursuant to the terms of an agreement and plan of reorganization which permits shareholders to acquire Shares at NAV;

as a Federated Life Member (Federated shareholders who originally were issued shares through the “Liberty Account,” which was an account for the Liberty Family of Funds on February 28, 1987, or who invested through an affinity group prior to August 1, 1987, into the Liberty Account) (Class A Shares only);

as a Director, employee or former employee of the Fund, the Adviser, the Distributor and their affiliates, an employee of any financial intermediary that sells Shares according to a sales agreement with the Distributor, an immediate family member of these individuals or a trust, pension or profit-sharing plan for these individuals; or

·	pursuant to the exchange privilege.

The sales charge will not be eliminated if you purchase Shares of the Fund through an exchange of shares of Liberty U.S. Government Money Market Trust unless your Liberty shares were acquired through an exchange of shares on which the sales charge had previously been paid.

SALES CHARGE WHEN YOU REDEEM

Your redemption proceeds may be reduced by a sales charge, commonly referred to as a contingent deferred sales charge (CDSC).

To keep the sales charge as low as possible, the Fund redeems your Shares in this order:

·	Shares that are not subject to a CDSC; and

·	Shares held the longest. (To determine the number of years your Shares have been held, include the time you held shares of other Federated funds that have been exchanged for Shares of this Fund.)

The CDSC is then calculated using the Share price at the time of purchase or redemption, whichever is lower.

Class A Shares:
If you make a purchase of Class A Shares in the amount of $1 million or more and your financial intermediary received an advance commission on the sale, you will pay a 0.75% CDSC on any such shares redeemed within 24 months of the purchase.

Class B Shares:
Shares Held Up To:		CDSC
1 Year		5.50%
2 Years		4.75%
3 Years		4.00%
4 Years		3.00%
5 Years		2.00%
6 Years		1.00%
7 Years or More		0.00%

Class C Shares:
You will pay a 1.00% CDSC if you redeem Shares within 12 months of the purchase date.

Class F Shares:
Purchase Amount	Shares Held	CDSC
Up to $2 million	4 years or less	1.00%
$2 million but less than $5 million	2 years or less	0.50%
$5 million or more	1 year or less	0.25%

If your investment qualifies for a reduction or elimination of the CDSC, you or your financial intermediary must notify the Transfer Agent at the time of redemption. If the Transfer Agent is not notified, the CDSC will apply.

Contingent upon notification to the Transfer Agent, you will not be charged a CDSC when redeeming Shares:

following the death of the last surviving shareholder on the account or the post-purchase disability of all registered shareholders, as defined in Section 72(m)(7) of the Internal Revenue Code of 1986 (the beneficiary on an account with a Transfer on Death registration is deemed the last surviving shareholder on the account);

·	representing minimum required distributions from an IRA or other retirement plan to a shareholder who has attained the age of 70½;

·	purchased within 120 days of a previous redemption of Shares, to the extent that the value of the Shares purchased was equal to or less than the value of the previous redemption;

purchased by Directors, employees of the Fund, the Adviser, the Distributor and their affiliates, by employees of a financial intermediary that sells Shares according to a sales agreement with the Distributor, by the immediate family members of the above persons, and by trusts, pension or profit-sharing plans for the above persons;

·	purchased through a financial intermediary that did not receive an advance commission on the purchase;

·	purchased with reinvested dividends or capital gains;

·	redeemed by the Fund when it closes an account for not meeting the minimum balance requirements; or

·	purchased pursuant to the exchange privilege if the Shares were held for the applicable CDSC holding period (the holding period on the shares purchased in the exchange will include the holding period of the shares sold in the exchange).

Class B Shares Only

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

Class F Shares Only

·	representing a total or partial distribution from a qualified plan, which does not include account transfers, rollovers or redemptions for the purpose of reinvestment. For these purposes, qualified plan does not include an IRA, Keogh Plan or custodial account following retirement.

How is the Fund Sold?

The Fund offers four Share classes: Class A Shares, Class B Shares, Class C Shares, and Class F Shares, each representing interests in a single portfolio of securities.

The Fund’s Distributor, Federated Securities Corp., markets the Shares described in this Prospectus to institutions or to individuals, directly or through financial intermediaries. The Fund may not be a suitable investment for retirement plans. Under the Distributor’s Contract with the Fund, the Distributor offers Shares on a continuous, best-efforts basis. The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

Payments to Financial Intermediaries

The Fund and its affiliated service providers may pay fees as described below to financial intermediaries (such as broker-dealers, banks, investment advisers or third-party administrators) whose customers are shareholders of the Fund.

FRONT-END SALES CHARGE REALLOWANCES

The Distributor receives a front-end sales charge on certain Share sales. The Distributor pays a portion of this charge to financial intermediaries that are eligible to receive it (the “Dealer Reallowance”) and retains any remaining portion of the front-end sales charge.

When a financial intermediary’s customer purchases Shares, the financial intermediary may receive a Dealer Reallowance as follows:

Class A Shares:
Purchase Amount	Dealer Reallowance as a Percentage of Public Offering Price
Less than $100,000	4.00%
$100,000 but less than $250,000	3.25%
$250,000 but less than $500,000	2.25%
$500,000 but less than $1 million	1.80%
$1 million or greater	0.00%

Class F Shares:
Less than $1 million	1.00%
$1 million or greater	0.00%

ADVANCE COMMISSIONS

When a financial intermediary’s customer purchases Shares, the financial intermediary may receive an advance commission as follows:

Class A Shares (for purchases over $1 million):
Purchase Amount	Advance Commission as a Percentage of Public Offering Price
First $1 million - $5 million	0.75%
Next $5 million - $20 million	0.50%
Over $20 million	0.25%

Advance commissions are calculated on a year-by-year basis based on amounts invested during that year. Accordingly, with respect to additional purchase amounts, the advance commission breakpoint resets annually to the first breakpoint on the anniversary of the first purchase.

Class A Share purchases under this program may be made by Letter of Intent or by combining concurrent purchases. The above advance commission will be paid only on those purchases that were not previously subject to a front-end sales charge or dealer advance commission. Certain retirement accounts may not be eligible for this program.

Class B Shares:
	Advance Commission as a Percentage of Public Offering Price
All Purchase Amounts	Up to 5.00%

Class C Shares:
	Advance Commission as a Percentage of Public Offering Price
All Purchase Amounts	1.00%

Class F Shares:
Purchase Amount	Advance Commission as a Percentage of Public Offering Price
Less than $2 million	1.00%
$2 million but less than $5 million	0.50%
$5 million or greater	0.25%

RULE 12B-1 FEES

The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees of up to 0.75% of average net assets to the Distributor for the sale, distribution, administration and customer servicing of the Fund’s Class B Shares and Class C Shares. When the Distributor receives Rule 12b-1 Fees, it may pay some or all of them to financial intermediaries whose customers purchase Shares. In addition, in connection with the sale of Class B Shares and Class C Shares, Federated and its subsidiaries make advance commission payments (effective March 1, 2010, for Class B Shares) to financial intermediaries and in return may receive Rule 12b-1 fees and contingent deferred sales loads for the Class B Shares and Class C Shares. Federated and its subsidiaries may benefit or sustain losses from such arrangements. Because these Shares pay mar keting fees on an ongoing basis, your investment cost may be higher over time than other shares with different sales charges and marketing fees.

SERVICE FEES

The Fund may pay Service Fees of up to 0.25% of average net assets to financial intermediaries or to Federated Shareholder Services Company (FSSC), a subsidiary of Federated, for providing services to shareholders and maintaining shareholder accounts. Intermediaries that receive Service Fees may include a company affiliated with management of Federated. If a financial intermediary receives Service Fees on an account, it is not eligible to also receive Account Administration Fees on that same account.

ACCOUNT ADMINISTRATION FEES

The Fund may pay Account Administration Fees of up to 0.25% of average net assets to banks that are not registered as broker-dealers or investment advisers for providing administrative services to the Funds and shareholders. If a financial intermediary receives Account Administration Fees on an account, it is not eligible to also receive Service Fees or Recordkeeping Fees on that same account.

RECORDKEEPING FEES

The Fund may pay Recordkeeping Fees on an average-net-assets basis or on a per-account-per-year basis to financial intermediaries for providing recordkeeping services to the Funds and shareholders. If a financial intermediary receives Recordkeeping Fees on an account, it is not eligible to also receive Account Administration Fees or Networking Fees on that same account.

NETWORKING FEES

The Fund may reimburse Networking Fees on a per-account-per-year basis to financial intermediaries for providing administrative services to the Funds and shareholders on certain non-omnibus accounts. If a financial intermediary receives Networking Fees on an account, it is not eligible to also receive Recordkeeping Fees on that same account.

ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES

The Distributor may pay out of its own resources amounts (including items of material value) to certain financial intermediaries that support the sale of Shares or provide services to Fund shareholders. The amounts of these payments could be significant, and may create an incentive for the financial intermediary or its employees or associated persons to recommend or sell Shares of the Fund to you. In some cases, such payments may be made by or funded from the resources of companies affiliated with the Distributor (including the Adviser). These payments are not reflected in the fees and expenses listed in the fee table section of the Fund’s Prospectus and described above because they are not paid by the Fund.

These payments are negotiated and may be based on such factors as the number or value of Shares that the financial intermediary sells or may sell; the value of client assets invested; or the type and nature of services or support furnished by the financial intermediary. These payments may be in addition to payments of Rule 12b-1 Fees and/or Service Fees and/or Account Administration Fees and/or Recordkeeping Fees and/or Networking Fees made by the Fund to the financial intermediary. In connection with these payments, the financial intermediary may elevate the prominence or profile of the Fund and/or other Federated funds within the financial intermediary’s organization by, for example, placement on a list of preferred or recommended funds, and/or granting the Distributor preferential or enhanced opportunities to pr omote the funds in various ways within the financial intermediary’s organization. You can ask your financial intermediary for information about any payments it receives from the Distributor or the Fund and any services provided.

How to Purchase Shares

You may purchase Shares through a financial intermediary, directly from the Fund or through an exchange from another Federated fund. The Fund reserves the right to reject any request to purchase or exchange Shares. New investors must submit a completed New Account Form.

Where the Fund offers more than one Share class and you do not specify the class choice on your New Account Form or form of payment (e.g., Federal Reserve wire or check), you automatically will receive Class A Shares.

THROUGH A FINANCIAL INTERMEDIARY

·	Establish an account with the financial intermediary; and

·	Submit your purchase order to the financial intermediary before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time).

You will receive the next calculated NAV if the financial intermediary forwards the order on the same day, and forwards your payment by the prescribed trade settlement date (typically within one to three business days) to the Fund's transfer agent, State Street Bank and Trust Company (Transfer Agent). You will become the owner of Shares and receive dividends when your payment is received in accordance with these time frames (provided that, if payment is received in the form of a check, the check clears). If your payment is not received in accordance with these time frames, or a check does not clear, your purchase will be canceled and you could be liable for any losses, fees or expenses incurred by the Fund or the Fund’s Transfer Agent.

Financial intermediaries should send payments according to the instructions in the sections “By Wire” or “By Check.”

DIRECTLY FROM THE FUND

·	Establish your account with the Fund by submitting a completed New Account Form; and

·	Send your payment to the Fund by Federal Reserve wire or check.

You will become the owner of Shares and your Shares will be priced at the next calculated NAV after the Fund receives your wire or your check. If your check does not clear, your purchase will be canceled and you could be liable for any losses or fees incurred by the Fund or State Street Bank and Trust Company, the Fund’s transfer agent.

An institution may establish an account and place an order by calling the Fund and the Shares will be priced at the next calculated NAV after the Fund receives the order.

By Wire

To facilitate processing your order, please call the Fund before sending the wire.

Send your wire to:

State Street Bank and Trust Company

Boston, MA

Dollar Amount of Wire

ABA Number 011000028

BNF: 23026552

Attention: Federated EDGEWIRE

Wire Order Number, Dealer Number or Group Number

Nominee/Institution Name

Fund Name and Number and Account Number

You cannot purchase Shares by wire on holidays when wire transfers are restricted.

By Check

Make your check payable to The Federated Funds, note your account number on the check, and send it to:

The Federated Funds

P.O. Box 8600

Boston, MA 02266-8600

If you send your check by a private courier or overnight delivery service that requires a street address, send it to:

The Federated Funds

30 Dan Road

Canton, MA 02021

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund reserves the right to reject any purchase request. For example, to protect against check fraud the Fund may reject any purchase request involving a check that is not made payable to The Federated Funds (including, but not limited to, requests to purchase Shares using third-party checks) or involving temporary checks or credit card checks.

THROUGH AN EXCHANGE

You may purchase Shares through an exchange from the same share class of another Federated fund. You must meet the minimum initial investment requirement for purchasing Shares (if applicable) and both accounts must have identical registrations.

BY SYSTEMATIC INVESTMENT PROGRAM (SIP)

Once you have opened an account, you may automatically purchase additional Shares on a regular basis by completing the SIP section of the New Account Form or by contacting the Fund or your financial intermediary.

BY AUTOMATED CLEARING HOUSE (ACH)

Once you have opened an account, you may purchase additional Shares through a depository institution that is an ACH member. This purchase option can be established by completing the appropriate sections of the New Account Form.

How to Redeem and Exchange Shares

You should redeem or exchange Shares:

·	through a financial intermediary if you purchased Shares through a financial intermediary; or

·	directly from the Fund if you purchased Shares directly from the Fund.

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. Redemption requests may be made by telephone or in writing.

THROUGH A FINANCIAL INTERMEDIARY

Submit your redemption or exchange request to your financial intermediary by the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). The redemption amount you will receive is based upon the next calculated NAV after the Fund receives the order from your financial intermediary.

DIRECTLY FROM THE FUND

By Telephone

You may redeem or exchange Shares by simply calling the Fund at 1-800-341-7400.

If you call before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time), you will receive a redemption amount based on that day’s NAV.

By Mail

You may redeem or exchange Shares by sending a written request to the Fund.

You will receive a redemption amount based on the next calculated NAV after the Fund receives your written request in proper form.

Send requests by mail to:

The Federated Funds

P.O. Box 8600

Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

The Federated Funds

30 Dan Road

Canton, MA 02021

All requests must include:

·	Fund Name and Share Class, account number and account registration;

·	amount to be redeemed or exchanged;

·	signatures of all shareholders exactly as registered; and

·	if exchanging, the Fund Name and Share Class, account number and account registration into which you are exchanging.

Call your financial intermediary or the Fund if you need special instructions.

Signature Guarantees

Signatures must be guaranteed by a financial institution which is a participant in a Medallion signature guarantee program if:

·	your redemption will be sent to an address other than the address of record;

·	your redemption will be sent to an address of record that was changed within the last 30 days;

·	a redemption is payable to someone other than the shareholder(s) of record; or

·	transferring into another fund with a different shareholder registration.

A Medallion signature guarantee is designed to protect your account from fraud. Obtain a Medallion signature guarantee from a bank or trust company, savings association, credit union or broker, dealer or securities exchange member. A notary public cannot provide a signature guarantee.

PAYMENT METHODS FOR REDEMPTIONS

Your redemption proceeds will be mailed by check to your address of record. The following payment options are available if you complete the appropriate section of the New Account Form or an Account Service Options Form. These payment options require a signature guarantee if they were not established when the account was opened:

·	an electronic transfer to your account at a financial institution that is an ACH member; or

·	wire payment to your account at a domestic commercial bank that is a Federal Reserve System member.

Redemption In-Kind

Although the Fund intends to pay Share redemptions in cash, it reserves the right to pay the redemption price in whole or in part by a distribution of the Fund’s portfolio securities.

LIMITATIONS ON REDEMPTION PROCEEDS

Redemption proceeds normally are wired or mailed within one business day after receiving a request in proper form. Payment may be delayed for up to seven days:

·	to allow your purchase to clear (as discussed below);

·	during periods of market volatility;

·	when a shareholder’s trade activity or amount adversely impacts the Fund’s ability to manage its assets; or

·	during any period when the Federal Reserve wire or applicable Federal Reserve banks are closed, other than customary weekend and holiday closings.

If you request a redemption of Shares recently purchased by check (including a cashier’s check or certified check), money order, bank draft or ACH, your redemption proceeds may not be made available for up to seven calendar days to allow the Fund to collect payment on the instrument used to purchase such Shares. If the purchase instrument does not clear, your purchase order will be canceled and you will be responsible for any losses incurred by the Fund as a result of your canceled order.

In addition, the right of redemption may be suspended, or the payment of proceeds may be delayed, during any period:

·	when the NYSE is closed, other than customary weekend and holiday closings;

·	when trading on the NYSE is restricted, as determined by the SEC; or

·	in which an emergency exists, as determined by the SEC, so that disposal of the Fund’s investments or determination of its NAV is not reasonably practicable.

You will not accrue interest or dividends on uncashed redemption checks from the Fund if those checks are undeliverable and returned to the Fund.

EXCHANGE PRIVILEGE

You may exchange Shares of the Fund into Shares of the same class of another Federated fund. To do this, you must:

·	ensure that the account registrations are identical;

·	meet any applicable minimum initial investment requirements; and

·	receive a prospectus for the fund into which you wish to exchange.

An exchange is treated as a redemption and a subsequent purchase and is a taxable transaction.

The Fund may modify or terminate the exchange privilege at any time.

In addition, the Fund may terminate your exchange privilege if your exchange activity is found to be excessive under the Fund’s frequent trading policies. See “Account and Share Information–Frequent Trading Policies.”

SYSTEMATIC WITHDRAWAL/EXCHANGE PROGRAM

You may automatically redeem or exchange Shares in a minimum amount of $100 on a regular basis. Complete the appropriate section of the New Account Form or an Account Service Options Form or contact your financial intermediary or the Fund. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce, and eventually deplete, your account. Payments should not be considered yield or income.

Generally, it is not advisable to continue to purchase Shares subject to a sales charge while redeeming Shares using this program.

Systematic Withdrawal Program (SWP) on Class B Shares

You will not be charged a CDSC on SWP redemptions if:

·	you redeem 12% or less of your account value in a single year;

·	you reinvest all dividends and capital gains distributions; and

·	your account has at least a $10,000 balance when you establish the SWP. (You cannot aggregate multiple Class B Share accounts to meet this minimum balance.)

You will be subject to a CDSC on redemption amounts that exceed the 12% annual limit. In measuring the redemption percentage, your account is valued when you establish the SWP and then annually at calendar year-end. You can redeem monthly, quarterly or semi-annually.

ADDITIONAL CONDITIONS

Telephone Transactions

The Fund will record your telephone instructions. If the Fund does not follow reasonable procedures, it may be liable for losses due to unauthorized or fraudulent telephone instructions.

Share Certificates

The Fund no longer issues Share certificates. If you are redeeming or exchanging Shares represented by certificates previously issued by the Fund, you must return the certificates with your written redemption or exchange request. For your protection, send your certificates by registered or certified mail, but do not endorse them.

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

You will receive confirmation of purchases, redemptions and exchanges (except for systematic transactions). In addition, you will receive periodic statements reporting all account activity, including systematic transactions, dividends and capital gains paid.

DIVIDENDS AND CAPITAL GAINS

The Fund declares any dividends daily and pays them monthly to shareholders. If you purchase Shares by wire, you begin earning dividends on the day your wire is received. If you purchase Shares by check, you begin earning dividends on the business day after the Fund receives your check. In either case, you earn dividends through the day your redemption request is received.

In addition, the Fund pays any capital gains at least annually, and may make such special distributions of dividends and capital gains as may be necessary to meet applicable regulatory requirements. Your dividends and capital gains distributions will be automatically reinvested in additional Shares without a sales charge, unless you elect cash payments. Dividends may also be reinvested without sales charges in shares of any class of any other Federated fund of which you are already a shareholder.

If you have elected to receive dividends and/or capital gain distributions in cash, and your check is returned by the postal or other delivery service as “undeliverable,” or you do not respond to mailings from Federated with regard to uncashed distribution checks, your distribution option will automatically be converted to having all dividends and capital gains reinvested in additional Shares. No interest will accrue on amounts represented by uncashed distribution checks.

If you purchase Shares just before the record date for a capital gain distribution, you will pay the full price for the Shares and then receive a portion of the price back in the form of a taxable distribution, whether or not you reinvest the distribution in Shares. Therefore, you should consider the tax implications of purchasing Shares shortly before the record date for a capital gain. Contact your financial intermediary or the Fund for information concerning when dividends and capital gains will be paid.

Under the federal securities laws, the Fund is required to provide a notice to shareholders regarding the source of distributions made by the Fund if such distributions are from sources other than ordinary investment income. In addition, important information regarding the Fund’s distributions, if applicable, is available in the “Products” section of Federated’s Web site at FederatedInvestors.com. To access this information from the “Products” section of the Web site, click on the “Notice to Shareholders–Source of Distributions” link under “Related Information.”

ACCOUNTS WITH LOW BALANCES

Federated reserves the right to close accounts if redemptions or exchanges cause the account balance to fall below $1,500. Before an account is closed, you will be notified and allowed at least 30 days to purchase additional Shares to meet the minimum.

TAX INFORMATION

The Fund sends an IRS Form 1099 and an annual statement of your account activity to assist you in completing your federal, state and local tax returns. It is anticipated that Fund distributions will be primarily dividends that are exempt from federal regular income tax, although a portion of the Fund’s dividends may not be exempt. Dividends may be subject to state and local taxes. In addition, the Fund may realize and distribute capital gains from time to time as a result of the Fund’s normal investment activities. Distributions of net short-term capital gains are taxable to you as ordinary income. Distributions of net long-term capital gains are taxable to you as long-term capital gains regardless of how long you have owned your Shares. The Fund may invest a portion of its assets in securities that generate income that is not exempt from federal or state income tax. Capital gains and non-exempt dividends are taxable whether paid in cash or reinvested in the Fund. Redemptions and exchanges are taxable sales. Please consult your tax adviser regarding your federal, state and local tax liability.

FREQUENT TRADING POLICIES

Frequent or short-term trading into and out of the Fund can have adverse consequences for the Fund and shareholders who use the Fund as a long-term investment vehicle. Such trading in significant amounts can disrupt the Fund’s investment strategies (e.g., by requiring it to sell investments at inopportune times or maintain excessive short-term or cash positions to support redemptions), increase brokerage and administrative costs and affect the timing and amount of taxable gains distributed by the Fund. Investors engaged in such trading may also seek to profit by anticipating changes in the Fund’s NAV in advance of the time as of which NAV is calculated.

The Fund’s Board has approved policies and procedures intended to discourage excessive frequent or short-term trading of the Fund’s Shares. The Fund monitors trading in Fund Shares in an effort to identify disruptive trading activity. The Fund monitors trades into and out of the Fund within a period of 30 days or less. The Fund may also monitor trades into and out of the Fund for potentially disruptive trading activity over periods longer than 30 days. The size of Share transactions subject to monitoring varies. Where it is determined that a shareholder has exceeded the detection amounts twice within a period of 12 months, the Fund will temporarily preclude the shareholder from making further purchases or exchanges of Fund Shares. If the shareholder continues to exceed the detection amounts for specified periods the Fund will impose lengthier trading restrictions on the shareholder, up to and including permanently precluding the shareholder from making any further purchases or exchanges of Fund Shares. Whether or not the specific monitoring limits are exceeded, the Fund’s management or the Adviser may determine from the amount, frequency or pattern of purchases and redemptions or exchanges that a shareholder is engaged in excessive trading that is or could be detrimental to the Fund and other shareholders and may preclude the shareholder from making further purchases or exchanges of Fund Shares. No matter how the Fund defines its limits on frequent trading of Fund Shares, other purchases and sales of Fund Shares may have adverse effects on the management of the Fund’s portfolio and its performance.

The Fund’s frequent trading restrictions do not apply to purchases and sales of Fund Shares by other Federated funds. These funds impose the same frequent trading restrictions as the Fund at their shareholder level. In addition, allocation changes of the investing Federated fund are monitored, and the managers of the recipient fund must determine that there is no disruption to their management activity. The intent of this exception is to allow investing fund managers to accommodate cash flows that result from non-abusive trading in the investing fund, without being stopped from such trading because the aggregate of such trades exceeds the monitoring limits. Nonetheless, as with any trading in Fund Shares, purchases and redemptions of Fund Shares by other Federated funds could adversely affect the management of the Fund’s port folio and its performance.

The Fund’s objective is that its restrictions on short-term trading should apply to all shareholders that are subject to the restrictions, regardless of the number or type of accounts in which Shares are held. However, the Fund anticipates that limitations on its ability to identify trading activity to specific shareholders, including where Shares are held through intermediaries in multiple or omnibus accounts, will mean that these restrictions may not be able to be applied uniformly in all cases.

PORTFOLIO HOLDINGS INFORMATION

Information concerning the Fund’s portfolio holdings is available in the “Products” section of Federated’s Web site at FederatedInvestors.com. A complete listing of the Fund’s portfolio holdings as of the end of each calendar quarter is posted on the Web site 30 days (or the next business day) after the end of the quarter and remains posted until replaced by the information for the succeeding quarter. Summary portfolio composition information as of the close of each month is posted on the Web site 15 days (or the next business day) after month-end and remains until replaced by the information for the succeeding month. The summary portfolio composition information may include identification of the Fund’s top 10 holdings, portfolio profile statistics (such as weighted average effective maturity and weight ed average effective duration) and a percentage breakdown of the portfolio by credit quality and sector.

To access this information from the “Products” section of the Web site, click on the “Portfolio Holdings” link under “Related Information” and select the appropriate link opposite the name of the Fund, or select the name of the Fund, and from the Fund’s page, click on the “Portfolio Holdings” or “Composition” link.

You may also access portfolio information as of the end of the Fund’s fiscal quarters from the “Products” section of the Web site. The Fund’s Annual and Semi-Annual Reports, which contain complete listings of the Fund’s portfolio holdings as of the end of the Fund’s second and fourth fiscal quarters, may be accessed by selecting the “Prospectuses and Regulatory Reports” link under “Related Information” and selecting the link to the appropriate PDF. Complete listings of the Fund’s portfolio holdings as of the end of the Fund’s first and third fiscal quarters may be accessed by selecting “Portfolio Holdings” from the “Products” section and then selecting the appropriate link opposite the name of the Fund. Fiscal quarter information is made avail able on the Web site within 70 days after the end of the fiscal quarter. This information is also available in reports filed with the SEC at the SEC’s Web site at www.sec.gov.

In addition, from time to time (for example, during periods of unusual market conditions), additional information regarding the Fund’s portfolio holdings and/or composition may be posted to Federated’s Web site. If and when such information is posted, its availability will be noted on, and the information will be accessible from, the home page of the Web site.

Who Manages the Fund?

The Board governs the Fund. The Board selects and oversees the Adviser, Federated Investment Management Company. The Adviser manages the Fund’s assets, including buying and selling portfolio securities. Federated Advisory Services Company (FASC), an affiliate of the Adviser, provides certain support services to the Adviser. The fee for these services is paid by the Adviser and not by the Fund. The address of the Adviser and FASC is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

The Adviser and other subsidiaries of Federated advise approximately 145 equity, fixed-income and money market mutual funds as well as a variety of other pooled investment vehicles and customized, separately managed accounts, which totaled approximately $389 billion in assets as of December 31, 2009. Federated was established in 1955 and is one of the largest investment managers in the United States with approximately 1,370 employees. Federated provides investment products to over 5,200 investment professionals and institutions.

The Adviser advises approximately 101 fixed-income and money market mutual funds as well as a variety of customized, separately managed accounts, which totaled approximately $287.2 billion in assets as of December 31, 2009.

PORTFOLIO MANAGEMENT INFORMATION

J. Scott Albrecht

J. Scott Albrecht has been the Fund’s Portfolio Manager since May 1996. He is Vice President of the Fund. Mr. Albrecht joined Federated in 1989. He became a Senior Vice President of the Fund’s Adviser in January 2005 and served as a Vice President of the Fund’s Adviser from 1994 through 2004. He has been a Senior Portfolio Manager since 1997 and was a Portfolio Manager from 1994 to 1996. Mr. Albrecht has received the Chartered Financial Analyst designation and an M.S. in Public Management from Carnegie Mellon University.

The Fund’s SAI provides additional information about the Portfolio Manager’s compensation, management of other accounts, and ownership of securities in the Fund.

ADVISORY FEES

The Fund’s investment advisory contract provides for payment to the Adviser of an annual investment advisory fee of 0.30% of the Fund’s average daily net assets plus 4.50% of the Fund’s gross income. The Adviser may voluntarily waive a portion of its fee or reimburse the Fund for certain operating expenses.

A discussion of the Board’s review of the Fund’s investment advisory contract is available in the Fund’s Annual Report dated March 31, 2010.

Legal Proceedings

Since October 2003, Federated and related entities (collectively, “Federated”) and various Federated-sponsored mutual funds (Funds) have been named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of certain Funds during specified periods beginning November 1, 1998. The suits are generally similar in alleging that Federated engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders. Federated without admitting the validity of any claim has reached a preliminary settlement with the Plaintiffs in these cases . Any settlement would have to be approved by the Court.

Federated entities have also been named as defendants in several additional lawsuits that are now pending in the United States District Court for the Western District of Pennsylvania. These lawsuits have been consolidated into a single action alleging excessive advisory fees involving one of the Funds.

The Board of the Funds retained the law firm of Dickstein Shapiro LLP to represent the Funds in each of the lawsuits described in the preceding two paragraphs. Federated and the Funds, and their respective counsel, have been defending this litigation, and none of the Funds remains a defendant in any of the lawsuits. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these lawsuits, all of which seek monetary damages, attorneys’ fees and expenses, and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, ongoing adverse publicity and/or other developments resulting from the allegations in these matters will not result in increased redemptions, or reduc ed sales, of shares of the Funds or other adverse consequences for the Funds.

Financial Information

FINANCIAL HIGHLIGHTS

The Financial Highlights will help you understand the Fund’s financial performance for its past five fiscal years or since inception, if the life of the Share Class is shorter. Some of the information is presented on a per Share basis. Total returns represent the rate an investor would have earned (or lost) on an investment in the Fund, assuming reinvestment of any dividends and capital gains.

This information has been audited by Ernst & Young LLP, an independent registered public accounting firm, whose report, along with the Fund’s audited financial statements, is included in the Annual Report.

Financial Highlights–Class A Shares

(For a Share Outstanding Throughout Each Period)

Year Ended March 31	2010	2009	2008	2007	2006
Net Asset Value, Beginning of Period	$9.41	$10.05	$10.65	$10.59	$10.65
Income From Investment Operations:
Net investment income1	0.41	0.43	0.44	0.46	0.46
Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts	0.59	(0.64)	(0.59)	0.06	(0.05)
TOTAL FROM INVESTMENT OPERATIONS	1.00	(0.21)	(0.15)	0.52	0.41
Less Distributions:
Distributions from net investment income	(0.42)	(0.43)	(0.45)	(0.46)	(0.47)
Net Asset Value, End of Period	$9.99	$9.41	$10.05	$10.65	$10.59
Total Return2	10.78%	(2.14)%	(1.48)%	5.05%	3.93%
Ratios to Average Net Assets:
Net expenses	0.87%	0.87%3	0.88%4	1.15%4	0.98%4
Net investment income	4.20%	4.40%	4.28%	4.31%	4.28%
Expense waiver/reimbursement5	0.09%	0.15%	0.13%	0.14%	0.14%
Supplemental Data:
Net assets, end of period (000 omitted)	$511,709	$396,603	$431,074	$436,073	$436,026
Portfolio turnover	23%	52%	37%	23%	23%

1	Per share numbers have been calculated using the average shares method.

2	Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.

3	The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratio for the year ended March 31, 2009, is 0.87% after taking into account this expense reduction.

4	Includes interest and trust expenses related to the Fund’s participation in certain inverse floater structures of less than 0.01%, 0.30% and 0.14% for the years ended March 31, 2008, 2007 and

2006, respectively.

5	This expense decrease is reflected in both the net expense and net investment income ratios shown above.

Further information about the Fund’s performance is contained in the Fund’s Annual Report, dated March 31, 2010, which can be obtained free of charge.

Financial Highlights–Class B Shares

(For a Share Outstanding Throughout Each Period)

Year Ended March 31	2010	2009	2008	2007	2006
Net Asset Value, Beginning of Period	$9.41	$10.05	$10.65	$10.59	$10.65
Income From Investment Operations:
Net investment income1	0.33	0.34	0.35	0.36	0.37
Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts	0.58	(0.64)	(0.60)	0.07	(0.05)
TOTAL FROM INVESTMENT OPERATIONS	0.91	(0.30)	(0.25)	0.43	0.32
Less Distributions:
Distributions from net investment income	(0.33)	(0.34)	(0.35)	(0.37)	(0.38)
Net Asset Value, End of Period	$9.99	$9.41	$10.05	$10.65	$10.59
Total Return2	9.81%	(3.01)%	(2.35)%	4.12%	3.01%
Ratios to Average Net Assets:
Net expenses	1.73%	1.76%3	1.76%4	2.04%4	1.87%4
Net investment income	3.35%	3.52%	3.39%	3.42%	3.38%
Expense waiver/reimbursement5	0.00%6	0.01%	0.00%6	0.00%6	0.00%6
Supplemental Data:
Net assets, end of period (000 omitted)	$19,606	$15,105	$18,246	$25,129	$33,002
Portfolio turnover	23%	52%	37%	23%	23%

1	Per share numbers have been calculated using the average shares method.

2	Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.

3	The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratio for the year ended March 31, 2009, is 1.76% after taking into account this expense reduction.

4	Includes interest and trust expenses related to the Fund's participation in certain inverse floater structures of less than 0.01%, 0.30% and 0.14% for the years ended March 31, 2008, 2007 and

2006, respectively.

5	This expense decrease is reflected in both the net expense and net investment income ratios shown above.

6	Represents less than 0.01%.

Further information about the Fund’s performance is contained in the Fund’s Annual Report, dated March 31, 2010, which can be obtained free of charge.

Financial Highlights–Class C Shares

(For a Share Outstanding Throughout Each Period)

Year Ended March 31	2010	2009	2008	2007	2006
Net Asset Value, Beginning of Period	$9.41	$10.05	$10.65	$10.59	$10.65
Income From Investment Operations:
Net investment income1	0.33	0.34	0.35	0.36	0.37
Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts	0.58	(0.64)	(0.59)	0.07	(0.05)
TOTAL FROM INVESTMENT OPERATIONS	0.91	(0.30)	(0.24)	0.43	0.32
Less Distributions:
Distributions from net investment income	(0.33)	(0.34)	(0.36)	(0.37)	(0.38)
Net Asset Value, End of Period	$9.99	$9.41	$10.05	$10.65	$10.59
Total Return2	9.81%	(3.00)%	(2.34)%	4.13%	3.01%
Ratios to Average Net Assets:
Net expenses	1.73%	1.76%3	1.75%4	2.03%4	1.87%4
Net investment income	3.35%	3.54%	3.42%	3.43%	3.38%
Expense waiver/reimbursement5	0.00%6	0.01%	0.00%6	0.00%6	0.00%6
Supplemental Data:
Net assets, end of period (000 omitted)	$26,570	$20,376	$15,434	$12,510	$13,739
Portfolio turnover	23%	52%	37%	23%	23%

1	Per share numbers have been calculated using the average shares method.

2	Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.

3	The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratio for the year ended March 31, 2009, is 1.76% after taking into account this expense reduction.

4	Includes interest and trust expenses related to the Fund's participation in certain inverse floater structures of less than 0.01%, 0.30% and 0.14% for the years ended March 31, 2008, 2007 and

2006, respectively.

5	This expense decrease is reflected in both the net expense and net investment income ratios shown above.

6	Represents less than 0.01%.

Further information about the Fund’s performance is contained in the Fund’s Annual Report, dated March 31, 2010, which can be obtained free of charge.

Financial Highlights–Class F Shares

(For a Share Outstanding Throughout Each Period)

	Year Ended March 31,		Period Ended 3/31/20081
	2010	2009	Period Ended 3/31/20081
Net Asset Value, Beginning of Period	$9.41	$10.05	$10.56
Income From Investment Operations:
Net investment income2	0.41	0.43	0.37
Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts	0.59	(0.64)	(0.51)
TOTAL FROM INVESTMENT OPERATIONS	1.00	(0.21)	(0.14)
Less Distributions:
Distributions from net investment income	(0.42)	(0.43)	(0.37)
Net Asset Value, End of Period	$9.99	$9.41	$10.05
Total Return3	10.78%	(2.14)%	(1.33)%
Ratios to Average Net Assets:
Net expenses	0.87%	0.87%4	0.87%5
Net investment income	4.20%	4.46%	4.42%5
Expense waiver/reimbursement6	0.11%	0.11%	0.13%5
Supplemental Data:
Net assets, end of period (000 omitted)	$18,298	$11,361	$4,292
Portfolio turnover	23%	52%	37%7

1	Reflects operations for the period from May 31, 2007 (date of initial investment) to March 31, 2008.

2	Per share numbers have been calculated using the average shares method.

3	Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized.

4	The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratio for the year ended March 31, 2009, is 0.87% after taking into account this expense reduction.

5	Computed on an annualized basis.

6	This expense decrease is reflected in both the net expense and net investment income ratios shown above.

7	Portfolio turnover is calculated at the Fund level. Percentage indicated was calculated for the fiscal year ended March 31, 2008.

Further information about the Fund’s performance is contained in the Fund’s Annual Report, dated March 31, 2010, which can be obtained free of charge.

Appendix A: Hypothetical Investment and Expense Information

The following charts provide additional hypothetical information about the effect of the Fund’s expenses, including investment advisory fees and other Fund costs, on the Fund’s assumed returns over a 10-year period. Each chart shows the estimated expenses that would be incurred in respect of a hypothetical investment of $10,000, assuming a 5% return each year, and no redemption of Shares. Each chart also assumes that the Fund’s annual expense ratio stays the same throughout the 10-year period (except for the impact of changes in contractual expense limitations and Class B Shares, which convert to Class A Shares after you have held them for eight years) and that all dividends and distributions are reinvested. The annual expense ratios used in each chart are the same as stated in the “Fees and Expenses” table o f this Prospectus (and thus may not reflect any fee waiver or expense reimbursement currently in effect). The maximum amount of any sales charge that might be imposed on the purchase of Shares (and deducted from the hypothetical initial investment of $10,000; the “Front-End Sales Charge”) is reflected in the “Hypothetical Expenses” column. The hypothetical investment information does not reflect the effect of charges (if any) normally applicable to redemptions of Shares (e.g., deferred sales charges, redemption fees). Mutual fund returns, as well as fees and expenses, may fluctuate over time, and your actual investment returns and total expenses may be higher or lower than those shown below.

FEDERATED MUNICIPAL SECURITIES FUND, INC. - CLASS A SHARES
ANNUAL EXPENSE RATIO: 0.98%
MAXIMUM FRONT-END SALES CHARGE: 4.50%
Year	Hypothetical Beginning Investment	Hypothetical Performance Earnings	Investment After Returns	Hypothetical Expenses	Hypothetical Ending Investment
1	$10,000.00	$477.50	$10,027.50	$545.47	$9,933.91
2	$9,933.91	$496.70	$10,430.61	$99.31	$10,333.25
3	$10,333.25	$516.66	$10,849.91	$103.30	$10,748.65
4	$10,748.65	$537.43	$11,286.08	$107.45	$11,180.75
5	$11,180.75	$559.04	$11,739.79	$111.77	$11,630.22
6	$11,630.22	$581.51	$12,211.73	$116.27	$12,097.75
7	$12,097.75	$604.89	$12,702.64	$120.94	$12,584.08
8	$12,584.08	$629.20	$13,213.28	$125.80	$13,089.96
9	$13,089.96	$654.50	$13,744.46	$130.86	$13,616.18
10	$13,616.18	$680.81	$14,296.99	$136.12	$14,163.55
Cumulative		$5,738.24		$1,597.29




FEDERATED MUNICIPAL SECURITIES FUND, INC. - CLASS B SHARES
ANNUAL EXPENSE RATIO: 1.73%
MAXIMUM FRONT-END SALES CHARGE: NONE
Year	Hypothetical Beginning Investment	Hypothetical Performance Earnings	Investment After Returns	Hypothetical Expenses	Hypothetical Ending Investment
1	$10,000.00	$500.00	$10,500.00	$175.83	$10,327.00
2	$10,327.00	$516.35	$10,843.35	$181.58	$10,664.69
3	$10,664.69	$533.23	$11,197.92	$187.52	$11,013.43
4	$11,013.43	$550.67	$11,564.10	$193.65	$11,373.57
5	$11,373.57	$568.68	$11,942.25	$199.98	$11,745.49
6	$11,745.49	$587.27	$12,332.76	$206.52	$12,129.57
7	$12,129.57	$606.48	$12,736.05	$213.27	$12,526.21
8	$12,526.21	$626.31	$13,152.52	$220.25	$12,935.82
Converts from Class B to Class A			Annual Expense Ratio: 0.87%
9	$12,935.82	$646.79	$13,582.61	$129.32	$13,455.84
10	$13,455.84	$672.79	$14,128.63	$134.52	$13,996.76
Cumulative		$5,808.57		$1,842.44




FEDERATED MUNICIPAL SECURITIES FUND, INC. - CLASS C SHARES
ANNUAL EXPENSE RATIO: 1.73%
MAXIMUM FRONT-END SALES CHARGE: NONE
Year	Hypothetical Beginning Investment	Hypothetical Performance Earnings	Investment After Returns	Hypothetical Expenses	Hypothetical Ending Investment
1	$10,000.00	$500.00	$10,500.00	$175.83	$10,327.00
2	$10,327.00	$516.35	$10,843.35	$181.58	$10,664.69
3	$10,664.69	$533.23	$11,197.92	$187.52	$11,013.43
4	$11,013.43	$550.67	$11,564.10	$193.65	$11,373.57
5	$11,373.57	$568.68	$11,942.25	$199.98	$11,745.49
6	$11,745.49	$587.27	$12,332.76	$206.52	$12,129.57
7	$12,129.57	$606.48	$12,736.05	$213.27	$12,526.21
8	$12,526.21	$626.31	$13,152.52	$220.25	$12,935.82
9	$12,935.82	$646.79	$13,582.61	$227.45	$13,358.82
10	$13,358.82	$667.94	$14,026.76	$234.89	$13,795.65
Cumulative		$5,803.72		$2,040.94




FEDERATED MUNICIPAL SECURITIES FUND, INC. - CLASS F SHARES
ANNUAL EXPENSE RATIO: 0.98%
MAXIMUM FRONT-END SALES CHARGE: 1.00%
Year	Hypothetical Beginning Investment	Hypothetical Performance Earnings	Investment After Returns	Hypothetical Expenses	Hypothetical Ending Investment
1	$10,000.00	$495.00	$10,395.00	$198.97	$10,297.98
2	$10,297.98	$514.90	$10,812.88	$102.95	$10,711.96
3	$10,711.96	$535.60	$11,247.56	$107.09	$11,142.58
4	$11,142.58	$557.13	$11,699.71	$111.39	$11,590.51
5	$11,590.51	$579.53	$12,170.04	$115.87	$12,056.45
6	$12,056.45	$602.82	$12,659.27	$120.53	$12,541.12
7	$12,541.12	$627.06	$13,168.18	$125.37	$13,045.27
8	$13,045.27	$652.26	$13,697.53	$130.41	$13,569.69
9	$13,569.69	$678.48	$14,248.17	$135.66	$14,115.19
10	$14,115.19	$705.76	$14,820.95	$141.11	$14,682.62
Cumulative		$5,948.54		$1,289.35

A Statement of Additional Information (SAI) dated May 31, 2010, is incorporated by reference into this Prospectus. Additional information about the Fund and its investments is contained in the Fund’s SAI and Annual and Semi-Annual Reports to shareholders as they become available. The Annual Report’s Management’s Discussion of Fund Performance discusses market conditions and investment strategies that significantly affected the Fund’s performance during its last fiscal year. The SAI contains a description of the Fund’s policies and procedures with respect to the disclosure of its portfolio securities. To obtain the SAI, Annual Report, Semi-Annual Report and other information without charge, and to make inquiries, call your financial intermediary or the Fund at 1-800-341-7400.

These documents, as well as additional information about the Fund (including portfolio holdings, performance and distributions), are also available on Federated’s Web site at FederatedInvestors.com.

You can obtain information about the Fund (including the SAI) by writing to or visiting the SEC’s Public Reference Room in Washington, DC. You may also access Fund information from the EDGAR Database on the SEC’s Web site at www.sec.gov. You can purchase copies of this information by contacting the SEC by email at publicinfo@sec.gov or by writing to the SEC’s Public Reference Section, Washington, DC 20549. Call 1-202-551-8090 for information on the Public Reference Room’s operations and copying fees.

Federated Municipal Securities Fund, Inc.

Federated Investors Funds

4000 Ericsson Drive

Warrendale, PA 15086-7561

or call 1-800-341-7400.

Federated Securities Corp., Distributor

Investment Company Act File No. 811-2677

Cusip 313913105

Cusip 313913204

Cusip 313913303

Cusip 313913402

G00322-01 (5/10)

Federated is a registered mark of Federated Investors, Inc.

2010 ©Federated Investors, Inc.

Federated Municipal Securities Fund, Inc.

STATEMENT OF ADDITIONAL INFORMATION

May 31, 2010

CLASS A SHARES (TICKER LMSFX)

CLASS B SHARES (TICKER LMSBX)

CLASS C SHARES (TICKER LMSCX)

CLASS F SHARES (TICKER LMFFX)

This Statement of Additional Information (SAI) is not a Prospectus. Read this SAI in conjunction with the Prospectus for Federated Municipal Securities Fund, Inc. (Fund), dated May 31, 2010.

This SAI incorporates by reference the Fund’s Annual Report. Obtain the Prospectus or the Annual Report without charge by calling 1-800-341-7400.

Federated Municipal Securities Fund, Inc.

Federated Investors Funds

4000 Ericsson Drive

Warrendale, PA 15086-7561

or call 1-800-341-7400.

Federated Securities Corp., Distributor

8051601B (5/10)

Federated is a registered mark

of Federated Investors, Inc.

2010 ©Federated Investors, Inc.

How is the Fund Organized?

The Fund is a diversified open-end, management investment company that was established under the laws of the State of Maryland on September 10, 1976.

The Board of Directors (Board) has established four classes of shares of the Fund, known as Class A Shares, Class B Shares, Class C Shares and Class F Shares (Shares). This SAI relates to all classes of Shares. The Fund’s investment adviser is Federated Investment Management Company (Adviser).

Securities in Which the Fund Invests

The principal securities in which the Fund invests are described in the Fund’s Prospectus. In pursuing its investment strategy, the Fund also may invest in the following securities for any purpose that is consistent with its investment objective:

SECURITIES DESCRIPTIONS AND TECHNIQUES

FIXED-INCOME SECURITIES

Fixed-income securities pay interest, dividends or distributions at a specified rate. The rate may be a fixed percentage of the principal or may be adjusted periodically. In addition, the issuer of a fixed-income security must repay the principal amount of the security, normally within a specified time. Fixed-income securities provide more regular income than equity securities. However, the returns on fixed-income securities are limited and normally do not increase with the issuer’s earnings. This limits the potential appreciation of fixed-income securities as compared to equity securities.

A security’s yield measures the annual income earned on a security as a percentage of its price. A security’s yield will increase or decrease depending upon whether it costs less (a discount) or more (a premium) than the principal amount. If the issuer may redeem the security before its scheduled maturity, the price and yield on a discount or premium security may change based upon the probability of an early redemption. Securities with higher risks generally have higher yields.

The following describes the types of fixed-income securities, in addition to those listed in the Prospectus, in which the Fund invests:

Asset-Backed Securities (A Type of Fixed-Income Tax-Exempt Security)

Asset-backed securities are payable from pools of obligations other than mortgages. Most asset-backed securities involve consumer or commercial debts with maturities of less than 10 years. However, almost any type of fixed-income assets (including other fixed-income securities) may be used to create an asset-backed security. Asset-backed securities may take the form of commercial paper, notes, or pass through certificates or similar securities. Asset-backed securities have prepayment risks.

Tax-Exempt Commercial Paper (A Type of Tax-Exempt Security)

Tax-exempt commercial paper is a tax-exempt issuer’s obligation with a maturity of less than nine months. Tax-exempt issuers may issue commercial paper to pay for current expenditures or other permissible activities. Tax-exempt issuers may constantly reissue their commercial paper and use the proceeds (or other sources) to repay maturing paper. If the tax-exempt issuer cannot continue to obtain liquidity in this fashion, its commercial paper may default.

DERIVATIVE CONTRACTS

For example, the Fund could close out an open contract to buy an asset at a future date by entering into an offsetting contract to sell the same asset on the same date. If the offsetting sale price is more than the original purchase price, the Fund realizes a gain; if it is less, the Fund realizes a loss. Exchanges may limit the amount of open contracts permitted at any one time. Such limits may prevent the Fund from closing out a position. If this happens, the Fund will be required to keep the contract open (even if it is losing money on the contract), and to make any payments required under the contract (even if it has to sell portfolio securities at unfavorable prices to do so). Inability to close out a contract could also harm the Fund by preventing it from disposing of or trading any assets it has been using to secure its obligation s under the contract.

The Fund may also trade derivative contracts over-the-counter (OTC) in transactions negotiated directly between the Fund and the counterparty. OTC contracts do not necessarily have standard terms, so they may be less liquid and more difficult to close-out than exchange-traded contracts. In addition, OTC contracts with more specialized terms may be more difficult to value than exchange-traded contracts, especially in times of financial stress.

The Fund may invest in a derivative contract if it is permitted to own, invest in, or otherwise have economic exposure to the Reference Instrument. The Fund is not required to own a Reference Instrument in order to buy or sell a derivative contract relating to that Reference Instrument.

The Fund may trade in the following specific types and/or combinations of derivative contracts:

Futures Contracts (A Type of Derivative)

Interest Rate Futures (A Type of Futures Contract)

An interest rate futures contract is an exchange-traded contract for which the Reference Instrument is an interest-bearing fixed-income security or an inter-bank deposit. Two examples of common interest rate futures contracts are U.S. Treasury futures contracts and Eurodollar futures contracts. The Reference Instrument for a U.S. Treasury futures contract is a U.S. Treasury security. The Reference Instrument for a Eurodollar futures contract is the London Interbank Offered Rate (commonly referred to as “LIBOR”); Eurodollar futures contracts enable the purchaser to obtain a fixed rate for the lending of funds over a stated period of time and the seller to obtain a fixed rate for a borrowing of funds over that same period.

Index Futures (A Type of Futures Contract)

An index futures contract is an exchange-traded contract to make or receive a payment based upon changes in the value of an index. An index is a statistical composite that measures changes in the value of designated Reference Instruments. An index is usually computed by a sum product of a list of the designated Reference Instruments’ current prices and a list of weights assigned to these Reference Instruments.

Security Futures (A Type of Futures Contract)

A security futures contract is an exchange-traded contract to purchase or sell in the future a specific quantity of a security (other than a Treasury security) or a narrow-based securities index at a certain price. Presently, the only available security futures contracts use shares of a single equity security as the Reference Instrument. However, it is possible that in the future security futures contracts will be developed that use a single fixed-income security as the Reference Instrument.

Option Contracts (A Type of Derivative)

Option contracts (also called “options”) are rights to buy or sell a Reference Instrument for a specified price (the exercise price) during, or at the end of, a specified period. The seller (or writer) of the option receives a payment, or premium, from the buyer, which the writer keeps regardless of whether the buyer uses (or exercises) the option. Options can trade on exchanges or in the OTC market and may be bought or sold on a wide variety of Reference Instruments. Options that are written on futures contracts will be subject to margin requirements similar to those applied to futures contracts.

The Fund may buy and/or sell the following types of options:

Call Options (A Type of Option)

A call option gives the holder (buyer) the right to buy the Reference Instrument from the seller (writer) of the option. The Fund may use call options in the following ways:

·	Buy call options on a Reference Instrument in anticipation of an increase in the value of the Reference Instrument; and

Write call options on a Reference Instrument to generate income from premiums, and in anticipation of a decrease or only limited increase in the value of the Reference Instrument. If the Fund writes a call option on a Reference Instrument that it owns and that call option is exercised, the Fund foregoes any possible profit from an increase in the market price of the Reference Instrument over the exercise price plus the premium received.

Put Options (A Type of Option)

A put option gives the holder the right to sell the Reference Instrument to the writer of the option. The Fund may use put options in the following ways:

·	Buy put options on a Reference Instrument in anticipation of a decrease in the value of the Reference Instrument; and

Write put options on a Reference Instrument to generate income from premiums, and in anticipation of an increase or only limited decrease in the value of the Reference Instrument. In writing puts, there is a risk that the Fund may be required to take delivery of the Reference Instrument when its current market price is lower than the exercise price.

The Fund may also buy or write options, as needed, to close out existing option positions.

Finally, the Fund may enter into combinations of options contracts in an attempt to benefit from changes in the prices of those options contracts (without regard to changes in the value of the Reference Instrument).

Swap Contracts (A Type of Derivative)

A swap contract (also known as a “swap”) is a type of derivative contract in which two parties agree to pay each other (swap) the returns derived from Reference Instruments. Most swaps do not involve the delivery of the underlying assets by either party, and the parties might not own the Reference Instruments. The payments are usually made on a net basis so that, on any given day, the Fund would receive (or pay) only the amount by which its payment under the contract is less than (or exceeds) the amount of the other party’s payment. Swap agreements are sophisticated instruments that can take many different forms and are known by a variety of names. Common swap agreements that the Fund may use include:

Interest Rate Swaps (A Type of Swap Contract)

Interest rate swaps are contracts in which one party agrees to make regular payments equal to a fixed or floating interest rate times a stated principal amount (commonly referred to as a “notional principal amount”) in return for payments equal to a different fixed or floating rate times the same principal amount, for a specific period. For example, a $10 million London Interbank Offered Rate (commonly referred to as “LIBOR”) swap would require one party to pay the equivalent of the London Interbank Offered Rate of interest (which fluctuates) on $10 million principal amount in exchange for the right to receive the equivalent of a stated fixed rate of interest on $10 million principal amount.

Caps and Floors (A Type of Swap Contract)

Caps and Floors are contracts in which one party agrees to make payments only if an interest rate or index goes above (Cap) or below (Floor) a certain level in return for a fee from the other party.

Total Return Swaps (A Type of Swap Contract)

A total return swap is an agreement between two parties whereby one party agrees to make payments of the total return from a Reference Instrument (or a basket of such instruments) during the specified period, in return for payments equal to a fixed or floating rate of interest or the total return from another Reference Instrument. Alternately, a total return swap can be structured so that one party will make payments to the other party if the value of a Reference Instrument increases, but receive payments from the other party if the value of that instrument decreases.

Credit Default Swaps (A Typed of Swap Contract)

A credit default swap (CDS) is an agreement between two parties whereby one party (the “Protection Buyer”) agrees to make payments over the term of the CDS to the other party (the “Protection Seller”), provided that no designated event of default, restructuring or other credit related event (each a “Credit Event”) occurs with respect to Reference Instrument that is usually a particular bond or the unsecured credit of an issuer, in general (the “Reference Obligation”). Many CDS are physically settled, which means that if a Credit Event occurs, the Protection Seller must pay the Protection Buyer the full notional value, or “par value,” of the Reference Obligation in exchange for delivery by the Protection Buyer of the Reference Obligation or another similar obligation issued by the issuer of the Reference Obligation (the “Deliverable Obligation”). The Counterparties agree to the characteristics of the Deliverable Obligation at the time that they enter into the CDS. Alternately, a CDS can be “cash settled,” which means that upon the occurrence of a Credit Event, the Protection Buyer will receive a payment from the Protection Seller equal to the difference between the par amount of the Reference Obligation and its market value at the time of the Credit Event. The Fund may be either the Protection Buyer or the Protection Seller in a CDS. If the Fund is a Protection Buyer and no Credit Event occurs, the Fund will lose its entire investment in the CDS (i.e., an amount equal to the payments made to the Protection Seller over the term of the CDS). However, if a Credit Event occurs, the Fund (as Protection Buyer) will deliver the Deliverable Obligation and receive a payment equal to the full notional value of the Reference Obligation, even though the Reference Obligati on may have little or no value. If the Fund is the Protection Seller and no Credit Event occurs, the Fund will receive a fixed rate of income throughout the term of the CDS. However, if a Credit Event occurs, the Fund (as Protection Seller) will pay the Protection Buyer the full notional value of the Reference Obligation and receive the Deliverable Obligation from the Protection Buyer. A CDS may involve greater risks than if the Fund invested directly in the Reference Obligation. For example, a CDS may increase credit risk since the Fund has exposure to both the issuer of the Reference Obligation and the Counterparty to the CDS.

OTHER INVESTMENTS, TRANSACTIONS, TECHNIQUES

Credit Enhancement

Investing in Securities of Other Investment Companies

The Fund may invest its assets in securities of other investment companies, including the securities of affiliated money market funds, as an efficient means of implementing its investment strategies and/or managing its uninvested cash. These other investment companies are managed independently of the Fund and incur additional fees and/or expenses which would, therefore, be borne indirectly by the Fund in connection with any such investment. However, the Adviser believes that the benefits and efficiencies of this approach should outweigh the potential additional fees and/or expenses. The Fund may invest in money market securities directly.

Hedging

Hedging transactions are intended to reduce specific risks. For example, to protect the Fund against circumstances that would normally cause the Fund’s portfolio securities to decline in value, the Fund may buy or sell a derivative contract that would normally increase in value under the same circumstances. The Fund may also attempt to hedge by using combinations of different derivative contracts, or derivative contracts and securities. The Fund’s ability to hedge may be limited by the costs of the derivative contracts. The Fund may attempt to lower the cost of hedging by entering into transactions that provide only limited protection, including transactions that: (1) hedge only a portion of its portfolio; (2) use derivative contracts that cover a narrow range of circumstances; or (3) involve the sale of derivative contracts w ith different terms. Consequently, hedging transactions will not eliminate risk even if they work as intended. In addition, hedging strategies are not always successful, and could result in increased expenses and losses to the Fund.

Hybrid Instruments

Hybrid instruments combine elements of two different kinds of securities or financial instruments (such as a derivative contract). Frequently, the value of a hybrid instrument is determined by reference to changes in the value of a Reference Instrument (that is a designated security, commodity, index or other asset or instrument including a derivative contract). Hybrid instruments can take on many forms including, but not limited to, the following forms. First, a common form of a hybrid instrument combines elements of a derivative contract with those of another security (typically a fixed-income security). In this case all or a portion of the interest or principal payable on a hybrid security is determined by reference to changes in the price of a Reference Instrument. Second, hybrid instruments may include convertible securities with con version terms related to a Reference Instrument.

Depending on the type and terms of the hybrid instrument, its risks may reflect a combination of the risks of investing in the Reference Instrument with the risks of investing in other securities and derivative contracts. Thus, an investment in a hybrid instrument may entail significant risks in addition to those associated with traditional securities or the Reference Instrument. Hybrid instruments are also potentially more volatile than traditional securities or the Reference Instrument. Moreover, depending on the structure of the particular hybrid, it may expose the Fund to leverage risks or carry liquidity risks.

Credit Linked Note (A Type of Hybrid Instrument)

A credit linked note (CLN) is a type of hybrid instrument in which a special purpose entity issues a structured note (the “Note Issuer”) with respect to which the Reference Instrument is a single bond, a portfolio of bonds, or the unsecured credit of an issuer, in general (each a “Reference Credit”). The purchaser of the CLN (the “Note Purchaser”) invests a par amount and receives a payment during the term of the CLN that equals a fixed or floating rate of interest equivalent to a high rated funded asset (such as a bank certificate of deposit) plus an additional premium that relates to taking on the credit risk of the Reference Credit. Upon maturity of the CLN, the Note Purchaser will receive a payment equal to: (i) the original par amount paid to the Note Issuer, if there is no occurrence of a designat ed event of default, restructuring or other credit event (each, a “Credit Event”) with respect to the issuer of the Reference Credit; or (ii) the market value of the Reference Credit, if a Credit Event has occurred. Depending upon the terms of the CLN, it is also possible that the Note Purchaser may be required to take physical delivery of the Reference Credit in the event of a Credit Event. Most credit linked notes use a corporate bond (or a portfolio of corporate bonds) as the Reference Credit. However, almost any type of fixed-income security (including foreign government securities), index or derivative contract (such as a credit default swap) can be used as the Reference Credit.

Repurchase Agreements (A Type of Fixed-Income Security)

Repurchase agreements are transactions in which the Fund buys a security from a dealer or bank and agrees to sell the

security back at a mutually agreed-upon time and price. The repurchase price exceeds the sale price, reflecting the Fund’s return on the transaction. This return is unrelated to the interest rate on the underlying security. The Fund will enter into repurchase agreements only with banks and other recognized financial institutions, such as securities dealers, deemed creditworthy by the Adviser.

The Fund’s custodian or subcustodian will take possession of the securities subject to repurchase agreements. The Adviser or subcustodian will monitor the value of the underlying security each day to ensure that the value of the security always equals or exceeds the repurchase price.

Repurchase agreements are subject to credit risks.

Reverse Repurchase Agreements (A Type of Fixed-Income Security)

Reverse repurchase agreements, which are considered a type of special transaction for asset segregation or asset coverage purposes, are repurchase agreements in which the Fund is the seller (rather than the buyer) of the securities, and agrees to repurchase them at an agreed-upon time and price. A reverse repurchase agreement may be viewed as a type of borrowing by the Fund. Reverse repurchase agreements are subject to credit risks. In addition, reverse repurchase agreements create leverage risks because the Fund must repurchase the underlying security at a higher price, regardless of the market value of the security at the time of repurchase.

Inter-Fund Borrowing and Lending Arrangements

The Securities and Exchange Commission (SEC) has granted an exemption that permits the Fund and all other funds advised by subsidiaries of Federated Investors, Inc. (Federated funds) to lend and borrow money for certain temporary purposes directly to and from other Federated funds. Participation in this inter-fund lending program is voluntary for both borrowing and lending Federated funds, and an inter-fund loan is only made if it benefits each participating Federated fund. Federated Investors, Inc. (Federated) administers the program according to procedures approved by the Fund’s Board, and the Board monitors the operation of the program. Any inter-fund loan must comply with certain conditions set out in the exemption, which are designed to assure fairness and protect all participating Federated funds.

For example, inter-fund lending is permitted only: (a) to meet shareholder redemption requests; and (b) to meet commitments arising from “failed” trades; and (c) for other temporary purposes. All inter-fund loans must be repaid in seven days or less. The Fund’s participation in this program must be consistent with its investment policies and limitations, and must meet certain percentage tests. Inter-fund loans may be made only when the rate of interest to be charged is more attractive to the lending Federated fund than market-competitive rates on overnight repurchase agreements (Repo Rate) and more attractive to the borrowing Federated fund than the rate of interest that would be charged by an unaffiliated bank for short-term borrowings (Bank Loan Rate), as determ ined by the Board. The interest rate imposed on inter-fund loans is the average of the Repo Rate and the Bank Loan Rate.

Asset Segregation

In accordance with the Securities and Exchange Commission (SEC) and SEC staff positions regarding the interpretation of the Investment Company Act of 1940 (1940 Act), with respect to derivatives that create a future payment obligation of the Fund, the Fund must “set aside” (referred to sometimes as “asset segregation”) liquid assets, or engage in other SEC- or staff-approved measures, while the derivative contracts are open. For example, with respect to forwards and futures contracts that are not contractually required to “cash-settle,” the Fund must cover its open positions by setting aside cash or readily marketable securities equal to the contracts’ full, notional value. With respect to forwards and futures that are contractually required to “cash-settle,” however, the Fund is permi tted to set aside cash or readily marketable securities in an amount equal to the Fund’s daily marked-to-market (net) obligations, if any (i.e., the Fund’s daily net liability, if any), rather than the notional value.

The Fund will employ another approach to segregating assets to cover options that it sells. If the Fund sells a call option, the Fund will set aside either the Reference Instrument subject to the option, cash or readily marketable securities with a value that equals or exceeds the current market value of the Reference Instrument. In no event, will the value of the cash or readily marketable securities set aside by the Fund be less than the exercise price of the call option. If the Fund sells a put option, the Fund will set aside cash or readily marketable securities with a value that equals or exceeds the exercise price of the put option.

The Fund’s asset segregation approach for swap agreements varies among different types of swaps. For example, if the Fund enters into a credit default swap as the Protection Buyer, then it will set aside cash or readily marketable securities necessary to meet any accrued payment obligations under the swap. By comparison, if the Fund enters into a credit default swap as the Protection Seller, then the Fund will set aside cash or readily marketable securities equal to the full notional amount of the swap that must be paid upon the occurrence of a Credit Event. For some other types of swaps, such as interest rate swaps, the Fund will calculate the obligations of the counterparties to the swap on a net basis. Consequently, the Fund’s current obligation (or rights) under this type of swap will equal only the net amount to be paid or received based on the relative values of the positions held by each counterparty to the swap (the “net amount”). The net amount currently owed by or to the Fund will be accrued daily and the Fund will set aside cash or readily marketable securities equal to any accrued but unpaid net amount owed by the Fund under the swap.

The Fund may reduce the liquid assets segregated to cover obligations under a derivative contract by entering into an offsetting derivative contract. For example, if the Fund sells a put option for the same Reference Instrument as a call option the Fund has sold, and the exercise price of the call option is the same as or higher than the exercise price of the put option, then the Fund may net its obligations under the options and set aside cash or readily marketable securities (including any margin deposited for the options) with a value equal to the greater of: (a) the current market value of the Reference Instrument deliverable under the call option; or (b) the exercise price of the put option.

By setting aside cash or readily marketable securities equal to only its net obligations under swaps and certain cash-settled derivative contracts, the Fund will have the ability to employ leverage to a greater extent than if the Fund were required to segregate cash or readily marketable securities equal to the full notional value of such contracts. The use of leverage involves certain risks. See “Risk Factors.” Unless the Fund has other cash or readily marketable securities to set aside, it cannot trade assets set aside in connection with derivative contracts or special transactions without entering into an offsetting derivative contract or terminating a special transaction. This may cause the Fund to miss favorable trading opportunities or to realize losses on derivative contracts or special transactions. The Fund reserves the right to modify its asset segregation policies in the future to comply with any changes in the positions articulated from time to time by the SEC and its staff.

Generally, special transactions do not cash-settle on a net basis. Consequently, with respect to special transactions, the Fund will set aside cash or readily marketable securities with a value that equals or exceeds the Fund’s obligations.

Temporary Investments

The Fund may make temporary defensive investments in the following taxable securities (in addition to taxable repurchase agreement and reverse repurchase agreement investments):

Treasury Securities (A Type of Fixed-Income Security)

Treasury securities are direct obligations of the federal government of the United States. Treasury securities are generally regarded as having the lowest credit risks.

Bank Instruments (A Type of Fixed-Income Security)

Bank instruments are unsecured interest bearing deposits with banks. Bank instruments include but are not limited to bank accounts, time deposits, certificates of deposit and banker’s acceptances. Yankee instruments are denominated in U.S. dollars and issued by U.S. branches of foreign banks. Eurodollar instruments are denominated in U.S. dollars and issued by non-U.S. branches of U.S. or foreign banks.

Government Securities (A Type of Fixed-Income Security)

Government securities are issued or guaranteed by a federal agency or instrumentality acting under federal authority. Some government securities are supported by the full faith and credit of the United States. These include the Government National Mortgage Association (“Ginnie Mae”), Small Business Administration, Federal Financing Bank, Department of Housing and Urban Development, Export-Import Bank, Overseas Private Investment Corporation, and Federal Deposit Insurance Corporation.

Other government securities receive support through federal subsidies, loans or other benefits. For example, the U.S. Treasury is authorized to purchase specified amounts of securities issued by (or otherwise make funds available to) the Federal Home Loan Bank System, Federal Home Loan Mortgage Corporation (“Freddie Mac”), Federal National Mortgage Association (“Fannie Mae”) and Tennessee Valley Authority in support of such obligations.

A few government securities have no explicit financial support, but are regarded as having implied support because the federal government sponsors their activities. These include Farm Credit System and Financing Corporation securities.

The Fund treats mortgage-backed securities guaranteed by a federal agency or instrumentality as government securities. Although such a guarantee protects against credit risks, it does not reduce other risks.

Recent Events Related to Freddie Mac and Fannie Mae. The extreme and unprecedented volatility and disruption that impacted the capital and credit markets beginning in 2008 led to market concerns regarding the ability of Freddie Mac and Fannie Mae to withstand future credit losses associated with securities held in their investment portfolios, and on which they provide guarantees, without the direct support of the federal government. On September 7, 2008, both Freddie Mac and Fannie Mae were placed under the conservatorship of the Federal Housing Finance Agency (“FHFA”), a newly created independent regulator. Under the plan of conservatorship, the FHFA assumed control of, and generally has the power to direct, the operations of Freddie Mac a nd Fannie Mae, and is empowered to exercise all powers collectively held by their respective shareholders, directors and officers, including the power to: (1) take over the assets of and operate Freddie Mac and Fannie Mae with all the powers of the shareholders, the directors, and the officers of Freddie Mac and Fannie Mae and conduct all business of Freddie Mac and Fannie Mae; (2) collect all obligations and money due to Freddie Mac and Fannie Mae; (3) perform all functions of Freddie Mac and Fannie Mae which are consistent with the conservator’s appointment; (4) preserve and conserve the assets and property of Freddie Mac and Fannie Mae; and (5) contract for assistance in fulfilling any function, activity, action or duty of the conservator.

In connection with the actions taken by the FHFA, the Treasury has entered into certain preferred stock purchase agreements (“SPAs”) with each of Freddie Mac and Fannie Mae which establish the Treasury as the holder of a new class of senior preferred stock in each of Freddie Mac and Fannie Mae. The senior preferred stock was issued in connection with financial contributions from the Treasury to Freddie Mac and Fannie Mae; the Treasury is obligated to provide such financial contributions under the SPAs through 2012. The SPAs impose significant restrictions on the activities of Freddie Mac and Fannie Mae.

The future status and role of Freddie Mac and Fannie Mae could be impacted by (among other things) the actions taken and restrictions placed on Freddie Mac and Fannie Mae by the FHFA in its role as conservator, the restrictions placed on Freddie Mac’s and Fannie Mae’s operations and activities under the SPAs, market responses to developments at Freddie Mac and Fannie Mae, and future legislative and regulatory action that alters the operations, ownership, structure and/or mission of these institutions, each of which may, in turn, impact the value of, and cash flows on, any securities guaranteed by Freddie Mac and Fannie Mae.

Corporate Debt Securities (A Type of Fixed-Income Security)

Corporate debt securities are fixed-income securities issued by businesses. Notes, bonds, debentures and commercial paper are the most prevalent types of corporate debt securities. The credit risks of corporate debt securities vary widely among issuers.

In addition, the credit risk of an issuer’s debt security may vary based on its priority for repayment. For example, higher ranking (senior) debt securities have a higher priority than lower ranking (subordinated) securities. This means that the issuer might not make payments on subordinated securities while continuing to make payments on senior securities. In addition, in the event of bankruptcy, holders of senior securities may receive amounts otherwise payable to the holders of subordinated securities. Some subordinated securities, such as trust preferred and capital securities notes, also permit the issuer to defer payments under certain circumstances. For example, insurance companies issue securities known as surplus notes that permit the insurance company to defer any payment that would reduce its capital below regulatory req uirements.

Commercial Paper (A Type of Corporate-Debt Security)

Commercial paper is an issuer’s obligation with a maturity of less than nine months. Companies typically issue commercial paper to pay for current expenditures. Most issuers constantly reissue their commercial paper and use the proceeds (or bank loans) to repay maturing paper. If the issuer cannot continue to obtain liquidity in this fashion, its commercial paper may default. The short maturity of commercial paper generally reduces both the market and credit risks as compared to other debt securities of the same issuer.

Portfolio Turnover

Portfolio turnover is a factor of the Fund's investment adviser's reaction to financial market conditions, expectations concerning the economy, and technical factors within the tax-exempt municipal bond market specifically. The portfolio turnover of the Fund during its most recently ended fiscal year decreased relative to its fiscal year ended March 31, 2009. Portfolio turnover had increased during the Fund's 2009 fiscal year as a result of the reallocation of the Fund's portfolio in an attempt to better position the Fund for changing market conditions. Portfolio turnover declined during the Fund's most recently ended fiscal year as a result of a more stable market environment and less need for portfolio rebalancing to attempt to meet the Fund's investment objective while seeking superior levels of after-tax total return .

Investment Risks

There are many factors which may affect an investment in the Fund. The Fund’s principal risks are described in its Prospectus. Additional risk factors are outlined below.

Credit Risks

Many fixed-income securities (including tax-exempt securities) receive credit ratings from services such as Standard & Poor’s and Moody’s Investor Services, Inc. These services assign ratings to securities by assessing the likelihood of issuer default. Lower credit ratings correspond to higher credit risk and higher credit ratings correspond to lower perceived credit risk. Credit ratings do not provide assurance against default or other loss of money. If a security has not received a rating, the Fund must rely entirely upon the Adviser’s credit assessment.

Tax Risks

In order to pay interest that is exempt from federal regular income tax, tax-exempt securities must meet certain legal requirements. Failure to meet such requirements may cause the interest received and distributed by the Fund to shareholders to be taxable. Changes or proposed changes in federal or state tax laws may cause the prices of tax-exempt securities to fall and/or may affect the tax-exempt status of the securities in which the Fund invests.

Liquidity Risks

These features may make it more difficult to sell or buy a security at a favorable price or time. Consequently, the Fund may have to accept a lower price to sell a security, sell other securities to raise cash or give up an investment opportunity, any of which could have a negative effect on the Fund’s performance. Infrequent trading of securities may also lead to an increase in their price volatility. Noninvestment-grade securities generally have less liquidity than investment-grade securities.

OTC derivative contracts generally carry greater liquidity risk than exchange-traded contracts. This risk may be increased in times of financial stress, if the trading market for OTC derivative contracts becomes restricted.

Leverage Risks

Investments can have these same results if their returns are based on a multiple of a specified index, security or other benchmark.

Prepayment Risks

Like municipal mortgage-backed securities, asset-backed securities (including fixed-income or tax-exempt securities that are pooled or collateralized) may be subject to prepayment risks and the possibility that interest and other payments may not be made. Such investments also may be subject to interest rate, credit and other risks described in the Fund’s Prospectus and this SAI.

Risks of Investing In Derivative Contracts And Hybrid Instruments

The Fund’s exposure to derivative contracts and hybrid instruments (either directly or through its investment in another investment company) involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. First, changes in the value of the derivative contracts and hybrid instruments in which the Fund invests may not be correlated with changes in the value of the underlying Reference Instruments or, if they are correlated, may move in the opposite direction than originally anticipated. Second, while some strategies involving derivatives may reduce the risk of loss, they may also reduce potential gains or, in some cases, result in losses by offsetting favorable price movements in portfolio holdings. Third, there is a risk that derivative contracts a nd hybrid instruments may be erroneously priced or improperly valued and, as a result, the Fund may need to make increased cash payments to the counterparty. Fourth, exposure to derivative contracts and hybrid instruments may have tax consequences to the Fund and its shareholders. For example, derivative contracts and hybrid instruments may cause the Fund to realize increased ordinary income or short-term capital gains (which are treated as ordinary income for Federal income tax purposes) and, as a result, may increase taxable distributions to shareholders. In addition, under certain circumstances certain derivative contracts and hybrid instruments may cause the Fund to: a) incur an excise tax on a portion of the income related to those contracts and instruments; and/or b) reclassify, as a return of capital, some or all of the distribution previously made to shareholder during the fiscal year as dividend income. Fifth, a common provision in OTC derivative contracts permits the counterparty to terminate any s uch contract between it and the Fund, if the value of the Fund’s total net assets declines below a specified level over a given time period. Factors that may contribute to such a decline (which usually must be substantial) include significant shareholder redemptions and/or a marked decrease in the market value of the Fund’s investments. Any such termination of the Fund’s OTC derivative contracts may adversely affect the Fund (for example, by increasing losses and/or costs, and/or preventing the Fund from fully implementing its investment strategies). Finally, derivative contracts and hybrid instruments may also involve other risks described herein or in the Fund’s prospectus, such as interest rate, credit, liquidity and leverage risks.

Risks Associated with the Investment Activities of Other Accounts

Investment decisions for the Fund are made independently from those of other accounts managed by the Adviser and accounts managed by affiliates of the Adviser. Therefore, it is possible that investment-related actions taken by such other accounts could adversely impact the Fund with respect to, for example, the value of Fund portfolio holdings, and/or prices paid to or received by the Fund on its portfolio transactions, and/or the Fund’s ability to obtain or dispose of portfolio securities. Related considerations are discussed elsewhere in this SAI under “Brokerage Transactions and Investment Allocation.”

Investment Objective (and Policies) and Investment Limitations

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. The Fund will invest its assets so that at least 80% of the income that it distributes will be exempt from federal regular income tax. The fundamental investment objective and policy may not be changed by the Board without shareholder approval.

Diversification

With respect to securities comprising 75% of the value of its total assets, the Fund will not purchase securities of any one issuer (other than cash, cash items, securities issued or guaranteed by the government of the United States or its agencies or instrumentalities and repurchase agreements collateralized by such U.S. government securities, and securities of other investment companies) if, as a result, more than 5% of the value of its total assets would be invested in the securities of that issuer, or the Fund would own more than 10% of the outstanding voting securities of that issuer.

Borrowing Money and Issuing Senior Securities

The Fund may borrow money, directly or indirectly, and issue senior securities to the maximum extent permitted under the Investment Company Act of 1940 (1940 Act).

Investing in Real Estate

The Fund may not purchase or sell real estate, provided that this restriction does not prevent the Fund from investing in issuers which invest, deal, or otherwise engage in transactions in real estate or interests therein, or investing in securities that are secured by real estate or interests therein. The Fund may exercise its rights under agreements relating to such securities, including the right to enforce security interests and to hold real estate acquired by reason of such enforcement until that real estate can be liquidated in an orderly manner.

Investing in Commodities

The Fund may not purchase or sell physical commodities, provided that the Fund may purchase securities of companies that deal in commodities. For purposes of this restriction, investments in transactions involving futures contracts and options, forward currency contracts, swap transactions and other financial contracts that settle by payment of cash are not deemed to be investments in commodities.

Underwriting

The Fund may not underwrite the securities of other issuers, except that the Fund may engage in transactions involving the acquisition, disposition or resale of its portfolio securities, under circumstances where it may be considered to be an underwriter under the Securities Act of 1933.

Lending

The Fund may not make loans, provided that this restriction does not prevent the Fund from purchasing debt obligations, entering into repurchase agreements, lending its assets to broker/dealers or institutional investors and investing in loans, including assignments and participation interests.

Concentration

The Fund will not make investments that will result in the concentration of its investments in the securities of issuers primarily engaged in the same industry, provided that the Fund may invest more that 25% of the value of its assets in industrial development bonds. Government securities, municipal securities and bank instruments will not be deemed to constitute an industry. 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 one industry, and the Fund reserves the right to invest more than 25% of its assets in industrial development bonds in the same state.

The above limitations cannot be changed unless authorized by the Board and by the “vote of a majority of its outstanding voting securities,” as defined by the 1940 Act. The following limitations, however, may be changed by the Board without shareholder approval. Shareholders will be notified before any material change in these limitations becomes effective.

Pledging Assets

The Fund will not mortgage, pledge or hypothecate any of its assets, provided that this shall not apply to the transfer of securities in connection with any permissible borrowing or to collateral arrangements in connection with permissible activities.

Purchases on Margin

The Fund will not purchase securities on margin, provided that the Fund may obtain short-term credits necessary for the clearance of purchases and sales of securities, and further provided that the Fund may make margin deposits in connection with its use of financial options and futures, forward and spot currency contracts, swap transactions and other financial contracts or derivative instruments.

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 board, 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.

To conform to the current view of the SEC staff that only domestic bank instruments may be excluded from industry concentration limitations, as a matter of non-fundamental policy, the Fund will not exclude foreign bank instruments from industry concentration tests as long as the policy of the SEC remains in effect.

The Fund applies its concentration of investments restrictions as follows:

·	utility companies will be divided according to their services, for example, gas, gas transmissions, electric and telephone will each be considered a separate industry;

·	financial service companies will be classified according to the end users of their services, for example, automobile finance, bank finance and diversified finance will each be considered a separate industry; and

·	asset-backed securities will be classified according to the underlying assets securing such securities.

For purposes of the above limitations, the Fund considers certificates of deposit and demand and time deposits issued by a U.S. branch of a domestic bank or savings association having capital, surplus and undivided profits in excess of $100,000,000 at the time of investment to be “cash items.”

As a matter of non-fundamental operating policy, the Fund will not exclude domestic bank instruments or foreign bank instruments from industry concentration limitations so long as it is the SEC staff’s view that such instruments should not be excluded from industry concentration tests.

Except with respect to borrowing money, if a percentage limitation is adhered to at the time of investment, a later increase or decrease in percentage resulting from any change in value or net assets will not result in a violation of such limitation.

What Do Shares Cost?

A Share’s NAV is determined as of the end of regular trading on the New York Stock Exchange (NYSE) (normally 4:00 p.m. Eastern time) each day the NYSE is open. The Fund calculates the NAV of each class by valuing the assets allocated to the Share’s class, subtracting the liabilities allocated to the class and dividing the balance by the number of Shares of the class outstanding. 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. The NAV is calculated to the nearest whole cent per Share.

In calculating its NAV, the Fund generally values investments as follows:

Equity securities listed on a U.S. securities exchange or traded through the U.S. national market system are valued at their last reported sale price or official closing price in their principal exchange or market. If a price is not readily available, such equity securities are valued based upon the mean of closing bid and asked quotations from one or more dealers.

·	Other equity securities traded primarily in the United States are valued based upon the mean of closing bid and asked quotations from one or more dealers.

Equity securities traded primarily through securities exchanges and regulated market systems outside the United States are valued at their last reported sale price or official closing price in their principal exchange or market. These prices may be adjusted for significant events occurring after the closing of such exchanges or market systems as described below. If a price is not readily available, such equity securities are valued based upon the mean of closing bid and asked quotations from one or more dealers.

Fixed-income securities and repurchase agreements acquired with remaining maturities of greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Board. The methods used by pricing services to determine such price evaluations are described below. If a price evaluation is not readily available, such fixed-income securities are fair valued based upon price evaluations from one or more dealers.

·	Fixed-income securities and repurchase agreements acquired with remaining maturities of 60 days or less are valued at their amortized cost as described below.

·	Futures contracts listed on exchanges are valued at their reported settlement price. Option contracts listed on exchanges are valued based upon the mean of closing bid and asked quotations reported by the exchange or from one or more futures commission merchants.

OTC derivative contracts are fair valued using price evaluations provided by various pricing services approved by the Board. The methods used by pricing services to determine such price evaluations are described below. If a price evaluation is not readily available, such derivative contracts are fair valued based upon price evaluations from one or more dealers or using a recognized pricing model for the contract.

·	Shares of other mutual funds are valued based upon their reported NAVs. The prospectuses for these mutual funds explain the circumstances under which they will use fair value pricing and the effects of using fair value pricing.

If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund’s NAV. The Fund will not use a pricing service or dealer who is an affiliated person of the Adviser to value investments.

Noninvestment assets and liabilities are valued in accordance with Generally Accepted Accounting Principles (GAAP). The NAV calculation includes expenses, dividend income, interest income and other income through the date of the calculation. Changes in holdings of investments and in the number of outstanding Shares are included in the calculation not later than the first business day following such change. Any assets or liabilities denominated in foreign currencies are converted into U.S. dollars using an exchange rate obtained from one or more currency dealers.

The Fund follows procedures that are common in the mutual fund industry regarding errors made in the calculation of its NAV. This means that, generally, the Fund will not correct errors of less than one cent per Share or errors that did not result in net dilution to the Fund.

Amortized Cost Values

Under the amortized cost valuation method, an investment is valued initially at its cost as determined in accordance with GAAP. The Fund then adjusts the amount of interest income accrued each day over the term of the investment to account for any difference between the initial cost of the investment and the amount payable at its maturity. If the amount payable at maturity exceeds the initial cost (a discount), then the daily accrual is increased; if the initial cost exceeds the amount payable at maturity (a premium), then the daily accrual is decreased. The Fund adds the amount of the increase to (in the case of a discount), or subtracts the amount of the decrease from (in the case of a premium), the investment’s cost each day. The Fund uses this adjusted cost to value the investment.

Fair Valuation and Significant Events Procedures

Pricing Service Valuations. Based on the recommendations of the Valuation Committee, the Board has authorized the Fund to use pricing services that provide daily fair value evaluations of the current value of certain investments, primarily fixed-income securities and OTC derivative contracts. Different pricing services may provide different price evaluations for the same security because of differences in their methods of evaluating market values. Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. A pricing servic e may find it more difficult to apply these and other factors to relatively illiquid or volatile investments, which may result in less frequent or more significant changes in the price evaluations of these investments. If a pricing service determines that it does not have sufficient information to use its standard methodology, it may evaluate an investment based on the present value of what investors can reasonably expect to receive from the issuer’s operations or liquidation.

Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts.

Fair Valuation Procedures. The Board has established procedures for determining the fair value of investments for which price evaluations from pricing services or dealers and market quotations are not readily available. The procedures define an investment’s “fair value” as the price that the Fund might reasonably expect to receive upon its current sale. The procedures assume that any sale would be made to a willing buyer in the ordinary course of trading. The procedures require consideration of factors that vary based on the type of investment and the information available. Factors that may be considered in determining an investment’s fair value include: (1) the last reported price at which the investment was traded; (2) information provid ed by dealers or investment analysts regarding the investment or the issuer; (3) changes in financial conditions and business prospects disclosed in the issuer’s financial statements and other reports; (4) publicly announced transactions (such as tender offers and mergers) involving the issuer; (5) comparisons to other investments or to financial indices that are correlated to the investment; (6) with respect to fixed-income investments, changes in market yields and spreads; (7) with respect to investments that have been suspended from trading, the circumstances leading to the suspension; and (8) other factors that might affect the investment’s value.

The Valuation Committee is responsible for the day-to-day implementation of these procedures. The Valuation Committee may also authorize the use of a financial valuation model to determine the fair value of a specific type of investment. The Board periodically reviews and approves the fair valuations made by the Valuation Committee and any changes made to the procedures.

Using fair value to price investments may result in a value that is different from an investment’s most recent closing price and from the prices used by other mutual funds to calculate their NAVs. The fair value of an investment will generally remain unchanged in the absence of new information relating to the investment or its issuer, such as changes in the issuer’s business or financial results, or relating to external market factors, such as trends in the market values of comparable securities. This may result in less frequent, and larger, changes in fair value prices as compared to prices based on market quotations or price evaluations from pricing services or dealers.

Significant Events. The Board has adopted procedures requiring an investment to be priced at its fair value whenever the Adviser determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment’s value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or the time of a price evaluation provided by a pricing service or a dealer, include:

·	With respect to securities traded principally in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities index futures or options contracts;

·	With respect to price evaluations of fixed-income securities determined before the close of regular trading on the NYSE, actions by the Federal Reserve Open Market Committee and other significant trends in U.S. fixed-income markets;

·	Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; and

·	Announcements concerning matters such as acquisitions, recapitalizations or litigation developments, or a natural disaster affecting the issuer’s operations or regulatory changes or market developments affecting the issuer’s industry.

The Valuation Committee uses a pricing service to determine the fair value of equity securities traded principally in foreign markets when the Adviser determines that there has been a significant trend in the U.S. equity markets or in index futures trading. The pricing service uses models that correlate changes between the closing and opening price of equity securities traded primarily in non-U.S. markets to changes in prices in U.S.-traded securities and derivative contracts. The pricing service seeks to employ the model that provides the most significant correlation based on a periodic review of the results. The model uses the correlation to adjust the reported closing price of a foreign equity security based on information available up to the close of the NYSE.

For other significant events, the Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the fair value of the investment is determined using the methods discussed above in “Fair Valuation Procedures.” The Board has ultimate responsibility for any fair valuations made in response to a significant event.

How is the Fund Sold?

Under the Distributor’s Contract with the Fund, the Distributor (Federated Securities Corp.) offers Shares on a continuous, best-efforts basis.

RULE 12b-1 PLAN (CLASS B SHARES AND CLASS C SHARES ONLY)

As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the Distributor for activities principally intended to result in the sale of Shares such as advertising and marketing of Shares (including printing and distributing prospectuses and sales literature to prospective shareholders and financial intermediaries) and providing incentives to financial intermediaries to sell Shares. The Plan is also designed to cover the cost of administrative services performed in conjunction with the sale of Shares, including, but not limited to, shareholder services, recordkeeping services and educational services, as well as the costs of implementing and operating the Plan. The Rule 12b-1 Plan allows the Distributor to contract with financial intermediaries to perform activities covered by the Plan. The Rule 12b-1 Plan is expected t o benefit the Fund in a number of ways. For example, it is anticipated that the Plan will help the Fund attract and retain assets, thus providing cash for orderly portfolio management and Share redemptions and possibly helping to stabilize or reduce other operating expenses.

In addition, the Plan is integral to the multiple class structure of the Fund, which promotes the sale of Shares by providing a range of options to investors. The Fund’s service providers that receive asset-based fees also benefit from stable or increasing Fund assets.

The Fund may compensate the Distributor more or less than its actual marketing expenses. In no event will the Fund pay for any expenses of the Distributor that exceed the maximum Rule 12b-1 Plan fee.

For some classes of Shares, the maximum Rule 12b-1 Plan fee that can be paid in any one year may not be sufficient to cover the marketing-related expenses the Distributor has incurred. Therefore, it may take the Distributor a number of years to recoup these expenses.

In addition, in connection with the sale of Class B Shares and Class C Shares, Federated and its subsidiaries make advance commission payments (effective March 1, 2010, for Class B Shares) to financial intermediaries and in return may receive Rule 12b-1 fees and contingent deferred sales loads from the Class B Shares and Class C Shares. Federated and its subsidiaries may benefit or sustain losses from such arrangements.

ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES

The Distributor may pay out of its own resources amounts (including items of material value) to certain financial intermediaries. In some cases, such payments may be made by, or funded from the resources of, companies affiliated with the Distributor (including the Adviser). While Financial Industry Regulatory Authority (FINRA) regulations limit the sales charges that you may bear, there are no limits with regard to the amounts that the Distributor may pay out of its own resources. In addition to the payments which are generally described herein and in the Prospectus, the financial intermediary also may receive payments under the Rule 12b-1 Plan and/or Service Fees. In connection with these payments, the financial intermediary may elevate the prominence or profile of the Fund and/or other Federated funds within the financial intermediary&# 8217;s organization by, for example, placement on a list of preferred or recommended funds, and/or granting the Distributor preferential or enhanced opportunities to promote the funds in various ways within the financial intermediary’s organization. You can ask your financial intermediary for information about any payments it receives from the Distributor or the Federated funds and any services provided.

The following examples illustrate the types of instances in which the Distributor may make additional payments to financial intermediaries.

Supplemental Payments

The Distributor may make supplemental payments to certain financial intermediaries that are holders or dealers of record for accounts in one or more of the Federated funds. These payments may be based on such factors as: the number or value of Shares the financial intermediary sells or may sell; the value of client assets invested; or the type and nature of services or support furnished by the financial intermediary.

Processing Support Payments

The Distributor may make payments to financial intermediaries that sell Federated fund shares to help offset their costs associated with client account maintenance support, statement processing and transaction processing. The types of payments that the Distributor may make under this category include: payment of ticket charges on a per transaction basis; payment of networking fees; and payment for ancillary services such as setting up funds on the financial intermediary’s mutual fund trading system.

Retirement Plan Program Servicing Payments

The Distributor may make payments to certain financial intermediaries who sell Federated fund shares through retirement plan programs. A financial intermediary may perform retirement plan program services itself or may arrange with a third party to perform retirement plan program services. In addition to participant recordkeeping, reporting or transaction processing, retirement plan program services may include: services rendered to a plan in connection with fund/investment selection and monitoring; employee enrollment and education; plan balance rollover or separation; or other similar services.

Other Benefits to Financial Intermediaries

From time to time, the Distributor, at its expense, may provide additional compensation to financial intermediaries that sell or arrange for the sale of Shares. Such compensation may include financial assistance to financial intermediaries that enable the Distributor to participate in or present at conferences or seminars, sales or training programs for invited employees, client and investor events and other financial intermediary-sponsored events.

The Distributor also may hold or sponsor, at its expense, sales events, conferences and programs for employees or associated persons of financial intermediaries and may pay the travel and lodging expenses of attendees. The Distributor also may provide, at its expense, meals and entertainment in conjunction with meetings with financial intermediaries. Other compensation may be offered to the extent not prohibited by applicable laws, regulations or the rules of any self-regulatory agency, such as the FINRA.

UNDERWRITING COMMISSIONS

The following chart reflects the total front-end sales charges and/or contingent deferred sales charges paid in connection with the sale of Class A Shares, Class C Shares and Class F Shares and the amount retained by the Distributor for the last three fiscal years ended March 31:

	2010		2009		2008
	Total Sales Charges	Amount Retained	Total Sales Charges	Amount Retained	Total Sales Charges	Amount Retained
Class A Shares	$641,516	$50,971	$311,124	$19,195	$224,047	$23,898
Class C Shares	$65,253	$2,601	$40,359	$4,496	$51	$51
Class F Shares	$148,337	$11,258	$127,474	$2,929	--	--

Purchases In-Kind

You may contact the Distributor to request a purchase of Shares using securities you own. The Fund reserves the right to determine whether to accept your securities and the minimum market value to accept. The Fund will value your securities in the same manner as it values its assets. An in-kind purchase may be treated as a sale of your securities for federal tax purposes; please consult your tax adviser regarding potential tax liability.

Subaccounting Services

Certain financial intermediaries may wish to use the transfer agent’s subaccounting system to minimize their internal recordkeeping requirements. The transfer agent may charge a fee based on the level of subaccounting services rendered. Financial intermediaries holding Shares in a fiduciary, agency, custodial or similar capacity may charge or pass through subaccounting fees as part of or in addition to normal trust or agency account fees. They may also charge fees for other services that may be related to the ownership of Shares. This information should, therefore, be read together with any agreement between the customer and the financial intermediary about the services provided, the fees charged for those services and any restrictions and limitations imposed.

Redemption In-Kind

Although the Fund generally intends to pay Share redemptions in cash, it reserves the right, on its own initiative or in response to a shareholder request, to pay the redemption price in whole or in part by a distribution of the Fund’s portfolio securities.

Because the Fund has elected to be governed by Rule 18f-1 under the 1940 Act, the Fund is obligated to pay Share redemptions to any one shareholder in cash only up to the lesser of $250,000 or 1% of the net assets represented by such Share class during any 90-day period.

Any Share redemption payment greater than this amount will also be in cash unless the Fund elects to pay all or a portion of the remainder of the redemption in portfolio securities, valued in the same way as the Fund determines its NAV.

Redemption in-kind is not as liquid as a cash redemption. Shareholders receiving the portfolio securities could have difficulty selling them, may incur related transaction costs and would be subject to risks of fluctuations in the securities’ value prior to sale.

Account and Share Information

VOTING RIGHTS

Each Share of the Fund gives the shareholder one vote in Director elections and other matters submitted to shareholders for vote.

All Shares of the Fund have equal voting rights, except that in matters affecting only a particular class, only Shares of that class are entitled to vote.

Directors may be removed by the Board or by shareholders at a special meeting. A special meeting of shareholders will be called by the Board upon the written request of shareholders who own at least 10% of the Corporation’s outstanding Shares .

As of May 6, 2010, the following shareholders owned of record, beneficially, or both, 5% or more of outstanding Class A Shares: Edward Jones & Co., Maryland Hts., MO, owned approximately 6,358,607 Shares (12.58%); UBS WM USA, Jersey City, NJ, owned approximately 3,202,816 Shares (6.33%); and First Clearing LLC, St. Louis, MO, owned approximately 2,807,496 Shares (5.55%).

As of May 6, 2010, the following shareholders owned of record, beneficially, or both, 5% or more of outstanding Class B Shares: Edward Jones & Co., Maryland Hts., MO, owned approximately 288, 096 Shares (15.23%); First Clearing, LLC, St. Louis, MO, owned approximately 267,939 Shares (14.16%); Pershing LLC, Jersey City, NJ owned approximately 248,038 Shares (13.11%); Citigroup Global Markets, Inc., New York, NY, owned approximately 227,195 Shares (12.01%); and MLPF&S, Jacksonville, FL, owned approximately 125,764 Shares (6.64%).

As of May 6, 2010, the following shareholders owned of record, beneficially, or both, 5% or more of outstanding Class C Shares: MLPF&S, Jacksonville, FL, owned approximately 593,762 Shares (22.10%); Special Custody ACCT for the Exclusive Benefit of Customers, Louisville, KY, owned approximately 341,377 Shares (12.70%); First Clearing, LLC, St. Louis, MO, owned approximately 282,555 Shares (10.51%); Edward Jones & Co., Maryland Hts., MO, owned approximately 164,004 Shares (6.10%); and UBS WM USA, Jersey City, NJ, owned approximately 137,488 Shares (5.11%).

As of May 6, 2010, the following shareholders owned of record, beneficially, or both, 5% or more of outstanding Class F Shares: Edward Jones & Co., Maryland Hts., MO, owned approximately 562,843 Shares (29.96%); Special Custody ACCT for the Exclusive Benefit of Customers, Louisville, KY, owned approximately 446,361 Shares (23.76%); Pershing LLC, Jersey City, NJ owned approximately 261,873 Shares (13.94%); and First Clearing, LLC, St. Louis, MO, owned approximately 105,899 Shares (5.63%).

Shareholders owning 25% or more of outstanding Shares may be in control and be able to affect the outcome of certain matters presented for a vote of shareholders.

Edward Jones & Co. is organized in the state of Missouri and is a subsidiary of Jones Financial Companies, organized in the state of Missouri.

Tax Information

FEDERAL INCOME TAX

The Fund intends to meet requirements of Subchapter M of the Internal Revenue Code (Code) applicable to regulated investment companies. If these requirements are not met, it will not receive special tax treatment and will be subject to federal corporate income tax.

The Fund is entitled to a loss carryforward, which may reduce the taxable income or gain that the Fund would realize, and to which the shareholder would be subject, in the future.

Who Manages and Provides Services to the Fund?

BOARD OF DIRECTORS

The Board of Directors is responsible for managing the Fund’s business affairs and for exercising all the Fund’s powers except those reserved for the shareholders. The following tables give information about each Director and the senior officers of the Fund. Where required, the tables separately list Directors who are “interested persons” of the Fund (i.e., “Interested” Directors) and those who are not (i.e., “Independent” Directors). Unless otherwise noted, the address of each person listed is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779. The address of all Independent Directors listed is 4000 Ericsson Drive, Warrendale, PA 15086-7561; Attention: Mutual Fund Board. As of December 31, 2009, the Fund comprised one portfolio, and the Federated Fund Complex consiste d of 43 investment companies (comprising 145 portfolios). Unless otherwise noted, each Officer is elected annually. Unless otherwise noted, each Director oversees all portfolios in the Federated Fund Complex and serves for an indefinite term.

As of May 6, 2010, the Fund’s Board and Officers as a group owned less than 1% of each Class of the Fund’s outstanding Shares.

QUALIFICATIONS OF INDEPENDENT DIRECTORS

Individual Director qualifications are noted in the “Independent Directors Background and Compensation” chart. In addition, the following characteristics are among those that were considered for each existing Director and will be considered for any Nominee Director.

·	Outstanding skills in disciplines deemed by the Independent Directors to be particularly relevant to the role of Independent Director and to the Federated Funds, including legal, accounting, business management, the financial industry generally and the investment industry particularly.

·	Desire and availability to serve for a substantial period of time, taking into account the Board’s current mandatory retirement age of 73 years.

·	No conflicts which would interfere with qualifying as independent.

·	Appropriate interpersonal skills to work effectively with other Independent Directors.

·	Understanding and appreciation of the important role occupied by Independent Directors in the regulatory structure governing regulated investment companies.

·	Diversity of background.

INTERESTED DIRECTORS BACKGROUND AND COMPENSATION

Name

Birth Date

Positions Held with Fund

Date Service Began

Principal Occupation(s) for Past Five Years,

Other Directorships Held and Previous Position(s)

Aggregate

Compensation

From Fund

(past fiscal year)

Total Compensation

From Fund and

Federated Fund Complex

(past calendar year)

John F. Donahue*

Birth Date: July 28, 1924

Director

Began serving: September 1976

Principal Occupations: Director or Trustee of the Federated Fund Complex; Chairman and Director, Federated Investors, Inc.; Chairman of the Federated Fund Complex’s Executive Committee.

Previous Positions: Chairman of the Federated Fund Complex; Trustee, Federated Investment Management Company; Chairman and Director, Federated Investment Counseling.

J. Christopher Donahue*

Birth Date: April 11, 1949

PRESIDENT AND Director

Began serving: December 1986

Principal Occupations: Principal Executive Officer and President of the Federated Fund Complex; Director or Trustee of some of the Funds in the Federated Fund Complex; President, Chief Executive Officer and Director, Federated Investors, Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee, Federated Investment Counseling; Chairman and Director, Federated Global Investment Management Corp.; Chairman, Federated Equity Management Company of Pennsylvania and Passport Research, Ltd. (investment advisory subsidiary of Federated); Trustee, Federated Shareholder Services Company; Director, Federated Services Company.

Previous Positions: President, Federated Investment Counseling; President and Chief Executive Officer, Federated Investment Management Company, Federated Global Investment Management Corp. and Passport

Research, Ltd.

*	Family relationships and reasons for “interested” status: John F. Donahue is the father of J. Christopher Donahue; both are “interested” due to their beneficial ownership of shares of Federated Investors, Inc. and the positions they hold with Federated and its subsidiaries.

INDEPENDENT DIRECTORS BACKGROUND, QUALIFICATIONS AND COMPENSATION

Name

Birth Date

Positions Held with Fund

Date Service Began

Principal Occupation(s) and Other Directorships Held for

Past Five Years, Previous Position(s) and Qualifications

Aggregate

Compensation

From Fund

(past fiscal year)

Total Compensation

From Fund and

Federated Fund Complex

(past calendar year)

John T. Conroy, Jr., Ph.D.

Birth Date: June 23, 1937

Director

Began serving: August 1991

Principal Occupations: Director or Trustee of the Federated Fund Complex; Chairman of the Board, Investment Properties Corporation; Partner or Trustee in private real estate ventures in Southwest Florida; Assistant Professor of Theology, Blessed Edmund Rice School for Pastoral Ministry.

Previous Positions: President, Investment Properties Corporation; Senior Vice President, John R. Wood and Associates, Inc., Realtors; President, Naples Property Management, Inc. and Northgate Village.

Development Corporation.

Qualifications: Business management and director experience.

$1,172.38

$225,000

Nicholas P. Constantakis, CPA

Birth Date: September 3, 1939

Director

Began serving: February 1998

Principal Occupation: Director or Trustee of the Federated Fund Complex.

Other Directorships Held: Director and Chairman of the Audit Committee, Michael Baker Corporation (architecture, engineering and construction services).

Previous Position: Partner, Andersen Worldwide SC.

Qualifications: Public accounting and director experience.

$1,289.59

$247,500

John F. Cunningham

Birth Date: March 5, 1943

Director

Began serving: June 1999

Principal Occupation: Director or Trustee of the Federated Fund Complex.

Other Directorships Held: Chairman, President and Chief Executive Officer, Cunningham & Co., Inc. (strategic business consulting); Trustee Associate, Boston College.

Previous Positions: Director, Redgate Communications and EMC Corporation (computer storage systems); Chairman of the Board and Chief Executive Officer, Computer Consoles, Inc.; President and Chief Operating Officer, Wang Laboratories; Director, First National Bank of Boston; Director, Apollo Computer, Inc.

Qualifications: Business management and director experience.

$1,172.38

$225,000

Maureen Lally-Green

Birth Date: July 5, 1949

Director

Began serving: August 2009

Principal Occupations: Director or Trustee of the Federated Fund Complex; Director, Office of Church Relations, Diocese of Pittsburgh; Adjunct Professor of Law, Duquesne University School of Law.

Other Directorships Held: Director, Auberle; Trustee, St. Francis University; Director, Ireland Institute of Pittsburgh; Director, UPMC Mercy Hospital; Regent, St. Vincent Seminary; Director, Epilepsy Foundation of Western and Central Pennsylvania; Director, Saint Thomas More Society, Allegheny County; Director, Carlow University.

Previous Position: Pennsylvania Superior Court Judge.

Qualifications: Legal and director experience.

$861.74

$103,942.45

Peter E. Madden

Birth Date: March 16, 1942

Director

Began serving: August 1991

Principal Occupation: Director or Trustee, and Chairman of the Board of Directors or Trustees, of the Federated Fund Complex.

Other Directorships Held: Board of Overseers, Babson College.

Previous Positions: Representative, Commonwealth of Massachusetts General Court; President, Chief Operating Officer and Director, State Street Bank and Trust Company and State Street Corporation (retired); Director, VISA USA and VISA International; Chairman and Director, Massachusetts Bankers Association; Director, Depository Trust Corporation; Director, The Boston Stock Exchange.

Qualifications: Business management, mutual fund services and director experience.

$1,615.25

$310,000

Charles F. Mansfield, Jr.

Birth Date: April 10, 1945

Director

Began serving: June 1999

Principal Occupations: Director or Trustee and Chairman of the Audit Committee of the Federated Fund Complex; Management Consultant.

Previous Positions: Chief Executive Officer, PBTC International Bank; Partner, Arthur Young & Company (now Ernst & Young LLP); Chief Financial Officer of Retail Banking Sector, Chase Manhattan Bank; Senior Vice President, HSBC Bank USA (formerly, Marine Midland Bank); Vice President, Citibank; Assistant Professor of Banking and Finance, Frank G. Zarb School of Business, Hofstra University; Executive Vice President DVC Group, Inc. (marketing, communications and technology).

Qualifications: Banking, business management, public accounting and director experience.

$1,318.90

$253,125

R. James Nicholson

Birth Date: February 4, 1938

Director

Began serving: January 2008

Principal Occupations: Director or Trustee of the Federated Fund Complex; Senior Counsel, Brownstein Hyatt Farber Schrek, P.C.; Former Secretary of the U.S. Dept. of Veterans Affairs; Former U.S. Ambassador to the Holy See; Former Chairman of the Republican National Committee.

Other Directorships Held: Director, Horatio Alger Association; Director, The Daniels Fund.

Previous Positions: Colonel, U.S. Army Reserve; Partner, Calkins, Kramer, Grimshaw and Harring, P.C.; General Counsel, Colorado Association of Housing and Building; Chairman and CEO, Nicholson Enterprises, Inc. (real estate holding company); Chairman and CEO, Renaissance Homes

of Colorado.

Qualifications: Legal, government, business management and mutual fund director experience.

$1,172.38

$222,527.36

Thomas M. O’Neill

Birth Date: June 14, 1951

Director

Began serving: October 2006

Principal Occupations: Director or Trustee of the Federated Fund Complex; Sole Proprietor, Navigator Management Company (investment and strategic consulting).

Other Directorships Held: Board of Overseers, Children’s Hospital of Boston; Visiting Committee on Athletics, Harvard College.

Previous Positions: Chief Executive Officer and President, Managing Director and Chief Investment Officer, Fleet Investment Advisors; President and Chief Executive Officer, Aeltus Investment Management, Inc.; General Partner, Hellman, Jordan Management Co., Boston, MA; Chief Investment Officer, The Putnam Companies, Boston, MA; Credit Analyst and Lending Officer, Fleet Bank; Director and Consultant, EZE Castle Software (investment order management software); Director, Midway Pacific (lumber).

Qualifications: Business management, mutual fund, director and investment experience.

$1,289.59

$241,875

John S. Walsh

Birth Date: November 28, 1957

Director

Began serving: January 1999

Principal Occupations: Director or Trustee of the Federated Fund Complex; President and Director, Heat Wagon, Inc. (manufacturer of construction temporary heaters); President and Director, Manufacturers Products, Inc. (distributor of portable construction heaters); President, Portable Heater Parts, a division of Manufacturers Products, Inc.

Previous Position: Vice President, Walsh & Kelly, Inc.

Qualifications: Business management and director experience.

$1,289.59

$247,500

James F. Will

Birth Date: October 12, 1938

Director

Began serving: April 2006

Principal Occupations: Director or Trustee of the Federated Fund Complex; formerly, Vice Chancellor and President, Saint Vincent College.

Other Directorships Held: Trustee, Saint Vincent College; Alleghany Corporation.

Previous Positions: Chairman, President and Chief Executive Officer, Armco, Inc.; President and Chief Executive Officer, Cyclops Industries; President and Chief Operating Officer, Kaiser Steel Corporation.

Qualifications: Business management, education and director experience.

$1,172.38

$225,000

OFFICERS**

Name

Birth Date

Positions Held with Fund

Date Service Began

Principal Occupation(s) and Previous Position(s)

John W. McGonigle

Birth Date: October 26, 1938

Executive Vice President

and Secretary

Began serving: September 1976

Principal Occupations: Executive Vice President and Secretary of the Federated Fund Complex; Vice Chairman, Executive Vice President, Secretary and Director, Federated Investors, Inc.

Previous Positions: Trustee, Federated Investment Management Company and Federated Investment Counseling; Director, Federated Global Investment Management Corp., Federated Services Company and Federated Securities Corp.

Richard A. Novak

Birth Date: December 25, 1963

Treasurer

Began serving: January 2006

Principal Occupations: Principal Financial Officer and Treasurer of the Federated Fund Complex; Senior Vice President, Federated Administrative Services; Financial and Operations Principal for Federated Securities Corp., Edgewood Services, Inc. and Southpointe Distribution Services, Inc.

Previous Positions: Controller of Federated Investors, Inc.; Vice President, Finance of Federated Services Company; held various financial management positions within The Mercy Hospital of Pittsburgh; Auditor, Arthur Andersen & Co.

Richard B. Fisher

Birth Date: May 17, 1923

Vice President

Began serving: January 1985

Principal Occupations: Vice Chairman or Vice President of some of the Funds in the Federated Fund Complex; Vice Chairman, Federated Investors, Inc.; Chairman, Federated Securities Corp.

Previous Positions: President and Director or Trustee of some of the Funds in the Federated Fund Complex; Executive Vice President, Federated Investors, Inc.; Director and Chief Executive Officer, Federated Securities Corp.

Brian P. Bouda

Birth Date: February 28, 1947

Chief Compliance Officer and Senior Vice President

Began serving: August 2004

Principal Occupations: Senior Vice President and Chief Compliance Officer of the Federated Fund Complex; Vice President and Chief Compliance Officer of Federated Investors, Inc. and Chief Compliance Officer of its subsidiaries. Mr. Bouda joined Federated in 1999 and is a member of the American Bar Association and the State Bar Association of Wisconsin.

Robert J. Ostrowski

Birth Date: April 26, 1963

CHIEF INVESTMENT OFFICER

Began serving: February 2010

Principal Occupations: Mr. Ostrowski joined Federated in 1987 as an Investment Analyst and became a Portfolio Manager in 1990. He was named Chief Investment Officer of taxable fixed-income products in 2004 and also serves as a Senior Portfolio Manager. He has been a Senior Vice President of the Fund’s Adviser since 1997. Mr. Ostrowski has received the Chartered Financial Analyst designation. He received his M.S. in Industrial Administration from Carnegie Mellon University.

J. Scott Albrecht

Birth Date: June 1, 1960

Vice President

Began serving: May 2004

Principal Occupations: J. Scott Albrecht has been the Fund’s Portfolio Manager since May 1996. He is Vice President of the Fund.

Mr. Albrecht joined Federated in 1989. He became a Senior Vice President of the Fund’s Adviser in January 2005 and served as a Vice President of the Fund’s Adviser from 1994 through 2004. He has been a Senior Portfolio Manager since 1997 and was a Portfolio Manager from 1994 to 1996. Mr. Albrecht has received the Chartered Financial Analyst designation and an M.S. in Public Management from Carnegie Mellon University.

**	Officers do not receive any compensation from the Fund.

In addition, the Fund has appointed an Anti-Money Laundering Compliance Officer.

BOARD LEADERSHIP STRUCTURE

As required under the terms of certain regulatory settlements, the Chairman of the Board is not an interested person of the Fund and neither the Chairman, nor any firm with which the Chairman is affiliated, has a prior relationship with Federated or its affiliates or (other than his position as a Director) with the Fund.

COMMITTEES OF THE BOARD

Board

Committee

Members

Committee Functions

Meetings Held

During Last

Fiscal Year

Executive

John F. Donahue

Peter E. Madden

John S. Walsh

In between meetings of the full Board, the Executive Committee generally may exercise all the powers of the full Board in the management and direction of the business and conduct of the affairs of the Corporation in such manner as the Executive Committee shall deem to be in the best interests of the Corporation. However, the Executive Committee cannot elect or remove Board members, increase or decrease the number of Directors, elect or remove any Officer, declare dividends, issue shares or recommend to shareholders any action requiring shareholder approval.

Three

Audit

Nicholas P. Constantakis

Charles F. Mansfield, Jr.

Thomas M. O’Neill

John S. Walsh

The purposes of the Audit Committee are to oversee the accounting and financial reporting process of the Fund, the Fund's internal control over financial reporting and the quality, integrity and independent audit of the Fund's financial statements. The Committee also oversees or assists the Board with the oversight of compliance with legal requirements relating to those matters, approves the engagement and reviews the qualifications, independence and performance of the Fund's independent registered public accounting firm, acts as a liaison between the independent registered public accounting firm and the Board and reviews the Fund's internal audit function.

Six

Nominating

John T. Conroy, Jr.

Nicholas P. Constantakis

John F. Cunningham

Maureen Lally-Green

Peter E. Madden

Charles F. Mansfield, Jr.

R. James Nicholson

Thomas M. O’Neill

John S. Walsh

James F. Will

The Nominating Committee, whose members consist of all Independent Directors, selects and nominates persons for election to the Fund's Board when vacancies occur. The Committee will consider candidates recommended by shareholders, Independent Directors, officers or employees of any of the Fund's agents or service providers and counsel to the Fund. Any shareholder who desires to have an individual considered for nomination by the Committee must submit a recommendation in writing to the Secretary of the Fund, at the Fund's address appearing on the back cover of this SAI. The recommendation should include the name and address of both the shareholder and the candidate and detailed information concerning the candidate’s qualifications and experience. In identifying and evaluating candidates for consideration, the Committee shall consider such factors as it deems appropriate. Those factors will ordinarily include: integrity, intelligence, collegiality, judgment, diversity, skill, business and other experience, qualification as an “Independent Director,” the existence of material relationships which may create the appearance of a lack of independence, financial or accounting knowledge and experience and dedication and willingness to devote the time and attention necessary to fulfill Board responsibilities.

Two

BOARD’S ROLE IN RISK OVERSIGHT

The Board’s role in overseeing the Fund’s general risks includes receiving performance reports for the Fund and risk management reports from Federated’s Chief Risk Officer at each regular Board meeting. The Chief Risk Officer is responsible for enterprise risk management at Federated, which includes risk management committees for investment management and for investor services. The Board also receives regular reports from the Fund’s Chief Compliance Officer regarding significant compliance risks.

On behalf of the Board, the Audit Committee plays a key role overseeing the Fund’s financial reporting and valuation risks. The Audit Committee meets regularly with the Fund’s Principal Financial Officer and outside auditors, as well as with Federated’s Chief Audit Executive to discuss financial reporting and audit issues, including risks relating to financial controls.

BOARD OWNERSHIP OF SHARES IN THE FUND AND IN THE FEDERATED FAMILY OF INVESTMENT COMPANIES AS OF DECEMBER 31, 2009

Interested Board Member Name	Dollar Range of Shares Owned in Federated Municipal Securities Fund, Inc.	Aggregate Dollar Range of Shares Owned in Federated Family of Investment Companies
John F. Donahue	None	Over $100,000
J. Christopher Donahue	None	Over $100,000
Independent Board Member Name
John T. Conroy, Jr.	None	Over $100,000
Nicholas P. Constantakis	None	Over $100,000
John F. Cunningham	None	Over $100,000
Maureen Lally-Green	None	$50,001-$100,000
Peter E. Madden	None	Over $100,000
Charles F. Mansfield, Jr.	None	Over $100,000
R. James Nicholson	None	Over $100,000
Thomas M. O’Neill	None	$50,001-$100,000
John S. Walsh	None	Over $100,000
James F. Will	None	Over $100,000

INVESTMENT ADVISER

The Adviser conducts investment research and makes investment decisions for the Fund.

The Adviser is a wholly owned subsidiary of Federated.

The Adviser shall not be liable to the Fund or any Fund 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.

Portfolio Manager Information

The following information about the Fund’s Portfolio Manager is provided as of the end of the Fund’s most recently completed fiscal year.

Other Accounts Managed	Total Number of Other Accounts Managed/Total Assets*
Registered Investment Companies	4/$717 million
Other Pooled Investment Vehicles	0/$0
Other Accounts	0/$0

*	None of the Accounts has an advisory fee that is based on the performance of the account.

Dollar value range of shares owned in the Fund: none

J. Scott Albrecht is paid a fixed base salary and a variable annual incentive. Base salary is determined within a market competitive position-specific salary range, based on the portfolio manager’s experience and performance. The annual incentive amount is determined based primarily on Investment Product Performance (IPP) and, to a lesser extent, Financial Success, and may be paid entirely in cash, or in a combination of cash and restricted stock of Federated Investors, Inc. (Federated). The total combined annual incentive opportunity is intended to be competitive in the market for this portfolio manager role.

IPP is measured on a rolling one, three and five calendar year pre-tax total return basis vs. the Fund's designated peer group of comparable accounts, and on a one year pre-tax total return basis vs. the Fund's benchmark (i.e., S&P Investortools, custom IG/3 Year+/Non AMT). In addition, performance is measured by comparing the account’s average one-year distribution yield, or taxable equivalent, for one, three and five calendar year periods to those of designated peer group accounts. Performance periods are adjusted if a portfolio manager has been managing an account for less than five years; accounts with less than one-year of performance history under a portfolio manager may be excluded. As noted above, Mr. Albrecht is also the portfolio manager for other accounts in addition to the Fund. Such other accounts may have differen t benchmarks. Within each performance measurement period, IPP is calculated with an equal weighting of each account managed by the portfolio manager. In this regard, any account for which the total return target is not met with respect to a five-year period will receive a score of zero. A portion of the bonus tied to the IPP score may be adjusted based on management's assessment of overall contributions to fund performance and any other factors as deemed relevant.

The Financial Success category is designed to tie the portfolio manager’s bonus, in part, to Federated’s overall financial results. Funding for the Financial Success category maybe determined on a product or asset class basis, as well as on corporate financial results. Senior Management determines individual Financial Success bonuses on a discretionary basis, considering overall contributions and any other factors deemed relevant.

As a general matter, certain conflicts of interest may arise in connection with a portfolio manager’s management of a fund’s investments, on the one hand, and the investments of other accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various accounts managed could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Fund. Alternatively, to the extent that the same investment opportunities might be desirable for more than one account, possible conflicts could arise in determining how to allocate them. Other potential conflicts might include conflicts created by specific portfolio manager compensation arrangements, and conflicts relating to selection of brokers or dealers to execute fund portfolio trades an d/or specific uses of commissions from Fund portfolio trades (for example, research, or “soft dollars”). The Adviser has structured the portfolio managers’ compensation in a manner, and the Fund has adopted policies and procedures, reasonably designed to safeguard the Fund from being negatively affected as a result of any such potential conflicts.

Services Agreement

Federated Advisory Services Company, an affiliate of the Adviser, provides certain support services to the Adviser. The fee for these services is paid by the Adviser and not by the Fund.

Other Related Services

Affiliates of the Adviser may, from time to time, provide certain electronic equipment and software to institutional customers in order to facilitate the purchase of Fund Shares offered by the Distributor.

CODE OF ETHICS RESTRICTIONS ON PERSONAL TRADING

As required by SEC rules, the Fund, its Adviser and its Distributor have adopted codes of ethics. These codes govern securities trading activities of investment personnel, Fund Directors and certain other employees. Although they do permit these people to trade in securities, including those that the Fund could buy, as well as Shares of the Fund, they also contain significant safeguards designed to protect the Fund and its shareholders from abuses in this area, such as requirements to obtain prior approval for, and to report, particular transactions.

VOTING PROXIES ON FUND PORTFOLIO SECURITIES

The Board has delegated to the Adviser authority to vote proxies on the securities held in the Fund’s portfolio. The Board has also approved the Adviser’s policies and procedures for voting the proxies, which are described below.

Proxy Voting Policies

The Adviser’s general policy is to cast proxy votes in favor of proposals that the Adviser anticipates will enhance the long-term value of the securities being voted. Generally, this will mean voting for proposals that the Adviser believes will: improve the management of a company; increase the rights or preferences of the voted securities; and/or increase the chance that a premium offer would be made for the company or for the voted securities.

The following examples illustrate how these general policies may apply to proposals submitted by a company’s board of directors. However, whether the Adviser supports or opposes a proposal will always depend on the specific circumstances described in the proxy statement and other available information.

On matters of corporate governance, generally the Adviser will vote for the full slate of directors nominated in an uncontested election; and for proposals to: require a company’s audit committee to be comprised entirely of independent directors; require independent tabulation of proxies and/or confidential voting by shareholders; reorganize in another jurisdiction (unless it would reduce the rights or preferences of the securities being voted); ratify the board’s selection of auditors (unless compensation for non-audit services exceeded 50% of the total compensation received from the company, or the previous auditor was dismissed because of a disagreement with the company); and repeal a shareholder rights plan (a lso known as a “poison pill”). The Adviser will generally vote against the adoption of such a plan (unless the plan is designed to facilitate, rather than prevent, unsolicited offers for the company).

On matters of capital structure, generally the Adviser will vote: against proposals to authorize or issue shares that are senior in priority or voting rights to the securities being voted; and for proposals to: reduce the amount of shares authorized for issuance; authorize a stock repurchase program; and grant preemptive rights to the securities being voted. The Adviser will generally vote against proposals to eliminate such preemptive rights.

On matters relating to management compensation, generally the Adviser will vote: for stock incentive plans that align the recipients’ interests with the interests of shareholders without creating undue dilution; against proposals that would permit the amendment or replacement of outstanding stock incentives with new stock incentives having more favorable terms; and against executive compensation plans that do not disclose the maximum amounts of compensation that may be awarded or the criteria for determining awards.

On matters relating to corporate transactions, the Adviser will vote proxies relating to proposed mergers, capital reorganizations and similar transactions in accordance with the general policy, based upon its analysis of the proposed transaction. The Adviser will vote proxies in contested elections of directors in accordance with the general policy, based upon its analysis of the opposing slates and their respective proposed business strategies. Some transactions may also involve proposed changes to the company’s corporate governance, capital structure or management compensation. The Adviser will vote on such changes based on its evaluation of the proposed transaction or contested election. In these circumstances, the Adviser may vote in a manner contrary to the general practice for similar proposals made outside the context of su ch a proposed transaction or change in the board. For example, if the Adviser decides to vote against a proposed transaction, it may vote for anti-takeover measures reasonably designed to prevent the transaction, even though the Adviser typically votes against such measures in other contexts.

The Adviser generally votes against proposals submitted by shareholders without the favorable recommendation of a company’s board. The Adviser believes that a company’s board should manage its business and policies, and that shareholders who seek specific changes should strive to convince the board of their merits or seek direct representation on the board.

In addition, the Adviser will not vote if it determines that the consequences or costs outweigh the potential benefit of voting. For example, if a foreign market requires shareholders casting proxies to retain the voted shares until the meeting date (thereby rendering the shares “illiquid” for some period of time), the Adviser will not vote proxies for such shares.

Proxy Voting Procedures

The Adviser has established a Proxy Voting Committee (Proxy Committee), to exercise all voting discretion granted to the Adviser by the Board in accordance with the proxy voting policies. The Adviser has hired Glass Lewis & Co. (GL) to obtain, vote and record proxies in accordance with the Proxy Committee’s directions. The Proxy Committee has supplied GL with general voting instructions that represent decisions made by the Proxy Committee in order to vote common proxy proposals; however, the Proxy Committee retains the right to modify these voting instructions at any time or to vote contrary to the voting instructions at any time in order to cast proxy votes in a manner that the Proxy Committee believes is consistent with the Adviser’s general policy. GL may vote any proxy as directed in the voting instructions without fur ther direction from the Proxy Committee and may make any determinations required to implement the voting instructions. However, if the voting instructions require case-by-case direction for a proposal, GL shall provide the Proxy Committee with all information that it has obtained regarding the proposal and the Proxy Committee will provide specific direction to GL.

Conflicts of Interest

The Adviser has adopted procedures to address situations where a matter on which a proxy is sought may present a potential conflict between the interests of the Fund (and its shareholders) and those of the Adviser or Distributor. This may occur where a significant business relationship exists between the Adviser (or its affiliates) and a company involved with a proxy vote. A company that is a proponent, opponent or the subject of a proxy vote, and which to the knowledge of the Proxy Committee has this type of significant business relationship, is referred to as an “Interested Company.”

The Adviser has implemented the following procedures in order to avoid concerns that the conflicting interests of the Adviser have influenced proxy votes. Any employee of the Adviser who is contacted by an Interested Company regarding proxies to be voted by the Adviser must refer the Interested Company to a member of the Proxy Committee, and must inform the Interested Company that the Proxy Committee has exclusive authority to determine how the Adviser will vote. Any Proxy Committee member contacted by an Interested Company must report it to the full Proxy Committee and provide a written summary of the communication. Under no circumstances will the Proxy Committee or any member of the Proxy Committee make a commitment to an Interested Company regarding the voting of proxies or disclose to an Interested Co mpany how the Proxy Committee has directed such proxies to be voted. If the voting instructions already provide specific direction on the proposal in question, the Proxy Committee shall not alter or amend such directions. If the voting instructions require the Proxy Committee to provide further direction, the Proxy Committee shall do so in accordance with the proxy voting policies, without regard for the interests of the Adviser with respect to the Interested Company. If the Proxy Committee provides any direction as to the voting of proxies relating to a proposal affecting an Interested Company, it must disclose to the Fund’s Board information regarding: the significant business relationship; any material communication with the Interested Company; the matter(s) voted on; and how, and why, the Adviser voted as it did. Alternatively, the Proxy Committee may seek direction from the Fund’s Board on how a proposal concerning an Interested Company shall be vo ted, and shall follow any such direction provided by the Board. In seeking such direction, the Proxy Committee will disclose the reason such company is considered an Interested Company and may provide a recommendation on how such proposal should be voted and the basis for such recommendation.

If the Fund holds shares of another investment company for which the Adviser (or an affiliate) acts as an investment adviser, the Proxy Committee will vote the Fund’s proxies in the same proportion as the votes cast by shareholders who are not clients of the Adviser at any shareholders’ meeting called by such investment company, unless otherwise directed by the Board.

Proxy Voting Report

A report on “Form N-PX” of how the Fund voted any proxies during the most recent 12-month period ended June 30 is available through Federated’s Web site. Go to FederatedInvestors.com; select “Products,” select the Fund; then use the link to “Prospectuses and Regulatory Reports” to access the link to Form N-PX. Form N-PX filings are also available at the SEC’s Web site at www.sec.gov.

PORTFOLIO HOLDINGS INFORMATION

Information concerning the Fund’s portfolio holdings is available in the “Products” section of Federated’s Web site at FederatedInvestors.com. A complete listing of the Fund’s portfolio holdings as of the end of each calendar quarter is posted on the Web site 30 days (or the next business day) after the end of the quarter and remains posted until replaced by the information for the succeeding quarter. Summary portfolio composition information as of the close of each month is posted on the Web site 15 days (or the next business day) after month-end and remains until replaced by the information for the succeeding month. The summary portfolio composition information may include: identification of the Fund’s top 10 holdings, portfolio profile statistics (such as weighted average effective maturity and weigh ted average effective duration) and a percentage breakdown of the portfolio by credit quality and sector.

The disclosure policy of the Fund and the Adviser prohibits the disclosure of portfolio holdings information to any investor or intermediary before the same information is made available to other investors. Employees of the Adviser or its affiliates who have access to nonpublic information concerning the Fund’s portfolio holdings are prohibited from trading securities on the basis of this information. Such persons must report all personal securities trades and obtain pre-clearance for all personal securities trades other than mutual fund shares.

Firms that provide administrative, custody, financial, accounting, legal or other services to the Fund may receive nonpublic information about Fund portfolio holdings for purposes relating to their services. The Fund may also provide portfolio holdings information to publications that rate, rank or otherwise categorize investment companies. Traders or portfolio managers may provide “interest” lists to facilitate portfolio trading if the list reflects only that subset of the portfolio for which the trader or portfolio manager is seeking market interest. A list of service providers, publications and other third parties who may receive nonpublic portfolio holdings information appears in the Appendix to this SAI.

The furnishing of nonpublic portfolio holdings information to any third party (other than authorized governmental or regulatory personnel) requires the prior approval of the President of the Adviser and of the Chief Compliance Officer of the Fund. The President of the Adviser and the Chief Compliance Officer will approve the furnishing of nonpublic portfolio holdings information to a third party only if they consider the furnishing of such information to be in the best interests of the Fund and its shareholders. In that regard, and to address possible conflicts between the interests of Fund shareholders and those of the Adviser and its affiliates, the following procedures apply. No consideration may be received by the Fund, the Adviser, any affiliate of the Adviser or any of their employees in connection with the disclosure of portfolio holdings information. Before information is furnished, the third party must sign a written agreement that it will safeguard the confidentiality of the information, will use it only for the purposes for which it is furnished and will not use it in connection with the trading of any security. Persons approved to receive nonpublic portfolio holdings information will receive it as often as necessary for the purpose for which it is provided. Such information may be furnished as frequently as daily and often with no time lag between the date of the information and the date it is furnished. The Board receives and reviews annually a list of the persons who receive nonpublic portfolio holdings information and the purposes for which it is furnished.

BROKERAGE TRANSACTIONS AND INVESTMENT ALLOCATION

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. Fixed-income securities are generally traded in an over-the-counter market on a net basis (i.e., without commission) through dealers acting as principal or in transactions directly with the issuer. Dealers derive an undisclosed amount of compensation by offering securities at a higher price than they bid for them. Some fixed-income securities may have only one primary market maker. The Adviser seeks to use dealers it believes to be actively and effectively trading the security being purchased or sold, but may not always obtain the lowest purchase price or highest sale price with respect to a security. The Adviser makes decisions on portfolio transactions and selects brokers and dealers subject to review by the Fund’s Board.

Investment decisions for the Fund are made independently from those of other accounts managed by the Adviser and accounts managed by affiliates of the Adviser. When the Fund and one or more of those accounts invests in, or disposes of, the same security, available investments or opportunities for sales will be allocated among the Fund and the account(s) in a manner believed by the Adviser to be equitable. While the coordination and ability to participate in volume transactions may benefit the Fund, it is possible that this procedure could adversely impact the price paid or received and/or the position obtained or disposed of by the Fund. Investment decisions, and trading, for certain separately managed or wrap-fee accounts, and other accounts, of the Adviser and/or certain investment adviser affiliates of the Adviser, are generally made, and conducted, independently from the Fund. It is possible that such independent trading activity could adversely impact the prices paid or received and/or positions obtained or disposed of by the Fund.

ADMINISTRATOR

Federated Administrative Services (FAS), a subsidiary of Federated, provides administrative personnel and services (including certain legal and financial reporting services) necessary to operate the Fund. FAS provides these at the following annual rates, based on the average aggregate daily net assets of the Fund and most of the other Federated funds:

Administrative Fee	Average Aggregate Daily Net Assets of the Federated Funds
0.150 of 1%	on the first $5 billion
0.125 of 1%	on the next $5 billion
0.100 of 1%	on the next $10 billion
0.075 of 1%	on assets over $20 billion

The administrative fee received during any fiscal year shall be at least $150,000 per portfolio and $40,000 per each additional class of Shares. FAS may voluntarily waive a portion of its fee and may reimburse the Fund for expenses.

FAS also provides certain accounting and recordkeeping services with respect to the Fund’s portfolio investments for a fee based on Fund assets plus out-of-pocket expenses.

CUSTODIAN

The Bank of New York Mellon, New York, New York, is custodian for the securities and cash of the Fund.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

State Street Bank and Trust Company, the Fund’s registered transfer agent, maintains all necessary shareholder records.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The independent registered public accounting firm for the Fund, Ernst & Young LLP, conducts its audits in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require it to plan and perform its audits to provide reasonable assurance about whether the Fund’s financial statements and financial highlights are free of material misstatement.

FEES PAID BY THE FUND FOR SERVICES

For the Year Ended March 31	2010	2009	2008
Advisory Fee Earned	$2,641,808	$2,388,575	$2,578,626
Advisory Fee Reduction	0	46,945	23,066
Advisory Fee Reimbursement	0	0	0
Administrative Fee	377,975	338,075	369,602
12b-1 Fee:
Class B Shares	122,784	—	—
Class C Shares	181,399	—	—
Shareholder Services Fee:
Class A Shares	621,219	—	—
Class B Shares	40,799	—	—
Class C Shares	60,261	—	—
Class F Shares	20,162	—	—

Fees are allocated among classes based on their pro rata share of Fund assets, except for marketing (Rule 12b-1) fees and shareholder services fees, which are borne only by the applicable class of Shares.

How Does the Fund Measure Performance?

The Fund may advertise Share performance by using the SEC’s standard methods for calculating performance applicable to all mutual funds. The SEC also permits this standard performance information to be accompanied by non-standard performance information.

Share performance reflects the effect of non-recurring charges, such as maximum sales charges, which, if excluded, would increase the total return and yield. The performance of Shares depends upon such variables as: portfolio quality; average portfolio maturity; type and value of portfolio securities; changes in interest rates; changes or differences in the Fund’s or any class of Shares' expenses; and various other factors.

Share performance fluctuates on a daily basis largely because net earnings and/or the value of portfolio holdings fluctuate daily. Both net earnings and offering price per Share are factors in the computation of yield and total return.

AVERAGE ANNUAL TOTAL RETURNS AND YIELD

Total returns are given for the one-year, five-year and ten-year or Start of Performance periods ended March 31, 2010.

Yield and Tax-Equivalent Yield are given for the 30-day period ended March 31, 2010.

	30-Day Period	1 Year	5 Years		10 Years
Class A Shares:
Total Return
Before Taxes	N/A	5.83%	2.18%		4.07%
After Taxes on Distributions	N/A	5.83%	2.18%		4.07%
After Taxes on Distributions and Sale of Shares	N/A	5.32%	2.48%		4.13%
Yield	3.47%	N/A	N/A		N/A
Tax-Equivalent Yield	5.34%	N/A	N/A		N/A
	30-Day Period	1 Year	5 Years		10 Years
Class B Shares:
Total Return
Before Taxes	N/A	4.31%	1.87%		3.81%
After Taxes on Distributions	N/A	4.31%	1.87%		3.81%
After Taxes on Distributions and Sale of Shares	N/A	4.07%	2.10%		3.81%
Yield	2.66%	N/A	N/A		N/A
Tax-Equivalent Yield	4.09%	N/A	N/A		N/A
	30-Day Period	1 Year	5 Years		10 Years
Class C Shares:
Total Return
Before Taxes	N/A	8.81%	2.22%		3.64%
After Taxes on Distributions	N/A	8.81%	2.22%		3.64%
After Taxes on Distributions and Sale of Shares	N/A	6.99%	2.40%		3.64%
Yield	2.66%	N/A	N/A		N/A
Tax-Equivalent Yield	4.09%	N/A	N/A		N/A
	30-Day Period	1 Year		Start of Performance on 5/31/2007
Class F Shares:
Total Return
Before Taxes	N/A	8.63%		1.71%
After Taxes on Distributions	N/A	8.63%		1.71%
After Taxes on Distributions and Sale of Shares	N/A	7.19%		2.08%
Yield	3.47%	N/A		N/A
Tax-Equivalent Yield	5.34%	N/A		N/A

TOTAL RETURN

Total return represents the change (expressed as a percentage) in the value of Shares over a specific period of time, and includes the investment of income and capital gains distributions.

The average annual total return for Shares is the average compounded rate of return for a given period that would equate a $10,000 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 NAV 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 $10,000, less any applicable sales charge, adjusted over the period by any additional Shares, assuming the annual reinvestment of all dividends and distributions.

Total returns after taxes are calculated in a similar manner, but reflect additional standard assumptions required by the SEC.

YIELD AND TAX-EQUIVALENT YIELD

The yield of Shares is calculated by dividing: (i) the net investment income per Share earned by the Shares over a 30-day period; by (ii) the maximum offering price per Share on the last day of the period. This number is then annualized using semi-annual compounding. This means that the amount of income generated during the 30-day period is assumed to be generated each month over a 12-month period and is reinvested every six months. The tax-equivalent yield of Shares is calculated similarly to the yield, but is adjusted to reflect the taxable yield that Shares would have had to earn to equal the actual yield, assuming the maximum combined federal and state tax rate. The yield and tax-equivalent yield do not necessarily reflect income actually earned by Shares because of certain adjustments required by the SEC and, therefore, may not corre late to the dividends or other distributions paid to shareholders.

To the extent financial intermediaries charge fees in connection with services provided in conjunction with an investment in Shares, the Share performance is lower for shareholders paying those fees.

Financial Information

The Financial Statements for the Fund for the fiscal year ended March 31, 2010, are incorporated herein by reference to the Annual Report to Shareholders of Federated Municipal Securities Fund, Inc. dated March 31, 2010.

Investment Ratings

STANDARD & POOR’S (S&P) LONG-TERM DEBT RATING DEFINITIONS

AAA–Highest credit quality. “AAA” ratings denote the lowest expectation of credit risk. They are assigned only in case of exceptionally strong capacity for timely payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.

AA–Very high credit quality. “AA” ratings denote a very low expectation of credit risk. They indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.

A–High credit quality. “A” ratings denote a low expectation of credit risk. The capacity for timely payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings.

BBB–Good credit quality. “BBB” ratings indicate that there is currently a low expectation of credit risk. The capacity for timely payment of financial commitments is considered adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this capacity. This is the lowest investment-grade category.

BB–Speculative. “BB” ratings indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time; however, business or financial alternatives may be available to allow financial commitments to be met. Securities rated in this category are not investment grade.

B–Highly speculative. “B” ratings indicate that significant credit risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is contingent upon a sustained, favorable business and economic environment.

CCC, CC, C–High default risk. Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments. A “CC” rating indicates that default of some kind appears probable. “C” ratings signal imminent default.

D–In payment default. The “D” rating category is used when payments on a financial commitment are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period. The “D” rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on a financial commitment are jeopardized.

MOODY’S INVESTORS SERVICE (MOODY’S) LONG-TERM DEBT RATINGS

Aaa–Bonds and preferred stock 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 and preferred stock 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 risk appear somewhat larger than the “Aaa” securities.

A–Bonds and preferred stock 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 some time in the future.

Baa–Bonds and preferred stock 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 and preferred stock 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 and preferred stock 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 and preferred stock 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 and preferred stock which are rated “Ca” are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

C–Bonds and preferred stock which are rated “C” are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.

NR–Indicates that both the bonds and the obligor or credit enhancer are not currently rated by S&P or Moody’s with respect to short-term indebtedness. However, management considers them to be of comparable quality to securities rated “A-1” or “P-1.”

NR(1)–The underlying issuer/obligor/guarantor has other outstanding debt rated “AAA” by S&P or “Aaa” by Moody’s.

NR(2)–The underlying issuer/obligor/guarantor has other outstanding debt rated “AA” by S&P or “Aa” by Moody’s.

NR(3)–The underlying issuer/obligor/guarantor has other outstanding debt rated “A” by S&P or Moody’s.

FITCH RATINGS LONG-TERM DEBT RATING DEFINITIONS

MOODY’S COMMERCIAL PAPER RATINGS

Prime-1–Issuers rated “Prime-1” (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. “Prime-1” repayment ability will often be evidenced by many of the following characteristics: leading market positions in well established industries, high rates of return on funds employed, conservative capitalization structure with moderate reliance on debt and ample asset protection, broad margins in earning coverage of fixed financial charges and high internal cash generation, and well-established access to a range of financial markets and assured sources of alternate liquidity.

Prime-2–Issuers rated “Prime-2” (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.

S&P COMMERCIAL PAPER RATINGS

A-1–A short-term obligation rated “A-1” is rated in the highest category by Standard & Poor’s. The obligor’s capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong.

A-2–A short-term obligation rated “A-2” is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory.

FITCH RATINGS COMMERCIAL PAPER RATING DEFINITIONS

F-1–Indicates the strongest capacity for timely payment of financial commitments relative to other issuers or issues in the same country. Under their national rating scale, this rating is assigned to the “best” credit risk relative to all others in the same country and is normally assigned to all financial commitments issued or guaranteed by the sovereign state. Where the credit risk is particularly strong, a “+” is added to the assigned rating.

F-2–Indicates a satisfactory capacity for timely payment of financial commitments relative to other issuers or issues in the same country. However, the margin of safety is not as great as in the case of the higher ratings.

A.M. BEST LONG-TERM DEBT RATINGS

An A.M. Best Long-Term Debt Rating (issue credit rating) is an opinion as to the issuer’s ability to meet its financial obligations to security holders when due. These ratings are assigned to debt and preferred stock issues.

aaa–Exceptional. Assigned to issues where the issuer has, in A.M. Best’s opinion, an exceptional ability to meet the terms of the obligation.

aa–Very Strong. Assigned to issues where the issuer has, in A.M. Best’s opinion, a very strong ability to meet the terms of the obligation.

a–Strong. Assigned to issues where the issuer has, in A.M. Best’s opinion, a strong ability to meet the terms of the obligation.

bbb–Adequate. Assigned to issues where the issuer has, in A.M. Best’s opinion, an adequate ability to meet the terms of the obligation; however, is more susceptible to changes in economic or other conditions.

bb–Speculative. Assigned to issues where the issuer has, in A.M. Best’s opinion, speculative credit characteristics, generally due to a moderate margin of principal and interest payment protection and vulnerability to economic changes.

b–Very Speculative. Assigned to issues where the issuer has, in A.M. Best’s opinion, very speculative credit characteristics, generally due to a modest margin of principal and interest payment protection and extreme vulnerability to economic changes.

ccc, cc, c–Extremely Speculative. Assigned to issues where the issuer has, in A.M. Best’s opinion, extremely speculative credit characteristics, generally due to a minimal margin of principal and interest payment protection and/or limited ability to withstand adverse changes in economic or other conditions.

d–In Default. In default on payment of principal, interest or other terms and conditions. The rating also is utilized when a bankruptcy petition, or similar action, has been filed.

Ratings from “aa” to “ccc” may be enhanced with a “+” (plus) or “-” (minus) to indicate whether credit quality is near the top or bottom of a category. A company’s Long-Term Credit Rating also may be assigned an Under Review modifier (“u”) that generally is event-driven (positive, negative or developing) and indicates that the company’s A.M. Best Rating opinion is under review and may be subject to near-term change. Ratings prefixed with an (“i”) denote indicative ratings. Ratings may also be assigned a Public Data modifier (“pd”) which indicates that a company does not subscribe to A.M. Best’s interactive rating process.

A.M. BEST SHORT-TERM DEBT RATINGS

An A.M. Best Short-Term Debt Rating (issue credit rating) is an opinion as to the issuer’s ability to meet its obligations having maturities generally less than one year, such as commercial paper.

AMB-1+–Strongest. Assigned to issues where the issuer has, in A.M. Best’s opinion, the strongest ability to repay short-term debt obligations.

AMB-1–Outstanding. Assigned to issues where the issuer has, in A.M. Best’s opinion, an outstanding ability to repay short-term debt obligations.

AMB-2–Satisfactory. Assigned to issues where the issuer has, in A.M. Best’s opinion, a satisfactory ability to repay short-term debt obligations.

AMB-3–Adequate. Assigned to issues where the issuer has, in A.M. Best’s opinion, an adequate ability to repay short-term debt obligations; however, adverse economic conditions will likely lead to a reduced capacity to meet its financial commitments on short-term debt obligations.

AMB-4–Speculative. Assigned to issues where the issuer has, in A.M. Best’s opinion, speculative credit characteristics and is vulnerable to economic or other external changes, which could have a marked impact on the company’s ability to meet its commitments on short-term debt obligations.

d–In Default. In default on payment of principal, interest or other terms and conditions. The rating also is utilized when a bankruptcy petition, or similar action, has been filed.

A company’s Short-Term Credit Rating also may be assigned an Under Review modifier (“u”) that generally is event-driven (positive, negative or developing) and indicates that the company’s A.M. Best Rating opinion is under review and may be subject to near-term change. Ratings prefixed with an (“i”) denote indicative ratings.

A.M. BEST RATING OUTLOOK

A.M. Best Credit Ratings (“aaa” to “c”) are assigned a Rating Outlook that indicates the potential direction of a company’s rating for an intermediate period, generally defined as the next 12 to 36 months. Public Data Ratings are not assigned an Outlook. Ratings Outlooks are as follows:

Positive–Indicates a company’s financial/market trends are favorable, relative to its current rating level, and if continued, the company has a good possibility of having its rating upgraded.

Negative–Indicates a company is experiencing unfavorable financial/market trends, relative to its current rating level, and if continued, the company has a good possibility of having its rating downgraded.

Stable–Indicates a company is experiencing stable financial/market trends and that there is a low likelihood that its rating will change in the near term.

Addresses

FEDERATED MUNICIPAL SECURITIES FUND, INC.

CLASS A SHARES

CLASS B SHARES

CLASS C SHARES

CLASS F SHARES

Federated Investors Funds

4000 Ericsson Drive

Warrendale, PA 15086-7561

Distributor

Federated Securities Corp.

Federated Investors Tower

1001 Liberty Avenue

Pittsburgh, PA 15222-3779

Investment Adviser

Federated Investment Management Company

Federated Investors Tower

1001 Liberty Avenue

Pittsburgh, PA 15222-3779

CUSTODIAN

The Bank of New York Mellon

One Wall Street

New York, NY 10286

Transfer Agent and Dividend Disbursing Agent

State Street Bank and Trust Company

P.O. Box 8600

Boston, MA 02266-8600

Independent Registered Public Accounting Firm

Ernst & Young LLP

200 Clarendon Street

Boston, MA 02116-5072

Appendix

The following is a list of persons, other than the Adviser and its affiliates, that have been approved to receive nonpublic portfolio holdings information concerning the Federated Fund Complex; however, certain persons below might not receive such information concerning the Fund:

CUSTODIAN(S)

The Bank of New York Mellon

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ernst & Young LLP

LEGAL COUNSEL

Dickstein Shapiro LLP

K&L Gates

Reed Smith LLP

SERVICE PROVIDERS

Abel Noser Corp.

Aegon Institutional Markets

Ashland Partners & Company LLP

Bank of America

Bank of New York Mellon

Barclay’s Capital Inc.

BBH (Brown Brothers Harriman) Infomediary

Bloomberg L.P.

Charles River

Citibank, NA

Computershare, Inc.

Eagle Investment Company

Edward Jones

FactSet

Fidelity

Financial Models Company LTD

GE Life and Annuity Assurance Company

General Electric Capital Assurance Company

Glass Lewis & Co.

J.P. Morgan Chase & Co.

New York Life Insurance Company

Options Clearing Corp. (OCC)

RiskMetrics

StatPro Group Plc

SunGard

The Travelers Insurance Company

Vintage Filings

Wells Fargo/Metropolitan West Securities LLC/MetWest Financials

Wilshire Associates, Inc.

XSP (Xcitek Solutions Plus)

SECURITY PRICING SERVICES

Debt Domain

FRI Corp.

FT Interactive Data

Interactive Data Corporation

Interactive Pricing and Reference Data

Markit Group Ltd.

Pricing Direct

Reuters LPC

RATINGS AGENCIES

Fitch, Inc.

Moody’s Investors Service

Standard & Poor’s

Standard & Poor’s Fund Services

Standard & Poor’s Rating Services

PERFORMANCE REPORTING/PUBLICATIONS

Emerging Market Funds Research, Inc.

Fidelity Strategic Advisers

iMoneyNet, Inc.

Lipper

MSCI Barra

Morningstar Associates

NASDAQ

Vickers Stock Research

OTHER

Chicago Mercantile Exchange

Investment Company Institute

Whitney Capital Group LLC

Item 28. Exhibits

(a)	Conformed copy of Articles of Restatement of the Registrant (including Amendment Nos. 4-13);	(20)
2	Conformed copy of Articles Supplementary;	(27)

(b)	Copy of By-Laws of the Registrant (including Amendment Nos. 11-13);	(20)
2	Amendment No. 14	(22)
3	Amendment No. 15	(23)
4	Amendment No. 16	(24)
5	Amendment No. 17	(24)
6	Amendment No. 18	(24)

(c)

Copies of Specimen Certificates for Shares of Capital Stock of the Registrant’s Class A Shares, Class B Shares and Class C Shares; As of September 1, 1997, Federated Securities Corp. stopped issuing share certificates.

(16)

(d)
1	Conformed Copy of Investment Advisory Contract of the Registrant;	(9)
2	Conformed copy of Amendment dated June 1, 2001 to the Investment Advisory Contract of the Registrant;	(21)

(e)
1	Conformed Copy of Distributor's Contract of the Registrant;	(12)
2	Conformed Copy of Exhibit A and B to the Distributor’s Contract of the Registrant;	(20)
3	Conformed Copy of Distributor’s Contract (Class B Shares) including Exhibit 1 and Schedule A and B;	(17)
4	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);
5	Conformed copy of Amendment dated June 1, 2001 to Distributor’s Contract of the Registrant;	(21)
6	Conformed copy of Amendment dated October 1, 2003 to Distributor’s Contract of the Registrant	(23)
7	Conformed copy of Exhibit E to the Distributor’s Contract of the Registrant	(27)

(f)

Not applicable

(g)
1	Conformed Copy of Custodian Contract of the Registrant;	(13)
2	Conformed Copy of Custodian Fee Schedule;	(17)
3	Conformed copy of Amendment to Custodian Contract of the Registrant;	(21)
4	Conformed Copy of Custodian Contract of the Registrant including Amendments 1 through 6	(+)

(h)
1	Conformed Copy of Amended and Restated Agreement for Fund Accounting Services, Administrative Services, Transfer Agency Services and Custodian Services Procurement;	(15)
2	The responses described in Item 23(e) (v) are hereby incorporated by reference.
3	The Registrant hereby incorporates the conformed copy of Amendment No. 2 to the Amended & Restated Agreement for Fund Accounting Services, Administrative Services, Transfer Agency Services and Custody Services Procurement from Item 23 (h) (v) of the Federated U.S. Government Securities: 2-5 Years Registration Statement on Form N-1A, filed with the Commission on March 30, 2004. (File Nos. 2-75769 and 811-3387);
4	The Registrant hereby incorporates the conformed copy of Amendment No. 3 to the Amended & Restated Agreement for Fund Accounting Services, Administrative Services, Transfer Agency Services and Custody Services Procurement from Item 23 (h) (v) of the Federated U.S. Government Securities: 2-5 Years Registration Statement on Form N-1A, filed with the Commission on March 30, 2004. (File Nos. 2-75769 and 811-3387);
5	Conformed Copy of Principal Shareholder Services Agreement (Class B Shares) including Exhibit 1 and Schedule A and B;	(17)
6	Conformed Copy of Shareholders Services Agreement (Class B Shares) including Exhibit 1 and Schedule A;	(17)
7	The Registrant hereby incorporates by reference the conformed copy of the Agreement for Administrative Services, with Exhibit 1 and Amendments 1 and 2 attached, between Federated Administrative Services and the Registrant from Item 23(h) (iv) of the Federated Total Return Series, Inc. Registration Statement on Form N-1A, filed with the Commission on November 29, 2004. (File Nos. 33-50773 and 811-7115);
8	The Registrant hereby incorporates the conformed copy of the Second Amended and Restated Services Agreement, with attached Schedule 1 revised 6/30/04, from Item 23(h) (vii) of the Cash Trust Series, Inc. Registration Statement on Form N-1A, filed with the Commission on July 29, 2004. (File Nos. 33-29838 and 811-5843)
9	The Registrant hereby incorporates the conformed copy of the Financial Administration and Accounting Services Agreement, with attached Exhibit A revised 6/30/04, from Item (h) (viii) of the Cash Trust Series, Inc. Registration Statement on Form N-1A, filed with the Commission on July 29, 2004. (File Nos. 33-29838 and 811-5843)
10	The Registrant hereby incorporates the conformed copy of Transfer Agency and Service Agreement between the Federated Funds and State Street Bank and Trust Company from Item 23(h)(viii)of the Federated Total Return Government Bond Fund Registration Statement on Form N-1A, filed with the Commission on April 28, 2006 (File Nos. 33-60411 and 811-07309);
11	Conformed copy of the Financial Administration and Accounting Services Agreement, with attached Exhibit A revised 1/1/07;	(26)
12	Conformed Copy of the Amendment to Transfer Agency and Service Agreement dated January 1, 2008.	(+)

(i)

Conformed Copy of Opinion and Consent of Counsel as to legality of shares being registered;

(2)

(j)
1	Conformed Copy of Consent of Independent Registered Public Accounting Firm;	(28)
2	Conformed Copy of Consent of Independent Registered Public Accounting Firm;	(+)

(k)

Not Applicable

(l)

Conformed Copy of Initial Capital Understanding; (2)

(m)
1	Conformed Copy of Distribution Plan of the Registrant;	(12)
2	Conformed Copy of Exhibit A of Distribution Plan of the Registrant;	(20)
3	The responses described in Item 23(e) (v) are hereby incorporated by reference.
4	Conformed Copy of Exhibit 1 and Schedule A to Distribution Plan (Class B Shares) of the Registrant;	(17)
5	Conformed copy of Distribution Plan (including Exhibit A) of the Registrant;	(23)

(n)	The Registrant hereby incorporates the Copy of the Multiple Class Plan and attached Exhibits from Item (n) of the Federated Income Trust Registration Statement on Form N-1A, filed with the Commission on March 31, 2005. (File Nos. 2-75366 and 811-3352)
1	Conformed Copy of the Multiple Class Plan and attached Exhibits;	(26)
2	Conformed Copy of the Multiple Class Plan and attached Exhibits;	(+)

(o)
1	Conformed Copy of Power of Attorney of the Registrant;	(20)
2	Conformed Copy of Power of Attorney Director of the Registrant;	(24)
3	Conformed Copy of Power of Attorney of Treasurer of the Registrant;	(24)
4	Conformed Copy of Power of Attorney of Director of the Registrant;	(28)
5	Conformed Copy of Power of Attorney of Director of the Registrant;	(+)

(p)
1	Item 23p(i) and (ii)has been superseded by Item 23 p(2)
2	Federated Investors, Inc. Code of Ethics for Access Persons, effective 10/01/2008	(28)

All exhibits have been filed electronically.

		ALL RESPONSES ARE INCORPORATED BY REFERENCE TO A POST-EFFECTIVE AMENDMENT (PEA) OF THE REGISTRANT FILED ON FORM N-1A (FILE NOS. 2-57181 and 811-2677.)
2	PEA No. 1 filed November 29, 1976.
9	PEA No. 36 filed July 17, 1990.
12	PEA No. 42 filed May 25, 1994.
13	PEA No. 45 filed May 25, 1995.
15	PEA No. 48 filed May 28, 1996.
16	PEA No. 50 filed May 29, 1997.
17	PEA No. 51 filed May 29, 1998.
20	PEA No. 56 filed May 25, 2001.
21	PEA No. 57 filed May 29, 2002.
22	PEA No. 58 filed May 28, 2003.
23	PEA No. 59 filed June 1, 2004.
24	PEA No. 60 filed May 27, 2005.
26	PEA No. 64 filed March 30, 2007.
27	PEA No. 67 filed May 29, 2008.
28	PEA No. 68 filed May 28, 2009.

Item 29 Persons Controlled by or Under Common Control with the Fund:

None

Item 30 Indemnification (11)

(1)

Item 31 Business and Other Connections of Investment Adviser:
For a description of the other business of the Investment Adviser, see the section entitled “Who Manages the Fund?” in Part A. The affiliations with the Registrant of one of the Trustees and two of the Officers of the Investment Adviser are included in Part B of this Registration Statement under "Who Manages and Provides Services to the Fund?" The remaining Trustees of the Investment Adviser and, in parentheses, their principal occupations are: Thomas R. Donahue, (Chief Financial Officer, Federated Investors, Inc.), 1001 Liberty Avenue, Pittsburgh, PA, 15222-3779, John B. Fisher, (Vice Chairman, Federated Investors, Inc.) 1001 Liberty Avenue, Pittsburgh, PA, 15222-3779 and Mark D. Olson (a principal of the firm, Mark D. Olson & Company, L.L.C. and Partner, Wilson, Halbrook & Bayard, P.A.), 800 Del aware Avenue, P.O. Box 2305, Wilmington, DE 19899-2305. The business address of each of the Officers of the Investment Adviser is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, Pennsylvania 15222-3779. These individuals are also officers of a majority of the Investment Advisers to the investment companies in the Federated Fund Complex described in Part B of this Registration Statement.
The remaining Officers of the Investment Adviser are:
President/ Chief Executive Officer:	John B. Fisher
Vice Chairman:	William D. Dawson, III
Executive Vice Presidents:	Deborah A. Cunningham Robert J. Ostrowski
Senior Vice Presidents:	Todd Abraham J. Scott Albrecht Joseph M. Balestrino Randall S. Bauer Jonathan C. Conley Mark E. Durbiano Donald T. Ellenberger Susan R. Hill Jeffrey A. Kozemchak Mary Jo Ochson Ihab Salib Paige Wilhelm
Vice Presidents:	G. Andrew Bonnewell Hanan Callas Jerome Conner James R. Crea, Jr. Karol Crummie Lee R. Cunningham, II B. Anthony Delserone, Jr. Bryan Dingle William Ehling Ann Ferentino Eamonn G. Folan Richard J. Gallo John T. Gentry Kathryn P. Glass Patricia L. Heagy William R. Jamison Nathan H. Kehm John C. Kerber J. Andrew Kirschler Allen Knizner Tracey Lusk Marian R. Marinack Natalie F. Metz Thomas J. Mitchell Joseph M. Natoli Gene Neavin Bob Nolte Mary Kay Pavuk Jeffrey A. Petro John Polinski Rae Ann Rice Brian Ruffner Roberto Sanchez-Dahl, Sr. John Sidawi Michael W. Sirianni, Jr. Christopher Smith Kyle Stewart Mary Ellen Tesla Timothy G. Trebilcock Nicholas S. Tripodes Paolo H. Valle Stephen J. Wagner Mark Weiss George B. Wright
Assistant Vice Presidents:	Jason DeVito Timothy Gannon James Grant Ann Kruczek Christopher McGinley Ann Manley Keith Michaud Karl Mocharko Joseph Mycka Nick Navari Liam O’Connell Tom Scherr Chris Wu
Secretary:	G. Andrew Bonnewell
Treasurer:	Thomas R. Donahue

Item 32 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:
	Cash Trust Series, Inc.
	Cash Trust Series II
	Federated Adjustable Rate Securities Fund
	Federated Core Trust
	Federated Core Trust II, L.P.
	Federated Core Trust III
	Federated Equity Funds
	Federated Equity Income Fund, Inc.
	Federated Fixed Income Securities, Inc.
	Federated GNMA Trust
	Federated Government Income Securities, Inc.
	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 Intermediate Government Fund, Inc.
	Federated International Series, Inc.
	Federated Investment Series Funds, Inc.
	Federated Managed Allocation Portfolios
	Federated Managed Pool Series
	Federated MDT Series
	Federated Municipal Securities Fund, Inc.
	Federated Municipal Securities Income Trust
	Federated Premier Intermediate Municipal Income Fund
	Federated Premier Municipal Income Fund
	Federated Short-Intermediate Duration Municipal Trust
	Federated Stock and Bond Fund
	Federated MDT Stock Trust
	Federated Total Return Government Bond Fund
	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 World Investment Series, Inc.
	Intermediate Municipal Trust
	Edward Jones Money Market Fund
	Money Market Obligations Trust
(b)

(1) Positions and Offices with Distributor	(2) Name	(3) Positions and Offices With Registrant
Chairman:	Richard B. Fisher	Vice President
Executive Vice President, Assistant Secretary and Director:	Thomas R. Donahue
President and Director:	Thomas E. Territ
Vice President and Director:	Peter J. Germain
Treasurer and Director:	Denis McAuley III

(1) Positions and Offices with Distributor	(2) Name	(3) Positions and Offices With Registrant
Executive Vice Presidents:	Solon Person Paul Uhlman
Senior Vice Presidents:	Michael Bappert Richard W. Boyd Bryan Burke Charles L. Davis, Jr. Laura M. Deger Peter W. Eisenbrandt Theodore Fadool, Jr. Bruce E. Hastings James M. Heaton Harry J. Kennedy Michael Koenig Anne H. Kruczek Amy Michaliszyn Richard C. Mihm Keith Nixon Solon A. Person, IV Brian S. Ronayne John Staley Colin B. Starks F. Andrew Thinnes Robert F. Tousignant William C. Tustin

(1) Positions and Offices with Distributor	(2) Name	(3) Positions and Offices With Registrant
Vice Presidents:	Irving Anderson Marc Benacci Dan Berry Bill Boarts John B. Bohnet Edward R. Bozek Jane E. Broeren-Lambesis Edwin J. Brooks, III Mark Carroll Dan Casey Scott Charlton Steven R. Cohen James Conely Kevin J. Crenny G. Michael Cullen Beth C. Dell Jack C. Ebenreiter Donald C. Edwards Timothy Franklin Jamie Getz Scott Gundersen Dayna C. Haferkamp Raymond J. Hanley Vincent L. Harper, Jr. Scott A. Holick Jeffrey S. Jones Patrick Kelly Matt Khan Ed Koontz Jerry L. Landrum David M. Larrick Christopher A. Layton Michael H. Liss Michael R. Manning Michael Marcin Diane Marzula Martin J. McCaffrey Mary A. McCaffrey Joseph McGinley Vincent T. Morrow John C. Mosko Doris T. Muller Alec H. Neilly Rebecca Nelson Ted Noethling John A. O’Neill James E. Ostrowski Stephen Otto Mark Patsy Rich Paulson Chris Prado Josh Rasmussen Richard A. Recker Diane M. Robinson Timothy A. Rosewicz

(1) Positions and Offices with Distributor	(2) Name	(3) Positions and Offices With Registrant
Vice Presidents:	Eduardo G. Sanchez Robert E. Savarese, Jr. Thomas S. Schinabeck Leland T. Scholey Peter Siconolfi Edward L. Smith Peter Smith Jack L. Streich Mark Strubel Jonathen Sullivan Michael Vahl David Wasik G. Walter Whalen Stephen White Lewis Williams Littell L. Wilson Edward J. Wojnarowski Michael P. Wolff Erik Zettlemayer Paul Zuber

(1) Positions and Offices with Distributor	(2) Name	(3) Positions and Offices With Registrant
Assistant Vice Presidents:	Robert W. Bauman Mary Ellen Coyne Dino Giovannone Chris Jackson William Rose
Secretary:	C. Todd Gibson
Assistant Treasurer:	Lori A. Hensler Richard A. Novak

(c)	Note applicable

Item 33 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	Investment Management Group (IMG) Reed Smith Centre 225 Fifth Avenue Pittsburgh, PA 15222 (Notices should be sent to the Agent for Service at above address) Federated Investors Funds 4000 Ericsson Drive Warrendale, PA 15086-7561
Federated Administrative Services (“Administrator”)	Federated Investors Tower 1001 Liberty Avenue Pittsburgh, PA 15222-3779
Federated Investment Management Company (“Adviser”)	Federated Investors Tower 1001 Liberty Avenue Pittsburgh, PA 15222-3779
State Street Bank and Trust Company (“Transfer Agent and Dividend Disbursing Agent”)	P.O. Box 8600 Boston, MA 02266-8600
The Bank of New York Mellon (“Custodian”)	One Wall Street New York, NY 10286

Item 34 Management Services: Not applicable.

Item 35 Undertakings:

Registrant hereby undertakes to comply with the provisions of Section 16(c) of the 1940 Act with respect to the removal of Trustees 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., certifies that it meets all of the requirements for effectiveness of this Amendment to its Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Pittsburgh and Commonwealth of Pennsylvania, on the 26th day of May, 2010.

FEDERATED MUNICIPAL SECURITIES FUND, INC.

BY: /s/ George F. Magera

George F. Magera, Assistant Secretary

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/ George F. Magera George F. Magera, Assistant Secretary	Attorney In Fact For the Persons Listed Below	May 26, 2010
John F. Donahue *	Director
J. Christopher Donahue *	President and Director (Principal Executive Officer)
Richard A. Novak*	Treasurer (Principal Financial Officer)
John T. Conroy, Jr.*	Director
Nicholas P. Constantakis*	Director
John F. Cunningham*	Director
Maureen Lally-Green*	Director
Peter E. Madden*	Director
Charles F. Mansfield, Jr.*	Director
R. James Nicholson*	Director
Thomas O’Neill*	Director
John S. Walsh*	Director
James F. Will*	Director
*By Power of Attorney

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Exhibit 28 (g) (4) under Form N-1A

Exhibit 10 under Item 601/Reg. S-K

CUSTODY AGREEMENT

AGREEMENT, dated as of June 7, 2005 between the registered investment companies, on behalf of each Series of such registered investment companies, if any, listed on Schedule I to this Agreement, as it may be amended from time to time (each stand alone registered investment company and each Series a “Fund” and collectively the “Funds”) and The Bank of New York, a New York corporation authorized to do a banking business having its principal office and place of business at One Wall Street, New York, New York 10286 (“Custodian” or “Bank”).

WITNESSETH:

that for and in consideration of the mutual promises hereinafter set forth the Funds and Custodian agree as follows:

ARTICLE I

DEFINITIONS

Whenever used in this Agreement, the following words shall have the meanings set forth below:

1. “Authorized Person” shall be any person, whether or not an officer or employee of the Fund, duly authorized by the Fund's board to execute any Certificate or to give any Oral Instruction with respect to one or more Accounts, such persons to be designated in a “Certificate annexed hereto as Schedule I hereto or such other Certificate as may be received by Custodian from time to time.

2. “BNY Affiliate” shall mean any office, branch or subsidiary of The Bank of New York Company, Inc.

3. “Book-Entry System” shall mean the Federal Reserve/Treasury book-entry system for receiving and delivering securities, its successors and nominees.

4. “Business Day” shall mean any day on which Custodian and relevant Depositories are open for business.

5. “Certificate” shall mean any notice, instruction, or other instrument in writing, authorized or required by this Agreement to be given to Custodian, which is actually received by Custodian by letter or facsimile transmission and signed on behalf of a Fund by an Authorized Person or a person reasonably believed by Custodian to be an Authorized Person.

6. “Composite Currency Unit” shall mean the Euro or any other composite currency unit consisting of the aggregate of specified amounts of specified currencies, as such unit may be constituted from time to time.

7. “Depository” shall include (a) the Book-Entry System, (b) the Depository Trust Company, { c) any other clearing agency or securities depository registered with the Securities and Exchange Commission identified to the Fund from time to time, and (d) the respective successors and nominees of the foregoing.

8. “Foreign Depository” shall mean (a) Euroclear, (b) Clearstream Banking, societe anonyme, (c) each Eligible Securities Depository as defined in Rule 17f-7 under the Investment Company Act of 1940, as amended, identified to the Fund from time to time, and (d) the respective successors and nominees of the foregoing.

9. “Instructions” shall mean communications transmitted by electronic or telecommunications media, including S.W.I.F.T., computer-to-computer interface, or dedicated transmission lines.

10. “Oral Instructions” shall mean verbal instructions received by Custodian from an Authorized Person or from a person reasonably believed by Custodian to be an Authorized Person.

11. “Series” shall mean a “series company” as defined in Rule 18f-2(a) promulgated under the Investment Company Act of 1940.

12. “Securities” shall include, without limitation, any common stock and other equity securities, bonds, debentures and other debt securities, notes, mortgages or other obligations, and any instruments representing rights to receive, purchase, or subscribe for the same, or representing any other rights or interests therein (whether represented by a certificate or held in a Depository or by a Subcustodian).

13. “Subcustodian” shall mean a bank (including any branch thereof) or other financial institution (other than a Foreign Depository) located outside the U.S. which is utilized by Custodian in connection with the purchase, sale or custody of Securities hereunder and identified to the Fund from time to time, and their respective successors and nominees.

14.  See Second Amendment, dated 9/5/08

ARTICLE II

APPOINTMENT OF CUSTODIAN; ACCOUNTS;

REPRESENTATIONS, WARRANTIES, AND COVENANTS

1.           (a)           The Fund hereby appoints Custodian as Custodian of all Securities and cash at any time delivered to Custodian during the term of this Agreement, and authorizes Custodian to hold Securities in registered form in its name or the name of its nominees. Custodian hereby accepts such appointment and agrees to establish and maintain one or more securities accounts and cash accounts for each Fund in which Custodian will hold Securities and cash as provided herein. Custodian shall maintain books and records segregating the assets of each Fund from the assets of any other Fund. Such accounts (each, an “Account”; collectively, the “AccountsR 21;) shall be in the name of each Fund.

(b)           Custodian may from time to time establish on its books and records such sub-accounts within each Account as the Fund and Custodian may agree upon (each a “Special Account”), and Custodian shall reflect therein such assets as the Fund may specify in a Certificate or Instructions.

(c)           Custodian may from time to time establish pursuant to a written agreement with and for the benefit of a broker, dealer, future commission merchant or other third party identified in a Certificate or Instruction such accounts on such terms and conditions as the Fund and Custodian shall agree, and Custodian shall transfer to such account such Securities and money as a Fund may specify in a Certificate or Instructions.

2.           Each Fund hereby represents and warrants, which representations and warranties shall be continuing and shall be deemed to be reaffirmed upon each delivery of a Certificate or each giving of Oral Instructions or Instructions by a Fund, that:

(a)           It is duly organized and existing under the laws of the jurisdiction of its organization, with full power to carry on its business as now conducted, to enter into this Agreement, and to perform its obligations hereunder;

(b)           This Agreement has been duly authorized by resolution of the Funds' boards, executed and delivered by each Fund, constitutes a valid and legally binding obligation of each Fund, enforceable in accordance with its terms, and there is no statute, regulation, role, order or judgment binding on it, and no provision of its charter or by-laws, nor of any mortgage, indenture, credit agreement or other contract binding on it or affecting its property, which would prohibit its execution or performance of this Agreement;

(c)           It is conducting its business in substantial compliance with all applicable laws and requirements, both state and federal, and has obtained all regulatory licenses, approvals and consents necessary to carry on its business as now conducted;

(d)           It will not use the services provided by Custodian hereunder in any manner that is, or will result in, a violation of any law, rule or regulation applicable to the Fund;

(e)           Its foreign custody manager, if the foreign custody manager is not the Custodian, as defined in Rule 17f-5 under the Investment Company Act of 1940, as amended (the “'40 Act”), has determined that use of each Subcustodian (including any Replacement Custodian) which Custodian is authorized to utilize in accordance with Section 1 (a) of Article ill hereof satisfies the applicable requirements of the '40 Act and Rule 17f-5 thereunder;

(f)           It is fully informed of the protections and risks associated with various methods of transmitting Instructions and Oral Instructions and delivering Certificates to Custodian, shall, and shall cause each Authorized Person, to safeguard and treat with reasonable care any user and authorization codes, passwords and/or authentication keys, understands that there may be more secure methods of transmitting or delivering the same than the methods selected by it, agrees that the security procedures (if any) to be utilized provide a commercially reasonable degree of protection in light of its particular needs and circumstances, and acknowledges and agrees that Instructions may conclusively be presumed by Custodian to have bee n given by person(s) duly authorized, and may be acted upon as given;

(g)           It shall manage its borrowings, including, without limitation any advance or overdraft (including any day-light overdraft) in the Accounts, so that the aggregate of its total borrowings for each Fund does not exceed the amount such Fund is permitted to borrow under the '40 Act;

(h)           Its transmission or giving of, and Custodian acting upon and in reliance on Certificates, Instructions, or Oral Instructions pursuant to this Agreement shall at all times comply with the '40 Act; and

(i)           It has the right to grant the security interest and security entitlement to Custodian contained in Section 1 of Article V hereof, free of any right of redemption or prior claim of any other person or entity, such pledge and such grants shall have a first priority subject to no setoffs, counterclaims, or other liens or grants prior to or on a parity therewith, and it shall take such additional steps as Custodian may require to assure such priority;

(j)            Each Fund or its investment adviser has considered the custody risks of maintaining assets with each Foreign Depository with which it maintains its assets.

(k)           Each Fund shall cause procedures to be maintained on the manner in which Instructions pursuant to which cash is distributed shall be given to Custodian.

3.           The Fund hereby covenants that it shall from time to time complete and execute and deliver to Custodian upon Custodian's request a Form FR U-1 (or successor form) whenever the Fund borrows from Custodian any money to be used for the purchase or carrying of margin stock as defined in Federal Reserve Regulation U .

4.           The Bank hereby represents and warrants, which representations and warranties shall be continuing that:

(a)           It is a bank having the qualifications prescribed in paragraph (1) of section 26(a) of the '40 Act;

(b)           It is duly organized and existing under the laws of the jurisdiction of its organization, with full power to carry on its business as now conducted, to enter into this Agreement, and to perform its obligations hereunder;

(c)           It is conducting its business in substantial compliance with all applicable laws and requirements, both state and federal, and has obtained all regulatory licenses, approvals and consents necessary to carry on its business as now conducted.

(d)           In connection with the Funds' obligations under Rule 38a-l of the 1940 Act the Bank agrees as follows:

(1)           the Bank agrees to reasonably cooperate with the Funds and the Funds' Chief Compliance Officer in the administration of the Funds' compliance program (“Compliance Program”) as required by the Securities and Exchange Commission (“SEC”);

(2)           the Bank has implemented and maintains policies and procedw.-es reasonably designed to prevent, detect and promptly correct any violations of Federal Securities Laws with respect to services the Bank provides to the Funds (“Compliance Procedures”);

(3)           the Bank Will provide summaries of any Compliance Procedures that may affect in any material respect, the services provided hereunder by the Bank to the Funds;

(4)           the Bank periodically reviews the adequacy of such Compliance Procedures and the effectiveness of their implementation and upon the request of a Fund, Will provide the then current interval between such reviews;

(5)           in the event that an officer or employee of the Bank administering this Agreement has actual knowledge of the occurrence of a “Material Compliance Matter” (as defined in Rule 38a-l(e)(2)) which the Bank reasonably believes is related to or Will affect the Fund, the Bank will, if permitted by law and the Bank's regulators, notify the Fund of such occurrence;

(6)           except where prohibited bylaw, regulation or rule or as may be directed or instructed by the Bank's regulators, the Bank agrees to notify the Funds following quarter-end of any inspections by, or other inquiries received from, the SEC or any other regulatory or law enforcement agency after the date of this certification, which relate to the services provided by the Bank to the Funds hereunder. For the avoidance of doubt, such notification obligation shall be satisfied if the notice is contained in any publicly available regulatory filing.

(d)           The Bank will maintain throughout the term of this Agreement, such contingency plans as it reasonably believes to be necessary and appropriate to recover its operations from the occurrence of a disaster and which are consistent with any statue or regulation to which it is subject that imposes business resumption and contingency planning standards. The Bank agrees to provide the Funds With a summary of its contingency plan as it relates to the systems used to provide the services hereunder and to provide the Funds with periodic updates of such summary upon the Funds' reasonable request.

ARTICLE llI

CUSTODY AND RELATED SERVICES

1.           (a)           Subject to the terms hereof, each Fund hereby authorizes Custodian to hold any Securities received by it from time to time for the Fund's account. Custodian shall be entitled to utilize, subject to subsection (c) of this Section I, Depositories, Subcustodians, and, subject to subsection (d) of this Section 1, Foreign Depositories, to the extent possible in connection With its performance hereunder. Securities and cash held in a Depository or Foreign Depository will be held subject to the rules, terms and conditions of such entity .Securities and cash held through Subcustodians shall be held subject to the terms and conditions of Custodian's agreement s with such Subcustodians. Subcustodians may be authorized to hold Securities in Foreign Depositories in which such Subcustodians participate. Unless otherwise required by local law or practice or a particular Subcustodian agreement, Securities deposited with a Subcustodian, a Depositary or a Foreign Depository Will beheld in a commingled account, in the name of Custodian, holding only Securities held by Custodian as Custodian for its customers.

Custodian shall identify on its books and records the Securities and cash belonging to the Fund, whether held directly or indirectly through Depositories, Foreign Depositories, or Subcustodians. Custodian shall, directly or indirectly, through Subcustodians, Depositories, or Foreign Depositories, endeavor, to the extent feasible, to hold Securities in the country or other jurisdiction in which the principal trading market for such Securities is located, where such Securities are to be presented for cancellation and/or payment and/or registration, or where such Securities are acquired. Custodian at any time may cease utilizing any Subcustodian and/or may replace a Subcustodian with a different Subcustodian (the “Replacement Subcustodian”). In the event Custodian selects a Replacement Subcustodian, Custodian shall not util ize such Replacement Subcustodian until after the Fund's foreign custody manager has determined that utilization of such Replacement Subcustodian satisfies the requirements of the' 40 Act and Rule 17f-5 thereunder.

(b)           Unless Custodian has received a Certificate or Instructions to the contrary, Custodian shall hold Securities indirectly through a Subcustodian only if (i) the Securities are not subject to any right, charge, security interest, lien or claim of any kind in favor of such Subcustodian or its creditors or operators, including a receiver or trustee in bankruptcy or similar authority, except for a claim of payment for the safe custody or administration of Securities on behalf of a Fund by such Subcustodian, and (ii) beneficial ownership of the Securities is freely transferable without the payment of money or value other than for safe custody or administration.

(c)           With respect to each Depository, Custodian (i) shall exercise due care in accordance with reasonable commercial standards in discharging its duties as a securities intermediary to obtain and thereafter maintain Securities or financial assets deposited or held in such Depository, and (ii) will provide, promptly upon request by a Fund, such reports as are available concerning the internal accounting controls and financial strength of Custodian.

(d)           With respect to each Foreign Depository, Custodian shall exercise reasonable care, prudence, and diligence (i) to provide the Fund with an analysis of the custody risks associated with maintaining assets with the Foreign Depository, and (ii) to monitor such custody risks on a continuing basis and promptly notify the Fund of any material change in such risks. The Fund acknowledges and agrees that such analysis and monitoring shall be made on the basis of, and limited by, information gathered from Subcustodians or through publicly available information otherwise obtained by Custodian, and shall not include any evaluation of Country Risks. As used herein the term “Country Risks” shall mean with respect to an y Foreign Depository: (a) the financial infrastructure of the country in which it is organized, (b) such country's prevailing custody and settlement practices, (c) nationalization, expropriation or other governmental actions, (d) such country's regulation of the banking or securities industry, (e) currency controls, restrictions, devaluations or fluctuations, and (f) market conditions which affect the order execution of securities transactions or affect the value of securities.

2.           Custodian shall furnish the Fund with an advice of daily transactions (including a confirmation of each transfer of Securities) and a monthly summary of all transfers to or from the Accounts.

3.           With respect to all Securities held hereunder, Custodian shall, unless otherwise instructed to the contrary:

(a)           Receive all income and other payments and advise the Fund as promptly as practicable of any such amounts due but not paid;

(b)           Present for payment and receive the amount paid upon all Securities which may mature and advise the Fund as promptly as practicable of any such amounts due but not paid;

(c)           Forward to the Fund copies of all information or documents that it may actually receive from an issuer of Securities which, in the opinion of Custodian, are intended for the beneficial owner of Securities;

(d)           Execute, as Custodian, any certificates of ownership, affidavits, declarations or other certificates under any tax. laws now or hereafter in effect in connection with the collection of bond and note coupons;

(e)           Hold directly or through a Depository, a Foreign Depository, or a Subcustodian all rights and similar Securities issued with respect to any Securities credited to an Account hereunder; and

(f)           Endorse for collection checks, drafts or other negotiable instruments.

(1)           Custodian shall notify the Fund of rights or discretionary actionswith respect to Securities held hereunder, and of the date or dates by when such rights must be exercised or such action must be taken, provided that Custodian has actually received, from the issuer or the relevant Depository (with respect to Securities issued in the United States) or from the relevant Subcustodian, Foreign Depository, or a nationally or internationally recognized bond or corporate action service to which Custodian subscribes, timely notice of such rights or discretionary corporate action or of the date or dates such rights must be exercised or such action must be taken. Absent actual receipt of such notice, Custodian shall have no liability for failing to so notify the Fund.

(2)           Whenever Securities (including, but not limited to, warrants, options, tenders, options to tender or non-mandatory puts or calls) confer discretionary rights on the Fund or provide for discretionary action or alternative courses of action by the Fund, the Fund shall be responsible for making any decisions relating thereto and for directing Custodian to act. In order for Custodian to act, it must receive the Fund's Certificate or Instructions at Custodian's offices, addressed as Custodian may from time to time request, not later than noon (New York time) at least two (2) Business Days prior to the last scheduled date to act with respect to such Securities (or such earlier date or time as Custodian may specify to the Fund). Absent Custodian's timely receipt of such Certificate or Instructions, Custodian shall not be liable for failure to take any action relating to or to exercise any rights conferred by such Securities.

4.           All voting rights with respect to Securities, however registered, shall be exercised by the Fund or its designee. For Securities issued in the United States, Custodian's only duty shall be to mail to the Fund ally documents (including proxy statements, annual reports and signed proxies) actually received by Custodian relating to the exercise of such voting rights. With respect to Securities issued outside of the United States, the Custodian will use reasonable commercial efforts to facilitate the exercise of voting and other shareholder rights, subject always to the laws, regulations and practical constraints that may exist in the country which such securities are issued. Notwithstanding the foregoing, the Custodian's only duty shall be to provide the Funds with access to a provider of global proxy services at the Fund's request and to coordinate the provision of services between each Fund and the global proxy service provider. The Fund shall be responsible for all costs associated with its use of such services.

5.           Custodian shall promptly advise the Fund upon Custodian's actual receipt of notification of the partial redemption, partial payment or other action affecting less than all Securities of the relevant class. If Custodian, any Subcustodian, any Depository, or any Foreign Depository holds any Securities in which the Fund has an interest as part of a fungible mass, Custodian, such Subcustodian, Depository, or Foreign Depository may select the Securities to participate in such partial redemption, partial payment or other action in any non-discriminatory manner that it customarily uses to make such selection.

6.           Custodian shall not under any circumstances accept bearer interest coupons which have been stripped from United States federal, state or local government or agency securities unless explicitly agreed to by Custodian in writing. ,

7.           The Fund shall be liable for all taxes, assessments, duties and other governmental charges, including any interest or penalty with respect thereto (“Taxes”), with respect to any cash or Securities held on behalf of the Fund or any transaction related thereto. The Fund shall indemnify Custodian and each Subcustodian for the amount of any Tax that Custodian, any such Subcustodian or any other withholding agent is required under applicable laws (whether by assessment or otherwise) to pay on behalf of, or in respect of income earned by or payments or distributions made to or for the account of the Fund (including any payment of Tax required by reason of an earlier failure to withhold). Custodian shall, or shal l instruct the applicable Subcustodian or other withholding agent to, withhold the amount of any Tax which is required to be withheld under applicable law upon collection of any dividend, interest or other distribution made with respect to any Security and any proceeds or income from the sale, loan or other transfer of any Security .In the event that Custodian or any Subcustodian is required under applicable law to pay any Tax on behalf of the Fund, Custodian is hereby authorized to withdraw cash from any cash account in the amount required to pay such Tax and to use such cash, or to remit such cash to the appropriate Subcustodian or other withholding agent, for the timely payment of such Tax in the manner required by applicable law. If the aggregate amount of cash in all cash accounts is not sufficient to pay such Tax, Custodian shall promptly notify the Fund of the additional amount of cash (in the appropriate currency) required, and the Fund shall directly deposit such additional amount in the appropriate cash account promptly after receipt of such notice, for use by Custodian as specified herein. In the event that Custodian reasonably believes that Fund is eligible, pursuant to applicable law or to the provisions of any tax treaty, for a reduced rate of, or exemption from, any Tax which is otherwise required to be withheld or paid on behalf of the Fund under any applicable law, Custodian shall, or shall instruct the applicable Subcustodian or withholding agent to, either withhold or pay such Tax at such reduced rate or refrain from withholding or paying such Tax, as appropriate; provided that Custodian shall have received from the Fund all documentary evidence of residence or other qualification for such reduced rate or exemption required to be received under such applicable law or treaty .In the event that Custodian reasonably believes that a reduced rate of, or exemption from, any Tax is obtainable only by means of an application for refund, Custodian and the applicable Subcustodian shall have no responsibility for the accuracy or validity of any forms or documentation provided by the Fund to Custodian hereunder. The Fund hereby agrees to indemnify and hold harmless Custodian and each Subcustodian in respect of any liability arising from any underwithholding or underpayment of any Tax which results from the inaccuracy or invalidity of any such forms or other documentation, and such obligation to indemnify shall be a continuing obligation of the Fund, its successors and assigns notwithstanding the termination of this Agreement.

8.           (a)           For the purpose of settling Securities and foreign exchange transactions, the Fund shall provide Custodian with sufficient immediately available funds for all transactions by such time and date as conditions in the relevant market dictate. As used herein, “sufficient immediately available funds” shall mean either (i) sufficient cash denominated in U .S. dollars to purchase the necessary foreign currency, or (ii) sufficient applicable foreign currency, to settle the transaction. Custodian shall provide the Fund with immediately available funds each day which result from the actual settlement of all sale transactions, based upon advices rec eived by Custodian from Subcustodians, Depositories, and Foreign Depositories. Such funds shall be in U.S. dollars or such other currency as the Fund may specify to Custodian.

(b)           Any foreign exchange transaction effected by Custodian in connection with this Agreement may be entered with Custodian or a BNY Affiliate acting as principal or otherwise through customary banking channels. The Fund may issue a standing Certificate or Instructions with respect to foreign exchange transactions, but Custodian may establish roles or limitations concerning any foreign exchange facility made available to the Fund. The Fund shall bear all risks of investing in Securities or holding cash denominated in a foreign currency.

9.           Until such time as Custodian receives a certificate to the contrary with respect to a particular Security, Custodian may release the identity of the Fund to an issuer which requests such information pursuant to the Shareholder Communications Act of 1985 for the specific purpose of direct communications between such issuer and shareholder.

ARTICLE IV

PURCHASE AND SALE OF SECURITIES;

CREDITS TO ACCOUNT

1.           Promptly after each purchase or sale of Securities by the Fund, the Fund shall deliver to Custodian a Certificate or Instructions, or with respect to a purchase or sale of a Security generally required to be settled on the same day the purchase or sale is made, Oral Instructions specifying all information Custodian may reasonably request to settle such purchase or sale. Custodian shall account for all purchases and sales of Securities on the actual settlement date unless otherwise agreed by Custodian,

2.           Custodian shall release and deliver securities owned by a Fund which are held by the Custodian or in a Depository account of the Custodian only upon receipt of Instructions, which may be continuing instructions when deemed appropriate by the parties. Unless an Instruction states to the contrary, Custodian shall only release and deliver securities from the account of a Fund upon receipt of payment thereof, In the case of a sale through a Depository, the Custodian shall transfer securities sold for the account of a Fund upon (i) receipt of advice from the Depository that payment for such securities has been transferred to the account of the Custodian at the Depository, and {ii) the making of an entry on the records of t he Custodian to reflect such transfer and payment for the account of the Fund.

3.           Upon receipt of Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall payout moneys of a Fund upon the purchase of securities for the account of the Fund against the delivery of such securities to the Custodian. In the case of a purchase effected through a Depository the Custodian shall pay for securities purchased for the account of each Fund upon (i) receipt of advice from the Depository that such securities have been transferred to the account of the Custodian at the Depository, and (ii) the making of an entry on the records of the Custodian to reflect such payment and transfer for the account of the Fund.

4.           Custodian may, as a matter of bookkeeping convenience or by separate agreement with the Fund, credit the Account with the proceeds from the sale, redemption or other disposition of Securities or interest, dividends or other distributions payable on Securities prior to its actual receipt of final payment therefor. All such credits shall be conditional until Custodian's actual receipt of final payment and may be reversed by Custodian to the extent that final payment is not received. Payment with respect to a transaction will not be “final” until Custodian shall have received immediately available funds which under applicable local law, rule and/or practice are irreversible and not subject to any security int erest, levy or other encumbrance, and which are specifically applicable to such transaction.

ARTICLE V

OVERDRAFTS OR INDEBTEDNESS

1.           See Second Amendment, dated 9/5/08.  If Custodian should in its sole discretion advance funds on behalf of any Fund which results in an overdraft {this shall specifically not include any day-light overdraft) because the money held by Custodian in an Account for such Fund shall be insufficient to pay the total amount payable upon a purchase of Securities specifically allocated to such Fund, as set forth ill a Certificate, Instructions or Oral Instructions, or if an overdraft arises in the separate account of a Fund for some other reason, including, without limitation, because of a reversal of a conditional credit or the purchase of any currency, or if the Fund is for any other reason indebted to Custodian with respect to a Fund due to a borrowing from a Fund from the Custodian, (except a borrowing for investment or for temporary or emergency purposes using Securities as collateral pursuant to a separate agreement and subject to the provisions of Section 2 of this Article), such overdraft or indebtedness shall be deemed to be a loan made by Custodian to the Fund for such Fund payable on demand and shall bear interest from the date incurred at a rate per annum as disclosed on the Fee Schedule between the Funds and Custodian, as such Fee Exhibit may be amended from time to time. In addition, the Fund hereby agrees that Custodian shall to the maximum extent permitted by law have a continuing lien, security interest, and security entitlement in and to any property, including, without limitation, any investment property or any financial asset, of such Fund at any time held by Custodian for the b enefit of such Fund or in which such Fund may have an interest (which is then in Custodian's possession or control or in possession or control of any third party acting in Custodian's behalf. The Fund authorizes Custodian, in its sole discretion, at any time to charge any such overdraft or indebtedness together with interest due thereon against any balance of account standing to such Fund's credit on Custodian's books. Notwithstanding, anything in this Agreement to the contrary, provided that Custodian and a Fund are parties to a Custodial Undertaking in Connection with Master Repurchase Agreement or a Subcustodial Undertaking in Connection with Master Repurchase Agreement (collectively the “Custodial Undertakings”), Custodian agrees that any securities held by Custodian in connection with a repurchase agreement entered into by such Fund and subject to the Custodial Undertakings shall not be subject to any security interest, lien or right of setoff by Custodian or any third pep claiming through C ustodian and Custodian shall not pledge, encumber, hypothecate, transfer, dispose of, or otherwise grant any third party an interest in, any such securities.

2.           If the Fund borrows money from any bank (including Custodian if the borrowing is pursuant to a separate agreement) for investment or for temporary or emergency purposes using Securities held by Custodian hereunder as collateral for such borrowings, the Fund shall deliver to Custodian a Certificate specifying with respect to each such borrowing: (a) the Fund to which such borrowing relates; (b) the name of the bank, (c) the amount of the borrowing, (d) the time and date, if known, on which the loan is to be entered into, (e) the total amount payable to the Fund on the borrowing date, (f) the Securities to be delivered as collateral for such loan, including the name of the issuer, the title and the number of shares or th e principal amount of any particular Securities, and (g) a statement specifying whether such loan is for investment purposes or for temporary or emergency purposes and that such loan is in conformance with the '40 Act and the Fund's prospectus. Custodian shall deliver on the borrowing date specified in a Certificate the specified collateral against payment by the lending bank of the total amount of the loan payable, provided that the same conforms to the total amount payable as set forth in the Certificate. Custodian may, at the option of the lending bank, keep such collateral in its possession, but such collateral shall be subject to all rights therein given the lending bank by virtue of any promissory note or loan agreement. Custodian shall deliver such Securities as additional collateral as may be specified in a Certificate to collateralize further any transaction described in this Section. The Fund shall cause all Securities released from collateral status to be returned directly to Custodian, and Custod ian shall receive from time to time such return of collateral as may be tendered to it. In the event that the Fund fails to specify in a Certificate the Fund, the name of the issuer, the title and number of shares or the principal amount of any particular Securities to be delivered as collateral by Custodian, Custodian shall not be under any obligation to deliver any Securities.

ARTICLE VI

SALE AND REDEMPTION OF SHARES

1.           Whenever the Fund shall sell any shares issued by the Fund (“Shares”) it shall deliver to Custodian a Certificate or, Instructions specifying the amount of money and/or Securities to be received by Custodian for the sale of such Shares and specifically allocated to an Account for such Fund.

2.           Upon receipt of such money, Custodian shall credit such money to an Account in the name of the Fund for which such money was received.

3.           Except as provided hereinafter, whenever the Fund desires Custodian to make payment out of the money held by Custodian hereunder in connection with a redemption of any Shares, it shall furnish to Custodian a Certificate or Instructions specifying the total amount to be paid for such Shares. Custodian shall make payment of such total amount to the transfer agent specified in such Certificate or Instructions out of the money held in an Account of the appropriate Fund.

4.           Notwithstanding the above provisions regarding the redemption of any Shares, whenever any Shares are redeemed pursuant to any check redemption privilege which may from time to time be offered by the Fund, Custodian, unless otherwise instructed by a Certificate or Instructions, shall, upon presentment of such check;, charge the amount thereof against the money held in the Account of the Fund of the Shares being redeemed, provided, that if the Fund or its agent timely advises Custodian that such check is not to be honored, Custodian shall return such check unpaid.

ARTICLE VII

PAYMENT OF DIVIDENDS OR DISTRIBUTIONS

1.           Whenever the Fund shall determine to pay a dividend or distribution on Shares it shall furnish to Custodian Instructions or a Certificate setting forth with respect to the Fund specified therein the date of the declaration of such dividend or distribution, the total amount payable, and the payment date.

2.           Upon the payment date specified in such Instructions or Certificate, Custodian shall payout of the money held for the account of such Fund the total amount payable to the dividend agent of the Fund specified therein.

ARTICLE VIII

CONCERNING CUSTODIAN

1.           (a)           The Custodian shall be held to a standard of reasonable care in carrying out the provisions of this Agreement; provided, however, that the Custodian shall be held to different standard of care of imposed by any other provision of this Agreement or imposed upon Custodian by any applicable law or regulation, which by its terms cannot be contractually modified or waived. Except as otherwise expressly provided herein, Custodian shall not be liable for any costs, expenses, damages, liabilities or claims, including attorneys' and accountants' fees (collectively, “Losses”), incurred by or asserted against the Fund, except those Losses arising ou t of Custodian's own negligence or willful misconduct. Custodian shall have no liability whatsoever for the action or inaction of any Depositories or of any Foreign Depositories, except in each case to the extent such action or inaction is a direct result of the Custodian' s failure to fulfill its duties hereunder. With respect to any Losses incurred by the Fund as a result of the

acts or any failures to act by any Subcustodian (other than a BNY Affiliate), Custodian shall take appropriate action to recover such Losses from such Subcustodian; and Custodian's sole responsibility and liability to the Fund shall be limited to amounts so received from such Subcustodian ( exclusive of costs and expenses incurred by Custodian). In no event shall Custodian be liable to the Fund or any third party for special, indirect or consequential damages, or lost profits or loss of business, arising in connection with this Agreement, nor shall Custodian or any Subcustodian be liable: (i) for acting in accordance with any Certificate or Oral Instructions actually received by Custodian and reasonably believed by Custodian to be given by an Authorized Person; (ii) for acting in accordance with Instructions without reviewing the same; (iii) for conclusively presuming that all Instructions are given only by person(s) duly authorized; (00 for conclusively presuming that all disbursements of cash directed by the Fund, whether by a Certificate, an Oral Instruction, or an Instruction, are in accordance with Section 2(i) of Article II hereof; (y) for holding property in any particular country, including, but not limited to, Losses resulting from nationalization, expropriation or other governmental actions; regulation of the banking or securities industry; exchange or currency controls or restrictions, devaluations or fluctuations; availability of cash or Securities or market conditions which prevent the transfer of property or execution of Securities transactions or affect the value of property; (yi) for any Losses due to forces beyond the control of Custodian, including without limitation strikes, work stoppages, acts of war or terrorism, insurrection, revolution, nuclear or natural catastrophes or acts of God, or interruptions, loss or malfu nctions of utilities, communications or computer (software and hardware) services; (yii) for the insolvency of any Subcustodian (other than a BNY Affiliate), any Depository, or, except to the extent such action or inaction is a direct result of the Custodian's failure to fulfill its duties hereunder, any Foreign Depository; or (yiii)l for any Losses arising from the applicability of any law or regulation now or hereafter in effect, or from the occurrence of any event, including, without limitation, implementation or adoption of any rules or procedures of a Foreign Depository, which may affect, limit prevent or impose costs or burdens on, the transferability, convertibility, or availability of any currency or Composite Currency Unit in any country or on the transfer of any Securities, and in no event shall Custodian be obligated to substitute another currency for a currency (including a currency that is a component of a Composite Currency Unit) whose transferability, convertibility or availability has been af fected, limited, or prevented by such law, regulation or event and to the extent that any such law, regulation or event imposes a cost or charge upon Custodian in relation to the transferability, convertibility, or availability of any cash currency or Composite Currency Unit, such cost or charge shall be for the account of the Fund, and Custodian may treat any account denominated in an affected currency as a group of separate accounts denominated in the relevant component currencies.

(b)           Custodian may enter into subcontracts, agreements and understandings with any BNY Affiliate, whenever and on such terms and conditions as it deems necessary or appropriate to perform its services hereunder. No such subcontract, agreement or understanding shall discharge Custodian from its obligations hereunder.

(c)           The Fund agrees to indemnify Custodian and hold Custodian harmless from and against any and all Losses sustained or incurred by or asserted against Custodian by reason of or as a result of any action or inaction, or arising out of Custodian's performance hereunder, including reasonable fees and expenses of counsel incurred by Custodian in a successful defense of claims by the Fund; provided however, that the Fund shall not indemnify Custodian for those Losses arising out of Custodian's own negligence or willful misconduct. This indemnity shall be a continuing obligation of the Fund, its successors and assigns, notwithstanding the termination of this Agreement.

2.           Without limiting the generality of the foregoing, Custodian sep be under no obligation to inquire into, and shall not be liable for:

(a)           Any Losses incurred by the Fund or any other person as a result of the receipt or acceptance of fraudulent, forged or invalid Securities, or Securities which are otherwise not freely transferable or deliverable without encumbrance in any relevant market;

(b)           The validity of the issue of any Securities purchased, sold, or written by or for the Fund, the legality of the purchase, sale or writing thereof, or the propriety of the amount paid or received therefor;

(c)           The legality of the sale or redemption of any Shares, or the propriety of the amount to be received or paid therefor;

(d)           The legality of the declaration or payment of any dividend or distribution by the Fund;

(e)           The legality of any borrowing by the Fund;

(f)           The legality of any loan of portfolio Securities, nor shall Custodian be under any duty or obligation to see to it that any cash or collateral delivered to it by a broker, dealer or financial institution or held by it at any time as a result of such loan of portfolio Securities is adequate security for the Fund against any loss it might sustain as a result of such loan, which duty or obligation shall be the sole responsibility of the Fund. In addition, Custodian shall be under no duty or obligation to see that any broker, dealer or financial institution to which portfolio Securities of the Fund are lent makes payment to it of any dividends or interest which are payable to or for the account of the Fund during the per iod of such loan or at the termination of such loan, provided, however that Custodian shall promptly notify the Fund in the event that such dividends or interest are not paid and received when due;

(g)           The sufficiency or value of any amounts of money and/or Securities held in any Special Account in connection with transactions by the Fund; whether any broker, dealer, futures commission merchant or clearing member makes payment to the Fund of any variation margin payment or similar payment which the Fund may be entitled to receive from such broker, dealer, futures commission merchant or clearing member, or whether any payment received by Custodian from any broker, dealer, futures commission merchant or clearing member is the amount the Fund is entitled to receive, or to notify the Fund of Custodian's receiptor non-receipt of any such payment; or

(h)           Whether any Securities at any time delivered to, or held by it or by any Subcustodian, for the account of a Fund are such as properly may be held by the Fund under the provisions of its then current prospectus and statement of additional information, or to ascertain whether any transactions by the Fund, whether or not involving Custodian, are such transactions as may properly be engaged in by the Fund.

3.           Custodian may, with respect to questions of law specifically regarding an Account, obtain the advice and opinion of counsel to the independent trustees of a Fund or other counsel that is mutually agreed upon by the Funds and the Custodian and shall be fully protected with respect to anything done or omitted by it in good faith in conformity with such advice.

4.           Custodian shall be under no obligation to take action to collect any amount payable on Securities in default, or if payment is refused after due demand and presentment.

5.           Custodian shall have no duty or responsibility to inquire into, make recommendations, supervise, or determine the suitability of any transactions affecting any Account.

6.           The Fund shall pay to Custodian the fees and charges as may be specifically agreed upon from time to time and such other fees and charges at Custodian's standard rates for such services as maybe applicable. The Fund shall reimburse Custodian for all costs associated with the conversion of the Fund's Securities hereunder and the transfer of Securities and records kept in connection with this Agreement. The Fund shall also reimburse Custodian, at cost, for out-of-pocket expenses which are a normal incident of the services provided hereunder.

7.           Custodian has the right to debit any cash account for any amount payable by the Fund in connection with any and all obligations of the Fund to Custodian. In addition to the rights of Custodian under applicable law and other agreements, at any time when the Fund shall not have honored any of its obligations to Custodian, Custodian shall have the right without notice to the Fund to retain or set-off, against such obligations of the Fund, any Securities or cash Custodian or a BNY Affiliate may directly or indirectly hold for the account of the Fund, and any obligations (whether matured or unmatured) that Custodian or a BNY Affiliate may have to the Fund in any currency or Composite Currency Unit. Any such asset of, or ob ligation to, the Fund may be transferred to Custodian and any BNY Affiliate in order to effect the above rights.

8.           The Fund agrees to forward to Custodian a Certificate or Instructions confirming Oral Instructions by the close of business of the same day that such Oral Instructions are given to Custodian. The Fund agrees that the fact that such confirming Certificate or Instructions are not received or that a contrary Certificate or contrary Instructions are received by Custodian shall in no way affect the validity or enforceability of transactions authorized by such Oral Instructions and effected by Custodian. If the Fund elects to transmit Instructions through an on-line communications system offered by Custodian, the Fund's use thereof shall be subject to the Terms and Conditions attached as Appendix J hereto, and Custodian sha ll provide user and authorization codes, passwords and authentication keys only to an Authorized Person or a person reasonably believed by Custodian to be an Authorized Person.

9.           The books and records pertaining to the Fund which are in possession of Custodian shall be the property of the Fund. Such books and records shall be prepared and maintained as required by the '40 Act and the rules thereunder. The Fund, or its authorized representatives, shall have access to such books and records during Custodian's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by Custodian to the Fund or its authorized representative. Upon the reasonable request of the Fund, Custodian shall provide in hard copy or on computer disc any records included in any such delivery which are maintained by Custodian on a computer disc, or are similarly main tained.

10.           It is understood that Custodian is authorized to supply any information regarding the Accounts which is required by any law, regulation or rule now or hereafter in effect. The Custodian shall provide the Fund with any report obtained by the Custodian on the system of internal accounting control of a Depository, and with such reports on its own system of internal accounting control as the Fund may reasonably request from time to time.

11.           Custodian shall have no duties or responsibilities whatsoever except such duties and responsibilities as are specifically set forth in this Agreement, and no covenant or obligation shall be implied against Custodian in connection with this Agreement.

ARTICLE IX

TERMINATION

1.           Either of the parties hereto may terminate this Agreement by giving to the other party a notice in writing specifying the date of such termination, which shall be not less than ninety (90) days after the date of giving of such notice. In the event such notice is given by the Fund, it shall be accompanied by a copy of a resolution of the board of the Fund, certified by the Secretary or any Assistant Secretary, electing to terminate this Agreement and designating a successor Custodian or Custodians, each of which shall be a bank or trust company having not less than $2,000,000 aggregate capital, surplus and undivided profits. In the event such notice is given by Custodian, the Fund shall, on or before the termination da te, deliver to Custodian a copy of a resolution of the board of the Fund, certified by the Secretary or any Assistant Secretary, designating a successor Custodian or Custodians. In the absence of such designation by the Fund, Custodian may designate a successor Custodian which shall be a bank or trust company having not less than $2,000,000 aggregate capital, surplus and undivided profits. Upon the date set forth in such notice this Agreement shall terminate, and Custodian shall upon receipt of a notice of acceptance by the successor Custodian on that date deliver directly to the successor Custodian all Securities and money then owned by the Fund and held by it as Custodian, after deducting an fees, expenses and other accounts for the payment or reimbursement of which it shall then be entitled.

2.           If a successor Custodian is not designated by the Fund or Custodian in accordance with the preceding Section, the Fund shall upon the date specified in the notice of termination of this Agreement and upon the delivery by Custodian of all Securities (other than Securities which cannot be delivered to the Fund) and money then owned by the Fund be deemed to be its own Custodian and Custodian shall thereby be relieved of all duties and responsibilities pursuant to this Agreement, other than the duty with respect to Securities which cannot be delivered to the Fund to hold such Securities hereunder in accordance with this Agreement.

ARTICLE X

MISCELLANEOUS

1.           The Fund agrees to furnish to Custodian a new Certificate of Authorized Persons in the event of any change in the then present Authorized Persons. Until such new Certificate is received, Custodian shall be fully protected in acting upon Certificates or Oral Instructions of such present Authorized Persons.

2.           Any notice or other instrument in writing, authorized or required by this Agreement to be given to Custodian, shall be sufficiently given if addressed to Custodian and received by it at its offices at One Wall Street, New York, New York 10286, or at such other place as Custodian may from time to time designate in writing.

3.           Any notice or other instrument in writing, authorized or required by this Agreement to be given to the Fund shall be sufficiently given if addressed to the Fund and received by it at its offices at 5800 Corporate Drive, Pittsburgh PA, J5237-7000 or at such other place as the Fund may from time to time designate in writing.

4.            Each and every right granted to either party hereunder or under any other document delivered hereunder or in connection herewith, or allowed it by law or equity, shall be cumulative and may be exercised from time to time. No failure on the part of either party to exercise, and no delay in exercising, any right will operate as a waiver thereof, nor will any single or partial exercise by either party of any right preclude any other or future exercise thereof or the exercise of any other right.

5.           In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any exclusive jurisdiction, the validity, legality and enforceability of the remaining provisions shall not in any way be affected thereby. This Agreement may not be amended or modified in any manner except by a written agreement executed by both parties, except that any amendment to the Schedule I hereto need be signed only by the Fund and any amendment to Appendix I hereto need be signed only by Custodian. This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by either party without the written consent of the other.

6.           This Agreement shall be construed in accordance with the substantive laws of the State of New York, without regard to conflicts of laws principles thereof. The Fund and Custodian hereby consent to the jurisdiction of a state or federal court situated in New York City, New York in connection with any dispute arising hereunder. The Fund hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of venue of any such proceeding brought in such a court and any claim that such proceeding brought in such a court has been brought in an inconvenient forum. The Fund and Custodian each hereby irrevocably waives any and all rights to trial by jury i n any legal proceeding arising out of or relating to this Agreement.

7.           This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but such counterparts shall, together, constitute only one instrument.

8.           The Custodian is expressly put on notice of the limitation of liability as set forth in the Declaration of Trust of those registered investment companies which are business trusts and agrees that the obligations and liabilities assumed by a registered investment company or any Series pursuant to this Agreement, including, without limitation, any obligation or liability to indemnify the Custodian, shall be limited in any case to the relevant Fund and its assets and that the Custodian shall not seek satisfaction of any such obligation from the shareholders of the relevant Fund, from any other Fund or its shareholders or from the Trustees, Officers, employees or agents of the registered investment company or Series, or a ny of them. In addition, in connection with the discharge and satisfaction of any claim made by the Custodian involving more than one Fund, the Trustees or Officers of such Funds shall have the exclusive right to determine the appropriate allocations of liability for any claim between or among the Funds.

9.           The Bank hereby represents and warrants that it has implemented and shall maintain appropriate measures designed to satisfy the requirements of federal and New York law applicable to the Bank with respect to the confidentiality of the portfolio holdings and transactions of each Fund. Upon request, the Bank shall annually make available to each Fund such summaries or audit reports, including any SAS 70 report, as the Bank generally makes available to its similar customers.

IN WITNESS WHEREOF, the Funds and Custodian have caused this Agreement to be executed by their respective officers, thereunto duly authorized, as of the day and year first above written.

Each of the registered investment companies or series thereof listed on Schedule II to this Agreement

By:  /s/ Richard J. Thomas

Title: Treasurer

THE BANK OF NEW YORK

By:  /s/ Edward G. McGann

Title: EDWARD G. McGANN

         MANAGING DIRECTOR

SCHEDULE I

CERTIFICATE OF AUTHORIZED PERSONS

(The Fund – Oral and Written Instructions)

The undersigned hereby certifies the he is the duly elected and acting Treasurer of the Funds, and further certifies that the following persons have been duly authorized by each Funds’ Board of Trustees/Directors to deliver Certificates and Oral Instructions to The Bank of New York (“Custodian”) pursuant to the Custody Agreement between the Funds and Custodian dated June 7, 2005, and that the signatures appearing opposite their names are true and correct:

Leslie Ciferno

Trader

/s/ Leslie Ciferno

/s/ LC

Name

Title

Signature

Initials

Adam Cohen

Assistant Trader

/s/ Adam Cohen

/s/ ASC

Name

Title

Signature

Initials

AVP, Trading

Karol Crummie

Operations Manager

/s/ Karol Crummie

/s/ KC

Name

Title

Signature

Initials

Timothy Gannon

Senior Trader

/s/ Timothy Gannon

/s/ TG

Name

Title

Signature

Initials

Tracey Lusk

AVP, Senior Trader

/s/ Tracey L. Lusk

/s/ TLL

Name

Title

Signature

Initials

Karl Mocharko

AVP, Senior Trader

/s/ Karl Mocharko

/s/ KM

Name

Title

Signature

Initials

Joseph Mycka

Senior Trader

/s/ Joseph Mycka

/s/ JM

Name

Title

Signature

Initials

Jeffrey Petro

VP, Senior Trader

/s/ Jeffrey Petro

/s/ JP

Name

Title

Signature

Initials

Charles Stafford

Trader

/s/ Charles Stafford

/s/ CS

Name

Title

Signature

Initials

Richard Tito

SVP, Head Trader

/s/ Richard Tito

/s/ RT

Name

Title

Signature

Initials

VP Fixed Income

Timothy Trebilcock

Trader

/s/ Timothy Trebilcock

/s/ TT

Name

Title

Signature

Initials

Patrick Benacci

Asst. Trader

/s/ Patrick Benacci

/s/ PDB

Name

Title

Signature

Initials

James Grant

AVP, Senior Trader

/s/ James Grant

/s/ JG

Name

Title

Signature

Initials

Rae Ann Rice

Sr. Trader, AVP

/s/ Rae Ann Rice

/s/ RAR

Name

Title

Signature

Initials

George Wright

Sr. Trader, AVP

/s/ George B. Wright

/s/ GBW

Name

Title

Signature

Initials

Trade Support

Marjorie Beatty

Associate

/s/ Marjorie L. Beatty

/s/ MB

Name

Title

Signature

Initials

Trade Support

Lynn C. Till

Associate

/s/ Lynn C. Till

/s/ LCT

Name

Title

Signature

Initials

Trade Support

Joseph Varrati

Associate

/s/ Joseph Varrati

/s/ JV

Name

Title

Signature

Initials

Jonathan C. Conley

Senior Vice President

/s/ Jonathan C. Conley

/s/ JCC

Name

Title

Signature

Initials

Deborah A. Cunningham

Sr. Portfolio Manager

/s/ Deborah Cunningham

/s/ DAC

Name

Title

Signature

Initials

Susan R. Hill

Portfolio Manager

/s/ Susan R. Hill

/s/ SRH

Name

Title

Signature

Initials

Portfolio Manager/

William R. Jamison

Analyst

/s/ William R. Jamison

/s/ WRJ

Name

Title

Signature

Initials

Joseph M. Natoli

Portfolio Manager

/s/ Joseph M. Natoli

/s/ JMN

Name

Title

Signature

Initials

CIO, SVP,

Mary Jo Ochson

Portfolio Manager

/s/ Mary Jo Ochson

/s/ MJO

Name

Title

Signature

Initials

Michael Sirianni

VP

/s/ Michael Sirianni

/s/ MS

Name

Title

Signature

Initials

Paige Wilhelm

Portfolio Manager

/s/ Paige Wilhelm

/s/ PMW

Name

Title

Signature

Initials

The following individuals shall be authorized to provide the Custodian with Certificates and Instructions solely with regard to the payment of any expenses or liability incurred by a Fund, including, but not limited to the following payments for the account of the Fund:  interest, taxes; management, accounting, transfer agent and legal fees; and operating expenses of the Fund, whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses.

Fund Tax Manager

Diane C. Allsworth

AVP

/s/ Diane C. Allsworth

/s/ DCA

Name

Title

Signature

Initials

Kristin M. Altschaffl

Fund Treasury Manager

/s/ Kristin M. Altschaffl

/s/ KMA

Name

Title

Signature

Initials

Keith A. Antle

Tax Director

/s/ Keith A. Antle

/s/ KAA

Name

Title

Signature

Initials

Ronald J. Ecoff, Jr.

FFO, Director

/s/ Ronald J. Ecoff, Jr.

/s/ RJE

Name

Title

Signature

Initials

Allison Gerber

Fund Treasury Manager

/s/ Allison Gerber

/s/ AG

Name

Title

Signature

Initials

Charles W. McHugh

Fund Treasury Manager

/s/ Charles W. McHugh

/s/ CM

Name

Title

Signature

Initials

Fund Treasury

Deborah M. Molini

Director/VP

/s/ Deborah M. Molini

/s/ DMM

Name

Title

Signature

Initials

Richard N. Paddock

Vice President

/s/ Richard N. Paddock

/s/ RP

Name

Title

Signature

Initials

Fund Treasury

Beverly L. Pirker

Manager/AVP

/s/ Beverly L. Pirker

/s/ BLP

Name

Title

Signature

Initials

Fund Treasury

Gretchen M. Shoup

Manager/AVP

/s/ Gretchen M. Shoup

/s/ GMS

Name

Title

Signature

Initials

Fund Tax

Sean A. Suchko

Manager/AVP

/s/ Sean A. Suchko

/s/ SS

Name

Title

Signature

Initials

Richard J. Thomas

Fund Treasurer/SVP

/s/ Richard J. Thomas

/s/ RJT

Name

Title

Signature

Initials

Fund Treasury

Tatiana M. Yewisiak

Manager

/s/ Tatiana M. Yewisiak

/s/ TMY

Name

Title

Signature

Initials

This certificate supersedes any certificate of Authorized Person you may currently have on file.

[seal]                                                                By:  /s/ Richard J. Thomas

Title:  Treasurer

Date:  June 7, 2005

See Amendment dated 11/8/07

SCHEDULE II

Federated Capital Reserves Fund a portfolio of Money Market Obligations Trust

Federated Government Reserves Fund a portfolio of Money Market Obligations Trust

Federated Municipal Trust a portfolio of Money Market Obligations Trust

APPENDIX I

THE BANK OF NEW YORK

ON-LINE COMMUNICATIONS SYSTEM (THE “SYSTEM”)

TERMS AND CONDITIONS

1.           License; Use.  Upon delivery to an Authorized Person or a person reasonably believed by Custodian to be an Authorized Person of the Fund of software enabling the Fund to obtain access to the System (the “Software”), Custodian grants to the Fund a personal, nontransferable and nonexclusive license to use the Software solely for the purpose of transmitting Written Instructions, receiving reports, making inquiries or otherwise communicating with Custodian in connection with the Account(s).  The Fund shall use the Software solely for its own internal and proper business purposes and not in the operation of a service bureau. Except as set forth herein, no license or right of any kind is granted to the Fund with respect to the Software.  The Fund acknowledges that Custodian and its suppliers retain and have title and exclusive proprietary rights to the Software, including any trade secrets or other ideas, concepts, know-how, methodologies, or information incorporated therein and the exclusive rights to any copyrights, trademarks and patents (including registrations and applications for registration of either), or other statutory or legal protections available in respect thereof.  The Fund further acknowledges that all or a part of the Software may be copyrighted or trademarked (or a registration or claim made therefor) by Custodian or its suppliers.  The Fund shall not take any action with respect tot the Software inconsistent with the foregoing acknowledgement, nor shall the Fund attempt to decompile, reverse engineer or modify the Software.  The Fund may not coy, sell, lease or prov ide, directly or indirectly, any of the Software of any portion thereof to any other person or entity without Custodian’s prior written consent.  The Fund may not remove any statutory copyright notice or other notice included in the Software or on any media containing the Software.  The Fund shall reproduce any such notice on any reproduction of the Software and shall add any statutory copyright notice or other notice to the Software or media upon Custodian’s request.

2.           Equipment.  The Fund shall obtain and maintain at its own cost and expense all equipment and services, including but not limited to communications services, necessary for it to utilize the Software and obtain access to the System, and Custodian shall not be responsible for the reliability or availability of any such equipment or services.

3.           Proprietary Information.  The Software, any data base and any proprietary data, processes, information and documentation made available to the Fund (other than which are or become part of the public domain or are legally required to be made available to the public) (collectively, the “Information”), are the exclusive and confidential property of Custodian or its suppliers.  The Fund shall keep the Information confidential by using the same care and discretion that the Fund uses with respect to its own confidential property and trade secrets, but not less than reasonable care.  Upon termination of the Agreement or th e Software license granted herein for any reason, the Fund shall return to Custodian any and all copies of the Information which are in its possession or under its control.

4.           Modifications.  Custodian reserves the right to modify the Software from time to time and the Fund shall install new releases of the Software as Custodian may direct.  The Fund agrees not to modify or attempt to modify the Software without the Custodian’s prior written consent.  The Fund acknowledges that any modifications to the Software, whether by the Fund or Custodian and whether with or without Custodian’s consent, shall become the property of Custodian.

5.           NO REPRESENTATIONS OR WARRANTIES.  CUSTODIAN AND ITS MANUFACTURERS AND SUPPLIERS MAKE NO WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE SOFTWARE, SERVICES OR ANY DATABASE, EXPRESS OR IMPLIED, IN FACT OR IN LAW, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.  THE FUND ACKNOWLEDGES THAT THE SOFTWARE, SERVICES AND ANY DATABASE ARE PROVIDED “AS IS.”  IN NO EVENT SHALL CUSTODIAN OR ANY SUPPLIER BE LIABLE FOR ANY DAMAGES, WHETHER DIRECT, INDIRECT SPECIAL, OR CONSEQUENTIAL, WHICH THE FUND MAY INCUR IN CONNECTION WITH THE SOFTWARE, SERVICES OR ANY DATABASE, EVEN IF CUSTOD IAN OR SUCH SUPPLIER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.  IN NO EVENT SHALL CUSTODIAN OR ANY SUPPLIER BE LIABLE FOR ACTS OF GOD, MACHINE OR COMPUTER BREAKDOWN OR MALFUNCTION, INTERRUPTION OR MALFUNCTION OF COMMUNICATION FACILITIES, LABOR DIFFICULTIES OR ANY OTHER SIMILAR OR DISSIMILAR CAUSE BEYOND THEIR REASONABLE CONTROL.

6.           Security; Reliance; Unauthorized Use.  The Fund will cause all persons utilizing the Software and System to treat all applicable user and authorization codes, passwords and authentication keys with extreme care, and it will establish internal control and safekeeping procedures to restrict the availability of the same to persons duly authorized to give Instructions.  Custodian is hereby irrevocably authorized to act in accordance with and rely on Instructions received by it through the System.  The Fund acknowledges that it is its sole responsibility to assure that only persons duly authorized use the System and that Custodian s hall not be responsible nor liable for any unauthorized use thereof.

7.           System Acknowledgements.  Custodian shall acknowledge through the System its receipt of each transmission communicated through the System, and in the absence of such acknowledgment Custodian shall not be liable for any failure to act in accordance with such transmission and the Fund may not claim that such transmission was received by Custodian.

8.           EXPORT RESTRICTIONS.  EXPORT OF THE SOFTWARE IS PROHIBITED BY UNITED STATES LAW.  THE FUND MAY NOT UNDER ANY CIRCUMSTANCES RESELL, DIVERT, TRANSFER, TRANSSHIP OR OTHERWISE DISPOSE OF THE SOFTWARE (IN ANY FORM) IN OR TO ANY OTHER COUNTRY.  IF CUSTODIAN DELIVERED THE SOFTWARE TO THE FUND OUTSIDE OF THE UNITED STATES, THE SOFTWARE WAS EXPORTED FROM THE UNITED STATES IN ACCORDANCE WITH THE EXPORTER ADMINISTRATION REGULATIONS.  DIVERSION CONTRARY TO U.S. LAW IS PROHIBITED.  The Fund hereby authorizes Custodian to report its name and address to government agencies to which Custodian is required to provide such inf ormation by law.

9.           ENCRYPTION.  The Fund acknowledges and agrees that encryption may not be available for every communication through the System, or for all data.  The Fund agrees that Custodian may deactivate any encryption features at any time, without notice or liability to the Fund, for the purpose of maintaining, repairing or troubleshooting the System or the Software.

JOINT TRADING ACCOUNT CUSTODY AGREEMENT

(Repurchase Transactions)

Agreement made as of June 7, 2005, between the Funds listed on Schedule I hereto (individually, a “Fund”; collectively, the “Funds”) and The Bank of New York (the “Custodian”).

WITNESSETH

WHEREAS, Custodian is presently the custodian for each Fund pursuant to a separate custody agreement between such Funds and Custodian (each, a “Custody Agreement”; collectively, the “Custody Agreements”); and

WHEREAS, the Funds are permitted to enter into repurchase transactions through joint trading accounts; and

WHEREAS, Custodian is willing to act as custodian of the assets of each Fund maintained in joint trading accounts in accordance with the Custody Agreements and this Agreement; and

WHEREAS, all capitalized terms used by not defined herein shall have the meanings given them in the Custody Agreements;

NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth, the parties agree as follows:

1.           The Funds hereby request Custodian to establish and maintain certain joint trading accounts (the “Joint Trading Accounts”) to be used by the Funds for the purpose of engaging in repurchase transactions.  Custodian agrees to establish and maintain the Joint Trading Accounts and hold cash transferred to the Joint Trading Account as provided herein.

2.           On each business day that Funds intend to enter into repurchase transactions through a Joint Trading Account, an Authorized Person shall on behalf of the applicable Funds deliver to Custodian a Certificate or Written Instructions disclosing each Fund’s interest in the monies transferred to each Joint Trading Account.  Upon transfer on monies from the Joint Trading Account against receipt of securities into Joint Trading Account or a similar Joint Trading Account established by a subcustodial bank pursuant to repurchase transactions (“Repo Assets”), Custodian shall confirm to each Fund the purchase of its proportionate interest in the Repo Assets, and shall identify such interest in Custodian&# 8217;s books and records as belonging to such Fund by including the Funds’ Certificate or Written Instructions in the books and records of all appropriate Funds or otherwise.  The following business day Custodian shall transfer the monies received upon completion of repurchase transactions from each Joint Trading Account or from a similar Joint Trading Account established at a bank pursuant to a Subcustodial Undertaking in connection with a Master Repurchase Agreement, plus any accrued income received, to each Fund’s Account in proportion to such Fund’s interest in such repurchase transactions.

3.           If Custodian in its sole discretion advances funds, or if there shall arise for whatever reason an overdraft or other indebtedness in connection with a Joint Trading Account, such advance, overdraft or indebtedness shall be deemed a loan made by Custodian to a Fund to which such advance, overdraft or indebtedness relates, payable on demand and bearing interest pursuant to the terms of such Fund’s Custody Agreement with Custodian.  The Funds agree to furnish to Custodian promptly (and in any event by the close of business on the day of such advance, overdraft or indebtedness) with a Certificate or Written Instructions identifying each Fund to which such advance, overdraft or indebtedness relates, and the a mount allocable to such Fund.  In order to secure repayment of each Fund’s indebtedness to Custodian hereunder, each Fund hereby agrees that Custodian shall have a continuing lien and security interest in and to any property at any time held by it for the benefit of the Fund either hereunder or under Such Fund’s Custody Agreement with Custodian, or in which the Fund may have an interest which is then in Custodian’s possession or control or in possession or control of any third party acting in Custodian’s behalf, including in its behalf as Custodian under the Fund’s Custody Agreement with Custodian.  Each Fund authorizes Custodian, in its sole discretion, at any time to charge any advance, overdraft or indebtedness together with interest due thereon against any balance of accounts standing to the Fund’s credit on the books of Custodian, including those books maintained by Custodian in its capacity as Custodian for the Fund under is Custody Agreement with the Fund.  Notwithstanding, anything in this Agreement to the contrary, provided that Custodian and a Fund are parties to a Custodial Undertaking in Connection with Master Repurchase Agreement (collectively, the “Custodial Undertakings”), Custodian agrees that any securities held by Custodian in connection with a repurchase agreement entered into by such Fund and subject to the Custodian Undertakings shall not be subject to any security interest, lien or right of setoff by Custodian or any third party claiming through Custodian and Custodian shall not pledge, encumber, hypothecate, transfer, dispose of, or otherwise grant any third party an interest in, any such securities.

3.           It is expressly understood and agreed that in performing hereunder, Custodian is relying solely upon information contained in Certificates and Written Instructions received by it from time to time, has no independent knowledge of the terms and conditions of any repurchase transactions entered by or on behalf of any Funds, and shall have no duty to inquire into any of such terms and conditions nor any valuation responsibilities (including mark-to-market) with regard to securities and monies which are the subject of repurchase transactions hereunder.  Custodian’s sole responsibility in settling transactions through the Joint Trading Account shall be to receive and deliver securities and monies in accordance with instructions contained in Certificates and Written Instructions and to comply with paragraph 2 of this Agreement.

4.           Each Fund hereby represents and warrants, which representations and warranties shall be continuing and shall be deemed to be reaffirmed upon each instruction given by each Fund, that

(a)           its execution and delivery of this Agreement and its performance hereunder has been duly authorized by its Board of Directors or Board of Trustees (as the case may be) and constitutes is several, but not joint, binding obligation;

(b)           the person or persons executing this Agreement on its behalf has and have been duly and properly authorized to do so;

(c)           upon allocation of any advance, overdraft or indebtedness to its account pursuant to paragraph 2 above, its total borrowings from all sources (including Custodian) shall be in conformity with the requirements and limitations set forth in the Investment Company Act of 1940, as amended, and its Prospectus.

5.           This Agreement is supplemental to the Custody Agreement between Custodian and each Fund and the assets of each Fund shall be maintained and administered by Custodian subject to the terms and conditions of the Custody Agreement.  In the event of any conflict between the terms and conditions of this Agreement and the Custody Agreement of any Fund, the terms and conditions of this Agreement shall govern and control.

6.           This Agreement shall be construed in accordance with the laws of the State of New York without giving effect to the conflict of law principles thereof.  This Agreement may not be amended or modified in any manner except by a written instrument executed by each Fund and Custodian.  This Agreement may be terminated with respect to any Fund by either Custodian or such Fund upon thirty (30) days prior written notice.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers, thereunto duly authorized, as of the day and year first above written.

By:  /s/ Richard J. Thomas

On behalf of each Fund listed on

Schedule I hereto

Title:  Treasurer

THE BANK OF NEW YORK

By:  /s/ Edward G. McGann

Title:  Managing Director

See Amendment dated 11/8/07

SCHEDULE I

Federated Capital Reserves Fund a portfolio of Money Market Obligations Trust

Federated Government Reserves Fund a portfolio of Money Market Obligations Trust

Federated Municipal Trust a portfolio of Money Market Obligations Trust

JOINT TRADING ACCOUNT

REPURCHASE TRANSACTION CONFIRMATION

The Bank of New York hereby confirms the purchase by each Fund identified in the attached Certificate of its proportionate share of an undivided interest in the securities transferred to the Joint Trading Account #, as such interests are set forth in the attached Certificate.

Date:

THE BANK OF NEW YORK

By:

(Authorized Signature)

EXHIBIT C

FOREIGN CUSTODY MANAGER AGREEMENT

AGREEMENT made as of November 8, 2007 between the Funds listed on Schedule I to this Agreement (the “Funds”) and The Bank of New York (“BNY”).

W I T N E S S E T H:

WHEREAS, the Funds desire to appoint BNY as a Foreign Custody Manager on the terms and conditions contained herein;

WHEREAS, BNY desires to serve as a Foreign Custody Manager and perform the duties set forth herein on the terms and conditions contained herein;

NOW THEREFORE, in consideration of the mutual promises hereinafter contained in this Agreement, the Funds and BNY hereby agree as follows:

ARTICLE I

DEFINITIONS

Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings:

1.

“Board” shall mean the board of directors or board of trustees, as the case may be, of the Funds.

2.

“Eligible Foreign Custodian” shall have the meaning provided in the Rule.

3.

“Monitoring System” shall mean a system established by BNY to fulfill the Responsibilities specified in clauses (d) and (e) of Section 1 of Article III of this Agreement.

4.

“Responsibilities” shall mean the responsibilities delegated to BNY under the Rule as a Foreign Custody Manager with respect to each Specified Country and each Eligible Foreign Custodian selected by BNY, as such responsibilities are more fully described in Article III of this Agreement.

5.

“Rule” shall mean Rule 17f-5 under the Investment Company Act of 1940, as amended.

6.

“Specified Country” shall mean each country listed on Schedule II attached hereto and each country, other than the United States, constituting the primary market for a security with respect to which the Funds has given settlement instructions to The Bank of New York as custodian (the “Custodian”) under its Custody Agreement with the Funds.

ARTICLE II

BNY AS A FOREIGN CUSTODY MANAGER

1. The Funds on behalf of its Board hereby delegate to BNY with respect to each Specified Country the Responsibilities.

2. BNY accepts the Board’s delegation of Responsibilities with respect to each Specified Country and agrees in performing the Responsibilities as a Foreign Custody Manager to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of the Funds’ assets would exercise.

3. BNY shall provide to the Board at such times as the Board deems reasonable and appropriate based on the circumstances of the Funds’ foreign custody arrangements written reports notifying the Board of the placement of assets of the Funds with a particular Eligible Foreign Custodian within a Specified Country and of any material change in the arrangements (including the contract governing such arrangements) with respect to assets of the Funds with any such Eligible Foreign Custodian.

ARTICLE III

RESPONSIBILITIES

1. Subject to the provisions of this Agreement, BNY shall with respect to each Specified Country select an Eligible Foreign Custodian.  In connection therewith, BNY shall: (a) determine that assets of the Funds held by such Eligible Foreign Custodian will be subject to reasonable care, based on the standards applicable to custodians in the relevant market in which such Eligible Foreign Custodian operates, after considering all factors relevant to the safekeeping of such assets, including, without limitation, those contained in paragraph (c)(1) of the Rule; (b) determine that the Funds’ foreign custody arrangements with each Eligible Foreign Custodian are governed by a written contract with the Custodian which will pr ovide reasonable care for the Funds’ assets based on the standards specified in paragraph (c)(1) of the Rule; (c) determine that each contract with an Eligible Foreign Custodian shall include the provisions specified in paragraph (c)(2)(i)(A) through (F) of the Rule or, alternatively, in lieu of any or all of such (c)(2)(i)(A) through (F) provisions, such other provisions as BNY determines will provide, in their entirety, the same or a greater level of care and protection for the assets of the Funds as such specified provisions; (d) monitor pursuant to the Monitoring System the appropriateness of maintaining the assets of the Funds with a particular Eligible Foreign Custodian pursuant to paragraph (c)(1) of the Rule and the performance of the contract governing such arrangement; and (e) advise the Funds whenever BNY determines under the Monitoring System that an arrangement (including, any material change in the contract governing such arrangement) described in preceding clause (d) no longer meets the requirements of the Rule.

2. For purposes of preceding Section 1 of this Article, BNY’s determination of appropriateness shall not include, nor be deemed to include, any evaluation of Country Risks associated with investment in a particular country.  For purposes hereof, “Country Risks” shall mean systemic risks of holding assets in a particular country including but not limited to (a) an Eligible Foreign Custodian’s use of any depositories that act as or operate a system or a transnational system for the central handling of securities or any equivalent book-entries; (b) such country’s financial infrastructure; (c) such country’s prevailing custody and settlement practices; (d) nationalization, expropriation or o ther governmental actions; (e) regulation of the banking or securities industry; (f) currency controls, restrictions, devaluations or fluctuations; and (g) market conditions which affect the orderly execution of securities transactions or affect the value of securities.

ARTICLE IV

REPRESENTATIONS

1. The Funds hereby represent that: (a) this Agreement has been duly authorized, executed and delivered by the Funds, constitutes a valid and legally binding obligation of the Funds enforceable in accordance with its terms, and no statute, regulation, rule, order, judgment or contract binding on the Funds prohibits the Funds’ execution or performance of this Agreement; and (b) this Agreement has been approved and ratified by the Board.

2. BNY hereby represents that: (a) BNY is duly organized and existing under the laws of the State of New York, with full power to carry on its businesses as now conducted, and to enter into this Agreement and to perform its obligations hereunder; (b) this Agreement has been duly authorized, executed and delivered by BNY, constitutes a valid and legally binding obligation of BNY enforceable in accordance with its terms, and no statute, regulation, rule, order, judgment or contract binding on BNY prohibits BNY’s execution or performance of this Agreement; and (c) BNY has established the Monitoring System.

ARTICLE V

CONCERNING BNY

1. BNY shall not be liable for any costs, expenses, damages, liabilities or claims, including attorneys’ and accountants’ fees, sustained or incurred by, or asserted against, the Funds except to the extent the same arises out of the failure of BNY to exercise the care, prudence and diligence required by Section 2 of Article II hereof.  In no event shall BNY be liable to the Funds, the Board, or any third party for special, indirect or consequential damages, or for lost profits or loss of business, arising in connection with this Agreement.

2. The Funds shall indemnify BNY and hold it harmless from and against any and all costs, expenses, damages, liabilities or claims, including attorneys’ and accountants’ fees, sustained or incurred by, or asserted against, BNY by reason or as a result of any action or inaction, or arising out of BNY’s performance hereunder, provided that the Funds shall not indemnify BNY to the extent any such costs, expenses, damages, liabilities or claims arises out of BNY’s failure to exercise the reasonable care, prudence and diligence required by Section 2 of Article II hereof.

3. For its services hereunder, the Funds agree to pay to BNY such compensation and out-of-pocket expenses as provided in the Custodian Agreement entered into between BNY and the Funds.

4. BNY shall have only such duties as are expressly set forth herein.  In no event shall BNY be liable for any Country Risks associated with investments in a particular country.

ARTICLE VI

MISCELLANEOUS

1. This Agreement constitutes the entire agreement between the Funds and BNY as a foreign custody manager, and no provision in the Custody Agreement between the Funds and the Custodian shall affect the duties and obligations of BNY hereunder, nor shall any provision in this Agreement affect the duties or obligations of the Custodian under the Custody Agreement.

2. Any notice or other instrument in writing, authorized or required by this Agreement to be given to BNY, shall be sufficiently given if received by it at its offices at 100 Church Street, 10th Floor, New York, New York 10286, or at such other place as BNY may from time to time designate in writing.

3. Any notice or other instrument in writing, authorized or required by this Agreement to be given to the Funds shall be sufficiently given if received by it at its offices at 5800 Corporate Drive, Pittsburgh PA, J5237-7000 or at such other place as the Funds may from time to time designate in writing.

4. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions shall not in any way be affected thereby.  This Agreement may not be amended or modified in any manner except by a written agreement executed by both parties.  This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided however, that this Agreement shall not be assignable by either party without the written consent of the other.

5. This Agreement shall be construed in accordance with the substantive laws of the State of New York, without regard to conflicts of laws principles thereof.  The Funds and BNY hereby consent to the jurisdiction of a state or federal court situated in New York City, New York in connection with any dispute arising hereunder.  The Funds hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of venue of any such proceeding brought in such a court and any claim that such proceeding brought in such a court has been brought in an inconvenient forum.  The Funds and BNY each hereby irrevocably waives any and all rights to tri al by jury in any legal proceeding arising out of or relating to this Agreement.

6. The parties hereto agree that in performing hereunder, BNY is acting solely on behalf of the Funds and no contractual or service relationship shall be deemed to be established hereby between BNY and any other person by reason of this Agreement.

7. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but such counterparts shall, together, constitute only one instrument.

8. This Agreement shall terminate simultaneously with the termination of the Custody Agreement between the Funds and the Custodian, and may otherwise be terminated by either party giving to the other party a notice in writing specifying the date of such termination, which shall be not less than thirty (30) days after the date of such notice.

9. The Custodian is expressly put on notice of the limitation of liability as set forth in the Declaration of Trust of those registered investment companies which are business trusts and agrees that the obligations and liabilities assumed by a registered investment company or any Series pursuant to this Agreement, including, without limitation, any obligation or liability to indemnify the Custodian, shall be limited in any case to the relevant Fund and its assets and that the Custodian shall not seek satisfaction of any such obligation from the shareholders of the relevant Fund, from any other Fund or its shareholders or from the Trustees, Officers, employees or agents of the registered investment company or Series, or any of them.& #160; In addition, in connection with the discharge and satisfaction of any claim made by the Custodian involving more than one Fund, the Trustees or Officers of such Funds shall have the exclusive right to determine the appropriate allocations of liability for any claim between or among the Funds.

IN WITNESS WHEREOF, the Funds and BNY have caused this Agreement to be executed by their respective officers, thereunto duly authorized, as of the date first above written.

THE FUNDS LISTED ON SCHEDULE I

By:  /s/ Richard A. Novak

Title:  Treasurer

THE BANK OF NEW YORK

By:  Joseph F. Keenan

Title:  Managing Director

SCHEDULE I

Federated Capital Reserves Fund, a portfolio of Money Market Obligations Trust

Federated Government Reserves Fund, a portfolio of Money Market Obligations Trust

Federated Municipal Trust, a portfolio of Money Market Obligations Trust

Government Obligations Tax-Managed Fund, a portfolio of Money Market Obligations Trust

U.S. Treasury Cash Reserves, a portfolio of Money Market Obligations Trust

Automated Government Cash Reserves, a portfolio of Money Market Obligations Trust

Federated Market Opportunity Fund, a portfolio of Federated Equity Funds

Federated Stock Trust

SCHEDULE II

Specified Countries

Australia

National Australia Bank Ltd

Austria

Bank Austria Creditanstalt A.G.

Belgium

ING Belgium SA/NV

Brazil

Citibank N.A.

Canada

Royal Bank of Canada

Czech Republic

ING Bank N.V. Prague

Denmark

Danske Bank

Egypt

Citibank, N.A.

Finland

Nordea Bank Finland plc

France

BNP Paribas Securities Services/ CACEIS Bank

Germany

BHF-BANK AG

Hong Kong

HSBC

Hungary

ING Bank (Hungary) Rt.

India

Deutsche Bank AG Mumbai/ HSBC

Indonesia

HSBC

Israel

Bank Hapoalim B.M.

Italy

Intesa Sanpaolo S.p.A.

Japan

The Bank of Tokyo-Mitsubishi UFJ Ltd/ Mizuho Corporate Bank, Ltd.

Malaysia

HSBC Bank Malaysia Berhad

Mexico

Banco Nacional de Mexico

Netherlands

ING Bank

New Zealand

National Australia Bank

Norway

DnB NOR Bank ASA

Poland

ING Bank Slaski

Portugal

Banco Comercial Portugues

Singapore

United Overseas Bank Limited/ DBS Bank Ltd.

South Africa

Standard Bank of South Africa Limited

South Korea

HSBC

Spain

Banco Bilbao Vizcaya Argentaria S.A./ Santander Investment, S.A.

Sweden

Skandinaviska Enskilda Banken

Switzerland

Credit Suisse, Zurich

Taiwan

HSBC

Turkey

Garanti Bank

United Kingdom

The Bank of New York/ Deutsche Bank AG London (Depository and Clearing Centre)

EXHIBIT D

NON-MONEY MARKET FUNDS FEE SCHEDULE

DOMESTIC CUSTODY (U.S. Securities Processing)

Safekeeping, Income Collection, Transaction Processing, Account Administration

0.25  of a basis point per annum on the average net assets of the Fund.

U.S. Security Transaction Charges (per transaction):

$4.50           DTC/FRB Book Entry Settlements

$4.00           Repurchase Agreements (each leg)

$5.00           Time Deposits

$5.00           Maturities

$20.00                      Physical Settlements, Euroclear, Options, and Futures Transactions

$5.00           Paydowns

$4.00           Wire Transfers/Checks (not related to securities settlements)

$2.00           Interfund/Account Transactions

Manual Instruction Surcharge

Transactions instructed in a manner which does not facilitate Straight-Through-Processing will incur an additional $15 per transaction.

Out-of-Pocket Expenses

In addition to the above fee-schedule, Out-of-Pocket expenses will be charged as incurred.  These charges would include but are not limited to:

·

Securities pricing.

·

Custom electronic interfaces and/or programming beyond normal and customary system development associated with conversion.

·

Local taxes, stamp duties or other assessments, including stock exchange fees, postage and insurance for shipping, facsimile reporting, extraordinary telecommunications fees or other unusual expenses, which are unique to a country in which the Funds are investing.

See Second Amendment, dated 9/5/08

Compensating Balance Arrangement

The Funds and The Bank of New York have entered into a compensating balance arrangement, which would allow the Funds to compensate the Bank for any overdrafts by maintaining a positive cash balance the next day.  Conversely, on any day the Funds maintain a positive balance, they will be allowed to overdraw the account as compensation.  In both cases, Federal Reserve requirements, currently 10%, will be assessed.  Therefore, all overdrafts must be compensated at 100% of the total and all positive balances will allow for an overdraft of 90% of the total.

Balances for the tax-exempt portfolios will be permitted an open-ended roll forward.   The taxable portfolios are closed out on a quarterly basis with no carry-over to the subsequent quarter.  At the end of each quarter, the average overdraft will be assessed a fee of 1% above the actual Federal Funds rate at the end of the period.  Any average positive balance will receive an earnings credit computed at the daily effective 90 day T-bill rate minus 0.25 bps on the last day of the period.  Earnings credits will be offset against the Funds’ safekeeping fees.

GLOBAL CUSTODY (Non-US Securities Processing)

Global

Safekeeping Fee

Transaction Fee

Countries

*(in basis points)1

(U.S. Dollars)2

Argentina

17.00

55

Australia

1.50

25

Austria

3.00

40

Bahrain

50.00

140

Bangladesh

50.00

145

Belgium

2.50

35

Bermuda

17.00

70

Botswana

50.00

140

Brazil

12.00

30

Bulgaria

30.00

85

Canada

1.00

10

Chile

20.00

80

China “A” Shares

15.00

80

China “B” Shares

15.00

60

Colombia

50.00

95

Costa Rica

14.00

65

Croatia

25.00

70

Cyprus

15.00

35

Czech Republic

18.00

50

Denmark

2.00

35

Ecuador

30.00

55

Egypt

30.00

85

Estonia

10.00

60

Euromarket/Euroclear3

1.00

10

Euromarket/Clearstream

1.00

10

Finland

3.50

35

France

2.00

30

Germany

1.50

25

Ghana

50.00

140

Greece

9.00

40

Hong Kong

3.00

45

Hungary

20.00

55

Iceland

11.00

35

India

13.00

105

Indonesia

11.00

80

Ireland (Equities)

3.00

33

Ireland (Gov’t Bonds)

1.00

13

Israel

20.00

40

Italy

1.50

35

Ivory Coast

50.00

140

Jamaica

50.00

60

Japan

1.75

20

Jordan

50.00

140

Kazakhstan

53.00

140

Kenya

48.00

140

Latvia

50.00

45

Lebanon

50.00

140

Lithuania

20.00

43

Luxembourg

10.00

80

Malaysia

4.50

45

Malta

20.00

63

Mauritius

25.00

100

Mexico

6.50

30

Morocco

50.00

95

Namibia

50.00

60

Netherlands

2.00

25

New Zealand

2.00

35

Nigeria

50.00

60

Norway

2.50

35

Oman

50.00

140

Pakistan

50.00

140

Peru

50.00

83

Philippines

6.00

60

Poland

15.00

63

Portugal

5.00

50

Qatar

50.00

140

Romania

30.00

80

Russia Equities

40.00

95

Singapore

3.50

45

Slovak Republic

23.00

95

Slovenia

50.00

60

South Africa

2.50

30

South Korea

6.50

45

Spain

2.50

40

Sri Lanka

13.00

70

Swaziland

50.00

60

Sweden

2.00

30

Switzerland

2.00

35

Taiwan

10.00

60

Thailand

5.00

50

Trinidad & Tobago

50.00

53

Tunisia

50.00

53

Turkey

12.50

60

Ukraine

75.00

250

United Kingdom

0.50

10

Uruguay

75.00

83

Venezuela

50.00

140

Zambia

50.00

140

Zimbabwe

50.00

140

Not In Bank/Not in Custody Assets USA4………………………$500 per line per annum

Third Party Foreign Exchange Settlements

$70 per non-USD currency movement

Minimum charges imposed by Agent Banks/Local Administrators

Brazil - 15 basis points for annual administrative charges

Colombia - USD $600 per month minimum administration charge

Ecuador - USD $800 monthly minimum per relationship

Egypt - USD $400 monthly minimum per relationship

Additional Charges

Local taxes, stamp duties or other assessments, including stock exchange fees, postage and

insurance for shipping, facsimile reporting, extraordinary telecommunications fees or other unusual

expenses, which are unique to a country in which the Funds are investing

1 Fee is expressed in basis points (b.p.) per annum where 1b.p. equals one hundredth of one percent (i.e. 0.01%) and is calculated based upon month-end market value, unless stated otherwise.

2 A transaction is defined as a receipt or deliver-versus-payment, a free receive or deliver, maturities, or security transaction related to corporate events.

3 Eurobonds are held in Euroclear at a standard rate, but other types of securities (including but not limited to equities, domestic market debt and mutual funds) will be subject to a surcharge.  In addition, certain transactions that are delivered within Euroclear or from a Euroclear account to a third party depository or settlement system, will be subject to a surcharge (surcharge schedule available upon request).  NOTE: For all other markets listed above, surcharges may apply if a security is held outside of the local market.

4 This fee will be applicable for assets held on The Bank of New York Mellon’s custody or accounting systems but not held in custody within The Bank of New York Mellon’s network of subcustodian banks and agents.

EXHIBIT E

MONEY MARKET FUNDS FEE SCHEDULE

DOMESTIC CUSTODY (U.S. Securities Processing)

Safekeeping, Income Collection, Transaction Processing, Account Administration

0.25  of a basis point per annum on the average net assets of the Fund.

U.S. Security Transaction Charges (per transaction):

$4.50           DTC/FRB Book Entry Settlements

$4.00           Repurchase Agreements (each leg)

$5.00           Time Deposits

$5.00           Maturities

$20.00                      Physical Settlements, Euroclear, Options, and Futures Transactions

$5.00           Paydowns

$4.00           Wire Transfers/Checks (not related to securities settlements)

$2.00           Interfund/Account Transactions

Manual Instruction Surcharge

Transactions instructed in a manner which does not facilitate Straight-Through-Processing will incur an additional $15 per transaction.

Out-of-Pocket Expenses

In addition to the above fee-schedule, Out-of-Pocket expenses will be charged as incurred.  These charges would include but are not limited to:

·

Securities pricing

·

Custom electronic interfaces and/or programming beyond normal and customary system development associated with conversion.

·

Local taxes, stamp duties or other assessments, including stock exchange fees, postage and insurance for shipping, facsimile reporting, extraordinary telecommunications fees or other unusual expenses, which are unique to a country in which the Funds are investing.

See Second Amendment, dated 9/5/08

Compensating Balance Arrangement

The Funds and The Bank of New York have entered into a compensating balance arrangement, which would allow the Funds to compensate the Bank for any overdrafts by maintaining a positive cash balance the next day.  Conversely, on any day the Funds maintain a positive balance, they will be allowed to overdraw the account as compensation.  In both cases, Federal Reserve requirements, currently 10%, will be assessed.  Therefore, all overdrafts must be compensated at 100% of the total and all positive balances will allow for an overdraft of 90% of the total.

Balances for the tax-exempt portfolios will be permitted an open-ended roll forward.   The taxable portfolios are closed out on a quarterly basis with no carry-over to the subsequent quarter.  At the end of each quarter, the average overdraft will be assessed a fee of 1% above the actual Federal Funds rate at the end of the period.  Any average positive balance will receive an earnings credit computed at the daily effective 90 day T-bill rate minus 0.25 bps on the last day of the period.  Earnings credits will be offset against the Funds’ safekeeping fees.

GLOBAL CUSTODY (Non-US Securities Processing)

Global

Safekeeping Fee

Transaction Fee

Countries

*(in basis points)1

(U.S. Dollars)2

Argentina

17.00

55

Australia

1.50

25

Austria

3.00

40

Bahrain

50.00

140

Bangladesh

50.00

145

Belgium

2.50

35

Bermuda

17.00

70

Botswana

50.00

140

Brazil

12.00

30

Bulgaria

30.00

85

Canada

1.00

10

Chile

20.00

80

China “A” Shares

15.00

80

China “B” Shares

15.00

60

Colombia

50.00

95

Costa Rica

14.00

65

Croatia

25.00

70

Cyprus

15.00

35

Czech Republic

18.00

50

Denmark

2.00

35

Ecuador

30.00

55

Egypt

30.00

85

Estonia

10.00

60

Euromarket/Euroclear3

1.00

10

Euromarket/Clearstream

1.00

10

Finland

3.50

35

France

2.00

30

Germany

1.50

25

Ghana

50.00

140

Greece

9.00

40

Hong Kong

3.00

45

Hungary

20.00

55

Iceland

11.00

35

India

13.00

105

Indonesia

11.00

80

Ireland (Equities)

3.00

33

Ireland (Gov’t Bonds)

1.00

13

Israel

20.00

40

Italy

1.50

35

Ivory Coast

50.00

140

Jamaica

50.00

60

Japan

1.75

20

Jordan

50.00

140

Kazakhstan

53.00

140

Kenya

48.00

140

Latvia

50.00

45

Lebanon

50.00

140

Lithuania

20.00

43

Luxembourg

10.00

80

Malaysia

4.50

45

Malta

20.00

63

Mauritius

25.00

100

Mexico

6.50

30

Morocco

50.00

95

Namibia

50.00

60

Netherlands

2.00

25

New Zealand

2.00

35

Nigeria

50.00

60

Norway

2.50

35

Oman

50.00

140

Pakistan

50.00

140

Peru

50.00

83

Philippines

6.00

60

Poland

15.00

63

Portugal

5.00

50

Qatar

50.00

140

Romania

30.00

80

Russia Equities

40.00

95

Singapore

3.50

45

Slovak Republic

23.00

95

Slovenia

50.00

60

South Africa

2.50

30

South Korea

6.50

45

Spain

2.50

40

Sri Lanka

13.00

70

Swaziland

50.00

60

Sweden

2.00

30

Switzerland

2.00

35

Taiwan

10.00

60

Thailand

5.00

50

Trinidad & Tobago

50.00

53

Tunisia

50.00

53

Turkey

12.50

60

Ukraine

75.00

250

United Kingdom

0.50

10

Uruguay

75.00

83

Venezuela

50.00

140

Zambia

50.00

140

Zimbabwe

50.00

140

Not In Bank/Not in Custody Assets USA4………………………$500 per line per annum

Third Party Foreign Exchange Settlements

$70 per non-USD currency movement

Minimum charges imposed by Agent Banks/Local Administrators

Brazil - 15 basis points for annual administrative charges

Colombia - USD $600 per month minimum administration charge

Ecuador - USD $800 monthly minimum per relationship

Egypt - USD $400 monthly minimum per relationship

Additional Charges

Local taxes, stamp duties or other assessments, including stock exchange fees, postage and

insurance for shipping, facsimile reporting, extraordinary telecommunications fees or other unusual

expenses, which are unique to a country in which the Funds are investing

1  Fee is expressed in basis points (b.p.) per annum where 1b.p. equals one hundredth of one percent (i.e. 0.01%) and is calculated based upon month-end market value, unless stated otherwise.

2  A transaction is defined as a receipt or deliver-versus-payment, a free receive or deliver, maturities, or security transaction related to corporate events.

3  Eurobonds are held in Euroclear at a standard rate, but other types of securities (including but not limited to equities, domestic market debt and mutual funds) will be subject to a surcharge.  In addition, certain transactions that are delivered within Euroclear or from a Euroclear account to a third party depository or settlement system, will be subject to a surcharge (surcharge schedule available upon request).  NOTE: For all other markets listed above, surcharges may apply if a security is held outside of the local market.

4  This fee will be applicable for assets held on The Bank of New York Mellon’s custody or accounting systems but not held in custody within The Bank of New York Mellon’s network of subcustodian banks and agents

THIRD PARTY SECURITIES LENDING

AUTHORIZATION AND AGREEMENT

Reference is made to that certain Custody Agreement dated as of June 7, 2005 and amended as of April 23, 2008  (the "Custody Agreement") between each Registered Investment Company listed on Exhibit A, as amended from time to time (each is hereinafter referred to as "Customer") and The Bank of New York ("Custodian").  This Third Party Securities Lending Authorization and Agreement hereby supplements and amends the Custody Agreement.  Capitalized terms used but not defined herein shall have the meanings given them in the Custody Agreement.

1.           Please be advised that Customer has appointed Wachovia Bank, N.A. ("Agent") as its agent to lend Securities from the Fund Account(s) (“Account”) maintained by Custodian for Customer and listed on Exhibit A.  Custodian will prepare and deliver to Customer and Agent procedures, including without limitation Custodian's deadlines for receipt of instructions, governing the securities lending transactions contemplated herein (such procedures are hereinafter referred to as the "Third Party Lending Support Operating Guidelines").

2.           It is understood and agreed that Custodian shall not have any responsibility for collateral management in connection with securities loan transactions hereunder.  It shall be Agent's sole responsibility to collect appropriate collateral and verify the sufficiency thereof in connection with transactions initiated by Agent.  Agent may instruct Custodian to receive collateral into the Account(s), or if Customer desires, Custodian will establish and maintain a collateral account (also referred to herein as an "Account") to which collateral may be deposited, subject to execution and delivery to Custodian of such agreements as it may require.

3.           Customer shall cause Agent to furnish to Custodian a Certificate of Authorized Persons (including specimen signatures) identifying all of Agent's officers and employees authorized to give Oral or Written Instructions with respect to the Account(s).  Upon Custodian's receipt of such Certificate, Agent and all such officers and employees shall be deemed to be Authorized Persons for such Accounts.  Customer hereby authorizes and directs Custodian to follow Agent's Oral or Written Instructions concerning the transfer of Securities and/or collateral to or from the Account(s) with deliveries of US Securities to borrowers simultaneously offset by receipt of collateral by the Custodian and collateral disbursed by the Custodian upon simultaneous return of Secu rities from the borrower.  For foreign securities custodied outside of the United States, Securities shall only be delivered by the Custodian to a borrower if the collateral is received by the Custodian a day in advance.  Collateral will be returned to the borrower by the Custodian the day following receipt by the Custodian of Securities recalled from the borrower or upon termination of a loan.  Custodian shall comply with Agent's Oral or Written Instructions on the Business Day such instructions are received, provided they are received prior to Custodian's deadlines for the same-day processing of such Instructions, and provided further, that such Instructions conform to Custodian's data specifications.  Custodian shall be entitled to rely upon any Oral or Written Instructions from Agent without inquiry, and shall have no duty to monitor any transactions initiated by Agent in connection herewith.  Agent must notify Custodian specifically regarding any partial securities loan closing.  Custodian shall have no responsibility or liability whatsoever as a result of the occurrence of any failed transaction due to a failure by Customer or Agent to comply with Custodian's trade instruction requirements detailed in the Third Party Lending Support Operating Guidelines, including without limitation, Custodian's published cut-off times for receipt of Instructions.

4.           Custodian shall furnish to Customer and Agent on each Business Day a report listing all Securities and funds then held in the Account(s), pending settlement instructions (if any) with respect to such Securities, and such other reports as Customer and Custodian shall agree.  All reports sent to Agent shall be in such format as Customer and Custodian shall agree.  Custodian shall have no responsibility to deliver any Security pursuant to Agent's Oral or Written Instructions if such Security is subject to a pending settlement instruction.  Customer shall be solely responsible for instructing Agent to recall any Security on loan if such Security is required to settle a trade.  Custodian s hall have no responsibility or liability in connection with any failed settlement due to a failure by Customer or Agent to cause the timely return of any Security on loan.

5.           Customer will receive corporate action notifications from Custodian (as set forth in the Custody Agreement); provided however, that in order for Customer to receive such notifications in connection with  Securities, Customer agrees that at least one share/one unit of its position in the relevant Securities must remain in an Account.  Customer must advise Custodian of the action to be taken on its position by the deadlines established by Custodian, provided however, that Custodian will process such corporate action instructions only for the Securities that remain in the Account(s).  It shall be Customer's responsibility to advise Agent of the action it has elected for Securities on loan. &# 160;If Customer's election results in its right to receive any proceeds (cash or securities) with respect to the loaned position, either Customer or Agent must advise Custodian of this event.  Custodian shall have no responsibility or liability in the event of any discrepancy between the corporate action election delivered to Custodian and that delivered to Agent.  Custodian may in its discretion send Customer reminders concerning elective events affecting loaned Securities even though voting instructions for such positions must be sent directly to Agent.  Customer understands and agrees that Custodian will not provide proxy services on loaned Securities.

6.           Custodian will post income for positions subject to securities loan transactions hereunder in accordance with Custodian's standard income pre-post schedule.  If Custodian does not receive an income payment within two Business Days it may in its discretion reverse the credit.  In the event that such income payment is received after Custodian has reversed the credit (a "Late Payment"), Custodian will credit such Late Payment in the currency in which it is received.  Custodian will not accept "standing instructions" to convert any such Late Payment that is posted in non-U.S. currencies.  Foreign exchange conversions will be processed separately as funds are finally received. Customer sha ll assume all risks associated with fluctuations in exchange rates affecting income.  Custodian shall not have any responsibility for the collection of any income due but not received for loaned Securities over the "ex" date or record date for the Securities.

7.           Custodian shall have no duties or responsibilities with respect to securities on loan except such duties and responsibilities as are specifically set forth in this Third Party Securities Lending Authorization and Agreement, and no covenant or obligation shall be implied against Custodian in connection herewith.  For purposes of this provision in particular and this Third Party Securities Lending Authorization and Agreement as a whole, Customer agrees that any Service Level Description or Third Party Lending Support Operating Guidelines are simply a description of services and performance guidelines that Custodian shall endeavor to achieve, that the same shall not impose duties or obligations on Custodian beyond th ose expressly set forth herein, and that Custodian shall not be liable for any discrepancy between its actual performance hereunder and anything contained in such Service Level Description or Third Party Lending Support Operating Guidelines.  Custodian shall be subject to the standard of care set forth in the Custody Agreement.

8.           Customer understands and agrees that Custodian shall not be responsible for any tax reclaims that are due on loaned Securities hereunder.  It is the responsibility of Customer (or its Agent) to collect any tax benefits that may be due to Customer in connection with any such transaction.

9.           All overdrafts and indebtedness in connection with the Account(s) shall be subject to the terms and conditions of the Custody Agreement.  Any account established pursuant to Section 2 hereof shall be deemed to be an "Account" for such purposes.

10.           For its services hereunder, Customer shall pay to the Custodian such fees and expenses as are mutually agreed from time to time.  Custodian agrees to invoice Agent directly for such fees and expenses, it being agreed however, that payment shall remain the responsibility of Customer if Agent does not make payment within 60 days of receipt of invoice.  However, if the invoice is disputed, in good faith, by either the Agent or the Customer, then the payment period shall be tolled and the parties will act in good faith to promptly resolve the disputed invoice.

11.           Customer may rescind the authority granted to Agent hereby at any time upon prior written notice to Custodian.

12.           Except as provided herein, the Custody Agreement shall remain in full force and effect.

On behalf of each Registered Investment

Company listed on Exhibit A, on behalf of

itself or its portfolios

By:  /s/ Richard A. Novak

Title:  Treasurer

Date :  9/3/08

ACKNOWLEDGED AND AGREED:

THE BANK OF NEW YORK

By:  /s/ illegible signature

Title:  Vice President

Date:  8/28/08

Amendment to

Custody Agreement

between

The Bank of New York

and

The Funds listed on Schedule II to the Custody Agreement, as amended from time to time

This Amendment (the “Amendment”) dated as of November 8, 2007 between The Bank of New York (“Custodian”) and the Funds listed on Schedule II to the Custody Agreement, as amended by Exhibit A attached hereto (each a “Fund”).

WHEREAS, the Federated Capital Reserves Fund, Federated Government Reserves Fund and Federated Municipal Trust (collectively, the “Federated Reserves Funds”), and Custodian, having executed the Custody Agreement dated June 7, 2005, now wish to make certain changes to the Custody Agreement and provisions thereof which provisions the Federated Reserves Funds and Custodian agree shall be deemed by them, and each of them, to be included as of the date of this Amendment within the Custody Agreement as if originally stated therein; and

WHEREAS, the Federated Reserves Funds and the Custodian agree to the addition of the following funds to the Custody Agreement: Government Obligations Tax-Managed Fund, U.S. Treasury Cash Reserves, and Automated Government Cash Reserves, each a portfolio of Money Market Obligations Trust; Federated Market Opportunity Fund, a portfolio of Federated Equity Funds; and Federated Stock Trust; and

WHEREAS, the Funds’ Board desires to delegate certain of its responsibilities for performing the services set forth in paragraphs (c)(1), (c)(2) and (c)(3) of Rule 17f-5 of the Investment Company Act of 1940 to the Custodian as Foreign Custody Manager and the Custodian agrees to accept such delegation of responsibilities; and

WHEREAS, the Custody Agreement is amended to include a Fee Schedule for non-money market funds;

WHEREAS, the Custody Agreement Fee Schedule for non-money market funds is amended to reduce the interest rate on overdrafts from 2% to 1% and to include a Global Custody Fee Schedule; and

WHEREAS, the Custody Agreement Fee Schedule for money market funds is amended to, include three new money market funds, to reduce the interest rate on overdrafts from 2% to 1% and to include a Global Custody Fee Schedule.

NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Funds and Custodian hereby agree as follows:

1.           Schedule II of the Custody Agreement and Schedule I of the Joint Trading Account Agreement are each replaced with the Schedule II and Schedule I respectively, attached to this Amendment as Exhibits A and B, respectively.

2.

The Custodian shall serve as Foreign Custody Manager in accordance with the Foreign Custody Management Agreement, attached to this Amendment as Exhibit C.

3.

The Custody Agreement is amended to include a Fee Schedule for non-money market funds, attached to this Amendment as Exhibit D.

4.

The Fee Schedule for non-money market funds is hereby added to the Custody Agreement in the form attached to this Amendment as Exhibit D.

5.

The Fee Schedule for money funds is amended to include Government Obligations Tax-Managed Fund, U.S. Treasury Cash Reserves, and Automated Government Cash Reserves, each a portfolio of Money Market Obligations Trust, to reduce the interest rate on overdrafts from 2% to 1% above the actual Federal Funds rate at the end of the period and to provide a Global Custody Fee schedule, attached to this Amendment as Exhibit E.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly designated officers below as of the day and year first above written.

ACKNOWLEDGED AND AGREED:

Custodian:

THE BANK OF NEW YORK

On behalf of each of the funds indicated on Schedule II of the Custody Agreement, as amended from time to time.

By:  /s/ Joseph F. Keenan

By:  /s/ Richard A. Novak

Title:  Managing Director

Title:  Treasurer

EXHIBIT A

CUSTODY AGREEMENT

SCHEDULE II

Federated Capital Reserves Fund, a portfolio of Money Market Obligations Trust

Federated Government Reserves Fund, a portfolio of Money Market Obligations Trust

Federated Municipal Trust, a portfolio of Money Market Obligations Trust

Government Obligations Tax-Managed Fund, a portfolio of Money Market Obligations Trust

U.S. Treasury Cash Reserves, a portfolio of Money Market Obligations Trust

Automated Government Cash Reserves, a portfolio of Money Market Obligations Trust

Federated Market Opportunity Fund, a portfolio of Federated Equity Funds

Federated Stock Trust

EXHIBIT B

JOINT TRADING ACCOUNT AGREEMENT

SCHEDULE I

Federated Capital Reserves Fund, a portfolio of Money Market Obligations Trust

Federated Government Reserves Fund, a portfolio of Money Market Obligations Trust

Federated Municipal Trust, a portfolio of Money Market Obligations Trust

Government Obligations Tax-Managed Fund, a portfolio of Money Market Obligations Trust

U.S. Treasury Cash Reserves, a portfolio of Money Market Obligations Trust

Automated Government Cash Reserves, a portfolio of Money Market Obligations Trust

Federated Market Opportunity Fund, a portfolio of Federated Equity Funds

Federated Stock Trust

Second Amendment to the Custody Agreement

This Amendment is made as of September 5, 2008 to the Custody Agreement (the “Agreement”) dated June 7, 2005 and amended November 8, 2007 between the Funds listed on Schedule II attached hereto (each a "Fund") and The Bank of New York Mellon (the "Custodian").

WHEREAS, each Fund and the Custodian wish to modify the provisions of the Agreement as set forth below;

NOW THEREFORE, each the Fund and the Custodian agree to the following amendments.

1.           Section 14. “Internal Operating Account” to Article I of the Agreement shall be revised as follows:

14.  “Internal Operating Account” shall mean accounts established by the Custodian at the direction of a Fund to facilitate the intraday transfer of monies to or from the Custodian representing aggregated subscriptions or redemptions for allocation to individual Funds as indicated by the Fund or its agent.

And;

Each Fund and the Custodian hereby amend Article V. Section 1 of the Agreement by replacing the first sentence of the section as follows:

If Custodian should in its sole discretion advance funds on behalf of any Fund which results in an overdraft at the end of any day, because the money held by Custodian in an Account, including an Internal Operating Account, for such Fund shall be insufficient to pay the total amount payable upon a purchase of Securities specifically allocated to such Fund, as set forth in a Certificate, Instructions or Oral Instructions, or if an overdraft arises in the separate account of a Fund for some other reason, including, without limitation, because of a reversal of a conditional credit or the purchase of any currency, or if the Fund is for any other reason indebted to Custodian with respect to a Fund, due to borrowing by a Fund from the Custodian, (except a borrowing for investment or for temporary or emergency purposes using Securities as colla teral pursuant to a separate agreement and subject to the provisions of Section 2 of this Article), such overdraft or indebtedness shall be deemed to be a loan made by Custodian to the Fund for such Fund payable on demand and shall bear interest from the date incurred at a rate per annum as disclosed on the Fee Schedule between the Funds and the Custodian as such Fee Exhibit may be amended from time to time.

2.           Within Exhibit D, the section entitled “Compensating Balance Arrangement” is replaced in its entirety with the following Amended and Restated section entitled “Compensating Balance Arrangement” as attached hereto.

3.           Within Exhibit E, the section entitled “Compensating Balance Arrangement” is replaced in its entirety with the following Amended and Restated section entitled “Compensating Balance Arrangement” as attached hereto.

4.           Each Exhibit A, Exhibit B, and Schedule I to Exhibit C, the Foreign Custody Manager Agreement, are updated to include the following new Funds:

Federated California Municipal Income Fund

Federated New York Municipal Income Fund

Federated North Carolina Municipal Income Fund

Federated Ohio Municipal Income Fund

Federated Pennsylvania Municipal Income Fund

IN WITNESS WHEREOF, this Amendment has been executed for and on behalf of the undersigned as of the day and year first written above.

On behalf of each of the Funds indicated on Schedule II attached hereto

By:  /s/ Richard A. Novak

Name:  Richard A. Novak

Title:  Treasurer

THE BANK OF NEW YORK MELLON

By:  /s/ Bruce L. Baumann

Title:  Vice President

Amended and Restated

Exhibit D

Compensating Balance Arrangement

Each of the Funds listed below and The Bank of New York Mellon have entered into an earnings credit balance arrangement pursuant to which it has been agreed that 90% of any positive balances will be compensated at the 90 day T-Bill rate and 100% of overdrawn balances will be charged at a rate of 1% over the Fed Funds rate.  Monthly, the net resultant credit or charge will be applied to the each Funds’ respective safekeeping fees. Credits that exceed the safekeeping fee may be carried over into the next billing period at the discretion of Custodian.

FUNDS

Federated Stock Trust

Federated Market Opportunity Fund

Federated California Municipal Income Fund

Federated North Carolina Municipal Income Fund

Federated New York Municipal Income Fund

Federated Ohio Municipal Income Fund

Federated Pennsylvania Municipal Income Fund

See Fifth Amendment dated 11/13/09 for Compensating Balance Arrangement

Amended and Restated

Exhibit E

Compensating Balance Arrangement

Each Fund listed below and The Bank of New York Mellon (the “Bank”) have entered into a average compensating balance arrangement, which would allow the Funds to compensate the Bank for any overdrafts by maintaining a positive cash balance and conversely, on any day a Fund maintains a positive balance, the respective Fund will be permitted to overdraw the account as compensation.

In each instance, Federal Reserve requirements (currently 10%), will be assessed.  Therefore, all overdrafts must be compensated at 100% of the total and all positive balances will allow for an overdraft of up to 90% of the total (unless the positive balance is the result of an error on the part on the Bank, in which case the positive balance would be assessed at 100%).  The Funds shall maintain the average compensating balance over quarterly periods (ending March, June, September and December for FGRF, FCRF and FMUTR; and ending February, May, August, and November for AGCR, USTCR and GOTMF).   Average balances will be computed at the end of the quarter.  Net positive balances will receive an earnings credit computed at the daily effective 90 – day T-Bill rate on the last day of a p eriod.  Net negative balances will be charged at the Fed Funds rate plus 1% on the last day of the period.  Quarterly net credits or charges will be applied to the safekeeping fees. Credits that exceed the safekeeping fee will be carried over into the next billing period but must be applied in a 12 month cycle; all accumulated unapplied credits will expire in the final quarter of the cycle, i.e. in November or December.  However, upon specific request from Fund, Custodian at its discretion may agree to carry forward into the next 12 month cycle any accumulated credits, contingent on their application within a specified time period.

Credits are not redeemable for cash and will expire in the event the relationship with the Funds is terminated.

FUNDS

Federated Capital Reserves Fund (FCRF)

Federated Government Reserve Fund (FGRF)

Federated Municipal Trust Fund (FMUTR)

US Treasury Cash Reserve Fund (USTCR)

Automated Government Cash Reserves (AGCR)

Government Obligations Tax Managed Fund (GOTMF)

Third Amendment to the Custody Agreement

This Amendment is made as of September 8, 2009 to the Custody Agreement (the “Agreement”) dated June 7, 2005, amended November 7, 2007 and September 5, 2008  between the Funds listed on Schedule II attached hereto (each a "Fund") and The Bank of New York Mellon (the "Custodian").

WHEREAS, each Fund and the Custodian wish to modify the provisions of the Agreement as set forth below;

NOW THEREFORE, each the Fund and the Custodian agree to the following amendments.

1.           Within Exhibit C, the section entitled Schedule II is replaced in its entirety with Amended and Restated Schedule II as attached hereto.

2.           Exhibit D, the fee schedule for non-money market funds, is amended to include a fee for the safekeeping of gold bullion and a transaction charge for settlement of trades involving same with restated Exhibit D as attached hereto.

3.           A Precious Metals Supplement is added as Exhibit F to include provisions for the custody of assets consisting of precious metals held for the Federated Market Opportunity Fund.

IN WITNESS WHEREOF, this Amendment has been executed for and on behalf of the undersigned as of the day and year first written above.

On behalf of each of the Funds indicated on Schedule II attached hereto

By:   /s/ Richard A. Novak

Title:  Treasurer

THE BANK OF NEW YORK MELLON

By: /s/ Andrew Pfeifer

Title:  Vice President

Custody Agreement

Schedule II

Federated Stock Trust

Federated Market Opportunity Fund

Federated California Municipal Income Fund

Federated North Carolina Municipal Income Fund

Federated New York Municipal Income Fund

Federated Ohio Municipal Income Fund

Federated Pennsylvania Municipal Income Fund

Federated Capital Reserves Fund

Federated Government Reserve Fund

Federated Municipal Trust Fund

US Treasury Cash Reserve Fund

Automated Government Cash Reserves

Government Obligations Tax Managed Fund

See Fourth Amendment adding new funds, effective 10/23/09

Custody Agreement

Amended and Restated

Exhibit C, Schedule II

Specified Countries

Country/Market

Subcustodian(s)

Argentina

Citibank N.A.

Australia

National Australia Bank Limited

Austria

UniCredit Bank Austria AG

Bahrain

HSBC Bank Middle East Limited

Bangladesh

Standard Chartered Bank

Belgium

ING Belgium, SA/NV

Benin

Société Générale de Banques en Côte d’Ivoire

Bermuda

Bank of Bermuda Limited

Botswana

Barclays Bank of Botswana Ltd.

Brazil

Citibank N.A.

Bulgaria

ING Bank N.V.

Burkina Faso

Société Générale de Banques en Côte d’Ivoire

Canada

CIBC Mellon Trust Company

Cayman Islands

The Bank of New York Mellon

Channel Islands

The Bank of New York Mellon

Chile

Banco de Chile

China

HSBC Bank (China) Company Limited

Colombia

Cititrust Colombia S.A.

Costa Rica

Banco BCT

Croatia

Privredna Banka Zagreb d.d.

Cyprus

EFG Eurobank Ergasias S.A.

Czech Republic

ING Bank  N.V.

Denmark

Danske Bank

Ecuador

Banco de la Produccion S.A.

Egypt

HSBC Bank Egypt S.A.E.

Estonia

SEB Pank AS

Euromarket

Clearstream Banking Luxembourg S.A.

Euromarket

Euroclear Bank

Finland

Skandinaviska Enskilda Banken

France

BNP Paribas Securities Services

France

CACEIS Bank

Germany

BHF Asset Servicing GmbH

Ghana

Barclays Bank of Ghana Ltd.

Greece

EFG Eurobank Ergasias S.A.

Guinea Bissau

Société Générale de Banques en Côte d’Ivoire

Hong Kong

HSBC Ltd.

Hungary

ING Bank N.V.

Iceland

New Landsbanki Islands

India

Deutsche Bank AG

Indonesia

HSBC Ltd.

Ireland

The Bank of New York Mellon

Israel

Bank Hapoalim B.M.

Italy

Intesa Sanpaolo S.p.A

Ivory Coast

Société Générale de Banques en Côte d’Ivoire

Japan

Mizuho Corporate Bank Ltd. (MHCB)

Japan

The Bank of Tokyo – Mitsubishi UFJ Ltd.

Jordan

HSBC Bank Middle East Ltd.

Kazakhstan

HSBC Kazakhstan

Kenya

Barclays Bank of Kenya Ltd.

Kuwait

HSBC Bank Middle East Ltd.

Latvia

AS SEB banka

Lebanon

HSBC Bank Middle East Ltd.

Lithuania

SEB Bankas

Luxembourg

Banque et Caisse d’Epargne de l’Etat (BCEEL)

Malaysia

HSBC Bank Malaysia Berhad

Mali

Société Générale de Banques en Côte d’Ivoire

Malta

HSBC Bank Malta plc

Mauritius

HSBC Ltd.

Mexico

Banco Nacional de Mexico (BANAMEX)

Morocco

Citibank Maghreb

Namibia

Standard Bank Namibia Ltd

Netherlands

BNY Mellon Asset Servicing BV

New Zealand

National Australia Bank

Niger

Société Générale de Banques en Côte d’Ivoire

Nigeria

Stanbic IBTC Bank Plc

Norway

DnB NOR Bank ASA

Oman

HSBC Bank Middle East Ltd.

Pakistan

Deutsche Bank AG

Palestinian Autonomous Area

HSBC Bank Middle East Ltd.

Peru

Citibank del Peru, S.A.

Philippines

HSBC Ltd.

Poland

ING Bank Slaski

Portugal

Banco Comercial Portugues

Qatar

HSBC Bank Middle East Ltd.

Romania

ING Bank N.V.

Russia

ING Bank (Eurasia)

Saudi Arabia

SABB Securities Limited

Senegal

Société Générale de Banques en Côte d’Ivoire

Serbia

UniCredit Bank Austria AG

Singapore

DBS Bank Ltd.

Singapore

United Overseas Bank Ltd.

Slovak Republic

ING Bank N.V.

Slovenia

UniCredit Banka Slovenia d.d.

South Africa

Standard Bank of South Africa

South Korea

HSBC Ltd.

Spain

Banco Bilbao Vizcaya Argentaria S.A. (BBVA)

Spain

Santander Investment S.A.

Sri Lanka

HSBC Ltd.

Swaziland

Standard Bank Swaziland Ltd

Sweden

Skandinaviska Enskilda Banken

Switzerland

Credit Suisse

Taiwan

Standard Chartered Bank (Taiwan) Ltd. / HSBC

Thailand

Bangkok Bank Public Company Ltd.

Thailand

HSBC Ltd

Togo

Société Générale de Banques en Côte d’Ivoire

Trinidad & Tobago

Republic Bank Ltd.

Tunisia

Banque Internationale Arabe de Tunisie

Turkey

Deutsche Bank AS

Ukraine

ING Bank Ukraine

United Arab Emirates

HSBC Bank Middle East Ltd.

United Kingdom

Deutsche Bank AG

United Kingdom

The Bank of New York Mellon

United States

The Bank of New York Mellon

Uruguay

Banco Itaú Uruguay S.A.

Venezuela

Citibank N.A.

Vietnam

HSBC Bank (Vietnam) Ltd

Zambia

Barclays Bank of Zambia Ltd

Zimbabwe

Barclays Bank of Zimbabwe Ltd

Custody Agreement

Amended and Restated

Exhibit D

Non-Money Market Funds Fee Schedule

Domestic Custody (U.S. Securities Processing)

Safekeeping, Income Collection, Transaction Processing, Account Administration

0.25           of a basis point per annum on the average net assets of the Fund.

GGold Bullion Safekeeping – at the following rates, minimum $75,000 per annum:

$20           per 400oz bar per month

$10           per 100oz bar per month

U.S. Security Transaction Charges (per transaction):

$4.50           DTC/FRB Book Entry Settlements

$4.00           Repurchase Agreements (each leg)

$5.00           Time Deposits

$5.00           Maturities

$20.00                      Physical Settlements, Euroclear, Options, and Futures Transactions

$5.00           Paydowns

$4.00           Wire Transfers/Checks (not related to securities settlements)

$2.00           Interfund/Account Transactions

Gold Bullion Transaction Charges

$  5           per receipt trade

$20           per delivery per 400oz bar

$10           per delivery per 100oz bar

Manual Instruction Surcharge

Transactions instructed in a manner which does not facilitate Straight-Through-Processing will incur an additional $15 per transaction.

Out-of-Pocket Expenses

In addition to the above fee-schedule, Out-of-Pocket expenses will be charged as incurred.  These charges would include but are not limited to:

·

Securities pricing

·

Custom electronic interfaces and/or programming beyond normal and customary system development associated with conversion.

·

Local taxes, stamp duties or other assessments, including stock exchange fees, postage and insurance for shipping, facsimile reporting, extraordinary telecommunications fees or other unusual expenses, which are unique to a country in which the Funds are investing.

Global Custody (non-U.S. securities processing)

Global

Safekeeping Fee

Transaction Fee5

Countries

*(in basis points)6

(U.S. Dollars)

Argentina

17.00

55

Australia

1.50

25

Austria

3.00

40

Bahrain

50.00

140

Bangladesh

50.00

145

Belgium

2.50

35

Bermuda

17.00

70

Botswana

50.00

140

Brazil

12.00

30

Bulgaria

30.00

85

Canada

1.00

10

Chile

20.00

80

China “A” Shares

15.00

80

China “B” Shares

15.00

60

Colombia

50.00

95

Costa Rica

14.00

65

Croatia

25.00

70

Cyprus

15.00

35

Czech Republic

18.00

50

Denmark

2.00

35

Ecuador

30.00

55

Egypt

30.00

85

Estonia

10.00

60

Euromarket/Euroclear7

1.00

10

Euromarket/Clearstream

1.00

10

Finland

3.50

35

France

2.00

30

Germany

1.50

25

5 A transaction is defined as a receipt or deliver-versus-payment, a free receive or deliver, maturities, or security transaction related to corporate events.

6 Fee is expressed in basis points (b.p.) per annum where 1b.p. equals one hundredth of one percent (i.e. 0.01%) and is calculated based upon month-end market value, unless stated otherwise.

7 Eurobonds are held in Euroclear at a standard rate, but other types of securities (including but not limited to equities, domestic market debt and mutual funds) will be subject to a surcharge.  In addition, certain transactions that are delivered within Euroclear or from a Euroclear account to a third party depository or settlement system, will be subject to a surcharge (surcharge schedule available upon request).  NOTE: For all other markets listed above, surcharges may apply if a security is held outside of the local market.

Global

Safekeeping Fee

Transaction Fee

Countries

*(in basis points)

(U.S. Dollars)

Ghana

50.00

140

Greece

9.00

40

Hong Kong

3.00

45

Hungary

20.00

55

Iceland

11.00

35

India

13.00

105

Indonesia

11.00

80

Ireland (Equities)

3.00

33

Ireland (Gov’t Bonds)

1.00

13

Israel

20.00

40

Italy

1.50

35

Ivory Coast

50.00

140

Jamaica

50.00

60

Japan

1.75

20

Jordan

50.00

140

Kazakhstan

53.00

140

Kenya

48.00

140

Latvia

50.00

45

Lebanon

50.00

140

Lithuania

20.00

43

Luxembourg

10.00

80

Malaysia

4.50

45

Malta

20.00

63

Mauritius

25.00

100

Mexico

6.50

30

Morocco

50.00

95

Namibia

50.00

60

Netherlands

2.00

25

New Zealand

2.00

35

Nigeria

50.00

60

Norway

2.50

35

Oman

50.00

140

Pakistan

50.00

140

Peru

50.00

83

Philippines

6.00

60

Poland

15.00

63

Portugal

5.00

50

Qatar

50.00

140

Romania

30.00

80

Russia Equities

40.00

95

Global

Safekeeping Fee

Transaction Fee

Countries

*(in basis points)

(U.S. Dollars)

Singapore

3.50

45

Slovak Republic

23.00

95

Slovenia

50.00

60

South Africa

2.50

30

South Korea

6.50

45

Spain

2.50

40

Sri Lanka

13.00

70

Swaziland

50.00

60

Sweden

2.00

30

Switzerland

2.00

35

Taiwan

10.00

60

Thailand

5.00

50

Trinidad & Tobago

50.00

53

Tunisia

50.00

53

Turkey

12.50

60

Ukraine

75.00

250

United Kingdom

0.50

10

Uruguay

75.00

83

Venezuela

50.00

140

Zambia

50.00

140

Zimbabwe

50.00

140

Not In Bank/Not in Custody Assets USA8 ………………………$500 per line per annum

Third Party Foreign Exchange Settlements

$70 per non-USD currency movement

Minimum charges imposed by Agent Banks/Local Administrators

Brazil - 15 basis points for annual administrative charges

Colombia - USD $600 per month minimum administration charge

Ecuador - USD $800 monthly minimum per relationship

Egypt - USD $400 monthly minimum per relationship

Additional Charges

Local taxes, stamp duties or other assessments, including stock exchange fees, postage and

insurance for shipping, facsimile reporting, extraordinary telecommunications fees or other unusual

expenses, which are unique to a country in which the Funds are investing.

Earnings Credit Arrangement

Each of the Funds listed below and The Bank of New York Mellon have entered into an earnings credit balance arrangement pursuant to which it has been agreed that 90% of any positive balances will be compensated at the 90 day T-Bill rate and 100% of overdrawn balances will be charged at a rate of 1% over the Fed Funds rate.  Monthly, the net resultant credit or charge will be applied to the each Funds’ respective safekeeping fees. Credits that exceed the safekeeping fee may be carried over into the next billing period at the discretion of the Custodian.

FUNDS

Federated Stock Trust

Federated Market Opportunity Fund

Federated California Municipal Income Fund

Federated North Carolina Municipal Income Fund

Federated New York Municipal Income Fund

Federated Ohio Municipal Income Fund

Federated Pennsylvania Municipal Income Fund

See Fourth Amendment adding new funds, effective 10/23/09

8 This fee will be applicable for assets held on The Bank of New York Mellon’s custody or accounting systems but not held in custody within The Bank of New York Mellon’s network of subcustodian banks and agents.

Custody Agreement

Exhibit F

PRECIOUS METALS SUPPLEMENT

(Precious Metals Physically Held in the USA)

In addition to the provisions of that certain Global Custody Agreement dated as of June 7, 2005, as amended, pursuant to which the registered investment company, the Federated Market Opportunity Fund, (the “Customer”) has appointed The Bank of New York Mellon, formerly known as The Bank of New York (the “Custodian”) as its custodian of securities and cash and to perform related services (the “Agreement”), the following provisions shall apply to the custody of assets consisting of precious metals.

ARTICLE I

APPOINTMENT OF CUSTODIAN; CUSTODIAL SERVICES TO BE PROVIDED BY SUBCUSTODIAN

1.      Customer hereby appoints the Custodian as custodian to hold and maintain certain property consisting of the metals described in the attached Addendum A (the “Precious Metals”) and which are specified in each authenticated trade instruction sent by the Customer or it’s Authorized Representative to the Custodian.

2.      Custodian hereby accepts appointment as such custodian of Precious Metals and agrees to perform its duties in respect thereof pursuant to the provisions of this Supplement. Customer acknowledges that Custodian shall utilize the services of one or more subcustodians, identified to Customer from time to time (each, for purposes of this Supplement, a “Subcustodian”), to serve as warehouseman of the Precious Metals held hereunder.  Precious Metals held through a Subcustodian shall be held subject to the terms and conditions of Custodian’s agreement with such Subcustodian.  Custodian at any time may cease utilizing any Subcustodian and/or may replace a Subc ustodian with a different Subcustodian. In the event Custodian selects a replacement Subcustodian, Custodian shall not utilize such replacement Subcustodian until after providing Customer with commercially reasonable notice.

ARTICLE II

RESPONSIBILITIES OF CUSTODIAN AND SUBCUSTODIANS

1.      Custodian shall receive, hold and keep the Precious Metals at a secure facility maintained by a Subcustodian which shall be identified to Customer from time to time (the “Secure Facility”).

2.      Custodian shall be responsible for the safekeeping of the Precious Metals in the form and condition in which they are delivered to its Subcustodian acting as its warehouseman. Custodian shall cause the Subcustodian to keep the Precious Metals held for Customer hereunder separately identified and segregated and to maintain records identifying the Precious Metals belonging to Customer.

3.      Custodian shall provide Customer with reporting by a means agreed between the parties detailing Precious Metals received, delivered and held at the Subcustodian. Customer agrees that it shall promptly review all such statements and shall advise Custodian of any error, omission or inaccuracy therein within a commercially reasonable time.

4.      Custodian shall cause the Subcustodian it designates to take delivery of Precious Metals from Customer and to acknowledge receipt from Customer of the Precious Metals.  The Subcustodian may, at its option, record certain specifications indicated on the Precious Metals.  It is understood and agreed that neither Custodian nor its Subcustodians are responsible for the authenticity of markings on or for the weight, fineness or contents of any of the Precious Metals, delivered to them by Customer or a third party for the account of Customer.

5.      Custodian shall maintain insurance protection covering the Custodian’s duties and activities hereunder in such amounts and insuring against such risks as Custodian deems reasonable and appropriate under the circumstances.  Subcustodians may maintain such insurance in regard to their business on such terms as they consider appropriate, but the Custodian shall have no liability for the terms or sufficiency of the insurance maintained by any Subcustodian or for the failure of any Subcustodian to maintain insurance.

ARTICLE III

DELIVERY OF PRECIOUS METALS TO, AND WITHDRAWAL OF PRECIOUS METALS FROM, CUSTODY

1.      Each delivery of Precious Metals to be held in custody in accordance with this Supplement shall be made pursuant to an authenticated trade instruction sent by the Customer or its Authorized Representative to the Custodian. Such instruction must be received by the published trade instruction deadlines and by the agreed communication method. Such instruction shall be acknowledged by the Custodian.  The authorized trade instruction shall identify the Precious Metal to be delivered, in such customary manner as specified by the Custodian, and the delivery date, and the Custodian’s acknowledgment shall identify the Subcustodian and Secure Facility to which the Customer shall deliver the Precious Metal.  Delivery shall be made only to the Secure Facility of the Subcustodian designated by the Custodian.  Customer acknowledges and agrees that neither the Custodian nor the Subcustodian has any responsibility or liability for any loss, damage or destruction of any Precious Metals prior to the time the Subcustodian identified by the Custodian accepts the care, custody and control of the Precious Metals at the specified Subcustodian’s Secure Facility, and Customer hereby releases Custodian and each Subcustodian from any responsibility or liability prior to the time the Subcustodian identified by the Custodian accepts the care, custody and control of the Precious Metals.  In the event the Precious Metal delivered to the Subcustodian differs from the identification provided by the Customer, the Custodian shall endeavor promptly to not ify the Customer.  Neither the Custodian nor any Subcustodian shall be liable for any loss resulting from the failure of the Precious Metal actually delivered to conform to the identification provided by the Customer in the authorized trade instruction.

2.  Each withdrawal of Precious Metals from custody in accordance with this Supplement shall be made pursuant to an authenticated trade instruction sent by the Customer or its Authorized Representative to the Custodian. Such instruction must be received by the published trade instruction deadlines and by the agreed communication method. Such instruction shall be acknowledged by the Custodian. The authorized trade instruction shall identify the Precious Metal to be withdrawn, in such customary manner as specified by the Custodian, and the delivery date and the Custodian’s acknowledgment shall identify the Subcustodian and Secure Facility from which the Customer shall take delivery of the Precious Metal. Customer must collect or arrange for the collection of the Precious Me tal being withdrawn from the Subcustodian having physical possession thereof.  All risk in and to the Precious Metal withdrawn shall pass at the specified Secure Facility at the time Customer or its Authorized Representative acknowledges receipt.

3.      Customer shall be responsible for all expenses associated with the delivery and withdrawal of Precious Metals to and from the Secure Facility, as well as all insurance, safekeeping, security and secure transport arrangements for the Precious Metals while either in storage outside the terms of this agreement or in transit to or from the Custodians appointed Subcustodian.  Customer shall pay or reimburse the Custodian from time to time for any taxes or other governmental charges payable, and actually paid, by Custodian upon storage or transfer of the Precious Metals made hereunder.

4.      If, in Custodian’s opinion, any authenticated trade instruction is unclear or ambiguous, Custodian shall endeavor to obtain clarification from Customer.  In the absence of such clarification Custodian may, in its absolute discretion, either (i) decline to take action until clarification is received or (ii) act on what it believes, in good faith, to be such instruction.

ARTICLE IV

CONCERNING CUSTODIAN

Except as otherwise expressly provided herein, Custodian shall not be liable for any costs, expenses, damages, liabilities or claims, including attorneys’ and accountants’ fees (collectively, “Losses”), incurred by or asserted against Customer, except those Losses arising out of Custodian’s own negligence or willful misconduct.  Custodian shall have no liability whatsoever for the action or inaction of any commodities exchange. With respect to any Losses incurred by Customer as a result of the acts or failures to act by a Subcustodian acting as warehouseman hereunder, Custodian shall take appropriate action to recover such Losses, and Custodian’s liability shall be limited to the amount recovered net of Custodian’s costs and expenses.  In no event shall Custodian be liable t o Customer or any third party for special, indirect or consequential damages, or lost profits or loss of business, arising in connection with this Supplement.

ARTICLE V

MISCELLANEOUS.

The provisions of this Supplement shall apply solely with respect to the custody of Precious Metals.  All provisions of the Agreement shall nevertheless remain in full force and effect with respect to assets held pursuant to this Supplement, and all capitalized terms and provisions contained in the Agreement shall be read so as to apply fully to the services and activities contemplated by this Supplement; provided, that in the event of any conflict between the provisions of the Agreement and the provisions of this Supplement, the provisions of this Supplement shall control.

Federated Equity Funds on behalf of its

Dated:Federated Market Opportunity Fund

/s/ Richard A. Novak

By: Richard A. Novak

Title: Treasurer

THE BANK OF NEW YORK MELLON

By: /s/ Andrew Pfeifer

Title: Vice President

Precious Metals Supplement

Addendum A

Gold Bullion

Fourth Amendment to the Custody Agreement

This Amendment is made as of October 23, 2009 to the Custody Agreement (as amended, the “Custody Agreement”) dated June 7, 2005, amended November 7, 2007, September 5, 2008, and September 8, 2009 between the Funds listed on Schedule II to the Custody Agreement (each a "Fund") and The Bank of New York Mellon (the "Custodian").

RECITALS

WHEREAS, the custody of the securities, cash and other portfolio assets of the funds specified in this Amendment are being converted to the Custodian as of the close of business on October 23, 2009;

WHEREAS, the parties agree that the list of Funds that are parties to the Custody Agreement is set forth on Schedule II to the Custody Agreement (which has been amended and attached as Exhibit A to prior amendments to the Custody Agreement) (“Schedule II to the Custody Agreement” or “Exhibit A”), and the parties desire to amend the list of Funds to add the funds specified in this Amendment;

WHEREAS, the parties agree that the list of Funds that are parties to the Joint Trading Account Custody Agreement, which is part of the Custody Agreement, is set forth on Schedule I to the Joint Trading Account Custody Agreement (which has been amended and attached as Exhibit B to prior amendments to the Custody Agreement) (“Schedule I to the Joint Trading Account Agreement” or “Exhibit B”), and the parties desire to amend the list of Funds to add the funds specified in this Amendment;

WHEREAS, the parties agree that the list of Funds that are parties to the Foreign Custody Agreement, which is part of the Custody Agreement, is set forth on Schedule I to the Foreign Custody Agreement (which has been attached as Exhibit C to in prior amendments) (“Schedule I to Foreign Custody Agreement” or “Exhibit C”), and the parties desire to amend the list of Funds to add the funds specified in this Amendment; and

WHEREAS, the parties agree that the Fee Schedule for Non-Money Market Funds, which is part of the Custody Agreement (which has been attached as Exhibit D in prior amendments (“Fee Schedule for Non-Money Market Funds” or “Exhibit D”), will apply to the funds specified herein, and the parties desire to add the funds specified in this Amendment to the funds subject to the Fee Schedule for Non-Money Market Funds.

AMENDMENT

NOW THEREFORE, intending to be legally bound, each of the Funds and the Custodian agree to the following amendments:

Each of Schedule II to the Custody Agreement (or Exhibit A), Schedule I to the Joint Trading Account Agreement (or Exhibit B), Schedule I to the Foreign Custody Agreement (or Exhibit C), and the Fee Schedule for Non-Money Market Funds (or Exhibit D) shall be, and hereby are, amended and updated to include the following new Funds:

Federated Municipal Securities Fund, Inc.

Federated Intermediate Municipal Trust, a portfolio of Intermediate Municipal Trust

Federated Michigan Intermediate Municipal Trust, a portfolio of Federated Municipal Securities Income Trust

Federated Municipal High Yield Advantage Fund, a portfolio of Federated Municipal Securities Income Trust

The agreements referenced herein shall remain in full force and effect as amended by this Amendment.

IN WITNESS WHEREOF, this Amendment has been executed for and on behalf of the undersigned as of the day and year first written above.

ON BEHALF OF EACH OF THE FUNDS INDICATED ON SCHEDULE II OF THE CUSTODY AGREEMENT, AS AMENDED FROM TIME TO TIME

By: /s/ Richard A. Novak

Title:  Treasurer

THE BANK OF NEW YORK MELLON

By:  /s/ Andrew Pfeiffer

Title:  Vice President

Fifth Amendment to the Custody Agreement

This Amendment is made as of November 13, 2009 to the Custody Agreement (the “Agreement”) dated June 7, 2005, amended November 7, 2007, September 5, 2008, September 8, 2009, and October 23, 2009  between the Funds listed on Schedule II attached hereto (each a "Fund") and The Bank of New York Mellon (the "Custodian").

Recitals

WHEREAS, the parties agree that the Fee Schedule for Money Market Funds, which is part of the Custody Agreement, which has been attached as Exhibit E in prior amendments (“Fee Schedule for Money Market Funds” or “Exhibit E”), will apply to the funds specified herein.

Amendment

WHEREAS, each Fund and the Custodian wish to modify the provisions of the Agreement as set forth below;

NOW THEREFORE, each the Fund and the Custodian agree to the following amendments.

Within Exhibit E, the section entitled “Compensating Balance Arrangement” is replaced in its entirety with Amended and Restated Exhibit E as attached hereto.

IN WITNESS WHEREOF, this Amendment has been executed for and on behalf of the undersigned as of the day and year first written above.

On behalf of each of the Funds indicated on Schedule II attached hereto

By:  /s/ Richard A. Novak

Title:  Treasurer

THE BANK OF NEW YORK MELLON

By: /s/ Peter D. Holland

Title: Managing Director

Amended and Restated

Exhibit E

Compensating Balance Arrangement

Each Fund listed below and The Bank of New York Mellon (the “Bank”) have entered into an average compensating balance arrangement, which would allow the Funds to compensate the Bank for any overdrafts by maintaining a positive cash balance and conversely, on any day a Fund maintains a positive balance, the respective Fund will be permitted to overdraw the account as compensation, within the Maximum Daily Balance limits as established for each fund as listed below.

In each instance, Federal Reserve requirements for minimum balances (currently 10%), will be assessed.  Therefore, all overdrafts must be compensated at 100% of the total and all positive balances will allow for an overdraft of up to 90% of the total (unless the positive balance is the result of an error on the part on the Bank, in which case the positive balance would be assessed at 100%).  The Funds shall maintain the average compensating balance over quarterly periods (ending March, June, September and December for FGRF, FCRF and FMUTR; and ending February, May, August, and November for AGCR, USTCR and GOTMF).   Average balances will be computed at the end of the quarter.  Net positive balances will receive an earnings credit computed at the daily effective 90 – day T-Bill rate on the last day of a period.  Net negative balances will be charged at the Fed Funds rate plus 1% on the last day of the period.  Quarterly net credits or charges will be applied to the safekeeping fees. Credits that exceed the safekeeping fee will be carried over into the next billing period but must be applied in a 12 month cycle; all accumulated unapplied credits will expire in the final quarter of the cycle, i.e. in November or December.  However, upon specific request from the Fund, Custodian at its discretion may agree to carry forward into the next 12 month cycle any accumulated credits, contingent on their application within a specified time period.

Credits are not redeemable for cash and will expire in the event the relationship with the Funds is terminated.

Maximum Daily Balances (“MDB”) limits have been determined for each fund.  On days where the Funds exceed their MDBs, interest will be credited on 90% of the excess balance at the 90-day T-Bill rate or charged on 100% of the excess overdraft balance at the Fed Funds rate plus 1%, based on the day(s) the MDB’s were exceeded.

Maximum Daily Balance +/- $175 million

US Treasury Cash Reserves Fund (USTCR)

Government Obligations Tax Managed Fund (GOTMF)

Maximum Daily Balance +/- $75 million

Federated Municipal Trust Fund (FMUTR)

Maximum Daily Balance +/- $25 million

Federated Capital Reserves Fund (FCRF)

Federated Government Reserves Fund (FGRF)

Automated Government Cash Reserves (AGCR)

Schedule II

Federated Capital Reserves Fund

Federated Government Reserve Fund

Federated Municipal Trust Fund

US Treasury Cash Reserve Fund

Automated Government Cash Reserves

Government Obligations Tax Managed Fund

Sixth Amendment to the Custody Agreement

This Amendment is made as of January 13, 2010 to the Custody Agreement (the “Agreement”) dated June 7, 2005, amended November 7, 2007, September 5, 2008,  September 8, 2009, October 23, 2009, and November 13, 2009 between the Funds listed on Schedule II attached hereto (each a "Fund") and The Bank of New York Mellon (the "Custodian").

WHEREAS, each Fund and the Custodian wish to modify the provisions of the Agreement as set forth below;

NOW THEREFORE, each the Fund and the Custodian agree to the following amendment.

Each Exhibit A (“Schedule II to the Agreement”), Exhibit B (“Joint Trading Account Agreement Schedule I”), and Exhibit D (“Fee Schedule for Non-Money Market Funds”) is updated to include the following new Fund:

Federated Enhanced Treasury Income Fund

IN WITNESS WHEREOF, this Amendment has been executed for and on behalf of the undersigned as of the day and year first written above.

On behalf of each of the Funds indicated on Schedule II attached hereto

By:  /s/ Richard A. Novak

By:  Richard A. Novak

Title:  Treasurer

THE BANK OF NEW YORK MELLON

By:  /s/ Peter D. Holland

By:  Peter D. Holland

Title:  Managing Director

Amended and Restated

Custody Agreement

Schedule II

Federated Stock Trust

Federated Market Opportunity Fund

Federated California Municipal Income Fund

Federated North Carolina Municipal Income Fund

Federated New York Municipal Income Fund

Federated Ohio Municipal Income Fund

Federated Pennsylvania Municipal Income Fund

Federated Municipal Securities Fund

Intermediate Municipal Trust Fund

Michigan Intermediate Municipal Trust Fund

Federated Municipal High Yield Advantaged Fund

Federated Enhanced Treasury Income Fund

Federated Capital Reserve Fund

Federated Government Reserves Fund

Federated Municipal Trust Fund

US Treasury Cash Reserves Fund

Automated Government Cash Reserves

Government Obligations Tax Managed Fund

EX-99 5 ta.htm TRANSFER AGENCY AGREEMENT ta.htm

Exhibit 28 (h) (12) under Form N-1A

Exhibit 10 under Item 601/Reg. S-K

AMENDMENT TO TRANSFER AGENCY AND SERVICE AGREEMENT

           This Amendment (the “Amendment”), made as of the 1st day of January 2008 amends that certain Transfer Agency and service Agreement, date as of July 1, 2004 (the “Agreement”) by and between each of the entities listed on the signature pages to the Agreement (the “Funds”) and State Street Bank and Trust Company (the “Transfer Agent”).  Capitalized terms used, but not otherwise defined herein, shall have the meanings ascribed thereto in the Agreement.

RECITALS

WHEREAS, the Funds and the Transfer Agent are parties to the Agreement under and pursuant to which Transfer Agent has agreed to perform services as transfer agent, divided disbursing agent and agent in connection with certain other activities of the Funds; and

WHEREAS, the Funds and the Transfer Agent wish to amend the Agreement to extend the initial term and to reflect certain fee reductions and other changes.

NOW, THEREFORE, in consideration of the mutual promises set forth herein, the parties agree as follows:

1.

Amendments to the Agreement:  The Agreement is hereby amended as follows:

(a)      COLA is waived for the redefined Initial Term, therefore Section 3.5 of the Agreement is hereby amended by deleting the first phrase of the first sentence and replacing it with the words “During the initial term”.  The second sentence is amended by deleting the first phrase and replacing it with the words “Following the initial term”.

(b)      The Initial Term of the Agreement is extended three (3) years, therefore Section 12.1 of the Agreement is hereby amended by deleting “five (5)” in the first sentence and replacing with “eight (8)”.

(c)      Schedule 3.1 (Fees) is hereby amended by (i) deleting the first footnote in its entirety and replacing it with the revised footnote below; (ii) deleting the Telephone Servicing section in its entirety and replacing it with the revised fees below; and (iii) deleting the third footnote:

“1  The “Per CUSIP Fee” shall be waived (i) for the first six (6) months from CUSIP implementation, unless such implementation is a result of a conversion or merger and (ii) once a closed CUSIP’s tax reporting requirements have been satisfied.”

“Telephone Servicing Complex Base Fees2

Years 1-3

$2,700,000/year

Year 4

July 1, 2007 -December 31, 2007

$1,350,000

January 1, 2008 - June 30, 2008

$   801,098

Year 5

July 1, 2008-December 31, 2008

$   801,097

January 1, 2009 -June 30, 2009

$   801,097

Year 6

July 1, 2009 - December 31, 2009

$   471,756

January 1, 2010 - June 30, 2010

$   471,756

Year 7

July 1, 2010 - December 31, 2010

$   471,756

January 1, 2011 - June 30, 2011

$   471,756

Year 8

July 1, 2011 - December 31, 2011

$   471,756

January 1, 2012 - June 30, 2012

$   471,756

2.           No Other Amendments.  Except as expressly amended hereby, the Agreement shall continue in full force and effect in accordance with the terms thereof.

3.           Due Authorization.  Each party hereto represents and warrants that it has full legal authority, and has obtained all requisite approvals necessary, to enter into this Amendment.  This Amendment constitutes the legal, valid and binding obligation of each such party, enforceable in accordance with the terms hereof.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

By each of the Federated Funds set forth on

STATE STREET BANK AND TRUST

Exhibit A to the Agreement

COMPANY

By:   /s/ John W. McGonigle

By:  /s/ Joseph L. Hooley

Name:  John W. McGonigle

Joseph L. Hooley, Vice Chairman

Title:  Executive Vice President and Secretary

EX-99 6 consent.htm AUDITOR'S CONSENT consent.htm

Exhibit 28(j)(2) under Form N-1A

Exhibit 23 under Item 601/Reg. S-K

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the references to our firm under the caption “Financial Highlights” in the Prospectus and under the caption “Independent Registered Public Accounting Firm” in the Statement of Additional Information in Post-Effective Amendment Number 69 to the Registration Statement (Form N-1A, No. 2-57181) of Federated Municipal Securities Fund, Inc., and to the incorporation by reference of our report, dated May 17, 2009, on Federated Municipal Securities Fund, Inc. included in the Annual Shareholder Report for the fiscal year ended March 31, 2010.

/s/ ERNST & YOUNG LLP

Boston, Massachusetts

May 21, 2010

EX-99 7 mcp.htm MULTIPLE CLASS PLAN mcp.htm

Exhibit 28 (n) (2) under Form N-1A

Exhibit 99 under Item 601/Reg. S-K

MULTIPLE CLASS PLAN

This Multiple Class Plan (this "Plan") is adopted by the investment companies (the "Multiple Class Companies") identified in exhibits hereto (the "Class Exhibits") as offering separate classes of shares ("Classes").

1.           Purpose

This Plan is adopted pursuant to Rule 18f-3 under the Investment Company Act of 1940, as amended (the "Rule"), in connection with the issuance by the Multiple Class Companies and any series thereof (collectively the "Funds") of more than one Class of shares in reliance on the Rule.  In documenting the exchange features for each Class, this plan describes the arrangements whereby shares of Funds may be exchanged for or from certain other investment companies which are not part of this Plan.  In documenting the separate arrangement for distribution of each Class, this Plan also sets forth the schedules for variations in sales loads and contingent deferred sales charges required by Rules 22d-1 and 6c-10, respectively.

2.          Separate Arrangements/Class Differences

The arrangements for shareholders services or the distribution of shares, or both, for each Class shall be set forth in the applicable Class Exhibit hereto.

3.           Expense Allocations

Each Class shall be allocated those shareholder service fees and fees and expenses payable under a Rule 12b-1 Plan specified in the Class Exhibit.  In addition the following expenses may be specifically allocated to each Class to the extent that the Fund's officers determine that such expenses are actually incurred in a different amount by that Class, or that the Class receives services of a different kind or to a different degree than other Classes:

(a)           transfer agent fees;

(b)

printing and postage expenses related to preparing and distributing materials such as shareholder reports, prospectuses, and proxies to current shareholders;

(c)

blue sky registration fees;

(d)

SEC registration fees;

(e)

the expense of administrative personnel and services as required to support the shareholders;

(f)

litigation or other legal expenses relating solely to one Class; or

(g)

other expenses incurred on behalf of the Class or for events or activities pertaining exclusively to the Class.

4.           Conversion and Exchange Features

The conversion and exchange features for shares of each Class shall be as set forth in the applicable Class Exhibit hereto.

5.           Amendment

Any material amendment of this Plan or any Class Exhibit hereto by any Multiple Class Company is subject to the approval of a majority of the directors/trustees of the applicable Multiple Class Company and a majority of the directors/trustees of the Multiple Class Company who are not interested persons of the Multiple Class Company, pursuant to the Rule.

CLASS A SHARES EXHIBIT

TO

MULTIPLE CLASS PLAN

(REVISED 1/15/10)

1.           Separate Arrangement And Expense Allocation

For purposes of Rule 18f-3 under the Act, the basic distribution and shareholder servicing arrangement of the Class A Shares will consist of sales and shareholder servicing by financial intermediaries in consideration of the payment of a portion of the applicable sales load (“dealer reallowance”)and a shareholder service fee. When indicated on the Schedule to this Exhibit, the principal underwriter and financial intermediaries may also receive payments for distribution and/or administrative services under a 12b-1 Plan. In connection with this basic arrangement, Class A Shares will bear the following fees and expenses:

Fees and Expenses

Maximum Amount Allocated Class A Shares

Sales Load

Up to 5.5% of the public offering price

Contingent Deferred

Sales Charge ("CDSC")

0.00%

Shareholder Service Fee

Up to 25 basis points (0.25%) of the average daily net asset value

12b-1 Fee

As set forth in the attached Schedule

Redemption Fee

As set forth in the attached Schedule

Other Expenses

Itemized expenses incurred by the Fund with respect to holders of Class A Shares as described in Section 3 of the Plan

2.           Conversion and Exchange Privileges

For purposes of Rule 18f-3, Class A Shares have the following conversion rights and exchange privileges at the election of the shareholder:

Conversion Rights:

None

Exchange Privilege:

Class A Shares may be exchanged for Class A Shares of any other Fund

In any exchange, the shareholder shall receive shares having the same aggregate net asset value as the shares surrendered.  Exchanges to any other Class shall be treated in the same manner as a redemption and purchase.

3.           Exceptions to Basic Arrangements

For purposes of Rules 22d-1 and 6c-10 under the Act, unless otherwise specified on the Schedule to this Exhibit, the scheduled variations in sales loads and contingent deferred sales charges are as follows:

(A)           BASIC SALES LOAD SCHEDULE

The basic schedule of sales loads for Class A Shares of Funds so designated on the Schedule to this Exhibit is as follows:

Purchase Amount

Sales Load as a Percentage of

Public Offering Price

Less than $50,000

5.50%

$50,000 but less than $100,000

4.50%

$100,000 but less than $250,000

3.75%

$250,000 but less than $500,000

2.50%

$500,000 but less than $1 million

2.00%

$1 million or greater

0.00%

(B)           FIXED INCOME SALES LOAD SCHEDULE

The schedule of sales loads for Class A Shares of Funds so designated on the Schedule to this Exhibit is as follows:

Purchase Amount

Sales Charge as a Percentage of

Public Offering Price

Less than $100,000

4.50%

$100,000 but less than $250,000

3.75%

$250,000 but less than $500,000

2.50%

$500,000 but less than $1 million

2.00%

$1 million or greater

0.00%

(C)           MODIFIED FIXED INCOME SALES LOAD SCHEDULE

The schedule of sales loads for Class A Shares of Funds so designated on the Schedule to this Exhibit is as follows:

Purchase Amount

Sales Charge as a Percentage of

Public Offering Price

Less than $250,000

1.00%

$250,000 or greater

0.00%

(D)           MONEY MARKET LOAD SCHEDULE

The Schedule of sales loads for Class A Shares of Funds so designated on the Schedule to this Exhibit is as follows:

Purchase Amount

Sales Charge as a Percentage of

Public Offering Price

All purchases

0.00%

(E)           ULTRASHORT BOND LOAD SCHEDULE

The Schedule of sales loads for Class A Shares of Funds so designated on the Schedule to this Exhibit is as follows:

Purchase Amount

Sales Charge as a Percentage of

Public Offering Price

Less than $50,000

2.00%

$50,000 but less than $100,000

1.75%

$100,000 but less than $250,000

1.50%

$250,000 +

0.00%

(F)           "LARGE TICKET" PURCHASES

Unless otherwise indicated on the Schedule to this Exhibit, a financial intermediary that places an order to purchase $1,000,000 or more of Class A Shares shall receive from the principal underwriter an advance commission equal to 75 basis points (0.75%) of the public offering price. In such event, notwithstanding anything to the contrary in the Plan or this Exhibit, such Class A Shares shall be subject to a contingent deferred sales charge upon redemption within 24 months of purchase equal to 75 basis points (0.75%) of the lesser of (x) the purchase price of the Class A Shares or (y) the redemption price of the Class A Shares. Any contingent deferred sales charge received upon redemption of Class A Shares shall be paid to the principal underwriter in consideration of the advance commission.

(G)           REDUCING OR ELIMINATING THE SALES LOAD

Contingent upon notification to the Fund’s principal underwriter or transfer agent, in applying the exceptions set forth in this Section 3, the purchase amount shall take into account:

·

Discounts achieved by combining concurrent purchases of and/or current investment in Class A, Class B, Class C, Class F, and Class K Shares, made or held by (or on behalf of) the investor, the investor’s spouse, and the investor’s children under age 21 (regardless of whether the purchases or investments are made or held directly or through an investment professional or through a single-participant retirement account); provided that such purchases and investments can be linked using tax identification numbers (TINs), social security numbers (SSNs), or Broker Identification Numbers (BINs); and

·

Letters of intent to purchase a certain amount of Class A Shares within a thirteen month period.

(H)           WAIVER OF SALES LOAD

Contingent upon notification to the Fund’s principal underwriter or transfer agent, no sales load shall be assessed on purchases of Class A Shares made:

·

within 120 days of redeeming shares of an equal or greater amount;

·

through a financial intermediary that did not receive a dealer reallowance on the purchase;

·

with reinvested dividends or capital gains;

·

by shareholders who originally became shareholders of a Fund pursuant to the terms of an agreement and plan of reorganization which permits the shareholders to acquire shares at net asset value;

·

by Federated Life Members (Federated shareholders who originally were issued shares through the "Liberty Account", which was an account for the Liberty Family of Funds on February 28, 1987, or who invested through an affinity group prior to August 1, 1987, into the Liberty Account);

·

by Directors, Trustees, employees, former employees and sales representatives of the Fund, the Adviser, the principal underwriter and their affiliates, employees of any investment professional that sells Shares according to a sales agreement with the principal underwriter, by the immediate family members of the above persons, and by trusts, pension or profit-sharing plans for the above persons; and

·

pursuant to the exchange privilege.

(I)              WAIVER OF CONTINGENT DEFFERED SALES CHARGE ON LARGE-TICKET PURCHASES

Contingent upon notification to the Fund’s principal underwriter or transfer agent, the 75 basis point (0.75%) CDSC applicable in connection with the “large-ticket” purchase program described above, will not be imposed on redemptions:

·

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

·

representing minimum required distributions from an Individual Retirement Account or other retirement plan to a shareholder who has attained the age of 70 ½;

·

of Shares that were reinvested within 120 days of a previous redemption;

·

of Shares held by the by Directors, Trustees, employees, former employees and sales representatives of the Fund, the Adviser, the principal underwriter and their affiliates, employees of any investment professional that sells Shares according to a sales agreement with the principal underwriter, by the immediate family members of the above persons, and by trusts, pension or profit-sharing plans for the above persons;

·

of Shares purchased through a financial intermediary that did not receive an advance commission on the purchase;

·

of Shares purchased with reinvested dividends or capital gains;

·

imposed by the Fund when it closes an account for not meeting the minimum balance requirements; and

·

of Shares which were purchased pursuant to an exchange privilege if the Shares were held for the applicable CDSC holding period.

4.           Special Offer Program

[NOTE: The 30 month CDSC period connected with of this program expired in September of 2002]

During the Special Offer Program which took place in March, 2000, the sales load was waived on purchases of Class A Shares of Federated Aggressive Growth Fund, Federated Communications Technology Fund, Federated Large Cap Growth Fund, and Federated International Small Company Fund (the "Special Offer Funds").  Instead, the principal underwriter paid an advance commission of 2.00% of the offering price of the Special Offer Funds to intermediaries participating in the Special Offer Program.  Class A Shares purchased through this Special Offer were subject to a CDSC of 2.00% on redemptions which occurred within 30 months after the purchase, which amount was to be paid to the principal underwriter in consideration for advancing the commission to intermediaries.  Class A Shares of the Special Offer Funds purchased during the Special Offer Program could be exchanged with Class A Shares of other Special Offer Funds with no imposition of a sales load or CDSC fee.  Class A Shares of the Special Offer Funds purchased during the Special Offer Program which were exchanged for Class A Shares of other Funds during the 30 month CDSC period incurred the CDSC fee upon redemption.  However, no sales load was charged for such an exchange.

5.           Redemption Fee

For purposes of Rule 11a-3 under the Act, any redemption fee received upon the redemption or exchange of Class A Shares will be applied to fees incurred or amount expended in connection with such redemption or exchange.  The balance of any redemption fees shall be paid to the Fund.

A Fund shall waive any redemption fee with respect to (i) non-participant directed redemptions or exchanges involving Class A Shares held in retirement plans established under Section 401(a) or 401(k) of the Internal Revenue Code (the “Code”), custodial plan accounts established under Section 493(b)(7) of the Code, or deferred compensation plans established under Section 457 of the Code; and (ii) redemptions or exchanges involving Class A Shares held in plans administered as college savings programs under Section 529 of the Code.

SCHEDULE OF FUNDS

OFFERING CLASS A SHARES

The Funds set forth on this Schedule each offer Class A Shares on the terms set forth in the Class A Shares Exhibit to the Multiple Class Plan, in each case as indicated below.  The 12b-1 fees indicated are the maximum amounts authorized based on the average daily net asset value.  Actual amounts accrued may be less.

1.      CLASS A SHARES SUBJECT TO THE BASIC LOAD SCHEDULE

Multiple Class Company

Series

12b-1

Fee

Redemption

Fee

Federated Equity Funds

Federated Capital Appreciation Fund

0.05%

None

Federated Clover Mid Value Fund

0.05%

None

Federated Clover Small Value Fund

0.05%

None

Federated Clover Value Fund

0.05%

None

Federated InterContinental Fund

0.05%

2% on shares redeemed or exchanged within 30 days of purchase

Federated International Strategic Value Fund

0.05%

2% on shares redeemed or exchanged within 30 days of purchase

Federated Kaufmann Fund

0.25%

None

Federated Kaufmann Large Cap Fund

0.25%

None

Federated Kaufmann Small Cap Fund

0.25%

None

Federated Market Opportunity Fund

0.05%

None

Federated Mid-Cap Growth Strategies Fund

None

None

Federated Prudent Bear Fund

0.05%

None

Federated Strategic Value Fund

0.05%

None

Federated Equity Income Fund, Inc.

0.05%

None

Federated Income Securities Trust

Federated Capital Income Fund

None

None

Federated Muni and Stock Advantage Fund

0.05%

None

Federated Prudent Global Income Fund

0.05%

None

Federated Real Return Bond Fund

0.05%

None

Federated MDT Series

Federated MDT All Cap Core Fund

0.05%

None

Federated MDT Balanced Fund

0.05%

None

Federated MDT Large Cap Growth Fund

0.05%

None

Federated MDT Mid Cap Growth Fund

0.05%

None

Federated MDT Small Cap Core Fund

0.05%

None

Federated MDT Small Cap Growth Fund

0.05%

None

Federated MDT Small Cap Value Fund

0.05%

None

Federated MDT Tax Aware/All Cap Core Fund

0.05%

None

1.  CLASS A SHARES SUBJECT TO THE BASIC LOAD SCHEDULE (continued)

Federated Managed Allocation Portfolios

Federated Balanced Allocation Fund

0.05%

None

Federated Stock and Bond Fund

None

None

Federated World Investment Series, Inc.

Federated International Small-Mid Company Fund

0.25%

2% on shares redeemed or exchanged within 30 days of purchase

Federated International Leaders Fund

0.25%

2% on shares redeemed or exchanged within 30 days of purchase

2.  CLASS A SHARES SUBJECT TO THE FIXED INCOME LOAD SCHEDULE

Multiple Class Company

Series

12b-1

Fee

Redemption

Fee

Federated Fixed Income Securities, Inc.

Federated Strategic Income Fund

None

None

Federated Government Income Securities, Inc.

0.05%

None

Federated High Income Bond Fund, Inc.

None

2% on shares redeemed or exchanged within 90 days of purchase

Federated Income Securities Trust

Federated Fund for U.S. Government Securities

None

None

Federated International Series, Inc.

Federated International Bond Fund

0.25%

None

Federated Investment Series Funds, Inc.

Federated Bond Fund

0.025%

None

Federated Municipal Securities Fund, Inc.

None

None

Federated Municipal Securities Income Trust

Federated Municipal High Yield Advantage Fund

0.05%

None

Federated New York Municipal Income Fund

0.05%

None

Federated Ohio Municipal Income Fund

0.05%

None

Federated Pennsylvania Municipal Income Fund

0.05%

None

Federated Total Return Series, Inc.

Federated Total Return Bond Fund

0.25%

None

Federated World Investment Series, Inc.

Federated International High Income Fund

0.05%

None

3.  Class A Shares Subject to the MODIFIED FIXED INCOME Sales Load Schedule

Multiple Class Company

Series

12b-1

Fee

Redemption

Fee

Federated Income Securities Trust

Federated Short-Term Income Fund

0.50%

None

Federated Short-Intermediate Duration Municipal

0.25%

None

4. Class A Shares Subject to the Money Market Load Schedule

Multiple Class Company

Series

12b-1

Fee

Redemption

Fee

Money Market Obligations Trust

Liberty U.S. Government Money Market Trust

None

None

5. Class A Shares Subject to the Ultrashort Bond Load Schedule

Multiple Class Company

Series

12b-1

Fee

Redemption

Fee

Federated Fixed Income Securities, Inc.

Federated Municipal Ultrashort Fund

0.25%

None

Federated Institutional Trust

Federated Government Ultrashort Duration Fund

0.25%

None

Federated Total Return Series, Inc.

Federated Ultrashort Bond Fund

0.30%

None

6.       Class A Shares Not Participating in the Large Ticket Purchase Program

Multiple Class Company

Series

Federated Fixed Income Securities, Inc.

Federated Municipal Ultrashort Fund

Federated Income Securities Trust

Federated Short-Term Income Fund

Federated Institutional Trust

Federated Government Ultrashort Duration Fund

Federated Short-Intermediate Duration Municipal Trust

Federated Total Return Series, Inc.

Federated Ultrashort Bond Fund

CLASS B SHARES EXHIBIT

TO

MULTIPLE CLASS PLAN

(Revised 3/1/10)

1.

Separate Arrangement And Expense Allocation

For purposes of Rule 18f-3 under the Act, the basic distribution and shareholder servicing arrangement of the Class B Shares will consist of sales by financial intermediaries in consideration of the payment of an advance commission paid by the principal underwriter.  Financial intermediaries may perform shareholder services and receive a shareholder service fee for their services. In consideration of advancing commissions and/or the provision of shareholder services, the principal underwriter may receive the contingent deferred sales charges paid upon redemption of Class B Shares, and/or shareholder service fees and/or fees under a 12b-1 plan. In connection with this basic arrangement, Class B Shares will bear the following fees and expenses:

Fees and Expenses

Maximum Amount Allocated Class B Shares

Sales Load

None

Contingent Deferred Sales Charge (“CDSC”)

Up to 5.5% of the share price at the time of purchase or redemption, whichever is lower

Shareholder Service Fee

Up to 25 basis points (0.25%) of the average daily net asset value

12b-1 Fee

Up to 75 basis points (0.75%) of the average daily net asset value

Redemption Fee

As set forth in the attached Schedule

Other Expenses

Itemized expenses incurred by the Fund with respect to holders of Class B Shares as described in Section 3 of the Plan

2.

Conversion and Exchange Privileges

For purposes of Rule 18f-3, Class B Shares have the following conversion rights and exchange privileges at the election of the shareholder:

Conversion Rights:

After Class B Shares have been held for eight years from the date of purchase, they will automatically convert into Class A Shares on or about the last day of the following month.

Exchange Privilege:

Class B Shares may be exchanged for Class B Shares of any other Fund.

In any conversion or exchange, the shareholder shall receive shares having the same aggregate net asset value as the shares surrendered.  Exchanges to any other Class shall be treated in the same manner as a redemption and purchase.

3.

Exceptions to Basic Arrangements

For purposes of Rules 6c-10 and 22d-1 under the Act, unless otherwise specified on the Schedule to this Exhibit, the scheduled variations in contingent deferred sales charges payable upon redemption are as follows:

(A)           BASIC CDSC SCHEDULE

Shares Held Up to: To:

Have A CDSC Of:

1 year

5.50 %

2 years

4.75 %

3 years

4.00 %

4 years

3.00 %

5 years

2.00 %

6 years

1.00 %

7 years

0.00 %

8 years

Convert to Class A Shares

(B)           WAIVER OF CDSC

Contingent upon notification to the Fund's principal underwriter or transfer agent, no CDSC will be imposed on redemptions:

n

following the death of the last surviving shareholder on the account or the post-purchase disability of all registered shareholder(s), as defined in Section 72(m)(7) of the Internal Revenue Code of 1986;

n

representing minimum required distributions from an Individual Retirement Account or other retirement plan to a shareholder who has attained the age of 70 ½;

n

of Shares that were reinvested within 120 days of a previous redemption;

n

of Shares held by the Directors, Trustees, employees and sales representatives of the Fund, the Adviser, the principal underwriter and their affiliates, employees of any investment professional that sells Shares according to a sales agreement with the principal underwriter, by the immediate family members of the above persons, and by trusts, pension or profit-sharing plans for the above persons;

n

of Shares originally purchased through a financial intermediary that did not receive an advance commission on the purchase;

n

of shares purchased with reinvested dividends or capital gains;

n

imposed by the Fund when it closes an account for not meeting minimum balance requirements; and

n

of Shares which were purchased pursuant to an exchange privilege if the Shares were held for the applicable CDSC holding period.

(C) SYSTEMATIC WITHDRAWAL PROGRAM

Contingent upon notification to the principal underwriter or the Fund’s transfer agent, no CDSC will be imposed on redemptions that are qualifying redemptions of Class B Shares under a Systematic Withdrawal Program as described in the applicable prospectus and statement of additional information.

4.

Redemption Fee

For purposes of Rule 11a-3 under the Act, any redemption fee received upon the redemption or exchange of Class B Shares will be applied to fees incurred or amount expended in connection with such redemption or exchange.  The balance of any redemption fees shall be paid to the Fund.

A Fund shall waive any redemption fee with respect to (i) non-participant directed redemptions or exchanges involving Class B Shares held in retirement plans established under Section 401(a) or 401(k) of the Internal Revenue Code (the “Code”), custodial plan accounts established under Section 493(b)(7) of the Code, or deferred compensation plans established under Section 457 of the Code; and (ii) redemptions or exchanges involving Class B Shares held in plans administered as college savings programs under Section 529 of the Code.

SCHEDULE OF FUNDS

OFFERING CLASS B SHARES

The Funds set forth on this Schedule each offer Class B Shares on the terms set forth in the Class B Shares Exhibit to the Multiple Class Plan, in each case as indicated below.  The 12b-1 fees indicated are the maximum amounts authorized based on the average daily net asset value.  Actual amounts accrued may be less.

CLASS B SHARES SUBJECT TO THE BASIC LOAD SCHEDULE

Multiple Class Company

Series

12b-1 Fee

Redemption Fee

Federated Equity Funds:

Federated Capital Appreciation Fund

0.75%

None

Federated Clover Value Fund

0.75%

None

Federated InterContinental Fund

0.75%

2% on shares redeemed or exchanged within 30 days of purchase

Federated Kaufmann Fund

0.75%

None

Federated Kaufmann Small Cap Fund

0.75%

None

Federated Market Opportunity Fund

0.75%

None

Federated Mid-Cap Growth Strategies Fund

0.75%

None

Federated Equity Income Fund, Inc.

0.75%

None

Federated Fixed Income Securities, Inc.:

Federated Strategic Income Fund

0.75%

None

Federated Government Income Securities, Inc.

0.75%

None

Federated High Income Bond Fund, Inc.

0.75%

2% on shares redeemed or exchanged within 90 days of purchase

Federated Income Securities Trust:

Federated Capital Income Fund

0.75%

None

Federated Fund for U.S. Government Securities

0.75%

None

Federated Muni and Stock Advantage Fund

0.75%

None

Federated International Series, Inc.:

Federated International Bond Fund

0.75%

None

Federated Investment Series Funds, Inc.:

Federated Bond Fund

0.75%

None

Multiple Class Company

Series

12b-1 Fee

Redemption Fee

Federated Managed Allocation Portfolios:

Federated Balanced Allocation Fund

0.75%

None

Federated MDT Series:

Federated MDT Large Cap Growth Fund

0.75%

None

Federated MDT Small Cap Growth Fund

0.75%

None

Federated Municipal Securities Fund, Inc.

0.75%

None

Federated Municipal Securities Income Trust:

Federated Municipal High Yield Advantage Fund

0.75%

None

Federated New York Municipal Income Fund

0.75%

None

Federated Pennsylvania Municipal Income Fund

0.75%

None

Federated Stock and Bond Fund

0.75%

None

Federated Total Return Series, Inc.:

Federated Total Return Bond Fund

0.75%

None

Federated World Investment Series, Inc.:

Federated International High Income Fund

0.75%

None

Federated International Small-Mid Company Fund

0.75%

2% on shares redeemed or exchanged within 30 days of purchase

Federated International Value Fund

0.75%

2% on shares redeemed or exchanged within 30 days of purchase

Money Market Obligations Trust:

Liberty U.S. Government Money Market Trust

0.75%

None

CLASS C SHARES EXHIBIT

TO

MULTIPLE CLASS PLAN

(REVISED 12/14/09)

1.           SEPARATE ARRANGEMENT AND EXPENSE ALLOCATION

For purposes of Rule 18f-3 under the Act, the basic distribution and shareholder servicing arrangement of the Class C Shares will consist of sales by financial intermediaries in consideration of an advance commission of up to 1.00% of the public offering price, paid by the principal underwriter. Financial intermediaries may also provide shareholder services and may receive shareholder services fees therefor.  Additionally, the principal underwriter and financial intermediaries may receive distribution and/or administrative service fees under the 12b-1 Plan. In cases where the principal underwriter has advanced a commission to the financial intermediary, such 12b-1 fees will be paid to the financial intermediary beginning in the thirteenth month after purchase.  In consideration of advancing commissions, the principal u nderwriter will receive the contingent deferred sales charges paid upon redemption of Class C Shares and payments made under the 12b-1 Plan for twelve months following the purchase.  In connection with this basic arrangement, Class C Shares will bear the following fees and expenses:

Fees and Expenses

Maximum Amount Allocated Class C Shares

Contingent Deferred Sales Charge (“CDSC”)

1.00% of the share price at the time of purchase or redemption, whichever is lower if redeemed within twelve months following purchase

Shareholder Service Fee

Up to 25 basis points (0.25%) of the average daily net asset value

12b-1 Fee

As set forth in the attached Schedule

Redemption Fee

As set forth in the attached Schedule

Other Expenses

Itemized expenses incurred by the Fund with respect to holders of Class C Shares as described in Section 3 of the Plan

2.           CONVERSION AND EXCHANGE PRIVILEGES

For purposes of Rule 18f-3, Class C Shares have the following conversion rights and exchange privileges at the election of the shareholder:

Conversion Rights:

None

Exchange Privileges:

Class C Shares may be exchanged for Class C Shares of any other Fund.

In any exchange, the shareholder shall receive shares having the same aggregate net asset value as the shares surrendered.  Exchanges to any other Class shall be treated in the same manner as a redemption and purchase.

3.           EXCEPTIONS TO BASIC ARRANGEMENTS

For purposes of Rules 22d-1 and 6c-10 under the Act, unless otherwise specified on the Schedule to this Exhibit, the scheduled variations contingent deferred sales charges are as follows:

(A)                  WAIVER OF CDSC

Contingent upon notification of the Fund’s principal underwriter or transfer agent, no CDSC will be imposed on redemptions:

·

following the death of the last surviving shareholder on the account or the post-purchase disability of all registered shareholder(s), as defined in Section 72(m) (7) of the Internal Revenue Code of 1986;

·

representing minimum required distributions from an Individual Retirement Account or other retirement plan to a shareholder who has attained the age of 70 1/2;

·

of Shares that were reinvested within 120 days of a previous redemption;

·

of Shares held by Directors, Trustees, employees, former employees and sales representatives of the Fund, the Adviser, the principal underwriter and their affiliates, employees of any investment professional that sells Shares according to a sales agreement with the principal underwriter, by the immediate family members of the above persons, and by trusts, pension or profit-sharing plans for the above persons;

·

of Shares purchased through a financial intermediary that did not receive an advance commission on the purchase;

·

of Shares purchased with reinvested dividends or capital gains;

·

imposed by the Fund when it closes an account for not meeting the minimum balance requirements;

·

of Shares which were purchased pursuant to an exchange privilege if the Shares were held for the applicable CDSC holding period; and

·

by shareholders who originally became a shareholder of a Federated fund pursuant to the terms of an agreement and plan of reorganization which permits shareholders to acquire Shares without a CDSC.

·

4.           REDEMPTION FEE

For purposes of Rule 11a-3 under the Act, any redemption fee received upon the redemption or exchange of Class C Shares will be applied to fees incurred or amount expended in connection with such redemption or exchange.  The balance of any redemption fees shall be paid to the Fund.

A Fund shall waive any redemption fee with respect to (i) non-participant directed redemptions or exchanges involving Class C Shares held in retirement plans established under Section 401(a) or 401(k) of the Internal Revenue Code (the “Code”), custodial plan accounts established under Section 493(b)(7) of the Code, or deferred compensation plans established under Section 457 of the Code; and (ii) redemptions or exchanges involving Class C Shares held in plans administered as college savings programs under Section 529 of the Code.

SCHEDULE OF FUNDS

OFFERING CLASS C SHARES

The Funds set forth on this Schedule each offer Class C Shares on the terms set forth in the Class C Shares Exhibit to the Multiple Class Plan, in each case as indicated below.  The 12b-1 fees indicated are the maximum amounts authorized based on the average daily net asset value.  Actual amounts accrued may be less.

CLASS C SHARES SUBJECT TO THE BASIC LOAD SCHEDULE

Multiple Class Company

Series

12b-1 Fee

Redemption Fee

Federated Equity Funds:

Federated Capital Appreciation Fund

0.75%

None

Federated Clover Mid Value Fund

0.75%

None

Federated Clover Small Value Fund

0.75%

None

Federated Clover Value Fund

0.75%

None

Federated InterContinental Fund

0.75%

2% on shares redeemed or exchanged within 30 days of purchase

Federated International Strategic Value Fund

0.75%

2% on shares redeemed or exchanged within 30 days of purchase

Federated Kaufmann Fund

0.75%

None

Federated Kaufmann Large Cap Fund

0.75%

None

Federated Kaufmann Small Cap Fund

0.75%

None

Federated Market Opportunity Fund

0.75%

None

Federated Mid Cap Growth Strategies Fund

0.75%

None

Federated Prudent Bear Fund

0.75%

None

Federated Strategic Value Fund

0.75%

None

Federated Equity Income Fund, Inc.

0.75%

None

Federated Fixed Income Securities, Inc.:

Federated Strategic Income Fund

0.75%

None

Federated Government Income Securities, Inc.

0.75%

None

Federated High Income Bond Fund, Inc.

0.75%

2% on shares redeemed or exchanged within 90 days of purchase

Federated Income Securities Trust:

Federated Capital Income Fund

0.75%

None

Federated Fund for U.S. Government Securities

0.75%

None

Federated Muni and Stock Advantage Fund

0.75%

None

Federated Prudent Global Income Fund

0.75%

None

Federated Real Return Bond Fund

0.75%

None

Federated Index Trust

Federated Max-Cap Index Fund

0.75%

None

CLASS C SHARES SUBJECT TO THE BASIC LOAD SCHEDULE (continued)

Multiple Class Company

Series

12b-1 Fee

Redemption Fee

Federated International Series, Inc.:

Federated International Bond Fund

0.75%

None

Federated Investment Series Funds, Inc.:

Federated Bond Fund

0.75%

None

Federated Managed Allocation Portfolios:

Federated Balanced Allocation Fund

0.75%

None

Federated MDT Series:

Federated MDT All Cap Core Fund

0.75%

None

Federated MDT Balanced Fund

0.75%

None

Federated MDT Large Cap Growth Fund

0.75%

None

Federated MDT Mid Cap Growth Fund

0.75%

None

Federated MDT Small Cap Core Fund

0.75%

None

Federated MDT Small Cap Growth Fund

0.75%

None

Federated MDT Small Cap Value Fund

0.75%

None

Federated MDT Tax Aware/All Cap Core Fund

0.75%

None

Federated Municipal Securities Fund, Inc.

0.75%

None

Federated Municipal Securities Income Trust:

Federated Municipal High Yield Advantage Fund

0.75%

None

Federated Stock and Bond Fund

0.75%

None

Federated Total Return Series, Inc.:

Federated Total Return Bond Fund

0.75%

None

Federated World Investment Series, Inc.:

Federated International High Income Fund

0.75%

None

Federated International Small-Mid Company Fund

0.75%

2% on shares redeemed or exchanged within 30 days of purchase

Federated International Leaders Fund

0.75%

2% on shares redeemed or exchanged within 30 days of purchase

Money Market Obligations Trust:

Liberty U.S. Government Money Market Trust

0.75%

None

CLASS F SHARES* EXHIBIT

TO

MULTIPLE CLASS PLAN

(REVISED 12/1/09)

1.           SEPARATE ARRANGEMENT AND EXPENSE ALLOCATION

For purposes of Rule 18f-3 under the Act, the basic distribution and shareholder servicing arrangement for the Class F Shares will consist of sales by financial intermediaries in consideration of the payment of the sales load (“dealer reallowance”). Financial intermediaries may also provide shareholder services and may receive shareholder service fees therefor. Additionally, the principal underwriter may pay up to 100 basis points (1.00%) of the public offering price to financial intermediaries as an advance commission on sales.  In consideration of advancing this payment, the principal underwriter will receive any contingent deferred sales charges paid upon redemption of Class F Shares and distribution service fees under the 12b-1 Plan on an ongoing basis.  In connection with this basic arrangement Class F Shares will bear the following fees and expenses:

Fees and Expenses

Maximum Amount Allocated Class F Shares

Sales Load

Up to 100 basis points (1.00%) of the public offering price

Contingent Deferred Sales Charge ("CDSC")

Up to 100 basis points (1.00%) of the share price at the time of original purchase or redemption, whichever is lower

Shareholder Service Fee

Up to 25 basis points (0.25%) of the average daily net asset value

12b-1 Fee

As set forth in the attached Schedule

Other Expenses

Itemized expenses incurred by the Fund with respect to holders of Class F Shares as described in Section 3 of the Plan

2.           CONVERSION AND EXCHANGE PRIVILEGES

For purposes of Rule 18f-3, Class F Shares have the following conversion rights and exchange privileges at the election of the shareholder:

Conversion Rights:

None

Exchange Privileges:

Class F Shares may be exchanged for Class F Shares of any other Fund.

In any exchange, the shareholder shall receive shares having the same aggregate net asset value as the shares surrendered.  Exchanges to any other Class shall be treated as a redemption and purchase.

3.           EXCEPTIONS TO BASIC ARRANGEMENTS

For purposes of Rules 22d-1 and 6c-10 under the Act, unless otherwise specified on the Schedule to this Exhibit, the scheduled variations in sales load and contingent deferred sales charges are as follows:

(A)           BASIC SALES LOAD SCHEDULE *

Purchase Amount:

Sales Charge as Percentage of Offering Price

Sales Charge as a Percentage of NAV

Less than $1 million

1.00%

1.01%

$1 million or greater

0.00%

0.00%

(B)           CDSC SCHEDULE

Unless otherwise indicated below, the Schedule of Contingent Deferred Sales Charges for each Fund is as follows:

Purchase Amount:

Shares Held:

Contingent Deferred Sales Charge:

Under $2 million

4 years or less

1.00%

$2 million but less than $5 million

2 years or less

0.50%

$ 5 million or greater

1 year or less

0.25%

(C)                 REDUCING OR ELIMINATING THE SALES LOAD

Contingent upon notification to the Fund’s principal underwriter or transfer agent, in applying the exceptions set forth in this Section 3, the purchase amount shall take into account:

·

Discounts achieved by combining concurrent purchases of and/or current investment in Class A, Class B, Class C, Class F, and Class K Shares, made or held by (or on behalf of) the investor, the investor’s spouse, and the investor’s children under age 21 (regardless of whether the purchases or investments are made or held directly or through an investment professional or through a single-participant retirement account); provided that such purchases and investments can be linked using tax identification numbers (TINs), social security numbers (SSNs), or Broker Identification Numbers (BINs); and

·

Letters of intent to purchase a certain amount of Class F Shares within a thirteen month period.

(D)      WAIVER OF SALES LOAD

Contingent upon notification to the Fund's principal underwriter or transfer agent, no sales load will be assessed on purchases of Class F Shares made:

·

within 120 days of redeeming Shares of an equal or greater amount;

·

through a financial intermediary that did not receive a dealer reallowance on the purchase;

·

by shareholders who originally became shareholders of a Fund pursuant to the terms of an agreement and plan of reorganization which permits the shareholders to acquire shares at net asset value;

·

with reinvested dividends or capital gains;

·

by Directors, Trustees, employees, former employees and sales representatives of the Fund, the Adviser, the principal underwriter and their affiliates, employees of any investment professional that sells shares according to a sales agreement with the principal underwriter, by the immediate family members of the above persons, and by trusts, pension or profit-sharing plans for the above persons; and

·

pursuant to the exchange privilege.

(E)      WAIVER OF CDSC

Contingent upon notification to the Fund's principal underwriter or transfer agent, no CDSC will be imposed on redemptions:

·

(Class F Shares of Federated Capital Income Fund Only) as a shareholder who owned Shares on September 30, 1989;

·

following the death of the last surviving shareholder on the account or the post-purchase disability of all registered shareholder(s), as defined in Section 72(m) (7) of the Internal Revenue Code of 1986;

·

representing minimum required distributions from an Individual Retirement Account or other retirement plan to a shareholder who has attained the age of 70 1/2;

·

of Shares purchased within 120 days of a previous redemption of an equal or lesser amount;

·

of Shares held by Directors, Trustees, employees, former employees and sales representatives of the Fund, the Adviser, the principal underwriter and their affiliates, employees of any investment professional that sells Shares according to a sales agreement with the principal underwriter, by the immediate family members of the above persons, and by trusts, pension or profit-sharing plans for the above persons;

·

of Shares purchased through a financial intermediary that did not receive an advance commission on the purchase ;

·

of Shares purchased with reinvested dividends or capital gains;

·

imposed by the Fund when it closes an account for not meeting the minimum balance requirements;

·

of Shares which were purchased pursuant to an exchange privilege if the Shares were held for the applicable CDSC holding period; and

·

representing a total or partial distribution from a qualified plan, which would not include account transfers, rollovers, or redemptions for the purpose of reinvestment.  For these purposes, qualified plans would not include an Individual Retirement Account, Keogh Plan or custodial account following retirement.

Schedule of Funds

Offering Class F Shares

The Funds set forth on this Schedule each offer Class F Shares on the terms set forth in the Class F Shares Exhibit to the Multiple Class Plan, in each case as indicated below.  The 12b-1 fees indicated are the maximum amounts authorized based on the average daily net asset value.  Actual amounts accrued may be less.

CLASS F SHARES SUBJECT TO THE BASIC LOAD SCHEDULE

Multiple Class Company

  Series

12b-1 Fee

Federated Equity Income Fund, Inc

0.25%

Federated Fixed Income Securities, Inc.:

Federated Strategic Income Fund

0.05%

Federated Government Income Securities, Inc.

None

Federated Income Securities Trust:

Federated Capital Income Fund

Federated Muni and Stock Advantage Fund

0.05%

None

Federated Investment Series Funds, Inc.:

Federated Bond Fund

None

Federated Municipal Securities Fund, Inc.

None

Federated Municipal Securities Income Trust:

Federated Municipal High Yield Advantage Fund

Federated Ohio Municipal Income Fund

0.05%

0.40%

Federated World Investment Series, Inc.:

Federated International High Income Fund

None

Money Market Obligations Trust:

Liberty U.S. Government Money Market Trust

None

* Formerly Fortress Class of Shares

EX-99 8 poa.htm POWER OF ATTORNEY poa.htm

Exhibit 28 (o) (5) under Form N-1A

Exhibit 24 under Item 601/Reg. S-K

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints the Secretary and Assistant Secretaries of FEDERATED MUNICIPAL SECURITIES FUND, INC. and each of them, their true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for them and in their names, place and stead, in any and all capacities, to sign any and all documents to be filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940, by means of the Securities and Exchange Commission's electronic disclosure system known as EDGAR; and to file the same, with all exhibits thereto and other documents in connection therewi th, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to sign and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as each of them might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof.

SIGNATURES

TITLE

DATE

/s/ Maureen E. Lally-Green

Director

August 14, 2009

Maureen E. Lally-Green

-----END PRIVACY-ENHANCED MESSAGE-----

It is proposed that this filing will become effective (check appropriate box):

X	immediately upon filing pursuant to paragraph (b)
	on	pursuant to paragraph (b)
	60 days after filing pursuant to paragraph (a)(1)
	on	pursuant to paragraph (a)(1)
	75 days after filing pursuant to paragraph (a)(2)
	on	pursuant to paragraph (a)(2) 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.

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

	Pre-Effective Amendment No.

	Post-Effective Amendment No.	69

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

	Amendment No.	53

Leslie Ciferno	Trader	/s/ Leslie Ciferno	/s/ LC
Name	Title	Signature	Initials

Adam Cohen	Assistant Trader	/s/ Adam Cohen	/s/ ASC
Name	Title	Signature	Initials
	AVP, Trading
Karol Crummie	Operations Manager	/s/ Karol Crummie	/s/ KC
Name	Title	Signature	Initials

Timothy Gannon	Senior Trader	/s/ Timothy Gannon	/s/ TG
Name	Title	Signature	Initials

Tracey Lusk	AVP, Senior Trader	/s/ Tracey L. Lusk	/s/ TLL
Name	Title	Signature	Initials

Karl Mocharko	AVP, Senior Trader	/s/ Karl Mocharko	/s/ KM
Name	Title	Signature	Initials

Joseph Mycka	Senior Trader	/s/ Joseph Mycka	/s/ JM
Name	Title	Signature	Initials

Jeffrey Petro	VP, Senior Trader	/s/ Jeffrey Petro	/s/ JP
Name	Title	Signature	Initials

Charles Stafford	Trader	/s/ Charles Stafford	/s/ CS
Name	Title	Signature	Initials

Richard Tito	SVP, Head Trader	/s/ Richard Tito	/s/ RT
Name	Title	Signature	Initials
	VP Fixed Income
Timothy Trebilcock	Trader	/s/ Timothy Trebilcock	/s/ TT
Name	Title	Signature	Initials

Patrick Benacci	Asst. Trader	/s/ Patrick Benacci	/s/ PDB
Name	Title	Signature	Initials

James Grant	AVP, Senior Trader	/s/ James Grant	/s/ JG
Name	Title	Signature	Initials

Rae Ann Rice	Sr. Trader, AVP	/s/ Rae Ann Rice	/s/ RAR
Name	Title	Signature	Initials

George Wright	Sr. Trader, AVP	/s/ George B. Wright	/s/ GBW
Name	Title	Signature	Initials
	Trade Support
Marjorie Beatty	Associate	/s/ Marjorie L. Beatty	/s/ MB
Name	Title	Signature	Initials
	Trade Support
Lynn C. Till	Associate	/s/ Lynn C. Till	/s/ LCT
Name	Title	Signature	Initials
	Trade Support
Joseph Varrati	Associate	/s/ Joseph Varrati	/s/ JV
Name	Title	Signature	Initials

Jonathan C. Conley	Senior Vice President	/s/ Jonathan C. Conley	/s/ JCC
Name	Title	Signature	Initials

Deborah A. Cunningham	Sr. Portfolio Manager	/s/ Deborah Cunningham	/s/ DAC
Name	Title	Signature	Initials

Susan R. Hill	Portfolio Manager	/s/ Susan R. Hill	/s/ SRH
Name	Title	Signature	Initials
	Portfolio Manager/
William R. Jamison	Analyst	/s/ William R. Jamison	/s/ WRJ
Name	Title	Signature	Initials

Joseph M. Natoli	Portfolio Manager	/s/ Joseph M. Natoli	/s/ JMN
Name	Title	Signature	Initials
	CIO, SVP,
Mary Jo Ochson	Portfolio Manager	/s/ Mary Jo Ochson	/s/ MJO
Name	Title	Signature	Initials

Michael Sirianni	VP	/s/ Michael Sirianni	/s/ MS
Name	Title	Signature	Initials

Paige Wilhelm	Portfolio Manager	/s/ Paige Wilhelm	/s/ PMW
Name	Title	Signature	Initials

	Fund Tax Manager
Diane C. Allsworth	AVP	/s/ Diane C. Allsworth	/s/ DCA
Name	Title	Signature	Initials

Kristin M. Altschaffl	Fund Treasury Manager	/s/ Kristin M. Altschaffl	/s/ KMA
Name	Title	Signature	Initials

Keith A. Antle	Tax Director	/s/ Keith A. Antle	/s/ KAA
Name	Title	Signature	Initials

Ronald J. Ecoff, Jr.	FFO, Director	/s/ Ronald J. Ecoff, Jr.	/s/ RJE
Name	Title	Signature	Initials

Allison Gerber	Fund Treasury Manager	/s/ Allison Gerber	/s/ AG
Name	Title	Signature	Initials

Charles W. McHugh	Fund Treasury Manager	/s/ Charles W. McHugh	/s/ CM
Name	Title	Signature	Initials
	Fund Treasury
Deborah M. Molini	Director/VP	/s/ Deborah M. Molini	/s/ DMM
Name	Title	Signature	Initials

Richard N. Paddock	Vice President	/s/ Richard N. Paddock	/s/ RP
Name	Title	Signature	Initials
	Fund Treasury
Beverly L. Pirker	Manager/AVP	/s/ Beverly L. Pirker	/s/ BLP
Name	Title	Signature	Initials
	Fund Treasury
Gretchen M. Shoup	Manager/AVP	/s/ Gretchen M. Shoup	/s/ GMS
Name	Title	Signature	Initials
	Fund Tax
Sean A. Suchko	Manager/AVP	/s/ Sean A. Suchko	/s/ SS
Name	Title	Signature	Initials

Richard J. Thomas	Fund Treasurer/SVP	/s/ Richard J. Thomas	/s/ RJT
Name	Title	Signature	Initials
	Fund Treasury
Tatiana M. Yewisiak	Manager	/s/ Tatiana M. Yewisiak	/s/ TMY
Name	Title	Signature	Initials

Australia	National Australia Bank Ltd
Austria	Bank Austria Creditanstalt A.G.
Belgium	ING Belgium SA/NV
Brazil	Citibank N.A.
Canada	Royal Bank of Canada
Czech Republic	ING Bank N.V. Prague
Denmark	Danske Bank
Egypt	Citibank, N.A.
Finland	Nordea Bank Finland plc
France	BNP Paribas Securities Services/ CACEIS Bank
Germany	BHF-BANK AG
Hong Kong	HSBC
Hungary	ING Bank (Hungary) Rt.
India	Deutsche Bank AG Mumbai/ HSBC
Indonesia	HSBC
Israel	Bank Hapoalim B.M.
Italy	Intesa Sanpaolo S.p.A.
Japan	The Bank of Tokyo-Mitsubishi UFJ Ltd/ Mizuho Corporate Bank, Ltd.
Malaysia	HSBC Bank Malaysia Berhad
Mexico	Banco Nacional de Mexico
Netherlands	ING Bank
New Zealand	National Australia Bank
Norway	DnB NOR Bank ASA
Poland	ING Bank Slaski
Portugal	Banco Comercial Portugues
Singapore	United Overseas Bank Limited/ DBS Bank Ltd.
South Africa	Standard Bank of South Africa Limited
South Korea	HSBC
Spain	Banco Bilbao Vizcaya Argentaria S.A./ Santander Investment, S.A.
Sweden	Skandinaviska Enskilda Banken
Switzerland	Credit Suisse, Zurich
Taiwan	HSBC
Turkey	Garanti Bank
United Kingdom	The Bank of New York/ Deutsche Bank AG London (Depository and Clearing Centre)

	Global
	Safekeeping Fee		Transaction Fee
Countries	*(in basis points)1		(U.S. Dollars)2
Argentina	17.00		55
Australia	1.50		25
Austria	3.00		40
Bahrain	50.00		140
Bangladesh	50.00		145
Belgium	2.50		35
Bermuda	17.00		70
Botswana	50.00		140
Brazil	12.00		30
Bulgaria	30.00		85
Canada	1.00		10
Chile	20.00		80
China “A” Shares	15.00		80
China “B” Shares	15.00		60
Colombia	50.00		95
Costa Rica	14.00		65
Croatia	25.00		70
Cyprus	15.00		35
Czech Republic	18.00		50
Denmark	2.00		35
Ecuador	30.00		55
Egypt	30.00		85
Estonia	10.00		60
Euromarket/Euroclear3	1.00		10
Euromarket/Clearstream	1.00		10
Finland	3.50		35
France	2.00		30
Germany	1.50		25
Ghana		50.00	140
Greece		9.00	40
Hong Kong		3.00	45
Hungary		20.00	55
Iceland		11.00	35
India		13.00	105
Indonesia		11.00	80
Ireland (Equities)		3.00	33
Ireland (Gov’t Bonds)		1.00	13
Israel		20.00	40
Italy		1.50	35
Ivory Coast		50.00	140
Jamaica		50.00	60
Japan		1.75	20
Jordan		50.00	140
Kazakhstan		53.00	140
Kenya		48.00	140
Latvia		50.00	45
Lebanon		50.00	140
Lithuania		20.00	43
Luxembourg		10.00	80
Malaysia		4.50	45
Malta		20.00	63
Mauritius		25.00	100
Mexico		6.50	30
Morocco		50.00	95
Namibia		50.00	60
Netherlands		2.00	25
New Zealand		2.00	35
Nigeria		50.00	60
Norway		2.50	35
Oman		50.00	140
Pakistan		50.00	140
Peru		50.00	83
Philippines		6.00	60
Poland		15.00	63
Portugal		5.00	50
Qatar		50.00	140
Romania		30.00	80
Russia Equities		40.00	95
Singapore		3.50	45
Slovak Republic		23.00	95
Slovenia		50.00	60
South Africa		2.50	30
South Korea		6.50	45
Spain		2.50	40
Sri Lanka		13.00	70
Swaziland		50.00	60
Sweden		2.00	30
Switzerland		2.00	35
Taiwan		10.00	60
Thailand		5.00	50
Trinidad & Tobago		50.00	53
Tunisia		50.00	53
Turkey		12.50	60
Ukraine		75.00	250
United Kingdom		0.50	10
Uruguay		75.00	83
Venezuela		50.00	140
Zambia		50.00	140
Zimbabwe		50.00	140

Third Party Foreign Exchange Settlements
$70 per non-USD currency movement

Minimum charges imposed by Agent Banks/Local Administrators
Brazil - 15 basis points for annual administrative charges

Colombia - USD $600 per month minimum administration charge
Ecuador - USD $800 monthly minimum per relationship
Egypt - USD $400 monthly minimum per relationship

Additional Charges
Local taxes, stamp duties or other assessments, including stock exchange fees, postage and
insurance for shipping, facsimile reporting, extraordinary telecommunications fees or other unusual
expenses, which are unique to a country in which the Funds are investing

Custodian: THE BANK OF NEW YORK	On behalf of each of the funds indicated on Schedule II of the Custody Agreement, as amended from time to time.


By: /s/ Joseph F. Keenan	By: /s/ Richard A. Novak
Title: Managing Director	Title: Treasurer

Country/Market	Subcustodian(s)
Argentina	Citibank N.A.
Australia	National Australia Bank Limited
Austria	UniCredit Bank Austria AG
Bahrain	HSBC Bank Middle East Limited
Bangladesh	Standard Chartered Bank
Belgium	ING Belgium, SA/NV
Benin	Société Générale de Banques en Côte d’Ivoire
Bermuda	Bank of Bermuda Limited
Botswana	Barclays Bank of Botswana Ltd.
Brazil	Citibank N.A.
Bulgaria	ING Bank N.V.
Burkina Faso	Société Générale de Banques en Côte d’Ivoire
Canada	CIBC Mellon Trust Company
Cayman Islands	The Bank of New York Mellon
Channel Islands	The Bank of New York Mellon
Chile	Banco de Chile
China	HSBC Bank (China) Company Limited
Colombia	Cititrust Colombia S.A.
Costa Rica	Banco BCT
Croatia	Privredna Banka Zagreb d.d.
Cyprus	EFG Eurobank Ergasias S.A.
Czech Republic	ING Bank N.V.
Denmark	Danske Bank
Ecuador	Banco de la Produccion S.A.
Egypt	HSBC Bank Egypt S.A.E.
Estonia	SEB Pank AS
Euromarket	Clearstream Banking Luxembourg S.A.
Euromarket	Euroclear Bank
Finland	Skandinaviska Enskilda Banken
France	BNP Paribas Securities Services
France	CACEIS Bank
Germany	BHF Asset Servicing GmbH
Ghana	Barclays Bank of Ghana Ltd.
Greece	EFG Eurobank Ergasias S.A.
Guinea Bissau	Société Générale de Banques en Côte d’Ivoire
Hong Kong	HSBC Ltd.
Hungary	ING Bank N.V.
Iceland	New Landsbanki Islands
India	Deutsche Bank AG
Indonesia	HSBC Ltd.
Ireland	The Bank of New York Mellon
Israel	Bank Hapoalim B.M.
Italy	Intesa Sanpaolo S.p.A
Ivory Coast	Société Générale de Banques en Côte d’Ivoire
Japan	Mizuho Corporate Bank Ltd. (MHCB)
Japan	The Bank of Tokyo – Mitsubishi UFJ Ltd.
Jordan	HSBC Bank Middle East Ltd.
Kazakhstan	HSBC Kazakhstan
Kenya	Barclays Bank of Kenya Ltd.
Kuwait	HSBC Bank Middle East Ltd.
Latvia	AS SEB banka
Lebanon	HSBC Bank Middle East Ltd.
Lithuania	SEB Bankas
Luxembourg	Banque et Caisse d’Epargne de l’Etat (BCEEL)
Malaysia	HSBC Bank Malaysia Berhad
Mali	Société Générale de Banques en Côte d’Ivoire
Malta	HSBC Bank Malta plc
Mauritius	HSBC Ltd.
Mexico	Banco Nacional de Mexico (BANAMEX)
Morocco	Citibank Maghreb
Namibia	Standard Bank Namibia Ltd
Netherlands	BNY Mellon Asset Servicing BV
New Zealand	National Australia Bank
Niger	Société Générale de Banques en Côte d’Ivoire
Nigeria	Stanbic IBTC Bank Plc
Norway	DnB NOR Bank ASA
Oman	HSBC Bank Middle East Ltd.
Pakistan	Deutsche Bank AG
Palestinian Autonomous Area	HSBC Bank Middle East Ltd.
Peru	Citibank del Peru, S.A.
Philippines	HSBC Ltd.
Poland	ING Bank Slaski
Portugal	Banco Comercial Portugues
Qatar	HSBC Bank Middle East Ltd.
Romania	ING Bank N.V.
Russia	ING Bank (Eurasia)
Saudi Arabia	SABB Securities Limited
Senegal	Société Générale de Banques en Côte d’Ivoire
Serbia	UniCredit Bank Austria AG
Singapore	DBS Bank Ltd.
Singapore	United Overseas Bank Ltd.
Slovak Republic	ING Bank N.V.
Slovenia	UniCredit Banka Slovenia d.d.
South Africa	Standard Bank of South Africa
South Korea	HSBC Ltd.
Spain	Banco Bilbao Vizcaya Argentaria S.A. (BBVA)
Spain	Santander Investment S.A.
Sri Lanka	HSBC Ltd.
Swaziland	Standard Bank Swaziland Ltd
Sweden	Skandinaviska Enskilda Banken
Switzerland	Credit Suisse
Taiwan	Standard Chartered Bank (Taiwan) Ltd. / HSBC
Thailand	Bangkok Bank Public Company Ltd.
Thailand	HSBC Ltd
Togo	Société Générale de Banques en Côte d’Ivoire
Trinidad & Tobago	Republic Bank Ltd.
Tunisia	Banque Internationale Arabe de Tunisie
Turkey	Deutsche Bank AS
Ukraine	ING Bank Ukraine
United Arab Emirates	HSBC Bank Middle East Ltd.
United Kingdom	Deutsche Bank AG
United Kingdom	The Bank of New York Mellon
United States	The Bank of New York Mellon
Uruguay	Banco Itaú Uruguay S.A.
Venezuela	Citibank N.A.
Vietnam	HSBC Bank (Vietnam) Ltd
Zambia	Barclays Bank of Zambia Ltd
Zimbabwe	Barclays Bank of Zimbabwe Ltd

	Global
	Safekeeping Fee	Transaction Fee5
Countries	*(in basis points)6	(U.S. Dollars)
Argentina	17.00	55
Australia	1.50	25
Austria	3.00	40
Bahrain	50.00	140
Bangladesh	50.00	145
Belgium	2.50	35
Bermuda	17.00	70
Botswana	50.00	140
Brazil	12.00	30
Bulgaria	30.00	85
Canada	1.00	10
Chile	20.00	80
China “A” Shares	15.00	80
China “B” Shares	15.00	60
Colombia	50.00	95
Costa Rica	14.00	65
Croatia	25.00	70
Cyprus	15.00	35
Czech Republic	18.00	50
Denmark	2.00	35
Ecuador	30.00	55
Egypt	30.00	85
Estonia	10.00	60
Euromarket/Euroclear7	1.00	10
Euromarket/Clearstream	1.00	10
Finland	3.50	35
France	2.00	30
Germany	1.50	25

Years 1-3	$2,700,000/year
Year 4
July 1, 2007 -December 31, 2007	$1,350,000

January 1, 2008 - June 30, 2008	$ 801,098
Year 5
July 1, 2008-December 31, 2008	$ 801,097
January 1, 2009 -June 30, 2009	$ 801,097
Year 6
July 1, 2009 - December 31, 2009	$ 471,756
January 1, 2010 - June 30, 2010	$ 471,756
Year 7
July 1, 2010 - December 31, 2010	$ 471,756
January 1, 2011 - June 30, 2011	$ 471,756
Year 8
July 1, 2011 - December 31, 2011	$ 471,756
January 1, 2012 - June 30, 2012	$ 471,756

By each of the Federated Funds set forth on	STATE STREET BANK AND TRUST
Exhibit A to the Agreement	COMPANY


By: /s/ John W. McGonigle	By: /s/ Joseph L. Hooley
Name: John W. McGonigle	Joseph L. Hooley, Vice Chairman
Title: Executive Vice President and Secretary

Fees and Expenses	Maximum Amount Allocated Class A Shares
Sales Load	Up to 5.5% of the public offering price
Contingent Deferred
Sales Charge ("CDSC")	0.00%
Shareholder Service Fee	Up to 25 basis points (0.25%) of the average daily net asset value
12b-1 Fee	As set forth in the attached Schedule
Redemption Fee	As set forth in the attached Schedule
Other Expenses	Itemized expenses incurred by the Fund with respect to holders of Class A Shares as described in Section 3 of the Plan

Conversion Rights:	None
Exchange Privilege:	Class A Shares may be exchanged for Class A Shares of any other Fund

Purchase Amount	Sales Load as a Percentage of Public Offering Price
Less than $50,000	5.50%
$50,000 but less than $100,000	4.50%
$100,000 but less than $250,000	3.75%
$250,000 but less than $500,000	2.50%
$500,000 but less than $1 million	2.00%
$1 million or greater	0.00%

Purchase Amount	Sales Charge as a Percentage of Public Offering Price
Less than $100,000	4.50%
$100,000 but less than $250,000	3.75%
$250,000 but less than $500,000	2.50%
$500,000 but less than $1 million	2.00%
$1 million or greater	0.00%

Purchase Amount	Sales Charge as a Percentage of Public Offering Price
Less than $250,000	1.00%
$250,000 or greater	0.00%

Purchase Amount	Sales Charge as a Percentage of Public Offering Price

All purchases	0.00%

·	Following the death of the last surviving shareholder or post-purchase disability, as defined in Section 72(m)(7) of the Internal Revenue Code of 1986;
·	representing minimum required distributions from an Individual Retirement Account or other retirement plan to a shareholder who has attained the age of 70 ½;
·	of Shares that were reinvested within 120 days of a previous redemption;
·	of Shares held by the by Directors, Trustees, employees, former employees and sales representatives of the Fund, the Adviser, the principal underwriter and their affiliates, employees of any investment professional that sells Shares according to a sales agreement with the principal underwriter, by the immediate family members of the above persons, and by trusts, pension or profit-sharing plans for the above persons;
·	of Shares purchased through a financial intermediary that did not receive an advance commission on the purchase;
·	of Shares purchased with reinvested dividends or capital gains;
·	imposed by the Fund when it closes an account for not meeting the minimum balance requirements; and
·	of Shares which were purchased pursuant to an exchange privilege if the Shares were held for the applicable CDSC holding period.

Multiple Class Company Series	12b-1 Fee	Redemption Fee

Federated Equity Funds
Federated Capital Appreciation Fund	0.05%	None
Federated Clover Mid Value Fund	0.05%	None
Federated Clover Small Value Fund	0.05%	None
Federated Clover Value Fund	0.05%	None
Federated InterContinental Fund	0.05%	2% on shares redeemed or exchanged within 30 days of purchase
Federated International Strategic Value Fund	0.05%	2% on shares redeemed or exchanged within 30 days of purchase
Federated Kaufmann Fund	0.25%	None
Federated Kaufmann Large Cap Fund	0.25%	None
Federated Kaufmann Small Cap Fund	0.25%	None
Federated Market Opportunity Fund	0.05%	None
Federated Mid-Cap Growth Strategies Fund	None	None
Federated Prudent Bear Fund	0.05%	None
Federated Strategic Value Fund	0.05%	None

Federated Equity Income Fund, Inc.	0.05%	None

Federated Income Securities Trust
Federated Capital Income Fund	None	None
Federated Muni and Stock Advantage Fund	0.05%	None
Federated Prudent Global Income Fund	0.05%	None
Federated Real Return Bond Fund	0.05%	None

Federated MDT Series
Federated MDT All Cap Core Fund	0.05%	None
Federated MDT Balanced Fund	0.05%	None
Federated MDT Large Cap Growth Fund	0.05%	None
Federated MDT Mid Cap Growth Fund	0.05%	None
Federated MDT Small Cap Core Fund	0.05%	None
Federated MDT Small Cap Growth Fund	0.05%	None
Federated MDT Small Cap Value Fund	0.05%	None
Federated MDT Tax Aware/All Cap Core Fund	0.05%	None


Federated Managed Allocation Portfolios
Federated Balanced Allocation Fund	0.05%	None

Federated Stock and Bond Fund	None	None

Federated World Investment Series, Inc.
Federated International Small-Mid Company Fund	0.25%	2% on shares redeemed or exchanged within 30 days of purchase
Federated International Leaders Fund	0.25%	2% on shares redeemed or exchanged within 30 days of purchase

Multiple Class Company	Series
Federated Fixed Income Securities, Inc.	Federated Municipal Ultrashort Fund
Federated Income Securities Trust	Federated Short-Term Income Fund
Federated Institutional Trust	Federated Government Ultrashort Duration Fund
Federated Short-Intermediate Duration Municipal Trust
Federated Total Return Series, Inc.	Federated Ultrashort Bond Fund

Fees and Expenses	Maximum Amount Allocated Class B Shares
Sales Load	None
Contingent Deferred Sales Charge (“CDSC”)	Up to 5.5% of the share price at the time of purchase or redemption, whichever is lower
Shareholder Service Fee	Up to 25 basis points (0.25%) of the average daily net asset value
12b-1 Fee	Up to 75 basis points (0.75%) of the average daily net asset value
Redemption Fee	As set forth in the attached Schedule
Other Expenses	Itemized expenses incurred by the Fund with respect to holders of Class B Shares as described in Section 3 of the Plan

Conversion Rights:	After Class B Shares have been held for eight years from the date of purchase, they will automatically convert into Class A Shares on or about the last day of the following month.
Exchange Privilege:	Class B Shares may be exchanged for Class B Shares of any other Fund.

Shares Held Up to: To:	Have A CDSC Of:
1 year	5.50 %
2 years	4.75 %
3 years	4.00 %
4 years	3.00 %
5 years	2.00 %
6 years	1.00 %
7 years	0.00 %
8 years	Convert to Class A Shares

Fees and Expenses	Maximum Amount Allocated Class C Shares
Contingent Deferred Sales Charge (“CDSC”)	1.00% of the share price at the time of purchase or redemption, whichever is lower if redeemed within twelve months following purchase
Shareholder Service Fee	Up to 25 basis points (0.25%) of the average daily net asset value
12b-1 Fee	As set forth in the attached Schedule
Redemption Fee	As set forth in the attached Schedule
Other Expenses	Itemized expenses incurred by the Fund with respect to holders of Class C Shares as described in Section 3 of the Plan

Conversion Rights:	None
Exchange Privileges:	Class C Shares may be exchanged for Class C Shares of any other Fund.

Fees and Expenses	Maximum Amount Allocated Class F Shares
Sales Load	Up to 100 basis points (1.00%) of the public offering price
Contingent Deferred Sales Charge ("CDSC")	Up to 100 basis points (1.00%) of the share price at the time of original purchase or redemption, whichever is lower
Shareholder Service Fee	Up to 25 basis points (0.25%) of the average daily net asset value
12b-1 Fee	As set forth in the attached Schedule
Other Expenses	Itemized expenses incurred by the Fund with respect to holders of Class F Shares as described in Section 3 of the Plan

Purchase Amount:	Sales Charge as Percentage of Offering Price	Sales Charge as a Percentage of NAV
Less than $1 million	1.00%	1.01%
$1 million or greater	0.00%	0.00%

Purchase Amount:	Shares Held:	Contingent Deferred Sales Charge:
Under $2 million	4 years or less	1.00%
$2 million but less than $5 million	2 years or less	0.50%
$ 5 million or greater	1 year or less	0.25%

Multiple Class Company Series	12b-1 Fee

Federated Equity Income Fund, Inc	0.25%

Federated Fixed Income Securities, Inc.: Federated Strategic Income Fund	0.05%

Federated Government Income Securities, Inc.	None

Federated Income Securities Trust: Federated Capital Income Fund Federated Muni and Stock Advantage Fund	0.05% None

Federated Investment Series Funds, Inc.: Federated Bond Fund	None

Federated Municipal Securities Fund, Inc.	None

Federated Municipal Securities Income Trust: Federated Municipal High Yield Advantage Fund Federated Ohio Municipal Income Fund	0.05% 0.40%

Federated World Investment Series, Inc.: Federated International High Income Fund	None

Money Market Obligations Trust: Liberty U.S. Government Money Market Trust	None