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e e eratd dWHY MUNICIPAL BOND FUNDS NOW?

Over the past several months, extreme market volatility due to the subprime implosion, bond insurerdowngrades and the resulting credit crunch has contributed to the underperformance of municipal bonds creating a tremendous window of opportunity for municipal bond fund investors.

Chart information reflects (pre-tax) municipal bond yields versus (pre-tax) Treasury yields from 1/08/65-8/29/08. Source: Ned Davis Research, Inc.

This chart is for illustrative purposes only and is not representative of performance for any specific investment.

A common measure of relative value of Muni vs. Treasuries is the ratio of Muni vs. treasury yields.

Munis are Overvalued when the yield is less than 85.1% as compared to Treasury yields.

Munis are Undervalued when the yield is greater than 85.1% as compared to Treasury yields.

Average yield ratio of Muni Bonds to U.S. Treasuries = 85.1%

8/29/2008 = 105.6%

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WHY NOW

Valuation

Falling Rate Environment

Impact of an Election Year

Supply and Demand

WHAT YOU SHOULD KNOW

The yield ratio of muni bonds to

U.S. Treasuries, traditionally averaging85.1%, has been at or near 100% of the

20-year Treasury yield.

Source: Ned Davis Research, Inc.

Bond prices have an inverse

relationship to interest rates. Wheninterest rates fall, bond prices rise,

and vice versa.

Top federal tax rates are expectedto rise with a Democratic Congress and even more likely to rise with a

Democratic president.

While municipal issuance may bedeclining, demand would increase.

POTENTIAL BENEFITS

TO INVESTORS

Muni yields in the range of 85% of

Treasuries are appealing to investorsin higher tax brackets, but when

muni yields are at or near 100% ofTreasuries, the appeal of munis

broadens to any investor particularly when the effects of

federal taxes are taken into account.

If interest rates continue to fall, the

time to buy muni bonds may be now,before prices increase.

Higher top tax rates typically increasethe appeal of tax shelters such asmuni bonds long considered one

of the last legal loopholes.

A reduction in the supply of municipalbond issues would raise the value

of existing bonds, supporting theirprice levels.

Municipal Bonds Outyield Treasuries

Not FDIC Insured May Lose Value No Bank Guarantee

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Federated Investors, Inc.Federated Investors Tower1001 Liberty AvenuePittsburgh, PA 15222-3779

Contact us at FederatedInvestors.comor call 1-800-341-7400.

39037 (9/08)

Federated Securities Corp., Distributor

Federated is a registered mark ofFederated Investors, Inc.

2008 Federated Investors, Inc.

e e eratd dWORLD-CLASSINVESTMENTMANAGER

MUNICIPAL BONDS HAVE

HISTORICALLY OFFERED

Attractive tax-equivalent yields vs. comparable

taxable investments

Competitive performance vs. other fixed incomeasset classes

Low historical default rates

Low correlation to other fixed income andequity asset classes

Credit Rating Municipal Corporate

Aaa 0.00% 0.52%

Aa 0.06% 0.52%

A 0.03% 1.29%

Baa 0.13% 4.63%

Ba 2.65% 19.15%

B 11.86% 43.34%

Caa-C 16.58% 69.18%

Investment Grade 0.07% 2.09%

Speculative Grade 4.29% 31.37%

LONG HISTORY OF EXPERIENCE IN THE

MUNICIPAL BOND MARKET

Through Federateds wide range of municipal bond funds,shareholders are hiring one of the most experienced and

skilled municipal bond management teams in the industry.Federateds municipal management team is widely recog-nized and respected for its breadth of product and experience

in the industry, achieving a history of unique stability. Thiscore municipal team that has worked together for nearly

20 years.

Federated is a significant institutional buyer of municipal

securities currently managing more than 13 portfoliostotaling over $2.9 billion in assets as of 6/30/08.

Six municipal portfolio managers averaging 19 yearsexperience and 17 years with Federated.

Past performance is no guarantee of future results.

Bond prices are sensitive to prices in interest rates and a rise in interest rates can cause a decline intheir prices.

Interest income may be subject to the federal alternative minimum tax (AMT) for individuals andcorporations and to state and local taxes.

Duration is a measure of a securitys price sensitivity to changes in interest rates. Securities with longerdurations are more sensitive to changes in interest rates than securities of shorter durations.

Mutual funds are subject to risks and fluctuate in value.

For more complete information please call your investment professional, visit

FederatedInvestors.com or call 1-800-341-7400 for a prospectus. You should

consider the funds investment objectives, risks, charges, and expenses carefully

before you invest. Information about these and other important subjects is in the

funds prospectus, which you should read carefully before you invest.

Average Duration (Years)

YieldPotential

Minimum

Ma

ximum

0 0.25 1 3 6

Ultra-short Short Intermediate Long

Federated offers municipal bond funds across the

entire spectrum of the yield curve

Source: Moodys

Most recent data available.

This chart is for illustrative purposes and not representative of any specific

Federated fund.

10-Year Cumulative Default Rates 1970-2006