1IBV01!.DOC;70411
1
Reg. No. 33-_____
811-4533
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FORTRESS MUNICIPAL INCOME FUND, INC.
(Exact Name of Registrant as Specified in Charter)
(412) 288-1900
(Area Code and Telephone Number)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
JOHN W. MCGONIGLE, ESQUIRE
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
Copies to:
Charles H. Field, Esquire Matthew G. Maloney, Esquire
Corporate Counsel Dickstein, Shapiro & Morin, L.L.P.
Federated Investors 2101 L Street, N.W.
Pittsburgh, PA 15222 Washington, D.C. 20037
It is proposed that this filing will become effective on February 18, 1995, or
as soon thereafter as is practicable, pursuant to Rule 488. (Approximate Date
of Proposed Public Offering)
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of 1940
that it elects to register an indefinite amount of securities under the
Securities Act of 1933 and filed the Notice required by that Rule for
Registrant's most recent fiscal year on October 14, 1994.
CROSS REFERENCE SHEET
Pursuant to Item 1(a) of Form N-14 Showing Location in
Prospectus of Information Required by Form N-14
This Registration Statement is comprised of six prospectus/proxy statements,
and related statements of additional information relating to the acquisition
by the Registrant of: (1) Florida Municipal Income Fund; (2) Maryland
Municipal Income Fund; (3) New Jersey Municipal Income Fund; (4) Texas
Municipal Income Fund; (5) Virginia Municipal Income Fund; each of which is a
portfolio of Municipal Securities Income Trust; and (6) Multi-State Income
Fund, a portfolio of Fixed Income Securities, Inc. The numbers below
correspond to the prospectus/proxy statement numbers.
Item of Part A of Form N-14 and Caption or Location in
Caption Prospectus
1.Beginning of Registration
Statement and Outside Front
Cover Page of Prospectus (1-6) Cross Reference Sheet; Cover Page
2.Beginning and Outside Back
Cover Page of Prospectus (1-6) Table of Contents
3.Synopsis Information and
Risk Factors (1-6) Summary; Risk Factors
4.Information About the
Transaction (1-6) Information About the
Reorganization
5.Information About the
Registrant (1-5) Information About the Trust, the
Portfolio and the Fund; (6) Information
About the Corporation; the Portfolio
and the Fund
6.Information About the
Company Being Acquired (1-5)Information About the Trust, the
Portfolio and the Fund; (6) Information
About the Corporation; the Portfolio
and the Fund
7.Voting Information (1-6) Voting Information
8.Interest of Certain Persons
and Experts Not Applicable
9.Additional Information
Required for Reoffering by
Persons Deemed to be
Underwriters Not Applicable
FLORIDA MUNICIPAL INCOME FUND,
a portfolio of MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Dear Shareholder:
The Board of Trustees and management of Municipal Securities Income
Trust (the "Trust") are pleased to submit for your vote a proposal to transfer
all of the assets of Florida Municipal Income Fund (the "Portfolio") to
Fortress Municipal Income Fund, Inc. (the "Fund"), a mutual fund advised by
Federated Advisers. The Fund has an investment objective similar to that of
the Portfolio in that it seeks current income which is exempt from the federal
regular income tax, although its shares will not be exempt from the Florida
intangibles tax. As part of the transaction, shareholders in the Portfolio
would receive shares in the Fund equal in value to their shares in the
Portfolio and the Portfolio would be liquidated.
The Board of Trustees of the Trust, as well as Federated Advisers,
the Trust's adviser, and Federated Securities Corp., the Trust's principal
underwriter, believe the proposed agreement and plan of reorganization is in
the best interests of Portfolio shareholders for the following reasons:
-- the Portfolio has not reached a size, and is not
expected to reach a size, in which it can provide
shareholders with a reasonable, competitive return on its
investments.
-- The reorganization of the Portfolio into the Fund is
expected to provide operating efficiencies as a result of
the size of the Fund which were not available to Portfolio
shareholders due to the smaller size of the Portfolio's
assets.
-- The Fund offers an investment portfolio which invests
in municipal bonds the interest from which is exempt from
the federal regular income tax.
We believe the transfer of the Portfolio's assets in this
transaction will present an excellent investment opportunity for our
shareholders. Your vote on the transaction is critical to its success. The
transfer will be effected only if approved by a majority of the Portfolio's
outstanding shares on the record date voted in person or represented by proxy.
We hope you share our enthusiasm and will participate by casting your vote in
person, or by proxy if you are unable to attend the meeting. Please read the
enclosed prospectus/proxy statement carefully before you vote. If you have
any questions, please feel free to call us at 800-245-5000.
Thank you for your prompt attention and participation.
Sincerely,
Richard B. Fisher
President
FLORIDA MUNICIPAL INCOME FUND,
a portfolio of MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO SHAREHOLDERS OF FLORIDA MUNICIPAL INCOME FUND:
A Special Meeting of Shareholders of Florida Municipal Income Fund (the
"Portfolio"), a portfolio of Municipal Securities Income Trust (the "Trust")
will be held at 2:15 p.m. on March 30, 1995 at the office of the Trust,
Federated Investors Tower, 19th Floor, Pittsburgh, Pennsylvania 15222-3779 for
the following purposes:
1. To approve or disapprove a proposed Agreement and Plan of
Reorganization between the Trust, on behalf of the Portfolio, and Fortress
Municipal Income Fund, Inc. (the "Fund"), whereby the Fund would acquire all
of the assets of the Portfolio in exchange for Fund shares to be distributed
pro rata by the Portfolio to its shareholders in complete liquidation of the
Portfolio; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
By Order of the Board of Trustees,
Dated: February __, 1995 John W. McGonigle
Secretary
Shareholders of record at the close of business February 10, 1995
are entitled to vote at the meeting. Whether or not you plan to attend the
meeting, please sign and return the enclosed proxy card. Your vote is
important.
To secure the largest possible representation and to save the
expense of further mailings, please mark your proxy card, sign it, and return
it in the enclosed envelope, which requires no postage if mailed in the United
States. You may revoke your proxy at any time at or before the meeting or
vote in person if you attend the meeting.
PROSPECTUS/PROXY STATEMENT
FEBRUARY 18, 1995
Acquisition of the Assets of
FLORIDA MUNICIPAL INCOME FUND,
a portfolio of
MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
By and in exchange for shares of
FORTRESS MUNICIPAL INCOME FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
This Prospectus/Proxy Statement describes the proposed Agreement and
Plan of Reorganization (the "Plan") whereby Fortress Municipal Income Fund,
Inc., a Maryland corporation (the "Fund"), would acquire all of the assets of
Florida Municipal Income Fund (the "Portfolio"), a portfolio of Municipal
Securities Income Trust, a Massachusetts business trust (the "Trust"), in
exchange for Fund shares to be distributed pro rata by the Portfolio to its
shareholders in complete liquidation of the Portfolio. As a result of the
Plan, each shareholder of the Portfolio will become the owner of Fund shares
having a total net asset value equal to the total net asset value of his or
her holdings in the Portfolio.
The Fund is an open-end, diversified management investment company
whose investment objective is a high level of current income which is
generally exempt from the federal regular income tax. The Fund pursues this
investment objective by investing primarily in a professionally managed,
diverse portfolio of municipal bonds. The Fund may invest up to 35% of its
net assets in lower quality municipal bonds. The Portfolio is a non-
diversified portfolio of securities of an open-end management investment
company whose investment objective is to provide current income which is
exempt from federal regular income tax and to maintain an investment portfolio
which will cause its shares to be exempt from the Florida intangibles tax.
The Portfolio pursues this objective by investing primarily in a portfolio of
municipal securities which are exempt from federal regular income tax and the
Florida intangibles tax. For a comparison of the investment policies of the
Portfolio and the Fund, see "Summary-Investment Objectives and Policies".
This Prospectus/Proxy Statement should be retained for future
reference. It sets forth concisely the information about the Fund that a
prospective investor should know before investing. This Prospectus/Proxy
Statement is accompanied by the Prospectus of the Fund dated October 31, 1994
which is incorporated herein by reference. Statements of Additional
Information for the Fund dated October 31, 1994 (relating to the Fund's
prospectus of the same date) and February 18, 1995 (relating to this
Prospectus/Proxy Statement) containing additional information have been filed
with the Securities and Exchange Commission and are incorporated herein by
reference. Copies of the Statements of Additional Information may be obtained
without charge by writing or calling the Fund at the address and telephone
number shown above.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Summary........................................................
Risk Factors...................................................
Information About the Reorganization...........................
Information About the Fund, the Portfolio and the Trust........
Voting Information.............................................
SUMMARY
About the Proposed Reorganization
The Board of Trustees of Municipal Securities Income Trust (the
"Trust") has voted to recommend to shareholders of its portfolio, Florida
Municipal Income Fund (the "Portfolio"), the approval of an Agreement and Plan
of Reorganization (the "Plan") whereby Fortress Municipal Income Fund, Inc., a
Maryland corporation (the "Fund"), would acquire all of the assets of the
Portfolio in exchange for Fund shares to be distributed pro rata by the
Portfolio to its shareholders in complete liquidation and dissolution of the
Portfolio (the "Reorganization"). As a result of the Reorganization, each
shareholder of the Portfolio will become the owner of Fund shares having a
total net asset value equal to the total net asset value of his or her
holdings in the Portfolio on the date of the Reorganization, i.e., the Closing
Date.
As a condition to the Reorganization transactions, the Fund and the
Trust will receive an opinion of counsel that the Reorganization will be
considered a tax-free "reorganization" under applicable provisions of the
Internal Revenue Code so that no gain or loss will be recognized by either the
Fund or the Portfolio or their shareholders. The tax cost basis of the Fund
shares received by Portfolio shareholders will be the same as the tax cost
basis of their shares in the Portfolio. After the acquisition is completed,
the Portfolio will be liquidated.
Investment Objectives and Policies
The investment objective of the Fund is to provide a high level of
current income which is generally exempt from the federal regular income tax.
This investment objective may not be changed without the approval of
shareholders. The Fund pursues its investment objective by investing
primarily in a diversified portfolio of municipal bonds, and may invest up to
35% of its net assets in lower quality municipal bonds. As a matter of
investment policy that cannot be changed without the approval of shareholders,
except when investing on a temporary basis for defensive purposes, the Fund
invests its assets so that at least 80% of its annual interest income is
exempt from the federal regular income tax.
The investment objective of the Portfolio is to provide current
income which is exempt from federal regular income tax and to maintain an
investment portfolio which will cause its shares to be exempt from the Florida
intangibles tax. This investment objective may not be changed without the
approval of shareholders. The Portfolio pursues its investment objective by
investing primarily in securities which are exempt from federal regular income
tax and the Florida intangibles tax. As a matter of investment policy which
cannot be changed without the approval of shareholders, the Portfolio invests
its assets so that at least 80% of its annual interest income is exempt from
federal regular income tax.
The Fund invests in municipal bonds which are rated Ba or higher by
Moody's Investors Service, Inc. ("Moody's") or rated BB or higher by
Standard & Poor's Ratings Group ("S&P") and bonds which are not rated but
which the adviser judges to be of comparable quality to bonds having such
ratings. The Fund will limit its purchases of municipal bonds rated Ba and BB
to 35% of its net assets. Unless otherwise designated, the investment
policies of the Fund may be changed by the Board of Directors without
shareholder approval, although shareholders will be notified before any
material change becomes effective.
The Portfolio invests primarily in Florida municipal securities,
which are obligations issued by or on behalf of the State of Florida and
Florida municipalities, as well as those issued by states, territories and
possessions of the United States and participation interests in such
instruments, the interest from which is exempt from federal regular income tax
and the Florida intangibles tax in the opinion of the issuer's bond counsel,
the Trust, its officers or the Adviser ("Florida Municipal Securities"). The
Florida Municipal Securities which the Portfolio buys are investment grade
bonds rated, at the time of purchase, Baa or higher by Moody's or BBB or
higher by S&P or by Fitch Investors Service, Inc. and bonds which are not
rated if the Adviser determines that such bonds are of comparable quality or
have similar characteristics to bonds having such ratings. Unless otherwise
designated, the investment policies of the Portfolio may be changed by the
Board of Trustees without shareholder approval, although shareholders will be
notified before any material change becomes effective. Currently, the
Portfolio invests primarily in variable rate municipal securities.
Both the Fund and the Portfolio are subject to certain investment
limitations. For the Fund, these include investment limitations which
prohibit it from (1) borrowing money directly or through reverse repurchase
agreements or pledging securities except that, under certain circumstances,
the Fund may, exclusive of custodian intra-day cash advances and the
collateralization of such advances, borrow up to one-third of the value of its
total assets and pledge up to 10% of the value of those assets to secure such
borrowings; (2) investing more than 10% of its net assets in securities
subject to restrictions on resale under the Securities Act of 1933 (the "1933
Act"); (3) investing more than 5% of its total assets in securities of one
issuer (except cash and cash items and United States government obligations);
and (4) investing more than 5% of its total assets in industrial development
bonds of issuers that have records of less than three years of continuous
operations. The first two investment limitations listed above cannot be
changed without shareholder approval; the last two limitations may be changed
by the Board of Directors without shareholder approval, although shareholders
will be notified before any material change becomes effective.
The Portfolio has investment limitations which prohibit it from (1)
borrowing money directly or through reverse repurchase agreements or pledging
securities except that, under certain circumstances, the Portfolio may borrow
up to one-third of the value of its total assets and pledge up to 10% of the
value of those assets to secure such borrowings; and (2) investing more than
5% of its total assets in industrial development bonds when the payment of
principal and interest is the responsibility of companies (or guarantors,
where applicable) with less than three years of continuous operations,
including the operation of any predecessor. The Portfolio's first investment
limitation cannot be changed without shareholder approval; the second may be
changed by the Board of Trustees without shareholder approval, although
shareholders will be notified before any material change becomes effective.
Both the Portfolio and the Fund are also subject to certain
additional investment limitations which are similar, although not identical,
described in the Fund's Statement of Additional Information dated October 31,
1994, and the Portfolio's Statement of Additional Information dated December
31, 1994. Reference is hereby made to the Fund's Prospectus and Statement of
Additional Information, each dated October 31, 1994, and to the Portfolio's
Prospectus and Statement of Additional Information, each dated December 31,
1994, which set forth in full the investment objectives and policies and
investment limitations of each of the Fund and the Portfolio, each of which is
incorporated herein by reference thereto.
Advisory and Other Fees
The annual investment advisory fee for the Fund is 0.60 of 1% of the
Fund's average daily net assets. Federated Advisers (the "Adviser"), the
investment adviser to the Fund, may voluntarily choose to waive a portion of
its advisory fee or reimburse the Fund for certain operating expenses. This
voluntary waiver of fees may be terminated by the Adviser at any time in its
sole discretion. The Adviser has also undertaken to reimburse the Fund for
operating expenses in excess of limitations established by certain states.
The annual investment advisory fee for the Portfolio is 0.40 of 1% of the
Portfolio's average daily net assets. The Adviser, which also serves as
investment adviser to the Portfolio, may similarly voluntarily choose to waive
a portion of its advisory fee or reimburse the Portfolio for operating
expenses but may likewise terminate such waiver or reimbursement at any time
in its sole discretion. The Adviser has also undertaken to reimburse the
Portfolio for operating expenses in excess of limitations established by
certain states. Without such waiver or reimbursement, the expense ratio of
each of the Fund and the Portfolio would be higher by 0.0 and 3.37% ,
respectively, of average daily net assets.
Federated Administrative Services, an affiliate of the Adviser,
provides certain administrative personnel and services necessary to operate
both the Fund and the Portfolio at an annual rate based upon the average
aggregate daily net assets of all funds advised by the Adviser and its
affiliates. The rate charged is 0.15 of 1% of the first $250 million of all
such funds' average aggregate daily net assets, 0.125 of 1% on the next $250
million, 0.10 of 1% on the next $250 million and 0.075 of 1% of all such
funds' average aggregate daily net assets in excess of $750 million, with a
minimum annual fee per portfolio of $125,000 plus $30,000 for each additional
class of such portfolio. Federated Administrative Services may choose
voluntarily to waive a portion of its fee. The administrative fee expense for
the Fund's most recent fiscal year was 0.09 of 1% of its average aggregate
daily net assets and for the Portfolio's most recent fiscal year was 1.29% of
its average aggregate daily net assets.
The Fund has adopted a Shareholder Services Plan under which it may
make payments of up to 0.25 of 1% of the average daily net asset value of the
Fund to obtain certain personal services for shareholders and the maintenance
of shareholder accounts. The Fund has entered into a Shareholder Services
Agreement pursuant to which Federated Shareholder Services, an affiliate of
the Adviser, either performs shareholder services directly or selects certain
financial institutions to perform such services. Financial institutions will
receive fees based upon shares owned by their customers. The schedule of such
fees is determined from time to time by the Fund and Federated Shareholder
Services.
The Portfolio has a similar Shareholder Services Plan pursuant to
which financial institutions enter into shareholder service agreements with
the Portfolio to provide administrative support services to their customers
who own Portfolio shares. Such services may include, but are not limited to,
the provision of personal services and maintenance of shareholder accounts.
The Portfolio may make payments to a financial institution of up to 0.25 of 1%
of the average daily net assets of Portfolio shares beneficially owned by such
financial institution's customers for such services.
The total annual operating expenses for the Fund were 1.09% of
average daily net assets for its most recent fiscal year. The total annual
operating expenses for the Portfolio were 0.75% of average daily net assets
for its most recent fiscal year and would have been 4.12% of average daily net
assets absent the voluntary waiver by the Adviser of a portion of the
investment advisory fee and reimbursement of certain other operating expenses.
As of December 1, 1994, the Adviser ceased its voluntary waiver of investment
advisory fees as well as its voluntary reimbursement of certain Portfolio
operating expenses. As a result, the maximum total annual operating expenses
for the Portfolio for its current fiscal year are expected to be 2.50% of
average daily net assets.
Distribution Arrangements
Federated Securities Corp. ("FSC") is the principal distributor for
shares of the Fund and the Portfolio. The Fund has adopted a Rule 12b-1
Distribution Plan (the "Distribution Plan") pursuant to which the Fund may pay
to the distributor an amount equal to an annual rate of 0.25 of 1% of the
average daily net asset value of the Fund to finance any activity which is
principally intended to result in the sale of shares subject to the
Distribution Plan. The Fund is not currently making payments under the
Distribution Plan, nor does it anticipate doing so in the immediate future.
The Portfolio has adopted a Rule 12b-1 Distribution Plan (the "Rule
12b-1 Plan") pursuant to which the Portfolio pays FSC an amount equal to an
annual rate of 0.75 of 1% of the average daily net asset value of the
Portfolio to reimburse FSC for payments paid to dealers and to finance any
activity which is principally intended to result in the sale of shares subject
to the 12b-1 Plan. In connection with the distribution of Portfolio shares,
FSC paid dealers from its assets up to 2% of the net asset value of Portfolio
shares purchased by their customers.
In connection with the distribution of and/or administrative
services relating to Fund shares, FSC pays brokers and financial institutions
1% of the offering price of the Fund shares acquired by their customers on
purchases up to $1,999,999; 0.50% on purchases of $2 million to $4,999,999;
and 0.25% on purchases of $5 million or more. Any fees paid by FSC pursuant
to these arrangements will be reimbursed by the Adviser. The administrator
may elect to receive amounts less than those stated, which would reduce the
redemption fee and/or the holding period used to calculate such fee upon the
sale of such shares described below. In addition, FSC may pay a fee to
financial institutions as financial assistance for providing substantial
marketing and sales support, which payments would be determined by the amount
of shares sold by such financial institution and/or the nature of the
marketing or sales support furnished. Although such payments would be made
from the assets of FSC, the Adviser or its affiliates may reimburse them.
Certain costs exist with respect to the purchase and sale of Fund
and Portfolio shares. Shares of the Fund are sold at their net asset value
next determined after an order is received, plus a sales load of 1% of the
offering price for purchases of less than $1 million in all of the Fortress
Investment Program funds and purchases which are not made through designated
institutions. Shares of the Fund received by Portfolio shareholders as a
result of the Reorganization will not be subject to a sales charge. Shares of
the Portfolio were sold at their net asset value next determined after an
order was received.
Absent an exemption, shareholders redeeming Fund shares within
certain time periods of the purchase of those shares will be charged a
contingent deferred sales charge by FSC based on the lesser of the original
price or the net asset value of the shares redeemed, as follows: for
purchases up to $1,999,999 held less than four years the charge is 1%; for
purchases of $2 million to $4,999,999 held less than two years the charge is
0.50%; and for purchases of more than $5 million held less than one year, the
charge is 0.25%. The contingent deferred sales charges are not imposed in
connection with the exercise of exchange rights,nor will they be imposed on
redemptions of Fund shares received by shareholders of the Portfolio as a
result of the consummation of the Reorganization.
Effective in late 1994, FSC has waived all contingent deferred sales
charges in connection with redemptions of Portfolio shares. Absent such
waiver or another exemption, shareholders redeeming Portfolio shares within
three full years of the purchase of such shares were charged a contingent
deferred sales charge by FSC based on the lesser of the net asset value of the
redeemed shares at the time of purchase or the net asset value of the redeemed
shares at the time of redemption, as follows: for shares held less than one
year the charge was 3%; for shares held more than one year but less than three
years the charge was 2%. These sales charges were not imposed in connection
with an exercise of exchange rights. For a complete description of sales
charges, contingent deferred sales charges and exemptions from such charges,
reference is hereby made to the Prospectus of the Fund dated October 31, 1994
and the Prospectus of the Portfolio dated December 31, 1994, each of which is
incorporated herein by reference thereto.
Purchase and Redemption Procedures
The transfer agent and dividend disbursing agent for each of the
Fund and the Portfolio is Federated Services Company. Procedures for the
purchase and redemption of Fund shares differ slightly from procedures
applicable to the purchase and redemption of Portfolio shares. Any questions
about such procedures may be directed to, and assistance in effecting
purchases or redemptions of Fund shares or redemptions of Portfolio shares,
may be obtained from, FSC, principal distributor for each of the Fund and the
Portfolio, at 800-245-5000.
Reference is made to the Prospectus of the Fund dated October 31,
1994, and the Prospectus of the Portfolio dated December 31, 1994 for a
complete description of the purchase and redemption procedures applicable to
purchases and redemptions of Fund and Portfolio shares, respectively, each of
which is incorporated herein by reference thereto. Set forth below is a brief
listing of the significant purchase and redemption procedures of each of the
Fund and the Portfolio.
Purchases of shares of the Fund may be made through an investment
dealer who has an agreement with FSC or by wire or check. The minimum initial
investment in the Fund is $1,500. Subsequent investments must be in amounts
of at least $100. As of October 17, 1994 the Portfolio ceased offering its
shares for sale except for dividend reinvestments by existing shareholders.
The purchase price of shares of both the Fund and the Portfolio is
based on net asset value. The net asset value for each of the Fund and the
Portfolio is calculated at 4:00 p.m. (Eastern time) on each day on which the
Fund and the Portfolio compute their net asset value. Purchase and redemption
orders for the Fund and redemption orders for the Portfolio received from
broker/dealers before 5:00 p.m. (Eastern time) and from financial institutions
before 4:00 p.m. (Eastern time) may be entered at that day's price. Purchase
orders by wire are considered received when the Fund's transfer agent's bank,
State Street Bank and Trust Company ("State Street Bank"), receives payment by
wire. Purchase orders received by check are considered received after the
check is converted into federal funds, which normally occurs one day after
receipt by State Street Bank.
Fund shareholders have exchange rights with respect to shares in a
family of thirteen funds known as the Fortress Investment Program (the
"Program"), each of which has different investment objectives and policies.
Shares in the Fund may be exchanged for shares in the Program at net asset
value without a sales load (if previously paid) or a contingent deferred sales
charge. Portfolio shareholders also had exchange rights with respect to
certain other investment companies. However, such other investment companies
are no longer offering their shares for sale. Shares of the Fund may be
exchanged on a periodic systematic basis or upon individual request, and must
have a net asset value which meets the minimum investment requirement for the
fund into which the exchange is being made. Exercise of the exchange
privilege is treated as a sale for federal income tax purposes and,
accordingly, may have tax consequences for the shareholder. Information on
share exchanges may be obtained from FSC.
Redemptions of Fund shares may be made through a financial
institution, by mailing a written request or through the Fund's Systematic
Withdrawal Program. Shares are redeemed at their net asset value next
determined after the redemption request is received by FSC. Proceeds will be
distributed by check within seven days after receipt of a redemption request.
Generally, redemption of Portfolio shares may be made through a
financial institution, by mailing a written request or through the Portfolio's
Systematic Withdrawal Program. Shares are redeemed at their net asset value
next determined after the redemption request is received by FSC. Proceeds
will be distributed by check within seven days after receipt of a redemption
request.
Tax Consequences
As a condition to the Reorganization transactions, the Fund and the
Trust will receive an opinion of counsel that the Reorganization will be
considered a tax-free "reorganization" under applicable provisions of the
Internal Revenue Code so that no gain or loss will be recognized by either the
Fund or the Portfolio or their shareholders. The tax cost basis of the Fund
shares received by Portfolio shareholders will be the same as the tax cost
basis of their shares in the Portfolio.
RISK FACTORS
Investment in the Fund is subject to certain risks which are set
forth in the Fund's Prospectus dated October 31, 1994 and the Statement of
Additional Information dated October 31, 1994 and incorporated herein by
reference thereto. Briefly, these risks include, but are not limited to, the
ability of the issuers of bonds owned by the Fund to meet their obligations
for the payment of principal and interest when due; fluctuation in the value
of the shares; gain or loss in the sale of bonds by the Fund based on interest
rate sensitivity and changes in the perceived quality of the credit of the
issuer; economic, political and regulatory developments which affect bonds
whose revenues are from similar projects or where issuers share the same
geographic location when such bonds constitute a large portion of the Fund's
portfolio; and narrow markets for lower rated and unrated bonds.
Investment in the Portfolio carries risks as well, as more fully
described in the Portfolio's Prospectus dated December 31, 1994 and the
Statement of Additional Information dated December 31, 1994. Such risks
include, but are not limited to, fluctuating yields on Florida Municipal
Securities based on factors such as general market conditions, the size of the
offering, the maturity of the obligations and the rating of the issue; the
ability of issuers to meet their obligations for payment of interest and
principal when due; legislative, executive or administrative changes or voter
initiatives which could result in adverse consequences for Florida Municipal
Securities; and any adverse economic conditions or developments affecting the
State of Florida or its municipalities.
INFORMATION ABOUT THE REORGANIZATION
Background and Reasons for the Proposed Reorganization
The Portfolio was established in 1993 to provide investors with the
opportunity to earn income exempt from both the federal regular income tax and
the Florida intangibles tax. In an effort to remain competitive with other
investment companies with similar investment objectives, the Adviser waived
all of its investment advisory fees and reimbursed the Portfolio for certain
operating expenses, resulting in aggregate fee waivers and expense
reimbursements of $263,489 for the Portfolio's fiscal year ended August 31,
1994. However, by August 31, 1994, the Portfolio's net assets had grown only
to $11,634,652. In the opinion of FSC, the Portfolio's principal underwriter,
the Portfolio suffered from a lack of investor interest sufficient to permit
it to grow to a size which would permit it to operate efficiently. Although
FSC expended significant marketing efforts to promote sales of the Portfolio's
shares, the negative investment climate for municipal securities throughout
1994 impeded sales of Portfolio shares and FSC concluded that it was unlikely
that the situation would improve materially in the foreseeable future. In
addition, the Adviser and its affiliates concluded that they would be unable
to continue to waive investment advisory fees and reimburse operating expenses
in order for the Portfolio to continue to earn a yield on its investments
competitive with other investment companies with similar investment
objectives.
As a result of these factors, in early November 1994, FSC notified
shareholders that it had ceased offering shares of the Portfolio for sale and
that it would recommend to the Trust's Board of Trustees that the Portfolio be
liquidated. It also indicated that the Adviser would cease waiving its
investment advisory fee after November 30, 1994 and that as a result, the
Portfolio's operating expenses could be expected to increase to approximately
2.5%. FSC accordingly recommended to shareholders that they voluntarily
redeem their shares and indicated that all contingent deferred sales charges
that would otherwise be applicable to such redemptions would be waived. In
anticipation of voluntary redemptions, the Adviser restructured the
Portfolio's investments by emphasizing shorter-term municipal securities.
Although many shareholders of the Portfolio elected to redeem their
shares as a result of the foregoing developments, a significant number of
shareholders expressed dissatisfaction both with this alternative and the
overall determination to recommend liquidation of the Portfolio. After
consultation with many shareholders as well as various broker dealers and
other financial institutions who had sold Portfolio shares, FSC voluntarily
determined to reimburse shareholders of the Portfolio as of October 13, 1994,
$100,000, or aproximately $0.077 per share, in order to restore to
shareholders a portion of the decrease in the dollar value of shareholders'
investments in the Portfolio. As a result, FSC and the Adviser recommended to
the Board of Trustees of the Trust that it consider the feasibility of
transferring the Portfolio's assets to another investment company in exchange
for shares of such other investment company in a transaction which would be
tax-free to the Portfolio and its shareholders. Recognizing that many
shareholders may not have wished to redeem their shares of the Portfolio, FSC
and the Adviser recommended to the Trust's Board of Trustees a transfer of the
Portfolio's assets to the Fund, which seeks to earn interest income exempt
from the federal regular income tax (although not exempt from the Florida
intangibles tax).
The Board of Trustees of the Trust evaluated this proposal as well
as other alternatives, including liquidation of the Portfolio. The Trustees
concluded that this transaction would be in the best interests of shareholders
because the Portfolio was unlikely to reach economic size on its own, as a
result of relatively high expenses, and that net yield on an investment in the
Portfolio would not be attractive to shareholders. With assets of
approximately $411,672,068 at December 31, 1994, the Trust's Board of Trustees
concluded that the Fund was of a size to provide operating efficiencies and
economies of scale sufficient to provide shareholders with competitive
investment returns and net income exempt from the federal regular income tax.
The Trustees also took account of the fact that the Fund also receives
investment advisory services from the Adviser and that the Fund and its
shareholders receive similar administrative and other shareholder services as
presently enjoyed by the Portfolio and its shareholders. The Trustees noted
that the Fund's investment advisory fee of 0.60% of average daily net assets
is higher than the Portfolio's investment advisory fee of 0.40% of average
daily net assets, but concluded that this difference in advisory fees is
offset by the lower overall expenses of the Fund as compared to the Portfolio.
Accordingly, the Trust's Board of Trustees, including a majority of
the independent Trustees, determined that participation in the Reorganization
is in the best interests of the Portfolio and that the interests of Portfolio
shareholders would not be diluted as a result of its effecting the
Reorganization. Based upon the foregoing considerations, and the fact that
shareholders of the Portfolio will not suffer any adverse tax consequences as
a result of the Reorganization, the Board of Trustees of the Trust unanimously
voted to approve, and recommend to Portfolio shareholders the approval of, the
Reorganization.
The Directors of the Fund, including the independent Directors, have
unanimously concluded that consummation of the Reorganization is in the best
interests of the Fund and the shareholders of the Fund and that the interests
of Fund shareholders would not be diluted as a result of effecting the
Reorganization and have unanimously approved the Plan.
In the event shareholders of the Portfolio do not approve the Plan,
the Trust's Board of Trustees will consider other alternatives which would
address the Portfolio's uneconomic size. These may include a plan of
liquidation or another transaction.
Description of the Plan of Reorganization
The Plan provides that the Fund will acquire all of the assets of
the Portfolio in exchange for Fund shares to be distributed pro rata by the
Portfolio to its shareholders in complete liquidation of the Portfolio on or
about March 30, 1995 (the "Closing Date"). Shareholders of the Portfolio will
become shareholders of the Fund as of the close of business on the Closing
Date and will begin accruing dividends on the next day. Shareholders of the
Fund will accrue their last dividend from the Fund on the Closing Date.
Consummation of the Reorganization is subject to the conditions set
forth in the Plan, including receipt of an opinion in form and substance
satisfactory to the Trust, on behalf of the Portfolio, and the Fund as
described under the caption "Federal Income Tax Consequences" below. The Plan
may be terminated and the Reorganization may be abandoned at any time before
or after approval by shareholders of the Portfolio prior to the Closing Date
by either party if it believes that consummation of the Reorganization would
not be in the best interests of its shareholders.
The Adviser is responsible for the payment of all expenses of the
Reorganization incurred by either party, whether or not the Reorganization is
consummated. Such expenses include, but are not limited to, accountants'
fees, legal fees, registration fees, transfer taxes (if any), the fees of
banks and transfer agents and the costs of preparing, printing, copying and
mailing proxy solicitation materials to the Portfolio's shareholders and the
costs of holding the Special Meeting of Shareholders.
The foregoing description of the Plan entered into between the Fund
and the Trust, on behalf of the Portfolio, is qualified in its entirety by the
terms and provisions of the Plan, a copy of which is attached hereto as
Exhibit A and incorporated herein by reference thereto.
Description of Portfolio Shares
Shares of the Fund to be issued to shareholders of the Portfolio
under the Plan will be fully paid and nonassessable when issued and
transferable without restriction and will have no preemptive or conversion
rights. Reference is hereby made to the Prospectus of the Fund dated
October 31, 1994 provided herewith for additional information about Fund
shares.
Federal Income Tax Consequences
As a condition to the Reorganization transactions, the Fund and the
Trust, on behalf of the Portfolio, will receive an opinion from Dickstein,
Shapiro & Morin, L.L.P., counsel to the Fund and the Trust, to the effect
that, on the basis of the existing provisions of the Internal Revenue Code of
1986, as amended (the "Code"), current administrative rules and court
decisions, for federal income tax purposes: (1) the Reorganization as set
forth in the Plan will constitute a tax-free reorganization under section
368(a)(1)(C) of the Code; (2) no gain or loss will be recognized by the Fund
upon its receipt of the Portfolio's assets solely in exchange for Fund shares;
(3) no gain or loss will be recognized by the Portfolio upon the transfer of
its assets to the Fund in exchange for Fund shares or upon the distribution
(whether actual or constructive) of the Fund shares to the Portfolio
shareholders in exchange for their shares of the Portfolio; (4) no gain or
loss will be recognized by shareholders of the Portfolio upon the exchange of
their Portfolio shares for Fund shares; (5) the tax basis of the Portfolio's
assets acquired by the Fund will be the same as the tax basis of such assets
to the Portfolio immediately prior to the Reorganization; (6) the tax basis of
Fund shares received by each shareholder of the Portfolio pursuant to the Plan
will be the same as the tax basis of Portfolio shares held by such shareholder
immediately prior to the Reorganization; (7) the holding period of the assets
of the Portfolio in the hands of the Fund will include the period during which
those assets were held by the Portfolio; and (8) the holding period of Fund
shares received by each shareholder of the Portfolio pursuant to the Plan will
include the period during which the Portfolio shares exchanged therefor were
held by such shareholder, provided the Portfolio shares were held as capital
assets on the date of the Reorganization.
Comparative Information on Shareholder Rights and Obligations
The Fund is organized as a corporation under the laws of the State
of Maryland. The Fund is not required to hold annual meetings of shareholders
except when required to do so under the 1940 Act. A special meeting of
shareholders of the Fund shall be called by the Chairman, Secretary or any
Director upon the written request of the holders of at least 25% of the
outstanding shares of the Fund. Each share of the Fund is entitled to one
vote at all meetings of shareholders.
The Trust is organized as a business trust pursuant to a Declaration
of Trust under the laws of the Commonwealth of Massachusetts. Set forth below
is a brief summary of the significant rights of shareholders of the Portfolio.
The Trust is not required to hold annual meetings of shareholders.
Shareholder approval is necessary only for certain changes in operations or
the election of trustees under certain circumstances. A special meeting of
shareholders of the Trust for any permissible purpose shall be called by the
Trustees upon the written request of the holders of at least 10% of the
outstanding shares of the Trust or of the relevant portfolio. Each share of
the Portfolio is entitled to one vote. All shares of the Trust have equal
voting rights except that in matters affecting only a particular portfolio or
class, only shares of that portfolio or class are entitled to vote.
Under certain circumstances, shareholders of the Portfolio may be
held personally liable as partners under Massachusetts law for obligations of
the Trust on behalf of the Portfolio. To protect its shareholders, the Trust
has filed legal documents with the Commonwealth of Massachusetts that
expressly disclaim the liability of Portfolio shareholders for such acts or
obligations of the Trust. These documents require that notice of this
disclaimer be given in each agreement, obligation or instrument that the Trust
or its Trustees enter into or sign on behalf of the Portfolio.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations on behalf of the Portfolio, the Trust is required to use the
property of the Portfolio to protect or compensate the shareholder. On
request, the Trust will defend any claim made and pay any judgment against a
shareholder for any act or obligation of the Trust on behalf of the Portfolio.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust cannot meet its obligations to indemnify shareholders and
pay judgments against them from the assets of the Portfolio.
Capitalization
The following table sets forth the unaudited capitalization of the
Fund and the Portfolio as of December 31, 1994 and on a pro forma basis as of
that date:
Fund Portfolio Pro Forma
Combined
Net Assets $411,672,068 $971,744 $412,643,812
Price Per Share 10.02 8.30 10.02
(NAV)
INFORMATION ABOUT THE FUND, THE
PORTFOLIO AND THE TRUST
Fortress Municipal Income Fund, Inc.
Information about the Fund is contained in the Fund's current
Prospectus dated October 31, 1994, a copy of which is included herewith and
incorporated by reference herein. Additional information about the Fund is
included in the Fund's Statement of Additional Information dated October 31,
1994, which is incorporated herein by reference. Copies of the Statement of
Additional Information, which has been filed with the Securities and Exchange
Commission (the "SEC"), may be obtained without charge by contacting the Fund
at 1-800-245-5000 or by writing the Fund at Federated Investors Tower,
Pittsburgh, PA 15222-3779. The Fund is subject to the informational
requirements of the 1933 Act, the Securities Exchange Act of 1934 (the "1934
Act") and the 1940 Act and in accordance therewith files reports and other
information with the SEC. Reports, proxy and information statements and other
information filed by the Fund, can be obtained by calling or writing the Fund
and can also be inspected and copied by the public at the public reference
facilities maintained by the SEC in Washington, D.C. located at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549 and at certain of its regional
offices located at Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Chicago, IL 60661 and 13th Floor, Seven World Trade Center, New York,
NY 10048. Copies of such material can be obtained at prescribed rates from
the Public Reference Branch, Office of Consumer Affairs and Information
Services, SEC, 450 Fifth Street, N.W., Washington, D.C. 20549.
This Prospectus/Proxy Statement, which constitutes part of a
Registration Statement filed by the Fund with the SEC under the 1933 Act,
omits certain of the information contained in the Registration Statement.
Reference is hereby made to the Registration Statement and to the exhibits
thereto for further information with respect to the Fund and the shares
offered hereby. Statements contained herein concerning the provisions of
documents are necessarily summaries of such documents, and each such statement
is qualified in its entirety by reference to the copy of the applicable
documents filed with the SEC.
Florida Municipal Income Fund, a portfolio of Municipal Securities Income
Trust
Information about the Portfolio and the Trust is contained in the
Portfolio's current Prospectus dated December 31, 1994 and its Statement of
Additional Information dated December 31, 1994, which are incorporated herein
by reference. Copies of such Prospectus and Statement of Additional
Information may be obtained without charge from the Fund by calling 1-800-245-
5000 or by writing to the Fund at Federated Investors Tower, Pittsburgh, PA
15222-3779. The Trust is subject to the informational requirements of the
1933 Act, the 1934 Act and the 1940 Act and in accordance therewith files
reports and other information with the SEC. Reports, proxy and information
statements and other information filed by the Portfolio can be obtained by
calling or writing the Fund and can also be inspected at the public reference
facilities maintained by the SEC or obtained at prescribed rates at the
addresses listed in the previous section.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the
solicitation by the Board of Trustees of the Trust of proxies for use at the
Special Meeting of Shareholders (the "Meeting") to be held on March 30, 1995
and at any adjournment thereof. The proxy confers discretionary authority on
the persons designated therein to vote on other business not currently
contemplated which may properly come before the Meeting. A proxy, if properly
executed, duly returned and not revoked, will be voted in accordance with the
specifications thereon; if no instructions are given, such proxy will be voted
in favor of the Plan. A shareholder may revoke a proxy at any time prior to
use by filing with the Secretary of the Trust an instrument revoking the
proxy, by submitting a proxy bearing a later date or by attending and voting
at the Meeting.
The cost of the solicitation, including the printing and mailing of
proxy materials, will be borne by the Adviser. In addition to solicitations
through the mails, proxies may be solicited by officers, employees and agents
of the Trust and the Adviser at no additional cost to the Trust. Such
solicitations may be by telephone. The Adviser will reimburse custodians,
nominees and fiduciaries for the reasonable costs incurred by them in
connection with forwarding solicitation materials to the beneficial owners of
shares held of record by such persons.
Outstanding Shares and Voting Requirements
The Board of Trustees of the Trust has fixed the close of business
on February 10, 1995 as the record date for the determination of shareholders
entitled to notice of and to vote at the Special Meeting of Shareholders and
any adjournment thereof. As of the record date, there were __________ shares
of the Portfolio outstanding. Each Portfolio share is entitled to one vote
and fractional shares have proportionate voting rights. On the record date,
________ owned of record _____ shares, or ___%, of the Portfolio's outstanding
shares. On such date, no other person owned of record, or to the knowledge of
the Adviser, beneficially owned, 5% or more of the Portfolio's outstanding
shares. On the record date, the trustees and officers of the Portfolio as a
group owned less than 1% of the outstanding shares of the Portfolio.
As of the record date, there were __________ shares of the Fund
outstanding. On the record date, ________ owned of record _____ shares, or
___%, of the Fund's outstanding shares. On such date, no other person owned
of record, or to the knowledge of the Adviser, beneficially owned, 5% or more
of the Fund's outstanding shares. On the record date, the trustees and
officers of the Fund as a group owned less than 1% of the outstanding shares
of the Fund.
Approval of the Plan requires the affirmative vote of the lesser of
(i) 67% of the shares of the Portfolio present at the Special Meeting, if the
holders of more than 50% of the outstanding shares are present or represented
by proxy, or (2) a majority of the outstanding shares of the Portfolio. The
votes of shareholders of the Fund are not being solicited since their approval
is not required in order to effect the Reorganization.
A majority of the outstanding shares of the Portfolio, represented
in person or by proxy, will be required to constitute a quorum at the Special
Meeting for the purpose of voting on the proposed Reorganization. For
purposes of determining the presence of a quorum, shares represented by
abstentions and "broker non-votes" will be counted as present, but not as
votes cast, at the Special Meeting. Under the 1940 Act, however, which
governs this transaction, matters subject to the requirements of the 1940 Act,
including the Reorganization, are determined on the basis of a percentage of
votes present at the Special Meeting, which would have the effect of treating
abstentions and "broker non-votes" as if they were votes against the proposal.
Dissenter's Right of Appraisal
Shareholders of the Portfolio objecting to the Reorganization have
no appraisal rights under the Trust's Declaration of Trust or Massachusetts
law. Under the Plan, if approved by Portfolio shareholders, each Portfolio
shareholder will become the owner of Fund shares having a total net asset
value equal to the total net asset value of his or her holdings in the
Portfolio at the Closing Date.
Other Matters
Management of the Trust knows of no other matters that may properly
be, or which are likely to be, brought before the meeting. However, if any
other business shall properly come before the meeting, the persons named in
the proxy intend to vote thereon in accordance with their best judgment.
So far as management is presently informed, there is no litigation
pending or threatened against the Fund.
Whether or not shareholders expect to attend the meeting, all
shareholders are urged to sign, fill in and return the enclosed proxy form
promptly.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated January 5, 1995 (the
"Agreement"), between FORTRESS MUNICIPAL INCOME FUND, INC., a Maryland
corporation (hereinafter called the "Acquiring Fund"), and MUNICIPAL
SECURITIES INCOME TRUST, a Massachusetts business trust (hereinafter called
the "Trust") on behalf of its portfolio FLORIDA MUNICIPAL INCOME FUND
(hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of
the United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of
the assets of the Acquired Fund in exchange solely for shares of common stock
of the Acquiring Fund (the "Acquiring Fund Shares") and the distribution,
after the Closing Date hereinafter referred to, of the Acquiring Fund Shares
to the shareholders of the Acquired Fund in liquidation of the Acquired Fund
as provided herein, all upon the terms and conditions hereinafter set forth in
this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are registered open-
end management investment companies and the Acquired Fund owns securities in
which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are authorized
to issue shares of common stock or shares of beneficial interest, as the case
may be;
WHEREAS, the Board of Directors, including a majority of the
Directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Acquiring Fund has
determined that the exchange of all or substantially all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquiring Fund shareholders and that the interests of the existing
shareholders of the Acquiring Fund would not be diluted as a result of this
transaction; and
WHEREAS, the Board of Trustees, including a majority of the Trustees
who are not "interested persons" (as defined under the 1940 Act), of the
Acquired Fund has determined that the exchange of all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquired Fund shareholders and that the interests of the existing shareholders
of the Acquired Fund would not be diluted as a result of this transaction;
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund agrees to assign, transfer and convey to the Acquiring Fund all of the
assets of the Acquired Fund, including all securities and cash, and the
Acquiring Fund agrees in exchange therefor (i) to deliver to the Acquired Fund
the number of Acquiring Fund Shares, including fractional Acquiring Fund
Shares, determined as set forth in paragraph 2.3. Such transaction shall take
place at the closing (the "Closing") on the closing date (the "Closing Date")
provided for in paragraph 3.1. In lieu of delivering certificates for the
Acquiring Fund Shares, the Acquiring Fund shall credit the Acquiring Fund
Shares to the Acquired Fund's account on the stock record books of the
Acquiring Fund and shall deliver a confirmation thereof to the Acquired Fund.
1.2 The Acquired Fund will discharge all of its liabilities and
obligations prior to the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street Bank
and Trust Company (hereinafter called "State Street"), Boston, Massachusetts,
the Acquiring Fund's custodian (the "Custodian"), for the account of the
Acquiring Fund, together with proper instructions and all necessary documents
to transfer to the account of the Acquiring Fund, free and clear of all liens,
encumbrances, rights, restrictions and claims. All cash delivered shall be in
the form of currency and immediately available funds payable to the order of
the Custodian for the account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund thereunder. The Acquired
Fund will transfer to the Acquiring Fund any distributions, rights or other
assets received by the Acquired Fund after the Closing Date as distributions
on or with respect to the securities transferred. Such assets shall be deemed
included in assets transferred to the Acquiring Fund on the Closing Date and
shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable, the
Acquired Fund will liquidate and distribute pro rata to the Acquired Fund's
shareholders of record, determined as of the close of business on the Closing
Date (the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by
the Acquired Fund pursuant to paragraph 1.1. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund Shares
then credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share record books of the Acquiring
Fund in the names of the Acquired Fund Shareholders and representing the
respective pro rata number of the Acquiring Fund Shares due such shareholders.
All issued and outstanding shares of the Acquired Fund will simultaneously be
canceled on the books of the Acquired Fund. Share certificates representing
interests in the Acquired Fund will represent a number of Acquiring Fund
Shares after the Closing Date as determined in accordance with Section 2.3.
The Acquiring Fund shall not issue certificates representing the Acquiring
Fund Shares in connection with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus and
statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund shares
on the books of the Acquired Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Trust.
2. VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of 4:00
p.m. (Eastern time) on the Closing Date (such time and date being hereinafter
called the "Valuation Date"), using the valuation procedures set forth in the
Acquiring Fund's then-current prospectus or statement of additional
information.
2.2 The net asset value of an Acquiring Fund Share shall be the net
asset value per share computed as of 4:00 p.m. (Eastern time) on the
Valuation Date, using the valuation procedures set forth in the Acquiring
Fund's then-current prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in paragraph
2.1 by the net asset value of one Acquiring Fund Share determined in
accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be March 30, 1995 or such later date as the
parties may mutually agree. All acts taking place at the Closing Date shall
be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place as
the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of the
value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 Federated Services Company, as transfer agent for each of the
Acquired Fund and the Acquiring Fund, shall deliver at the Closing a
certificate of an authorized officer stating that its records contain the
names and addresses of the Acquired Fund Shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver
a confirmation evidencing the Acquiring Fund Shares to be credited on the
Closing Date to the Secretary of the Acquired Fund, or provide evidence
satisfactory to the Acquired Fund that such Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund.
At the Closing, each party shall deliver to the other such bills of sale,
checks, assignments, assumption agreements, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Acquired Fund represents and warrants to the Acquiring Fund as
follows:
(a) The Trust is a business trust duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has power to own all of its properties and assets and to
carry out this Agreement.
(b) The Trust is registered under the 1940 Act, as an open-
end, management investment company, and such registration has not been revoked
or rescinded and is in full force and effect.
(c) The Acquired Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Trust's Declaration of Trust or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquired Fund is
a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquired Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquired Fund knows of no facts which might form the basis for the institution
of such proceedings, and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially
and adversely affects its business or its ability to consummate the
transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "Commission") hereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein as necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) The Statements of Assets and Liabilities of the
Acquired Fund at August 31, 1993 and 1994 have been audited by Deloitte &
Touche LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, consistently applied, and such
statements (copies of which have been furnished to the Acquiring Fund) fairly
reflect the financial condition of the Acquired Fund as of such dates, and
there are no known contingent liabilities of the Acquired Fund as of such
dates not disclosed therein.
(h) Since August 31, 1994, there has not been any material
adverse change in the Acquired Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business,
or any incurrence by the Acquired Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Acquiring Fund.
(i) At the Closing Date, all Federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
dates shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquired Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(j) For each fiscal year of its operation, the Acquired
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. All of the issued and outstanding shares of
the Acquired Fund will, at the time of the Closing, be held by the persons and
in the amounts set forth in the records of the transfer agent as provided in
paragraph 3.3. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquired Fund
shares, nor is there outstanding any security convertible into any of the
Acquired Fund Shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets to
be transferred by it hereunder.
(m) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Acquired Fund's Trustees and, subject to
the approval of the Acquired Fund Shareholders, this Agreement will constitute
the valid and legally binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a proceeding
in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund
(the "Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (other than information therein that
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
(o) The Acquired Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
4.2 The Acquiring Fund represents and warrants to the Acquired Fund as
follows:
(a) The Acquiring Fund is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland
and the Acquiring Fund has the power to carry on its business as it is now
being conducted and to carry out this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as
an open-end, diversified, management investment company, and such registration
has not been revoked or rescinded and is in full force and effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquiring Fund's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquiring Fund knows of no facts which might form the basis for the
institution of such proceedings, and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to
consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the
Acquiring Fund at August 31, 1993 and 1994, have been audited by Deloitte &
Touche LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, and such statements (copies of which
have been furnished to the Acquired Fund) fairly reflect the financial
condition of the Acquiring Fund as of such dates, and there are no known
contingent liabilities of the Acquiring Fund as of such dates not disclosed
therein.
(g) Since August 31, 1994, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of indebtedness maturing
more than one year from the date such indebtedness was incurred, except as
disclosed to and accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed by such
date shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquiring Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(i) For each fiscal year of its operation, the Acquiring
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(j) All issued and outstanding shares of the Acquiring
Fund are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any of the Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares.
(k) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action, if any, on the part of the Acquiring Fund's Trustees, and
this Agreement will constitute the valid and legally binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject to the effect
of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
and other similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto, and to general principles of equity
and the discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading.
(m) The Acquiring Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date,
it being understood that such ordinary course of business will include
customary dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and do
or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in
such form as is reasonably satisfactory to the Acquiring Fund, a statement of
the earnings and profits of the Acquired Fund for Federal income tax purposes
which will be carried over to the Acquiring Fund as a result of Section 381 of
the Code and which will be certified by the Acquired Fund's President and its
Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(m), all
to be included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquired Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of the Acquired Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such securities by lot
and the holding periods of such securities, as of the Closing Date, certified
by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of the
Acquired Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquiring Fund shall
reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquiring Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquired Fund shall
reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness, except
as otherwise disclosed to and accepted by the Acquired Fund.
8. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares
of the Acquired Fund in accordance with the provisions of the Trust's
Declaration of Trust.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit consummation,
in all material respects, of the transactions contemplated hereby shall have
been obtained, except where failure to obtain any such consent, order or
permit would not involve a risk of a material adverse effect on the assets or
properties of the Acquiring Fund or the Acquired Fund, provided that either
party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 The Acquiring Fund and the Acquired Fund shall have received an
opinion of Dickstein, Shapiro & Morin, L.L.P. substantially to the effect that
for Federal income tax purposes:
(a) The transfer of all or substantially all of the
Acquired Fund assets in exchange for the Acquiring Fund Shares and the
distribution of the Acquiring Fund Shares to the Acquired Fund Shareholders in
liquidation of the Acquired Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code; (b) No gain or loss will be
recognized by the Acquiring Fund upon the receipt of the assets of the
Acquired Fund solely in exchange for the Acquiring Fund Shares; (c) No gain or
loss will be recognized by the Acquired Fund upon the transfer of the Acquired
Fund assets to the Acquiring Fund in exchange for the Acquiring Fund Shares or
upon the distribution (whether actual or constructive) of the Acquiring Fund
Shares to Acquired Fund Shareholders in exchange for their shares of the
Acquired Fund; (d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the Acquiring
Fund Shares; (e) The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization; (f) The tax basis of
the Acquiring Fund Shares received by each of the Acquired Fund Shareholders
pursuant to the Reorganization will be the same as the tax basis of the
Acquired Fund shares held by such shareholder immediately prior to the
Reorganization; (g) The holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which those
assets were held by the Acquired Fund; and (h) The holding period of the
Acquiring Fund Shares to be received by each Acquired Fund Shareholder will
include the period during which the Acquired Fund shares exchanged therefor
were held by such shareholder (provided the Acquired Fund shares were held as
capital assets on the date of the Reorganization).
9. TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Trustees of the Trust
or the Board of Directors of the Acquiring Fund at any time prior to the
Closing Date (and notwithstanding any vote of the Board of Trustees of the
Acquired Fund) if circumstances should develop that, in the opinion of either
of the parties' Board, make proceeding with the Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on the
part of any party hereto or the directors, officers or shareholders of the
Acquiring Fund or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Trustees of the Acquiring Fund or of
the Acquired Fund, if, in the judgment of either, such waiver will not have a
material adverse effect on the benefits intended under this Agreement to the
shareholders of the Acquiring Fund or of the Acquired Fund, as the case may
be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings of
every kind and nature between them relating to the subject matter hereof.
Neither party shall be bound by any condition, definition, warranty or
representation, other than as set forth or provided in this Agreement or as
may be set forth in a later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania, without giving effect
to principles of conflict of laws.
11.4 This Agreement may be executed in any number of counterparts, each
of which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason
of this Agreement.
11.6 The Acquiring Fund is hereby expressly put on notice of the
limitation of liability as set forth in Article XI of the Declaration of Trust
of the Acquired Fund and agrees that the obligations assumed by the Acquired
Fund pursuant to this Agreement shall be limited in any case to the Acquired
Fund and its assets and the Acquiring Fund shall not seek satisfaction of any
such obligation from the shareholders of the Acquired Fund, the trustees,
officers, employees or agents of the Acquired Fund or any of them.
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the date
first above written.
Acquired Fund:
MUNICIPAL SECURITIES INCOME TRUST,
on behalf of its portfolio,
FLORIDA MUNICIPAL INCOME FUND
Attest:
By:/s/John W. McGonigle
/s/Charles H. Field
Assistant Secretary Name:John W. McGonigle
Title:Vice President
Acquiring Fund:
FORTRESS MUNICIPAL INCOME
FUND, INC.
Attest:
By: /s/Richard B. Fisher
/s/Charles H. Field
Assistant Secretary Name:Richard B. Fisher
Title:President
STATEMENT OF ADDITIONAL INFORMATION
February 18, 1995
Acquisition of the assets of
FLORIDA MUNICIPAL INCOME FUND,
a Portfolio of MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
By and in exchange for shares of
FORTRESS MUNICIPAL INCOME FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
This Statement of Additional Information dated February 18, 1995 is
not a prospectus. A Prospectus/Proxy Statement dated February 18, 1995
related to the above-referenced matter may be obtained from Fortress Municipal
Income Fund, Inc., Federated Investors Tower, Pittsburgh, Pennsylvania 15222-
3779. This Statement of Additional Information should be read in conjunction
with such Prospectus/Proxy Statement.
TABLE OF CONTENTS
1.Statement of Additional Information of Fortress Municipal Income
Fund, Inc., dated October 31, 1994
2.Statement of Additional Information of Florida Municipal Income
Fund, a portfolio of Municipal Securities Income Trust, dated December 31,
1994
3.Financial Statements of Fortress Municipal Income Fund, Inc.,
dated August 31, 1994
4.Financial Statements of Florida Municipal Income Fund, a portfolio
of Municipal Securities Income Trust, dated August 31, 1994
The Statement of Additional Information of Fortress Municipal Income
Fund, Inc. (the "Fund"), dated October 31, 1994, is incorporated herein by
reference to Post-Effective Amendment No. 10 to the Fund's Registration
Statement on Form N-1A (File Nos. 33-11410 and 811-4533) which was filed with
the Securities and Exchange Commission on or about October 26, 1994. A copy
may be obtained from the Fund at Federated Investors Tower, Pittsburgh, PA
15222-3279; telephone number: 1-800-245-5000.
The Statement of Additional Information of Florida Municipal Income
Fund (the "Portfolio"), a portfolio of Municipal Securities Income Trust (the
"Trust"), dated December 31, 1994, is incorporated herein by reference to Post-
Effective Amendment No. 17 to the Trust's Registration Statement on Form N-1A
(File Nos. 33-36729 and 811-6165) which was filed with the Securities and
Exchange Commission on or about December 30, 1994.
The audited financial statements of the Fund, dated August 31, 1994,
are incorporated herein by reference to the Fund's Prospectus dated October
31, 1994 which was filed with the Securities and Exchange Commission in Post-
Effective Amendment No. 10 to the Fund's Registration Statement on Form N-1A
(File Nos. 33-11410 and 811-4533) on or about October 26, 1994.
The audited financial statements of the Portfolio, dated August 31,
1994, are incorporated herein by reference to the Portfolio's Annual Report to
Shareholders for the fiscal year ended August 31, 1994, which was filed with
the Securities and Exchange Commission on or about November 1, 1994.
Pro forma financial statements are not included herein as the total
net assets of the Portfolio do not exceed 10% of the total net assets of the
Fund. At December 31, 1994, the total net assets of the Fund were
$411,672,068 and the total net assets of the Portfolio were $971,744.
MARYLAND MUNICIPAL INCOME FUND,
a portfolio of MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Dear Shareholder:
The Board of Trustees and management of Municipal Securities Income
Trust (the "Trust") are pleased to submit for your vote a proposal to transfer
all of the assets of Maryland Municipal Income Fund (the "Portfolio") to
Fortress Municipal Income Fund, Inc. (the "Fund"), a mutual fund advised by
Federated Advisers. The Fund has an investment objective similar to that of
the Portfolio in that it seeks current income which is exempt from the federal
regular income tax, although dividends in respect of income generally will not
be exempt from the personal income taxes imposed by the State of Maryland and
Maryland municipalities. As part of the transaction, shareholders in the
Portfolio would receive shares in the Fund equal in value to their shares in
the Portfolio and the Portfolio would be liquidated.
The Board of Trustees of the Trust, as well as Federated Advisers,
the Trust's adviser, and Federated Securities Corp., the Trust's principal
underwriter, believe the proposed agreement and plan of reorganization is in
the best interests of Portfolio shareholders for the following reasons:
-- the Portfolio has not reached a size, and is not
expected to reach a size, in which it can provide
shareholders with a reasonable, competitive return on its
investments.
-- The reorganization of the Portfolio into the Fund is
expected to provide operating efficiencies as a result of
the size of the Fund which were not available to Portfolio
shareholders due to the smaller size of the Portfolio's
assets.
-- The Fund offers an investment portfolio which invests
in municipal bonds the interest from which is exempt from
the federal regular income tax.
We believe the transfer of the Portfolio's assets in this
transaction will present an excellent investment opportunity for our
shareholders. Your vote on the transaction is critical to its success. The
transfer will be effected only if approved by a majority of the Portfolio's
outstanding shares on the record date voted in person or represented by proxy.
We hope you share our enthusiasm and will participate by casting your vote in
person, or by proxy if you are unable to attend the meeting. Please read the
enclosed prospectus/proxy statement carefully before you vote. If you have
any questions, please feel free to call us at 800-245-5000.
Thank you for your prompt attention and participation.
Sincerely,
Richard B. Fisher
President
MARYLAND MUNICIPAL INCOME FUND,
a portfolio of MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO SHAREHOLDERS OF MARYLAND MUNICIPAL INCOME FUND:
A Special Meeting of Shareholders of Maryland Municipal Income Fund (the
"Portfolio"), a portfolio of Municipal Securities Income Trust (the "Trust")
will be held at 2:15 p.m. on March 30, 1995 at the office of the Trust,
Federated Investors Tower, 19th Floor, Pittsburgh, Pennsylvania 15222-3779 for
the following purposes:
1. To approve or disapprove a proposed Agreement and Plan of
Reorganization between the Trust, on behalf of the Portfolio, and Fortress
Municipal Income Fund, Inc. (the "Fund"), whereby the Fund would acquire all
of the assets of the Portfolio in exchange for Fund shares to be distributed
pro rata by the Portfolio to its shareholders in complete liquidation of the
Portfolio; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
By Order of the Board of Trustees,
Dated: February __, 1995 John W. McGonigle
Secretary
Shareholders of record at the close of business February 10, 1995
are entitled to vote at the meeting. Whether or not you plan to attend the
meeting, please sign and return the enclosed proxy card. Your vote is
important.
To secure the largest possible representation and to save the
expense of further mailings, please mark your proxy card, sign it, and return
it in the enclosed envelope, which requires no postage if mailed in the United
States. You may revoke your proxy at any time at or before the meeting or
vote in person if you attend the meeting.
PROSPECTUS/PROXY STATEMENT
FEBRUARY 18, 1995
Acquisition of the Assets of
MARYLAND MUNICIPAL INCOME FUND,
a portfolio of
MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
By and in exchange for shares of
FORTRESS MUNICIPAL INCOME FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
This Prospectus/Proxy Statement describes the proposed Agreement and
Plan of Reorganization (the "Plan") whereby Fortress Municipal Income Fund,
Inc., a Maryland corporation (the "Fund"), would acquire all of the assets of
Maryland Municipal Income Fund (the "Portfolio"), a portfolio of Municipal
Securities Income Trust, a Massachusetts business trust (the "Trust"), in
exchange for Fund shares to be distributed pro rata by the Portfolio to its
shareholders in complete liquidation of the Portfolio. As a result of the
Plan, each shareholder of the Portfolio will become the owner of Fund shares
having a total net asset value equal to the total net asset value of his or
her holdings in the Portfolio.
The Fund is an open-end, diversified management investment company
whose investment objective is a high level of current income which is
generally exempt from the federal regular income tax. The Fund pursues this
investment objective by investing primarily in a professionally managed,
diverse portfolio of municipal bonds. The Fund may invest up to 35% of its
net assets in lower quality municipal bonds. The Portfolio is a non-
diversified portfolio of securities of an open-end management investment
company whose investment objective is to provide current income which is
exempt from federal regular income tax and the personal income taxes imposed
by the State of Maryland and Maryland municipalities. The Portfolio pursues
this objective by investing primarily in securities which are exempt from
federal regular income tax and personal income taxes imposed by the State of
Maryland and Maryland municipalities. For a comparison of the investment
policies of the Portfolio and the Fund, see "Summary-Investment Objectives and
Policies".
This Prospectus/Proxy Statement should be retained for future
reference. It sets forth concisely the information about the Fund that a
prospective investor should know before investing. This Prospectus/Proxy
Statement is accompanied by the Prospectus of the Fund dated October 31, 1994
which is incorporated herein by reference. Statements of Additional
Information for the Fund dated October 31, 1994 (relating to the Fund's
prospectus of the same date) and February 18, 1995 (relating to this
Prospectus/Proxy Statement) containing additional information have been filed
with the Securities and Exchange Commission and are incorporated herein by
reference. Copies of the Statements of Additional Information may be obtained
without charge by writing or calling the Fund at the address and telephone
number shown above.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Summary........................................................
Risk Factors...................................................
Information About the Reorganization...........................
Information About the Fund, the Portfolio and the Trust........
Voting Information.............................................
SUMMARY
About the Proposed Reorganization
The Board of Trustees of Municipal Securities Income Trust (the
"Trust") has voted to recommend to shareholders of its portfolio, Maryland
Municipal Income Fund (the "Portfolio"), the approval of an Agreement and Plan
of Reorganization (the "Plan") whereby Fortress Municipal Income Fund, Inc., a
Maryland corporation (the "Fund"), would acquire all of the assets of the
Portfolio in exchange for Fund shares to be distributed pro rata by the
Portfolio to its shareholders in complete liquidation and dissolution of the
Portfolio (the "Reorganization"). As a result of the Reorganization, each
shareholder of the Portfolio will become the owner of Fund shares having a
total net asset value equal to the total net asset value of his or her
holdings in the Portfolio on the date of the Reorganization, i.e., the Closing
Date.
As a condition to the Reorganization transactions, the Fund and the
Trust will receive an opinion of counsel that the Reorganization will be
considered a tax-free "reorganization" under applicable provisions of the
Internal Revenue Code so that no gain or loss will be recognized by either the
Fund or the Portfolio or their shareholders. The tax cost basis of the Fund
shares received by Portfolio shareholders will be the same as the tax cost
basis of their shares in the Portfolio. After the acquisition is completed,
the Portfolio will be liquidated.
Investment Objectives and Policies
The investment objective of the Fund is to provide a high level of
current income which is generally exempt from the federal regular income tax.
This investment objective may not be changed without the approval of
shareholders. The Fund pursues its investment objective by investing
primarily in a diversified portfolio of municipal bonds, and may invest up to
35% of its net assets in lower quality municipal bonds. As a matter of
investment policy that cannot be changed without the approval of shareholders,
except when investing on a temporary basis for defensive purposes, the Fund
invests its assets so that at least 80% of its annual interest income is
exempt from the federal regular income tax.
The investment objective of the Portfolio is to provide current
income which is exempt from federal regular income tax and the personal income
taxes imposed by the State of Maryland and Maryland municipalities. This
investment objective may not be changed without the approval of shareholders.
The Portfolio pursues its investment objective by investing primarily in
securities which are exempt from federal regular income tax and personal
income taxes imposed by the State of Maryland and Maryland municipalities. As
a matter of investment policy which cannot be changed without the approval of
shareholders, the Portfolio invests its assets so that, under normal
circumstances, at least 80% of its annual interest income is exempt from
federal regular income tax, or that at least 80% of its net assets are
invested in securities the interest from which is exempt from federal regular
income tax.
The Fund invests in municipal bonds which are rated Ba or higher by
Moody's Investors Service, Inc. ("Moody's") or rated BB or higher by
Standard & Poor's Ratings Group ("S&P") and bonds which are not rated but
which the adviser judges to be of comparable quality to bonds having such
ratings. The Fund will limit its purchases of municipal bonds rated Ba and BB
to 35% of its net assets. Unless otherwise designated, the investment
policies of the Fund may be changed by the Board of Directors without
shareholder approval, although shareholders will be notified before any
material change becomes effective.
Under normal circumstances, the Portfolio will invest at least 65%
of its total assets in Maryland municipal securities, which are obligations
issued by or on behalf of the State of Maryland, its political subdivisions,
or agencies, debt obligations of any state, territory or possession of the
United States, including the District of Columbia, or any political
subdivision of any of these, and participation interests in such instruments,
the interest from which is exempt from both federal regular income tax and the
personal income taxes imposed by the State of Maryland and Maryland
municipalities in the opinion of the issuer's bond counsel, the Trust, its
officers or the Adviser ("Maryland Municipal Securities"). The Maryland
Municipal Securities which the Portfolio buys are investment grade bonds
rated, at the time of purchase, Baa or higher by Moody's or BBB or higher by
S&P or by Fitch Investors Service, Inc. and bonds which are not rated if the
Adviser determines that such bonds are of comparable quality or have similar
characteristics to bonds having such ratings. Unless otherwise designated,
the investment policies of the Portfolio may be changed by the Board of
Trustees without shareholder approval, although shareholders will be notified
before any material change becomes effective. Currently, the Portfolio
invests primarily in variable rate municipal securities.
Both the Fund and the Portfolio are subject to certain investment
limitations. For the Fund, these include investment limitations which
prohibit it from (1) borrowing money directly or through reverse repurchase
agreements or pledging securities except that, under certain circumstances,
the Fund may, exclusive of custodian intra-day cash advances and the
collateralization of such advances, borrow up to one-third of the value of its
total assets and pledge up to 10% of the value of those assets to secure such
borrowings; (2) investing more than 10% of its net assets in securities
subject to restrictions on resale under the Securities Act of 1933 (the "1933
Act"); (3) investing more than 5% of its total assets in securities of one
issuer (except cash and cash items and United States government obligations);
and (4) investing more than 5% of its total assets in industrial development
bonds of issuers that have records of less than three years of continuous
operations. The first two investment limitations listed above cannot be
changed without shareholder approval; the last two limitations may be changed
by the Board of Directors without shareholder approval, although shareholders
will be notified before any material change becomes effective.
The Portfolio has investment limitations which prohibit it from (1)
borrowing money directly or through reverse repurchase agreements or pledging
securities except that, under certain circumstances, the Portfolio may borrow
up to one-third of the value of its total assets and pledge up to 10% of the
value of those assets to secure such borrowings; and (2) investing more than
5% of its total assets in industrial development bonds when the payment of
principal and interest is the responsibility of companies (or guarantors,
where applicable) with less than three years of continuous operations,
including the operation of any predecessor. The Portfolio's first investment
limitation cannot be changed without shareholder approval; the second may be
changed by the Board of Trustees without shareholder approval, although
shareholders will be notified before any material change becomes effective.
Both the Portfolio and the Fund are also subject to certain
additional investment limitations which are similar, although not identical,
described in the Fund's Statement of Additional Information dated October 31,
1994, and the Portfolio's Statement of Additional Information dated December
31, 1994. Reference is hereby made to the Fund's Prospectus and Statement of
Additional Information, each dated October 31, 1994, and to the Portfolio's
Prospectus and Statement of Additional Information, each dated December 31,
1994, which set forth in full the investment objectives and policies and
investment limitations of each of the Fund and the Portfolio, each of which is
incorporated herein by reference thereto.
Advisory and Other Fees
The annual investment advisory fee for the Fund is 0.60 of 1% of the
Fund's average daily net assets. Federated Advisers (the "Adviser"), the
investment adviser to the Fund, may voluntarily choose to waive a portion of
its advisory fee or reimburse the Fund for certain operating expenses. This
voluntary waiver of fees may be terminated by the Adviser at any time in its
sole discretion. The Adviser has also undertaken to reimburse the Fund for
operating expenses in excess of limitations established by certain states.
The annual investment advisory fee for the Portfolio is 0.40 of 1% of the
Portfolio's average daily net assets. The Adviser, which also serves as
investment adviser to the Portfolio, may similarly voluntarily choose to waive
a portion of its advisory fee or reimburse the Portfolio for operating
expenses but may likewise terminate such waiver or reimbursement at any time
in its sole discretion. The Adviser has also undertaken to reimburse the
Portfolio for operating expenses in excess of limitations established by
certain states. Without such waiver or reimbursement, the expense ratio of
each of the Fund and the Portfolio would be higher by 0.0 and 4.64%,
respectively, of average daily net assets.
Federated Administrative Services, an affiliate of the Adviser,
provides certain administrative personnel and services necessary to operate
both the Fund and the Portfolio at an annual rate based upon the average
aggregate daily net assets of all funds advised by the Adviser and its
affiliates. The rate charged is 0.15 of 1% of the first $250 million of all
such funds' average aggregate daily net assets, 0.125 of 1% on the next $250
million, 0.10 of 1% on the next $250 million and 0.075 of 1% of all such
funds' average aggregate daily net assets in excess of $750 million, with a
minimum annual fee per portfolio of $125,000 plus $30,000 for each additional
class of such portfolio. Federated Administrative Services may choose
voluntarily to waive a portion of its fee. The administrative fee expense for
the Fund's most recent fiscal year was 0.09 of 1% of its average aggregate
daily net assets and for the Portfolio's most recent fiscal year was 1.68% of
its average aggregate daily net assets.
The Fund has adopted a Shareholder Services Plan under which it may
make payments of up to 0.25 of 1% of the average daily net asset value of the
Fund to obtain certain personal services for shareholders and the maintenance
of shareholder accounts. The Fund has entered into a Shareholder Services
Agreement pursuant to which Federated Shareholder Services, an affiliate of
the Adviser, either performs shareholder services directly or selects certain
financial institutions to perform such services. Financial institutions will
receive fees based upon shares owned by their customers. The schedule of such
fees is determined from time to time by the Fund and Federated Shareholder
Services.
The Portfolio has a similar Shareholder Services Plan pursuant to
which financial institutions enter into shareholder service agreements with
the Portfolio to provide administrative support services to their customers
who own Portfolio shares. Such services may include, but are not limited to,
the provision of personal services and maintenance of shareholder accounts.
The Portfolio may make payments to a financial institution of up to 0.25 of 1%
of the average daily net assets of Portfolio shares beneficially owned by such
financial institution's customers for such services.
The total annual operating expenses for the Fund were 1.09% of
average daily net assets for its most recent fiscal year. The total annual
operating expenses for the Portfolio were 0.75% of average daily net assets
for its most recent fiscal year and would have been 5.39% of average daily net
assets absent the voluntary waiver by the Adviser of a portion of the
investment advisory fee and reimbursement of certain other operating expenses.
As of December 1, 1994, the Adviser ceased its voluntary waiver of investment
advisory fees as well as its voluntary reimbursement of certain Portfolio
operating expenses. As a result, the maximum total annual operating expenses
for the Portfolio for its current fiscal year are expected to be 2.50% of
average daily net assets.
Distribution Arrangements
Federated Securities Corp. ("FSC") is the principal distributor for
shares of the Fund and the Portfolio. The Fund has adopted a Rule 12b-1
Distribution Plan (the "Distribution Plan") pursuant to which the Fund may pay
to the distributor an amount equal to an annual rate of 0.25 of 1% of the
average daily net asset value of the Fund to finance any activity which is
principally intended to result in the sale of shares subject to the
Distribution Plan. The Fund is not currently making payments under the
Distribution Plan, nor does it anticipate doing so in the immediate future.
The Portfolio has adopted a Rule 12b-1 Distribution Plan (the "Rule
12b-1 Plan") pursuant to which the Portfolio pays FSC an amount equal to an
annual rate of 0.75 of 1% of the average daily net asset value of the
Portfolio to reimburse FSC for payments paid to dealers and to finance any
activity which is principally intended to result in the sale of shares subject
to the 12b-1 Plan. In connection with the distribution of Portfolio shares,
FSC paid dealers from its assets up to 2% of the net asset value of Portfolio
shares purchased by their customers.
In connection with the distribution of and/or administrative
services relating to Fund shares, FSC pays brokers and financial institutions
1% of the offering price of the Fund shares acquired by their customers on
purchases up to $1,999,999; 0.50% on purchases of $2 million to $4,999,999;
and 0.25% on purchases of $5 million or more. Any fees paid by FSC pursuant
to these arrangements will be reimbursed by the Adviser. The administrator
may elect to receive amounts less than those stated, which would reduce the
redemption fee and/or the holding period used to calculate such fee upon the
sale of such shares described below. In addition, FSC may pay a fee to
financial institutions as financial assistance for providing substantial
marketing and sales support, which payments would be determined by the amount
of shares sold by such financial institution and/or the nature of the
marketing or sales support furnished. Although such payments would be made
from the assets of FSC, the Adviser or its affiliates may reimburse them.
Certain costs exist with respect to the purchase and sale of Fund
and Portfolio shares. Shares of the Fund are sold at their net asset value
next determined after an order is received, plus a sales load of 1% of the
offering price for purchases of less than $1 million in all of the Fortress
Investment Program funds and purchases which are not made through designated
institutions. Shares of the Fund received by Portfolio shareholders as a
result of the Reorganization will not be subject to a sales charge. Shares of
the Portfolio were sold at their net asset value next determined after an
order was received.
Absent an exemption, shareholders redeeming Fund shares within
certain time periods of the purchase of those shares will be charged a
contingent deferred sales charge by FSC based on the lesser of the original
price or the net asset value of the shares redeemed, as follows: for
purchases up to $1,999,999 held less than four years the charge is 1%; for
purchases of $2 million to $4,999,999 held less than two years the charge is
0.50%; and for purchases of more than $5 million held less than one year, the
charge is 0.25%. The contingent deferred sales charges are not imposed in
connection with the exercise of exchange rights, nor will they be imposed on
redemptions of Fund shares received by shareholders of the Portfolio as a
result of the consummation of the Reorganization.
Effective in late 1994, FSC has waived all contingent deferred sales
charges in connection with redemptions of Portfolio shares. Absent such
waiver or another exemption, shareholders redeeming Portfolio shares within
three full years of the purchase of such shares were charged a contingent
deferred sales charge by FSC based on the lesser of the net asset value of the
redeemed shares at the time of purchase or the net asset value of the redeemed
shares at the time of redemption, as follows: for shares held less than one
year the charge was 3%; for shares held more than one year but less than three
years the charge was 2%. These sales charges were not imposed in connection
with an exercise of exchange rights. For a complete description of sales
charges, contingent deferred sales charges and exemptions from such charges,
reference is hereby made to the Prospectus of the Fund dated October 31, 1994
and the Prospectus of the Portfolio dated December 31, 1994, each of which is
incorporated herein by reference thereto.
Purchase and Redemption Procedures
The transfer agent and dividend disbursing agent for each of the
Fund and the Portfolio is Federated Services Company. Procedures for the
purchase and redemption of Fund shares differ slightly from procedures
applicable to the purchase and redemption of Portfolio shares. Any questions
about such procedures may be directed to, and assistance in effecting
purchases or redemptions of Fund shares or redemptions of Portfolio shares,
may be obtained from, FSC, principal distributor for each of the Fund and the
Portfolio, at 800-245-5000.
Reference is made to the Prospectus of the Fund dated October 31,
1994, and the Prospectus of the Portfolio dated December 31, 1994 for a
complete description of the purchase and redemption procedures applicable to
purchases and redemptions of Fund and Portfolio shares, respectively, each of
which is incorporated herein by reference thereto. Set forth below is a brief
listing of the significant purchase and redemption procedures of each of the
Fund and the Portfolio.
Purchases of shares of the Fund may be made through an investment
dealer who has an agreement with FSC or by wire or check. The minimum initial
investment in the Fund is $1,500. Subsequent investments must be in amounts
of at least $100. As of December 1, 1994, the Portfolio ceased offering its
shares for sale except for dividend reinvestments by existing shareholders.
The purchase price of shares of both the Fund and the Portfolio is
based on net asset value. The net asset value for each of the Fund and the
Portfolio is calculated at 4:00 p.m. (Eastern time) on each day on which the
Fund and the Portfolio compute their net asset value. Purchase and redemption
orders for the Fund and redemption orders for the Portfolio received from
broker/dealers before 5:00 p.m. (Eastern time) and from financial institutions
before 4:00 p.m. (Eastern time) may be entered at that day's price. Purchase
orders by wire are considered received when the Fund's transfer agent's bank,
State Street Bank and Trust Company ("State Street Bank"), receives payment by
wire. Purchase orders received by check are considered received after the
check is converted into federal funds, which normally occurs one day after
receipt by State Street Bank.
Fund shareholders have exchange rights with respect to shares in a
family of thirteen funds known as the Fortress Investment Program (the
"Program"), each of which has different investment objectives and policies.
Shares in the Fund may be exchanged for shares in the Program at net asset
value without a sales load (if previously paid) or a contingent deferred sales
charge. Portfolio shareholders also had exchange rights with respect to
certain other investment companies. However, such other investment companies
are no longer offering their shares for sale. Shares of the Fund may be
exchanged on a periodic systematic basis or upon individual request, and must
have a net asset value which meets the minimum investment requirement for the
fund into which the exchange is being made. Exercise of the exchange
privilege is treated as a sale for federal income tax purposes and,
accordingly, may have tax consequences for the shareholder. Information on
share exchanges may be obtained from FSC.
Redemptions of Fund shares may be made through a financial
institution, by mailing a written request or through the Fund's Systematic
Withdrawal Program. Shares are redeemed at their net asset value next
determined after the redemption request is received by FSC. Proceeds will be
distributed by check within seven days after receipt of a redemption request.
Generally, redemption of Portfolio shares may be made through a
financial institution, by mailing a written request or through the Portfolio's
Systematic Withdrawal Program. Shares are redeemed at their net asset value
next determined after the redemption request is received by State Street Bank.
Proceeds will be distributed by check within seven days after receipt of a
redemption request.
Tax Consequences
As a condition to the Reorganization transactions, the Fund and the
Trust will receive an opinion of counsel that the Reorganization will be
considered a tax-free "reorganization" under applicable provisions of the
Internal Revenue Code so that no gain or loss will be recognized by either the
Fund or the Portfolio or their shareholders. The tax cost basis of the Fund
shares received by Portfolio shareholders will be the same as the tax cost
basis of their shares in the Portfolio.
RISK FACTORS
Investment in the Fund is subject to certain risks which are set
forth in the Fund's Prospectus dated October 31, 1994 and the Statement of
Additional Information dated October 31, 1994 and incorporated herein by
reference thereto. Briefly, these risks include, but are not limited to, the
ability of the issuers of bonds owned by the Fund to meet their obligations
for the payment of principal and interest when due; fluctuation in the value
of the shares; gain or loss in the sale of bonds by the Fund based on interest
rate sensitivity and changes in the perceived quality of the credit of the
issuer; economic, political and regulatory developments which affect bonds
whose revenues are from similar projects or where issuers share the same
geographic location when such bonds constitute a large portion of the Fund's
portfolio; and narrow markets for lower rated and unrated bonds.
Investment in the Portfolio carries risks as well, as more fully
described in the Portfolio's Prospectus dated December 31, 1994 and the
Statement of Additional Information dated December 31, 1994. Such risks
include, but are not limited to, fluctuating yields on Maryland Municipal
Securities based on factors such as general market conditions in the municipal
bond market, the size of the offering, the maturity of the obligations and the
rating of the issue; the ability of issuers and participation interests, or
the guarantors of either, to meet their obligations for payment of interest
and principal when due; legislative, executive or administrative changes or
voter initiatives which could result in adverse consequences for Maryland
Municipal Securities; and any adverse economic conditions or developments
affecting the State of Maryland or its municipalities.
INFORMATION ABOUT THE REORGANIZATION
Background and Reasons for the Proposed Reorganization
The Portfolio was established in 1993 to provide investors with the
opportunity to earn income exempt from both the federal regular income tax and
the personal income tax imposed by the State of Maryland and Maryland
municipalities. In an effort to remain competitive with other investment
companies with similar investment objectives, the Adviser waived all of its
investment advisory fees and reimbursed the Portfolio for certain operating
expenses, resulting in aggregate fee waivers and expense reimbursements of
$155,732 for the Portfolio's fiscal year ended August 31, 1994. However, by
August 31, 1994, the Portfolio's net assets had grown only to $5,996,564. In
the opinion of FSC, the Portfolio's principal underwriter, the Portfolio
suffered from a lack of investor interest sufficient to permit it to grow to a
size which would permit it to operate efficiently. Although FSC expended
significant marketing efforts to promote sales of the Portfolio's shares, the
negative investment climate for municipal securities throughout 1994 impeded
sales of Portfolio shares and FSC concluded that it was unlikely that the
situation would improve materially in the foreseeable future. In addition,
the Adviser and its affiliates concluded that they would be unable to continue
to waive investment advisory fees and reimburse operating expenses in order
for the Portfolio to continue to earn a yield on its investments competitive
with other investment companies with similar investment objectives.
As a result of these factors, in early November 1994, FSC notified
shareholders that it had ceased offering shares of the Portfolio for sale and
that it would recommend to the Trust's Board of Trustees that the Portfolio be
liquidated. It also indicated that the Adviser would cease waiving its
investment advisory fee after November 30, 1994 and that as a result, the
Portfolio's operating expenses could be expected to increase to approximately
2.5%. FSC accordingly recommended to shareholders that they voluntarily
redeem their shares and indicated that all contingent deferred sales charges
that would otherwise be applicable to such redemptions would be waived. In
anticipation of voluntary redemptions, the Adviser restructured the
Portfolio's investments by emphasizing shorter-term municipal securities.
Although many shareholders of the Portfolio elected to redeem their
shares as a result of the foregoing developments, a significant number of
shareholders expressed dissatisfaction both with this alternative and the
overall determination to recommend liquidation of the Portfolio. After
consultation with many shareholders as well as various broker dealers and
other financial institutions who had sold Portfolio shares, FSC voluntarily
determined to reimburse shareholders of the Portfolio as of October 13, 1994,
$150,000, or approximately $0.205 per share, in order to restore to
shareholders a portion of the decrease in the dollar value of shareholders'
investments in the Portfolio. As a result, FSC and the Adviser recommended to
the Board of Trustees of the Trust that it consider the feasibility of
transferring the Portfolio's assets to another investment company in exchange
for shares of such other investment company in a transaction which would be
tax-free to the Portfolio and its shareholders. Recognizing that many
shareholders may not have wished to redeem their shares of the Portfolio, FSC
and the Adviser recommended to the Trust's Board of Trustees a transfer of the
Portfolio's assets to the Fund, which seeks to earn interest income exempt
from the federal regular income tax (although not exempt from the personal
income tax imposed by the State of Maryland and Maryland municipalities).
The Board of Trustees of the Trust evaluated this proposal as well
as other alternatives, including liquidation of the Portfolio. The Trustees
concluded that this transaction would be in the best interests of shareholders
because the Portfolio was unlikely to reach economic size on its own, as a
result of relatively high expenses, and that net yield on an investment in the
Portfolio would not be attractive to shareholders.
With assets of approximately $411,672,068 at December 31, 1994, the
Trust's Board of Trustees concluded that the Fund was of a size to provide
operating efficiencies and economies of scale sufficient to provide
shareholders with competitive investment returns and net income exempt from
the federal regular income tax. The Trustees also took account of the fact
that the Fund also receives investment advisory services from the Adviser and
that the Fund and its shareholders receive similar administrative and other
shareholder services as presently enjoyed by the Portfolio and its
shareholders. The Trustees noted that the Fund's investment advisory fee of
0.60% of average daily net assets is higher than the Portfolio's investment
advisory fee of 0.40% of average daily net assets, but concluded that this
difference in advisory fees is offset by the lower overall expenses of the
Fund as compared to the Portfolio.
Accordingly, the Trust's Board of Trustees, including a majority of
the independent Trustees, determined that participation in the Reorganization
is in the best interests of the Portfolio and that the interests of Portfolio
shareholders would not be diluted as a result of its effecting the
Reorganization. Based upon the foregoing considerations, and the fact that
shareholders of the Portfolio will not suffer any adverse tax consequences as
a result of the Reorganization, the Board of Trustees of the Trust unanimously
voted to approve, and recommend to Portfolio shareholders the approval of, the
Reorganization.
The Directors of the Fund, including the independent Directors, have
unanimously concluded that consummation of the Reorganization is in the best
interests of the Fund and the shareholders of the Fund and that the interests
of Fund shareholders would not be diluted as a result of effecting the
Reorganization and have unanimously approved the Plan.
In the event shareholders of the Portfolio do not approve the Plan,
the Trust's Board of Trustees will consider other alternatives which would
address the Portfolio's uneconomic size. These may include a plan of
liquidation or another transaction.
Description of the Plan of Reorganization
The Plan provides that the Fund will acquire all of the assets of
the Portfolio in exchange for Fund shares to be distributed pro rata by the
Portfolio to its shareholders in complete liquidation of the Portfolio on or
about March 30, 1995 (the "Closing Date"). Shareholders of the Portfolio will
become shareholders of the Fund as of the close of business on the Closing
Date and will begin accruing dividends on the next day. Shareholders of the
Fund will accrue their last dividend from the Fund on the Closing Date.
Consummation of the Reorganization is subject to the conditions set
forth in the Plan, including receipt of an opinion in form and substance
satisfactory to the Trust, on behalf of the Portfolio, and the Fund as
described under the caption "Federal Income Tax Consequences" below. The Plan
may be terminated and the Reorganization may be abandoned at any time before
or after approval by shareholders of the Portfolio prior to the Closing Date
by either party if it believes that consummation of the Reorganization would
not be in the best interests of its shareholders.
The Adviser is responsible for the payment of all expenses of the
Reorganization incurred by either party, whether or not the Reorganization is
consummated. Such expenses include, but are not limited to, accountants'
fees, legal fees, registration fees, transfer taxes (if any), the fees of
banks and transfer agents and the costs of preparing, printing, copying and
mailing proxy solicitation materials to the Portfolio's shareholders and the
costs of holding the Special Meeting of Shareholders.
The foregoing description of the Plan entered into between the Fund
and the Trust, on behalf of the Portfolio, is qualified in its entirety by the
terms and provisions of the Plan, a copy of which is attached hereto as
Exhibit A and incorporated herein by reference thereto.
Description of Portfolio Shares
Shares of the Fund to be issued to shareholders of the Portfolio
under the Plan will be fully paid and nonassessable when issued and
transferable without restriction and will have no preemptive or conversion
rights. Reference is hereby made to the Prospectus of the Fund dated
October 31, 1994 provided herewith for additional information about Fund
shares.
Federal Income Tax Consequences
As a condition to the Reorganization transactions, the Fund and the
Trust, on behalf of the Portfolio, will receive an opinion from Dickstein,
Shapiro & Morin, L.L.P., counsel to the Fund and the Trust, to the effect
that, on the basis of the existing provisions of the Internal Revenue Code of
1986, as amended (the "Code"), current administrative rules and court
decisions, for federal income tax purposes: (1) the Reorganization as set
forth in the Plan will constitute a tax-free reorganization under section
368(a)(1)(C) of the Code; (2) no gain or loss will be recognized by the Fund
upon its receipt of the Portfolio's assets solely in exchange for Fund shares;
(3) no gain or loss will be recognized by the Portfolio upon the transfer of
its assets to the Fund in exchange for Fund shares or upon the distribution
(whether actual or constructive) of the Fund shares to the Portfolio
shareholders in exchange for their shares of the Portfolio; (4) no gain or
loss will be recognized by shareholders of the Portfolio upon the exchange of
their Portfolio shares for Fund shares; (5) the tax basis of the Portfolio's
assets acquired by the Fund will be the same as the tax basis of such assets
to the Portfolio immediately prior to the Reorganization; (6) the tax basis of
Fund shares received by each shareholder of the Portfolio pursuant to the Plan
will be the same as the tax basis of Portfolio shares held by such shareholder
immediately prior to the Reorganization; (7) the holding period of the assets
of the Portfolio in the hands of the Fund will include the period during which
those assets were held by the Portfolio; and (8) the holding period of Fund
shares received by each shareholder of the Portfolio pursuant to the Plan will
include the period during which the Portfolio shares exchanged therefor were
held by such shareholder, provided the Portfolio shares were held as capital
assets on the date of the Reorganization.
Comparative Information on Shareholder Rights and Obligations
The Fund is organized as a corporation under the laws of the State
of Maryland. The Fund is not required to hold annual meetings of shareholders
except when required to do so under the 1940 Act. A special meeting of
shareholders of the Fund shall be called by the Chairman, Secretary or any
Director upon the written request of the holders of at least 25% of the
outstanding shares of the Fund. Each share of the Fund is entitled to one
vote at all meetings of shareholders.
The Trust is organized as a business trust pursuant to a Declaration
of Trust under the laws of the Commonwealth of Massachusetts. Set forth below
is a brief summary of the significant rights of shareholders of the Portfolio.
The Trust is not required to hold annual meetings of shareholders.
Shareholder approval is necessary only for certain changes in operations or
the election of trustees under certain circumstances. A special meeting of
shareholders of the Trust for any permissible purpose shall be called by the
Trustees upon the written request of the holders of at least 10% of the
outstanding shares of the Trust or of the relevant portfolio. Each share of
the Portfolio is entitled to one vote. All shares of the Trust have equal
voting rights except that in matters affecting only a particular portfolio or
class, only shares of that portfolio or class are entitled to vote.
Under certain circumstances, shareholders of the Portfolio may be
held personally liable as partners under Massachusetts law for obligations of
the Trust on behalf of the Portfolio. To protect its shareholders, the Trust
has filed legal documents with the Commonwealth of Massachusetts that
expressly disclaim the liability of Portfolio shareholders for such acts or
obligations of the Trust. These documents require that notice of this
disclaimer be given in each agreement, obligation or instrument that the Trust
or its Trustees enter into or sign on behalf of the Portfolio.
In the unlikely event a shareholder is held personally liable for
the Trust's obligations on behalf of the Portfolio, the Trust is required to
use the property of the Portfolio to protect or compensate the shareholder.
On request, the Trust will defend any claim made and pay any judgment against
a shareholder for any act or obligation of the Trust on behalf of the
Portfolio. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Trust cannot meet its obligations to
indemnify shareholders and pay judgments against them from the assets of the
Portfolio.
Capitalization
The following table sets forth the unaudited capitalization of the
Fund and the Portfolio as of December 31, 1994 and on a pro forma basis as of
that date:
Pro Forma
Fund Portfolio Combined
Net Assets $411,672,068 $912,252 $412,584,320
Price Per Share 10.02 7.80 10.02
INFORMATION ABOUT THE FUND, THE
PORTFOLIO AND THE TRUST
Fortress Municipal Income Fund, Inc.
Information about the Fund is contained in the Fund's current
Prospectus dated October 31, 1994, a copy of which is included herewith and
incorporated by reference herein. Additional information about the Fund is
included in the Fund's Statement of Additional Information dated October 31,
1994, which is incorporated herein by reference. Copies of the Statement of
Additional Information, which has been filed with the Securities and Exchange
Commission (the "SEC"), may be obtained without charge by contacting the Fund
at 1-800-245-5000 or by writing the Fund at Federated Investors Tower,
Pittsburgh, PA 15222-3779. The Fund is subject to the informational
requirements of the 1933 Act, the Securities Exchange Act of 1934 (the "1934
Act") and the 1940 Act and in accordance therewith files reports and other
information with the SEC. Reports, proxy and information statements and other
information filed by the Fund, can be obtained by calling or writing the Fund
and can also be inspected and copied by the public at the public reference
facilities maintained by the SEC in Washington, D.C. located at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549 and at certain of its regional
offices located at Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Chicago, IL 60661 and 13th Floor, Seven World Trade Center, New York,
NY 10048. Copies of such material can be obtained at prescribed rates from
the Public Reference Branch, Office of Consumer Affairs and Information
Services, SEC, 450 Fifth Street, N.W., Washington, D.C. 20549.
This Prospectus/Proxy Statement, which constitutes part of a
Registration Statement filed by the Fund with the SEC under the 1933 Act,
omits certain of the information contained in the Registration Statement.
Reference is hereby made to the Registration Statement and to the exhibits
thereto for further information with respect to the Fund and the shares
offered hereby. Statements contained herein concerning the provisions of
documents are necessarily summaries of such documents, and each such statement
is qualified in its entirety by reference to the copy of the applicable
documents filed with the SEC.
Maryland Municipal Income Fund, a portfolio of Municipal Securities Income
Trust
Information about the Portfolio and the Trust is contained in the
Portfolio's current Prospectus dated December 31, 1994 and its Statement of
Additional Information dated December 31, 1994, which are incorporated herein
by reference. Copies of such Prospectus and Statement of Additional
Information may be obtained without charge from the Fund by calling 1-800-245-
5000 or by writing to the Fund at Federated Investors Tower, Pittsburgh, PA
15222-3779. The Trust is subject to the informational requirements of the
1933 Act, the 1934 Act and the 1940 Act and in accordance therewith files
reports and other information with the SEC. Reports, proxy and information
statements and other information filed by the Portfolio can be obtained by
calling or writing the Fund and can also be inspected at the public reference
facilities maintained by the SEC or obtained at prescribed rates at the
addresses listed in the previous section.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the
solicitation by the Board of Trustees of the Trust of proxies for use at the
Special Meeting of Shareholders (the "Meeting") to be held on March 30, 1995
and at any adjournment thereof. The proxy confers discretionary authority on
the persons designated therein to vote on other business not currently
contemplated which may properly come before the Meeting. A proxy, if properly
executed, duly returned and not revoked, will be voted in accordance with the
specifications thereon; if no instructions are given, such proxy will be voted
in favor of the Plan. A shareholder may revoke a proxy at any time prior to
use by filing with the Secretary of the Trust an instrument revoking the
proxy, by submitting a proxy bearing a later date or by attending and voting
at the Meeting.
The cost of the solicitation, including the printing and mailing of
proxy materials, will be borne by the Adviser. In addition to solicitations
through the mails, proxies may be solicited by officers, employees and agents
of the Trust and the Adviser at no additional cost to the Trust. Such
solicitations may be by telephone. The Adviser will reimburse custodians,
nominees and fiduciaries for the reasonable costs incurred by them in
connection with forwarding solicitation materials to the beneficial owners of
shares held of record by such persons.
Outstanding Shares and Voting Requirements
The Board of Trustees of the Trust has fixed the close of business
on February 10, 1995 as the record date for the determination of shareholders
entitled to notice of and to vote at the Special Meeting of Shareholders and
any adjournment thereof. As of the record date, there were __________ shares
of the Portfolio outstanding. Each Portfolio share is entitled to one vote
and fractional shares have proportionate voting rights. On the record date,
________ owned of record _____ shares, or ___%, of the Portfolio's outstanding
shares. On such date, no other person owned of record, or to the knowledge of
the Adviser, beneficially owned, 5% or more of the Portfolio's outstanding
shares. On the record date, the trustees and officers of the Portfolio as a
group owned less than 1% of the outstanding shares of the Portfolio.
As of the record date, there were __________ shares of the Fund
outstanding. On the record date, ________ owned of record _____ shares, or
___%, of the Fund's outstanding shares. On such date, no other person owned
of record, or to the knowledge of the Adviser, beneficially owned, 5% or more
of the Fund's outstanding shares. On the record date, the trustees and
officers of the Fund as a group owned less than 1% of the outstanding shares
of the Fund.
Approval of the Plan requires the affirmative vote of the lesser of
(i) 67% of the shares of the Portfolio present at the Special Meeting, if the
holders of more than 50% of the outstanding shares are present or represented
by proxy, or (2) a majority of the outstanding shares of the Portfolio. The
votes of shareholders of the Fund are not being solicited since their approval
is not required in order to effect the Reorganization.
A majority of the outstanding shares of the Portfolio, represented
in person or by proxy, will be required to constitute a quorum at the Special
Meeting for the purpose of voting on the proposed Reorganization. For
purposes of determining the presence of a quorum, shares represented by
abstentions and "broker non-votes" will be counted as present, but not as
votes cast, at the Special Meeting. Under the 1940 Act, however, which
governs this transaction, matters subject to the requirements of the 1940 Act,
including the Reorganization, are determined on the basis of a percentage of
votes present at the Special Meeting, which would have the effect of treating
abstentions and "broker non-votes" as if they were votes against the proposal.
Dissenter's Right of Appraisal
Shareholders of the Portfolio objecting to the Reorganization have
no appraisal rights under the Trust's Declaration of Trust or Massachusetts
law. Under the Plan, if approved by Portfolio shareholders, each Portfolio
shareholder will become the owner of Fund shares having a total net asset
value equal to the total net asset value of his or her holdings in the
Portfolio at the Closing Date.
Other Matters
Management of the Trust knows of no other matters that may properly
be, or which are likely to be, brought before the meeting. However, if any
other business shall properly come before the meeting, the persons named in
the proxy intend to vote thereon in accordance with their best judgment.
So far as management is presently informed, there is no litigation
pending or threatened against the Fund.
Whether or not shareholders expect to attend the meeting, all
shareholders are urged to sign, fill in and return the enclosed proxy form
promptly.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated January 5, 1995 (the
"Agreement"), between FORTRESS MUNICIPAL INCOME FUND, INC., a Maryland
corporation (hereinafter called the "Acquiring Fund"), and MUNICIPAL
SECURITIES INCOME TRUST, a Massachusetts business trust (hereinafter called
the "Trust") on behalf of its portfolio MARYLAND MUNICIPAL INCOME FUND
(hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of
the United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of
the assets of the Acquired Fund in exchange solely for shares of common stock
of the Acquiring Fund (the "Acquiring Fund Shares") and the distribution,
after the Closing Date hereinafter referred to, of the Acquiring Fund Shares
to the shareholders of the Acquired Fund in liquidation of the Acquired Fund
as provided herein, all upon the terms and conditions hereinafter set forth in
this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are registered open-
end management investment companies and the Acquired Fund owns securities in
which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are authorized
to issue shares of common stock or shares of beneficial interest, as the case
may be;
WHEREAS, the Board of Directors, including a majority of the
Directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Acquiring Fund has
determined that the exchange of all or substantially all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquiring Fund shareholders and that the interests of the existing
shareholders of the Acquiring Fund would not be diluted as a result of this
transaction; and
WHEREAS, the Board of Trustees, including a majority of the Trustees
who are not "interested persons" (as defined under the 1940 Act), of the
Acquired Fund has determined that the exchange of all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquired Fund shareholders and that the interests of the existing shareholders
of the Acquired Fund would not be diluted as a result of this transaction;
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund agrees to assign, transfer and convey to the Acquiring Fund all of the
assets of the Acquired Fund, including all securities and cash, and the
Acquiring Fund agrees in exchange therefor (i) to deliver to the Acquired Fund
the number of Acquiring Fund Shares, including fractional Acquiring Fund
Shares, determined as set forth in paragraph 2.3. Such transaction shall take
place at the closing (the "Closing") on the closing date (the "Closing Date")
provided for in paragraph 3.1. In lieu of delivering certificates for the
Acquiring Fund Shares, the Acquiring Fund shall credit the Acquiring Fund
Shares to the Acquired Fund's account on the stock record books of the
Acquiring Fund and shall deliver a confirmation thereof to the Acquired Fund.
1.2 The Acquired Fund will discharge all of its liabilities and
obligations prior to the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street Bank
and Trust Company (hereinafter called "State Street"), Boston, Massachusetts,
the Acquiring Fund's custodian (the "Custodian"), for the account of the
Acquiring Fund, together with proper instructions and all necessary documents
to transfer to the account of the Acquiring Fund, free and clear of all liens,
encumbrances, rights, restrictions and claims. All cash delivered shall be in
the form of currency and immediately available funds payable to the order of
the Custodian for the account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund thereunder. The Acquired
Fund will transfer to the Acquiring Fund any distributions, rights or other
assets received by the Acquired Fund after the Closing Date as distributions
on or with respect to the securities transferred. Such assets shall be deemed
included in assets transferred to the Acquiring Fund on the Closing Date and
shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable, the
Acquired Fund will liquidate and distribute pro rata to the Acquired Fund's
shareholders of record, determined as of the close of business on the Closing
Date (the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by
the Acquired Fund pursuant to paragraph 1.1. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund Shares
then credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share record books of the Acquiring
Fund in the names of the Acquired Fund Shareholders and representing the
respective pro rata number of the Acquiring Fund Shares due such shareholders.
All issued and outstanding shares of the Acquired Fund will simultaneously be
canceled on the books of the Acquired Fund. Share certificates representing
interests in the Acquired Fund will represent a number of Acquiring Fund
Shares after the Closing Date as determined in accordance with Section 2.3.
The Acquiring Fund shall not issue certificates representing the Acquiring
Fund Shares in connection with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus and
statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund shares
on the books of the Acquired Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Trust.
2. VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of 4:00
p.m. (Eastern time) on the Closing Date (such time and date being hereinafter
called the "Valuation Date"), using the valuation procedures set forth in the
Acquiring Fund's then-current prospectus or statement of additional
information.
2.2 The net asset value of an Acquiring Fund Share shall be the net
asset value per share computed as of 4:00 p.m. (Eastern time) on the
Valuation Date, using the valuation procedures set forth in the Acquiring
Fund's then-current prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in paragraph
2.1 by the net asset value of one Acquiring Fund Share determined in
accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be March 30, 1995 or such later date as the
parties may mutually agree. All acts taking place at the Closing Date shall
be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place as
the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of the
value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 Federated Services Company, as transfer agent for each of the
Acquired Fund and the Acquiring Fund, shall deliver at the Closing a
certificate of an authorized officer stating that its records contain the
names and addresses of the Acquired Fund Shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver
a confirmation evidencing the Acquiring Fund Shares to be credited on the
Closing Date to the Secretary of the Acquired Fund, or provide evidence
satisfactory to the Acquired Fund that such Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund.
At the Closing, each party shall deliver to the other such bills of sale,
checks, assignments, assumption agreements, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Acquired Fund represents and warrants to the Acquiring Fund as
follows:
(a) The Trust is a business trust duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has power to own all of its properties and assets and to
carry out this Agreement.
(b) The Trust is registered under the 1940 Act, as an open-
end, management investment company, and such registration has not been revoked
or rescinded and is in full force and effect.
(c) The Acquired Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Trust's Declaration of Trust or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquired Fund is
a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquired Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquired Fund knows of no facts which might form the basis for the institution
of such proceedings, and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially
and adversely affects its business or its ability to consummate the
transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "Commission") hereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein as necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) The Statement of Assets and Liabilities of the
Acquired Fund at August 31, 1994 have been audited by Deloitte & Touche LLP,
independent auditors, and have been prepared in accordance with generally
accepted accounting principles, consistently applied, and such statements
(copies of which have been furnished to the Acquiring Fund) fairly reflect the
financial condition of the Acquired Fund as of such dates, and there are no
known contingent liabilities of the Acquired Fund as of such dates not
disclosed therein.
(h) Since August 31, 1994, there has not been any material
adverse change in the Acquired Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business,
or any incurrence by the Acquired Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Acquiring Fund.
(i) At the Closing Date, all Federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
dates shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquired Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(j) For each fiscal year of its operation, the Acquired
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. All of the issued and outstanding shares of
the Acquired Fund will, at the time of the Closing, be held by the persons and
in the amounts set forth in the records of the transfer agent as provided in
paragraph 3.3. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquired Fund
shares, nor is there outstanding any security convertible into any of the
Acquired Fund Shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets to
be transferred by it hereunder.
(m) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Acquired Fund's Trustees and, subject to
the approval of the Acquired Fund Shareholders, this Agreement will constitute
the valid and legally binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a proceeding
in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund
(the "Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (other than information therein that
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
(o) The Acquired Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
4.2 The Acquiring Fund represents and warrants to the Acquired Fund as
follows:
(a) The Acquiring Fund is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland
and the Acquiring Fund has the power to carry on its business as it is now
being conducted and to carry out this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as
an open-end, diversified, management investment company, and such registration
has not been revoked or rescinded and is in full force and effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquiring Fund's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquiring Fund knows of no facts which might form the basis for the
institution of such proceedings, and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to
consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the
Acquiring Fund at August 31, 1993 and 1994, have been audited by Deloitte &
Touche LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, and such statements (copies of which
have been furnished to the Acquired Fund) fairly reflect the financial
condition of the Acquiring Fund as of such dates, and there are no known
contingent liabilities of the Acquiring Fund as of such dates not disclosed
therein.
(g) Since August 31, 1994, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of indebtedness maturing
more than one year from the date such indebtedness was incurred, except as
disclosed to and accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed by such
date shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquiring Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(i) For each fiscal year of its operation, the Acquiring
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(j) All issued and outstanding shares of the Acquiring
Fund are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any of the Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares.
(k) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action, if any, on the part of the Acquiring Fund's Trustees, and
this Agreement will constitute the valid and legally binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject to the effect
of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
and other similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto, and to general principles of equity
and the discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading.
(m) The Acquiring Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date,
it being understood that such ordinary course of business will include
customary dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and do
or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in
such form as is reasonably satisfactory to the Acquiring Fund, a statement of
the earnings and profits of the Acquired Fund for Federal income tax purposes
which will be carried over to the Acquiring Fund as a result of Section 381 of
the Code and which will be certified by the Acquired Fund's President and its
Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(m), all
to be included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquired Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of the Acquired Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such securities by lot
and the holding periods of such securities, as of the Closing Date, certified
by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of the
Acquired Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquiring Fund shall
reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquiring Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquired Fund shall
reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness, except
as otherwise disclosed to and accepted by the Acquired Fund.
8. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares
of the Acquired Fund in accordance with the provisions of the Trust's
Declaration of Trust.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit consummation,
in all material respects, of the transactions contemplated hereby shall have
been obtained, except where failure to obtain any such consent, order or
permit would not involve a risk of a material adverse effect on the assets or
properties of the Acquiring Fund or the Acquired Fund, provided that either
party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 The Acquiring Fund and the Acquired Fund shall have received an
opinion of Dickstein, Shapiro & Morin, L.L.P. substantially to the effect that
for Federal income tax purposes:
(a) The transfer of all or substantially all of the
Acquired Fund assets in exchange for the Acquiring Fund Shares and the
distribution of the Acquiring Fund Shares to the Acquired Fund Shareholders in
liquidation of the Acquired Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code; (b) No gain or loss will be
recognized by the Acquiring Fund upon the receipt of the assets of the
Acquired Fund solely in exchange for the Acquiring Fund Shares; (c) No gain or
loss will be recognized by the Acquired Fund upon the transfer of the Acquired
Fund assets to the Acquiring Fund in exchange for the Acquiring Fund Shares or
upon the distribution (whether actual or constructive) of the Acquiring Fund
Shares to Acquired Fund Shareholders in exchange for their shares of the
Acquired Fund; (d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the Acquiring
Fund Shares; (e) The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization; (f) The tax basis of
the Acquiring Fund Shares received by each of the Acquired Fund Shareholders
pursuant to the Reorganization will be the same as the tax basis of the
Acquired Fund shares held by such shareholder immediately prior to the
Reorganization; (g) The holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which those
assets were held by the Acquired Fund; and (h) The holding period of the
Acquiring Fund Shares to be received by each Acquired Fund Shareholder will
include the period during which the Acquired Fund shares exchanged therefor
were held by such shareholder (provided the Acquired Fund shares were held as
capital assets on the date of the Reorganization).
9. TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Trustees of the Trust
or the Board of Directors of the Acquiring Fund at any time prior to the
Closing Date (and notwithstanding any vote of the Board of Trustees of the
Acquired Fund) if circumstances should develop that, in the opinion of either
of the parties' Board, make proceeding with the Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on the
part of any party hereto or the directors, officers or shareholders of the
Acquiring Fund or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Trustees of the Acquiring Fund or of
the Acquired Fund, if, in the judgment of either, such waiver will not have a
material adverse effect on the benefits intended under this Agreement to the
shareholders of the Acquiring Fund or of the Acquired Fund, as the case may
be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings of
every kind and nature between them relating to the subject matter hereof.
Neither party shall be bound by any condition, definition, warranty or
representation, other than as set forth or provided in this Agreement or as
may be set forth in a later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania, without giving effect
to principles of conflict of laws.
11.4 This Agreement may be executed in any number of counterparts, each
of which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason
of this Agreement.
11.6 The Acquiring Fund is hereby expressly put on notice of the
limitation of liability as set forth in Article XI of the Declaration of Trust
of the Acquired Fund and agrees that the obligations assumed by the Acquired
Fund pursuant to this Agreement shall be limited in any case to the Acquired
Fund and its assets and the Acquiring Fund shall not seek satisfaction of any
such obligation from the shareholders of the Acquired Fund, the trustees,
officers, employees or agents of the Acquired Fund or any of them.
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the date
first above written.
Acquired Fund:
MUNICIPAL SECURITIES INCOME TRUST,
on behalf of its portfolio,
MARYLAND MUNICIPAL INCOME FUND
Attest:
By:/s/John W. McGonigle
/s/Charles H. Field
Assistant Secretary Name:John W. McGonigle
Title:Vice President
Acquiring Fund:
FORTRESS MUNICIPAL INCOME
FUND, INC.
Attest:
By: /s/Richard B. Fisher
/s/Charles H. Field
Assistant Secretary Name:Richard B. Fisher
Title:President
STATEMENT OF ADDITIONAL INFORMATION
February 18, 1995
Acquisition of the assets of
MARYLAND MUNICIPAL INCOME FUND,
a Portfolio of MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
By and in exchange for shares of
FORTRESS MUNICIPAL INCOME FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
This Statement of Additional Information dated February 18, 1995 is
not a prospectus. A Prospectus/Proxy Statement dated February 18, 1995
related to the above-referenced matter may be obtained from Fortress Municipal
Income Fund, Inc., Federated Investors Tower, Pittsburgh, Pennsylvania 15222-
3779. This Statement of Additional Information should be read in conjunction
with such Prospectus/Proxy Statement.
TABLE OF CONTENTS
1.Statement of Additional Information of Fortress Municipal Income
Fund, Inc., dated October 31, 1994
2.Statement of Additional Information of Maryland Municipal Income
Fund, a portfolio of Municipal Securities Income Trust, dated December 31,
1994
3.Financial Statements of Fortress Municipal Income Fund, Inc.,
dated August 31, 1994
4.Financial Statements of Maryland Municipal Income Fund, a
portfolio of Municipal Securities Income Trust, dated August 31, 1994
The Statement of Additional Information of Fortress Municipal Income
Fund, Inc. (the "Fund"), dated October 31, 1994, is incorporated herein by
reference to Post-Effective Amendment No. 10 to the Fund's Registration
Statement on Form N-1A (File Nos. 33-11410 and 811-4533) which was filed with
the Securities and Exchange Commission on or about October 26, 1994. A copy
may be obtained from the Fund at Federated Investors Tower, Pittsburgh, PA
15222-3279; telephone number: 1-800-245-5000.
The Statement of Additional Information of Maryland Municipal Income
Fund (the "Portfolio"), a portfolio of Municipal Securities Income Trust (the
"Trust"), dated December 31, 1994, is incorporated herein by reference to Post-
Effective Amendment No. 17 to the Trust's Registration Statement on Form N-1A
(File Nos. 33-36729 and 811-6165) which was filed with the Securities and
Exchange Commission on or about December 30, 1994.
The audited financial statements of the Fund, dated August 31, 1994,
are incorporated herein by reference to the Fund's Prospectus dated October
31, 1994 which was filed with the Securities and Exchange Commission in Post-
Effective Amendment No. 10 to the Fund's Registration Statement on Form N-1A
(File Nos. 33-11410 and 811-4533) on or about October 26, 1994.
The audited financial statements of the Portfolio, dated August 31,
1994, are incorporated herein by reference to the Portfolio's Annual Report to
Shareholders for the fiscal year ended August 31, 1994 which was filed with
the Securities and Exchange Commission on or about November 1, 1994.
Pro forma financial statements are not included herein as the total
net assets of the Portfolio do not exceed 10% of the total net assets of the
Fund. At December 31, 1994, the total net assets of the Fund were
$411,672,068 and the total net assets of the Portfolio were $912,252.
NEW JERSEY MUNICIPAL INCOME FUND,
a portfolio of MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Dear Shareholder:
The Board of Trustees and management of Municipal Securities Income
Trust (the "Trust") are pleased to submit for your vote a proposal to transfer
all of the assets of New Jersey Municipal Income Fund (the "Portfolio") to
Fortress Municipal Income Fund, Inc. (the "Fund"), a mutual fund advised by
Federated Advisers. The Fund has an investment objective similar to that of
the Portfolio in that it seeks current income which is exempt from the federal
regular income tax, although dividends in respect of income generally will not
be exempt from the personal income taxes imposed by the State of New Jersey
and New Jersey municipalities. As part of the transaction, shareholders in
the Portfolio would receive shares in the Fund equal in value to their shares
in the Portfolio and the Portfolio would be liquidated.
The Board of Trustees of the Trust, as well as Federated Advisers,
the Trust's adviser, and Federated Securities Corp., the Trust's principal
underwriter, believe the proposed agreement and plan of reorganization is in
the best interests of Portfolio shareholders for the following reasons:
-- the Portfolio has not reached a size, and is not
expected to reach a size, in which it can provide
shareholders with a reasonable, competitive return on its
investments.
-- The reorganization of the Portfolio into the Fund is
expected to provide operating efficiencies as a result of
the size of the Fund which were not available to Portfolio
shareholders due to the smaller size of the Portfolio's
assets.
-- The Fund offers an investment portfolio which invests
in municipal bonds the interest from which is exempt from
the federal regular income tax.
We believe the transfer of the Portfolio's assets in this
transaction will present an excellent investment opportunity for our
shareholders. Your vote on the transaction is critical to its success. The
transfer will be effected only if approved by a majority of the Portfolio's
outstanding shares on the record date voted in person or represented by proxy.
We hope you share our enthusiasm and will participate by casting your vote in
person, or by proxy if you are unable to attend the meeting. Please read the
enclosed prospectus/proxy statement carefully before you vote. If you have
any questions, please feel free to call us at 800-245-5000.
Thank you for your prompt attention and participation.
Sincerely,
Richard B. Fisher
President
NEW JERSEY MUNICIPAL INCOME FUND,
a portfolio of MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO SHAREHOLDERS OF NEW JERSEY MUNICIPAL INCOME FUND:
A Special Meeting of Shareholders of New Jersey Municipal Income Fund (the
"Portfolio"), a portfolio of Municipal Securities Income Trust (the "Trust")
will be held at 2:15 p.m. on March 30, 1995 at the office of the Trust,
Federated Investors Tower, 19th Floor, Pittsburgh, Pennsylvania 15222-3779 for
the following purposes:
1. To approve or disapprove a proposed Agreement and Plan of
Reorganization between the Trust, on behalf of the Portfolio, and Fortress
Municipal Income Fund, Inc. (the "Fund"), whereby the Fund would acquire all
of the assets of the Portfolio in exchange for Fund shares to be distributed
pro rata by the Portfolio to its shareholders in complete liquidation of the
Portfolio; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
By Order of the Board of Trustees,
Dated: February __, 1995 John W. McGonigle
Secretary
Shareholders of record at the close of business February 10, 1995
are entitled to vote at the meeting. Whether or not you plan to attend the
meeting, please sign and return the enclosed proxy card. Your vote is
important.
To secure the largest possible representation and to save the
expense of further mailings, please mark your proxy card, sign it, and return
it in the enclosed envelope, which requires no postage if mailed in the United
States. You may revoke your proxy at any time at or before the meeting or
vote in person if you attend the meeting.
PROSPECTUS/PROXY STATEMENT
FEBRUARY 18, 1995
Acquisition of the Assets of
NEW JERSEY MUNICIPAL INCOME FUND,
a portfolio of
MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
By and in exchange for shares of
FORTRESS MUNICIPAL INCOME FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
This Prospectus/Proxy Statement describes the proposed Agreement and
Plan of Reorganization (the "Plan") whereby Fortress Municipal Income Fund,
Inc., a Maryland corporation (the "Fund"), would acquire all of the assets of
New Jersey Municipal Income Fund (the "Portfolio"), a portfolio of Municipal
Securities Income Trust, a Massachusetts business trust (the "Trust"), in
exchange for Fund shares to be distributed pro rata by the Portfolio to its
shareholders in complete liquidation of the Portfolio. As a result of the
Plan, each shareholder of the Portfolio will become the owner of Fund shares
having a total net asset value equal to the total net asset value of his or
her holdings in the Portfolio.
The Fund is an open-end, diversified management investment company
whose investment objective is a high level of current income which is
generally exempt from the federal regular income tax. The Fund pursues this
investment objective by investing primarily in a professionally managed,
diverse portfolio of municipal bonds. The Fund may invest up to 35% of its
net assets in lower quality municipal bonds. The Portfolio is a non-
diversified portfolio of securities of an open-end management investment
company whose investment objective is to provide current income which is
exempt from federal regular income tax and the personal income taxes imposed
by the State of New Jersey and New Jersey municipalities. The Portfolio
pursues this objective by investing primarily in a securities which are exempt
from federal regular income tax and personal income taxes imposed by the State
of New Jersey and New Jersey municipalities. For a comparison of the
investment policies of the Portfolio and the Fund, see "Summary-Investment
Objectives and Policies".
This Prospectus/Proxy Statement should be retained for future
reference. It sets forth concisely the information about the Fund that a
prospective investor should know before investing. This Prospectus/Proxy
Statement is accompanied by the Prospectus of the Fund dated October 31, 1994
which is incorporated herein by reference. Statements of Additional
Information for the Fund dated October 31, 1994 (relating to the Fund's
prospectus of the same date) and February 18, 1995 (relating to this
Prospectus/Proxy Statement) containing additional information have been filed
with the Securities and Exchange Commission and are incorporated herein by
reference. Copies of the Statements of Additional Information may be obtained
without charge by writing or calling the Fund at the address and telephone
number shown above.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Summary........................................................
Risk Factors...................................................
Information About the Reorganization...........................
Information About the Fund, the Portfolio and the Trust........
Voting Information.............................................
SUMMARY
About the Proposed Reorganization
The Board of Trustees of Municipal Securities Income Trust (the
"Trust") has voted to recommend to shareholders of its portfolio, New Jersey
Municipal Income Fund (the "Portfolio"), the approval of an Agreement and Plan
of Reorganization (the "Plan") whereby Fortress Municipal Income Fund, Inc., a
Maryland corporation (the "Fund"), would acquire all of the assets of the
Portfolio in exchange for Fund shares to be distributed pro rata by the
Portfolio to its shareholders in complete liquidation and dissolution of the
Portfolio (the "Reorganization"). As a result of the Reorganization, each
shareholder of the Portfolio will become the owner of Fund shares having a
total net asset value equal to the total net asset value of his or her
holdings in the Portfolio on the date of the Reorganization, i.e., the Closing
Date.
As a condition to the Reorganization transactions, the Fund and the
Trust will receive an opinion of counsel that the Reorganization will be
considered a tax-free "reorganization" under applicable provisions of the
Internal Revenue Code so that no gain or loss will be recognized by either the
Fund or the Portfolio or their shareholders. The tax cost basis of the Fund
shares received by Portfolio shareholders will be the same as the tax cost
basis of their shares in the Portfolio. After the acquisition is completed,
the Portfolio will be liquidated.
Investment Objectives and Policies
The investment objective of the Fund is to provide a high level of
current income which is generally exempt from the federal regular income tax.
This investment objective may not be changed without the approval of
shareholders. The Fund pursues its investment objective by investing
primarily in a diversified portfolio of municipal bonds, and may invest up to
35% of its net assets in lower quality municipal bonds. As a matter of
investment policy that cannot be changed without the approval of shareholders,
except when investing on a temporary basis for defensive purposes, the Fund
invests its assets so that at least 80% of its annual interest income is
exempt from the federal regular income tax.
The investment objective of the Portfolio is to provide current
income which is exempt from federal regular income tax and the personal income
taxes imposed by the State of New Jersey and New Jersey municipalities. This
investment objective may not be changed without the approval of shareholders.
The Portfolio pursues its investment objective by investing primarily in
securities which are exempt from federal regular income tax and personal
income taxes imposed by the State of New Jersey and New Jersey municipalities.
As a matter of investment policy which cannot be changed without the approval
of shareholders, the Portfolio invests its assets so that at least 80% of its
annual interest income is exempt from federal regular income tax and New
Jersey state and municipal income tax.
The Fund invests in municipal bonds which are rated Ba or higher by
Moody's Investors Service, Inc. ("Moody's") or rated BB or higher by
Standard & Poor's Ratings Group ("S&P") and bonds which are not rated but
which the adviser judges to be of comparable quality to bonds having such
ratings. The Fund will limit its purchases of municipal bonds rated Ba and BB
to 35% of its net assets. Unless otherwise designated, the investment
policies of the Fund may be changed by the Board of Directors without
shareholder approval, although shareholders will be notified before any
material change becomes effective.
The Portfolio invests primarily in New Jersey municipal securities,
which are obligations issued by or on behalf of the State of New Jersey, its
political subdivisions, or agencies, debt obligations of any state, territory
or possession of the United States, including the District of Columbia, or any
political subdivision of any of these, and participation interests in any of
the above obligations, the interest from which is exempt from both federal
regular income tax and the personal income taxes imposed by the State of New
Jersey and New Jersey municipalities in the opinion of the issuer's bond
counsel, the Trust, its officers or the Adviser ("New Jersey Municipal
Securities"). The New Jersey Municipal Securities which the Portfolio buys
are investment grade bonds rated, at the time of purchase, Baa or higher by
Moody's or BBB or higher by S&P or by Fitch Investors Service, Inc. and bonds
which are not rated if the Adviser determines that such bonds are of
comparable quality or have similar characteristics to bonds having such
ratings. Unless otherwise designated, the investment policies of the
Portfolio may be changed by the Board of Trustees without shareholder
approval, although shareholders will be notified before any material change
becomes effective. Currently, the Portfolio invests primarily in variable
rate municipal securities.
Both the Fund and the Portfolio are subject to certain investment
limitations. For the Fund, these include investment limitations which
prohibit it from (1) borrowing money directly or through reverse repurchase
agreements or pledging securities except that, under certain circumstances,
the Fund may, exclusive of custodian intra-day cash advances and the
collateralization of such advances, borrow up to one-third of the value of its
total assets and pledge up to 10% of the value of those assets to secure such
borrowings; (2) investing more than 10% of its net assets in securities
subject to restrictions on resale under the Securities Act of 1933 (the "1933
Act"); (3) investing more than 5% of its total assets in securities of one
issuer (except cash and cash items and United States government obligations);
and (4) investing more than 5% of its total assets in industrial development
bonds of issuers that have records of less than three years of continuous
operations. The first two investment limitations listed above cannot be
changed without shareholder approval; the last two limitations may be changed
by the Board of Directors without shareholder approval, although shareholders
will be notified before any material change becomes effective.
The Portfolio has investment limitations which prohibit it from (1)
borrowing money directly or through reverse repurchase agreements or pledging
securities except that, under certain circumstances, the Portfolio may borrow
up to one-third of the value of its total assets and pledge up to 10% of the
value of those assets to secure such borrowings; and (2) investing more than
5% of its total assets in industrial development bonds when the payment of
principal and interest is the responsibility of companies (or guarantors,
where applicable) with less than three years of continuous operations,
including the operation of any predecessor. The Portfolio's first investment
limitation cannot be changed without shareholder approval; the second may be
changed by the Board of Trustees without shareholder approval, although
shareholders will be notified before any material change becomes effective.
Both the Portfolio and the Fund are also subject to certain
additional investment limitations which are similar, although not identical,
described in the Fund's Statement of Additional Information dated October 31,
1994, and the Portfolio's Statement of Additional Information dated December
31, 1994. Reference is hereby made to the Fund's Prospectus and Statement of
Additional Information, each dated October 31, 1994, and to the Portfolio's
Prospectus and Statement of Additional Information, each dated December 31,
1994, which set forth in full the investment objectives and policies and
investment limitations of each of the Fund and the Portfolio, each of which is
incorporated herein by reference thereto.
Advisory and Other Fees
The annual investment advisory fee for the Fund is 0.60 of 1% of the
Fund's average daily net assets. Federated Advisers (the "Adviser"), the
investment adviser to the Fund, may voluntarily choose to waive a portion of
its advisory fee or reimburse the Fund for certain operating expenses. This
voluntary waiver of fees may be terminated by the Adviser at any time in its
sole discretion. The Adviser has also undertaken to reimburse the Fund for
operating expenses in excess of limitations established by certain states.
The annual investment advisory fee for the Portfolio is 0.40 of 1% of the
Portfolio's average daily net assets. The Adviser, which also serves as
investment adviser to the Portfolio, may similarly voluntarily choose to waive
a portion of its advisory fee or reimburse the Portfolio for operating
expenses but may likewise terminate such waiver or reimbursement at any time
in its sole discretion. The Adviser has also undertaken to reimburse the
Portfolio for operating expenses in excess of limitations established by
certain states. Without such waiver or reimbursement, the expense ratio of
each of the Fund and the Portfolio would be higher by 0.0 and 3.22% ,
respectively, of average daily net assets.
Federated Administrative Services, an affiliate of the Adviser,
provides certain administrative personnel and services necessary to operate
both the Fund and the Portfolio at an annual rate based upon the average
aggregate daily net assets of all funds advised by the Adviser and its
affiliates. The rate charged is 0.15 of 1% of the first $250 million of all
such funds' average aggregate daily net assets, 0.125 of 1% on the next $250
million, 0.10 of 1% on the next $250 million and 0.075 of 1% of all such
funds' average aggregate daily net assets in excess of $750 million, with a
minimum annual fee per portfolio of $125,000 plus $30,000 for each additional
class of such portfolio. Federated Administrative Services may choose
voluntarily to waive a portion of its fee. The administrative fee expense for
the Fund's most recent fiscal year was 0.09 of 1% of its average aggregate
daily net assets and for the Portfolio's most recent fiscal year was 1.22% of
its average aggregate daily net assets.
The Fund has adopted a Shareholder Services Plan under which it may
make payments of up to 0.25 of 1% of the average daily net asset value of the
Fund to obtain certain personal services for shareholders and the maintenance
of shareholder accounts. The Fund has entered into a Shareholder Services
Agreement pursuant to which Federated Shareholder Services, an affiliate of
the Adviser, either performs shareholder services directly or selects certain
financial institutions to perform such services. Financial institutions will
receive fees based upon shares owned by their customers. The schedule of such
fees is determined from time to time by the Fund and Federated Shareholder
Services.
The Portfolio has a similar Shareholder Services Plan pursuant to
which financial institutions enter into shareholder service agreements with
the Portfolio to provide administrative support services to their customers
who own Portfolio shares. Such services may include, but are not limited to,
the provision of personal services and maintenance of shareholder accounts.
The Portfolio may make payments to a financial institution of up to 0.25 of 1%
of the average daily net assets of Portfolio shares beneficially owned by such
financial institution's customers for such services.
The total annual operating expenses for the Fund were 1.09% of
average daily net assets for its most recent fiscal year. The total annual
operating expenses for the Portfolio were 0.75% of average daily net assets
for its most recent fiscal year and would have been 3.97% of average daily net
assets absent the voluntary waiver by the Adviser of a portion of the
investment advisory fee and reimbursement of certain other operating expenses.
As of December 1, 1994, the Adviser ceased its voluntary waiver of investment
advisory fees as well as its voluntary reimbursement of certain Portfolio
operating expenses. As a result, the maximum total annual operating expenses
for the Portfolio for its current fiscal year are expected to be 2.50% of
average daily net assets.
Distribution Arrangements
Federated Securities Corp. ("FSC") is the principal distributor for
shares of the Fund and the Portfolio. The Fund has adopted a Rule 12b-1
Distribution Plan (the "Distribution Plan") pursuant to which the Fund may pay
to the distributor an amount equal to an annual rate of 0.25 of 1% of the
average daily net asset value of the Fund to finance any activity which is
principally intended to result in the sale of shares subject to the
Distribution Plan. The Fund is not currently making payments under the
Distribution Plan, nor does it anticipate doing so in the immediate future.
The Portfolio has adopted a Rule 12b-1 Distribution Plan (the "Rule
12b-1 Plan") pursuant to which the Portfolio pays FSC an amount equal to an
annual rate of 0.75 of 1% of the average daily net asset value of the
Portfolio to reimburse FSC for payments paid to dealers and to finance any
activity which is principally intended to result in the sale of shares subject
to the 12b-1 Plan. In connection with the distribution of Portfolio shares,
FSC paid dealers from its assets up to 2% of the net asset value of Portfolio
shares purchased by their customers.
In connection with the distribution of and/or administrative
services relating to Fund shares, FSC pays brokers and financial institutions
1% of the offering price of the Fund shares acquired by their customers on
purchases up to $1,999,999; 0.50% on purchases of $2 million to $4,999,999;
and 0.25% on purchases of $5 million or more. Any fees paid by FSC pursuant
to these arrangements will be reimbursed by the Adviser. The administrator
may elect to receive amounts less than those stated, which would reduce the
redemption fee and/or the holding period used to calculate such fee upon the
sale of such shares described below. In addition, FSC may pay a fee to
financial institutions as financial assistance for providing substantial
marketing and sales support, which payments would be determined by the amount
of shares sold by such financial institution and/or the nature of the
marketing or sales support furnished. Although such payments would be made
from the assets of FSC, the Adviser or its affiliates may reimburse them.
Certain costs exist with respect to the purchase and sale of Fund
and Portfolio shares. Shares of the Fund are sold at their net asset value
next determined after an order is received, plus a sales load of 1% of the
offering price for purchases of less than $1 million in all of the Fortress
Investment Program funds and purchases which are not made through designated
institutions. Shares of the Fund received by Portfolio shareholders as a
result of the Reorganization will not be subject to a sales charge. Shares of
the Portfolio were sold at their net asset value next determined after an
order was received.
Absent an exemption, shareholders redeeming Fund shares within
certain time periods of the purchase of those shares will be charged a
contingent deferred sales charge by FSC based on the lesser of the original
price or the net asset value of the shares redeemed, as follows: for
purchases up to $1,999,999 held less than four years the charge is 1%; for
purchases of $2 million to $4,999,999 held less than two years the charge is
0.50%; and for purchases of more than $5 million held less than one year, the
charge is 0.25%. The contingent deferred sales charges are not imposed in
connection with the exercise of exchange rights, nor will they be imposed on
redemptions of Fund shares received by shareholders of the Portfolio as a
result of the consummation of the Reorganization.
Effective in late 1994, FSC has waived all contingent deferred sales
charges in connection with redemptions of Portfolio shares. Absent such
waiver or another exemption, shareholders redeeming Portfolio shares within
three full years of the purchase of such shares were charged a contingent
deferred sales charge by FSC based on the lesser of the net asset value of the
redeemed shares at the time of purchase or the net asset value of the redeemed
shares at the time of redemption, as follows: for shares held less than one
year the charge was 3%; for shares held more than one year but less than three
years the charge was 2%. These sales charges were not imposed in connection
with an exercise of exchange rights. For a complete description of sales
charges, contingent deferred sales charges and exemptions from such charges,
reference is hereby made to the Prospectus of the Fund dated October 31, 1994
and the Prospectus of the Portfolio dated December 31, 1994, each of which is
incorporated herein by reference thereto.
Purchase and Redemption Procedures
The transfer agent and dividend disbursing agent for each of the
Fund and the Portfolio is Federated Services Company. Procedures for the
purchase and redemption of Fund shares differ slightly from procedures
applicable to the purchase and redemption of Portfolio shares. Any questions
about such procedures may be directed to, and assistance in effecting
purchases or redemptions of Fund shares or redemptions of Portfolio shares,
may be obtained from, FSC, principal distributor for each of the Fund and the
Portfolio, at 800-245-5000.
Reference is made to the Prospectus of the Fund dated October 31,
1994, and the Prospectus of the Portfolio dated December 31, 1994 for a
complete description of the purchase and redemption procedures applicable to
purchases and redemptions of Fund and Portfolio shares, respectively, each of
which is incorporated herein by reference thereto. Set forth below is a brief
listing of the significant purchase and redemption procedures of each of the
Fund and the Portfolio.
Purchases of shares of the Fund may be made through an investment
dealer who has an agreement with FSC or by wire or check. The minimum initial
investment in the Fund is $1,500. Subsequent investments must be in amounts
of at least $100. As of October 17, 1994 the Portfolio ceased offering its
shares for sale except for dividend reinvestments by existing shareholders.
The purchase price of shares of both the Fund and the Portfolio is
based on net asset value. The net asset value for each of the Fund and the
Portfolio is calculated at 4:00 p.m. (Eastern time) on each day on which the
Fund and the Portfolio compute their net asset value. Purchase and redemption
orders for the Fund and redemption orders for the Portfolio received from
broker/dealers before 5:00 p.m. (Eastern time) and from financial institutions
before 4:00 p.m. (Eastern time) may be entered at that day's price. Purchase
orders by wire are considered received when the Fund's transfer agent's bank,
State Street Bank and Trust Company ("State Street Bank"), receives payment by
wire. Purchase orders received by check are considered received after the
check is converted into federal funds, which normally occurs one day after
receipt by State Street Bank.
Fund shareholders have exchange rights with respect to shares in a
family of thirteen funds known as the Fortress Investment Program (the
"Program"), each of which has different investment objectives and policies.
Shares in the Fund may be exchanged for shares in the Program at net asset
value without a sales load (if previously paid) or a contingent deferred sales
charge. Portfolio shareholders also had exchange rights with respect to
certain other investment companies. However, such other investment companies
are no longer offering their shares for sale. Shares of the Fund may be
exchanged on a periodic systematic basis or upon individual request, and must
have a net asset value which meets the minimum investment requirement for the
fund into which the exchange is being made. Exercise of the exchange
privilege is treated as a sale for federal income tax purposes and,
accordingly, may have tax consequences for the shareholder. Information on
share exchanges may be obtained from FSC.
Redemptions of Fund shares may be made through a financial
institution, by mailing a written request or through the Fund's Systematic
Withdrawal Program. Shares are redeemed at their net asset value next
determined after the redemption request is received by FSC. Proceeds will be
distributed by check within seven days after receipt of a redemption request.
Generally, redemption of Portfolio shares may be made through a
financial institution, by mailing a written request or through the Portfolio's
Systematic Withdrawal Program. Shares are redeemed at their net asset value
next determined after the redemption request is received by State Street Bank.
Proceeds will be distributed by check within seven days after receipt of a
redemption request.
Tax Consequences
As a condition to the Reorganization transactions, the Fund and the
Trust will receive an opinion of counsel that the Reorganization will be
considered a tax-free "reorganization" under applicable provisions of the
Internal Revenue Code so that no gain or loss will be recognized by either the
Fund or the Portfolio or their shareholders. The tax cost basis of the Fund
shares received by Portfolio shareholders will be the same as the tax cost
basis of their shares in the Portfolio.
RISK FACTORS
Investment in the Fund is subject to certain risks which are set
forth in the Fund's Prospectus dated October 31, 1994 and the Statement of
Additional Information dated October 31, 1994 and incorporated herein by
reference thereto. Briefly, these risks include, but are not limited to, the
ability of the issuers of bonds owned by the Fund to meet their obligations
for the payment of principal and interest when due; fluctuation in the value
of the shares; gain or loss in the sale of bonds by the Fund based on interest
rate sensitivity and changes in the perceived quality of the credit of the
issuer; economic, political and regulatory developments which affect bonds
whose revenues are from similar projects or where issuers share the same
geographic location when such bonds constitute a large portion of the Fund's
portfolio; and narrow markets for lower rated and unrated bonds.
Investment in the Portfolio carries risks as well, as more fully
described in the Portfolio's Prospectus dated December 31, 1994 and the
Statement of Additional Information dated December 31, 1994. Such risks
include, but are not limited to, fluctuating yields on New Jersey Municipal
Securities based on factors such as the general conditions of the short-term
municipal note market and the municipal bond market, the size of the offering,
the maturity of the obligations and the rating of the issue; the ability of
issuers and participation interests, or the guarantors of either, to meet
their obligations for payment of interest and principal when due; and any
adverse economic conditions or developments affecting the State of New Jersey
or its municipalities.
INFORMATION ABOUT THE REORGANIZATION
Background and Reasons for the Proposed Reorganization
The Portfolio was established in 1993 to provide investors with the
opportunity to earn income exempt from both the federal regular income tax and
the personal income taxes imposed by the State of New Jersey and New Jersey
municipalities. In an effort to remain competitive with other investment
companies with similar investment objectives, the Adviser waived all of its
investment advisory fees and reimbursed the Portfolio for certain operating
expenses, resulting in aggregate fee waivers and expense reimbursements of
$267,395 for the Portfolio's fiscal year ended August 31, 1994. However, by
August 31, 1994, the Portfolio's net assets had grown only to $11,166,179. In
the opinion of FSC, the Portfolio's principal underwriter, the Portfolio
suffered from a lack of investor interest sufficient to permit it to grow to a
size which would permit it to operate efficiently. Although FSC expended
significant marketing efforts to promote sales of the Portfolio's shares, the
negative investment climate for municipal securities throughout 1994 impeded
sales of Portfolio shares and FSC concluded that it was unlikely that the
situation would improve materially in the foreseeable future. In addition,
the Adviser and its affiliates concluded that they would be unable to continue
to waive investment advisory fees and reimburse operating expenses in order
for the Portfolio to continue to earn a yield on its investments competitive
with other investment companies with similar investment objectives.
As a result of these factors, in early November 1994, FSC notified
shareholders that it had ceased offering shares of the Portfolio for sale and
that it would recommend to the Trust's Board of Trustees that the Portfolio be
liquidated. It also indicated that the Adviser would cease waiving its
investment advisory fee after November 30, 1994 and that as a result, the
Portfolio's operating expenses could be expected to increase to approximately
2.5%. FSC accordingly recommended to shareholders that they voluntarily
redeem their shares and indicated that all contingent deferred sales charges
that would otherwise be applicable to such redemptions would be waived. In
anticipation of voluntary redemptions, the Adviser restructured the
Portfolio's investments by emphasizing shorter-term municipal securities.
Although many shareholders of the Portfolio elected to redeem their
shares as a result of the foregoing developments, a significant number of
shareholders expressed dissatisfaction both with this alternative and the
overall determination to recommend liquidation of the Portfolio. After
consultation with many shareholders as well as various broker dealers and
other financial institutions who had sold Portfolio shares, FSC voluntarily
determined to reimburse shareholders of the Portfolio as of October 13, 1994,
$500,000, or approximately $0.421 per share, in order to restore to
shareholders a portion of the decrease in the dollar value of shareholders'
investments in the Portfolio. As a result, FSC and the Adviser recommended to
the Board of Trustees of the Trust that it consider the feasibility of
transferring the Portfolio's assets to another investment company in exchange
for shares of such other investment company in a transaction which would be
tax-free to the Portfolio and its shareholders. Recognizing that many
shareholders may not have wished to redeem their shares of the Portfolio, FSC
and the Adviser recommended to the Trust's Board of Trustees a transfer of the
Portfolio's assets to the Fund, which seeks to earn interest income exempt
from the federal regular income tax (although not exempt from the personal
income taxes imposed by the State of New Jersey and New Jersey
municipalities).
The Board of Trustees of the Trust evaluated this proposal as well
as other alternatives, including liquidation of the Portfolio. The Trustees
concluded that this transaction would be in the best interests of shareholders
because the Portfolio was unlikely to reach economic size on its own, as a
result of relatively high expenses, and that net yield on an investment in the
Portfolio would not be attractive to shareholders.
With assets of approximately $411,672,068 at December 31, 1994, the
Trust's Board of Trustees concluded that the Fund was of a size to provide
operating efficiencies and economies of scale sufficient to provide
shareholders with competitive investment returns and net income exempt from
the federal regular income tax. The Trustees also took account of the fact
that the Fund also receives investment advisory services from the Adviser and
that the Fund and its shareholders receive similar administrative and other
shareholder services as presently enjoyed by the Portfolio and its
shareholders. The Trustees noted that the Fund's investment advisory fee of
0.60% of average daily net assets is higher than the Portfolio's investment
advisory fee of 0.40% of average daily net assets, but concluded that this
difference in advisory fees is offset by the lower overall expenses of the
Fund as compared to the Portfolio.
Accordingly, the Trust's Board of Trustees, including a majority of
the independent Trustees, determined that participation in the Reorganization
is in the best interests of the Portfolio and that the interests of Portfolio
shareholders would not be diluted as a result of its effecting the
Reorganization. Based upon the foregoing considerations, and the fact that
shareholders of the Portfolio will not suffer any adverse tax consequences as
a result of the Reorganization, the Board of Trustees of the Trust unanimously
voted to approve, and recommend to Portfolio shareholders the approval of, the
Reorganization.
The Directors of the Fund, including the independent Directors, have
unanimously concluded that consummation of the Reorganization is in the best
interests of the Fund and the shareholders of the Fund and that the interests
of Fund shareholders would not be diluted as a result of effecting the
Reorganization and have unanimously approved the Plan.
In the event shareholders of the Portfolio do not approve the Plan,
the Trust's Board of Trustees will consider other alternatives which would
address the Portfolio's uneconomic size. These may include a plan of
liquidation or another transaction.
Description of the Plan of Reorganization
The Plan provides that the Fund will acquire all of the assets of
the Portfolio in exchange for Fund shares to be distributed pro rata by the
Portfolio to its shareholders in complete liquidation of the Portfolio on or
about March 30, 1995 (the "Closing Date"). Shareholders of the Portfolio will
become shareholders of the Fund as of the close of business on the Closing
Date and will begin accruing dividends on the next day. Shareholders of the
Fund will accrue their last dividend from the Fund on the Closing Date.
Consummation of the Reorganization is subject to the conditions set
forth in the Plan, including receipt of an opinion in form and substance
satisfactory to the Trust, on behalf of the Portfolio, and the Fund as
described under the caption "Federal Income Tax Consequences" below. The Plan
may be terminated and the Reorganization may be abandoned at any time before
or after approval by shareholders of the Portfolio prior to the Closing Date
by either party if it believes that consummation of the Reorganization would
not be in the best interests of its shareholders.
The Adviser is responsible for the payment of all expenses of the
Reorganization incurred by either party, whether or not the Reorganization is
consummated. Such expenses include, but are not limited to, accountants'
fees, legal fees, registration fees, transfer taxes (if any), the fees of
banks and transfer agents and the costs of preparing, printing, copying and
mailing proxy solicitation materials to the Portfolio's shareholders and the
costs of holding the Special Meeting of Shareholders.
The foregoing description of the Plan entered into between the Fund
and the Trust, on behalf of the Portfolio, is qualified in its entirety by the
terms and provisions of the Plan, a copy of which is attached hereto as
Exhibit A and incorporated herein by reference thereto.
Description of Portfolio Shares
Shares of the Fund to be issued to shareholders of the Portfolio
under the Plan will be fully paid and nonassessable when issued and
transferable without restriction and will have no preemptive or conversion
rights. Reference is hereby made to the Prospectus of the Fund dated
October 31, 1994 provided herewith for additional information about Fund
shares.
Federal Income Tax Consequences
As a condition to the Reorganization transactions, the Fund and the
Trust, on behalf of the Portfolio, will receive an opinion from Dickstein,
Shapiro & Morin, L.L.P., counsel to the Fund and the Trust, to the effect
that, on the basis of the existing provisions of the Internal Revenue Code of
1986, as amended (the "Code"), current administrative rules and court
decisions, for federal income tax purposes: (1) the Reorganization as set
forth in the Plan will constitute a tax-free reorganization under section
368(a)(1)(C) of the Code; (2) no gain or loss will be recognized by the Fund
upon its receipt of the Portfolio's assets solely in exchange for Fund shares;
(3) no gain or loss will be recognized by the Portfolio upon the transfer of
its assets to the Fund in exchange for Fund shares or upon the distribution
(whether actual or constructive) of the Fund shares to the Portfolio
shareholders in exchange for their shares of the Portfolio; (4) no gain or
loss will be recognized by shareholders of the Portfolio upon the exchange of
their Portfolio shares for Fund shares; (5) the tax basis of the Portfolio's
assets acquired by the Fund will be the same as the tax basis of such assets
to the Portfolio immediately prior to the Reorganization; (6) the tax basis of
Fund shares received by each shareholder of the Portfolio pursuant to the Plan
will be the same as the tax basis of Portfolio shares held by such shareholder
immediately prior to the Reorganization; (7) the holding period of the assets
of the Portfolio in the hands of the Fund will include the period during which
those assets were held by the Portfolio; and (8) the holding period of Fund
shares received by each shareholder of the Portfolio pursuant to the Plan will
include the period during which the Portfolio shares exchanged therefor were
held by such shareholder, provided the Portfolio shares were held as capital
assets on the date of the Reorganization.
Comparative Information on Shareholder Rights and Obligations
The Fund is organized as a corporation under the laws of the State
of Maryland. The Fund is not required to hold annual meetings of shareholders
except when required to do so under the 1940 Act. A special meeting of
shareholders of the Fund shall be called by the Chairman, Secretary or any
Director upon the written request of the holders of at least 25% of the
outstanding shares of the Fund. Each share of the Fund is entitled to one
vote at all meetings of shareholders.
The Trust is organized as a business trust pursuant to a Declaration
of Trust under the laws of the Commonwealth of Massachusetts. Set forth below
is a brief summary of the significant rights of shareholders of the Portfolio.
The Trust is not required to hold annual meetings of shareholders.
Shareholder approval is necessary only for certain changes in operations or
the election of trustees under certain circumstances. A special meeting of
shareholders of the Trust for any permissible purpose shall be called by the
Trustees upon the written request of the holders of at least 10% of the
outstanding shares of the Trust or of the relevant portfolio. Each share of
the Portfolio is entitled to one vote. All shares of the Trust have equal
voting rights except that in matters affecting only a particular portfolio or
class, only shares of that portfolio or class are entitled to vote.
Under certain circumstances, shareholders of the Portfolio may be
held personally liable as partners under Massachusetts law for obligations of
the Trust on behalf of the Portfolio. To protect its shareholders, the Trust
has filed legal documents with the Commonwealth of Massachusetts that
expressly disclaim the liability of Portfolio shareholders for such acts or
obligations of the Trust. These documents require that notice of this
disclaimer be given in each agreement, obligation or instrument that the Trust
or its Trustees enter into or sign on behalf of the Portfolio.
In the unlikely event a shareholder is held personally liable for
the Trust's obligations on behalf of the Portfolio, the Trust is required to
use the property of the Portfolio to protect or compensate the shareholder.
On request, the Trust will defend any claim made and pay any judgment against
a shareholder for any act or obligation of the Trust on behalf of the
Portfolio. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Trust cannot meet its obligations to
indemnify shareholders and pay judgments against them from the assets of the
Portfolio.
Capitalization
The following table sets forth the unaudited capitalization of the
Fund and the Portfolio as of December 31, 1994 and on a pro forma basis as of
that date:
Pro Forma Fund
Portfolio Combined
Net Assets $411,672,068 $944,673 $412,616,741
Price Per Share
(NAV) 10.02 8.08 10.02
INFORMATION ABOUT THE FUND, THE
PORTFOLIO AND THE TRUST
Fortress Municipal Income Fund, Inc.
Information about the Fund is contained in the Fund's current
Prospectus dated October 31, 1994, a copy of which is included herewith and
incorporated by reference herein. Additional information about the Fund is
included in the Fund's Statement of Additional Information dated October 31,
1994, which is incorporated herein by reference. Copies of the Statement of
Additional Information, which has been filed with the Securities and Exchange
Commission (the "SEC"), may be obtained without charge by contacting the Fund
at 1-800-245-5000 or by writing the Fund at Federated Investors Tower,
Pittsburgh, PA 15222-3779. The Fund is subject to the informational
requirements of the 1933 Act, the Securities Exchange Act of 1934 (the "1934
Act") and the 1940 Act and in accordance therewith files reports and other
information with the SEC. Reports, proxy and information statements and other
information filed by the Fund, can be obtained by calling or writing the Fund
and can also be inspected and copied by the public at the public reference
facilities maintained by the SEC in Washington, D.C. located at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549 and at certain of its regional
offices located at Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Chicago, IL 60661 and 13th Floor, Seven World Trade Center, New York,
NY 10048. Copies of such material can be obtained at prescribed rates from
the Public Reference Branch, Office of Consumer Affairs and Information
Services, SEC, 450 Fifth Street, N.W., Washington, D.C. 20549.
This Prospectus/Proxy Statement, which constitutes part of a
Registration Statement filed by the Fund with the SEC under the 1933 Act,
omits certain of the information contained in the Registration Statement.
Reference is hereby made to the Registration Statement and to the exhibits
thereto for further information with respect to the Fund and the shares
offered hereby. Statements contained herein concerning the provisions of
documents are necessarily summaries of such documents, and each such statement
is qualified in its entirety by reference to the copy of the applicable
documents filed with the SEC.
New Jersey Municipal Income Fund, a portfolio of Municipal Securities Income
Trust
Information about the Portfolio and the Trust is contained in the
Portfolio's current Prospectus dated December 31, 1994 and its Statement of
Additional Information dated December 31, 1994, which are incorporated herein
by reference. Copies of such Prospectus and Statement of Additional
Information may be obtained without charge from the Fund by calling 1-800-245-
5000 or by writing to the Fund at Federated Investors Tower, Pittsburgh, PA
15222-3779. The Trust is subject to the informational requirements of the
1933 Act, the 1934 Act and the 1940 Act and in accordance therewith files
reports and other information with the SEC. Reports, proxy and information
statements and other information filed by the Portfolio can be obtained by
calling or writing the Fund and can also be inspected at the public reference
facilities maintained by the SEC or obtained at prescribed rates at the
addresses listed in the previous section.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the
solicitation by the Board of Trustees of the Trust of proxies for use at the
Special Meeting of Shareholders (the "Meeting") to be held on March 30, 1995
and at any adjournment thereof. The proxy confers discretionary authority on
the persons designated therein to vote on other business not currently
contemplated which may properly come before the Meeting. A proxy, if properly
executed, duly returned and not revoked, will be voted in accordance with the
specifications thereon; if no instructions are given, such proxy will be voted
in favor of the Plan. A shareholder may revoke a proxy at any time prior to
use by filing with the Secretary of the Trust an instrument revoking the
proxy, by submitting a proxy bearing a later date or by attending and voting
at the Meeting.
The cost of the solicitation, including the printing and mailing of
proxy materials, will be borne by the Adviser. In addition to solicitations
through the mails, proxies may be solicited by officers, employees and agents
of the Trust and the Adviser at no additional cost to the Trust. Such
solicitations may be by telephone. The Adviser will reimburse custodians,
nominees and fiduciaries for the reasonable costs incurred by them in
connection with forwarding solicitation materials to the beneficial owners of
shares held of record by such persons.
Outstanding Shares and Voting Requirements
The Board of Trustees of the Trust has fixed the close of business
on February 10, 1995 as the record date for the determination of shareholders
entitled to notice of and to vote at the Special Meeting of Shareholders and
any adjournment thereof. As of the record date, there were __________ shares
of the Portfolio outstanding. Each Portfolio share is entitled to one vote
and fractional shares have proportionate voting rights. On the record date,
________ owned of record _____ shares, or ___%, of the Portfolio's outstanding
shares. On such date, no other person owned of record, or to the knowledge of
the Adviser, beneficially owned, 5% or more of the Portfolio's outstanding
shares. On the record date, the trustees and officers of the Portfolio as a
group owned less than 1% of the outstanding shares of the Portfolio.
As of the record date, there were __________ shares of the Fund
outstanding. On the record date, ________ owned of record _____ shares, or
___%, of the Fund's outstanding shares. On such date, no other person owned
of record, or to the knowledge of the Adviser, beneficially owned, 5% or more
of the Fund's outstanding shares. On the record date, the trustees and
officers of the Fund as a group owned less than 1% of the outstanding shares
of the Fund.
Approval of the Plan requires the affirmative vote of the lesser of
(i) 67% of the shares of the Portfolio present at the Special Meeting, if the
holders of more than 50% of the outstanding shares are present or represented
by proxy, or (2) a majority of the outstanding shares of the Portfolio. The
votes of shareholders of the Fund are not being solicited since their approval
is not required in order to effect the Reorganization.
A majority of the outstanding shares of the Portfolio, represented
in person or by proxy, will be required to constitute a quorum at the Special
Meeting for the purpose of voting on the proposed Reorganization. For
purposes of determining the presence of a quorum, shares represented by
abstentions and "broker non-votes" will be counted as present, but not as
votes cast, at the Special Meeting. Under the 1940 Act, however, which
governs this transaction, matters subject to the requirements of the 1940 Act,
including the Reorganization, are determined on the basis of a percentage of
votes present at the Special Meeting, which would have the effect of treating
abstentions and "broker non-votes" as if they were votes against the proposal.
Dissenter's Right of Appraisal
Shareholders of the Portfolio objecting to the Reorganization have
no appraisal rights under the Trust's Declaration of Trust or Massachusetts
law. Under the Plan, if approved by Portfolio shareholders, each Portfolio
shareholder will become the owner of Fund shares having a total net asset
value equal to the total net asset value of his or her holdings in the
Portfolio at the Closing Date.
Other Matters
Management of the Trust knows of no other matters that may properly
be, or which are likely to be, brought before the meeting. However, if any
other business shall properly come before the meeting, the persons named in
the proxy intend to vote thereon in accordance with their best judgment.
So far as management is presently informed, there is no litigation
pending or threatened against the Fund.
Whether or not shareholders expect to attend the meeting, all
shareholders are urged to sign, fill in and return the enclosed proxy form
promptly.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated January 5, 1995 (the
"Agreement"), between FORTRESS MUNICIPAL INCOME FUND, INC., a Maryland
corporation (hereinafter called the "Acquiring Fund"), and MUNICIPAL
SECURITIES INCOME TRUST, a Massachusetts business trust (hereinafter called
the "Trust") on behalf of its portfolio NEW JERSEY MUNICIPAL INCOME FUND
(hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of
the United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of
the assets of the Acquired Fund in exchange solely for shares of common stock
of the Acquiring Fund (the "Acquiring Fund Shares") and the distribution,
after the Closing Date hereinafter referred to, of the Acquiring Fund Shares
to the shareholders of the Acquired Fund in liquidation of the Acquired Fund
as provided herein, all upon the terms and conditions hereinafter set forth in
this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are registered open-
end management investment companies and the Acquired Fund owns securities in
which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are authorized
to issue shares of common stock or shares of beneficial interest, as the case
may be;
WHEREAS, the Board of Directors, including a majority of the
Directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Acquiring Fund has
determined that the exchange of all or substantially all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquiring Fund shareholders and that the interests of the existing
shareholders of the Acquiring Fund would not be diluted as a result of this
transaction; and
WHEREAS, the Board of Trustees, including a majority of the Trustees
who are not "interested persons" (as defined under the 1940 Act), of the
Acquired Fund has determined that the exchange of all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquired Fund shareholders and that the interests of the existing shareholders
of the Acquired Fund would not be diluted as a result of this transaction;
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund agrees to assign, transfer and convey to the Acquiring Fund all of the
assets of the Acquired Fund, including all securities and cash, and the
Acquiring Fund agrees in exchange therefor (i) to deliver to the Acquired Fund
the number of Acquiring Fund Shares, including fractional Acquiring Fund
Shares, determined as set forth in paragraph 2.3. Such transaction shall take
place at the closing (the "Closing") on the closing date (the "Closing Date")
provided for in paragraph 3.1. In lieu of delivering certificates for the
Acquiring Fund Shares, the Acquiring Fund shall credit the Acquiring Fund
Shares to the Acquired Fund's account on the stock record books of the
Acquiring Fund and shall deliver a confirmation thereof to the Acquired Fund.
1.2 The Acquired Fund will discharge all of its liabilities and
obligations prior to the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street Bank
and Trust Company (hereinafter called "State Street"), Boston, Massachusetts,
the Acquiring Fund's custodian (the "Custodian"), for the account of the
Acquiring Fund, together with proper instructions and all necessary documents
to transfer to the account of the Acquiring Fund, free and clear of all liens,
encumbrances, rights, restrictions and claims. All cash delivered shall be in
the form of currency and immediately available funds payable to the order of
the Custodian for the account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund thereunder. The Acquired
Fund will transfer to the Acquiring Fund any distributions, rights or other
assets received by the Acquired Fund after the Closing Date as distributions
on or with respect to the securities transferred. Such assets shall be deemed
included in assets transferred to the Acquiring Fund on the Closing Date and
shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable, the
Acquired Fund will liquidate and distribute pro rata to the Acquired Fund's
shareholders of record, determined as of the close of business on the Closing
Date (the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by
the Acquired Fund pursuant to paragraph 1.1. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund Shares
then credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share record books of the Acquiring
Fund in the names of the Acquired Fund Shareholders and representing the
respective pro rata number of the Acquiring Fund Shares due such shareholders.
All issued and outstanding shares of the Acquired Fund will simultaneously be
canceled on the books of the Acquired Fund. Share certificates representing
interests in the Acquired Fund will represent a number of Acquiring Fund
Shares after the Closing Date as determined in accordance with Section 2.3.
The Acquiring Fund shall not issue certificates representing the Acquiring
Fund Shares in connection with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus and
statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund shares
on the books of the Acquired Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Trust.
2. VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of 4:00
p.m. (Eastern time) on the Closing Date (such time and date being hereinafter
called the "Valuation Date"), using the valuation procedures set forth in the
Acquiring Fund's then-current prospectus or statement of additional
information.
2.2 The net asset value of an Acquiring Fund Share shall be the net
asset value per share computed as of 4:00 p.m. (Eastern time) on the
Valuation Date, using the valuation procedures set forth in the Acquiring
Fund's then-current prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in paragraph
2.1 by the net asset value of one Acquiring Fund Share determined in
accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be March 30, 1995 or such later date as the
parties may mutually agree. All acts taking place at the Closing Date shall
be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place as
the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of the
value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 Federated Services Company, as transfer agent for each of the
Acquired Fund and the Acquiring Fund, shall deliver at the Closing a
certificate of an authorized officer stating that its records contain the
names and addresses of the Acquired Fund Shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver
a confirmation evidencing the Acquiring Fund Shares to be credited on the
Closing Date to the Secretary of the Acquired Fund, or provide evidence
satisfactory to the Acquired Fund that such Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund.
At the Closing, each party shall deliver to the other such bills of sale,
checks, assignments, assumption agreements, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Acquired Fund represents and warrants to the Acquiring Fund as
follows:
(a) The Trust is a business trust duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has power to own all of its properties and assets and to
carry out this Agreement.
(b) The Trust is registered under the 1940 Act, as an open-
end, management investment company, and such registration has not been revoked
or rescinded and is in full force and effect.
(c) The Acquired Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Trust's Declaration of Trust or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquired Fund is
a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquired Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquired Fund knows of no facts which might form the basis for the institution
of such proceedings, and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially
and adversely affects its business or its ability to consummate the
transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "Commission") hereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein as necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) The Statements of Assets and Liabilities of the
Acquired Fund at August 31, 1993 and 1994 have been audited by Deloitte &
Touche LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, consistently applied, and such
statements (copies of which have been furnished to the Acquiring Fund) fairly
reflect the financial condition of the Acquired Fund as of such dates, and
there are no known contingent liabilities of the Acquired Fund as of such
dates not disclosed therein.
(h) Since August 31, 1994, there has not been any material
adverse change in the Acquired Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business,
or any incurrence by the Acquired Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Acquiring Fund.
(i) At the Closing Date, all Federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
dates shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquired Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(j) For each fiscal year of its operation, the Acquired
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. All of the issued and outstanding shares of
the Acquired Fund will, at the time of the Closing, be held by the persons and
in the amounts set forth in the records of the transfer agent as provided in
paragraph 3.3. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquired Fund
shares, nor is there outstanding any security convertible into any of the
Acquired Fund Shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets to
be transferred by it hereunder.
(m) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Acquired Fund's Trustees and, subject to
the approval of the Acquired Fund Shareholders, this Agreement will constitute
the valid and legally binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a proceeding
in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund
(the "Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (other than information therein that
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
(o) The Acquired Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
4.2 The Acquiring Fund represents and warrants to the Acquired Fund as
follows:
(a) The Acquiring Fund is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland
and the Acquiring Fund has the power to carry on its business as it is now
being conducted and to carry out this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as
an open-end, diversified, management investment company, and such registration
has not been revoked or rescinded and is in full force and effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquiring Fund's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquiring Fund knows of no facts which might form the basis for the
institution of such proceedings, and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to
consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the
Acquiring Fund at August 31, 1993 and 1994, have been audited by Deloitte &
Touche LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, and such statements (copies of which
have been furnished to the Acquired Fund) fairly reflect the financial
condition of the Acquiring Fund as of such dates, and there are no known
contingent liabilities of the Acquiring Fund as of such dates not disclosed
therein.
(g) Since August 31, 1994, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of indebtedness maturing
more than one year from the date such indebtedness was incurred, except as
disclosed to and accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed by such
date shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquiring Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(i) For each fiscal year of its operation, the Acquiring
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(j) All issued and outstanding shares of the Acquiring
Fund are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any of the Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares.
(k) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action, if any, on the part of the Acquiring Fund's Trustees, and
this Agreement will constitute the valid and legally binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject to the effect
of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
and other similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto, and to general principles of equity
and the discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading.
(m) The Acquiring Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date,
it being understood that such ordinary course of business will include
customary dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and do
or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in
such form as is reasonably satisfactory to the Acquiring Fund, a statement of
the earnings and profits of the Acquired Fund for Federal income tax purposes
which will be carried over to the Acquiring Fund as a result of Section 381 of
the Code and which will be certified by the Acquired Fund's President and its
Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(m), all
to be included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquired Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of the Acquired Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such securities by lot
and the holding periods of such securities, as of the Closing Date, certified
by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of the
Acquired Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquiring Fund shall
reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquiring Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquired Fund shall
reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness, except
as otherwise disclosed to and accepted by the Acquired Fund.
8. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares
of the Acquired Fund in accordance with the provisions of the Trust's
Declaration of Trust.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit consummation,
in all material respects, of the transactions contemplated hereby shall have
been obtained, except where failure to obtain any such consent, order or
permit would not involve a risk of a material adverse effect on the assets or
properties of the Acquiring Fund or the Acquired Fund, provided that either
party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 The Acquiring Fund and the Acquired Fund shall have received an
opinion of Dickstein, Shapiro & Morin, L.L.P. substantially to the effect that
for Federal income tax purposes:
(a) The transfer of all or substantially all of the
Acquired Fund assets in exchange for the Acquiring Fund Shares and the
distribution of the Acquiring Fund Shares to the Acquired Fund Shareholders in
liquidation of the Acquired Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code; (b) No gain or loss will be
recognized by the Acquiring Fund upon the receipt of the assets of the
Acquired Fund solely in exchange for the Acquiring Fund Shares; (c) No gain or
loss will be recognized by the Acquired Fund upon the transfer of the Acquired
Fund assets to the Acquiring Fund in exchange for the Acquiring Fund Shares or
upon the distribution (whether actual or constructive) of the Acquiring Fund
Shares to Acquired Fund Shareholders in exchange for their shares of the
Acquired Fund; (d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the Acquiring
Fund Shares; (e) The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization; (f) The tax basis of
the Acquiring Fund Shares received by each of the Acquired Fund Shareholders
pursuant to the Reorganization will be the same as the tax basis of the
Acquired Fund shares held by such shareholder immediately prior to the
Reorganization; (g) The holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which those
assets were held by the Acquired Fund; and (h) The holding period of the
Acquiring Fund Shares to be received by each Acquired Fund Shareholder will
include the period during which the Acquired Fund shares exchanged therefor
were held by such shareholder (provided the Acquired Fund shares were held as
capital assets on the date of the Reorganization).
9. TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Trustees of the Trust
or the Board of Directors of the Acquiring Fund at any time prior to the
Closing Date (and notwithstanding any vote of the Board of Trustees of the
Acquired Fund) if circumstances should develop that, in the opinion of either
of the parties' Board, make proceeding with the Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on the
part of any party hereto or the directors, officers or shareholders of the
Acquiring Fund or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Trustees of the Acquiring Fund or of
the Acquired Fund, if, in the judgment of either, such waiver will not have a
material adverse effect on the benefits intended under this Agreement to the
shareholders of the Acquiring Fund or of the Acquired Fund, as the case may
be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings of
every kind and nature between them relating to the subject matter hereof.
Neither party shall be bound by any condition, definition, warranty or
representation, other than as set forth or provided in this Agreement or as
may be set forth in a later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania, without giving effect
to principles of conflict of laws.
11.4 This Agreement may be executed in any number of counterparts, each
of which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason
of this Agreement.
11.6 The Acquiring Fund is hereby expressly put on notice of the
limitation of liability as set forth in Article XI of the Declaration of Trust
of the Acquired Fund and agrees that the obligations assumed by the Acquired
Fund pursuant to this Agreement shall be limited in any case to the Acquired
Fund and its assets and the Acquiring Fund shall not seek satisfaction of any
such obligation from the shareholders of the Acquired Fund, the trustees,
officers, employees or agents of the Acquired Fund or any of them.
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the date
first above written.
Acquired Fund:
MUNICIPAL SECURITIES INCOME TRUST,
on behalf of its portfolio,
NEW JERSEY MUNICIPAL INCOME FUND
Attest:
By:/s/John W. McGonigle
/s/Charles H. Field
Assistant Secretary Name:John W. McGonigle
Title:Vice President
Acquiring Fund:
FORTRESS MUNICIPAL INCOME
FUND, INC.
Attest:
By: /s/Richard B. Fisher
/s/Charles H. Field
Assistant Secretary Name:Richard B. Fisher
Title:President
STATEMENT OF ADDITIONAL INFORMATION
February 18, 1995
Acquisition of the assets of
NEW JERSEY MUNICIPAL INCOME FUND,
a Portfolio of MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
By and in exchange for shares of
FORTRESS MUNICIPAL INCOME FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
This Statement of Additional Information dated February 18, 1995 is
not a prospectus. A Prospectus/Proxy Statement dated February 18, 1995
related to the above-referenced matter may be obtained from Fortress Municipal
Income Fund, Inc., Federated Investors Tower, Pittsburgh, Pennsylvania 15222-
3779. This Statement of Additional Information should be read in conjunction
with such Prospectus/Proxy Statement.
TABLE OF CONTENTS
1.Statement of Additional Information of Fortress Municipal Income
Fund, Inc., dated October 31, 1994
2.Statement of Additional Information of New Jersey Municipal Income
Fund, a portfolio of Municipal Securities Income Trust, dated December 31,
1994
3.Financial Statements of Fortress Municipal Income Fund, Inc.,
dated August 31, 1994
4.Financial Statements of New Jersey Municipal Income Fund, a
portfolio of Municipal Securities Income Trust, dated August 31, 1994
The Statement of Additional Information of Fortress Municipal Income
Fund, Inc. (the "Fund"), dated October 31, 1994, is incorporated herein by
reference to Post-Effective Amendment No. 10 to the Fund's Registration
Statement on Form N-1A (File Nos. 33-11410 and 811-4533) which was filed with
the Securities and Exchange Commission on or about October 26, 1994. A copy
may be obtained from the Fund at Federated Investors Tower, Pittsburgh, PA
15222-3279; telephone number: 1-800-245-5000.
The Statement of Additional Information of New Jersey Municipal
Income Fund (the "Portfolio"), a portfolio of Municipal Securities Income
Trust (the "Trust"), dated December 31, 1994, is incorporated herein by
reference to Post-Effective Amendment No. 17 to the Trust's Registration
Statement on Form N-1A (File Nos. 33-36729 and 811-6165) which was filed with
the Securities and Exchange Commission on or about December 31, 1994.
The audited financial statements of the Fund, dated August 31, 1994,
are incorporated herein by reference to the Fund's Prospectus dated October
31, 1994 which was filed with the Securities and Exchange Commission in Post-
Effective Amendment No. 10 to the Fund's Registration Statement on Form N-1A
(File Nos. 33-11410 and 811-4533) on or about October 26, 1994.
The audited financial statements of the Portfolio, dated August 31,
1994, are incorporated herein by reference to the Portfolio's Annual Report to
Shareholders for the fiscal year ended August 31, 1994 which was filed with
the Securities and Exchange Commission on or about November 1, 1994.
Pro forma financial statements are not included herein as the total
net assets of the Portfolio do not exceed 10% of the total net assets of the
Fund. At December 31, 1994, the total net assets of the Fund were
$411,672,068 and the total net assets of the Portfolio were $944,673.
TEXAS MUNICIPAL INCOME FUND,
a portfolio of MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Dear Shareholder:
The Board of Trustees and management of Municipal Securities Income
Trust (the "Trust") are pleased to submit for your vote a proposal to transfer
all of the assets of Texas Municipal Income Fund (the "Portfolio") to Fortress
Municipal Income Fund, Inc. (the "Fund"), a mutual fund advised by Federated
Advisers. The Fund has an investment objective similar to that of the
Portfolio in that it seeks current income which is exempt from the federal
regular income tax. As part of the transaction, shareholders in the Portfolio
would receive shares in the Fund equal in value to their shares in the
Portfolio and the Portfolio would be liquidated.
The Board of Trustees of the Trust, as well as Federated Advisers,
the Trust's adviser, and Federated Securities Corp., the Trust's principal
underwriter, believe the proposed agreement and plan of reorganization is in
the best interests of Portfolio shareholders for the following reasons:
-- the Portfolio has not reached a size, and is not
expected to reach a size, in which it can provide
shareholders with a reasonable, competitive return on its
investments.
-- The reorganization of the Portfolio into the Fund is
expected to provide operating efficiencies as a result of
the size of the Fund which were not available to Portfolio
shareholders due to the smaller size of the Portfolio's
assets.
-- The Fund offers an investment portfolio which invests
in municipal bonds the interest from which is exempt from
the federal regular income tax.
We believe the transfer of the Portfolio's assets in this
transaction will present an excellent investment opportunity for our
shareholders. Your vote on the transaction is critical to its success. The
transfer will be effected only if approved by a majority of the Portfolio's
outstanding shares on the record date voted in person or represented by proxy.
We hope you share our enthusiasm and will participate by casting your vote in
person, or by proxy if you are unable to attend the meeting. Please read the
enclosed prospectus/proxy statement carefully before you vote. If you have
any questions, please feel free to call us at 800-245-5000.
Thank you for your prompt attention and participation.
Sincerely,
Richard B. Fisher
President
TEXAS MUNICIPAL INCOME FUND,
a portfolio of MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO SHAREHOLDERS OF TEXAS MUNICIPAL INCOME FUND:
A Special Meeting of Shareholders of Texas Municipal Income Fund (the
"Portfolio"), a portfolio of Municipal Securities Income Trust (the "Trust")
will be held at 2:15 p.m. on March 30, 1995 at the office of the Trust,
Federated Investors Tower, 19th Floor, Pittsburgh, Pennsylvania 15222-3779 for
the following purposes:
1. To approve or disapprove a proposed Agreement and Plan of
Reorganization between the Trust, on behalf of the Portfolio, and Fortress
Municipal Income Fund, Inc. (the "Fund"), whereby the Fund would acquire all
of the assets of the Portfolio in exchange for Fund shares to be distributed
pro rata by the Portfolio to its shareholders in complete liquidation of the
Portfolio; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
By Order of the Board of Trustees,
Dated: February __, 1995 John W. McGonigle
Secretary
Shareholders of record at the close of business February 10, 1995
are entitled to vote at the meeting. Whether or not you plan to attend the
meeting, please sign and return the enclosed proxy card. Your vote is
important.
To secure the largest possible representation and to save the
expense of further mailings, please mark your proxy card, sign it, and return
it in the enclosed envelope, which requires no postage if mailed in the United
States. You may revoke your proxy at any time at or before the meeting or
vote in person if you attend the meeting.
PROSPECTUS/PROXY STATEMENT
FEBRUARY 18, 1995
Acquisition of the Assets of
TEXAS MUNICIPAL INCOME FUND,
a portfolio of
MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
By and in exchange for shares of
FORTRESS MUNICIPAL INCOME FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
This Prospectus/Proxy Statement describes the proposed Agreement and
Plan of Reorganization (the "Plan") whereby Fortress Municipal Income Fund,
Inc., a Maryland corporation (the "Fund"), would acquire all of the assets of
Texas Municipal Income Fund (the "Portfolio"), a portfolio of Municipal
Securities Income Trust, a Massachusetts business trust (the "Trust"), in
exchange for Fund shares to be distributed pro rata by the Portfolio to its
shareholders in complete liquidation of the Portfolio. As a result of the
Plan, each shareholder of the Portfolio will become the owner of Fund shares
having a total net asset value equal to the total net asset value of his or
her holdings in the Portfolio.
The Fund is an open-end, diversified management investment company
whose investment objective is a high level of current income which is
generally exempt from the federal regular income tax. The Fund pursues this
investment objective by investing primarily in a professionally managed,
diverse portfolio of municipal bonds. The Fund may invest up to 35% of its
net assets in lower quality municipal bonds. The Portfolio is a non-
diversified portfolio of securities of an open-end management investment
company whose investment objective is to provide current income which is
exempt from federal regular income tax. The Portfolio pursues this objective
by investing primarily in securities which are exempt from federal regular
income tax. For a comparison of the investment policies of the Portfolio and
the Fund, see "Summary-Investment Objectives and Policies".
This Prospectus/Proxy Statement should be retained for future
reference. It sets forth concisely the information about the Fund that a
prospective investor should know before investing. This Prospectus/Proxy
Statement is accompanied by the Prospectus of the Fund dated October 31, 1994
which is incorporated herein by reference. Statements of Additional
Information for the Fund dated October 31, 1994 (relating to the Fund's
prospectus of the same date) and February 18, 1995 (relating to this
Prospectus/Proxy Statement) containing additional information have been filed
with the Securities and Exchange Commission and are incorporated herein by
reference. Copies of the Statements of Additional Information may be obtained
without charge by writing or calling the Fund at the address and telephone
number shown above.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Summary........................................................
Risk Factors...................................................
Information About the Reorganization...........................
Information About the Fund, the Portfolio and the Trust........
Voting Information.............................................
SUMMARY
About the Proposed Reorganization
The Board of Trustees of Municipal Securities Income Trust (the
"Trust") has voted to recommend to shareholders of its portfolio, Texas
Municipal Income Fund (the "Portfolio"), the approval of an Agreement and Plan
of Reorganization (the "Plan") whereby Fortress Municipal Income Fund, Inc., a
Maryland corporation (the "Fund"), would acquire all of the assets of the
Portfolio in exchange for Fund shares to be distributed pro rata by the
Portfolio to its shareholders in complete liquidation and dissolution of the
Portfolio (the "Reorganization"). As a result of the Reorganization, each
shareholder of the Portfolio will become the owner of Fund shares having a
total net asset value equal to the total net asset value of his or her
holdings in the Portfolio on the date of the Reorganization, i.e., the Closing
Date.
As a condition to the Reorganization transactions, the Fund and the
Trust will receive an opinion of counsel that the Reorganization will be
considered a tax-free "reorganization" under applicable provisions of the
Internal Revenue Code so that no gain or loss will be recognized by either the
Fund or the Portfolio or their shareholders. The tax cost basis of the Fund
shares received by Portfolio shareholders will be the same as the tax cost
basis of their shares in the Portfolio. After the acquisition is completed,
the Portfolio will be liquidated.
Investment Objectives and Policies
The investment objective of the Fund is to provide a high level of
current income which is generally exempt from the federal regular income tax.
This investment objective may not be changed without the approval of
shareholders. The Fund pursues its investment objective by investing
primarily in a diversified portfolio of municipal bonds, and may invest up to
35% of its net assets in lower quality municipal bonds. As a matter of
investment policy that cannot be changed without the approval of shareholders,
except when investing on a temporary basis for defensive purposes, the Fund
invests its assets so that at least 80% of its annual interest income is
exempt from the federal regular income tax.
The investment objective of the Portfolio is to provide current
income which is exempt from federal regular income tax. This investment
objective may not be changed without the approval of shareholders. The
Portfolio pursues its investment objective by investing primarily in
securities which are exempt from federal regular income tax. As a matter of
investment policy which cannot be changed without the approval of
shareholders, the Portfolio invests its assets so that at least 80% of its
annual interest income is exempt from federal regular income tax.
The Fund invests in municipal bonds which are rated Ba or higher by
Moody's Investors Service, Inc. ("Moody's") or rated BB or higher by
Standard & Poor's Ratings Group ("S&P") and bonds which are not rated but
which the adviser judges to be of comparable quality to bonds having such
ratings. The Fund will limit its purchases of municipal bonds rated Ba and BB
to 35% of its net assets. Unless otherwise designated, the investment
policies of the Fund may be changed by the Board of Directors without
shareholder approval, although shareholders will be notified before any
material change becomes effective.
The Portfolio invests primarily in Texas municipal securities, which
are obligations issued by or on behalf of the State of Texas or its political
subdivisions and participation interests in any of the above obligations, the
interest from which is exempt from federal regular income tax in the opinion
of the issuer's bond counsel, the Trust, its officers or the Adviser ("Texas
Municipal Securities"). The Texas Municipal Securities which the Portfolio
buys are investment grade bonds rated, at the time of purchase, Baa or higher
by Moody's or BBB or higher by S&P or by Fitch Investors Service, Inc. and
bonds which are not rated if the Adviser determines that such bonds are of
comparable quality or have similar characteristics to bonds having such
ratings. Unless otherwise designated, the investment policies of the
Portfolio may be changed by the Board of Trustees without shareholder
approval, although shareholders will be notified before any material change
becomes effective. Currently, the Portfolio invests primarily in variable
rate municipal securities.
Both the Fund and the Portfolio are subject to certain investment
limitations. For the Fund, these include investment limitations which
prohibit it from (1) borrowing money directly or through reverse repurchase
agreements or pledging securities except that, under certain circumstances,
the Fund may, exclusive of custodian intra-day cash advances and the
collateralization of such advances, borrow up to one-third of the value of its
total assets and pledge up to 10% of the value of those assets to secure such
borrowings; (2) investing more than 10% of its net assets in securities
subject to restrictions on resale under the Securities Act of 1933 (the "1933
Act"); (3) investing more than 5% of its total assets in securities of one
issuer (except cash and cash items and United States government obligations);
and (4) investing more than 5% of its total assets in industrial development
bonds of issuers that have records of less than three years of continuous
operations. The first two investment limitations listed above cannot be
changed without shareholder approval; the last two limitations may be changed
by the Board of Directors without shareholder approval, although shareholders
will be notified before any material change becomes effective.
The Portfolio has investment limitations which prohibit it from (1)
borrowing money directly or through reverse repurchase agreements or pledging
securities except that, under certain circumstances, the Portfolio may borrow
up to one-third of the value of its total assets and pledge up to 10% of the
value of those assets to secure such borrowings; and (2) investing more than
5% of its total assets in industrial development bonds when the payment of
principal and interest is the responsibility of companies (or guarantors,
where applicable) with less than three years of continuous operations,
including the operation of any predecessor. The Portfolio's first investment
limitation cannot be changed without shareholder approval; the second may be
changed by the Board of Trustees without shareholder approval, although
shareholders will be notified before any material change becomes effective.
Both the Portfolio and the Fund are also subject to certain
additional investment limitations which are similar, although not identical,
described in the Fund's Statement of Additional Information dated October 31,
1994, and the Portfolio's Statement of Additional Information dated December
31, 1994. Reference is hereby made to the Fund's Prospectus and Statement of
Additional Information, each dated October 31, 1994, and to the Portfolio's
Prospectus and Statement of Additional Information, each dated December 31,
1994, which set forth in full the investment objectives and policies and
investment limitations of each of the Fund and the Portfolio, each of which is
incorporated herein by reference thereto.
Advisory and Other Fees
The annual investment advisory fee for the Fund is 0.60 of 1% of the
Fund's average daily net assets. Federated Advisers (the "Adviser"), the
investment adviser to the Fund, may voluntarily choose to waive a portion of
its advisory fee or reimburse the Fund for certain operating expenses. This
voluntary waiver of fees may be terminated by the Adviser at any time in its
sole discretion. The Adviser has also undertaken to reimburse the Fund for
operating expenses in excess of limitations established by certain states.
The annual investment advisory fee for the Portfolio is 0.40 of 1% of the
Portfolio's average daily net assets. The Adviser, which also serves as
investment adviser to the Portfolio, may similarly voluntarily choose to waive
a portion of its advisory fee or reimburse the Portfolio for operating
expenses but may likewise terminate such waiver or reimbursement at any time
in its sole discretion. The Adviser has also undertaken to reimburse the
Portfolio for operating expenses in excess of limitations established by
certain states. Without such waiver or reimbursement, the expense ratio of
each of the Fund and the Portfolio would be higher by 0.0 and 2.98%,
respectively, of average daily net assets.
Federated Administrative Services, an affiliate of the Adviser,
provides certain administrative personnel and services necessary to operate
both the Fund and the Portfolio at an annual rate based upon the average
aggregate daily net assets of all funds advised by the Adviser and its
affiliates. The rate charged is 0.15 of 1% of the first $250 million of all
such funds' average aggregate daily net assets, 0.125 of 1% on the next $250
million, 0.10 of 1% on the next $250 million and 0.075 of 1% of all such
funds' average aggregate daily net assets in excess of $750 million, with a
minimum annual fee per portfolio of $125,000 plus $30,000 for each additional
class of such portfolio. Federated Administrative Services may choose
voluntarily to waive a portion of its fee. The administrative fee expense for
the Fund's most recent fiscal year was 0.09 of 1% of its average aggregate
daily net assets and for the Portfolio's most recent fiscal year was 1.09% of
its average aggregate daily net assets.
The Fund has adopted a Shareholder Services Plan under which it may
make payments of up to 0.25 of 1% of the average daily net asset value of the
Fund to obtain certain personal services for shareholders and the maintenance
of shareholder accounts. The Fund has entered into a Shareholder Services
Agreement pursuant to which Federated Shareholder Services, an affiliate of
the Adviser, either performs shareholder services directly or selects certain
financial institutions to perform such services. Financial institutions will
receive fees based upon shares owned by their customers. The schedule of such
fees is determined from time to time by the Fund and Federated Shareholder
Services.
The Portfolio has a similar Shareholder Services Plan pursuant to
which financial institutions enter into shareholder service agreements with
the Portfolio to provide administrative support services to their customers
who own Portfolio shares. Such services may include, but are not limited to,
the provision of personal services and maintenance of shareholder accounts.
The Portfolio may make payments to a financial institution of up to 0.25 of 1%
of the average daily net assets of Portfolio shares beneficially owned by such
financial institution's customers for such services.
The total annual operating expenses for the Fund were 1.09% of
average daily net assets for its most recent fiscal year. The total annual
operating expenses for the Portfolio were 0.75% of average daily net assets
for its most recent fiscal year and would have been 3.73% of average daily net
assets absent the voluntary waiver by the Adviser of a portion of the
investment advisory fee and reimbursement of certain other operating expenses.
As of December 1, 1994, the Adviser ceased its voluntary waiver of investment
advisory fees as well as its voluntary reimbursement of certain Portfolio
operating expenses. As a result, the maximum total annual operating expenses
for the Portfolio for its current fiscal year are expected to be 2.50% of
average daily net assets.
Distribution Arrangements
Federated Securities Corp. ("FSC") is the principal distributor for
shares of the Fund and the Portfolio. The Fund has adopted a Rule 12b-1
Distribution Plan (the "Distribution Plan") pursuant to which the Fund may pay
to the distributor an amount equal to an annual rate of 0.25 of 1% of the
average daily net asset value of the Fund to finance any activity which is
principally intended to result in the sale of shares subject to the
Distribution Plan. The Fund is not currently making payments under the
Distribution Plan, nor does it anticipate doing so in the immediate future.
The Portfolio has adopted a Rule 12b-1 Distribution Plan (the "Rule
12b-1 Plan") pursuant to which the Portfolio pays FSC an amount equal to an
annual rate of 0.75 of 1% of the average daily net asset value of the
Portfolio to reimburse FSC for payments paid to dealers and to finance any
activity which is principally intended to result in the sale of shares subject
to the 12b-1 Plan. In connection with the distribution of Portfolio shares,
FSC paid dealers from its assets up to 2% of the net asset value of Portfolio
shares purchased by their customers.
In connection with the distribution of and/or administrative
services relating to Fund shares, FSC pays brokers and financial institutions
1% of the offering price of the Fund shares acquired by their customers on
purchases up to $1,999,999; 0.50% on purchases of $2 million to $4,999,999;
and 0.25% on purchases of $5 million or more. Any fees paid by FSC pursuant
to these arrangements will be reimbursed by the Adviser. The administrator
may elect to receive amounts less than those stated, which would reduce the
redemption fee and/or the holding period used to calculate such fee upon the
sale of such shares described below. In addition, FSC may pay a fee to
financial institutions as financial assistance for providing substantial
marketing and sales support, which payments would be determined by the amount
of shares sold by such financial institution and/or the nature of the
marketing or sales support furnished. Although such payments would be made
from the assets of FSC, the Adviser or its affiliates may reimburse them.
Certain costs exist with respect to the purchase and sale of Fund
and Portfolio shares. Shares of the Fund are sold at their net asset value
next determined after an order is received, plus a sales load of 1% of the
offering price for purchases of less than $1 million in all of the Fortress
Investment Program funds and purchases which are not made through designated
institutions. Shares of the Fund received by Portfolio shareholders as a
result of the Reorganization will not be subject to a sales charge. Shares of
the Portfolio were sold at their net asset value next determined after an
order was received.
Absent an exemption, shareholders redeeming Fund shares within
certain time periods of the purchase of those shares will be charged a
contingent deferred sales charge by FSC based on the lesser of the original
price or the net asset value of the shares redeemed, as follows: for
purchases up to $1,999,999 held less than four years the charge is 1%; for
purchases of $2 million to $4,999,999 held less than two years the charge is
0.50%; and for purchases of more than $5 million held less than one year, the
charge is 0.25%. The contingent deferred sales charges are not imposed in
connection with the exercise of exchange rights, nor will they be imposed on
redemptions of Fund shares received by shareholders of the Portfolio as a
result of the consummation of the Reorganization.
Effective in late 1994, FSC has waived all contingent deferred sales
charges in connection with redemptions of Portfolio shares. Absent such
waiver or another exemption, shareholders redeeming Portfolio shares within
three full years of the purchase of such shares were charged a contingent
deferred sales charge by FSC based on the lesser of the net asset value of the
redeemed shares at the time of purchase or the net asset value of the redeemed
shares at the time of redemption, as follows: for shares held less than one
year the charge was 3%; for shares held more than one year but less than three
years the charge was 2%. These sales charges were not imposed in connection
with an exercise of exchange rights. For a complete description of sales
charges, contingent deferred sales charges and exemptions from such charges,
reference is hereby made to the Prospectus of the Fund dated October 31, 1994
and the Prospectus of the Portfolio dated December 31, 1994, each of which is
incorporated herein by reference thereto.
Purchase and Redemption Procedures
The transfer agent and dividend disbursing agent for each of the
Fund and the Portfolio is Federated Services Company. Procedures for the
purchase and redemption of Fund shares differ slightly from procedures
applicable to the purchase and redemption of Portfolio shares. Any questions
about such procedures may be directed to, and assistance in effecting
purchases or redemptions of Fund shares or redemptions of Portfolio shares,
may be obtained from, FSC, principal distributor for each of the Fund and the
Portfolio, at 800-245-5000.
Reference is made to the Prospectus of the Fund dated October 31,
1994, and the Prospectus of the Portfolio dated December 31, 1994 for a
complete description of the purchase and redemption procedures applicable to
purchases and redemptions of Fund and Portfolio shares, respectively, each of
which is incorporated herein by reference thereto. Set forth below is a brief
listing of the significant purchase and redemption procedures of each of the
Fund and the Portfolio.
Purchases of shares of the Fund may be made through an investment
dealer who has an agreement with FSC or by wire or check. The minimum initial
investment in the Fund is $1,500. Subsequent investments must be in amounts
of at least $100. As of December 1, 1994, the Portfolio ceased offering its
shares for sale except for dividend reinvestments by existing shareholders.
The purchase price of shares of both the Fund and the Portfolio is
based on net asset value. The net asset value for each of the Fund and the
Portfolio is calculated at 4:00 p.m. (Eastern time) on each day on which the
Fund and the Portfolio compute their net asset value. Purchase and redemption
orders for the Fund and redemption orders for the Portfolio received from
broker/dealers before 5:00 p.m. (Eastern time) and from financial institutions
before 4:00 p.m. (Eastern time) may be entered at that day's price. Purchase
orders by wire are considered received when the Fund's transfer agent's bank,
State Street Bank and Trust Company ("State Street Bank"), receives payment by
wire. Purchase orders received by check are considered received after the
check is converted into federal funds, which normally occurs one day after
receipt by State Street Bank.
Fund shareholders have exchange rights with respect to shares in a
family of thirteen funds known as the Fortress Investment Program (the
"Program"), each of which has different investment objectives and policies.
Shares in the Fund may be exchanged for shares in the Program at net asset
value without a sales load (if previously paid) or a contingent deferred sales
charge. Portfolio shareholders also had exchange rights with respect to
certain other investment companies. However, such other investment companies
are no longer offering their shares for sale. Shares of the Fund may be
exchanged on a periodic systematic basis or upon individual request, and must
have a net asset value which meets the minimum investment requirement for the
fund into which the exchange is being made. Exercise of the exchange
privilege is treated as a sale for federal income tax purposes and,
accordingly, may have tax consequences for the shareholder. Information on
share exchanges may be obtained from FSC.
Redemptions of Fund shares may be made through a financial
institution, by mailing a written request or through the Fund's Systematic
Withdrawal Program. Shares are redeemed at their net asset value next
determined after the redemption request is received by FSC. Proceeds will be
distributed by check within seven days after receipt of a redemption request.
Generally, redemption of Portfolio shares may be made through a
financial institution, by mailing a written request or through the Portfolio's
Systematic Withdrawal Program. Shares are redeemed at their net asset value
next determined after the redemption request is received by FSC. Proceeds
will be distributed by check within seven days after receipt of a redemption
request.
Tax Consequences
As a condition to the Reorganization transactions, the Fund and the
Trust will receive an opinion of counsel that the Reorganization will be
considered a tax-free "reorganization" under applicable provisions of the
Internal Revenue Code so that no gain or loss will be recognized by either the
Fund or the Portfolio or their shareholders. The tax cost basis of the Fund
shares received by Portfolio shareholders will be the same as the tax cost
basis of their shares in the Portfolio.
RISK FACTORS
Investment in the Fund is subject to certain risks which are set
forth in the Fund's Prospectus dated October 31, 1994 and the Statement of
Additional Information dated October 31, 1994 and incorporated herein by
reference thereto. Briefly, these risks include, but are not limited to, the
ability of the issuers of bonds owned by the Fund to meet their obligations
for the payment of principal and interest when due; fluctuation in the value
of the shares; gain or loss in the sale of bonds by the Fund based on interest
rate sensitivity and changes in the perceived quality of the credit of the
issuer; economic, political and regulatory developments which affect bonds
whose revenues are from similar projects or where issuers share the same
geographic location when such bonds constitute a large portion of the Fund's
portfolio; and narrow markets for lower rated and unrated bonds.
Investment in the Portfolio carries risks as well, as more fully
described in the Portfolio's Prospectus dated December 31, 1994 and the
Statement of Additional Information dated December 31, 1994. Such risks
include, but are not limited to, fluctuating yields on Texas Municipal
Securities based on factors such as general conditions of the short-term
municipal market and the municipal bond market, the size of the offering, the
maturity of the obligations and the rating of the issue; the ability of
issuers or credit enhancers to meet their obligations for payment of interest
and principal when due; legislative, executive or administrative changes or
voter initiatives which could result in adverse consequences for Texas
Municipal Securities; and any adverse economic conditions or developments
affecting the State of Texas or its municipalities.
INFORMATION ABOUT THE REORGANIZATION
Background and Reasons for the Proposed Reorganization
The Portfolio was established in 1993 to provide investors with the
opportunity to earn income exempt from the federal regular income tax. In an
effort to remain competitive with other investment companies with similar
investment objectives, the Adviser waived all of its investment advisory fees
and reimbursed the Portfolio for certain operating expenses, resulting in
aggregate fee waivers and expense reimbursements of $277,377 for the
Portfolio's fiscal year ended August 31, 1994. However, by August 31, 1994,
the Portfolio's net assets had grown only to $11,130,471. In the opinion of
FSC, the Portfolio's principal underwriter, the Portfolio suffered from a lack
of investor interest sufficient to permit it to grow to a size which would
permit it to operate efficiently. Although FSC expended significant marketing
efforts to promote sales of the Portfolio's shares, the negative investment
climate for municipal securities throughout 1994 impeded sales of Portfolio
shares and FSC concluded that it was unlikely that the situation would improve
materially in the foreseeable future. In addition, the Adviser and its
affiliates concluded that they would be unable to continue to waive investment
advisory fees and reimburse operating expenses in order for the Portfolio to
continue to earn a yield on its investments competitive with other investment
companies with similar investment objectives.
As a result of these factors, in early November 1994, FSC notified
shareholders that it had ceased offering shares of the Portfolio for sale and
that it would recommend to the Trust's Board of Trustees that the Portfolio be
liquidated. It also indicated that the Adviser would cease waiving its
investment advisory fee after November 30, 1994 and that as a result, the
Portfolio's operating expenses could be expected to increase to approximately
2.5%. FSC accordingly recommended to shareholders that they voluntarily
redeem their shares and indicated that all contingent deferred sales charges
that would otherwise be applicable to such redemptions would be waived. In
anticipation of voluntary redemptions, the Adviser restructured the
Portfolio's investments by emphasizing shorter-term municipal securities.
Although many shareholders of the Portfolio elected to redeem their
shares as a result of the foregoing developments, a significant number of
shareholders expressed dissatisfaction both with this alternative and the
overall determination to recommend liquidation of the Portfolio. After
consultation with many shareholders as well as various broker dealers and
other financial institutions who had sold Portfolio shares, FSC voluntarily
determined to reimburse shareholders of the Portfolio as of October 13, 1994,
$150,000, or approximately $0.125 per share, in order to restore to
shareholders a portion of the decrease in the dollar value of shareholders'
investments in the Portfolio. As a result, FSC and the Adviser recommended to
the Board of Trustees of the Trust that it consider the feasibility of
transferring the Portfolio's assets to another investment company in exchange
for shares of such other investment company in a transaction which would be
tax-free to the Portfolio and its shareholders. Recognizing that many
shareholders may not have wished to redeem their shares of the Portfolio, FSC
and the Adviser recommended to the Trust's Board of Trustees a transfer of the
Portfolio's assets to the Fund, which seeks to earn interest income exempt
from the federal regular income tax.
The Board of Trustees of the Trust evaluated this proposal as well
as other alternatives, including liquidation of the Portfolio. The Trustees
concluded that this transaction would be in the best interests of shareholders
because the Portfolio was unlikely to reach economic size on its own, as a
result of relatively high expenses, and that net yield on an investment in the
Portfolio would not be attractive to shareholders.
With assets of approximately $411,672,068 at December 31, 1994, the
Trust's Board of Trustees concluded that the Fund was of a size to provide
operating efficiencies and economies of scale sufficient to provide
shareholders with competitive investment returns and net income exempt from
the federal regular income tax. The Trustees also took account of the fact
that the Fund also receives investment advisory services from the Adviser and
that the Fund and its shareholders receive similar administrative and other
shareholder services as presently enjoyed by the Portfolio and its
shareholders. The Trustees noted that the Fund's investment advisory fee of
0.60% of average daily net assets is higher than the Portfolio's investment
advisory fee of 0.40% of average daily net assets, but concluded that this
difference in advisory fees is offset by the lower overall expenses of the
Fund as compared to the Portfolio.
Accordingly, the Trust's Board of Trustees, including a majority of
the independent Trustees, determined that participation in the Reorganization
is in the best interests of the Portfolio and that the interests of Portfolio
shareholders would not be diluted as a result of its effecting the
Reorganization. Based upon the foregoing considerations, and the fact that
shareholders of the Portfolio will not suffer any adverse tax consequences as
a result of the Reorganization, the Board of Trustees of the Trust unanimously
voted to approve, and recommend to Portfolio shareholders the approval of, the
Reorganization.
The Directors of the Fund, including the independent Directors, have
unanimously concluded that consummation of the Reorganization is in the best
interests of the Fund and the shareholders of the Fund and that the interests
of Fund shareholders would not be diluted as a result of effecting the
Reorganization and have unanimously approved the Plan.
In the event shareholders of the Portfolio do not approve the Plan,
the Trust's Board of Trustees will consider other alternatives which would
address the Portfolio's uneconomic size. These may include a plan of
liquidation or another transaction.
Description of the Plan of Reorganization
The Plan provides that the Fund will acquire all of the assets of
the Portfolio in exchange for Fund shares to be distributed pro rata by the
Portfolio to its shareholders in complete liquidation of the Portfolio on or
about March 30, 1995 (the "Closing Date"). Shareholders of the Portfolio will
become shareholders of the Fund as of the close of business on the Closing
Date and will begin accruing dividends on the next day. Shareholders of the
Fund will accrue their last dividend from the Fund on the Closing Date.
Consummation of the Reorganization is subject to the conditions set
forth in the Plan, including receipt of an opinion in form and substance
satisfactory to the Trust, on behalf of the Portfolio, and the Fund as
described under the caption "Federal Income Tax Consequences" below. The Plan
may be terminated and the Reorganization may be abandoned at any time before
or after approval by shareholders of the Portfolio prior to the Closing Date
by either party if it believes that consummation of the Reorganization would
not be in the best interests of its shareholders.
The Adviser is responsible for the payment of all expenses of the
Reorganization incurred by either party, whether or not the Reorganization is
consummated. Such expenses include, but are not limited to, accountants'
fees, legal fees, registration fees, transfer taxes (if any), the fees of
banks and transfer agents and the costs of preparing, printing, copying and
mailing proxy solicitation materials to the Portfolio's shareholders and the
costs of holding the Special Meeting of Shareholders.
The foregoing description of the Plan entered into between the Fund
and the Trust, on behalf of the Portfolio, is qualified in its entirety by the
terms and provisions of the Plan, a copy of which is attached hereto as
Exhibit A and incorporated herein by reference thereto.
Description of Portfolio Shares
Shares of the Fund to be issued to shareholders of the Portfolio
under the Plan will be fully paid and nonassessable when issued and
transferable without restriction and will have no preemptive or conversion
rights. Reference is hereby made to the Prospectus of the Fund dated
October 31, 1994 provided herewith for additional information about Fund
shares.
Federal Income Tax Consequences
As a condition to the Reorganization transactions, the Fund and the
Trust, on behalf of the Portfolio, will receive an opinion from Dickstein,
Shapiro & Morin, L.L.P., counsel to the Fund and the Trust, to the effect
that, on the basis of the existing provisions of the Internal Revenue Code of
1986, as amended (the "Code"), current administrative rules and court
decisions, for federal income tax purposes: (1) the Reorganization as set
forth in the Plan will constitute a tax-free reorganization under section
368(a)(1)(C) of the Code; (2) no gain or loss will be recognized by the Fund
upon its receipt of the Portfolio's assets solely in exchange for Fund shares;
(3) no gain or loss will be recognized by the Portfolio upon the transfer of
its assets to the Fund in exchange for Fund shares or upon the distribution
(whether actual or constructive) of the Fund shares to the Portfolio
shareholders in exchange for their shares of the Portfolio; (4) no gain or
loss will be recognized by shareholders of the Portfolio upon the exchange of
their Portfolio shares for Fund shares; (5) the tax basis of the Portfolio's
assets acquired by the Fund will be the same as the tax basis of such assets
to the Portfolio immediately prior to the Reorganization; (6) the tax basis of
Fund shares received by each shareholder of the Portfolio pursuant to the Plan
will be the same as the tax basis of Portfolio shares held by such shareholder
immediately prior to the Reorganization; (7) the holding period of the assets
of the Portfolio in the hands of the Fund will include the period during which
those assets were held by the Portfolio; and (8) the holding period of Fund
shares received by each shareholder of the Portfolio pursuant to the Plan will
include the period during which the Portfolio shares exchanged therefor were
held by such shareholder, provided the Portfolio shares were held as capital
assets on the date of the Reorganization.
Comparative Information on Shareholder Rights and Obligations
The Fund is organized as a corporation under the laws of the State
of Maryland. The Fund is not required to hold annual meetings of shareholders
except when required to do so under the 1940 Act. A special meeting of
shareholders of the Fund shall be called by the Chairman, Secretary or any
Director upon the written request of the holders of at least 25% of the
outstanding shares of the Fund. Each share of the Fund is entitled to one
vote at all meetings of shareholders.
The Trust is organized as a business trust pursuant to a Declaration
of Trust under the laws of the Commonwealth of Massachusetts. Set forth below
is a brief summary of the significant rights of shareholders of the Portfolio.
The Trust is not required to hold annual meetings of shareholders.
Shareholder approval is necessary only for certain changes in operations or
the election of trustees under certain circumstances. A special meeting of
shareholders of the Trust for any permissible purpose shall be called by the
Trustees upon the written request of the holders of at least 10% of the
outstanding shares of the Trust or of the relevant portfolio. Each share of
the Portfolio is entitled to one vote. All shares of the Trust have equal
voting rights except that in matters affecting only a particular portfolio or
class, only shares of that portfolio or class are entitled to vote.
Under certain circumstances, shareholders of the Portfolio may be
held personally liable as partners under Massachusetts law for obligations of
the Trust on behalf of the Portfolio. To protect its shareholders, the Trust
has filed legal documents with the Commonwealth of Massachusetts that
expressly disclaim the liability of Portfolio shareholders for such acts or
obligations of the Trust. These documents require that notice of this
disclaimer be given in each agreement, obligation or instrument that the Trust
or its Trustees enter into or sign on behalf of the Portfolio.
In the unlikely event a shareholder is held personally liable for
the Trust's obligations on behalf of the Portfolio, the Trust is required to
use the property of the Portfolio to protect or compensate the shareholder.
On request, the Trust will defend any claim made and pay any judgment against
a shareholder for any act or obligation of the Trust on behalf of the
Portfolio. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Trust cannot meet its obligations to
indemnify shareholders and pay judgments against them from the assets of the
Portfolio.
Capitalization
The following table sets forth the unaudited capitalization of the
Fund and the Portfolio as of December 31, 1994 and on a pro forma basis as of
that date:
Pro Forma
Fund Portfolio Combined
Net Assets $411,672,068 $1,596,568 $413,268,636
Price Per Share
(NAV) 10.02 8.35 10.02
INFORMATION ABOUT THE FUND, THE
PORTFOLIO AND THE TRUST
Fortress Municipal Income Fund, Inc.
Information about the Fund is contained in the Fund's current
Prospectus dated October 31, 1994, a copy of which is included herewith and
incorporated by reference herein. Additional information about the Fund is
included in the Fund's Statement of Additional Information dated October 31,
1994, which is incorporated herein by reference. Copies of the Statement of
Additional Information, which has been filed with the Securities and Exchange
Commission (the "SEC"), may be obtained without charge by contacting the Fund
at 1-800-245-5000 or by writing the Fund at Federated Investors Tower,
Pittsburgh, PA 15222-3779. The Fund is subject to the informational
requirements of the 1933 Act, the Securities Exchange Act of 1934 (the "1934
Act") and the 1940 Act and in accordance therewith files reports and other
information with the SEC. Reports, proxy and information statements and other
information filed by the Fund, can be obtained by calling or writing the Fund
and can also be inspected and copied by the public at the public reference
facilities maintained by the SEC in Washington, D.C. located at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549 and at certain of its regional
offices located at Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Chicago, IL 60661 and 13th Floor, Seven World Trade Center, New York,
NY 10048. Copies of such material can be obtained at prescribed rates from
the Public Reference Branch, Office of Consumer Affairs and Information
Services, SEC, 450 Fifth Street, N.W., Washington, D.C. 20549.
This Prospectus/Proxy Statement, which constitutes part of a
Registration Statement filed by the Fund with the SEC under the 1933 Act,
omits certain of the information contained in the Registration Statement.
Reference is hereby made to the Registration Statement and to the exhibits
thereto for further information with respect to the Fund and the shares
offered hereby. Statements contained herein concerning the provisions of
documents are necessarily summaries of such documents, and each such statement
is qualified in its entirety by reference to the copy of the applicable
documents filed with the SEC.
Texas Municipal Income Fund, a portfolio of Municipal Securities Income Trust
Information about the Portfolio and the Trust is contained in the
Portfolio's current Prospectus dated December 31, 1994 and its Statement of
Additional Information dated December 31, 1994, which are incorporated herein
by reference. Copies of such Prospectus and Statement of Additional
Information may be obtained without charge from the Fund by calling 1-800-245-
5000 or by writing to the Fund at Federated Investors Tower, Pittsburgh, PA
15222-3779. The Trust is subject to the informational requirements of the
1933 Act, the 1934 Act and the 1940 Act and in accordance therewith files
reports and other information with the SEC. Reports, proxy and information
statements and other information filed by the Portfolio can be obtained by
calling or writing the Fund and can also be inspected at the public reference
facilities maintained by the SEC or obtained at prescribed rates at the
addresses listed in the previous section.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the
solicitation by the Board of Trustees of the Trust of proxies for use at the
Special Meeting of Shareholders (the "Meeting") to be held on March 30, 1995
and at any adjournment thereof. The proxy confers discretionary authority on
the persons designated therein to vote on other business not currently
contemplated which may properly come before the Meeting. A proxy, if properly
executed, duly returned and not revoked, will be voted in accordance with the
specifications thereon; if no instructions are given, such proxy will be voted
in favor of the Plan. A shareholder may revoke a proxy at any time prior to
use by filing with the Secretary of the Trust an instrument revoking the
proxy, by submitting a proxy bearing a later date or by attending and voting
at the Meeting.
The cost of the solicitation, including the printing and mailing of
proxy materials, will be borne by the Adviser. In addition to solicitations
through the mails, proxies may be solicited by officers, employees and agents
of the Trust and the Adviser at no additional cost to the Trust. Such
solicitations may be by telephone. The Adviser will reimburse custodians,
nominees and fiduciaries for the reasonable costs incurred by them in
connection with forwarding solicitation materials to the beneficial owners of
shares held of record by such persons.
Outstanding Shares and Voting Requirements
The Board of Trustees of the Trust has fixed the close of business
on February 10, 1995 as the record date for the determination of shareholders
entitled to notice of and to vote at the Special Meeting of Shareholders and
any adjournment thereof. As of the record date, there were __________ shares
of the Portfolio outstanding. Each Portfolio share is entitled to one vote
and fractional shares have proportionate voting rights. On the record date,
________ owned of record _____ shares, or ___%, of the Portfolio's outstanding
shares. On such date, no other person owned of record, or to the knowledge of
the Adviser, beneficially owned, 5% or more of the Portfolio's outstanding
shares. On the record date, the trustees and officers of the Portfolio as a
group owned less than 1% of the outstanding shares of the Portfolio.
As of the record date, there were __________ shares of the Fund
outstanding. On the record date, ________ owned of record _____ shares, or
___%, of the Fund's outstanding shares. On such date, no other person owned
of record, or to the knowledge of the Adviser, beneficially owned, 5% or more
of the Fund's outstanding shares. On the record date, the trustees and
officers of the Fund as a group owned less than 1% of the outstanding shares
of the Fund.
Approval of the Plan requires the affirmative vote of the lesser of
(i) 67% of the shares of the Portfolio present at the Special Meeting, if the
holders of more than 50% of the outstanding shares are present or represented
by proxy, or (2) a majority of the outstanding shares of the Portfolio. The
votes of shareholders of the Fund are not being solicited since their approval
is not required in order to effect the Reorganization.
A majority of the outstanding shares of the Portfolio, represented
in person or by proxy, will be required to constitute a quorum at the Special
Meeting for the purpose of voting on the proposed Reorganization. For
purposes of determining the presence of a quorum, shares represented by
abstentions and "broker non-votes" will be counted as present, but not as
votes cast, at the Special Meeting. Under the 1940 Act, however, which
governs this transaction, matters subject to the requirements of the 1940 Act,
including the Reorganization, are determined on the basis of a percentage of
votes present at the Special Meeting, which would have the effect of treating
abstentions and "broker non-votes" as if they were votes against the proposal.
Dissenter's Right of Appraisal
Shareholders of the Portfolio objecting to the Reorganization have
no appraisal rights under the Trust's Declaration of Trust or Massachusetts
law. Under the Plan, if approved by Portfolio shareholders, each Portfolio
shareholder will become the owner of Fund shares having a total net asset
value equal to the total net asset value of his or her holdings in the
Portfolio at the Closing Date.
Other Matters
Management of the Trust knows of no other matters that may properly
be, or which are likely to be, brought before the meeting. However, if any
other business shall properly come before the meeting, the persons named in
the proxy intend to vote thereon in accordance with their best judgment.
So far as management is presently informed, there is no litigation
pending or threatened against the Fund.
Whether or not shareholders expect to attend the meeting, all
shareholders are urged to sign, fill in and return the enclosed proxy form
promptly.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated January 5, 1995 (the
"Agreement"), between FORTRESS MUNICIPAL INCOME FUND, INC., a Maryland
corporation (hereinafter called the "Acquiring Fund"), and MUNICIPAL
SECURITIES INCOME TRUST, a Massachusetts business trust (hereinafter called
the "Trust") on behalf of its portfolio TEXAS MUNICIPAL INCOME FUND
(hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of
the United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of
the assets of the Acquired Fund in exchange solely for shares of common stock
of the Acquiring Fund (the "Acquiring Fund Shares") and the distribution,
after the Closing Date hereinafter referred to, of the Acquiring Fund Shares
to the shareholders of the Acquired Fund in liquidation of the Acquired Fund
as provided herein, all upon the terms and conditions hereinafter set forth in
this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are registered open-
end management investment companies and the Acquired Fund owns securities in
which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are authorized
to issue shares of common stock or shares of beneficial interest, as the case
may be;
WHEREAS, the Board of Directors, including a majority of the
Directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Acquiring Fund has
determined that the exchange of all or substantially all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquiring Fund shareholders and that the interests of the existing
shareholders of the Acquiring Fund would not be diluted as a result of this
transaction; and
WHEREAS, the Board of Trustees, including a majority of the Trustees
who are not "interested persons" (as defined under the 1940 Act), of the
Acquired Fund has determined that the exchange of all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquired Fund shareholders and that the interests of the existing shareholders
of the Acquired Fund would not be diluted as a result of this transaction;
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund agrees to assign, transfer and convey to the Acquiring Fund all of the
assets of the Acquired Fund, including all securities and cash, and the
Acquiring Fund agrees in exchange therefor (i) to deliver to the Acquired Fund
the number of Acquiring Fund Shares, including fractional Acquiring Fund
Shares, determined as set forth in paragraph 2.3. Such transaction shall take
place at the closing (the "Closing") on the closing date (the "Closing Date")
provided for in paragraph 3.1. In lieu of delivering certificates for the
Acquiring Fund Shares, the Acquiring Fund shall credit the Acquiring Fund
Shares to the Acquired Fund's account on the stock record books of the
Acquiring Fund and shall deliver a confirmation thereof to the Acquired Fund.
1.2 The Acquired Fund will discharge all of its liabilities and
obligations prior to the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street Bank
and Trust Company (hereinafter called "State Street"), Boston, Massachusetts,
the Acquiring Fund's custodian (the "Custodian"), for the account of the
Acquiring Fund, together with proper instructions and all necessary documents
to transfer to the account of the Acquiring Fund, free and clear of all liens,
encumbrances, rights, restrictions and claims. All cash delivered shall be in
the form of currency and immediately available funds payable to the order of
the Custodian for the account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund thereunder. The Acquired
Fund will transfer to the Acquiring Fund any distributions, rights or other
assets received by the Acquired Fund after the Closing Date as distributions
on or with respect to the securities transferred. Such assets shall be deemed
included in assets transferred to the Acquiring Fund on the Closing Date and
shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable, the
Acquired Fund will liquidate and distribute pro rata to the Acquired Fund's
shareholders of record, determined as of the close of business on the Closing
Date (the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by
the Acquired Fund pursuant to paragraph 1.1. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund Shares
then credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share record books of the Acquiring
Fund in the names of the Acquired Fund Shareholders and representing the
respective pro rata number of the Acquiring Fund Shares due such shareholders.
All issued and outstanding shares of the Acquired Fund will simultaneously be
canceled on the books of the Acquired Fund. Share certificates representing
interests in the Acquired Fund will represent a number of Acquiring Fund
Shares after the Closing Date as determined in accordance with Section 2.3.
The Acquiring Fund shall not issue certificates representing the Acquiring
Fund Shares in connection with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus and
statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund shares
on the books of the Acquired Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Trust.
2. VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of 4:00
p.m. (Eastern time) on the Closing Date (such time and date being hereinafter
called the "Valuation Date"), using the valuation procedures set forth in the
Acquiring Fund's then-current prospectus or statement of additional
information.
2.2 The net asset value of an Acquiring Fund Share shall be the net
asset value per share computed as of 4:00 p.m. (Eastern time) on the
Valuation Date, using the valuation procedures set forth in the Acquiring
Fund's then-current prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in paragraph
2.1 by the net asset value of one Acquiring Fund Share determined in
accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be March 30, 1995 or such later date as the
parties may mutually agree. All acts taking place at the Closing Date shall
be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place as
the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of the
value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 Federated Services Company, as transfer agent for each of the
Acquired Fund and the Acquiring Fund, shall deliver at the Closing a
certificate of an authorized officer stating that its records contain the
names and addresses of the Acquired Fund Shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver
a confirmation evidencing the Acquiring Fund Shares to be credited on the
Closing Date to the Secretary of the Acquired Fund, or provide evidence
satisfactory to the Acquired Fund that such Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund.
At the Closing, each party shall deliver to the other such bills of sale,
checks, assignments, assumption agreements, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Acquired Fund represents and warrants to the Acquiring Fund as
follows:
(a) The Trust is a business trust duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has power to own all of its properties and assets and to
carry out this Agreement.
(b) The Trust is registered under the 1940 Act, as an open-
end, management investment company, and such registration has not been revoked
or rescinded and is in full force and effect.
(c) The Acquired Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Trust's Declaration of Trust or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquired Fund is
a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquired Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquired Fund knows of no facts which might form the basis for the institution
of such proceedings, and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially
and adversely affects its business or its ability to consummate the
transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "Commission") hereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein as necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) The Statements of Assets and Liabilities of the
Acquired Fund at August 31, 1993 and 1994 have been audited by Deloitte &
Touche LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, consistently applied, and such
statements (copies of which have been furnished to the Acquiring Fund) fairly
reflect the financial condition of the Acquired Fund as of such dates, and
there are no known contingent liabilities of the Acquired Fund as of such
dates not disclosed therein.
(h) Since August 31, 1994, there has not been any material
adverse change in the Acquired Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business,
or any incurrence by the Acquired Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Acquiring Fund.
(i) At the Closing Date, all Federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
dates shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquired Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(j) For each fiscal year of its operation, the Acquired
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. All of the issued and outstanding shares of
the Acquired Fund will, at the time of the Closing, be held by the persons and
in the amounts set forth in the records of the transfer agent as provided in
paragraph 3.3. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquired Fund
shares, nor is there outstanding any security convertible into any of the
Acquired Fund Shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets to
be transferred by it hereunder.
(m) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Acquired Fund's Trustees and, subject to
the approval of the Acquired Fund Shareholders, this Agreement will constitute
the valid and legally binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a proceeding
in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund
(the "Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (other than information therein that
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
(o) The Acquired Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
4.2 The Acquiring Fund represents and warrants to the Acquired Fund as
follows:
(a) The Acquiring Fund is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland
and the Acquiring Fund has the power to carry on its business as it is now
being conducted and to carry out this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as
an open-end, diversified, management investment company, and such registration
has not been revoked or rescinded and is in full force and effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquiring Fund's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquiring Fund knows of no facts which might form the basis for the
institution of such proceedings, and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to
consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the
Acquiring Fund at August 31, 1993 and 1994, have been audited by Deloitte &
Touche LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, and such statements (copies of which
have been furnished to the Acquired Fund) fairly reflect the financial
condition of the Acquiring Fund as of such dates, and there are no known
contingent liabilities of the Acquiring Fund as of such dates not disclosed
therein.
(g) Since August 31, 1994, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of indebtedness maturing
more than one year from the date such indebtedness was incurred, except as
disclosed to and accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed by such
date shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquiring Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(i) For each fiscal year of its operation, the Acquiring
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(j) All issued and outstanding shares of the Acquiring
Fund are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any of the Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares.
(k) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action, if any, on the part of the Acquiring Fund's Trustees, and
this Agreement will constitute the valid and legally binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject to the effect
of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
and other similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto, and to general principles of equity
and the discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading.
(m) The Acquiring Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date,
it being understood that such ordinary course of business will include
customary dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and do
or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in
such form as is reasonably satisfactory to the Acquiring Fund, a statement of
the earnings and profits of the Acquired Fund for Federal income tax purposes
which will be carried over to the Acquiring Fund as a result of Section 381 of
the Code and which will be certified by the Acquired Fund's President and its
Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(m), all
to be included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquired Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of the Acquired Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such securities by lot
and the holding periods of such securities, as of the Closing Date, certified
by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of the
Acquired Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquiring Fund shall
reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquiring Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquired Fund shall
reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness, except
as otherwise disclosed to and accepted by the Acquired Fund.
8. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares
of the Acquired Fund in accordance with the provisions of the Trust's
Declaration of Trust.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit consummation,
in all material respects, of the transactions contemplated hereby shall have
been obtained, except where failure to obtain any such consent, order or
permit would not involve a risk of a material adverse effect on the assets or
properties of the Acquiring Fund or the Acquired Fund, provided that either
party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 The Acquiring Fund and the Acquired Fund shall have received an
opinion of Dickstein, Shapiro & Morin, L.L.P. substantially to the effect that
for Federal income tax purposes:
(a) The transfer of all or substantially all of the
Acquired Fund assets in exchange for the Acquiring Fund Shares and the
distribution of the Acquiring Fund Shares to the Acquired Fund Shareholders in
liquidation of the Acquired Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code; (b) No gain or loss will be
recognized by the Acquiring Fund upon the receipt of the assets of the
Acquired Fund solely in exchange for the Acquiring Fund Shares; (c) No gain or
loss will be recognized by the Acquired Fund upon the transfer of the Acquired
Fund assets to the Acquiring Fund in exchange for the Acquiring Fund Shares or
upon the distribution (whether actual or constructive) of the Acquiring Fund
Shares to Acquired Fund Shareholders in exchange for their shares of the
Acquired Fund; (d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the Acquiring
Fund Shares; (e) The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization; (f) The tax basis of
the Acquiring Fund Shares received by each of the Acquired Fund Shareholders
pursuant to the Reorganization will be the same as the tax basis of the
Acquired Fund shares held by such shareholder immediately prior to the
Reorganization; (g) The holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which those
assets were held by the Acquired Fund; and (h) The holding period of the
Acquiring Fund Shares to be received by each Acquired Fund Shareholder will
include the period during which the Acquired Fund shares exchanged therefor
were held by such shareholder (provided the Acquired Fund shares were held as
capital assets on the date of the Reorganization).
9. TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Trustees of the Trust
or the Board of Directors of the Acquiring Fund at any time prior to the
Closing Date (and notwithstanding any vote of the Board of Trustees of the
Acquired Fund) if circumstances should develop that, in the opinion of either
of the parties' Board, make proceeding with the Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on the
part of any party hereto or the directors, officers or shareholders of the
Acquiring Fund or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Trustees of the Acquiring Fund or of
the Acquired Fund, if, in the judgment of either, such waiver will not have a
material adverse effect on the benefits intended under this Agreement to the
shareholders of the Acquiring Fund or of the Acquired Fund, as the case may
be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings of
every kind and nature between them relating to the subject matter hereof.
Neither party shall be bound by any condition, definition, warranty or
representation, other than as set forth or provided in this Agreement or as
may be set forth in a later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania, without giving effect
to principles of conflict of laws.
11.4 This Agreement may be executed in any number of counterparts, each
of which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason
of this Agreement.
11.6 The Acquiring Fund is hereby expressly put on notice of the
limitation of liability as set forth in Article XI of the Declaration of Trust
of the Acquired Fund and agrees that the obligations assumed by the Acquired
Fund pursuant to this Agreement shall be limited in any case to the Acquired
Fund and its assets and the Acquiring Fund shall not seek satisfaction of any
such obligation from the shareholders of the Acquired Fund, the trustees,
officers, employees or agents of the Acquired Fund or any of them.
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the date
first above written.
Acquired Fund:
MUNICIPAL SECURITIES INCOME TRUST,
on behalf of its portfolio,
TEXAS MUNICIPAL INCOME FUND
Attest:
By:/s/John W. McGonigle
/s/Charles H. Field
Assistant Secretary Name:John W. McGonigle
Title:Vice President
Acquiring Fund:
FORTRESS MUNICIPAL INCOME
FUND, INC.
Attest:
By: /s/Richard B. Fisher
/s/Charles H. Field
Assistant Secretary Name:Richard B. Fisher
Title:President
STATEMENT OF ADDITIONAL INFORMATION
February 18, 1995
Acquisition of the assets of
TEXAS MUNICIPAL INCOME FUND,
a Portfolio of MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
By and in exchange for shares of
FORTRESS MUNICIPAL INCOME FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
This Statement of Additional Information dated February 18, 1995 is
not a prospectus. A Prospectus/Proxy Statement dated February 18, 1995
related to the above-referenced matter may be obtained from Fortress Municipal
Income Fund, Inc., Federated Investors Tower, Pittsburgh, Pennsylvania 15222-
3779. This Statement of Additional Information should be read in conjunction
with such Prospectus/Proxy Statement.
TABLE OF CONTENTS
1.Statement of Additional Information of Fortress Municipal Income
Fund, Inc., dated October 31, 1994
2.Statement of Additional Information of Texas Municipal Income
Fund, a portfolio of Municipal Securities Income Trust, dated December 31,
1994
3.Financial Statements of Fortress Municipal Income Fund, Inc.,
dated August 31, 1994
4.Financial Statements of Texas Municipal Income Fund, a portfolio
of Municipal Securities Income Trust, dated August 31, 1994
The Statement of Additional Information of Fortress Municipal Income
Fund, Inc. (the "Fund"), dated October 31, 1994, is incorporated herein by
reference to Post-Effective Amendment No. 10 to the Fund's Registration
Statement on Form N-1A (File Nos. 33-11410 and 811-4533) which was filed with
the Securities and Exchange Commission on or about October 26, 1994. A copy
may be obtained from the Fund at Federated Investors Tower, Pittsburgh, PA
15222-3279; telephone number: 1-800-245-5000.
The Statement of Additional Information of Texas Municipal Income
Fund (the "Portfolio"), a portfolio of Municipal Securities Income Trust (the
"Trust"), dated December 31, 1994, is incorporated herein by reference to Post-
Effective Amendment No. 17 to the Trust's Registration Statement on Form N-1A
(File Nos. 33-36729 and 811-6165) which was filed with the Securities and
Exchange Commission on or about December 30, 1994.
The audited financial statements of the Fund, dated August 31, 1994,
are incorporated herein by reference to the Fund's Prospectus dated October
31, 1994 which was filed with the Securities and Exchange Commission in Post-
Effective Amendment No. 10 to the Fund's Registration Statement on Form N-1A
(File Nos. 33-11410 and 811-4533) on or about October 26, 1994.
The audited financial statements of the Portfolio, dated August 31,
1994, are incorporated herein by reference to the Portfolio's Annual Report to
Shareholders for the fiscal year ended August 31, 1994 which was filed with
the Securities and Exchange Commission on or about November 1, 1994.
Pro forma financial statements are not included herein as the total
net assets of the Portfolio do not exceed 10% of the total net assets of the
Fund. At December 31, 1994, the total net assets of the Fund were
$411,672,068 and the total net assets of the Portfolio were $1,596,568.
VIRGINIA MUNICIPAL INCOME FUND,
a portfolio of MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Dear Shareholder:
The Board of Trustees and management of Municipal Securities Income
Trust (the "Trust") are pleased to submit for your vote a proposal to transfer
all of the assets of Virginia Municipal Income Fund (the "Portfolio") to
Fortress Municipal Income Fund, Inc. (the "Fund"), a mutual fund advised by
Federated Advisers. The Fund has an investment objective similar to that of
the Portfolio in that it seeks current income which is exempt from the federal
regular income tax, although dividends in respect of income generally will not
be exempt from the personal income taxes imposed by the Commonwealth of
Virginia and Virginia municipalities. As part of the transaction,
shareholders in the Portfolio would receive shares in the Fund equal in value
to their shares in the Portfolio and the Portfolio would be liquidated.
The Board of Trustees of the Trust, as well as Federated Advisers,
the Trust's adviser, and Federated Securities Corp., the Trust's principal
underwriter, believe the proposed agreement and plan of reorganization is in
the best interests of Portfolio shareholders for the following reasons:
-- the Portfolio has not reached a size, and is not
expected to reach a size, in which it can provide
shareholders with a reasonable, competitive return on its
investments.
-- The reorganization of the Portfolio into the Fund is
expected to provide operating efficiencies as a result of
the size of the Fund which were not available to Portfolio
shareholders due to the smaller size of the Portfolio's
assets.
-- The Fund offers an investment portfolio which invests
in municipal bonds the interest from which is exempt from
the federal regular income tax.
We believe the transfer of the Portfolio's assets in this
transaction will present an excellent investment opportunity for our
shareholders. Your vote on the transaction is critical to its success. The
transfer will be effected only if approved by a majority of the Portfolio's
outstanding shares on the record date voted in person or represented by proxy.
We hope you share our enthusiasm and will participate by casting your vote in
person, or by proxy if you are unable to attend the meeting. Please read the
enclosed prospectus/proxy statement carefully before you vote. If you have
any questions, please feel free to call us at 800-245-5000.
Thank you for your prompt attention and participation.
Sincerely,
Richard B. Fisher
President
VIRGINIA MUNICIPAL INCOME FUND,
a portfolio of MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO SHAREHOLDERS OF VIRGINIA MUNICIPAL INCOME FUND:
A Special Meeting of Shareholders of Virginia Municipal Income Fund (the
"Portfolio"), a portfolio of Municipal Securities Income Trust (the "Trust")
will be held at 2:15 p.m. on March 30, 1995 at the office of the Trust,
Federated Investors Tower, 19th Floor, Pittsburgh, Pennsylvania 15222-3779 for
the following purposes:
1. To approve or disapprove a proposed Agreement and Plan of
Reorganization between the Trust, on behalf of the Portfolio, and Fortress
Municipal Income Fund, Inc. (the "Fund"), whereby the Fund would acquire all
of the assets of the Portfolio in exchange for Fund shares to be distributed
pro rata by the Portfolio to its shareholders in complete liquidation of the
Portfolio; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
By Order of the Board of Trustees,
Dated: February __, 1995 John W. McGonigle
Secretary
Shareholders of record at the close of business February 10, 1995
are entitled to vote at the meeting. Whether or not you plan to attend the
meeting, please sign and return the enclosed proxy card. Your vote is
important.
To secure the largest possible representation and to save the
expense of further mailings, please mark your proxy card, sign it, and return
it in the enclosed envelope, which requires no postage if mailed in the United
States. You may revoke your proxy at any time at or before the meeting or
vote in person if you attend the meeting.
PROSPECTUS/PROXY STATEMENT
FEBRUARY 18, 1995
Acquisition of the Assets of
VIRGINIA MUNICIPAL INCOME FUND,
a portfolio of
MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
By and in exchange for shares of
FORTRESS MUNICIPAL INCOME FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
This Prospectus/Proxy Statement describes the proposed Agreement and
Plan of Reorganization (the "Plan") whereby Fortress Municipal Income Fund,
Inc., a Maryland corporation (the "Fund"), would acquire all of the assets of
Virginia Municipal Income Fund (the "Portfolio"), a portfolio of Municipal
Securities Income Trust, a Massachusetts business trust (the "Trust"), in
exchange for Fund shares to be distributed pro rata by the Portfolio to its
shareholders in complete liquidation of the Portfolio. As a result of the
Plan, each shareholder of the Portfolio will become the owner of Fund shares
having a total net asset value equal to the total net asset value of his or
her holdings in the Portfolio.
The Fund is an open-end, diversified management investment company
whose investment objective is a high level of current income which is
generally exempt from the federal regular income tax. The Fund pursues this
investment objective by investing primarily in a professionally managed,
diverse portfolio of municipal bonds. The Fund may invest up to 35% of its
net assets in lower quality municipal bonds. The Portfolio is a non-
diversified portfolio of securities of an open-end management investment
company whose investment objective is to provide current income which is
exempt from federal regular income tax and the personal income taxes imposed
by the Commonwealth of Virginia and Virginia municipalities. The Portfolio
pursues this objective by investing primarily in securities which are exempt
from federal regular income tax and personal income taxes imposed by the
Commonwealth of Virginia and Virginia municipalities. For a comparison of the
investment policies of the Portfolio and the Fund, see "Summary-Investment
Objectives and Policies".
This Prospectus/Proxy Statement should be retained for future
reference. It sets forth concisely the information about the Fund that a
prospective investor should know before investing. This Prospectus/Proxy
Statement is accompanied by the Prospectus of the Fund dated October 31, 1994
which is incorporated herein by reference. Statements of Additional
Information for the Fund dated October 31, 1994 (relating to the Fund's
prospectus of the same date) and February 18, 1995 (relating to this
Prospectus/Proxy Statement) containing additional information have been filed
with the Securities and Exchange Commission and are incorporated herein by
reference. Copies of the Statements of Additional Information may be obtained
without charge by writing or calling the Fund at the address and telephone
number shown above.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Summary........................................................
Risk Factors...................................................
Information About the Reorganization...........................
Information About the Fund, the Portfolio and the Trust........
Voting Information.............................................
SUMMARY
About the Proposed Reorganization
The Board of Trustees of Municipal Securities Income Trust (the
"Trust") has voted to recommend to shareholders of its portfolio, Virginia
Municipal Income Fund (the "Portfolio"), the approval of an Agreement and Plan
of Reorganization (the "Plan") whereby Fortress Municipal Income Fund, Inc., a
Maryland corporation (the "Fund"), would acquire all of the assets of the
Portfolio in exchange for Fund shares to be distributed pro rata by the
Portfolio to its shareholders in complete liquidation and dissolution of the
Portfolio (the "Reorganization"). As a result of the Reorganization, each
shareholder of the Portfolio will become the owner of Fund shares having a
total net asset value equal to the total net asset value of his or her
holdings in the Portfolio on the date of the Reorganization, i.e., the Closing
Date.
As a condition to the Reorganization transactions, the Fund and the
Trust will receive an opinion of counsel that the Reorganization will be
considered a tax-free "reorganization" under applicable provisions of the
Internal Revenue Code so that no gain or loss will be recognized by either the
Fund or the Portfolio or their shareholders. The tax cost basis of the Fund
shares received by Portfolio shareholders will be the same as the tax cost
basis of their shares in the Portfolio. After the acquisition is completed,
the Portfolio will be liquidated.
Investment Objectives and Policies
The investment objective of the Fund is to provide a high level of
current income which is generally exempt from the federal regular income tax.
This investment objective may not be changed without the approval of
shareholders. The Fund pursues its investment objective by investing
primarily in a diversified portfolio of municipal bonds, and may invest up to
35% of its net assets in lower quality municipal bonds. As a matter of
investment policy that cannot be changed without the approval of shareholders,
except when investing on a temporary basis for defensive purposes, the Fund
invests its assets so that at least 80% of its annual interest income is
exempt from the federal regular income tax.
The investment objective of the Portfolio is to provide current
income which is exempt from federal regular income tax and the personal income
taxes imposed by the Commonwealth of Virginia and Virginia municipalities.
This investment objective may not be changed without the approval of
shareholders. The Portfolio pursues its investment objective by investing
primarily in securities which are exempt from federal regular income tax and
personal income taxes imposed by the Commonwealth of Virginia and Virginia
municipalities. As a matter of investment policy which cannot be changed
without the approval of shareholders, the Portfolio invests its assets so
that, under normal circumstances, at least 80% of its annual interest income
is exempt from federal regular income tax, or that at least 80% of its net
assets are invested in securities the interest from which is exempt from
federal regular income tax.
The Fund invests in municipal bonds which are rated Ba or higher by
Moody's Investors Service, Inc. ("Moody's") or rated BB or higher by
Standard & Poor's Ratings Group ("S&P") and bonds which are not rated but
which the adviser judges to be of comparable quality to bonds having such
ratings. The Fund will limit its purchases of municipal bonds rated Ba and BB
to 35% of its net assets. Unless otherwise designated, the investment
policies of the Fund may be changed by the Board of Directors without
shareholder approval, although shareholders will be notified before any
material change becomes effective.
Under normal circumstances, the Portfolio will invest at least 65%
of its total assets in Virginia municipal securities, which are obligations
issued by or on behalf of the Commonwealth of Virginia, its political
subdivisions, or agencies, debt obligations of any state, territory, or
possession or the United States, including the District of Columbia, or any
political subdivision of any of these, and participation interests in any of
the above obligations, the interest from which is exempt from both the federal
regular income tax and personal income taxes imposed by the Commonwealth of
Virginia and Virginia municipalities in the opinion of the issuer's bond
counsel, the Trust, its officers or the Adviser ("Virginia Municipal
Securities"). The Virginia Municipal Securities which the Portfolio buys are
investment grade bonds rated, at the time of purchase, Baa or higher by
Moody's or BBB or higher by S&P or by Fitch Investors Service, Inc. and bonds
which are not rated if the Adviser determines that such bonds are of
comparable quality or have similar characteristics to bonds having such
ratings. Unless otherwise designated, the investment policies of the
Portfolio may be changed by the Board of Trustees without shareholder
approval, although shareholders will be notified before any material change
becomes effective. Currently, the Portfolio invests primarily in variable
rate municipal securities.
Both the Fund and the Portfolio are subject to certain investment
limitations. For the Fund, these include investment limitations which
prohibit it from (1) borrowing money directly or through reverse repurchase
agreements or pledging securities except that, under certain circumstances,
the Fund may, exclusive of custodian intra-day cash advances and the
collateralization of such advances, borrow up to one-third of the value of its
total assets and pledge up to 10% of the value of those assets to secure such
borrowings; (2) investing more than 10% of its net assets in securities
subject to restrictions on resale under the Securities Act of 1933 (the "1933
Act"); (3) investing more than 5% of its total assets in securities of one
issuer (except cash and cash items and United States government obligations);
and (4) investing more than 5% of its total assets in industrial development
bonds of issuers that have records of less than three years of continuous
operations. The first two investment limitations listed above cannot be
changed without shareholder approval; the last two limitations may be changed
by the Board of Directors without shareholder approval, although shareholders
will be notified before any material change becomes effective.
The Portfolio has investment limitations which prohibit it from (1)
borrowing money directly or through reverse repurchase agreements or pledging
securities except that, under certain circumstances, the Portfolio may borrow
up to one-third of the value of its total assets and pledge up to 10% of the
value of those assets to secure such borrowings; and (2) investing more than
5% of its total assets in industrial development bonds when the payment of
principal and interest is the responsibility of companies (or guarantors,
where applicable) with less than three years of continuous operations,
including the operation of any predecessor. The Portfolio's first investment
limitation cannot be changed without shareholder approval; the second may be
changed by the Board of Trustees without shareholder approval, although
shareholders will be notified before any material change becomes effective.
Both the Portfolio and the Fund are also subject to certain
additional investment limitations which are similar, although not identical,
described in the Fund's Statement of Additional Information dated October 31,
1994, and the Portfolio's Statement of Additional Information dated December
31, 1994. Reference is hereby made to the Fund's Prospectus and Statement of
Additional Information, each dated October 31, 1994, and to the Portfolio's
Prospectus and Statement of Additional Information, each dated December 31,
1994, which set forth in full the investment objectives and policies and
investment limitations of each of the Fund and the Portfolio, each of which is
incorporated herein by reference thereto.
Advisory and Other Fees
The annual investment advisory fee for the Fund is 0.60 of 1% of the
Fund's average daily net assets. Federated Advisers (the "Adviser"), the
investment adviser to the Fund, may voluntarily choose to waive a portion of
its advisory fee or reimburse the Fund for certain operating expenses. This
voluntary waiver of fees may be terminated by the Adviser at any time in its
sole discretion. The Adviser has also undertaken to reimburse the Fund for
operating expenses in excess of limitations established by certain states.
The annual investment advisory fee for the Portfolio is 0.40 of 1% of the
Portfolio's average daily net assets. The Adviser, which also serves as
investment adviser to the Portfolio, may similarly voluntarily choose to waive
a portion of its advisory fee or reimburse the Portfolio for operating
expenses but may likewise terminate such waiver or reimbursement at any time
in its sole discretion. The Adviser has also undertaken to reimburse the
Portfolio for operating expenses in excess of limitations established by
certain states. Without such waiver or reimbursement, the expense ratio of
each of the Fund and the Portfolio would be higher by 0.0 and 5.55%,
respectively, of average daily net assets.
Federated Administrative Services, an affiliate of the Adviser,
provides certain administrative personnel and services necessary to operate
both the Fund and the Portfolio at an annual rate based upon the average
aggregate daily net assets of all funds advised by the Adviser and its
affiliates. The rate charged is 0.15 of 1% of the first $250 million of all
such funds' average aggregate daily net assets, 0.125 of 1% on the next $250
million, 0.10 of 1% on the next $250 million and 0.075 of 1% of all such
funds' average aggregate daily net assets in excess of $750 million, with a
minimum annual fee per portfolio of $125,000 plus $30,000 for each additional
class of such portfolio. Federated Administrative Services may choose
voluntarily to waive a portion of its fee. The administrative fee expense for
the Fund's most recent fiscal year was 0.09 of 1% of its average aggregate
daily net assets and for the Portfolio's most recent fiscal year was 2.15% of
its average aggregate daily net assets.
The Fund has adopted a Shareholder Services Plan under which it may
make payments of up to 0.25 of 1% of the average daily net asset value of the
Fund to obtain certain personal services for shareholders and the maintenance
of shareholder accounts. The Fund has entered into a Shareholder Services
Agreement pursuant to which Federated Shareholder Services, an affiliate of
the Adviser, either performs shareholder services directly or selects certain
financial institutions to perform such services. Financial institutions will
receive fees based upon shares owned by their customers. The schedule of such
fees is determined from time to time by the Fund and Federated Shareholder
Services.
The Portfolio has a similar Shareholder Services Plan pursuant to
which financial institutions enter into shareholder service agreements with
the Portfolio to provide administrative support services to their customers
who own Portfolio shares. Such services may include, but are not limited to,
the provision of personal services and maintenance of shareholder accounts.
The Portfolio may make payments to a financial institution of up to 0.25 of 1%
of the average daily net assets of Portfolio shares beneficially owned by such
financial institution's customers for such services.
The total annual operating expenses for the Fund were 1.09% of
average daily net assets for its most recent fiscal year. The total annual
operating expenses for the Portfolio were 0.75% of average daily net assets
for its most recent fiscal year. and would have been 6.30% of average daily
net assets absent the voluntary waiver by the Adviser of a portion of the
investment advisory fee and reimbursement of certain other operating expenses.
As of December 1, 1994, the Adviser ceased its voluntary waiver of investment
advisory fees as well as its voluntary reimbursement of certain Portfolio
operating expenses. As a result, the maximum total annual operating expenses
for the Portfolio for its current fiscal year are expected to be 2.50% of
average daily net assets.
Distribution Arrangements
Federated Securities Corp. ("FSC") is the principal distributor for
shares of the Fund and the Portfolio. The Fund has adopted a Rule 12b-1
Distribution Plan (the "Distribution Plan") pursuant to which the Fund may pay
to the distributor an amount equal to an annual rate of 0.25 of 1% of the
average daily net asset value of the Fund to finance any activity which is
principally intended to result in the sale of shares subject to the
Distribution Plan. The Fund is not currently making payments under the
Distribution Plan, nor does it anticipate doing so in the immediate future.
The Portfolio has adopted a Rule 12b-1 Distribution Plan (the "Rule
12b-1 Plan") pursuant to which the Portfolio pays FSC an amount equal to an
annual rate of 0.75 of 1% of the average daily net asset value of the
Portfolio to reimburse FSC for payments paid to dealers and to finance any
activity which is principally intended to result in the sale of shares subject
to the 12b-1 Plan. In connection with the distribution of Portfolio shares,
FSC paid dealers from its assets up to 2% of the net asset value of Portfolio
shares purchased by their customers.
In connection with the distribution of and/or administrative
services relating to Fund shares, FSC pays brokers and financial institutions
1% of the offering price of the Fund shares acquired by their customers on
purchases up to $1,999,999; 0.50% on purchases of $2 million to $4,999,999;
and 0.25% on purchases of $5 million or more. Any fees paid by FSC pursuant
to these arrangements will be reimbursed by the Adviser. The administrator
may elect to receive amounts less than those stated, which would reduce the
redemption fee and/or the holding period used to calculate such fee upon the
sale of such shares described below. In addition, FSC may pay a fee to
financial institutions as financial assistance for providing substantial
marketing and sales support, which payments would be determined by the amount
of shares sold by such financial institution and/or the nature of the
marketing or sales support furnished. Although such payments would be made
from the assets of FSC, the Adviser or its affiliates may reimburse them.
Certain costs exist with respect to the purchase and sale of Fund
and Portfolio shares. Shares of the Fund are sold at their net asset value
next determined after an order is received, plus a sales load of 1% of the
offering price for purchases of less than $1 million in all of the Fortress
Investment Program funds and purchases which are not made through designated
institutions. Shares of the Fund received by Portfolio shareholders as a
result of the Reorganization will not be subject to a sales charge. Shares of
the Portfolio were sold at their net asset value next determined after an
order was received.
Absent an exemption, shareholders redeeming Fund shares within
certain time periods of the purchase of those shares will be charged a
contingent deferred sales charge by FSC based on the lesser of the original
price or the net asset value of the shares redeemed, as follows: for
purchases up to $1,999,999 held less than four years the charge is 1%; for
purchases of $2 million to $4,999,999 held less than two years the charge is
0.50%; and for purchases of more than $5 million held less than one year, the
charge is 0.25%. The contingent deferred sales charges are not imposed in
connection with the exercise of exchange rights, nor will they be imposed on
redemptions of Fund shares received by shareholders of the Portfolio as a
result of the consummation of the Reorganization.
Effective in late 1994, FSC has waived all contingent deferred sales
charges in connection with redemptions of Portfolio shares. Absent such
waiver or another exemption, shareholders redeeming Portfolio shares within
three full years of the purchase of such shares were charged a contingent
deferred sales charge by FSC based on the lesser of the net asset value of the
redeemed shares at the time of purchase or the net asset value of the redeemed
shares at the time of redemption, as follows: for shares held less than one
year the charge was 3%; for shares held more than one year but less than three
years the charge was 2%. These sales charges were not imposed in connection
with an exercise of exchange rights.
For a complete description of sales charges, contingent deferred
sales charges and exemptions from such charges, reference is hereby made to
the Prospectus of the Fund dated October 31, 1994 and the Prospectus of the
Portfolio dated December 31, 1994, each of which is incorporated herein by
reference thereto.
Purchase and Redemption Procedures
The transfer agent and dividend disbursing agent for each of the
Fund and the Portfolio is Federated Services Company. Procedures for the
purchase and redemption of Fund shares differ slightly from procedures
applicable to the purchase and redemption of Portfolio shares. Any questions
about such procedures may be directed to, and assistance in effecting
purchases or redemptions of Fund shares or redemptions of Portfolio shares,
may be obtained from, FSC, principal distributor for each of the Fund and the
Portfolio, at 800-245-5000.
Reference is made to the Prospectus of the Fund dated October 31,
1994, and the Prospectus of the Portfolio dated December 31, 1994 for a
complete description of the purchase and redemption procedures applicable to
purchases and redemptions of Fund and Portfolio shares, respectively, each of
which is incorporated herein by reference thereto. Set forth below is a brief
listing of the significant purchase and redemption procedures of each of the
Fund and the Portfolio.
Purchases of shares of the Fund may be made through an investment
dealer who has an agreement with FSC or by wire or check. The minimum initial
investment in the Fund is $1,500. Subsequent investments must be in amounts
of at least $100. As of October 17, 1994 the Portfolio ceased offering its
shares for sale except for dividend reinvestments by existing shareholders.
The purchase price of shares of both the Fund and the Portfolio is
based on net asset value. The net asset value for each of the Fund and the
Portfolio is calculated at 4:00 p.m. (Eastern time) on each day on which the
Fund and the Portfolio compute their net asset value. Purchase and redemption
orders for the Fund and redemption orders for the Portfolio received from
broker/dealers before 5:00 p.m. (Eastern time) and from financial institutions
before 4:00 p.m. (Eastern time) may be entered at that day's price. Purchase
orders by wire are considered received when the Fund's transfer agent's bank,
State Street Bank and Trust Company ("State Street Bank"), receives payment by
wire. Purchase orders received by check are considered received after the
check is converted into federal funds, which normally occurs one day after
receipt by State Street Bank.
Fund shareholders have exchange rights with respect to shares in a
family of thirteen funds known as the Fortress Investment Program (the
"Program"), each of which has different investment objectives and policies.
Shares in the Fund may be exchanged for shares in the Program at net asset
value without a sales load (if previously paid) or a contingent deferred sales
charge. Portfolio shareholders also had exchange rights with respect to
certain other investment companies. However, such other investment companies
are no longer offering their shares for sale. Shares of the Fund may be
exchanged on a periodic systematic basis or upon individual request, and must
have a net asset value which meets the minimum investment requirement for the
fund into which the exchange is being made. Exercise of the exchange
privilege is treated as a sale for federal income tax purposes and,
accordingly, may have tax consequences for the shareholder. Information on
share exchanges may be obtained from FSC.
Redemptions of Fund shares may be made through a financial
institution, by mailing a written request or through the Fund's Systematic
Withdrawal Program. Shares are redeemed at their net asset value next
determined after the redemption request is received by FSC. Proceeds will be
distributed by check within seven days after receipt of a redemption request.
Generally, redemption of Portfolio shares may be made through a
financial institution, by mailing a written request or through the Portfolio's
Systematic Withdrawal Program. Shares are redeemed at their net asset value
next determined after the redemption request is received by State Street Bank.
Proceeds will be distributed by check within seven days after receipt of a
redemption request.
Tax Consequences
As a condition to the Reorganization transactions, the Fund and the
Trust will receive an opinion of counsel that the Reorganization will be
considered a tax-free "reorganization" under applicable provisions of the
Internal Revenue Code so that no gain or loss will be recognized by either the
Fund or the Portfolio or their shareholders. The tax cost basis of the Fund
shares received by Portfolio shareholders will be the same as the tax cost
basis of their shares in the Portfolio.
RISK FACTORS
Investment in the Fund is subject to certain risks which are set
forth in the Fund's Prospectus dated October 31, 1994 and the Statement of
Additional Information dated October 31, 1994 and incorporated herein by
reference thereto. Briefly, these risks include, but are not limited to, the
ability of the issuers of bonds owned by the Fund to meet their obligations
for the payment of principal and interest when due; fluctuation in the value
of the shares; gain or loss in the sale of bonds by the Fund based on interest
rate sensitivity and changes in the perceived quality of the credit of the
issuer; economic, political and regulatory developments which affect bonds
whose revenues are from similar projects or where issuers share the same
geographic location when such bonds constitute a large portion of the Fund's
portfolio; and narrow markets for lower rated and unrated bonds.
Investment in the Portfolio carries risks as well, as more fully
described in the Portfolio's Prospectus dated December 31, 1994 and the
Statement of Additional Information dated December 31, 1994. Such risks
include, but are not limited to, fluctuating yields on Virginia Municipal
Securities based on factors such as general market conditions, the size of the
offering, the maturity of the obligations and the rating of the issue; the
ability of issuers and participation interests, or the guarantors of either,
to meet their obligations for payment of interest and principal when due;
legislative, executive or administrative changes or voter initiatives which
could result in adverse consequences for Virginia Municipal Securities; and
any adverse economic conditions or developments affecting the Commonwealth of
Virginia or its municipalities.
INFORMATION ABOUT THE REORGANIZATION
Background and Reasons for the Proposed Reorganization
The Portfolio was established in 1993 to provide investors with the
opportunity to earn income exempt from both the federal regular income tax and
personal income taxes imposed by the Commonwealth of Virginia and Virginia
municipalities. In an effort to remain competitive with other investment
companies with similar investment objectives, the Adviser waived all of its
investment advisory fees and reimbursed the Portfolio for certain operating
expenses, resulting in aggregate fee waivers and expense reimbursements of
$145,296 for the Portfolio's fiscal year ended August 31, 1994. However, by
August 31, 1994, the Portfolio's net assets had grown only to $4,375,390. In
the opinion of FSC, the Portfolio's principal underwriter, the Portfolio
suffered from a lack of investor interest sufficient to permit it to grow to a
size which would permit it to operate efficiently. Although FSC expended
significant marketing efforts to promote sales of the Portfolio's shares, the
negative investment climate for municipal securities throughout 1994 impeded
sales of Portfolio shares and FSC concluded that it was unlikely that the
situation would improve materially in the foreseeable future. In addition,
the Adviser and its affiliates concluded that they would be unable to continue
to waive investment advisory fees and reimburse operating expenses in order
for the Portfolio to continue to earn a yield on its investments competitive
with other investment companies with similar investment objectives.
As a result of these factors, in early November 1994, FSC notified
shareholders that it had ceased offering shares of the Portfolio for sale and
that it would recommend to the Trust's Board of Trustees that the Portfolio be
liquidated. It also indicated that the Adviser would cease waiving its
investment advisory fee after November 30, 1994 and that as a result, the
Portfolio's operating expenses could be expected to increase to approximately
2.5%. FSC accordingly recommended to shareholders that they voluntarily
redeem their shares and indicated that all contingent deferred sales charges
that would otherwise be applicable to such redemptions would be waived. In
anticipation of voluntary redemptions, the Adviser restructured the
Portfolio's investments by emphasizing shorter-term municipal securities.
Although many shareholders of the Portfolio elected to redeem their
shares as a result of the foregoing developments, a significant number of
shareholders expressed dissatisfaction both with this alternative and the
overall determination to recommend liquidation of the Portfolio. After
consultation with many shareholders as well as various broker dealers and
other financial institutions who had sold Portfolio shares, FSC voluntarily
determined to reimburse shareholders of the Portfolio as of October 13, 1994,
$40,000, or approximately $0.081 per share, in order to restore to
shareholders a portion of the decrease in the dollar value of shareholders'
investments in the Portfolio. As a result, FSC and the Adviser recommended to
the Board of Trustees of the Trust that it consider the feasibility of
transferring the Portfolio's assets to another investment company in exchange
for shares of such other investment company in a transaction which would be
tax-free to the Portfolio and its shareholders. Recognizing that many
shareholders may not have wished to redeem their shares of the Portfolio, FSC
and the Adviser recommended to the Trust's Board of Trustees a transfer of the
Portfolio's assets to the Fund, which seeks to earn interest income exempt
from the federal regular income tax (although not exempt from the personal
income taxes imposed by the Commonwealth of Virginia and Virginia
municipalities).
The Board of Trustees of the Trust evaluated this proposal as well
as other alternatives, including liquidation of the Portfolio. The Trustees
concluded that this transaction would be in the best interests of shareholders
because the Portfolio was unlikely to reach economic size on its own, as a
result of relatively high expenses, and that net yield on an investment in the
Portfolio would not be attractive to shareholders.
With assets of approximately $411,672,068 at December 31, 1994, the
Trust's Board of Trustees concluded that the Fund was of a size to provide
operating efficiencies and economies of scale sufficient to provide
shareholders with competitive investment returns and net income exempt from
the federal regular income tax. The Trustees also took account of the fact
that the Fund also receives investment advisory services from the Adviser and
that the Fund and its shareholders receive similar administrative and other
shareholder services as presently enjoyed by the Portfolio and its
shareholders. The Trustees noted that the Fund's investment advisory fee of
0.60% of average daily net assets is higher than the Portfolio's investment
advisory fee of 0.40% of average daily net assets, but concluded that this
difference in advisory fees is offset by the lower overall expenses of the
Fund as compared to the Portfolio.
Accordingly, the Trust's Board of Trustees, including a majority of
the independent Trustees, determined that participation in the Reorganization
is in the best interests of the Portfolio and that the interests of Portfolio
shareholders would not be diluted as a result of its effecting the
Reorganization. Based upon the foregoing considerations, and the fact that
shareholders of the Portfolio will not suffer any adverse tax consequences as
a result of the Reorganization, the Board of Trustees of the Trust unanimously
voted to approve, and recommend to Portfolio shareholders the approval of, the
Reorganization.
The Directors of the Fund, including the independent Directors, have
unanimously concluded that consummation of the Reorganization is in the best
interests of the Fund and the shareholders of the Fund and that the interests
of Fund shareholders would not be diluted as a result of effecting the
Reorganization and have unanimously approved the Plan.
In the event shareholders of the Portfolio do not approve the Plan,
the Trust's Board of Trustees will consider other alternatives which would
address the Portfolio's uneconomic size. These may include a plan of
liquidation or another transaction.
Description of the Plan of Reorganization
The Plan provides that the Fund will acquire all of the assets of
the Portfolio in exchange for Fund shares to be distributed pro rata by the
Portfolio to its shareholders in complete liquidation of the Portfolio on or
about March 30, 1995 (the "Closing Date"). Shareholders of the Portfolio will
become shareholders of the Fund as of the close of business on the Closing
Date and will begin accruing dividends on the next day. Shareholders of the
Fund will accrue their last dividend from the Fund on the Closing Date.
Consummation of the Reorganization is subject to the conditions set
forth in the Plan, including receipt of an opinion in form and substance
satisfactory to the Trust, on behalf of the Portfolio, and the Fund as
described under the caption "Federal Income Tax Consequences" below. The Plan
may be terminated and the Reorganization may be abandoned at any time before
or after approval by shareholders of the Portfolio prior to the Closing Date
by either party if it believes that consummation of the Reorganization would
not be in the best interests of its shareholders.
The Adviser is responsible for the payment of all expenses of the
Reorganization incurred by either party, whether or not the Reorganization is
consummated. Such expenses include, but are not limited to, accountants'
fees, legal fees, registration fees, transfer taxes (if any), the fees of
banks and transfer agents and the costs of preparing, printing, copying and
mailing proxy solicitation materials to the Portfolio's shareholders and the
costs of holding the Special Meeting of Shareholders.
The foregoing description of the Plan entered into between the Fund and the
Trust, on behalf of the Portfolio, is qualified in its entirety by the terms
and provisions of the Plan, a copy of which is attached hereto as Exhibit A
and incorporated herein by reference thereto.
Description of Portfolio Shares
Shares of the Fund to be issued to shareholders of the Portfolio
under the Plan will be fully paid and nonassessable when issued and
transferable without restriction and will have no preemptive or conversion
rights. Reference is hereby made to the Prospectus of the Fund dated
October 31, 1994 provided herewith for additional information about Fund
shares.
Federal Income Tax Consequences
As a condition to the Reorganization transactions, the Fund and the
Trust, on behalf of the Portfolio, will receive an opinion from Dickstein,
Shapiro & Morin, L.L.P., counsel to the Fund and the Trust, to the effect
that, on the basis of the existing provisions of the Internal Revenue Code of
1986, as amended (the "Code"), current administrative rules and court
decisions, for federal income tax purposes: (1) the Reorganization as set
forth in the Plan will constitute a tax-free reorganization under section
368(a)(1)(C) of the Code; (2) no gain or loss will be recognized by the Fund
upon its receipt of the Portfolio's assets solely in exchange for Fund shares;
(3) no gain or loss will be recognized by the Portfolio upon the transfer of
its assets to the Fund in exchange for Fund shares or upon the distribution
(whether actual or constructive) of the Fund shares to the Portfolio
shareholders in exchange for their shares of the Portfolio; (4) no gain or
loss will be recognized by shareholders of the Portfolio upon the exchange of
their Portfolio shares for Fund shares; (5) the tax basis of the Portfolio's
assets acquired by the Fund will be the same as the tax basis of such assets
to the Portfolio immediately prior to the Reorganization; (6) the tax basis of
Fund shares received by each shareholder of the Portfolio pursuant to the Plan
will be the same as the tax basis of Portfolio shares held by such shareholder
immediately prior to the Reorganization; (7) the holding period of the assets
of the Portfolio in the hands of the Fund will include the period during which
those assets were held by the Portfolio; and (8) the holding period of Fund
shares received by each shareholder of the Portfolio pursuant to the Plan will
include the period during which the Portfolio shares exchanged therefor were
held by such shareholder, provided the Portfolio shares were held as capital
assets on the date of the Reorganization.
Comparative Information on Shareholder Rights and Obligations
The Fund is organized as a corporation under the laws of the State
of Maryland. The Fund is not required to hold annual meetings of shareholders
except when required to do so under the 1940 Act. A special meeting of
shareholders of the Fund shall be called by the Chairman, Secretary or any
Director upon the written request of the holders of at least 25% of the
outstanding shares of the Fund. Each share of the Fund is entitled to one
vote at all meetings of shareholders.
The Trust is organized as a business trust pursuant to a Declaration
of Trust under the laws of the Commonwealth of Massachusetts. Set forth below
is a brief summary of the significant rights of shareholders of the Portfolio.
The Trust is not required to hold annual meetings of shareholders.
Shareholder approval is necessary only for certain changes in operations or
the election of trustees under certain circumstances. A special meeting of
shareholders of the Trust for any permissible purpose shall be called by the
Trustees upon the written request of the holders of at least 10% of the
outstanding shares of the Trust or of the relevant portfolio. Each share of
the Portfolio is entitled to one vote. All shares of the Trust have equal
voting rights except that in matters affecting only a particular portfolio or
class, only shares of that portfolio or class are entitled to vote.
Under certain circumstances, shareholders of the Portfolio may be
held personally liable as partners under Massachusetts law for obligations of
the Trust on behalf of the Portfolio. To protect its shareholders, the Trust
has filed legal documents with the Commonwealth of Massachusetts that
expressly disclaim the liability of Portfolio shareholders for such acts or
obligations of the Trust. These documents require that notice of this
disclaimer be given in each agreement, obligation or instrument that the Trust
or its Trustees enter into or sign on behalf of the Portfolio.
In the unlikely event a shareholder is held personally liable for
the Trust's obligations on behalf of the Portfolio, the Trust is required to
use the property of the Portfolio to protect or compensate the shareholder.
On request, the Trust will defend any claim made and pay any judgment against
a shareholder for any act or obligation of the Trust on behalf of the
Portfolio. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Trust cannot meet its obligations to
indemnify shareholders and pay judgments against them from the assets of the
Portfolio.
Capitalization
The following table sets forth the unaudited capitalization of the
Fund and the Portfolio as of December 31, 1994 and on a pro forma basis as of
that date:
Pro Forma
Fund Portfolio Combined
Net Assets $411,672,068 $ 83,387 $411,755,455
Price Per Share
(NAV) 10.02 7.98 10.02
INFORMATION ABOUT THE FUND, THE
PORTFOLIO AND THE TRUST
Fortress Municipal Income Fund, Inc.
Information about the Fund is contained in the Fund's current
Prospectus dated October 31, 1994, a copy of which is included herewith and
incorporated by reference herein. Additional information about the Fund is
included in the Fund's Statement of Additional Information dated October 31,
1994, which is incorporated herein by reference. Copies of the Statement of
Additional Information, which has been filed with the Securities and Exchange
Commission (the "SEC"), may be obtained without charge by contacting the Fund
at 1-800-245-5000 or by writing the Fund at Federated Investors Tower,
Pittsburgh, PA 15222-3779. The Fund is subject to the informational
requirements of the 1933 Act, the Securities Exchange Act of 1934 (the "1934
Act") and the 1940 Act and in accordance therewith files reports and other
information with the SEC. Reports, proxy and information statements and other
information filed by the Fund, can be obtained by calling or writing the Fund
and can also be inspected and copied by the public at the public reference
facilities maintained by the SEC in Washington, D.C. located at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549 and at certain of its regional
offices located at Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Chicago, IL 60661 and 13th Floor, Seven World Trade Center, New York,
NY 10048. Copies of such material can be obtained at prescribed rates from
the Public Reference Branch, Office of Consumer Affairs and Information
Services, SEC, 450 Fifth Street, N.W., Washington, D.C. 20549.
This Prospectus/Proxy Statement, which constitutes part of a
Registration Statement filed by the Fund with the SEC under the 1933 Act,
omits certain of the information contained in the Registration Statement.
Reference is hereby made to the Registration Statement and to the exhibits
thereto for further information with respect to the Fund and the shares
offered hereby. Statements contained herein concerning the provisions of
documents are necessarily summaries of such documents, and each such statement
is qualified in its entirety by reference to the copy of the applicable
documents filed with the SEC.
Virginia Municipal Income Fund, a portfolio of Municipal Securities Income
Trust
Information about the Portfolio and the Trust is contained in the
Portfolio's current Prospectus dated December 31, 1994 and its Statement of
Additional Information dated December 31, 1994, which are incorporated herein
by reference. Copies of such Prospectus and Statement of Additional
Information may be obtained without charge from the Fund by calling 1-800-245-
5000 or by writing to the Fund at Federated Investors Tower, Pittsburgh, PA
15222-3779. The Trust is subject to the informational requirements of the
1933 Act, the 1934 Act and the 1940 Act and in accordance therewith files
reports and other information with the SEC. Reports, proxy and information
statements and other information filed by the Portfolio can be obtained by
calling or writing the Fund and can also be inspected at the public reference
facilities maintained by the SEC or obtained at prescribed rates at the
addresses listed in the previous section.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the
solicitation by the Board of Trustees of the Trust of proxies for use at the
Special Meeting of Shareholders (the "Meeting") to be held on March 30, 1995
and at any adjournment thereof. The proxy confers discretionary authority on
the persons designated therein to vote on other business not currently
contemplated which may properly come before the Meeting. A proxy, if properly
executed, duly returned and not revoked, will be voted in accordance with the
specifications thereon; if no instructions are given, such proxy will be voted
in favor of the Plan. A shareholder may revoke a proxy at any time prior to
use by filing with the Secretary of the Trust an instrument revoking the
proxy, by submitting a proxy bearing a later date or by attending and voting
at the Meeting.
The cost of the solicitation, including the printing and mailing of
proxy materials, will be borne by the Adviser. In addition to solicitations
through the mails, proxies may be solicited by officers, employees and agents
of the Trust and the Adviser at no additional cost to the Trust. Such
solicitations may be by telephone. The Adviser will reimburse custodians,
nominees and fiduciaries for the reasonable costs incurred by them in
connection with forwarding solicitation materials to the beneficial owners of
shares held of record by such persons.
Outstanding Shares and Voting Requirements
The Board of Trustees of the Trust has fixed the close of business
on February 10, 1995 as the record date for the determination of shareholders
entitled to notice of and to vote at the Special Meeting of Shareholders and
any adjournment thereof. As of the record date, there were __________ shares
of the Portfolio outstanding. Each Portfolio share is entitled to one vote
and fractional shares have proportionate voting rights. On the record date,
________ owned of record _____ shares, or ___%, of the Portfolio's outstanding
shares. On such date, no other person owned of record, or to the knowledge of
the Adviser, beneficially owned, 5% or more of the Portfolio's outstanding
shares. On the record date, the trustees and officers of the Portfolio as a
group owned less than 1% of the outstanding shares of the Portfolio.
As of the record date, there were __________ shares of the Fund
outstanding. On the record date, ________ owned of record _____ shares, or
___%, of the Fund's outstanding shares. On such date, no other person owned
of record, or to the knowledge of the Adviser, beneficially owned, 5% or more
of the Fund's outstanding shares. On the record date, the trustees and
officers of the Fund as a group owned less than 1% of the outstanding shares
of the Fund.
Approval of the Plan requires the affirmative vote of the lesser of
(i) 67% of the shares of the Portfolio present at the Special Meeting, if the
holders of more than 50% of the outstanding shares are present or represented
by proxy, or (2) a majority of the outstanding shares of the Portfolio. The
votes of shareholders of the Fund are not being solicited since their approval
is not required in order to effect the Reorganization.
A majority of the outstanding shares of the Portfolio, represented
in person or by proxy, will be required to constitute a quorum at the Special
Meeting for the purpose of voting on the proposed Reorganization. For
purposes of determining the presence of a quorum, shares represented by
abstentions and "broker non-votes" will be counted as present, but not as
votes cast, at the Special Meeting. Under the 1940 Act, however, which
governs this transaction, matters subject to the requirements of the 1940 Act,
including the Reorganization, are determined on the basis of a percentage of
votes present at the Special Meeting, which would have the effect of treating
abstentions and "broker non-votes" as if they were votes against the proposal.
Dissenter's Right of Appraisal
Shareholders of the Portfolio objecting to the Reorganization have
no appraisal rights under the Trust's Declaration of Trust or Massachusetts
law. Under the Plan, if approved by Portfolio shareholders, each Portfolio
shareholder will become the owner of Fund shares having a total net asset
value equal to the total net asset value of his or her holdings in the
Portfolio at the Closing Date.
Other Matters
Management of the Trust knows of no other matters that may properly
be, or which are likely to be, brought before the meeting. However, if any
other business shall properly come before the meeting, the persons named in
the proxy intend to vote thereon in accordance with their best judgment.
So far as management is presently informed, there is no litigation
pending or threatened against the Fund.
Whether or not shareholders expect to attend the meeting, all
shareholders are urged to sign, fill in and return the enclosed proxy form
promptly.
exhibit a
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated January 5, 1995 (the
"Agreement"), between FORTRESS MUNICIPAL INCOME FUND, INC., a Maryland
corporation (hereinafter called the "Acquiring Fund"), and MUNICIPAL
SECURITIES INCOME TRUST, a Massachusetts business trust (hereinafter called
the "Trust") on behalf of its portfolio VIRGINIA MUNICIPAL INCOME FUND
(hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of
the United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of
the assets of the Acquired Fund in exchange solely for shares of common stock
of the Acquiring Fund (the "Acquiring Fund Shares") and the distribution,
after the Closing Date hereinafter referred to, of the Acquiring Fund Shares
to the shareholders of the Acquired Fund in liquidation of the Acquired Fund
as provided herein, all upon the terms and conditions hereinafter set forth in
this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are registered open-
end management investment companies and the Acquired Fund owns securities in
which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are authorized
to issue shares of common stock or shares of beneficial interest, as the case
may be;
WHEREAS, the Board of Directors, including a majority of the
Directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Acquiring Fund has
determined that the exchange of all or substantially all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquiring Fund shareholders and that the interests of the existing
shareholders of the Acquiring Fund would not be diluted as a result of this
transaction; and
WHEREAS, the Board of Trustees, including a majority of the Trustees
who are not "interested persons" (as defined under the 1940 Act), of the
Acquired Fund has determined that the exchange of all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquired Fund shareholders and that the interests of the existing shareholders
of the Acquired Fund would not be diluted as a result of this transaction;
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund agrees to assign, transfer and convey to the Acquiring Fund all of the
assets of the Acquired Fund, including all securities and cash, and the
Acquiring Fund agrees in exchange therefor (i) to deliver to the Acquired Fund
the number of Acquiring Fund Shares, including fractional Acquiring Fund
Shares, determined as set forth in paragraph 2.3. Such transaction shall take
place at the closing (the "Closing") on the closing date (the "Closing Date")
provided for in paragraph 3.1. In lieu of delivering certificates for the
Acquiring Fund Shares, the Acquiring Fund shall credit the Acquiring Fund
Shares to the Acquired Fund's account on the stock record books of the
Acquiring Fund and shall deliver a confirmation thereof to the Acquired Fund.
1.2 The Acquired Fund will discharge all of its liabilities and
obligations prior to the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street Bank
and Trust Company (hereinafter called "State Street"), Boston, Massachusetts,
the Acquiring Fund's custodian (the "Custodian"), for the account of the
Acquiring Fund, together with proper instructions and all necessary documents
to transfer to the account of the Acquiring Fund, free and clear of all liens,
encumbrances, rights, restrictions and claims. All cash delivered shall be in
the form of currency and immediately available funds payable to the order of
the Custodian for the account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund thereunder. The Acquired
Fund will transfer to the Acquiring Fund any distributions, rights or other
assets received by the Acquired Fund after the Closing Date as distributions
on or with respect to the securities transferred. Such assets shall be deemed
included in assets transferred to the Acquiring Fund on the Closing Date and
shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable, the
Acquired Fund will liquidate and distribute pro rata to the Acquired Fund's
shareholders of record, determined as of the close of business on the Closing
Date (the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by
the Acquired Fund pursuant to paragraph 1.1. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund Shares
then credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share record books of the Acquiring
Fund in the names of the Acquired Fund Shareholders and representing the
respective pro rata number of the Acquiring Fund Shares due such shareholders.
All issued and outstanding shares of the Acquired Fund will simultaneously be
canceled on the books of the Acquired Fund. Share certificates representing
interests in the Acquired Fund will represent a number of Acquiring Fund
Shares after the Closing Date as determined in accordance with Section 2.3.
The Acquiring Fund shall not issue certificates representing the Acquiring
Fund Shares in connection with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus and
statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund shares
on the books of the Acquired Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Trust.
2. VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of 4:00
p.m. (Eastern time) on the Closing Date (such time and date being hereinafter
called the "Valuation Date"), using the valuation procedures set forth in the
Acquiring Fund's then-current prospectus or statement of additional
information.
2.2 The net asset value of an Acquiring Fund Share shall be the net
asset value per share computed as of 4:00 p.m. (Eastern time) on the
Valuation Date, using the valuation procedures set forth in the Acquiring
Fund's then-current prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in paragraph
2.1 by the net asset value of one Acquiring Fund Share determined in
accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be March 30, 1995 or such later date as the
parties may mutually agree. All acts taking place at the Closing Date shall
be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place as
the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of the
value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 Federated Services Company, as transfer agent for each of the
Acquired Fund and the Acquiring Fund, shall deliver at the Closing a
certificate of an authorized officer stating that its records contain the
names and addresses of the Acquired Fund Shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver
a confirmation evidencing the Acquiring Fund Shares to be credited on the
Closing Date to the Secretary of the Acquired Fund, or provide evidence
satisfactory to the Acquired Fund that such Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund.
At the Closing, each party shall deliver to the other such bills of sale,
checks, assignments, assumption agreements, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Acquired Fund represents and warrants to the Acquiring Fund as
follows:
(a) The Trust is a business trust duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has power to own all of its properties and assets and to
carry out this Agreement.
(b) The Trust is registered under the 1940 Act, as an open-
end, management investment company, and such registration has not been revoked
or rescinded and is in full force and effect.
(c) The Acquired Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Trust's Declaration of Trust or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquired Fund is
a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquired Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquired Fund knows of no facts which might form the basis for the institution
of such proceedings, and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially
and adversely affects its business or its ability to consummate the
transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "Commission") hereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein as necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) The Statement of Assets and Liabilities of the
Acquired Fund at August 31, 1994 have been audited by Deloitte & Touche LLP,
independent auditors, and have been prepared in accordance with generally
accepted accounting principles, consistently applied, and such statements
(copies of which have been furnished to the Acquiring Fund) fairly reflect the
financial condition of the Acquired Fund as of such dates, and there are no
known contingent liabilities of the Acquired Fund as of such dates not
disclosed therein.
(h) Since August 31, 1994, there has not been any material
adverse change in the Acquired Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business,
or any incurrence by the Acquired Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Acquiring Fund.
(i) At the Closing Date, all Federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
dates shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquired Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(j) For each fiscal year of its operation, the Acquired
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. All of the issued and outstanding shares of
the Acquired Fund will, at the time of the Closing, be held by the persons and
in the amounts set forth in the records of the transfer agent as provided in
paragraph 3.3. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquired Fund
shares, nor is there outstanding any security convertible into any of the
Acquired Fund Shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets to
be transferred by it hereunder.
(m) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Acquired Fund's Trustees and, subject to
the approval of the Acquired Fund Shareholders, this Agreement will constitute
the valid and legally binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a proceeding
in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund
(the "Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (other than information therein that
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
(o) The Acquired Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
4.2 The Acquiring Fund represents and warrants to the Acquired Fund as
follows:
(a) The Acquiring Fund is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland
and the Acquiring Fund has the power to carry on its business as it is now
being conducted and to carry out this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as
an open-end, diversified, management investment company, and such registration
has not been revoked or rescinded and is in full force and effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquiring Fund's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquiring Fund knows of no facts which might form the basis for the
institution of such proceedings, and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to
consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the
Acquiring Fund at August 31, 1993 and 1994, have been audited by Deloitte &
Touche LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, and such statements (copies of which
have been furnished to the Acquired Fund) fairly reflect the financial
condition of the Acquiring Fund as of such dates, and there are no known
contingent liabilities of the Acquiring Fund as of such dates not disclosed
therein.
(g) Since August 31, 1994, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of indebtedness maturing
more than one year from the date such indebtedness was incurred, except as
disclosed to and accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed by such
date shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquiring Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(i) For each fiscal year of its operation, the Acquiring
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(j) All issued and outstanding shares of the Acquiring
Fund are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any of the Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares.
(k) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action, if any, on the part of the Acquiring Fund's Trustees, and
this Agreement will constitute the valid and legally binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject to the effect
of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
and other similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto, and to general principles of equity
and the discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading.
(m) The Acquiring Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date,
it being understood that such ordinary course of business will include
customary dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and do
or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in
such form as is reasonably satisfactory to the Acquiring Fund, a statement of
the earnings and profits of the Acquired Fund for Federal income tax purposes
which will be carried over to the Acquiring Fund as a result of Section 381 of
the Code and which will be certified by the Acquired Fund's President and its
Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(m), all
to be included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquired Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of the Acquired Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such securities by lot
and the holding periods of such securities, as of the Closing Date, certified
by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of the
Acquired Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquiring Fund shall
reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquiring Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquired Fund shall
reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness, except
as otherwise disclosed to and accepted by the Acquired Fund.
8. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares
of the Acquired Fund in accordance with the provisions of the Trust's
Declaration of Trust.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit consummation,
in all material respects, of the transactions contemplated hereby shall have
been obtained, except where failure to obtain any such consent, order or
permit would not involve a risk of a material adverse effect on the assets or
properties of the Acquiring Fund or the Acquired Fund, provided that either
party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 The Acquiring Fund and the Acquired Fund shall have received an
opinion of Dickstein, Shapiro & Morin, L.L.P. substantially to the effect that
for Federal income tax purposes:
(a) The transfer of all or substantially all of the
Acquired Fund assets in exchange for the Acquiring Fund Shares and the
distribution of the Acquiring Fund Shares to the Acquired Fund Shareholders in
liquidation of the Acquired Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code; (b) No gain or loss will be
recognized by the Acquiring Fund upon the receipt of the assets of the
Acquired Fund solely in exchange for the Acquiring Fund Shares; (c) No gain or
loss will be recognized by the Acquired Fund upon the transfer of the Acquired
Fund assets to the Acquiring Fund in exchange for the Acquiring Fund Shares or
upon the distribution (whether actual or constructive) of the Acquiring Fund
Shares to Acquired Fund Shareholders in exchange for their shares of the
Acquired Fund; (d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the Acquiring
Fund Shares; (e) The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization; (f) The tax basis of
the Acquiring Fund Shares received by each of the Acquired Fund Shareholders
pursuant to the Reorganization will be the same as the tax basis of the
Acquired Fund shares held by such shareholder immediately prior to the
Reorganization; (g) The holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which those
assets were held by the Acquired Fund; and (h) The holding period of the
Acquiring Fund Shares to be received by each Acquired Fund Shareholder will
include the period during which the Acquired Fund shares exchanged therefor
were held by such shareholder (provided the Acquired Fund shares were held as
capital assets on the date of the Reorganization).
9. TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Trustees of the Trust
or the Board of Directors of the Acquiring Fund at any time prior to the
Closing Date (and notwithstanding any vote of the Board of Trustees of the
Acquired Fund) if circumstances should develop that, in the opinion of either
of the parties' Board, make proceeding with the Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on the
part of any party hereto or the directors, officers or shareholders of the
Acquiring Fund or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Trustees of the Acquiring Fund or of
the Acquired Fund, if, in the judgment of either, such waiver will not have a
material adverse effect on the benefits intended under this Agreement to the
shareholders of the Acquiring Fund or of the Acquired Fund, as the case may
be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings of
every kind and nature between them relating to the subject matter hereof.
Neither party shall be bound by any condition, definition, warranty or
representation, other than as set forth or provided in this Agreement or as
may be set forth in a later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania, without giving effect
to principles of conflict of laws.
11.4 This Agreement may be executed in any number of counterparts, each
of which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason
of this Agreement.
11.6 The Acquiring Fund is hereby expressly put on notice of the
limitation of liability as set forth in Article XI of the Declaration of Trust
of the Acquired Fund and agrees that the obligations assumed by the Acquired
Fund pursuant to this Agreement shall be limited in any case to the Acquired
Fund and its assets and the Acquiring Fund shall not seek satisfaction of any
such obligation from the shareholders of the Acquired Fund, the trustees,
officers, employees or agents of the Acquired Fund or any of them.
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the date
first above written.
Acquired Fund:
MUNICIPAL SECURITIES INCOME TRUST,
on behalf of its portfolio,
VIRGINIA MUNICIPAL INCOME FUND
Attest:
By:/s/John W. McGonigle
/s/Charles H. Field
Assistant Secretary Name:John W. McGonigle
Title:Vice President
Acquiring Fund:
FORTRESS MUNICIPAL INCOME
FUND, INC.
Attest:
By: /s/Richard B. Fisher
/s/Charles H. Field
Assistant Secretary Name:Richard B. Fisher
Title:President
STATEMENT OF ADDITIONAL INFORMATION
February 18, 1995
Acquisition of the assets of
VIRGINIA MUNICIPAL INCOME FUND,
a Portfolio of MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
By and in exchange for shares of
FORTRESS MUNICIPAL INCOME FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
This Statement of Additional Information dated February 18, 1995 is
not a prospectus. A Prospectus/Proxy Statement dated February 18, 1995
related to the above-referenced matter may be obtained from Fortress Municipal
Income Fund, Inc., Federated Investors Tower, Pittsburgh, Pennsylvania 15222-
3779. This Statement of Additional Information should be read in conjunction
with such Prospectus/Proxy Statement.
TABLE OF CONTENTS
1.Statement of Additional Information of Fortress Municipal Income
Fund, Inc., dated October 31, 1994
2.Statement of Additional Information of Virginia Municipal Income
Fund, a portfolio of Municipal Securities Income Trust, dated December 31,
1994
3.Financial Statements of Fortress Municipal Income Fund, Inc.,
dated August 31, 1994
4.Financial Statements of Virginia Municipal Income Fund, a
portfolio of Municipal Securities Income Trust, dated August 31, 1994
The Statement of Additional Information of Fortress Municipal Income
Fund, Inc. (the "Fund"), dated October 31, 1994, is incorporated herein by
reference to Post-Effective Amendment No. 10 to the Fund's Registration
Statement on Form N-1A (File Nos. 33-11410 and 811-4533) which was filed with
the Securities and Exchange Commission on or about October 26, 1994. A copy
may be obtained from the Fund at Federated Investors Tower, Pittsburgh, PA
15222-3279; telephone number: 1-800-245-5000.
The Statement of Additional Information of Virginia Municipal Income
Fund (the "Portfolio"), a portfolio of Municipal Securities Income Trust (the
"Trust"), dated December 31, 1994, is incorporated herein by reference to Post-
Effective Amendment No. 17 to the Trust's Registration Statement on Form N-1A
(File Nos. 33-36729 and 811-6165) which was filed with the Securities and
Exchange Commission on or about December 30, 1994.
The audited financial statements of the Fund, dated August 31, 1994,
are incorporated herein by reference to the Fund's Prospectus dated October
31, 1994 which was filed with the Securities and Exchange Commission in Post-
Effective Amendment No. 10 to the Fund's Registration Statement on Form N-1A
(File Nos. 33-11410 and 811-4533) on or about October 26, 1994.
The audited financial statements of the Portfolio, dated August 31,
1994, are incorporated herein by reference to the Portfolio's Annual Report to
Shareholders for the fiscal year ended August 31, 1994 which was filed with
the Securities and Exchange Commission on or about November 1, 1994.
Pro forma financial statements are not included herein as the total
net assets of the Portfolio do not exceed 10% of the total net assets of the
Fund. At December 31, 1994, the total net assets of the Fund were
$411,672,068 and the total net assets of the Portfolio were $83,387.
MULTI-STATE MUNICIPAL INCOME FUND,
a portfolio of FIXED INCOME SECURITIES, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Dear Shareholder:
The Board of Directors and management of Fixed Income Securities,
Inc. (the "Corporation") are pleased to submit for your vote a proposal to
transfer all of the assets of Multi-State Municipal Income Fund (the
"Portfolio") to Fortress Municipal Income Fund, Inc. (the "Fund"), a mutual
fund advised by Federated Advisers. The Fund has an investment objective
similar to that of the Portfolio. As part of the transaction, shareholders in
the Portfolio would receive shares in the Fund equal in value to their shares
in the Portfolio and the Portfolio would be liquidated.
The Board of Directors of the Corporation, as well as Federated
Advisers, the Corporation's adviser, and Federated Securities Corp., the
Corporation's principal underwriter, believe the proposed agreement and plan
of reorganization is in the best interests of Portfolio shareholders for the
following reasons:
-- the Portfolio has not reached a size, and is not
expected to reach a size, in which it can provide
shareholders with a reasonable, competitive return on its
investments.
-- The reorganization of the Portfolio into the Fund is
expected to provide operating efficiencies as a result of
the size of the Fund which were not available to Portfolio
shareholders due to the smaller size of the Portfolio's
assets.
-- The Fund offers an investment portfolio which invests
in municipal bonds the interest from which is exempt from
the federal regular income tax.
We believe the transfer of the Portfolio's assets in this
transaction will present an excellent investment opportunity for our
shareholders. Your vote on the transaction is critical to its success. The
transfer will be effected only if approved by a majority of the Portfolio's
outstanding shares on the record date voted in person or represented by proxy.
We hope you share our enthusiasm and will participate by casting your vote in
person, or by proxy if you are unable to attend the meeting. Please read the
enclosed prospectus/proxy statement carefully before you vote. If you have
any questions, please feel free to call us at 800-245-5000.
Thank you for your prompt attention and participation.
Sincerely,
Richard B. Fisher
President
MULTI-STATE MUNICIPAL INCOME FUND,
a portfolio of FIXED INCOME SECURITIES, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO SHAREHOLDERS OF MULTI-STATE MUNICIPAL INCOME FUND:
A Special Meeting of Shareholders of Multi-State Municipal Income Fund (the
"Portfolio"), a portfolio of Fixed Income Securities, Inc. (the "Corporation")
will be held at 2:00 p.m. on March 30, 1995 at the office of the Corporation,
Federated Investors Tower, 19th Floor, Pittsburgh, Pennsylvania 15222-3779 for
the following purposes:
1. To approve or disapprove a proposed Agreement and Plan of
Reorganization between the Corporation, on behalf of the Portfolio, and
Fortress Municipal Income Fund, Inc. (the "Fund"), whereby the Fund would
acquire all of the assets of the Portfolio in exchange for Fund shares to be
distributed pro rata by the Portfolio to its shareholders in complete
liquidation of the Portfolio; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
By Order of the Board of Trustees,
Dated: February __, 1995 John W. McGonigle
Secretary
Shareholders of record at the close of business February 10, 1995
are entitled to vote at the meeting. Whether or not you plan to attend the
meeting, please sign and return the enclosed proxy card. Your vote is
important.
To secure the largest possible representation and to save the
expense of further mailings, please mark your proxy card, sign it, and return
it in the enclosed envelope, which requires no postage if mailed in the United
States. You may revoke your proxy at any time at or before the meeting or
vote in person if you attend the meeting.
PROSPECTUS/PROXY STATEMENT
FEBRUARY 18, 1995
Acquisition of the Assets of
MULTI-STATE MUNICIPAL INCOME FUND,
a portfolio of
FIXED INCOME SECURITIES, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
By and in exchange for shares of
FORTRESS MUNICIPAL INCOME FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
This Prospectus/Proxy Statement describes the proposed Agreement and
Plan of Reorganization (the "Plan") whereby Fortress Municipal Income Fund,
Inc., a Maryland corporation (the "Fund"), would acquire all of the assets of
Multi-State Municipal Income Fund (the "Portfolio"), a portfolio of Fixed
Income Securities, Inc., a Maryland corporation (the "Corporation"), in
exchange for Fund shares to be distributed pro rata by the Portfolio to its
shareholders in complete liquidation of the Portfolio. As a result of the
Plan, each shareholder of the Portfolio will become the owner of Fund shares
having a total net asset value equal to the total net asset value of his or
her holdings in the Portfolio.
The Fund is an open-end, diversified management investment company
whose investment objective is a high level of current income which is
generally exempt from the federal regular income tax. The Fund pursues this
investment objective by investing primarily in a professionally managed,
diverse portfolio of municipal bonds. The Fund may invest up to 35% of its
net assets in lower quality municipal bonds. The Portfolio is a diversified
portfolio of securities of an open-end management investment company whose
investment objective is to provide a high level of current income which is
exempt from federal regular income tax. The Portfolio pursues this objective
by investing in a diversified portfolio primarily limited to municipal
securities. For a comparison of the investment policies of the Portfolio and
the Fund, see "Summary-Investment Objectives and Policies".
This Prospectus/Proxy Statement should be retained for future
reference. It sets forth concisely the information about the Fund that a
prospective investor should know before investing. This Prospectus/Proxy
Statement is accompanied by the Prospectus of the Fund dated October 31, 1994
which is incorporated herein by reference. Statements of Additional
Information for the Fund dated October 31, 1994 (relating to the Fund's
prospectus of the same date) and February 18, 1995 (relating to this
Prospectus/Proxy Statement) containing additional information have been filed
with the Securities and Exchange Commission and are incorporated herein by
reference. Copies of the Statements of Additional Information may be obtained
without charge by writing or calling the Fund at the address and telephone
number shown above.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Summary........................................................
Risk Factors...................................................
Information About the Reorganization...........................
Information About the Fund, the Portfolio and the
Corporation....................................................
Voting Information.............................................
SUMMARY
About the Proposed Reorganization
The Board of Directors of Fixed Income Securities, Inc. (the
"Corporation") has voted to recommend to shareholders of its portfolio, Multi-
State Municipal Income Fund (the "Portfolio"), the approval of an Agreement
and Plan of Reorganization (the "Plan") whereby Fortress Municipal Income
Fund, Inc., a Maryland corporation (the "Fund"), would acquire all of the
assets of the Portfolio in exchange for Fund shares to be distributed pro rata
by the Portfolio to its shareholders in complete liquidation of the Portfolio
(the "Reorganization"). As a result of the Reorganization, each shareholder
of the Portfolio will become the owner of Fund shares having a total net asset
value equal to the total net asset value of his or her holdings in the
Portfolio on the date of the Reorganization, i.e., the Closing Date.
As a condition to the Reorganization transactions, the Fund and the
Corporation will receive an opinion of counsel that the Reorganization will be
considered a tax-free "reorganization" under applicable provisions of the
Internal Revenue Code so that no gain or loss will be recognized by either the
Fund or the Portfolio or their shareholders. The tax cost basis of the Fund
shares received by Portfolio shareholders will be the same as the tax cost
basis of their shares in the Portfolio. After the acquisition is completed,
the Portfolio will be liquidated.
Investment Objectives and Policies
The investment objective of the Fund is to provide a high level of
current income which is generally exempt from the federal regular income tax.
This investment objective may not be changed without the approval of
shareholders. The Fund pursues its investment objective by investing
primarily in a diversified portfolio of municipal bonds, and may invest up to
35% of its net assets in lower quality municipal bonds. As a matter of
investment policy that cannot be changed without the approval of shareholders,
except when investing on a temporary basis for defensive purposes, the Fund
invests its assets so that at least 80% of its annual interest income is
exempt from the federal regular income tax.
The investment objective of the Portfolio is to provide a high level
of current income which is exempt from federal regular income tax. This
investment objective may not be changed without the approval of shareholders.
The Portfolio pursues its investment objective by investing in a diversified
portfolio primarily limited to municipal securities. As a matter of
investment policy which cannot be changed without the approval of
shareholders, under normal circumstances the Portfolio invests its assets so
that at least 80% of its income from investments is exempt from federal
regular income tax or so that at least 80% of its net assets are invested in
obligations, the interest from which is exempt from federal regular income
tax. The Portfolio will also, under normal circumstances, invest at least 65%
of its assets in municipal securities issued by more than two states, although
this investment policy may be changed without shareholder approval.
The Fund invests in municipal bonds which are rated Ba or higher by
Moody's Investors Service, Inc. ("Moody's") or rated BB or higher by
Standard & Poor's Ratings Group ("S&P") and bonds which are not rated but
which the adviser judges to be of comparable quality to bonds having such
ratings. The Fund will limit its purchases of municipal bonds rated Ba and BB
to 35% of its net assets. Unless otherwise designated, the investment
policies of the Fund may be changed by the Board of Directors without
shareholder approval, although shareholders will be notified before any
material change becomes effective.
The Portfolio invests primarily in municipal securities, which are
debt obligations issued by or on behalf of states, territories and possessions
of the United States, including the District of Columbia, and their political
subdivisions, agencies and instrumentalities, the interest from which is
exempt from federal regular income tax. The municipal securities in which the
Portfolio invests are rated, at the time of purchase, Baa or higher by Moody's
or BBB or higher by S&P or by Fitch Investors Service, Inc. and bonds which
are not rated if the Adviser determines that such bonds are of comparable
quality or have similar characteristics to investment grade bonds. Unless
otherwise designated, the investment policies of the Portfolio may be changed
by the Board of Directors without shareholder approval, although shareholders
will be notified before any material change becomes effective. Currently, the
Portfolio invests primarily in variable rate municipal securities.
Both the Fund and the Portfolio are subject to certain investment
limitations. For the Fund, these include investment limitations which
prohibit it from (1) borrowing money directly or through reverse repurchase
agreements or pledging securities except that, under certain circumstances,
the Fund may, exclusive of custodian intra-day cash advances and the
collateralization of such advances, borrow up to one-third of the value of its
total assets and pledge up to 10% of the value of those assets to secure such
borrowings; (2) investing more than 10% of its net assets in securities
subject to restrictions on resale under the Securities Act of 1933 (the "1933
Act"); (3) investing more than 5% of its total assets in securities of one
issuer (except cash and cash items and United States government obligations);
and (4) investing more than 5% of its total assets in industrial development
bonds of issuers that have records of less than three years of continuous
operations. The first two investment limitations listed above cannot be
changed without shareholder approval; the last two limitations may be changed
by the Board of Directors without shareholder approval, although shareholders
will be notified before any material change becomes effective.
The Portfolio has investment limitations which prohibit it from (1)
borrowing money directly or through reverse repurchase agreements or pledging
securities except that, under certain circumstances, the Portfolio may borrow
up to one-third of the value of its total assets and pledge up to 10% of the
value of those assets to secure such borrowings; and (2) investing more than
5% of its total assets in industrial development bonds when the payment of
principal and interest is the responsibility of companies (or guarantors,
where applicable) with less than three years of continuous operations,
including the operation of any predecessor. The Portfolio's first investment
limitation cannot be changed without shareholder approval; the second may be
changed by the Board of Directors without shareholder approval, although
shareholders will be notified before any material change becomes effective.
Both the Portfolio and the Fund are also subject to certain
additional investment limitations which are similar, although not identical,
described in the Fund's Statement of Additional Information dated October 31,
1994, and the Portfolio's Statement of Additional Information dated
January 31, 1994. Reference is hereby made to the Fund's Prospectus and
Statement of Additional Information, each dated October 31, 1994, and to the
Portfolio's Prospectus and Statement of Additional Information, each dated
January 31, 1994, which set forth in full the investment objectives and
policies and investment limitations of each of the Fund and the Portfolio,
each of which is incorporated herein by reference thereto.
Advisory and Other Fees
The annual investment advisory fee for the Fund is 0.60 of 1% of the
Fund's average daily net assets. Federated Advisers (the "Adviser"), the
investment adviser to the Fund, may voluntarily choose to waive a portion of
its advisory fee or reimburse the Fund for certain operating expenses. This
voluntary waiver of fees may be terminated by the Adviser at any time in its
sole discretion. The Adviser has also undertaken to reimburse the Fund for
operating expenses in excess of limitations established by certain states.
The annual investment advisory fee for the Portfolio is 0.40 of 1% of the
Portfolio's average daily net assets. Under the advisory contract, the
Adviser, which also serves as investment adviser to the Portfolio, may
similarly voluntarily choose to waive a portion of its advisory fee but may
likewise terminate such waiver at any time in its sole discretion. The
Adviser has also undertaken to reimburse the Portfolio for operating expenses
in excess of limitations established by certain states. Without such waiver
or reimbursement, the expense ratio of each of the Fund and the Portfolio
would be higher by 0.0 and 3.88, respectively, of average daily net assets.
Federated Administrative Services, an affiliate of the Adviser,
provides certain administrative personnel and services necessary to operate
both the Fund and the Portfolio at an annual rate based upon the average
aggregate daily net assets of all funds advised by the Adviser and its
affiliates. The rate charged is 0.15 of 1% of the first $250 million of all
such funds' average aggregate daily net assets, 0.125 of 1% on the next $250
million, 0.10 of 1% on the next $250 million and 0.075 of 1% of all such
funds' average aggregate daily net assets in excess of $750 million, with a
minimum annual fee per portfolio of $125,000 plus $30,000 for each additional
class of such portfolio. Federated Administrative Services may choose
voluntarily to waive a portion of its fee. The administrative fee expense for
the Fund's most recent fiscal year was 0.09 of 1% of its average aggregate
daily net assets and for the Portfolio's fiscal year ended November 30, 1993
and for the six months ended May 31, 1994 was 0.14 of 1% and 2.84%,
respectively, of its average aggregate daily net assets.
The Fund has adopted a Shareholder Services Plan under which it may
make payments of up to 0.25 of 1% of the average daily net asset value of the
Fund to obtain certain personal services for shareholders and the maintenance
of shareholder accounts. The Fund has entered into a Shareholder Services
Agreement pursuant to which Federated Shareholder Services, an affiliate of
the Adviser, either performs shareholder services directly or selects certain
financial institutions to perform such services. Financial institutions will
receive fees based upon shares owned by their customers. The schedule of such
fees is determined from time to time by the Fund and Federated Shareholder
Services.
The Portfolio has a similar Shareholder Services Plan pursuant to
which financial institutions enter into shareholder service agreements with
the Portfolio to provide administrative support services to their customers
who own Portfolio shares. Such services may include, but are not limited to,
the provision of personal services and maintenance of shareholder accounts.
The Portfolio may make payments to a financial institution of up to 0.25 of 1%
of the average daily net assets of Portfolio shares beneficially owned by such
financial institution's customers for such services.
The total annual operating expenses for the Fund were 1.09% of
average daily net assets for its most recent fiscal year. The total annual
operating expenses for the Portfolio were 0.75% of average daily net assets
for its fiscal year ended November 30, 1993 and for the six months ended May
31, 1994 and would have been 4.63% and 7.00%, respectively, of average daily
net assets absent the voluntary waiver by the Adviser of a portion of the
investment advisory fee and reimbursement of certain other operating expenses.
As of December 1, 1994, the Adviser ceased its voluntary waiver of investment
advisory fees as well as its voluntary reimbursement of certain Portfolio
operating expenses. As a result, the maximum total annual operating expenses
for the Portfolio for its current fiscal year are expected to be 2.50% of
average daily net assets.
Distribution Arrangements
Federated Securities Corp. ("FSC") is the principal distributor for
shares of the Fund and the Portfolio. The Fund has adopted a Rule 12b-1
Distribution Plan (the "Distribution Plan") pursuant to which the Fund may pay
to the distributor an amount equal to an annual rate of 0.25 of 1% of the
average daily net asset value of the Fund to finance any activity which is
principally intended to result in the sale of shares subject to the
Distribution Plan. The Fund is not currently making payments under the
Distribution Plan, nor does it anticipate doing so in the immediate future.
The Portfolio has adopted a Rule 12b-1 Distribution Plan (the "Rule
12b-1 Plan") pursuant to which the Portfolio pays FSC an amount equal to an
annual rate of 0.75 of 1% of the average daily net asset value of the
Portfolio to reimburse FSC for payments paid to dealers and to finance any
activity which is principally intended to result in the sale of shares subject
to the 12b-1 Plan. In connection with the distribution of Portfolio shares,
FSC paid dealers from its assets up to 2% of the net asset value of Portfolio
shares purchased by their customers.
In connection with the distribution of and/or administrative
services relating to Fund shares, FSC pays brokers and financial institutions
1% of the offering price of the Fund shares acquired by their customers on
purchases up to $1,999,999; 0.50% on purchases of $2 million to $4,999,999;
and 0.25% on purchases of $5 million or more. Any fees paid by FSC pursuant
to these arrangements will be reimbursed by the Adviser. The administrator
may elect to receive amounts less than those stated, which would reduce the
redemption fee and/or the holding period used to calculate such fee upon the
sale of such shares described below. In addition, FSC may pay a fee to
financial institutions as financial assistance for providing substantial
marketing and sales support, which payments would be determined by the amount
of shares sold by such financial institution and/or the nature of the
marketing or sales support furnished. Although such payments would be made
from the assets of FSC, the Adviser or its affiliates may reimburse them.
Certain costs exist with respect to the purchase and sale of Fund
and Portfolio shares. Shares of the Fund are sold at their net asset value
next determined after an order is received, plus a sales load of 1% of the
offering price for purchases of less than $1 million in all of the Fortress
Investment Program funds and purchases which are not made through designated
institutions. Shares of the Fund received by the Portfolio shareholders as a
result of the Reorganization will not be subject to a sales charge. Shares of
the Portfolio were sold at their net asset value next determined after an
order was received.
Absent an exemption, shareholders redeeming Fund shares within
certain time periods of the purchase of those shares will be charged a
contingent deferred sales charge by FSC based on the lesser of the original
price or the net asset value of the shares redeemed, as follows: for
purchases up to $1,999,999 held less than four years the charge is 1%; for
purchases of $2 million to $4,999,999 held less than two years the charge is
0.50%; and for purchases of more than $5 million held less than one year, the
charge is 0.25%. The contingent deferred sales charges are not imposed in
connection with the exercise of exchange rights, nor will they be imposed on
redemptions of Fund shares received by shareholders of the Portfolio as a
rsult of the consummation of the Reorganization.
Effective in late 1994, FSC has waived all contingent deferred sales
charges in connection with redemptions of Portfolio shares. Absent such
waiver or another exemption, shareholders redeeming Portfolio shares within
three full years of the purchase of such shares were charged a contingent
deferred sales charge by FSC based on the lesser of the net asset value of the
redeemed shares at the time of purchase or the net asset value of the redeemed
shares at the time of redemption, as follows: for shares held less than one
year the charge was 3%; for shares held more than one year but less than three
years the charge was 2%. These sales charges were not imposed in connection
with an exercise of exchange rights.
For a complete description of sales charges, contingent deferred
sales charges and exemptions from such charges, reference is hereby made to
the Prospectus of the Fund dated October 31, 1994 and the Prospectus of the
Portfolio dated January 31, 1994, each of which is incorporated herein by
reference thereto.
Purchase and Redemption Procedures
The transfer agent and dividend disbursing agent for each of the
Fund and the Portfolio is Federated Services Company. Procedures for the
purchase and redemption of Fund shares differ slightly from procedures
applicable to the purchase and redemption of Portfolio shares. Any questions
about such procedures may be directed to, and assistance in effecting
purchases or redemptions of Fund shares, or redemptions of Portfolio shares,
may be obtained from, FSC, principal distributor for each of the Fund and the
Portfolio, at 800-245-5000.
Reference is made to the Prospectus of the Fund dated October 31,
1994, and the Prospectus of the Portfolio dated January 31, 1994 for a
complete description of the purchase and redemption procedures applicable to
purchases and redemptions of Fund and Portfolio shares, respectively, each of
which is incorporated herein by reference thereto. Set forth below is a brief
listing of the significant purchase and redemption procedures of each of the
Fund and the Portfolio.
Purchases of shares of the Fund may be made through an investment
dealer who has an agreement with FSC or by wire or check. The minimum initial
investment in the Fund is $1,500. Subsequent investments must be in amounts
of at least $100. As of October 17, 1994, the Portfolio ceased offering its
shares for sale except for dividend reinvestments by existing shareholders.
The purchase price of shares of both the Fund and the Portfolio is
based on net asset value. The net asset value for each of the Fund and the
Portfolio is calculated at 4:00 p.m. (Eastern time) on each day on which the
Fund and the Portfolio compute their net asset value. Purchase and redemption
orders for the Fund and redemption orders for the Portfolio received from
broker/dealers before 5:00 p.m. (Eastern time) and from financial institutions
before 4:00 p.m. (Eastern time) may be entered at that day's price. Purchase
orders by wire are considered received when the Fund's transfer agent's bank,
State Street Bank and Trust Company ("State Street Bank"), receives payment by
wire. Purchase orders received by check are considered received after the
check is converted into federal funds, which normally occurs one day after
receipt by State Street Bank.
Fund shareholders have exchange rights with respect to shares in a
family of thirteen funds known as the Fortress Investment Program (the
"Program"), each of which has different investment objectives and policies.
Shares in the Fund may be exchanged for shares in the Program at net asset
value without a sales load (if previously paid) or a contingent deferred sales
charge. Portfolio shareholders also had exchange rights with respect to
certain other investment companies. However, such other investment companies
are no longer offering their shares for sale. Shares of the Fund may be
exchanged on a periodic systematic basis or upon individual request, and must
have a net asset value which meets the minimum investment requirement for the
fund into which the exchange is being made. Exercise of the exchange
privilege is treated as a sale for federal income tax purposes and,
accordingly, may have tax consequences for the shareholder. Information on
share exchanges may be obtained from FSC.
Redemptions of Fund shares may be made through a financial
institution, by mailing a written request or through the Fund's Systematic
Withdrawal Program. Shares are redeemed at their net asset value next
determined after the redemption request is received by FSC. Proceeds will be
distributed by check within seven days after receipt of a redemption request.
Generally, redemption of Portfolio shares may be made through a
financial institution, by mailing a written request or through the Portfolio's
Systematic Withdrawal Program. Shares are redeemed at their net asset value
next determined after the redemption request is received by FSC. Proceeds
will be distributed by check within seven days after receipt of a redemption
request.
Tax Consequences
As a condition to the Reorganization transactions, the Fund and the
Corporation will receive an opinion of counsel that the Reorganization will be
considered a tax-free "reorganization" under applicable provisions of the
Internal Revenue Code so that no gain or loss will be recognized by either the
Fund or the Portfolio or their shareholders. The tax cost basis of the Fund
shares received by Portfolio shareholders will be the same as the tax cost
basis of their shares in the Portfolio.
RISK FACTORS
Investment in the Fund is subject to certain risks which are set
forth in the Fund's Prospectus dated October 31, 1994 and the Statement of
Additional Information dated October 31, 1994 and incorporated herein by
reference thereto. Briefly, these risks include, but are not limited to, the
ability of the issuers of bonds owned by the Fund to meet their obligations
for the payment of principal and interest when due; fluctuation in the value
of the shares; gain or loss in the sale of bonds by the Fund based on interest
rate sensitivity and changes in the perceived quality of the credit of the
issuer; economic, political and regulatory developments which affect bonds
whose revenues are from similar projects or where issuers share the same
geographic location when such bonds constitute a large portion of the Fund's
portfolio; and narrow markets for lower rated and unrated bonds.
Investment in the Portfolio carries risks as well, as more fully
described in the Portfolio's Prospectus dated January 31, 1994 and the
Statement of Additional Information dated January 31, 1994. Such risks
include, but are not limited to, general market conditions in the municipal
note market and the municipal bond market; the size of the offering; the
maturity of the obligations and the rating of the issue; and the ability of
issuers or guarantors to meet their obligations for payment of interest and
principal when due.
INFORMATION ABOUT THE REORGANIZATION
Background and Reasons for the Proposed Reorganization
The Portfolio was established in 1993 to provide investors with the
opportunity to earn a high level of current income exempt from the federal
regular income tax. In an effort to remain competitive with other investment
companies with similar investment objectives, the Adviser waived all of its
investment advisory fees and reimbursed the Portfolio for certain operating
expenses, resulting in aggregate fee waivers and expense reimbursements of
$50,173 for the Portfolio's fiscal year ended November 30, 1993 and $199,042
for the six month ended May 31, 1994. However, by September 30, 1994, the
Portfolio's net assets had grown only to $6,443,205. In the opinion of FSC,
the Portfolio's principal underwriter, the Portfolio suffered from a lack of
investor interest sufficient to permit it to grow to a size which would permit
it to operate efficiently. Although FSC expended significant marketing
efforts to promote sales of the Portfolio's shares, the negative investment
climate for municipal securities throughout 1994 impeded sales of Portfolio
shares and FSC concluded that it was unlikely that the situation would improve
materially in the foreseeable future. In addition, the Adviser and its
affiliates concluded that they would be unable to continue to waive investment
advisory fees and reimburse operating expenses in order for the Portfolio to
continue to earn a yield on its investments competitive with other investment
companies with similar investment objectives.
As a result of these factors, in early November 1994, FSC notified
shareholders that it had ceased offering shares of the Portfolio for sale and
that it would recommend to the Corporation's Board of Directors that the
Portfolio be liquidated. It also indicated that the Adviser would cease
waiving its investment advisory fee after November 30, 1994 and that as a
result, the Portfolio's operating expenses could be expected to increase to
approximately 2.5%. FSC accordingly recommended to shareholders that they
voluntarily redeem their shares and indicated that all contingent deferred
sales charges that would otherwise be applicable to such redemptions would be
waived. In anticipation of voluntary redemptions, the Adviser restructured
the Portfolio's investments by emphasizing shorter-term municipal securities.
Although many shareholders of the Portfolio elected to redeem their
shares as a result of the foregoing developments, a significant number of
shareholders expressed dissatisfaction both with this alternative and the
overall determination to recommend liquidation of the Portfolio. After
consultation with many shareholders as well as various broker dealers and
other financial institutions who had sold Portfolio shares, FSC voluntarily
determined to reimburse shareholders of the Portfolio as of October 13, 1994,
$60,000, or approximately $0.084 per share, in order to restore to
shareholders a portion of the decrease in the dollar value of shareholders'
investments in the Portfolio. As a result, FSC and the Adviser recommended to
the Board of Directors of the Corporation that it consider the feasibility of
transferring the Portfolio's assets to another investment company in exchange
for shares of such other investment company in a transaction which would be
tax-free to the Portfolio and its shareholders. Recognizing that many
shareholders may not have wished to redeem their shares of the Portfolio, FSC
and the Adviser recommended to the Corporation's Board of Directors a transfer
of the Portfolio's assets to the Fund, which seeks to earn interest income
exempt from the federal regular income tax.
The Board of Directors of the Corporation evaluated this proposal as
well as other alternatives, including liquidation of the Portfolio. The
Directors concluded that this transaction would be in the best interests of
shareholders because the Portfolio was unlikely to reach economic size on its
own, as a result of relatively high expenses, and that net yield on an
investment in the Portfolio would not be attractive to shareholders.
With assets of approximately $411,672,068 at December 31, 1994, the
Corporation's Board of Directors concluded that the Fund was of a size to
provide operating efficiencies and economies of scale sufficient to provide
shareholders with competitive investment returns and net income exempt from
the federal regular income tax. The Directors also took account of the fact
that the Fund also receives investment advisory services from the Adviser and
that the Fund and its shareholders receive similar administrative and other
shareholder services as presently enjoyed by the Portfolio and its
shareholders. The Directors noted that the Fund's investment advisory fee of
0.60% of average daily net assets is higher than the Portfolio's investment
advisory fee of 0.40% of average daily net assets, but concluded that this
difference in advisory fees is offset by the lower overall expenses of the
Fund as compared to the Portfolio.
Accordingly, the Corporation's Board of Directors, including a
majority of the independent Directors, determined that participation in the
Reorganization is in the best interests of the Portfolio and that the
interests of Portfolio shareholders would not be diluted as a result of its
effecting the Reorganization. Based upon the foregoing considerations, and
the fact that shareholders of the Portfolio will not suffer any adverse tax
consequences as a result of the Reorganization, the Board of Directors of the
Corporation unanimously voted to approve, and recommend to Portfolio
shareholders the approval of, the Reorganization.
The Board of Directors of the Fund, including the independent
Directors, have unanimously concluded that consummation of the Reorganization
is in the best interests of the Fund and the shareholders of the Fund and that
the interests of Fund shareholders would not be diluted as a result of
effecting the Reorganization and have unanimously approved the Plan. In the
event shareholders of the Portfolio do not approve the Plan, the Corporation's
Board of Directors will consider other alternatives which would address the
Portfolio's uneconomic size. These may include a plan of liquidation or
another transaction.
Description of the Plan of Reorganization
The Plan provides that the Fund will acquire all of the assets of
the Portfolio in exchange for Fund shares to be distributed pro rata by the
Portfolio to its shareholders in complete liquidation of the Portfolio on or
about March 30, 1995 (the "Closing Date"). Shareholders of the Portfolio will
become shareholders of the Fund as of the close of business on the Closing
Date and will begin accruing dividends on the next day. Shareholders of the
Fund will accrue their last dividend from the Fund on the Closing Date.
Consummation of the Reorganization is subject to the conditions set
forth in the Plan, including receipt of an opinion in form and substance
satisfactory to the Corporation, on behalf of the Portfolio, and the Fund as
described under the caption "Federal Income Tax Consequences" below. The Plan
may be terminated and the Reorganization may be abandoned at any time before
or after approval by shareholders of the Portfolio prior to the Closing Date
by either party if it believes that consummation of the Reorganization would
not be in the best interests of its shareholders.
The Adviser is responsible for the payment of all expenses of the
Reorganization incurred by either party, whether or not the Reorganization is
consummated. Such expenses include, but are not limited to, accountants'
fees, legal fees, registration fees, transfer taxes (if any), the fees of
banks and transfer agents and the costs of preparing, printing, copying and
mailing proxy solicitation materials to the Portfolio's shareholders and the
costs of holding the Special Meeting of Shareholders.
The foregoing description of the Plan entered into between the Fund and the
Corporation, on behalf of the Portfolio, is qualified in its entirety by the
terms and provisions of the Plan, a copy of which is attached hereto as
Exhibit A and incorporated herein by reference thereto.
Description of Portfolio Shares
Shares of the Fund to be issued to shareholders of the Portfolio
under the Plan will be fully paid and nonassessable when issued and
transferable without restriction and will have no preemptive or conversion
rights. Reference is hereby made to the Prospectus of the Fund dated
October 31, 1994 provided herewith for additional information about Fund
shares.
Federal Income Tax Consequences
As a condition to the Reorganization transactions, the Fund and the
Corporation, on behalf of the Portfolio, will receive an opinion from
Dickstein, Shapiro & Morin, L.L.P., counsel to the Fund and the Corporation,
to the effect that, on the basis of the existing provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), current administrative rules
and court decisions, for federal income tax purposes: (1) the Reorganization
as set forth in the Plan will constitute a tax-free reorganization under
section 368(a)(1)(C) of the Code; (2) no gain or loss will be recognized by
the Fund upon its receipt of the Portfolio's assets solely in exchange for
Fund shares; (3) no gain or loss will be recognized by the Portfolio upon the
transfer of its assets to the Fund in exchange for Fund shares or upon the
distribution (whether actual or constructive) of the Fund shares to the
Portfolio shareholders in exchange for their shares of the Portfolio; (4) no
gain or loss will be recognized by shareholders of the Portfolio upon the
exchange of their Portfolio shares for Fund shares; (5) the tax basis of the
Portfolio's assets acquired by the Fund will be the same as the tax basis of
such assets to the Portfolio immediately prior to the Reorganization; (6) the
tax basis of Fund shares received by each shareholder of the Portfolio
pursuant to the Plan will be the same as the tax basis of Portfolio shares
held by such shareholder immediately prior to the Reorganization; (7) the
holding period of the assets of the Portfolio in the hands of the Fund will
include the period during which those assets were held by the Portfolio; and
(8) the holding period of Fund shares received by each shareholder of the
Portfolio pursuant to the Plan will include the period during which the
Portfolio shares exchanged therefor were held by such shareholder, provided
the Portfolio shares were held as capital assets on the date of the
Reorganization.
Comparative Information on Shareholder Rights and Obligations
The Fund is organized as a corporation under the laws of the State
of Maryland. The Fund is not required to hold annual meetings of shareholders
except when required to do so under the 1940 Act. A special meeting of
shareholders of the Fund shall be called by the Chairman, Secretary or any
Director upon the written request of the holders of at least 25% of the
outstanding shares of the Fund. Each share of the Fund is entitled to one
vote at all meetings of shareholders.
The Corporation is organized as a corporation under the laws of the
State of Maryland. The Corporation is not required to hold annual meetings of
shareholders. Shareholder approval is necessary only for certain changes in
operations or the election of Directors under certain circumstances. A
special meeting of shareholders of the Corporation for any permissible purpose
shall be called by the Directors upon the written request of the holders of at
least 25% of the outstanding shares entitled to be cast at the meeting. Each
share of the Portfolio is entitled to one vote. All shares of the Corporation
have equal voting rights except that in matters affecting only a particular
portfolio or class, only shares of that portfolio or class are entitled to
vote.
Capitalization
The following table sets forth the unaudited capitalization of the
Fund and the Portfolio as of December 31, 1994 and on a pro forma basis as of
that date:
Pro Forma Fund
Portfolio Combined
Net Assets $411,672,068 $306,943 $411,979,011
Price Per Share
(NAV) 10.02 8.30 10.02
INFORMATION ABOUT THE FUND, THE
PORTFOLIO AND THE CORPORATION
Fortress Municipal Income Fund, Inc.
Information about the Fund is contained in the Fund's current
Prospectus dated October 31, 1994, a copy of which is included herewith and
incorporated by reference herein. Additional information about the Fund is
included in the Fund's Statement of Additional Information dated October 31,
1994, which is incorporated herein by reference. Copies of the Statement of
Additional Information, which has been filed with the Securities and Exchange
Commission (the "SEC"), may be obtained without charge by contacting the Fund
at 1-800-245-5000 or by writing the Fund at Federated Investors Tower,
Pittsburgh, PA 15222-3779. The Fund is subject to the informational
requirements of the 1933 Act, the Securities Exchange Act of 1934 (the "1934
Act") and the 1940 Act and in accordance therewith files reports and other
information with the SEC. Reports, proxy and information statements and other
information filed by the Fund, can be obtained by calling or writing the Fund
and can also be inspected and copied by the public at the public reference
facilities maintained by the SEC in Washington, D.C. located at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549 and at certain of its regional
offices located at Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Chicago, IL 60661 and 13th Floor, Seven World Trade Center, New York,
NY 10048. Copies of such material can be obtained at prescribed rates from
the Public Reference Branch, Office of Consumer Affairs and Information
Services, SEC, 450 Fifth Street, N.W., Washington, D.C. 20549.
This Prospectus/Proxy Statement, which constitutes part of a
Registration Statement filed by the Fund with the SEC under the 1933 Act,
omits certain of the information contained in the Registration Statement.
Reference is hereby made to the Registration Statement and to the exhibits
thereto for further information with respect to the Fund and the shares
offered hereby. Statements contained herein concerning the provisions of
documents are necessarily summaries of such documents, and each such statement
is qualified in its entirety by reference to the copy of the applicable
documents filed with the SEC.
Multi-State Municipal Income Fund, a portfolio of Fixed Income Securities,
Inc.
Information about the Portfolio and the Corporation is contained in
the Portfolio's current Prospectus dated January 31, 1994 and its Statement of
Additional Information dated January 31, 1994, which are incorporated herein
by reference. Copies of such Prospectus and Statement of Additional
Information may be obtained without charge from the Fund by calling 1-800-245-
5000 or by writing to the Fund at Federated Investors Tower, Pittsburgh, PA
15222-3779. The Corporation is subject to the informational requirements of
the 1933 Act, the 1934 Act and the 1940 Act and in accordance therewith files
reports and other information with the SEC. Reports, proxy and information
statements and other information filed by the Corporation can be obtained by
calling or writing the Fund and can also be inspected at the public reference
facilities maintained by the SEC or obtained at prescribed rates at the
addresses listed in the previous section.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of the Corporation of proxies for use
at the Special Meeting of Shareholders (the "Meeting") to be held on March 30,
1995 and at any adjournment thereof. The proxy confers discretionary
authority on the persons designated therein to vote on other business not
currently contemplated which may properly come before the Meeting. A proxy,
if properly executed, duly returned and not revoked, will be voted in
accordance with the specifications thereon; if no instructions are given, such
proxy will be voted in favor of the Plan. A shareholder may revoke a proxy at
any time prior to use by filing with the Secretary of the Corporation an
instrument revoking the proxy, by submitting a proxy bearing a later date or
by attending and voting at the Meeting.
The cost of the solicitation, including the printing and mailing of
proxy materials, will be borne by the Adviser. In addition to solicitations
through the mails, proxies may be solicited by officers, employees and agents
of the Corporation and the Adviser at no additional cost to the Corporation.
Such solicitations may be by telephone. The Adviser will reimburse
custodians, nominees and fiduciaries for the reasonable costs incurred by them
in connection with forwarding solicitation materials to the beneficial owners
of shares held of record by such persons.
Outstanding Shares and Voting Requirements
The Board of Directors of the Corporation has fixed the close of
business on February 10, 1995 as the record date for the determination of
shareholders entitled to notice of and to vote at the Special Meeting of
Shareholders and any adjournment thereof. As of the record date, there were
__________ shares of the Portfolio outstanding. Each Portfolio share is
entitled to one vote and fractional shares have proportionate voting rights.
On the record date, ________ owned of record _____ shares, or ___%, of the
Portfolio's outstanding shares. On such date, no other person owned of
record, or to the knowledge of the Adviser, beneficially owned, 5% or more of
the Portfolio's outstanding shares. On the record date, the Directors and
officers of the Portfolio as a group owned less than 1% of the outstanding
shares of the Portfolio.
As of the record date, there were __________ shares of the Fund
outstanding. In addition on the record date, ________ owned of record _____
shares, or ___%, respectively, of the Fund's outstanding shares. On such
date, no other person owned of record, or to the knowledge of the Adviser,
beneficially owned, 5% or more of the Fund's outstanding shares. On the
record date, the Directors and officers of the Fund as a group owned less than
1% of the outstanding shares of the Fund.
Approval of the Plan requires the affirmative vote of the lesser of
(1) 67% of the shares of the Portfolio present at the Special Meeting, if the
holders of more than 50% of the outstanding shares are present or represented
by proxy, or (2) a majority of the outstanding shares of the Portfolio. The
votes of shareholders of the Fund are not being solicited since their approval
is not required in order to effect the Reorganization.
One-third of the outstanding shares of the Portfolio, represented in
person or by proxy, will be required to constitute a quorum at the Special
Meeting for the purpose of voting on the proposed Reorganization. For
purposes of determining the presence of a quorum, shares represented by
abstentions and "broker non-votes" will be counted as present, but not as
votes cast, at the Special Meeting. Under the 1940 Act, however, which
governs this transaction, matters subject to the requirements of the 1940 Act,
including the Reorganization, are determined on the basis of a percentage of
votes present at the Special Meeting, which would have the effect of treating
abstentions and "broker non-votes" as if they were votes against the proposal.
Dissenter's Right of Appraisal
Shareholders of the Portfolio objecting to the Reorganization have
no appraisal rights under the Corporation's Articles of Incorporation or
Maryland law. Under the Plan, if approved by Portfolio shareholders, each
Portfolio shareholder will become the owner of Fund shares having a total net
asset value equal to the total net asset value of his or her holdings in the
Portfolio at the Closing Date.
Other Matters
Management of the Corporation knows of no other matters that may
properly be, or which are likely to be, brought before the meeting. However,
if any other business shall properly come before the meeting, the persons
named in the proxy intend to vote thereon in accordance with their best
judgment.
So far as management is presently informed, there is no litigation
pending or threatened against the Fund.
Whether or not shareholders expect to attend the meeting, all
shareholders are urged to sign, fill in and return the enclosed proxy form
promptly.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated January 5, 1995 (the
"Agreement"), between FORTRESS MUNICIPAL INCOME FUND, INC., a Maryland
corporation (hereinafter called the "Acquiring Fund"), and FIXED INCOME
SECURITIES, INC., a Maryland corporation (hereinafter called the
"Corporation") on behalf of its portfolio MULTI-STATE MUNICIPAL INCOME FUND
(hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of
the United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of
the assets of the Acquired Fund in exchange solely for shares of common stock
of the Acquiring Fund (the "Acquiring Fund Shares") and the distribution,
after the Closing Date hereinafter referred to, of the Acquiring Fund Shares
to the shareholders of the Acquired Fund in liquidation of the Acquired Fund
as provided herein, all upon the terms and conditions hereinafter set forth in
this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are registered
open-end management investment companies and the Acquired Fund owns securities
in which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are
authorized to issue shares of common stock;
WHEREAS, the Board of Directors, including a majority of the
Directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Acquiring Fund has
determined that the exchange of all or substantially all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquiring Fund shareholders and that the interests of the existing
shareholders of the Acquiring Fund would not be diluted as a result of this
transaction; and
WHEREAS, the Board of Directors, including a majority of the
Directors who are not "interested persons" (as defined under the 1940 Act), of
the Acquired Fund has determined that the exchange of all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquired Fund shareholders and that the interests of the existing shareholders
of the Acquired Fund would not be diluted as a result of this transaction;
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund agrees to assign, transfer and convey to the Acquiring Fund all of the
assets of the Acquired Fund, including all securities and cash, and the
Acquiring Fund agrees in exchange therefor (i) to deliver to the Acquired Fund
the number of Acquiring Fund Shares, including fractional Acquiring Fund
Shares, determined as set forth in paragraph 2.3. Such transaction shall take
place at the closing (the "Closing") on the closing date (the "Closing Date")
provided for in paragraph 3.1. In lieu of delivering certificates for the
Acquiring Fund Shares, the Acquiring Fund shall credit the Acquiring Fund
Shares to the Acquired Fund's account on the stock record books of the
Acquiring Fund and shall deliver a confirmation thereof to the Acquired Fund.
1.2 The Acquired Fund will discharge all of its liabilities and
obligations prior to the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street Bank
and Trust Company (hereinafter called "State Street"), Boston, Massachusetts,
the Acquiring Fund's custodian (the "Custodian"), for the account of the
Acquiring Fund, together with proper instructions and all necessary documents
to transfer to the account of the Acquiring Fund, free and clear of all liens,
encumbrances, rights, restrictions and claims. All cash delivered shall be in
the form of currency and immediately available funds payable to the order of
the Custodian for the account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund thereunder. The Acquired
Fund will transfer to the Acquiring Fund any distributions, rights or other
assets received by the Acquired Fund after the Closing Date as distributions
on or with respect to the securities transferred. Such assets shall be deemed
included in assets transferred to the Acquiring Fund on the Closing Date and
shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable, the
Acquired Fund will liquidate and distribute pro rata to the Acquired Fund's
shareholders of record, determined as of the close of business on the Closing
Date (the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by
the Acquired Fund pursuant to paragraph 1.1. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund Shares
then credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share record books of the Acquiring
Fund in the names of the Acquired Fund Shareholders and representing the
respective pro rata number of the Acquiring Fund Shares due such shareholders.
All issued and outstanding shares of the Acquired Fund will simultaneously be
canceled on the books of the Acquired Fund. Share certificates representing
interests in the Acquired Fund will represent a number of Acquiring Fund
Shares after the Closing Date as determined in accordance with Section 2.3.
The Acquiring Fund shall not issue certificates representing the Acquiring
Fund Shares in connection with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus and
statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund shares
on the books of the Acquired Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Corporation.
2. VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of 4:00
p.m. (Eastern time) on the Closing Date (such time and date being hereinafter
called the "Valuation Date"), using the valuation procedures set forth in the
Acquiring Fund's then-current prospectus or statement of additional
information.
2.2 The net asset value of an Acquiring Fund Share shall be the net
asset value per share computed as of 4:00 p.m. (Eastern time) on the
Valuation Date, using the valuation procedures set forth in the Acquiring
Fund's then-current prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in paragraph
2.1 by the net asset value of one Acquiring Fund Share determined in
accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be March 30, 1995 or such later date as the
parties may mutually agree. All acts taking place at the Closing Date shall
be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place as
the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of the
value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 Federated Services Company, as transfer agent for each of the
Acquired Fund and the Acquiring Fund, shall deliver at the Closing a
certificate of an authorized officer stating that its records contain the
names and addresses of the Acquired Fund Shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver
a confirmation evidencing the Acquiring Fund Shares to be credited on the
Closing Date to the Secretary of the Acquired Fund, or provide evidence
satisfactory to the Acquired Fund that such Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund.
At the Closing, each party shall deliver to the other such bills of sale,
checks, assignments, assumption agreements, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Acquired Fund represents and warrants to the Acquiring Fund as
follows:
(a) The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland
and has power to own all of its properties and assets and to carry out this
Agreement.
(b) The Corporation is registered under the 1940 Act, as
an open-end, management investment company, and such registration has not been
revoked or rescinded and is in full force and effect.
(c) The Acquired Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Corporation's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquired Fund is a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquired Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquired Fund knows of no facts which might form the basis for the institution
of such proceedings, and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially
and adversely affects its business or its ability to consummate the
transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "Commission") hereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein as necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) The Statements of Assets and Liabilities of the
Acquired Fund at November 30, 1993 and 1994 have been audited by Deloitte &
Touche LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, consistently applied, and such
statements (copies of which have been furnished to the Acquiring Fund) fairly
reflect the financial condition of the Acquired Fund as of such dates, and
there are no known contingent liabilities of the Acquired Fund as of such
dates not disclosed therein.
(h) Since November 30, 1994, there has not been any
material adverse change in the Acquired Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquired Fund of indebtedness maturing more
than one year from the date such indebtedness was incurred, except as
otherwise disclosed to and accepted by the Acquiring Fund.
(i) At the Closing Date, all Federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
dates shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquired Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(j) For each fiscal year of its operation, the Acquired
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. All of the issued and outstanding shares of
the Acquired Fund will, at the time of the Closing, be held by the persons and
in the amounts set forth in the records of the transfer agent as provided in
paragraph 3.3. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquired Fund
shares, nor is there outstanding any security convertible into any of the
Acquired Fund Shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets to
be transferred by it hereunder.
(m) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Acquired Fund's Directors and, subject to
the approval of the Acquired Fund Shareholders, this Agreement will constitute
the valid and legally binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a proceeding
in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund
(the "Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (other than information therein that
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
(o) The Acquired Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
4.2 The Acquiring Fund represents and warrants to the Acquired Fund as
follows:
(a) The Acquiring Fund is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland
and the Acquiring Fund has the power to carry on its business as it is now
being conducted and to carry out this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as
an open-end, diversified, management investment company, and such registration
has not been revoked or rescinded and is in full force and effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquiring Fund's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquiring Fund knows of no facts which might form the basis for the
institution of such proceedings, and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to
consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the
Acquiring Fund at August 31, 1993 and 1994, have been audited by Deloitte &
Touche LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, and such statements (copies of which
have been furnished to the Acquired Fund) fairly reflect the financial
condition of the Acquiring Fund as of such dates, and there are no known
contingent liabilities of the Acquiring Fund as of such dates not disclosed
therein.
(g) Since August 31, 1994, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of indebtedness maturing
more than one year from the date such indebtedness was incurred, except as
disclosed to and accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed by such
date shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquiring Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(i) For each fiscal year of its operation, the Acquiring
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(j) All issued and outstanding shares of the Acquiring
Fund are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any of the Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares.
(k) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action, if any, on the part of the Acquiring Fund's Trustees, and
this Agreement will constitute the valid and legally binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject to the effect
of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
and other similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto, and to general principles of equity
and the discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading.
(m) The Acquiring Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date,
it being understood that such ordinary course of business will include
customary dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and do
or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in
such form as is reasonably satisfactory to the Acquiring Fund, a statement of
the earnings and profits of the Acquired Fund for Federal income tax purposes
which will be carried over to the Acquiring Fund as a result of Section 381 of
the Code and which will be certified by the Acquired Fund's President and its
Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(m), all
to be included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquired Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of the Acquired Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such securities by lot
and the holding periods of such securities, as of the Closing Date, certified
by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of the
Acquired Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquiring Fund shall
reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquiring Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquired Fund shall
reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness, except
as otherwise disclosed to and accepted by the Acquired Fund.
8. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares
of the Acquired Fund in accordance with the provisions of the Corporation's
Articles of Incorporation.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit consummation,
in all material respects, of the transactions contemplated hereby shall have
been obtained, except where failure to obtain any such consent, order or
permit would not involve a risk of a material adverse effect on the assets or
properties of the Acquiring Fund or the Acquired Fund, provided that either
party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 The Acquiring Fund and the Acquired Fund shall have received an
opinion of Dickstein, Shapiro & Morin, L.L.P. substantially to the effect that
for Federal income tax purposes:
(a) The transfer of all or substantially all of the
Acquired Fund assets in exchange for the Acquiring Fund Shares and the
distribution of the Acquiring Fund Shares to the Acquired Fund Shareholders in
liquidation of the Acquired Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code; (b) No gain or loss will be
recognized by the Acquiring Fund upon the receipt of the assets of the
Acquired Fund solely in exchange for the Acquiring Fund Shares; (c) No gain or
loss will be recognized by the Acquired Fund upon the transfer of the Acquired
Fund assets to the Acquiring Fund in exchange for the Acquiring Fund Shares or
upon the distribution (whether actual or constructive) of the Acquiring Fund
Shares to Acquired Fund Shareholders in exchange for their shares of the
Acquired Fund; (d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the Acquiring
Fund Shares; (e) The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization; (f) The tax basis of
the Acquiring Fund Shares received by each of the Acquired Fund Shareholders
pursuant to the Reorganization will be the same as the tax basis of the
Acquired Fund shares held by such shareholder immediately prior to the
Reorganization; (g) The holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which those
assets were held by the Acquired Fund; and (h) The holding period of the
Acquiring Fund Shares to be received by each Acquired Fund Shareholder will
include the period during which the Acquired Fund shares exchanged therefor
were held by such shareholder (provided the Acquired Fund shares were held as
capital assets on the date of the Reorganization).
9. TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Directors of the
Corporation or the Board of Directors of the Acquiring Fund at any time prior
to the Closing Date (and notwithstanding any vote of the Board of Directors of
the Acquired Fund) if circumstances should develop that, in the opinion of
either of the parties' Board, make proceeding with the Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on the
part of any party hereto or the directors, officers or shareholders of the
Acquiring Fund or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Directors of the Acquiring Fund or of
the Acquired Fund, if, in the judgment of either, such waiver will not have a
material adverse effect on the benefits intended under this Agreement to the
shareholders of the Acquiring Fund or of the Acquired Fund, as the case may
be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings of
every kind and nature between them relating to the subject matter hereof.
Neither party shall be bound by any condition, definition, warranty or
representation, other than as set forth or provided in this Agreement or as
may be set forth in a later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania, without giving effect
to principles of conflict of laws.
11.4 This Agreement may be executed in any number of counterparts, each
of which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason
of this Agreement.
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the date
first above written.
Acquired Fund:
FIXED INCOME SECURITIES, INC.,
on behalf of its portfolio,
MULTI-STATE MUNICIPAL INCOME FUND
Attest:
By:/s/John W. McGonigle
/s/Charles H. Field
Assistant Secretary Name:John W. McGonigle
Title:Vice President
Acquiring Fund:
FORTRESS MUNICIPAL INCOME
FUND, INC.
Attest:
By: /s/Richard B. Fisher
/s/Charles H. Field
Assistant Secretary Name:Richard B. Fisher
Title:President
STATEMENT OF ADDITIONAL INFORMATION
February 18, 1995
Acquisition of the assets of
MULTI-STATE MUNICIPAL INCOME FUND,
a Portfolio of FIXED INCOME SECURITIES, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
By and in exchange for shares of
FORTRESS MUNICIPAL INCOME FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-245-5000
This Statement of Additional Information dated February 18, 1995 is
not a prospectus. A Prospectus/Proxy Statement dated February 18, 1995
related to the above-referenced matter may be obtained from Fortress Municipal
Income Fund, Inc., Federated Investors Tower, Pittsburgh, Pennsylvania 15222-
3779. This Statement of Additional Information should be read in conjunction
with such Prospectus/Proxy Statement.
TABLE OF CONTENTS
1. Statement of Additional Information of Fortress Municipal
Income Fund, Inc., dated October 31, 1994
2. Statement of Additional Information of Multi-State Municipal
Income Fund, a portfolio of Fixed Income Securities, Inc., dated January 31,
1994
3. Financial Statements of Fortress Municipal Income Fund,
Inc., dated August 31, 1994
4. Financial Statements of Multi-State Municipal Income Fund, a
portfolio of Fixed Income Securities, Inc., dated November 30, 1993
5.Financial Statements (Unaudited) of Multi-State Municipal Income
Fund, dated May 31, 1994
The Statement of Additional Information of Fortress Municipal Income
Fund, Inc. (the "Fund"), dated October 31, 1994, is incorporated herein by
reference to Post-Effective Amendment No. 10 to the Fund's Registration
Statement on Form N-1A (File Nos. 33-11410 and 811-4533) which was filed with
the Securities and Exchange Commission on or about October 26, 1994. A copy
may be obtained from the Fund at Federated Investors Tower, Pittsburgh, PA
15222-3279; telephone number: 1-800-245-5000.
The Statement of Additional Information of Multi-State Municipal
Income Fund (the "Portfolio"), a portfolio of Fixed Income Securities, Inc.
(the "Corporation"), dated January 31, 1994, is incorporated herein by
reference to Post-Effective Amendment No. 8 to the Corporation's Registration
Statement on Form N-1A (File Nos. 33-43472 and 811-6447) which was filed with
the Securities and Exchange Commission on or about January 28, 1994.
The audited financial statements of the Fund, dated August 31, 1994,
are incorporated herein by reference to the Fund's Prospectus dated October
31, 1994 which was filed with the Securities and Exchange Commission in Post-
Effective Amendment No. 10 to the Fund's Registration Statement on Form N-1A
(File Nos. 33-11410 and 811-4533) on or about October 26, 1994.
The audited financial statements of the Portfolio, dated
November 30, 1993, are incorporated herein by reference to the Portfolio's
Prospectus dated January 31, 1994 which was filed with the Securities and
Exchange Commission in Post-Effective Amendment No. 8 to the Corporation's
Registration Statement on Form N-1A (File Nos. 33-43472 and 811-6447) on or
about January 28, 1994.
The unaudited financial statements of the Portfolio, dated May 31,
1994, are incorporated herein by reference to the Portfolio's Semi-Annual
Report to the Shareholders which was filed with the Securities and Exchange
Commission on or about July 28, 1994.
Pro forma financial statements are not included herein as the total
net assets of the Portfolio do not exceed 10% of the total net assets of the
Fund. At December 31, 1994, the total net assets of the Fund were
$411,672,068 and the total net assets of the Portfolio were $306,943.
PART C - OTHER INFORMATION
Item 15. Indemnification
Indemnification is provided to directors and officers of the
Registrant pursuant to the Registrant's Articles of Incorporation, except
where such indemnification is not permitted by law. However, the Articles of
Incorporation do not protect the directors or officers from liability based on
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of their office.
Directors and officers of the Registrant are insured against certain
liabilities, including liabilities arising under the Securities Act of 1933
(the "Act").
Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers, and controlling persons of the Registrant
by the Registrant pursuant to the Articles of Incorporation or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by directors, officers, or controlling
persons of the Registrant in connection with the successful defense of any
act, suit, or proceeding) is asserted by such directors, officers, or
controlling persons in connection with the shares being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
Insofar as indemnification for liabilities may be permitted pursuant
to Section 17 of the Investment Company Act of 1940 for directors, officers,
or controlling persons of the Registrant by the Registrant pursuant to the
Articles of Incorporation or otherwise, the Registrant is aware of the
position of the Securities and Exchange Commission as set forth in Investment
Company Act Release No. IC-11330. Therefore, the Registrant undertakes that
in addition to complying with the applicable provisions of the Articles of
Incorporation or otherwise, in the absence of a final decision on the merits
by a court or other body before which the proceeding was brought, that an
indemnification payment will not be made unless in the absence of such a
decision, a reasonable determination based upon factual review has been made
(i) by a majority vote of a quorum of non-party directors who are not
interested persons of the Registrant or (ii) by independent legal counsel in
a written opinion that the indemnitee was not liable for an act of willful
misfeasance, bad faith, gross negligence, or reckless disregard of duties.
The Registrant further undertakes that advancement of expenses incurred in the
defense of a proceeding (upon undertaking for repayment unless it is
ultimately determined that indemnification is appropriate) against an officer,
director, or controlling person of the Registrant will not be made absent the
fulfillment of at least one of the following conditions: (i) the indemnitee
provides security for his undertaking; (ii) the Registrant is insured against
losses arising by reason of any lawful advances; or (iii) a majority of a
quorum of disinterested non-party directors or independent legal counsel in a
written opinion makes a factual determination that there is reason to believe
the indemnitee will be entitled to indemnification.
Item 16. Exhibits
1.1 Conformed Copy of Articles of Incorporation of the Registrant(1)
1.2 Conformed Copy of Amendment to Articles of Incorporation of the
Registrant(2)
2.1 Bylaws of the Registrant(2)
2.1 Amendment to Bylaws of the Registrant*
3. Not Applicable
4.1 Agreement and Plan of Reorganization dated January 5, 1995, between
Municipal Securities Income Trust, a Massachusetts business trust, on behalf
of its portfolio Florida Municipal Income Fund, and Fortress Municipal Income
Fund, Inc., a Maryland corporation*
4.2 Agreement and Plan of Reorganization dated January 5, 1995 between
Municipal Securities Income Trust, a Massachusetts business trust, on behalf
of its portfolio Maryland Municipal Income Fund, and Fortress Municipal Income
Fund, Inc., a Maryland corporation*
4.3 Agreement and Plan of Reorganization dated January 5, 1995 between
Municipal Securities Income Trust, a Massachusetts business trust, on behalf
of its portfolio New Jersey Municipal Income Fund, and Fortress Municipal
Income Fund, Inc., a Maryland corporation*
4.4 Agreement and Plan of Reorganization dated January 5, 1995 between
Municipal Securities Income Trust, a Massachusetts business trust, on behalf
of its portfolio Texas Municipal Income Fund, and Fortress Municipal Income
Fund, Inc., a Maryland corporation*
4.5 Agreement and Plan of Reorganization dated January 5, 1995 between
Municipal Securities Income Trust, a Massachusetts business trust, on behalf
of its portfolio Virginia Municipal Income Fund, and Fortress Municipal Income
Fund, Inc., a Maryland corporation*
4.6 Agreement and Plan of Reorganization dated January 5, 1995 between Fixed
Income Securities, Inc., a Maryland corporation, on behalf of its portfolio
Multi-State Municipal Income Fund, and Fortress Municipal Income Fund, Inc., a
Maryland corporation*
5. Copy of Specimen Certificate for Shares of Capital Stock of the
Registrant(1)
6. Conformed Copy of Investment Advisory Contract of the Registrant(3)
7. Conformed Copy of Administrative Support and Distributor's Contract of
the Registrant(4)
8. Not Applicable
9.1 Conformed Copy of Custodian Agreement of the Registrant(5)
9.2 Conformed Copy of Agency Agreement of the Registrant(4)
10.1 Conformed Copy of Distribution Plan of the Registrant, as amended(4)
10.2 Copy of Rule 12b-1 Agreement of the Registrant(1)
11. Opinion of Charles H. Field, Corporate Counsel, Federated Investors
regarding legality of shares being issued*
12.1 Opinion of Dickstein, Shapiro & Morin, L.L.P. regarding tax consequences
of Reorganization*
12.2 Opinion of Dickstein, Shapiro & Morin, L.L.P. regarding tax consequences
of Reorganization*
12.3 Opinion of Dickstein, Shapiro & Morin, L.L.P. regarding tax consequences
of Reorganization*
12.4 Opinion of Dickstein, Shapiro & Morin, L.L.P. regarding tax consequences
of Reorganization*
12.5 Opinion of Dickstein, Shapiro & Morin, L.L.P. regarding tax consequences
of Reorganization*
12.6 Opinion of Dickstein, Shapiro & Morin, L.L.P. regarding tax consequences
of Reorganization*
13.1 Conformed Copy of Shareholder Services Plan of the Registrant dated
March 1, 1993(5)
13.2 Conformed Copy of Shareholder Services Plan of the Registrant dated
March 1, 1994(5)
13.3 Conformed Copy of Administrative Services Agreement (5)
13.4 Conformed Copy of Shareholder Services Agreement (5)
13.5 Conformed Copy of Shareholder Services Sub-Contract (5)
13.6 Conformed Copy of Fund Accounting and Shareholder Recordkeeping
Agreement(5)
14.1 Conformed copy of Consent of Independent Auditors, Deloitte & Touche
LLP*
14.2 Consent of Legal Counsel, Dickstein, Shapiro & Morin, L.L.P. (contained
in Exhibit 12)
15. Not Applicable
16. Conformed Copy of Powers of Attorney*
17.1 Declaration under Rule 24f-2*
17.2 Form of Proxy of Florida Municipal Income Fund*
17.3 Form of Proxy of Maryland Municipal Income Fund*
17.4 Form of Proxy of New Jersey Municipal Income Fund*
17.5 Form of Proxy of Texas Municipal Income Fund*
17.6 Form of Proxy of Virginia Municipal Income Fund*
17.7 Form of Proxy of Multi-State Municipal Income Fund*
___________________
* Filed electronically.
(1) Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A Amendment No. 1 filed on January 21, 1987
(File Nos. 33-11410 and 811-4533).
(2) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed on October 24, 1990 (File Nos. 33-11410 and
811-4533).
(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 4 on Form N-1A filed on August 25, 1989 (File Nos. 33-11410 and
811-4533).
(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed on October 25, 1989 (File Nos. 33-11410 and
811-4533).
(5) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed on October 26, 1994 (File Nos. 33-11410
and 811-4533).
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public
reofferring of the securities registered through the use of a prospectus which
is a part of this Registration Statement by any person or party who is deemed
to be an underwriter within the meaning of Rule 145(c) of the Securities Act
of 1933, the reofferring prospectus will contain the information called for by
the applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that
is filed under paragraph (1) above will be filed as a part of an amendment to
the Registration Statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act of
1933, each post-effective amendment shall be deemed to be a new Registration
Statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide offering
of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Fortress Municipal Income Fund, Inc., has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Pittsburgh, Commonwealth of
Pennsylvania on January 19, 1995.
FORTRESS MUNICIPAL INCOME FUND, INC.
(Registrant)
By:/s/Richard B. Fisher
Richard B. Fisher
President
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on January 19, 1995:
/s/John F. Donahue Chairman and Director
John F. Donahue
(Chief Executive Officer)
/s/Richard B. Fisher President and Director
Richard B. Fisher
/s/Edward C. Gonzales Vice President and Treasurer
Edward C. Gonzales
(Principal Financial and
Accounting Officer)
/s/Thomas G. Bigley Director
Thomas G. Bigley
/s/John T. Conroy Director
John T. Conroy, Jr.
/s/William J. Copeland Director
William J. Copeland
/s/James E. Dowd Director
James E. Dowd
/s/Lawrence D. Ellis, M.D. Director
Lawrence D. Ellis, M.D.
/s/Edward L. Flaherty, Jr. Director
Edward L. Flaherty, Jr.
/s/Peter E. Madden Director
Peter E. Madden
/s/Gregor F. Meyer Director
Gregor F. Meyer
/s/Wesley W. Posvar Director
Wesley W. Posvar
/s/Marjorie P. Smuts Director
Marjorie P. Smuts
1* By: /s/ Charles H. Field
Attorney in Fact
_______________________________
1* Such signature has been affixed pursuant to a Power of Attorney.
Exhibit 2.1
Amendment to Bylaws
FORTRESS MUNICIPAL INCOME FUND, INC.
Effective January 5, 1995
ARTICLE I
ANNUAL MEETINGS
Section I. The Corporation is not required to hold an annual meeting of
shareholders in any year in which the election of directors is not required
to be acted upon under the Investment Company Act of 1940, as amended. If
the Corporation is required to hold a meeting of Shareholders to elect
directors, the meeting shall be designated the annual meeting of
Shareholders for that year. If an annual meeting of Shareholders is held,
it shall be held at a date and time determined by the Board of Directors
within 120 days after the occurrence of the event requiring the meeting.
Any other business may be considered at the meeting.
1K0901!.DOC;72585
1
Exhibit 4.1
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated January 5, 1995 (the
"Agreement"), between FORTRESS MUNICIPAL INCOME FUND, INC., a Maryland
corporation (hereinafter called the "Acquiring Fund"), and MUNICIPAL
SECURITIES INCOME TRUST, a Massachusetts business trust (hereinafter called
the "Trust") on behalf of its portfolio FLORIDA MUNICIPAL INCOME FUND
(hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of
the United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of
the assets of the Acquired Fund in exchange solely for shares of common stock
of the Acquiring Fund (the "Acquiring Fund Shares") and the distribution,
after the Closing Date hereinafter referred to, of the Acquiring Fund Shares
to the shareholders of the Acquired Fund in liquidation of the Acquired Fund
as provided herein, all upon the terms and conditions hereinafter set forth in
this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are registered open-
end management investment companies and the Acquired Fund owns securities in
which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are authorized
to issue shares of common stock or shares of beneficial interest, as the case
may be;
WHEREAS, the Board of Directors, including a majority of the
Directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Acquiring Fund has
determined that the exchange of all or substantially all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquiring Fund shareholders and that the interests of the existing
shareholders of the Acquiring Fund would not be diluted as a result of this
transaction; and
WHEREAS, the Board of Trustees, including a majority of the Trustees
who are not "interested persons" (as defined under the 1940 Act), of the
Acquired Fund has determined that the exchange of all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquired Fund shareholders and that the interests of the existing shareholders
of the Acquired Fund would not be diluted as a result of this transaction;
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund agrees to assign, transfer and convey to the Acquiring Fund all of the
assets of the Acquired Fund, including all securities and cash, and the
Acquiring Fund agrees in exchange therefor (i) to deliver to the Acquired Fund
the number of Acquiring Fund Shares, including fractional Acquiring Fund
Shares, determined as set forth in paragraph 2.3. Such transaction shall take
place at the closing (the "Closing") on the closing date (the "Closing Date")
provided for in paragraph 3.1. In lieu of delivering certificates for the
Acquiring Fund Shares, the Acquiring Fund shall credit the Acquiring Fund
Shares to the Acquired Fund's account on the stock record books of the
Acquiring Fund and shall deliver a confirmation thereof to the Acquired Fund.
1.2 The Acquired Fund will discharge all of its liabilities and
obligations prior to the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street Bank
and Trust Company (hereinafter called "State Street"), Boston, Massachusetts,
the Acquiring Fund's custodian (the "Custodian"), for the account of the
Acquiring Fund, together with proper instructions and all necessary documents
to transfer to the account of the Acquiring Fund, free and clear of all liens,
encumbrances, rights, restrictions and claims. All cash delivered shall be in
the form of currency and immediately available funds payable to the order of
the Custodian for the account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund thereunder. The Acquired
Fund will transfer to the Acquiring Fund any distributions, rights or other
assets received by the Acquired Fund after the Closing Date as distributions
on or with respect to the securities transferred. Such assets shall be deemed
included in assets transferred to the Acquiring Fund on the Closing Date and
shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable, the
Acquired Fund will liquidate and distribute pro rata to the Acquired Fund's
shareholders of record, determined as of the close of business on the Closing
Date (the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by
the Acquired Fund pursuant to paragraph 1.1. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund Shares
then credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share record books of the Acquiring
Fund in the names of the Acquired Fund Shareholders and representing the
respective pro rata number of the Acquiring Fund Shares due such shareholders.
All issued and outstanding shares of the Acquired Fund will simultaneously be
canceled on the books of the Acquired Fund. Share certificates representing
interests in the Acquired Fund will represent a number of Acquiring Fund
Shares after the Closing Date as determined in accordance with Section 2.3.
The Acquiring Fund shall not issue certificates representing the Acquiring
Fund Shares in connection with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus and
statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund shares
on the books of the Acquired Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Trust.
2. VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of 4:00
p.m. (Eastern time) on the Closing Date (such time and date being hereinafter
called the "Valuation Date"), using the valuation procedures set forth in the
Acquiring Fund's then-current prospectus or statement of additional
information.
2.2 The net asset value of an Acquiring Fund Share shall be the net
asset value per share computed as of 4:00 p.m. (Eastern time) on the
Valuation Date, using the valuation procedures set forth in the Acquiring
Fund's then-current prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in paragraph
2.1 by the net asset value of one Acquiring Fund Share determined in
accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be March 30, 1995 or such later date as the
parties may mutually agree. All acts taking place at the Closing Date shall
be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place as
the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of the
value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 Federated Services Company, as transfer agent for each of the
Acquired Fund and the Acquiring Fund, shall deliver at the Closing a
certificate of an authorized officer stating that its records contain the
names and addresses of the Acquired Fund Shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver
a confirmation evidencing the Acquiring Fund Shares to be credited on the
Closing Date to the Secretary of the Acquired Fund, or provide evidence
satisfactory to the Acquired Fund that such Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund.
At the Closing, each party shall deliver to the other such bills of sale,
checks, assignments, assumption agreements, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Acquired Fund represents and warrants to the Acquiring Fund as
follows:
(a) The Trust is a business trust duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has power to own all of its properties and assets and to
carry out this Agreement.
(b) The Trust is registered under the 1940 Act, as an open-
end, management investment company, and such registration has not been revoked
or rescinded and is in full force and effect.
(c) The Acquired Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Trust's Declaration of Trust or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquired Fund is
a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquired Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquired Fund knows of no facts which might form the basis for the institution
of such proceedings, and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially
and adversely affects its business or its ability to consummate the
transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "Commission") hereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein as necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) The Statements of Assets and Liabilities of the
Acquired Fund at August 31, 1993 and 1994 have been audited by Deloitte &
Touche, LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, consistently applied, and such
statements (copies of which have been furnished to the Acquiring Fund) fairly
reflect the financial condition of the Acquired Fund as of such dates, and
there are no known contingent liabilities of the Acquired Fund as of such
dates not disclosed therein.
(h) Since August 31, 1994, there has not been any material
adverse change in the Acquired Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business,
or any incurrence by the Acquired Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Acquiring Fund.
(i) At the Closing Date, all Federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
dates shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquired Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(j) For each fiscal year of its operation, the Acquired
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. All of the issued and outstanding shares of
the Acquired Fund will, at the time of the Closing, be held by the persons and
in the amounts set forth in the records of the transfer agent as provided in
paragraph 3.3. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquired Fund
shares, nor is there outstanding any security convertible into any of the
Acquired Fund Shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets to
be transferred by it hereunder.
(m) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Acquired Fund's Trustees and, subject to
the approval of the Acquired Fund Shareholders, this Agreement will constitute
the valid and legally binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a proceeding
in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund
(the "Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (other than information therein that
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
(o) The Acquired Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
4.2 The Acquiring Fund represents and warrants to the Acquired Fund as
follows:
(a) The Acquiring Fund is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland
and the Acquiring Fund has the power to carry on its business as it is now
being conducted and to carry out this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as
an open-end, diversified, management investment company, and such registration
has not been revoked or rescinded and is in full force and effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquiring Fund's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquiring Fund knows of no facts which might form the basis for the
institution of such proceedings, and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to
consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the
Acquiring Fund at August 31, 1993 and 1994, have been audited by Deloitte &
Touche, LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, and such statements (copies of which
have been furnished to the Acquired Fund) fairly reflect the financial
condition of the Acquiring Fund as of such dates, and there are no known
contingent liabilities of the Acquiring Fund as of such dates not disclosed
therein.
(g) Since August 31, 1994, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of indebtedness maturing
more than one year from the date such indebtedness was incurred, except as
disclosed to and accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed by such
date shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquiring Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(i) For each fiscal year of its operation, the Acquiring
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(j) All issued and outstanding shares of the Acquiring
Fund are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any of the Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares.
(k) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action, if any, on the part of the Acquiring Fund's Trustees, and
this Agreement will constitute the valid and legally binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject to the effect
of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
and other similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto, and to general principles of equity
and the discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading.
(m) The Acquiring Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date,
it being understood that such ordinary course of business will include
customary dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and do
or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in
such form as is reasonably satisfactory to the Acquiring Fund, a statement of
the earnings and profits of the Acquired Fund for Federal income tax purposes
which will be carried over to the Acquiring Fund as a result of Section 381 of
the Code and which will be certified by the Acquired Fund's President and its
Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(m), all
to be included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquired Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of the Acquired Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such securities by lot
and the holding periods of such securities, as of the Closing Date, certified
by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of the
Acquired Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquiring Fund shall
reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquiring Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquired Fund shall
reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness, except
as otherwise disclosed to and accepted by the Acquired Fund.
8. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares
of the Acquired Fund in accordance with the provisions of the Trust's
Declaration of Trust.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit consummation,
in all material respects, of the transactions contemplated hereby shall have
been obtained, except where failure to obtain any such consent, order or
permit would not involve a risk of a material adverse effect on the assets or
properties of the Acquiring Fund or the Acquired Fund, provided that either
party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 The Acquiring Fund and the Acquired Fund shall have received an
opinion of Dickstein, Shapiro & Morin, L.L.P. substantially to the effect that
for Federal income tax purposes:
(a) The transfer of all or substantially all of the
Acquired Fund assets in exchange for the Acquiring Fund Shares and the
distribution of the Acquiring Fund Shares to the Acquired Fund Shareholders in
liquidation of the Acquired Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code; (b) No gain or loss will be
recognized by the Acquiring Fund upon the receipt of the assets of the
Acquired Fund solely in exchange for the Acquiring Fund Shares; (c) No gain or
loss will be recognized by the Acquired Fund upon the transfer of the Acquired
Fund assets to the Acquiring Fund in exchange for the Acquiring Fund Shares or
upon the distribution (whether actual or constructive) of the Acquiring Fund
Shares to Acquired Fund Shareholders in exchange for their shares of the
Acquired Fund; (d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the Acquiring
Fund Shares; (e) The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization; (f) The tax basis of
the Acquiring Fund Shares received by each of the Acquired Fund Shareholders
pursuant to the Reorganization will be the same as the tax basis of the
Acquired Fund shares held by such shareholder immediately prior to the
Reorganization; (g) The holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which those
assets were held by the Acquired Fund; and (h) The holding period of the
Acquiring Fund Shares to be received by each Acquired Fund Shareholder will
include the period during which the Acquired Fund shares exchanged therefor
were held by such shareholder (provided the Acquired Fund shares were held as
capital assets on the date of the Reorganization).
9. TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Trustees of the Trust
or the Board of Directors of the Acquiring Fund at any time prior to the
Closing Date (and notwithstanding any vote of the Board of Trustees of the
Acquired Fund) if circumstances should develop that, in the opinion of either
of the parties' Board, make proceeding with the Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on the
part of any party hereto or the directors, officers or shareholders of the
Acquiring Fund or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Trustees of the Acquiring Fund or of
the Acquired Fund, if, in the judgment of either, such waiver will not have a
material adverse effect on the benefits intended under this Agreement to the
shareholders of the Acquiring Fund or of the Acquired Fund, as the case may
be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings of
every kind and nature between them relating to the subject matter hereof.
Neither party shall be bound by any condition, definition, warranty or
representation, other than as set forth or provided in this Agreement or as
may be set forth in a later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania, without giving effect
to principles of conflict of laws.
11.4 This Agreement may be executed in any number of counterparts, each
of which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason
of this Agreement.
11.6 The Acquiring Fund is hereby expressly put on notice of the
limitation of liability as set forth in Article XI of the Declaration of Trust
of the Acquired Fund and agrees that the obligations assumed by the Acquired
Fund pursuant to this Agreement shall be limited in any case to the Acquired
Fund and its assets and the Acquiring Fund shall not seek satisfaction of any
such obligation from the shareholders of the Acquired Fund, the trustees,
officers, employees or agents of the Acquired Fund or any of them.
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the date
first above written.
Acquired Fund:
MUNICIPAL SECURITIES INCOME TRUST,
on behalf of its portfolio,
FLORIDA MUNICIPAL INCOME FUND
Attest:
By:/s/John W. McGonigle
/s/Charles H. Field
Assistant Secretary Name:John W. McGonigle
Title:Vice President
Acquiring Fund:
FORTRESS MUNICIPAL INCOME
FUND, INC.
Attest:
By: /s/Richard B. Fisher
/s/Charles H. Field
Assistant Secretary Name:Richard B. Fisher
Title:President
1KOA01!.DOC
1
Exhibit 4.2
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated January 5, 1995 (the
"Agreement"), between FORTRESS MUNICIPAL INCOME FUND, INC., a Maryland
corporation (hereinafter called the "Acquiring Fund"), and MUNICIPAL
SECURITIES INCOME TRUST, a Massachusetts business trust (hereinafter called
the "Trust") on behalf of its portfolio MARYLAND MUNICIPAL INCOME FUND
(hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of
the United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of
the assets of the Acquired Fund in exchange solely for shares of common stock
of the Acquiring Fund (the "Acquiring Fund Shares") and the distribution,
after the Closing Date hereinafter referred to, of the Acquiring Fund Shares
to the shareholders of the Acquired Fund in liquidation of the Acquired Fund
as provided herein, all upon the terms and conditions hereinafter set forth in
this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are registered open-
end management investment companies and the Acquired Fund owns securities in
which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are authorized
to issue shares of common stock or shares of beneficial interest, as the case
may be;
WHEREAS, the Board of Directors, including a majority of the
Directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Acquiring Fund has
determined that the exchange of all or substantially all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquiring Fund shareholders and that the interests of the existing
shareholders of the Acquiring Fund would not be diluted as a result of this
transaction; and
WHEREAS, the Board of Trustees, including a majority of the Trustees
who are not "interested persons" (as defined under the 1940 Act), of the
Acquired Fund has determined that the exchange of all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquired Fund shareholders and that the interests of the existing shareholders
of the Acquired Fund would not be diluted as a result of this transaction;
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund agrees to assign, transfer and convey to the Acquiring Fund all of the
assets of the Acquired Fund, including all securities and cash, and the
Acquiring Fund agrees in exchange therefor (i) to deliver to the Acquired Fund
the number of Acquiring Fund Shares, including fractional Acquiring Fund
Shares, determined as set forth in paragraph 2.3. Such transaction shall take
place at the closing (the "Closing") on the closing date (the "Closing Date")
provided for in paragraph 3.1. In lieu of delivering certificates for the
Acquiring Fund Shares, the Acquiring Fund shall credit the Acquiring Fund
Shares to the Acquired Fund's account on the stock record books of the
Acquiring Fund and shall deliver a confirmation thereof to the Acquired Fund.
1.2 The Acquired Fund will discharge all of its liabilities and
obligations prior to the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street Bank
and Trust Company (hereinafter called "State Street"), Boston, Massachusetts,
the Acquiring Fund's custodian (the "Custodian"), for the account of the
Acquiring Fund, together with proper instructions and all necessary documents
to transfer to the account of the Acquiring Fund, free and clear of all liens,
encumbrances, rights, restrictions and claims. All cash delivered shall be in
the form of currency and immediately available funds payable to the order of
the Custodian for the account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund thereunder. The Acquired
Fund will transfer to the Acquiring Fund any distributions, rights or other
assets received by the Acquired Fund after the Closing Date as distributions
on or with respect to the securities transferred. Such assets shall be deemed
included in assets transferred to the Acquiring Fund on the Closing Date and
shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable, the
Acquired Fund will liquidate and distribute pro rata to the Acquired Fund's
shareholders of record, determined as of the close of business on the Closing
Date (the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by
the Acquired Fund pursuant to paragraph 1.1. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund Shares
then credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share record books of the Acquiring
Fund in the names of the Acquired Fund Shareholders and representing the
respective pro rata number of the Acquiring Fund Shares due such shareholders.
All issued and outstanding shares of the Acquired Fund will simultaneously be
canceled on the books of the Acquired Fund. Share certificates representing
interests in the Acquired Fund will represent a number of Acquiring Fund
Shares after the Closing Date as determined in accordance with Section 2.3.
The Acquiring Fund shall not issue certificates representing the Acquiring
Fund Shares in connection with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus and
statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund shares
on the books of the Acquired Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Trust.
2. VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of 4:00
p.m. (Eastern time) on the Closing Date (such time and date being hereinafter
called the "Valuation Date"), using the valuation procedures set forth in the
Acquiring Fund's then-current prospectus or statement of additional
information.
2.2 The net asset value of an Acquiring Fund Share shall be the net
asset value per share computed as of 4:00 p.m. (Eastern time) on the
Valuation Date, using the valuation procedures set forth in the Acquiring
Fund's then-current prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in paragraph
2.1 by the net asset value of one Acquiring Fund Share determined in
accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be March 30, 1995 or such later date as the
parties may mutually agree. All acts taking place at the Closing Date shall
be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place as
the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of the
value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 Federated Services Company, as transfer agent for each of the
Acquired Fund and the Acquiring Fund, shall deliver at the Closing a
certificate of an authorized officer stating that its records contain the
names and addresses of the Acquired Fund Shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver
a confirmation evidencing the Acquiring Fund Shares to be credited on the
Closing Date to the Secretary of the Acquired Fund, or provide evidence
satisfactory to the Acquired Fund that such Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund.
At the Closing, each party shall deliver to the other such bills of sale,
checks, assignments, assumption agreements, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Acquired Fund represents and warrants to the Acquiring Fund as
follows:
(a) The Trust is a business trust duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has power to own all of its properties and assets and to
carry out this Agreement.
(b) The Trust is registered under the 1940 Act, as an open-
end, management investment company, and such registration has not been revoked
or rescinded and is in full force and effect.
(c) The Acquired Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Trust's Declaration of Trust or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquired Fund is
a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquired Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquired Fund knows of no facts which might form the basis for the institution
of such proceedings, and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially
and adversely affects its business or its ability to consummate the
transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "Commission") hereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein as necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) The Statements of Assets and Liabilities of the
Acquired Fund at August 31, 1993 and 1994 have been audited by Deloitte &
Touche, LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, consistently applied, and such
statements (copies of which have been furnished to the Acquiring Fund) fairly
reflect the financial condition of the Acquired Fund as of such dates, and
there are no known contingent liabilities of the Acquired Fund as of such
dates not disclosed therein.
(h) Since August 31, 1994, there has not been any material
adverse change in the Acquired Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business,
or any incurrence by the Acquired Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Acquiring Fund.
(i) At the Closing Date, all Federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
dates shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquired Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(j) For each fiscal year of its operation, the Acquired
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. All of the issued and outstanding shares of
the Acquired Fund will, at the time of the Closing, be held by the persons and
in the amounts set forth in the records of the transfer agent as provided in
paragraph 3.3. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquired Fund
shares, nor is there outstanding any security convertible into any of the
Acquired Fund Shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets to
be transferred by it hereunder.
(m) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Acquired Fund's Trustees and, subject to
the approval of the Acquired Fund Shareholders, this Agreement will constitute
the valid and legally binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a proceeding
in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund
(the "Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (other than information therein that
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
(o) The Acquired Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
4.2 The Acquiring Fund represents and warrants to the Acquired Fund as
follows:
(a) The Acquiring Fund is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland
and the Acquiring Fund has the power to carry on its business as it is now
being conducted and to carry out this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as
an open-end, diversified, management investment company, and such registration
has not been revoked or rescinded and is in full force and effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquiring Fund's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquiring Fund knows of no facts which might form the basis for the
institution of such proceedings, and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to
consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the
Acquiring Fund at August 31, 1993 and 1994, have been audited by Deloitte &
Touche, LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, and such statements (copies of which
have been furnished to the Acquired Fund) fairly reflect the financial
condition of the Acquiring Fund as of such dates, and there are no known
contingent liabilities of the Acquiring Fund as of such dates not disclosed
therein.
(g) Since August 31, 1994, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of indebtedness maturing
more than one year from the date such indebtedness was incurred, except as
disclosed to and accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed by such
date shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquiring Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(i) For each fiscal year of its operation, the Acquiring
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(j) All issued and outstanding shares of the Acquiring
Fund are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any of the Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares.
(k) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action, if any, on the part of the Acquiring Fund's Trustees, and
this Agreement will constitute the valid and legally binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject to the effect
of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
and other similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto, and to general principles of equity
and the discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading.
(m) The Acquiring Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date,
it being understood that such ordinary course of business will include
customary dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and do
or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in
such form as is reasonably satisfactory to the Acquiring Fund, a statement of
the earnings and profits of the Acquired Fund for Federal income tax purposes
which will be carried over to the Acquiring Fund as a result of Section 381 of
the Code and which will be certified by the Acquired Fund's President and its
Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(m), all
to be included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquired Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of the Acquired Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such securities by lot
and the holding periods of such securities, as of the Closing Date, certified
by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of the
Acquired Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquiring Fund shall
reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquiring Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquired Fund shall
reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness, except
as otherwise disclosed to and accepted by the Acquired Fund.
8. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares
of the Acquired Fund in accordance with the provisions of the Trust's
Declaration of Trust.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit consummation,
in all material respects, of the transactions contemplated hereby shall have
been obtained, except where failure to obtain any such consent, order or
permit would not involve a risk of a material adverse effect on the assets or
properties of the Acquiring Fund or the Acquired Fund, provided that either
party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 The Acquiring Fund and the Acquired Fund shall have received an
opinion of Dickstein, Shapiro & Morin, L.L.P. substantially to the effect that
for Federal income tax purposes:
(a) The transfer of all or substantially all of the
Acquired Fund assets in exchange for the Acquiring Fund Shares and the
distribution of the Acquiring Fund Shares to the Acquired Fund Shareholders in
liquidation of the Acquired Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code; (b) No gain or loss will be
recognized by the Acquiring Fund upon the receipt of the assets of the
Acquired Fund solely in exchange for the Acquiring Fund Shares; (c) No gain or
loss will be recognized by the Acquired Fund upon the transfer of the Acquired
Fund assets to the Acquiring Fund in exchange for the Acquiring Fund Shares or
upon the distribution (whether actual or constructive) of the Acquiring Fund
Shares to Acquired Fund Shareholders in exchange for their shares of the
Acquired Fund; (d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the Acquiring
Fund Shares; (e) The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization; (f) The tax basis of
the Acquiring Fund Shares received by each of the Acquired Fund Shareholders
pursuant to the Reorganization will be the same as the tax basis of the
Acquired Fund shares held by such shareholder immediately prior to the
Reorganization; (g) The holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which those
assets were held by the Acquired Fund; and (h) The holding period of the
Acquiring Fund Shares to be received by each Acquired Fund Shareholder will
include the period during which the Acquired Fund shares exchanged therefor
were held by such shareholder (provided the Acquired Fund shares were held as
capital assets on the date of the Reorganization).
9. TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Trustees of the Trust
or the Board of Directors of the Acquiring Fund at any time prior to the
Closing Date (and notwithstanding any vote of the Board of Trustees of the
Acquired Fund) if circumstances should develop that, in the opinion of either
of the parties' Board, make proceeding with the Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on the
part of any party hereto or the directors, officers or shareholders of the
Acquiring Fund or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Trustees of the Acquiring Fund or of
the Acquired Fund, if, in the judgment of either, such waiver will not have a
material adverse effect on the benefits intended under this Agreement to the
shareholders of the Acquiring Fund or of the Acquired Fund, as the case may
be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings of
every kind and nature between them relating to the subject matter hereof.
Neither party shall be bound by any condition, definition, warranty or
representation, other than as set forth or provided in this Agreement or as
may be set forth in a later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania, without giving effect
to principles of conflict of laws.
11.4 This Agreement may be executed in any number of counterparts, each
of which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason
of this Agreement.
11.6 The Acquiring Fund is hereby expressly put on notice of the
limitation of liability as set forth in Article XI of the Declaration of Trust
of the Acquired Fund and agrees that the obligations assumed by the Acquired
Fund pursuant to this Agreement shall be limited in any case to the Acquired
Fund and its assets and the Acquiring Fund shall not seek satisfaction of any
such obligation from the shareholders of the Acquired Fund, the trustees,
officers, employees or agents of the Acquired Fund or any of them.
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the date
first above written.
Acquired Fund:
MUNICIPAL SECURITIES INCOME TRUST,
on behalf of its portfolio,
MARYLAND MUNICIPAL INCOME FUND
Attest:
By:/s/John W. McGonigle
/s/Charles H. Field
Assistant Secretary Name:John W. McGonigle
Title:Vice President
Acquiring Fund:
FORTRESS MUNICIPAL INCOME
FUND, INC.
Attest:
By: /s/Richard B. Fisher
/s/Charles H. Field
Assistant Secretary Name:Richard B. Fisher
Title:President
1K0B01!.DOC
1
Exhibit 4.3
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated January 5, 1995 (the
"Agreement"), between FORTRESS MUNICIPAL INCOME FUND, INC., a Maryland
corporation (hereinafter called the "Acquiring Fund"), and MUNICIPAL
SECURITIES INCOME TRUST, a Massachusetts business trust (hereinafter called
the "Trust") on behalf of its portfolio NEW JERSEY MUNICIPAL INCOME FUND
(hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of
the United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of
the assets of the Acquired Fund in exchange solely for shares of common stock
of the Acquiring Fund (the "Acquiring Fund Shares") and the distribution,
after the Closing Date hereinafter referred to, of the Acquiring Fund Shares
to the shareholders of the Acquired Fund in liquidation of the Acquired Fund
as provided herein, all upon the terms and conditions hereinafter set forth in
this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are registered open-
end management investment companies and the Acquired Fund owns securities in
which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are authorized
to issue shares of common stock or shares of beneficial interest, as the case
may be;
WHEREAS, the Board of Directors, including a majority of the
Directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Acquiring Fund has
determined that the exchange of all or substantially all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquiring Fund shareholders and that the interests of the existing
shareholders of the Acquiring Fund would not be diluted as a result of this
transaction; and
WHEREAS, the Board of Trustees, including a majority of the Trustees
who are not "interested persons" (as defined under the 1940 Act), of the
Acquired Fund has determined that the exchange of all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquired Fund shareholders and that the interests of the existing shareholders
of the Acquired Fund would not be diluted as a result of this transaction;
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund agrees to assign, transfer and convey to the Acquiring Fund all of the
assets of the Acquired Fund, including all securities and cash, and the
Acquiring Fund agrees in exchange therefor (i) to deliver to the Acquired Fund
the number of Acquiring Fund Shares, including fractional Acquiring Fund
Shares, determined as set forth in paragraph 2.3. Such transaction shall take
place at the closing (the "Closing") on the closing date (the "Closing Date")
provided for in paragraph 3.1. In lieu of delivering certificates for the
Acquiring Fund Shares, the Acquiring Fund shall credit the Acquiring Fund
Shares to the Acquired Fund's account on the stock record books of the
Acquiring Fund and shall deliver a confirmation thereof to the Acquired Fund.
1.2 The Acquired Fund will discharge all of its liabilities and
obligations prior to the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street Bank
and Trust Company (hereinafter called "State Street"), Boston, Massachusetts,
the Acquiring Fund's custodian (the "Custodian"), for the account of the
Acquiring Fund, together with proper instructions and all necessary documents
to transfer to the account of the Acquiring Fund, free and clear of all liens,
encumbrances, rights, restrictions and claims. All cash delivered shall be in
the form of currency and immediately available funds payable to the order of
the Custodian for the account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund thereunder. The Acquired
Fund will transfer to the Acquiring Fund any distributions, rights or other
assets received by the Acquired Fund after the Closing Date as distributions
on or with respect to the securities transferred. Such assets shall be deemed
included in assets transferred to the Acquiring Fund on the Closing Date and
shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable, the
Acquired Fund will liquidate and distribute pro rata to the Acquired Fund's
shareholders of record, determined as of the close of business on the Closing
Date (the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by
the Acquired Fund pursuant to paragraph 1.1. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund Shares
then credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share record books of the Acquiring
Fund in the names of the Acquired Fund Shareholders and representing the
respective pro rata number of the Acquiring Fund Shares due such shareholders.
All issued and outstanding shares of the Acquired Fund will simultaneously be
canceled on the books of the Acquired Fund. Share certificates representing
interests in the Acquired Fund will represent a number of Acquiring Fund
Shares after the Closing Date as determined in accordance with Section 2.3.
The Acquiring Fund shall not issue certificates representing the Acquiring
Fund Shares in connection with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus and
statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund shares
on the books of the Acquired Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Trust.
2. VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of 4:00
p.m. (Eastern time) on the Closing Date (such time and date being hereinafter
called the "Valuation Date"), using the valuation procedures set forth in the
Acquiring Fund's then-current prospectus or statement of additional
information.
2.2 The net asset value of an Acquiring Fund Share shall be the net
asset value per share computed as of 4:00 p.m. (Eastern time) on the
Valuation Date, using the valuation procedures set forth in the Acquiring
Fund's then-current prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in paragraph
2.1 by the net asset value of one Acquiring Fund Share determined in
accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be March 30, 1995 or such later date as the
parties may mutually agree. All acts taking place at the Closing Date shall
be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place as
the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of the
value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 Federated Services Company, as transfer agent for each of the
Acquired Fund and the Acquiring Fund, shall deliver at the Closing a
certificate of an authorized officer stating that its records contain the
names and addresses of the Acquired Fund Shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver
a confirmation evidencing the Acquiring Fund Shares to be credited on the
Closing Date to the Secretary of the Acquired Fund, or provide evidence
satisfactory to the Acquired Fund that such Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund.
At the Closing, each party shall deliver to the other such bills of sale,
checks, assignments, assumption agreements, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Acquired Fund represents and warrants to the Acquiring Fund as
follows:
(a) The Trust is a business trust duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has power to own all of its properties and assets and to
carry out this Agreement.
(b) The Trust is registered under the 1940 Act, as an open-
end, management investment company, and such registration has not been revoked
or rescinded and is in full force and effect.
(c) The Acquired Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Trust's Declaration of Trust or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquired Fund is
a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquired Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquired Fund knows of no facts which might form the basis for the institution
of such proceedings, and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially
and adversely affects its business or its ability to consummate the
transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "Commission") hereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein as necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) The Statements of Assets and Liabilities of the
Acquired Fund at August 31, 1993 and 1994 have been audited by Deloitte &
Touche, LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, consistently applied, and such
statements (copies of which have been furnished to the Acquiring Fund) fairly
reflect the financial condition of the Acquired Fund as of such dates, and
there are no known contingent liabilities of the Acquired Fund as of such
dates not disclosed therein.
(h) Since August 31, 1994, there has not been any material
adverse change in the Acquired Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business,
or any incurrence by the Acquired Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Acquiring Fund.
(i) At the Closing Date, all Federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
dates shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquired Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(j) For each fiscal year of its operation, the Acquired
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. All of the issued and outstanding shares of
the Acquired Fund will, at the time of the Closing, be held by the persons and
in the amounts set forth in the records of the transfer agent as provided in
paragraph 3.3. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquired Fund
shares, nor is there outstanding any security convertible into any of the
Acquired Fund Shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets to
be transferred by it hereunder.
(m) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Acquired Fund's Trustees and, subject to
the approval of the Acquired Fund Shareholders, this Agreement will constitute
the valid and legally binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a proceeding
in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund
(the "Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (other than information therein that
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
(o) The Acquired Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
4.2 The Acquiring Fund represents and warrants to the Acquired Fund as
follows:
(a) The Acquiring Fund is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland
and the Acquiring Fund has the power to carry on its business as it is now
being conducted and to carry out this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as
an open-end, diversified, management investment company, and such registration
has not been revoked or rescinded and is in full force and effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquiring Fund's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquiring Fund knows of no facts which might form the basis for the
institution of such proceedings, and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to
consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the
Acquiring Fund at August 31, 1993 and 1994, have been audited by Deloitte &
Touche, LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, and such statements (copies of which
have been furnished to the Acquired Fund) fairly reflect the financial
condition of the Acquiring Fund as of such dates, and there are no known
contingent liabilities of the Acquiring Fund as of such dates not disclosed
therein.
(g) Since August 31, 1994, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of indebtedness maturing
more than one year from the date such indebtedness was incurred, except as
disclosed to and accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed by such
date shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquiring Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(i) For each fiscal year of its operation, the Acquiring
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(j) All issued and outstanding shares of the Acquiring
Fund are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any of the Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares.
(k) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action, if any, on the part of the Acquiring Fund's Trustees, and
this Agreement will constitute the valid and legally binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject to the effect
of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
and other similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto, and to general principles of equity
and the discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading.
(m) The Acquiring Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date,
it being understood that such ordinary course of business will include
customary dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and do
or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in
such form as is reasonably satisfactory to the Acquiring Fund, a statement of
the earnings and profits of the Acquired Fund for Federal income tax purposes
which will be carried over to the Acquiring Fund as a result of Section 381 of
the Code and which will be certified by the Acquired Fund's President and its
Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(m), all
to be included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquired Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of the Acquired Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such securities by lot
and the holding periods of such securities, as of the Closing Date, certified
by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of the
Acquired Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquiring Fund shall
reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquiring Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquired Fund shall
reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness, except
as otherwise disclosed to and accepted by the Acquired Fund.
8. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares
of the Acquired Fund in accordance with the provisions of the Trust's
Declaration of Trust.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit consummation,
in all material respects, of the transactions contemplated hereby shall have
been obtained, except where failure to obtain any such consent, order or
permit would not involve a risk of a material adverse effect on the assets or
properties of the Acquiring Fund or the Acquired Fund, provided that either
party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 The Acquiring Fund and the Acquired Fund shall have received an
opinion of Dickstein, Shapiro & Morin, L.L.P. substantially to the effect that
for Federal income tax purposes:
(a) The transfer of all or substantially all of the
Acquired Fund assets in exchange for the Acquiring Fund Shares and the
distribution of the Acquiring Fund Shares to the Acquired Fund Shareholders in
liquidation of the Acquired Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code; (b) No gain or loss will be
recognized by the Acquiring Fund upon the receipt of the assets of the
Acquired Fund solely in exchange for the Acquiring Fund Shares; (c) No gain or
loss will be recognized by the Acquired Fund upon the transfer of the Acquired
Fund assets to the Acquiring Fund in exchange for the Acquiring Fund Shares or
upon the distribution (whether actual or constructive) of the Acquiring Fund
Shares to Acquired Fund Shareholders in exchange for their shares of the
Acquired Fund; (d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the Acquiring
Fund Shares; (e) The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization; (f) The tax basis of
the Acquiring Fund Shares received by each of the Acquired Fund Shareholders
pursuant to the Reorganization will be the same as the tax basis of the
Acquired Fund shares held by such shareholder immediately prior to the
Reorganization; (g) The holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which those
assets were held by the Acquired Fund; and (h) The holding period of the
Acquiring Fund Shares to be received by each Acquired Fund Shareholder will
include the period during which the Acquired Fund shares exchanged therefor
were held by such shareholder (provided the Acquired Fund shares were held as
capital assets on the date of the Reorganization).
9. TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Trustees of the Trust
or the Board of Directors of the Acquiring Fund at any time prior to the
Closing Date (and notwithstanding any vote of the Board of Trustees of the
Acquired Fund) if circumstances should develop that, in the opinion of either
of the parties' Board, make proceeding with the Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on the
part of any party hereto or the directors, officers or shareholders of the
Acquiring Fund or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Trustees of the Acquiring Fund or of
the Acquired Fund, if, in the judgment of either, such waiver will not have a
material adverse effect on the benefits intended under this Agreement to the
shareholders of the Acquiring Fund or of the Acquired Fund, as the case may
be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings of
every kind and nature between them relating to the subject matter hereof.
Neither party shall be bound by any condition, definition, warranty or
representation, other than as set forth or provided in this Agreement or as
may be set forth in a later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania, without giving effect
to principles of conflict of laws.
11.4 This Agreement may be executed in any number of counterparts, each
of which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason
of this Agreement.
11.6 The Acquiring Fund is hereby expressly put on notice of the
limitation of liability as set forth in Article XI of the Declaration of Trust
of the Acquired Fund and agrees that the obligations assumed by the Acquired
Fund pursuant to this Agreement shall be limited in any case to the Acquired
Fund and its assets and the Acquiring Fund shall not seek satisfaction of any
such obligation from the shareholders of the Acquired Fund, the trustees,
officers, employees or agents of the Acquired Fund or any of them.
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the date
first above written.
Acquired Fund:
MUNICIPAL SECURITIES INCOME TRUST,
on behalf of its portfolio,
NEW JERSEY MUNICIPAL INCOME FUND
Attest:
By:/s/John W. McGonigle
/s/Charles H. Field
Assistant Secretary Name:John W. McGonigle
Title:Vice President
Acquiring Fund:
FORTRESS MUNICIPAL INCOME
FUND, INC.
Attest:
By: /s/Richard B. Fisher
/s/Charles H. Field
Assistant Secretary Name:Richard B. Fisher
Title:President
1K0C01!.DOC
1
Exhibit 4.4
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated January 5, 1995 (the
"Agreement"), between FORTRESS MUNICIPAL INCOME FUND, INC., a Maryland
corporation (hereinafter called the "Acquiring Fund"), and MUNICIPAL
SECURITIES INCOME TRUST, a Massachusetts business trust (hereinafter called
the "Trust") on behalf of its portfolio TEXAS MUNICIPAL INCOME FUND
(hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of
the United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of
the assets of the Acquired Fund in exchange solely for shares of common stock
of the Acquiring Fund (the "Acquiring Fund Shares") and the distribution,
after the Closing Date hereinafter referred to, of the Acquiring Fund Shares
to the shareholders of the Acquired Fund in liquidation of the Acquired Fund
as provided herein, all upon the terms and conditions hereinafter set forth in
this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are registered open-
end management investment companies and the Acquired Fund owns securities in
which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are authorized
to issue shares of common stock or shares of beneficial interest, as the case
may be;
WHEREAS, the Board of Directors, including a majority of the
Directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Acquiring Fund has
determined that the exchange of all or substantially all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquiring Fund shareholders and that the interests of the existing
shareholders of the Acquiring Fund would not be diluted as a result of this
transaction; and
WHEREAS, the Board of Trustees, including a majority of the Trustees
who are not "interested persons" (as defined under the 1940 Act), of the
Acquired Fund has determined that the exchange of all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquired Fund shareholders and that the interests of the existing shareholders
of the Acquired Fund would not be diluted as a result of this transaction;
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund agrees to assign, transfer and convey to the Acquiring Fund all of the
assets of the Acquired Fund, including all securities and cash, and the
Acquiring Fund agrees in exchange therefor (i) to deliver to the Acquired Fund
the number of Acquiring Fund Shares, including fractional Acquiring Fund
Shares, determined as set forth in paragraph 2.3. Such transaction shall take
place at the closing (the "Closing") on the closing date (the "Closing Date")
provided for in paragraph 3.1. In lieu of delivering certificates for the
Acquiring Fund Shares, the Acquiring Fund shall credit the Acquiring Fund
Shares to the Acquired Fund's account on the stock record books of the
Acquiring Fund and shall deliver a confirmation thereof to the Acquired Fund.
1.2 The Acquired Fund will discharge all of its liabilities and
obligations prior to the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street Bank
and Trust Company (hereinafter called "State Street"), Boston, Massachusetts,
the Acquiring Fund's custodian (the "Custodian"), for the account of the
Acquiring Fund, together with proper instructions and all necessary documents
to transfer to the account of the Acquiring Fund, free and clear of all liens,
encumbrances, rights, restrictions and claims. All cash delivered shall be in
the form of currency and immediately available funds payable to the order of
the Custodian for the account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund thereunder. The Acquired
Fund will transfer to the Acquiring Fund any distributions, rights or other
assets received by the Acquired Fund after the Closing Date as distributions
on or with respect to the securities transferred. Such assets shall be deemed
included in assets transferred to the Acquiring Fund on the Closing Date and
shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable, the
Acquired Fund will liquidate and distribute pro rata to the Acquired Fund's
shareholders of record, determined as of the close of business on the Closing
Date (the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by
the Acquired Fund pursuant to paragraph 1.1. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund Shares
then credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share record books of the Acquiring
Fund in the names of the Acquired Fund Shareholders and representing the
respective pro rata number of the Acquiring Fund Shares due such shareholders.
All issued and outstanding shares of the Acquired Fund will simultaneously be
canceled on the books of the Acquired Fund. Share certificates representing
interests in the Acquired Fund will represent a number of Acquiring Fund
Shares after the Closing Date as determined in accordance with Section 2.3.
The Acquiring Fund shall not issue certificates representing the Acquiring
Fund Shares in connection with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus and
statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund shares
on the books of the Acquired Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Trust.
2. VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of 4:00
p.m. (Eastern time) on the Closing Date (such time and date being hereinafter
called the "Valuation Date"), using the valuation procedures set forth in the
Acquiring Fund's then-current prospectus or statement of additional
information.
2.2 The net asset value of an Acquiring Fund Share shall be the net
asset value per share computed as of 4:00 p.m. (Eastern time) on the
Valuation Date, using the valuation procedures set forth in the Acquiring
Fund's then-current prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in paragraph
2.1 by the net asset value of one Acquiring Fund Share determined in
accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be March 30, 1995 or such later date as the
parties may mutually agree. All acts taking place at the Closing Date shall
be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place as
the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of the
value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 Federated Services Company, as transfer agent for each of the
Acquired Fund and the Acquiring Fund, shall deliver at the Closing a
certificate of an authorized officer stating that its records contain the
names and addresses of the Acquired Fund Shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver
a confirmation evidencing the Acquiring Fund Shares to be credited on the
Closing Date to the Secretary of the Acquired Fund, or provide evidence
satisfactory to the Acquired Fund that such Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund.
At the Closing, each party shall deliver to the other such bills of sale,
checks, assignments, assumption agreements, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Acquired Fund represents and warrants to the Acquiring Fund as
follows:
(a) The Trust is a business trust duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has power to own all of its properties and assets and to
carry out this Agreement.
(b) The Trust is registered under the 1940 Act, as an open-
end, management investment company, and such registration has not been revoked
or rescinded and is in full force and effect.
(c) The Acquired Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Trust's Declaration of Trust or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquired Fund is
a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquired Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquired Fund knows of no facts which might form the basis for the institution
of such proceedings, and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially
and adversely affects its business or its ability to consummate the
transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "Commission") hereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein as necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) The Statements of Assets and Liabilities of the
Acquired Fund at August 31, 1993 and 1994 have been audited by Deloitte &
Touche, LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, consistently applied, and such
statements (copies of which have been furnished to the Acquiring Fund) fairly
reflect the financial condition of the Acquired Fund as of such dates, and
there are no known contingent liabilities of the Acquired Fund as of such
dates not disclosed therein.
(h) Since August 31, 1994, there has not been any material
adverse change in the Acquired Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business,
or any incurrence by the Acquired Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Acquiring Fund.
(i) At the Closing Date, all Federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
dates shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquired Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(j) For each fiscal year of its operation, the Acquired
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. All of the issued and outstanding shares of
the Acquired Fund will, at the time of the Closing, be held by the persons and
in the amounts set forth in the records of the transfer agent as provided in
paragraph 3.3. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquired Fund
shares, nor is there outstanding any security convertible into any of the
Acquired Fund Shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets to
be transferred by it hereunder.
(m) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Acquired Fund's Trustees and, subject to
the approval of the Acquired Fund Shareholders, this Agreement will constitute
the valid and legally binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a proceeding
in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund
(the "Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (other than information therein that
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
(o) The Acquired Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
4.2 The Acquiring Fund represents and warrants to the Acquired Fund as
follows:
(a) The Acquiring Fund is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland
and the Acquiring Fund has the power to carry on its business as it is now
being conducted and to carry out this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as
an open-end, diversified, management investment company, and such registration
has not been revoked or rescinded and is in full force and effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquiring Fund's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquiring Fund knows of no facts which might form the basis for the
institution of such proceedings, and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to
consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the
Acquiring Fund at August 31, 1993 and 1994, have been audited by Deloitte &
Touche, LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, and such statements (copies of which
have been furnished to the Acquired Fund) fairly reflect the financial
condition of the Acquiring Fund as of such dates, and there are no known
contingent liabilities of the Acquiring Fund as of such dates not disclosed
therein.
(g) Since August 31, 1994, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of indebtedness maturing
more than one year from the date such indebtedness was incurred, except as
disclosed to and accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed by such
date shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquiring Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(i) For each fiscal year of its operation, the Acquiring
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(j) All issued and outstanding shares of the Acquiring
Fund are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any of the Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares.
(k) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action, if any, on the part of the Acquiring Fund's Trustees, and
this Agreement will constitute the valid and legally binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject to the effect
of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
and other similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto, and to general principles of equity
and the discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading.
(m) The Acquiring Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date,
it being understood that such ordinary course of business will include
customary dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and do
or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in
such form as is reasonably satisfactory to the Acquiring Fund, a statement of
the earnings and profits of the Acquired Fund for Federal income tax purposes
which will be carried over to the Acquiring Fund as a result of Section 381 of
the Code and which will be certified by the Acquired Fund's President and its
Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(m), all
to be included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquired Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of the Acquired Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such securities by lot
and the holding periods of such securities, as of the Closing Date, certified
by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of the
Acquired Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquiring Fund shall
reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquiring Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquired Fund shall
reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness, except
as otherwise disclosed to and accepted by the Acquired Fund.
8. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares
of the Acquired Fund in accordance with the provisions of the Trust's
Declaration of Trust.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit consummation,
in all material respects, of the transactions contemplated hereby shall have
been obtained, except where failure to obtain any such consent, order or
permit would not involve a risk of a material adverse effect on the assets or
properties of the Acquiring Fund or the Acquired Fund, provided that either
party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 The Acquiring Fund and the Acquired Fund shall have received an
opinion of Dickstein, Shapiro & Morin, L.L.P. substantially to the effect that
for Federal income tax purposes:
(a) The transfer of all or substantially all of the
Acquired Fund assets in exchange for the Acquiring Fund Shares and the
distribution of the Acquiring Fund Shares to the Acquired Fund Shareholders in
liquidation of the Acquired Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code; (b) No gain or loss will be
recognized by the Acquiring Fund upon the receipt of the assets of the
Acquired Fund solely in exchange for the Acquiring Fund Shares; (c) No gain or
loss will be recognized by the Acquired Fund upon the transfer of the Acquired
Fund assets to the Acquiring Fund in exchange for the Acquiring Fund Shares or
upon the distribution (whether actual or constructive) of the Acquiring Fund
Shares to Acquired Fund Shareholders in exchange for their shares of the
Acquired Fund; (d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the Acquiring
Fund Shares; (e) The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization; (f) The tax basis of
the Acquiring Fund Shares received by each of the Acquired Fund Shareholders
pursuant to the Reorganization will be the same as the tax basis of the
Acquired Fund shares held by such shareholder immediately prior to the
Reorganization; (g) The holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which those
assets were held by the Acquired Fund; and (h) The holding period of the
Acquiring Fund Shares to be received by each Acquired Fund Shareholder will
include the period during which the Acquired Fund shares exchanged therefor
were held by such shareholder (provided the Acquired Fund shares were held as
capital assets on the date of the Reorganization).
9. TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Trustees of the Trust
or the Board of Directors of the Acquiring Fund at any time prior to the
Closing Date (and notwithstanding any vote of the Board of Trustees of the
Acquired Fund) if circumstances should develop that, in the opinion of either
of the parties' Board, make proceeding with the Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on the
part of any party hereto or the directors, officers or shareholders of the
Acquiring Fund or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Trustees of the Acquiring Fund or of
the Acquired Fund, if, in the judgment of either, such waiver will not have a
material adverse effect on the benefits intended under this Agreement to the
shareholders of the Acquiring Fund or of the Acquired Fund, as the case may
be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings of
every kind and nature between them relating to the subject matter hereof.
Neither party shall be bound by any condition, definition, warranty or
representation, other than as set forth or provided in this Agreement or as
may be set forth in a later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania, without giving effect
to principles of conflict of laws.
11.4 This Agreement may be executed in any number of counterparts, each
of which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason
of this Agreement.
11.6 The Acquiring Fund is hereby expressly put on notice of the
limitation of liability as set forth in Article XI of the Declaration of Trust
of the Acquired Fund and agrees that the obligations assumed by the Acquired
Fund pursuant to this Agreement shall be limited in any case to the Acquired
Fund and its assets and the Acquiring Fund shall not seek satisfaction of any
such obligation from the shareholders of the Acquired Fund, the trustees,
officers, employees or agents of the Acquired Fund or any of them.
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the date
first above written.
Acquired Fund:
MUNICIPAL SECURITIES INCOME TRUST,
on behalf of its portfolio,
TEXAS MUNICIPAL INCOME FUND
Attest:
By:/s/John W. McGonigle
/s/Charles H. Field
Assistant Secretary Name:John W. McGonigle
Title:Vice President
Acquiring Fund:
FORTRESS MUNICIPAL INCOME
FUND, INC.
Attest:
By: /s/Richard B. Fisher
/s/Charles H. Field
Assistant Secretary Name:Richard B. Fisher
Title:President
1K0D01!.DOC;
1
Exhibit 4.5
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated January 5, 1995 (the
"Agreement"), between FORTRESS MUNICIPAL INCOME FUND, INC., a Maryland
corporation (hereinafter called the "Acquiring Fund"), and MUNICIPAL
SECURITIES INCOME TRUST, a Massachusetts business trust (hereinafter called
the "Trust") on behalf of its portfolio VIRGINIA MUNICIPAL INCOME FUND
(hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of
the United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of
the assets of the Acquired Fund in exchange solely for shares of common stock
of the Acquiring Fund (the "Acquiring Fund Shares") and the distribution,
after the Closing Date hereinafter referred to, of the Acquiring Fund Shares
to the shareholders of the Acquired Fund in liquidation of the Acquired Fund
as provided herein, all upon the terms and conditions hereinafter set forth in
this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are registered open-
end management investment companies and the Acquired Fund owns securities in
which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are authorized
to issue shares of common stock or shares of beneficial interest, as the case
may be;
WHEREAS, the Board of Directors, including a majority of the
Directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Acquiring Fund has
determined that the exchange of all or substantially all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquiring Fund shareholders and that the interests of the existing
shareholders of the Acquiring Fund would not be diluted as a result of this
transaction; and
WHEREAS, the Board of Trustees, including a majority of the Trustees
who are not "interested persons" (as defined under the 1940 Act), of the
Acquired Fund has determined that the exchange of all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquired Fund shareholders and that the interests of the existing shareholders
of the Acquired Fund would not be diluted as a result of this transaction;
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund agrees to assign, transfer and convey to the Acquiring Fund all of the
assets of the Acquired Fund, including all securities and cash, and the
Acquiring Fund agrees in exchange therefor (i) to deliver to the Acquired Fund
the number of Acquiring Fund Shares, including fractional Acquiring Fund
Shares, determined as set forth in paragraph 2.3. Such transaction shall take
place at the closing (the "Closing") on the closing date (the "Closing Date")
provided for in paragraph 3.1. In lieu of delivering certificates for the
Acquiring Fund Shares, the Acquiring Fund shall credit the Acquiring Fund
Shares to the Acquired Fund's account on the stock record books of the
Acquiring Fund and shall deliver a confirmation thereof to the Acquired Fund.
1.2 The Acquired Fund will discharge all of its liabilities and
obligations prior to the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street Bank
and Trust Company (hereinafter called "State Street"), Boston, Massachusetts,
the Acquiring Fund's custodian (the "Custodian"), for the account of the
Acquiring Fund, together with proper instructions and all necessary documents
to transfer to the account of the Acquiring Fund, free and clear of all liens,
encumbrances, rights, restrictions and claims. All cash delivered shall be in
the form of currency and immediately available funds payable to the order of
the Custodian for the account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund thereunder. The Acquired
Fund will transfer to the Acquiring Fund any distributions, rights or other
assets received by the Acquired Fund after the Closing Date as distributions
on or with respect to the securities transferred. Such assets shall be deemed
included in assets transferred to the Acquiring Fund on the Closing Date and
shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable, the
Acquired Fund will liquidate and distribute pro rata to the Acquired Fund's
shareholders of record, determined as of the close of business on the Closing
Date (the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by
the Acquired Fund pursuant to paragraph 1.1. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund Shares
then credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share record books of the Acquiring
Fund in the names of the Acquired Fund Shareholders and representing the
respective pro rata number of the Acquiring Fund Shares due such shareholders.
All issued and outstanding shares of the Acquired Fund will simultaneously be
canceled on the books of the Acquired Fund. Share certificates representing
interests in the Acquired Fund will represent a number of Acquiring Fund
Shares after the Closing Date as determined in accordance with Section 2.3.
The Acquiring Fund shall not issue certificates representing the Acquiring
Fund Shares in connection with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus and
statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund shares
on the books of the Acquired Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Trust.
2. VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of 4:00
p.m. (Eastern time) on the Closing Date (such time and date being hereinafter
called the "Valuation Date"), using the valuation procedures set forth in the
Acquiring Fund's then-current prospectus or statement of additional
information.
2.2 The net asset value of an Acquiring Fund Share shall be the net
asset value per share computed as of 4:00 p.m. (Eastern time) on the
Valuation Date, using the valuation procedures set forth in the Acquiring
Fund's then-current prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in paragraph
2.1 by the net asset value of one Acquiring Fund Share determined in
accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be March 30, 1995 or such later date as the
parties may mutually agree. All acts taking place at the Closing Date shall
be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place as
the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of the
value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 Federated Services Company, as transfer agent for each of the
Acquired Fund and the Acquiring Fund, shall deliver at the Closing a
certificate of an authorized officer stating that its records contain the
names and addresses of the Acquired Fund Shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver
a confirmation evidencing the Acquiring Fund Shares to be credited on the
Closing Date to the Secretary of the Acquired Fund, or provide evidence
satisfactory to the Acquired Fund that such Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund.
At the Closing, each party shall deliver to the other such bills of sale,
checks, assignments, assumption agreements, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Acquired Fund represents and warrants to the Acquiring Fund as
follows:
(a) The Trust is a business trust duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has power to own all of its properties and assets and to
carry out this Agreement.
(b) The Trust is registered under the 1940 Act, as an open-
end, management investment company, and such registration has not been revoked
or rescinded and is in full force and effect.
(c) The Acquired Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Trust's Declaration of Trust or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquired Fund is
a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquired Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquired Fund knows of no facts which might form the basis for the institution
of such proceedings, and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially
and adversely affects its business or its ability to consummate the
transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "Commission") hereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein as necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) The Statements of Assets and Liabilities of the
Acquired Fund at August 31, 1993 and 1994 have been audited by Deloitte &
Touche, LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, consistently applied, and such
statements (copies of which have been furnished to the Acquiring Fund) fairly
reflect the financial condition of the Acquired Fund as of such dates, and
there are no known contingent liabilities of the Acquired Fund as of such
dates not disclosed therein.
(h) Since August 31, 1994, there has not been any material
adverse change in the Acquired Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business,
or any incurrence by the Acquired Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Acquiring Fund.
(i) At the Closing Date, all Federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
dates shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquired Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(j) For each fiscal year of its operation, the Acquired
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. All of the issued and outstanding shares of
the Acquired Fund will, at the time of the Closing, be held by the persons and
in the amounts set forth in the records of the transfer agent as provided in
paragraph 3.3. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquired Fund
shares, nor is there outstanding any security convertible into any of the
Acquired Fund Shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets to
be transferred by it hereunder.
(m) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Acquired Fund's Trustees and, subject to
the approval of the Acquired Fund Shareholders, this Agreement will constitute
the valid and legally binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a proceeding
in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund
(the "Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (other than information therein that
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
(o) The Acquired Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
4.2 The Acquiring Fund represents and warrants to the Acquired Fund as
follows:
(a) The Acquiring Fund is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland
and the Acquiring Fund has the power to carry on its business as it is now
being conducted and to carry out this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as
an open-end, diversified, management investment company, and such registration
has not been revoked or rescinded and is in full force and effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquiring Fund's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquiring Fund knows of no facts which might form the basis for the
institution of such proceedings, and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to
consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the
Acquiring Fund at August 31, 1993 and 1994, have been audited by Deloitte &
Touche, LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, and such statements (copies of which
have been furnished to the Acquired Fund) fairly reflect the financial
condition of the Acquiring Fund as of such dates, and there are no known
contingent liabilities of the Acquiring Fund as of such dates not disclosed
therein.
(g) Since August 31, 1994, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of indebtedness maturing
more than one year from the date such indebtedness was incurred, except as
disclosed to and accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed by such
date shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquiring Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(i) For each fiscal year of its operation, the Acquiring
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(j) All issued and outstanding shares of the Acquiring
Fund are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any of the Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares.
(k) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action, if any, on the part of the Acquiring Fund's Trustees, and
this Agreement will constitute the valid and legally binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject to the effect
of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
and other similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto, and to general principles of equity
and the discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading.
(m) The Acquiring Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date,
it being understood that such ordinary course of business will include
customary dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and do
or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in
such form as is reasonably satisfactory to the Acquiring Fund, a statement of
the earnings and profits of the Acquired Fund for Federal income tax purposes
which will be carried over to the Acquiring Fund as a result of Section 381 of
the Code and which will be certified by the Acquired Fund's President and its
Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(m), all
to be included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquired Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of the Acquired Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such securities by lot
and the holding periods of such securities, as of the Closing Date, certified
by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of the
Acquired Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquiring Fund shall
reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquiring Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquired Fund shall
reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness, except
as otherwise disclosed to and accepted by the Acquired Fund.
8. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares
of the Acquired Fund in accordance with the provisions of the Trust's
Declaration of Trust.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit consummation,
in all material respects, of the transactions contemplated hereby shall have
been obtained, except where failure to obtain any such consent, order or
permit would not involve a risk of a material adverse effect on the assets or
properties of the Acquiring Fund or the Acquired Fund, provided that either
party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 The Acquiring Fund and the Acquired Fund shall have received an
opinion of Dickstein, Shapiro & Morin, L.L.P. substantially to the effect that
for Federal income tax purposes:
(a) The transfer of all or substantially all of the
Acquired Fund assets in exchange for the Acquiring Fund Shares and the
distribution of the Acquiring Fund Shares to the Acquired Fund Shareholders in
liquidation of the Acquired Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code; (b) No gain or loss will be
recognized by the Acquiring Fund upon the receipt of the assets of the
Acquired Fund solely in exchange for the Acquiring Fund Shares; (c) No gain or
loss will be recognized by the Acquired Fund upon the transfer of the Acquired
Fund assets to the Acquiring Fund in exchange for the Acquiring Fund Shares or
upon the distribution (whether actual or constructive) of the Acquiring Fund
Shares to Acquired Fund Shareholders in exchange for their shares of the
Acquired Fund; (d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the Acquiring
Fund Shares; (e) The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization; (f) The tax basis of
the Acquiring Fund Shares received by each of the Acquired Fund Shareholders
pursuant to the Reorganization will be the same as the tax basis of the
Acquired Fund shares held by such shareholder immediately prior to the
Reorganization; (g) The holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which those
assets were held by the Acquired Fund; and (h) The holding period of the
Acquiring Fund Shares to be received by each Acquired Fund Shareholder will
include the period during which the Acquired Fund shares exchanged therefor
were held by such shareholder (provided the Acquired Fund shares were held as
capital assets on the date of the Reorganization).
9. TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Trustees of the Trust
or the Board of Directors of the Acquiring Fund at any time prior to the
Closing Date (and notwithstanding any vote of the Board of Trustees of the
Acquired Fund) if circumstances should develop that, in the opinion of either
of the parties' Board, make proceeding with the Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on the
part of any party hereto or the directors, officers or shareholders of the
Acquiring Fund or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Trustees of the Acquiring Fund or of
the Acquired Fund, if, in the judgment of either, such waiver will not have a
material adverse effect on the benefits intended under this Agreement to the
shareholders of the Acquiring Fund or of the Acquired Fund, as the case may
be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings of
every kind and nature between them relating to the subject matter hereof.
Neither party shall be bound by any condition, definition, warranty or
representation, other than as set forth or provided in this Agreement or as
may be set forth in a later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania, without giving effect
to principles of conflict of laws.
11.4 This Agreement may be executed in any number of counterparts, each
of which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason
of this Agreement.
11.6 The Acquiring Fund is hereby expressly put on notice of the
limitation of liability as set forth in Article XI of the Declaration of Trust
of the Acquired Fund and agrees that the obligations assumed by the Acquired
Fund pursuant to this Agreement shall be limited in any case to the Acquired
Fund and its assets and the Acquiring Fund shall not seek satisfaction of any
such obligation from the shareholders of the Acquired Fund, the trustees,
officers, employees or agents of the Acquired Fund or any of them.
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the date
first above written.
Acquired Fund:
MUNICIPAL SECURITIES INCOME TRUST,
on behalf of its portfolio,
VIRGINIA MUNICIPAL INCOME FUND
Attest:
By:/s/John W. McGonigle
/s/Charles H. Field
Assistant Secretary Name:John W. McGonigle
Title:Vice President
Acquiring Fund:
FORTRESS MUNICIPAL INCOME
FUND, INC.
Attest:
By: /s/Richard B. Fisher
/s/Charles H. Field
Assistant Secretary Name:Richard B. Fisher
Title:President
1K0E01!.DOC;
1
Exhibit 4.6
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated January 5, 1995 (the
"Agreement"), between FORTRESS MUNICIPAL INCOME FUND, INC., a Maryland
corporation (hereinafter called the "Acquiring Fund"), and FIXED INCOME
SECURITIES, INC., a Maryland corporation (hereinafter called the
"Corporation") on behalf of its portfolio MULTI-STATE MUNICIPAL INCOME FUND
(hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of
the United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of
the assets of the Acquired Fund in exchange solely for shares of common stock
of the Acquiring Fund (the "Acquiring Fund Shares") and the distribution,
after the Closing Date hereinafter referred to, of the Acquiring Fund Shares
to the shareholders of the Acquired Fund in liquidation of the Acquired Fund
as provided herein, all upon the terms and conditions hereinafter set forth in
this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are registered
open-end management investment companies and the Acquired Fund owns securities
in which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are
authorized to issue shares of common stock;
WHEREAS, the Board of Directors, including a majority of the
Directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Acquiring Fund has
determined that the exchange of all or substantially all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquiring Fund shareholders and that the interests of the existing
shareholders of the Acquiring Fund would not be diluted as a result of this
transaction; and
WHEREAS, the Board of Directors, including a majority of the
Directors who are not "interested persons" (as defined under the 1940 Act), of
the Acquired Fund has determined that the exchange of all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquired Fund shareholders and that the interests of the existing shareholders
of the Acquired Fund would not be diluted as a result of this transaction;
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund agrees to assign, transfer and convey to the Acquiring Fund all of the
assets of the Acquired Fund, including all securities and cash, and the
Acquiring Fund agrees in exchange therefor (i) to deliver to the Acquired Fund
the number of Acquiring Fund Shares, including fractional Acquiring Fund
Shares, determined as set forth in paragraph 2.3. Such transaction shall take
place at the closing (the "Closing") on the closing date (the "Closing Date")
provided for in paragraph 3.1. In lieu of delivering certificates for the
Acquiring Fund Shares, the Acquiring Fund shall credit the Acquiring Fund
Shares to the Acquired Fund's account on the stock record books of the
Acquiring Fund and shall deliver a confirmation thereof to the Acquired Fund.
1.2 The Acquired Fund will discharge all of its liabilities and
obligations prior to the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street Bank
and Trust Company (hereinafter called "State Street"), Boston, Massachusetts,
the Acquiring Fund's custodian (the "Custodian"), for the account of the
Acquiring Fund, together with proper instructions and all necessary documents
to transfer to the account of the Acquiring Fund, free and clear of all liens,
encumbrances, rights, restrictions and claims. All cash delivered shall be in
the form of currency and immediately available funds payable to the order of
the Custodian for the account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund thereunder. The Acquired
Fund will transfer to the Acquiring Fund any distributions, rights or other
assets received by the Acquired Fund after the Closing Date as distributions
on or with respect to the securities transferred. Such assets shall be deemed
included in assets transferred to the Acquiring Fund on the Closing Date and
shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable, the
Acquired Fund will liquidate and distribute pro rata to the Acquired Fund's
shareholders of record, determined as of the close of business on the Closing
Date (the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by
the Acquired Fund pursuant to paragraph 1.1. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund Shares
then credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share record books of the Acquiring
Fund in the names of the Acquired Fund Shareholders and representing the
respective pro rata number of the Acquiring Fund Shares due such shareholders.
All issued and outstanding shares of the Acquired Fund will simultaneously be
canceled on the books of the Acquired Fund. Share certificates representing
interests in the Acquired Fund will represent a number of Acquiring Fund
Shares after the Closing Date as determined in accordance with Section 2.3.
The Acquiring Fund shall not issue certificates representing the Acquiring
Fund Shares in connection with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus and
statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund shares
on the books of the Acquired Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Corporation.
2. VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of 4:00
p.m. (Eastern time) on the Closing Date (such time and date being hereinafter
called the "Valuation Date"), using the valuation procedures set forth in the
Acquiring Fund's then-current prospectus or statement of additional
information.
2.2 The net asset value of an Acquiring Fund Share shall be the net
asset value per share computed as of 4:00 p.m. (Eastern time) on the
Valuation Date, using the valuation procedures set forth in the Acquiring
Fund's then-current prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in paragraph
2.1 by the net asset value of one Acquiring Fund Share determined in
accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be March 30, 1995 or such later date as the
parties may mutually agree. All acts taking place at the Closing Date shall
be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place as
the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of the
value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 Federated Services Company, as transfer agent for each of the
Acquired Fund and the Acquiring Fund, shall deliver at the Closing a
certificate of an authorized officer stating that its records contain the
names and addresses of the Acquired Fund Shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver
a confirmation evidencing the Acquiring Fund Shares to be credited on the
Closing Date to the Secretary of the Acquired Fund, or provide evidence
satisfactory to the Acquired Fund that such Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund.
At the Closing, each party shall deliver to the other such bills of sale,
checks, assignments, assumption agreements, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Acquired Fund represents and warrants to the Acquiring Fund as
follows:
(a) The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland
and has power to own all of its properties and assets and to carry out this
Agreement.
(b) The Corporation is registered under the 1940 Act, as
an open-end, management investment company, and such registration has not been
revoked or rescinded and is in full force and effect.
(c) The Acquired Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Corporation's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquired Fund is a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquired Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquired Fund knows of no facts which might form the basis for the institution
of such proceedings, and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially
and adversely affects its business or its ability to consummate the
transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "Commission") hereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein as necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) The Statements of Assets and Liabilities of the
Acquired Fund at November 30, 1993 and 1994 have been audited by Deloitte &
Touche, LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, consistently applied, and such
statements (copies of which have been furnished to the Acquiring Fund) fairly
reflect the financial condition of the Acquired Fund as of such dates, and
there are no known contingent liabilities of the Acquired Fund as of such
dates not disclosed therein.
(h) Since November 30, 1994, there has not been any
material adverse change in the Acquired Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquired Fund of indebtedness maturing more
than one year from the date such indebtedness was incurred, except as
otherwise disclosed to and accepted by the Acquiring Fund.
(i) At the Closing Date, all Federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
dates shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquired Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(j) For each fiscal year of its operation, the Acquired
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. All of the issued and outstanding shares of
the Acquired Fund will, at the time of the Closing, be held by the persons and
in the amounts set forth in the records of the transfer agent as provided in
paragraph 3.3. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquired Fund
shares, nor is there outstanding any security convertible into any of the
Acquired Fund Shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets to
be transferred by it hereunder.
(m) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Acquired Fund's Directors and, subject to
the approval of the Acquired Fund Shareholders, this Agreement will constitute
the valid and legally binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a proceeding
in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund
(the "Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (other than information therein that
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
(o) The Acquired Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
4.2 The Acquiring Fund represents and warrants to the Acquired Fund as
follows:
(a) The Acquiring Fund is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland
and the Acquiring Fund has the power to carry on its business as it is now
being conducted and to carry out this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as
an open-end, diversified, management investment company, and such registration
has not been revoked or rescinded and is in full force and effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquiring Fund's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquiring Fund knows of no facts which might form the basis for the
institution of such proceedings, and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to
consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the
Acquiring Fund at August 31, 1993 and 1994, have been audited by Deloitte &
Touche, LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, and such statements (copies of which
have been furnished to the Acquired Fund) fairly reflect the financial
condition of the Acquiring Fund as of such dates, and there are no known
contingent liabilities of the Acquiring Fund as of such dates not disclosed
therein.
(g) Since August 31, 1994, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of indebtedness maturing
more than one year from the date such indebtedness was incurred, except as
disclosed to and accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed by such
date shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquiring Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such returns.
(i) For each fiscal year of its operation, the Acquiring
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(j) All issued and outstanding shares of the Acquiring
Fund are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any of the Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares.
(k) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action, if any, on the part of the Acquiring Fund's Trustees, and
this Agreement will constitute the valid and legally binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject to the effect
of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
and other similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto, and to general principles of equity
and the discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading.
(m) The Acquiring Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the reorganization
including accountants' fees, legal fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the Acquired
Fund's shareholders and the costs of holding the Special Meeting of
Shareholders.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date,
it being understood that such ordinary course of business will include
customary dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and do
or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in
such form as is reasonably satisfactory to the Acquiring Fund, a statement of
the earnings and profits of the Acquired Fund for Federal income tax purposes
which will be carried over to the Acquiring Fund as a result of Section 381 of
the Code and which will be certified by the Acquired Fund's President and its
Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(m), all
to be included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquired Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of the Acquired Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such securities by lot
and the holding periods of such securities, as of the Closing Date, certified
by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of the
Acquired Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquiring Fund shall
reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquiring Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement, and as to such other matters as the Acquired Fund shall
reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness, except
as otherwise disclosed to and accepted by the Acquired Fund.
8. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares
of the Acquired Fund in accordance with the provisions of the Corporation's
Articles of Incorporation.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit consummation,
in all material respects, of the transactions contemplated hereby shall have
been obtained, except where failure to obtain any such consent, order or
permit would not involve a risk of a material adverse effect on the assets or
properties of the Acquiring Fund or the Acquired Fund, provided that either
party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 The Acquiring Fund and the Acquired Fund shall have received an
opinion of Dickstein, Shapiro & Morin, L.L.P. substantially to the effect that
for Federal income tax purposes:
(a) The transfer of all or substantially all of the
Acquired Fund assets in exchange for the Acquiring Fund Shares and the
distribution of the Acquiring Fund Shares to the Acquired Fund Shareholders in
liquidation of the Acquired Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code; (b) No gain or loss will be
recognized by the Acquiring Fund upon the receipt of the assets of the
Acquired Fund solely in exchange for the Acquiring Fund Shares; (c) No gain or
loss will be recognized by the Acquired Fund upon the transfer of the Acquired
Fund assets to the Acquiring Fund in exchange for the Acquiring Fund Shares or
upon the distribution (whether actual or constructive) of the Acquiring Fund
Shares to Acquired Fund Shareholders in exchange for their shares of the
Acquired Fund; (d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the Acquiring
Fund Shares; (e) The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization; (f) The tax basis of
the Acquiring Fund Shares received by each of the Acquired Fund Shareholders
pursuant to the Reorganization will be the same as the tax basis of the
Acquired Fund shares held by such shareholder immediately prior to the
Reorganization; (g) The holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which those
assets were held by the Acquired Fund; and (h) The holding period of the
Acquiring Fund Shares to be received by each Acquired Fund Shareholder will
include the period during which the Acquired Fund shares exchanged therefor
were held by such shareholder (provided the Acquired Fund shares were held as
capital assets on the date of the Reorganization).
9. TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Directors of the
Corporation or the Board of Directors of the Acquiring Fund at any time prior
to the Closing Date (and notwithstanding any vote of the Board of Directors of
the Acquired Fund) if circumstances should develop that, in the opinion of
either of the parties' Board, make proceeding with the Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on the
part of any party hereto or the directors, officers or shareholders of the
Acquiring Fund or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Directors of the Acquiring Fund or of
the Acquired Fund, if, in the judgment of either, such waiver will not have a
material adverse effect on the benefits intended under this Agreement to the
shareholders of the Acquiring Fund or of the Acquired Fund, as the case may
be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings of
every kind and nature between them relating to the subject matter hereof.
Neither party shall be bound by any condition, definition, warranty or
representation, other than as set forth or provided in this Agreement or as
may be set forth in a later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania, without giving effect
to principles of conflict of laws.
11.4 This Agreement may be executed in any number of counterparts, each
of which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason
of this Agreement.
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the date
first above written.
Acquired Fund:
FIXED INCOME SECURITIES, INC.,
on behalf of its portfolio,
MULTI-STATE MUNICIPAL INCOME FUND
Attest:
By:/s/John W. McGonigle
/s/Charles H. Field
Assistant Secretary Name:John W. McGonigle
Title:Vice President
Acquiring Fund:
FORTRESS MUNICIPAL INCOME
FUND, INC.
Attest:
By: /s/Richard B. Fisher
/s/Charles H. Field
Assistant Secretary Name:Richard B. Fisher
Title:President
Exhibit 11
FEDERATED ADMINISTRATIVE SERVICES
Federated Investors Tower
Pittsburgh, PA 15222-3779
(412) 288-1900
January 19, 1995
The Board of Directors of
Fortress Municipal Income Fund, Inc.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
Fortress Municipal Income Fund, Inc. ("Corporation") proposes to
offer and sell shares of its common stock pursuant to the Corporation's
registration statement filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended.
As counsel we have participated in the organization of the
Corporation and the preparation of its amended registration statement
under the Securities Act of 1933 and the Investment Company Act of 1940.
Further, we have examined and are familiar with the Charter of the
Corporation, its Bylaws and other corporate records and documents deemed
relevant.
On the basis of the foregoing, it is our opinion that:
1. The Corporation has been duly organized and it is legally
existing under the laws of the State of Maryland.
2. The Corporation is authorized to issue 2,000,000,000 shares of
common stock of a par value of $0.001 per share.
3. The authorized and unissued common stock of the Corporation
when issued in the manner described in the prospectus comprising a part
of the Corporation's registration statement under the Securities Act of
1933 for consideration equal to or exceeding its par value and not less
than its net asset value as required by the Charter of the Corporation
will be legally issued and outstanding common stock of the Corporation
and will be fully paid and non-assessable.
We hereby consent to the filing of this opinion as a part of the
Corporation's registration statement filed with the Securities and
Exchange Commission under the Securities Act of 1933 and as part of any
The Board of Directors of
Fortress Municipal Income Fund, Inc.
Page 2
January 19, 1995
application or registration statement filed under the securities laws of
the States of the United States.
We further consent to the reference to this opinion and the
reference to us as Legal Counsel to the Corporation in the prospectus,
registration statements and applications.
Very truly yours,
FEDERATED ADMINISTRATIVE SERVICES
By: /s/ Charles H. Field
Charles H. Field
Fund Attorney
CHF/nbc
Municipal Securities Income Trust
January 17, 1995
Page 1
FL_OPN>DOC
Exhibit 12.1
DICKSTEIN, SHAPIRO & MORIN, L.L.P.
2101 L STREET, N.W.
WASHINGTON, D.C. 20037-1526
202 785-9700
January 17, 1995
Municipal Securities Income Trust,
on behalf of its portfolio,
Florida Municipal Income Fund
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Fortress Municipal Income Fund, Inc.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Dear Ladies and Gentlemen:
We have acted as special counsel in connection with, and you
have requested our opinion concerning the federal income tax
consequences of, a transaction (the "Reorganization") in which all of
the assets of Florida Municipal Income Fund (the "Acquired Fund"), a
portfolio of Municipal Securities Income Trust, a Massachusetts business
trust (the "Trust"), will be acquired by Fortress Municipal Income Fund,
Inc., a Maryland corporation (the "Acquiring Fund"), in exchange solely
for shares of common stock of the Acquiring Fund (the "Acquiring Fund
Shares"). The terms and conditions of this transaction are set forth in
an Agreement and Plan of Reorganization dated January 5, 1995 between
the Acquiring Fund and the Trust (the "Reorganization Agreement"). This
opinion is rendered to you pursuant to paragraph 8.5 of the
Reorganization Agreement, and all terms used herein have the meanings
assigned to them in the Reorganization Agreement.
Both the Acquired Fund and the Acquiring Fund are open-end,
management investment companies which qualify as regulated investment
companies described in Section 851(a) of the Internal Revenue Code of
1986, as amended (the "Code"). Both the Acquiring Fund and the Acquired
Fund are engaged in the business of investing in a professionally
managed portfolio of municipal securities.
On the Closing Date under the Reorganization Agreement, the
Acquired Fund will transfer its entire investment portfolio to the
Acquiring Fund. In exchange, the Acquiring Fund will transfer, to the
Acquired Fund, Acquiring Fund Shares in an amount equal in value to the
assets transferred by the Acquired Fund to the Acquiring Fund. The
Acquired Fund will thereupon liquidate and distribute its Acquiring Fund
Shares pro rata to its shareholders ("Acquired Fund Shareholders").
We have reviewed and relied upon the representations contained
in the Reorganization Agreement and in such other documents and
instruments as we have deemed necessary for the purposes of this
opinion, and have reviewed the applicable provisions of the Code,
current regulations and administrative rules thereunder and pertinent
case law.
Based upon the foregoing, and assuming that the Reorganization
and related transactions will take place as described in the
Reorganization Agreement, we are of the opinion that, for federal income
tax purposes:
(a) The transfer of all of the Acquired Fund assets in
exchange for the Acquiring Fund Shares and the distribution of the
Acquiring Fund Shares to the Acquired Fund Shareholders in liquidation
of the Acquired Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code;
(b) No gain or loss will be recognized by the Acquiring Fund
upon the receipt of the assets of the Acquired Fund solely in exchange
for the Acquiring Fund Shares;
(c) No gain or loss will be recognized by the Acquired Fund
upon the transfer of the Acquired Fund assets to the Acquiring Fund in
exchange for the Acquiring Fund Shares or upon the distribution (whether
actual or constructive) of the Acquiring Fund Shares to Acquired Fund
Shareholders in exchange for their shares of the Acquired Fund;
(d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the
Acquiring Fund Shares;
(e) The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization;
(f) The tax basis of the Acquiring Fund Shares received by
each of the Acquired Fund Shareholders pursuant to the Reorganization
will be the same as the tax basis of the Acquired Fund shares held by
such shareholder immediately prior to the Reorganization;
(g) The holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which
those assets were held by the Acquired Fund; and
(h) The holding period of the Acquiring Fund Shares received
by each Acquired Fund Shareholder will include the period during which
the Acquired Fund shares exchanged therefor were held by such
shareholder (provided the Acquired Fund shares were held as capital
assets on the date of the Reorganization).
We hereby consent to the filing of a copy of this opinion with
the Securities and Exchange Commission as an exhibit to the Registration
Statement on Form N-14 filed by the Acquiring Fund in connection with
the Reorganization, and to the references to this firm and this opinion
in the Prospectus/Proxy Statement which is contained in such
Registration Statement.
Very truly yours,
/s/ Dickstein, Shapiro & Morin, L.L.P.
Municipal Securities Income Trust
January 17, 1995
Page 1
MD_OPN.DOC
Exhibit 12.2
DICKSTEIN, SHAPIRO & MORIN, L.L.P.
2101 L STREET, N.W.
WASHINGTON, D.C. 20037-1526
202 785-9700
January 17, 1995
Municipal Securities Income Trust,
on behalf of its portfolio,
Maryland Municipal Income Fund
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Fortress Municipal Income Fund, Inc.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Dear Ladies and Gentlemen:
We have acted as special counsel in connection with, and you
have requested our opinion concerning the federal income tax
consequences of, a transaction (the "Reorganization") in which all of
the assets of Maryland Municipal Income Fund (the "Acquired Fund"), a
portfolio of Municipal Securities Income Trust, a Massachusetts business
trust (the "Trust"), will be acquired by Fortress Municipal Income Fund,
Inc., a Maryland corporation (the "Acquiring Fund"), in exchange solely
for shares of common stock of the Acquiring Fund (the "Acquiring Fund
Shares"). The terms and conditions of this transaction are set forth in
an Agreement and Plan of Reorganization dated January 5, 1995 between
the Acquiring Fund and the Trust (the "Reorganization Agreement"). This
opinion is rendered to you pursuant to paragraph 8.5 of the
Reorganization Agreement, and all terms used herein have the meanings
assigned to them in the Reorganization Agreement.
Both the Acquired Fund and the Acquiring Fund are open-end,
management investment companies which qualify as regulated investment
companies described in Section 851(a) of the Internal Revenue Code of
1986, as amended (the "Code"). Both the Acquiring Fund and the Acquired
Fund are engaged in the business of investing in a professionally
managed portfolio of municipal securities.
On the Closing Date under the Reorganization Agreement, the
Acquired Fund will transfer its entire investment portfolio to the
Acquiring Fund. In exchange, the Acquiring Fund will transfer, to the
Acquired Fund, Acquiring Fund Shares in an amount equal in value to the
assets transferred by the Acquired Fund to the Acquiring Fund. The
Acquired Fund will thereupon liquidate and distribute its Acquiring Fund
Shares pro rata to its shareholders ("Acquired Fund Shareholders").
We have reviewed and relied upon the representations contained
in the Reorganization Agreement and in such other documents and
instruments as we have deemed necessary for the purposes of this
opinion, and have reviewed the applicable provisions of the Code,
current regulations and administrative rules thereunder and pertinent
case law.
Based upon the foregoing, and assuming that the Reorganization
and related transactions will take place as described in the
Reorganization Agreement, we are of the opinion that, for federal income
tax purposes:
(a) The transfer of all of the Acquired Fund assets in
exchange for the Acquiring Fund Shares and the distribution of the
Acquiring Fund Shares to the Acquired Fund Shareholders in liquidation
of the Acquired Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code;
(b) No gain or loss will be recognized by the Acquiring Fund
upon the receipt of the assets of the Acquired Fund solely in exchange
for the Acquiring Fund Shares;
(c) No gain or loss will be recognized by the Acquired Fund
upon the transfer of the Acquired Fund assets to the Acquiring Fund in
exchange for the Acquiring Fund Shares or upon the distribution (whether
actual or constructive) of the Acquiring Fund Shares to Acquired Fund
Shareholders in exchange for their shares of the Acquired Fund;
(d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the
Acquiring Fund Shares;
(e) The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization;
(f) The tax basis of the Acquiring Fund Shares received by
each of the Acquired Fund Shareholders pursuant to the Reorganization
will be the same as the tax basis of the Acquired Fund shares held by
such shareholder immediately prior to the Reorganization;
(g) The holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which
those assets were held by the Acquired Fund; and
(h) The holding period of the Acquiring Fund Shares received
by each Acquired Fund Shareholder will include the period during which
the Acquired Fund shares exchanged therefor were held by such
shareholder (provided the Acquired Fund shares were held as capital
assets on the date of the Reorganization).
We hereby consent to the filing of a copy of this opinion with
the Securities and Exchange Commission as an exhibit to the Registration
Statement on Form N-14 filed by the Acquiring Fund in connection with
the Reorganization, and to the references to this firm and this opinion
in the Prospectus/Proxy Statement which is contained in such
Registration Statement.
Very truly yours,
/s/ Dickstein, Shapiro & Morin, L.L.P.
Municipal Securities Income Trust
January 17, 1995
Page 1
NJ_OPN.DOC
Exhibit 12.3
DICKSTEIN, SHAPIRO & MORIN, L.L.P.
2101 L STREET, N.W.
WASHINGTON, D.C. 20037-1526
202 785-9700
January 17, 1995
Municipal Securities Income Trust,
on behalf of its portfolio,
New Jersey Municipal Income Fund
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Fortress Municipal Income Fund, Inc.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Dear Ladies and Gentlemen:
We have acted as special counsel in connection with, and you
have requested our opinion concerning the federal income tax
consequences of, a transaction (the "Reorganization") in which all of
the assets of New Jersey Municipal Income Fund (the "Acquired Fund"), a
portfolio of Municipal Securities Income Trust, a Massachusetts business
trust (the "Trust"), will be acquired by Fortress Municipal Income Fund,
Inc., a Maryland corporation (the "Acquiring Fund"), in exchange solely
for shares of common stock of the Acquiring Fund (the "Acquiring Fund
Shares"). The terms and conditions of this transaction are set forth in
an Agreement and Plan of Reorganization dated January 5, 1995 between
the Acquiring Fund and the Trust (the "Reorganization Agreement"). This
opinion is rendered to you pursuant to paragraph 8.5 of the
Reorganization Agreement, and all terms used herein have the meanings
assigned to them in the Reorganization Agreement.
Both the Acquired Fund and the Acquiring Fund are open-end,
management investment companies which qualify as regulated investment
companies described in Section 851(a) of the Internal Revenue Code of
1986, as amended (the "Code"). Both the Acquiring Fund and the Acquired
Fund are engaged in the business of investing in a professionally
managed portfolio of municipal securities.
On the Closing Date under the Reorganization Agreement, the
Acquired Fund will transfer its entire investment portfolio to the
Acquiring Fund. In exchange, the Acquiring Fund will transfer, to the
Acquired Fund, Acquiring Fund Shares in an amount equal in value to the
assets transferred by the Acquired Fund to the Acquiring Fund. The
Acquired Fund will thereupon liquidate and distribute its Acquiring Fund
Shares pro rata to its shareholders ("Acquired Fund Shareholders").
We have reviewed and relied upon the representations contained
in the Reorganization Agreement and in such other documents and
instruments as we have deemed necessary for the purposes of this
opinion, and have reviewed the applicable provisions of the Code,
current regulations and administrative rules thereunder and pertinent
case law.
Based upon the foregoing, and assuming that the Reorganization
and related transactions will take place as described in the
Reorganization Agreement, we are of the opinion that, for federal income
tax purposes:
(a) The transfer of all of the Acquired Fund assets in
exchange for the Acquiring Fund Shares and the distribution of the
Acquiring Fund Shares to the Acquired Fund Shareholders in liquidation
of the Acquired Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code;
(b) No gain or loss will be recognized by the Acquiring Fund
upon the receipt of the assets of the Acquired Fund solely in exchange
for the Acquiring Fund Shares;
(c) No gain or loss will be recognized by the Acquired Fund
upon the transfer of the Acquired Fund assets to the Acquiring Fund in
exchange for the Acquiring Fund Shares or upon the distribution (whether
actual or constructive) of the Acquiring Fund Shares to Acquired Fund
Shareholders in exchange for their shares of the Acquired Fund;
(d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the
Acquiring Fund Shares;
(e) The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization;
(f) The tax basis of the Acquiring Fund Shares received by
each of the Acquired Fund Shareholders pursuant to the Reorganization
will be the same as the tax basis of the Acquired Fund shares held by
such shareholder immediately prior to the Reorganization;
(g) The holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which
those assets were held by the Acquired Fund; and
(h) The holding period of the Acquiring Fund Shares received
by each Acquired Fund Shareholder will include the period during which
the Acquired Fund shares exchanged therefor were held by such
shareholder (provided the Acquired Fund shares were held as capital
assets on the date of the Reorganization).
We hereby consent to the filing of a copy of this opinion with
the Securities and Exchange Commission as an exhibit to the Registration
Statement on Form N-14 filed by the Acquiring Fund in connection with
the Reorganization, and to the references to this firm and this opinion
in the Prospectus/Proxy Statement which is contained in such
Registration Statement.
Very truly yours,
/s/ Dickstein, Shapiro & Morin, L.L.P.
Municipal Securities Income Trust
January 17, 1995
Page 1
TX_OPN.DOC
Exhibit 12.4
DICKSTEIN, SHAPIRO & MORIN, L.L.P.
2101 L STREET, N.W.
WASHINGTON, D.C. 20037-1526
202 785-9700
January 17, 1995
Municipal Securities Income Trust,
on behalf of its portfolio,
Texas Municipal Income Fund
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Fortress Municipal Income Fund, Inc.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Dear Ladies and Gentlemen:
We have acted as special counsel in connection with, and you
have requested our opinion concerning the federal income tax
consequences of, a transaction (the "Reorganization") in which all of
the assets of Texas Municipal Income Fund (the "Acquired Fund"), a
portfolio of Municipal Securities Income Trust, a Massachusetts business
trust (the "Trust"), will be acquired by Fortress Municipal Income Fund,
Inc., a Maryland corporation (the "Acquiring Fund"), in exchange solely
for shares of common stock of the Acquiring Fund (the "Acquiring Fund
Shares"). The terms and conditions of this transaction are set forth in
an Agreement and Plan of Reorganization dated January 5, 1995 between
the Acquiring Fund and the Trust (the "Reorganization Agreement"). This
opinion is rendered to you pursuant to paragraph 8.5 of the
Reorganization Agreement, and all terms used herein have the meanings
assigned to them in the Reorganization Agreement.
Both the Acquired Fund and the Acquiring Fund are open-end,
management investment companies which qualify as regulated investment
companies described in Section 851(a) of the Internal Revenue Code of
1986, as amended (the "Code"). Both the Acquiring Fund and the Acquired
Fund are engaged in the business of investing in a professionally
managed portfolio of municipal securities.
On the Closing Date under the Reorganization Agreement, the
Acquired Fund will transfer its entire investment portfolio to the
Acquiring Fund. In exchange, the Acquiring Fund will transfer, to the
Acquired Fund, Acquiring Fund Shares in an amount equal in value to the
assets transferred by the Acquired Fund to the Acquiring Fund. The
Acquired Fund will thereupon liquidate and distribute its Acquiring Fund
Shares pro rata to its shareholders ("Acquired Fund Shareholders").
We have reviewed and relied upon the representations contained
in the Reorganization Agreement and in such other documents and
instruments as we have deemed necessary for the purposes of this
opinion, and have reviewed the applicable provisions of the Code,
current regulations and administrative rules thereunder and pertinent
case law.
Based upon the foregoing, and assuming that the Reorganization
and related transactions will take place as described in the
Reorganization Agreement, we are of the opinion that, for federal income
tax purposes:
(a) The transfer of all of the Acquired Fund assets in
exchange for the Acquiring Fund Shares and the distribution of the
Acquiring Fund Shares to the Acquired Fund Shareholders in liquidation
of the Acquired Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code;
(b) No gain or loss will be recognized by the Acquiring Fund
upon the receipt of the assets of the Acquired Fund solely in exchange
for the Acquiring Fund Shares;
(c) No gain or loss will be recognized by the Acquired Fund
upon the transfer of the Acquired Fund assets to the Acquiring Fund in
exchange for the Acquiring Fund Shares or upon the distribution (whether
actual or constructive) of the Acquiring Fund Shares to Acquired Fund
Shareholders in exchange for their shares of the Acquired Fund;
(d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the
Acquiring Fund Shares;
(e) The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization;
(f) The tax basis of the Acquiring Fund Shares received by
each of the Acquired Fund Shareholders pursuant to the Reorganization
will be the same as the tax basis of the Acquired Fund shares held by
such shareholder immediately prior to the Reorganization;
(g) The holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which
those assets were held by the Acquired Fund; and
(h) The holding period of the Acquiring Fund Shares received
by each Acquired Fund Shareholder will include the period during which
the Acquired Fund shares exchanged therefor were held by such
shareholder (provided the Acquired Fund shares were held as capital
assets on the date of the Reorganization).
We hereby consent to the filing of a copy of this opinion with
the Securities and Exchange Commission as an exhibit to the Registration
Statement on Form N-14 filed by the Acquiring Fund in connection with
the Reorganization, and to the references to this firm and this opinion
in the Prospectus/Proxy Statement which is contained in such
Registration Statement.
Very truly yours,
/s/ Dickstein, Shapiro & Morin, L.L.P.
Municipal Securities Income Trust
January 17, 1995
Page 1
VA_OPN.DOC
Exhibit 12.5
DICKSTEIN, SHAPIRO & MORIN, L.L.P.
2101 L STREET, N.W.
WASHINGTON, D.C. 20037-1526
202 785-9700
January 17, 1995
Municipal Securities Income Trust,
on behalf of its portfolio,
Virginia Municipal Income Fund
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Fortress Municipal Income Fund, Inc.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Dear Ladies and Gentlemen:
We have acted as special counsel in connection with, and you
have requested our opinion concerning the federal income tax
consequences of, a transaction (the "Reorganization") in which all of
the assets of Virginia Municipal Income Fund (the "Acquired Fund"), a
portfolio of Municipal Securities Income Trust, a Massachusetts business
trust (the "Trust"), will be acquired by Fortress Municipal Income Fund,
Inc., a Maryland corporation (the "Acquiring Fund"), in exchange solely
for shares of common stock of the Acquiring Fund (the "Acquiring Fund
Shares"). The terms and conditions of this transaction are set forth in
an Agreement and Plan of Reorganization dated January 5, 1995 between
the Acquiring Fund and the Trust (the "Reorganization Agreement"). This
opinion is rendered to you pursuant to paragraph 8.5 of the
Reorganization Agreement, and all terms used herein have the meanings
assigned to them in the Reorganization Agreement.
Both the Acquired Fund and the Acquiring Fund are open-end,
management investment companies which qualify as regulated investment
companies described in Section 851(a) of the Internal Revenue Code of
1986, as amended (the "Code"). Both the Acquiring Fund and the Acquired
Fund are engaged in the business of investing in a professionally
managed portfolio of municipal securities.
On the Closing Date under the Reorganization Agreement, the
Acquired Fund will transfer its entire investment portfolio to the
Acquiring Fund. In exchange, the Acquiring Fund will transfer, to the
Acquired Fund, Acquiring Fund Shares in an amount equal in value to the
assets transferred by the Acquired Fund to the Acquiring Fund. The
Acquired Fund will thereupon liquidate and distribute its Acquiring Fund
Shares pro rata to its shareholders ("Acquired Fund Shareholders").
We have reviewed and relied upon the representations contained
in the Reorganization Agreement and in such other documents and
instruments as we have deemed necessary for the purposes of this
opinion, and have reviewed the applicable provisions of the Code,
current regulations and administrative rules thereunder and pertinent
case law.
Based upon the foregoing, and assuming that the Reorganization
and related transactions will take place as described in the
Reorganization Agreement, we are of the opinion that, for federal income
tax purposes:
(a) The transfer of all of the Acquired Fund assets in
exchange for the Acquiring Fund Shares and the distribution of the
Acquiring Fund Shares to the Acquired Fund Shareholders in liquidation
of the Acquired Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code;
(b) No gain or loss will be recognized by the Acquiring Fund
upon the receipt of the assets of the Acquired Fund solely in exchange
for the Acquiring Fund Shares;
(c) No gain or loss will be recognized by the Acquired Fund
upon the transfer of the Acquired Fund assets to the Acquiring Fund in
exchange for the Acquiring Fund Shares or upon the distribution (whether
actual or constructive) of the Acquiring Fund Shares to Acquired Fund
Shareholders in exchange for their shares of the Acquired Fund;
(d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the
Acquiring Fund Shares;
(e) The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization;
(f) The tax basis of the Acquiring Fund Shares received by
each of the Acquired Fund Shareholders pursuant to the Reorganization
will be the same as the tax basis of the Acquired Fund shares held by
such shareholder immediately prior to the Reorganization;
(g) The holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which
those assets were held by the Acquired Fund; and
(h) The holding period of the Acquiring Fund Shares received
by each Acquired Fund Shareholder will include the period during which
the Acquired Fund shares exchanged therefor were held by such
shareholder (provided the Acquired Fund shares were held as capital
assets on the date of the Reorganization).
We hereby consent to the filing of a copy of this opinion with
the Securities and Exchange Commission as an exhibit to the Registration
Statement on Form N-14 filed by the Acquiring Fund in connection with
the Reorganization, and to the references to this firm and this opinion
in the Prospectus/Proxy Statement which is contained in such
Registration Statement.
Very truly yours,
/s/ Dickstein, Shapiro & Morin, L.L.P.
Fixed Income Securities, Inc.
January 17, 1995
Page 1
MS_OPN.DOC
Exhibit 12.6
DICKSTEIN, SHAPIRO & MORIN, L.L.P.
2101 L STREET, N.W.
WASHINGTON, D.C. 20037-1526
202 785-9700
January 17, 1995
Fixed Income Securities, Inc.
on behalf of its portfolio,
Multi-State Municipal Income Fund
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Fortress Municipal Income Fund, Inc.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Dear Ladies and Gentlemen:
We have acted as special counsel in connection with, and you
have requested our opinion concerning the federal income tax
consequences of, a transaction (the "Reorganization") in which all of
the assets of Multi-State Municipal Income Fund (the "Acquired Fund"), a
portfolio of Fixed Income Securities, Inc., a Maryland corporation (the
"Corporation"), will be acquired by Fortress Municipal Income Fund,
Inc., a Maryland corporation (the "Acquiring Fund"), in exchange solely
for shares of common stock of the Acquiring Fund (the "Acquiring Fund
Shares"). The terms and conditions of this transaction are set forth in
an Agreement and Plan of Reorganization dated January 5, 1995 between
the Acquiring Fund and the Corporation (the "Reorganization Agreement").
This opinion is rendered to you pursuant to paragraph 8.5 of the
Reorganization Agreement, and all terms used herein have the meanings
assigned to them in the Reorganization Agreement.
Both the Acquired Fund and the Acquiring Fund are open-end,
management investment companies which qualify as regulated investment
companies described in Section 851(a) of the Internal Revenue Code of
1986, as amended (the "Code"). Both the Acquiring Fund and the Acquired
Fund are engaged in the business of investing in a professionally
managed portfolio of municipal securities.
On the Closing Date under the Reorganization Agreement, the
Acquired Fund will transfer its entire investment portfolio to the
Acquiring Fund. In exchange, the Acquiring Fund will transfer, to the
Acquired Fund, Acquiring Fund Shares in an amount equal in value to the
assets transferred by the Acquired Fund to the Acquiring Fund. The
Acquired Fund will thereupon liquidate and distribute its Acquiring Fund
Shares pro rata to its shareholders ("Acquired Fund Shareholders").
We have reviewed and relied upon the representations contained
in the Reorganization Agreement and in such other documents and
instruments as we have deemed necessary for the purposes of this
opinion, and have reviewed the applicable provisions of the Code,
current regulations and administrative rules thereunder and pertinent
case law.
Based upon the foregoing, and assuming that the Reorganization
and related transactions will take place as described in the
Reorganization Agreement, we are of the opinion that, for federal income
tax purposes:
(a) The transfer of all of the Acquired Fund assets in
exchange for the Acquiring Fund Shares and the distribution of the
Acquiring Fund Shares to the Acquired Fund Shareholders in liquidation
of the Acquired Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code;
(b) No gain or loss will be recognized by the Acquiring Fund
upon the receipt of the assets of the Acquired Fund solely in exchange
for the Acquiring Fund Shares;
(c) No gain or loss will be recognized by the Acquired Fund
upon the transfer of the Acquired Fund assets to the Acquiring Fund in
exchange for the Acquiring Fund Shares or upon the distribution (whether
actual or constructive) of the Acquiring Fund Shares to Acquired Fund
Shareholders in exchange for their shares of the Acquired Fund;
(d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the
Acquiring Fund Shares;
(e) The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization;
(f) The tax basis of the Acquiring Fund Shares received by
each of the Acquired Fund Shareholders pursuant to the Reorganization
will be the same as the tax basis of the Acquired Fund shares held by
such shareholder immediately prior to the Reorganization;
(g) The holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which
those assets were held by the Acquired Fund; and
(h) The holding period of the Acquiring Fund Shares received
by each Acquired Fund Shareholder will include the period during which
the Acquired Fund shares exchanged therefor were held by such
shareholder (provided the Acquired Fund shares were held as capital
assets on the date of the Reorganization).
We hereby consent to the filing of a copy of this opinion with
the Securities and Exchange Commission as an exhibit to the Registration
Statement on Form N-14 filed by the Acquiring Fund in connection with
the Reorganization, and to the references to this firm and this opinion
in the Prospectus/Proxy Statement which is contained in such
Registration Statement.
Very truly yours,
/s/ Dickstein, Shapiro & Morin, L.L.P.
[IN-PROCESS]___CONS AUTHOR'S INITLS___ FINAL Y N
Exhibit 14.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Fortress Municipal Income Fund, Inc. on Form N-14 of our reports dated
October 7, 1994 appearing in the Annual Reports to Shareholders of Texas
Municipal Income Fund, New Jersey Municipal Income Fund, Florida Municipal
Income Fund, Maryland Municipal Income Fund and Virginia Municipal Income
Fund (portfolios of Municipal Securities Income Trust) for the year ended
August 31, 1994, our report dated October 7, 1994 appearing in the
Prospectus dated October 31, 1994 of Fortress Municipal Income Fund, Inc.,
and our report dated January 14, 1994 appearing in the Prospectus dated
January 31, 1994 of Multi-State Municipal Income Fund (a portfolio of
Fixed Income Securities, Inc.), and to the references to us under the
heading "Financial Highlights" in such Prospectuses.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
January 13, 1995
Exhibit 16
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of FORTRESS MUNICIPAL INCOME
FUND, INC. and the Assistant General Counsel of Federated Investors, and
each of them, their true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for them and in their names, place
and stead, in any and all capacities, to sign any and all documents to be
filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, by means of the Securities and Exchange
Commission's electronic disclosure system known as EDGAR; and to file the
same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
sign and perform each and every act and thing requisite and necessary to be
done in connection therewith, as fully to all intents and purposes as each
of them might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
SIGNATURES TITLE DATE
/s/ John F. Donahue Chairman and Director January 9, 1995
John F. Donahue (Chief Executive
Officer)
/s/ Richard B. Fisher President and Director January 9, 1995
Richard B. Fisher
/s/Edward C. Gonzales Vice President and January 9, 1995
Edward C. Gonzales Treasurer (Principal
Financial and
Accounting Officer)
/s/ Thomas G. Bigley Director January 9, 1995
Thomas G. Bigley
/s/ John T. Conroy Director January 9, 1995
John T. Conroy, Jr.
SIGNATURES TITLE DATE
/s/ William J. Copeland Director January 9, 1995
William J. Copeland
/s/ James E. Dowd Director January 9, 1995
James E. Dowd
/s/ Lawrence D. Ellis, M.D. Director January 9, 1995
Lawrence D. Ellis, M.D.
/s/ Edward L. Flaherty, Jr. Director January 9, 1995
Edward L. Flaherty, Jr.
/s/ Peter E. Madden Director January 9, 1995
Peter E. Madden
/s/ Gregor F. Meyer Director January 9, 1995
Gregor F. Meyer
/s/ Wesley W. Posvar Director January 9, 1995
Wesley W. Posvar
/s/ Marjorie P. Smuts Director January 9, 1995
Marjorie P. Smuts
Sworn to and subscribed before me this 9th day of January, 1995
/s/ Marie M. Hamm
Notary Public
Exhibit 17.1
Rule 24f-2 Notice
FORTRESS MUNICIPAL INCOME FUND, INC.
(Fund Name)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
1933 Act No. 33-11410
(i) fiscal period for which notice is filed August 31, 1994
(ii) The number or amount of securities of the
same class or series, if any, which had
been registered under the Securities Act
of 1933, other than pursuant to Rule 24f-2
but which remained unsold at September 1, 1993
the beginning of the Registrant's fiscal
period -0-
(iii) The number or amount of securities, if
any, registered during the fiscal period
of this notice other than pursuant to
Rule 24f-2 -0- -0-
(iv) The number or amount of securities
sold during the fiscal period of this
notice 10,474,491
(v) The number or amount of securities sold
during the fiscal period of this notice
in reliance upon registration pursuant
to Rule 24f-2 (see attached Computation
of Fee) 10,474,491
WITNESS the due execution hereof this 14th day of October, 1994.
By: /s/Charles H. Field
Charles H. Field
Assistant Secretary
COMPUTATION OF FEE
1. Actual aggregate sale price of Registrant's
securities sold pursuant to Rule 24f-2 during
the fiscal period for which the 24f-2 notice
is filed (see Section v)................................ $117,130,230
2. Reduced by the difference between:
(a) actual aggregate redemption price
of such securities redeemed by the
issuer during the fiscal period for
which the 24f-2 notice is filed........ $80,661,344
(b) actual aggregate redemption price
of such redeemed securities
previously applied by the issuer
pursuant to Section 24e(2)(a) for
the fiscal period for which the
24f-2 notice is filed.................. -0- 80,661,344
Total amount upon which the fee calculation specified
in Section 6(b) of the Securities Act of 1933 is
based......................................................... $ 36,468,886
FEE SUBMITTED (1/29 of 1% of Total amount)............... $ 12,576
HOUSTON, HOUSTON & DONNELLY
ATTORNEYS AT LAW
2510 CENTRE CITY TOWER
WILLIAM McC. HOUSTON PITTSBURGH, PA. 15222
FRED CHALMERS HOUSTON, JR. __________
THOMAS J. DONNELLY
JOHN F. MECK (412) 471-5828 FRED CHALMERS HOUSTON
FAX (412) 471-0736 (1914 - 1971)
MARIO SANTILLI, JR.
THEODORE M. HAMMER
October 14, 1994
Fortress Municipal Income Fund, Inc.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
You have requested our opinion for use in conjunction with a
Rule 24f-2 Notice for Fortress Municipal Income Fund, Inc.
("Fund") to be filed in respect of shares of the Fund ("Shares")
sold for the fiscal year ended August 31, 1994, pursuant to the
Fund's registration statement filed with the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933 (File
No. 33-11410) ("Registration Statement").
In its Registration Statement, the Fund elected to register
an indefinite number of Shares pursuant to the provisions of SEC
Rule 24f-2.
We have reviewed the amended Registration Statement of the
Fund and such other documents and records deemed relevant. On the
basis of the foregoing, it is our opinion that the Shares sold for
the fiscal year ended August 31, 1994, registration of which the
Rule 24f-2 Notice makes definite in number, were legally issued,
fully paid and non-assessable.
We consent to your filing this opinion as an Exhibit to the
Rule 24f-2 Notice referred to above, the Registration Statement of
the Fund and to any application or registration statement filed
under the Securities Laws of any of the States of the United
States.
Very truly yours,
HOUSTON, HOUSTON & DONNELLY
By: /s/ Thomas J. Donnelly
TJD:smg
FORTRESS MUNICIPAL INCOME FUND, INC.
Federated Investors
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
October 14, 1994
EDGAR Operations Branch
Securities and Exchange Commission
Division of Investment Management
450 Fifth Street, Northwest
Washington, DC 20549
RE: Rule 24f-2 Notice for Fortress Municipal Income Fund, Inc.
1933 Act File No. 33-11410
1940 Act File No. 811-4533
Dear Sir or Madam:
Pursuant to the provisions of Rule 24f-2 of the Investment Company Act
of 1940, I enclose the Rule 24f-2 Notice for Fortress Municipal Income Fund,
Inc.
Since the aggregate sales price of securities sold by the fund during
the period for which the Rule 24f-2 Notice is filed exceeded the aggregate
redemption price of securities redeemed, an additional filing fee in the
amount of $12,576 pursuant to Rule 24f-2(c) has been remitted to the U.S.
Treasury Lockbox at Mellon Bank in Pittsburgh.
As required by Rule 24f-2(b)(1)(v), a conformed opinion of counsel has
been electronically filed herewith which indicates whether the securities,
the registration of which this Notice makes definite in number, were legally
issued, fully paid and non-assessable.
Very truly yours,
/s/ Charles H. Field
Charles H. Field
Assistant Secretary
Enclosures
cc: Thomas J. Donnelly, Esquire
Charles H. Morin, Esquire
Matthew G. Maloney, Esquire
Linda L. Banas
1K2C01!.DOC
Exhibit 17.2
FLORIDA MUNICIPAL INCOME FUND
a Portfolio of
MUNICIPAL SECURITIES INCOME TRUST
FEDERATED INVESTORS TOWER
PITTSBURGH PA 15222-3779
_____________________________________________________________________
FLORIDA MUNICIPAL INCOME FUND
a Portfolio of
MUNICIPAL SECURITIES INCOME TRUST
CUSIP NO. 625922802
FOR SPECIAL MEETING OF SHAREHOLDERS MARCH 30, 1995
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned shareholders of
Florida Municipal Income Fund, a portfolio of Municipal Securities
Income Trust, hereby appoint J. Crilley Kelly, Suzanne W. Land, J.
Martin Levine, Marjorie B. Sellers and Scott Tretter, or any of them
true and lawful attorneys, with power of substitution of each, to vote
all shares of Florida Municipal Income Fund, a portfolio of Municipal
Securities Income Trust, which the undersigned is entitled to vote, at
the Special Meeting of Shareholders to be held on March 30, 1995, at
Federated Investors Tower, Pittsburgh, Pennsylvania, at 2:15 p.m.
(Eastern Standard Time) and at any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The
attorneys named will vote the shares represented by this proxy in
accordance with the choices made on this card. IF NO CHOICE IS
INDICATED AS TO ANY ITEM, THIS PROXY WILL BE VOTED AFFIRMATIVELY ON THAT
MATTER.
Discretionary authority is hereby conferred as to all other matters as
may properly come before the Special Meeting.
PROPOSAL
1. TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION.
PLEASE RETURN THE BOTTOM PORTION WITH YOUR VOTE IN
THE ENCLOSED ENVELOPE AND RETAIN THE TOP PORTION.
Florida Municipal Income Fund PROXY VOTING MAIL-IN STUB
a Portfolio of Municipal Securities PROPOSAL 1: TO APPROVE OR
Income Trust DISAPPROVE AN AGREEMENT AND
RECORD DATE SHARES PLAN OF REORGANIZATION
R FOR the Agreement and Plan
of Reorganization
R AGAINST the Agreement and
Plan of Reorganization
R ABSTAIN
Please sign EXACTLY as your name(s) appear
above. When signing as attorney, executor,
administrator, guardian, trustee, custodian,
etc., please give your full title as such. If a
corporation or partnership, please sign the full
name by an authorized officer or partner. If
stock is owned jointly, all owners should sign.
_______________________________
Signature(s) of Shareholder(s)
Date:__________________________
Exhibit 17.3
MARYLAND MUNICIPAL INCOME FUND
a Portfolio of
MUNICIPAL SECURITIES INCOME TRUST
FEDERATED INVESTORS TOWER
PITTSBURGH PA 15222-3779
_____________________________________________________________________
MARYLAND MUNICIPAL INCOME FUND
a Portfolio of
MUNICIPAL SECURITIES INCOME TRUST
CUSIP NO. 625922851
FOR SPECIAL MEETING OF SHAREHOLDERS MARCH 30, 1995
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned shareholders of
Maryland Municipal Income Fund, a portfolio of Municipal Securities
Income Trust, hereby appoint J. Crilley Kelly, Suzanne W. Land, J.
Martin Levine, Marjorie B. Sellers and Scott Tretter, or any of them
true and lawful attorneys, with power of substitution of each, to vote
all shares of Maryland Municipal Income Fund, a portfolio of Municipal
Securities Income Trust, which the undersigned is entitled to vote, at
the Special Meeting of Shareholders to be held on March 30, 1995, at
Federated Investors Tower, Pittsburgh, Pennsylvania, at 2:15 p.m.
(Eastern Standard Time) and at any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The
attorneys named will vote the shares represented by this proxy in
accordance with the choices made on this card. IF NO CHOICE IS
INDICATED AS TO ANY ITEM, THIS PROXY WILL BE VOTED AFFIRMATIVELY ON THAT
MATTER.
Discretionary authority is hereby conferred as to all other matters as
may properly come before the Special Meeting.
PROPOSAL
1. TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION.
PLEASE RETURN THE BOTTOM PORTION WITH YOUR VOTE IN
THE ENCLOSED ENVELOPE AND RETAIN THE TOP PORTION.
Maryland Municipal Income Fund PROXY VOTING MAIL-IN STUB
a Portfolio of Municipal Securities PROPOSAL 1: TO APPROVE OR
Income Trust DISAPPROVE AN AGREEMENT AND
RECORD DATE SHARES PLAN OF
REORGANIZATION
R FOR the Agreement and Plan
of Reorganization
R AGAINST the Agreement and
Plan of Reorganization
R ABSTAIN
Please sign EXACTLY as your name(s) appear
above. When signing as attorney, executor,
administrator, guardian, trustee, custodian,
etc., please give your full title as such. If a
corporation or partnership, please sign the full
name by an authorized officer or partner. If
stock is owned jointly, all owners should sign.
____________________________________
Signature(s) of Shareholder(s)
Date:_______________________________
Exhibit 17.4
NEW JERSEY MUNICIPAL INCOME FUND
a Portfolio of
MUNICIPAL SECURITIES INCOME TRUST
FEDERATED INVESTORS TOWER
PITTSBURGH PA 15222-3779
_____________________________________________________________________
NEW JERSEY MUNICIPAL INCOME FUND
a Portfolio of
MUNICIPAL SECURITIES INCOME TRUST
CUSIP NO. 625922885
FOR SPECIAL MEETING OF SHAREHOLDERS MARCH 30, 1995
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned shareholders of
New Jersey Municipal Income Fund, a portfolio of Municipal Securities
Income Trust, hereby appoint J. Crilley Kelly, Suzanne W. Land, J.
Martin Levine, Marjorie B. Sellers and Scott Tretter, or any of them
true and lawful attorneys, with power of substitution of each, to vote
all shares of New Jersey Municipal Income Fund, a portfolio of Municipal
Securities Income Trust, which the undersigned is entitled to vote, at
the Special Meeting of Shareholders to be held on March 30, 1995, at
Federated Investors Tower, Pittsburgh, Pennsylvania, at 2:15 p.m.
(Eastern Standard Time) and at any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The
attorneys named will vote the shares represented by this proxy in
accordance with the choices made on this card. IF NO CHOICE IS
INDICATED AS TO ANY ITEM, THIS PROXY WILL BE VOTED AFFIRMATIVELY ON THAT
MATTER.
Discretionary authority is hereby conferred as to all other matters as
may properly come before the Special Meeting.
PROPOSAL
1. TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION.
PLEASE RETURN THE BOTTOM PORTION WITH YOUR VOTE IN
THE ENCLOSED ENVELOPE AND RETAIN THE TOP PORTION
.
New Jersey Municipal Income Fund PROXY VOTING MAIL-IN STUB
a Portfolio of Municipal Securities PROPOSAL 1: TO APPROVE OR
Income Trust DISAPPROVE AN AGREEMENT AND
RECORD DATE SHARES PLAN OF
REORGANIZATION
R FOR the Agreement and Plan
of Reorganization
R AGAINST the Agreement and
Plan of Reorganization
R ABSTAIN
Please sign EXACTLY as your name(s) appear
above. When signing as attorney, executor,
administrator, guardian, trustee, custodian,
etc., please give your full title as such. If a
corporation or partnership, please sign the full
name by an authorized officer or partner. If
stock is owned jointly, all owners should sign.
_______________________________________
Signature(s) of Shareholder(s)
Date:__________________________________
Exhibit 17.5
TEXAS MUNICIPAL INCOME FUND
a Portfolio of
MUNICIPAL SECURITIES INCOME TRUST
FEDERATED INVESTORS TOWER
PITTSBURGH PA 15222-3779
_____________________________________________________________________
TEXAS MUNICIPAL INCOME FUND
a Portfolio of
MUNICIPAL SECURITIES INCOME TRUST
CUSIP NO. 625922877
FOR SPECIAL MEETING OF SHAREHOLDERS MARCH 30, 1995
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned shareholders of
Texas Municipal Income Fund, a portfolio of Municipal Securities Income
Trust, hereby appoint J. Crilley Kelly, Suzanne W. Land, J. Martin
Levine, Marjorie B. Sellers and Scott Tretter, or any of them true and
lawful attorneys, with power of substitution of each, to vote all shares
of Texas Municipal Income Fund, a portfolio of Municipal Securities
Income Trust, which the undersigned is entitled to vote, at the Special
Meeting of Shareholders to be held on March 30, 1995, at Federated
Investors Tower, Pittsburgh, Pennsylvania, at 2:15 p.m. (Eastern
Standard Time) and at any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The
attorneys named will vote the shares represented by this proxy in
accordance with the choices made on this card. IF NO CHOICE IS
INDICATED AS TO ANY ITEM, THIS PROXY WILL BE VOTED AFFIRMATIVELY ON THAT
MATTER.
Discretionary authority is hereby conferred as to all other matters as
may properly come before the Special Meeting.
PROPOSAL
1. TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION.
PLEASE RETURN THE BOTTOM PORTION WITH YOUR VOTE IN
THE ENCLOSED ENVELOPE AND RETAIN THE TOP PORTION.
Texas Municipal Income Fund PROXY VOTING MAIL-IN STUB
a Portfolio of Municipal Securities PROPOSAL 1: TO APPROVE OR
Income Trust DISAPPROVE AN AGREEMENT AND
RECORD DATE SHARES PLAN OF
REORGANIZATION
R FOR the Agreement and Plan
of Reorganization
R AGAINST the Agreement and
Plan of Reorganization
R ABSTAIN
Please sign EXACTLY as your name(s) appear
above. When signing as attorney, executor,
administrator, guardian, trustee, custodian,
etc., please give your full title as such. If a
corporation or partnership, please sign the full
name by an authorized officer or partner. If
stock is owned jointly, all owners should sign.
_______________________________________
Signature(s) of Shareholder(s)
Date:__________________________________
Exhibit 17.6
VIRGINIA MUNICIPAL INCOME FUND
a Portfolio of
MUNICIPAL SECURITIES INCOME TRUST
FEDERATED INVESTORS TOWER
PITTSBURGH PA 15222-3779
_____________________________________________________________________
VIRGINIA MUNICIPAL INCOME FUND
a Portfolio of
MUNICIPAL SECURITIES INCOME TRUST
CUSIP NO. 625922844
FOR SPECIAL MEETING OF SHAREHOLDERS MARCH 30, 1995
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned shareholders of
Virginia Municipal Income Fund, a portfolio of Municipal Securities
Income Trust, hereby appoint J. Crilley Kelly, Suzanne W. Land, J.
Martin Levine, Marjorie B. Sellers and Scott Tretter, or any of them
true and lawful attorneys, with power of substitution of each, to vote
all shares of Virginia Municipal Income Fund, a portfolio of Municipal
Securities Income Trust, which the undersigned is entitled to vote, at
the Special Meeting of Shareholders to be held on March 30, 1995, at
Federated Investors Tower, Pittsburgh, Pennsylvania, at 2:15 p.m.
(Eastern Standard Time) and at any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The
attorneys named will vote the shares represented by this proxy in
accordance with the choices made on this card. IF NO CHOICE IS
INDICATED AS TO ANY ITEM, THIS PROXY WILL BE VOTED AFFIRMATIVELY ON THAT
MATTER.
Discretionary authority is hereby conferred as to all other matters as
may properly come before the Special Meeting.
PROPOSAL
1. TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION.
PLEASE RETURN THE BOTTOM PORTION WITH YOUR VOTE IN
THE ENCLOSED ENVELOPE AND RETAIN THE TOP PORTION.
Virginia Municipal Income Fund PROXY VOTING MAIL-IN STUB
a Portfolio of Municipal Securities PROPOSAL 1: TO APPROVE OR
Income Trust DISAPPROVE AN AGREEMENT AND
RECORD DATE SHARES PLAN OF
REORGANIZATION
R FOR the Agreement and Plan
of Reorganization
R AGAINST the Agreement and
Plan of Reorganization
R ABSTAIN
Please sign EXACTLY as your name(s) appear
above. When signing as attorney, executor,
administrator, guardian, trustee, custodian,
etc., please give your full title as such. If a
corporation or partnership, please sign the full
name by an authorized officer or partner. If
stock is owned jointly, all owners should sign.
_______________________________________
Signature(s) of Shareholder(s)
Date:__________________________________
1K3R01!.DOC
Exhibit 17.7
MULTI-STATE MUNICIPAL INCOME FUND
a Portfolio of
FIXED INCOME SECURITIES, INC.
FEDERATED INVESTORS TOWER
PITTSBURGH PA 15222-3779
____________________________________________________________
MULTI-STATE MUNICIPAL INCOME FUND
a Portfolio of
FIXED INCOME SECURITIES, INC.
CUSIP NO. 338319205
FOR SPECIAL MEETING OF SHAREHOLDERS MARCH 30, 1995
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned shareholders of
Multi-State Municipal Income Fund, a portfolio of Fixed Income Securities,
Inc., hereby appoint Patricia F. Conner, Charles H. Field, Laura Goldner,
Suzanne W. Land, and Judy L. Petras, or any of them true and lawful
attorneys, with power of substitution of each, to vote all shares of Multi-
State Municipal Income Fund, a portfolio of Fixed Income Securities, Inc.,
which the undersigned is entitled to vote, at the Special Meeting of
Shareholders to be held on March 30, 1995, at Federated Investors Tower,
Pittsburgh, Pennsylvania, at 2:00 p.m. (Eastern Standard Time) and at any
adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The attorneys named will vote the shares represented by this proxy in
accordance with the choices made on this card. IF NO CHOICE IS INDICATED
AS TO ANY ITEM, THIS PROXY WILL BE VOTED AFFIRMATIVELY ON THAT MATTER.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting.
PROPOSAL
1. TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF
REORGANIZATION.
PLEASE RETURN THE BOTTOM PORTION WITH YOUR VOTE IN
THE ENCLOSED ENVELOPE AND RETAIN THE TOP PORTION.
Municipal Income Fund PROXY VOTING MAIL-IN STUB
a Portfolio of Municipal Securities PROPOSAL 1: TO APPROVE OR
Income Trust DISAPPROVE AN AGREEMENT AND
RECORD DATE SHARES PLAN OF REORGANIZATION
R FOR the Agreement and Plan
of Reorganization
R AGAINST the Agreement and
Plan of Reorganization
R ABSTAIN
Please sign EXACTLY as your name(s) appear
above. When signing as attorney, executor,
administrator, guardian, trustee, custodian,
etc., please give your full title as such. If a
corporation or partnership, please sign the full
name by an authorized officer or partner. If
stock is owned jointly, all owners should sign.
_____________________________________
Signature(s) of Shareholder(s)
Date:________________________________
